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Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Repoit No\. P-2844-EGT REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE EGYPTIAN ELECTRICITY AUTHORITY AND A PROPOSED DEVELOPMENT CREDIT FOR A THIRD POWER PROJECT June 9, 1980 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS 1 Egyptian Pound (LE) = US$ 1\.44 1 US Dollar ($) = LE 0\.69 FISCAL YEAR July 1 - June 30 LIST OF ABBREVIATIONS EEA Egyptian Electricity Authority EGPC Egyptian General Petroleum Corporation MEE Ministry of Electricity and Energy QPA Qattara Hydropower and Renewable Energy Resources R^^EA Rural Electrification Authority DCA Development Credit Agreement GA Guarantee Agreement LA Loan Agreement GWh Gigawatt-hour (1 million kWh) HZ Hertz kv Kilovolt kWh Kilowatt-hour (1,000 watt hours) MMcf/d Million cubic feet per day MW Megawatt (1,000 kilowatts)  FOR OFFICIAL USE ONLY ARAB REPUBLIC OF EGYPT THIRD POWER PROJECT LOAN AND CREDIT SUMMARY Borrowers: Credit Arab Republic of Egypt Loan Egyptian Electricity Authority (EEA) Guarantor: Arab Republic of Egypt Beneficiary: Egyptian Electricity Authority (EEA) Amount: IDA Credit US$120\.0 million IBRD Loan US$ 7\.0 million Total US$127\.0 million Terms: IDA Credit: Standard IBRD Loan: 20 years, including 5 years of grace, at 8\.25 percent interest per annum\. Relending Terms: The Government would onlend the proceeds of the IDA credit to EEA for 20 years, including 5 years of grace, at 8\.25 percent interest per annum\. Project Description: The objective of the project is to help meet the electri- city load forecast through 1986\. The project would consist of three different components: (i) an extension of the old Aswan hydropower station; (ii) the completion of the Shoubrah El Kheima Thermal Power Station, north of Cairo; and (iii) the rehabilitation and extension of distribution facilities in urban, suburban and rural areas outside Cairo and Alexandria\. Specifically the project would comprise: (i) four 67\.5 MW Kaplan turbines, (ii) a 300 MW steam electric generating unit, and (iii) about 7,000 kms of 11-kv and 380/220 volts lines and 250 MW of distribution transformer capacity\. The Qattara Hydropower and Renewable Energy Resources Project Authority would be responsible for the construction of the hydropower com- ponent, the Egyptian Electricity Authority for the thermal power unit and the Rural Electrification Authority for the regional electrification component\. The project would meet primarily industrial needs and also supply growing urban and rural demands\. Physical risks of the project are those related to difficult underwater excavations for the hydropower component\. Also, there are certain risks related to EEA's financial performance and the sizable foreign exchange gap for the project\. However, adequate safeguards have been provided to minimize the above risks\. This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Estimated Cost: US$ million equivalent Item Local Foreign Total Hydropower Station 18\.0 105\.7 123\.7 Thermal Power Station 17\.6 160\.7 168\.3 Distribution 15\.3 48\.5 63\.8 Project Management and Engineering 9\.5 16\.6 26\.1 Base Cost 60\.4 331\.5 391\.9 Physical Contingencies 5\.8 31\.4 37\.2 Price Contingencies 21\.7 125\.0 146\.7 TOTAL PROJECT COST 1/ 87\.9 487\.9 575\.8 Financing Plan: US$ million equivalent Local Foreign Total IBRD 7\.0 7\.0 IDA - 120\.0 120\.0 CIDA (Canada) - 25\.0 25\.0 Netherlands - 9\.6 9\.6 Japan - 15\.0 15\.0 Export/Suppliers Credits - 303\.6 303\.6 Government 87\.9 109\.7 197\.6 2/ TOTAL 87\.9 589\.9 677\.8 1/ Excluding import duties and taxes for which the implementing agency is not liable, and interest during construction amounting to US$102\.0 million\. 2/ Includes interest during construction amounting to US$102\.0 million\.  - iii- Estimated Disbursements: - $ million FY1981 1982 1983 1984 Bank Loan Annual 7\.0 Cumulative 7\.0 IDA Credit Annual 14\.0 31\.0 49\.0 26\.0 Cumulative 14\.0 45\.0 94\.0 120\.0 Economic Rate of Return: About 10 percent (see para\. 67) Staff Appraisal Report: No\. 2874-EGT, dated June 9, 1980 EMENA Projects Department   INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDTION OF THE PRESIDENT OF IBRD AND IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE EGYPTIAN ELECTRICITY AUTHORITY AND ON A PROPOSED DEVELOPMENT CREDIT TO THE ARAB REPUBLIC OF EGYPT FOR A THIRD POWER PROJECT 1\. I submit the following report and recommendation on a proposed development credit of $120 million equivalent, on standard IDA terms, to the Arab Republic of Egypt, and a proposed Bank loan of $7 million equivalent to the Egyptian Electricity Authority (EEA) for a term of 20 years including 5 years grace, with interest at 8\.25 percent per annum, to help finance part of the foreign exchange cost of a third power project\. The proceeds of the IDA credit would be onlent to EEA on the same terms and conditions as the Bank loan\. The Canadian International Development Agency (CIDA), the Government of the Netherlands and the Overseas Economic Cooperation Fund (OECF) of Japan will participate in the financing of the regional electrification component of the project\. Suppliers'/export credits are expected to be secured for the electro-mechanical equipment of the projects's hydro- and thermal power components\. PART I - THE ECONOMY 1/ 2\. The latest economic mission visited Egypt during September-October 1979\. Subsequent to that a report on "Recent Economic Development and External Capital Requirements" (SecM 79-839) was distributed to the Execu- tive Directors on November 28, 1979\. The findings of this report are incor- porated in the following\. Country data sheets are attached\. The Open-Door Strategy 3\. Economic trends in Egypt have been strongly influenced by the "open- door" strategy enunciated by President Sadat in October 1973 and approved in a national referendum in May 1974\. This strategy aims at accelerating economic development through modernization and making Egypt's largely publicly-owned and centrally-controlled economy more market-oriented\. Specifically, the strategy envisages (i) a gradual dismantling of government regulations, many of which are to be replaced by the price mechanism; (ii) the decentralization 1/ Part I is identical to Part I of the recent President's Report for the Cairo Gas Distribution Project, approved by the Executive Directors on May 20, 1980\.  of decision-making in state-owned enterprises; (iii) a more active role for the private sector, including private foreign investors; and (iv) expanded economic cooperation with other countries\. Substantial inflows of external assistance are considered essential to support the strategy\. 4\. Iu implement the open-door strategy the Government has taken a number of specific policy actions\. Among the more important ones were the gradual devaluation of the Egyptian pound, and the concurrent liberalization of foreign exchange regulations\. Starting in 1973 when the parallel market rate was introduced, Egypt's currency has been effectively devalued by 44 percent from US$2\.56 to US$1\.43 per pound at present\. Exchange restrictions were eased, specific import allocations were replaced by general import quotas, and more foreign exchange was made available to both the public and private sector\. A new investment law (1974, amended in 1977) offers attractive incentives to foreign firms\. Trade agreements, especially with the EEC, opened new markets for export products; at the same time, bilateral trade with COMECON countries was much reduced\. A debt management unit was established in the Central Bank, and became operative in mid-1978\. 5\. A Five-Year Plan was adopted in 1978 and is currently under revision, in accordance with the Government's desire to periodically reassess development perspectives and respond to changing economic conditions and investment options\. In support of the overall plan, a number of sector and subsector programs are currently under preparation with the assistance of the Bank and other donors\. These include a Water Master Plan, various industrial subsector studies, a review of the transport sector, and an electrification program\. 6\. In accordance with the objective of greater decentralization, the autonomy of public enterprises has been somewhat strengthened, especially by a new law issued in 1978 which grants greater flexibility to individual enter- prises in (i) setting up organizational structures, (ii) introducing material incentives, (iii) establishing productivity related wage scales, (iv) adjust- ing the work force to production requirements by not having to hire additional people, and (v) undertaking some investments from their own resources\. Provincial authority to undertake regional development programs has also been expanded\. Central bureau-cratic control remains strong, however, over most investment decisions\. 7\. A start has been made in rationalizing the price structure and increasing price flexibility\. The share of industrial output subject to centralized price control has decreased, and prices for a number of controlled products (including agricultural crops and some public service tariffs) were substantially increased\. Interest rates have been raised several times and now stand at 10 to 12 percent for lending (to non-government sector) and 6 to 8\.5 percent for term deposits\. Private sector activity is being encouraged and has been freed from many previous restrictions\. Moreover, a growing number of foreign investment contracts are being signed, especially in the important oil and tourist sectors\. Impact of the "Open-Door" Strategy 8\. The open-door strategy and subsequent policy actions have yielded impressive results\. Above all, they have led to a rapid increase in Egypt's  -3- foreign exchange earnings which rose from $1\.4 billion in 1973 to $5\.5 billion in 1978\. During this period, oil exports, workers' remittances,, tourism and the Suez Canal emerged as major new sources of foreign exchange\. This was accompanied by a major shift of agricultural and industrial exports from COMECON countries to the hard currency area\. In addition, the Government managed to attract large amounts of foreign assistance\. Gross inflows of medium- and long-term capital averaged $3\.4 billion per annum during 1975-78, compared with an average of only $0\.6 billion during 1967-72\. The bulk of these aid flows came from Arab and western donors and were provided at highly concessional terms\. 9\. Increased exchange earnings and foreign aid inflows have resulted in a consolidation of Egypt's external debt and have strengthened the country's creditworthiness\. Short-term credits owed by the Government to commercial banks were reduced from $1\.4 billion at the end of 1976 to $443 million at end-1978, largely with the help of loans granted by the Gulf Organization for the Development of Egypt (GODE)\. During the same period substantial arrears in debt payments, which had built up in previous years, were cleared\. These changes have solved the pressing liquidity problems that threatened Egypt's financial position in 1975 and 1976\. Favorable terms on new borrowings have also eased the burden on the country's medium- and long-term debt\. Although Egypt's total medium- and long-term public debt increased sharply during recent years--from $2\.1 billion at the end 1973 to an estimated $10\.0 billion at the end-1978--the debt service ratio declined from 33 percent to 24 percent, during the same period\. This reflects not only more favorable credit terms -- i\.e\., lower interest rates and longer maturities--but also the rapid increase in foreign exchange earnings\. 10\. The increased availability of foreign exchange from Egypt's own exports of goods and services and from external assistance has allowed much higher levels of imports\. This in turn paved the way for a rapid increase of investment, larger domestic consumption, and a better utilization of existing production capacities\. Imports of goods and services (excluding interest payments) rose from about $2\.0 billion in 1973 to an estimated $6\.5 billion in 1978; imports of capital goods increased at an even faster rate\. Increased availability of foreign exchange to industrial producers and farmers enabled them to import more raw materials, intermediate goods--including fertilizer and pesticides--and spare parts, thus breaking crucial bottlenecks that had constrained local production\. Together with investments in new capacities and a vigorous expansion of services such as trade, tourism and shipping, these developments sharply accelerated the rate of economic growth\. 11\. The Ministry of Planning estimates that GDP at constant prices rose at an average rate of close to 9 percent per annum during 1974-78\. Much of the growth was concentrated in petroleum, construction, manufacturing, transport and public utilities\. Agricultural production, on the other hand, increased very slowly (about 1 percent per annum)\. The growth rate of GNP was very high, about 13 percent per annum, because of the massive growth in workers' remit- tances from $189 million in 1974 to $1,760 million in 1978\. The higher level of economic activity together with large-scale labor migration to neighboring oil exporting countries has absorbed much of the excess labor force that existed in the early 1970s\. In fact, serious labor shortages have begun to emerge in a number of occupations, especially in the construction sector\.  - 4 - 1\. $Since 1974 Egypt's investment rate (investment/GNP) increased from about 18 percent to about 25 percent on average in the 1976-78 period\. This increase was made possible by the substantial contribution of foreign savings including the massive growth in workers' remittances\. National savings increased from 2\.3 percent of GNP in 1974 to more than 12 percent in 1978, reflecting the rise in remittance income\. The domestic savings rate, however, while showing some growth since 1974, financed less than a quarter of investment in the 1974- 78 period\. A major cause for this inadequate level of domestic savings was the continuously low and sometimes even negative savings generated by the government budget\. During 1974-78 current budget surpluses averaged less than one percent of GNP, and their contribution to the financing of public investment averaged less than 10 percent\. This was the result of high defense and security expendi- tures, large consumer subsidies and fast growing interest payments which, taken together, claimed 79 percent of the government's tax revenues in 1978\. At the same time, savings generated by public enterprises remained constrained by price regulations\. The result has been a continuous shortage of domestic funds, which in many instances has slowed down the implementation of investment projects\. Recent Economic Developments 13\. Preliminary estimates indicate that GDP growth in 1979 was about 8\.6 percent, close to the average achieved during 1975-78\. The increase of agri- cultural value added (2\.6 percent) was significantly above the long-term trend because of favourable climatic conditions and improved distribution of inputs\. Growth in industry and mining continued at 7\.8 percent, close to the 1975-78 average\. There was, however, a marked slowdown in the growth of the petroleum sector, 20 percent in 1979 compared to 34 percent in 1978, reflecting the lack of major discoveries in recent years and the approaching "peak" in production from existing fields\. Overall, the growth rate in the commodity sectors realized in 1979 (6\.9 percent) was close to the 1975-78 average (7\.6 percent)\. Growth in the distributive and service sectors, about 12 percent and 9 percent respectively, continued to be significantly higher than in the commodity sectors\. 14\. Egypt's foreign exchange earnings continued to grow rapidly in 1979\. Based on preliminary estimates, merchandise exports increased by about 38 per- cent in value due to a major increase in petroleum revenue made possible by the surge in world prices\. Merchandise imports, on the other hand, increased by only 11 percent in current value\. With the continued growth in Suez Canal earnings (17 percent) and officially recorded workers' remittances (11 percent), the current account deficit declined by about 15 percent from its 1978 value to about $1\.5 billion\. While the current account improved substantially, esti- mated medium- and long-term capital inflow in 1979 ($2,410 million) was about 29 percent below its 1978 value ($3,373 million) reflecting the cessation of cash inflows from GODE ($500 million in 1978), and a drastic decline in bilateral disbursements from Arab sources (about $70 million in 1979 compared to about $300 million in 1978)\. As a result, the overall balance (current account plus net MLT capital flows) showed a small deficit ($18 million), and there was some net short-term borrowing (about $150 million)\. Prospects for 1980 are reasonably good, with petroleum revenue expected to exceed $2 billion and Suez  -5 - Canal earnings increasing as a result of recent increases in the Canal's capacity as well as higher tariffs\. In addition net MLT capital flows are projected to grow significantly\. Growth in these sources of foreign exchange, and continued growth in workers' remittances and tourism receipts, would permit the resumption of rapid growth in imports of producer goods essential for sustaining high rates of investment and GDP growth\. 15\. Reforms in trade, exchange rate and incentive policies have contri- buted significantly to the recent improvements in the balance of payments\. Continued care must be taken, however, that incentives remain appropriate and are adapted to changing circumstances\. The gap between interest rates on foreign and domestic deposits will have to be closed to channel more workers' remittances and tourism receipts into official channels and prevent the re-emergence of a large dual foreign exchange market\. Periodic adjustments in the exchange rate may also become necessary if the unofficial "Rfree market" rate were to start deviating substantially from the "unified" official rate\. In 1979 the free market premium fluctuated around 8 percent and significant downward pressure on the exchange rate did not develop\. 16\. The domestic fiscal situation remains an area of major concern\. The overall budget deficit increased to reach about 22 percent of GNP in 1979\. Domestic financing of this deficit has gone up from 5\.9 percent of GNP in 1977 to about 13\.2 percent in 1979, increasing the pressure on money supply and prices\. While public revenue increased by 21 percent, current expenditure alone increased by about 37 percent, principally because of a doubling of subsidy payments linked to the exchange rate adjustment\. Furthermore, in spite of increasing revenue from petroleum and the Suez Canal, the public enterprise sector still generated only half of the surplus that would be required to finance its investment program\. 17\. There are indications of a growing Government effort to contain widening budgetary deficits\. Already in 1979 two major agricultural input prices (e\.g\., fertilizers and pesticides) and a wide range of other prices (e\.g\., cement, gasoline, railway freights, etc\.,) have been substantially raised\. The 1980 budget contains similar provisions and net domestic borrowing is projected to decline\. This is expected to be achieved through a variety of measures: a new sales tax and elimination of tax loopholes, increases of 20 to 30 percent in consumer prices of mass consumption articles such as cloth, cigarettes, soft drinks, sugar, petrol, kerosene, as well as limiting the ration card system to the lowest income groups and eliminating subsidies on flour for uses other than the production of traditional bread\. The net revenues derived from these measures will be complemented by a large increase in revenue from the petroleum sector\. The overall fiscal situation is, therefore, likely to improve in 1980, unless massive increases in public investment expenditures are allowed to outweigh the increase in revenues\. Development Potential and Constraints 18\. Egypt has considerable potential for further development\. The rea- sons for this are, in brief: a large domestic market, a relatively skilled and literate population, an agricultural resource base not yet fully developed,  - 6 - varied raw materials (including oil and gas), and a key geographical location\. In addition, there are good prospects for continued growth of foreign exchange earnings from tourism, workers' remittances and the Suez Canal which is under- going a major expansion\. While oil exports are likely to decline in volume in the long-rur\.--in the light of increasing domestic consumption and less optimistic assumptions on new discoveries--the outlook for exports of new industrial and agricultural products is promising\. 19\. Future economic growth may come less easily, however, than during the past years\. The need to gradually substitute domestic for foreign savings will become more pressing as foreign contributions decline in relation to GNP\. Capacities are now strained in a number of sectors, including infrastructure\. Investment in new capacities has been slowed down by administrative inefficiency, inadequate fiscal resources and weakness in national coordination and sector programming\. Managerial effectiveness in public enterprises and financial incentives for production are inadequate in many instances\. Higher levels of economic activity together with labor emigration have led to shortages in critical professional and technical skills\. Educational facilities in Egypt still reflect a non-technical bias and their quality needs to be upgraded\. 20\. Another key issue is population\. Already very large for Egypt's limited living space--about 39 million in 1978 with an average density exceed- ing 1,300 per square kilometer of agricultural land--the population was growing at a rate of about 2\.2 percent per annum in the mid-1970's, adding almost one million people every year\. This continues to create great pressures on resources for consumption and investment and aggravates the employment problem in the longer run\. In the past years the Government has made a new commitment to direct action on population matters\. While it has already initiated such action (e\.g\., an intensified home visiting program under the second IDA financed population project), it will take time for measurable results in fertility reduction to be achieved\. 21\. A serious side-effect of the open-door strategy has been a growing disparity in consumption levels\. Currently the lower 40 percent of the rural population receive about 25 percent of the rural incomes while in the urban areas the proportion is about 21 percent\. About 30 percent of the rural and 22 percent of the urban population live in absolute poverty\. Although this pattern of inequality and incidence of absolute poverty is no worse than in most economies at similar income levels, it is nevertheless a serious problem, which could become more severe if no effective policy action is taken\. 22\. To maintain the momentum of development, major efforts are required to overcome present structural constraints\. Specifically, action is needed to (i) increase the efficiency of government administration through organiza- tional and procedural modifications and selective changes in salary struc- tures; (ii) strengthen the capacity for development programming and project preparation/implementation; (iii) pursue a vigorous and balanced program to upgrade the country's physical infrastructure; (iv) substantially expand the program to curb population growth; (v) articulate urban and rural strategies aimed at decentralizing urban agglomeration and economic opportunities; (vi) further increase the use of prices as indicators of relative scarcities;  (vii) strengthen the management of public enterprises; (viii) improve pro- fessional and technical education; (ix) increase domestic savings; and (x) develop a coordinated export promotion policy\. There is an ongoing dialogue on all these issues between the Egyptian authorities and the Bank; they have also been the focus of the discussion among the members of the Consultative Group for Egypt\. External Debt and Creditworthiness 23\. Egypt's non-military medium- and long-term public debt outstanding and disbursed as of July 31, 1979 was estimated at about $10\.6 billion\. Bilat eral loans comprised about $6\.5 billion or about 62 percent of the debt outstanding while the shares of multilateral credit and suppliers' credit were about 24 percent ($2\.5 billion) and 8 percent ($0\.8 billion) respectively, with the remainder being held by financial institutions\. Major creditors were the GODE and USA, followed by Saudi Arabia, Kuwait, and the Federal Republic of Germany\. IBRD/IDA debt comprised about 4 percent of the total disbursed debt\. The estimated end-December 1979 total disbursed debt was about $11\.0 billion\. Debt service on medium- and long-term debt was estimated at $1\.4 billion in 1979 giving a debt service ratio of about 20 percent\. No reliable estimates of military debt are available\. 24\. The Government's recent policy actions have initiated structural adjustments called for by Egypt's economic situation and international environ- ment\. If progress towards overcoming present constraints is maintained and the country's foreign exchange earning potential realized, the average deficit on current account is estimated to be about $2\.5 billion per annum for the coming five years\. The required capital inflows are large--but if they are available on concessional terms, Egypt would have the debt servicing capacity to borrow the amounts envisaged, including a limited amount on harder terms\. The burden of servicing medium- and long-term debt as a percentage of total foreign exchange earnings is estimated to fluctuate around 20 percent during 1980-84, and to decline gradually thereafter\. PART II - BANK GROUP OPERATIONS IN EGYPT 1/ 25\. The proposed development credit and loan would be the World Bank's fiftieth and fifty-first lending operation in Egypt\. It would bring Bank and IDA commitments made since 1970 to $1,851\.5 million\. 2/ Annex II contains a Summary of Bank loans and IDA credits as of March 31, 1980 and notes on the execution of ongoing projects\. 1/ Paragraphs 26 to 30 are identical to the recent President's Report for the Cairo Gas Distribution Project, approved by the Executive Directors on May 20, 1980\.  - 8 - 26\. Egypt faces a host of basic structural problems: pressure of population on resources; inadequate economic infrastructure; a large but inefficient public sector constrained by out of date equipment, overstaffing, weak management and a network of controls over investment, production, distri- bution and prices; significant balance of payments deficits and shortages of domestic resources\. The Bank's response has been tailored to address these long-term developmental issues in a very broad fashion and in close coopera- tion with other donors\. Its strategy involves entry into the spectrum of sectors in order to provide not only direct finance with its relatively limited resources but, equally, to act as a catalyst for other agencies, bilateral and multilateral, and as a spur for initiating discussion and, hopefully, positive action on a coherent framework of policies and investment proposals which can tackle the substantive issues\. The approach also includes delivery of technical assistance not only for adequate implementation of specific investment programs but for developing the domestic institutional capability to devise and implement future policies and investment programs\. The Bank's deliberately broad multisectoral intervention has been differen- tiated by sectors and tailored to the pace at which the Egyptian authorities can reasonably be expected to address these issues and implement the programs\. 27\. Industry, which has received the largest portion of Bank resources and significant attention over the past five years, illustrates the nature and scope of the Bank's intervention\. The Government looks to industry to create productive employment, cater to basic consumer needs, generate an "export surplus", and stimulate growth of the economy\. However, this sector is beset by a complex set of problems which stem largely from the rigidity of central- ized control and lack of management autonomy, distorted pricing, and the lack of incentives for better use of productive capacity\. Efforts under Bank financed projects have gone beyond the immediate objective of improving capacity utilization (imports loans and credits Nos: Cr\. 524, Ln\. 1062 and Ln\. 1456) and increasing production capacity and supply of essential commodi- ties in resource-based industries (cotton ginning, textiles, cement and fertilizer projects)\. The more fundamental effort is directed at introducing policy and structural improvements\. Towards this end the Bank is assisting the Government in reviewing the planning apparatus and strengthening sectoral planning and project preparation and implementation capabilities with the objective of formulating an industrial strategy and plan for the 1980's\. It has also financed six subsector studies in textiles, building materials, pulp and paper, food processing, metallurgy, and engineering industries, in order to assist the Government in formulating a package of policy and investment proposals, which would be embodied in future projects\. Two subsectors, textiles and steel, are planned for study in greater detail with a view to developing specific recommendations concerning the major issues facing public enterprises in Egypt, such as those relating to employment, wages, prices, profit retention and the relationship between the public and private sectors\. To complement these efforts the Bank has also carried out a study on small- scale industries which is laying the basis for joint Egyptian/Bank efforts in this area\. In addition, the Bank is assisting the Government in undertaking a major study of the construction/contracting industry, which is one of the most critical bottlenecks facing Egyptian industry today, as well as in initiating studies to develop a brick master plan and cement distribution master plan\.  -9- 28\. The above sketch illustrating the scope and breadth of the Bank's intervention in one sector is representative of the multifaceted approach that it has adopted in varying degrees in the other sectors of the Egyptian economy\. It is a role that is in harmony not only with the Egyptian Government's wishes but is welcomed by the various bilateral and multilateral donors as an appro- priate function for the Bank as the Chairman of the Consultative Group for Egypt\. Preparation of projects for future lending follows this strategy, and the pipeline includes projects in education, power, gas exploration, rural and urban development, transportation, rural water supply, agriculture (includ- ing drainage), agro-industry, development finance and industry\. 29\. Bank Group disbursements in 1978 represent 2\.8 percent of Egypt's medium- and long-term capital inflow\. The Bank and IDA shares of total external debt outstanding and disbursed were about 1\.8 percent and 2\.4 per- cent, respectively, as of July 31, 1979\. For the future, the Bank and IDA shares of total external debt outstanding and disbursed (excluding military debts) are estimated to reach about 5\.0 and 3\.5 percent respectively in 1981\. It is estimated that in 1981, debt service payments due to the Bank and IDA will represent about 2\.3 percent and 0\.2 percent, respectively of service payments due on Egypt's external debt\. 30\. Total IFC participation and lending for projects in Egypt now total about $37 million and include: a ceramics project (approved in 1976) a ready- made garment project (1977); a project for an agricultural complex primarily for sugar beet (May 1978); a poultry project (July 1978); and a fish farming project (December 1979)\. IFC is discussing several other private sector and joint venture projects\. PART III - THE ENERGY SECTOR 1/ Introduction 31\. Egypt's energy outlook has continuously improved over the last decade\. With the commissioning of the Aswan High Dam, Egypt successfully developed its largest hydroelectric resource\. Increases in oil production have made it first self-sufficient and, more recently, an exporter of oil\. In 1978 petroleum exports accounted for 50 percent of its foreign trade receipts\. Gas finds have further strengthened the energy base and increased export possibilities of oil\. These positive developments notwithstanding, the medium and long term outlook is not as clear\. Much of Egypt's current economic and industrial planning is predicated upon ample and continued availability of low cost energy and a significant increase in oil exports\. However, it is not certain that this will necessarily come about\. A fast growing domestic demand for oil stimulated by prices well below the international level, declining production from some of Egypt's existing major oil fields, the need for increased efforts in exploration and in developing natural gas, are the areas of concern\. I/ Paras\. 31-34 and 37-38 are identical with paras\. 31-34 and 39-40 of President's Report for Cairo Gas Distribution Project, dated April 30, 1980 and approved by the Executive Directors on May 20, 1980\.  - 10 - Resource Endowment 32\. The main sources of primary commercial energy in Egypt are hydro power and petroleum\. Coal deposits have been discovered in the western desert and Siu,ai peninsula, and are estimated at around 100 million tons\. A feasibility study for a coal-fired power plant in Sinai is presently under preparation\. As in other developing economies, non-commercial fuels in the form of crop residues and animal waste are in extensive use and are estimated to represent about one quarter of the total commercial energy used\. 33\. Hydro power for Egypt is an important source and in 1977 accounted for 20 percent of primary commercial energy\. By equipping the Aswan Dam with turbine generators having a total capacity of 345 MW, the first step was taken in 1960 to tap the hydro power potential of the river Nile\. With the completion of the Aswan High Dam in 1970, with an installed capacity of 2100 MW, 80 percent of the Nile's hydro power potential has been harnessed\. The remaining 60 meter drop between Aswan and Cairo represents a generating poten- tial of 460 MW which, subject to the establishment of economic viability, could be secured by electrifying three existing barrages and developing other potential barrage sites not yet identified\. The only other potential source of hydro power is the Qattara project and mini-hydro schemes along water canals connected to the Nile\. The Qattara project which would utilize the drop of 60 meters between the Mediterranean and the Qattara Depression in the Western desert could produce about 640 MW during the first 12 years, and about 340 MW thereafter\. Oil and Gas 34\. Hydrocarbons are a major source of commercial energy in Egypt and on account of limited hydro potential, are likely to be relied upon increasingly for meeting Egypt's incremental demand for energy\. Though the first oil well in Egypt was drilled in 1886, oil exploration was not taken up on a systematic basis until the turn of the century\. Commercial production commenced in 1913, but it was only after 1968 that oil production exceeded 10 million tons\. The current production level is around 500,000 barrels a day (25 million tons per annum) of which about 25 percent represents the share of foreign partners, 45 percent is consumed domestically and the balance is exported\. Recoverable reserves are estimated at around 2\.5 billion barrels (350 million tons)\. Asso- ciated with the production of oil, 100 million cubic feet a day (MM cf/d) of gas (one million tons of oil equivalent per annum) is estimated to have been produced in 1979, which is being flared except for a small amount consumed in the oil fields\. Four non-associated gas fields at Abu Gharadig, Abu Madi, Abu Qir and Amal are estimated to have recoverable reserves amounting to 3\.3 trillion cubic feet\. Of these, the first three gas fields have been developed which, in 1979, produced about 110 MMcf/d of gas, equivalent to 1\.1 million tons of oil\. When fully exploited these four gas fields would replace about 4 million tons of liquid hydrocarbons\. Elf-Aquitaine has recently discovered an off-shore gas field 55 kilometers north east of Alexandria\. While further drilling would be required to fully delineate this field, recoverable reserves from the existing production data are estimated at 3\.0 trillion cubic feet\. This gas field, when developed, would add significantly to gas supplies in  - 11 - Egypt\. Currently, the production potential of natural gas is greater than demand\. This situation is likely to reverse itself over the next few years, however\. In connection with Loan 1732-EGT, the Bank is financing a study to address the questions of gas use optimization and the need to upgrade this resource from a substitute for fuel oil to higher value uses\. 35\. Egypt anticipates continued growth in petroleum production which is projected to exceed 35 million tons by 1981 and reach about 47 million tons by 1983, a production level it hopes to sustain thereafter\. However, attain- ment of the projected production rate is predicated upon new discoveries which will not only double the current level of production but would also compensate for the decline in production from active oil fields which have already peaked\. Failure to achieve the assumed discovery rates could result in a significant shortfall\. In any case, the lags which are inherent in the development of an oil field will make it extremely difficult to achieve the target originally stipulated for the 1978-82 Plan period\. 36\. In the short term, the Government is planning to use part of its associated and non-associated gas to help meet the power demand in the eighties\. By 1985, 60% of the natural gas would be used for power generation\. In the long term, the Government anticipates to meet a major part of the power demand by constructing coal fired and nuclear plants\. If these plants are constructed, the nuclear fuel will most likely be imported rather than extracted from the domestic uranium deposits but domestic coal will be the preferred fuel for coal fired plants\. Oil shale and solar energy are also contained in the Government's long term energy development plans\. The oil shale would probably be used for power generation and extraction of synthetic oil\. The mix between the two would most likely be determined by the technological advance in the extraction of shale oil and by the cost of using alternative fuels for power generation\. Solar energy would be used for water heating and low lift irriga- tion pumping\. Energy Sector Issues 37\. The price system in Egypt is still characterized by a great deal of centralized control and involves substantial explicit or implicit subsidies on many goods and services\. The prices of energy supplies are set at levels that are substantially below their opportunity cost (border prices) to the economy\. The Government has traditionally kept the overall price of energy low relative to the rest of the domestic prices to foster industrial growth through publicly owned enterprises\. At present, close to 58 percent of the petroleum products is consumed by industry and the power sector, and about 82 percent of the electricity generated is consumed either by industry or Government-related activities\. The low prices for energy continue to hinder the ability of the entities in the energy sector to generate sufficient revenues to finance the capital investment necessary to meet future needs\. An additional shortcoming of the prevailing pricing structure is that the relative scarcity of the various competing energy products is not reflected in the prevailing price system\. This leads to the use of energy resources in a non-optimal combination\.  - 12 - 38\. Increasing the domestic prices of energy resources to the interna- tional level should be the goal of the national energy pricing policy\. How- ever, this is a long-term objective which is primarily determined by the ability of the Egyptian economy to structurally adjust and absorb the new higher prices\. This adjustment is particularly difficult in the Egyptian economy with its extensive system of subsidies, price controls and quantity rationing where the impact of increases in the price of energy requires careful analysis\. In connection with the Gulf of Suez Gas Project (Loan 1732-EGT) and the first power project (Loan 1453-EGT), the Bank is financing a pricing study for petroleum products and another study for the formulation of electricity tariffs\. Both studies aim at the improvement of the overall pricing of energy in Egypt\. The implementation of the results of these studies will require continued Bank involvement in the sector which is being provided for under existing agreements\. 39\. Pending the outcome of the above studies, the Bank intends to continue its dialogue with the Government, in connection with ongoing and proposed gas and power projects, aimed at bringing about improvements in energy pricing policy affecting key petroleum products and electricity tariffs\. In this regard, certain positive developments have taken place\. Under the proposed Cairo Gas Distribution project, for instance, the Government has agreed to two important pricing measures: (i) domestic consumers will be charged a price which is substantially above the current price of city gas and liquefied petroleum gas, and (ii) two small power stations to be supplied with natural gas under the project will pay about two and a half times the price charged until recently to all power stations\. Also, it should be noted that in January 1980, in a move to improve energy pricing, the Government increased prices of petroleum products by about 20 percent with the exception of the prices of liquefied petroleum gas and fuel oil, which remained unchanged\. Electricity tariffs for residential and small commercial consumers were also increased on the average by 20 percent\. Also, in connection with the proposed power project, EEA agreed to complete by December 31, 1982 a load management study and submit to the Government and the Bank proposals for regulations aimed at improving efficiency in the use of electricity (Loan Agreement (LA), Section 4\.07)\. The Government agreed to implement by June 30, 1983 regula- tions which are mutually acceptable to it and the Bank (Guarantee Agreement, Section 3\.03)\. Further, to avoid burdening EEA with rising fuel costs for power generation, the Government agreed that whenever it shall approve any change in the price of fuels supplied to EEA by the Egyptian General Petroleum Corporation, it would take simultaneously appropriate action to enable EEA to adjust its tariffs accordingly\. EEA, in turn, agreed to a corresponding adjustment of its tariffs (GA, Section 3\.04(a) and LA, Section 5\.07)\. The Power Subsector 40 The Ministry of Electricity and Energy (MEE) is in charge of public electricity supply\. Under MEE, the Egyptian Electricity Authority (EEA) is responsible for generation, and bulk supply of electricity to the whole coun- try\. Power distribution is carried out by seven distribution companies which are subsidiaries of EEA\. Other agencies of the Ministry of Electricity and Energy are: the Rural Electrification and the Qattara Hydropower and Renewable  - 13 - Energy Resources Project Authorities and a power equipment manufacturer (medium voltage switchgear and distribution and small power transformers)\. Recently MEE has informed the Bank that it plans to transfer the five rural distribution companies (those other than for Cairo and Alexandria) to REA\. In accordane with existing agreements (Loans 1453/1733-EGT) the Government would confirm that the transfer would take place in a manner satisfactory to the Bank\. 41\. In 1979 Egypt's total interconnected generating capability was 3404 MW in 17 generating stations\. Of these, 1151 MW were in steam electric plants, 647 MW in combustion turbines and 1606 MW in hydro\. The power system comprises also a 500-kV interconnection between the hydro plants in the south (Aswan) with the load centers and thermal plants in the northern part of the country (Cairo and the Nile Delta)\. A 220-kV network serves the Northern Egypt loads and a 132-kV system, generally parallelling the 500-kV link, serves the loads in the Nile Valley and nearby oases\. Utilization voltage is 380/220 volts and system frequency is 50 Hz\. 42\. Planning in the power subsector has been improving primarily as a result of improvements in EEA's organization in line with the recommendations of the UNDP-financed Power Sector Survey carried out in 1976-78, for which the Bank was Executing Agency\. The Survey identified major issues in relation to pricing, organizational and institutional aspects of the Egyptian power subsector\. EEA is making progress in dealing with these issues, with assis- tance from the Bank under the first power project (e\.g\. tariff study, strength- ening of financial administration and accounting, safety inspection services, manpower development and training, etc\.)\. In addition, EEA has undertaken, with financial assistance from UNDP and under Bank supervision, a thermal power plant maintenance project to strengthen EEA's capabilities in combustion turbine and boiler operation and maintenance\. The Market for Electrical Energy 43\. The Project forms part of the proposed development program to meet the future demand for electricity on the EEA system\. Maximum demand rose from 987 MW in 1969 to 2,814 MW in 1979 (11\.0 percent per annum) and sales from 5,580 GWh to 14,675 GWh (10\.1 percent per annum)\. The average growth rates for the whole ten-year period conceal very divergent trends within the period\. Between 1969 and 1972 annual growth rates for sales declined from 6\.6 percent to -0\.8 percent, and from 6\.1 percent to 1\.4 percent for maximum demand; the average annual growth rate over the period being 4\.2 percent and 6\.1 percent respectively\. These low growth rates reflected the relatively lackluster performance of the economy in these years, during which the growth of GNP averaged only 3 percent per annum\. Since 1972, there has been a sharp reversal of these trends, with economic growth of 7\.8 percent per annum and power demand growing at over 16 percent per annum on average\. The key factor in the much higher growth rate of the power market over the last few years has been the demand of major industrial consumers\. Sales to large industrial consumers grew at over 29 percent per annum during 1974-79\. On the other hand, sales to other consumer categories grew much less rapidly, ranging from 16 percent per annum for residential/commercial consumers to 0\.4 percent per annum for irrigation/agriculture\. As a result, the share of industry  - 14 - in total electricity sales rose from 55 percent to 65 percent\. This high proportion of industrial sales also accounts for the relatively high load factor (68 percent in 1979)\. Power Development Program 44\. A balanced, least-cost system expansion program using economic cost figures for all inputs has been defined by EEA with the help of up-to-date planning tools including the Wien Automatic System Planning (WASP) digital computer programs in use by EEA since 1978\. The most recent updating of the program (November 1979) confirmed the need for early commissioning of the available Nile hydro-power at Aswan (Aswan II) and three existing barrage sites\. The further development of the "old" Aswan Dam which is part of the proposed project, would include the installation of 270 MW additional capacity\. Of the remaining 460 MW potential on the Nile River, about 190 MW are planned to be harnessed at three existing barrages (Esna-89 MW, Nag Hammadi 48-MW, and Assiut 53-MW) and about 270 MW at other potential barrage sites not yet identified\. Coal fired and nuclear power plants also form part of EEA's long-term development plans, e\.g\. the construction of a 600 MW coal fired plant and a nuclear station are planned for 1988 and 1990, respectively\. For the near future, however, EEA will have to rely on hydro and oil and gas fired thermal power stations to meet the load growth\. About 4,500 MW of additional generating capacity are planned between now and 1987 (more than double the existing capacity)\. Of these, 600 MW of steam electric units are being installed under the Second Power Project (Loan 1733-EGT), 270 MW of hydro and 300 MW of thermal are included under the proposed Project\. 300 MW of addi- tional combustion turbines and 3000 MW of steam electric capacity are already committed\. 45\. Taking into account the need for expansion in transmission and dis- tribution facilities, the total power sector investment program for 1980-1987 amounts to LE 5\.7 billion (US$8\.2 billion) including escalation and contin- gencies\. The proposed project would represent about 7 percent of the total investment requirements\. It is recognized that the above investment program is a very ambitious one and will require careful monitoring during the review of the Five-Year Development Plan\. Bank Group Participation in the Energy Sector 46\. The Bank Group has made two loans/credits for power in Egypt\. A loan (1453 EGT) of $48 million was made in 1977 for regional electrification providing for rehabilitation and extension of electric power facilities serv- ing a regional population in urban zones and rural centers outside Cairo and Alexandria\. Progress on the project is satisfactory and the project is expected to be completed on schedule by the end of 1980\. In June 1979 an IDA credit of $37 million, a Bank loan of $102 million, and an EEC Special Action credit of $35 million (Loan 1733 ECT et al) were approved to help finance part of the foreign cost of the first stage (600 MW) of a 900 MW thermal power station at Shoubrah El Kheima\. Bidding documents for civil works and electro-mechanical equipment are expected to be issued in late 1980, respectively\. In the oil and gas sector, the Bank made a first loan of $75 million to the Egyptian General Petroleum Corporation (EGPC) for the Gulf  - 15 - of Suez Gas Project (Loan 1732-EGT) in June 1979\. The project is designed to gather, process and transport associated gas from oil fields in the Gulf of Suez which is presently being flared\. The stripped gas would be used principally as fuel for electric power generation and industrial users, thus freeing fuel oil and diesel oil which could be exported\. The project also includes financing for several important sector studies covering energy pricing, oil/gas reserve assessment and optimal utilization of gas as mentioned above\. A second project in the sector, the Cairo Gas Distribution Project, for which a $50 million IDA credit was approved on May 20, 1980, is designed to supply natural gas to domestic consumers in four districts of Cairo and to two power stations, thus reducing Egypt's reliance on imports of liquified petroleum gas (LPG), gas oil, and kerosene\. The Borrower/Beneficiary 47\. Three authorities within the Ministry of Electricity and Energy (MEE) would carry out the three components of the proposed project: the Egyptian Electricity Authority (EEA) would be responsible for the thermal power, the Qattara Hydropower and Renewable Energy Resources Project Authority (QPA) for the hydro-power, and the Rural Electrification Authority (REA) for the regional electrification components, respectively\. As in the case of the first power project (Ln\. 1453) and the loan component of the second power project (Ln\. 1733), EEA would be the borrower under the proposed Bank loan\. The proposed IDA credit would be made to the Arab Republic of Egypt who would, in turn, onlend it to EEA on the same terms as the proposed Bank loan\. EEA is a Government-owned public utility established in 1976\. It is responsible for implementation, management, operation and maintenance of all electric power facilities throughout Egypt\. In addition, for the time being, EEA controls distribution throughout Egypt as the parent company of seven subsidiary distribution companies (see para\. 40 above)\. EEA is governed by a Board of Directors, whose chairman is EEA's chief executive\. Other members of the Board are: two deputy chairmen, one for systems operations, and the other for financial and administrative affairs, the heads of EEA's five regional offices, representatives of the Ministries of Electricity and Energy, Finance and Planning, and the Chairman of REA\. While as a Government-owned utility it is subject to overall Government regulations, EEA is financially partly autonomous, in that it prepares its own annual budget and 5 year plans, retains surplus revenues for its own development and is legally authorized to contract loans from national and international sources and to procure goods and services\. In personnel matters, however, i\.e\. hiring and firing of staff, wages and salaries, EEA has little autonomy since it has to comply with the rather restrictive Government policies\. 48\. QPA was established originally under the name of Qattara Depression Authority to carry out investigations related to the development of the Qattara Depression Generating Scheme\. Recently QPA has been given the task of identifying, preparing and carrying out all hydroelectric projects in Egypt starting with the Aswan Dam redevelopment (Aswan II) included in the proposed project and for developing projects using renewable energy resources\. Other major hydro projects being studied by QPA in addition to the Qattara depression  - 16 - developments are pumped storage hydro generating facilities along the western shore of the Gulf of Suez and hydro power development at three Nile barrages, Esna, Nag Hammadi, and Assiut\. REA will be responsible for the execution of the distribution component of the proposed project as part of REA's National Rural Electrification Plan\. This would be the second Bank-financed project in which REA participates as Executing Agency\. REA is also Executing Agency for the Regional Electrification Project being financed under Loan 1453-EGT\. Both QPA and REA are separate legal entities, independent of EEA and functioning only as non operating executing agencies under MEE\. Upon completion of the works for which they are responsible the assets thus built will be owned and run by EEA\. PART IV - THE PROJECT Project Objectives 49\. The proposed project forms part of a least-cost system expansion program, developed by EEA with the help of consulants and using up-to-date system planning techniques to meet Egypt's demand for electricity through 2000\. EEA's interconnected power system is growing rapidly to meet the needs of industry, which presently accounts for about 65 percent of electrical consumption, and to supply the growing urban and rural demands\. The project was identified in July and appraised in November 1979\. Negotiations were held in Washington from April 7 to 11, 1980\. The Government was represented by Mr\. Samir Koraiem, Undersecretary, Ministry of Economy, Foreign Trade and Economic Cooperation, EEA by Eng\. Desouki, Chairman, REA by Eng\. El Sherif, Deputy Chairman and QPA by Eng\. Rizk, Deputy Chairman\. A supplementary project data sheet is attached as Annex IV\. The Staff Appraisal Report (No\. 2874-EGT of June 9, 1980) is being distributed separately to the Executive Directors\. Project Description 50\. The proposed project would consist of: (a) a hydro power redevelopment (4 x 67\.5 MW Kaplan turbines) in upper Egypt (Aswan II); (b) the third 300-MW steam electric generating unit to complete the Shoubrah El Kheima Thermal Power Station near Cairo (Shoubrah no\. 3); (c) rehabilitation and extension of the distribution system in urban, suburban and rural areas outside Cairo and Alexandria (about 6,990 km of 11-kV and 380/220 Volts lines and 250 MVA of distri- bution transformer capacity)\. 51\. Specifically, the hydro-power component of the project would add 4 x 67\.5 MW of Kaplan turbine generators at the old Aswan irrigation dam  - 17 - to obtain about 1110 GWh/a additional generation from programed irrigation water releases from Lake Nasser\. The new installations would operate inter- connected with the national grid system\. Addition of the third thermal power unit at Shoubrah El Kheima, north of Cairo would complete the development of this site to its full capability (3 x 300 MW)\. This portion of the project would round out the work being financed by the Bank through Loan 1733-EGT and Credits 985/20-EGT\. Rehabilitation and extension of regional distribution in outlying towns and suburban and rural areas would improve service to a popula- tion of about 1 million and bring electric service for the first time to another 2 million inhabitants\. Because of a chronic lack of foreign exchange funds routine upgrading has been less than adequate and service extensions to new consumers greatly curtailed\. The project would tend to remedy these deficiencies\. Project Cost and Financing 52\. The estimated total project cost for the three components is US$575\.8 million equivalent excluding import duties and taxes for which EEA is not liable\. The project's foreign exchange component is estimated at US$487\.9 million\. For the hydro generation component, the cost estimate is based on a feasibility study prepared by QPA's consultants\. The cost estimate for the thermal generation component is based on the feasibility study pre- pared by EEA's consultants for the first two Shoubrah El Kheima units\. Cost estimates for the distribution component were developed with data from the First Regional Electrification Project (Loan 1453-EGT) and planning figures developed by REA and its distribution consultants\. All estimates were appro- priately revised during appraisal\. Costs per man-month of engineering and management consultants for the hydro component are estimated at $8,420, for the thermal component at $8,500 and the distribution component at $7,400\. All the above costs include salaries, social costs and overhead\. A physical contingency of 15 percent was applied to the hydro generation cost estimate to take account of pending refinements of design data on underwater excavations, but lower physical contingencies were assumed for the thermal generation (7 percent) and distribution (5 percent) components for which better site data are available\. Price contingencies of 10\.5 percent for 1980, 9\.0 percent for 1981, 8\.0 percent for 1982, 7\.0 percent for 1983-85, and 6 percent for 1986 were applied to both equipment and civil works estimates in line with the best available data on expected price escalation\. 53\. The proposed IDA/Bank credit/loan of $120 million and $7 million respectively, would finance about 22 percent of total and about 26 percent of the project's foreign cost\. The proposed credit would be made to the Arab Republic of Egypt on standard IDA terms which, in turn, would relend the proceeds to EEA under a subsidiary loan agreement\. The proposed loan would be made to EEA for 20 years including five years of grace; the same terms would apply to proceeds of the IDA credit re-lent to EEA\. The execu- tion of (i) a Subsidiary Loan Agreement between the Arab Republic of Egypt and EEA covering the terms and conditions on which the proceeds of the credit will be made available to EEA; and (ii) subsidiary agreements between EEA and QPA and REA, respectively would be conditions of effectiveness (Development Credit Agreement (DCA) and LA, Sections 5\.01(a) and 7\.01(b))\. The foreign  - 18 - exchange risk on the proposed Bank loan and the proceeds of the IDA credit relent to EEA would be borne by EEA\. As to the remaining financing require- ments, the following would apply: regarding the regional electrification component, the Egyptian Government has already secured $35 million from the Canadian International Development Agency (CIDA) and the Netherlands for related equipment\. An additional $15 million are being secured from the Overseas Economic Cooperation Fund (OECF) of Japan\. Regarding the hydro power component, bidding documents for electro-mechanical equipment which have been issued on February 15, 1980 require interested suppliers to submit a financing proposal with their technical offer\. Bids are to be submitted by early June 1980\. Completion of a satisfactory financing plan regarding the hydro-power component would be a condition of effectiveness of the proposed loan and credit (LA and DCA, Sections 7\.01(a) and 5\.01(b))\. Regarding the thermal power component, bidding documents for the first two 300 MW units being financed under the second power project (Ln 1733) and the third 300 MW units to be financed under the proposed project are likely to be issued only in late 1980 and actual contract signing is not expected until early 1981\. As in the case of the hydro-power component, the bidding documents will require suppliers to offer financing for the third unit\. The completion of a satis- factory financing plan for this component would be a condition of disbursement for this specific component (DCA, Schedule 1, para\. 4)\. Based on the results of a meeting of potential co-financiers interested in the electro--mechanical equipment for the thermal and hydro-power components, held in Paris on March 13 and 14, 1980, prospects to secure the necessary financing appear quite promising\. Agreement will be sought with major cofinanciers on a Financial Administration Agreement to provide for mutual cooperation during execution and supervision of the Project\. Cross default clauses are also envisaged with major cofinanciers with a view to assure a reasonably complete financing plan for the Project at all times\. The Government agreed to provide the remaining local and foreign funds as well as any funds required to meet cost overruns (GA, Section 2\.02)\. Project Implementation, Design and Supervision 54\. The project would be implemented during 1980-86 starting with the hydro and distribution components\. The expected completion date is December 1986 when the third Shoubrah unit is scheduled for commercial operation\. Once commissioned, all components would be owned and operated by EEA or one of EEA's distribution subsidiaries\. Within each of the participating Agencies, i\.e\., EEA, QPA, and REA, a Project Unit (PU) will be in charge of the respec- tive component\. The PUs will in turn report to a Project Coordinating Committee under MEE\. Consultants to assist in design, preparation of bidding documents and management and supervision of construction for each of the three project components have already been appointed and would continue to assist EEA, QPA and REA during project execution\. Procurement 55\. The tentative financing plan for the project envisages that Bank/IDA financing would most likely be allocated to civil works only\. Equipment and materials would probably all be financed through export credits or bilateral  - 19 - assistance\. Contracts being financed from proceeds of the proposed Bank Group loan/credit would be awarded on the basis of international competitive bidding in accordance with Bank guidelines\. Civil works contractors would be subject to prequalification\. Civil works bids for (i) the hydro component are due end May 1980 and (ii) the thermal component will be invited by mid-1981, together with bids for the civil works for the first two 300 MW units being financed under Loan 1733-EGT\. Although civil works for the distribution component will cover widely scattered areas throughout the country, bids will be invited for large enough contract packages to attract international firms\. Disbursement 56\. The proceeds of the proposed Bank loan would be disbursed against 100 percent of the foreign cost of imported items, 70 percent of the civil works contracts for the hydro component, 72 percent of the civil works contract for the thermal component, 50 percent of the civil works contracts for the distribution component (representing the respective foreign exchange component of the civil works contracts), and 100 percent of the cost of engineering services\. As mentioned in para\. 53 above, completion of a satisfactory financing plan for the thermal power component would be a condition of dis- bursement for that particular component\. Environmental Aspects 57\. The hydro component is only an extension of the old Aswan irrigation dam\. The environmental impact therefore will be insignificant\. Also, no particular environmental problems are envisaged in relation to the extension of the Shoubrah project to accommodate the third unit to bring the site to full capability (3 x 300 MW)\. As agreed under Loan 1733-EGT at least one of the three units will be operated on gas to avoid excessive sulphur dioxide emission from operating all three units on heavy fuel oil\. The distribution component involves work consisting entirely of rehabilitation and extension of overhead and underground distribution\. The overhead lines would be built mostly in agricultural areas; no significant environmental impact is expected\. Electricity Tariffs 58\. As mentioned above (para\. 37), prices of energy supplies in Egypt are set at levels that are substantially below their opportunity cost (border prices) to the economy\. In the case of electricity, there is a two-fold subsidy: an economic and a financial subsidy\. The economic subsidy is passed on to all electrcity consumers through the unrealistically low prices paid by EEA for oil and gas supplied by EGPC ($11/tons)\. If exported, EGPC could earn about $160 equivalent/ton on these commodities\. In addition, there is a financial subsidy absorbed by EEA\. This financial subsidy is particularly visible in the case of two public sector companies, the Kima fertilizer plant and an aluminum complex\. The two consumers which account for 30 percent of EEA's total sales but pay only about 60 percent of the tariff applied to other industrial consumers\. As a result, EEA is incurring a loss of about $15 million during 1980 for electricity supplied to these plants\.  - 20 - 59\. Since the uneconomic and unsatisfactory tariff structure for indus- trial consumers is only a reflection of an overall deficiency in the tariff system as a whole, especially at the high and medium voltages, the Government agreed in connection with the first power project (Loan 1453-EGT) to carry out a tariff study for the high voltage consumers (phase I)\. Because of inadequate technical and financial data, the study has been delayed by about 18 months\. EEA agreed to (i) complete phase I of the tariff study by March 31, 1981, (ii) submit to the Government and the Bank by June 30, 1981 a draft plan and imple- mentation schedule to increase electricity tariffs charged to "high voltage consumers", and (iii) finalize and implement such plan by December 31, 1981, taking into account the Bank's comments\. The Ministry of Electricity has also initiated Phase II of the tariff study which covers, among others, the formula- tion of tariffs for the medium and low voltage consumers\. However, to avoid the delays experienced with Phase I, the consultants will be responsible for the collection of the required data, the training of EEA's staff in tariff work and advise EEA on the establishment of a tariff department and the com- pletion of the study according to a specific timetable\. EEA agreed to (i) complete the phase II study by December 31, 1981, (ii) submit recommendations emanating from the study to the Government and the Bank by March 31, 1982, and (iii) implement such recommendations by June 30, 1982, taking into account the Bank's comments\. The Government in turn, agreed to enable EEA to comply with the above undertakings (LA, Section 4\.01(e) and GA, Section 3\.04(b))\. 60\. Pending the completion of the two phases of the tariff study, the Government has introduced as an interim measure a new tariff for domestic and small commercial consumers\. The new tariff was made effective January 1, 1980, after approval by the Egyptian Parliament in the context of the 1980 budget\. It is designed to induce conservation in the use of electricity by almost tripling the rate for consumption above 150 kwh/month\. The new tariffs are expected to generate about $11\.5 million in additional revenues to EEA during 1980\. 61\. Another positive development is the Government's decision to charge companies operating in the joint venture sector the international prices for oil and gas on the grounds that these companies are mostly export oriented and therefore enjoy to operate in world market economic framework\. This distin- guishes these companies from those functioning in the public sector, especially as regards pricing of their output\. Furthermore, these companies are now being charged electricity tariffs that reflect the opportunity cost of the resources used in the production of electricity\. In addition, to protect EEA from increasingly greater fuel expenses on thermal generation, EEA will promptly adjust its tariffs to reflect changes in the price of fuel supplied to it by the Egyptian General Petroleum Corporation (see para\. 39 above)\. Financial Performance of EEA 62\. On the basis that the Government wished to establish EEA as a financially viable entity with a level of earnings high enough to provide for some of EEA's future expansion after meeting operating expenses and debt service obligations, Loan 1453-EGT, as subsequently modified by Loan 1733-EGT, required EEA to achieve a minimum return, on its revalued assets, of 5 percent  - 21 - in 1980, 6 percent in 1981, 8 percent in 1982 and 9 percent in 1983 and there- after\. These targets were to be applied to the consolidated results of EEA and the seven distribution companies which were established on January 1, 1979, as subsidiaries of EEA\. Agreement with the Bank on the specific measures, including tariff increases, required to achieve the 5 percent return in 1980, and their timing, was a condition of effectiveness of Loan 1733-EGT\. After such agreement was reached, the loan was made effective on April 8, 1980\. However, additional measures would have to be taken by EEA in the coming years to meet covenanted rates of return of 6 percent in 1981, 8 percent in 1982 and 9 percent in 1983\. To achieve these targets, a cumulative 100 percent tariff increase would be required over the three-year period even if fuel prices remained at the present level (January 1980)\. However, it is recognized that it will be extremely difficult to achieve such increases during 1981-1983 given the fact that under the prevailing system of price controls, any move in changing an essential input price such as energy, requires a careful assessment of its impact on prices throughout the system so as to avoid economic and social disruptions\. It was, therefore, agreed that EEA would achieve a rate of return of not less than 5 percent of its revalued assets from fiscal year 1981 (LA, Section 5\.04(a))\. Upon comple- tion of the studies and agreement between the Government and the Bank on the implementation of mutually agreeable proposals resulting therefrom, the Government, EEA and the Bank may have to establish new rate of return targets as appropriate to enable EEA to carry on its operations in accordance with sound public utility financial practices\. To achieve even the 5 percent rate of return, would still require tariff increases in the order of between 15 and 20 percent per annum\. EEA also agreed to present to the Bank by November 30 of every year a plan on how it proposes to achieve the agreed target rate of return for the subsequent year and agree with the Bank and the Government on such a plan before December 31 of every year (LA, Section 5\.04(b))\. Arrears 63\. EEA has always had difficulty in collecting its bills from munici- palities, Government industrial enterprises and other public sector entities\. The Government and EEA have been taking vigorous action to reduce EEA's accounts receivable to no more than the equivalent of 3 months' sales, as agreed under Loans 1453-EGT and 1733-EGT\. The Government further agreed under Loan 1733-EGT to take all measures necessary on its part to enable EEA to achieve this\. Action by the Government and EEA in pursuance of these under- takings have almost yielded the desired results, and EEA's receivables for the sale of electricity amounted to the equivalent of only four months' revenues at the end of August 1979, excluding municipal overdues of about LE 9 million responsibility for payment of which has been accepted in principle by the Ministry of Finance\. However, since this is likely to be a continuing problem with effects on EEA's liquidity position, the Government and EEA agreed to extend the covenant under Loan 1733-EGT also to the proposed loan (GA, Section 3\.02(a) and LA, Section 4\.01(b))\.  - 22 - Other Financial Covenants Debt Limitation 64\. Under Loans 1453-EGT and 1733-EGT, EEA agreed to obtain the Bank's prior consent to any borrowing it plans to undertake whenever its internal cash generation is not sufficient to cover its debt service at least 1\.5 times in any future year\. In calculating amortization of long-term debt, EEA had agreed that it would revalue all foreign debts at the end of each year in accordance with the current rates of exchange obtainable by EEA\. Revaluation of the 1979 foreign debts is presently being carried out on the basis of a methodology which has been agreed with the Bank\. EEA agreed to extend this covenant also to the proposed loan so that EEA and the Bank could keep under review EEA's assumption of debt liabilities and ensure that they do not exceed prudent levels (LA, Section 5\.05)\. Audit 65\. EEA's accounts are audited by the Government's Central Auditing Organization, a satisfactory arrangement, although timely completion of the audit report has posed problems in the past\. With the expected improvement in its inventory management and accounting, EEA considers that the past delays in the submission of the audited financial statements and Audit Report to the Bank would be eliminated within about three years\. Accordingly EEA agreed under Loan 1733-EGT to submit to the Bank its audited financial statements and audit report for a fiscal year within six months of the close of the year beginning with 1981\. For the years 1978 and 1979, the Bank extended the time limit for the submission of the audited accounts and audit report from 6 to 9 months, and for the year 1980 to 7 months\. EEA agreed to extend the covenant under Loan 1733-EGT to the proposed loan (LA, Section 5\.02)\. Benefits and Justification 66\. The project will help meet Egypt's electricity load demand up to 1986 as part of the least-cost system expansion program developed to meet the country's future demand for electricity\. The project would meet primarily the growing needs of industry (which currently accounts for about 65 percent of electricity consumption), but would also serve the rural and urban popula- tion who would be supplied with electricity under ongoing distribution projects financed by the Bank and other aid donors\. The main benefits are the incre- mental sales of electricity attributable to the generation, transmission and distribution facilities included in the Project\. Other benefits comprise fuel savings through substitution of electricity from the plant for higher cost fuels, extra tax revenues and connection charges\. 67\. As to the project's rate of return, if one was to calculate it using border prices for fuel input and domestic sales prices 1/ for the electricity produced, the rate of return obtained is 6\.1 percent\. This reflects the fact that electricity tariffs in Egypt are substantially lower than the opportunity 1/ The conversion factors required to express the domestic price revenues into equivalent border prices are not available\.  - 23 - cost of the resources used in the production of electricity\. The Government has recently introduced new tariffs for the sale of electricity to the new high and medium voltage industrial consumers operating in the uncontrolled segment of the economy\. The new tariffs are based on the long run marginal cost which reflects the value to the economy of the resources (in border prices) used in delivering electricity to these consumers\. At present, only 20 such firms are paying the marginal cost-based tariffs\. If these tariffs were taken as a proxy for the willingness to pay of all high and medium voltage consumers (about 30 percent of the total sales), the rate of return on the project would be 11\.5 percent\. Risks 68\. Difficult underwater excavations in the hydro component for which additional field surveys are being made are the major physical risks\. On the institutional side, the major risks are inadequate performance of EEA under existing covenants in Loans 1453-1733-EGT and the yet unsecured co- financing for electrical and mechanical equipment of the hydro and thermal components under the proposed project\. However, as a result of the ongoing discussions on energy pricing with the Government and EEA, early agreement on acceptable measures to overcome EEA's financial difficulties is foreseen\. Also, provisions for adequate safeguards in the loan/credit documents would ensure adequate financing throughout project execution\. Other risks are also manageable and no major implementation problems are expected\. PART V - LEGAL INSTRUMENTS AND AUTHORITY 69\. The draft Development Credit Agreement between the Arab Republic of Egypt and the Assocation, the draft Loan Agreement between the Bank and the Egyptian Electricity Authority, the draft Project Agreement among the Bank and the Qattara Project Authority and the Rural Electrification Authority and the draft Guarantee Agreement between the Arab Republic of Egypt and the Bank, and the Reports of the Committees provided for in Article V, Section l(d) of the Articles of Agreement of the Association and in Article III, Section 4 (iii) of the Articles of Agreement of the Bank, are being distri- buted to the Executive Directors separately\. 70\. Features of the Development Credit, Loan and Guarantee Agreements of special interest are referred to in Section III of Annex III\. 71\. Special conditions of effectiveness of the credit and loan are: execution of a Subsidiary Loan Agreement between the Government and EEA (Development Credit Agreement, Section 5\.01(a)), execution of subsidiary agreements between, on the one hand EEA and, on the other hand, QPA and REA, respectively (Loan Agreement, Section 7\.01(b)) and completion of a satisfactory financing plan for the hydropower component (Loan Agreement, Section 7\.01(a))\. A special condition of disbursement with respect to the thermal power component would be the completion of a satisfactory financing plan therefor (Development Credit Agreement, Schedule 1, para\. 4)\.  - 24 - 72\. I am satisfied that the proposed Development Credit and Loan would comply with the Articles of Agreement of the association and the Articles of Agreement of the Bank, respectively\. PART VI - RECOMMENDATION 73\. I recommend that the Executive Directors approve the proposed Development Credit and the proposed Loan\. Robert S\. McNamara President Attachments June 9, 1980 Washington, D\.C\.  - 25 - TABLE 3A AM EX I EGYPT - SOCIAL INDICATORS DATA SHEET rage 1 of 5 LANDIARIAC(THOUS EGYPIT REFERENCE GROUPS (ADJUSTED Ay1RAGES LAND AREA (THOUSAND SO\. IM\.) - H0ST RECENT ESTIMATE) - TOTAL 1001\.4 SAME SAME NEXT HIGHUR AGRICULTURAL 29\.6 MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE /b RFGION /c GROUP /d GROUP /e GNP PR CAPITA (USS) 90\.0 150\.0 400\.0 1532\.3 209\.6 467\.5 ENERGY CONSUMPTION PER CAPITA (XILOGRAHS OF COAL EQUIVALENT) 298\.0 275\.0 473\.0 838\.1 d3\.9 262\.1 POPULATION AND VITAL STATISTICS POPULATION HID-YEAR (MILLIONS) 25\.9 32\.6 37\.8 URBAN POPULATION (PERCENT OF TOTAL) 38\.0 42\.3 43\.9 49\.0 16\.2 24\.6 POPULATION PtOJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 58\.0 STATIONARY POPULATION (MILLIONS) 90\.0 YEAR STATIONARY POPMLATION IS REACHED 2105 POPULATION DENSITY PER SQ\. KM\. 26\.0 33\.0 39\.0 19\.9 49\.4 45\.3 PER SQ\. YH\. AGRICULTURAL LAND 982\.0 1125\.0 1324\.0 99\.0 252\.0 149\.0 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS\. 42\.0 42\.1 40\.0 45\.6 43\.1 45\.2 15-64 YRS\. 55\.0 54\.7 56\.0 51\.4 53\.2 51\.9 65 YRS\. AND ABOVE 3\.0 3\.2 4\.0 2\.8 3\.0 2\.8 POPULATION GROWTH RATE (PERCENT) TOTAL 2\.4 2\.3 2\.1 3\.0 2\.4 2\.7 URBLN 6\.0 3\.4 2\.7 5\.2 4\.6 4\.3 CRUDE BIRTH RATE (PER THOUsAND) 44\.0 40\.0 36\.0 43\.7 42\.4 39\.4 CRUDE DOAlE RATE (PER THOUSAND) 19\.0 15\.0 13\.0 13\.5 15\.9 11\.7 GROSS REPRODUCTION RATE 2\.8/f 3\.0 2\.3 3\.2 2\.9 2\.7 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) \. 206\.0 187\.0 USERS (PERCRNT OP HARIED WOMEN) \. 9\.0 21\.1 \. 12\.2 13\.2 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 92\.6 99\.0 95\.0 90\.8 98\.2 99\.6 PER CAPITA SUPPLY Of CALORIES (PERCENT OF REQUIRDENETS) 95\.0 106\.0 113\.0 99\.0 93\.3 94\.7 PROTEINS (GRAMS PER DAY) 66\.0 66\.0 70\.7 63\.6 52\.1 54\.3 OF WHICH ANIMAL AND PULSE 17\.0/8 16\.0 16\.0 16\.0 13\.6 17\.4 CHILD (AGES 1-4) HDRTALITY RATE 31\.0 23\.0 18\.0 15\.9 18\.5 11\.4 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 46\.0 51\.0 54\.0 53\.8 49\.3 54\.7 INFANT HORTALITY RATE (PER THOUSAND) \. \. 108\.0 \. 105\.4 68\.1 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL \. \. 66\.0 56\.4 26\.3 34\.4 UIBAN \. \. 88\.0 83\.4 58\.5 57\.9 RURAL \. \. 50\.0 34\.3 15\.8 21\.2 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL \. \. \. 59\.1 16\.0 40\.8 URBMN \. \. \. 78\.2 65\.1 71\.3 RURAL \. \. \. 26\.4 3\.5 27\.7 POPULATION PER PHYSICIAN 2600\.0 1910\.0 1190\.0/h 3677\.0 11396\.4 6799\.4 POPULATION PER NURSING PERSON 2730\.0/h 1640\.0/h 1150\.07h 1730\.6 5552\.4 1522\.1 POPULATION PER HOSPITAL BED TOTAL 480\.0 460\.0 460\.0 577\.0 1417\.1 726\.5 URBAN \. 290\.0 250\.0 \. 197\.3 272\.7 RURAL \. 2110\.0 2090\.0 \. 2445\.9 1404\.4 ADMISSIONS PER HOSPITAL BED \. \. \. 21\.8 24\.8 27\.5 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 5\.0 \. 5\.8 5\.8 5\.3 5\.4 URBAN 4\.8 \. 5\.6 5\.5 4\.9 5\.1 RURAL \. \. 6\.0 6\.0 5\.4 5\.5 AVERAGE NUMBER OF PERSONS PER ROOM TOTAL 1\.9 \. 1\.8 URBAN 1\.6 RURL \. \. \. ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 38\.0 \. 45\.7 45\.1 23\.5 28\.1 URBAN 37\.8 \. 77\.0 67\.9 17\.8 45\.1 RURAL \. \. 19\.6 \. \. 9\.9  - 26 - ANNEX I TABLE 3A Page 2 of 5 EGYPT - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES - MOST RECENT ESTIMATE) / SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 lb ESTIMATE /b REGION 1c GROUP /d GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 66\.0 69\.0 72\.0 85\.0 63\.3 82\.7 MALE 80\.0 84\.0 88\.0 103\.7 79\.1 87\.3 FEMALE 52\.0 53\.0 56\.0 66\.0 48\.4 75\.8 SECONDARY: TOTAL 16\.0 32\.0 42\.0 27\.6 16\.7 21\.4 MALE 24\.0 44\.0 54\.0 39\.2 22\.1 33\.0 FEMALE 9\.0 21\.0 29\.0 20\.8 10\.2 15\.5 VOCATIONAL ENROL\. (1 OF SECONDARY) 22\.0 19\.0 18\.0 4\.3 5\.6 9\.8 PUPIL-TEACHER RATIO PRIMARY 39\.0 38\.0 40\.0 32\.6 41\.0 34\.1 SECONDARY 16\.0 25\.0 29\.0 23\.4 21\.7 23\.4 ADULT LITERACY RATE (PERCENT) 26\.0 \. 44\.0 41\.4 31\.2 54\.0 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 3\.0 4\.0 6\.4 16\.7 2\.8 9\.3 RADIO RECEIVERS PER THOUSAND POPULATION 58\.0 132\.0 138\.0 147\.9 27\.2 76\.9 TV RECEIVERS PER THOUSAND POPULATION 1\.9 16\.0 17\.0 36\.0 2\.4 13\.5 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION \. 22\.0 21\.0 17\.9 5\.3 18\.3 CINEMA ANNUAL ATTENDANCE PEB CAPITA 3\.0 2\.0 \. 2\.9 1\.1 2\.5 LABOR FORCE MOTAL LABOR FORCE (THOUSANDS) 7482\.0 9319\.0 9600\.0 FEMALE (PERCENT) 7\.3 7\.2 7\.6 8\.6 24\.8 29\.2 AGRICULTURE (PERCENT) 58\.4 54\.4 51\.0 43\.0 69\.4 62\.7 INDUSTRY (PERCENT) 12\.2 18\.8 26\.0 23\.7 10\.0 11\.9 PARTICIPATION RATE (PERCENT) TOTAL 28\.9 28\.0 28\.0 26\.7 36\.9 37\.1 MALE 53\.2 51\.5 51\.3 46\.4 52\.4 48\.8 FEMALE 4\.2 4\.1 4\.3 5\.1 18\.0 20\.4 ECONOMIC DEPENDENCY RATIO 1\.6 1\.6 1\.8 1\.8 1\.2 1\.4 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 17\.5LJ 17\.4Li\. 22\.0 21\.4 \. 15\.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 44-411 42\.8Li,1 49\.2 48\.6 \. 48\.2 LOWEST 20 PERCENT OF HOUSEHOLDS 6\.6/1 7\.0OLW 5\.1 5\.3 \. 6\.3 LOWEST 40 PERCENT OF HOUSEHOLDS 17\.5L/ 18\.7LW 14\.8 15\.0 *- 16\.3 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. 116\.0 201\.3 99\.2 241\.3 RURAL \. \. 84\.0 134\.2 78\.9 136\.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN \. \. 153\.0 288\.6 91\.9 179\.7 RURAL \. \. 65\.0 107\.0 54\.8 103\.7 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN \. \. 21\.0 22\.9 44\.1 24\.8 RURAL \. \. 25\.0 31\.2 53\.9 37\.5 Not available Not applicable\. NOTES /a The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group\. Coverage of countries among the indicators depends on availability of data and is not uniform\. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977\. /c North Africa S Middle East; /d Low Income ($280 or less per capita, 1976); /e Lower Middle Income (S281-550 per capita, 1976); /f 1950-55; la 1960-62; /h Registered, not all practicing in the country; /i 1964-65; /i rural expenditure only\. Most Recent Estimate of GNP per capita is for 1978\. August, 1979  -27 - Annex I kts ±~ the 4\. r b COm ecese" 68NOaJJ1 judged the Meat &OItat,ve MA reliable, it \.-aI, also in mated thet thay my Mt he lztema b= ftb - ofStusa - duitiu -1 cot o y tiffereat COcKtri\. LB ocllactlMt the dat&, lbe dta are, Dethe15es, 21bk\. iAig Ufor e dist ts presucaiee-eLmtetge\.amtr-ie -, incdisg the strams raises of the idistic r se t c met Pepolatid gr os leak of dtat, rmap aeverges of all 1adlOators for CapItal Rerplcs Oil xportra eat of i\.sItloaos of Accoee te Water eft eret\. Dispseai, Souing, Iwomee okstributifa md %wwetl for other cousty group ane poplation-aeigbtet geamtric mac\. sithoat amiceloL of the eatrees vlsa ead te atpePIlated cosatry\. ho,o ocre h clao i aleil o aaeti c af o ctica edt h soi ~ iA(thseaa eq\.h\. A,,,,, to\.~E 2oost frsca ort of;9seaics oa\.coi a re-a- - Ttal eofcea comprtisin load are ad 1alent eater\. Samber of poi ttl ri,atrc-l evdb ert psla M!loa ost receat extloat\. of egricultural area uast temprwsily percentages of their respecti,e ppacl&tioas\. looceta diepoaLI seW inciute orpraaal for crop\., FaStur\., meiet aid kitehm g-arde or- to the coll\.ction sit diaposLI, sith or sithoot trWoteat, of ba *eor\.ta 21\. alice aid~~~~~~~~~~~- rets-rat-r by eate-bora\. syteta or the Ase of pit pririse aid eloole \.01Pp55 capita aetleatas carrest markoneter Paicias population divLided by comber of practic log physic Lii 1960, 19M0,sa4 1977 dtat\. \. Popalation tiridet by mbtr of psracticinog male c w AP\. Annual oasm ti- of commrial energ psatical mar\.55 end a\.i\.iteat euaoss\. tezoa eatioityl 5cOko etbe--, nuclear atd gee otltc rEeta e oa\.chn\.-etreael - Popolatioc (total, t,, th-wa lwtritiiyrn = o coaeqsivbleat per capita; 1960, ai ua iie yterrsetv str\.ofhopital bed" a\.eil"\.e ta Ipso \.ad 19pg tat\. pobl eat poicat\. gamera1 sad sp-Loieiad hotpital eat rehahiLitatinc mt\.re\. lb\.pitel\. ac- etabliahemta parmasatly stu?ffat by at leasht 00s Vbyaiciaa\. POPH=01 MM VrTAL 3 l~~~~~~~~~~~~atbIlimeate proetdia prtosipal\.y ousttial caeare - -t ixLostd\. Ruoral as\. pmtm f-Year om)- As of Jaly 1; 1960, 1970, eat hospital\., bover include health and osdiceL centers act peromeatly ataffed IT" "t\. ~~~~~~~~~~~~~~~~by a pV'IW\.ie1 (hot by a \.UdicL aa\.latemt soe\., tidif\., ec\.) ehlb offer tOo-bn P0 100 erosa of ttal) \. Btlo of srbe to total poplatico uapaie acendation eat provide a lialtsd ra\.W of med1oal feeiliti\.s\. diffreatdeftdie\.of a-teaarea my ffect\.oprehILIty of date A4:tpI\.p'flgJrjppAtOV & Toal muaber of adai\.sions to or dischwarge fr00 ameoeors\.1960, 1970\. aid 1970 tate\. hiiltedfh1merof beds\. Povpoplatosireectproaejbcedions1S ems ead- at their atelity sad fertilIty Aorg 05 f Honssehld (sroma rbsibi)-tota\. ra\. -et ,al - rate\. Projection permeete or m-tailty raisacomi\. of tbee\. A W Aeeol consists of a group ofitrdaseoaa h gquearver eAt ILevl -Aaea-i life epsotmay at birtOh Iaerasa\.ng Ath country s their mali meals\. A hoardr or lodger emy or my Mct be inclded L\. the Pe" sepita ioo leve, eat fC l\. Life -eapeteay atehimlg at heceshold for statistical peerpee\. 77\.5 jeers Th\. p-Owatur\. for fertility rat\. also hare three l-vela Aveaeabro oras pm-toa\.o-m a turalwwvrage nmiber V-L~ift dec11\. i0 fertilitY according to twomm level eat Peaufpseaprs A ohat rualroomie cav %tosL deslloS,, feadlt --eia pefrfosece\. lash sintry Is thee \.aiged me of these repeetielyi, Dasiig -\.erot -o-pssmaet et-et,O-e eat oa-eopi\. perte\. nine ca Leati of nortallty kW fetility trmd\. for projectimoLcs oEetiiy(e-eto oelo\.-ttl ehn a ua m PAfPOS64\. LAMttoAl ftUg nObk letricit IA\. ;iRlvIogoas-tr Ls peceaag of at-tiona" ?Dw - ic a attioeas Popelatio ther is no groeth total, urban, at s-os-el d-eLsga respectivel\. :itssthibhkbt t qual to the death rats, and also to\. see stractur* remids\.-ctaltt\. This is aihievd -al after fertility rates !IPLTIOI declice to the osplWacent level of colt eat rproduction rate, Ahnn ~ ~ dcoitatott0 seth geaertioo of rasn placee itself \. ttly\. The stticoay 00Db\. TIIr= %p!ffI17rt6aoll oatd fuemle 1- rs Ootal, sole ad fcols -11ol- lation sic\. ca eatiented oM the basis of the projected o~baeteristica miofllaes at the primary ls-sl aspercovtes of respective pigary of thepbclatioc IA the year 2000, Ad the rote of deolios of fertility scolaepopuLatiocl ocomaly includee otildres gas 6-11 Yease\. hot rte to repla= aet level\. adjwt\.d for differeat lengths of prisary eductioc; for ocats-i\.e cith Yon gtati2Ess- -o,ltO ecahed - Tho ys-oarshe sttiocory pOteolAti\. ociv-ersalduoctioo se"ar\.lnLt MaY oast\. 100 poroet slice em wpoplo si\. ha\. heec reached\. ore ~~~bolos or b\.ov the officil ach\.ol age\. leodr oci - oae aeat _ Camle~ - C\."Ated Os shove; acoodary Par e\. t-yer pOa\.laioOper eqoe\. kiloeste (100 oectarea of dotior,ie a1\.0 oryasof approca ps'-ar itetrotico; total area proides g9ceral I aial or teachr traiciag isstrotioc for pupil\. Pe ks\. e\. saitotr ed C--C oted as abov for agico\.ltural led uitoall of 12 wo\.17 ymar of ag\.; correspoodeace coors\.s are game-aIly 21\.lf eocluded\. bplsaltico AA\. Strcaccor (pErveat) - Child-an (0\.14 V---) , -crulg-age VoctiocoL erimt (terosotf s\.ooday) - oaiclicatlt%iq9lo LcclOt ~15-h y"sral, ea reird yeere eat ove) as p-eroteg\. of aid-year tchoiLaL, IAo\.tra, or ohrw progem shiob oPerte iedepeadetly or a poPolation; 196, 1970, and 1977 late\. departats of ceceata7 itotit,tioai- Popalatioc Groeth cats nercet - tta - A--Ime =-tO rates of total mid- P,cI-Ies -rtiM-renfeteeodr - Tota etdatet \.erliad to year poPIlti_c for l90-0 177 aid 1970-77\. priar e t acailir level diiMS ycobr ftecesi tecr pos\.atIo Oreh \.a\. psov-t) - sh\.- Anssual groeth ratos Of caba 4poedig 1Lel\. po olaa or- 1950-6, 19b0-70, ad 1970-\. rat r -at - lt-ret -tolts ebl\. to read WiA -ite) os Or\.d ItLh R\. (mthou-d)- Ai-AaI live births per thoosand of aid- oftt eotpoPalatio\. egd 15 years aidovr year popojotico; 19c0, 1970 cad 1977 data\. C~A\. D&tl R\. ~arth-a-ed) - A-area deaths per theossod of aid-yea -bPI pipo1atio iiVl, 9707, wd1977 data\. paao?Cas(par thessea oo,lto)- asse as cpi atr care Ir\.e Rsprodootioc RWt -iAreeg oab-r of --cdotrs ca l vrsata ssta ih pesos-eo-aubsu,l\.aoe, he-arse cad alltar in her for\.-LI reprodmctv period if she opari\.cce proosot age-veil speciflc fertility -t\.; osArce11 fiv-year avrago ending Jo 1960, Radio eevr (pertoe d opoi\.i(-All1 types of reoeo-r\. for 5dbo 1970, acd 1975\. b\.oast, ts 0;or\.lpbi \. tbcoacd of Popolotioo;ealee,iO e F\.t;il_ Plcli-S ptors\. Aiou-l (thouaaid\. ( - AcoocL comber of rciver L\. coitrias eat in ersoe rogi\.trtic of ratio sets es0 accptrs f irt-_oatrel devIces Ander auscpiC\. of oCticoal family feffct; data for recent year my cot heb\. r l since met cooctrie plI-isg program\. abolished liceasing\. yeaul\. ?Iacie eestor t of mriod som) -iPer-auteg\. of rvid 7Occovr (asI thecocad cooaioc) TVreivs for brostoat to geoe-ei sam of obi :d\.-berog\. ae(5-i yea-s ( oh bo brthl-otrol d\.rto- pobll per thou\.ea --oaisceIteoLio-\.A:' T7 receiver -- coontriese t\. l married ees in 'am age groap\. end IA years she registratioc of TV sets sain effect\. cciD AND eborRTIOW fRi b\.t\.g uto [Was or rd\. of Par \.Pit\. ~~~~~~~~of 'diygeooLr Literet ceappe *dew te as \.periodIcal poblicatioo tot ofFoo ~o '-tic ~r Cpit (i6~971\.00 -tieofprcit Ierted primarily to recortlg geeral uases\. it is omoiter*d t0 ha 'dAlyly esLmoL prodwetio falfo ccdte\. -tion caclods seat md if it app\.rs at Leout four time a seed\. feed ai Is -0 oaleatr year basic\. C\.-ditiee coe prIms', goots Clim Acce Atteadeace Ya ait s eer 3- hd 00 the otomoer of tickets (e\.g 4soerc itoeted of ea-s ( hich are edible aid ocotal Octriente o\.dro the yea, l tlolo aisoal on driv-ic cIdsm- ac achiLe (eg \. cofe aid tea are -ccided)\. Aguegatt Protootio of eahIL sh omits\. is based e astiosal averag prodocer price eeights\. Per c,pit -ooi o cloie os2veat of ragoal Coup( -t "te Lre AP0 i -eaer eqtoireat of oct food coppilac aviabe10oosr per ctia r 'oLathoaid\. - ftoweinla\.ly ative per\.o, -lecldlog Ormd per day\. Availble sepplis -Wri\. domestic prot,cction, ipmpot I\.esa ~ Coianodid~JC6l7Aot aseclotig oasseives stodeata, etc Dafliti-c experts, aid thesges 10 stock\. Net se4pplies esold cimaI feed, $seds, iA vebsoca ccis-lee ar oat -wsehble\. oceeItite seed In food ProcesaLig, eat bases ic dctribotios\. capsizee !41A\.~~(' mle labor fove as Percetage of total labor force\. -ms ea- estimated by Pc based o0 pby\.iailgioal osedi for so-r%l Mothil60f\. reait - Lhoro forv-\.a inareing, forestry, b,oatlsg sad activity acd health coceidorisg uftairosasotal taeeratA,*, body swights, C1i\.bInd as jeemage of totalmo lhr\.rce\. age oct sa dietrib,Ation\. of ppoaic, dc a11io 6a 10 percent for toDectt,oeoa - tAhor fovea IA aliag, -mtroctwn, -efaatoclIg aid aets at household lard\. seletct - e aid gas as Perveatag of total Labor Coves\. \.ervoito oprf'rti -m\.prder( -Protein coatet of per patccto ae(percect) - totalIml,et \.l Pacpetio or captaoa ofppY oftoiod pe d gtsppyo od is defibd ea activity rates ar compted u total, sae1atC \.lbrCfoves as pe-- shov\. Osqaieote for 011 cosOotr-is cetabliid by look provie for csot"\.g of total, gmle - fatCmis popelatics of al eages rpectivly; aiiu Uo,,ac of 650 gea of total poteIo Per dW eatd 20 gra of 1960, 1970, eat 1975 data\. The\.se are 0v0 5PertboOpeti ratee reflacting Tacia eatd PAI\.e protei\., of ohich 10 gpame should be a\.11 prot-a -ag\.-e\. \.troct-r hf the poPolation, eat 1ag tim tree\. A fee estimetes Iba tenderd are lose thea thoes of 75 Sr-e of total vrotei\. aid s'sfea tiooi scre\. 25 gram of\.imiPvetet as ca aveag for the erld, proposed by PIOl R\.&L - Ratio of l,Pslatiou coder 15 catd 65 aid 0-\. to L\. the Third Wdorld Food Sorvy\. teiof 6ba grousp of 15-64 years\. Per osItaetel c iC oeaimasL sat Pulse - Protel VAPPlYl of foot Zhild ais10)gralt at ic \.hoo ssed- Accoaal deaths por thoosat PeoaioPrivt om(b Atsk ai kad \.foeeve OF richest Iage""osa 14 year, to childom in thi, age grap; for met decal\. 5 ims\.Mta, rtoh55t 0 eea,pret 20 Per t aid pooret -\.0 p-erst opi\.g occtris data derived Cr00 lifs tables, of ~sba\. lts\. Ufe bosoteacy at hi-t V t%rs - vrg bro ears of life Ielae ho\.te Poverty omlvlUAaroia re o oh -miciueag t birth; 10,\. 190 id19 numtar fbolt pYr lo lvl i\.s ta hm evlhl\.aih o iae lofamt IcbrtLLIO" catsor tooIAst ( - A-oAsL deaths of iofeits xodr one Asutrihiaally edsquat\. dist plc\. -ectil\. 00-food retq,irmat\. is act yea of ege per thoosedliebis-th\., affordable\. Acess\. to Oaf e Vater (oerct of ooletioa) -itot _al rban\.stcrl\. Itue ealsPoet e ee 0$ rcta csha eat rucral- Bhater of Ppeopl total, or-h o oa ltraonbl cest sa eaiepoet ca oo sm-hr 0o averageprcit eafr eter supply (Lccl,cdsa treated ss-facs cter or octreated hot Persomal icem of the 0-try0\. Urbe Leve is derived Cfrc Pthe 'rra \.ave Amotetmando eater such -e that fc- protaetad Or e sprisga, otto idJums~t for higher cost of 1ivOog is o-bee areas\. eat sealter sobu) as peretages of their respestiv populations\. to Iaiaa oelticSleAelt Pvry:c ee oeeet - o-a a ma o~ aea poIlofosatmis or Uatsidwsa isated eat me theahProe P50-ct f ppl Aatic ;* orb atroeal fse r Miest poor\. me\.ters fra a hoece my be osiderd as being sitkin -eaa\.ebi* c\.sa of that he\. Ia ral ara reasmehL w&*&e \. e dsel th\.- at the hoeseif\. mor er of the boAuQWI d\. et bae" to ePmd a disawpe- U i sat Oocial D\.ta Divisic \.imo part of the day is feteoi" -b AMRy' Jan,$e akege Scm~ov Adiaia eat P-eietioes Depertvt  -28 - ANNEX I Page 4 of 5 ECONOMIC INDICATORS GNP PER CAPITA (1978)-US$400 MID-1978 POPULATION - 38\.7 Million (World Bank Atlas Methodology) GROSS NATIONAL PRODUCT IN 1978 ANNUAL RATE OF GROWTH 7\. Constant Prices) US$ Mln\. a 1961-66 1/ 1967-74 1/ 1975-78 2/ GNP at Market Prices 13,600 100\.0 5\.4 3\.6 13\.3 Gross Domestic Investment 3,590 26\.4 10\.7 5\.4 24\.9 Current Account Balance -1,760 12\.9 Export of Goods, NFS 3,530 26\.0 4\.3 6\.2 7\.8 Import of Goods, NFS 6,490 47\.7 8\.8 9\.2 7\.0 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1978 Value Added Labor Force 3/ V\. A\. Per Worker US$ M%\. \. M\. 7 EI Agriculture 3,350 28\.7 4\.135 41\.1 810 15\.7 Industry 4/ 3,460 29\.6 1\.902 18\.9 1820 35\.4 Distributive Sector 2,340 20\.0 1\.560 15\.5 1500 29\.1 Services 2,530 21\.7 2\.472 24\.5 1020 19\.8 Total/Average 11680/2920 100\.0 10,069 100\.0 1160 100\.0 GOVERNMENT FINANCE General Government 5/ US$ Mln\. % of GNP 1978 1974 1978 Current Receipts 5,310 33\.9 39\.1 Current Expenditure 4,640 34\.0 34\.2 Current Surplus/Deficit 670 -0\.1 4\.9 Capital Expenditures 3,310 13\.8 24\.3 External Financing (net) 1,140 3\.3 8\.4 MONEY, CREDIT and PRICES 1973 1974 1975 1976 1977 1978 (Million L\.E\. outstanding end period) Money and Quasi Money 1207 1515 1883 2417 3185 4090 Bank Credit to Public Sector 1852 2338 3527 4123 4775 6035 Bank Credit to Private Sector 102 149 230 251 434 570 (Percentages or Index Numbers) Money and Quasi Money as % of GDP 31\.7 36\.1 38\.5 38\.5 43\.4 47\.5 Wholesale Price Index (1973 = 100) 100\.0 112\.4 119\.1 131\.4 145\.0 157\.7 Annual percentage changes in: Wholesale Price Index 10\.4 12\.4 6\.0 10\.3 10\.3 8\.7 Bank Credit to Public Sector 9\.6 26\.2 50\.9 16\.9 15\.8 26\.4 Bank Credit to Private Sector 10\.9 46\.1 54\.4 9\.1 72\.9 31\.3 NOTE: All conversions to dollars in this table are at the 1978 weighted exchange rate of US$1\.496 -1 LE\. 1/ At 1965 Constant Prices\. 2/ At 1975 Constant Prices\. 3/ Total labor force; unemployed are allocated to sector of their normal occupation\. 4/ Manufacturing and Mining, Petroleum, Electricity and Construction\. 5/ Local Government comprises a small part of General Government\. not applicable  -29- ANNEX I Page 5 of 5 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1975-78) 1975 1976 1977 1978 US$ Ml\.n % (US$ million) Cotton 354 19\.8 Exports of Goods, NFS 2,194 2,759 3,537 3,530 Yarn and Textiles 364 20\.4 Imports of Goods\. NFS 4,931 -4,910 -5,486 -6,490 Petroleum 442 24\.7 Other Agriculture 224 12\.5 Imports of Foreign -140 -240 -330 -290 All other commodities 405 22\.6 oil ComLpanies Total 1,789 100\.0 Workers' Remittances 366 755 894 1,760 Other Factor Services (Net) -104 -202 -205 -270 Net Factor Services 262 553 689 1 EXTERNAL DEBT (MLT), DECEMBER 31\. 1978 Balance on Current Account -2,615 -1,838 -1,590 -1,760 Amortization -600 -734 -812 -900 US$ Mln Total Deficit -3,215 -2,572 -2,402 -2,660 ______ Public debt, incl guaranteed 9,970 1/ Repayments on public debt 900 Direct Foreign Investment 140 300 434 440 Interest on public debt 390 Grants 1,076 792 445 345 MLT Borrow\.ing 2,509 1,622 3,Q27 2,585 3,725 2,714 3,Q 3,370 3 725 2714 3 906 3\.370 DEBT SERVICE RATIO FOR 1978 if 23\.7% Other Capital 'Net) -152 236 -961 -495 Residual -420 -333 -348 -145 Tncrease in Reserves '+) -62 45 195 71 Gross Reserves 'end year) 294 339 534 605 Fuel and Related Materials tmports of vhich: Petroleum -477 -385 -250 -200 Exports of ihich: Petroleum 164 268 600 730 1/ $10,590 million as of July 31, 1979\. / Ratio of debt service to exports of goods and services\. February 4, 1980  30 ANNEX II Page I of 8 THE STATUS OF BANK GROUP OPERATIONS IN EGYPT A\. STATEMENT OF BANK LOANS AND IDA CREDITS (As of March 31, 1980) 4/ Asount in million US dollars Loan/Credit Approved 1ess cancellations Numbers FY Borrower Purpose Bank IDA Undisbursed Ln 243-UAR 60 SCA Suez Canal Expansion 56\.5 - Cr 181-UAR 70 UAR Nile Delta Drainage -- 26\.0 1\.9 Cr 284-UAR 72 ARE Railways I -- 30\.0 0\.8 Cr 393-UAR 73 ARE Upper Egypt Drainage -- 36\.0 4\.0 Cr 412-UAR 73 ARE Development Industrial Bank 1/ -- 15\.0 0\.3 Cr 423-UAR 74 ARE Cotton Ginning Rehabilitation -- 18\.5 3\.5 Cr 437-UAR 74 ARE Population __ 5\.0 0\.1 Cr 484-UAR 74 ARE Talkha Fertilizer -- 20\.0 0\.4 Cr 524-EOT 75 ARE Ag/Ind Imports _- 35\.0 0\.3 Ln 1062-EOT 75 ARE Ag/Ind Imports 35\.0 -- 1\.2 Ln 1064-EGT 75 SCA Suez Canal Rehabilitation 50\.0 -- 21\.7 Ln 1085-EGT 75 ARE Tourah Cement 40\.0 __ 4\.0 Ln 1098-EGT 75 ER Railways II 37\.0 -- 10\.4 Cr 548-EGT 75 ARE Telecommunicationa -- 30\.0 3\.1 Cr 576-EGT 76 ARE Development Industrial Bank II 1/ -- 25\.0 0\.5 Ln 1239-EOT 76 APA Alexandria Port 45\.0 -- 32\.7 Ln 1276-T-EGT 2/ 76 ARE Fruit and Vegetable Dev\. 50\.0 -_ 42\.3 Cr 637-EGT 76 ARE Upper Egypt Drainage II -- 40\.0 23\.1 Ln 1285-EGT 76 ARE Upper Egypt Drainage II 10\.0 -_ 10\.0 Ln 1292-EGT 76 ARE Textile Rehabilitation 52\.0 -- 34\.8 Ln 1369-EGT 77 AWA Alexandria Water Supply 56\.0 __ 45\.2 Cr 681-EGT 77 ARE Education -- 25\.0 5\.8 Cr 719-EGT 77 ARE Nile Delta Drainage II -- 27\.0 13\.9 Ln 1439 EGT 77 ARE Nile Delta Drainage II 27\.0 -_ 27\.0 Ln 1440-T-ECT 2/ 77 ARE Nile Delta Drainage IT 12\.0 __ 12\.0 Ln 1453-ETT 77 EEA Regional Electrification 48\.0 __ 28\.6 Ln 1456-EGT 77 ARE Industrial Imports 70\.0 -_ 38\.0 Ln S-005-ETT 77 ARE Iron Ore Beneficiation and 2\.5 __ 1\.1 Engineering Ln 1482-EOT 78 SCA Suez Canal Expansion 100\.0 -- 41\.4 Cr 5-20-ETT 78 ARE Water Supply Engineering -- 2\.0 0\.2 Cr 774-ECT 78 ARE Telecommunications II -- 53\.0 53\.0 Ln 1533-EGT 78 DIB Development Industrial Bank III 40\.0 -- 28\.0 Cr 830-ERT 78 ARE Agricultural Development -- 32\.0 32\.0 Cr 831-EGT 78 ARE Urban Development -- 14\.0 13\.7 Cr 850-EGT 79 ARE Second Population -- 25\.0 24\.9 Cr 868-EGT 79 ARE Second Education -- 40\.0 38\.7 Ln 1-14-EGT 79 ARE New Valley Phosphate Engineering 11\.0 -_ 4\.3 and Technical Assistance Cr 909-EGT 79 ARE Tourism -_ 32\.5 32\.5 Ln 1732-EGT 79 ARE Gulf of Suez Gas 75\.0 -- 75\.0 Cr 935-ETT 79 ARE Shoubrah El Eheisa 37\.0 37\.0 Thermal Power 3/ Ln 1733-EGT 79 EEA Sboubrah El Kheima 102\.0 -- 102\.0 Thermal Power 80 ARE Agroindu\.tries -- 45\.0 45\.0 80 DIE DIB 50\.0 -- 50\.0 Totals 969\.0 613\.0 944\.4 Of which has been repaid 58\.5 Total now outstanding 910\.5 Amount sold 7\.5 Of which has been repaid 7\.4 0\.1 Total now held by Bank and IDA 910\.4 613\.0 S\. STATEMENT OF IFC INVESTMENTS (Amount in US$ million) Year Obligor Type of Business Loan Equity Total 1976 Arab Ceramic Company Ceramic Industry 4\.25 \.75 5\.0 (Plus \.635 contingency commitment) (5\.635) 1977 Nile Clothing Company Ready-Made Garment Industry 0\.40 0\.20 0\.60 1978 Delta Sugar Company Agricultural Production, 20\.0 2\.00 22\.00 mainly sugar (Plus 1\.0 standby commitment) (23\.00) 1979 Ismailia Misr Poultry Food and Food Processing 5\.97 1\.52 7\.49 Company 1979 Ismailia Fish Farming Food and Food Processing 1\.929 \.453 2\.382 Company (Plus 0\.1 contingency commitment) (2\.482) 32\.549 4,923 37\.472 (Plus contingency conitment) (39\.207) 1/ Formerly Bank of Alexandria 2/ Third Window Loan 3/ Not included is EEC Sp\. Action Credit 20 of $35\.0 4/ Tha following Bank loans and IDA creditc hays been approved and signed since March 31, 1980: $69 million Bank loan for Second Textile Project, $30 million Bank loan for Miar Iran Development (DFC) project, $50 million IDA credit for Cairo Gas Distribution Project, and $50 million for Pulp and Paper Project\.  - 31 - ANNEX II Page 2 of 8 C\. PROJECTS IN EXECUTION 1/ Cr\. No\. 181-UAR - Nile Delta Drainage I Project; US$26 million Credit of April 17, 1970; Effective Date: December 22, 1970; Closing Date: December 31, 1980 The only outstanding activity on this project is installation of field drainage, which remains to be accomplished on about 9 percent of the project area of 950,000 feddans\. Progress on this activity is slow due mainly to management problems with public sector contracting companies\. Work is complete on other major components including some 1,700 km surface drains and eleven pumping stations\. The Drainage Authority expects to achieve full completion of the project ending December 1980\. Cr\. No\. 284-UAR - Egyptian Railway Project; US$30 million Credit of February 9, 1972; Effective Date: July 17, 1972; Closing Date: June 30, 1980\. The project generally was implemented satisfactorily but progress on the electrical signalling items which is 95 percent complete, has been at a standstill for the last two years due to difficulties with municipal authori- ties regarding site occupation\. Successive extensions of the loan period have been necessary\. ER has been informed that no further extensions will be agreed beyond the present closing date\. The disbursement total is likely to be US$29 million\. Cr\. No\. 393-UAR - Upper Egypt Drainage I Project; US$36 million Credit of June 8, 1973; Effective Date: November 28, 1973; Closing Date: July 31, 1981\. Work is almost complete on some 1,640 km surface drains in 300,000 feddan project area\. Of the five pumping stations, one is operational and work on the others is about 82 percent complete\. Installation of tile drains is about 61 percent complete\. Progress on this activity is slow because of inadequate management by contractors and physical difficulties arising from sugarcane which occupies in the cropping pattern some 50 percent of the area\. Bilharzia Control Program is proceeding as scheduled\. Progress on procurement is satisfactory\. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any prob- lems which are being encountered, and the action being taken to remedy them\. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution\.  - 32 - ANNEX II Page 3 of 8 Cr\. No\. 423-UAR - Cotton Ginnlng Rehabilitation Project; US$18\.5 million Credit of July 30, 1973; Effective Date: February 15, 1974; Closing Date: December 31, 1980\. The scaled-down project financed by IDA is estimated to be completed in 1982\. The remainder of the full project is being financed by a loan from the Saudi Fund for Development\. The foreign cost estimates for the project have remained basically unchanged, but the local component continues to escalate mainly due to delays caused by shortage of local funds\. Cr\. No\. 484-UAR - Talkha II Fertilizer Project; US$20 million Credit of June 24, 1974; Effective Date: January 22, 1975; Closing Date: April 1, 1980\. Project is nearing mechanical completion; procurement has been completed\. According to the latest indication, the project is expected to be commissioned by mid-1980, about two years behind schedule, partly because of delays in civil works and procurement\. Cr\. No\. 524-EGT and Ln\. No\. 1062-EGT - Agricultural and Industrial Imports Project; US$35 million Credit and US$35 million Loan of December 20, 1974; Effective Date: March 19, 1975; Closing Date: December 31, 1980\. The bulk of the procurement actions has been completed and only about $0\.4 million and $1\.2 million remain to be disbursed under the credit and loan, respectively\. Discussions are presently taking place with the Government regarding the utilization of the uncommitted funds prior to the closing date which has been extended by one year\. Ln\. No\. 1064-EGT - Suez Canal Rehabilitation Project; US$50 million Loan of December 20, 1974; Effective Date: April 21, 1975; Closing Date: December 31, 1980\. Progress in implementation has improved and about 85 percent of the project funds have been committed\. The design of the last major item of equipment to be financed from the loan is now being undertaken\. Because of the initial delay in implementation, the project is now expected to be com- pleted only by December 1981; the closing date of the loan will, therefore, have to be extended\. Ln\. No\. 1085-EGT - Tourah Cement Expansion Project; US$40 million Loan of February 10, 1975; Effective Date: June 9, 1975; Closing Date: December 31, 1982\. Procurement of machinery and equipment is completed\. Most items are already on site being erected\. Slow civil works execution has further delayed project execution\. Thus start-up of commercial operations is expected to be only towards early 1981\.  - 33 - ANNEX II Page 4 of 8 Ln\. No\. 1098-EGT - Railways II Project; US$37 million Loan of April 2, 1975; Effective Date: August 20, 1975; Closing Date: June 30, 1981\. Investment in mobile assets has been satisfactory but progress on fixed installations is slow\. The Egyptian Railways' (ER) operations and maintenance situation remains very poor with low availability of locomotives and rolling stock\. The track renewal and repair program is also behind schedule\. Efforts are now being made to improve rolling stock maintenance with the help of consultants and ER plans to set up separate companies with overseas technical assistance to upgrade track conditions\. The 1980-84 draft investment program contains many large investments including new lines for which no economic justification has been demonstrated\. The financial situation is poor and a deficit of LE 38 million was forecast for 1979\. After many years without tariff increases, substantial increases in freight tariffs were made in 1979, and passenger fare increases are promised for 1980\. A draft decree which would establish a National Railway authority and aims to give the railways inter alia considerably more autonomy in relation to tariffs and staff salaries is under discussion\. Cr\. No\. 548-EGT - Telecommunications Project; US$30 million Credit of May 16, 1975; Effective Date: August 14, 1975; Closing Date: December 31, 1980\. Procurement has now been completed and the IDA credit has been fully committed\. Procurement of the telex exchanges was transferred to the Telecommunications II project\. Physical installations are about two years behind the appraisal schedule mainly because of initial delays in procurement actions and in building construction\. Cr\. No\. 576-EGT - Second Development Industrial Bank (formerly Bank of Alexandria) Project; US$25 million Credit of July 30, 1975; Effective Date: February 19, 1976; Closing Date: October 31, 1980\. The credit is now fully committed and $24\.5 million has been dis- bursed as of April 2, 1980\. Ln\. No\. 1239-EGT - Alexandria Port Project; US$45 million Loan of April 19, 1976; Effective Date: August 30, 1976; Closing Date: December 31, 1980\. The contract for the major part of the civil works and dredging was awarded in April 1979 and work is now progressing\. Procurement of equipment is also progressing satisfactorily\. Because of the delayed start of the main civil works, the project is now expected to be completed only by June 1982; the closing date of the loan will, therefore, have to be extended\. Ln\. No\. 1276-EGT - Fruit and Vegetable Development Project; US$50 million Third Window Loan of June 11, 1976; Effective Date: December 20, 1976; Closing Date: December 31, 1982\. The project is now over two years behind schedule\. Work on the drainage and irrigation components of the project is proceeding although  - 34 - ANNEX II Page 5 of 8 behind schedule\. The seed component has major problems, which the Bank is now discussing with Egyptian officials\. The Agricultural Development Lending Unit in Bank Misr is attempting, with assistance from the World Bank, to ensure that the variovfs sub-borrowers proceed with their respective investments, and to identify additional sub-borrowers\. The project scope has been expanded to allow financing of agroindustries subprojects, and terms of financing liberalized\. Ln\. No\. 1285-EGT and Cr\. 637-EGT - Upper Egypt Drainage II Project; US$10 million Loan and US$40 million Credit, both of June 11, 1976\. Effective Date: January 31, 1977; Closing Date: June 30, 1983\. Work is progressing in accordance with the revised schedule on some 1,602 km of surface drains in 500,000 feddans\. Overall progress is about 55 percent\. As compared to appraisal target of 240,000 feddans, field drainage is complete on only about 24,000 feddans\. This shortfall has resulted from a delay of almost two years with supply and erection of USAID financed equipment for three PVC pipe-making factories\. As these factories are now nearing production, the work of installing tile drains will be accelerated\. Contracts for the same have already been awarded covering the entire project area\. Ln\. No\. 1292-EGT - Textile Project; US$52 million Loan of September 20, 1976\. Effective Date: February 16, 1977; Closing Date: March 31, 1982\. The project is proceeding with a year and a half delay caused by a later and slower than anticipated start of the civil works\. The project is now estimated to cost about US$21 million equivalent (all in local currency) more than appraised, due to increased scope of civil works and general price increases of construction materials beyond what was expected at appraisal\. No difficulties are foreseen in financing this, although some government equity contribution would be required in the next two years to supplement the companies' internal cash generation in order to adhere to the financial covenants as well as project costs\. Early management problems have now been overcome and both companies have developed effective project implementation units\. Disbursements are slower than anticipated reflecting initial delays in procurement\. However, about 90 percent of the contracts for machinery and equipment have now been awarded and the balance is expected to be awarded in the near future\. Ln\. No\. 1369-EGT - Alexandria Water Supply Project; US$56 million Loan of March 7, 1977; Effective Date: July 6, 1977; Closing Date: June 30, 1982\. After a second round of bidding for construction of the pipelines, borrower decided to reject all bids as being out of line with prices obtainable from local contractors for similar work, and informed the Bank that it wished to execute this component with local contractors using Egyptian funds\. Accordingly it requested cancellation of that part of the loan\. The Bank has thus cancelled US$2\.85 million\. The construction contract for the treatment plant extensions is currently out to bid\. Proposals for data processing equipment and training have been called for\. Meter replacement to improve  - 35 - ANNEX II Page 6 of 8 AWA's operations continues at a satisfactory pace\. An application for a general tariff increase is with the Governor for consideration by the Alexandria Local Council but approval is still pending\. Cr\. No\. 681-EGT - Education Project; US$25 million Credit of March 7, 1977; Effective Date: August 19, 1977; Closing Date: December 31, 1980\. Project implementation, since the transfer of two MOHE institutes to Credit 868, is proceeding satisfactorily\. Virtually all technical assis- tance has been completed\. About 90 percent of all equipment has been procured and nearly all has been installed\. Of the 23 institutions to be constructed 17 are completed and are operational, 5 will be completed by August and the other by December 1980\. All of the existing institutions being re-equipped are operational\. About 77 percent of Credit amount has been disbursed and nearly all of the remainder has been committed\. Cr\. No\. 719-EGT, Ln\. No\. 1439-EGT and Ln\. No\. 1440T-EGT - Nile Delta Drainage II Project; US$27 Million Credit, US$27 Million Loan and US$12 Million Third Window Loan of July 15, 1977; Effective Date: April 17, 1978; Closing Date: December 31, 1983\. Progress on surface drains is satisfactory with completion achieved in some 230,000 feddans out of total area of 815,000 feddans\. For construction of four new and renovation of two existing pumping stations, the contractors have started preliminary works following award of contracts in December 1979\. Work has not started on installation of field drainage in 400,000 feddans\. Progress on this activity will depend upon KfW financed PVC pipe-making factory (planing is currently in progress)\. This factory is expected to be commissioned more than one year behind appraisal target of December 1979\. It would accordingly delay completion of field drainage, which is critical to full completion of the project\. Ln\. No\. 1453-EGT - Regional Electrification Project; US$48 Million Loan of July 15, 1977; Effective Date: February 6, 1978; Closing Date: December 31, 1981\. Physical progress is good\. A six month delay in completion of construction is expected, however\. Consultants for the extension of the UNDP Power Sector Survey have completed their work\. The Tariff Study financed under the Loan has been completed\. Consultants for the distribution companies have been engaged\. All contracts for equipment, materials and technical assistance have been awarded\. Ln\. No\. 1456-EGT - Industrial Imports Project; US$70\.0 Million Loan of July 15, 1977; Effective Date: November 7, 1977; Closing Date: December 31, 1980\. As of February 29, 1980, about $31\.4 million had been disbursed and about $38\.3 million committed, representing some 55 percent of the total loan\. Utilization of the loan proceeds has been slow mainly because of delays in procurement of equipment for public sector firms\.  - 36 - ANNEX II Page 7 of 8 Ln No\. S-5 EGT - Iron Ore Engineering and Beneficiation Project; US$2\.5 Million Loan of July 15, 1977\. Effective Date: February 2, 1978; Closing Date: December 31, 1980\. Consultants preparing both iron ore beneficiation and diagnostic studies have submitted the final feasibility studies\. The closing date was extended to help finance consulting services to help prepare a rehabilitation and balancing project for Egyptian Iron and Steel Company\. Ln\. No\. 1482-EGT - Suez Canal Expansion Project; US$100 Million Loan of September 28, 1977; Effective Date: February 8, 1978; Closing Date: December 31, 1981\. Progress in the execution of the project is close to appraisal estimates although in some areas, such as demolition and procurement of tugs, there is some delay\. This, however, is not expected to materially affect the project completion date\. The financial situation of the borrower is sound, canal traffic and revenue being higher than appraisal estimates\. Cr\. No\. S-20-EGT - Water Supply Engineering Project; US$2\.0 Million Engineering Credit of December 29, 1977; Effective Date: April 28, 1978; Closing Date: June 30, 1980\. Formal presentation of final draft report took place in December 1979 and Government comments have been incorporated into the draft report\. Project in Beheira Governorate identified in the report\. Ln No\. 1533-EGT - Development Industrial Bank III; US$40\.0 Million Loan of Ap-ril 12, 1978; Effective Date: July 18, 1978; Closing Date: December 31, 1982\. Commitments and disbursements are progressing satisfactorily\. As of February 29, 1980, $10\.8 million had been disbursed and $35\.5 million had been committed\. The balance of the Loan is expected to be committed by June 1980\. Cr\. No\. 774-ECT - Second Telecommunications Project; US$53\.0 Million Credit of March 21, 1978; Effective Date: September 19, 1978; Closing Date: December 31, 1981\. Some reallocation of Credit proceeds was agreed to in September 1979\. Bid documents for a substantial part of the equipment and materials to be financed under the Credit had been processed by January 1980, and the rest are expected by May 1980\. Cr\. No\. 830-EGT - Agricultural Development Project; US$32\.0 Million Credit of July 24, 1978; Effective Date: February 20, 1979; Closing Date: December 31, 1983\. Satisfactory progress has been made in procurement of farm machin- ery\. Institutional development is lagging behind appraisal expectations\.  - 37 - ANNEX II Page 8 of 8 Cr\. No\. 831-EGT - Egypt Urban Development Project; US$14\.0 Million Credit of August 30, 1978; Effective Date: April 30, 1979; Closing Date: December 31, 1982\. Key staff have been appointed, draft terms of reference for some advisors and consultants have been agreed and contracts are being finalized\. Preliminary steps on the design of physical works have been started\. Completion of the project is expected to be delayed by at least 18 months\. Cr\. No\. 850-EGT - Second Population Project; US$25\.0 Million Credit of October 30, 1978; Effective Date: May 1, 1979; Closing Date: December 31, 1983\. Civil works and procurement of furniture, equipment and vehicles are proceeding satisfactorily\. Recruitment of project personnel shows progress, but is not complete\. Cr\. No\. 868-EGT - Second Education Project; US$40\.0 Million Credit of January 26, 1979; Effective Date: July 18, 1979; Closing Date: March 31, 1984\. Project implementation is proceeding very well\. Of the twenty three institutions to be constructed, two are completed, eight will be completed by mid-1981, 10 will be completed in late 1981 and the three MOHE institutes are expected to be completed on schedule by late 1983\. Eighty four percent of all equipment is under procurement with contracts already signed for 23 percent\. All technical assistance has been contracted and implementation is underway\. Disbursements are well ahead of schedule, a situation which is expected to continue\. Ln\. No\. 5-14-EGT - New Valley Phosphate Engineering and Technical Assistance Project; US$11\.0 Million Loan of May 25, 1979; Effective Date: October 19, 1979; Closing Date: June 30, 1982\. Procurement and delivery of mining equipment is underway and erec- tion has started at mine site; laboratory tests of phosphate rock are being carried out\. Cr\. No\. 909-EGT - Tourism Project; US$32\.5 Million of June 13, 1979; Effective Date: March 26, 1980; Closing Date: December 31, 1985\. Project implementation has started\. Ln\. No\. 1732-EGT - Gulf of Suez Gas Project; US$75\.0 Million of June 29, 1979; Effective Date: January 29, 1980; Closing Date: September 30, 1982\. Project implementation is in progress\. The onshore contract was signed on March 23, 1980\. Construction completion is scheduled for 19 months after receipt of a 10 percent downpayment due within 30 days after signing\. Ln\. No\. 1733-EGT, Cr\. No\. 935-EGT and Special Action Cr\. No\. 20-EGT - Shoubrah El Kheima Thermal Power Project of September 6, 1979; Effective Date: April 8, 1980; Closing Date: June 30, 1986\. Agreements declared effective on April 8, 1980\.  ANNEX III - 38 - Page 1 ARAB REPUBLIC OF EGYPT THIRD POWER PROJECT Supplementary Project Data Sheet Section I - Timetable of Key Events (a) Time taken by Ministry of Electricity Eighteen months (January 1978 and implementing agencies to prepare to June 1979) project: (b) Agencies which have prepared project: Egyptian Electricity Authority (EEA) Qattara Project Authority (QPA) Rural Electrification Authority (REA) (c) Project first presented to the Bank: May 1979 (d) First Bank mission to consider project: July 1979 (e) Date of departure of appraisal mission: October 1979 (f) Date of completion of negotiations: April 11, 1980 (g) Planned date of effectiveness: December 1980 Section II - Special Bank Implementation Actions None\. Section III - Special Conditions Special conditions of effectiveness of the credit and loan are: Ci) execution of Subsidiary Loan Agreements between the Government and EEA; (ii) execution of subsidary agreements between, on the one hand, EEA and, on the other hand, QPA and REA, respectively; and (iii) completion of satis- factory financing plan for hydropwer component\. Special condition of dis- bursement for the thermal power component is a completion of a satisfactory financing plan therefor (para\. 51)\. Other special conditions are: Ci) adjustment of EEA's tariffs in line with fuel price increases being introduced by Egyptian General Petroleum Corporation (para\. 39); and (ii) completion of phase I and II tariff studies and implementation of the recommendations emanating therefrom taking into account the Bank's comments (para\. 59)\.  ,BRD 14794 Medewr0'neptt 3C Sect ISRA L' j 35- MARCH 1980 !El = eo ARAB REPUBLIC OF EGYPT 2J Elmir AloeejnOlt \il/ORDAN THIRD POWER PROJECT -30' nrs i,o Eiton I F Aswan II Location Elboero\.( Proposed Forebay and Powerhouse Proposed 132kV Transmission Line Sokog ! A E Y T \ 0 '' XExisting 132kV Transmission Line A\. R\. EGYPT ' Qeo X @ | * Existing 500kV Transmission Line _ ! E Khorqo 1lo, \ rg_ Roads do~~~~~~~~~~od -25- Aoris * Isi \ 2I --I-I Railroods \. 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APPROVAL

P075947

Document of The World Bank Report No: 34084-AFR PROJECT APPRAISAL DOCUMENT Efficient Water Use for Agricultural Production Project NILE BASIN INITIATIVE SHARED VISION PROGRAM November, 2005 AFTNL Nile Team Africa and Middle East and North Africa Regions  Acronyms and Abbreviations BAW Blanket Application for Withdrawal CBSI Confidence Building and Stakeholder Involvement CIDA Canadian International Development Agency CMI Community-Managed Irrigation CMIWG Community-Managed Irrigation Working Group CQ Consultant Qualifications DPP Detailed Procurement Plan DSS Decision Support System EN-SAP Eastern Nile Subsidiary Action Program FAO United Nations Food and Agriculture Organization FMRs Financial Monitoring Reports FMS Financial Management Specialist GEF Global Environment Facility GPN General Procurement Notice ICARDA International Center for Agricultural Research in the Dry Areas ICB International Competitive Bidding ICCON International Consortium for Cooperation on the Nile ICR Implementation Completion Report ICRISAT International Crops Research Institute for the Semi-Arid Tropics IWMI International Water Management Institute MSA Management Services Agreement NBI Nile Basin Initiative NBTF Nile Basin Trust Fund NCB National Competitive Bidding NEL-SAP Nile Equatorial Lakes Region Subsidiary Action Program NGO Nongovernmental organization Nile-COM Council of Ministers of Water Affairs of the Nile Basin States Nile-TAC Nile Basin Initiative Technical Advisory Committee Nile-SEC Nile Basin Initiative Secretariat NPC National Project Coordinator OPP Overall Procurement Plan PAD Project Appraisal Document PMI Public and Private Managed Irrigation PMIWG Public and Private Managed Irrigation Working Group PMU Project Management Unit PSA Project Services Agency PSC Project Steering Committee QCBS Quality and Cost-Based Selection RBA Rapid Baseline Assessment RELMA Regional Land Management Unit RPM Regional Project Manager SAP Subsidiary Action Program SPN Specific Procurement Notices SVP Shared Vision Program UNDB United Nations Development Business UNDP United Nations Development Programme UNOPS United Nations Office for Project Services WH Water Harvesting WHWG Water Harvesting Working Group WUAs Water Users Associations Fiscal Year: January 1-December 31 All dollar figures are in current U\.S\. dollars Vice President: Gobind Nankani AFR and Christiaan Poortman MNA Sector Directors: John McIntire, AFTSD and Inger Andersen, MNSRE Nile Team Manager: David Grey, AFTNL Task Team Leader, IJsbrand H\. de Jong, AFTS2  Table of Contents A\. Background and Project Development Objective \. 1 1\. Project Development Objective \. 2 2\. Key Performance Indicators (see Annex 1)\. 2 B\. Strategic Context\. 2 1\. The Nile Basin Initiative and the Shared Vision Program \. 2 2\. Sector­related Regional and Country Assistance Strategy Goal Supported by the Project \. 3 3\. Main Sector Issues and Government Strategy: \. 4 4\. Sector Issues addressed by the project \. 4 C\. Project Description\. 5 1\. Project Components \. 5 2\. Key Policy and Institutional Reforms Supported by the Project\. 8 3\. Benefits and Target Populations \. 8 4\. Institutional and implementation arrangements \. 8 D\. Project Rationale\. 14 1\. Project Alternatives Considered and Reasons for Rejection\. 14 2\. Major Related Projects Financed by External Support Agencies and Lessons Learned \. 15 3\. Indications of Borrower Commitment and Ownership \. 16 4\. Value Added of Bank Support in the Project\. 16 E\. Summary Project Analysis\. 16 1\. Economic \. 16 2\. Financial\. 17 3\. Technical\. 17 4\. Institutional \. 18 5\. Environment\. 19 6\. Social\. 19 7\. Safeguard Policies\. 21 F\. Sustainability and Risks\. 22 1\. Sustainability\. 22 2\. Critical Risks\. 22 G\. Main Grant Conditions\. 23 1\. Requirements for Appraisal \. 24 2\. Requirements for Negotiations\. 24 3\. Requirements for Effectiveness for each SVP Project\. 24  Annexes ANNEX 1: Project Logframe\. 25 ANNEX 2: Detailed Project Description\. 35 ANNEX 3:Destimated Project Costs\. 49 ANNEX 4: Documents in the Project file\. 63 ANNEX 5: Financial Summary\. 64 ANNEX 6: Procurement and Disbursement \. 65 ANNEX 7: Project Processing Schedule\. 75 ANNEX 8: Description of the Nile Basin Initiative\. 77 ANNEX 9: Integrated Safeguards Data Sheet \. 91  NILE BASIN INITIATIVE Efficient Water Use for Agricultural Production PROJECT APPRAISAL DOCUMENT AFRICA/MNA Region AFTS2 Date: October, 2005 Team Leader: IJsbrand H\. de Jong Sector Manager/Director: Karen Brooks Sector(s): Water Resources, Agriculture Country Director: Makhtar Diop Theme(s): Water Resources Management, Irrigation and drainage Project ID: P075947 Focal Area: International Waters; Agriculture Project Financing Information [ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Other: Total Project Cost (US$m): 5\.28 Cofinancing: 0\.45 Total Financing by the IBRD (US$M): 4\.83 Finance Plan: Sources Total US$ Million Recipients Nile Basin Trust Fund/(NBTF) 4\.83 Government 0\.45 TOTAL IMPLEMENTATION: 5\.28 Total: 5\.28 Borrower/Recipient: Nile Basin Initiative Responsible Agency: Nile Basin Initiative Address: P\.O\. Box 192, Entebbe, Uganda Contact Person: Mr\. Patrick Kahangire, Executive Director Tel: 256 41 32 13 29 Fax: 256 41 32 09 71 Email: nbisec@nilesec\.org Estimated Bank FY/US$'000 FY 2005 2006 2007 2008 Annual 844\.2 1,704\.7 1,573 712\.5 Cumulative 844\.2 2,548\.9 4,121\.9 4,834 Project Implementation Period: 3 years Expected Effectiveness Date: June 1, 2005 Expected Closing Date: November 30, 2008   A\. Background and Project Development Objective 1\. Background Nile Basin Initiative\. The NBI is a partnership initiated and led by the riparian states of the Nile River through the Council of Ministers of Water Affairs of the Nile Basin states (Nile Council of Ministers, or Nile-COM)\. The NBI seeks to develop the river in a cooperative manner, share substantial socioeconomic benefits, and promote regional peace and security\. The NBI started with a participatory process of dialogue among the riparians that resulted in their agreeing on a shared vision: to "achieve sustainable socioeconomic development through the equitable utilization of, and benefit from, the common Nile Basin water resources," and a Strategic Action Program to translate this vision into concrete activities and projects\.1 NBI Strategic Action Program\. The NBI's Strategic Action Program is made up of two complementary programs: the basinwide Shared Vision Program to build confidence and capacity across the basin, and Subsidiary Action Programs to initiate concrete investments and action on the ground at sub-basin levels\. The programs are reinforcing in nature\. The Shared Vision Program, which focuses on building regional institutions, capacity, and trust, lays the foundation for unlocking the development potential of the Nile, which can be realized through the subsidiary action programs\. These investment-oriented programs are currently under preparation in the Eastern Nile and the Nile Equatorial Lakes Regions\. Shared Vision Program\. The SVP is a multicountry, multisectoral, grant-funded program of collaborative action, exchange of experience, and analytical work intended to build a strong foundation for regional cooperation\. The development objective of the SVP is to build trust, capacity, and an enabling environment for investment in Nile Basin countries\. This objective will be achieved through the implementation of the projects in the SVP portfolio and the successful coordination and management of the Program throughout the basin\.2 SVP Project Portfolio\. The SVP project portfolio, identified and prepared through a participatory process involving a range of stakeholders from the Nile riparian states, includes seven thematic projects (including the Efficient Water Use for Agricultural Production project, referred hereafter as the Agriculture project) and an eighth coordination project\. Initial project documents were presented at a meeting of donors in Geneva in June 2001, and were later developed and refined during implementation planning and appraisal through extensive consultation with Nile riparians, the Bank, and development partners\. Project Appraisal Document\. The purpose of this project appraisal document is to describe the Agriculture project, one of the seven thematic projects in the Shared Vision Program\. The PAD includes project-specific information regarding implementation arrangements, financial management and disbursement arrangements, procurement, and monitoring and evaluation\. This project-specific PAD, however, is considered subsidiary to the SVP Master PAD,3 which 1Nile Council of Ministers, Policy Guidelines for the Nile River Basin Strategic Action Program, February 1999\. 2Although the Shared Vision Program is a grand funded, technical assistance (TA) program, it is using the World Bank's project cycle process for lending operations, adapted to the unique nature of the NBI, to ensure high standards of quality and fiduciary management\. 3Nile Basin Initiative: Shared Vision Program, Project Appraisal Document, World Bank Report No\. 26222, April 21, 2003\.  Efficient Water Use for Agricultural Production Project Appraisal Document provides a comprehensive overview of the entire Shared Vision Program and its implementation arrangements\. 2\. Project Development Objective The objective of the Agriculture project is to establish a forum to assist stakeholders at regional, national, and community levels to address issues related to efficient use of water for agricultural production in the Nile Basin\. The forum will foster exchange of experiences that will further Nile cooperation by enhancing mutual confidence and providing a critical building block to sustainable utilization of Nile waters\. In addition, it will provide an opportunity to develop a sound conceptual and practical basis for Nile riparian countries to increase the availability and efficient use of water for agricultural production\. 3\. Key Performance Indicators (see Annex 1) Desired outcomes for the Agriculture Project are: Regional dialogue on water harvesting established, best practices for water harvesting explored and disseminated, and national capacity for sustainable water harvesting enhanced\. Regional consultation on community-managed irrigation strengthened, awareness on efficient irrigation water use enhanced, best practices for community-managed irrigation explored and disseminated, and national capacity for community-managed irrigation enhanced\. Regional consultation on public and private-managed irrigation strengthened, awareness on efficient irrigation water use enhanced, best practices for public and private-managed irrigation explored and disseminated, and national capacity for public and private- managed irrigation enhanced\. National level support for agricultural and irrigation policy development provided and national capacity strengthened\. B\. Strategic Context 1\. The Nile Basin Initiative and the Shared Vision Program The Nile Basin enjoys a diverse and rich range of cultures and traditions\. It is also characterized by poverty, political instability and conflict, rapid population growth, environmental degradation, and weak relations among the states\. These issues are related to the Nile in myriad, complex ways\. The Nile River system played a key role in the evolution of societies, cultures, political systems, and international order that exist today\. Control of the Nile has been a strategic objective across much of the basin for centuries\. Because of its complex history, there is only limited cooperation in the development and management of the Nile, with unilateral action causing dispute, and even threatening regional security\. All riparian states rely to a greater or lesser extent on the waters of the Nile for their basic needs and economic growth, or have high expectations of harnessing Nile waters for development\. International rivers and the benefits of cooperation\. Where rivers cross or form national borders and river flow is extremely variable, international cooperation is essential and generates a wide range of benefits for riparian states\. Cooperation will enable better management of ecosystems, providing benefits to the river, which underpins all other benefits\. The efficient, 2  Efficient Water Use for Agricultural Production Project Appraisal Document cooperative management and development of shared rivers can yield major benefits from the river, such as increased food and energy production Cooperation on an international river will result in the reduction of costs because of the river because tensions between riparian states will always be present, to a greater or lesser extent, and those tensions will generate costs\. International rivers can be catalytic agents, because cooperation that yields benefits from the river and reduces costs because of the river can pave the way to much greater cooperation between states, even economic integration among states, generating benefits beyond the river\. The NBI, in which all riparian states are seeking to generate and share the benefits of cooperation at all of these levels, leads the way in Africa, where more than 60 river basins are shared by two or more nations\. The Shared Vision Program\. The basinwide SVP as approved by the Nile Council of Ministers is intended to create the enabling environment for the Nile riparians to realize their vision to "achieve sustainable socioeconomic development through the equitable utilization of, and benefit from, the common Nile Basin water resources\." The Agriculture project is one of eight SVP projects that will provide the vehicle for realizing this vision\.4 2\. Sector­related Regional and Country Assistance Strategy Goals Supported by the Project Supporting the Millennium Development Goals\. Poverty alleviation and sustainable development are the main objectives of the Millennium Development Goals (MDGs), which were agreed upon at the United Nations Millennium Summit in September 2000 to provide a benchmark of indicators to measure development progress\. The World Bank is strongly committed to supporting the MDGs by aligning its corporate strategy to the MDG agenda\. With a focus on institutional capacity building and building regional trust and cooperation, the Shared Vision Program, including the Agriculture Project, lays the foundation for unlocking the investment potential of Nile Basin states\. The Shared Vision Program will create an enabling environment for subsequent NBI cooperative investment programs, the Eastern Nile Subsidiary Action Program (ENSAP) and the Nile Equatorial Lakes Subsidiary Action Program (NELSAP)\. These will support the MDG agenda of poverty alleviation and sustainable development, and in addition will promote regional peace and security\. Supporting Bank policies\. The SVP as a whole, as well as the Agriculture Project, support the goals of the Bank's Water Resources Management Policy Paper, the Africa Water Resources Strategy, and the Bank's recent Water Resources Sector Strategy (2003)\. To illustrate: The Policy Paper notes that the Bank will "help countries improve their management of shared international water resources\." and "if requested, help governments establish or strengthen institutions, such as river basin organizations\." 5 The Africa Strategy Paper emphasizes the need for a basin-wide approach, strengthening of water professional and decision maker in the basin-wide knowledge on Integrated Water Resources Planning and Management, and for the promotion of regional cooperation\.6 Supporting regional cooperation in Africa\. The Bank's development strategy emphasizes gains for all parties from cooperation and regional integration\. Accordingly, the Bank has entered into close partnerships with the New Partnership for Africa's Development (NEPAD) and other regional organizations, including the East African Community (EAC), the Southern African 4For an elaboration of the Nile Basin Initiative, please refer to Annex 9\. 5World Bank Policy Paper, Water Resources Management, 1993, p\. 75\. 6World Bank Technical Paper No\. 331, African Water Resources, Challenges and Opportunities for Sustainable Development, August 1996, pp\. 76f\. 3  Efficient Water Use for Agricultural Production Project Appraisal Document Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA)\. The Shared Vision Program continues with this trend of cross-sectoral and multi- country initiatives\. The Agriculture Project specifically aims to foster such initiatives and to provide opportunities to agricultural and irrigation specialists to meet peers in other Nile Basin countries\. Supporting overall CAS goals\. Water resources management issues are prominent in the Country Assistance Strategies (CAS) for seven of the NBI countries\. Each country gives prominence to different aspects of the water subsector (such as water supply and sanitation, irrigation)\. The Nile is mentioned as an important issue for Egypt, Uganda, and Ethiopia in the country CAS\. Managing transboundary relations on the Nile is a key ingredient of water resource and development plans for these countries\. The NBI provides a forum for transboundary dialogue\. The Agriculture Project supports the overall CAS goals through the promotion of cooperation on irrigated agriculture, the exchange of experiences and best practices, and through training opportunities\. 3\. Main Sector Issues and Government Strategy: The main water related technical, economic, and institutional issues hindering fulfillment of basin country basic needs and economic growth include: (i) stressed water resources throughout the basin; (ii) fragmented rather than integrated approaches to water management at the national level; (iii) lack of capacity in water resources management and regional differences in capacity; (iv) inadequate access to safe drinking water and sanitation facilities; (v) re-enforcing poverty and environmental degradation; (vi) limited access to electricity; (vii) dominant use of water in the basin by agriculture, yet food insecurity remains endemic; and (viii) ineffective sharing of water related information and exchange\. The basin countries have responded by: Country level efforts under way to formulate national water resources policies and strategies to give proper direction to resource management and sectoral services within the country\. Engagement in a variety of regional initiatives (see above), including the NBI\. 4\. Sector Issues addressed by the project The following describes the key sector issues addressed by the Agriculture project\. Inefficient use of water for agriculture\. With intensifying competition over what is becoming a scarce resource, high water abstractions for agriculture, inefficient use and wastage are becoming more and more a problem\. There is strong pressure to reduce allocations to agriculture and to divert water to other sectors (urban, industrial, mining and environmental/tourism)\. Agriculture is now expected to produce `more crop per drop'\. The issue of efficient water use for agriculture is best addressed in a comprehensive way at a basin level by considering resource use efficiency at the scheme level, while at the same time capturing synergies from a basin approach to efficiency\. Limited knowledge of initiatives to use agricultural water more efficiently\. Mechanisms for demand management such as the establishment of user forums, introduction of volumetric water charges, and water regulation and legislation are being established in a number of basin countries\. New Water Policies that embody these principles are being adopted and implemented in a number of countries in the basin\. Also, new technologies are being introduced to ensure higher irrigation efficiencies\. There is limited knowledge among riparian countries of on-going initiatives elsewhere in the basin to address constraints and capture opportunities related to efficient use of agricultural water\. 4  Efficient Water Use for Agricultural Production Project Appraisal Document Little interaction among agricultural water professionals in the basin\. There are currently limited opportunities for regular interaction among agricultural experts on a basin level\. Political, economic, social, and cultural differences among the countries pose a major challenge to such exchange\. The absence of opportunities for exchange of experience among the Basin's experts in agricultural water use has been a constraint to further Nile cooperation\. Establishing such interaction contributes to enhancing mutual confidence, and provides a critical building block to sustainable utilization of Nile waters\. C\. Project Description 1\. Project Components The Agriculture project includes the following four components: Project Coordination and Facilitation Water Harvesting Community-Managed Irrigation Public and Private-Managed Irrigation A detailed project description is provided in Annex 2\. Component 1: Project Coordination and Facilitation This component covers activities related to the project management arrangements that facilitate regional cooperation and project implementation, the implementation of a rapid baseline assessment (RBA), and the preparation of the project work plan\. Subcomponent 1\.1: Project Management Arrangements The project management set up includes the Project Steering Committee (PSC), the Project Management Unit (PMU), the National Project Coordinators (NPCs), the working groups, and the national technical counterparts in each country\. Details about institutional arrangements and ongoing coordination at regional and national levels will be presented in Section 2 of this report\. Subcomponent 1\.2: Regional Planning Workshop and Rapid Baseline Assessment The first tasks of the PMU are the development of a detailed annual workplan based on the PIP, and the realization of the rapid baseline assessment (RBA)\. A project-kickoff regional workshop will be organized two months after the establishment of the PMU to discuss the main outlines of the work plan and finalize the design and planning of the rapid baseline assessment activity\. The RBA will be designed to complement the information assembled in the country reports by gathering additional information including identification of opportunities and needs related to the exchange of best practices for water harvesting, community-managed irrigation, and public and private-managed irrigation\. The RBA will also identify national stakeholders including public/private professional and research institutions, water users representatives, and community groups including women groups and NGOs; and explore with them major concerns and practical options and needs to improve water harvesting, community-managed irrigation, and public and private-managed irrigation\. This baseline assessment will be carried in each of the countries, for approximately four weeks, by a national private consultant in coordination with the NPC and the PMU\. A Project Steering Committee meeting will be organized, two months after the project kickoff regional workshop, to finalize the project work plan and budget and present findings of the RBA\. 5  Efficient Water Use for Agricultural Production Project Appraisal Document Component 2: Water Harvesting The water harvesting component will enhance dialogue and cooperation among national and regional stakeholders to explore the best indigenous and modern water harvesting practices, build regional and national capacity, and promote the exchange of experience between participating countries, with the objective of improving rainfed crop production and enhancing supplies for small-scale irrigation and domestic water needs, especially for poor rural communities\. Subcomponent 2\.1: Regional Consultation and Training This sub-component is aimed at assisting stakeholders at the regional, national, and local levels to address the issues and needs identified in the country reports and the RBA, develop a common view on water harvesting best practices that are suitable for the Nile basin environment, build regional and national capacities, and generate future activities for the SAPs investment programs and other NBI projects\. Subcomponent 2\.2: Exchange of Experience and Best Practices, and Basin-wide Twinning of Institutions Based on criteria of potential water harvesting best practices and information from the Rapid Baseline Assessment, appropriate best practice sites (if available) will be identified in the riparian countries and profiled by national practitioners\. A selected number of these sites will be targeted for visits by regional practitioners from riparian countries to exchange experience and share information on lessons learned on water harvesting issues\. The selected sites will cover a wide- spread of indigenous and modern techniques\. These sites will be visited in two regional study tours that will be organized preferably back to back to a regional workshop, seminar, or training to optimize participation and reduce expenses\. Moreover, the sub-component will coordinate with the SVP Environment project on the implementation of its Microgrant activities\. Component 3: Community-managed Irrigation The Community-managed irrigation component offers an opportunity for decision makers, professionals, farmers, private sector, and other stakeholders to enhance regional consultation with the objective of developing a clear understanding of the needs for the development of sustainable and effective community-managed irrigation schemes using low-cost water collection, water abstraction (e\.g\. treadle pump) and irrigation technologies\. The component will also enhance capacity building on efficient water use and encourage exchange of best practices for community-managed irrigation\. Subcomponent 3\.1: Regional Consultation and Training This sub-component will assist stakeholders at the regional, national, and local levels to establish a forum that leads to the development of a shared vision on the issues and needs identified in the country reports and the Rapid Baseline Assessment for establishing sustainable community- managed irrigation systems using low-cost technologies and efficient water use best practices\. It will also generate activities for the SAPs investment programs and other NBI projects, and build capacity for future cooperative implementation of related SAPs investment programs\. 6  Efficient Water Use for Agricultural Production Project Appraisal Document Subcomponent 3\.2: Exchange of Experience and Best Practices, and Basin-wide Twinning of Institutions Using criteria of community-managed irrigation best practices and information from the Rapid Baseline Assessment, appropriate best practice schemes (if available) will be identified in the riparian countries and profiled by national practitioners\. A selected number of these schemes will be aimed for visits by regional specialists from riparian countries to exchange experience and share information on lessons learned on community-managed low-cost irrigation\. Study tours related to site visits for this sub-component will be preferably organized in conjunction with the water harvesting tours to illustrate links between water harvesting and community-managed irrigation schemes\. This sub-component will also assist stakeholders to create new partnerships among professional institutions, research centers, NGOs, and private organizations from various countries to advance community-managed irrigation for the benefits of Nile Basin communities\. Moreover, the sub-component will coordinate with the Environment project on the Microgrant activities\. Component 4: Public and Private-Managed Irrigation Several common technical, institutional, environmental, and socio-economic concerns have been raised by the Nile Basin Countries about the performance of public and private-managed irrigation systems\. Many of the countries have started, individually, tackling these issues\. Experiences in the basin and other parts of the world have shown that improved water management in these systems would result in significant amount of water saving and increased productivity\. This component will establish a regional forum for the Nile Countries to enhance the knowledge and understanding of these issues and needs identified in the country reports and the Rapid Baseline Assessment, and explore appropriate strategy and options for improving public and private-managed irrigation systems with participation of regional, national, and local stakeholders\. The component will also generate activities for the SAPs investment programs and other NBI projects, offer capacity building opportunities, and promote exchange of best practices and sharing information on learned lessons\. The implementation of this component will be coordinated by the Regional Project Manager, who will work closely with the National Project Coordinators, and the Public and Private-Managed Irrigation Working Group (PMIWG)\. Subcomponent 4\.1: Regional Consultation and Training This sub-component will establish the regional forum to promote dialogue and cooperation at regional, national, and local levels towards the development of a common vision on tangible options for public and private-managed irrigation, and provide hands on targeted seminars and practical training courses to enhance capacity on major topics related to improved public and private-managed irrigation and future cooperative implementation of related SAPs investment programs\. Subcomponent 4\.2: Exchange of Experience and Best Practices, and Basin-wide Twinning of Institutions Among the public and private-managed irrigation sites identified and profiled by national practitioners for best management and reform practices, priority locations will be selected for visits by regional specialists from riparian countries to exchange experience and share information on lessons learned on management and reform of these public and private-managed irrigation systems\. One study tour will be organized in the Nile Basin and possibly another tour, 7  Efficient Water Use for Agricultural Production Project Appraisal Document depending on availability of budget, outside the basin\. The Nile Basin study tour will be organized preferably back to back to a regional workshop seminar, or training to optimize participation and reduce expenses\. This sub-component will assist stakeholders to create a new network of cooperation and partnerships among professional institutions, research centers, NGOs, and private organizations from various countries to move forward positive reforms and improve the efficiency of public and private-managed irrigation systems for the benefit of the Nile Basin communities\. A roster of the regional institutions and research centers, NGOs, and private organizations will be prepared\. Opportunities for twinning to carry joint activities, including organization of seminars, short courses, and future public and private-managed irrigation transboundary projects will be targeted\. International institutions may also be considered for contribution in twinning activities related to public and private-managed irrigation\. The sub-component will also develop linkages with existing networks such as RELMA, ASARECA, SWMNet and others to enhance access to the knowledge and analytical work that is conducted in the basin\. 2\. Key Policy and Institutional Reforms Supported by the Project The key change being fostered under the Agriculture Project is promoting the adoption of approaches and technologies to use agricultural water more efficiently by strengthening the understanding of technological innovation and policy, legislation and institutional reforms\. Such reforms would strive to provide a comprehensive incentive framework for all, agricultural water users, to improve scheme- and basin wide irrigation efficiencies\. The need to use water in a more efficient way and to adopt measures such as regulation, demand management and water charges have been reflected in all major global strategies for sustainable development\. They form part of a long-term strategy to provide incentives for, ultimately, rational water allocation among users while safeguarding environmental flows\. By approval of this Project by the Nile TAC and COM, key decision-makers in the basin counties are committing to support a more efficient use of water for agricultural production\. 3\. Benefits and Target Populations There are three main beneficiaries of the Agriculture Project: Professionals in the field of agricultural water who will participate in study tours, exchange visits and who will benefit from regional consultations and training\. Policy makers will become attentive to issues related to the efficient use of agricultural water\. Professional institutions, research centers, NGOs, and private organizations will participate in exchange of experience and basin-wide twinning\. 4\. Institutional and implementation arrangements This section outlines the institutional arrangements for implementing the SVP Agriculture project\. These arrangements, which have evolved through intensive dialogue within the NBI as well as with donor partners, are based on the generic SVP institutional framework\. They also draw on experience and best practice from other regional programs\. However, the nature of the NBI requires innovative strategies to ensure early action on the ground, maintain trust and commitment, foster broad ownership by the riparian states, and develop a multi-track approach\. Decentralized Approach In March 2001, at the Extraordinary Meeting of the Nile-COM in Khartoum, options for the implementation arrangements of the SVP projects were further reviewed\. The Nile-COM decided, as a basic principle, that the project management units (PMUs) for each of the seven 8  Efficient Water Use for Agricultural Production Project Appraisal Document SVP projects will be located in several Nile countries in accordance with a "decentralized approach" to enhance ownership and commitment to the program in the region\. In making its decision on PMU location, the Nile Council of Ministers took into account issues such as country commitment, project synergies, special expertise, and donor relations\. The Nile-COM decided that to be eligible to host a PMU, a country must at minimum: (i) be up to date in its NBI Secretariat annual dues; and (ii) have committed to funding a National NBI Office that will serve a coordination function among the various regional and national NBI activities\. Moreover, a country interested in hosting a PMU was requested by the Nile-COM to demonstrate commitment to the project by providing office space and administrative-secretarial support, water and power services, operation and maintenance of the project's premises, and other support\. Following consultations between Nile-COM members, PMU locations have been agreed as indicated below\. Shared Vision Program Projects and Project Management Unit Locations Project PMU Location Confidence Building and Stakeholder Involvement Uganda (NBI Secretariat) Nile Basin Regional Power Trade Tanzania Efficient Water Use for Agricultural Production Kenya Nile Transboundary Environmental Action Sudan Water Resources Planning and Management Ethiopia Applied Training Egypt Socioeconomic Development and Benefit Sharing Uganda Management at the Regional Level The Project Management Unit for the Agriculture project will operate at the basinwide level\. In support of the NBI, the PMU will be responsible for managing and implementing the agriculture project in all participating countries\. In addition, the PMU will also provide some support to the national activities of other SVP projects in Kenya as related to procurement, financial management and logistics\. In order to facilitate smooth operations, maintain and enhance dialogue between the Nile riparians, and further the SVP's developmental objectives, the NBI is entering into a partnership with the United Nations Office for Project Services (UNOPS)\. NBI will request UNOPS to oversee the daily management of the PMUs in order to facilitate local contracting, fund management, local procurement, disbursement, program administration, and project-level monitoring and evaluation\. The staff of the Agriculture PMU will include: a regional project manager; a regional lead specialist, a national procurement and finance officer; an information management specialist, and a project administrator/administrative assistant\. The Regional Project Manager (RPM) will provide the overall leadership for the technical and administrative management of the Agriculture Project to ensure timely implementation of the basin-wide project activities in coordination and collaboration with the National Coordinators\. The RPM will have three reporting lines: The Project Steering Committee (PSC) on sectoral and thematic activities related to the achievement of project objectives; 9  Efficient Water Use for Agricultural Production Project Appraisal Document The Nile-Sec for coordination and integration of the project within the SVP and NBI framework; The UNOPS, supporting the NBI in project implementation, for general management of the PMU, particularly in general administration, financial management, procurement, monitoring and evaluation, and reporting\. The RPM will also serve as the Lead Specialist for the Public and Private-Managed Irrigation component\. The Regional Lead Specialist will provide the technical expertise and leadership for both the Water Harvesting and Community-Managed Irrigation components\. The Lead Specialist will play a key role in ensuring effective basin-wide communication and collaboration among national specialists, relevant thematic working groups, consultants, and stakeholder groups\. The Lead Specialist will report to the Regional Manager of the Agriculture Project\. The Finance/Procurement Officer, in support of UNOPS, will be responsible for procurement actions and for financial management of Project funds at the Regional Project Management Unit (PMU) level, and provide some support to the national activities of the other SVP projects\. The Finance/Procurement Officer will work in close liaison with the RPM, the Nile-Sec, and UNOPS to ensure efficient and effective project implementation in accordance with World Bank financial management and procurement guidelines\. The Finance/Procurement Officer will report to the Regional Project Manager\. Information Management Specialist will be responsible for the technical support related to the design and management of the project database, the operation of the computing and networking equipment, the development and maintenance of the project web-site, and establishing links to the other SVP and NBI activities\. He will also support the Regional Project Manager and the Lead Specialist in the dissemination and exchange of project information\. The Support Staff will include: Project Administrator/Administrative Assistant will provide secretarial, administrative, and logistic support at the Regional Project Management Unit (PMU) level\. She/he will report to the Regional Project Manager\. The Regional Project Manager and the Lead Specialist will be recruited competitively, preferably originating from the region\. The Finance/Procurement Officer or other support staff will be recruited competitively from Kenya\. National Project Coordinators are government staff who will participate on an as needed basis\. The Agriculture PMU will report to a Project Steering Committee, which will provide programmatic and strategic guidance and oversight to ensure that the project objectives are achieved and the project remains within budget and on schedule\. The Steering Committee will be composed of one senior officer (such as Director, Head of Division or department) representing the agricultural water use sector of each participating country, a Nile-TAC member from Kenya to ensure coordination with the broader NBI and other SVP projects, and a representative of the NBI Secretariat\. The National Project Coordinators, donor representative(s), World Bank representative(s), UNOPS representative, and other appropriate parties will be invited as observers to the meetings\. The PSC will review and approve annual work plans and will receive and review annual substantive and financial reports on project activities\. The PSC is expected to meet at least annually at the PMU location\. The steering committee member from the PMU host country, Kenya, will chair the committee, while the PMU will provide secretariat support to the committee\. 10  Efficient Water Use for Agricultural Production Project Appraisal Document To meet needs as determined by each PMU, special ad hoc basinwide Working Groups can be convened by the PMU\. These working groups are intended to be temporary, existing only for the duration necessary to address the identified need\. Three working groups will be established for the agriculture project, one for water harvesting, another for community-managed irrigation, and one for public and private-managed irrigation\. To ensure overall program harmonization, strengthen the capacity of the NBI to execute basinwide programs, and reinforce strong riparian ownership of the SVP, the eighth SVP project will support the SVP Coordination Project at the NBI Secretariat in Entebbe\. This project, which will be funded from the other SVP projects, will be responsible for overall program coordination and the development of generic procedures to ensure quality control and fiduciary responsibility\. The SVP Coordination unit will also be responsible for monitoring and evaluation at the program level, and for facilitating information sharing within the NBI as well as with the public\. Illustrations of the SVP from a programmatic perspective and of a typical SVP project are presented in Figures 1 and 2, respectively\. 11  Efficient Water Use for Agricultural Production Project Appraisal Document Figure 1: Organizational chart illustrating the Shared Vision Program NBI SHARED VISION PROGRAM Implementation Approach from the Programmatic Perspective Policy level Nile-COM Nile-TAC Nile-SEC PMU - SVP Coordination Regional level Environment Power Agricultural Water Confidence Applied Benefit Trade Water Use Resources Building Training Sharing Special basinwide Working Groups, ad hoc NBI National Office (one per country) National level Environment Power Agricultural Water Confidence Applied Benefit Trade Water Use Resources Building Training Sharing Management at the national level The Agriculture project will have a National Project Coordinator (NPC) in each of the participating countries\. The NPC will be responsible for supervising and coordinating the implementation of all national project activities related to the project\. The NPC will provide a critical link between the PMU level and regional activities and national technical counterparts and stakeholders at the national level over the planning and execution of all the various project components within country\. The NPC will ensure the participation of all relevant stakeholders including public professional institutions, universities and research centers, private sector, NGOs, farmers, and community groups\. The national project coordinator will also liaise with the Nile Technical Advisory Committee (Nile-TAC) members within the country, the National NBI office, and other NBI SVP projects to ensure synergy between the Agriculture project and all the national level NBI activities\. The NPC will liaise with the Regional Project Manager and will work under the overall guidance of the Project Steering Committee member and the Nile-TAC member in his/her country\. National project coordinators, who will participate on an as needed basis, will most likely be housed in the ministries responsible for agricultural water\. The national counterparts include the technical and research staff from the public and private institutions, NGOs, water users, and community groups, who will be involved in activities related to the project components\. The seven SVP projects will be hosted by different sectoral ministries\. Thus, to facilitate in- country coordination of NBI activities, the Ministry of Water Affairs in each Nile Basin country has established a government-funded national NBI focal point institution (also referred to as a national NBI office)\. The national NBI office will support the NBI Technical Advisory Committee member in each country and act as a counterpart to the NBI Secretariat at the national operational level\. To facilitate effective interaction among the various ministries and institutions involved in the NBI, the office will include interagency and intersectoral committees\. In each 12  Efficient Water Use for Agricultural Production Project Appraisal Document country, members of SVP steering committees and SVP national project coordinators are involved in these intersectoral committees\. Figure 2: Organizational chart illustrating the Agriculture Project Policy level Nile-COM Nile-TAC Nile-SEC Project Steering Committee PMU - Regional level Project Management Unit Regional Project Manager Lead Specialist Finance/Procurement Officer PMU Support Staff Special basinwide Working Groups, ad hoc National Project Coordinators National level National Counterparts National Counterparts Community- National Counterparts Water Harvesting Managed Irrigation Public-Managed Irrigation Project Services Agency In order to facilitate smooth operations, maintain and enhance dialogue between the Nile riparians, and further the SVP's development objectives, the NBI is entering into a partnership with the United Nations Office for Project Services (UNOPS)7\. The Agriculture PMU oversees the implementation of the project and supports other national SVP activities\. On behalf of the NBI, UNOPS, through the PMUs, will be responsible for contracting, fund management, procurement, disbursement, program administration, and project- level monitoring\. UNOPS will also support NBI by strengthening its capacity to manage and implement basinwide projects and apply high-quality and fiduciary standards to the SVP\. The specific Management Services Agreements (MSAs) between the NBI and UNOPS will outline the services to be provided for each project, in the general framework of the generic terms of reference for a PSA adopted for the Shared Vision Program8\. It is anticipated that UNOPS will post a senior advisor, a finance/administrative officer and two locally recruited administrative personnel to the NBI at the NBI Secretariat in Entebbe to support the program as a whole\. In countries where there is a Project Management Unit, the PMU will facilitate procurement and financial management of other SVP projects\. In countries where there is not a PMU, UNOPS will provide in-country professional staff\. Overall management from UNOPS will be from the headquarters in New York, drawing upon its extended network of offices around the world\. SVP Coordination 7The Nile-COM decision to enter into a formal partnership with UNOPS through a contractual arrangement to support the NBI in project execution was given no-objection by the Bank with the approval of the Bank's Operation Procurement Review Committee (OPRC) in April 2002\. 8Nile Council of Ministers, ninth annual meeting, Cairo, February 2002\. 13  Efficient Water Use for Agricultural Production Project Appraisal Document Due to the multisectoral and multicountry nature of the Shared Vision Programs, SVP projects will need to liaise both with sectoral ministries (i\.e\., water, power, environment, agriculture, etc) in each country, as well as with7 NBI institutions\. At the operational level, the Agriculture PMU will coordinate closely with the NBI Secretariat, through the SVP Coordination Project, to ensure synergies are captured among SVP projects and that all projects operate within the SVP framework\. The SVP Coordination Project, located at the NBI Secretariat in Entebbe, is responsible for overall program coordination and the development of generic procedures to ensure quality control and fiduciary responsibility\. The SVP Coordination project is also responsible for monitoring and evaluation at the program level, and for facilitating information sharing within the NBI as well as with the public\. The SVP Coordination project is funded from the other SVP projects (approximately three percent), including the Agriculture project, as well as through direct funding from the NBTF and direct support from donor partners\. Linkages with other SVP projects and the subsidiary actions programs Links to other SVP Projects\. The Agriculture Project is designed to provide ample opportunity for collaboration with other SVP projects, both at a substantive level, and at the level of project implementation\. At various places, this report has provided indications of such collaboration possibilities among SVP projects\. Links to SAP Projects\. The Agriculture Project, as all SVP projects, has been designed to inform and support preparation of SAP projects\. Outputs of the Agriculture Project include for instance project concepts that could be further developed for implementation under SAP projects\. D\. Project Rationale 1\. Project Alternatives Considered and Reasons for Rejection At the outset of project identification, the following alternative was considered: Comparative advantages and agricultural trade in the Basin, to address questions related to economic efficiency and regional optimization of water use for agricultural production, urban and industrial functions, power generation, environment, navigation, etc\. However, it appeared that issues related to economic efficiency and trade would be addressed in other components within the Shared Vision Program, such as the Integration and Benefit Sharing project\. These issues may also be addressed in subsequent agricultural projects as cooperation grows\. Therefore, it was decided to focus on agronomic water use efficiency and related issues\. An additional choice was made between the following two alternatives: Implementation of pilot and demonstration projects throughout the Basin; Focus on capacity and institutions building, exchange of experience and basin-wide consultations\. For a number of reasons, the second option has been retained\. In the first place, it became clear that during a first phase of the project, donor contributions would primarily be targeted towards capacity and institutions building\. It is, however, understood that the Agriculture Project will be an opportunity to identify and appraise a number of project ideas that will be submitted for funding, either under a second phase of the project, or by other projects (for example, SAP)\. In the second place, the added value of the Agriculture Project would be in particular to contribute 14  Efficient Water Use for Agricultural Production Project Appraisal Document to regional confidence-building through the establishment of a forum of experts in the field of agricultural water use\. Presently, such a forum does not exist\. In the third place, there was a strong feeling that with the number of projects currently under implementation in the region, there would be a sufficient number of pilots already underway\. It was therefore decided to shift the focus away from pilot implementation towards basin-wide pilot stocktaking and the organization of study tours and exchange visits\. A rapid baseline assessment will be conducted in the early stages of the project to identify national stakeholders including public/private professional and research institutions, water users representatives, and community groups; and complement existing information including identification of opportunities and needs related to the exchange of best practices for water harvesting, irrigation management, and efficient water use\. 2\. Major Related Projects Financed by External Support Agencies and Lessons Learned Agriculture has been one of the priorities for the Nile Basin countries\. Considerable assistance from external support agencies has been received\. An outline of on-going or recently completed projects related to agricultural water use in the Nile Basin countries, is provided below\. From a review of these and similar projects in other regions, important lessons have been incorporated in the project design\. Of direct relevance to the proposed project are efforts by ICARDA (the International Center for Agricultural Research in the Dry Areas), and ICRISAT (the International Crops Research Institute for the Semi-Arid Tropics) that have established regional drawdown facilities for training, study tours, and workshops related to arid and semi-arid agriculture\. In addition, the FAO and UNDP both finance regional programs that are relevant to the current project proposal\. ICARDA is involved in cooperative agricultural research carried out in many countries in West Asia and North Africa\. The results of research are transferred through cooperation with national and regional research institutions, with universities and ministries of agriculture, and through the technical assistance and training that the Center provides\. A range of training programs is offered and these efforts are supported by seminars, publications, and specialized information services\. ICRISAT serves as a global center for the development of improved farming systems that will help to increase and stabilize agricultural production through more effective use of natural and human resources in the seasonally dry semi-arid tropics\. It also assists in the development and transfer of technology to the farmer through cooperation with national and regional research programs, and by sponsoring workshops and conferences, operating training programs, and assisting extension activities\. ICRISAT has established skill development programs to improve the background and qualifications of agriculturists in national and cooperating programs concerned with ICRISAT mandate\. RELMA\. In 1998, the Swedish International Development Agency (SIDA) established the Regional Land Management Unit (RELMA) based in Nairobi as a tool to address issues of food security in Eastern Africa (Eritrea, Ethiopia, Kenya, Uganda, Tanzania, and Zambia)\. RELMA aims at focusing on the productive potential of the farm in land husbandry, including aspects of soil and water conservation, agroforestry, animal and crop husbandry and water harvesting, farm economy and marketing\. Activities include dissemination of information, production of publications, training, institutional capacity-building, networking and manpower development\. FAO\. FAO's Special Program for Food Security aims at enabling conditions, improving access to food, producing food, increasing the role of trade, dealing adequately with disaster and investing in food security\. This is done through (a) participatory constraints analysis and resolution, (b) 15  Efficient Water Use for Agricultural Production Project Appraisal Document agricultural policy reform aimed at addressing macro-level socio-economic and institutional constraints, and (c) an investment program that ensures availability of the resources required to overcome infrastructure constraints\. With funding from the Italian Government, the FAO is also involved in the implementation of the Capacity-building for Nile Basin Water Resources Management Project\. The project focuses on strengthening capacities in water resources planning and data base management, however, it does not focus specifically on agricultural water use\. 3\. Indications of Borrower Commitment and Ownership Regional level\. At the regional level the commitment of the Nile countries has been unprecedented\. Leaders in the Nile Basin countries have made it clear that they see the NBI as a tremendous opportunity to bring further cooperation, economic exchange, and eventually greater integration and interdependence\. The SVP is the first large-scale cooperative, basin wide program of the Nile riparians and the first common step toward realizing their Shared Vision\. National level\. The governments of the region have committed themselves to finding cooperative solutions to implement this basinwide initiative\. The Nile COM and TAC have endorsed the Agriculture Project and its components at various meetings, starting with the ICCON meeting in Geneva, June 2001 and during the recent TAC meeting in Entebbe in December 2002\. The host country, Kenya has committed office space and infrastructure support for the Agriculture project\. 4\. Value Added of Bank Support in the Project The external support provided to the NBI is critical to the success of the Shared Vision Program as well as the subsidiary action programs\. The World Bank, United Nations Development Programme (UNDP), and the Canadian International Development Agency (CIDA) have been strong "cooperating partners" in support of the NBI process since the beginning of the initiative\. After ICCON, the circle of partners supporting the Shared Vision Program widened to include eight additional bilateral donor and international agencies\. The World Bank and its partners add value to the program by continuing to facilitate the NBI process, providing technical expertise, mobilizing international funding support, and ensuring quality assurance and fiduciary management\. E\. Summary Project Analysis 1\. Economic The goal of the overall SVP is to provide the framework, the relationships, and the information that will underpin and enable the cooperative management and development of Nile waters through the NBI\. The Agriculture Project is one project instrument to achieve this goal\. The broad benefits of cooperative Nile waters management and development fall into four categories: Environmental benefits derived from integrated river basin management; Direct economic benefits derived from more optimal, basinwide planning and development of water resources; Regional political benefits, in terms of increased stability and diminished tensions over river control issues; 16  Efficient Water Use for Agricultural Production Project Appraisal Document Indirect economic benefits, in apparently unrelated sectors, that are enabled by increased economic productivity and interaction, and decreased regional tensions\. The Agriculture project will generate substantial benefits by enhancing knowledge of approaches and technologies for more efficient use of water for agricultural production among agricultural water professionals and decision makers in basin countries\. Specific quantification of project benefits is difficult because it is not possible to estimate the value of experience sharing between individuals and decision makers, or to quantify the marginal benefit of any improvement to resource management resulting from a more efficient use of water for higher agricultural production\. 2\. Financial The SVP is a US$136-million grant-funded program\. Approximately 100 percent of total program cost has been pledged by bilateral donors, the GEF, the African Development Bank, the EU Water Initiative, and the World Bank (DGF)\. The administration of program funds is streamlined by the establishment of the multi-donor Nile Basin Trust Fund (NBTF), which ensures a unified and coherent approach to fund management\. Most donors will use the NBTF9\. As per the SVP financing plan, the NBTF would cover about 95 percent of the total project costs including taxes and duties\. The Nile basin governments' contribution in kind (office space and staff time) would cover the balance of about 5 percent\. For the Agriculture Project, costing US$5\.28 million, the governments' net contribution would be about $ \.45 million spread over 3 project years\. Therefore, the contributions of the Governments would not have any significant negative impact on the development budget of the basin countries\. The impact of the incremental O&M budget requirement due to the implementation of the Agriculture Project is also minimal\. The O&M annual budget requirement after the project to maintain the office and IT facilities created by the project is about 6 percent of the investment costs\. The level of investment and the operation and maintenance requirement is therefore very small and the fiscal impact of the project on the development and current budgets of the basin riparian Governments is not significant\. 3\. Technical The basinwide SVP aims to create the enabling environment for the Nile riparians to realize their vision to "achieve sustainable socioeconomic development through the equitable utilization of, and benefit from, the common Nile Basin water resources\." It promotes collaborative action, exchange of experience, and analytical work intended to build a strong foundation for regional cooperation\. The development objective of the SVP is to build trust, capacity, and an enabling environment for investment in Nile Basin countries\. The Agriculture Project will contribute to achieving these objectives by providing opportunities for basin experts to meet and exchange experience\. Through these exchanges, experts are expected to become more familiar with constraints and opportunities related to agricultural water use in each of the riparian countries, and with the latest developments in the field of irrigation and rainwater harvesting\. This is expected to lead to a widespread recognition of the importance of efficient water use, as well as a basinwide awareness of new technologies and approaches to increase water use efficiency\. 9The Nile Council of Ministers established an approved procedure for Non-Nile Basin Trust fund support for the Shared Vision Program at its 9th Annual Meeting, Cairo, Egypt, Feb 2002\. 17  Efficient Water Use for Agricultural Production Project Appraisal Document 4\. Institutional SVP Executing Agencies The NBI, through its executive arm the NBI Secretariat, will execute the Nile Basin Trust Fund components of the project\. The NBI will act on behalf of the Nile Basin countries and will be responsible for ensuring that applicable World Bank rules and procedures are followed\. The Agriculture Project will be managed by a Project Management Unit in Nairobi\. The PMU will operate on a regional basis and will function in close liaison with the NBI Secretariat and under its supervision\. To ensure that the NBI meets its required fiduciary, procurement, and project management responsibilities, the World Bank and the NBI have agreed on an implementation arrangement through which the NBI will contract UNOPS to support the execution of each project\. For the Agriculture Project, no funds will transit directly through NBI, and a procurement and financial management assessment of the NBI is not required\.10 The SVP Coordination Project will strengthen the capacity of the NBI to execute and coordinate the SVP, through its executive arm, the NBI Secretariat\. This is essential to ensure both strong ownership of the SVP by the riparian states and effective program execution\. The Coordination Project will be located at the NBI Secretariat to coordinate the program effectively and to put in place generic procedures to ensure quality control and fiduciary responsibility\. The SVP Coordination Project also will be responsible for monitoring and evaluation at the program level and for facilitating information sharing within the NBI and with the public\. The SVP Coordination Project will be primarily financed through the Nile Basin Trust Fund\. Other development partners, such as Germany/GTZ, are also providing direct bilateral support to the project\. Project Management Project management challenges in a multi-country regional setting cannot be underestimated\. The commitment of all the Nile countries to the NBI has been and continues to be a key for success\. The success of the NBI so far is due largely to the fact that the countries have been squarely in the driver's seat, and that they have a keen sense of ownership of the initiative\. As the program moves into the project implementation phase, attention must be paid to ensure that the project management unit and the national project staff identify closely with and integrate well into NBI structures rather than functioning as separate units\. Procurement issues Choice of a project services agency\. The Bank-financed portions of the project will be executed by the NBI Secretariat\. The Nile Council of Ministers has decided that the NBI will contract a project services agency to support the implementation of the Shared Vision Program's 8 projects\. The project services agency will provide project services, particularly financial management, procurement of goods and services, and building the NBI's capacity to oversee basinwide projects\. Following an extensive evaluation of options, the Bank agreed to the Nile Council of Minister's request that UNOPS be selected on a single source basis as the project services agency\.11\. For the seven thematic projects of the SVP, including the Agriculture Project, no funds 10Nile Basin Initiative: Shared Vision Program, Project Appraisal Document (SVP Master PAD), World Bank Report No\. 26222, April 21, 2003\. 11The concept of a project services agency was adopted by the Nile Council of Ministers at its extraordinary meeting in March 2001 in Khartoum\. The Nile Council of Ministers decided to select UNOPS as the project services agency at its ninth annual meeting in February 2002 in Cairo and 18  Efficient Water Use for Agricultural Production Project Appraisal Document will transit directly through the NBI, and a procurement assessment of the NBI is not required\. Sr\. Bank procurement staff has visited UNOPS during SVP preparation and are satisfied with their capabilities to carry out procurement functions for the projects of the SVP in accordance with Bank guidelines\. Procurement of works and goods\. Procurement of works and goods financed by the NBTF administered by the World Bank will follow procedures outlined in the Bank's "Guidelines for Procurement under IBRD Loans and IDA Credits", May 2004\. Procurement of consulting services and training financed by the NBTF will follow the Bank's "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", May 2004\. The Bank's latest editions of guidelines and standard bidding documents will be used\. Consultant services\. Details of the type and amount of consultant services required for the project are provided in Annex 6\. Financial Management Issues Because UNOPS will support the project implementation functions for the NBI, and because the NBI will undertake no direct financial management actions, a financial management assessment of the NBI is not required\. A financial management assessment of UNOPS was conducted by Bank staff and it was concluded that the UNOPS system, as redesigned for the SVP, and capabilities and audit arrangements (internal and external) are sufficient to satisfy the needs of the NBI Shared Vision Program at the present level envisaged (under service contract for all 8 projects)\. It is therefore understood that the proposed staffing and usage of the UNOPS integrated system are to be maintained at all times at the proposed level\. The certification of UNOPS is valid for all eight projects under the umbrella program and there is no need for case by case assessment\. However, as part of implementation supervision, the Bank team should periodically monitor that UNOPS maintains the systems and capacity at the agreed level\. Furthermore, a new evaluation of the capacity may become necessary, should the level of funding and volume of transactions increase\. 5\. Environment The Agriculture Project is a project that aims to establish opportunities for exchange and joint learning, and will therefore not have any physical impacts on the environment\. On a substantive level, the Project aims to strengthen recognition of the importance of a more efficient use of water for agricultural production\. Water thus saved could be used for other purposes, including for the maintenance of environmental flows\. 6\. Social Participatory approach--key stakeholders' participation in the project\. The SVP Confidence Building and Stakeholder Involvement Project (CBSI) has been designed to increase public awareness, stakeholder involvement, and confidence building throughout the region, with a focus on three categories of stakeholders: (i) decision makers; (ii) opinion makers; and (iii) local riparian users\. To achieve trust and ownership objectives, the SVP, through the CBSI project, is communicated this decision in a letter from its Chairman dated March 5, 2002\. The World Bank Operations Procurement Review Committee (OPRC) reviewed the decision and granted a no-objection on April 25, 2002\. 19  Efficient Water Use for Agricultural Production Project Appraisal Document using a robust participatory approach that features dialogue, collective analysis, action, and participatory monitoring for feedback\. This four-point approach is designed to scale up existing participation efforts and go beyond simple consultation\. All SVP projects, as well as SAP investment programs, will incorporate an active program of participation with key stakeholders The CBSI project will provide advice and technical support to SVP and SAP projects, as needed, on how to implement and maintain high-quality participation and stakeholder inclusion programs in these projects\. As for the Agriculture Project, stakeholder participation has been instrumental in formulating the project (see Table below)\. Table 3: Preparation of the Agriculture Project Date Meeting Type Location Key Outcomes July 1998 Nile-TAC Dar es Salam, Drafting of policy guidelines that define the SVP Tanzania Feb 1999 Nile-COM and Dar es Salam, Adoption of the NBI Policy Guidelines, and instruction by Nile-TAC Tanzania Nile-COM to prepare a portfolio of priority SVP projects for ICCON May 1999 SVP Planning Sodere, Preliminary list of priority projects, including project goals & Meeting Ethiopia objectives, based on consultation and brainstorming by Nile- TAC members and two additional sectoral experts from each country May 1999 Nile-COM and Addis Ababa, Approval of list of priority projects and project preparation Nile-TAC Ethiopia process Sept 1999 Nile-TAC Entebbe, Based on output from Sodere planning meeting, Uganda development of project concept notes for seven priority projects and approval of a detailed project preparation process and schedule for each project Dec 1999 Project Entebbe, Review and further development of draft Agriculture project Preparation 1 Uganda concept notes/documents by working groups (WGs); for each project, the WGs included a Nile-TAC member and national expert(s) from each country; a total of eight national experts were involved from each country; each project was assisted by a lead consultant Dec 1999 to National Nile Basin Lead consultants together with national experts prepare Nov 2000 Analysis & countries draft Agriculture project documents; national experts Consultations provided inputs through preparation of national reports\. Jan 2000 Nile-TAC Entebbe, Review of progress in project preparation and further Uganda refinement of project concepts as warranted July 2000 Project Addis Ababa, Review and further development of detailed draft Agriculture Preparation 2 Ethiopia project document by working group members for each project and Nile-TAC members Oct 2000 Nile-TAC Via electronic Review of draft final project documents mail Mar 2001 Nile-COM Khartoum, Final approval of SVP project portfolio and project Sudan documents June 2001 ICCON Geneva Presentation of Project Documents to the Consultative Group, followed by pledges of support\. October Agriculture Kisumu, Kenya Meeting of Senior National Experts from countries of the 2003 Project basin to review draft Project Implementation Plan\. 20  Efficient Water Use for Agricultural Production Project Appraisal Document Advisory Group Meeting Appraisal? Consultation and collaboration with NGOs and other civil society organizations The SVP has placed considerable effort in consultative project preparation with key technical stakeholders, and key points are reflected in the Master PAD\. It has also defined and committed itself to a strong implementation plan that features substantive participation and collaboration with NGOs and other civil society organizations, as described below in SVP's Confidence Building project\. Institutional arrangements to ensure achievement of social development outcomes The SVP will focus on the development and continuation of four institutional mechanisms or arrangements designed to ensure development of social development outcomes\. Responsibilities will rest primarily with the Confidence Building project, whose PMU is based at the Nile Secretariat in Entebbe, Uganda\. They are: Promotion of formal mechanisms of participation between national governments and their civil societies\. Establishment of active stakeholder networks within countries and across collaborating sub- regional countries\. Establishment of formal linkages with the Eastern Nile Technical Regional Office and the Nile Equatorial Lakes Coordination Unit to facilitate the integration of participatory and social approaches into the subsidiary action investment programs\. Facilitation of regional and national Nile Forums (similar to the Nile 2002 conferences), with support of designated SVP projects, as regular events\. Also, the SVP in general has provided for a series of meetings every six months among SVP project managers to review progress and challenges\. The Socio Economic Development and Benefit Sharing, and SVP Coordination Projects shall coordinate these meetings\. Social development outcomes will be an explicit topic for discussion at each meeting\. In addition all SVP projects include regular meetings of the project steering committees, where government representatives, the World Bank, and donor partners can obtain information on these issues\. 7\. Safeguard Policies The ISDS for the Agriculture Project is attached in Annex 9\. Table 4: Applicability of the World Bank Safeguards Policy to the Agriculture Project Policy Applicability Environmental Assessment (OP 4\.01, BP 4\.01, GP 4\.01) Yes No Natural habitats (OP 4\.04, BP 4\.04, GP 4\.04) Yes No Forestry (OP 4\.36, GP 4\.36) Yes No Pest Management (OP 4\.09) Yes No Cultural Property (OPN 11\.03) Yes No Indigenous Peoples (OD 4\.20) Yes No Involuntary Resettlement (OD 4\.30) Yes No Safety of Dams (OP 4\.37, BP 4\.37) Yes No 21  Efficient Water Use for Agricultural Production Project Appraisal Document Projects in International Waters (OP 7\.50, BP 7\.50, GP 7\.50) Yes No Projects in Disputed Areas (OP 7\.60, BP 7\.60, GP 7\.60) Yes No F\. Sustainability and Risks 1\. Sustainability Country commitment to the Project\. In most of the Nile Basin countries, agriculture is by far the most important economic activity\. In identifying the efficient use of water for agricultural production as a priority concern, the Nile Basin countries have indicated that they are clearly committed to raising awareness and understanding of the potential benefits of joint action towards a more rational use of the basin's water resources\. A key consideration regarding commitment is the question of project ownership\. Through a resolutely participatory process of project design, every effort has been made to ensure that respective sector ministries genuinely "own" the project\. National experts were nominated to work with the Nile Secretariat in the preparation of the Agriculture project\. Later, an Advisory Group of experts from the basin countries provided strategic advice on project design and implementation\. During implementation, there will be close linkages to the SVP and the governing mechanisms of the NBI\. These steps will prove to have laid the foundation for future steps, when local communities and the private sector need to be genuinely engaged in the process and encouraged to take ownership\. Efficient water use for agricultural production in the long run\. Improving the efficiency of agricultural water use is a long-term process\. Where water is becoming scarce, overt competition and conflicts over water among water users will provide an incentive for adoption of legislation and technologies that save water\. The Agriculture Project is expected to contribute to awareness raising and understanding of such measures, which will assist riparian countries in the preparation and implementation of policies and strategies\. Much of the success and sustainability will depend on whether the project outcomes will result in tangible benefits for stakeholders\. As these long- term benefits are likely to be less visible than the outcomes of, for example, direct infrastructure delivery, the project will need to remain alert and need to demonstrate tangible change for stakeholders\. Incorporating regional experiences at the national level will need to form an important element of this strategy\. 2\. Critical Risks Risk Risk Rating Risk Mitigation Measure From Outputs to Objective Lack of commitment of individual S National experts, appointed by the riparian countries, support for national level governments, have fully participated in the project activities, stalling of NBI cooperation\. preparation process to ensure there is full riparian ownership and strong national commitment to successful project implementation\. The NBI has evolved from a long process that has culminated in the formation of this first ever-inclusive mechanism in the Nile Basin\. Cooperation has continued in the face of difficult challenges\. The riparian governments have continuously expressed their commitment to the NBI process\. 22  Efficient Water Use for Agricultural Production Project Appraisal Document Insufficient donor support and funding M It is expected that at project completion, the and inability to establish sustainable performance of the project will form a basis for funding mechanisms\. continued donor support\. Under the prevailing situation in the Basin, it is difficult to see how the project could become financially independent in the short term, although some of its elements may be taken up by the private sector\. Rather, financial sustainability will be understood in this proposal as the long-term capability of the project to provide sufficient quality so as to continue to attract donor funding\. Insufficient collaboration/ coordination S The project has been designed in a way to ensure between SVP and SAPs\. collaboration among SVPs and between SAPs\. Coordination among SVPs will be further strengthened through the NBI-SVP Coordination project, located in the NBI-Sec\. In addition, ENSAP and NELSAP representatives will be closely involved in project implementation\. From Components to Outputs Insufficient regional level management M The institutions of the NBI, supported by the Nile- capacity to ensure basin-wide SEC, have effectively managed a complex, multi- coordination\. country, multi-sectoral process to prepare the eight projects of the Shared Vision Program\. The creation of a strong project management unit has been incorporated into the project design, while the continued strengthening of the regional coordination capabilities of the NBI institutions will be addressed at the Shared Vision Program level\. Insufficient national level institutional M The project has been designed to strengthen capacity and cooperation to implement institutional and human resources capacity in the and sustain the project\. recipient countries through `learning by doing'\. The project at the national level will be anchored in the national institution responsible for irrigation\. The three-year time frame of the project, the extensive focus on training and exchange of experience are designed to strengthen institutional capacity\. NBI activities remain a priority for S NBI countries have faced a number of challenges in national govt\. (e\.g\., diverted by national the past, but have remained steadfast in their disasters)\. commitment to the initiative\. Ministries responsible for Water and M Nile Basin countries have often transferred the Ministries responsible for Agriculture responsibility for irrigation between the two continue to work closely together Ministries\. Collaboration between the two Ministries is essential\. Overall Risk Rating M G\. Main Grant Conditions Requirements for appraisal, negotiations, and project effectiveness for the Agriculture Project are listed below\. 23  Efficient Water Use for Agricultural Production Project Appraisal Document 1\. Requirements for Appraisal The NBI Secretariat confirms to the Bank for the Agriculture project, based on satisfactory evidence, that: Regional project management unit (PMU) facility has been identified and acceptable proposals have been made by the host country for its contribution to the PMU\. Draft project implementation plan has been prepared\. 2\. Requirements for Negotiations The NBI Secretariat confirms to the Bank for the Agriculture project, based on satisfactory evidence, that: Letter from competent authority (Ministry of Finance and/or appropriate line ministry) confirming host country contribution to supporting the regional project management unit has been submitted\. A project steering committee has been constituted\. Project implementation plan, including a procurement plan for the first year, for use in project implementation has been submitted to the Bank and agreed\. Draft Management Services Agreement for project services support has been prepared\. 3\. Requirements for Effectiveness for each SVP Project The NBI Secretariat confirms to the Bank for the Agriculture project, based on satisfactory evidence, that: The core staff of the regional project management unit has been selected, and the project management unit offices are ready for occupation\. An adequate financial management system for project monitoring and implementation has been established, including, in particular, the conclusion by the NBI, through its executive arm the NBI Secretariat, of a management services agreement for project services execution to the satisfaction of the Bank\. A Project Implementation Manual has been submitted to the Bank and agreed\. 24  Efficient Water Use for Agricultural Production Project Appraisal Document ANNEX 1: PROJECT LOGFRAME Hierarchy of Objectives Key Performance Monitoring and Critical Assumptions Indicators Evaluations NBI Regional Goal Sector Indicators Sector / Country Reports Continued The vision of the Nile Basin Increasing levels of regional commitment of Initiative (NBI) is to achieve cooperation and coordination Nile Secretariat's Annual riparian countries sustainable socioeconomic through the Shared Vision Report to pursue development through the Program's seven regional cooperative equitable utilization of, and projects\. development of the benefit from, the common Nile\. Nile Basin water resources\. Political and economic stability of riparian countries\. Program Development Outcome/Impact Indicators Project Reports (From Objective to Goal) Objective The objective of the Regional dialogue on Semiannual project NBI regional cooperation Agriculture project is to water harvesting implementation progress continues, backed by establish a forum to assist established, best reports strong commitment at the stakeholders at regional, practices for water Annual substantive national level\. national, and community harvesting explored and progress reports Adequate regional level levels to address issues disseminated, and Substantive work plans implementation and related to efficient use of national capacity for (attached to annual management capacity to water for agricultural water harvesting substantive progress ensure basinwide production in the Nile Basin\. enhanced\. report) coordination\. Ad hoc substantive Adequate national-level Regional consultation on reports institutional capacity and community-managed Annual steering cooperation to implement irrigation strengthened, committee meetings and sustain project\. awareness on efficient Annual supervision Qualified and motivated irrigation water use mission reports staff available and enhanced, best practices Evaluation reports retained to effectively for community-managed (midterm and final) implement and sustain irrigation explored and Quarterly Financial project\. disseminated, and Monitoring Reports Riparians willing to share national capacity for information and community-managed Annual audits\. collaborate in project irrigation enhanced\. activities\. Stakeholders well Regional consultation on integrated into the public and private- Agriculture Project and managed irrigation other SVP projects and strengthened, awareness activities\. on efficient irrigation water use enhanced, best practices for public and private-managed irrigation explored and disseminated, and national capacity for public and private- managed irrigation enhanced\. National level support for agricultural and irrigation policy development provided and national capacity strengthened\. 25  Efficient Water Use for Agricultural Production Project Appraisal Document Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions Evaluations Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) Component 1: Project Management 1\.1 Project Management 1\.1 Project Steering 1\.1 Qualified and motivated Arrangements Committee, PMU, Working staff available and Groups, and national focal retained to effectively point institutions set-up implement and sustain and functioning effectively\. project\. 1\.2 Project Work Plan and 1\.2 Rapid Baseline 1\.2 Overall Project Work 1\.2 Riparian countries agree Rapid Baseline Assessment conducted Plan Report on the overall project Assessment and Overall Project work work plan\. plan and budget finalized and approved\. 1\.2 Rapid Baseline Assessment Report Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) Component 2: Water Harvesting 2\.1 Regional Consultation 2\.1 Regional/National 2\.1 Reports on regional 2\.1 Stakeholders at regional, and Training workshops and meetings and national national, and community are held, as specified in workshops level from both the public the project implementation and private sectors are schedule (section 4), to willing to actively strengthen regional and participate in and national consultation and collaborate with the dialogue on water project\. harvesting issues\. 2\.1 Criteria for best water 2\.1 Technical note on harvesting practices best water harvesting adaptable to the Nile practices criteria Basin are collaboratively defined by riparian countries\. 2\.1 Common Nile Basin 2\.1 Report on Water 2\.1 Commitment among guidelines for design and Harvesting Guidelines riparians to agree on implementation of water common criteria and harvesting schemes based guidelines\. on best practices in the region and in similar international environments\. 2\.1 Regional training and 2\.1 Evaluation and 2\.1 Minimum level of trained seminars are designed and Reports on regional staff available for conducted, as specified in training and seminars regional training and the project implementation seminars\. schedule (section 4), to enhance regional capacity and technical skills related to water harvesting \. 26  Efficient Water Use for Agricultural Production Project Appraisal Document Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions Evaluations Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) 2\.1 National training and 2\.1 Evaluation and 2\.1 Willingness and seminars are designed Reports on national capability of regionally and conducted, upon training and seminars trained staff to conduct request by the countries national training and and approved by PMU seminars\. Regional Manager, to enhance regional capacity and technical skills related to water harvesting\. 2\.2 Exchange of experience and best practices, and 2\.2 Roster of universities, basin-wide twinning of research centers, public institutions\. professional institutions, NGOs, and private organizations in the Nile Basin for potential twinning on joint water harvesting activities is prepared and shared with other relevant PMUs\. 2\.2 Opportunities for twinning 2\.2 Reports on joint water 2\.2 Willingness and on joint water harvesting harvesting activities capability of relevant activities between Nile conducted by twinning institutions to conduct Basin institutions are institutions joint water harvesting identified and encouraged\. activities\. 2\.2 Field visits are conducted 2\.2 Country reports on 2\.2 Availability of water to profile water harvesting national best water harvesting best practices best practices schemes (if harvesting practices and commitment among available)\. (if available) riparian countries to share experience and 2\.2 Two regional Study tours 2\.2 Reports on lessons information\. are organized, one in the learned from study Nile Equatorial and the tours other in the Eastern Nile region, to visit and exchange experience on selected water harvesting best practices sites\. 2\.2 Coordination with the SVP Environment project on Microgrant field activities related to water harvesting to decrease erosion to ensure synergy between SVP projects\. 2\.2 Comprehensive summary 2\.2 Report on compiled of water harvesting best water harvesting best practices is compiled and practices within the disseminated to all riparian Nile Basin and in countries\. other similar regional or international 2\.2 Develop linkages with settings\. existing networks of regional organizations\. 2\.2 Report on linkages with networks 2\.2 Action plan for future water harvesting activities to be 2\.2 Action Plan Report\. implemented through SAPs and/or cooperative projects\. 27  Efficient Water Use for Agricultural Production Project Appraisal Document Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions Evaluations Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) Component 3: Community- Managed Irrigation 3\.1 Regional Consultation 3\.1 Regional/National 3\.1 Reports on regional 3\.1 Stakeholders at regional, and Training workshops and meetings and National national, and community are held, as specified in workshops level from both the public the project implementation and private sectors are schedule (section 4), to willing to actively strengthen regional and participate in and national consultation and collaborate with the dialogue on community- project\. managed irrigation issues\. 3\.1 Criteria for best 3\.1 Technical note on community-managed best community- irrigation practices managed irrigation adaptable to the Nile practices criteria Basin are collaboratively defined by riparian countries\. 3\.1 Common Nile Basin 3\.1 Report on 3\.1 Commitment among guidelines for design and Community-managed riparians to agree on implementation of irrigation Guidelines common criteria and community-managed guidelines\. irrigation schemes based on best practices in the region and in similar international environments\. 3\.1 Regional training and 3\.1 Evaluation and 3\.1 Minimum level of trained seminars are designed and Reports on regional staff available for conducted, as specified in training and seminars regional training and the project implementation seminars\. schedule (section 4), to enhance regional capacity and technical skills related to community-managed irrigation\. 3\.1 National training and 3\.1 Evaluation and Reports 3\.1 Willingness and capability seminars are designed and on national training and of regionally trained staff to conducted, upon request by seminars conduct national training the countries and approved and seminars\. by PMU Regional Manager, to enhance regional capacity and technical skills related to community- managed irrigation\. 28  Efficient Water Use for Agricultural Production Project Appraisal Document Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions Evaluations Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) 3\.1 Coordination with and 3\.1 Riparians are willing to assistance of SVP Water share information and Resources project is collaborate on the design established for the and implementation of the collection of existing DSS\. community-managed irrigation water use data for the DSS development, and for the establishment of procedures for community- managed irrigation water use data\. 3\.1 Coordination with and 3\.1 Relevant institutions are assistance of SVP Water willing to participate in Resources project is collaborative efforts established for the review towards policy changes\. of agriculture/irrigation policy to promote community-managed irrigation best practices\. 3\.2 Exchange of experience 3\.2 Roster of universities, and best practices, and research centers, public basin-wide twinning of professional institutions, institutions NGOs, and private organizations in the Nile Basin for potential twinning on joint community-managed irrigation activities is prepared and shared with 3\.2 Reports on joint 3\.2 Willingness and capability other relevant PMUs\. community-managed of relevant institutions to irrigation activities conduct joint community- 3\.2 Opportunities for twinning conducted by twinning managed irrigation on joint community- institutions\. activities\. managed irrigation activities between Nile Basin institutions are identified and encouraged\. 3\.2 Country reports, on 3\.2 Availability of community- 3\.2 Field visits are conducted national best managed irrigation best to profile community- community-managed practices and managed irrigation best irrigation practices (if commitment among practices schemes (if available)\. riparian countries to share available)\. experience and information\. 29  Efficient Water Use for Agricultural Production Project Appraisal Document Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions Evaluations Outcome/Impact Indicators Project Reports (From outputs to objectives) 3\.2 Two regional Study tours 3\.2 Reports on lessons are organized, one in the learned from study Nile Equatorial and the tours other in the Eastern Nile region, to visit and exchange experience on selected community- managed irrigation best practices sites\. 3\.2 Coordination with the SVP Environment project on Microgrant field activities related to community-managed irrigation to decrease erosion to ensure synergy between SVP projects\. 3\.2 Comprehensive summary 3\.2 Report on compiled of community-managed community-managed irrigation best practices is irrigation best practices compiled and within the Nile Basin disseminated to all and in other similar riparian countries\. regional or international settings\. 3\.2 Develop linkages with existing networks of 3\.2 Report on linkages with regional organizations\. networks\. Action plan for future community-managed irrigation activities to be Action Plan Report implemented through SAPs and/or other cooperative projects\. 30  Efficient Water Use for Agricultural Production Project Appraisal Document Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) Component 4: Public and Private-Managed Irrigation 4\.1 Regional Consultation 4\.1 Regional/National 4\.1 Reports on regional 4\.1 Stakeholders at regional, and Training workshops and meetings and National national, and community are held, as specified in workshops level from both the public the project and private sectors are implementation schedule willing to actively (section 4), to strengthen participate in and regional and national collaborate with the consultation and dialogue project\. on public and private- managed irrigation issues\. 4\.1 Criteria for best public 4\.1 Technical note on best and private-managed public and private- irrigation practices managed irrigation adaptable to the Nile practices criteria Basin are collaboratively defined by riparian countries\. 31  Efficient Water Use for Agricultural Production Project Appraisal Document Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions Evaluations Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) 4\.1 Common Nile Basin 4\.1 Report on Public and 4\.1 Commitment among guidelines for design and private-managed riparians to agree on implementation of public irrigation Guidelines common criteria and and private-managed guidelines\. irrigation schemes based on best practices in the region and in similar international environments\. 4\.1 Regional training and 4\.1 Evaluation and Reports 4\.1 Minimum level of trained seminars are designed and on regional training and staff available for conducted, as specified in seminars regional training and the project implementation seminars\. schedule (section 4), to enhance regional capacity and technical skills related to public and private- managed irrigation\. 4\.1 National training and 4\.1 Evaluation and Reports 4\.1 Willingness and capability seminars are designed on national training and of regionally trained staff and conducted, upon seminars to conduct national request by the countries training and seminars\. and approved by PMU Regional Manager, to enhance regional capacity and technical skills related to public and private-managed irrigation\. 4\.1 Coordination with and 4\.1 Riparians are willing to assistance of SVP Water share information and Resources project is collaborate on the design established for the and implementation of the collection of existing DSS\. public and private- managed irrigation water use data for the DSS development, and for the establishment of procedures for Public and Private-Managed irrigation water use data\. 4\.1 Coordination with and 4\.1 Relevant institutions are assistance of SVP Water willing to participate in Resources project is collaborative efforts established for the review towards policy changes\. of agriculture/irrigation policy to promote public and private-managed irrigation best practices\. 32  Efficient Water Use for Agricultural Production Project Appraisal Document Hierarchy of Objectives Key Performance Indicators Monitoring and Critical Assumptions Evaluations Output by Component Outcome/Impact Indicators Project Reports (From outputs to objectives) 4\.2 Exchange of 4\.2 Roster of universities, experience and best research centers, public practices, and basin- professional institutions, wide twinning of NGOs, and private institutions\. organizations in the Nile Basin for potential twinning on joint water public and private- managed irrigation activities is prepared and shared with other relevant PMUs\. 4\.2 Opportunities for twinning 4\.2 Reports on joint public 4\.2 Willingness and capability on joint public and and private-managed of relevant institutions to private-managed irrigation activities conduct joint public and irrigation activities conducted by twinning private-managed between Nile Basin institutions\. irrigation activities\. institutions are identified and encouraged\. 4\.2 Field visits are conducted 4\.2 Country reports on 4\.2 Availability of public and to profile public and national best public private-managed private-managed and private-managed irrigation best practices irrigation best practices irrigation practices (if and commitment among schemes (if available)\. available)\. riparian countries to share experience and information\. 4\.2 Two regional Study tours 4\.2 Reports on lessons are organized, one in the learned from study Nile Equatorial and the tours\. other in the Eastern Nile region, to visit and exchange experience on selected public and private-managed irrigation best practices sites\. 4\.2 Comprehensive summary 4\.2 Report on compiled of public and private- public and private- managed irrigation best managed irrigation best practices is compiled and practices within the disseminated to all Nile Basin and in other riparian countries\. similar regional or international settings\. 4\.3 Develop linkages with existing networks of 4\.2 Report on linkages with regional organizations\. networks\. Action plan for future public and private- Action Plan Report managed irrigation activities to be implemented through SAPs and/or other cooperative projects\. 33   ANNEX 2: DETAILED PROJECT DESCRIPTION Approach Recognizing the important role of agriculture in the Nile Basin this project symbolizes the first step in bringing together the regional and national stakeholders in the riparian countries to develop a shared vision on common issues related to the increase of the availability of water and its efficient use for agricultural production\. The project will focus on formulating basic principles and guidelines for best practices, sharing experiences, and basin-wide twinning of institutions\. This will pave the way to a cooperative implementation of the mainstream of the efficient irrigation water use and water harvesting actions that will be secured through the investment program of the agriculture SAPs activities in the Eastern Nile (ENSAP) and the Nile Equatorial Lakes (NELSAP) regions\. One of the main thrusts of this project is the creation of a framework that will enable stakeholders from the Nile Countries to work together to promote basin-wide cooperation and awareness, enhance understanding, and build capacity, on the common irrigation and water harvesting issues\. This will be achieved through basin-wide consultations, workshops, and seminars that create networks of key actors who will collectively work together on water harvesting, community- managed irrigation, and public and private-managed irrigation\. The project was designed based on identified national concerns and needs, and will be implemented with contribution and ownership of water users and stakeholders from relevant public and private institutions, community groups, and NGOs from the Nile Countries\. The regional cooperation and national contribution will be promoted simultaneously to build greater understanding and transparency and enable key stakeholders to identify and take advantage of the opportunities offered by international collaboration to move towards effective and sustainable use of water for agricultural production while making available additional water supply for municipal, industrial, rural and poor communities, and environmental needs\. Building on the main issues and suggested options in the country reports, a rapid baseline assessment will be carried out to identify national stakeholders including public/private professional and research institutions, water users representatives, and community groups; and complement existing information including identification of opportunities and needs related to the exchange of best practices for water harvesting, irrigation management, and efficient water use\. The project activities will be fully integrated with the remaining SVP projects\. Increased stakeholder involvement and public awareness in coordination with the Confidence Building & Stakeholder Involvement (CBSI) project will expand understanding and confidence, and foster basin-wide ownership of the agriculture project\. Improved streamlining of water quality monitoring and land-water conservation issues by the Nile Transboundary Environmental Action Project, referred hereafter as the Environment project, will help in the better management of water quality which in turn contributes to the improvement of irrigation efficiency\. The Environment project will also promote appropriate water harvesting methods that reduce soil degradation and preserve the local environment\. Similarly, efficient water use and water harvesting will make additional water available for food production, domestic water supply, and environmental needs\. Hydropower trade will create opportunities to extend electrical connectivity to rural areas\. This will in turn lead to easier access to water, especially in poor communities, and relieve women and children from carrying water from far distances\. Advance on efficient irrigation water use and water harvesting will assist decision makers in gaining a  Efficient Water Use for Agricultural Production Project Appraisal Document better understanding of water use linkages and trade-offs opportunities that will be demonstrated by the Nile Decision Support System (DSS) tool that will be developed by the SVP Water Resources Planning and Management project, and appreciating the need for cooperative and integrated water resources management and data sharing\. Improved regional and national agricultural/irrigation policies in harmony with integrated water and environmental policies will also help decision makers and stakeholders to move towards sustainable management of the Nile water resources\. Irrigation water saving and additional augmentation of water supplies via water harvesting will support socio-economic development and poverty alleviation\. Furthermore, the Benefit Sharing project takes a strategic approach through scenario-building and macroeconomic analysis, which will necessarily include the role of agriculture in the basin's future\. In addition to the SVP Applied Training activities, the Agriculture project series of meetings, seminars, and workshops targeted to various stakeholders including decision makers, planners, managers, water users, community groups, NGOs, and other relevant public and private entities will enhance capacities, strengthen cooperation, and develop practical guidelines for sustainable-efficient agricultural water use and water harvesting\. Project Components The Agriculture project includes the following four components: Project Coordination and Facilitation Water Harvesting Community-Managed Irrigation Public and Private-Managed Irrigation The project is being executed by the NBI and financed by the multi-donor Nile Basin Trust Fund (NBTF)\. Component 1: Project Coordination and Facilitation This component covers activities related to the project management arrangements that facilitate regional cooperation and project implementation, the implementation of a rapid baseline assessment (RBA), and the preparation of the project work plan\. Subcomponent 1\.1: Project Management Arrangements The project management set up includes the Project Management Unit (PMU), establishing the National Project Coordinators (NPCs), the working groups, and the national technical counterparts in each country\. 36  Efficient Water Use for Agricultural Production Project Appraisal Document Subcomponent 1\.1: Main Activities & Tasks Establish and support the Project Management Unit (PMU) in Kenya\. Additional tasks include establishing the National Project Coordinators (NPCs), the working groups, and the national technical counterparts in each country\. Establish and support the Water Harvesting Working Group (WHWG)\. The WHWG will be preferably composed of one member per country\. This member will be a watershed specialist/hydrologist either from the focal point institution (FPI) or from a national university/research center\. The specialists of the WHWG will be called in, when needed, to provide technical backstopping to the national project coordinators and support the Regional Project Manager and lead specialist in selected water harvesting project activities\. Establish and support the Community-Managed Irrigation Working Group (CMIWG)\. The CMIWG will be preferably composed of one irrigation engineer per country\. The specialists of the CMIWG will be called in, when needed, to provide technical backstopping to the national project coordinators and support the Regional Project Manager and lead specialist in selected community-managed irrigation project activities\. Establish Public and Private-Managed Irrigation Working Group\. The PMIWG will be preferably composed of two members per country: one practitioner, the irrigation engineer of the CMIWG, and a researcher (agricultural production specialist), from a national university or research center\. The specialists of the PMIWG will be called in, when needed, to provide technical backstopping to the national project coordinators and support the Regional Project Manager in selected public and private-managed irrigation project activities\. At the end of the project, hold a regional executive workshop for decision makers to present findings and action plan for all the three project components: water harvesting, community- managed irrigation, and public and private-managed irrigation\. Subcomponent 1\.2: Regional Planning Workshop and Rapid Baseline Assessment The first tasks of the PMU are the development of a detailed annual workplan based off of the PIP, and the realization of the rapid baseline assessment (RBA)\. A project-kickoff regional workshop will be organized two months after the establishment of the PMU to discuss the main outlines of the work plan and finalize the design and planning of the rapid baseline assessment activity\. The RBA will be designed to complement the information assembled in the country reports by gathering additional information including identification of opportunities and needs related to the exchange of best practices for water harvesting, community-managed irrigation, and public and private-managed irrigation\. The RBA will also identify national stakeholders including public/private professional and research institutions, water users representatives, and community groups including women groups and NGOs; and explore with them major concerns and practical options and needs to improve water harvesting, community-managed irrigation, and public and private-managed irrigation\. This baseline assessment will be carried in each of the countries, for approximately four weeks, by a national private consultant in coordination with the NPC and the PMU\. A Project Steering Committee meeting will be organized, two months after the project kickoff regional workshop, to finalize the project work plan and budget and present findings of the RBA\. 37  Efficient Water Use for Agricultural Production Project Appraisal Document Subcomponent 1\.2: Main Activities & Tasks 1\. Hold a project-kickoff regional workshop to discuss the detailed annual workplan, and finalize the design and planning of the Rapid Baseline Assessment\. 2\. Conduct the rapid baseline assessment and prepare a detailed report on findings, including a list of best practices sites\. 3\. Hold a Project Steering Committee meeting to present findings of the RBA and finalize the project work plan and budget\. 4\. Prepare subsequent annual work plans, progress reports, and financial monitoring reports\. Component 2: Water Harvesting The water harvesting component will enhance dialogue and cooperation among national and regional stakeholders to explore the best indigenous and modern water harvesting practices, build regional and national capacity, and promote the exchange of experience between participating countries, with the objective of improving rainfed crop production and enhancing supplies for small-scale irrigation and domestic water needs, especially for poor rural communities\. The implementation of this component will be coordinated by the Irrigation/Water Harvesting Lead Specialist, who will work closely with the National Project Coordinators in the participating countries and the Water Harvesting Working Group\. Cooperation and coordination with the SVP Environment Project will be sought, especially in the implementation of its Microgrant activities to increase the linkages and synergy between environment and water harvesting practices\. Subcomponent 2\.1: Regional Consultation and Training This sub-component is aimed at assisting stakeholders at the regional, national, and local levels to address the issues and needs identified in the country reports and the RBA, develop a common view on water harvesting best practices that are suitable for the Nile basin environment, build regional and national capacities, and generate future activities for the SAPs investment programs and other NBI projects\. The main water harvesting issues would include: Identification of indigenous and modern low-cost best practices such as terracing, mulching, Fanya Yuu (throwing soil uphill), runoff collection and spreading, supplemental irrigation, flood recession cropping, wetlands cropping, and roof top rainwater collection for domestic water supply Empowerment of farmers by providing incentives such as access to credits, and extension services for adoption of the above practices; Promotion and support of water harvesting schemes for poor communities; Integrated water harvesting, soil-water conservation, and environmental protection, in collaboration with the SVP Environment project; Sustainability of water harvesting technical support beyond the SAPs; 38  Efficient Water Use for Agricultural Production Project Appraisal Document Capacity building in various aspects related to the establishment of sustainable and economically viable water harvesting schemes\. The Lead Specialist, the National Coordinators, and the Water Harvesting Working Group will coordinate the regional consultation and capacity building via a series of meetings, workshops, seminars, and hands on training that involve decision makers, practitioners, public/private institutions, water users/farmers, NGOs, and community groups as described hereafter: 1\. Regional workshops to promote dialogue and cooperation on water harvesting issues, define criteria of best practices adaptable to the Nile Basin, and develop common Nile Basin guidelines for the design and implementation of future regional SAPs and national watershed management projects\. 2\. National workshops and meetings with public/private institutions, farmers/water users, local NGOs, and community groups to raise awareness about the issues related to the proper implementation and socio-economic benefits of identified water harvesting techniques, and encourage their active involvement in the development of future national and transboundary water harvesting projects\. 3\. Regional seminars and training for practitioners to enhance their capacity and deepen their knowledge of the various indigenous and modern water harvesting methods aimed at increasing water availability for agricultural production and domestic water supply for rural areas, and increasing access to water to poor communities\. This regional capacity building effort will also serve as training of trainers, who will conduct, as needed, national round of seminars and training on major topics presented at the regional level to disseminate know-how and build capacity at national level\. The training will be conducted in coordination with the SVP Applied Training project\. The seminars and training will be based on the principle of learning by doing, which presents the basic topic-background with emphasis on hands on practical exercises using Nile basin data and case studies\. 4\. Regional executive workshop for decision makers to present findings and promote cooperative regional consensus on water harvesting\. Subcomponent 2\.1: Main Activities & Tasks 1\. Hold regional workshops to enhance dialogue and cooperation on water harvesting issues, define criteria of best practices adaptable to the Nile Basin, and develop common Nile Basin guidelines for design and implementation of water harvesting schemes based on recommendations of the country reports, the participatory rapid baseline assessment, and lessons learned from best practices in the region and in similar international environment\. 2\. Hold national meetings and workshops with public/private institutions, community groups, and NGOs to enhance awareness of the best water harvesting practices, and ensure national stakeholders' contribution to and ownership of the national and transboundary water harvesting development\. 3\. Organize regional seminars and training sessions to strengthen regional capacity and share information on lessons learned on various water harvesting best practices\. This activity will include a special seminar on methods of identification of water harvesting sites, and planning/implementation of transboundary water harvesting projects\. 4\. Assist, following review of country request by the Regional Project Manager, in the organization 39  Efficient Water Use for Agricultural Production Project Appraisal Document of national seminars and training sessions to transfer knowledge gained at regional level to build/enhance national capacity in the planning and implementation of regional and national water projects\. These events will be organized and conducted by the trainees who attended the regional seminars and training indicated in 3 above\. 5\. Prepare action plan for future water harvesting activities through the SAPs and other cooperative NBI projects\. Subcomponent 2\.2: Exchange of experience and best practices, and basin-wide twinning of institutions Based on criteria of potential water harvesting best practices and information from the Rapid Baseline Assessment, appropriate best practice sites (if available) will be identified in the riparian countries and profiled by national practitioners\. A selected number of these sites will be targeted for visits by regional practitioners from riparian countries to exchange experience and share information on lessons learned on water harvesting issues\. The selected sites will cover a wide- spread of indigenous and modern techniques\. These sites will be visited in two regional study tours that will be organized preferably back to back to a regional workshop, seminar, or training to optimize participation and reduce expenses\. This sub-component also offers an opportunity to pool resources, link on-going initiatives across the basin, and create new partnerships among professional/research institutions and NGOs dealing with water harvesting\. The Project Management Unit will assist the National Project Coordinators in establishing a roster of the regional institutions, research centers, NGOs, and private organizations\. The PMU will also help the NPCs to identify opportunities for twinning to carry joint activities, including organization of seminars, short courses, and future water harvesting transboundary projects\. The twinning may also include joint activities with international institutions specialized in agricultural development, watershed management and water harvesting\. Among these institutions may include the International Center for Agricultural Research in the Dry Areas (ICARDA) based in Aleppo, Syria, and operates mainly in West Asia and North Africa, the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) which covers a large part of Africa including parts of the Nile Basin and has a branch in Nairobi, Kenya, and FAO through the Special Program for Food Security\. Moreover, the sub-component will coordinate with the SVP Environment project on the implementation of its Microgrant activities\. Subcomponent 2\.2: Main Activities & Tasks 1\. Prepare a roster of universities, research centers, public professional institutions, NGOs, and private organizations for potential twinning to carry out joint water harvesting activities, including organization of seminars, short courses, study tours, and future water harvesting transboundary projects\. This work will be done by the National Coordinators, the Regional Project Manager, the Lead Specialist, and the Water Harvesting Working Group\. The roster, with relevant details about each institution, will be sent to all PMUs through the NBI Secretariat for coordination and synergy between SVP activities\. 2\. Identify opportunities for twinning and encourage joint water harvesting activities between institutions in the region, in collaboration with the SVP Applied Training Project\. This activity will 40  Efficient Water Use for Agricultural Production Project Appraisal Document preferably build on experience gained in previous twinning established by research projects in the region such as the UNESCO-FRIEND Program\. 3\. Establish contact with regional and international institutions such as ICARDA, ICRISAT and FAO for potential assistance in field training, seminars, and study tours\. 4\. Conduct field visits in riparian countries to profile water harvesting best practice schemes (if available)\. 5\. Conduct two study tours to visit and exchange experience on selected water harvesting best practices sites\. One study tour in the Nile Equatorial Lakes region and the other in the Eastern Nile region\. 6\. Prepare a comprehensive summary of water harvesting best practices based on profiles of best practice schemes in the Nile Basin (see 4 above) and in other regional and international settings, and disseminate results to all participating countries 7\. Coordinate with the SVP Environment project on the implementation of its Microgrant activities (coordination activity, non-financed)\. Component 3: Community-managed irrigation The Community-managed irrigation component offers an opportunity for decision makers, professionals, farmers, private sector, and other stakeholders to enhance regional consultation with the objective of developing a clear understanding of the needs for the development of sustainable and effective community-managed irrigation schemes using low-cost water collection, water abstraction (i\.e\. treadle pump) and irrigation technologies\. The component will also enhance capacity building on efficient water use and encourage exchange of best practices for community-managed irrigation\. This component will be coordinated by the Irrigation/Water Harvesting Lead Specialist, who will work closely with the National Project Coordinators in the participating countries and the Community-Managed Irrigation Working Group\. Synergy with the SVP Environment project will be ensured, especially in the implementation of its Microgrant activities\. Subcomponent 3\.1: Regional Consultation and Training This sub-component will assist stakeholders at the regional, national, and local levels to establish a forum that leads to the development of a shared vision on the issues and needs identified in the country reports and the Rapid Baseline Assessment for establishing sustainable community- managed irrigation systems using low-cost technologies and efficient water use best practices\. It will also generate activities for the SAPs investment programs and other NBI projects, and build capacity for future cooperative implementation of related SAPs investment programs\. The main issues that could be addressed would include: Identification of low-cost technologies for water collection and abstraction; Establishment and enforcement of water abstraction licenses; Empowerment of farmers by providing incentives such as access to credits, and extension services for operation and maintenance of the up-to-date low-cost water collection and 41  Efficient Water Use for Agricultural Production Project Appraisal Document abstraction technologies, improved irrigation efficiency and on-farm water use management, and increased crop production; Encouragement of community groups for the cooperative management of irrigation systems, through water users associations (WUAs); Promotion and support of small-irrigation schemes for poor communities; Involvement of private sector in farm inputs and marketing services; Integrated watershed management activities (small-scale irrigation, soil-water conservation, and environmental protection), in collaboration with the SVP Environment project; Establishment of procedures for irrigation water use data management and evaluation of water use efficiency, in collaboration with the SVP Water Resources Planning and Management Project; Sustainability of extension services beyond the SAPs; Review of national agriculture/irrigation policy to promote community-managed irrigation best practices, in collaboration with the SVP Water Resources Planning and Management Project; Capacity building in various aspects related to the establishment of sustainable community-managed irrigation\. The Irrigation/Water Harvesting Lead Specialist, with active participation of the National Project Coordinators and the CMIWG, will coordinate the regional consultation and capacity building through a series of meetings, workshops, seminars, and hands on training that involve decision makers, practitioners, NGOs, private sector, and community groups as indicated below: 1\. Regional workshops to advance dialogue and cooperation on community-managed irrigation improvement, define criteria of best practices adaptable to the Nile Basin, and develop common Nile Basin guidelines for the design and implementation of future regional SAPs and national community-managed Irrigation projects\. 2\. National workshops and meetings with public/private institutions, farmers/water users, local NGOs, and community groups to raise their awareness of the issues that are related to the proper implementation and socio-economic benefits of community-managed irrigation, and encourage their active involvement in the development of future national and transboundary small-scale irrigation projects\. 3\. Regional seminars and training for practitioners to enhance their capacity and deepen their knowledge of various aspects related to the development of sustainable community-management irrigation schemes, with emphasis on crop water requirement, irrigation scheduling, extension services for irrigation efficiency, agricultural production, poverty alleviation, agriculture/irrigation policy, and integrated watershed management\. This regional capacity building effort will also serve as training of trainers, who will conduct a national round of seminars and training on major topics presented at the regional level to disseminate know-how and build capacity at national level\. The training will be conducted in coordination with the SVP Applied Training project\. The seminars and training will be based on the principle of learning by doing\. 4\. Regional executive workshop for decision makers to present findings and promote cooperative regional consensus on the development of sustainable and efficient community-management irrigation schemes\. 42  Efficient Water Use for Agricultural Production Project Appraisal Document Subcomponent 3\.1: Main Activities & Tasks 1\. Hold regional workshops to enhance dialogue and cooperation on community-managed irrigation improvement, define criteria of best practices adaptable to the Nile Basin, and develop guidelines for design and implementation of community-managed irrigation schemes based on recommendations of the country reports, the participatory rapid baseline assessment, and lessons learned from best practices in the region and in similar international environment\. These workshops will be preferably organized in conjunction with those of water harvesting indicated in section 1\.3\.2\.2 of this report\. 2\. Hold national meetings and workshops with farmers/water users, community groups, NGOs, private sector representatives\. These events will aim at raising awareness and encouraging new attitudes and behavioral pattern to move towards best community-managed irrigation practices, and ensure their full participation and ownership of the process\. 3\. Organize regional seminars and training sessions to strengthen regional capacity and share information on lessons learned on various community-managed irrigation best practices\. This will include seminars and training on low-cost technologies for water collection and abstraction, crop water requirement and irrigation scheduling, evaluation of water use efficiency, integrated irrigation-crop production extension services, water abstraction licensing, and marketing of agricultural produce\. 4\. Assist, following review of country request by the Regional Project Manager, in the organization of national seminars and training sessions to transfer knowledge gained at regional level to build/enhance national capacity in the planning and implementation of regional and national water projects\. These events will be organized and conducted by the trainees who attended the regional seminars and training indicated in 3 above\. 5\. Collaborate with the SVP Water Resources Planning and Management Project on the review of national agriculture/irrigation policy to promote community-managed irrigation best practices 6\. Cooperate with the SVP Water Resources Planning and Management Project on the collection of existing community-managed irrigation water use data for the DSS development, and the establishment of procedures for the management of irrigation water use data\. (coordination activity, non-financed)\. 7\. Prepare action plan for future community-managed irrigation activities through the SAPs and other cooperative projects\. Subcomponent 3\.2: Exchange of experience and best practices, and basin-wide twinning of institutions Using criteria of community-manage irrigation best practices and information from the Rapid Baseline Assessment, appropriate best practice schemes (if available) will be identified in the riparian countries and profiled by national practitioners\. A selected number of these schemes will be aimed for visits by regional specialists from riparian countries to exchange experience and share information on lessons learned on community-managed low-cost irrigation\. Study tours related to site visits for this sub-component will be preferably organized in conjunction with the 43  Efficient Water Use for Agricultural Production Project Appraisal Document water harvesting tours to illustrate links between water harvesting and community-managed irrigation schemes\. This sub-component will also assist stakeholders to create new partnerships among professional institutions, research centers, NGOs, and private organizations from various countries to advance community-managed irrigation for the benefits of Nile Basin communities\. A roster of the regional institutions and research centers, NGOs, and private organizations will be prepared\. Opportunities for twinning to carry joint activities, including organization of seminars, short courses, and future community-managed irrigation transboundary projects will be targeted\. For instance, Approtech, a Kenyan NGO that has successfully reconfigured the treadle pump into a lighter portable device called a pedal pump or "moneymaker" for water abstraction for small- scale irrigation, would be with other Nile sister organizations potential candidates for transferring their experience to other NGOs and farmers in the region\. In addition to the International institutions mentioned in section 1\.3\.2\.2 above, the International Water Management Institute (IWMI) may also be considered in twinning activities on small-scale irrigation management\. Moreover, the sub-component will coordinate with the Environment project on the Microgrant activities\. Subcomponent 3\.2: Main Activities & Tasks 1\. Prepare a roster of universities, research centers, professional public institutions, NGOs, and private organizations for potential twinning to carry out joint community-managed irrigation activities, including organization of seminars, short courses, study tours, and future transboundary projects\. This work will be done by the National Coordinators, the Regional Project Manager, the Lead Specialist, and the Community-Managed Irrigation Working Group\. The roster, with relevant details about each institution, will be sent to all PMUs through the NBI Secretariat for coordination and synergy between other SVP projects\. 2\. Identify opportunities for twinning and encourage joint activities between institutions in the region, in collaboration with the other SVP projects, especially Applied Training, Water Resources Planning and Management, and Environment\. This activity will preferably be built on experience gained in twinning established by previous research projects in the region such as the UNESCO- FRIEND Program\. 3\. Establish contact with regional and international institutions such as ICARDA, ICRISAT, IWMI, and FAO for potential assistance in field training, seminars, and study tours\. 4\. Conduct field visits in riparian countries to profile community-managed irrigation best practice schemes (if available)\. 5\. Conduct two study tours to visit and exchange experience on selected community-managed irrigation best practices sites\. These tours would be preferably organized in concurrence with those of the water harvesting\. 6\. Prepare a comprehensive summary of community-managed irrigation best practices based on profiles of best practice schemes in the Nile Basin (see 4 above) and in other regional and international environment, and disseminate results to all participating countries\. 7\. Coordinate with the Environment project on the implementation of its Microgrant activities (coordination activity, non-financed)\. 44  Efficient Water Use for Agricultural Production Project Appraisal Document Component 4: Public and Private-Managed Irrigation Several common technical, institutional, environmental, and socio-economic concerns have been raised by the Nile Basin Countries about the performance of public and private-managed irrigation systems\. Many of the countries have started, individually, tackling these issues\. Experiences in the basin and other parts of the world have shown that improved water management in these systems would result in significant amount of water saving and increased productivity\. This component will establish a regional forum for the Nile Countries to enhance the knowledge and understanding of these issues and needs identified in the country reports and the Rapid Baseline Assessment, and explore appropriate strategy and options for improving public and private-managed irrigation systems with participation of regional, national, and local stakeholders\. The component will also generate activities for the SAPs investment programs and other NBI projects, offer capacity building opportunities, and promote exchange of best practices and sharing information on learned lessons\. The implementation of this component will be coordinated by the Regional Project Manager, who will work closely with the National Project Coordinators, and the Public and Private-Managed Irrigation Working Group (PMIWG)\. Subcomponent 4\.1: Regional Consultation and Training This sub-component will establish the regional forum to promote dialogue and cooperation at regional, national, and local levels towards the development of a common vision on tangible options for public and private-managed irrigation, and provide hands on targeted seminars and practical training courses to enhance capacity on major topics related to improved public and private-managed irrigation and future cooperative implementation of related SAPs investment programs\. The following are among the possible issues to be addressed by the forum: On farm water management best practices to improve irrigation efficiency and agricultural production; Integrated irrigation-crop production extension services for appropriate use of modern irrigation and crop production technologies and sustainability of on farm water management best practices\. The integrated extension services will be designed to achieve the agronomic water use efficiency or "more crop per drop" as reflected by the priority themes indicated in the country reports; Improved operation and maintenance (O&M) of water distribution network to reduce water losses and sedimentation and improve reliability of water delivery in space and time; Improvement of drainage and water quality, especially salinity and the effects of pesticides on water quality in collaboration with SVP Environment project; Adoption of water use fees to recover O&M and investment costs, and encourage water saving; Transfer of Operation and Management of the tertiary Irrigation System (before the farm gate) to WUAs; Empowerment of farmers that adopt best practices by providing incentives such as access to credits and improved marketing; Role of private sector in integrated extension services and management of irrigation system; 45  Efficient Water Use for Agricultural Production Project Appraisal Document Establishment of procedures for irrigation water use data management and evaluation of water use efficiency, in collaboration with the SVP Water Resources Planning and Management Project; Sustainability of extension services beyond the SAPs; Review of national agriculture/irrigation policy to promote public and private-managed irrigation reform, in collaboration with the SVP Water Resources Planning and Management Project (policy component), as appropriate; Capacity building in various aspects related to the establishment of sustainable public and private-managed irrigation\. The regional consultation and capacity building will be achieved through the following series of meetings, workshops, seminars, and hands on training that involve decision makers, practitioners, NGOs, private sector, and community groups: 1\. Regional workshops to enhance dialogue and cooperation on public and private-managed irrigation reform, define criteria of best practices adaptable to the Nile Basin, and develop common Nile Basin guidelines for future regional SAPs and national projects related to the reform of this public sector\. 2\. National meetings and workshops for farmers/water users, local NGOs, community groups, and private sector representatives to raise their awareness of the above issues associated with the reform of public and private-managed irrigation, and encourage their active involvement in the development of related future national and transboundary projects\. 3\. Regional seminars and training for practitioners to enhance their capacity and understanding of aspects related to management and reform of the sector\. Note that crop water requirement, irrigation scheduling, and extension services for improved irrigation efficiency and agricultural production are covered in the community-managed component\. Therefore, the regional seminars and training will stress on the introduction of modern irrigation techniques which are different from those of the small-scale irrigation that tends to use low-cost technology, agriculture/irrigation policy to promote reform, incentives, transfer of operation and management of tertiary irrigation system to WUAs, and role of private sector in the activation of the reform\. This regional capacity building effort will also serve as training of trainers, who will conduct national round of seminars and training on major topics presented at the regional level to disseminate know-how and build capacity at national level\. The training will be conducted in coordination with the SVP Applied Training project\. The seminars and training will be based on the principle of learning by doing\. 4\. Regional executive workshop for decision makers to present findings and promote cooperative regional consensus on the reform of the public and private-managed irrigation\. Subcomponent 4\.1: Main Activities & Tasks 1\. Hold regional workshops to enhance dialogue and cooperation on public and private-managed irrigation reform, define criteria of best practices adaptable to the Nile Basin, and develop guidelines for the design and implementation of reform projects based on recommendations of the country reports, the participatory rapid baseline assessment, and lessons learned from best practices in the region and in similar international environment\. 2\. Hold national meetings and workshops with public/private institutions, farmers/water users, WUAs, community groups, and NGOs\. These events will enhance awareness and promote new positive attitudes towards the reform of public and private-managed irrigation practices, and ensure 46  Efficient Water Use for Agricultural Production Project Appraisal Document the national stakeholders' full participation and ownership of the process\. 3\. Organize regional seminars and training sessions to strengthen regional capacity and share information on lessons learned on best practices related to the reform of public/private managed irrigation\. This will include topics on modern irrigation techniques, integrated irrigation-crop production extension services applied to large scale irrigation schemes, marketing of agricultural produce, transfer of operation and management of tertiary irrigation system to WUAs, and role of private sector in the reform this public sector\. 4\. Assist, following review of country request, in the organization of national seminars and training sessions to transfer knowledge gained at regional level to build/enhance national capacity in the planning and implementation of regional and national projects related to the management and reform of the public and private-managed irrigation systems\. These events will be organized and conducted by the trainees who attended the regional seminars and training indicated in 3 above\. 5\. Collaborate with the SVP Water Resources Planning and Management Project on the review of national agriculture/irrigation policy to improve the management and promote reform of public and private-managed irrigation systems\. 6\. Coordinate with the SVP Water Resources Planning and Management Project on the collection of existing public and private-managed irrigation water use data for the DSS development, and the establishment of procedures for the management of irrigation water use data\. (coordination activity, non-financed)\. 7\. Prepare action plan for future public and private-managed irrigation activities through the SAPs and other cooperative projects\. Subcomponent 4\.2: Exchange of experience and best practices, and basin-wide twinning of institutions Among the public and private-managed irrigation sites identified and profiled by national practitioners for best management and reform practices, priority locations will be selected for visits by regional specialists from riparian countries to exchange experience and share information on lessons learned on management and reform of these public and private-managed irrigation systems\. One study tour will be organized in the Nile Basin and possibly another tour, depending on availability of budget, outside the basin\. The Nile Basin study tour will be organized preferably back to back to a regional workshop seminar, or training to optimize participation and reduce expenses\. This sub-component will assist stakeholders to create a new network of cooperation and partnerships among professional institutions, research centers, NGOs, and private organizations from various countries to move forward positive reforms and improve the efficiency of public and private-managed irrigation systems for the benefit of the Nile Basin communities\. A roster of the regional institutions and research centers, NGOs, and private organizations will be prepared\. Opportunities for twinning to carry joint activities, including organization of seminars, short courses, and future public and private-managed irrigation transboundary projects will be targeted\. International institutions may also be considered for contribution in twinning activities related to public and private-managed irrigation\. 47  Efficient Water Use for Agricultural Production Project Appraisal Document Subcomponent 4\.2: Main Activities & Tasks 1\. Prepare a roster of universities, research centers, NGOs, and private organizations for potential twinning to carry out joint public and private-managed irrigation activities, including organization of seminars, short courses, study tours, and future transboundary projects\. This work will be done by the National Coordinators, the PMU manager, the Lead Specialist, and the Public and Private- Managed Irrigation Working Group\. The roster, with relevant details about each institution, will be sent to all PMUs through the NBI Secretariat for coordination and synergy between other SVP projects\. 2\. Identify opportunities for twinning and encourage joint activities between institutions in the region, in collaboration with the other SVP projects, especially Applied Training, Water Resources Planning and Management, and Environment\. This activity will preferably be built on experience gained in twinning established by previous research projects in the region such as the UNESCO- FRIEND Program\. 3\. Establish contact with regional and international institutions for potential assistance in field training, seminars, and study tours\. 4\. Conduct field visits in riparian countries to profile public and private-managed irrigation best practice schemes (if available)\. 5\. Conduct one study tour in the Nile Basin and possibly a second study tour outside the basin to exchange experience and learn lessons on best practices related to the management and reform of public and private-managed irrigation systems\. 6\. Prepare a comprehensive summary of public and private-managed irrigation best practices based on profiles of best practice schemes in the Nile Basin (see 4 above) and in other regional and international environment, and disseminate results to all participating countries\. 48  ANNEX 3: ESTIMATED PROJECT COSTS Table 3\.1: Components Project Cost Summary, Base Costs NILE BASIN INITIATIVE % % Total (US$ '000) Foreign Base Local Foreign Total Exchange Costs A\. PROJECT COORDINATION & FACILITATION /a 1\. PROJECT MANAGEMENT STAFF 89\.280 904\.932 994\.212 91 24 2\. PROJECT MANAGEMENT TRAVEL 7\.200 64\.800 72\.000 90 2 3\. PROJECT MONITORING AND EVALUATION - 80\.050 80\.050 100 2 4\. PROJECT MANAGEMENT EQUIPMENT 40\.950 368\.550 409\.500 90 10 5\. PROJECT MANAGEMENT EXPENSES 34\.524 310\.716 345\.240 90 8 6\. WORK PLAN - RAPID BASIN ASSESSMENT 6\.800 61\.200 68\.000 90 2 Subtotal PROJECT COORDINATION & FACILITATION 178\.754 1,790\.248 1,969\.002 91 47 B\. WATERHARVESTING /b 1\. WATER HARVESTING WORKING GROUP 14\.400 129\.600 144\.000 90 3 2\. REGIONAL AND NATIONAL CONSULTATION 7\.800 70\.200 78\.000 90 2 3\. TRAINING 39\.000 351\.000 390\.000 90 9 4\. TWINING INSTITUTIONS 6\.000 54\.000 60\.000 90 1 5\. PROFILES OF BEST PRACTICES SCHEMES 6\.000 54\.000 60\.000 90 1 Subtotal WATERHARVESTING 73\.200 658\.800 732\.000 90 17 C\. COMMUNITY MANAGED IRRIGATION 1\. COMMUNITY MANAGED IRRIGATION WORKING GROUP 6\.000 54\.000 60\.000 90 1 2\. REGIONAL AND NATIONAL CONSULTATION cmi 7\.800 70\.200 78\.000 90 2 3\. TRAINING cmi 39\.000 351\.000 390\.000 90 9 4\. TWINING INSTITUTIONS cmi 6\.000 54\.000 60\.000 90 1 5\. PROFILES OF BEST PRACTICES SCHEMES CMI 6\.000 54\.000 60\.000 90 1 6\. STUDY TOURS CMI 8\.400 75\.600 84\.000 90 2 7\. AGRI-COMMUNITY MANAGED IRRIGATION POLICY SUPPORT 3\.000 27\.000 30\.000 90 1 Subtotal COMMUNITY MANAGED IRRIGATION 76\.200 685\.800 762\.000 90 18 D\. PUBLIC - AND PRIVATE-MANAGED IRRIGATION 1\. PUBLIC - AND PRIVATE-MANAGED IRRIGATION WORKING GROUP 6\.000 54\.000 60\.000 90 1 2\. REGIONAL AND NATIONAL CONSULTATION PMI 7\.800 70\.200 78\.000 90 2 3\. TRAINING PMI 39\.000 351\.000 390\.000 90 9 4\. TWINING INSTITUTIONS PMI 6\.000 54\.000 60\.000 90 1 5\. PROFILES OF BEST PRACTICES SCHEMES PMI 6\.000 54\.000 60\.000 90 1 6\. STUDY TOURS PMI 8\.700 78\.300 87\.000 90 2 7\. AGRI-PUBLIC PRIVATE MANAGED IRRIGATION POLICY SUPPORT PMI 3\.000 27\.000 30\.000 90 1 Subtotal PUBLIC - AND PRIVATE-MANAGED IRRIGATION 76\.500 688\.500 765\.000 90 18 Total BASELINE COSTS 404\.654 3,823\.348 4,228\.002 90 100 Physical Contingencies 9\.817 92\.487 102\.304 90 2 Price Contingencies 14\.195 131\.958 146\.153 90 3 Sub-total PROJECT COSTS (without PSA Fees) 428\.666 4,047\.793 4,476\.459 90 106 PSA Fees (8% of total) 358\.117 358\.117 Total PROJEST COSTS 428\.666 4,405\.910 4,834\.575 Governments' Contribution 454\.300 454\.300 TOTAL AGRICULTURE PROJECT COSTS 882\.966 4,405\.910 5,288\.875 \a Stationed in Nairobi, KENYA \b Available upon approval of Country Proposals  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.2: Project Component Costs by Year, Totals Including Contingencies NILE BASIN INITIATIVE (US$'000) Totals Including Contingencies 2004 2005 2006 Total A\. PROJECT COORDINATION & FACILITATION /a 1\. PROJECT MANAGEMENT STAFF 343\.973 349\.262 356\.636 1,049\.872 2\. PROJECT MANAGEMENT TRAVEL 22\.793 29\.360 23\.463 75\.615 3\. PROJECT MONITORING AND EVALUATION 24\.209 17\.856 42\.380 84\.445 4\. PROJECT MANAGEMENT EQUIPMENT 401\.333 26\.603 - 427\.936 5\. PROJECT MANAGEMENT EXPENSES 119\.227 120\.668 122\.732 362\.628 6\. WORK PLAN - RAPID BASIN ASSESSMENT 70\.451 - - 70\.451 Subtotal PROJECT COORDINATION & FACILITATION 981\.985 543\.749 545\.212 2,070\.946 B\. WATERHARVESTING /b 1\. WATER HARVESTING WORKING GROUP 64\.596 65\.700 21\.613 151\.908 2\. REGIONAL AND NATIONAL CONSULTATION 27\.131 27\.595 28\.235 82\.961 3\. TRAINING 203\.484 206\.962 - 410\.445 4\. TWINING INSTITUTIONS 20\.870 21\.227 21\.719 63\.816 5\. PROFILES OF BEST PRACTICES SCHEMES 20\.972 21\.330 21\.825 64\.127 Subtotal WATERHARVESTING 337\.052 342\.814 93\.393 773\.258 C\. COMMUNITY MANAGED IRRIGATION 1\. COMMUNITY MANAGED IRRIGATION WORKING GROUP 20\.870 21\.227 21\.719 63\.816 2\. REGIONAL AND NATIONAL CONSULTATION cmi 27\.131 27\.595 28\.235 82\.961 3\. TRAINING cmi - 206\.962 211\.762 418\.724 4\. TWINING INSTITUTIONS cmi 20\.870 21\.227 21\.719 63\.816 5\. PROFILES OF BEST PRACTICES SCHEMES CMI 20\.981 21\.331 21\.820 64\.132 6\. STUDY TOURS CMI 43\.827 44\.576 - 88\.404 7\. AGRI-COMMUNITY MANAGED IRRIGATION POLICY SUPPORT 10\.389 10\.562 10\.804 31\.755 Subtotal COMMUNITY MANAGED IRRIGATION 144\.068 353\.480 316\.059 813\.608 D\. PUBLIC - AND PRIVATE-MANAGED IRRIGATION 1\. PUBLIC - AND PRIVATE-MANAGED IRRIGATION WORKING GROU 20\.870 21\.227 21\.719 63\.816 2\. REGIONAL AND NATIONAL CONSULTATION PMI 27\.131 27\.595 28\.235 82\.961 3\. TRAINING PMI - 206\.962 211\.762 418\.724 4\. TWINING INSTITUTIONS PMI 20\.870 21\.227 21\.719 63\.816 5\. PROFILES OF BEST PRACTICES SCHEMES PMI 20\.981 21\.331 21\.820 64\.132 6\. STUDY TOURS PMI - 44\.576 48\.868 93\.445 7\. AGRI-PUBLIC PRIVATE MANAGED IRRIGATION POLICY SUPPORT 10\.384 10\.562 10\.807 31\.752 Subtotal PUBLIC - AND PRIVATE-MANAGED IRRIGATION 100\.236 353\.480 364\.930 818\.646 Sub-Total NBTF (without PSA fees) 1,563\.342 1,593\.522 1,319\.594 4,476\.459 E\. COST SHARING OF PSA FEES 1\. PSA fees (8% of total) CONSULTANT ITEM 125\.067 127\.482 105\.568 358\.117 Total PROJECT COSTS 1,688\.409 1,721\.004 1,425\.162 4,834\.575 GOVERNMENTS' CONTRIBUTIONS 153\.100 150\.600 150\.600 454\.300 Total PROJECT COSTS including Governments' Contribution 1,841\.509 1,871\.604 1,575\.762 5,288\.875 \a Stationed in Nairobi, KENYA \b Available upon approval of Country Proposals 50  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.3: Component 1 Unit Quantities and Costs NILE BASIN INITIATIVE PROJECT COORDINATION AND FACILITATION (US '000) Quantities Unit Cost - Unit 2004 2005 2006 Total Negotiation I\. Investment Costs A\. Project Management Staff /a Regional Project Manager /b person-month 12 12 12 36 8\.5 Regional Lead Specialist /c person-month 12 12 12 36 8\.17 PMU Information Management Specialist /d person-month 12 12 12 36 1\.2 PMU Finance-Procurement Officer /e person-month 12 12 12 36 1\.417 Subtotal Project Management Staff B\. Project Management Equipment 1\. PMU Computers Regular Desktop workstation 5 - - 5 2 IT Workstation workstation 1 - - 1 3\.5 Laptop laptop 2 - - 2 3 Printer-laser printer 1 - - 1 1 Printer-color printer 1 - - 1 0\.6 Server server 1 - - 1 6 LAN LAN 1 - - 1 5 Software /f softwear 1 - - 1 3 Subtotal PMU Computers 2\. PMU Office Equipment Phone-handset phone handset 4 - - 4 0\.1 Phone-cell phone-cell 2 - - 2 0\.2 Phone-switchboard phone-switchboard 1 - - 1 1\.5 Phone-Polycom (conf\. calls) phone-Polycom 1 - - 1 2 Copier /g copier 1 - - 1 8 Fax-machine fax-machine 1 - - 1 0\.4 Scanner scanner 1 - - 1 0\.2 Digital Camera camera 1 - - 1 0\.5 LCD LCD 1 - - 1 5 Voltage Regulator ragulator 1 - - 1 1 Generator generator 1 - - 1 10 Subtotal PMU Office Equipment 3\. PMU Furiture Office Furniture /h furniture 4 - - 4 3 Airconditioner airconditioner 4 - - 4 2 Subtotal PMU Furiture 4\. PMU Vehicle /i vehicle 1 - - 1 25 5\. National Offices Computers-Internet Regular Desktop workstation 20 - - 20 2 Printer-color printer 10 - - 10 0\.6 Fax-machine fax-machine 10 - - 10 0\.4 Subtotal National Offices Computers-Internet 6\. Vehicle for National Project Coordinators /j vehicle 9 1 - 10 25 Subtotal Project Management Equipment Total Investment Costs II\. Recurrent Costs /k A\. Project Management Staff PMU Project Adminstrator /l person-month 12 12 12 36 1 PMU Driver /m person-month 12 12 12 36 0\.58 PMU Other Support (Cleaner) /n person-month 12 12 12 36 0\.25 Subtotal Project Management Staff B\. Project Management Travel /o Regional Project Manager /p Trip per year 3 4 3 10 2 Regional Lead Specialist /q Trip per year 5 6 5 16 2 IT Specialist /r Trip per year 3 4 3 10 2 Subtotal Project Management Travel C\. Project Monitoring and Evaluation Monitoring and Evaluation Specialist /s person-day 5 - 10 15 1\.67 Monitoring and Evaluation Basin Consultants /t person-day 5 - 10 15 1\.6 Mid-term Evaluation person-trip - 1 - 1 10 Audit audit 1 1 1 3 7 Subtotal Project Monitoring and Evaluation D\. Project Management Expenses Project Steering Committee meetings /u meeting 1 1 1 3 40 PMU Communications /v communication 12 12 12 36 2 PMU Utilities /w utilities 12 12 12 36 1 PMU Office Running Expenses /x expenses 12 12 12 36 0\.83 Printing/Translation/Dessimination expenses PMU Vehicle Operation and Maintenance /y expenses 12 12 12 36 0\.5 Miscelllaneous Expenses expenses 12 12 12 36 0\.26 Subtotal Project Management Expenses E\. National Offices Operation Expenses Office Supplies /z expenses 12 12 12 36 2 Communication /aa expenses 12 12 12 36 2 Vehicle Operation and Maintenance /bb expenses 12 12 12 36 2\.5 Subtotal National Offices Operation Expenses F\. Work Plan-Rapid Baseline Assessment (RBA) Regional Workshop /cc workshop 1 - - 1 18 RBA National Meetings /dd meeting 10 - - 10 5 Subtotal Work Plan-Rapid Baseline Assessment (RBA) Total Recurrent Costs 51 Total PSA Fees (8% of total) Total Including PSA Fees  Efficient Water Use for Agricultural Production Project Appraisal Document \a Regional Level \b Regional Level - A4 \c A3 level \d SC 5 mid level \e SC 5 max level \f Arcview (2\.5) + other contingency software (0\.5) \g between 5\.0 and 15\.0 (regular heavy duty) \h IT and Procurement Staff share one office \i 1 vehicle (25\.0) according to SVP standard cost \j 1 vehicle (small car/small SUV) for 25K according to SVP standard cost \k Within region travels \l SC 4 Max \m SC3 Mid \n SC1 Min \o 5-7 days/trip incl\. airfaire + DSA \p 5-7 days/trip incl\. airfaire + DSA \q 5-7 days/trip incl\. airfaire + DSA \r 5-7 days/trip incl\. airfaire + DSA \s Travel and DSA for 2 weeks\. Rate/day - 0\.6, DSA + travel - 8\.0 \t Travel and DSA for 2 weeks \u 2-3 day meeting (around 28 persons) Regional: 9 PS, 9 NPCs, 1 Nile-SEC, UNOPS (20*1750): 35 K with 1000 Travel + 150 DSA/person/dayx5days, Min: 20*(1300): National: Kenya PSC, 1 Nile-TAC, NPC, RPM, Lead Spec\.: (100x3days)x5: 1\.5 K 100 DSA for 3 da? ? \v Incl\. per month: phone (0\.8K), cell (0\.2K), Internet accounts fees (0\.4K), wireless fee (0\.6K) \w Incl\. Air conditioner, 50% less than estimated standard, 40% of those of TEA PMU \x Incl\. per month: Office supplies (0\.5K) and IT Equipment O&M (0\.3K) \y Incl\.: pertol (0\.4K), regular services (0\.2K) amd repair (0\.2K) \z 0\.2K per month per office (10 offices) \aa 0\.2K per month per office (10 offices), includ\. telephone, internet \bb 0\.25K per months per car (10 cars), 10% of car cost, incl\. petrol \cc NPCs (10), Kenya TAC-member, RPM, Lead Specialist, and possibly 1 or 2 other persons for 2 days 9*1K (travel) + 9*0\.15K (RDSA)*4 days+ 6*0\.1K(NDSA)*2 days, 2K (Conference room, lunch etc\.), Total aprox\. 18K \dd Estimated 5K per country for meeting to indentify stakeholders including community groups and initiate their participation 52  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.4: Component 1 Detailed Costs NILE BASIN INITIATIVE PROJECT COORDINATION AND FACILITATION (US '000) Base Cost - Negotiation Totals Including Contingencies 2004 2005 2006 Total 2004 2005 2006 Total I\. Investment Costs A\. Project Management Staff /a Regional Project Manager /b 102\.000 102\.000 102\.000 306\.000 105\.869 107\.723 110\.258 323\.850 Regional Lead Specialist /c 98\.040 98\.040 98\.040 294\.120 101\.758 103\.541 105\.978 311\.277 PMU Information Management Specialist /d 14\.400 14\.400 14\.400 43\.200 14\.946 15\.208 15\.566 45\.720 PMU Finance-Procurement Officer /e 17\.004 17\.004 17\.004 51\.012 17\.649 17\.958 18\.381 53\.988 Subtotal Project Management Staff 231\.444 231\.444 231\.444 694\.332 240\.222 244\.430 250\.183 734\.835 B\. Project Management Equipment 1\. PMU Computers Regular Desktop 10\.000 - - 10\.000 10\.438 - - 10\.438 IT Workstation 3\.500 - - 3\.500 3\.653 - - 3\.653 Laptop 6\.000 - - 6\.000 6\.263 - - 6\.263 Printer-laser 1\.000 - - 1\.000 1\.044 - - 1\.044 Printer-color 0\.600 - - 0\.600 0\.626 - - 0\.626 Server 6\.000 - - 6\.000 6\.263 - - 6\.263 LAN 5\.000 - - 5\.000 5\.219 - - 5\.219 Software /f 3\.000 - - 3\.000 3\.131 - - 3\.131 Subtotal PMU Computers 35\.100 - - 35\.100 36\.637 - - 36\.637 2\. PMU Office Equipment Phone-handset 0\.400 - - 0\.400 0\.418 - - 0\.418 Phone-cell 0\.400 - - 0\.400 0\.418 - - 0\.418 Phone-switchboard 1\.500 - - 1\.500 1\.566 - - 1\.566 Phone-Polycom (conf\. calls) 2\.000 - - 2\.000 2\.088 - - 2\.088 Copier /g 8\.000 - - 8\.000 8\.350 - - 8\.350 Fax-machine 0\.400 - - 0\.400 0\.418 - - 0\.418 Scanner 0\.200 - - 0\.200 0\.209 - - 0\.209 Digital Camera 0\.500 - - 0\.500 0\.522 - - 0\.522 LCD 5\.000 - - 5\.000 5\.219 - - 5\.219 Voltage Regulator 1\.000 - - 1\.000 1\.044 - - 1\.044 Generator 10\.000 - - 10\.000 10\.438 - - 10\.438 Subtotal PMU Office Equipment 29\.400 - - 29\.400 30\.687 - - 30\.687 3\. PMU Furiture Office Furniture /h 12\.000 - - 12\.000 12\.525 - - 12\.525 Airconditioner 8\.000 - - 8\.000 8\.350 - - 8\.350 Subtotal PMU Furiture 20\.000 - - 20\.000 20\.876 - - 20\.876 4\. PMU Vehicle /i 25\.000 - - 25\.000 26\.094 - - 26\.094 5\. National Offices Computers-Internet Regular Desktop 40\.000 - - 40\.000 41\.751 - - 41\.751 Printer-color 6\.000 - - 6\.000 6\.263 - - 6\.263 Fax-machine 4\.000 - - 4\.000 4\.175 - - 4\.175 Subtotal National Offices Computers-Internet 50\.000 - - 50\.000 52\.189 - - 52\.189 6\. Vehicle for National Project Coordinators /j 225\.000 25\.000 - 250\.000 234\.850 26\.603 - 261\.453 Subtotal Project Management Equipment 384\.500 25\.000 - 409\.500 401\.333 26\.603 - 427\.936 Total Investment Costs 615\.944 256\.444 231\.444 1,103\.832 641\.555 271\.033 250\.183 1,162\.771 II\. Recurrent Costs /k A\. Project Management Staff PMU Project Adminstrator /l 12\.000 12\.000 12\.000 36\.000 12\.535 12\.593 12\.714 37\.842 PMU Driver /m 6\.960 6\.960 6\.960 20\.880 7\.271 7\.304 7\.374 21\.949 PMU Other Support (Cleaner) /n 3\.000 3\.000 3\.000 9\.000 3\.134 3\.148 3\.179 9\.461 Subtotal Project Management Staff 21\.960 21\.960 21\.960 65\.880 22\.940 23\.044 23\.267 69\.251 B\. Project Management Travel /o Regional Project Manager /p 6\.000 8\.000 6\.000 20\.000 6\.216 8\.388 6\.399 21\.004 Regional Lead Specialist /q 10\.000 12\.000 10\.000 32\.000 10\.360 12\.583 10\.665 33\.608 IT Specialist /r 6\.000 8\.000 6\.000 20\.000 6\.216 8\.388 6\.399 21\.004 Subtotal Project Management Travel 22\.000 28\.000 22\.000 72\.000 22\.793 29\.360 23\.463 75\.615 C\. Project Monitoring and Evaluation Monitoring and Evaluation Specialist /s 8\.350 - 16\.700 25\.050 8\.645 - 17\.812 26\.457 Monitoring and Evaluation Basin Consultants /t 8\.000 - 16\.000 24\.000 8\.282 - 17\.065 25\.348 Mid-term Evaluation - 10\.000 - 10\.000 - 10\.482 - 10\.482 Audit 7\.000 7\.000 7\.000 21\.000 7\.282 7\.373 7\.503 22\.158 Subtotal Project Monitoring and Evaluation 23\.350 17\.000 39\.700 80\.050 24\.209 17\.856 42\.380 84\.445 D\. Project Management Expenses Project Steering Committee meetings /u 40\.000 40\.000 40\.000 120\.000 41\.441 41\.942 42\.660 126\.044 PMU Communications /v 24\.000 24\.000 24\.000 72\.000 24\.865 25\.165 25\.596 75\.626 PMU Utilities /w 12\.000 12\.000 12\.000 36\.000 12\.432 12\.583 12\.798 37\.813 PMU Office Running Expenses /x 9\.960 9\.960 9\.960 29\.880 10\.319 10\.444 10\.622 31\.385 Printing/Translation/Dessimination 20\.000 20\.000 20\.000 60\.000 20\.721 20\.971 21\.330 63\.022 PMU Vehicle Operation and Maintenance /y 6\.000 6\.000 6\.000 18\.000 6\.216 6\.291 6\.399 18\.907 Miscelllaneous Expenses 3\.120 3\.120 3\.120 9\.360 3\.232 3\.272 3\.327 9\.831 Subtotal Project Management Expenses 115\.080 115\.080 115\.080 345\.240 119\.227 120\.668 122\.732 362\.628 E\. National Offices Operation Expenses Office Supplies /z 24\.000 24\.000 24\.000 72\.000 24\.865 25\.165 25\.596 75\.626 Communication /aa 24\.000 24\.000 24\.000 72\.000 24\.865 25\.165 25\.596 75\.626 Vehicle Operation and Maintenance /bb 30\.000 30\.000 30\.000 90\.000 31\.081 31\.457 31\.995 94\.533 Subtotal National Offices Operation Expenses 78\.000 78\.000 78\.000 234\.000 80\.811 81\.788 83\.187 245\.785 F\. Work Plan-Rapid Baseline Assessment (RBA) Regional Workshop /cc 18\.000 - - 18\.000 18\.649 - - 18\.649 RBA National Meetings /dd 50\.000 - - 50\.000 51\.802 - - 51\.802 Subtotal Work Plan-Rapid Baseline Assessment (RBA) 68\.00053 - - 68\.000 70\.451 - - 70\.451 Total Recurrent Costs 328\.390 260\.040 276\.740 865\.170 340\.430 272\.716 295\.029 908\.175 Total 944\.334 516\.484 508\.184 1,969\.002 981\.985 543\.749 545\.212 2,070\.946 PSA Fees (8% of total) 78\.559 43\.500 43\.617 165\.676 Total Including PSA Fees 1,060\.544 587\.249 588\.829 2,236\.622  Efficient Water Use for Agricultural Production Project Appraisal Document \a Regional Level \b Regional Level - A4 \c A3 level \d SC 5 mid level \e SC 5 max level \f Arcview (2\.5) + other contingency software (0\.5) \g between 5\.0 and 15\.0 (regular heavy duty) \h IT and Procurement Staff share one office \i 1 vehicle (25\.0) according to SVP standard cost \j 1 vehicle (small car/small SUV) for 25K according to SVP standard cost \k Within region travels \l SC 4 Max \m SC3 Mid \n SC1 Min \o 5-7 days/trip incl\. airfaire + DSA \p 5-7 days/trip incl\. airfaire + DSA \q 5-7 days/trip incl\. airfaire + DSA \r 5-7 days/trip incl\. airfaire + DSA \s Travel and DSA for 2 weeks\. Rate/day - 0\.6, DSA + travel - 8\.0 \t Travel and DSA for 2 weeks \u 2-3 day meeting (around 28 persons) Regional: 9 PS, 9 NPCs, 1 Nile-SEC, UNOPS (20*1750): 35 K with 1000 Travel + 150 DSA/person/dayx5days, Min: 20*(1300): National: Kenya PSC, 1 Nile-TAC, NPC, RPM, Lead Spec\.: (100x3days)x5: 1\.5 K 100 DSA for 3 da? ? \v Incl\. per month: phone (0\.8K), cell (0\.2K), Internet accounts fees (0\.4K), wireless fee (0\.6K) \w Incl\. Air conditioner, 50% less than estimated standard, 40% of those of TEA PMU \x Incl\. per month: Office supplies (0\.5K) and IT Equipment O&M (0\.3K) \y Incl\.: pertol (0\.4K), regular services (0\.2K) amd repair (0\.2K) \z 0\.2K per month per office (10 offices) \aa 0\.2K per month per office (10 offices), includ\. telephone, internet \bb 0\.25K per months per car (10 cars), 10% of car cost, incl\. petrol \cc NPCs (10), Kenya TAC-member, RPM, Lead Specialist, and possibly 1 or 2 other persons for 2 days 9*1K (travel) + 9*0\.15K (RDSA)*4 days+ 6*0\.1K(NDSA)*2 days, 2K (Conference room, lunch etc\.), Total aprox\. 18K \dd Estimated 5K per country for meeting to indentify stakeholders including community groups and initiate their participation 54  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.5: Component 2 Unit Quantities and Costs NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION (US$ '000) Unit Cost - Unit 2004 2005 2006 Total Negotiation I\. Investment Costs A\. Water Harvesting Working Group /a person - month 10 10 10 30 2 B\. Regional and National Consultations /b Regional Workshops /c workshop 1 1 1 3 18 National Workshops /d workshop 1 1 1 3 8 Subtotal Regional and National Consultations C\. Training Regional Seminars/Training /e seminar 1 1 - 2 75 National Seminars/Training Supports /f seminar 1 1 - 2 120 Subtotal Training D\. Twinning of Institutions Joint Activities meeting/workshop 2 2 2 6 10 E\. Profile of Best Practices Schemes /g In Country Field Visits /h 10 1 1 1 3 20 F\. Study Tours /i tour 1 1 - 2 42 Total PSA Fees (8% of total) Total Including PSA Fees _________________________________ \a One consultant per country for 10 countries \b NPC 10, TAC members, Lead specialist and others for 2 days \c NPCs (10), Kenya TAC-member, Lead Specialist, and possibly 1 or 2 other persons \d 20 participants for 2 days \e 20 participants for 2 weeks \f 8 participants for 2 weeks at FPI \g 10 consultants, 1 per country \h 10 consultants, 1 per cpontry \i 20 participants + Lead Specialist for one week 55  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.6: Component 2 Detailed Costs NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION (US$ '000) 2004 2005 2006 Total 2004 2005 2006 Total I\. Investment Costs A\. Water Harvesting Working Group /a 20\.000 20\.000 20\.000 60\.000 20\.768 21\.123 21\.613 63\.505 B\. Regional and National Consultations /b Regional Workshops /c 18\.000 18\.000 18\.000 54\.000 18\.783 19\.104 19\.547 57\.435 National Workshops /d 8\.000 8\.000 8\.000 24\.000 8\.348 8\.491 8\.688 25\.526 Subtotal Regional and National Consultations 26\.000 26\.000 26\.000 78\.000 27\.131 27\.595 28\.235 82\.961 C\. Training Regional Seminars/Training /e 75\.000 75\.000 - 150\.000 78\.263 79\.601 - 157\.864 National Seminars/Training Supports /f 120\.000 120\.000 - 240\.000 125\.221 127\.361 - 252\.582 Subtotal Training 195\.000 195\.000 - 390\.000 203\.484 206\.962 - 410\.445 D\. Twinning of Institutions Joint Activities 20\.000 20\.000 20\.000 60\.000 20\.870 21\.227 21\.719 63\.816 E\. Profile of Best Practices Schemes /g In Country Field Visits /h 20\.000 20\.000 20\.000 60\.000 20\.972 21\.330 21\.825 64\.127 F\. Study Tours /i 42\.000 42\.000 - 84\.000 43\.827 44\.576 - 88\.404 Total 323\.000 323\.000 86\.000 732\.000 337\.052 342\.814 93\.393 773\.258 PSA Fees (8% of total) 26\.964 27\.425 7\.471 61\.861 Total Including PSA Fees 364\.016 370\.239 100\.864 835\.119 _________________________________ \a One consultant per country for 10 countries \b NPC 10, TAC members, Lead specialist and others for 2 days \c NPCs (10), Kenya TAC-member, Lead Specialist, and possibly 1 or 2 other persons \d 20 participants for 2 days \e 20 participants for 2 weeks \f 8 participants for 2 weeks at FPI \g 10 consultants, 1 per country \h 10 consultants, 1 per cpontry \i 20 participants + Lead Specialist for one week 56  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.7: Component 3 Unit Quantities and Costs NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION (US$ '000) Quantities Unit Cost - Unit 2004 2005 2006 Total Negotiation I\. Investment Costs A\. Community Managed Irrigation Working Group /a member-month 10 10 10 30 2 B\. Regional and National Consultation Regional Workshops workshop 1 1 1 3 18 National Meetings/Workshops /b meeting/workshop 1 1 1 3 8 Subtotal Regional and National Consultation C\. Training Regional Seminars/Training /c seminar - 1 1 2 75 National Seminars/Training Supports seminar - 1 1 2 120 Subtotal Training D\. Twining of Institutions Joint Activities meeting/workshop 2 2 2 6 10 E\. Profile of Best Practices Schemes In Country Field Visits /d 10 1 1 1 3 20 F\. Study Tours Regional Study Tours tour 1 1 - 2 42 G\. Agriculture/Small-Scale Irrigation Policy Support person-month 2 2 2 6 5 Total PSA Fees (8% of total) Total Including PSA Fees _________________________________ \a One for each country for 10 member countries \b 20 participants for 2 daysmeeting/workshop \c 20 participants for 2 weeks \d 10 consultants, 1 per country 57  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.8: Component 3 Detailed Costs NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION (US$ '000) Base Cost - Negotiation Totals Including Contingencies 2004 2005 2006 Total 2004 2005 2006 Total I\. Investment Costs A\. Community Managed Irrigation Working Group /a 20\.000 20\.000 20\.000 60\.000 20\.870 21\.227 21\.719 63\.816 B\. Regional and National Consultation Regional Workshops 18\.000 18\.000 18\.000 54\.000 18\.783 19\.104 19\.547 57\.435 National Meetings/Workshops /b 8\.000 8\.000 8\.000 24\.000 8\.348 8\.491 8\.688 25\.526 Subtotal Regional and National Consultation 26\.000 26\.000 26\.000 78\.000 27\.131 27\.595 28\.235 82\.961 C\. Training Regional Seminars/Training /c - 75\.000 75\.000 150\.000 - 79\.601 81\.447 161\.048 National Seminars/Training Supports - 120\.000 120\.000 240\.000 - 127\.361 130\.315 257\.676 Subtotal Training - 195\.000 195\.000 390\.000 - 206\.962 211\.762 418\.724 D\. Twining of Institutions Joint Activities 20\.000 20\.000 20\.000 60\.000 20\.870 21\.227 21\.719 63\.816 E\. Profile of Best Practices Schemes In Country Field Visits /d 20\.000 20\.000 20\.000 60\.000 20\.981 21\.331 21\.820 64\.132 F\. Study Tours Regional Study Tours 42\.000 42\.000 - 84\.000 43\.827 44\.576 - 88\.404 G\. Agriculture/Small-Scale Irrigation Policy Support 10\.000 10\.000 10\.000 30\.000 10\.389 10\.562 10\.804 31\.755 Total 138\.000 333\.000 291\.000 762\.000 144\.068 353\.480 316\.059 813\.608 PSA Fees (8% of total) 11\.525 28\.278 25\.285 65\.089 Total Including PSA Fees 155\.593 381\.759 341\.344 878\.696 _________________________________ \a One for each country for 10 member countries \b 20 participants for 2 daysmeeting/workshop \c 20 participants for 2 weeks \d 10 consultants, 1 per country 58  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.9: Component 4 Unit Quantities and Costs NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION (US$ '000) Quantities Unit Cost - Unit 2004 2005 2006 Total Negotiation I\. Investment Costs A\. Public/Private Managed Irrigation Group /a member-month 10 10 10 30 2 B\. Regional and National Consultation Regional Workshops workshop 1 1 1 3 18 National Meetings/Workshops meeting/workshop 1 1 1 3 8 Subtotal Regional and National Consultation C\. Training Regional Seminars/Training /b seminar - 1 1 2 75 National Seminars/TRaining Support /c seminar - 1 1 2 120 Subtotal Training D\. Twinning of Institutions Joint Activities meeting/workshop 2 2 2 6 10 E\. Profile of Best Practices Schemes In Country Field Visits /d 10 per 1 1 1 1 3 20 F\. Study Tours Regional Study Tour /e tour - 1 - 1 42 International Study Tours /f tour - - 1 1 45 Subtotal Study Tours G\. Agriculture/Small-Scale Irrigation Support person-month 2 2 2 6 5 Total PSA Fees (8% of total) Total Including PSA Fees _________________________________ \a One memeber per country for 10 countries\. \b 20 participants for 2 weeks \c 8 participants for 2 weeks at FPI \d 10 consultants, 1 per country \e 20 participants + Lead Specialist for one week \f 10 participants + Lead Specialist for one week 59  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.10: Component 4 Detailed Costs NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION (US$ '000) Base Cost - Negotiation Totals Including Contingencies 2004 2005 2006 Total 2004 2005 2006 Total I\. Investment Costs A\. Public/Private Managed Irrigation Group /a 20\.000 20\.000 20\.000 60\.000 20\.870 21\.227 21\.719 63\.816 B\. Regional and National Consultation Regional Workshops 18\.000 18\.000 18\.000 54\.000 18\.783 19\.104 19\.547 57\.435 National Meetings/Workshops 8\.000 8\.000 8\.000 24\.000 8\.348 8\.491 8\.688 25\.526 Subtotal Regional and National Consultation 26\.000 26\.000 26\.000 78\.000 27\.131 27\.595 28\.235 82\.961 C\. Training Regional Seminars/Training /b - 75\.000 75\.000 150\.000 - 79\.601 81\.447 161\.048 National Seminars/TRaining Support /c - 120\.000 120\.000 240\.000 - 127\.361 130\.315 257\.676 Subtotal Training - 195\.000 195\.000 390\.000 - 206\.962 211\.762 418\.724 D\. Twinning of Institutions Joint Activities 20\.000 20\.000 20\.000 60\.000 20\.870 21\.227 21\.719 63\.816 E\. Profile of Best Practices Schemes In Country Field Visits /d 20\.000 20\.000 20\.000 60\.000 20\.981 21\.331 21\.820 64\.132 F\. Study Tours Regional Study Tour /e - 42\.000 - 42\.000 - 44\.576 - 44\.576 International Study Tours /f - - 45\.000 45\.000 - - 48\.868 48\.868 Subtotal Study Tours - 42\.000 45\.000 87\.000 - 44\.576 48\.868 93\.445 G\. Agriculture/Small-Scale Irrigation Support 10\.000 10\.000 10\.000 30\.000 10\.384 10\.562 10\.807 31\.752 Total 96\.000 333\.000 336\.000 765\.000 100\.236 353\.480 364\.930 818\.646 PSA Fees (8% of total) 8\.019 28\.278 29\.194 65\.492 Total Including PSA Fees 108\.255 381\.758 394\.125 884\.138 _________________________________ \a One memeber per country for 10 countries\. \b 20 participants for 2 weeks \c 8 participants for 2 weeks at FPI \d 10 consultants, 1 per country \e 20 participants + Lead Specialist for one week \f 10 participants + Lead Specialist for one week 60  Efficient Water Use for Agricultural Production Project Appraisal Document Table 3\.11: Inflation and Exchange Rates NILE BASIN INITIATIVE Up to Up to Project Negotiation Start 2004 2005 2006 Inflation (in %'s) /a Civilwork, Goods and Equipment Annual rates Local 0\.0 3\.0 3\.5 4\.0 4\.5 Foreign 0\.0 2\.0 3\.2 2\.9 2\.7 Compounded rates Local 0\.0 3\.0 4\.8 8\.7 13\.4 Foreign 0\.0 2\.0 3\.6 6\.8 9\.8 Consultancy Services, Training , Seminars Annual rates Local 0\.0 2\.0 3\.0 3\.5 4\.0 Foreign 0\.0 2\.0 3\.2 2\.9 2\.7 Compounded rates Local 0\.0 2\.0 3\.5 6\.9 10\.9 Foreign 0\.0 2\.0 3\.6 6\.8 9\.8 Administration, Operation and Maintenance Annual rates Local 0\.0 1\.5 2\.0 2\.2 2\.5 Foreign 0\.0 1\.0 1\.5 1\.8 2\.0 Compounded rates Local 0\.0 1\.5 2\.5 4\.7 7\.1 Foreign 0\.0 1\.0 1\.8 3\.4 5\.4 Exchange rates (Local/Foreign) /b Civilwork, Goods and Equipment Rates actually used 78\.0 78\.0 77\.5 78\.5 79\.5 Constant purchasing parity rates 78\.0 78\.0 78\.9 79\.4 80\.5 % deviation 0\.0 0\.0 -1\.8 -1\.2 -1\.3 Consultancy Services, Training , Seminars Rates actually used 78\.0 78\.0 77\.5 78\.5 79\.5 Constant purchasing parity rates 78\.0 78\.0 77\.9 78\.1 78\.8 % deviation 0\.0 0\.0 -0\.5 0\.5 0\.9 Administration, Operation and Maintenance Rates actually used 78\.0 78\.0 77\.5 78\.5 79\.5 Constant purchasing parity rates 78\.0 78\.0 78\.6 78\.9 79\.3 % deviation 0\.0 0\.0 -1\.4 -0\.5 0\.3 \a Yearly values are within Each Project Year \b Yearly values are at Project Year Midpoints 61  Efficient Water Use for Agricultural Production Project Appraisal Document 62  Efficient Water Use for Agricultural Production Project Appraisal Document ANNEX 4: DOCUMENTS IN THE PROJECT FILE 1\. Nile Basin Initiative: Shared Vision Program, Project Appraisal Document, The World Bank, Report No\. 26222, April 21, 2003\. 2\. Council of Ministers of Water Affairs, Nile Basin Initiative, Shared Vision Program (SVP), Efficient Water Use for Agricultural Production, Project Document, March 2001 (presented at the Meeting of the International Committee for Cooperation on the Nile -- 1, Geneva, June 2001) 3\. SVP, Efficient Water Use for Agricultural Production, Project Implementation Plan 4\. SVP Efficient Water Use for Agricultural Production Project, Appraisal Mission, Aide Memoire, June 19, 2003 63  Efficient Water Use for Agricultural Production Project Appraisal Document ANNEX 5: FINANCIAL SUMMARY Project Costs by Financiers and Procurement Categories\. The total project costs for the Agriculture Project is estimated at US$5\.28 million, of which the Nile Basin Trust Fund will finance $4\.83 million\. The balance of $0\.45 million equivalent would be contributed in kind by the national governments of the basin countries\. The NBTF demonstrates the strong support of the international community to the NBI programs, following on the success of the first meeting of the International Consortium for Cooperation on the Nile (ICCON), where US$131 million was pledged for the Shared Vision Program and the Subsidiary Action Programs\. The NBTF will be executed by the World Bank\. Funds will flow from the NBTF to project activities through UNOPS on the authorization of the NBI\. 64  Efficient Water Use for Agricultural Production Project Appraisal Document ANNEX 6: PROCUREMENT AND DISBURSEMENT 1\. Procurement Procurement Arrangements The Efficient Water Use for Agricultural Production (Agriculture) Project is a stand-alone project under the Shared Vision Program, Nile Basin Initiative\. The Bank financed portion will be executed on behalf of the Nile riparian countries by the Nile Basin Initiative (NBI) and is funded from the Nile Basin Trust Fund (NBTF) in the amount of US$ 4\.83 million equivalent\. Currently, this Annex outlines the Procurement for the NBTF funded three-year project activities\. Procurement of works and goods financed by the NBTF administered by the World Bank will follow procedures outlined in the Bank's "Guidelines for Procurement under IBRD Loans and IDA Credits", May 2004\. Procurement of consulting services and training financed by the NBTF will follow the Bank's "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", May 2004\. The Bank's latest editions of standard bidding documents and request for proposals will be used\. The Nile Council of Ministers (Nile-COM) decided to select United Nations Office for Project Services (UNOPS) as PSA after serious consultations among themselves, taking full cognizance of the shift from the traditional client/ consultant contractual relationship to that of a partnership relation to maintain and enhance dialogue between the Nile riparian and to further the project's developmental objectives\. NILE-COM further recognized the fact that this approach would open the participation of all eligible consulting firms in the various consulting opportunities under the proposed project\. The recommendation from Nile-COM was given no-objection by the Bank with the approval of the Bank's Operations Procurement Review Committee (OPRC)\. All procurement will therefore be undertaken by the UNOPS, on behalf of the NBI\. While the specific arrangements will be further detailed in the Management Services Agreement (MSA) negotiated between the NBI and UNOPS, it has been agreed that UNOPS will outpost a senior staff to the NBI at the Nile Secretariat in Entebbe\. This senior staff will support the operations of the PMU of the Agriculture Project and will draw on UNOPS services (procurement, finance, logistics, etc\.)\. Overall management from the UNOPS side will be from UNOPS/New York\. Advertising of Procurement Opportunities A General Procurement Notice (GPN) has been published in the UN Development Business (UNDB) on-line and print version in September 2004 after the Appraisal mission\. The Executive Director of the Nile Secretariat, the NBI's administrative body, will be listed as the contact\. The Executive Director has been advised of the need for NBI to collect and file all inquiries that are received in response to the GPN\. NBI will in turn pass these to UNOPS for action once UNOPS has been appointed under the MSA\. When the full project is conceived and negotiated, and when required, Specific Procurement Notices (SPN) for goods to be procured under ICB, and Expressions of Interest (EOI) for these international consulting services estimated to cost the equivalent of US$200,000 or more or for special services will be announced, as they become available, in UN Development Business, development gateway (http://www\.dgmarket\.com) and in the appropriate regional and local newspapers of the Nile riparian countries\. In addition, EOI may be sought from prospective consultants by advertising in national newspapers of Nile riparian countries or technical magazines\. Assignments estimated to cost US$200,000 or less may be advertised regionally in riparian countries and the shortlist may be entirely made up of 65  Efficient Water Use for Agricultural Production Project Appraisal Document consultants from the Nile riparian countries, provided that no more than two consultants from any one riparian country are on the short list, at least three qualified firms or individuals from the Nile riparian countries are available, and foreign consultants who wish to participate are not excluded from consideration\. Procurement notices for contracts below US$200,000 will be placed in the regional press in each of the Nile riparian countries\. Procurement Planning (Tables 6\.1\.1 and 6\.1\.2) A Procurement Plan (PP) for consultant services, goods and works, which will be part of the final Project Implementation Plan (PIP) for the PMU, for the initial 18 months of the project will be prepared by NBI and agreed with the Bank prior to negotiations\. The PP includes relevant information on consulting services, goods, and works as well as the timing of each milestone in the procurement process\. The PP will be updated whenever required but at least annually by UNOPS for the NBI, and upon acceptance by the NBI, will be submitted by the NBI to the Bank for the Bank's review and comments\. This will be received by the Bank not later than three months before the end of each fiscal year\. Goods, including Equipment, and Vehicles (Total Costs US$0\.428million) Technical equipment, vehicles and other goods (e\.g\. computer hardware and software) costing US$80,000 or more per contract will be subject to ICB requirements\. For vehicles and goods below US$80,000 contracts will be awarded on the basis of the Banks' Shopping procedure, where price quotations will be obtained from at least three qualified suppliers from at least two IDA eligible countries or from comparison of quotations obtained from 3 domestic suppliers from the riparian countries\. Consultant Services12, including Long- and Short-Term Consultants, Audit Fees and Agent Fees (Total Costs US$1\.496 million) As the majority of work undertaken in this project is providing capacity building and technical assistance to the Nile riparian countries, a large percentage of expenditures will be for consultant services, much of which will be based in the Nile Basin\. Following the agreed upon criteria, the PMU will maintain and update a list of individual short-term consultants that will be used to establish shortlists\. The shortlists will be established based on EOI received through GPNs and Specific Advertisements placed in the U\.N\. Development Business (UNDB online), in Development Gateway Market (dgMarket) and/or regional newspapers, depending upon the estimated value of such assignments\. Consulting firms (including academic institutions and NGOs) financed under the project will be selected in accordance with Bank consultant guidelines through a Quality and Cost-Based Selection (QCBS) and by using the Bank's Standard Request for Proposals\. Specialized Consultants' Services from the Nile riparian countries, below an estimated contract value of US$ 50,000 equivalent, will be selected on the basis qualification from a predetermined roster of consultants\. Training and workshops under the project will be implemented according to an annual training plan that the PMU will prepare and submit to the Bank for no-objection before implementation\. More specifically, the following selection procedures would be used: Quality-and-Cost-based Selection (QCBS): All technical assistance consulting service of contracts valued at more than US$200,000 equivalent would be awarded through the Quality and Cost Based Selection method\. QCBS can also be used for all contracts awarded to consulting firms and academic institution between US$50,000 and US$200,000 equivalent\. Short-lists for QCBS contracts estimated at or less than US$200,000 equivalent may be comprised entirely of national consultants from the Nile 12This includes all regional and national long-term consultants staffed at the PMU office\. 66  Efficient Water Use for Agricultural Production Project Appraisal Document Riparian countries, with no more than two firms/individuals on the short-list from any one riparian country (in accordance with provisions of paragraph 2\.7 the consultant guidelines), provided that a sufficient number of qualified individual or firms (at least three) are available\. However, if foreign firms have expressed interest, they would not be excluded from consideration\. Consultant Qualification Selection (CQS) may be used for small13 consultant service contracts below an estimated contract amount of US$ 200,000 equivalent, for training14, research, and targeted interventions for which organizations with specialized expertise, strong capacities to work with multinational groups and proven track records would be recruited\. Individual Consultants (IC): Consultants for services meeting the requirements of Section V of the Consultant Guidelines will be selected under the provisions for the Selection of Individual Consultants method\. Individual Consultants (IC) will be selected through comparison of curriculum vitae against job description requirements of those expressing interest in the assignment, or those having been identified directly by the PMU\. The details on the consultants' services and the proposed selection arrangements are shown in the tables 6\.1\.1, 6\.1\.2, and 6\.1\.3\. Project Service Agency (PSA) As mentioned earlier, the United Nations Office for Project Services (UNOPS) has selected on sole source basis (in accordance with the provisions of paras 3\.9 through 3\.13 of the Consultant Guidelines) as PSA for Financial and Procurement management services by the Nile Council of Ministers (Nile-COM) with Bank's prior agreement\. The above-mentioned Consultants' expenses include pro-rata shared cost for PSA fees of US$ 0\.358 million\. Training and Workshops (Total Costs US2\.086 million) Training, workshops, conference attendance, seminars and study tours will be carried out on the basis of approved annual programs that will identify the general framework of training and similar activities for the year, including the nature of training, study tours, and workshops, the number of participants, and cost estimates (see PP and PIP)\. For the organization and support of national training and workshops, the short-list may consist of only consultants from the country in which the training is being organized provided that a sufficient number of qualified individuals or firms (at least three) are available\. Similarly, for the organization and support of regional training, the short-list may consist of consultants from the Nile riparian countries, provided that no more than two consultants from any one riparian country are short-listed and a sufficient number of qualified individuals or firms (at least three) are available\. In both cases, foreign consultants who wish to participate will not be excluded from consideration\. 13Dollar thresholds defining `small' shall be determined in each case, taking into account the nature and complexity of the assignment, but shall not exceed US$200,000 (Consultant Guidelines, paragraph 3\.7)\. 14The regional and technical nature of the project will result in the possibility that a number of training and research activities may best be undertaken by existing state-owned academic, training and research institutions in the Nile Riparian countries\. In that case PMU has to submit case by case basis for the clearance of the Bank\. The selection should be based on both quality and costs\. 67  Efficient Water Use for Agricultural Production Project Appraisal Document Operating Costs, including Administration, Operation and Maintenance Expenses (Total Costs US$ 0\.824 million) The project will establish and staff a PMU15 in Nairobi, Kenya\. The participating riparian countries will also establish national Agriculture Project offices\. The PMU will be staffed with Administration staff (clerks), Account staff and a driver\. The PMU staff will be employed locally through UNOPS using standard UNOPS employment contracts in accordance with Section V of the Bank's Consultants' Guidelines\. The Administration and operation costs includes salaries and overhead of PMU staff (except LTC consultants) and the other operational costs, such as utilities, fuel and maintenance of vehicles, office equipment maintenance, office supplies, printing and promotion costs, PMU travels, etc\., of the Regional PMU, and countries offices\. Other operational costs, such as utilities, fuel, office supplies, will be purchased based on standard UNOPS procedures\. The project operation excludes the NBI Governments' contributions in kind of $0\.45 million equivalent\. Details of the procurement arrangements for these costs are found in Table 6\.1\. Research Institutions and/or Government-Owned Universities The regional and technical nature of this project will result in the possibility that some of the tasks and activities delineated above may best be undertaken by existing state owned universities or research institutions in the Nile riparian countries\. The project thus may involve contracting research institutions, think tanks, and academic institutions that are government-owned in the respective countries where the services are required to be rendered\. Thus the services of government-owned universities or research centers in the riparian countries may be hired in accordance with Consultant Guidelines 1\.11 (C)16\. On the same basis, university professors or scientists from research institutes can be contracted individually\.17 Prior Review Thresholds The World Bank will conduct a prior review of the following procurement documentation: (a) Goods and Equipment: The first contract for goods and equipment and services (other than consultants' services) estimated to cost more than US$80,000 but less than US$200,000 will be subject to prior review\. All contracts for goods and equipment and services (other than consultants' services) the equivalent of US$200,000 or more will be subject to prior review\. (b) Consultant Services: The first contract for consultants' services provided by a firm estimated to cost less than US$100,000, and subsequently, each contract for consultants' services provided by a firms estimated to cost the equivalent of US$100,000 or more will be submitted for prior review\. Individual consultant contracts estimated to cost the equivalent of US$50,000 or more, and contracts for the employment of individual consultants greater than six months, will all be subject to prior review\. Terms of Reference will be written by the appropriate NBI/PMU (in 15The PMU will be headed by a project manager, who is a professional, and comprised of Lead Training Specialist (time sharing),an Finance/Procurement Officer, who all will be recruited on regional basis by UNOPS as long term consultants (under para 6)\. 16When the services of government-owned universities or research centers in the riparian countries are of unique and exceptional nature, and their participation is critical to project implementation, the Bank may agree on hiring of those institutions on a case-by-case basis\. 17Provided that they have full-time employment contracts with their institution, have regularly exercised their function for a year or more before they are contracted under Bank funding, and selection is made on a competitive basis, with full justification, and in accordance with Bank policies\. 68  Efficient Water Use for Agricultural Production Project Appraisal Document many cases by the subject matter specialists) and UNOPS shall be responsible for review of all Terms of Reference\. (c) Ex-post Review: The contracts not subject to prior review would be subject to ex-post review during supervision and it should constitute, but not be limited to, at least 15 percent of the total number of contracts\. Overall Procurement Risk Assessment Frequency of procurement supervision missions proposed: One every 6 months along with the project semiannual review mission or independent mission (includes special procurement supervision for post-review/audits)\. The ex-post review would cover at least 15% of the contracts awarded during the transpired period of project in between missions\. First Year Procurement: Under the proposed implementation schedule it is envisaged that the special International and Regional Consultancy services of nearly US$ 0\.14 million, the procurement of almost all office and IT equipment including vehicles of costs US$ 0\.40 million and the selection and appointment of PMU core Long-Term Consultant staff (about US$ 0\.24 million) will be made through UNOPS\. Procurement Processing All procurement packages will be prepared either by UNOPS directly or by the Finance and Procurement Officer at the PMU\. All procurement will be carried out in accordance with the procurement plan and packaging and as agreed with the Bank\. The PMU/UNOPS will forward the procurement packages and schedule, to the NBI for endorsement and for onward forwarding to the Bank for prior review and 'no objection', as required\. Detailed Terms of Reference for the Project Services Agency is provided in the SVP Master PAD\. Table 6\.1\.1 Project Costs by Procurement Arrangements NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION Procurement Arrangements (US$ Million) Procurement Method Shopping Consulting & Other Services N\.B\.F\. Total A\. CONSULTANCY SERVICES - 1\.50 - 1\.50 (1\.50) (1\.50) B\. GOODS Incldg\. EQUIPMENT & VEHICLES 0\.43 - - 0\.43 (0\.43) (0\.43) C\. TRAINING and WORKSHOP 2\.09 - - 2\.09 (2\.09) (2\.09) D\. OPERATING COSTS 0\.82 - - 0\.82 (0\.82) (0\.82) Total 3\.34 1\.50 - 4\.84 (3\.34) (1\.50) - (4\.84) _________________________________ Note: Figures in parenthesis are the respective amounts financed by NILE BASIN TRUST FUND All costs include contingencies\. Others include items to be procured through ICB for goods, services for administration, operation and maintenance, travel costs, and incremental operating costs related to training and workshops\. 69  Efficient Water Use for Agricultural Production Project Appraisal Document Table 6\.1\.2: Consultant Selection Arrangements (optional) Consultant Selection Method Total Costs Services In $ mill\. Expenditure QCBS QBS SFB LCS CQS Others N\.B\.F Category A\. Firm 0\.033 0\.033 B\. Individuals 1\.463 1\.463 Total 1\.496 Total costs include contingencies\. Figures in parenthesis are the amounts to be financed by the NBTF Grant executed by the Bank QCBS - Quality- and Cost-Based Selection QBS - Quality Based Selection SFB - Selection under fixed Budget LCS - Least - Cost Selection CQ - Selection Based on Consultants' Qualification Other - Selection of individual consultants (per Section V of Consultants Guidelines), Commercial practices\. etc\. It includes PSA fees N\.B\.F -Non Bank-Financed Table 6\.2: Thresholds for Procurement Methods and Prior Review Expenditure Category Contract Value Threshold Procurement Method Contracts Subject to (US$ thousand) Prior Review (US$ million) 1\. Works 2\. Goods > 200 ICB All > 80 and < 200 ICB First < 80 Shopping Post review 3\. Services- Firms > 100 QCBS All < 100 QCBS, CQS First contract (each selection method) 4\. Services ­ Individuals > 50* IC All > 50 and all project long-term consultants of duration > 6months Total value of contracts subject to prior review: About $ 0\.8 million *see Prior Review Requirements in this section on Prior Review Thresholds in this Annex 2\. Disbursement and Financial Management Disbursement Management Services Agreement (MSA) and Blanket Application for Withdrawal (BAW)\. Following the signing of the Grant Agreement between the Bank and the NBI, the NBI will establish a Management Services Agreement (MSA) with UNOPS\. After the effective date of the Grant Agreement, the NBI will submit to the Bank a copy of the signed MSA along with a blanket withdrawal application covering the total estimated cost of the Services, such application to be copied to UNOPS\. This will enable UNOPS to request for advances from the Grant 70  Efficient Water Use for Agricultural Production Project Appraisal Document proceeds for the purposes agreed in the MSA; however, disbursement will not commence until the Bank Financial Management Specialist (FMS) certifies that the accounting and financial management systems used for the purpose of the implementation of the Project are operational and able to produce the agreed upon Financial Monitoring Reports (FMRs)18\. Initial request for advance\. Upon receipt by UNOPS of a notice from the Bank that the Withdrawal Application has been received in good order and accepted, UNOPS will submit a request to the Bank, with copy to the NBI, for an initial advance necessary to cover project expenditures for the first six months of the project life\. This request will be supported by the first set of FMRs\. The estimate of funds required will be consistent with the initial work plan as reflected in the Project Implementation Plan, which will have been agreed between the NBI and the Bank\. UNOPS will start making obligations against the project budget when the initial advance is received\. Quarterly replenishment requests\. Replenishment of the project account will be on quarterly basis\. UNOPS will submit quarterly replenishment requests for each calendar year to the Bank with copies to the NBI reflecting expenditures paid during the previous three months and an estimate of expenditures for the ensuing six months\. These quarterly requests will be in the agreed FMR format, which will include the following for disbursement purposes: An introductory Narrative discussing developments and progress Project Account reconciliation statement Financial Reports: o Source and uses of funds (period and cumulative) o Use of funds by project component (budgeted, actual period, and cumulative) Physical Progress Report (narrative may complement of substitute tabular information): o Linkage of financial information with output indicators or contract status of key activities o Outcome indicators For contracts above the prior review threshold: o The contractor/consultant's name, nationality, and (where applicable) the zip code o The amount disbursed under each contract For contracts below the prior review threshold: o Aggregate disbursement by country of supply o Breakdown of aggregate disbursements by legal disbursement category and disbursement percentage Forecast of expenditures for the next two FMR reporting periods (two quarters) Project Account Activity Statement 18A financial management assessment of UNOPS was conducted by Bank staff (July 2003) and it was concluded that the UNOPS system, as redesigned for the SVP, and capabilities and audit arrangements (internal and external) are sufficient to satisfy the needs of the NBI Shared Vision Program at present level envisaged (under contract for all 8 projects)\. The certification of UNOPS is valid for all eight projects under the umbrella program and there is no need for a case by case assessment\. It is understood, however, that the proposed staffing and usage of UNOPS integrated system are to be maintained at all times at the proposed level\. In addition, as part of implementation supervision the Bank team should periodically monitor that UNOPS maintains the systems and capacity at agreed levels\. A new evaluation of the system may become necessary should the level of anticipated funding and volume of transactions increase\. 71  Efficient Water Use for Agricultural Production Project Appraisal Document As part of each replenishment request, and in order to reconcile the advance amounts previously made, UNOPS will submit cash-flow projections (estimate of disbursements for project expenditures for the ensuing six months, less unspent balance of previous advances and interest earned)\. Deposit Account\. Advances from the Grant account will be deposited into UNOPS US dollar denominated bank account with the JP Morgan Chase Bank, New York\. UNOPS will maintain ledger accounts for the NBTF funding of the project\. Interest will be calculated based on the monthly undisbursed balance of funds which have been received in accordance with the financial monitoring reports and apportioned annually to the project\. Bank guidelines\. Advances to UNOPS from the Grants' Accounts will be managed by UNOPS in accordance with Bank Guidelines as set forth in the MSA between UNOPS and the NBI and the Disbursement Letters to be issued by the Bank\. Financial Management UNOPS will provide support to the NBI in the execution of the SVP Efficient Water Use for Agricultural Production project, through the provision of project services, in particular financial management, procurement of goods and services, and capacity building\. The Bank staff has visited UNOPS and interviewed its management and staff and is satisfied with the capacity and systems in place and procedures and practices for project management services\. With regards to the assignment and required business standards, as part of documentation for the negotiations of the MSA, UNOPS has produced a statement of capability, describing its capacity and the salient features of the systems it maintains, and demonstrating its ability to perform at the highest standards all responsibilities conferred to it through the agreement\. Furthermore, along with the proposal, an acceptable draft of the project implementation and FM manuals as well as a copy of the FMRs was submitted to the Bank for review\. The Bank Nile Team, though joint meetings with UNOPS in September 2004, has further reviewed the systems operated by UNOPS and has satisfied itself that those are operational and able to produce FMRs\. Financial Monitoring Reports\. UNOPS will report on behalf of NBI on the financial progress of the project using the quarterly Financial Monitoring Reports (FMR) and the Bank will reimburse UNOPS for project expenses based on those FMRs, the content of which has been discussed between the Bank and UNOPS\. The FMR and any supporting documentation must be provided to the NBI, with a copy to the World Bank\. The FMR format will be customized in a format to be agreed between the Bank, the NBI and UNOPS adapting to the specific needs of the project\. The FMR will be submitted on a quarterly basis by UNOPS Finance Section and is forwarded directly by the UNOPS Finance Section to the Bank\. During the meeting with UNOPS in September 2004, the formats for the FMRs were agreed upon, and would be attached to project MSA\. UNOPS will be responsible on behalf of NBI for preparing quarterly and annual budgets and Project Monitoring Reports, including FMRs, and the annual consolidated financial statements to be submitted to NBI and the World Bank\. All documentation relating to financial transactions, procurement, contracts and invoices will be retained and made available to supervision missions and auditors\. Audit Reports\. As UNOPS will be acting as the NBI's agent, an annual audit of the Grant will be conducted by the UNDP Division for Audit and Management Review and/or by auditors or audit firms contracted by it for this purpose in accordance with established practice in similar 72  Efficient Water Use for Agricultural Production Project Appraisal Document arrangements involving UN agencies acting as project service provider under Bank financed projects\. Flow of funds\. Upon receipt of the Blanket Withdrawal Application from NBI and the subsequent request for project advance from UNOPS, the Bank shall deposit the requested project advance to a Deposit Account (see below) - funds will be advanced to the Project because of the time that it will take UNOPS to collect documentation and confirm accountability of funds disbursed by the PMU in the recipient countries\. Thereafter, the Bank shall reimburse UNOPS for Project expenses based on the quarterly FMRs and Payment Request\. UNOPS in turn, based on agreed work plans and acting on behalf of the NBI, will be responsible for contracting goods and services to achieve the project objectives\. Major expenses (salaries, ICB Contracts, QCB Contracts, etc\.) shall be paid directly by UNOPS\. In order to facilitate smooth project operations and cover minor expenses, UNOPS will open imprest accounts for the PMU and the National Project Coordinators\. The Imprest Account is to be used in accordance to the PIM\. UNOPS will bear full responsibility and all business risks associated with those accounts\. Deposit Account\. UNOPS maintains a bank account at the JP Morgan Chase Bank to receive funds, including funds for NBI Projects from UNDP and the World Bank - this account is maintained in United States dollars\. Therefore, UNOPS will be required to maintain a separate ledger account for the various funding streams for the project (NBTF/World Bank and other grant)\. It should be noted that UNOPS only serves as the Project Service Agency, which means that it is not the owner of any funds by mandate\. Rather UNOPS is the custodian of the funds on behalf of the NBI\. Management Fee\. The level of the fee, which will be paid to UNOPS has been agreed between UNOPS and the NBI as about 8% in the estimate\. The fee was based on the workload and the level of services to be provided\. The fee will be requested as part of the Quarterly Payment Requests\. The estimated category-wise NBTF Grant allocation according to the designed project is reflected in the following table\. Allocation of NBTF Proceeds\. The allocation of the NBTF Grant proceeds is shown in Table 6\.3 below\. The full Project will be implemented over a period of three years\. \. The anticipated starting, completion and closing dates are as indicated in the inner page of the PAD\. Disbursements will be against the four main expenditure categories: (a) Consultants' Services including audit fees and the agent's fees; (b) Training and Workshops; (c) Goods, including equipment and vehicles; and (d) Operating Costs, including administration, operating and maintenance costs\. 73  Efficient Water Use for Agricultural Production Project Appraisal Document Table 6\.3: Allocation of Grant Proceeds in US$ million NILE BASIN INITIATIVE EFFICIENT WATER USE FOR AGRICULTURAL PRODUCTION Allocation of Grant Proceeds NILE BASIN TRUST FUND (US$ '000) Suggested Allocation of Grant Proceeds Disbursement Total Project Cost Grant Amount % Total Local Foreign 1\. CONSULTANCY SERVICES 1,464\.375 100\.000 1,496\.800 31\.972 1,464\.828 2\. TRAINING, RESEARCH & STUDIES 2,035\.229 100\.000 2,086\.109 208\.691 1,877\.419 3\. EQUIPMENT & GOODS 417\.498 100\.000 427\.936 43\.063 384\.873 4\. ADMINISTRATION AND OPERATION & MAINTENANCE 803\.970 100\.000 823\.730 144\.940 678\.790 Unallocated 113\.503 - - - - Total 4,834\.576 100\.000 4,834\.576 428\.666 4,405\.910 _________________________________ Grant amounts financed by NILE BASIN TRUST FUND 74  Efficient Water Use for Agricultural Production Project Appraisal Document ANNEX 7: PROJECT PROCESSING SCHEDULE PREPARATION ASSISTANCE Name Specialty Ijsbrand Harko de Jong Water Resources Zaure Zikibayeva Procurement Ohn Myint Water Resources, Procurement Allison Berland SVP Operations Analyst Raquel Silva Program Assistant PROJECT PROCESSING SCHEDULE Activity Date Pre-appraisal Mission October 2003 Review of draft PIP by Nile-TAC October 2003 Decision Meeting February 2003 Appraisal July 2004 Negotiations February 2005 Effectiveness June 2005 75  Efficient Water Use for Agricultural Production Project Appraisal Document 76  Efficient Water Use for Agricultural Production Project Appraisal Document ANNEX 8: DESCRIPTION OF THE NILE BASIN INITIATIVE 1\.THE NILE BASIN INITIATIVE: AN OVERVIEW The Nile Basin The River Nile\. The Nile is one of the world's great rivers\. For millennia, this unique waterway has nourished varied livelihoods, an array of ecosystems, and a rich diversity of cultures\. As the world's longest river, it traverses nearly 6,700 kilometers, covering more than 35 degrees of latitude and draining an area of over 3 million square kilometers--one tenth of Africa's total land mass\. It is a basin of varied landscapes, with high mountains, tropical forests, woodlands, lakes, savannas, wetlands, arid lands, and deserts, culminating in an enormous delta on the Mediterranean Sea\. It is generally agreed that the Nile has several sources\. The principle streams are the White Nile, which begins in the Great Lakes region of Central Africa; and the Blue Nile (Abbay) and the Atbara (Tekeze), both flowing from the highlands of Ethiopia\. The most distant source is the Kagera River, which winds its way through Burundi, Rwanda, Tanzania, and Uganda into Lake Victoria\. A transboundary resource\. The Nile River is shared by 10 countries: Burundi, Democratic Republic of Congo, Egypt, Eritrea, Ethiopia, Kenya, Rwanda, Sudan, Tanzania, and Uganda\. It is home to world-class environmental assets, such as Lake Victoria (the second-largest fresh water body by area in the world) and the vast wetlands of the Sudd\. It also serves as home to an estimated 160 million people within the boundaries of the basin, while about twice that number-- roughly 300 million--live in the 10 countries that share and depend on Nile waters\. Challenges and opportunities\. Despite the extraordinary natural endowments and rich cultural history of the Nile Basin, its people face considerable challenges\. Today, the basin is characterized by poverty, instability, rapid population growth, and environmental degradation\. Four of the Nile riparian countries are among the world's 10 poorest, with per capita incomes of US$100­200 per year\. Population is expected to double within the next 25 years, placing additional strain on scarce water and other natural resources\. Only one other river basin (the Danube) is shared by more countries than the Nile, and the transboundary nature of the river poses complex challenges\. Yet the Nile holds significant opportunities for "win-win" development that could enhance food production, energy availability, transportation, industrial development, environmental conservation, and other related development activities in the region\. Cooperative water resources management can also serve as a catalyst for greater regional integration, both economic and political, with potential benefits possibly far exceeding those derived from the river itself\. Evolving cooperation\. Appreciating the benefits of cooperation, various subgroups within the Nile Basin have engaged in cooperative activities over the past 30 years\. One of the early regional projects in the Nile Basin was Hydromet, which was launched in 1967, with the support of the United Nations Development Programme (UNDP), to foster the joint collection of hydrometeorologic data\. Hydromet operated until 1992\. In 1993, the Technical Cooperation Committee for the Promotion of the Development and Environmental Protection of the Nile Basin (TECCONILE) was formed in an effort to focus on a development agenda\. Also in 1993, the first in a series of 10 Nile 2002 Conferences, supported by the Canadian International Development Agency (CIDA), was launched to provide an informal mechanism for riparian dialogue and the exchange of views between countries, as well as with the international community\. Within the framework of the TECCONILE, a Nile River Basin action plan was prepared in 1995 with support from CIDA\. In 1997, the World Bank agreed to a request by the 77  Efficient Water Use for Agricultural Production Project Appraisal Document Council of Ministers of Water Affairs of the Nile Basin states (the Nile Council of Ministers, or Nile-COM) to lead and coordinate donor support for their activities\. Thus, the World Bank, UNDP, and CIDA began operating in concert as "cooperating partners" to facilitate dialogue and cooperation among the riparians, creating a climate of confidence within which an inclusive mechanism for working together could be established\. New era of regional cooperation Towards a long-term legal and institutional framework\. Aware that sustained Nile cooperation requires a development focus, a permanent institution, and agreement on core legal principles, the Nile riparians established a forum for a process of legal and institutional dialogue in 1997, with UNDP support\. With three-person teams from each country (typically senior government lawyers and water resource specialists) a panel of experts produced the draft text of the Cooperative Framework in early 2000\. This encompasses general principles, rights and obligations, and institutional structure\. The draft framework has moved the riparians a long way and important compromises have been reached\. However, some key issues remain to be resolved, and the Council of Ministers agreed in August 2000 to extend the dialogue process to seek further agreement on the outstanding issues\. UNDP has pledged its continued support to the process, which by its nature requires time and effort\. Establishment of the Nile Basin Initiative\. In 1998, recognizing that cooperative development holds the greatest prospects of bringing mutual benefits to the region, all riparians, except Eritrea, joined in a dialogue to create a regional partnership to facilitate the common pursuit of sustainable development and management of Nile waters\. In an historic step, they jointly established an inclusive transitional mechanism for cooperation until a permanent cooperative framework is established\. The transitional mechanism was officially launched in February 1999 in Dar es Salaam by the Nile Council of Ministers\. In May 1999, the overall process was officially named the Nile Basin Initiative (NBI)\. Developing a shared vision and objectives\. Following extensive consultations, the Nile Council of Ministers, at its Extraordinary Meeting in February 1999, adopted a shared vision and policy guidelines for the NBI (see Annex 1)\. The shared vision is: To achieve sustainable socioeconomic development through the equitable utilization of, and benefit from, the common Nile Basin water resources\. The policy guidelines, which provide a basinwide framework for moving forward with cooperative action, set forth the primary objectives of the NBI: To develop the water resources of the Nile Basin in a sustainable and equitable way to ensure prosperity, security, and peace for all its peoples To ensure efficient water management and the optimal use of the resources To ensure cooperation and joint action between the riparian countries, seeking win-win gains To target poverty eradication and promote economic integration To ensure that the program results in a move from planning to action\. Pursuing cooperative development\. The initiative provides a unique forum for the countries of the Nile to move toward a cooperative process to realize tangible benefits in the basin and build a solid foundation of trust and confidence\. The Nile Council of Ministers serves as the highest decision-making body of the NBI\. Chairmanship of the Nile Council of Ministers is rotated annually\. The Nile Council of Ministers is supported by the Nile Technical Advisory Committee, which is composed of two senior officials from each member country\. The NBI maintains a 78  Efficient Water Use for Agricultural Production Project Appraisal Document secretariat (sometimes referred to as the Nile-SEC) in Entebbe, Uganda\. The NBI Secretariat began operations in June 1999 and was officially launched on September 3, 1999\. The NBI Strategic Action Program From vision to action\. To translate the Shared Vision into action, the riparians are developing a Strategic Action Program that focuses on two complementary ideas--a shared vision and action on the ground (Figure 1)\. The ideas are mutually reinforcing\. A common vision provides a framework for activities on the ground, and, in turn, these activities realize the vision\. These ideas are being translated into actions through two complementary programs: (i) a basinwide Shared Vision Program to create an enabling environment for cooperative action through building trust and skill, and (ii) subsidiary action programs to plan and implement investments and activities on the ground at the lowest appropriate level, taking into account the benefits from, and impacts of, these activities in all riparian countries\. The Shared Vision Program\. The primary purpose of the Shared Vision Program (SVP) is to create an enabling environment for cooperative management and development in the Nile Basin through a limited but effective set of basinwide activities and projects\. The SVP project portfolio includes the seven thematic projects listed below and summarized in Table 1\. These projects address the major water-related sectors and crosscutting themes deemed critical by the Nile riparians to ensure an integrated and comprehensive approach to water resources development and management\. The projects may also serve as catalysts for broader socioeconomic development\. An eighth "project," the SVP Coordination project, will strengthen the capacity of the NBI institutions to execute and coordinate cooperative, basinwide projects\. Nile Transboundary Environmental Action SHARED VISION Nile Basin Regional Power Trade Shared Efficient Water Use for Agricultural Production Vision Program Water Resources Planning and Management Confidence Building and Stakeholder Involvement Subsidiary Applied Training Action Programs Socioeconomic Development and Benefit Sharing\. Although each project is different in focus and scope, they ACTION ON THE GROUND build upon each other to form a coordinated program\. All SVP projects contribute to building a strong Figure 1\. Strategic Action Program foundation for regional cooperation by supporting for the Nile Basin basinwide engagement and dialogue, developing common strategic and analytical frameworks, building practical tools and demonstrations, and strengthening human and institutional capacity\. Together, the projects of the Shared Vision Program seek to lay the foundations for the shared vision for--as well as build the capacity to achieve--the sustainable development of the River Nile for the benefit of all\. The detailed preparation of the Shared Vision Program was accomplished through a unique, multicountry, multisectoral, and participatory process led by the Nile Council of Ministers and NBI Technical Advisory Committee and executed by the NBI Secretariat\. More than 70 national experts, including eight technical specialists from each of the nine countries, were involved in detailed project preparation\. For many, it was the first time that they have discussed common concerns and potential opportunities with their colleagues from neighboring and co-riparian 79  Efficient Water Use for Agricultural Production Project Appraisal Document countries\. The creative energy and hope for the future engendered by this preparation process were a visible demonstration of the strong ownership by the Nile riparian countries and their commitment to jointly pursue their common goal\. Table 1\. Overview of SVP Project Portfolio Function Project Objectives Indicative Cost* (US$ mil) Creating an enabling Nile Transboundary Provide a strategic framework for 39 environment for cooperative Environmental Action environmentally sustainable development of development: the Nile River Basin\. Support basinwide Basinwide engagement environmental action linked to transboundary and dialogue issues in the context of the Nile Basin Common strategic and Initiative Strategic Action Program\. analytical frameworks Nile Basin Regional Power Establish the institutional means to 13 Practical tools and Trade coordinate the development of regional demonstrations power markets among the Nile Basin Institutional and human countries\. capacity building Efficient Water Use for Provide a sound conceptual and practical 5 Agricultural Production basis to increase availability and efficient use of water for agricultural production\. Water Resources Planning Enhance the analytical capacity for 28 and Management basinwide perspective to support the development, management, and protection of Nile Basin waters\. Confidence Building and Develop confidence in regional cooperation 15 Stakeholder Involvement under the NBI, both at basin and local levels, and ensure full stakeholder involvement in the NBI and its projects\. Applied Training Strengthen capacity in selected subject 20 areas of water resources planning and management in public and private sectors and community groups\. Strengthen centers with capacity to develop and deliver programs on a continuing basis\. Expand the frequency and scope of basin interchange among water professionals\. Socioeconomic Strengthen Nile River basinwide 11 Development and Benefit socioeconomic cooperation and integration\. Sharing Total 131 * Estimated project costs to be finalized during the appraisal process for each project\. Estimated costs shown are based on preappraisals as of September 2002 and do not include counterpart contributions\. The objective of the eighth SVP project, referred to as the SVP Coordination project and located at the NBI Secretariat, is to strengthen the capacity of the NBI institutions to execute basinwide programs and to ensure the effective oversight and coordination of the NBI's Shared Vision Program\. The Shared Vision Program and project documents for each of the seven projects were approved by the Nile Council of Ministers at its Extraordinary Meeting held in Khartoum, Sudan, in March 2001 and presented to the international community to raise support for implementation in June 2001\. The SVP projects are currently undergoing detailed implementation planning, with project startup to occur in a phased manner beginning in early 2003\. 80  Efficient Water Use for Agricultural Production Project Appraisal Document Subsidiary action programs\. In parallel to the Shared Vision Program, groups of countries have initiated subsidiary action programs to cooperatively identify and implement investment projects that confer mutual benefits\. The objective of these programs is to translate the Shared Vision into action, realizing transboundary development opportunities within the agreed basinwide framework\. Potential types of projects identified by the riparians for bundling into subsidiary action programs are summarized in Table 2\. Table 2\. Types of Projects for Consideration in Subsidiary Action Programs I\. Generic Water Resources Management Project II\. Other Related Joint Development Project Possibilities Possibilities Water supply and sanitation Infrastructure Irrigation and drainage development Regional energy networks, including power interconnection and gas pipelines Fisheries development Telecommunication development Hydropower development and pooling Regional transport, including: railway and road Watershed management networks; river and marine navigation; and aviation\. Sustainable management of wetlands and Trade and Industry biodiversity conservation Promotion of trade (including border trade) Sustainable management of lakes and linked wetland systems Industrial development River regulation Regional tourism development Flood management Promotion of private investment and joint ventures Desertification control Marketing and storage of agricultural products Water hyacinth and weeds control Forest crop harvesting Pollution control and water quality management Health, environment, other Water use efficiency improvements\. Malaria and other endemic diseases control§ Protection of wildlife Environmental management Disaster forecasting and management To date, the Nile riparians have formed two subsidiary action programs--one in the Eastern Nile region and the other in the Nile Equatorial Lakes region (see below)\. Based on wide consultation at the political and technical levels, both programs have developed a strategic approach to cooperative management and development at the sub-basin level, as well as a list of priorities and criteria for projects\. Both subsidiary action programs have identified the first set of cooperative projects to be prepared, and project identification documents for donor consideration were made available in early June 2001\. Initial support for project preparation activities and the implementation of fast-track projects was raised in June 2001 at a meeting of the international community held in June 2001 in Geneva, Switzerland (section 2 of this annex has more information about this meeting)\. Over the next few years, preparatory activities will include detailed social, environmental, and economic analyses; prefeasibility and feasibility studies; and other design-related activities\. Selected preparatory activities have begun in each of the subsidiary action programs\. The Eastern Nile Subsidiary Action Program\. The Eastern Nile Subsidiary Action Program (ENSAP) currently includes the countries of Egypt, Ethiopia, and Sudan\. As set out in a jointly developed strategy adopted by the Eastern Nile Council of Ministers, the primary objectives of ENSAP are to: ensure efficient water management and optimal use of resources through equitable utilization and causing no significant harm; ensure cooperation and joint action between the 81  Efficient Water Use for Agricultural Production Project Appraisal Document Eastern Nile countries seeking win-win gains; target poverty eradication and promote economic integration; and ensure that ENSAP results in a move from planning to action\. The Eastern Nile riparians recognize that potential investments need to be assessed within a regional context and that benefits of a win-win nature are most likely to be found in the bundling of projects within a multipurpose context\. Consequently, consensus was reached that the objective of a first ENSAP project, referred to as the Integrated Development of the Eastern Nile (IDEN) Project, will be to "initiate a regional, integrated, multipurpose development project through a first set of investments which confer tangible, win-win gains and demonstrate joint action between the Eastern Nile countries\." IDEN includes a preparation process that facilitates integration, options analysis based on best practices, and prioritization of subprojects within an overall regional, integrated framework\. IDEN, the first ENSAP project, will comprise the following seven major subprojects: Eastern Nile Planning Model subproject* Baro-Akobo Multipurpose Water Resources Development subproject Flood Preparedness and Early Warning subproject* Ethiopia-Sudan Transmission Interconnection subproject* Eastern Nile Power Trade Investment Program Irrigation and Drainage subproject Watershed Management subproject\. * Each of the subprojects will be prepared and implemented in a phased manner, and the subprojects will be more fully defined during the preparation process\. Four sub-projects, which have been clearly identified as contributing to an integrated, regional program will proceed at an accelerated pace (fast-track) to final stages of appraisal\. This will ensure that tangible results are realized early, fostering confidence in the process\. Other subprojects will require extensive preparatory work to ensure and maximize win-win gains in a regional context\. It is anticipated that additional activities may be identified during the project preparation process and prepared for appraisal or fast-tracked as appropriate\. An Eastern Nile technical regional office has been established in Addis Ababa, Ethiopia, to facilitate the process of cooperative development and assist the Eastern Nile Council of Ministers and technical team in the joint and coordinated preparation of IDEN\. The Eastern Nile Technical Regional Office, ENTRO, has been established as an international organization in June 2002 in Addis Ababa, Ethiopia\. ENTRO facilitates the process of cooperative development and assists the Eastern Nile Council of Ministers and the ENSAP Technical Advisory Committee in developing, implementing and managing the Eastern Nile Subsidiary Action Program, and the coordinated preparation of the IDEN project\. Nile Equatorial Lakes Region Subsidiary Action Program\. The Nile Equatorial Lakes region includes the six countries in the southern portion of the Nile Basin--Burundi, Democratic Republic of Congo, Kenya, Rwanda, Tanzania and Uganda--as well as the downstream riparians Egypt and Sudan\. The water resources of the Nile Equatorial Lakes region include one of the world's great complexes of lakes, wetlands, and rivers\. The region's economies are characterized by rain-fed agriculture, subsistence farming, low industrialization, and poor infrastructure development\. The objectives of the Nile Equatorial Lakes Region Subsidiary Action Program (NELSAP), as defined by the Nile Equatorial Lakes Council of Ministers, are to contribute to the eradication of poverty, promote economic growth, and reverse environmental degradation\. NELSAP is expected to be a long-term program with multiplier effects in broader economic integration as the program 82  Efficient Water Use for Agricultural Production Project Appraisal Document shows results on the ground\. Continued cooperation between NEL-SAP riparian countries and their project steering mechanisms is an important to create synergies between different regional development efforts in the Nile Equatorial Lakes Region\. This includes programs such as the Lake Victoria Development Program (LVDP) and the Lake Victoria Visioning Exercise of the East African Community (EAC), the Lake Victoria Management Program (LVEMP), and the Lake Victoria Fisheries Development Program\. Twelve NELSAP projects have been identified by the Nile Equatorial Lakes riparians in a consultative manner, targeting investments in Water Resources Management of shared-sub- basins, Hydropower Development and Transmission Interconnection, Fisheries Development and Lakes Management, Water Resources Management, Agriculture Development, and Water Hyacinth Control\. Depending on the scale and scope of the project, preparation will take between one and three years\. Projects will be prepared and implemented by the countries involved and will be guided by regional project steering committees or another suitable regional steering mechanism agreed upon by the participating riparian countries\. A Coordination Unit, NEL-CU, has been established in Entebbe, Uganda, in December 2001 to facilitate project preparation and implementation\. The following 12 projects have been identified: Natural Resources Management Enhanced Agriculture Productivity through Rainwater Harvesting, Small Scale Irrigation and Livestock Management Fisheries Project for Lake Albert and Lake Edward Development of a Framework for Cooperative Management of the Water Resources of the Mara River Basin Kagera River Basin Integrated Water Resources Management Development of a Framework for Cooperative Management of the Water Resources of the Sio-Malaba-Malakisi River Basins Water Hyacinth Abatement in the Kagera River Basin\. Hydropower Development and Power Trade Rusumo Falls Hydroelectric Power Development Ranking and Feasibility Study of Hydroelectric Power in the NEL Region Interconnection between Kenya and Uganda Interconnection between Burundi, Democratic Republic of Congo, and Rwanda Interconnection between Burundi and Rwanda Interconnection between Rwanda and Uganda\. Detailed preparation has begun for the river basin management project in the Kagera, Mara and Sio-Malaba-Malakisi River Basins, including the establishment of two Regional Project Steering Committees\. Preparation steps have also been taken for the Fisheries and Lake Management Project targeting Lake Albert and Lake Edward, as well as for the Power Development and Transmission Program with the upcoming launch of a Strategic/Social and Environmental Assessment (SSEA) of Power Development Options in the Nile Equatorial Lakes Region\. 83  Efficient Water Use for Agricultural Production Project Appraisal Document Riparian consultative process\. The NBI facilitates riparian dialogue and cooperative action at multiple political and technical levels\. The Nile Council of Ministers provides the main policy direction for Nile Basin cooperation, including the Strategic Action Program\. The NBI Technical Advisory Committee, which coordinates joint activities, is responsible to the council for preparing and implementing the basinwide Shared Vision Program\. While the Nile Council of Ministers and the NBI Technical Advisory Committee have promoted the identification of subsidiary action program projects at the sub-basin level, the responsibility for the subsidiary action programs rests with the involved riparians, within the overall basinwide framework\. Throughout the process, high priority has been and will continue to be placed on strengthening the process of consultation in order to build trust and confidence\. Figures 2 and 3 illustrate how country activities will take place within sub-basin frameworks, which will occur within the broader context of the basinwide framework\. The basinwide framework also includes an "international discourse" to promote broad-based discussion on the sustainable development and management of Nile waters\. The international discourse, which was initiated in cooperation between the World Wildlife Fund, the World Conservation Union, and the World Bank, is now being implemented by the World Conservation Union with initial support from CIDA\. The International Discourse Desk is being established in Kampala, Uganda\. Figure 2\. Levels of Cooperation within the Nile Basin Initiative Global (ICCON incl\. International Discourse) Rwanda Burundi Ethiopia Sudan Tanzania Eastern Nile Sub-Basin Nile Equatorial Lakes Sub-Basin (ENSAP) (NELSAP) Egypt Kenya Eritrea DRC Uganda Nile Basin (SVP, Cooperative Framework) Supporting an historic process International Consortium for Cooperation on the Nile\. The International Consortium for Cooperation on the Nile (ICCON) has been established to support the NBI's Strategic Action Program\. Its first meeting was held in Geneva in June 2001\. The ICCON is a unique forum, envisioned as a long-term partnership of the riparian states and the international community\. The first meeting of the ICCON raised funding for the portfolio of basinwide Shared Vision projects and the preparation of projects identified under the subsidiary action programs\. The first ICCON 84  Efficient Water Use for Agricultural Production Project Appraisal Document meeting also celebrated cooperation and demonstrated international solidarity for cooperative development in the Nile Basin\. More detailed information on ICCON is provided in Section 2\. Partnerships\. Support for the NBI has been characterized by partnership since it began\. The initial partners comprised the World Bank, UNDP, and CIDA\. These initial cooperating partners have played the role of concerned facilitators, assisting the process of dialogue\. As the NBI moved into the initial preparation of the Strategic Action Program, the governments of Denmark, Finland, Germany, Italy, the Netherlands, Norway, Sweden, the United Kingdom, and the United States, together with the United Nations Food and Agriculture Organization (FAO) and the Global Environmental Facility (GEF), supported the initiative, directly or through World Bank trust funds\. With the first ICCON, the circle of partners widened as the international development community committed further support for implementation of the Shared Vision Program and for preparation of subsidiary action program projects\. Riparian ownership and commitment\. The Nile Basin countries have invested significant time, effort, and resources in launching and sustaining the NBI\. The initiative provides a transitional institutional mechanism for cooperation, an agreed vision and basinwide framework, and a process to facilitate substantial investment in the Nile Basin\. The initiative is based on the recognition that the basin has a shared past and a shared future, and that there is an urgent need for development and for the alleviation of poverty\. It represents deep commitment by the Nile riparian countries to foster cooperation and pursue jointly the sustainable development and management of Nile water resources for the benefit of all\. Figure 3: Overview of the NBI and its Strategic Action Programs Basinwide Level Nile-COM Policy level Shared Vision Nile-TAC (basinwide) Program Nile-SEC Shared Vision Program Projects - Environment (basinwide) - Power Trade - Agricultural W ater Use - W ater Resources - Confidence Building - Applied Training - Benefit Sharing - SVP Coordination NEL-COM EN-COM NEL-TAC ENSAPT Policy level Sub-basin Level (sub-basin) Subsidiary Action NEL-CU ENTRO Programs NEL Coord Unit Eastern Nile Tech\. (SAPs) Regional Office NELSAP ENSAP Program Areas IDEN Project Projects - W atershed management with subprojects on: (sub-basin) - Sustainable mgt of lakes & wetlands - Eastern Nile planning model - Agricultural water use - Flood preparedness & early warning - W ater hyacinth control - Ethiopian-Sudan transmissio - Power development & trade - EN power trade investment program - W atershed Management - Irrigation & drainage - Baro-Akobo Multip W ater Res Devlp Although various subgroups of Nile riparians have engaged in cooperative activities over the past 30 years, the Cooperative Framework and the NBI process mark the first time that all riparians 85  Efficient Water Use for Agricultural Production Project Appraisal Document have joined together in a joint dialogue and a cooperative initiative as equal members\. The inclusion of all 10 Nile riparians holds the promise of meaningful, comprehensive cooperation in the basin\. 2\. INTERNATIONAL CONSORTIUM FOR COOPERATION ON THE NILE Introduction Mandate\. Following a request by the Council of Ministers of Water Affairs of the Nile Basin states, the Bank agreed in 1997 to coordinate donor support for an action plan and to convene a consultative group meeting\. This consultative group is now within the broader framework of the ICCON\. In accordance with confirmation by the Nile Council of Ministers at its meeting in Khartoum, Sudan, in March 2001, the first ICCON meeting was held June 26­28, 2001, in Geneva, Switzerland\. Subsequent meetings will be held when needed, probably about every two to three years ICCON objective\. ICCON is conceived as a partnership between and among the Nile riparian countries and the international community\. ICCON will seek to raise and coordinate funding from bilateral, multilateral, and possibly private funding entities, in support of cooperative water resources management and development projects and other related projects in the Nile Basin\. ICCON will also provide a forum for discourse that will bring together riparians and donors, and, increasingly, civil society, nongovernmental organizations (NGOs), and the private sector\. ICCON structure The ICCON structure, which is based on discussions by the Nile Council of Ministers and input from consultations with the donor community, consists of two interrelated elements, one a subset of the other, working in close collaboration under the guidance of the Nile Council of Ministers\. A schematic of the ICCON partnership structure is presented in Figure 4\. Figure 4\. The ICCON Partnership Structure ICCON International Discourse Led by the NBI ICCON-CG Riparians World Bank Chair at request of COM Donors NGOs Riparians & NBTF Group Civil Society donors COM & WB co-Chair contributing to Academia the NBI Private Sector Riparians & donors contributing to the NBTF Other ICCON is a broad partnership, led by the NBI, encompassing the riparian countries of the Nile, the international donor community, public and private lenders, and investors, as well as other interested parties such as civil society, professional organizations, and NGOs, who wish to work together to support achievement of the riparians' Shared Vision\. ICCON will inform and foster a 86  Efficient Water Use for Agricultural Production Project Appraisal Document growing international dialogue on the opportunities and options for cooperative development in the Nile Basin\. ICCON Consultative Group\. The ICCON Consultative Group, established at the request of the Nile Council of Ministers, is a subgroup of the ICCON\. The ICCON Consultative Group is chaired and coordinated by the World Bank according to Consultative Group practice and custom, in collaboration with cooperating partners\. The ICCON Consultative Group comprises those donors/lenders that are financially contributing to, or anticipating contribution to, support of the NBI\. Additionally the ICCON Consultative Group includes donors providing official development assistance to individual riparian countries, to promote linkages between country development programs and the NBI\. Meetings of the ICCON Consultative Group will provide the forum for building and maintaining donor commitment to, and raising funds for, NBI programs, and for detailed reporting to donors on the progress, coordination, and work plans of the NBI\. Funding mechanisms The financial mechanisms proposed in support of the NBI are designed with several objectives in mind: to maximize riparian ownership and control of the process; to meet donor requirements for fiduciary accountability; and to provide timely and efficient administration of funds\. Given the nascent nature of the cooperative Nile institutions, the magnitude of financial resources involved, the imperative for early implementation of projects, and following extensive consultation with potential donors, a World Bank­managed, multidonor trust fund was proposed by the Nile Council of Ministers as the preferred initial funding mechanism (although alternative funding mechanisms may also be used)\. This would allow funds to be transferred according to established disbursement and procurement procedures\. An objective would be the eventual transfer of the trust fund to a Nile Basin institution as program implementation progresses and a permanent institutional framework is established\. NBTF Committee\. The NBTF Committee will be responsible for overseeing the operation of the Nile Basin Trust Fund and the use of its resources to meet the objectives of the NBI programs\. The NBTF Committee will foster both close partnership between the Nile Basin Countries, Development Partners and the World Bank, and at the same time, strong ownership of the NBI by the Nile countries\. To achieve this, the NBTF Committee will be both consultative and advisory\. The NBTF Committee will be co-chaired by the by the Nile Council of Ministers (or its representative) and the World Bank, and will develop its own procedures\. The NBTF may be convened at the request of the World Bank; however, it is proposed that the Committee normally meet annually\. Alternative arrangements for donor financing\. Some donors may be unwilling or unable to provide their support through the NBTF\. In such cases, support to individual projects or to the NBI's executive arm, the NBI Secretariat, will be arranged through mutually agreed channels, for example, bilaterally to the NBI\. Donors whose contributions are not channeled through the NBTF would not be members of the NBTF Committee, but would be members of the ICCON Consultative Group and receive regular progress and coordination briefings in that forum\. Every effort needs to be made to minimize the proliferation of alternative administrative arrangements due to different donor requirements\. As preparation of the subsidiary action programs progresses, innovative financing mechanisms, beyond the NBTF, for preparation and implementation of large-scale investments will be needed\. Riparian contributions\. The core costs of the Nile Council of Ministers, NBI Technical Advisory Committee, and NBI Secretariat will be supported by the Nile Basin countries through their continued payment of annual dues\. Riparians will be expected to provide counterpart funds for all projects, and may also choose to contribute additional funds to the NBI Secretariat\. 87  Efficient Water Use for Agricultural Production Project Appraisal Document Sponsorship of SVP project management units, whose local costs are to be financed by the host countries, will be another avenue of riparian support to the NBI\. The first meeting of ICCON Launching of ICCON\. The first ICCON meeting was held June 26­28, 2001, in Geneva\. This meeting consisted of two components\. The first day, June 26, was an ICCON event hosted by the NBI and attended by more than 70 ministers and other representatives from the Nile Basin countries, as well as a broad spectrum of invited parties from the international community, including representatives from more than 35 bilateral donors, multinational financing agencies, international agencies, and the NGO community (see Table 3)\. This event was designed to launch the consortium, to celebrate cooperation in the Nile River Basin, and to further the discourse on Nile development\. The chairman of the Nile Council of Ministers launched the meeting and was followed by an invited keynote address by James D\. Wolfensohn, president of the World Bank, and statements of support from UNDP, CIDA, the European Union, GEF, and a coalition of interested NGOs\. Poems and stories by children of the Nile, followed by presentations on the challenges in the basin and opportunities afforded by cooperation, underscored the importance of this initiative in launching a new, unprecedented era of cooperation on the Nile\. Table 3\. Participation of the International Community at the First ICCON Meeting Belgium Abu Dhabi Fund for Development Kuwait Fund for Arab Economic Canada African Center for Technology Development Denmark Studies Sudanese Environment Conservation Society Finland African Development Bank Third World Water France Arab Bank for Economic Development in Africa Forum Uganda Wildlife Society Germany East African Community United Nations Development Italy European Commission Programme (UNDP) Japan Food and Agricultural U\.N\. Economic Commission for Netherlands Organization Africa (UNECA) Norway Global Environmental Facility UNESCO Chair in Water Resources (UCWR) Sweden InterAfrica Group World Bank Switzerland International Monetary Fund World Meteorological Organization United Kingdom World Conservation Union United States Islamic Development Bank Consultative Group meeting\. On the second and third days, June 27­28, a meeting of the ICCON Consultative Group, chaired by the World Bank in fulfillment of the request of the Nile Council of Ministers, took place\. The purpose of this part of the meeting was to present the details of the NBI's Strategic Action Program to interested donors, raise financing for the current NBI programs, and lay the foundations for financing future investments\. The delegates expressed strong support for the initiative, acknowledged the leadership shown by the Nile Council of Ministers, and welcomed the contribution of NGOs\. The initiative was praised as a new paradigm of regional cooperation that could address many of the challenges in the basin and serve as an example to other international waters\. As a demonstration of their support of the initiative, development partners expressed initial financial support of at least US$140 million towards financing the implementation of the Shared Vision Program and preparatory activities for the subsidiary action programs\. Strong support was also expressed to underwrite the first phase of the investment programs in the sub-basins, estimated at US$3 billion, when ready for funding\. The donor partners committed to working with the Nile states to secure financing for this initial phase of investment, as well as for further phases\. 88  Efficient Water Use for Agricultural Production Project Appraisal Document Partner interest and post-ICCON activities Partner interest\. Ten bilateral and multilateral partner donors pledged support at ICCON to finance the implementation of the basinwide Shared Vision Program\. This includes Canada, Denmark, Germany, the Netherlands, Norway, Sweden, and the United Kingdom, as well as the African Development Bank, GEF (World Bank and UNDP), and the World Bank Development Grant Facility\. In addition, Italy, working with FAO as an executing agency, supports the Capacity Building for Water Resources Management Project, which also operates within the NBI umbrella\. It is expected that full financing will be obtained for the Shared Vision Program, although it is likely that some donors will pledge support on a rolling basis or in tranches, based upon agreed milestones and demonstrated results\. In support of the sub-basin level investment programs, in addition to the World Bank, the African Development Bank, Canada, Finland, and the United Kingdom pledged support for ENSAP; while the African Development Bank, Canada, Norway, Sweden and the United States pledged support for the preparatory activities of NELSAP\. Other donors, such as the European Union, France, Japan, Italy, and Switzerland have expressed interest in the NBI's Strategic Action Program and may play a role in the future\. Growing partner involvement\. A number of partners expressed interest in undertaking a joint SVP appraisal following the June ICCON meeting, which would include the participation of all donors contributing funds for SVP implementation\. This would provide a constructive opportunity to resolve details and any outstanding implementation issues, and enable donors to pledge funds at ICCON contingent upon meeting their appraisal requirements or resolving details of project design or execution\. An SVP implementation review meeting, attended by representatives from the NBI and more than 14 partners interested in the Shared Vision Program, was held in Entebbe in October 2001\. Since that time, the SVP donor partners have been fully involved in the appraisal process and detailed implementation planning for each of the projects\. Similarly, donor partners have been involved with the early preparatory activities of the subsidiary action programs\. A planning meeting for ENSAP was held in February 2002 attended by several donors, and the African Development Bank has undertaken identification missions for three ENSAP projects\. A NELSAP implementation review meeting was held in Entebbe in September 2002\. Key donor partners participated in the meeting, where they re-confirmed their support to NELSAP\. Subsequently, they have remained active partners in the project preparation process\. Moving towards implementation\. Since 1997, the NBI has progressed from a phase of dialogue and political engagement to a phase of preparation of the Strategic Action Program\. Each phase has had unique and complex challenges\. Now, since ICCON, a new phase of partnership with a broader circle of the international community has begun\. There are many details regarding the implementation of the Strategic Action Program related to financing mechanisms, program management and coordination, and implementation arrangements, which have been under discussion\. The Nile riparians have welcomed the active and constructive engagement with the donor community in addressing these issues in ways that have promoted strong partnership yet ensured riparian ownership and direction of the process of Nile cooperation\. 89  Efficient Water Use for Agricultural Production Project Appraisal Document 90  Efficient Water Use for Agricultural Production Project Appraisal Document ANNEX 9: INTEGRATED SAFEGUARDS DATA SHEET Integrated Safeguards Data Sheet Section I ­ Basic Information Date ISDS Prepared/Updated: February 16, 2005 A\. Basic Project Data I\.A\.1\. Project Statistics COUNTRY: Nile Basin Initiative (Member PROJECT ID: PO 75946 Countries: Burundi, D\.R\. Congo, Egypt, Ethiopia, Kenya, Rwanda, Sudan, Tanzania, Uganda) PROJECT: Shared Vision Program (SVP) ­ TTL: IJsbrand Harko de Jong Efficient Water Use for Agricultural Production APPRAISAL DATE: April/May 2004 IBRD AMOUNT ($m): NA SECTOR DIRECTOR APPROVAL: June 2004 GRANT AMOUNT ($m): Nile Basin Trust Fund, $4\.83; (Total Amount (incl\. local) 5\.28 $ million) MANAGING UNIT: AFTNL SECTOR: Irrigation & Drainage, Agricultural Extension LENDING INSTRUMENTS: Grant STATUS: PAD I\.A\.2\. Project Objectives The objective of the Agriculture Project is to establish a forum to assist stakeholders at regional, national, and community levels to address issues related to efficient use of water for agricultural production in the Nile Basin\. The forum will foster exchange of experiences that will further Nile cooperation by enhancing mutual confidence and providing a critical building block to sustainable utilization of Nile waters\. In addition, it will provide an opportunity to develop a sound conceptual and practical basis for Nile riparian countries to increase the availability and efficient use of water for agricultural production\. I\.A\.3\. Project Description Component 1: Project Coordination and Facilitation This component covers activities related to the project management arrangements that facilitate regional cooperation and project implementation, the implementation of a rapid baseline assessment (RBA), and the preparation of the project work plan\. The two subcomponents are: Management Arrangements: including Project Steering Committee, Project Management Unit and the National Project Coordinators\. Project Planning Workshop and Rapid Baseline Assessment (rba)\. Component 2: Water Harvesting The water harvesting component will enhance dialogue and cooperation among regional, national and local stakeholders to explore the best indigenous and modern water harvesting practices, build regional and national capacity, and promote the exchange of experience between participating countries, with the objective of improving rainfed crop production and enhancing supplies for small-scale irrigation and domestic water needs, especially for poor rural communities\. The two subcomponents are: Regional consultation and training: aims at assisting stakeholders at the regional, national, and local levels to address the issues and needs identified in the country reports and the RBA, develop a common view on water harvesting best practices that are suitable for the Nile Basin environment, building regional and national capacities, and generate future activities for the NBI Subsidiary Action Programs and other NBI projects\. Exchange of experience and best practices, and basin-wide winning of institutions: based on criteria of potential water harvesting best practices and information from the RBA, appropriate best practice sites will be identified in the riparian countries and profiled by national practitioners\. A selected number of these sites will be targeted for visits by regional practitioners from riparian countries to exchange experience and share information on lessons learned on water harvesting techniques\. 91  Efficient Water Use for Agricultural Production Project Appraisal Document Component 3: Community-managed Irrigation This component offers an opportunity for decision makers, professional, farmers, private sector, and other stakeholders to enhance regional consultation with the objective of developing a clear understanding of the needs for the development of sustainable and effective community-managed irrigation schemes using low-cost water collection, water abstraction and irrigation technologies\. The two subcomponents are: Regional consultation and training: will assist stakeholders at the regional, national, and local levels to establish a forum that leads to the development of a shared vision on the issues and needs identified in the country reports and RBA for establishing sustainable community-managed irrigation systems using low-cost technologies and efficient water use best practices\. It will also generate activities for the Subsidiary Action Programs and other NBI projects, and build capacity for future cooperative implementation of related investment programs\. Exchange of experience and best practices, and basin-wide twinning of institutions: based on criteria of community-managed irrigation best practices and information from the RBA, appropriate best practice schemes will be identified in the riparian countries and profiled by national practitioners\. A selected number of these schemes will be targeted for visits by regional specialists from riparian countries to exchange experience and share information on lessons learned on community-managed irrigation schemes\. Study tours related to site visits for this sub-component will be preferably organized in conjunction with the water harvesting tours\. This subcomponent will also assist stakeholders in creating new partnerships among professional institutions, research centers, NGOs, and private organizations from various countries to advance community-managed irrigation for the benefit of Nile Basin communities\. Component 4: Public and Private-Managed Irrigation This component will establish a regional forum for the Nile countries to enhance the knowledge and understanding of the issues around public and private-managed irrigation systems, and to explore options for improving public and private- managed irrigation systems with participation of regional, national, and local stakeholders\. The two subcomponents are: Regional consultation and training: will establish the regional forum and promote dialogue and cooperation towards a common vision on tangible options for public and private-managed irrigation, and provide seminars and practical training courses to enhance capacity in areas related to public and private-related irrigation and future cooperative implementation of related Subsidiary Action Programs\. Exchange of experience and best practices, and basin-wide twinning of institutions: among the public and private-managed irrigation sites identified and profiled by national practitioners for best management and reform practices, priority locations will be selected for visits by regional specialists from riparian countries to exchange experience and share information on lessons learned on this topic\. One study tour will be organized in the Nile Basin and possibly another tour, outside the basin\. This subcomponent will also assist stakeholders to create a new network of cooperation and partnerships among professional institutions, research centers, NGOs, and private organizations from various countries to move forward positive reforms and improve the efficiency of public and private-managed irrigation systems for the benefit of the Nile Basin communities\. A roster of the regional institutions and research centers, NGOs, and private organizations will be prepared\. Opportunities for twinning to carry out joint activities, including organization of seminars, short courses, and future public and private-managed irrigation transboundary initiatives will be targeted\. Linkage will existing networks such as RELMA, ASARECA, SWMNet and others will be developed to enhance access to the knowledge and analytical work that is conducted in the Basin\. I\.A\.4\. Project Location: (Geographic location, information about the key environmental and social characteristics of the area and population likely to be affected, and proximity to any protected areas, or sites or critical natural habitats, or any other culturally or socially sensitive areas\.) The proposed project will have its headquarters in Kenya, and will be implemented in nine Nile riparian countries: Burundi, Democratic Republic of Congo, Egypt, Ethiopia, Kenya, Rwanda, Sudan, Tanzania, and Uganda\. B1\. Check Environmental Classification A [ ], B [ }, C [ x], FI [ ], TBD [ ] Comments: The project enhances transboundary cooperation, building capacity through a range of consultation and training and exchange of experience and best practices targeted at regional, national, and local stakeholders\. 92  Efficient Water Use for Agricultural Production Project Appraisal Document C\. Safeguard Policies Triggered Click on Policy name for brief summary of objectives, triggers and requirements Click on Policy reference number for full policy I\.C1\. Table on applicability Yes No TBD Environmental Assessment (OP/BP/GP 4\.01) [ ] [ x] [ ] Forestry (OP/GP 4\.36) [ ] [ x] [ ] Natural Habitats (OP/BP 4\.04) [ ] [ x] [ ] Safety of Dams (OP/BP 4\.37) [ ] [ x] [ ] Pest Management (OP 4\.09) [ ] [ x] [ ] Involuntary Resettlement (OD 4\.30) [ ] [ x] [ ] Indigenous Peoples (OD 4\.20) [ ] [ x] [ ] Cultural Property (OPN 11\.03) [ ] [ x] [ ] Projects in Disputed Areas (OP/BP/GP 7\.60)* [ ] [ x] [ ] Projects on International Waterways (OP/BP/GP 7\.50) [ ] [ x] [ ] Section II ­ Key Safeguard Issues and Their Management II\.D\. Summary of Key Safeguard Issues\. Please fill in all relevant questions\. If information is not available, describe steps to be taken to obtain necessary data\. II\.D\.1a\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts\. There are no anticipated safeguard issues associated with the project\. II\.D\.1b\. Describe any potential cumulative impacts due to application of more than one safeguard policy or due to multiple project component\. Not applicable\. II\.D\.1c Describe any potential long term impacts due to anticipated future activities in the project area\. There are no safeguards issues associated with the project\. The project will enhance the capacity of water professionals throughout the Nile Basin through regional dialogues and exchange of experience and best practices in key issues of agricultural production\. II\.D\.2\. In light of 1, describe the proposed treatment of alternatives (if required) Not applicable\. II\.D\.3\. Describe arrangement for the borrower to address safeguard issues\. This project does not have any safeguard issues\. II\.D\.4\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. There are no safeguards related specific disclosure requirements associated with the project\. As the NBI is committed to demonstrate "good practice" from the start, the Basin countries are aiming to increase stakeholder involvement in the NBI and reach out to the public through the implementation of the Shared Vision Program (SVP)\. The preparation of the SVP (the Efficient Water Use for Agricultural Production is one of eight projects comprising the SVP) has so far exhibited an exemplary multi-country and multi-sectoral participatory process led by the Nile-COM and the Nile-TAC and executed by the Nile-SEC with involvement of more than 70 national experts from nine riparian countries\. This policy, regional, and national participatory action will be further broadened in the coordination and implementation mechanisms of the Agriculture Project *By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 93  Efficient Water Use for Agricultural Production Project Appraisal Document E\. Safeguards Classification (select one)\. Category is determined by the highest impact in any policy\. Or on basis of cumulative impacts from multiple safeguards\. Whenever an individual safeguard policy is triggered the provisions of that policy apply\. [ ] S1\. ­ Significant, cumulative and/or irreversible impacts; or significant technical and institutional risks in management of one or more safeguard areas [ ] S2\. ­ One or more safeguard policies are triggered, but effects are limited in their impact and are technically and institutionally manageable [x ] S3\. ­ No safeguard issues [ ] SF ­ Financial intermediary projects, social development funds, community driven development or similar projects which require a safeguard framework or programmatic approach to address safeguard issues\. F\. Disclosure Requirements Expected Date Actual Date Environmental Assessment/Analysis/Management Plan: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors N/A Resettlement Action Plan/Framework: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A Indigenous Peoples Development Plan/Framework: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A Pest Management Plan: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A Dam Safety Management Plan: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A If in-country disclosure of any of the above documents is not expected, please explain why\. 94

APPROVAL

P000327

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 3507 PROJECT PERFORMANCE AUDIT REPORT CAMEROON NIETE RUBBER ESTATE PROJECT (CREDIT 574-CM) June 22, 1981 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. ABBREVIATIONS EIB European Investment Bank CCCE Caisse Centrale de Cooperation Economique (France) (Central Bank for Economic Cooperation) CDC (CAMDEV) Cameroon Development Corporation CDC (COMDEV) Commonwealth Development Corporation (UK) ENSA Ecole Nationale Superieure Agronomique (Higher National School of Agronomy) FAC Fonds D'aide et de coop6ration (France) EDF European Development Fund HEVECAM SociEt6 H6v&a-Cameroun IDA International Development Association IRA Institut de recherches agronomiques (Agronomical Research Institute) IRCA Institut de recherches sur le caoutchouc (Rubber Research Institute) PAMOL Societe PAMOL de Cameroun (Unilever Group) PCR Project Completion Report SAFACAM Soci6t6 Africaine Forestilre et Agricole Cameroun (African Forestry and Agricultural Company, Cameroon) SAR Staff Appraisal Report SATET Soci6tC Africaine de travaux et d'studes topographiques (African Company for Topographical Works and Studies) SEDA Soci6t6 d'Etude pour le d6veloppement de l'Afrique (Research Company for the Development of Africa) SOCAPALM Soci6t6 camerounaise de Palmeraies (Cameroonian Oil Palm Plantation Company) SPFS Soci6t6 des plantations de la ferme suisse SPROA Soci6t6 des plantations r6unies de l'Ouest Africain (United West African Plantations Company) WEIGHTS AND MEASURES 1 kilometer (km) = 0\.621 miles 1 hectare (ha) = 2\.471 acres 1 kilogram (kg) = 2\.205 pounds 1 metric ton (t) = 0\.984 long ton 1 kilowatt (kW) = 1\.360 cheval-vapeur (CV) or = 1\.341 horsepower (hp) FISCAL YEAR Government and HEVECAM - July 1 to June 30  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT CAMEROON NIETE RUBBER ESTATE PROJECT (CREDIT 574-CM) TABLE OF CONTENTS Page No\. Preface \. i Project Performance Audit Basic Data Sheet \. ii Highlights \. \. \. \. \. \. iv PROJECT PERFORMANCE AUDIT MEMORANDUM I\. SUMMARY \. 1 II\. MAIN ISSUES \. \. 4 A\. Turnover of the Labor Force \. 4 B\. Foodcrop Production \. \. 6 C\. Salvage Logging \. 7 D\. The Indigenous Forest-Dwelling Minorities \. 8 ATTACHMENT: PROJECT COMPLETION REPORT I\. INTRODUCTION\. \. \. 10 II\. IDENTIFICATION, PREPARATION AND APPRAISAL OF THE PROJECT\. \. 19 III\. EXECUTION \. 32 IV\. PROJECT COSTS AND FINANCING\. 42 V\. ECONOMIC RATE OF RETURN \. 45 Annexes 1-161/ IDA OVERVIEW OF THE HEVECAM PROJECT COMPLETION REPORT INTRODUCTION\. * \. 68 SUMMARY\. \. 68 IMPLEMENTATION\. 69 COMMENTARY\. #\. 69 1/ The West Africa Regional Office has excluded some of the material from the original PCR\. The material so excluded does not contribute to the main thrust and emphasis of the PCR\. This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. C s - 1 - PROJECT PERFORMANCE AUDIT REPORT CAMEROON NIETE RUBBER ESTATE PROJECT (CREDIT 574-CM) PREFACE This is a performance audit of the Niete Rubber Estate Project in the United Republic of Cameroon for which Credit 574-CM was approved in July 1975 in the sum of US$16 million\. The final disbursement in respect of this loan was made on March 13, 1980\. The audit report consists of an audit memorandum prepared by the Operations Evaluation Department and a Project Completion Report (PCR) dated March 31, 1980\. The PCR was prepared by the Project Executing Agency; the IDA Overview was prepared by the Western Africa Regional Office\. The audit memorandum is based on a review of the Appraisal Report (No\. 716a-CM) dated May 20, 1975, the President-s Report (P1615-CM) dated May 21, 1974, the Development Credit Agreement dated July 30, 1975, the Staff Appraisal Report of the follow-on HEVECAM II Project (2661-CM) of December 10, 1979, and the PCR\. Internal Bank memoranda on project issues as contained in relevant Bank files have also been consulted, and Bank staff associated with the project have been interviewed\. An OED mission visited Cameroon in February 1981\. The mission held discussions with officials of the Ministry of Agriculture and the project authority (HEVECAM: Societe de Hevea; - Cameroon)\. The information obtained during that mission was used to test the validity of the conclusions of the PCR and of the IDA Overview\. The audit finds that the PCR and the IDA Overview together cover adequately the project-s salient features and the PPAM generally agrees with their conclusions\. In addition to summarizing the objectives and results of the project, the PPAM expands upon the discussion of the high labor turnover and the problems of foodcrop production\. The draft audit report was sent to the Government of the United Repolic of the Cameroon and to the project executing agency on April 22, 1981\. No comments were received from either\. A copy was also sent to the CCCE; they advised that they had no observations to make\. The valuable assistance provided by the Government of the United Republic of Cameroon and the staff of HEVECAM met during the preparation of this report is gratefully acknowledged\.  - ii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET CAMEROON NIETE RUBBER ESTATE PROJECT (CREDIT 574-CM) KEY PROJECT DATA Appraisal Actual or Expectation Current Estimate Total Project Cost (US$ million) 28\.5 30\.3a Cost Overrun (%) - 6 Credit Amount (US$ million) 16 16\.1a Disbursed ) 16 Cancelled )-- Raeaid January 31, 1981 Repaid)-- Outstanding ) 16 Exchange Adjustment Borrowers Obligation (US$ million) - 16 Date Physical Components Completed 06/30/80 /b Proportion Completed by Target Date - /b Delay (% Time Overrun) -b Economic Rate of Return 14/c 11\.9 Cumulative Estimated and Actual Disbursements (US$ Million) FY76 FY77 FY78 FY79 FY80 Appraisal Estimate 1\.5 4\.0 7\.5 11\.8 16\.0 Actual 0\.7 3\.3 7\.0 13\.8 16\.0 Actual as % of Estimate 47 83 93 117 100 OTHER PROJECT DATA Original Actual or Plan Revisions Est\. Actual First Mention in Files - - 02/71 Negotiations 05/75 - 05/75 Board Approval 05/20/75 - 05/20/75 Effective Date 12/01/75 - 12/01/75 Closing Date 12/31/80 - 06/30/80 Borrower United Republic of Cameroon (Republique Unie du Cameroun) Co-financier Caisse Centrale de Cooperacion Economique Executing Agency Societe Hevea - Cameroun (HEVECAM) Follow-on Project Name Second Hevecam Rubber Project Loan/Credit No\. Ln 1791-CM and Cr 975-CM Loan/Credit Agreement Date April 18, 1980 Loan Amount ) US$15 million US$31\.5 million Credit Amount ) US$16\.5 million ) /a Includes pre-financing US$0\.9 million from follow-on project (Cr 975-CM and Ln 1791-CM) and US$0\.3 million from Cr 673-CM\. /b Reduced targets completed by November 12, 1979\. By June 30, 1980, financed by follow-on project, 94% of original targets were achieved\. /c Assuming the full 15,000 ha will be planted which the follow-on project will assure\.  - iii - MISSION DATA Sent Month/ No\. of No\. of Man- Report Item by Year Weeks Persons weeks Date Identification Bank 04/73 0\.5 2 1 05/10/73 Preparation I Bank 04/74 0\.3 3 1/a 05/17/74 Preparation II Bank 10/74 1 1 1 11/74 Appraisal Bank 12/74 4 4 16 05/20/75 Total 19 Supervision I Bank 10/75 2 1 2 12/05/75 Supervision II Bank 10/76 1 1 1 11/24/76 Supervision III Bank 06/77 1 2 2 07/15/77 Supervision IV Bank 02/78 1 2 2 03/30/78 Supervision V Bank 10/78 1 2 2 12/01/78 Supervision VI Bank 04/79 0\.6 3 2 06/25/79 Supervision VII Bank 03/80 2 1 2 03/27/80 Total 13 Project Completion Report prepared by project executing agency\. COUNTRY EXCHANGE RATES Country Currency: Franc de la Communaute- Financiere Africain (CFAF or F\.CFA) CFAF 50 = FF1 (tied exchange rate) During the disbursement period, the rate to the US$ varied between 204 and 249\. At appraisal US$1 = 225 During disbursement (average) US$1 = 227 Completion US$1 = 246 /a Bank staff time\.  - iv - PROJECT PERFORMANCE AUDIT REPORT CAMEROON NIETE RUBBER ESTATE PROJECT (CREDIT 574-CM) HIGHLIGHTS The credit was granted to support the first 5,800 ha tranche of establishing a 15,000 ha rubber estate in the south-western, rain-forest area of the United Republic of Cameroon (Republic Unie de Cameroun) and to finance the preparation of a master plan for the proposed development of the south- western province of the country\. As the area was only sparsely inhabited, housing as well as health, communal and social facilities had to be provided as part of the project\. The project was financed by an IDA credit of US$16 million equivalent and a loan of French Francs (FF) 20 million (approximately US$4\.4 million) granted by the Caisse Central de Cooperacion Economique (CCCE) the French Government's foreign aid agency\. Owing to higher-than-expected price escalation and technical prob- lems that necessitated employment of the costlier solutions, the original funds permitted only planting about 4,200 ha, or 72% of the area planned\. Health, communal and social facilities were provided only for the area planted\. The Master Plan was prepared in draft, for Government and Bank review\. A follow-on project, in which the Bank, CCCE and the Commonwealth Development Corporation (CDC) of the United Kingdom are participating, will bring the estate to 13,500 ha\. A third project is expected to finance the completion of the entire 15,000 ha and the latex processing facilities\. The economic rate of return of the project was estimated, in 1975, to be about 14%\. The present re-estimate, allowing for higher costs but also significantly higher price (in real terms) of rubber is about 12%\. The following points are of special interest: - the high labor turnover may jeopardize efficient operations of the estate (PPAM paras\. 12-18, PCR para\. 3\.05 and Annex 13 Tables 3 to 6); - problems of subsistence food production by the labor force (PPAM paras\. 19-20); - existing timber resources were not fully utilized during clear- ing operations (PPAM para\. 21); - high quality assistance rendered by the Bank-s rubber special- ists, especially in the early stages in project execution (PPAM para\. 9); and - problems of indigenous forest dwellers due to envisaged develop- ment schemes investigated under Bank financed Regional Master Plan (PCR para\. 22-24)\. O' ek PROJECT PERFORMANCE AUDIT MEMORANDUM CAMEROON NIETE RUBBER ESTATE PROJECT (CREDIT 574-CM) I\. SUMMARY1' 1\. The project represented a segment of the proposed development of the southwestern corner of the United Republic of Cameroon (Republique Unie du Cameroun)\. Its objective was to develop 5,800 ha of a proposed 15,000 ha rubber estate and to finance the preparation of a master plan for the develop- ment of the entire southwestern, tropical rainforest region of the country\. Information at hand in 1974 justified proceeding with the first rubber estate even before formulating the regional plan\. The Bank, and the the co-financier (Caisse Centrale de Cooperation Economique, - CCCE, - of France) indicated to the Cameroonian Government at the time of project appraisal that, if circum- stances should permit at the appropriate time, they would continue their assistance for the full development of the 15,000 ha Niete Estate, including processing facilities\. This point was reached in 1980 when together with the Commonwealth Development Corporation (CDC) of the United Kingdom, the Bank and CCCE formally participated in what is known as the Second HEVECAM Rubber Proj- ect\. This second project, inter alia, aims to develop a total of 13,500 ha of the eventual 15,000 ha plantation envisaged in the first project, finance the first tranche of facilities to process the output of earlier plantings, and the completion of the regional master plan\. The remaining 1,500 ha planta- tion, and processing facilities to handle the estate-s designed peak produc- tion, would be financed by a third project, due to be appraised in 1983/84\. Consequently, the cautious attitude of the appraisal report which endeavored to evaluate the economics of the first project if only 5,800 ha were to be planted, is no longer relevant\. 2\. The Niete Project is under its own autonomous management by a cor- poration specially created for the purpose: Societe Hevea Cameroun - HEVECAM, which, more descriptively than "Niete Estate", gave its name to the second project\. 3\. The first project, the subject of this Audit Report, was estimated to cost US$28\.5 million\. As noted, it aimed to establish a 5,800 ha rubber plantation, a supporting road network, housing and medical services for 3,000 of the 7,500 worker families who would eventually live on the estate and for the management staff of 38 persons\. Rubber tree nurseries; an adaptive re- search area to test different rubber clones and their response to alternative cultural practices, including planting methods; and clearing a further 1,700 ha to continue expanding the plantation, were included\. The Societe Africain Forestiere et Agricole Cameroun - SAFACAM, who are also the managing agency of 1/ Adapted from "IDA Overview of the HEVECAM Completion Report"\. - 2 - HEVECAM, participated in the preparation of a master plan for Ocean Depart- ment, which is part of the south-west region\. SAFACAM is a wholly-owned subsidiary of a well-known French plantation and research corporation with extensive interests and experience in many parts of the world, including the Far East\. Production would not start until trees are at least six years old, i\.e\., at least two years after project completion, and would peak 12 years later when the trees are between 18 and 34 years old\. The project was fi- nanced by an IDA credit of US$16 million equivalent and by a loan of about US$4\.4 million by CCCE (denominated in French Francs; FF20 million)\. The United Republic of Cameroon would contribute US$8\.1 million equivalent\. 4\. Because the project would not produce any income for several years and would not show a positive cash flow for at least 10 years, rubber price projections prepared by the Bank-s economic staff had to be applied to cal- culate project benefits\. Compared to 1975 when the project was appraised, the latest price forecasts are higher because of higher crude oil prices!/\. Therefore, despite considerable cost overruns (see para\. 6 below), the eco- nomic rate of return for the entire 15,000 ha estate is now estimated to be 11\.9% (para\. 10) compared to 14% at appraisal\. 5\. Project execution by HEVECAM has been assisted by expatriate per- sonnel seconded from SAFACAM\. Profitable exploitation of the plantations will depend on the ability to recruit, train and, - most importantly, - keep a skilled and motivated labor force; the number and permanence of skilled tappers being the most crucial\. This risk was recognized at project apprai- sal, and therefore adequate housing, schools, shops, social and recreational facilities, health services and the growing of food crops by the laborers' families were either included in the project or planned as items to be pro- vided during the subsequent expansion of the community\. 6\. Project costs exceeded appraisal estimates\. The Bank, CCCE, the Government of Cameroon and the fourth partner in the follow-on project, the CDC (see para\. 1) eventually agreed to the following adjustments: Appraisal Revised Targets Estimates and Attainments area to be planted (ha) 5,800 4,206 families to be housed 3,000 2,631 date to achieve the above 06/30/80 11/12/79 costs of plantation-a CFAF 6140M CFAF 6547M (US$27\.3 M) (US$29\.1 M) /a Excluding cost of Master Plan\. 1/ Crude oil is the raw material used in synthetic rubber production - the main competitor of natural rubber\. - 3 - 7\. The project was financed as follows (in US$M): Appraisal Estimate/a Actual IDA Credit 574 15\.3 15\.3 IDA Credit 673 - 0\.313 CCCE 4\.2 4\.4L1 Hevecam II project/d - 0\.9 (CFAF 204 M) Government of Cameroon 7\.8 8\.2 Total 27\.3 29\.1 /a Excluding cost of Master Plan\. /b A technical assistance credit, approved on June 15, 1977\. /c Increase, in terms of US$, due to changes in the exchange rates\. /d Out of CDC's contribution\. 8\. The reasons for the extra costs, apart from the fact that price escalation exceeded the estimated 13\.2% price contingencies, were as follows: (a) Social amenities for the labor force had to be considerably in- creased, partly at the initiative of REVECAM and partly by Govern- ment-s decision\. (b) The middle management cadre had to be increased, to train Cam- eroonian staff for the management of this and future estates\. (c) There were unexpected problems and higher costs in plantation development - by far the most costly factor\. These were: (i) The condition of all roads; within the estate and to Kribi, the town where the access road branches off from the main highway, predicated the purchase of more and, mainly, more expensive vehicles: four-wheel drive personnel carriers and larger trucks\. (ii) Land clearing had to be fully mechanized, partly due to labor shortages and partly because all trees and stumps had to be windrowed and burnt as a preventive disease control measure\. This meant purchasing and operating more heavy equipment than estimated\. (iii) Of the three planting methods envisaged at appraisal, the only one giving acceptable rates of establishment: plants raised in polybags, was the most expensive\. 9\. An outstanding feature of project implementation was the close technical coordination and constant exchange of ideas between HEVECAM, SAFACAM and experts from the Bank\. This cooperation has clearly helped in problem solving and contributed to the containment of cost overruns\. 10\. Based on appraisal production forecasts, since corroborated by yields currently bein obtained in nearby estates from the same clones that HEVECAM has planted,1 the economic rate of return for the 4,200 ha is esti- mated at about 7\.5%; on the 13,500 ha, which is the area of the combined first and second project, the ERR is estimated at 11\.3%\. Combining it with the expected third phase of 1,500 ha, which would complete the planned total of 15,000 ha, the ERR is expected to be 11\.9%\. However, the following additional factors need to be considered, pointing to possibly larger overall benefits from the entire scheme on its completion than those reflected in the re-esti- mates of rates of return: (a) the ERR calculations allow no residual value for the trees at the end of their useful life\. This is considerable, whether for fuel- wood or for further processing, the technology for which is rapidly developing; (b) replanting, when the trees reach the end of their economic life, will cost only a fraction of the original planting costs\. 11\. The Master Plan for the south-west zone has been completed according to appraisal estimates and within estimated costs\. The final draft was available by the end of June 1980\. II\. MAIN ISSUES A\. Turnover of the Labor Force 12\. The major problem of the project is undoubtedly the very rapid turnover of labor\. Rubber tapping is a highly skilled operation, the quality of which not only determines annual yields, but, more importantly, the useful life of the tree\. A rapidly changing labor force cannot, and would not have the interest to apply the necessary skills\. Past records of labor turnover are disappointing, as shown in the following table: Table 1 Jan\. 1 Dec\. 31 Increase Engaged Left or dismissed 1977 463 918 455 1,123 668 1978 918 1,520 602 2,222 1,620 1979 1,520 2,040 520 2,884 2,364 1980 2,040 2,242 202 1,902 1,700 Source: HEVECAM annual reports\. 1/ In view of the high labor turnover, from which it follows that many tappers may not be well trained and fully skilled (paras\. 12-18), CPS thinks that while yields in the early years may reach the levels assumed (PCR Annex 10, Tables 1 and 2), the possibility of lower peak yields and earlier decline in production is not to be overlooked\. However, to solve or at least to alleviate the problem, the Region is considering the ini- tiation of a study into the causes and remedies of high labor turnover\. - 5 - 13\. The ethnic composition of the labor force is, as can be expected in a country with numerous tribes, mixed\. Original expectations at the time of project appraisal, that the major part of the labor would come from the northern savannah areas where the population is underemployed, have not materialized; only 2% are ethnic northerners\. This expectation proved to be unrealistic since no precedent existed of savannah people settling in rain forests of the coast\. At present, 82% of the workers come from the north-west and center of the country\. The plantation has no difficulties in attracting them; - only in keeping them\. However, there are no records on the average length of a laborer's employment\. 14\. The personnel officer of the estate advised the mission that most unmarried men remain for a short time only; married laborers with families tend to settle more permanently\. While undoubtedly correct, no records exist to substantiate the statement\. Based on this experience the outlook for a more permanent force appears to be gloomy since to date the estate attracted only 28% married laborers, thereby implying substantial labor movements in the future\. 15\. Facilities provided by the project include villages in various parts of the estate\. They are about 4-5 km apart\. Unfortunately, the estate management did not consult a professional planner or architect, - who in a developing country, needs to be supported by a professional social anthropo- logist, - in the design of the houses and, perhaps more importantly, the siting and layout of the villages\. At present, housing units are blocks of three family or six bachelor dwellings\. No attempt has been made to create ethnically homogeneous communities: management believes that all laborers, including their wives, speak sufficient French to communicate freely\. How- ever, even if there is no language barrier, ignoring the strong ties of ethnic origin and a common background has probably been a mistake\. Moreover, no management staff actually reside in the workers' villages, even though each village has a "chief" who is a HEVECAM staff member\. All these measures are not conducive to establishing a community spirit, which would be necessary to make laborers "feel at home" at the plantation\. On the positive side, villages have good medical and educational facilities (there are 26 teachers for 637 pupils, a 1 to 25 ratio); drinking water is readily available, and all who want one are given a garden\. Shopping facilities consist of an "economat" run by the estate where basic food and household commodities are available at cost and of privately operated shops for a great variety of other goods\. The village has electric street lights but no electricity is provided to the houses\. The probable effects of house electricity have not been examined; it would certainly be very costly to install, and few other estates provide it\. 16\. A rubber and oil palm estate, situated close to Douala, - the largest city in Cameroon, - and established in its present form some 25 years ago, provides the same facilities as Niete\. Moreover, the majority of its labor force is of local origin\. Yet, in 1980, they had a 35% labor turnover\. - 6 - There, too, the bachelors do not stay long: they regard work on the estate as a staging post to more attractive jobs in Douala\. This estate runs a school for tappers but is nevertheless concerned about the effect of the transient labor force on eventual yields and the useful life of the trees\. 17\. The appraisal report expected labor recruitment to be helped "\.as satisfied workers begin to write relatives in their home villages\." (Annex 2 para\. 11)\. Yet, there is no post office on the estate and no postage stamps are available in the village shops\. With the relatively high literacy rates evidently anticipated, this omission may well exacerbate a sense of isolation\. 18\. It is unquestionably vital to determine whaL would be the appro- priate incentives to attract more permanent - which appears to be synonymous with more married - laborers to the estate\. Neither in the appraisal report nor in the course of subsequent supervision missions was it considered neces- sary to call upon a social anthropologist to examine the problem, despite the fact that most missions flagged it as a cause for concern\. Since the Bank continues to disburse in its follow-on project for villages and social facili- ties, it would appear essential to identify the underlying causes and, if possible, introduce remedial measures even at this late stage\. B\. Foodcrop Production 19\. The regular and cheap supply of bulky staple foods - plantains, cassava, and the different kinds of yams - was rightly considered an important labor-stabilizing factor\. One project component was to support foodcrop pro- duction\. Originally, it was expected that most of the laborers would be ethnic northerners (para 13)\. Since the northerners' principal food is cereals (as opposed to tubers and rootcrops, the preferred starchy food of the forest-dwelling southerners\.), project management has decided to invest in the mechanized growing of rainfed and swamp rice\. This venture, which was to be carried out on land not suitable for rubber, was soon abandoned, but not until after a combine harvester and a rice drier were purchased; both are now unused and unsaleable \. The venture should never have been started; there was no practical evidence that it could succeed: the terrain allocated was not suitable for mechanized rice production\. The policy adopted now is to support village "gardens": allocating plots of land to workers who wish to grow foodcrops\. Planting material of plantains and maize and groundnut seeds are distributed\. However, cassava, the most widespread and popular food crop, has not received any attention: infestation with the mosaic virus is widespread and cultural practices observed by the mission leave much to be desired\. Neither the project authority nor the Ministry of Agriculture provide advice to villagers on crop husbandry\. This is all the more to be regretted because, owing to the soil conditions of the Niete estate, additional skill and atten- tion is required to attain yields of foodcrops that compare to those the laborers have obtained, with less effort, in their home areas\. Also, in some cases, garden plots are some distance from the villages, thereby receiving less attention by owners due to excessive time required in reaching them\. The appraisal report correctly foresaw the need for specialized research and -7- extension assistancel/ and included an adviser on foodcrops on the consul- tant's team\. There is little indication that he was effective and the lack of his achievements was never highlighted in supervision reports\.2 20\. Without a socio-economic study, it is difficult to be definite whether these factors exert any significant influence on labor turnover, but based on experience gained elsewhere, it cannot be ruled out\. The manager of a nearby oilpalm estate believes that foodcrop gardens are important, and attributes his own labor problems, which are worse than those of the Niete estate, to the lack of village gardens\. C\. Salvage Logging 21\. Much of the valuable timber was lost when clearing the forest prior to planting\. Concessionaires were expected to extract all usable timber, starting about a year before the area was due to be cleared\. HEVECAM did not and does not have the right to extract any of the trees, even for its own use\. In practice, the concessionaires were frequently unable to remove all timber on time and did not find it profitable to fell some of the more inaccessible trees\. By the time the second project was appraised (March/ April 1979) it was obvious that much timber was wasted\. According to the Staff Appraisal Report of the second project (para\. 2\.08), about 16m3 per ha would pay for the full cost of land clearing\. Yet, the wasteful process continues\. Under present legislation and ordinances, only the principal timber concessionary, Exploitant Forestiere, is allowed to cut and market the trees\. Physically, HEVECAM would be able to cut the trees and prepare them for sale and, there- fore, the question has to be raised whether stronger representations on the Bank's part would not have helped in better utilizing this important national asset by overcoming the legal barriers\.3/ 1/ The appraisal mission has based its assessment on the generally poor performance of the traditional forest-belt foodcrops and the lack of any well-tested and proven recommendations from the research stations on how to increase yields and production\. 2/ The Region states that "the performance of the food crop advisor was discussed with project management and staff changes were made\." How- ever, perhaps it was too optimistic to expect, at appraisal, that one expert can materially influence the situation (see footnote 1/ above)\. 3/ On this issue, the Region advises as follows: "though not specifically stated in the various supervision reports, the problem of logging \. had been discussed with the Ministry of Agriculture, HEVECAM and CAMDEV\. On April 22, 1980 the Bank requested that action be taken to allow the agro-industrial estates to extract timber from their concessions and on February 13, 1981 the Minister of Economy and Plan has given his approval\." - 8 - D\. The Indigenous Forest-Dwelling Minorities 22\. The Pygmies\. In connection with the preparation of the Master Plan, the appraisal report of the project under review (see para\. 3\.09) and the Staff Appraisal Report of the second project (see para\. 2\.03) suggest some problems that may arise in integrating the pygmies into regional development\. The agreed work program of the Master Plan study contains provisions that the interests of the indigenous minorities will be duly considered (Section 3\.05(a) of the Development Credit Agreement)\. 23\. There are an estimated 3,000 to 5,000 pygmies in the area covered by the Master Plan\. The provincial administration recognizes the problem: they believe it arises partly out of the pygmies unwillingness to change their present lifestyle, made more profitable and rewarding by illegal shooting of elephants for ivory, and partly from the reluctance of other groups, local and immigrant, to accept them as equals\. However, the aud:t mission was informed of a successful effort of integration recently completed in the south-eastern provinces, helped considerably by efforts of missionary groups\. 24\. The fishermen, also numbering about 5,000, despite their less flexible lifestyle, present fewer problems, as their habitat is likely to be affected only to a minor extent, and their contact with other outside people is much more developed than that of the pygmies\. One group, who live on the Niete estate, have been successfully resettled from potential rubber land and are able to follow their former lifestyle\. While not offering themselves for permanent employment, they form a useful reservoir for short- term tasks which they appear willing to undertake\. As with the pygmies, their interests and further development should continue to engage the Bank's attention\. -9- UNITED REPUBLIC OF CAMEROON MINISTRY OF AGRICULTURE MINISTRY OF ECONOMIC AFFAIRS AND PLANNING Societe Hevea-Cameroun (HEVECAM) Development Corporation Capital: CFAF 9,506,120,000 Headquarters: Kribi Ocean Department United Republic of Cameroon PROJECT COMPLETION REPORT ON THE NIETE RUBBER ESTATE PROJECT International Development Association Credit and Project Agreements No\. 574-CM Credit Agreement of the Caisse Centrale de Cooperation Economique No\. 58 31 00 75 04 0 Financing Agreement between the United Republic of Cameroon and Hevecam dated September 29, 1975 Douala, March 31, 1980 - 10 - L IN TROD U C TIO N 1\.01 Suitability of the coastal rezion for Derennial crc Ds The coastal region of Cameroon is suitable for perennial crops such as oilpalm, coconut and rubber as a result of the existence of areas below 300 m in elevation\. having high humidity, over 2,000 hours of sunshine a year, ferrallitic soils, and rainfall above 1,800 mm a year without any months of inadequate precipitation\. 1\.02 Situation in 1960/61 (a) When Cameroon became independent there were five groups of planta- tions in the coastal zone (the present South-West and Littoral provinces): C AM D EV: oil palm, rubber, tea, bananas, pepper and cocoa (South- W est) PAM 0L: oil palm and rubber (South-W est) SO C FIN OL: oil palm (Littoral) SP R 0 A: oil palm (Littoral) SAFACAM: rubber (Littoral) The first group was a "Statutory Corporation" of the Federation of Nigeria\. The other four groups were entirely private\. A sixth private family plantation (Colinet plantation) existed in the Eastern region (now province), producing rubber\. (b) A program of rubber development on family plantations had been started, chiefly in the Eastern province, during the Second World War, but like many "war effort" activities, it did not last long after the return to normal economic conditions\. In the 1950s the colonial authorities introduced an oil palm rehabi- litation program in the Littoral province, with three main features: - rationalizing the collection of the fruit of the natural palm groves (including creation and rehabilitation of access tracks), - processing of production, - establishing oil palm plantations using selected planting materiaL The oil mills at Edea and Dibombari were constructed at this time with public funds\. Their management was entrusted to two private groups with plantations nearby, under agreements between France, the owner of the oil mills, and the groups concerned: SPROA at Edea and SOCFINOL at Dibombari\. Management of the latter was subsequently transferred to the local Societe Africaine de Prevoyance; it was eventually closed in 1963 as a result of disastrous administration\. The Edea oil mill was later handed over to SOCAPALM by the - 11 - State of Cameroon (successor to France)\. These two oil mills experienced many operat-ng difficulties as a result of inadequate supplies of fruit: the low oil content (10% at most) of the fruit of the wild palms and the dispersion of production (high collection costs) compelled processors to offer purchase prices that the producers considered hardly remu- nerative; this made them reluctant to hand over their crop, much of which was processed using traditional (small-scale) methods\. - the modern plantations introduced by the authorities on a family smallholding basis by a specialized semi-public organization, SEM- MARITIME, were poorly maintained by their owners; output from these plantations was therefore unable to compensate for the declining yield from the wild palms\. (c) At the time of independence the oil palm and rubber plantation sector was in a poor state: the industrial plantations were ageing and there was little or no interest among smallholders in the establishment of improved plantations\. 1\.03 Development strategy for perennial crops Given this situation the Government of Cameroon decided to submit for the approval of the National Assembly a program whose principal aim was to develop industrial plantations under various successive five-year plans, with the dual purpose of: - rapidly increasing national output; and - demonstrating to smallholders the advantages to be derived from using the im proved planting material\. Now that a certain number of industrial plantations have been es- tablished, the Government systematically includes a smallholder component in any new oil palm and rubber development project\. The evolution of this strategy is reflected in the description of projects for which the Government has requested external financial assistance\. (Annex I of French text, retained on file)\. 1\.04 The Development Corporations Achievement of the short, medium and long-term goals contained in the Economic, Social and Cultural Development Plan requires a massive and constantly increasing investment of public, semi-public and private capital\. From the second Plan onwards, the State was faced with the need to define a legal structure enabling such capital to be invested in a simple, flexible and effective way\. Law No\. 68/LF/9 on Development Corporations was therefore submitted to and approved by the National Assembly and promulgated on June 11, 1968\. The Development Corporations have the following characteristics: - they help to execute the Plan, - 12 - - they make possible participation by the State and/or public entities and/or public enterprises and/or the private sector; - they are commercial corporations governed, except as otherwise sti- pulated in their statutes, by the provisions applicable to stock com- panies at their headquarters; - they are established by a decree approving their statutes, and any subsequent amendments to those statutes are also approved by decree; - they are eligible for the various schemes contaLned in the Investment C ode; - they are under State supervision: through a Government Commissioner appointed by decree, who: receives his instructions from and reports to the Supervisory Minister for the corporation concerned and attends general meet- ings and meetings of the Board of Directors; has a te mporar-\. veto power over decisions in cases where 50% or more of the capital is held by the State, pu'lic entities and public enterprises, or the right to express reservations where less than 50% of the capital is so held; these powers are valid for only one session and lose all effect if the Supervisory Minister does not request a review of the question within 15 days\. at the auditing level, through the Directorate-General of State Supervision\. 1\.05 Brief description cf the Project The Project as negotiated in 1975 contained two components: - the frst component, hereafter referred to as the "Estate Projects", consisted in selecting and planting 5,800 ha with rubber between 1975/76 and 1979/80, preparing a further 1,700 ha for planting in 1980/81, and constructing housing and other facilities for workers, the factory and the VRDs 1/, as well as the network of roads and tracks serving the complex; - the second component, hereafter called the "Master Plan", concerns the preparation of a Master Plan for the Kribi region with the emphasis on the production of perennial crops\. The Estate Project was executed by HEVECAM (cf\. section 1\.07) and the studies for the Master Plan are being carried out by SEDA\. 1\.06 Geographical location of the Project The Project was executed in the northern part of a rural area of 1/ VRD = Roads and Bridges\. - 13 - "0\.000 ha\. 25 km from the town and port of K 'bi\. a municiaky in the Ocean department in the South-Central province; this area is located to the south of the Kribi-Ebolowa road\. from which it is separated by a corridor 20km long between Angale and Elon reserved for the development of food crops\. The area was classified as "collective national endowment" by Decree No\. 74/615 of July 2, 1974, which also authorized its addition to the capital of the development corporation which was designated to execute the Project\. The boundaries of the area were amended by Decree 76/403 of February 17, 1976, but the figure of 40,000 ha remained unchanged\. Map 2 shows the boundaries as established by Decree 76/403\. 1\.07 Negotiation and Project financing (a) Negotiations Negotiations for financing the Project took place at World Bank headquarters in Washington between April 28 and May 7, 1975, the participants being representatives of the World Bank, CCCE and the Republic of Cameroon\. The delegation from Cameroon included (in addition to Government represent- atives) two representatives of SAFAC AM which had been asked by the Government to prepare the feasibility study and to provide technical assistance to the Project in the areas of know-how, management, recruitment of personnel, and training\. (b) Project costs and participation in the financing The cost of the Project was estimated at CFAF 6,435 million (US$28\.6 million), of which CFAF 6,093 million (US$27\.1 million) were for the Estate Project and CFAF 342 million (US$1\.5 million) for the Master Plan\. Financing was arranged as follows: - IDA Credit No\. 574 CM for the equivalent of US$16 million, signed on July 30, 1975 and effective December 1, 1975: Estate Project: US$15,127,000 Master Plan: US$ 873,000 - Opening of a credit from the CCCE in the amount of FF 20 million, under Agreement No\. 58 31 00 75 04 0 signed on September 29, 1975, with no stipulation as to the effective date: Estate Project: FF 18,900,000 Master Plan: FF 1,100,000 - Constitution of the capital of HEVECAM from Cameroonian funds: CFAF 1,600 million - Grant from the State of Cameroon: Estate Project: CFAF 145 million Master Plan: CFAF 90 million\. - 14 - (c) Financing arransements (Financing Agreement) The funds for the Estate Project from the external and domestic sources indicated in (b) above were passed on to HEVECAM under a Financing Agreement signed on December 6, 1975 between the Republic of Cameroon and HEVECAM (cf\. Section 1\.7), in the form of loans, subsidies and capital grants, according to the nature of the costs; these were divided into seven categories of which the last provided for physical contingencies and price increases\. The cost categories, amounts and the allocations to HEVECAM by category and source of financing are listed in Annex 2\. It was agreed during negotiations that the resources provided by and repayable to ID A and C C CE relating to cost categories 1 through 3 would be passed on to HEVECAM in the form of an equity contribution (15%), and a loan (85%) on the following conditions: - interest rate: 5\.5% per annum - duration: 30 years from the signature of the Agreement - grace period: 15 years for both principal and interest, which will not be capitalized - repayment of principal and interest in 30 equal semi-annual ins- tallments after expiry of the grace period - payment dates: March 1 and September 1 each year\. The exchange rates used were those at the time of the negotiations, namely US$1= CFAF 225, and FF1 = CFAF 50\. The financial structure of HEVECAM resulting from the provisions of the Financing Agreement is as shown below, in CFAF million: National IDA CCCE Resources Total % Establishment costs 20 20 Statutory capital 462 128 1,580 2,170 33 Grant 321 89 145 555 9 Own funds 783 217 1,745 2,745 42 External financing 20 728 - 3,348 52 Total financing 3,403 945 1,745 6,093 94 Value of land - - 400 400 6 Gtand Total 3,403 945 2,145 6,493 100 - 15 - 1\.08 HEVECAM (a) Establishment The HEVEA-CAMEROUN Corporation (HEVECAM) was established in 1 75 to execute the Estate Project\. Decree No\. 75/284a of April 30, 1975: - established the Corporation under the legal framework for Development Corporations referred to in section 1\.04; - fixed its initial capital at CFAF 700 million of which: CFAF 400 million in kind, representing the area of 40,000 ha described in section 1\.06; and CFAF 300 million in cash shares callable in full upon subscription; - define its objectives as follows: \. to acquire, establish, administer, operate and develop agricultural enterprises of all kinds, and process their products, especially as regards permanent plantations of crops such as rubber; \. to market agricultural products, or products resulting from processing by the corporation; \. to assist small farmers, or associations of the same, in growing crops capable of being marketed, processed and/or treated on the corpo- ration's premises; \. to undertake all com mercial or industrial operations connected with the above-mentioned objectives, through the creation of new compa- nies, financial support, mergers, stock participations or other means; \. to rent, purchase and sell all kinds of fixed assets and land, and to create any kind of industrial and com mercial establishment or enter- prise related to the above-mentioned objectives; and \.in general all operations directly or indirectly connected with the above activities or tending to encourage their development\. The statutes were approved by a second Decree, No\. 75/346 of May 23, 1975\. (b) Amendments to the statutes These amendments relate purely to increases in the corporation's capital as provided for the following legislation: Decree 76/67 of February 19, 1976 : first increase Decree 78/386 of September 7, 1978 second increase Decree 80/007 of January 9, 1980 : third increase Decree 80/007 of January 9, 1980: fourth increase\. - 16 - At the time this report was prepared the amount and structure of the capital stock was as follows: State National External Land Resources Funds ONCPB SNI TOTAL Initial capital 400 50 - 200 50 700 First increase 320 556(1) 880 100 1,856 Second increase 320 - 950 130 1,400 Third increase - 500(2) - - 500 Fourth increase 450 500(2) 3,600 500 5,050 Total 400 1,140 1,556 5,630 780 9,506 3,096 % 4\.2 12\.0 16\.4 59\.2 8\.2 100\.0 32\.6 - 17 - On June 30, 1980 the following was added under the second capital increase by incorporating the 15% of the res urces provided by CCCE and IDA for costs of the Project (categories 1, 2 and 3), received after June 30, 1979: (CFAF million) State ONCPB SNI TOTAL Second increase 71(1) 71 Total 400 1,140 1,627(3) 5,630 780 9,577(4) 3,167 % 4\.2 11\.9 17\.0 58\.8 8\.1 100\.0 33\.1 (1) 15% of resources for cost categories 1, 2 and 3, IDA and CCCE funds for the Project\. (2) Transfer of CCCE credit for the follow-up Project 2 (3) The exact amount is CFAF 1,626,955,000 (4) The exact amount is C FAF 9,576,955,000 (c) Establishment Agreement The Government was authorized to make an establishment agreement with HEVECAM by Law 76/10 of July 8, 1976\. The said agreement, concluded August 30, 1976 between the Govern- ment, represented by the Minister of Economic Affairs and Planning, and HEVE- CAM, represented by the Chairman of the Board of Directors, classifies HEVECAM under Category C as provided by Law 60/64 of June 27, 1960 (amended by Laws 64/LF/6 of April 6, 1964 and 66/LF/5 of June 10, 1966) on the Investment Code\. The text of the Investment Code and of the Establishment Agreement are at Annexes 3 and 4 (French text only)\. (d) HEVECAM/SAFACAM Agreement As noted in2\.03(a)SAFACAM, a company belonging to the French RIVAUD group, was retained by the Government to: - prepare the feasibility study - 18 - - provide assistance to HEVE CAM at the senior rn anage n ent level in the areas of technical know-how, seconding of perso\.nel to H EVE CAM and training of Cameroonian nationals\. Cooperation between HEVECAM and SAFACAYM on this second point was the subject of a convention signed on May 23, 1975, ef:Fective for a period of eight years and subsequently renewable for periods of four years\. (The text of this agreement has been retained on file\.) 1\.09 Supervision Supervision missions from the World Bank and CCCE visited Cameroon, generally on a joint basis, in October 1976, March 1977, July 1977, February 1978, October 1978, March 1979 and March 1980\. 1\.10 The Second Phase Project In 1977 HEVECAM drew the attention of the Government and co- financiers to the necessity of rescheduling the estate program so as to give priority to preparing the land and roads one year ahead of planting, in order to obtain the best possible burn of the felled vegetation in the climatic conditions prevailing in the Kribi region\. This question was studied during the July 1977 supervision mission\. The World Bank representatives felt that the rescheduling was very justified but that for this reason, it was desirable to appraise the second phase of the 15,000 ha program in September 1978 as to avoid a hiatus of funds between the two phases due to the inevitable delays between appraisal and the effectiveness of the agreements\. There were more discussions between the co-fLnanciers (including Government) during the February 1978 supervision mission, during which it was also noted that for other reasons beyond the control of the Estate management the cost of the first phase would be higher than the 1974 appraisal estimate; the overrun was then estimated at CFAF 1,300 million, which implied that the existing financing would be exhausted towards the end of 1979\. At that time the Bank representatives indicated that as far as their institution was concerned, appraisal of the second phase could probably not take place before t;he beginning of 1979, which would give HEVEC AM the time to analyze the actual costs and yields during the first phase for the 1977/78 financial year, thus making possible a more realistic estimate of the costs of the second phase\. As requested by Government, HEVECAM sent to the Commonwealth Development Corporation (CDC, London)in March 1978, a complete documentation about its activities as this institution had shown interest in participating in the financing of the second phase of the program\. On September 7, 1978, the Government invited these three organizations (World Bank, CCCE and CDC) to send a mission at the beginning of January 1979 to supervise the first phase and appraise the second phase, with a view to holding financial negotiations in May 1979\. To this end the feasibility study for the second phase was sent to the headquarters of each institution by special messenger at the beginning of De- cember 1978\. The World Bank could not adhere to this time'able because of staff constraints, and appraisal of the second phase finally took place between March 12 and 29, 1979\. This was followed by a co-donors meeting in Paris on May 14, 1979, during which agreement was reached on the final project cost estimate and financing plan, and the co-financiers explained the legal requirements and pro- - 19 - cedures of their organizations\. Negotiations with CCC-E took pace in ?ans on November 9, 1970, from November 12 to 16 in Washington with the World Bank, CCCE and CDC and on November 22 in London with CDC\. The costs of the second project were finally calculated at CFAF 19,958 million (US$95 million),to which CFAF 1,012 million (US$4\.8 million) were added as additional working capital, giving a total amount of CFAF 20,970 million (US$99\.8 million)\. Details of the financing plan and on-lending terms between the Government and HEVECAM are on file in supple m ent 6\. By granting financing for the second phase, the co-financiers confirmed their agreement to include under the second phase project the investments initially envisaged under the first phase\. As a result the closing date for the first phase was fixed at June 30, 1979, corresponding to a planted area of 4,200 ha\. The present completion report therefore covers the period from the start of the Estate Project up to June 30, 1979, with an extension up to September only as regards the planting operations executed after June 30, 1979 under the program for calendar 1979\. It does not cover the execution of the Master Plan, which, has not yet been completed and will be the subject of a separate report\. II\. IDENTIFICATION, PREPARATION AND APPRAISAL OF THE PROJECT 2\.01 Preliminary studies The first exchanges of views between the Government, the World Bank, the French Ministry of Cooperation and CC CE concerning the appropriateness of a new rubber project, in the form of an agro-industrial complex, took place during the first quarter of 1971\. The interest shown by these donors strengthened the Government's own intention to include such a project in the Third Five-Year Plan, and from then on there were regular contacts between the Government and the financing agencies on major decisions\. Based on a study of the economic and technical conditions of rubber production and their probable evolution over the medium and long term, the Government and the co-financers decided that the size of the complexes to be created should be between 10,000 and 15,000 ha in order to obtain a satisfactory rate of return\. To ensure the preparation of an accurate feasibility study, the Government requested IRCA to carry out a preliminary study for the purpose of: - bringing together the existing documentation on the areas where the establishment of a rubber production complex seemed a priori feasible; - analyzing the climatic, pedological, demographic and geographical data thus collected and progressively eliminating those areas lacking the essential conditions for the establishment of such a complex; and - making a first survey of the zone or zones retained\. This study, carried out between January 18 and February 18, 1972, identied ecologically suitable zones on the basis of the following criteria: - rainfall of between 1,850 mm and 2,700m m; the lower limit guarantees - 20 - an adequate water supOlV to the future plantations\. given the monthly distribution of rainfall in Cameroon; the upper limit constitutes a maximum in order to exclude areas of heavy rainfall which, while not retarding tree growth, affects the frequency of tapping and therefore reduces production; and - altitudes less than 300 m to provide a guarantee against cool tempera- tures at night and in the morning which, while facilitating the latex flow lead to fungus diseases of the tapping-panel and leaves, and reduce tree growth\. This first survey led to retention of only an area between the 2,700 mm isohyet to the west and the higher land to the east, a crescent shaped zone around Douala, as shown in Map 3\. The next criterion was the existence of adequately-sized areas with the right topography for establishing plantations at reasonable costs\. The aim was to find plantable areas as little fragmented as possible by a dense hydrographic network or by rugged terrain\. This led to the retention of four areas shown in Map 3\. Field visits with the exception of the Campo hinterland (which was inaccessible) led to the conclusion that the risks of wind-break 1/ were not so severe as to jeopardize the economic exploitation of the plantations\. It was also confirmed, despite limited observation during a short visit, that it would be possible to find soils of appropriate depth (1\.10 m) without any hard or rocky layers to hinder rooting, and with a clay content of the order of 35 % to 45 % in the red (Kompina) or yellow (other locations) ferrallitic soils from metamorphic rocks, principally gneiss, which constitute the cultivable soils in the area retained\. The preliminary report was submitted to the financing agencies, whose representatives met with Government officials on April 11, 1973 to examine the four areas retained, namely: - Kompina (Mungo department) in the bend of the Mungo river at K o m pina; - Nyong bounded by the 2,700 mm isohyet, downstream from the SOCA- PALM plantations; - Kribi to the south of the Kribi-Ebolowa road opposite Kienke forest reserve; - Campo comprising the eastern part of Dipikar island and a strip about 7 km wide on the other side of the river\. It was decided to eliminate the Kompina zone since it did not contain an area of 15,000 cultivable hectares on which to create the complex envisaged\. 1/ certain high yielding rubber clones are susceptible to =unk snap in areas subjected to violent wind storms - 21 - 2\.02 Project site location studies It was also decided that the studies to select a site should be undertaken in stages so that they could be suspended at any moment if insur- mountable drawbacks precluding development were identified, thus limiting costs if no positive result emerged\. The difficulties experienced in establishing the agro- industrial oilpalm complex at Eseka provided a precedent for proceeding with great caution; in that case the 4,500 ha plantation originally planned had to be reduced to 2,500 ha in view of the very fragmented nature of the cultivable surfaces, which led to high establishment and exploitation costs\. The studies were therefore planned in three successive stages and entrusted to the SATET-Cameroon company, as regards topography, and to the So" Sciences Department of ENSA as regards soil studies; these two aspects were investigated simultaneously for phases II and IIL (a) Phase L* study on IG N map of scale 1:200,000 and 1:50,000 (insofar as they exist) and stereoscopic study of the 1:50,000 photographs, and preparation of a plan (1:50,000) indicating zones according to land surface characteristics\. This work made it possible to eliminate areas of unsuitable topography\. The report submitted on August 1, 1973 by SATET-Cameroon confirmed that the plantable area in the Kompina zone did not exceed 9,000 ha, thereby fully justifying the earlier decision to eliminate this zone\. Likewise, stereoscopic examination of the photographs of the Campo region led to the exclusion of 11,000 ha of steep hills from among the 28,000 ha in the zone, leaving 17,000 prospective ha, of which very probably less than 10,000 ha were plantable\. As a result, this zone was also eliminated\. This left only the Kribi and Nyong zones where at least 15,000 plantable ha in terms of topography and non-fragmentation of parcels could potentially be located with a reasonable degree of precision\. (b) Phase MI opening of survey traces using compass and clinometer, plotted on the 1:50,000 plan, as far as possible cutting across the hydrographic network in the zones retained as a result of phase L Soil sampling every 300 m along the traces to a depth of 1\.50 m except where augering was impossible\. The length of the traces opened and studied during this phase in the Kribi and Nyong zones was 157 and 224 km respectively; over these distances the following percentages were obtained: Kribi Nyong Swampy soils 14% 9% Steep gradients (more than 15%) 5% 20% Topographically suitable soils 81% 71% In these two zones the depth of the plateau soils (described above as "topographically suitable") was generally in excess of 1\.50 m, making them suitable for rubber planting; the gravel content of the 60 cm surface layer was as follows: - 22 - Percentage of zravel at less than 60 cm Nvons less than 10% 84Z 84% from 10 to 20% 10% 4% from 20 to 50% 5% 6% above 50% 1% 6% The content of fine elements (clay and silt) was: Kribi Nyong Horizon Average Maximum Minimum Average Maximum Minimum 0-30 cm 30\.6 38\.1 23\.7 33\.8 43\.7 25\.6 30-60 cm 35\.2 40\.9 29\.1 41\.2 51\.1 32\.1 As regards the pH level, studies made in the two zones gave very satisfactory values for rubber cultivation: pH Range Kribi Nyong 4 to 4\.50 8% 3% 4\.50 to 5 50% 77% 5 to 5\.50 35% 17% above 5\.50 6% 3% It is generally accepted that the optimum pH level for rubber is between 4\.50 and 5\.50 On the basis of these data the Kribi soils proved to be slightly richer than those of the Nyong zone in exchangeable bases, especially as regards potassium, an important element in the nutrition of rubber trees\. Moreover the precedent of the SOCAPALM plantation at Eseka gave rise to apprehension that the Nyong region, which is a continuation of the oilpalm plantations, would present similar terrain and that the more detailed topographical s-udies under phase III would reveal many gradients greater than 15%, entailing considerable fragmenta- tion of the cultivable parcels\. Thus, the representatives of the various departments concerned met at Yaounde on December 19, 1973, and recommended the selection of the Kribi zone, since apart from the advantages mentioned above it is favorably located 40 km from the port of Kribi and lies along the Kribi-Ebolowa road, which has an important role to play in the evacuation of forest products from the south-eastern region of the country\. (c) Phase III: Execution of the following operations in the zone selected as a result of phase IL - 23 - - preparation of a north-south/east-west grid of 2 km by 2 km squares, with posts at every kilometer along all traces: - survey of the major features of the area bounding the mountains and hills; - survey of the flood-liable areas and rivers; - study of soil profiles along the traces as in phase II, and 600 complete soil analyses\. Representatives of the financing agencies (World Bank and French aid Authority) and government ministries concerned, and the administrative authorities of the Ocean department, visited the Kribi site on April 18, 1974\. SATET-Cameroon and the Soil Sciences Department of ENSA had at this point covered 8,260 ha out of the 20,000 usable ha (after elimination of the central hill) in the zone initially retained to the north of the Niete river (see Map 4)\. The soil data collected along the 55 km of traces at the time of the visit confirmed that 80% of the soils were usable, 40% being deep soils (no obstacles down to 1\.50 m), and 40 % having a variable gravel content constituting no serious hindrance to root penetration\. The remaining 20% represented hydromorphic soils or gradients in excess of 15%\. The issue of the land to be allocated to the local communities for the continuation and further development of their agricultural activities was raised during the visit and discussed at the working meeting which took place on April 19, 1974 at Yaounde\. Taking this into account and in order to provide for the possibility of expanding the future rubber estate beyond 15,000 ha, the Minister of Planning and Territorial Develo- ment requested the expropriation on the grounds of public utility, and the transfer to State ownership, of an area of 40,000 ha, as shown in Map 5, leaving a strip more than 1 km wide along the Kribi-Ebolowa road in the hands of the villagers\. The definition of these boundaries (Map 5), further to the south than those of the zone initially selected (Map 4), meant giving up 4,660 ha already surveyed at the time of the visit to the north and north-eastern parts of the zone; these were replaced by an equal area to the south-east and by 1,720 ha not yet surveyed to the east of the Adjap-Zingui road\. Thus the surveyed area remained at 20,000 ha out of the total area of 40,000 ha allocated to the future estate; thus even on the pessimistic assumption that only 50% of the surveyed area were plantable, this guaranteed the availability of a plantable area of at least 10,000 ha\. Given that establishment of the 15,000 ha estate would be financed under several sub-projects, the existence of a development plan covering a plantable area of 10,00 ha was deemed sufficient for the preparation of the feasibility study for the program as a whole and for identification of the financing needs for the first sub- project only where there was no doubt that the required plantable area could be found in the remainder of the estate zone\. For this reason topographical and soil studies similar to those carried out in phase I were completed for the 18,800 ha in the south and south-western parts of the estate zone which were not covered in the studies under phase TII\. - 24 - 2\.03 Fearibilitv study (a) Choice of a nartner From the first discussions onwards, the World Bank and the French Aid authorities indicated that they would prefer that the Government of Cameroon select an experienced firm to assist, firstly, in the preparation of the feasibility study, and subsequently with project execution, and that in their view this partner should be the same for both the preparation and execution stages so as to avoid any problems during the transition from one phase to another\. Four groups were consulted: - Societe Africaine Forestiere et Agricole (SAFAC AM) - Societe de Developpement des Cultures Industrielles (SODECI),acting jointly with the Societe des C aoutchoucs d'Extre me Orient (CEX 0) - Compagnie Generale des Etablissements Michelin - Commonwealth Development Corporation (CDC)\. The last two groups declined, though CDC indicated that it might possibly contribute to project financing\. The proposals presented by the first two groups were fairly similar in content but differed as regards the financial arrangements\. SAFACAM proposed, if it were engaged, to finance itself the activities of its experts, while the CEXO- SODECI group proposed to charge for these activities\. Given SAFACAM's willingness to assume the financial risk, the Government decided therefore to engage this company and an agreement was signed on April 31, 1974, entrusting SAFACAM with the control and coordination of all studies and preliminary operations\. (b) Terms of reference of the feasibility study These were discussed and adopted atthe April31,197L meeting and are given in Annex 7\. (Text retained on file\.) (c) Introduction and multiplication of experimental planting material In order to save time and ensure correct establishment of the estates the Government requested IR CA to undertake the introduction and multiplication of planting material\. For reasons of convenience (assistance provided by SO C APALM) the first nurseries was established at Eseka\. After the April 18, 1974 meeting a second nursery covering 2 ha was established at Kribi, together with a field office\. This work was executed by SAFAC AM\. - 25 - (d) Cost and rinanc nz of the studies (including f-2sibili-_y s-'\. nurseries) (CFAF '000) Government FAC SAFACAM Preliminary study 890 Phase 1 2,285 455 Phase 2 16,408 3,399 Phase 3 42,907 12,396 Feasibility study - 450 21,000 Planting material 6,400 7,900 Kribi field office 9,500 IRCA activities 2,900 Food crops study 4,000 68,890 41,000 21,000 130:'890 (e) Submission of the feasibility study A meeting of the co-financiers (World Bank, France, Government) and the consultant (SAFAC AM) was held on October 7, 10 and 11, 1974 at Yaounde to discuss progress on the feasibility study, the final version of which was sent to all the interested parties in November 1974\. 2\.04 Project appraisal The project was appraised from November 24, 1974 onwards by a team of experts from the World Bank, the French Ministry of Cooperation, CCCE and the Government, including representatives of SAFAC AM, which had prepared the feasibility study\. A meeting was held on December 13, 1974 at the Ministry of Planning and Territorial Development under the chairmanship of its Secretary- General, which was attended by the appraisal team and representatives of these Government departments and agencies: Planning and Territorial Development, Agriculture, Industrial and Commercial Development, Finance, and the National Investment Corporation (SNI)\. (a) Estate Component During the course of their stay in Cameroon the experts from the financing agencies visited the site (which some of them had already visited) and then examined in depth the study prepared by SAFAC AM, the excellent quality of which was recognized regarding both the technical aspects and the economic analysis\. They considered that the undulating terrain at the project site would not pose any particular development problems\. However, they recommended that: - additional surveys be carried out to identify the needs for culverts and bridges for crossing the network of streams and rivers, which fortu- nately were not numerous; - 26 - - the duration and characteristics of the flooding of the land alonZ the Niete river be specified; and - the soils not being very rich, careful study be given to the question of manuring in the light of the results of the soil surveys\. The agricultural techniques proposed by SAFACAM (choice of clones, planting systems etc\.) were considered satisfactory, as was the proposal to market the crop in the form of technically specified, granulated block rubber\. Construc- tion costs of the processing factory were not very high but given the time required for the first plantings to come into bearing it was agreed that this question should be re-examined when a decision was to be taken concerning construction of the industrial complex\. It was agreed that as much of the work as possible should be carried out on force account by HEVECAM, so as to limit costs (especially as regards construction of the social facilities)\. Thus total project costs (in 1974 prices) for the establishment of the agro-industrial complex (plantations, factory and all infrastructures), putting the areas into production and operating the estate until the time when the cash flow becomes positive (after 15 years) were calculated at CFAF 9,955 million (US$44\.2 million) including 5% for physical contingencies\. This sum did not include price contingencies\. Given the prevailing unstable economic conditions, the financing agen- cies noted that it would be reasonable to provide financing for a 5-year period covering the cost of establishing a 5,800 ha estate, including overheads, related infrastructure (villages, office, estate roads) and various equipment\. The cost of this first phase was estimated in 1974 terms at CFAF 3,747 million (US$16\.7 million) including 5 % for physical contingencies\. Adding price contingencies (12% in 1975 and 8% thereafter), the cost of the first phase was estimated at CFAF 5,400 million, or approximately US$22,500,000\. This amount included customs duties on imported goods of the order of 15% to 20% (which were to be waived by Government); on the other hand it did not cover: - the remuneration of SAFAC AM; - foodcrop development to ensure food supplies to the estate workers (calculated roughly at CFAF 83 million over the four years 1977-80); and - supplementary surveys, firstly in relation to that part of the zone not covered in the feasibility study, and secondly to remove remaining uncertainties regarding topography and soils, given the size of the grid squares used (2 km x 2 km)\. After long discussions with Government officials, the representatives of the co-financing agencies indicated that they would recom ni end to their respective managements a development program for the establishment of an agro-industrial complex of 15,000 ha, and a first phase of financing covering the exectition of operations during the first five years; they did not think that their institutions could at that time undertake a com mitment to finance the continuation of the project\. - 27 - The donors emphasized the need to establish a contract,al relationship between HEVECAM and SAFACAM (the consultant providing technical assistance to the estate project) during both the establishment and exploitation stages, with a clear definition of the consultant's responsibility for proper execution of the said estate component\. The financing agencies recalled that this question of project management had been debated at length and that they had advised the Government to create a new development corporation rather than entrust the project to an existing company, in this case SO C APALM\. Finally, at the suggestion of the financing agencies, it was agreed to give the estate component a more precise name; hitherto it had been generally known as the "agro-industrial rubber complex in the Kribi region"\. The new title of "Niete estate" proposed by Government representatives was adopted\. (b) Master Plan It was unanimously agreed that financing be provided under the proposed project for a master plan for the long-term development of the south- west coastal region (not to be confused with the South-West province); this had been recommended during the identification and preparation missions\. This study was intended to make recommendations for the development over some 25 years of agro-industrial complexes, covering a total area of about 100,000 ha, and small- holder plantations\. It is still under preparation and a separate completion report on this component of the project will be prepared when it becomes available\. The Government requested the consultants (a consortium composed of SEDA, as the prime contractor, SATET-Cameroon, the Soil Sciences Department of EN SA and SA FACA M) to include in its study the entire coastal area less than 300 m-ters above sea level between Wouri-Nkam and the border with Equatorial G nea\. 2\.05 Project Financing (see section 1\.07) Project cost estimates were drawn from the appraisal report of April 18, 1975 (green cover) prepared by the World Bank experts following their joint appraisal mission with CCCE in Cameroonin November/December 1974\. (a) Project costs Project costs were estimnated at CFAF 6 billion (i\.e\. US$26\.7 million at the exchange rate of US$1 = CFAF 225)\. An examination of specific cost components indicated that the following corrections should be made: CFAF millions - Inclusion of taxes on fuel for clearing and planting operations 57 - Inclusion of taxes on fuel in "water and power" under 19 "fixed expenditures" category - HEVEC AM's establishment expenses (corporate fees) and 145 annual capital levies - Inclusion of all expenditures under "Food Crop Development," 42 which had been only partially included, an increase of - 28 - - Preparation of the follow-up project and aronomic stucies 50 (;reviously omitted) - Revision of the cost of SAFAC AM services (one year delay) 22 - Provision for physical contingencies 17 - Provision for p-ce contingencies 63 TOTAL \. 415 The revised project costs therefore became CFAF 6,415 million\. Following a request for clarification from the delegation, the Government explain- ed that fuel for heavy tractors and stationary equipment could, exceptionally, be imported duty-free and that HEVECAM could be exempted from corporate fees and capital levies\. This, therefore, reduced the increase in project cost to CFAF 114 million (in 1974 prices), i\.e\. CFAF 141 million including physical and price contingencies\. It was nevertheless deemed more prudent to maintain the estimated project costs at CF AF 6,415 million so as to increase H EVE CA M's working capital, since the Company had to prefinance its suppliers before it was reimbursed from the proceeds of the IDA and CCCE credits, i\.e\. after a lag of two to four months\. The total was subsequently increased by CFAF 20 million in order to cover HEVECAM's corporate fees (financed with local funds), thereby bringing the cost of the estate component to CFAF 6,093 million\. Local Funds IDA CCCE TOTAL (CFAF millions) Estate Component 1,745 3,403 945 6,093 Master Plan 90 197 55 342 1,835 3,600 1,000 6,435 A breakdown (Annex 2) by category of expenditure, source of financing and allocation of funds were agreed upon as well as the terms of the Financing Agreement between Government and HEVECAM, which governs the release to HEVECAM of the funds needed for the execution of the Estate component\. (b) Financing and allocation of funds Agreement was reached on a financing par ?assu applicable to all categories of expenditures as follows: IDA Credit 58% CCCE Credit: 16% Local Funds: 26% - 29 - excluding HEVECAM's corporate fees, which were to be Hnanced 100" by the Govern m ent\. (b\.1) Local funds were contributed to HEVECAM, prior to expenditures, as follows: - equity: CFAF 1,600 million - grant: CFAF 145 million ID A and CCCE disburse ments were to be made on presentation of substantiating documents or extracts from HEVECAM's accounts proving that HEVECAM had paid for goods and services acquired for the Estate Component\. (b\.2) With regard to the Master Plan, the SEDA/SATET-Came- roon/ENSA/SAFACAM Group entered into an agreement with the Government which was recorded on December 1, 1977\. All invoices were settled direct with the Group by the three donors pari passu, as indicated above\. (c) CCCE Credit-Agreement 58 31 00 75 04 0 The terms of this agreement are standard except for the repayment terms of the loan to the Government which were adapted to the long gestation period and gradual entry into production of the rubber plantations\. A grace period of up to October 31, 1985 was agreed upon, during which period the United Republic of Cameroon will be exempt from any repayment of the principal\. The amortization schedule is as follows: Amountin FF Date - 400,000 October 31, 1986 - 600,000 October 31, 1987 - 800,000 October 31, 1988 -1,000,000 October 31, 1989 -1,400,000 October 31, 1990 -2,000,000 October 31, 1991 -2,600,000 October 31, 1992 -3,200,000 October 31, 1993 -3,800,000 October 31, 1994 -4,200,000 October 31, 1995 (d) Credit and Project Agreements 574-CM The changes made during negotiations to the draft IDA Credit Agree- ment were minor and did not affect the substance of those documents\. Most involved new references to the Financing Agreement and Schedule of the Credit Agreement (Description of the Project)\. - 30 - TIree side letters were sgned: - representations ) standard for all agreements involving a company or autonomous agency having - right of veto and suspension) a Government Co=issioner\. - Master Plan for Kribi Region: This involves the assurances by the United Republic of Cameroon to use the terms of reference agreed upon during negotiations and attached to the letter for implementation of the Master Plan\. Retroactive Enancing of up to US$300,000 for expenditures incurred after January 1, 1975 was accepted by IDA\. (e) Description of the Project (Schedule 2 of Credit Agreement 574-CM) The Project is the first phase of the development of a rubber estate during the years 1975 through 1980 located north of the Niete River in the Kribi area of the Borrower's Ocean Department\. The Project consists of the following parts: Part A The clearing of about 5,800 hectares and planting high-yielding rubber thereon, the preparation of about 1,700 hectares for planting thereon in 1981, and the maintenance of plantings during the development period of the Project\. Part B The conducting of feld trials of promising planting material and agronomic research, if required\. PART C The construction of housing, health, education and social facilities for about 3,000 families living on the rubber estate, and the building of service roads for the rubber estate\. Part D The establishment of a com missariat on the rubber estate to provide food supplies and to supervise trials with foodcrops\. Part E The preparation of a follow-up project, including the continuation of the pedological and topographical prospection\. Part F The preparation of a program for training and technical assistance\. Part G The preparation of a master plan for the Kribi area which emphasizes the production of perennial crops\. The Project is expectged to be completed by Decembr 31, 1980\. 2\.06 Financing Decisions and signature of the Agreements CCCE: Decision of the Board of Trustees on June 27, 1975\. Signature on September 29, 1975\. IDA: Decision of the Board of Directors on June 3, 1975\. Signature on July 30, 1975\. - 31 - 2\.07 Conditions for effectiveness of the ALreements (a) CC CE: no such condition, although the following st'pulations governing disbursement were made: - Receipt of the HEVECAM/SAFACAM Convention - Receipt of the Financing Agreement\. (b) World Bank (specific conditions stipulated in the Credit Agreement) furnishing of legal opinions on the validity of commitments made by: - The United Republic of Cameroon (Credit and Financing Agreements) - HEVECAM (Project and Financing Agreements) Receipt of the CCCE Credit Agree m ent and the Financing Agree m ent\. Receipt of the HEVEC AM/SAFAC AM Convention\. Allocation of CFAF 300 million to HEVECAM from national funds and agreement on the payment schedule for the balance of the local contribution\. After the information required above was furnished the Credit and Project Agreements became effective on December 1, 1975\. 2\.08 Project area (a) Transportation infrastructure For its supplies the Project is heavily dependent on the Douala-Edea- Kribi road\. Unrestricted use of the Edea rail bridge, about which concern had been expressed before the start of the Project, has not been a problem\. In any event this difficulty with the Douala-Kribi highway will soon no longer be a factor after the separation of traffic for the crossing of the two branches of the Sanaga River by different road and rail structures\. Even though major repairs have been periodically made to the Douala- Edea road, deterioration is swift and extensive on this route, which can no longer meet traffic de m ands\. This problem will be eliminated over the medium term with the opening of a new heavy-vehicle highway betgween Douala and Edea for which preselection is now under way\. Financing will come from French aid, with participation by the EEC and the Netherlands\. However, travel is difficult during the rainy season on the Edea-Kribi section, which is still a very mediocre dirt road\. In view of the significant potential of the entire southern region of Cameroon and the country's need for a deep-water port, the Government has just begun studies on such a facility south of Kribi, between that town and the site known as Rocher du Loup\. Road infrastructure problems will be included in the studies\. Thus satisfactory port and road service to and from the Niete Estate will eventually be assured\. - 32 - HEVE CAM has built an ai-strio near its mn cer 'n connections are frequently provided by the SOCAPALM airliane\. (b) Social services The children of the workers attend the schools built under the Project as r art of village construction\. These schools are staffed by 11 primary and secondary teachers (8 paid by the State and 3 by the Project)\. Medical care is provided by six nurses, all paid by HEVEC AM, as well as three nuns who run the central clinic and the laboratory attached to it\. Construc- tion of the health center, to be built under the Second Project, is to begin shortly\. A police station was opened near the Estate center (Niete village)\. Talks are being held between HEVECAM and The Ministry of Post and Telecom munications on providing Niete village with rural nail service\. III\. EXECUTION 3\.01 Project-related studies When the works began, HEVECAM had a map on the scale of 1:10,000, which had been prepared from a topographic and soil survey using a grid of 2 km x 2 km and included the flood liable areas but not the peripheral tracts\. This work, covering only about 20,000 ha of the property HEVECAM now holds, was carried out as part of the phase III studies (para\. 2\.02c)\. A provision of CFAF 40 million in 1974 values; (i\.e\. CFAF 47\.9 million with provisions for physical contingencies and price increases) was included in project financing under the category of "Project-related studies" in order to complete this 2 km x 2 km grid for the rest of the property (about 18,000 ha to the west and southwest) and plot it on the map on the scale of 1:10,000\. It soon became apparent that this grid would not permit the preparation of a sufficiently detailed map to be used in planning feeder roads and thalweg crossings, and the establish m ent of crop plots and villages\. HEVECAM therefore revised its topographical and soil studies program to cover the entire property with a 1 km x 1 km grid, including the peripheral areas - which had not been done during the phase III studies - and the preparation of a map on the scale of 1:5,000\. This meant an additional cost of CFAF 91 miLlion, which the Govern- m ent financed jointly with ID A under Technical Assistance Project 673-C M of June 15, 1977 (IDA: CFAF 70 million; URC: CFAF 21 million)\. Some of the work was contracted out to SATE"-Cameroon, the balance being done by HEVECAM on force account\. - 33 - 3\.02 Planting (a) Rate of implementation The following table compares the estimated and actual timetables for land preparation and planting for the first 4-1/2 years of the work program: Second Half 1975/76 1976/77 1977/78 1978/79 of 1979 1/ -----------------------hectares--------------------- Deforestation actual per year 220 1120 1630 1750 1720 cumulative 220 1340 2970 4720 6440 Land ready for planting yearly estimate 300 700 1500 2500 1250 cumulative 300 1000 2500 5000 6250 actual per year 170 920 1330 1840 1410 cumulative 170 1090 2470 4310 5720 Planting yearly estimate 600 900 1800 1250 cumulative 600 1500 3300 4550 actual per year 94 280 672 2035 1125 cumulative 94 374 1046 3081 4206 (b) Land preparation During the supervision mission of July 1977 it was agreed to modify the work program, to accelerate land and road preparation and reduce the planting program somewhat for one to two years, after which time the previous rhythm would be resumed to ensure that the total area planted was within the range of the initial estimates by the end of the project\. The above table shows that the execution of the program has been consistent with that modification; 4,206 ha were planted by the end of 1979 as compared with the 4,550 ha estimated\. The land was prepared mechanically using D8 crawler tractors equipped for deforestation work\. The felled vegetation was then windrowed using bulldozer blades and root rakes\. The feasibility study had assumed 4\.5 hours/ha for each of these operations\. The time allotted to windrowing was halved during appraisal, since the recom mended technique was to use a V-blade to open planting rows without windrowing\. HEVECAM tried this technique but because of discouraging results had to revert to conventional windrowing\. Experience has shown the total time required to be 8\.5 hours/ha for both operations, an increase of nearly 26%, increasing land preparation costs by nearly 25 %\. 1/ Calendar Year\. - 34 - The initial estimates for utilization of heavy -r-ctors called for operation during 1\.800 hours per year\. In practice\. utilization was lower owing to the amount of rainfall and the fact that work could not continue dud\.ng the rains\. It was therefore necessary; to expand the number of vehicles and ourchase three D6 tractors instead of the two planned, these being adequate for the windrowing and finishing work in land preparation (Section 3\.4)\. (c) Planting method' The appraisal report called for 3,400 ha to be planted with "seed at stake," in which the seedlings are raised directly in the field and subsequently bud- grafted there, and 2,400 ha planted with nursery-grafted container-grown plants\. As it happened, the direct seed program had to be reduced owing to damage caused by rodents and difficulties with budding\. Instead, another method, using budded stumps, was followed\. (d) Origin of planting material The planting material used was very similar to what had been planned, with a large majority of two clones, GT 1 (55%) and PR 107 (25%)\. Later in the program, it became apparent that the proportion of PR 107 had to be reduced because its growth was less satisfactory than that of other clones\. (e) Pests and diseases The damage caused by rodents during the first year after planting can be controled only by placing low fences around the planted areas and by hunting\. As had been thought, there was evidence of Fomes (root disease) but tree losses are still within acceptable limits up to this point\. However, vigilance must be maintained because the trees are still young and it will take several years to obtain a precise idea of the situation\. There were no significant signs of leaf disease\. (f) Exploitation (Annex 10) Tapping will begin only in 1981/82\. Estimated yields and tonnages are given in Tables 1 and 2 of Annex 10\. The first puncture tapping trials began during the first quarter of 1980\. 3\.03 Construction (Annex 11) Expenditures as of June 30, 1979 were 95% higher than the appraisal estimates (CFAF 1,447 million as compared with CFAF 743 million)\. In general the very sharp increase is due to the following reasons: - underestim ation of costs; - change in prescribed standards for labour housing; - inflation higher than expected; - work executed ahead of schedule\. - 35 - An exact breakdown of increases by category of expenditure is im- possible without a large-scale data collection effort since the cost accounting system is not yet effective\. Housing for Labour The housing program, completion of which had been planned for June 30, 1980 was virtually finished by the end of June, 1979\. The 1975 appraisal report estimated that 25 % of the housing units built in the first five years would be temporary\. In actuality, semi-permanent dwellings have been built since the outset; moreover, the area per worker housed has been increased from 10 to 15 m2\. Thus, the cost per worker housed, originally estimated at CFAF 93,000 (1974 prices) in the appraisal report, rose to CFAF 285,000 in 1978/79 (corresponding to CFAF 175,000 in 1974 prices), the real increase in cost per worker housed is therefore 88%\. The cost overrun under this heading is estimated at CFAF 400 million\. (b) Housing for managerial staff The appraisal report called for a managerial staff of 25 in 1979/80 (15 expatriates and 10 nationals)\. This figure, according to estimates approved by the Board of Directors, will rise to 33 (12 expatriates and 21 nationals)\. The appraisal report also stipulated that the housing units to be built for the managerial staff during the first two years would be temporary, but in practice it was deemed desirable to build permanent dwellings from the start\. Execution at June 30, 1979 is largely in line with the appraisal report timetable, and completion is expected by June 30, 1980, i\.e\. almost one year ahead of schedule\. Because of the decision to build permanent rather than temporary dwellings, there was a 20% increase in costs over the appraisal estimate (CFAF 235 million), i\.e\. a cost overrun of about CFAF 50 million\. (c) Basic village infrastructure The cost of basic village infrastructure (schools, clinics, markets, offices and warehouses, and water supply) exceeded the appraisal estimates by about CFAF 130 million\. (d) General service buildings For this type of building, construction during the first four years exceeded the five-year projections by 2,450 m2, which means that implementation is ahead of schedule with regard to both the first and second projects\. These include construction of additional buildings not called for at appraisal, in particular food crop hangars, police station, clinic, food commisariat, housing for the nuns, a club at village 4\. The cost overun under this heading is about CFAF 100 million\. 3\.04 Materials and equipment (Annex 12) The table in Annex 12 compares the procurement estimates for major equipment for the five years and actual purchases by the end of June 1979\. It was expected that in FY 1979/80 such procurement would amount to CFAF 32\.6 million in 1974 prices (or CFAF 53 million in current prices), equivalent to only 5% of the five-year total, since all the heavy equipment was to be purchased during the first four years\. - 36 - With regard to heavy equipment for land prepracior, the additona outlay of CFAF 157 million represents the purchase of the following equipmert not included in the 1975 estimates: (in CFAF million) 1 D8 Crawler tractor 33\.2 ) 1 D6 Crawler tractor 23\.5 ) 2 Self-propelled compactors 23\.2 ) ) 103\.0 1 Vibrating roller 5\.0 ) 1 Loader 11\.0 ) 1 Crushing station 7\.0 ) Miscellaneous equipment and accessories\. The additional outlays of CFAF 41 million for agricultural materials covers, among other items: (in CFAF million) 6 Wheeled tractors 25\.1 6 Trailers 6\.8 Foodcrop materials 7\.5 It should be noted that the figure for foodcrop materials represents a transfer from one heading to another and is not an additional expenditure (see Note 1 of Annex 15, Table 3)\. Because of the difficult conditions on the Douala-Kribi and Kribi-Niete roads and on estate service roads, the project purchased heavier-duty vehicles and increased the fleet by: 6 trucks 9 Jeeps of which 6 replaced lightweight vehicles (R4 or R5) The additional outlays were only CFAF 31 million owing to attractive prices obtained for the fleet as a whole\. Additional expenditure under the heading "ot:her equipment" in the appraisal report came to CFAF 75 million, of which CFAF 12 million were for foodcrops\. The other CFAF 63 million represent purchases of additional surveying equipment, furniture and office supplies, residential furnishings and appliances, shop and hospital equipment and miscellaneous items\. Another amount of CFAF 62 million is also shown in the balance sheet for prefinancing and partial payment for equipment not yet received\. - 37 - 3\.05 Personnel and workforce As HEVECAM was going into a region of very low population density (about 2 inhabitants/km 2), some concern was expressed during appraisal and negotiations with regard to the recruitment of the personnel needed for project implementation in terms of both sheer numbers and skills\. Recruitment and personnel stability have indeed caused problems, but these have been largely solved and the present situation is satisfactory\. Recruitment of managerial staff followed the planned timetable\. The Cameroonian managers come from diverse backgrounds, which bears witness to the interest in H EVE CAM shown by various schools\. Laborers had to be recruited in the various provinces of Cameroon, with the Central-South and the West/Northwest provinces supplying the bulk of the laborers\. Instability of the labour force is unquestionably attributable to the fact that a high proportion of the workers are bachelors, and they feel isolated when they do not know anybody in their new surroundings\. Mindful of this, HEVEC AM is attempting to promote the recruitment of families and is now sending laborers who have demonstrated their willingness to work hard to their own villages as recruiters\. They later serve as "mentors" for the new recruits which greatly facilitates the settling-in and adaptation process\. Annex 13 shows the statistics on recruitment and HEVECAM's labor structure\. 3\.06 Foodcrop development Despite the additional work that they caused to HEVECAM during the first four years of the project, when start-up and organization of industrial estates were in full swing, foodcrop development activities have been pursued very actively\. This involved the identification of possible crops and then the choice of varieties adapted to local conditions and to modern farming techniques, primarily with regard to plant protection and manuring\. The original idea of producing foodcrops by force account, has been dropped\. Instead, HEVECAM has begun work on the multiplication of plantain stocks and stepped up its cooperation with IRA on seed production (maize, groundnuts, etc\.) with a view to distribution to the workers\. 3\.07 Technical assistance The planned technical assistance from SAFACAM has been provided regularly, including periodic inspections and special visits to solve problems and verification of the accounts\. The various reports are issued on time and submitted to all interested parties, especially the financing agencies\. Technical assistance has, in particular, involved recruiting and making available experts for HEVECAM's permanent staff, or on secondment for specific tasks\. Expatriate personnel made available full-time increased as follows: - 38 - July 1975 3 July 1976 5 July 1977 7 July 1978 10 July 1979 12 Seconded personnel who lent their assistance diring these four years were as follows: Mr\. DOUXAML Seconded from March 1, 1976 to October 31, 1976: Preparation of HEVECAM's accounting instructions and accounting system-Acting Administrative Manager and General Manager; Mr\. JOURDAN: Seconded from February 2, 1977 to June 10, 1977 for organization of the accounting system; Mr\. BRIVES: Seconded from May 1, 1977 to July 14, 1977: Acting Sector Manager; Mr\. CHAMBE: Seconded from September 15, 1978 to November 15, 1978: Expert agro-economist for the phase II feasibility study and from March 1, 1979 to March 31, 1979: HEVECAM II appraisal mission\. Lastly Mr\. VERNERIE, an auditor at SAFACAM headquarters makes annual visits to audit the accounts\. The sum provided for in the Agreement was paid in virtue of the above technical assistance, viz\. a lump-sum fee of CFAF 30 million (January 1, 1975) per year adjusted annually by application of the revision formula specified in the Agreement, and an additional fee proportional to the approved expenditures\. This last payment, set at 2%, has grown along with the increase in total costs\. 3\.08 Training The development of the Niete estate to its full size of 15,000 ha will bring the necessary staff to 6,950, broken down as follows: Unskilled laborers 1,180 Skilled laborers 5,000 Office/workshop/factory specialists 566 Field managers 160 Managerial staff (of whom 6 expatriates) 44 Some of these people, particularly the specialists, are already fully trained or have had some of the necessary training before they were recruited, although more advanced training is given on the job in order to facilitate their adaptation\. - 39 - Much of the work in rubber-growing reauires specialized 1im'nT, primarily for the skilled laborers who all have to receive additional training, such as in bud-grafting and tapping as well as running factory -machinery\. Lastly, the junior managers who will in future be taking over senior positions in the Corporation must be given the necessary experience\. This involves being exposed to all planting and processing operations plus budgetary control and administrative organization\. This experience should also give them the opportunity to accuire the necessary authority\. Thus far little has been done because HEVECAM is too recent a creation; local managers have not yet been there long enough for a determination to be made as to which ones have the aptitude for more advanced training\. The measures taken, or to be taken, for staff development are as follows: Laborers With regard to skilled laborers and field managers, training has been and will continue to be given on the job\. Prior to opening for tapping, the first teams of workers and their supervisors will be trained at SAFACAM and CDC\. Specialists The few experienced specialists who are available prefer to stay in town rather than live on the estate\. There is already a sufficient core but it has to be built up\. With regard to accounting, it is planned to use the Association pour la Formation des Cadres de l'Industrie et de l'Administration (Association for the Training of Managers in Industry and Administration - AFCA) in Douala for advanced training and refresher courses\. Managerial staff The number of Cameroonian managers is expected to rise from 15 to 38, while that of expatriates is to be reduced from 12 to 6\. The on-job training of managers will be supplemented by stays of several months in rubber estate companies abroad (Ivory Coast and Malaysia) for technical training, and in management training agencies\. 3\.09 Exrerim entation The 1975 appraisal report proposed that "up to 1% of the total planted area would be allocated in various locations of the concession area for clone trials and field experiments\. Agronomic research would be undertaken if and when required\." Introductions of budwood from the Ivory Coast were made in April/May 1978\. Some of the planting material received was multiplied in bud-gardens, the rest being done in the field\. - 40 - The 1978 experimentation program included the estabishment of a clone trial in the plantings for that year\. The experimental area would have two densities: 445 trees/ha (Sm x 2\.75m) and 555 trees/ha (8m x 2\.25m) in the North 11/5-C block for the lower density and the South 11/5-C or North 11/5-D block for normal density\. The purpose of this trial is to compare eight clones with two planting densities and four replicates per clone and per densi:y, i\.e\. 2 x 8 x 4 = 64 plots\.The clones represented are: - GT 1, AV 2037 and PR 261 (from Indonesia) - PB 217, PB 235, PB 28/59, RRIM 527 and RRIM 60) (from Malaysia)\. A clone trial was established in the 1979 area with: - Clones existing at Niete: GT 1 RRIC 100, 101, 102, 103 and 110 (from Sri Lanka) N 10, 29 and 60 (from Liberia) vith respectively 90, 61 and 210 plants RRIM 701 PB 252 and PB 254 with respectively 33 and 21 plants\. - Clones introduced from the Ivory Coast R RIM 703 PR 253 and PR 257 IAN 717 and IAN 873 (from South America) One RO clone (Brazil) two M DF clones (Firestone-Brazil) five clones from new IRCA selections\. As part of the cooperation with IRCA, it was agreed that all new planting material introduced in to the Ivory Coast would also 'e tried in Cameroon as soon as feasible\. IRCA was requested to furnish as much information as possible on promising new clones (area planted and in tapping in Indonesia and Malaysia) in order to ensure optimal conditions for their introduction which, because of their impact on the future of an estate, must be made with every care and precaution\. At the request of the Government, as recommended by HEVECAM, FAC financed two expert Missions: - Mr\. GENER in May and October, 1978 - Mr\. TRAN VAN CANH, October 1979\. - 41 - During these missions visits were made to the areas show:g evidence of Fomes\. These involved 1975\. 1976 and 1977 trees planted in bags in hand cleare plots\. It was observed that the attacks of this disease were slightly more serious than those found in the Ivory Coast\. The methods for collecting field observations (Fomes, performance of new clones) have been defined\. At the request of the Government, FAC agreed to bear the cost of a research officer assigned to HEVECAM in order to help it carry out its experi- mental program\. 3\.10 Procure m ent Project Agreement 574-C M stipulates (Schedule I A): A\. General Procedures 1\. Except as provided in Part A\.3 hereof, contracts shall be awarded under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1971 (hereinafter called the Guidelines), on the basis of international competitive bidding\. 2\. Bidders for the works included in Parts C and D of the Project shall be prequalified as described in Part 2\.2 of the Guidelines\. 3\. (a) Land clearing, building of service roads and construction of housing and other facilities shall either be carried out by HEVE CAM through force account or by contractor hand labor procured on the basis of competitive bidding advertised locally in accordance with local procedures\. (b) Any other contract not exceeding $60,000 equivalent shall be procured on the basis of competitive bidding advertised locally in accordance with local procedures\. A single international call for bids was issued in 1975 (closing date July 31, 1975) for the procurement of land clearing equipment, farm tractors, trucks and lightweight vehicles, generating equipment, water treatment station and sprinkler irrigation equipment\. All other contracts were awarded on the basis of local competitive bidding or local quotations in accordance with Sectin A3 of Schedule 1 of the Credit Agreement\. 3\.11 Supervision missions All supervision missions found project implementation to be satis- factory while also making the following observations reviewed below: (a) Seed supply Initial difficulties were caused by incomplete knowledge of possible supply sources\. This problem seems to have been resolved in 1979, as HEVECAM was able to obtain large amounts of higher quality seed\. - 42 - (b) With regard to land preparation, the desired progress has not yet entirely been achieved although this can be expected during the next fiscal year\. Unfortunately, the V-blade trials (opening of individual lines) made with a view to avoiding costly windrowing operations did not produce the results hoped for and windrowing will have to be continued\. (c) The bud-gardens were expanded and are producing enough to supply the budwood necessary for the realization of future programs\. The recommendations made to HEVECAM involving the placement of container-grown plants (two per planting point) and abandoning planting of budded stumps could not yet be put into practice\. (d) The tests on poisoning the stumps which constitute the sources of Fomes infection are now under way\. It is HEVECAM's policy, also with a view to controling Fomes, to plant the cover crop as soon as the land is ready for planting, although this depends on weather conditions\. (e) Rather than recruit an established firm as chief of construction for the works being carried out by force account, HEVECAM has preferred thus far to use small local contractors, as part of the Government's policy to foster the develop- ment of small and medium scale enterprises\. (f) The intention to establish an agricultural section within the Company's technical department has taken a first step forward, even though the estate is not yet in full production, with the assignment of a French cooperant* who is responsible in particular for experimentation\. *This is the least costly solution for HEVECAM, since the company does not have to pay his salary\. (g) HEVECAM's bookkeeping is improving steadily, but still leaves some- thing to be desired, particularly with regard to cost accounting\. The transfer of accounting services from Douala to Niete has caused an upheaval owing to a number of resignations\. IV\. PROJECT COSTS AND FINANCING 4\.01 Projects Costs (Annex 15) From the tables in Annex 1, the cost estimates on which the financing was based can be compared with actual expenditures at June 30, 1979: Table 1: 1975 estimate Table 2: Actual Project expenditures taken from balance sheets and accounts at the end of the fiscal year Table 3: Difference between estimated and actual expenditures\. National service recruit\. - 43 - It should be noted that during negotiations ae motter ol inventories was not raised, although this is an important point for al agro-industial projects, especially those just starting up\. The Government is drawig the attention of the coinanciers to the desirability of establishing such inventories and providing funds for their financing within the framework of new projects in this sector\., The increase in costs as compared with the May 1975 estimates is as follows: 1975 Cost Actual Cost Increase (in millions of CFAF) 4,419 with inventory: 6,717 2,298: 52% 4,419 without inventory: 6,343 1,924: 44% Actual Project outlays at the completion of planting 4,206 ha include the expenditures shown at June 30, 1979 plus the following: - The proportional share of the fees for technical assistance for FY 1978/79 which can only be invoiced after the accounts are closed at the end of the year; - the upkeep of nurseries and planting operations on the 1,125 ha established after June 30, 1979; - completion of buildings under construction at June 30, 1979\. Thus, expenditures under the first Project for the establishment of 4,206 ha as of the planting of the last seedling in the program is CFAF 6,921 million, including the establishment of an inventory of CF AF 374 million\. 4\.02 Financing (Annex 16) Total financing secured for the first Project comes to CFAF 7,777 million (Table 1, Annex 15): National Funds CFAF 3,279 million IDA: 3,553 CCCE: 945 7,777 Foreign aid disbursements exceeded the 1975 estimates: IDA Credit 574-CM: US$15,300,000 instead of US$15,127,000, i\.e\. CFAF 3,483,194,374 instead of CFAF 3,403,575,000\. - 44 - CCC E: C FAF 945,280,000 instead of C FAF 945,0O,OO\. The Government and IDA agreed to finance the addioral topographic and soil surveys (switch from 2 km x 2 km grid to 1 km x 1 kin grid, with peripheral areas) in the form of a subproject under the technical assistance project: ID A Credit 673-C M CF AF 69,903,292 URC -Investment Budget: Technical Assistance appropriation 21,120,000 At the outset of the Project, HEVECAM's cash position was sound, enabling it to invest funds that it did not need immediately and thereby accumulate financial proceeds of CFAF 103 million which helped to finance the project\. However, since 1978, owing to increases in costs and the need to finance inventories, there has been a clear tendency for working capital to dip below the level agreed upon in CCCE Credit Agreement No\. 58 31 00 75 04 0 (Article 6) and in IDA Credit Agreement 574-C M (Section 3\.01\.e): "In order to ensure that adequate working capital shall be available to HEVECAM, the Borrower shall take all action necessary on its part to enable HEVECAM, to dispose at all times of a cash bank balance, including overdraft facilities guaranteed by the Borrower, to cover HEVEC AM's expenditures during the four-month period following, but in any event not less than CFAF 300,000,000\." Consequently, HEVECAM's special general meeting on July 17, 1978 decided on the second capital increase for CFAF 1,400 million, half of which would be paid up in FY 1978/79 and half in FY 1979/80\. This dec5sion was approved by Decree 78/386 of December 7, 1978\. Financing of CFAF 7,777,736,084 was granted to HEVECAM under the following terms: IDA Credit Credit CCCE URC TOTAL CFAF million 574-CM 673-CM (in CFAF million) Capital contribution 493 - 134 3000 3627 Grants 187 70 51 279(1) 587 Loan 2803 - 760 - 3563 3483 70 945 3279 7777 (1) of which creditor interest: 103\. Working capital at June 30, 1979 (Table 4) was CFAF 1,060 million, b-t there was a net cash deficit of CFAF 21 million owing to the amount of acc: -:nts receivable (CFAF 1,351 million)\. - 45 - The cash position has been restored as of the drafting of this report and the outlook is satisfactory for all of calendar 1980, as shown by Table 5, which assumes that financing actually secured for the second project (all the financing for the first project was used at March 31, 1980) is to: - the paying up of the third capital increase (CC CE: CFAF 500 million) and 40% of the fourth capital increase (national funds plus CCC E: CFAF 2,020 million); - the utilization of the first withdrawal of the proceeds of the COM DEV loan ($2\.3 million = CFAF 1,080 million); - the possibility of using the bank overdraft facilities granted by the SCB/BIAO consortium (CFAF 600 million, interest rate 7\.5% per annum)\. V\. ECONOMIC RATE OF RETURN The economic rate of return on the first project involving 4,200 ha was recalculated just prior to negotiations for the second project in November 1979\. This report therefore refers to IBRD appraisal report No\. 2661-CM (green cover of October 26, 1979) for the second project in indicating the following results for the economic analysis of the first project involving 4,200 ha\. 5\.01 Economic rate of return 1975 Appraisal (a) 1979 Appraisal Project (1) Program Project (2) Program Appraisal Estimates 10\.2 13\.6 8\.1 12\.3 Costs plus 10% 9\.0 12\.4 6\.9 11\.1 Costs plus 15% 8\.4 11\.8 Costs plus 25% 7\.2 10\.9 Benefits plus 15% 12\.0 15\.2 Benefits plus 25% 13\.0 16\.2 Benefits minus 25% 6\.2 10\.0 Costs plus 10% and Benefits minus 10% 7\.4 11\.0 Costs plus 20% and Benefits minus 20% 4\.4 8\.2 Benefits minus 10% - - 6\.8 10\.9 Project (1): 5,800 ha (a) World Bank report No\. 716a-CM of May 20, 1975\. - 46 - Project (2): 4,200 ha Program: 15,000 ha Assumed rubber price: First project: USc 35/lb in constant 1974 prices, equivalent to USc 59/lb in current 1980 prices\. Second project: US 117/kg in constant 1980 prices, or USc 150/kg in current 1982 prices, when the first rubber is marketed in 1982\. 5\.02 Financial rate of return Phase I II Ha 4200 13,500 15,000 Appraisal estimates 4\.5 8\.3 8\.7 Costs up 10% 3\.0 6\.9 7\.3 Costs down 10% 6\.0 9\.8 10\.2 Benefits up 10% 5\.9 9\.6 10\.1 Benefits down 10%\. 2\.8 6\.7 7\.2 ANNEX I Perennial Crops Plantation Projects in Coastal Areas (AlIJUT) (7P!'0FLT1T::S PROJECTS CO-FINANCERS IDAN/CREDIT W, DATE CROPS IDAN CREDIT GRANT CANDEV I IDA 100-CM 1967 Oil palm and rubber US$ 7 M US$ 11 M IBRD 490-CH 1OT')ON I FED 448/CA/P 04/11/67 Oil pals\. UCE 6\.482 N Project 225-002\.18 DJ'JTTITSA FED 2282/CA/P July 17, 1978 Tea U1CE 1\.42 ti Projects 4100\.031\.16\.22 Industrial estates UCE 1\.42 i 4200\.031\.16\.23 Smallholders CAM1DEV II IBRD 1508-CH February 1, 1978) oil palm, rubber, US$ 15 H CCCE 58\.31\.00\.77\.04\.0 April 14, 197B ) Nester plan, FF\. 36\.75 H CONDEV \pril 13, 1978 ) Smallholders E 3\.87 H SCAPAIM 111110m0, IBRD 593-CM April 15, 1969 ) US$ 7\.9 N ESEKA CCCE 50,31\.00\.68\.02\.0 February 3, 1970) oil pals FF\. 8\.86 N FAC 11C/69/0\. Project 3/CD/ June 14, 1969 ) FF\. 8\.86 P 69/VI/0/2\. WIBONCO, IBRD 886-CM April 9, 1973 ) US$ 1\.7 H ESEYA CCCE 58\.31\.00\.73\.01\.0 August 6, 1973 ) oil palm FF\. S\.0 M (Supplement) FAC \. 4C/73/0\. Proj\. 47/CD/73/ Hay 16, 1973 ) FF\. 4\.1 m VI/0113 DIM3BARI FED 1157/CA/P November 27, 1973 11 p\.a Proj\. 3200\.019\.02\.18 UCE 8\.85 H 3100 119 02 15 CFAF 808\.9 M DTEOIARI FED 2032/CA/P (Supplement) Proj\. 4200 019\.16\.06 February 14, 1977 UCE 2\.5 HI Capital Venture December 9, 1976 UCE 2\.3 H S!IALIUIOLDERS FED 2189 CA/P Projectst retember 16, 1977 oil palm 4100 031 16 17 4200 031 16 18 UCE 1\.104 it UCE 0, 331 t 1'Bo\.G0, CCCE 58\.31\.00\.77\.03\.0 April 29, 1978 Otl palm, livestock FF\. 13\.4 m ESM'A under palm, coconut LIVESTOCK SOCAPAIN 11 13RD 1391-T-CM; 1392-CM August 25, 1977 oil palm US$ 7\.0 M Us$ 18\.0 M ANNEX 2 Appraisal Cost and Sources of Funds, by Categories of Expenses (in million CFAF and '000 US$) TOTAL COST IDA CCCE GOVERNMENT CATEGORIES IN MILLION IN '000 US$ IN MILLION CFAF IN MILLION CFAF CFAF GRANT CAPITAL LOAN GRANT CAPITAL LOAN CAPITAL SUBSIDY 15% 85% 15% 85% 1\. Field establishment cost 1246 2\. Civil works, buildings 611 720 4080 45 252 480 3\. Equipment materials 837 330 1870 19 115 208 4\. Administration 1138 375 2125 24 135 417 5\. Food crop development 130 300 21 41 1 41 6\. Technical Assistance 227 580 36 36 on 7\. Project related studies 50 120 8 15 BASE COST 4239 1000 1425 8075 65 88 502 1130 92 8\. Contingencies 1834 425 630 3572 24 40 226 450 53 9\. Preliminary expenses 20 20 T 0 T A L 6093 1425 2055 11647 89 128 728 1600 154 15127 1/ 945 1745 1/ US$15,127,000 = CFAF 3403 million 1) - 49 - ANNEX II Table 1 CONSTRUCTIONS areas in m2 Forecast Actual HOUSING/LABOUR temporary 9600 5076 Semi-permanent 28800 29947 HOUSING/SUPERVISORS 4680 3212 HOUSTNG/MANAGEMENT STAFF Assistant 648 Staff level C temporary 904 S i permanent 791 " level B 1376 " level A 200 Total Management Staff 3919 3721 Social buildings 1/ 5796 5277 Kitchens 0 8633 Buildings/ General Services 2/ temporary 250 permanent 3211 3461 5614 TOTAL 56256 61480 3/ 1/ includes: toilets, wash-houses, schools, shops, market, churches, hospital, club\. 2/ includes: offices, workshops, garages, warehouses\. 3/ without kitchens: 52847m2 - 50 - Table 3 BUILDINGS (COMPLETED AND IN PROCESS) (in m2) Type Achieved In Process Total Supervisor/Temporary buildings (a) 5,076 - 5,076 Labour/72m2 construction (b) 23,408 1,728 25,136 60m2 construction (c) 1,800 960 2,760 Individual houses (d) 1,739 312 2,051 Supervisors level 1L & 2L 2,588 624 3,212 Social buildings 3,180 1,336 4,516 Kitchens 7,661 972 8,633 Toilets 609 152 761 Sub-Total 46,061 6,084 52,145 Managerial staff houses 3,173 548 3,721 Administrative buildings 600 - 600 Industrial buildings 5,014 - 5,014 Total 54,848 6,632 61,480 Total buildings (a) + (b) + (c) + (d) equal to 32,023m2 enabling to house 2,668 bachelors (12m2 each) or 670 families (24m2 each) plus 1,335 bachelors (12m2 each) i\.e\. 2005 workers\. CAHIFJ1I3 A11 sEIli HVECAM RUBIrK n~JECF ugnancinl2L&C, (in Hillion s Sterlin, CFAF) WORLD wAwK coc ccCE CFAF) CUVERIT i/ (CrAF) (CrAF) iRF\. CvAF ug$ CFAF IAN E MlMJY S\.I\.51DT 1TTAL EQ'TY SUBS ID¥ TOTAL 10A\. i\.Fild I Sk ablilsb,ent coat 1\.1 jiv i - Deoc\.r,ber 31, 1979 1 418 0\.9 704 111452 1\.2 ia,\. I, (9), Second Pas\. 2 2,243 10\.7 1,458 3\.2 754 256 1,010 897 697 3,608 I\.3 lhi Phae4 570 570 570 2\. Ci_i Bu0,07\. 8uildings 2\.1 ,1v I - 1\. ,ber 3!, 1979 i 166 0\.4 4141 207 \.2 j narv I, 1I0 sond Phase 2 870 4\.1 566 1\.1 293 99 392 348 34 1,16 7\.3 HIld I1\., 4 47 47 47 3\.1 !g\.lør:nt/ r, riectri\.tty 2 120 0\.6 77 0\.2 40 14 54 48 48 299 1\.21 i\.,:, 12,el iractors 3 219 219 219 1\.t2 ter vehic\.", fleevy Iquipi\.nt 2 314 1\.9 204 0\.4 103 36 141 123 12s 7p4 3\.3 oil\.,r Fq\.ipnt \.2 74 0\.4 48 0\.1 25 8 29 29 If, __:t_ 2 367 1\.7 239 0\.5 123 62 165 167 147 918 5\. Ilt iniat [on Joly I - fecimber 31, 1979 1 338 0\.8 81 85 423 1f'er January 1, 1980 2 1,982 9\.4 1,288 2\.9 666 226 892 193 193 955 9378 6\. lesi al A tance 3 564 564 564 7 : ,22,105 1035 1095 4 los losj~ 5\. 'jpljef j_eseerclh 4 9) 9> 9I 9\. _ _libolders 4 e\.lhJ,oIder t Unit 60 60 60 oatoF-rnr\. 85 85- 14s i\. r i laited SudIe 3 139 139 139 11\.1 uIv I - Deter\.ber 31, 1979 1 102 0\.2 26 128 100' erCe 3 24 78 102 102 >,0'\. coverrenent 4 44 62 106 106 Parl Iasso 2 645 3\.1 496 1\.1 213 76 89 I 21 4 234 I 64" 2,i000 1oAL PmoilrCT csT/FIlANCINM 6,613 31\.3 s,400 12\.0 2,219 1,000 781 4,000 3,538 405 3,943 19,95" FIV:;:Cir:G WIMGI CAPIAL 1\.012 1\.012 1\.012 TOTAL 6,615 5,400 4,000 4,95 2 g/ Ref1 I Pari Posu CDC 807,, G-ler-ent 20%\. R'r 2 - art a\. Baik 40%, CoC 26, Goernv \.1 16%, CcC £81 al tich 4ß6z In øqutty and 13\.4% J, J-n\.' Ref 3 - 100', CCE\. Re: f - 100\. CoverOant\. /Of hkl1ch: Eq\.ity: 5,s50 S,b,idyl 1,186 luana '_ Status of Rubber Cultivation in Cameroon S Evolultjon of areas (ha) 75/76 76/77 77/70 70/79 70/0/ 1)1 not in production 2 400l 3 151 3 2641 4 5031 6 6 61I 7 5H(101 In production l 10 7561 10 3701 10 7721 1] 109 1 100! ! 4 5011! 101A t3 156 13 521 14 036 15 612 17 669 22 0t0 'Al ACAM not in production 20 735 7(3 790 995 O l in produetion I4 623 li 607 4 249 4 159 4 159 5 PIAI10 not in production l 00 j0 100 10(10 10010 in production 1 61 1 60 1 6 00 1 60 1 6 6I 01 lAl 1 7001 1 700 1 700 1 700 l 700ll7: IllAviL M not in production 91 37 t 1 li 6 3 Ol l 5 200 () ) 2 in production -3 (19(1 HAI 79 4 374 1 046 3 (01 5 200 15 (1(1 UAltl l(OUN not in production 4 360 5 1937 I li 74 l l 2091(1 19 30 ' in production 16 979 6 577 16 621 I6 I6 6 767 2 0 9 03320 93 21 14 25342 9 7i23,5 ro u d L i o 1 Cl 545l 1 631l 1 740l 1) 615 l l3 Il iAI AUAM n o 2In r05 4 300 l 4 (12() 1 3 4001 $56 19I l PAM10 1 2 000 1 2 0 00 l 2 (0001 2 0001 2 000(1 i l i k Att (I2 ) 1 01dA c6716 791 16 93 17 7 76( 1 6 065 Ill 6071[ (1) Including development of llevacam I project (2) Thieretical production potentiality: 4 200 ha 7 169 T " "15 000 hia =25 57' Tr Regional \.tudy related to levacam I project Future Development of Rubber plantations in the Southern Coasta! zone (1) 19/80 80/81 B1/B2 8ý2/03 6V84 84/85 85/66 860/7 07/8 !6/9 89/90 90/91 91/92 92/9 1Iy;yVIsCÅ4 i 4200 I 13VSCAM Ii 990t 2 210 2 200 2 192 1 7 0 + Plantationf smallholder 50 10D0 1001 250 I 5O¡gygca 11 500 Pl1 600 1600 1 600 1 600 1 600 + PYH/1 200 200 200 200 200 Pq11/2 6 00 1 6 1 (X) + Mi/ 200 100 Total Planted 5 190 7 406 9 650 Il 950 13 750 15 500 16 100 17 900 19 700 21 500'23 300 24 100 25 900 27 700 I Production l- 261 2061 700 2 3851 5 7171 9 704114 090116 650123 182127 460131 001135 146 1 93/94 94/95 95/96 96/97 197/98 90/99 99/00 100/01 01/02 02/03 03/04 04/05 05/06 1Il/2 (mult*) 1 600 1 600 + PY11/2 (flute) 200 200 200 1111/3 6oo i 60o 1 600 1 600 1 600 + PYl/3 200 200 200 200 200 I I I la/4 i 60ó0 6000 6000 1 6001 1 6001 I I I 200 200 200 200 200 Total Planted 129 500 31 300 32 100 133 900 35 700 37 500 9 300 40 100 41 900 43 700 45 500 47 300 47 50 Produotion 139 276143 319147 180150 190J53 666157 620161 476165 211160 135171 661175 141173 61711b1 6541 (1) From the mw-ter plan, being prepared\. - 54 - AN'IEX 10 TABLE i Yield/ha (kg) EVAL A TiN PROJECT YEAR 197_' 1979 N 15C 200 7 900 1200 8 1200 1500 9 150C 1700 10 170C 1900 11 190C 2000 12 210C 2100 13 2200 2200 14 230C 2300 15 2300 2300 16 2300 2300 17 230C 2300 18 230C 2300 19 230C 2300 20 220C 2300 21 220C 2300 22 220C 2330 23 220C 230i 24 230C 2300 25 230C 2203 26 2100 2200 27 210C 2i00 28 200C 2100 29 2000 20u5 30 2000 2000 31 2000 900 32 2000 1900 33 2000 100 35 17 001 36 1700 3 7 1å0 - 55 - AMNEX i0 TABLE 2 HEVECAM I Project rroauction - Tons (in metric tons) PPCUC 0 GN Tons YFAP ilna l 243n' 1085naz2372 ! 37lnn !iat 1981/82 26 26 82 157 49 206 83 196 292 217 705 84 223 365 1302 474 2364 85 249 413 1627 2846 75 5210 86 262 462 1845 3558 450 6577 87 275 486 2061 4032 562 7416 88 283 510 2170 4507 638 8113 39 301 535 2279 4744 712 8571 90/91 301 -559 2387 4981 750 8978 91 301 559 2495 5218 788 9361 92 301 559 2495 5456 825 9636 93 301 559 2495 5456 862 9673 94 301 559 2495 5456 862 9673 95 301 559 2495 5456 862 9673 96 301 559 2495 5456 862 9673 97 301 559 2495 5456 862 9673 98 301 559 2495 5456 862 9673 99 301 559 2495 5456 862 9673 2000/01 258 559 2495 5456 862 9660 01 288 535 2495 5456 862 9636 02 275 535 2387 5456 862 9515 03 275 510 2387 5218 862 9252 04 262 510 2279 5218 825 9094 05 262 486 2279 4981 825 8833 06 249 486 2170 4981 788 8674 07 249 462 2170 4744 788 8413 08 236 462 2061 4744 750 8253 09 236 437 2061 4507 750 7991 10/11 223 437 1953 4507 712 7832 11 223 413 1953 4270 712 7571 12 210 913 145 4270 675 7413 13 - 389 1E45 4032 675 6941 Total 253\.952 t P' l 72 l 0 DI-ic l ' 1 v I C l01Al Village' 1 x1 - 3160 - - 1 20 650 52 564 160 - 4706 Viii lIge 2 3 1 - 4624 - \. 17211 1 5840 127 7(07 - 1 54 4 ILt 360 -I 90\. 7, 72 ? 2 Vii age 3 1 20116 6192 ('ho - 3269 192 uhli (10 - 1,04 ? VilIlme 4 7 1 1441 46(1 0 0 (f4l1 - - 1650 132 616 144 - 4 0 0 it' - - - - 312 150 116 - - - 5411 0 Vi uie 5 9 1 1440 3111111 - - - 1332 106 - - 6 16 10 C -- 432 960 - 312 426 34 60M0 - - 21152 H- Vi I1l t 6 1 1 1 - 936 - -- - - - - 9 56 12 IC - 576 - -- 216 10 5/6 - - 1 3I86 Staff compound 13 - - - 1739 - \. \. - 3 75 4912 15 14 (' - 312 - - - - - 5411 11(60 C (i e 15 1 - - - 165 2(150 t 31115 ( 16 It -' - - - - - - Police 17 1 - 120) - 190 42 - - - - (D2 D Il iil it joll 19 1 1 1 -0- - - - - - 1115 - 0/iIl 20 TOTAL 1 5076 2 54(108 11100 1739 2511 7661 609 3101( 6 14 17/ 51 411 TOTAL - 1728 96(10 312 624 972 152 J336 5411 957 GRAND TOTAL 5076 2513(6 27604 2051 1212 11633 761 4516 5614 5721 614110 1 = completed EC= in process - 57 - MAIN EQUIPMENT Apavraisal Actual I\. HEAVY EQUIPMENT Crawler tractor D8 13 14 + 1 D6 2 3 + 1 D4 1 1 - Motorgrader 1 2 + 1 Loader 1 2 + 1 Road roller 1 4 + 3 Stone crushing unit 0 1 + 1 Wheel tractor 7 13 + 6 Trailer 9 15 + 6 II\. VEHICLES 8T truck 9 16 + 7 Wheel tractor plus trailer 1 1 - Tipping truck 1 1 - Tow truck 2 1 (1) Garbage truck 1 - (1) Fuel truck - 1 +1 Car/9HP 10 10 - Car/7HP 26 20 (6) Car/4 wheel drive 11 20 + 9 Minibus 6 4 (2) Ambulance 1 1 - Motorcycles 50cm3 9 10 + 1 - 58 - 13 TABLE 3 ';?OWER EVOLUTION (HIRED AND DISMISSED) PERIOD BEGINNING OF HIRED DISMISSED END OF PERIOD :PERIOD January/June 1977 528 400 275 652 July/December 1977 652 :58 392 918 : : January/June 1978 918 : 1 246 779 13Q5 : July/December 1978 1 385- : 976 841 1 520 : January/June 1979 : \. 520 1 555 1 178 1 897 :28 : 4 835 : 456 1 897 TYPE OF RECRUITMENI PERI0DE IN GROUP INDIVIDUALLY TDTAL July/December 1977 381 277 658 January/June 1978 754 492 1 246 July/December 1978 576 400 9765 January/June 1979 866 689 1 55 ORIGIN OF HEVECAM WnRKijRg PROVINCE OF ORIGIN May 1978 Januarv 1-97 June 197q Center - South 41,4 : 45,9 40,6 w\. Littoral 16,0: 9,0 7,2: West & South - West 33,5 t\. 37,5 42,3 : North : 3,9 : 1,3 7 : East 3,8 :,7 7 2 : Foreigners 100: 00~ 100 - 59 - ANNEX 13 MANPOWER EVOLUTION 2/7S!6/76 12/76 6/77-12/77 6/7,2/7 6/79 Niete Es:ate Plantation Supervisors 2 2 3 5 14 18 20 28 Skilled workers Laborers 10 8 10 79 Unskilled laborers 36 33 91 33 189 243 277 303 - Men 177 595 389 465 641 976 1030 1354 - Women 33 30 37 30 62 12 14 125 248 273 528 661 920 1385 152C 1897 Douala Office 12 9 Supervisors Category VI and VII 4 4 6 6 10 13 13 Category III and IV 6 10 10 13 14 15 20 14 12 18 22 29 35 39 45 34 - 60 - GRO\.TE IN GROSS SALARIES NIETE RUBBER ESTATE 75/76 76/77 77/78 78/79 1) Number of days Days worked 55,918 120,470 264,517 436,306 Days paid 59,100 128,447 286,490 L69,884 2) Gross salaries paid (CFAF) 22,048,811 72,207,957 174,L86,664 334,383,975 3) Average daily salary (CFAF/DAY) Per day worked 394\.3 599\.4 659\.6 766\.4 Per day paid 373\.1 562\.2 609\.0 711\.6 GROWTH OF SUPPLEMENTAL PIECE WORK (CFAF) 77/78 78/79 Construction - 16,141,108 Maintenance of fields 15,466,075 30,321,826 Topographical surveys 5,335,865 3,770,803 20,801,940 50,233,737 Day - equivalents 46,250 days 90,533 days ANALYSIS OF LABOUR USE 76/77 77/78 78/79 1) Days Worked (w) 120,,70 264,517 436,306 Paid leave (PL) 8,625 23,077 35,992 Unpaid leave (UL) 44,062 84,281 125,676 2) Absenteeism (Y) Total 17\.9 15\.7 14\.3 Unjustified 13\.0 10\.9 9\.9 3) Number of days paid 128,447 286,490 469,884 -- - 61 - ANNEX 13 TABLE 6 Distribution/Age of Workers May 1978 January 1979 June 1979 1930 to 1935 75 6,4 - 97 6,2 t 117 6,2 - 1936 to 1940 147 12,4 ! 192 12,3 1 223 11,9 ! 2941 to 1945 37 8,2 % 128 8,2 X 148 7, C9 1946 to 1950 158 13,4 % 214 13,8 t 243 12,9 - 1951 to 1955 340 28,7 % 449 28,9 % 553 29,4 Z 1955 to 1960 366 30,9 I 475 30,5 X 595 31,7 1 1 183 1555 1879 Break-down of Dependant Population May 1978 January 1979 June 1979 Married 139 183 222 Bachelor 915 1 202 1 453 Unmarried living 129 169 206 together Married women 139 221 225 Illegitimate wife 139 129 205 Legitimata boy 82 107 127 Legitimate girl 37 97 157 Illegitimate boy 43 57 68 Illegitimate girl 59 72 79 1\.662 2\.237 2\.742 *1 Cost of the Plantation Project: 1975 estimate, project of 5,800 \. Category (1) 75/76\. 76/77\. 77/78\. 78/79\. S/Total 79/80\. Total U a - Field Costs 54 171 292 661 1 078 742 1 820 r - Civil Works 49 72 258 264 743 251 994 Sub-Total 103 243 550 925 1 821 993 2 814 t 2 - knuipment and\.material 193 33? 304 214 1 043 53 1 096 0 3 - Administration 194 176 312 408 1 090 516 1 60C Rood crops 48 50 53 )51 29 180 5 - Technical Assistance 44 53 64 75 236 78 314 6 - Pro1cet related stidies 24 27 3 4 8 63 7\. Initial statutory cost 20 20 Total 578 879 1 283 1 679 4 419 1 674 6 093 (1) The regional studies have been finance ou de Hevecam for 342 million, ANNEX 15 TABLE 2 HEVE CAM I Project Actual Expenditure (in million of CFAF) (excluding Master Plan) \. \. \. \. \.Sous \. 1975/76 1976/77 1977/78 1978/79 TOTAL 1979/80 T 0 T A L 1-a- Field establishment 45 187 432 879 1 543 85 1 628 -b- Civil works 92 284 568 503 1 447 75 1 522 -c- Inventories 26 113 169 66 374 - 374 A - Sub-total a-b-c 163 584 1 169 1 448 3 364 160 3 524 2- Material/equipments 248 502 467 193 1 410 - 1 410 3- Administration 155 218 460 642 1 475 - 1 475 4- Food crop development - 10 32 33 75 - 75 5- Technical Assistance 34 46 66 85 231 44 275 6- Project Related Studies 10 97 29 17 153 - 153 B - Sub-total 447 873 1\. 054 970 3 344 44 3\.388 Initial statutory cost 2 - 1 2 5 5 Coastal Estate Center - - 2 2 - Advances and deposits I - - 2 - 2 3 1 1 4 9 0 9 10TAL A i 8 i C 613 1 458 2 224 2 422 6 717 204 6G921 - 64 - ANNEX 15 TABLE 3 PROJECT COST EXCLUDING MASTER PLAN Variation Between 1975 Estimates and Actual Expenses Estimates Actual Expenses Variation 1-a- Field establishment 1 078 1 543 + 43 b- Civil Works 743 1 447 + 95 Inventories 0 374 2- Material and equipment 1 043 1 410 + 35 3- Administration 1 090 1 475 + 35 4- Food'crops 151 75 - 50 5- Technical Assistance 236 231 - 2 6- Project related studies 58 153 + 154 20 5 - 75 7- Initial statutory cost - Coastal Estate Center 0 - Advances, deposits 0 2 Total 4 419 6 717 + 52 4 419 + 43 - 65 - ANNEX 16 TABLE 1 Project Financing (Excluding Master Plan Distribution Between Co-financers R\.U\.C CaPital Equity 300 000 000 1st increase 1 300 000 000 2nd increase 1 400 000 000 Subsidies Financial agreement 15E 000 000 Topographical surveys 21 120 000 Interest -103 238 418 3\.279\.358\.418 IDA Credit 574 CM 3 A83 104 374 Credit 673 CM 69 903 292 3\.553\.097\.666 C\.C\.E 945\.280\.000 7\.777\.736\.084 (1) PARI-PASSU FIRST PROJECT (2) TECHNICAL ASSISTANCE PROJECTTOTAL AID CCCE RUC TOTAL AiD RUC TOTAL Field establ\. and 58 t_16 1 26 100 1 civil works 1891562910 511149320 844196189 3246908419 3407109014 Material and equipment 733974849 201882261 328814660 1264671770 1264671770 Administration 670217512 180810151 299009719 1150037382 1150037382 Food crops 53894373 14084653 23884523 \.91863549 91863549 Technical Assistance 106758685 29964361 48037827 184760873 270353060 Project related studies 26786045 7389254 12007538 46182837 69903292 21120000 91023292 \.137206129 3483194374 945?80000 1!,5950456 5984424830 69903292 21120000 91023292 0 0 343?47 9420003Z9546 ~1240912 0 15 300 000 US A Or I US $ 227\.66 F\. CFA 0 (3) Expenses incurred after July 10, 1979 related to the completion of the 4,206 ha and financed under the 2nd project C\.D\.C (i\.w\. C C\.C\.C\.E 80o 20 % 100 T otal Field establ\. and 128\.160\.476 32\.040\.119 160\.200\.595 civil works Technical Assistance 85\.592\.191, 85\.592\.195 128\.160\.476 32\.040\. 119 85\.592\.195 245\.792\.790 1/ Grand total (1) + (2) + (3) ,_Ni Total of Co-financing National (in million CFAF) Total Cost total National FinWp,ing Financing Share b 0'b e= + Se c + d O H H0 Plantation, civil works, 3 52 3 407 876 118 994 inventories Material and equipment 1 410 1 265 329 145 474 0 Administration 1 475 1 150 299 325 624 n Food crops development Wa 75 92 (1)24 (17) 7 C t Technical Assistance 275 (2) 270 48 5 53 Project related studies 152,6 137 33 15,5 48:5 Expenses related to statutory 5 C 5 Participation 2 2 A deposit 1\.5 1,5 1,5 101AL 6 921 6 321 i1 609 600 2 209 (1) Concerning the food crop development, the amount appearing in column "a" is related to the operating costs, the amount indicated in column "b" includes the equipment brought for this program\. # - 68 - CAMEROON NIETE RUBBER ESTATE PROJECT (Cr\. 574-CM) IDA Overview of the HEVECAM Project Completion Reoort /1 Introduction 1\. The project completion report (PCR) was prepared by the implementing agency HEVECAM on the basis of the Bank's standard guidelines\. The original French text of the main report has been translated while the numerous Annexes are kept on file in the original version and are available on request\. However, certain key tables from the Annexes have also been translated and are appended together with a set of the maps of the attached report\. 2\. The HEVECAM PCR itself provides an objective assessment of the achievements realized, as well as detail the problems and difficulties that were encountered during project implementation\. The following observations are provided to record the views of the operating division that was responsible for identification, appraisal and supervision of the project\. Summary 3\. The project set out to create an industrial rubber estate of 5,800 ha as the first phase of an eventual 15,000 ha plantation\. Also included was the preparation of a Master Plan for the development of the southern coastal zone of Cameroon in which the plantation is located\. Financing was provided by IDA (US$16 million), CCCE (FF20 million), and Camerooniar Government (CFAFl\.8 billion)\. At the prevailing exchange rate total project cost was estimated at CFAF6\.4 billion (US$28\.5 million)\. 4\. No detailed rate of return calculations were prepared for the 5,800 ha first phase, but the completed 15,000 ha estate was expected to show a rate of return to Government of 14% (financial and economic estimates identical), and the 5,800 ha treated separately was expected to show the same rate of return within one percentage point\. Principal benefits deriving from the 5,800 ha were expected to be: (i) foreign exchange earnings rising to US$7 million annually at full maturity from a production of 13,000 tons of rubber, (ii) secure employment for 3,000 workers and higher living standards for them and their families, 12,000 people in total, and (iii) the creation of a focal point for further development of a largely unpopulated region\. 5\. The principal risk was seen to lie in the difficulty of attracting and retaining a satisfactory labour force in such an undeveloped area\. 6\. As a result of substantial cost overruns and a rescheduling of the development timetable, financing was exhausted when only 72% of the planting /1 Prepared by Western Africa Region (WAPA2) staff\. The attached translation of the original text has been made with only minor editorial changes\. - 69 - program (4,200 ha) had been achieved\. Revised rate of return calculations now suggest: for the 4,200 ha, 4\.5% financial and 7\.5% economic; and for the eventual 15,000 ha, 8\.7% financial and 12% economic\. The necessity for higher than initially planned investments in social infrastructure were a major factor in the cost overruns\. This was of course closely related to the problem of attracting and retaining labour and a major upgrading, imposed by Government, of the housing standards to be provided by the agro-industrial corporations\. No attempt has been made to evaluate in quantitative terms these increased social benefits deriving from the project but they are by no means negligible in socio-economic terms and must be recognized in any overall judgment of the project's achievement\. On the other hand, the expectation that surplus labour from the north would be attracted and settled in the project area was not realized and HEVECAM is in direct, competition for still scarce labour with SOCAPALM and CAMDEV, the two other major Government-owned plantation companies, and with the private sector, PAMOL, SAFACAM, and SPFS\. Imnlementation 7\. Relations between IDA, the project agency HEVECAM, the technical assistance agency SAFACAM, and the supervising ministry have at all times been good and the contractual obligations imposed by the Credit and Project agreements have in general been respected\. Effectiveness was delayed by a tardy contribution of capital by the SNI, and HEVECAM was at times in financial difficulties because of delays between the dates when expenses were engaged by the company and reimbursements were received\. This was largely due to time consuming screening procedures in the country before demands were presented to IDA\. Supervision missions also commented on delays in the preparation and presentation of HEVECAM's accounts and on certain shorbcomings in its auditing arrangements\. 8\. At the agronomic level HEVECAM's performance has been highly competent, and the creation of 4,200 ha of plantations in this area, virtually devoid of infrastructural support, represents no mean technical achievement\. 9\. In the following paragraphs an attempt has been made to clarify and when appropriate comment upon the major issues raised by HEVECAM in the PCR\. For ease of reference we have retained the paragraph numbering of the English text\. Commentary 2\.08(a) TransDortation infrastructure\. Government ha\.s remained in default, through lack of resources, on Section 3\.04 of the Credit Agreement\. The Douala- Kriti road has never been upgraded to the status required and lack of a year- round motorable road has at times severly handicapped the project\. 3\.02(e) Pests and Diseases\. While the risk of losses due to Fomes root-disease should not be underestimated the conditions at Niet6 do not lead one to anticipate more serious losses than are normally encountered in a development of this nature\. The agricultural techniques that have been adopted are designed to keep the danger to a minimum\. - 70 - 3\.02(f) Exploitation\. The yield forecasts are realistic in terms of the known genetic potential of the planting material under modern methods of exploitation\. However, instability of the labour force, and the difficulty other companies are known to have in retaining tapping labour of the required calibre, must raise some concern as to the prospects of achieving the projected yields, at least during the early years of exploitation\. 3\.03 Construction\. (a) Housing for Labour\. The CFAF 400 million is not all strictly a cost overrun since, had temporary housing been built as originally planned, the cost of permanent quarters would have been an additional expense against the company's future development budget (HEVECAM II et seq\.) The accelarated construction program was related to the labour problem, the need to provide more attractive accommodation in order to retain workers, and Government's decision to upgrade statutory housing standards for all plantation workers\. While one cannot do other than commend these social objectives it becomes very difficult to evaluate HEVECAM's prospects and performance as a commercial organization when it is obliged to fill such a dual role\. (c) Basis village infrastructure, and (d) General service buldings have both been provided to standards that could not have been considered as essential in a purely commercial context and reflect HEVECAM's special obligations as Government- owned development corporation\. It is of course arguable that these social expenditures should be more heavily subsidized by the state in order to ensure a normal level of profitability for the commercial venture\. 3\.04 Materials and Equipment\. The expansion of the tractor fleet was made necessary by the limited number of hours that heavy equipment is able to operate under Niete conditions\. However, the normal total of operating hours over the life of the equipment is still expected to be realized and the potential carried forward to the second project has substantially reduced, in fact almost eliminated, the purchase of new tractors to complete the planned development\. The need for more solidly built supervision and general service vehicles is closely related to Government's failure to create a road system commensurate with the requirements of the area\. 3\.05 Personnel and Workforce\. According to the SAR it was expected that by June 30, 1979 HEVECAM would be employing 20 management staff, 12 expatriates and 8 nationals\. (Annex 3 of the PCR is in error on this point)\. In fact the number of Cameroonian managers has been raised to 15 while the expatriate strength remained at 12 as planned\. Thus, by normal standards, the company is overstaffed\. However, here again, HEVECAM's development role in the training of national management has been given precedence over purely commercial considerations\. The labour force, which numbered 528 workers in January 1977, had risen to 1,897 by June 1979\. These figures are very close to the appraisal forecast of the company's needs (1,810 workers at end of PY4, i\.e\. at June 30, 1979)\. In order to achieve this increase of 1,369 over 2 1/2 years HEVECAM brought in a total of 4,835 recruits\. Total wastage over the period was 3,466\. Between January and June 1979, 1,555 new workers were recruited and there were 1,178 departures\. This enormous turnover has grave implications for the future as the company's need for skilled labourers, especially rubber tappers, builds up\. At appraisal it was expected that HEVECAM would be able to recruit most of its labour from - 71 - the north but by June 1979 less than 2% of the workforce were northerners\. It has now to be\.realized that in a country as ethnically and climatically diverse as Cameroon great mobility of labour across cultural boundaries is not to be expected in the short term\. Actually workers are more interested in a shift from rural to urban employment than in changing from one agricul- tural job to another\. 3\.06 Foodcrop develorment\. After some disappointing attempts to adopt modern methods of husbandry (e\.g\. mechanized rice growing) in order to produce food crops for its workforce HEVECAM has' gone back to the more traditional system of making available land on which its workers can grow their own food\. The eventual provision of improved varieties of the staple crops should prove of real benefit, but not too much can be expected in the way of food crop farming until the company has a stable labour force with a high proportion of married workers\. 3\.07 Technical Assistance\. HEVECAM has been strongly supported by SAFACAM and the six-monthly inspection visits have been followed by the production of detailed reports on project progress that have been of the highest quality\. This technical assistance has greatly facilitated the task of IDA supervision missions\. However, the TA contract is open to criticism in that the amount paid to SAFACAM is proportional to HEVECAM's investment expenditures\. In principle, this is an unsatisfactory arrangement and open to abuse\. Though it must be recorded that in SAFACAM'c case the utmost probity has been observed, the contract is not a satisfactory model for future use\. 3\.10 Procurement\. There have been no major problems with regard to procurement though inflation during the project period resulted in some technical infringements (ICB not observed for everythLng over US$60,000) which were accepted by the co-financers\. 4\.01 The financial tables relate to the planting of 4,200 hectares, which was completed in September 1979\. The total cost (CFAF6,921 million) was financed partly under this project (CFAF6,717 million for expenditures up to June 30, 1979) and partly out of co-donors contributions to the second HEVECAM project (CFAF204 million) for expenses incurred in the first quarter of FY 1979/80\. Minor discrepancies appearing between the various financial tables have been summarized in a separate memorandum\. They do not affect the global view of the project costs and financing\. 4\.02 IDA financing was made available partly through technical assistance credit 673-CM (cFAF69\.9 million) and mainly through c:redit 574-CM (total US$16 million, i\.e\. CFAF3,483 million for HEVECAM and CFAF152 million for the Master Plan)\. Transfers were made at an average :ate of US$1: CFAF227\.2 against the appraisal estimate of US$1: CFAF225 representing a gain of CFAF35 baillion\. The credit was entirely disbursed by end March 1980, 15 months before the closing date\. - 72 - The disbursement profile given below is expressed as a percentage of the total credit: Years from loan signature % 1 4 2 21 3 44 4 86 5 100 AGreen:mcl Attachments  一，& ヤSPし上0と日1

APPROVAL

P083543

Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: AB895 Project Name Road Maintenance Program (Phase 2) Region EAST ASIA AND PACIFIC Sector Roads and highways (97%);Central government administration (3%) Project ID P083543 Borrower(s) LA O PEOPLE'S DEMOCRATIC REPUBLIC Implementing Agency Ministry of Finance Lao People's Democratic Republic Ministry of Communication, Transport, Post and Construction Lanexang Avenue P\.O\. Box 4467 Lao People's Democratic Republic Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Safeguard Classification [ ] S 1 [X] S 2 [ ] S 3 [ ] S F [ ] TBD (to be determined) Date PID Prepared June 4, 2004 Date of Appraisal Authorization May 17, 2004 Date of Board Approval J une 29, 2004 1\. Country and Sector Background The World Bank has nearly ten years of partnership with Lao PDR in the transport sector\. RMP - 2 is the second and concluding phase of the Road Maintenance Program (an Adaptable Program Loan (APL)) which builds u pon the initial Road Maintenance Project (RMP: Cr\. 3481 - LA; SDR 19\.2 million), and follows a previous series of investment projects including the First, Second and Third Highway Improvement Projects (Cr\. 2218; SDR 32\.1 million; Cr\. 2606 ; SDR 21\.8 million ; and Cr\. 2943; SDR 34\.6 million)\. All projects have been implemented satisfactorily, and the Government has requested continued IDA assistance\. The Government has made a strong start towards achieving sustainable maintenance of the road system, as sho wn by the establishment of the Road Maintenance Fund (RMF) in 2001 and the successful implementation of three years of maintenance programs with support from the Road Maintenance Project\. The RMP - 1, supported by a parallel financed Second Lao - Swedish Road Sector Project (LSRSP - 2), strengthened the technical and managerial capacity in the Ministry of Construction Transport, Post and Communications (MCTPC) and in selected provincial Departments of Construction Transport, Post and Communications (DCTPC)\. The approach to management and delivery of maintenance was established through three successive annual work programs for periodic and routine maintenance on the NRN and on the LRN in the selected Provinces, and the participation of the private sector through the development of national Page 2 competitive contracting procedures and village - based contracts\. The purpose of the RMF is to establish a steady and adequate domestic funding source for road maintenance based on the substantial recovery of costs from road user s\. The Government currently meets an estimated 45% of road maintenance needs, of which nearly one third is sourced from the RMF, mainly for national roads\. The RMF is growing slowly and effort is now required to establish and achieve a sustainable level, and to develop its role for the local road network (provincial, district and rural roads)\. Steps have been taken to protect road assets by reducing the overloading of heavy vehicles but much more is needed for improving the safety and administration of r oad transport\. 2\. Objectives The second phase of the Road Maintenance Program (RMP - 2) will expand the operation of financing and management systems for the sustainable maintenance of the road networks to all 18 provinces/zones countrywide, based on the succe ssful experience of initiation and piloting under the first phase, with the following development objectives: (a) National and local road assets are preserved to provide sustainable improved travel and access for road users and communities in most areas c ountrywide; and (b) Sustainable financing and management of roads is operational countrywide with improved institutional capacity at central and local levels in the public and private sectors\. In line with the main objective of the World Bank’s CAS, the proposed project will support rural and national infrastructure development, including maintenance of national highway networks\. The second phase of the APL will continue to assist with the long - term development of an effective road management system at t he central and provincial levels for the maintenance of both the national and local road networks\. The proposed grant activities will complement a US$22\.65 million IDA credit and other cofinancing for goods and services with a results - oriented capacity - enh ancement program which aims to achieve a sustainable maintenance management and financial management systems for the entire network\. 3\. Rationale for Bank Involvement Rationale : GoL has performed well on RMP - 1 and has requested to proceed with Phase 2\. The development objectives for RMP - 1 have been substantially met, and all three trigger criteria for the second phase have been substantially met, i\.e\.: (i) financial resources allocated for road maintenance exceed 35% of needs on NRN and LRN (achieved 45% i n FY03); (ii) the third maintenance AWP (MP - 3) prioritized using the new Road Management System (RMS) (delayed but will achieve for the MP - 4 in FY04/05); and (iii) disbursements from IDA Credit are greater than 60% (79% in March 2004)\. Under their ‘one c ountry, one system’ policy, MCTPC is relying on IDA to lead the support on the road maintenance initiative to be followed by other donors\. Development and conservation of the road network is crucial to the national and regional integration of this land - lo cked country\. A series of investment projects in the 1990s, along with other donors, focused on rehabilitating about 3,000 km of the arterial road network and bridges, with an investment of about $600 million which absorbed about half of the government’s public investment plan and over 5 percent of GDP\. The three IDA Highway Improvement projects have been implemented satisfactorily, ending in 2003\. Despite this improvement to the national Page 3 network (NRN), much of the 24,000 km network remains under develo ped, with just 22% paved and 45% all - weather\. The 8 - year two phase Road Maintenance Program marks a major shift in focus, arising from the Government’s “Strategic Directions for Development of the Road Sector” of June 2000, from investment to one of prese rvation and sustainable management of the road assets\. It aims to help establish a maintenance culture in the country at both national and local levels, including the capacity and tools for management, and the capacity for delivering services through the private sector\. The first phase (Road Maintenance Project, RMP - 1: Cr\. 3481 - LA; SDR 19\.2 million) focused on initiation of the road management system, establishing a national cost - recovery - based financing mechanism and road management programming tools, implementing three annual programs of competitively sourced periodic maintenance contracts on the National Road Network (NRN), piloting maintenance contracts on the Local Road Network, establishing village - based area contracts for routine maintenance, init iating effective vehicle loading control, establishing vehicle weight control facilities, and strengthening institutional capacity at the national level and selectively at the local level in four Provinces (Luangprabang, Luangnamtha, Champassack and Savann akhet)\. Partnership was key – Nordic (NDF) cofinancing for the technical assistance aspects of RMP - 1, and Swedish (Sida) financing of a parallel project (LSRSP - 2) which led on the local road aspects and expanded the coverage to seven Provinces (of 19)\. Th e second phase is intended to fine - tune the systems and extend them to cover the management of both National and Local road networks over the whole country\. The Road Maintenance Fund (RMF) established in 2001 has grown steadily but slowly with only one increase in the low initial fuel levy and over - reliance on road tolls – the current revenues of estimated $2\.5 m in 2003/04 constitute only 15% of the $16 m estimated annual road preservation needs, and the 6 - fold increase in fuel levy (to about 3\.5 c/L) n eeded to reach the full target by 2009 is challenging to GoL\. The Government, with foreign assistance, currently meets an estimated 45% of road maintenance needs, however counterpart funds are very limited, often causing delays, so greater leveraging of t he Fund is a favored option under RMP - 2\. There is pressure to release more of the funds for rehabilitation, currently limited to less than 20 percent of RMF or RMP\. Funding for local roads (provincial, district and rural roads) is particularly scarce, a nd an improved mechanism for sharing and distributing funds needs to be developed and piloted under RMP - 2\. The new local road management model developed under the parallel LSRSP - 2 is being reviewed before expanding its use to national coverage\. This will focus on clarifying the roles of Provincial District and village levels in managing rural infrastructure, which will be coordinated with the parallel IDA projects Provincial and Rural Infrastructure (proposed) and Poverty Reduction\. Poverty impacts will derive from improved all - weather access and increased local employment\. Considerable effort will be needed to strengthen the technical and managerial capacity in all the provincial Departments (DCTPC) to implement the preparation, procurement and supervis ion of works\. In road transport, a significant reduction in incidence of overloading on heavy vehicles from over 90% to about 32% was made with targeted enforcement, now Page 4 training will be needed for operation of the pending new weighing stations\. Much mor e is needed for improving the safety and administration of road transport\. 4\. Description Component A\. PRESERVATION OF THE ROAD NETWORKS (US$60\.7 million) Adopting a programmatic approach, this will support a slice of four Annual Work Programs (AWPs) for periodic maintenance and routine maintenance on the National Road network countrywide and on selected parts of the Local Road network in all Provinces/Zones countrywide, and strengthen the quality of implementation\. In a shift of focus based on economic and social analysis of needs, the Phase 2 program would devote nearly half the resources (48%) to maintenance of local roads, with particular emphasis on Provincial roads (30%) due to the poor condition of that network, and will contribute to substantial i mprovements in the quality of access to all districts, especially the 47 poorest districts\. A\.1 National roads : Support for the periodic maintenance and rehabilitation program at an average level of US$6\.4 million/yr (estimated to be about 45 percent of th e sustainable level of about US$15 million/year), by supplementing the resources of the Road Maintenance Fund (RMF) which is recovering an increasing portion of costs from road users, and resources from other donors\. All routine maintenance will be finance d by counterpart funding, largely through the RMF, and all implemented through the private sector and mainly village - based\. A\.2 Local Roads : Support for the periodic maintenance and rehabilitation of about 30% of the provincial road network at an average lev el of US$4\.10 million/yr with costs shared by local government, RMF and external funding\. There is the potential for additional external donor support for the District and rural road networks in the near future\. A\.3 Implementation Support: Assistance to cent ral and provincial departments for improving the quality of implementation of the road preservation programs, including strengthened supervision of technical aspects and monitoring of safeguards aspects, especially at the provincial level\. Component B \. CAPACITY BUILDING (US$10\.1 million): This will support the strengthening of capacity of the transport sector in two core business functions (management and financing of the road infrastructure, and management of road transport and safety), as well as the general institutional capacity at both national and sub - national levels, through: B\.1 Road Management and Financing - the establishment and operation of appropriate procedures at central and provincial levels for planning, budgeting and implementing maint enance work programs on: a) National roads and bridges; b) Local roads and bridges (provincial, district and rural roads); and c) Support for scaling up the RMF to a sustainable level of cost recovery and determining appropriate cost - sharing arrangements a t the local level\. B\.2 Road Transport Management and Safety - Improvements to road transport administration procedures and systems, expanding the heavy transport management program (HTMP) of overloading control through the operation of new weight control Page 5 faci lities built under RMP1, and development and implementation of a program of road safety improvements\. B\.3 Institutional Capacity Building – Strengthening the capacity and performance of MCTPC and provincial DCTPCs’s through: a) Improvements to the organizatio n and business processes, for upgrading key business functions including safeguards and strengthening organizational functions, and for effective operation under a decentralized structure; b) Human Resource Development, including results - oriented learning and training programs; c) Information technology and communications, for upgrading the computerization of central and provincial offices; d) Facilities, for provision of basic office facilities and transport to support operations at district level; e) Str engthening of the private sector, including construction and transport industries, and consultant capacity; a nd f) Environmental and Social Safeguards Capacity, enhancing baseline information on construction resources, community right - of - way, and related a ctivities\. Component C\. PROJECT ADMINISTRATION (US$0\.85 million) This will support efficient administration of the Program through: C\.1 Project Monitoring - Strengthening project management, reporting, monitoring of project impacts and safeguards, and pr eparation of future sector programs\. C\.2 Incremental operating costs – Modest budget support for project - related activities at central and provincial levels\. C\.3 Auditing - Financial and technical audits to ensure quality of project implementation\. The project s cope of approximately US$71\.7 million is slightly larger than the originally planned scope of US$70 million because of the inclusion of all the local road network and thus a larger apparent share by the government\. The IDA allocation of US$22\.65 million a vailable for the second phase is less than the US$35 million planned\. Other financing has been tentatively planned to meet the financing gap, but this would also be eliminated if the RMF targets for road user cost recovery are fully met\. 5\. Financing Sourc e: ($m\.) BORROWER/RECIPIENT 26\.7 INTERNATIONAL DEVELOPMENT ASSOCIATION 22\.7 ASIAN DEVELOPMENT BANK 1\.0 JAPAN: MINISTRY OF FINANCE - PHRD GRANTS 4\.8 NORDIC DEVELOPMENT FUND 9\.7 SWEDEN: SWEDISH INTERNATIONAL DEVELOPMENT COOPERATION AGENCY (Sida) 5\.8 Total 71\.7 6\. Implementation The unit responsible for overall financial management functions will remain the same, which is Disbursement Division within Department of Road\. The current FM system will be continued with minor modification in reporting system, arrangement of audit and accounting procedures to Page 6 be up to acceptable standards\. This system was assessed to be adequate in the first phase of the project and it has been gradually improved during implementation\. Currently, it is functioning well\. Since t he division was established to handle all foreign fund financial activities in the road sector and the system was unified to capture records of all foreign fund projects in a single database, this would benefit for sector financial statements and audit if the client wish to move the sector agenda along\. As for funds flow, there would be two Special Accounts similar to the current project; one for MTCPC to cover eligible share of project expenditures other than RMF activities and the other for Road Mainten ance Fund (RMF) secretariat\. The proposed funds flow arrangements are presented in the attached chart\. 7\. Sustainability The basic objective of the RMP - 2 is to enhance the long - term sustainability framework for maintaining the NRN and LRN through the followi ng initiatives: a) Maintain a sustainable revenue source for preserving road assets; b) Continue to promote participation of main stakeholders in project design, implementation and operations to ensure ownership of project objectives; c) Improve MCTPC /DCTPC practices and restructure them according to their responsibilities; d) Promote road maintenance activities that are economically, financially and environmentally viable; e) Enforce key regulations on road transport operations which affect the pave ment life; f) Promote road users' participation both in the management and financing of the sector; and g) Improve the capability of the local construction and consulting industry\. RMP - 2 will support the continued efficient operation of the Road Maintena nce Fund which, over time, would generate sufficient revenue to cover the full cost of preserving the road network in Lao PDR, by 2010\. Moreover, the Road Management System will be further enhanced and strengthened within the existing sub - systems\. 8\. Less ons Learned from Past Operations in the Country/Sector Project Implementation is mainstreamed in MCTPC \. Coordinated by DOR through the Project Monitoring Division, this organization of functions enables improvement of monitoring and reporting, avoidance o f duplication, fostering donors’ coordination and opportunities for the staff’s career growth and professional development\. The RMP - 2 project will be implemented by the MCTPC’s departments with all the functions incorporated into MCTPC\. Technical Audi ts are an effective instrument for enhancing quality \. Timely and independent professional opinion will be provided by auditors during implementation to allow for MCTPC to identify and resolve any issues early in the life of the project\. The auditor has t he mandate to comment on technical issues, the implementing agency’s procedures, as well as the Bank’s contribution and effectiveness during implementation\. Continued contracting with the local private construction industry \. Previous projects contributed to the commercialization of all MCTPC construction and maintenance enterprises Page 7 (SOEs) and to the introduction of competition - based procurement\. RMP - 1 established a long - term development strategy and supported its implementation and will continue to do so with this project\. Allocation for emergency maintenance \. Lao PDR is frequently affected by heavy rains that cause land and road slides\. The project includes financing emergency (about 15% of the planned routine maintenance) and routine maintenance work s on the maintainable sections of the NRN and LRN through the RMF and the consolidated budget\. Role of the provincial authorities \. The Governors play a relevant role in the management of the provincial branches of central agencies\. While the DCTPCs ar e official branches of the central MCTPC, they work under the day - to - day guidance of the Governor's office\. In addition, the role of the provinces has increased in recent years due to the decentralization/devolution policy promoted by the Government\. Thi s implies that the implementation of a common strategy and system for the maintenance of the NRN and LRN under RMP - 2 will continue to require substantial consultations and knowledge sharing\. 9\. Safeguard Policies (including public consultation) Safeguard P olicies Triggered by the Project Yes No Environmental Assessment ( OP / BP / GP 4\.01) [X] [ ] Natural Habitats ( OP / BP 4\.04) [ ] [X] Pest Management ( OP 4\.09 ) [ ] [X] Cultural Property ( OPN 11\.03 , being revised as OP 4\.11) [ ] [X] Involuntary Resettlement ( OP / BP 4\.12) [X] [ ] Indigenous Peoples ( OD 4\.20 , being revised as OP 4\.10) [X] [ ] Forests ( OP / BP 4\.36) [ ] [X] Safety of Dams ( OP / BP 4\.3 7) [ ] [X] Projects in Disputed Areas ( OP / BP / GP 7\.60) * [ ] [X] Projects on International Waterways ( OP / BP / GP 7\.50) [ ] [X] 10\. List of Factual Technical Documents Lao Road Maintenance Program – Strategic Expenditure Pl an for 2004 – 2013 \. April 2004\. Ramboll Consultants\. Periodic Maintenance on the Local Road Network , MCTPC - DOR - LRD, March 2004\. Road Maintenance Project Progress Report , MCTPC - DOR - RAD, September 30, 2003\. Maintainable Local Roads in LSRSP2 and RMP – Target Provinces, Fiscal Year 2002/03 , MCTPC - DOR, December 2002\. Prioritization of Works on Local Roads , MCTPC - DOR, April 2002\. 11\. Contact point Contact: William D\. O\. Paterson Title: Lead Highway Engineer * By supporting the proposed project, the Bank does n ot intend to prejudice the final determination of the parties' claims on the disputed areas Page 8 Tel: (202) 458 - 1334 Fax: (202) 614 - 0172 Email: Wpaterson@ worldbank\.org 12\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458 - 5454 Fax: (202) 522 - 1500 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P162454

‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫ع المجمعة‪/‬‬‫وثائق معلومات المشرو‬ ‫صحيفة بيانات اإلجر‬ ‫اءات الوقائية المتكاملة‬ ‫مرحلة التقييم المسبق | تاريخ اإلعداد‪/‬التحديث‪ 13 :‬مارس‪/‬آذار ‪ | 2019‬تقرير رقم‪PIDISDSA23369 :‬‬ ‫‪21‬‬ ‫صفحة ‪ 1‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫معلومات أساسية‬ ‫‪OPS_TABLE_BASIC_DATA‬‬ ‫ع‬‫(Ø£) البيانات األساسية للمشرو‬ ‫ع األم (إن‬‫الرقم التعريفي للمشرو‬ ‫ع‬‫اسم المشرو‬ ‫ع‬‫الرقم التعريفي للمشرو‬ ‫البلد‬ ‫وجد)‬ ‫ع إعادة بناء وتعزيز‬‫مشرو‬ ‫‪P162454‬‬ ‫العر‬ ‫اق‬ ‫خدمات الكهرباء في العر‬ ‫اق‬ ‫ي للعرض على‬‫التاريخ التقدير‬ ‫مجال الممارسات (الرئيسي)‬ ‫ي للتقييم المسبق‬‫التاريخ التقدير‬ ‫المنØقة‬ ‫مجلس المديرين التنفيذيين‬ ‫اجية‬ ‫الØاقة والصناعات االستخر‬ ‫‪ 30‬مايو‪/‬أيار ‪2019‬‬ ‫اير‪/â€¬Ø´Ø¨Ø§Ø â€ª2019‬‬ ‫‪ 22‬فبر‬ ‫الشرق Ø§Ø£Ù„ÙˆØ³Ø ÙˆØ´Ù…Ø§Ù„ أفريقيا‬ ‫الهيئة المسؤولة عن إدار‬ ‫ة التنفيذ‬ ‫المقترض‬ ‫أداة التمويل‬ ‫زر‬ ‫ة الكهرباء‬ ‫وا‬ ‫زر‬ ‫ة المالية‬ ‫وا‬ ‫تمويل المشروعات االستثمارية‬ ‫األهداف اإلنمائية المقترحة‬ ‫ع‪\.‬‬ ‫المختار‬ ‫ة للمشرو‬ ‫تحسين موثوقية خدمات الكهرباء وتعزيز الكفاءة التشغيلية والتجارية لهذه الخدمات في المناØق ُ‬ ‫المكونات‬ ‫ّ‬ ‫المكون ‪ \.1‬تعزيز شبكة النقل‬ ‫المكون ‪ \.2‬إعادة إعمار شبكة التوزيع وتعزيز الكفاءة التشغيلية والتجارية‬ ‫ع‬ ‫المكون ‪ \.3‬تدعيم القدر‬ ‫ات المؤسسية ومساندة تنفيذ المشرو‬ ‫ع (بالمليون دو‬ ‫الر)‬ ‫بيانات تمويل المشرو‬ ‫م َّ‬ ‫لخص‬ ‫ُ‬ ‫‪200\.00‬‬ ‫ع‬‫التكلفة الكلية للمشرو‬ ‫‪200\.00‬‬ ‫ع التمويل‬‫مجمو‬ ‫‪21‬‬ ‫صفحة ‪ 2‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫‪200\.00‬‬ ‫منه تمويل من البنك الدولي لإلنشاء والتعمير‪/‬المؤسسة الدولية للتنمية‬ ‫‪0\.00‬‬ ‫الفجوة التمويلية‬ ‫التفاصيل‪NewFinEnh1-‬‬ ‫تمويل من مجموعة البنك الدولي‬ ‫‪200\.00‬‬ ‫البنك الدولي لإلنشاء والتعمير‬ ‫فئة التقييم البيئي‬ ‫ب‪ -‬تقييم جزئي‬ ‫القر‬ ‫ار‬ ‫اض لفريق العمل إجر‬ ‫اء التقييم المسبق والتفاوض‬ ‫أجاز االستعر‬ ‫ى (حسب الحاجة)‬ ‫رر‬ ‫ات أخر‬ ‫قا‬ ‫(ب) المقدمة والسياق‬ ‫السياق العام‬ ‫اق‪ ،‬وهو بلد غني بالموارد ÙˆÙ…ØªÙˆØ³Ø Ø§Ù„Ø¯Ø®Ù„â€ª ،‬من صر‬ ‫اعات داخلية وإقليمية في Ø¥Øار سعيه لتحقيق االتساق بين‬ ‫‪ \.1‬عانى العر‬ ‫المؤسسات السياسية ومكوناته االقتصادية االجتماعية المتداخلة وØوائفه العرقية والدينية المتنوعة‪ \.‬وكما هو موضح في‬ ‫اق الصادر في ‪ ،2017‬فقد أدى اجتماع عدد من العوامل‪ ،‬منها الثروة النفØية وسوء إدار‬ ‫ة‬ ‫الدر‬ ‫اسة المنهجية المنتظمة للعر‬ ‫اء مشكالت الحوكمة‬ ‫اعات‪ ،‬وتفاقمت األوضاع من جر‬ ‫ع االجتماعي‪ ،‬إلى هشاشة الدولة ونشوب الصر‬‫الشؤون السياسية والتنو‬ ‫ال حكومة العر‬ ‫اق تواجه تحديات تأمين وتحسين الخدمات‬ ‫والتحديات الصعبة لتحقيق التوزيع العادل للموارد الوØنية‪ \.‬و‬ ‫ال تز‬ ‫األساسية والتصدي لمشكالت البØالة والفقر‪\.‬‬ ‫ة حادة على مدى السنوات القليلة الماضية‪ \.‬وبسبب الحرب ضد داعش والتر‬ ‫اجع‬ ‫‪ \.2‬تباØأت وتير‬ ‫ة النمو االقتصادي بصور‬ ‫اجع االقتصاد غير النفØي بمعدل انخفاض بلغ ‪ %21\.6‬منذ ‪ُ \.2014‬‬ ‫ويشير االعتماد‬ ‫المستمر في أسعار النفØ‪ ،‬فقد تر‬ ‫الكبير للعر‬ ‫اق على Ø§Ù„Ù†ÙØ Ø¥Ù„Ù‰ انكماش معدل النمو اإلجمالي المقدر بنسبة ‪ %0\.8‬خالل عام ‪ ،2017‬بسبب انخفاض بنسبة‬ ‫المصدر‬ ‫ة Ù„Ù„Ù†ÙØ (أوبك) ومنتجي Ø§Ù„Ù†ÙØ ØºÙŠØ± األعضاء‪ ،‬بهدف‬ ‫‪ %3\.5‬من إنتاج النفØ‪ ،‬بعد إبر‬ ‫ام اتفاقية بين منظمة الدول ُ‬ ‫خفض إنتاج Ø§Ù„Ù†ÙØ Ø­ØªÙ‰ نهاية ‪\.2018‬‬ ‫‪21‬‬ ‫صفحة ‪ 3‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫ات حكومة العر‬ ‫اق لعام ‪ %22\.5 ،2014‬في مختلف أنحاء البالد‪ \.‬وفي المحافظات الخاضعة‬ ‫‪ \.3‬بلغ معدل الفقر‪ ،‬وفق تقدير‬ ‫لداعش‪ ،‬تشير التقدير‬ ‫ات إلى أن أثر تعØل األنشØØ© االقتصادية واالجتماعية واألمنية قد ضاعف معدالت الفقر إلى ‪\.%44‬‬ ‫وفي الجنوب حيث تكون معدالت الفقر أعلى دائما‪ ،‬ز‬ ‫ادت الصدمات على مستوى االقتصاد الكلي من معدالت الفقر وفقا‬ ‫للتقدير‬ ‫ات إلى أعلى من ‪\.%30‬‬ ‫عي منه الخاص Ø¨Ø§Ù„Ù†ÙØ Ù…Ø§ يزيد على ‪%65‬‬ ‫‪ \.4‬يعتبر قØاع الØاقة العر‬ ‫اقي األهم في اقتصاد البالد ــ حيث يمثل القØاع الفر‬ ‫اق‪ \.‬ويمتلك العر‬ ‫اق‬ ‫ادات الحكومية السنوية‪ ،‬و‪ %98‬من صادر‬ ‫ات العر‬ ‫من إجمالي الناتج المحلي‪ ،‬وأكثر من ‪ %90‬من اإلير‬ ‫خامس أكبر مخزون في العالم من Ø§Ù„Ù†ÙØ Ø§Ù„Ø®Ø§Ù…â€ª ،‬حيث يبلغ مخزونه ‪ 141\.4‬مليار برميل‪ ،‬ويهيمن قØاع Ø§Ù„Ù†ÙØ ÙˆØ§Ù„ØºØ§Ø² على‬ ‫اقتصاد البلد‪ ،‬حتى بالمستويات اإلقليمية‪ \.‬ومع الزيادة السريعة في اإلنتاج منذ ‪ ،2015‬يعتبر العر‬ ‫اق اآلن ثالث أكبر بلد‬ ‫مصدر Ù„Ù„Ù†ÙØ Ø¹Ù„Ù‰ مستوى العالم‪ ،‬وثاني أكبر بلد مصدر Ù„Ù„Ù†ÙØ Ø¹Ù„Ù‰ مستوى أوبك‪ \.‬وبلغت تقدير‬ ‫ات احتياØيات الغاز الØبيعي‬ ‫اق المركز الثاني عشر على مستوى العالم في‬ ‫المثبتة ‪ 130‬تريليون قدم مكعب في نهاية ‪ ،2016‬ومن ّ‬ ‫ثم يحتل العر‬ ‫احتياØيات الغاز الØبيعي التي لم تُستغل بعد إلى حد كبير‪\.‬‬ ‫اقيين أنفسهم ال يحصلون على ما‬ ‫غم من ضخامة ما يمتلكه العر‬ ‫اق من احتياØيات من Ø§Ù„Ù†ÙØ ÙˆØ§Ù„ØºØ§Ø²â€ª ،‬فإن العر‬ ‫‪ \.5‬على الر‬ ‫اق عن‬ ‫ويضØرون إلى استخدام مولدات الديزل باهظة التكلفة‪ \.‬ونظ اً‬ ‫ر لعجز العر‬ ‫يكفي احتياجاتهم األساسية من الكهرباء‪ُ ،‬‬ ‫ح‬ ‫ة تتر‬ ‫او‬ ‫استغالل موارده الØبيعية ُ‬ ‫المتاحة‪ ،‬فإنه يلجأ إلى االعتماد على موارد الوقود البديلة الباهظة والمستوردة‪ ،‬بتكلفة مقدر‬ ‫الر سنوياً (تقرير اإلستر‬ ‫اتيجية‬ ‫الر سنوياً‪ ،‬وتكلفة نقص إمدادات الكهرباء تقدر بمبلغ ‪ 40‬مليار دو‬ ‫بين ‪ 6‬إلى ‪ 8‬مليار‬ ‫ات دو‬ ‫الوØنية المتكاملة للØاقة لعام ‪ \.1)2013‬ويؤثر نقص إمدادات الكهرباء المستمر‬ ‫ة بشدة في رفاهة العائالت‪ ،‬ونمو منشآت‬ ‫مستدامة للوفاء باحتياجات األعداد المتز‬ ‫ايدة من الشباب الملتحقين‬ ‫األعمال‪ ،‬وقدر‬ ‫ة مؤسسات األعمال على خلق فرص عمل ُ‬ ‫بسوق العمل‪\.‬‬ ‫اق على تحقيق النمو‬ ‫ة المنØقة الجنوبية بالعر‬‫المتهالكة والخدمات األساسية الرديئة تحول دون قدر‬ ‫‪ \.6‬إن البنية التحتية ُ‬ ‫ع مديرية توزيع كهرباء الجنوب والتي تشمل كال من‬‫االقتصادي الشامل للجميع وتقاسم ثمار الرخاء‪ \.‬وتغØي منØقة المشرو‬ ‫ي لدعم‬ ‫ال شك في أن توفير الخدمات األساسية كالكهرباء هو ركن جوهر‬ ‫الم ّ‬ ‫ثنى وذي قار وميسان‪ \.‬و‬ ‫ةوُ‬ ‫محافظات البصر‬ ‫ى أنها ظّلت ّ‬ ‫مهمشة لسنوات Øويلة أو‬ ‫عية الحكومة المركزية‪ ،‬في مسعاها إلى Ø¨Ø³Ø Ù†ÙÙˆØ°Ù‡Ø§â€ª ،‬و‬ ‫السيما في المناØق التي تر‬ ‫شر‬ ‫ة الصر‬ ‫اع‪\.‬‬ ‫تلك التي خرجت لتوها من دائر‬ ‫رر‬ ‫ة‪ ،‬وتغير Ø£Ù†Ù…Ø§Ø Ù‡Øول األمØار‪،‬‬ ‫جات الح ا‬ ‫اق على نحو غير عادي آلثار ّ‬ ‫تغير المناخ‪ \.‬ومن شأن ارتفاع در‬ ‫‪ \.7‬يتعرض العر‬ ‫اق بشدة لمخاØر الكوارث الØبيعية (موجات الحر الشديد ُ‬ ‫وشح‬ ‫وارتفاع مستويات مياه البحر أن يضاعف تهديد تعرض العر‬ ‫اإلستراتيجية الوØنية المتكاملة للØاقة (‪ \.)2013‬اللجنة االستشارية التابعة لرئيس وزراء العراق‪ ،‬بغداد‪\.‬‬ ‫‪1‬‬ ‫‪21‬‬ ‫صفحة ‪ 4‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫ائق الغابات‪ ،‬وسيول المناØق الحضرية وفيضان األنهار واالنهيار‬ ‫ات األرضية) وفرص المعاناة من ظروف الØقس‬ ‫المياه وحر‬ ‫ة (تفاوت هØول األمØار وانتشار الجفاف والعواصف الرملية العنيفة)‪ \.‬وبحلول منتصف القرن‪ ،‬يمكن أن يتسبب ُ‬ ‫شح‬ ‫الضار‬ ‫ح بين ‪ 6‬إلى ‪ %14‬سنوياً‪\.‬‬ ‫المياه بفعل العوامل المناخية في تقليص معدل نمو إجمالي الناتج المحلي في المنØقة بنسبة تتر‬ ‫او‬ ‫جات‬ ‫ح بين ‪ 2‬إلى ‪ 6‬در‬‫او‬ ‫ة تتر‬‫رر‬ ‫جات الح ا‬‫اق لزيادة سنوية في Ù…ØªÙˆØ³Ø Ø¯Ø±â€¬ ‫ومع حلول نهاية القرن‪ ،‬من المتوقع أن يتعرض العر‬ ‫ح بين ‪ 25‬إلى ‪ \.2%65‬وتواجه‬ ‫يتوقع أن تشهد انخفاضاً في Ø§Ù„Ù…ØªÙˆØ³Ø Ø§Ù„Ø³Ù†ÙˆÙŠ لهØول األمØار بنسبة تتر‬ ‫او‬ ‫مئوية‪ ،‬بينما ُ‬ ‫رر‬ ‫ة‬ ‫جات الح ا‬ ‫اق العديد من التحديات المناخية الفريدة‪ ،‬حيث سيؤدي استمر‬ ‫ار ارتفاع در‬ ‫مشروعات البنية التحتية للØاقة في العر‬ ‫ة على توفير‬ ‫ها‪ \.‬فعلى جانب الØلب‪،‬‬ ‫في الوقت نفسه إلى زيادة الØلب على الكهرباء‪ ،‬ومن ثم انخفاض العرض‪ ،‬وتر‬ ‫اجع القدر‬ ‫جات‬ ‫ايد الموجات الحار‬ ‫ة في ارتفاع منحنيات األحمال الكهربائية؛ بينما على جانب العرض‪ ،‬سيتسبب ارتفاع در‬ ‫سيت سبب تز‬ ‫ة في تخفيض عوامل القدر‬ ‫ة في محØات توليد الØاقة الكهربائية‪ \.‬كما ستودي موجات الجفاف الممتدة والناتجة عن‬ ‫رر‬‫الح ا‬ ‫ة الزحف العمر‬ ‫اني‪ ،‬وتكثيف Ø§Ù„Ø¶ØºØ Ø§Ù„ÙˆØ§Ù‚Ø¹ على البنية‬ ‫الظروف المناخية إلى تحفيز حركة الزحف إلى المدن‪ ،‬وتسريع وتير‬ ‫التحتية االقتصادية واالجتماعية الحالية‪ ،‬والتي تعاني أصال من التدهور والضعف‪ \.‬وللقضاء على الفقر ُ‬ ‫المدقع وتعزيز الرخاء‬ ‫ايد الحاجة الملحة لضخ االستثمار‬ ‫ات في البنية التحتية بالبلد‪ ،‬بغية مواجهة مخاØر المناخ والكوارث الØبيعية‪\.‬‬ ‫المشترك‪ ،‬تتز‬ ‫السياق القØاعي والمؤسسي‬ ‫اعات وعقوبات امتدت لعقود من الزمان‪ ،‬وهو ما أدى إلى إضعاف مؤسساته وتر‬ ‫اجع‬ ‫‪ \.8‬عانى قØاع الØاقة في العر‬ ‫اق من صر‬ ‫غم من تحقيق العر‬ ‫اق لتقدم ملحوظ في تحسين‬ ‫معدالت االستثمار وتدهور مزمن في البنية التحتية لهذا القØاع‪ \.‬وعلى الر‬ ‫ال يواجه العديد من التحديات الخØير‬ ‫ة بسبب النمو الكبير في‬ ‫قدر‬ ‫اته على توليد الØاقة الكهربائية‪ ،‬فإن هذا القØاع ال يز‬ ‫الØلب بنسبة تتجاوز ‪ %10‬سنوياً‪ ،‬مقترنة بالعجز المزمن في توريد الكهرباء وعدم توفر شبكة التغذية سوى لما يقل عن ‪15‬‬ ‫ها في صيف ‪ ،2018‬دليال‬ ‫ى‪ ،‬والتي كان آخر‬ ‫ة وعدة مناØق أخر‬ ‫ساعة يومياً‪ \.‬وتُعد االحتجاجات العامة التي شهدتها البصر‬ ‫ايد لدى المواØنين العر‬ ‫اقيين بسبب التدهور المستمر في انتظام إمدادات الØاقة الكهربائية‪\.‬‬ ‫على Ø§Ù„Ø³Ø®Ø Ø§Ù„Ù…ØªØ²â€¬ ‫ع إلى دعم حكومة العر‬ ‫اق لتحقيق ما يلي‪ )1( :‬تحسين جودة اإلمداد عن Øريق تذليل عقبات التوزيع‬ ‫‪ \.9‬يهدف هذا المشرو‬ ‫المختار‬ ‫ة؛ (‪ )2‬استعادة االستدامة المالية لقØاع الكهرباء لتخفيف العبء عن الموارد العامة وتمكين‬ ‫والنقل في القØاعات ُ‬ ‫اق من اجتذاب المشاركة والتمويل المتز‬ ‫ايد من القØاع الخاص‪ ،‬وخصوصاً في مجال توليد الØاقة الكهربائية وإنتاج الغاز‬ ‫العر‬ ‫رر‬ ‫ات‬ ‫لالستخدامات المنزلية؛ و (‪ )3‬دعم الالمركزية وخصخصة خدمات اإلمداد بالكهرباء لتحسين المساءلة وتقارب الق ا‬ ‫والموارد من الوفاء باحتياجات المواØنين‪\.‬‬ ‫‪ 2‬الموجز القُØري للعراق‪ ،‬وبوابة المعرفة الخاصة بتغيّر المناخ‪\.‬‬ ‫‪21‬‬ ‫صفحة ‪ 5‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫ة التجارية المرتبØØ© بها‪،‬‬ ‫‪ \.10‬تحسين جودة اإلمداد‪ \.‬إن مواجهة األوضاع المتدهور‬ ‫ة لشبكة نقل وتوزيع الكهرباء‪ ،‬وأنظمة اإلدار‬ ‫اقيين باحتياجاتهم من خدمات الكهرباء‪ \.‬و‬ ‫ال تستØيع البنية التحتية‬ ‫هما الركيز‬ ‫ة األساسية لتحسين خدمات إمداد المواØنين العر‬ ‫ة‪ ،‬يتم تعويض العجز في اإلمداد عن Øريق‬ ‫ها؛ وبالنسبة للبصر‬ ‫المتهالكة للشبكة نقل إمدادات الكهرباء اإلضافية حال توفر‬ ‫ُ‬ ‫ع الدعم الالزم لتحسين انتظام اإلمداد بالكهرباء وكفاءتها في كل من محافظات بغداد‬ ‫الشبكة اإلير‬ ‫انية‪ \.‬وسيؤمن هذا المشرو‬ ‫الم ّ‬ ‫ثنى وذي قار وميسان‪ ،‬والتي تشكل مجتمعة ما يزيد على ‪ %50‬من إجمالي استهالك الكهرباء‪ ،‬وذلك من خالل‬ ‫والبصر‬ ‫ةو ُ‬ ‫عية وخØÙˆØ Ø¬Ø¯ÙŠØ¯Ø© للنقل والتوزيع‪ ،‬وإعادة تأهيل الموجود منها‬‫إنشاء محØات فر‬ ‫‪ \.11‬استعادة االستدامة المالية لقØاع الكهرباء‪ \.‬يشكل تحسين االستدامة المالية لعمليات التوزيع ركيز‬ ‫ة أساسية لتخفيف األعباء‬ ‫المحتاجة إليها مثل إعادة‬‫ى ُ‬ ‫اق‪ ،‬واستنز‬ ‫اف الموارد وحرمان القØاعات األخر‬ ‫المالية التي يفرضها القØاع على ميز‬ ‫انية العر‬ ‫ر لما يتكبده النظام من‬ ‫ي أيضاً توفير مناخ استثمار ّ‬ ‫جيد في قØاع الكهرباء‪ \.‬فنظ اً‬ ‫اإلعمار والصحة والتعليم‪ \.‬ومن الضرور‬ ‫ادات منخفضة واحتياجات استثمارية ضخمة‪ ،‬ال يستØيع قØاع التوزيع اجتذاب رؤوس أموال خاصة‪ ،‬التي‬ ‫خسائر كبير‬ ‫ة‪ ،‬وإير‬ ‫ات من‬ ‫التحسن التدريجي وتوفير الحد األدنى من االستقر‬ ‫ار الالزم الجتذاب االستثمار‬ ‫ّ‬ ‫تحتاج إلى الدعم الحكومي لتحقيق‬ ‫ادات‪ ،‬وتخفيض تكاليف‬ ‫ي‪ \.‬وعلى المدى المتوسØ‪ ،‬سيساعد تحسين آليات تحصيل اإلير‬ ‫القØاع الخاص والتمويل التجار‬ ‫التوليد‪ ،‬وتحسين موثوقية الشبكة لتصريف الفائض من توليد الØاقة الكهربائية‪ ،‬في تقليص انØباعات المستثمرين عن‬ ‫المخاØر‪ ،‬ومن ثم تحسين إمكانية الوصول إلى التمويل منخفض التكلفة وتعزيز كفاءة القØاع الخاص وفرص ريادة األعمال‪\.‬‬ ‫ات والموارد من الوفاء باحتياجات‬ ‫‪ \.12‬مُساندة الالمركزية وخصخصة خدمات الكهرباء لتحسين المساءلة وتقريب الق ا‬ ‫رر‬ ‫ع الدعم الالزم لتفعيل قانون الكهرباء الجديد‪ ،‬من خالل إنهاء المركزية في إمداد خدمات‬‫المواØنين‪ \.‬سيوفر هذا المشرو‬ ‫الكهرباء‪ \.‬ويشتمل ذلك على مساندة جهود تحسين المؤسسات والتشغيل واألداء لتحقيق مستوى أفضل من إمداد خدمات‬ ‫الكهرباء‪ ،‬من خالل تدعيم العمليات التجارية في مديرية توزيع كهرباء بغداد و مديرية توزيع كهرباء الجنوب بصفتهما شركتين‬ ‫ى لتوزيع الكهرباء‪ ،‬مع‬ ‫مملوكتين للدولة و "مركزين ّ‬ ‫للتميز"‪ \.‬ومن الممكن تغيير هذا النموذج الحقاً ليشمل الشركات األخر‬ ‫حة على مديرية توزيع‬ ‫تحسن أداء القØاع‪ ،‬وتنفيذ عمليات الخصخصة والتحديث‪ \.‬وينصب تركيز أنشØØ© تحسين األداء ُ‬ ‫المقتر‬ ‫ات للتحول في قØاع خدمات الكهرباء بالعر‬ ‫اق‪\.‬‬ ‫الكهرباء في بغداد ومديرية توزيع كهرباء الجنوب‪ ،‬بغية تحويلها إلى محفز‬ ‫رر‬ ‫ات التشغيلية من الوفاء باحتياجات العميل‪ ،‬شوØاً‬ ‫المحسنة‪ ،‬واقتر‬ ‫اب آليات المساءلة والق ا‬ ‫وستقØع عمليات توزيع الكهرباء ُ‬ ‫كبي اً‬ ‫ر للتغلب على فقدان الثقة المزمن لدى مستهلكي الكهرباء‪ ،‬وستبدأ في ذات الوقت في تخفيف األعباء على موارد الحكومة‬ ‫من خالل تحسين األداء المالي‪\.‬‬ ‫(ج) األهداف اإلنمائية المقترحة‬ ‫ع)‬‫الهدف اإلنمائي (من وثيقة التقييم المسبق للمشرو‬ ‫ع‪\.‬‬ ‫المختار‬ ‫ة للمشرو‬ ‫تحسين موثوقية خدمات الكهرباء وتعزيز الكفاءة التشغيلية والتجارية لهذه الخدمات في المناØق ُ‬ ‫‪21‬‬ ‫صفحة ‪ 6‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫النتائج الرئيسية‬ ‫ع‪:‬‬ ‫‪ \.13‬تُقاس المؤشر‬ ‫ات التالية إلظهار وإثبات إنجاز الهدف اإلنمائي للمشرو‬ ‫المغØى على الØاقة نتيجة للقصور في قدر‬ ‫ة مديرية‬ ‫موثوقية اإلمداد بخدمات الكهرباء‪ \.‬نسبة االنخفاض في الØلب غير ُ‬ ‫‪\.i‬‬ ‫النقل والتوزيع‪—%50 :â€¬Ø®Ø Ø§Ø£Ù„Ø³Ø§Ø³ = ‪ 111\.0‬جيجا ÙˆØ§Ø Ø³Ø§Ø¹Ø© (‪ُ ،)2017‬‬ ‫المستهدف = ‪ 42\.5‬جيجا ÙˆØ§Ø Ø³Ø§Ø¹Ø©â€¬ ‫(‪)2022‬‬ ‫الكفاءة التشغيلية لخدمات الكهرباء نسبة االنخفاض في الفاقد الفني‪—%17 :â€¬Ø®Ø Ø§Ø£Ù„Ø³Ø§Ø³ = ‪ 10\.9‬ميجا ÙˆØ§Ø (‪،)2017‬‬ ‫‪\.ii‬‬ ‫المستهدف = ‪ 9\.0‬ميجا ÙˆØ§Ø (‪\.)2022‬‬ ‫ُ‬ ‫العمليات التجارية الزيادة في نسبة السداد إلى التوريد في مجال الØاقة‪—%30 :â€¬Ø®Ø Ø§Ø£Ù„Ø³Ø§Ø³ = ‪،)2016( %26\.3‬‬ ‫‪\.iii‬‬ ‫المستهدف ≥ ‪\.)2022( %60‬‬ ‫ُ‬ ‫ع‬‫د‪ \.‬وصف المشرو‬ ‫نى وذي‬ ‫ةو ُ‬ ‫المثّ‬ ‫ع جهود تحسين الموثوقية والكفاءة‪ ،‬وحوكمة اإلمداد بالكهرباء في محافظات البصر‬ ‫‪ \.14‬سيساند هذا المشرو‬ ‫قار وميسان‪ ،‬من خالل تحسين البنية التحتية للنقل والتوزيع‪ ،‬وتخفيض الفاقد الفني في الكهرباء على امتداد نظام النقل‬ ‫ع على تمويل برنامج لتحسين الكفاءة التشغيلية والتجارية‪ ،‬ويشمل التصميم واإلمداد والتركيب‬‫والتوزيع‪ \.‬كما يعمل هذا المشرو‬ ‫ة بالمعلومات الوظائف األساسية لشركات مر‬ ‫افق‬ ‫والتشغيل لنظام متكامل إلدار‬ ‫ة التوزيع بالمعلومات‪ \.‬حيث سيغØي نظام اإلدار‬ ‫توزيع الكهرباء‪ ،‬ومنها على وجه التحديد عمليات الشبكة والصيانة والشؤون التجارية واإلدارية لموارد المديرية ‪ \.‬وأخي اً‬ ‫ر‪،‬‬ ‫ع أيضاً إنهاء المركزية وتفعيل العمل بقانون الكهرباء فيما يتعلق بتحويل مديرية توزيع كهرباء الجنوب‬‫سيساند هذا المشرو‬ ‫إلى مديرية مساهمة‪\.‬‬ ‫ع‪ ،‬من‬‫ع الدعم المباشر لرفع كفاءة وموثوقية اإلمداد بالكهرباء داخل المناØق التي يغØيها المشرو‬‫‪ \.15‬سيوفر هذا المشرو‬ ‫يسهم هذا‬‫عية وخØÙˆØ Ø§Ù„Ù†Ù‚Ù„ والتوزيع‪ \.‬ويتوقع أن ُ‬‫خالل تعزيز نظام النقل والتوزيع عبر إنشاء العديد من المحØات الفر‬ ‫ع‪ ،‬من خالل تقليص االنقØاع في اإلمداد‬ ‫ع في زيادة موثوقية اإلمداد بالكهرباء في المناØق التي يغØيها المشرو‬‫المشرو‬ ‫بالكهرباء بسبب ÙØ±Ø Ø§Ø£Ù„Ø­Ù…Ø§Ù„ والفاقد الفني بالشبكة بنسب تبلغ ‪ %50‬و ‪ %17‬على الترتيب‪ \.‬ويتوقع أن يحقق برنامج‬ ‫تحسين الكفاءة التجارية زيادة في إير‬ ‫ادات مبيعات الكهرباء بنسبة ‪ ،%40‬مع زيادة نسبة التحصيل من ‪ %30‬إلى أكثر من‬ ‫ع الدعم لإلصالحات المؤسسية في القØاع من أجل تحسين كفاءة اإلمداد بخدمات الكهرباء‬‫‪ \.% 70‬كما سيوفر المشرو‬ ‫وتحسين العمليات والشفافية والمساءلة‪ ،‬عن Øريق مساندته للعمليات التجارية المبدئية في مديرية توزيع كهرباء الجنوب‬ ‫بصفتها مديرية مملوكة للدولة‪\.‬‬ ‫‪21‬‬ ‫صفحة ‪ 7‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫ع فرصاً للتخفيف من وØأة‬‫‪ \.16‬ستكون هناك فوائد مشتركة لجهود مكافحة تغير المناخ‪ \.‬إذ سيتيح العديد من أنشØØ© المشرو‬ ‫تغير المناخ والفوائد المشتركة للتكيف‪ \.‬وسيؤدي تعزيز قدر‬ ‫ة شبكة النقل والتوزيع‪ ،‬شاملة إعادة توصيل الخØÙˆØ Ø§Ù„Ø­Ø§Ù„ÙŠØ©â€¬ ‫ة‪ ،‬إلى تقليص الفاقد الفني‪ ،‬لتحقيق وفور‬ ‫ات سنوية في الØاقة الكهربائية تقدر بما يعادل ‪ 1\.9‬ميجا‬ ‫بموصالت أعلى في القدر‬ ‫واØ‪ \.‬وسيؤدي تحسين البنية التحتية للكهرباء إلى تحسين موثوقية اإلمداد‪ ،‬ومن ثم اإلسهام في تخفيف انبعاثات غاز‬ ‫ات‬ ‫ي نتيجة لتخفيض االعتماد على المولدات الشخصية الصغير‬ ‫ة (التي تعمل بالديزل)‪ ،‬المشوبة بقصور الكفاءة‬ ‫االحتباس الحر‬ ‫ار‬ ‫ي‪ ،‬مقارنة بشبكة اإلمداد الوØنية‪ ،‬والتي ينتشر استخدامها نتيجة‬ ‫ات االحتباس الحر‬ ‫ار‬ ‫وتنتج كميات أكبر من انبعاثات غاز‬ ‫ه‪ ،‬حيث‬ ‫ع لمعالجة قابلية التأثر بفعل التغير المناخي وأخØار‬‫لرداءة موثوقية شبكة اإلمداد‪ \.‬كما ستتØرق أنشØØ© هذا المشرو‬ ‫عية والبنية التحتية المتØور‬ ‫ة للقياس بالعدادات) بتصميمات تضمن‬ ‫سيتم تركيب المر‬ ‫افق (كخØÙˆØ Ø§Ù„Ù†Ù‚Ù„â€ª ،‬والمحØات الفر‬ ‫ات المستقبلية بفعل الظواهر المناخية العاتية‪ \.‬ومن المتوقع أن تتناول هذه اإلجر‬ ‫اءات‬ ‫المتانة‪ ،‬وتحمي قØاع الكهرباء من التأثير‬ ‫ة المرتفعة والفيضانات والرياح العاتية والعواصف الرملية والز‬ ‫الزل‪ ،‬ومن ثم تحقيق المنافع‬ ‫رر‬‫ثبات الهيكل وتأثير درجات الح ا‬ ‫المشتركة للتكيف المناخي‪\.‬‬ ‫ِّ‬ ‫المكون ‪-2‬إعادة إعمار شبكة‬ ‫ِّ‬ ‫المكون ‪ -1‬تعزيز شبكة النقل؛ (‪)2‬‬ ‫ع من المكونات الثالثة التالية‪( :‬ا)‬ ‫‪ \.17‬يتألف هذا المشرو‬ ‫ّ‬ ‫ّ‬ ‫ع‪\.‬‬ ‫ِّ‬ ‫المكون ‪ -3‬تدعيم القدر‬ ‫ات المؤسسية‪ ،‬وتنفيذ المشرو‬ ‫النقل‪ ،‬وتحسين الكفاءة التشغيلية والتجارية؛ و (‪)3‬‬ ‫ّ‬ ‫ح أن يمول هذا المكون األنشØØ© التي تستهدف زيادة قدر‬ ‫ة شبكة النقل لتحقيق ما‬ ‫‪ِّّ \.18‬‬ ‫المكون ‪ - 1‬تعزيز شبكة النقل‪ \.‬من المقتر‬ ‫ة الشبكة لتلبية االحتياجات القائمة للØاقة الكهربائية؛ (‪ )2‬تلبية احتياجات تز‬ ‫ايد‬ ‫يلي‪ )1( :‬معالجة أوجه القصور في قدر‬ ‫األحمال في المستقبل؛ (‪ )3‬توفير المرونة في التشغيل ومن ثم تحسين انتظام إمدادات الكهرباء؛ و(‪ )4‬خفض الفاقد الفني‬ ‫عية بØاقة ‪ 11/33/132‬كيلو فولت؛‬‫لشبكة النقل‪ \.‬وتضمنت األنشØØ© المؤجلة ما يلي‪ )1( :‬إعادة تأهيل وتحديث محØات فر‬ ‫عية متنقلة بØاقة ‪ 11/33/132‬كيلو فولت‪\.‬‬‫(‪ )2‬تعزيز شبكة النقل بØاقة ‪ 132‬كيلو فولت؛ و(‪ )3‬توريد وتركيب محØات فر‬ ‫ح على زيادة قدر‬ ‫ة شبكة النقل بما يبلغ ‪ 1\.60‬جيجا واØ‪\.‬‬ ‫ومن المتوقع أن يعمل النØاق المقتر‬ ‫ِّ‬ ‫المكون األنشØØ© ذات العالقة بما‬ ‫‪ِّّ \.19‬‬ ‫المكون ‪ - 2‬إعادة إعمار شبكة النقل‪ ،‬وتحسين الكفاءة التشغيلية والتجارية‪ \.‬يدعم هذا‬ ‫ّ‬ ‫يلي‪( :‬أ) إعادة تأهيل شبكة التوزيع لتلبية الØلب الحالي والمستقبلي على الكهرباء وخفض الفاقد الفني وزيادة مرونة التشغيل‬ ‫عية وخØÙˆØ Ø§Ù„ØªÙˆØ²ÙŠØ¹Ø› و(ب) تصميم وتوريد وتركيب وتجهيز نظام متكامل إلدار‬ ‫ة‬ ‫والعمليات بما في ذلك المحØات الفر‬ ‫معلومات التوزيع لتغØية الوظائف األساسية Ù„Ù†Ø´Ø§Ø ØªÙˆØ²ÙŠØ¹ الكهرباء‪ ،‬وهي على وجه التحديد تشغيل وصيانة الشبكات‪ ،‬وإدار‬ ‫ة‬ ‫ة معلومات التوزيع برنامج لحماية اإلير‬ ‫ادات‪ ،‬بهدف تحسين‬ ‫الموارد المؤسسية والجوانب التجارية‪ \.‬ويضم النظام المتكامل إلدار‬ ‫جعية جغر‬ ‫افية‪ ،‬والقياس بالعدادات وإصدار الفواتير‬ ‫ة إير‬ ‫ادات مبيعات الكهرباء‪ ،‬بما في ذلك قاعدة بيانات للعمالء ذات مر‬ ‫إدار‬ ‫وتحصيل اإلير‬ ‫ادات‪\.‬‬ ‫‪21‬‬ ‫صفحة ‪ 8‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق (‪)P162454‬‬ ‫ع‪ \.‬ويشتمل ذلك على إعداد Ø£Øر عمل اللوائح التنظيمية‬ ‫ات المؤسسية ومساندة تنفيذ المشرو‬ ‫‪ِّّ \.20‬‬ ‫المكون ‪ - 3‬تدعيم القدر‬ ‫ات المؤسسية المتسقة مع برنامج اإلصالح الحكومي لتحسين المساءلة والحوكمة واالستدامة المالية وزيادة‬‫وتحسين القدر‬ ‫ع‪ ،‬والخدمات االستشارية‪ ،‬والمساعدة الفنية‪\.‬‬ ‫ِّ‬ ‫المكون مساعدة تنفيذ المشرو‬ ‫مشاركة القØاع الخاص‪ \.‬كما يشمل هذا‬ ‫ّ‬ ‫ه‪ \.‬التنفيذ‬ ‫الترتيبات المؤسسية وترتيبات التنفيذ‬ ‫ثنى وذي قار وميسان‪ \.‬ومديرية توزيع‬ ‫ةوُ‬ ‫الم ّ‬ ‫ع شبكة النقل والتوزيع التي تخدم كل من محافظات البصر‬‫‪ \.21‬تُغØي منØقة المشرو‬ ‫ة تنفيذ ِّ‬ ‫مكون النقل من‬ ‫كهرباء الجنوب هي الهيئة المسؤولة عن إدار‬ ‫ة التنفيذ‪ \.‬وستضØلع مديرية نقل كهرباء الجنوب بإدار‬ ‫ّ‬ ‫ع‪ ،‬بينما تتحمل مديرية كهرباء الجنوب مسؤولية تنفيذ ِّ‬ ‫مكون التوزيع منه‪ \.‬وستحيل مديرية توزيع كهرباء الجنوب‬ ‫هذا المشرو‬ ‫ّ‬ ‫ع‪\.‬‬‫ع إلى مديرية نقل كهرباء الجنوب بموجب اتفاقية تنفيذ المشرو‬ ‫مسؤوليات تنفيذ ِّ‬ ‫مكون النقل من اتفاقية تنفيذ المشرو‬ ‫ّ‬ ‫ع بالكامل‪ ،‬وتنمية القدر‬ ‫ات لدى كل من شركتي نقل وتوزيع كهرباء‬ ‫‪ \.22‬سيقدم المهندس التابع للمالك الدعم الالزم لتنفيذ المشرو‬ ‫ة التعاقد واإلدار‬ ‫ة المالية وتدابير الوقاية البيئية‬ ‫ع‪ ،‬فيما يتعلق بإدار‬ ‫الجنوب بصفتهما الجهتين المسؤولتين عن إدار‬ ‫ة تنفيذ المشرو‬ ‫ة في مجال تشغيل المر‬ ‫افق‪ ،‬لتقديم الدعم والمساندة لمديرية‬ ‫واالجتماعية‪ \.‬وسيتم التعاقد مع مديرية خدمات دعم ذات خبر‬ ‫ة المالية وإدار‬ ‫ة الشبكة وعملياتها‪\.‬‬ ‫توزيع كهرباء الجنوب لتدعيم قدر‬ ‫اتها المؤسسية في الوظائف الرئيسية لموارد المؤسسة‪ ،‬واإلدار‬ ‫‪\.‬‬ ‫ع وأبرز الخصائص المادية ذات الصلة بتحليل اإلجر‬ ‫اءات الوقائية (إن كانت معروفة)‬ ‫(و) موقع المشرو‬ ‫ع‬‫ثنى وذي قار وميسان‪ \.‬ويغلب على منØقة المشرو‬ ‫ةوُ‬ ‫الم ّ‬ ‫اق‪ ،‬والتي تضم محافظات البصر‬‫ع في المنØقة الجنوبية من العر‬‫سيتم تنفيذ المشرو‬ ‫ات عند المصب في محافظة البصر‬ ‫ة‪\.‬‬ ‫اوية‪ \.‬ومع ذلك‪ ،‬يمتد نهر دجلة عبر حدود محافظة ميسان من الشمال‪ ،‬ليلتقي بنهر الفر‬ ‫الØبيعة الصحر‬ ‫وتتميز ال منØقة بتوفر المسØحات المائية الدائمة والموسمية فيها على الدوام في صور‬ ‫ة أهوار ومستنقعات‪ \.‬علما بأن منØقة األهوار في دلتا‬ ‫جت ضمن الئحة‬‫ات تشكل أهمية اقتصادية وبيئية عالية لجميع من يعيشون بتلك المنØقة‪ ،‬ولها أهمية بيئية عالمية حيث ادر‬ ‫ي دجلة والفر‬‫نهر‬ ‫التر‬ ‫اث العالمي واليونسكو ‪ \.‬ويعد Ø§Ù„Ù†ÙØ Ø£Ø­Ø¯ أهم المعادن الموجودة والتي تتركز عليها أنشØØ© االستكشاف بالمنØقة التي تضم ما يقرب من ثلثي‬ ‫اإلنتاج الحالي للدولة من النفØ‪ \.‬وتقترن حقول Ø§Ù„Ù†ÙØ Ø¹Ø§Ø¯Ø© بالغاز الØبيعي‪ ،‬والذي ُ‬ ‫يحرق معظمه حالياً في الشعالت مسبباً مستويات عالية من‬ ‫ع الحيوي‪ ،‬فهناك ما يزيد على ‪ 400‬فصيلة من الØيور التي تستوØن منØقة شمال الخليج‬ ‫تلوث الهواء‪ ،‬وخصوصاً في البصر‬ ‫ة‪ \.‬وبالنسبة للتنو‬ ‫ان بين‬ ‫ات الØير‬ ‫ء ÙŠØ±Ø¨Ø Ù…Ø³Ø§Ø±â€¬ ‫اق وشرق المملكة العربية السعودية وغرب إير‬ ‫ان)‪ \.‬وتحتل هذه المنØقة أهمية خاصة كجز‬ ‫(التي تضم الكويت والعر‬ ‫ة بين أفريقيا وأور‬ ‫اسيا (أوروبا وآسيا)‪ \.‬وحيث ستتم إقامة Ø®ØÙˆØ Ø§Ù„Ù†Ù‚Ù„ الجديدة المقترحة‬ ‫القار‬ ‫ات‪ ،‬وا لتي تسلكها أعداد ضخمة من الØيور المهاجر‬ ‫ع مع المناØق ذات األهمية‬ ‫اضي صحر‬ ‫اوية‪ ،‬فمن غير المتوقع أن تتداخل أعمال المشرو‬ ‫على Øول ممر‬ ‫ات الØاقة الحالية التي تمر عبر أر‬ ‫ع إلى الدولة‪ ،‬وسيتم اتخاذ كافة التدابير‬‫المستخدمة في المشرو‬ ‫اضي ُ‬ ‫ة الØيور‪ \.‬وتعود ملكية غالبية األر‬ ‫البيئية‪ ،‬وستكون بعيدة عن مسار‬ ‫ات هجر‬ ‫‪21‬‬ ‫صفحة ‪ 9‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫يØلب فيها إعادة توØين‪ ،‬سيتم‬ ‫ى سواء لفتر‬ ‫ة مؤقتة أو دائماً‪ \.‬وفي حاالت غير محتملة قد ُ‬ ‫اضي أخر‬‫الالزمة لتفادي الحاجة إلى االستحواذ على أر‬ ‫تقديم تعويضات عادلة للمتضررين وفق معايير يتم وضعها في وثيقة Ø¥Øار سياسة إعادة التوØين‪\.‬‬ ‫(ز) أخصائيو اإلجر‬ ‫اءات الوقائية البيئية واالجتماعية في فريق العمل‬ ‫اهيم إسماعيل محمد باسالمة‪ ،‬أخصائي شؤون اجتماعية‬ ‫إيهاب محمد محمد شعالن‪ ،‬أخصائي شؤون بيئية‪ ،‬وإبر‬ ‫اهيم إبر‬ ‫السياسات التي قد يتم تفعيلها‬ ‫ي)‬‫التفسير (اختيار‬ ‫هل تم تفعيلها؟‬ ‫سياسات اإلجر‬ ‫اءات الوقائية‬ ‫معلقة بقدر‬ ‫ة‬ ‫ع شر‬ ‫اء وتركيب Ø®ØÙˆØ Ù†Ù‚Ù„ وتوزيع ُ‬ ‫سيشمل المشرو‬ ‫‪ 132‬كيلو ÙÙˆÙ„Ø Ùˆ ‪ 33‬كيلو فولت على الترتيب‪ ،‬ومحØات‬ ‫عية بقدر‬ ‫ات ‪ 400‬كيلو فولت ‪ 11 / 33 / 132 /‬كيلو فولت‪\.‬‬ ‫فر‬ ‫وسيتم القيام باألشغال المدنية مثل إنشاء أساسات معدات‬ ‫عية وأعمال الحفر غير العميق‪ ،‬ووضع األساسات‬‫المحØØ© الفر‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك بشأن التقييم‬ ‫الخرسانية‪ ،‬وإقامة األبر‬ ‫اج واألعمدة‪ ،‬وكذلك مد الكابالت‬ ‫نعم‬ ‫البيئي (‪)OP/BP 4\.01‬‬ ‫واألسالك‪ \.‬ومن المتوقع حدوث انبعاثات هوائية‪ ،‬وضوضاء‪،‬‬ ‫وتلوث للمياه وتوليد مخلفات صلبة‪ \.‬وبالتالي‪ ،‬سيتم تفعيل منشور‬ ‫سياسة العمليات رقم (‪ \.)OP 4\.01‬وقد تم إعداد Ø¥Øار اإلدار‬ ‫ة‬ ‫ع‪ ،‬واإلفصاح عنه للجهات الداخلية‬‫البيئية واالجتماعية للمشرو‬ ‫بالبلد وعلى موقع البنك الدولي اإللكتروني‪،‬‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك ( ‪OP/BP‬‬ ‫ال‬ ‫‪ )4\.03‬بشأن معايير األداء ألنشØØ© القØاع الخاص‬ ‫ع في مناØق‬‫من غير المتوقع أن تتم األنشØØ© الخاصة بالمشرو‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك ( ‪OP/BP‬‬ ‫ال‬ ‫ذات أهمية إيكولوجية‪ \.‬وسيتم تشييد Ø®ØÙˆØ Ø§Ù„Ù†Ù‚Ù„ والتوزيع المعلقة‬ ‫‪ )4\.04‬بشأن الموائل الØبيعية‬ ‫‪21‬‬ ‫صفحة ‪ 10‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫بقدر‬ ‫ة ‪ 132‬كيلو ÙÙˆÙ„Ø Ùˆâ€ª 33‬كيلو ÙÙˆÙ„Ø Ø¹Ù„Ù‰ امتداد المسار‬ ‫اوية بصفة عامة‪\.‬‬ ‫الحالي لحقوق المرور‪ ،‬عبر أر ٍ‬ ‫اض صحر‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك (‪OP/BP‬‬ ‫ع‪\.‬‬‫ال توجد غابات داخل حدود المشرو‬ ‫ال‬ ‫‪ )4\.36‬بشأن الغابات‬ ‫منشور سياسة العمليات (‪ )OP 4\.09‬بشأن مكافحة‬ ‫لن يتم القيام بأي أنشØØ© ذات صلة باآلفات أو الزر‬ ‫اعة‪\.‬‬ ‫ال‬ ‫اآلفات‬ ‫من غير المتوقع أن تمر Ø®ØÙˆØ Ø§Ù„Ù†Ù‚Ù„ وشبكات التوزيع بقدر‬ ‫ة‬ ‫‪ 132‬كيلو ÙÙˆÙ„Ø Ùˆ ‪ 33‬كيلو فولت‪ ،‬عبر مواقع ذات أهمية ثقافية‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك‬ ‫ِّ‬ ‫المكون بعد اختيا ا‬ ‫ر‬ ‫وحضارية‪ \.‬ومع ذلك‪ ،‬سيتم التأكيد على هذا‬ ‫ال‬ ‫ّ‬ ‫(‪ )OP/BP4\.11‬بشأن الموارد الثقافية المادية‬ ‫المحددة للخØ‪ً ،‬‬ ‫بناء على أعمال المسح والتحديد‬ ‫ات ُ‬ ‫المسار‬ ‫المفصلة‪\.‬‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك ( ‪OP/BP‬‬ ‫ع‪\.‬‬‫ال توجد شعوب أصلية تقØن داخل حدود المشرو‬ ‫ال‬ ‫‪ )4\.10‬بشأن الشعوب األصلية‬ ‫ع في أثناء مرحلة‬ ‫نظ اً‬ ‫ر لعدم معرفة مواقع جميع أنشØØ© المشرو‬ ‫اإلعداد‪ ،‬فقد تم إُعداد Ø¥Øار سياسة إعادة التوØين بهدف تقديم‬ ‫اإلرشادات بشأن التعامل مع متØلبات واشتر‬ ‫اØات إعادة التوØين‬ ‫ع‪ \.‬وتم اإلفصاح‬ ‫وإجر‬ ‫اءات التعويضات في أثناء التنفيذ المشرو‬ ‫عن Ø¥Øار سياسة إعادة التوØين في العر‬ ‫اق وعلى موقع البنك‬ ‫الدولي اإللكتروني‪\.‬‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك ( ‪OP/BP‬‬ ‫نعم‬ ‫‪ )4\.12‬بشأن إعادة التوØين القسرية‬ ‫اضي خاصة‪ ،‬فقد تم‬ ‫نظ اً‬ ‫ر الحتمال الحاجة لالستحواذ على أر‬ ‫تفعيل سياسة البنك الدولى رقم ‪ OP 4\.12‬ألخاصة بإعادة‬ ‫ى‪ \.‬وفضال عن ذلك‪ ،‬سيتم إعداد Ø®ØØ Ø¹Ù…Ù„ إعادة‬‫التوØين القسر‬ ‫التوØين أو Ø®ØØ© عمل مختصر‬ ‫ة إلعادة التوØين‪ ،‬إذا اقتضى‬ ‫ح مادي أو استحواذ على‬‫األمر استخدام أي مواقع تتØلب نزو‬ ‫اضي أو فقدان لمصدر الدخل أو تأثر‬ ‫ه‪\.‬‬ ‫األر‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك ( ‪OP/BP‬‬ ‫ع أي أنشØØ© ذات عالقة بالسدود‪\.‬‬‫ال يضم نØاق أعمال المشرو‬ ‫ال‬ ‫‪ )4\.37‬بشأن سالمة السدود‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك ( ‪OP/BP‬‬ ‫ي المياه الدولية‪\.‬‬‫ع على مجار‬‫لن تُنّفذ أي من أنشØØ© المشرو‬ ‫ال‬ ‫ي المياه الدولية‬‫‪ 7\.50‬بشأن المشروعات على مجار‬ ‫‪21‬‬ ‫صفحة ‪ 11‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك ( ‪OP/BP‬‬ ‫ع في مناØق متناز‬ ‫ع عليها‪\.‬‬ ‫لن تُنفذ أي من أنشØØ© المشرو‬ ‫ال‬ ‫‪ )7\.60‬بشأن المشروعات المقامة في المناØق‬ ‫المتناز‬ ‫ع عليها‬ ‫مسائل السياسات الوقائية األساسية وإدارتها‬ ‫أ‪ \.‬موجز لمسائل السياسات الوقائية األساسية‬ ‫ح أي آثار محتملة واسعة النØاق‬ ‫اءات الوقائية‪ \.‬ثم ِّ‬ ‫حدد واشر‬ ‫ح تتعلق بالسياسات واإلجر‬‫ع المقتر‬‫ح أي مسائل أو آثار مصاحبة للمشرو‬ ‫‪ \.1‬اشر‬ ‫ّ‬ ‫ع‪:‬‬ ‫ة و‪/‬أو ال يمكن إز‬ ‫التها ناتجة عن المشرو‬ ‫وكبير‬ ‫ع أثناء أعمال اإلنشاءات ومر‬ ‫احل التشغيل فيما يلي‪:‬‬ ‫تتمثل المنافع المتوقعة من المشرو‬ ‫(‪ )1‬أثناء مرحلة اإلنشاءات‪ ،‬بالقرب من المواقع؛‬ ‫(‪ )2‬توليد دخل من خالل خلق فرص عمل مؤقتة؛‬ ‫(‪ )3‬إيجاد أنشØØ© أعمال صغير‬ ‫ة (مواد غذائية‪ ،‬ومالبس‪ ،‬إلخ)؛ و‬ ‫(‪ )4‬زيادة الدخل من خالل توريد مواد محلية ومستوردة يتم بيعها في السوق المحلي‪\.‬‬ ‫ع‪ ،‬من المتوقع حدوث األثر اإليجابي التالي‪:‬‬‫وبعد تنفيذ المشرو‬ ‫ة الكهربائية وإنار‬ ‫ة المنازل؛‬ ‫(‪ )1‬تحسين جودة الحياة من خالل إمكانية استخدام األجهز‬ ‫(‪ )2‬تحسين األمن بسبب اإلنار‬ ‫ة العامة؛‬ ‫(‪ )3‬زيادة األنشØØ© االقتصادية الناشئة عن تأسيس الشركات‪ ،‬ومكننة المحال التجارية والورش ذات Øبيعة تحتاج إلى بعض المكائن و أالالت‬ ‫ألتي تعمل على الØاقة الكهربائية؛‬ ‫(‪ )4‬خدمات الوصول إلى المعلومات (التكنولوجيا الجديدة‪ ،‬والتلفاز‪ ،‬الخ)؛ و‬ ‫ع (تحسين ظروف العمل‪،‬‬‫(‪ ) 5‬تحسين أداء الخدمات اإلدارية واالجتماعية‪ ،‬والجهات المعنية باألنشØØ© االقتصادية الكائنة في منØقة المشرو‬ ‫وإمكانية وجود معدات تكنولوجيا معلومات‪ ،‬ووسائل اتصاالت)‪\.‬‬ ‫ح بين‬ ‫ع‪ \.‬وتُصنف هذه اآلثار على أنها ذات أهمية تتر‬ ‫او‬ ‫فيما يلي توضيح للقضايا المتعلقة باإلجر‬ ‫اءات الوقائية واآلثار السلبية المرتبØØ© بالمشرو‬ ‫ها وهي مقيدة بإØار‬‫منخفضة إلى متوسØة‪ \.‬وتقتصر اآلثار المتوقعة على Øرق ومواقع محددة‪ ،‬سواء كانت مشتركة أو محلية‪ ،‬ويمكن تغيير‬ ‫اءات وتدابير التخفيف‪ ،‬ستكون هذه اآلثار إما محايدة أو ستقل إلى أقصى حد ممكن‪ \.‬و‬ ‫ال يعتبر أي‬ ‫زمني ويمكن التخفيف منها‪ \.‬وعند تØبيق إجر‬ ‫أثر من اآلثار التي تم حصر‬ ‫ها غير قابل للتغيير أو له نØاق كبير محتمل‪\.‬‬ ‫‪21‬‬ ‫صفحة ‪ 12‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫عية)‬‫أثناء مرحلة اإلنشاء (Ø®ØÙˆØ Ø§Ù„Ù†Ù‚Ù„ المعلقة والمحØات الفر‬ ‫(‪ )1‬انبعاثات الهواء من المعدات الثقيلة؛‬ ‫(‪ )2‬توليد الغبار من أنشØØ© الحفر وتخزين المواد في أماكن مفتوحة والتربة التي يتم حفر‬ ‫ها؛‬ ‫(‪ )3‬انبعاثات الضوضاء من المعدات الثقيلة المستخدمة في أنشØØ© اإلنشاءات العامة؛‬ ‫ة المخلفات الصلبة والسائلة والخØر‬ ‫ة على نحو غير سليم وتلوث التربة؛‬ ‫(‪ )4‬إدار‬ ‫(‪ )5‬استهالك المياه في أنشØØ© اإلنشاءات؛‬ ‫(‪ )6‬التخلص من مياه الصرف والمياه المستعملة من مكاتب الموقع على نحو غير صحيح؛‬ ‫(‪ )7‬تجفيف المياه السØحية والتخلص غير الصحيح من مياه الصرف والمياه المستخدمة الناتجة عن أالنشØØ© المختلفة؛‬ ‫(‪ )8‬اآلثار المحتملة على المواقع ذات القيمة الثقافية والحضارية واآلثار بسبب أنشØØ© الحفر؛‬ ‫ي وغلق الØرق بسبب أعمال الحفر واإلنشاءات والتركيبات؛‬‫(‪ )9‬الزحام المرور‬ ‫(‪ ) 10‬تدمير المحاصيل واآلثار السلبية على سبل كسب العيش بسبب تركيب Ø®ØÙˆØ ØªÙˆØ²ÙŠØ¹ ونقل الكهرباء الهوائية (المعلقة) السيما في األر‬ ‫اضي‬ ‫الزر‬ ‫اعية المملوكة ملكية خاصة؛‬ ‫عية دائمة؛‬ ‫(‪ )11‬الØلب الدائم على األر‬ ‫اضي إلنشاء محØات فر‬ ‫ى؛‬ ‫(‪ )12‬الØلب المؤقت على األر‬ ‫اضي لنقل اآلالت والمعدات والقيام بأعمال اإلنشاءات األخر‬ ‫(‪ )13‬اآلثار على شاغلي األرض بصور‬ ‫ة غير قانونية واألنشØØ© التجارية المقامة في أماكن الشبكة؛‬ ‫(‪ )14‬مخاØر إتالف‪/‬كسر Ø®ØÙˆØ Ø§Ù„Ù…Ø±â€¬ ‫افق واالنابيب تحت األرض (الخاصة بمياه الشرب والصرف الصحي وكابالت الكهرباء وخØÙˆØ Ø§Ù„Ù‡Ø§ØªÙ)‬ ‫أثناء أعمال الحفر‪ ،‬السيما داخل المناØق الحضرية؛‬ ‫(‪ )15‬المخاوف الخاصة بصحة وسالمة العمال السيما إذا تم التعامل مع مقاولين من الباØن محليين في بعض أعمال اإلنشاءات التي تنØوي‬ ‫ال يتمتع مقاولو الباØن المحليون بوجه عام بثقافة استخدام معدات الحماية الشخصية أو مر‬ ‫اعاة‬ ‫على مخاØر سالمة ØªØ±ØªØ¨Ø Ø¨Ø§Ø¥Ù„Ù†Ø´Ø§Ø¡Ø§Øªâ€ª \.‬و‬ ‫ممارسات أو إجر‬ ‫اءات الصحة والسالمة للعمال‪\.‬‬ ‫أثناء التشغيل‬ ‫خØÙˆØ Ø§Ù„Ø¶ØºØ Ø§Ù„Ø¹Ø§Ù„Ù‰ المعلقة لنقل الكهرباء بقدر‬ ‫ة ‪ 132‬كيلو فولØ‪ \.‬بمجرد إنشاء هذه الخØوØ‪ ،‬تتمثل اآلثار الرئيسية الناجمة عن وجودها‬ ‫ة التفريغ الهالي‪ \.‬وعالوة على ذلك‪ ،‬يخلق التواجد المادي أث اً‬ ‫ر مرئياً وتهديداً للØيور‬ ‫الفعلي في وجود مجال مغناØيسي مع ضوضاء تحدثها ظاهر‬ ‫التي تصØدم باألسالك‪\.‬‬ ‫ة على المحرم االمن الالزم توفير‬ ‫ه للخØ‪ \.‬ويبلغ المجال المغناØيسي‬ ‫المجاالت المغناØيسية‪ \.‬يعتمد حجم حق الØريق ومنØقة الحماية بصور‬ ‫ة كبير‬ ‫لخØÙˆØ Ø¨Ù‚Ø¯Ø±â€¬ ‫ة ‪ 132‬كيلو ÙÙˆÙ„Ø Ø¹Ù„Ù‰ مسافة خلوص نموذجية تبلغ ‪ 15\.5‬متر من مكان إنشاء Ø§Ù„Ø®Ø Ø£Ù‚Ù„ من ‪ 5‬كيلو فولØ‪/‬متر‪ ،‬وهو ما يتوافق‬ ‫مع المعيار المحدد الخاص بالتعرض للمخاØر بال حدود‪ \.‬ونظ اً‬ ‫ر لوجود Ø®Øر التعرض لمستويات مجال مغناØيسي تتخØى حد األمان‪ ،‬فيلزم‬ ‫ات حقوق المرور‪\.‬‬‫تØبيق مسافة الخلوص القياسية لمسار‬ ‫‪21‬‬ ‫صفحة ‪ 13‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫القيمة الجمالية‪ \.‬تمثل Ø®ØÙˆØ Ø§Ù„Ù†Ù‚Ù„ هياكل بنائية دائمة تعبر مناØق واسعة من الصحر‬ ‫اء وقد تنال من القيمة الجمالية الØبيعية للرقعة‬ ‫اوية‪ ،‬فقد تأثرت‬‫ونظر ألن المنØقة تشتهر بحقول Ø§Ù„Ù†ÙØ ÙˆØ¹Ù…Ù„ÙŠØ§Øª الحرق في العديد من المناØق الصحر‬ ‫ًا‬ ‫اوية‪ \.‬لكن ً‬ ‫أيا ما كان األمر‪،‬‬ ‫الصحر‬ ‫سلبا بسبب مواقع إنتاج النفØ‪ \.‬وبالتالي‪ ،‬من المتوقع أال يكون لخØÙˆØ Ø§Ù„Ù†Ù‚Ù„ واألبر‬ ‫اج الخاصة بالكهرباء تأثير‬ ‫اء بالفعل ً‬ ‫القيمة الجمالية للصحر‬ ‫اوية في البصر‬ ‫ة‪\.‬‬ ‫كبير على القيمة الجمالية للرقعة الصحر‬ ‫ع المعزول بمادة سداسي فلوريد الكبريت‪ ،‬وهو‬ ‫ة من النو‬ ‫عية مثل قواØع الدائر‬ ‫عية‪ \.‬تكون Ø£Øقم المفاتيح ُ‬ ‫المستخدمة في المحØات الفر‬ ‫المحØات الفر‬ ‫ات الدفيئة القوية‪ \.‬ومن الممكن أن يتسرب هذا الغاز إلى Ø§Ù„Ù…Ø­ÙŠØ Ø§Ù„Ø¬ÙˆÙŠ من المعدات القديمة أو أثناء صيانتها وخدمتها‪\.‬‬‫من الغاز‬ ‫عية للتحويل‬‫الت و‪/‬أو محØات الفر‬ ‫عية للمحو‬‫عية للتحويل‪ \.‬سينØوي تركيب محØات فر‬ ‫عية للمحو‬ ‫الت و‪/‬أو المحØات الفر‬ ‫تركيب المحØات الفر‬ ‫ات للوصول‬ ‫في غرف مصنوعة من Øابوق على القيام بأشغال مدنية واستخدام Øرق إنشاء شائعة ومواد بناء معروفة‪ \.‬و‬ ‫ال توجد Ø®ØØ Ù„ÙØªØ­ مسار‬ ‫إليها بصور‬ ‫ة محددة‪\.‬‬ ‫عية للتحويل‪ \.‬تؤدي إز‬ ‫الة المعدات المتقادمة إلى وجود مواد معدنية يمكن إعادة‬ ‫عية للمحو‬ ‫الت و‪/‬أو المحØات الفر‬ ‫إعادة تأهيل المحØات الفر‬ ‫ها (حديد صلب ونحاس على وجه التحديد)‪ \.‬لكن قد تحتوي بعض المحو‬ ‫الت على زيوت ملوثة بمادة ثنائي الفينول متعدد الكلورينات‪ \.‬وإذا‬ ‫تدوير‬ ‫ي اتخاذ تدابير خاصة لتغليفها والتخلص منها‬‫الت تحتوي بالفعل على مادة ثنائي الفينيل متعدد الكلورينات‪ ،‬من الضرور‬ ‫وجد أن بعض المحو‬ ‫ُ‬ ‫نهائيا للوقاية من المخاØر البيئية والمخاØر على الصحة العامة‪\.‬‬ ‫ً‬ ‫اضي ُ‬ ‫المخصصة إلقامة البنية التحتية‪ \.‬يتØلب تركيب المحØات الثانوية وخØÙˆØ Ø§Ù„Ù†Ù‚Ù„ والتوزيع‪ ،‬االستحواذ على أرض أو دفع تعويض‬ ‫األر‬ ‫مستغلة سواء تم وضع اليد عليها بØريقة رسمية أو غير رسمية‪\.‬‬ ‫مقابل أي أرض ُ‬ ‫ع‪:‬‬ ‫ح أي آثار محتملة غير مباشر‬ ‫ة و‪/‬أو Øويلة األمد ناتجة عن األنشØØ© المتوقعة مستقبال في منØقة المشرو‬ ‫‪ \.2‬اشر‬ ‫ع مجاال مغناØيسياً‪ ،‬والذي له تأثير على الصحة العامة‪ ،‬وخصوصاً عند‬ ‫ة ‪ 132‬كيلو ÙÙˆÙ„Ø Ùâ€¬ ‫المركبة في هذا المشرو‬ ‫ستنتج Ø®ØÙˆØ Ø§Ù„Øاقة بقدر‬ ‫ات Øويلة‬ ‫مرور‬ ‫ه على مقربة من األماكن المأهولة مثل المناØق الحضرية والمساكن والمدارس والمستشفيات‪ \.‬ومن غير المتوقع حدوث أي تأثير‬ ‫األمد‪ ،‬حال االلتز‬ ‫ام بالحد األدنى المØلوب من المحرم اآلمن الفاصل عن مسار الحق في المرور‪\.‬‬ ‫عية وأØقم المفاتيح الموجودة بها‪ \.‬سيتم تحديد مستويات الضوضاء باالمتثال للمعايير الدولية‪،‬‬ ‫ستنبعث الضوضاء عن محو‬ ‫الت المحØات الفر‬ ‫مثل معايير اللجنة الكهربائية التقنية الدولية ( ‪ ،)IEC‬وستقتصر تلك الضوضاء على المستويات المقبولة فحسب‪\.‬‬ ‫ينØوي وجود Ø®ØÙˆØ Ø­ÙŠØ© ومعدات دائماً على أخØار كهربائية‪ ،‬والتي يمكن تخفيفها بضمان مØابقة الهياكل وارتخاء الخØÙˆØ Ù„Ù…ØªØلبات‬ ‫‪21‬‬ ‫صفحة ‪ 14‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫ع حماية أسفل األسالك عند مناØق العبور المزدحمة مثل الØرق‪ ،‬إن لزم األمر‪ \.‬فضال على ذلك‪ ،‬إذا وقع اختيار‬‫الخلوص شاملة تركيب درو‬ ‫ات هجر‬ ‫ة الØيور‪ ،‬فينبغي استخدام وحدات حرف مسار الØيور للحماية من اصØدام‬ ‫المسار النهائي لخØÙˆØ Ù†Ù‚Ù„ ‪ 132‬كيلو ÙÙˆÙ„Ø Ø¹Ø¨Ø± مسار‬ ‫الØيور بالخØوØ‪\.‬‬ ‫ة الفنية‪ \.‬وسيترتب على تقليص الخسار‬ ‫ة الفنية انخفاض متØلبات‬ ‫ع في تحسين موثوقية الشبكة‪ ،‬وتقليص الخسار‬‫من المتوقع أن يسهم المشرو‬ ‫ي‪ ،‬وسيؤدي تحسن الموثوقية إلى تحفيز النمو االقتصادي‪ ،‬وخلق فرص العمل وتحسين‬ ‫ات االحتباس الحر‬ ‫ار‬ ‫التوليد وتخفيض مكافئ انبعاثات غاز‬ ‫ى‪\.‬‬‫جودة الحياة‪ ،‬نتيجة لتحسين اإلمداد بالخدمات األساسية إلى جانب العناصر األخر‬ ‫ع (إذا كان مناسباً) تتم در‬ ‫استها للمساعدة في تجنب اآلثار السلبية أو الحد منها‪\.‬‬ ‫ح أي بدائل للمشرو‬‫‪ \.3‬اشر‬ ‫ة ‪ 132‬كيلو ÙÙˆÙ„Ø ÙˆØ®ØÙˆØ Ø§Ù„ØªÙˆØ²ÙŠØ¹ بقدر‬ ‫ة ‪ 33‬كيلو‬ ‫عية‪ ،‬ومسار‬ ‫ات Ø®ØÙˆØ Ø§Ù„Ù†Ù‚Ù„ المقترحة بقدر‬ ‫تنØبق المسار‬ ‫ات البديلة على مواقع المحØات الفر‬ ‫محتملة‪ \.‬وسيتم اختيار مسار‬ ‫ات‬ ‫ات الخØÙˆØ Ø¨Ù…Ø§ يضمن تفادي أي تأثير‬ ‫ات بيئية أو اجتماعية ُ‬ ‫عية ومسار‬‫فولت‪ ،‬ويتم اختيار مواقع المحØات الفر‬ ‫خØÙˆØ Ø§Ù„Ù†Ù‚Ù„ والتوزيع المقترحة على نحو من شأنه تفادي المرور عبر أي مناØق تتسم بحساسية إيكولوجية أو ثقافية وحضارية‪\.‬‬ ‫ات المقترض لتخØÙŠØ Ø§Ù„ØªØ¯Ø§Ø¨ÙŠØ± الوارد وصفها‬ ‫ح التدابير التي قام بها المقترض لمعالجة مسائل السياسات الوقائية‪ِّ \.‬‬ ‫وقدم تقييماً لقدر‬ ‫‪ \.4‬اشر‬ ‫ّ‬ ‫وتنفيذها‪\.‬‬ ‫عية وغرف المحو‬ ‫الت غير معروفة على وجه اليقين وقت التقييم المسبق‬ ‫ات شبكات النقل والتوزيع والمواقع الدقيقة للمحØات الفر‬ ‫ونظ اً‬ ‫ر ألن مسار‬ ‫ع‪ ،‬فقد تم إعداد Ø¥Øار اإلدار‬ ‫ة البيئية واالجتماعية وإØار سياسة إعادة التوØين ليشكال األساس اإلرشادي لتناول متØلبات إعادة‬ ‫لهذا المشرو‬ ‫ع وقد تم اإلفصاح عن كل من Ø¥Øار اإلدار‬ ‫ة البيئية واالجتماعية‪ ،‬وإØار سياسة إعادة‬ ‫اءات التعويض ُ‬ ‫المتبعة خالل تنفيذ المشرو‬ ‫التوØين وإجر‬ ‫اق وعلى موقع البنك الدولي اإللكتروني‪ ،‬بتاريخ ‪ 16‬أكتوبر‪ /‬تشرين األول‪ ،‬وفي ‪ 28‬يناير‪/‬كانون الثاني ‪ 2019‬على‬‫التوØين في كل من العر‬ ‫ة البيئية واالجتماعية وخØØ© عمل إلعادة التوØين‪ ،‬إن دعت الضرور‬ ‫ة إلى‬ ‫الترتيب‪ \.‬وعند تحديد موقع أو مسار محدد‪ ،‬سيتم إعداد Ø®ØØ© لإلدار‬ ‫اءات الواردة في Ø¥Øار اإلدار‬ ‫ة البيئية واالجتماعية‪ \.‬وستنص Ø®ØØ‬ ‫ذلك‪ \.‬وسيتم إعداد Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫ة البيئية واالجتماعية باتباع المبادئ واإلجر‬ ‫ة البيئية واالجتماعية أو األدوات اإلضافية المرتبØØ© بها (Ø®ØØ© عمل إعادة التوØين) على إجر‬ ‫اءات وتدابير واضحة لتناول قضايا الصحة‬ ‫اإلدار‬ ‫ي إعداد Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫ة البيئية واالجتماعية الخاصة بالمواقع‬ ‫والسالمة‪ ،‬وإدار‬ ‫ة آثار تدفقات العمالة والتعويض عن آثار إعادة التوØين‪ \.‬وسيجر‬ ‫وخØØ Ø¹Ù…Ù„ إعادة التوØين والموافقة عليها واإلفصاح عنها قبل بدء أي أعمال إنشاءات‪\.‬‬ ‫تØبيق تدابير الحد من المخاØر واآلثار البيئية واالجتماعية‪ \.‬تضم جميع عقود اإلنشاء Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫ة البيئية واالجتماعية الخاصة بالموقع‪ ،‬والتي‬ ‫ة التنفيذ (مديرية توزيع كهرباء الجنوب ومديرية نقل كهرباء الجنوب) تعيين‬ ‫يكون االلتز‬ ‫ام بها إجبارياً‪ \.‬ويتعين على الهيئتين اللتين تتوليان إدار‬ ‫ة البيئية واالجتماعية‪ \.‬وعالوة على ذلك‪،‬‬ ‫مسؤولين متخصصين في الشؤون البيئية واالجتماعية لضمان تنفيذ متØلبات واشتر‬ ‫اØات Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫اءات الواردة في Ø®ØØ© اإلدار‬ ‫ة البيئية واالجتماعية‪\.‬‬ ‫افية التابعة للبنك على ضمان االلتز‬ ‫ام بالتدابير واإلجر‬ ‫ستعمل البعثات اإلشر‬ ‫‪21‬‬ ‫صفحة ‪ 15‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫ة البيئية واالجتماعية‪ \.‬ال تمتلك الهيئات المسؤولة عن إدار‬ ‫ة التنفيذ‬ ‫ة المقترض ‪ /‬الهيئات المسؤولة عن إدار‬ ‫ة التنفيذ على تØبيق Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫قدر‬ ‫اف عليها‪ \.‬لذا‪ ،‬ينبغي أن تضم فرق تنفيذ‬ ‫ة سابقة في تنفيذ Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫ة البيئية واالجتماعية أو اإلشر‬ ‫(شركتي نقل وتوزيع كهرباء الجنوب) خبر‬ ‫ة التنفيذ أخصائيين لحماية الشؤون البيئية واالجتماعية‪ ،‬الذين يتلقون المساندة من المهندس التابع‬ ‫ع التابعة للهيئتين اللتين تتوليان إدار‬‫المشرو‬ ‫اجعة Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫ة البيئية واالجتماعية وسياسة إعادة التوØين الخاصة بالموقع‪ ،‬والرقابة على التنفيذ الشامل لخØØ‬ ‫ع‪ ،‬بغية مر‬‫لمالك المشرو‬ ‫ة‬ ‫امات التي نصت عليها Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫اج جميع المتØلبات وااللتز‬ ‫ع إدر‬‫اإلدارية البيئية واالجتماعية‪ \.‬باإلضافة إلى ذلك‪ ،‬تكفل فرق تنفيذ المشرو‬ ‫البيئية واالجتماعية‪ /‬سياسة إعادة التوØين في جميع عقود اإلنشاءات‪\.‬‬ ‫ح اآلليات الخاصة بالتشاور واإلفصاح بشأن السياسات الوقائية‪ ،‬مع التركيز على‬‫ة‪ ،‬ثم اشر‬ ‫اف األساسية صاحبة المصلحة المباشر‬ ‫‪ِّ \.5‬‬ ‫حدد األØر‬ ‫ّ‬ ‫ع‪\.‬‬ ‫السكان المحتمل تضرر‬ ‫هم من المشرو‬ ‫ة الكهرباء‪ ،‬وموظفو إدار‬ ‫ات التوزيع والنقل‪ ،‬والمنظمات غير‬ ‫زر‬‫ع‪ ،‬ومسؤولو و ا‬ ‫أصحاب المصلحة واألØر‬ ‫اف المعنية هم مسؤولو مناØق المشرو‬ ‫حلة إعداد‬‫ة الجمهور ومشاركته خالل اجتماعات محلية انعقدت في أثناء مر‬ ‫ع‪ \.‬وتم االتفاق على آليات مشاور‬‫الحكومية والمتضررون من المشرو‬ ‫اعت مشاور‬ ‫ة الجمهور مستويات التعّلم التي يتمتع بها أًصحاب المصلحة‬ ‫خØØ© اإلدار‬ ‫ة البيئية واالجتماعية وإØار سياسة إعادة التوØين‪ \.‬وقد ر‬ ‫المختلفين‪ \.‬وسيتم اتباع منهج مماثل عند إعداد Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±â€¬ ‫ة البيئية واالجتماعية الخاصة بالموقع (وسياسة إعادة التوØين عند الحاجة)‪ \.‬إن‬ ‫ع‪ ،‬واآلثار البيئية واالجتماعية المتوقعة ألنشØة‬‫ع وتصميمه‪ ،‬ومنافع المشرو‬‫الغرض من جلسات التشاور هذه هو العرض الشامل لنØاق المشرو‬ ‫ع وأنشØته‪ ،‬وكذلك ضمان النظر بعين االعتبار في تساؤ‬ ‫التهم و مقترحاتهم‬ ‫ع‪ \.‬وستساعد هذه اللقاءات أصحاب المصلحة على فهم المشرو‬‫المشرو‬ ‫ع‪ ،‬بما في ذلك مرحلة التخØيØ‪\.‬‬ ‫و مخاوفهم في جميع مر‬ ‫احل المشرو‬ ‫ر ممكناً‪ ،‬نظ اً‬ ‫ر للمخاوف‬ ‫ات موسعة مع الجمهور وقت إعداد Ø®ØØ© اإلدار‬ ‫ة البيئية واالجتماعية وإØار سياسة إعادة التوØين أم اً‬ ‫لم يكن إجر‬ ‫اء مشاور‬ ‫ابات المدنية التي سادت المنØقة حينئذ‪ \.‬إال أنه قد جرت مشاور‬ ‫ات مع كل من شركتي نقل وتوزيع كهرباء الجنوب في اليوم‬ ‫األمنية‪ ،‬واالضØر‬ ‫الموافق ‪ 3‬مايو‪/‬أيار ‪ \. 2018‬وكان الهدف من هذه الجلسة هو عرض أهداف Ø®ØØ© اإلدار‬ ‫ة البيئية والمجتمعية وإØار سياسة إعادة التوØين‪،‬‬ ‫اضي‪ ،‬وتحديد‬ ‫اضي‪ ،‬والقوانين البيئية واالستحواذ على األر‬ ‫ة األر‬ ‫ع‪ ،‬وحياز‬ ‫وجمع المزيد من المعلومات حول أدوار ومسؤوليات فرق إدار‬ ‫ة المشرو‬ ‫التهم ومخاوف جميع األØر‬ ‫اف‪\.‬‬ ‫المسائل الرئيسية وكيفية تسوية تساؤ‬ ‫ات العامة‪ ،‬وفقاً لما ورد في Ø®ØØ© اإلدار‬ ‫ة البيئية واالجتماعية وإØار سياسة إعادة التوØين‪ ،‬على‬ ‫وقد تم اإلفصاح ّ‬ ‫عما خلصت إليه جلسة المشاور‬ ‫ة الكهرباء (المرتبØØ© بكل من شركتي‬ ‫زر‬‫اق وو ا‬ ‫هابية بالعر‬ ‫الموقع اإللكتروني الخاص بصندوق إعادة إعمار المناØق المتضرر‬ ‫ة من األعمال اإلر‬ ‫ع على كيفية تقديم تعليقاتهم ومخاوفهم أو Ø§Ù„Ù†Ù‚Ø§Ø Ø§Ù„ØªÙ‰ قد تقلق‬ ‫نقل وتوزيع كهرباء الجنوب)‪ \.‬وقد تم Ø¥Øالع جميع األفر‬ ‫اد المتضررين من المشرو‬ ‫ر‬ ‫احتهم عند الحاجة‪\.‬‬ ‫آلية معالجة المظالم‪\.‬‬ ‫ة التكلفة‬ ‫ي (‪ )OP 4\.12‬وجود إجر‬ ‫اءات متاحة وميسور‬ â€«ÙŠØ´ØªØ±Ø Ù…Ù†Ø´ÙˆØ± سياسة عمليات البنك بشأن االستحواذ على األر‬ ‫اضي وإعادة التوØين القسر‬ ‫‪21‬‬ ‫صفحة ‪ 16‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫اعات الناشئة عن إعادة التوØين (على سبيل المثال‪ ،‬آليات لتسوية التظلمات(‪ ،‬تر‬ ‫اعي هذه اآلليات توفر حق اللجوء‬ ‫لقيام Øرف ثالث بتسوية النز‬ ‫عرف أإلجتماعية ألسائدة فى تلك المنØقة لتسوية النز‬ ‫اعات‪\.‬‬ ‫إلى القضاء وكذلك اآلليات وفقا لأل ا‬ ‫تلتزم كل من شركتي نقل وتوزيع كهرباء الجنوب بتشكيل وحدة لمعالجة المظالم‪ ،‬للتعامل مع أي شكاوى أو Øلبات مقدمة بشأن أنشØة‬ ‫ع‪ ،‬وتخصيص شخص ليعمل كمنسق‪ \.‬وينبغي توفير العديد من أساليب التواصل (هاتف‪ ،‬وصندوق شكاوى‪ ،‬وموقع على شبكة اإلنترنت‪،‬‬‫المشرو‬ ‫اب عن مخاوفهم وقلقهم أو إلبداء وجهات نظر‬ ‫هم‪\.‬‬ ‫وبريد إلكتروني‪ ،‬ورسائل نصية‪ ،‬إلخ) لكى يتسنى توفير سبل متعددة أمام المستفيدين لإلعر‬ ‫ع‬ ‫وسيتم نشر معلومات االتصال الخاصة بمسؤول معالجة المظالم باللغة المحلية وعلى المستوى المحلي‪ \.‬ويضØلع مدير فريق عمل إدار‬ ‫ة المشرو‬ ‫بمسؤولية معالجة تلك المخاوف والمشاكل و المقترحات التي يتلقاها مسؤولو االتصال بشأن اآلثار البيئية و‪/‬أو االجتماعية ألناتجة عن أنشØة‬ ‫ع وقت ممكن مع اإلحتفاظ بنسخ من‬ ‫ي أن يتم تسجيل الشكاوى ُ‬ ‫المقدمة ومتابعتها والتحقيق بشأنها وحسمها بأسر‬ ‫ع‪ ،‬كما و إنه من ألضرور‬‫المشرو‬ ‫الشكاوى في ملفات األنشØØ© وتقارير سير العمل‪ ،‬ويتضمن ذلك رقم ونوعية الشكاوى ونتائج حسمها‪\.‬‬ ‫التعامل مع الشكاوى بالبنك الدولي‪\.‬‬ ‫اد الذين يعتقدون أنهم تضرروا من أحد المشروعات التي يدعمها البنك الدولي أن يتقدموا بشكاويهم إلى آليات‬ ‫يمكن للمجتمعات المحلية واألفر‬ ‫اجعة الشكاوى فور تلقيها‬ ‫ة معالجة المظالم مر‬ ‫ة معالجة المظالم بالبنك الدولي‪ \.‬وتكفل دائر‬ ‫ع أو إلى دائر‬‫التظلم القائمة حالياً على مستوى المشرو‬ ‫ع رفع شكاواهم إلى هيئة‬ ‫ع‪ \.‬كما يمكن للمجتمعات المحلية واألفر‬ ‫اد المتضررين من المشرو‬ ‫بغرض معالجة المخاوف والهموم المتعلق Ø© بالمشرو‬ ‫ام البنك بسياساته وإجر‬ ‫اءاته‪ \.‬ويجوز‬ ‫التفتيش المستقلة التابعة للبنك التي تقرر ما إذا كان قد حدث ضرر ‪ -‬أو يمكن أن يحدث ‪ -‬نتيجة لعدم التز‬ ‫رفع الشكاوى في أي وقت بعد أن يتم لفت انتباه البنك الدولي مباشر‬ ‫ة إلى هذه المخاوف‪ ،‬وإعØاء الفرصة لجهاز إدارته للرد عليها‪ \.‬للمزيد من‬ ‫ة الموقع‪http://www\.worldbank\.org/en/projects- :‬‬ ‫جى زيار‬ ‫المعلومات عن كيفية تقديم الشكاوى إلى دائر‬ ‫ة معالجة المظالم بالبنك‪ ،‬ير‬ ‫‪ \.operations/products-and-services/grievance-redress-service‬ولالØالع على أي معلومات بشأن كيفية رفع الشكاوى إلى‬ ‫جى زيار‬ ‫ة الموقع اإللكتروني‪\.www\.inspectionpanel\.org :‬‬ ‫هيئة التفتيش التابعة للبنك‪ُ ،‬‬ ‫ير‬ ‫ب‪ \.‬متØلبات اإلفصاح عن المعلومات‬ ‫ها‬ ‫‪OPS_EA_DISCLOSURE_TABLE‬‬ ‫البيئية‪/‬وغير‬ ‫اجعة البيئية‪/‬خØØ© اإلدار‬ ‫ة‬ ‫التقييم البيئي‪/‬المر‬ ‫بالنسبة للمشروعات من الفئة أ‪ ،‬تاريخ توزيع‬ ‫الموجز الوافي للتقييم البيئي على المديرين‬ ‫تاريخ تقديم الوثيقة للبنك من أجل اإلفصاح‬ ‫تاريخ تلقي البنك للوثيقة‬ ‫التنفيذيين‬ ‫‪ 28‬يناير‪/‬كانون الثاني ‪2019‬‬ ‫‪ 28‬يناير‪/‬كانون الثاني ‪2019‬‬ ‫اإلفصاح عن المعلومات داخل البلد‬ ‫‪21‬‬ ‫صفحة ‪ 17‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫العر‬ ‫اق‬ ‫‪ 16‬أكتوبر ‪/‬تشرين األول ‪2018‬‬ ‫التعليقات‬ ‫زر‬ ‫ة الكهرباء (المرتبØØ© بموقعي شركتي‬ ‫ة البيئية واالجتماعية داخل العر‬ ‫اق على المواقع اإللكترونية لكل من‪ )1( :‬و ا‬ ‫تم اإلفصاح عن Ø®ØØ© اإلدار‬ ‫اق‪\.‬‬ ‫هابية بالعر‬ ‫نقل وتوزيع كهرباء الجنوب على اإلنترنت)؛ و (‪ )2‬صندوق إعادة إعمار المناØق المتضرر‬ ‫ة من األعمال اإلر‬ ‫‪OPS_RA_DISCLOSURE_TABLE‬‬ ‫خØØ© العمل‪/‬إØار‪/‬عملية وضع السياسات بشأن إعادة التوØين‪:‬‬ ‫تاريخ تقديم الوثيقة للبنك من أجل اإلفصاح‬ ‫تاريخ تلقي البنك للوثيقة‬ ‫‪ 28‬يناير‪/‬كانون الثاني ‪2019‬‬ ‫‪ 28‬يناير‪/‬كانون الثاني ‪2019‬‬ ‫اإلفصاح عن المعلومات داخل البلد‬ ‫العر‬ ‫اق‬ ‫‪ 16‬أكتوبر ‪/‬تشرين األول ‪2018‬‬ ‫التعليقات‬ ‫زر‬ ‫ة الكهرباء (المرتبØØ© بموقعي شركتي نقل‬ ‫تم اإلفصاح عن Ø¥Øار سياسة إعادة التوØين داخل العر‬ ‫اق على المواقع اإللكترونية لكل من‪ )1( :‬و ا‬ ‫اق‪\.‬‬ ‫هابية بالعر‬ ‫وتوزيع كهرباء الجنوب على اإلنترنت)؛ و (‪ )2‬صندوق إعادة إعمار المناØق المتضرر‬ ‫ة من األعمال اإلر‬ ‫ع بوضع الشكل‬‫ات بشأن المشرو‬ ‫رر‬‫ام على المستوى المؤسسي (يتم استيفاؤه عندما يقوم االجتماع الذي يتخذ الق ا‬ ‫ج‪ \.‬مؤشر‬ ‫ات رصد مدى االلتز‬ ‫النهائي لموجز بيانات اإلجر‬ ‫اءات الوقائية المتكاملة)‬ ‫‪OPS_EA_COMP_TABLE‬‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك (‪ -)OP/BP/GP 4\.01‬التقييم البيئي‬ ‫ع إعداد تقرير تقييم بيئي منفصل (بما في ذلك Ø®ØØ© اإلدار‬ ‫ة البيئية)؟‬ ‫هل يتØلب هذا المشرو‬ ‫نعم‬ ‫ة البيئية أو مدير قØاع الممارسات بالمنØقة باستعر‬ ‫اض تقرير التقييم البيئي والموافقة عليه؟‬ ‫إذا كانت اإلجابة نعم‪ ،‬هل قامت وحدة اإلدار‬ ‫نعم‬ ‫‪21‬‬ ‫صفحة ‪ 18‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫هل تم دمج التكاليف والمسؤوليات الخاصة بخØØ© اإلدار‬ ‫ة البيئية في االعتماد‪/‬القرض؟‬ ‫نعم‬ ‫‪OPS_IR_COMP_TABLE‬‬ ‫منشور سياسة العمليات‪/‬إجر‬ ‫اءات البنك (‪ )OP/BP 4\.12‬ــ إعادة التوØين القسرية‬ ‫ع Ø®Øة‪/‬خØØ© مختصر‬ ‫ة‪/‬إØار سياسات‪/‬إØار عمليات إلعادة التوØين (حسب االقتضاء)؟‬ ‫هل أعد المشرو‬ ‫نعم‬ ‫اءات الوقائية أو مدير الممارسات باستعر‬ ‫اض هذه الخØة؟‬ ‫إذا كانت اإلجابة نعم‪ ،‬هل قامت الوحدة المعنية باإلجر‬ ‫نعم‬ ‫‪OPS_PDI_COMP_TABLE‬‬ ‫سياسة البنك الدولي المعنية باإلفصاح عن المعلومات‬ ‫هل تم إرسال المستندات ذات الصلة بالسياسات الوقائية إلى البنك الدولي لإلفصاح عنها؟‬ ‫نعم‬ ‫ع‬ ‫هل تم اإلفصاح عن المستندات ذات الصلة داخل البلد للجمهور في مكان عام بشكل ولغة مفهومين ويسهل على الفئات المتأثر‬ ‫ة بالمشرو‬ ‫والمنظمات غير الحكومية المحلية الوصول إليه؟‬ ‫نعم‬ ‫‪21‬‬ ‫صفحة ‪ 19‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫جميع سياسات اإلجر‬ ‫اءات الوقائية‬ ‫هل تم إعداد جدول زمني مالئم وميز‬ ‫انية وتحديد مسؤوليات مؤسسية واضحة لتنفيذ التدابير ذات الصلة بالسياسات الوقائية؟‬ ‫نعم‬ ‫ع؟‬ ‫هل تم إدر‬ ‫اج التكاليف المتصلة بتدابير السياسات الوقائية في تكلفة المشرو‬ ‫نعم‬ ‫ع متابعة اآلثار والتدابير الوقائية ذات الصلة بالسياسات الوقائية؟‬‫هل يشمل نظام المتابعة والتقييم الخاص بالمشرو‬ ‫نعم‬ ‫ع ذلك على نحو ٍ‬ ‫كاف ومالئم؟‬ ‫هل تم االتفاق مع المقترض على ترتيبات مالئمة للتنفيذ‪ ،‬وهل تعكس الوثائق القانونية للمشرو‬ ‫نعم‬ ‫مسؤول االتصال‬ ‫البنك الدولي‬ ‫بول بارينغانير‬ ‫أخصائي أول شؤون Øاقة‬ ‫محمد وفاء العاني‬ ‫مسؤول العمليات‬ ‫المقترض‪/‬البلد المتعامل مع البنك‪/‬المستفيد‬ ‫زر‬ ‫ة المالية‬ ‫وا‬ ‫الهيئات المسؤولة عن إدار‬ ‫ة التنفيذ‬ ‫‪21‬‬ ‫صفحة ‪ 20‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع إعادة بناء وتعزيز خدمات الكهرباء في العراق ()‪P162454‬‬ ‫زر‬ ‫ة الكهرباء‬ ‫وا‬ ‫د‪ \.‬لؤي الخØيب‬ ‫وزير الكهرباء‬ ‫‪imoe_hq@yahoo\.com‬‬ ‫للمزيد من المعلومات الرجاء االتصال بـ‪:‬‬ ‫البنك الدولي‬ ‫‪H Street, NW 1818‬‬ ‫‪Washington, D\.C\. 20433‬‬ ‫هاتف‪1000-473 )202( :‬‬ ‫الموقع اإللكتروني‪http://www\.worldbank\.org/projects :‬‬ ‫الموافقة‬ ‫بول بارينغانير‬ ‫رئيسا فريق العمل‪:‬‬ ‫محمد وفاء العاني‬ ‫وافق عليه‪:‬‬ ‫‪ 14‬مارس‪/‬آذار ‪2019‬‬ ‫نينا تشي‬ ‫مستشار اإلجر‬ ‫اءات الوقائية‪:‬‬ ‫مدير قØاع الممارسات العالمية‬ ‫‪ 14‬مارس‪/‬آذار ‪2019‬‬ ‫إريك ماغنوس فيرنستروم‬ ‫بالمنØقة‪/‬المدير‪:‬‬ ‫‪ 15‬مارس‪/‬آذار ‪2019‬‬ ‫يا ا‬ ‫ر سالم‬ ‫مدير مكتب البنك الدولي في العر‬ ‫اق‪:‬‬ ‫‪21‬‬ ‫صفحة ‪ 21‬من‬ ‫‪ 03‬سبتمبر‪/‬أيلول ‪2018‬‬

APPROVAL

P070963

Document of The World Bank Report No: ICR00002970 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-73530) ON A LOAN IN THE AMOUNT OF US$150 MILLION TO THE ARGENTINE REPUBLIC FOR A RURAL EDUCATION IMPROVEMENT PROJECT - PROMER May 30, 2014 Human Development Department Argentina, Paraguay and Uruguay Country Management Latin America and the Caribbean Region  CURRENCY EQUIVALENTS (Exchange Rate Effective June 4, 2014) Currency Unit = Argentine Peso 1\.00 = US$0\.12 US$ 1\.00 = AR$8\.09 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS CEAPI Consejo Educativo Autónomo de Pueblos Indígenas or AutonomousEducation Council for Indigenous Groups CFE Consejo Federal de Educación or Federal Education Council CPS Country Partnership Strategy DGI General Directorate for Infrastructure DGUFI Dirección General Unidad de Financiamiento Internacional or General Directorate of the International Finance Unit DINIECE Dirección Nacional de Información y Evaluación de la Calidad Educativa or National Directorate of Information and Educational Quality Evaluation EGB Educación General Básica or General Basic Education ICR Implementation Completion and Results Report ISR Implementation Status Report LEF Law for Educational Financing NAP Núcleos de Aprendizajes Prioritarios or Core Learning Priorities NBI Necesidades Básicas Insatisfechas or Unsatisfied Basic Needs NEA Noreste Argentina or Northeast Argentina NME National Ministry of Education NOA Noroeste Argentina or Northwest Argentina NPRE National Program for Rural Education OECD The Organisation for Economic Co-operation and Development ONE Operativo Nacional de Evaluación or National Evaluation Survey PDO Project Development Objective PISA Program for International Student Assessment PNEDOyFD Plan Nacional de Educación Obligatoria y Formación Docente or National Plan for Compulsory Education and Educator Training PRODYMES Programa de Descentralización y Mejoramiento de la Educación Secundaria or Program for the Decentralization and Improvement of Secondary Education PROMER Rural Education Improvement Project QAE Quality at Entry QSA Quality of Supervision SIGEN General Comptroller of the Nation  Vice President: Jorge Familiar Country Director: Jesko Hentschel Sector Manager: Reema Nayar Project Team Leader: Diego Ambasz ICR Team Leader: Diego Ambasz  ARGENTINA Rural Education Improvement Project - PROMER CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives, and Design \. 1  2\. Key Factors Affecting Implementation and Outcomes \. 4  3\. Assessment of Outcomes \. 11  4\. Justification of Overall Outcome Rating \. 19  5\. Assessment of Bank and Borrower Performance \. 21  6\. Lessons Learned \. 23  Annex 1\. Project Costs and Financing  Annex 2\. Outputs by Component  Annex 3\. Economic and Financial Analysis  Annex 4\. Bank Lending and Implementation Support/Supervision Processes  Annex 5\. Summary of Borrower's ICR and/or Comments on Draft ICR  Annex 6\. List of Supporting Documents  MAP  A\. Basic Information Argentina Rural Education Country: Argentina Project Name: Improvement Project - PROMER Project ID: P070963 L/C/TF Number(s): IBRD-73530 ICR Date: 10/30/2013 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: ARGENTINA Original Total USD 150\.00M Disbursed Amount: USD 150\.00M Commitment: Revised Amount: USD 150\.00M Environmental Category: B Implementing Agencies: Ministry of Education Co-financiers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 02/08/2005 Effectiveness: 12/14/2006 12/14/2006 09/01/2011 Appraisal: 10/28/2005 Restructuring(s): 04/03/2013 Approval: 12/15/2005 Mid-term Review: 10/27/2008 04/05/2010 Closing: 10/31/2011 12/31/2013 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately satisfactory Borrower Performance: Moderately satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Moderately satisfactory Moderately satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately satisfactory Moderately satisfactory Performance: Performance: i C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 3 3 Pre-primary education 25 25 Primary education 60 60 Secondary education 5 5 Sub-national government administration 7 7 Theme Code (as % of total Bank financing) Administrative and civil service reform 14 14 Education for all 14 14 Education for the knowledge economy 29 29 Indigenous peoples 14 14 Rural services and infrastructure 29 29 E\. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Pamela Cox Country Director: Jesko Hentschel Axel van Trotsenburg Sector Manager: Reema Nayar Eduardo Velez Bustillo Project Team Leader: Diego Ambasz Suhas D\. Parandekar ICR Team Leader: Diego Ambasz ICR Primary Author: William Experton ii F\. Results Framework Analysis Project Development Objectives (from Project Loan Agreement) The objectives of the Project are to improve: (i) the coverage, efficiency, and quality of the Argentine education system, and (ii) the governance of the Argentine education system through strengthening of the normative, planning, information, monitoring, and evaluation capacity at the national and provincial levels\. (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values 1 documents) Target Years Indicator 1 : Reduce by half the number of 6–year-old children in 1st grade who did not attend preschool in rural areas in Argentina\. Value 15,861(Original baseline (Quantitative or 4,500 7,921 3,859 9,000) Qualitative) Date achieved 11/17/2004 12/31/2012 12/31/2013 04/30/2013 Comments Surpassed: This indicator was revised at 2011 restructuring\. The baseline was (incl\. % corrected the target and the wording were revised but the substance was not achievement) changed\. Increase the access of students completing the 7th grade to the 8th grade of Indicator 2 : schooling in rural areas in Argentina\. Value 77\.8 % (Original baseline (Quantitative or 85\.0% 82\.9% 73%) Qualitative) Date achieved 11/17/2004 12/31/2012 12/31/2013 Comments 82\.5% achieved: The Project achieved the targeted access rate from 7th to 8th grade (incl\. % in 2011 with 85\.1%\. However the promotion rate decreased slightly to 84% in 2012 achievement) and to 82\.9% in 2013\. This indicator’s baseline was corrected at 2011 restructuring\. Indicator 3 : Increase the access of students completing the 6th grade to the 7th grade of schooling in rural areas in Argentina\. Value (Quantitative or 91\.6% 93\.0% 87\.9% Qualitative) Date achieved 11/17/2004 12/31/2013 12/31/2013 55\.3% achieved\. Although coverage of lower secondary education increased Comments significantly by 30\.8% between 2004 and 2013 in rural schools, the access rate from (incl\. % 6th to 7th grade at 87\.9% is below the target\. achievement) This indicator was introduced at the 2011 restructuring\. Indicator 4 : Improve promotion rates in grades 1 to 6 in rural areas in Argentina in rural areas\. 1 All the education statistical data were collected at the beginning of the school year 04 /30 /2013\. iii Value 85\.3% (original baseline (Quantitative or 85% 91% 93\.3% 76%) Qualitative) Date achieved 11/17/2004 12/31/2012 12/31/2013 Comments Surpassed: This indicator was revised at the 2011 restructuring (initially it was to (incl\. % improve promotion rate in EGB1 grades 1 to 3)\. The baseline and target were achievement) revised\. Indicator : Reduce by two or more years the over-age enrollment in EGB2 (grades 4 to 6) in rural areas from 24 percent to 12 percent\. Value (Quantitative or 24% (2002) 12% 16\.1% Qualitative) Date achieved 11/17/2004 12/31/2012 12/31/2013 66% achieved\. This indicator was dropped at restructuring because other complementary policies such as extra tutoring and flexible hours were intended to Comments bring children that had previously dropped out back to school\. This might have led (incl\. % to stability in the over-age student population even when Project activities were achievement) designed to decrease it\. So the target could not be kept\. But in reality these policies had little impact on the number of children who went back to school and the percentage of over-age students decreased substantially in rural areas\. Number of rural schools with at least one teacher graduate from the diploma Indicator 5 : program in Math and Spanish\. This indicator was introduced at the 2011 restructuring\. Value (Quantitative or 0 3,000 2, 735 Qualitative) Date achieved 11/17/2004 12/31/2013 12/31/2013 91% achieved: 6,043 teachers from rural schools (with just one teacher) enrolled in this diploma program (400 hours of in-service training combining distance Comments education with training sessions in 47 teacher training institutions in 20 provinces) (incl\. % which took place in 2010 and 2011\. Surveys of the 2,735 teachers who graduated achievement) showed that they had improved their teaching practices\. All of these teacher graduates returned to work in their original schools\. Number of bilateral agreements between national and provincial Governments in Indicator 6 : satisfactory execution\. To have 23 agreements have agreements been signed, and Value with 23 executed\. Of these (Quantitative or 0 provinces agreements 20 have Qualitative) being executed been executed satisfactorily satisfactorily\. Date achieved 11/17/2004 12/31/2012 12/31/2013 12/31/2013 86% achieved: The baseline and target were set at the 08/29/2011 restructuring\. Comments All the agreements have been signed and executed\. Provinces’ performance in terms (incl\. % of execution was uneven: (i) in four provinces execution was rated highly achievement) satisfactory; (ii) in nine, satisfactory; (iii) in seven, moderately satisfactory; and (iv) in three, execution was not satisfactory\. Annual plans regarding the compilation, analysis, dissemination and use of Indicator 7 : educational statistics in satisfactory execution\. iv  System in Federal Education operation and Value Information System updated based (Quantitative or No system in place is fully operational on currently Qualitative) and updated annually available in April information Date achieved 11/17/2004 12/31/2012 12/31/2013 12/31/2013 Achieved: The Federal Education Information System was modernized and is fully Comments operational\. Data are collected annually on April 30 in all of the provinces, and are (incl\. % currently updated to April 2013\. The time required to compile, analyze and achievement) disseminate the data has been reduced from 18 months to nine months\. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Percentage of rural secondary schools that receive ICT equipment as a share of Indicator 1 : total rural secondary schools participating in school networks\. Value (Quantitative 0% 100% 100% or Qualitative) Date achieved 11/17/2004 12/31/2013 12/31/2013 Comments Achieved: All schools in rural areas have been equipped with a PC, printer, TV, (incl\. % furniture and a set of CDs and software\. (Indicator introduced at the 2011 achievement) restructuring\.) Percentage of rural schools that receive institutional libraries as a share of rural Indicator 2 : schools participating in school networks\. Value (Quantitative 0 100% 100% or Qualitative) Date achieved 12/31/2013 12/31/2013 Comments Achieved: All the schools in rural areas received library furniture and a set of (incl\. % library books (200 titles in preschool, 272 in primary, and 2,020 in secondary), achievement) textbooks, and teaching guides\. Indicator 3 : Number of infrastructure projects completed with PROMER funding\. Value (Quantitative 0 420 473 or Qualitative) Date achieved 11/17/2004 12/31/2012 12/31/2013 Comments Surpassed: 473 infrastructure works financed by the Project have been completed\. (incl\. % In addition, 81 infrastructure projects in rural area were financed outside the achievement) Project\. Standardized National Assessment Test (ONE) sample extended and specifically Indicator 4 : designed to assess student learning in grades 3 and 6 in rural schools in 2007, 2010, and 2013\. Value No standardized One “ONE” National \. (Quantitative National Assessment Test conducted with Assessment Test v or Qualitative) (ONE) results for a an extended were conducted in representative sample in sample of rural 2007, 2010, and rural areas\. schools in 2013\. 2007 and years 2007, 2010 results were 2010 and 2013\. compared and Report delivered to the including the Provinces\. comparative performance between 2007 and 2010 delivered to the Provinces to inform educational policy decisions Date achieved 11/17/2004 12/31/2013 12/31/2013 Comments Partially achieved: The results of the National Assessment Test (ONE) 2013 are (incl\. % being processed and should be available in July 2014\. achievement) Indicator 5 : Percentage of rural schools surveyed for the National Education Map\. Value (Quantitative 0% 100% 100% or Qualitative) Date achieved 11/17/2004 12/31/2013 12/31/2013 Comments (incl\. % Achieved: The rural schools survey was completed in 2006\. achievement) Indicator 6 : Implementation of a web-based system to access information and the results of the new rural schools census\. Value System System designed (Quantitative No system in place\. designed and and implemented in or Qualitative) implemented\. 20 provinces\. Date achieved 11/17/2004 12/31/2013 12/31/2013 Comments 87% achieved: In 2013, 20 Provinces were using the web to collect and upload (incl\. % education data\. The system should be fully operational in all the Provinces by the achievement) end of 2014\. G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 12/30/2005 Satisfactory Satisfactory 0\.00 2 12/27/2006 Satisfactory Satisfactory 1\.45 3 05/18/2007 Satisfactory Satisfactory 1\.69 4 12/07/2007 Satisfactory Satisfactory 11\.31 vi  5 03/19/2008 Satisfactory Satisfactory 16\.18 6 12/20/2008 Satisfactory Satisfactory 24\.79 7 06/21/2009 Moderately Satisfactory Moderately Satisfactory 36\.81 8 12/04/2009 Moderately Satisfactory Moderately Satisfactory 45\.17 9 06/18/2010 Moderately Satisfactory Moderately Satisfactory 57\.76 10 02/15/2011 Moderately Satisfactory Moderately Satisfactory 79\.57 11 12/25/2011 Moderately Satisfactory Moderately Satisfactory 101\.17 12 07/09/2012 Moderately Satisfactory Moderately Satisfactory 120\.73 13 04/24/2013 Moderately Satisfactory Moderately Satisfactory 141\.48 H\. Restructuring (if any) Amount disbursed at Restructuring PDO rating at IP rating at Reasons for restructuring restructuring dates restructuring restructuring & key changes made in USD millions - Extensively revise the Results framework 09/01/2011 MS MS 95\.32 - Revise Project costs - Reallocate proceeds - Extend the closing date 04/03/2013 MS MS 139\.73 - Reallocate proceeds I\. Disbursement Profile vii 1\. Project Context, Development Objectives, and Design 1\.1 Context at Appraisal 1\. In 2005, after three years of accelerated growth, Argentina was still recovering from the severe economic and social crisis that had begun in 1998\. The Government’s focus was to transition from crisis response to addressing long-term structural issues in the economy, such as improving the investment climate to sustain long-term growth that would further fuel a strong demand for skilled labor and the social inclusion of vulnerable groups\. The Government sought to provide equal opportunities by improving the educational attainment of the rural population, particularly in the poorer provinces of the Northwest and Northeast\. 2\. In rural areas, the education system was characterized by pockets of limited coverage with incomplete access to the ten obligatory years of education\. In addition, the quality of education in rural areas was significantly below that of urban areas which resulted in high repetition and dropout rates\. Because they served areas with low population density, schools in rural areas tended to be low priorities in terms of the allocation of resources for infrastructure, equipment, didactic materials, and teacher training\. Schools in rural areas were characterized by multi-grade classrooms, teachers with limited access to information and professional support, poor facilities, and a lack of equipment and material\. 3\. The Government’s National Rural Education Program was designed to address the specific requirements of the education system in rural areas and support full coverage of the ten years of compulsory education, including preschool, while improving the quality of basic education, especially as it related to Core Learning Priorities, (NAP: Núcleos de Aprendizajes Prioritarios) to make the education system more productive and equitable\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 4\. The objectives of the Project are to improve: (i) the coverage, efficiency, and quality of the Argentine education system, and (ii) the governance of the Argentine education system through strengthening of the normative, planning, information, monitoring, and evaluation capacity at the national and provincial levels\. In the PAD, the key indicators that follow the PDO indicate that “the Argentine education system” means the rural education system from pre-school to lower secondary education as also indicated by the Project’s name “Rural Education Improvement Project”\. 5\. The original PDO indicators, identified as specific objectives in the PAD, were: (i) Reduce by half the difference in the access of 6 year old children in 1st grade as compared to 5 year old children in Pre-School in rural areas in Argentina; (ii) Increase from 73 percent to 85 percent the access of students completing the 7th grade to the 8th grade of schooling in rural areas in Argentina; (iii) Improve promotion rate in EGB1 (Grades 1 to 3) in rural areas in Argentina from 76 percent (2002) to 85 percent (2010); (iv) Reduce two or more years of overage enrollment in EGB2 in rural areas from 24 percent (2002) to 12 percent (2010); (v) Improve the percentage of students in Grade 3 in rural schools achieving proficiencies in the nationally ratified standards of the NAP); (vi) ) Improve the 1 percentage of students in Grade 6 in rural schools achieving proficiencies in the nationally ratified standards of the NAP; (vii) Number of bilateral agreements between national and provincial Governments in satisfactory execution; and (viii) Annual plans regarding the compilation, analysis, dissemination and use of educational statistics in satisfactory execution\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 6\. The PDO remained unchanged throughout the life of the Project\. At the 09/01/2011 restructuring, the PDO indicators were revised to reflect updated data available from the National Ministry of Education (NME) and to be consistent with the changes introduced to the operating environment of the education sector by the December 2006 National Education Law 2\. The indicator measuring overage enrollment in grade 6 was dropped because Government policy also intended to bring children that had previously dropped out back to school\. The indicators measuring student learning gains in grade 3 and 6 as measured by the National Student Assessment were dropped and replaced by an indicator measuring the number of schools with graduated teachers\. Due to data processing lags and delays in implementation of activities, there would only be two data points (2007 and 2010) taken, rendering comparability of performance over time in schools difficult\. 7\. The revised PDO indicators were: (i) Reduce by half the number of 6-year-old children in 1st grade in rural areas in Argentina who did not attend preschool; (ii) Increase from 77\.8 percent to 85 percent the student promotion rate from 7th grade to 8th grade in rural areas of Argentina; (iii) Increase the student promotion rate from 6th grade to 7th grade in rural areas of Argentina; (iv) Improve the average promotion rates in grades 1 to 6 in rural areas in Argentina; (v) Number of rural schools with at least one teacher who had graduated from the diploma program in Math and Spanish; (vi) Number of bilateral agreements between national and provincial Governments being satisfactorily executed; and (vii) Annual plans regarding the compilation, analysis, dissemination, and use of educational statistics, whose execution is rated as satisfactory\. 1\.4 Main Beneficiaries 8\. The main beneficiaries were the population age 5 to 14 enrolled in rural schools, which was estimated to comprise 868,540 students\. Other secondary beneficiaries were the teachers in rural schools and the staff in the line departments in the Ministries of Education at the federal and provincial levels dealing with management, planning, information systems, procurement, and school supervision for the rural education system\. 1\.5 Original Components 2 The National Education Law increased the length of compulsory education from 9 to 13 years and restructure the education system from a mandatory basic education (grade 1-9) to a system of kindergarten plus 6 or 7 years of primary followed by 6 or 5 years of secondary education\. 2 Component A: Improving the Quality and Coverage of Rural Education 1\. Carrying out activities aimed at improving the operating conditions of Rural Schools (A\.1 Subprojects) and including: (a) provision of didactic materials and teaching equipment; (b) construction and/or rehabilitation of classrooms to accommodate existing and/or additional enrollment and to meet minimum school infrastructure standards, maintenance of Rural Schools and provision of the infrastructure and materials required thereof; (c) provision of technical tools necessary to access distance education through the educational television channels ; (d) provision of technical assistance for the preparation of Institutional Pedagogical Activities in Rural Schools serving predominantly indigenous students including carrying out training programs for Rural Schools implementing the Borrower’s indigenous education programs; and (e) establishment and operation of clusters of Rural Schools designed to deal with common sets of problems such as education planning, training and management of didactic materials, teaching equipment, and other resources for such schools (School Clusters)\. 2\. Carrying out activities aimed at expanding coverage and improving the student promotion flow in Rural Schools (A\.2 Subprojects) and including: (a) expansion of coverage of preschool education through the development and application of multi- grade preschool models, including the provision of educational materials and teacher training required thereof; (b) implementation of measures aimed to prevent dropout and repetition in the first years of primary education, such as measures to increase the reading and mathematics ability of students in the early grades, adoption of a three-year learning cycle as a framework for learning and promotion of students, and provision of training as required therein; (c) implementation of selected actions aimed to assist over-age students in catching up academically and reducing the over-age distortion in the latter years of primary education, and provision of the materials and training required therein; (d) design and implementation of learning modules for delivery of compulsory secondary education to students in Rural Schools, including the provision of materials and teacher training required therein; and (e) carrying out Institutional Pedagogical Activities\. 3\. Undertaking activities aimed at strengthening the management of education delivery in Rural Schools at the provincial level (A\.3 Subprojects) and including the provision of technical assistance and training for staff at the Provincial education ministries in management, financial management, procurement, internal auditing, planning, information management and systems, pedagogical activities, administrative tasks, and school supervision\. 4\. Carrying out procurement at the national level for Component A activities\. Component B: Enhancing Stewardship Capacity of the MECyT 1\. Strengthening the planning, normative, monitoring, evaluation, implementation, financial management, procurement, and internal auditing capabilities of selected 3  departments in the MECyT through: (a) a review of the institutional arrangements in selected departments to identify and correct overlapping of activities and establish modern procedures and mechanisms to monitor and evaluate education activities and projects; and (b) provision of training to upgrade the technical skills of those involved in improving educational quality, principally in the use of implementation tools and information management systems\. 2\. Carrying out: (a) surveys of the functional conditions of Rural Schools and impact evaluation studies of the Project; and (b) student learning assessments in Rural Schools and the provision of feedback to these schools\. 1\.6 Revised Components 9\. The components and sub-components were not formally revised\. 1\.7 Other significant changes 10\. The 09/01/2011 level 2 restructuring: (i) revised the Results Framework; (ii) reallocated proceeds because the cost of component B increased as the Project supported student learning assessments on an expanded sample of rural schools and the provision of feedback to these schools in 2006 and 2010 and increased consultant costs needed to support the provincial and national governments3; and (iii) extended the closing date from October 31, 2011 to December 31, 2013 to allow sufficient time to finalize all Project activities\. 11\. The 04/03/2013 restructuring reallocated proceeds to finance: (i) increased unit costs in infrastructure activities; (ii) unanticipated consultant services related to the production of pedagogical materials; and (iii) increased operating costs linked to the teacher training program, and the financial transfers to schools (“Planes de Mejora”) implemented in 2,033 schools\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design, and Quality at Entry Strengths: 12\. The Project built on the lessons learned from the four previous Bank-financed education projects\. The key lessons were: (i) to provide financing to the Federal Government, so it would be responsible for the compensatory programs and instruments required for improved educational service delivery; (ii) to strengthen provincial ownership through extensive consultations with the Provinces to tailor the Project’s interventions to their needs and through bilateral agreements between the Federal government and the Provinces; (iii) to ensure the Project was part of the national policy for rural education in 3 The increased costs of Component B were financed by reallocating the remaining funds of the categories “Refunding of Project Preparation Advance” and “Unallocated”\. 4 order to increase its sustainability; (iv) to put emphasis on the timely collection and sharing of education indicators through the inclusion of monitoring and evaluation in the Project, along with the provision of resources and technical assistance for evaluation and dissemination; and (v) to build flexibility into the Project’s design by providing only a general definition of inputs and including a system for annual review and revision based on intermediate results\. 13\. The Project was implemented within the existing structures of the NME and provincial Ministries\. At the national level, the Directorate General for the International Finance Unit (DGUFI), in coordination with the other technical directorates was in charge of coordinating all Project activities\. The DGUFI was also responsible for an IDB-financed project4\. The need to build provincial implementation capacity (e\.g\. procurement, financial management, or monitoring and evaluation) was to be accomplished by strengthening existing line departments\. This practice was designed to increase both implementation capacity and the sustainability of the rural education policy\. 14\. The Project design was simple and entirely focused on rural education\. The choice of investment and approach were well adapted to the context of rural education, more specifically: (i) the access of students aged four and five years old to preschool; (ii) teaching methods for multi-age classrooms; (iii) teaching guides, textbooks, and library books well suited for learning to read; (iv) a pedagogical and institutional model to develop secondary education\. Initially in the preparation process the Project was designed to cover rural education, technical education, and the transition to higher education\. However, when the Law funding technical education was adopted in 2005, the Government did not request the inclusion of technical education\. Therefore, the Project was simplified to support the National Program for Rural Education (NPRE), which exhibited strong ownership by the National Ministry of Education (NME) and the Provincial Ministries\. By expanding coverage and quality of education in rural areas, the Project addressed the issue of social inclusion of vulnerable groups, equality of opportunity, and productivity improvement\. 15\. The use of bilateral agreements between the federal government and the Provinces was considered the best way to consolidate support for the reforms, build ownership and trust, and strengthen capacity and accountability among participating Provinces\. The bilateral agreements: (i) were piloted to facilitate dialogue; (ii) included a requirement for each province to undertake diagnostic work needed to define the gaps in coverage and in the efficiency indicators for rural education using a standardized methodology developed by the NME; (iii) would be supported by annual work plans and would contain targets; (iv) would allocate funds annually based on a review of progress toward compliance with the previous year’s work plan and projected activities; and (v) ensured that provinces that were slow on implementation would receive help and special attention from national authorities\. 4 The IDB-financed project supported the quality, equity and efficiency in the Argentine education system, with particular focus on secondary education and expanding infrastructure in urban areas\. It was approved in 2004\. 5 Weaknesses: 16\. A more careful assessment of Provincial implementation capacity should have been undertaken in order to fine tune the implementation arrangements and evaluate the technical assistance to be provided to the Provinces\. Although the PAD and the Operation Manual clearly delineated responsibilities and processes, they did not fully anticipate the difficulties that could arise from decentralized implementation\. As a result, it took time, effort, and technical assistance for the Project to commence in the Provinces with weak administrative and implementation capacity, especially to test procedures and train staff\. This was particularly true for the procurement of civil works\. 17\. The PDO, as stated in the loan agreement, was too broad\. It should have explicitly restricted the scope of the Project to preschool, primary, and lower secondary education in rural areas\. This issue arose as a result of the decision to distinguish between general and specific objectives in the PAD\. The specific objectives did restrict the objectives to the rural areas\. 18\. The risk assessment did not anticipate the difficulties that the Project encountered in implementing and modernizing the system of data collection, analysis and dissemination\. These were due to: (i) the lack of a culture of evaluation and results; (ii) delays in processing and analyzing the data; and (iii) the impact of changes to the educational regulatory framework at the secondary level\. 2\.2 Implementation Factors generally subject to Government control 19\. The Law for Educational Financing (LEF), approved by the Congress on December 20, 2005, set strategic goals for the education sector and established a set of rules for resource allocation that provided incentives for the Provinces to meet these goals\. The Project design built on this new funding framework in which provinces would sign bilateral agreements with the Federal Government committing to achieve specific goals and to match additional federal resources with their general revenues\. When the LEF took effect in 2007, the funds from PROMER were the first to be allocated to the Provinces according to the new framework\. Essentially, the LEF: (i) led to an increase of the education budget from 4\.5% of GDP in 2006 to 6\.4% of GDP in 2010; and (ii) guaranteed the provision of resources to the provinces for the duration of the bilateral agreements\. 20\. The 2006 National Education Law (Law 26\.206) recognized the rural education modality5 in education policy and institutionalized it in the administration at the National and Provincial levels\. In terms of the Project, the most significant features were: (i) to extend compulsory education to twelve years; (ii) to include 100% of 5 year- olds and 5 The rural education modality, along with the other eight modalities (bilingual intercultural, art, science and technology, special, youth and adults, technical and professional, healthcare, and prison inmate education) are organizational and/or curricular choices within the education system, covering one or more educational levels, that seek to address specific training requirements in order to ensure equality in the right to education\. 6 increase 3 and 4 year-old enrollment in preschool, particularly in low income areas; (iii) to ensure that at least 30% of children have a complete school day in basic education; (iv) to provide one computer to all students at the secondary level; (v) to allocate cash transfers to families for each child enrolled in school (Asignación Universal por Hijo); and (vi) the third cycle of basic education (grades 7 to 9), which was integrated in primary education, became the first cycle of secondary education\. However, this change to the legal framework delayed the expansion of coverage of secondary education in the Provinces as well as the implementation of the components of the Project related to it because it sparked numerous debates and controversies regarding the integration of grades 7 to 9 within the institutional organization of the schools\. 21\. In December 2007, the election of a new Government resulted in a change of officials at the NME\. However, the PROMER coordinator, the director of DGUFI, and most of the staff in charge of the Project remained in their positions\. As a result, the impact on Project implementation was minimal\. 22\. On December 13, 2010, the Federal Council of Education approved the document “Rural Education within the National Education System” as part of resolution 128/10\. The document provided the operational guidelines for the modality and accelerated the implementation of the Project at the Provincial level\. This decision was a major policy step toward sustaining the rural education modality in each province\. Factors generally subject to implementing agency control 23\. In December 2008, after the Provincial elections, there was a change of the administrators and technical staff in charge of the implementation of PROMER in 17 of the 22 provincial education ministries\. This, with other factors linked to institutional capacity, explained why Project implementation was slow to start up in many Provinces\. 24\. In 2009, after implementation bottlenecks were identified, the DGUFI reorganized itself at national level to provide increased support to the Provinces through more frequent visits\. At the same time, the Infrastructure Division of the Ministry of Education adopted measures to improve the pace of physical and financial implementation of the school construction programs\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization Design 25\. The Project design emphasized the timely collection and sharing of education indicators through: (i) the inclusion of monitoring and evaluation requirements in the bilateral agreements with the provinces; (ii) the provision of resources and technical assistance to the provinces for data collection, evaluation, and dissemination; and (iii) the development of a modernized web-based Federal Education Information Network\. 26\. The design of the Results Framework exhibited some weaknesses: (i) only the PDO indicators had baselines, values, and targets; (ii) intermediate indicators were few and were not structured such that they would facilitate the assessment of the contribution of the 7 different components of the Project to the achievement of the objectives; (iii) the choice of indicators to measure quality in grade 3 and grade 6 was correct, but the initial, mostly urban sample used by the Standardized National Assessment Test (ONE) did not allow authorities to monitor the progress toward the achievement of the Core Learning Priorities in rural areas; (iv) indicators 6 and 7 measuring governance were weak and vague because they lacked baselines and targets\. Implementation 27\. The 2011 restructuring corrected some of the Results Framework’s initial deficiencies\. The following changes were made to key indicators: (i) the baselines for the and targets for PDO indicators 1, 2 and 3 measuring access were modified because additional information was available in 2007 and a significant number of rural schools (particularly in the Province of Buenos Aires, where 25% of rural schools were reclassified) had to be reclassified as urban schools; (ii) a new PDO indicator 3 was introduced to monitor primary school completion; (iii) PDO indicator 3 was dropped 6 ; (iv) a new indicator 5 was introduced, replacing the previous indicators 5 and 6, to monitor improvements in the quality of instruction by measuring the number of rural schools with at least one teacher graduate from the diploma program in math and Spanish7 ; and (v) baselines and targets were set for 6 and 7\. An important new intermediary indicator was introduced to reflect that the mostly urban Standardized National Assessment Test (ONE) sample was expanded and specifically designed to assess student learning including in rural areas in grade 3 and in grade 6 in 2007, 2010, and 2013\. 28\. Regrettably, this restructuring was carried late and did not fully correct all the deficiencies in the Results matrix: (i) PDO indicators 2 and 3, which measured access, are insufficient to measure education coverage; (ii) the intermediate indicators related to component B ‘Enhancing the stewardship capacity’ of the national government, such as “measuring the timely availability of educational statistics” or “measuring sharing of educational statistics with schools”, which were dropped were not repetitive as indicated in the restructuring since they gave more precision to the PDO indicator 7 related to educational statistics\. 29\. Despite the emphasis on monitoring and evaluation, the NME, and more specifically the DINIECE (Directorate of Information and Educational Quality Evaluation), often processed the data later than required for effectively monitoring the Project\. During 6 This indicator measuring the over-age enrollment was dropped at restructuring because other complementary policies such as extra tutoring and flexible hours were intended to bring children that had previously dropped out back to school\. This might have led to stability in the over-age student population even though Project activities were designed to decrease it\. But, in reality, this policy had little impact on the number of children who went back to school so this indicator remained relevant\. Although the initial target was not achieved, the percentage of over-age students and dropouts decreased substantially in rural areas\. 7 Indicators C1 and C2 measuring student learning gains in grade 3 and grade 6 as measured by the National Student Assessment were dropped\. As a result of data processing lag and delays in implementation, there would have been only two data points (2007 and 2010), rendering comparability of performance over time in schools difficult\. 8 the Project, it took about eighteen months after basic education data and Project data were collected (in April at the beginning of the school year) to process and disseminate them\. 30\. It was only in 2013 that the DINIECE successfully overcame these initial difficulties and put in place a modern and efficient Federal Education Information Network\. During implementation, this system could not be put in place because: (i) the subcomponent to support the development of a system of data collection, analysis, and dissemination and to provide technical assistance to the provinces did not begin until 2010; (ii) there were four changes of leadership in DINIECE between 2005 and 2009; and (iii) the Federal Education Information Network was ambitious since the objective was that each school upload their data to the system directly through the Web\. Utilization 31\. A survey of rural schools was performed by the University of La Plata in August 2005 to determine schools’ rehabilitation and equipment needs and to establish baselines for Project indicators\. However, the information from that survey was not fully utilized\. In 2007, DINIECE extended this survey of the operating conditions of rural schools in the provinces using funding from the Project\. This survey was used: (i) to determine the sample of rural schools for the ONE; (ii) to organize various Project activities; and (iii) to initiate modernization of the Federal Education Information Network\. 32\. Because of the delays in processing information throughout the life of the Project, data tracked by the DINIECE on rural education were underutilized to inform policy decisions at the national and provincial levels\. However, student assessment data was disseminated to the Provinces in 2007 and 2010\. 2\.4 Safeguards and Fiduciary Compliance Environmental safeguards: 33\. This was a category B Project because it included school construction\. An Environmental Management Framework was prepared and included in the Operation Manual\. All of the construction (mostly expansion and rehabilitation) was completed at the existing school sites\. All construction complied with the environmental safeguards\. Indigenous Peoples safeguards: 34\. One of the Project components is entirely dedicated to indigenous education\. It experienced a delayed start due to technical difficulties locating the indigenous population and identifying their needs\. It commenced with: (i) the 2007 creation of the Autonomous Education Council for Indigenous Groups (CEAPI Consejo Educativo Autónomo de Pueblos Indígenas); (ii) decision 119/10 (September 2010) of the Federal Council of Education which defined the policy guidelines for Bilingual and intercultural education; (iii) a study of the sociolinguistic situation in the bilingual schools (December 2010); and (iv) an initial mapping exercise, including the linguistic and cultural criteria of 15,314 rural schools performed during from 2005-2009\. 9 35\. The Project’s main achievements in this area are: (i) a specific and detailed census and description of intercultural and bilingual education in 499 schools with indigenous children in 14 Provinces in 2011 and 2012 (there were 237 indigenous students in preschool, 313 in primary, and 172 in secondary; (ii) the implementation, mostly in 2012, of 146 school development plans (10 in preschool, 102 in primary, 16 in secondary, and 18 that combined all levels); (iii) 17 trainings organized for 1,260 teachers from 526 schools organized in 13 provinces; (iv) the organization of five regional round table discussions in 2010 to increase awareness of cultural diversity and knowledge of the traditional language, while also debating and formulating education policy for the indigenous population; and (v) an inventory of didactic materials specific to the indigenous population\. Financial management 36\. Overall, the Project’s financial management was handled adequately\. Nonetheless, mid-way through the project, there were some delays in the transmission of audit reports and minor issues continued to be flagged in these audits\. By 2011-2012 the situation had improved substantially through the joint efforts of the General Comptroller of the Nation (SIGEN), supervising the actions of the Internal Audit Unit of the NME in coordination with the Provincial Court of Accounts\. The quality of control mechanisms regulating the use of funds at the subnational level was considerably reinforced\. Fund oversight at the provincial level was adequate\. When the audits were flagged, there was a prompt reaction from authorities at the national and provincial levels to fix the issues\. The financial management of this Project demonstrates good practice for the Bank’s portfolio in Argentina\. Procurement 37\. The Project procurement arrangements and action plans were adequate, reflecting the recommendations of the Procurement Capacity Assessment done during Project preparation The DGUFI already possessed ample experience from previous operations with the Bank and the IDB\. Apart from assessing procurement capacity and arrangements at the national level, the Bank also undertook a procurement capacity assessment at the provincial level, using one province as a representative example\. Based on this methodology, the DGUFI carried out an assessment of the capacity of the Provinces (between April and May 2005) and established a risk level for procurement for each participating Province\. This was used to prepare action plans to improve procurement capacity at provincial level\. The DGUFI did an excellent job in annually consolidating the procurement plans from all the Provinces into a single Procurement Plan (this was considered to be best practice and PROMER was the only Bank financed project in Argentina that was able to do so)\. 38\. However, there were difficulties procuring civil work at the Provincial level during the early years of implementation\. The requirement that the Provinces submit all the technical documentation to the central level for review resulted in considerable delays\. To accelerate this process in 2010: (i) the DGUFI reorganized itself to strengthen its Procurement unit; (ii) the Bank organized a one day seminar to train the new procurement staff of DGUFI to use Bank’s documents and guidelines; (iii) the Project paid for consultants to provide technical assistance to the Provinces and train procurement staff to 10 follow the Bank’s guidelines; and (iv) the Operation Manual was updated with information on the procurement of training, maintenance funds, and school development plans\. As a result, the procurement difficulties were overcome in all the provinces except for Jujuy and Santiago del Estero where the initial construction plan had to be downsized\. Covenants 39\. All the covenants stipulated under the loan agreement were met\. 2\.5\. Post-completion Operation/Next Phase The rural modality is now well institutionalized\. All the Provinces adopted resolution 128/10 approved by the Federal Council of Education on December 13, 2010\. A follow-up Project PROMER II is in preparation to be financed by a US$250 million Bank loan\. Its PDO is expected to be: (i) to reduce the repetition rate in primary education; and (ii) to increase access and achievement in secondary education in rural areas\. The objectives also include the upper secondary cycle, which became mandatory in December 2006\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation Relevance of objective: Pre 2011 restructuring rating- High / Post restructuring rating - High 40\. The Project was instrumental in creating a national policy for rural education in Argentina\. The relevance of Project objectives is fully reflected in the enactment of the 2006 National Education Law (Law 26\.206) which among its main provisions: (i) recognizes the rural modality in education policy8; (ii) and extends compulsory education to twelve years; (iii), promotes quality at all levels; and (iv) promotes increasing participation in preschool, particularly in low-income areas\. In addition the objective of improving governance of the education system is included in the LEF, approved by Congress on December 20, 2005\. The Project is consistent with the Government’s strategic objective of social inclusion of vulnerable groups, and it played a defining role in boosting the draf of the Federal Council for Education’s resolution 128/10 which institutionalized the rural education agenda in Argentina\. On December 5, 2012 the Federal Council of Education approved the National Plan for Mandatory Education and Teacher Training (Plan Nacional de Educación Obligatoria y Formación Docente, PNEDOyFD) which defined the government’s priorities for 2012-2016\. This plan had two main lines of action 8 The Law 26\.206 set up the objectives of rural education: (i) ensuring access to knowledge through flexible pedagogical proposals that strengthen the link with the cultural identities and local productive activities: (ii) promoting institutional designs that enable learners to maintain links with their household and local environment of belonging, during the educational process; (iii) allowing school organization models appropriate to each context, such as clusters of institutions, multigrade rooms ensuring compliance with compulsory education and continuing studies in different cycles, and levels of the education system; (iv) promoting equal opportunities and ensuring gender equality\. 11 detailed in specific lines for each level of the education system: (i) improving the quality of education services; and (ii) providing universal access to education services, especially for marginalized groups\. The objective of the second pillar of the CPS 2010-2012 (the most recent CPS) continues to be relevant: it consists of expanding efforts to reverse the longer- term poverty trend by, among other social measures, assuring high-quality educational opportunities for all by reducing the differences in educational attainment by region, gender and socio economic status, increasing access to secondary education and improving the quality of education to ensure improved entry into the workforce\. Relevance of design: Pre 2011 restructuring rating - Substantial / Post restructuring rating - Substantial 41\. The Project design, which included the lessons learned from previous projects in Argentina and the best practices from other countries, was substantially relevant to the objective of improving efficiency and quality of the learning process of rural education by focusing on the quality of the learning process particularly at preschool and primary levels, because they are determinant for children’s future, through the provision of textbooks, learning materials, teacher training and clusters of rural schools; of improving coverage to preschool and lower secondary education by improving access by building and rehabilitating classrooms and extending schooling in lower secondary\. It was substantially relevant to the governance objective by: (i) supporting bilateral agreements with the provinces to ensure flexibility of implementation and accountability for Project results; (ii) strengthening the implementation capacity at the provincial level to ensure the sustainable development of rural education; and (iii) supporting the development of modern procedures and mechanisms to monitor and evaluate education\. 3\.2\. Achievement of Project Development Objectives 42\. To assess the Project’s achievement, this ICR considers the four dimensions of the Project’s PDO (to improve coverage, efficiency, quality and governance of the education system), relying on the Project’s key outcome indicators but also on several supplementary indicators collected at the ICR stage\. A\. Improve coverage Pre 2011 restructuring rating - Substantial / Post restructuring rating - Substantial 43\. The number of 6 year-old children that did not attend pre-school has been drastically reduced beyond the pre and post restructuring target\. Preschool enrollment in rural areas (not including the Province of Buenos Aires) increased 32\.4% between 2004 and 2013 and in rural areas of the Province of Buenos Aires enrollment increased 5\.2% between 2007 and 2013\. 12 Table 1: Preschool enrollment in rural areas Baseline Target End Value Change 2004 12/31/2013 (04/30/ 2013) Reduce by half the No\. of 6-year-old 15,861 children in 1st grade in rural areas in (corrected in 7,291 3,859 -75\.7% Argentina who did not attend preschool\. 2011 restructuring) Enrollment in preschool in rural areas, 94,453 125,042 32\.4% excluding the province of BA\.9 (Baseline 2004) Enrollment in preschool in rural areas 17,828 18,758 5\.2% of the Province of BAs (Baseline 2007) 44\. The following actions contributed to the expansion of coverage at the preschool level: (i) the Project supported the implementation of Law 26\.206, which expands compulsory education to preschool and provides access to kindergarten for four and five year-olds; (ii) the construction and rehabilitation of kindergarten class rooms; (iii) the distribution of didactic materials and learning equipment to 4,455 preschool facilities (100% of preschool facilities in rural areas); and (iv) training provided to 6,137 preschool teachers along with technical assistance to organize multi-grade classrooms\. Different provinces used various alternatives to achieve increased preschool coverage: multi-grade classrooms annexed to primary schools, independent kindergartens, traveling teachers, teachers with dual degrees, and attention to children at home\. 45\. Enrollment in lower secondary education in rural areas without including the Province of Buenos Aires increased 30\.8% between 2004 and 2013\. In the rural areas of the Province of Buenos Aires, enrollment increased 19\.4% between 2007 and 2013\. The increase was remarkable (greater than 40%) in 8 provinces –including the poorest provinces-10, average in 10 provinces, and insignificant in 5 provinces11\. The target for the access to 7th grade from 6th was 55\.3% achieved (this indicator was introduced at the 2011 restructuring)\. The target of 85% for access to 8th grade from 7th was achieved in 2011, but in 2012 and 2013 the value slipped slightly below the target\. 46\. The Project contributed to an increase in access to lower secondary education through: (i) the promotion of a pedagogical and institutional model adapted to the rural context; (ii) the construction and rehabilitation of class rooms; (iii) the provision of libraries, library books, teaching guides, textbooks, and manuals to 6,168 schools (100% of secondary schools in rural areas); (iv) equipping schools with science laboratories, computers, printers, and audiovisual material; (v) technical assistance provided to 1,687 schools for school development plans (27\.3% of secondary schools in rural areas); (vi) 9 In 2007, about a quarter of rural schools in the province of Buenos Aires were reclassified as urban\. Thus, in order to allow for the comparison of enrollment between the baselines and the targets, the tables below present: (i) the data for the rural schools in Argentina excluding those in the province of Buenos Aires with a baseline of 2004; and (ii) the data for the rural schools in the Province of Buenos Aires with a baseline of 2007\. 10 Catamarca, Chaco, Chubut, Misiones, San Luis, Santa Cruz, Santiago del Estero, Formosa\. 11 Jujuy, Rio Negro, San Juan, La Pampa, Buenos Aires\. 13 teacher training; and (vi) the organization of 1,688 rural school clusters to optimize the use of resources12\. Table 2: Promotion rate and enrollment in lower secondary education in rural areas Baseline Target End Value Change 2004 31/12/2013 (4/30/2013) Increase the access for students completing the 7th 77\.8 % grade and entering 8th grade in rural areas in 85% 82\.9% 6\.6% (corrected) Argentina\. Increase the access for students completing the 6th grade and entering the 7th grade in rural areas in 91\.6% 93% 87\.9% -4\.0% Argentina\. (Introduced at the 2011 restructuring)\. Enrollment in lower secondary education in 7th 137,295 and 8th grade in rural areas (excluding the 179,634 30\.8% (Baseline 2004) province of BA)\. Enrollment in lower secondary education 7th and 17,533 20,932 19\.4% 8th grade in rural areas of the Province of BA\. (Baseline 2007) B\. Improve efficiency Pre 2011 restructuring rating - Substantial / Post restructuring rating - Substantial 47\. The post-restructuring target for the promotion rate in primary education in rural areas was exceeded, with a significant reduction in repetition and dropout rates\. As a result, the proportion of over-age students declined substantially, in spite of policies that encouraged over-age students to return to school\. 48\. The Project contributed to an increase in promotion rate and reduction of repetition and drop out among primary education students by: (i) developing students’ reading ability in preschool using books, teaching guides, and didactic materials; (ii) provision of libraries with 272 books and 150 textbooks, 7 teaching guides, and a science laboratory to all 6,540 primary schools in rural areas; (iii) training 11,940 teachers in three main areas: a) teaching techniques to stimulate reading and writing, b)management of multi-grade classrooms, and c) implementation of the three-year learning cycle as the framework for learning and student promotion and (iv) training of 2,735 teachers in the rural education diploma program\. 12 The clusters grouped an average of 10 schools with the following objectives: sharing experiences, pedagogical management, achieving economies of scale, organization of supervisors, teacher training, and increasing coverage\. 14 Table 3: Internal efficiency indicators in rural areas Target (12/ End value Baseline 2004 Change 31/2013) (04/30/2013) 85\.3% Improve promotion rate in grades 1-6 in rural (corrected at 93\.3% 91% 9\.4% areas13 2011 restructuring) Reduce over-age enrollment in EGB2 (grade 4 to 6) by two or more years (indicator dropped in 2011 24% (2002) 12%14 16\.1% -32\.9% restructuring) Reduce repetition rate in grades 1-3 in rural areas 13\.8% 7% -49\.3% Reduce repetition rate in grades 3-6 in rural areas 7\.1% 4% -43\.7% Reduce dropout rate in grades 1-3 in rural areas 1\.4% 0\.9% -35\.7% Reduce dropout rate in grades 1-6 in rural areas 1\.2% 1% -16\.7% C\. Improve Quality: Pre 2011 restructuring rating - Modest / Post restructuring rating - Modest 49\. The standardized national learning assessment test (Operativo Nacional de Evaluación ONE) was conducted in 2007, 2010, 2013 on a sample of schools that ensured the representation of rural schools\. However, it is not possible to draw conclusions for quality improvement from the ONE since only the 2013 ONE results (not available at the date of the ICR) could confirm whether some positive trends observed between 2007 and 2010 were sustained as a result of the Project\. It is an achievement of the Project that the ONE was conducted regularly every three years in Argentina, but the test still has some limitations: (i) it is a universal standard assessment test only in secondary schools in the last grade but it is administered on a sample of primary schools in grade 3 and 6 ; (ii) the results, available by province, are disseminated to the public only by region on the website of DINIECE so their impact on the behavior of stakeholders at the school level is questionable; and (iii) to guide a policy driven toward quality the ONE should be complemented by studies that assess the incidence of inputs on the improvement of the learning process\. 50\. The comparison of the results of the ONE in 2007 and 2010 in primary education shows that the results improved in rural areas in this period on the Core Learning Priorities 13 The target for grades 1-3 in rural areas prior to the 2011 restructuring was 85%, and the original baseline was 76%\. The indicator was changed to reflect performance in all grades of primary school\. 14 Target date was original closing date (March 31st, 2011)\. 15 (NAP)15, particularly in language and mathematics, at a higher pace than at the national level, in all subject areas except Natural Science in grade 6th\. Indicator: Improve the percentage of students in Grade 3 in rural schools achieving proficiency16 in the nationally ratified Core Learning Priorities (NAP) Rural Schools Grade 3 2007 2010 Discipline Low Medium High Low Medium High Spanish 36\.7 29\.7 33\.6 32\.6 30\.0 37\.5 Mathematics 37\.3 37\.1 25\.7 27\.0 38\.9 34\.2 Social Sciences 36\.5 33\.3 30\.3 34\.0 31\.5 34\.5 Natural Sciences 54\.3 27\.3 18\.3 34\.2 40\.6 25\.2 Indicator: Improve the percentage of students in Grade 6 in rural schools achieving proficiencies in the nationally ratified Core Learning Priorities (NAP); Rural Schools Grade 6 2007 2010 Discipline Low Medium High Low Medium High Spanish 45\.0 41\.7 13\.3 38\.9 45\.9 15\.1 Mathematics 47\.3 35\.3 17\.4 44\.6 36\.4 19 Social Sciences 41\.8 37\.8 20\.5 45\.0 37\.5 17\.5 Natural Sciences 50\.7 35\.7 13\.6 50\.9 33\.2 15\.9 51\. The number of rural schools with at least one teacher who graduated from the diploma program in Math and Spanish reached 2,735 a number slightly below the target\. (Each teacher that graduated continued to teach at schools where they were the only teacher)\. The evaluation performed in 2011 and the 2013 survey of beneficiaries showed that17: (i) 95% of the teachers who graduated declared that they received training on the relevant didactic tools to teach in multi-grade classrooms; (ii) 82\.7% received the methodology to organize their time, space and resources; (iii) 51\.9% strengthened their ability to work more autonomously; and (iv) 49\.4% increased their knowledge of the core disciplines\. Table 4: Number of rural primary schools with qualified teachers Target End value Baseline 2004 (12/31/2012) (12/31/2012) No\. of rural schools with at least one teacher graduate from the diploma program in Math and Spanish\. (Indicator 0 3,000 2,735 added in the 2011 restructuring)\. 15 As established by the Federal Education Board (Resolutions 225/04 and 37/07), Core Learning Priorities are common cognitive competencies at national level in the areas of Language, Mathematics, Natural Science, Social Science\. 16 Proficiency is achieved when students obtain a Medium or High performance in the evaluation\. 17 Evaluación del Postítulo: Evaluación de la Especialización docente de nivel superior en educación rural para el nivel primario\. Ana Belèn Zapata 2011 16 52\. The Project contributed to improvement in quality through the training of 6,043 teachers in primary schools of which, 2,735 graduated\. The graduation rate is low because: (i) the training was demanding in addition to teachers’ normal working hours; (ii) the training was long, 400 hours combining distance education and face to face training; and (iii) the certification process was strict\. 53\. This training was successful\. First, it contributed to the installation of permanent training capacity at the provincial level, with 256 professors in charge of the training and 191 supervisors trained in 47 teacher training institutions in 20 Provinces\. Secondly, all the teacher graduates returned to their positions in their original schools and they expressed a high appreciation for the training\. But the number of teacher graduates is too low to have a significant impact (about 5\.5% of the 47,133 primary teaching staff in all 11,637 rural schools)\. 54\. In addition the Project contributed to quality by providing didactic materials, learning equipment and improving schools facilities (as detailed in previous section on coverage and efficiency)\. D\. Improve Governance of the Argentine education system: Pre 2011 restructuring rating - Substantial/ Post restructuring rating - Substantial 55\. The improvement in governance of the Argentine education system is substantial\. The bilateral agreements (convenios bilaterales) including the Provincial Rural Education Plan and the operational mechanisms for the implementation of Project actions were signed with almost all the Provinces in 2006 (La Pampa, Neuquén, and San Luis signed them in 2007) conforming to the sample agreed on in the PAD\. They were followed in 2007 by the signing of the first annual covenants (Actas de Monitoreo Anual) specifying activities, goals and indicators\. For each year that the Project was in implementation a complementary act was signed to update the bilateral agreements followed by annual covenants for program activities\. In 2012, bilateral agreements for the period 2012-2016 were signed with all the Provinces\. 56\. The flexible approach instituted in the bilateral agreements proved to be successful in particular in terms of: (i) organizing the partnership between the national and provincial education ministries; (ii) adapting the Project to the implementation capacity of each province; (iii) promoting a more targeted and differentiated policy to address the educational disparities in educational opportunity and the peculiarities of school in rural areas; (iii) programming and monitoring inputs; (iv) introducing more transparency and promoting a culture of results; and (v) taking corrective measures when necessary\. As a result, most of the Provinces increased the resources dedicated to rural education\. The DGUFI designed a diagnostic tool to assess the performance of the provinces\. The execution of the bilateral agreements in the provinces was uneven: (i) in four provinces execution was rated highly satisfactory; (ii) in nine, satisfactory; (iii) in seven, moderately satisfactory; and (iv) in three the execution was not satisfactory\.18 18 The rating has been established by the DGUFI through a diagnostic tool based on five criteria: (i) percentage of execution of the agreed action plans; (ii) administrative and financial management; (iii) procurement management; (iv) 17 57\. The Project made a substantial contribution to improve governance at the provincial level by: (i) undertaking the collaborative planning activities necessary to prepare and monitor the bilateral agreements; (ii) allowing investment decisions to be made based on a more careful assessment of learning conditions and educational performance in rural schools; (iii) transferring all of the elements of the normative framework related to the rural education policy through technical assistance and training; (iv) funding an average of 203 positions in the provinces in key areas such as procurement, financial management, pedagogy, and monitoring and evaluation and (v) the Project was implemented through the existing institutional structure which increases sustainability of arrangements and outcomes\. 58\. DINIECE was successful in establishing a modernized Federal Education Information Network in 2013 which significantly improved data collection analysis and dissemination\. As a result, an effective annual plan is now in place to collect, analyze and disseminate the annual education data and the time necessary went from 18 months during the period from 2005-2012 to 9 months in 2013\. The Project contributed to build the network through different steps: (i) in 2006, the Federal Education Information Network project design was modernized and strengthened; (ii) in 2007, the procurement plan for the network equipment (computers, servers, printers) was completed; (iii) in 2010, the equipment was distributed to the Provinces and the staff was trained; (iv) in 2011, the software for data collection and analysis and the website for direct queries were finalized; (v) in 2012, in some of Provinces a new system that allowed the data to be directly uploaded at the school level through the web was piloted; and (vi) in 2013, the network was fully operational in all the Provinces\. 3\.3 Efficiency Pre 2011 restructuring rating - Negligible/ Post restructuring rating - Negligible 59\. The economic and financial analysis that was conducted includes: (i) an analysis of the fiscal impact of the Project including its contribution to key results achieved by the rural education sector and comparing the fiscal performance of the Project to the results initially forecasted in the PAD; and (ii) a cost analysis of the education system, that takes into account each province as well as the characteristics of the rural education system\. However, it was not possible to measure the efficiency gains in rural areas or to perform a cost benefit analysis of the Project’s interventions because the Provincial education budgets do not make a distinction between education in rural areas and total education expenditure\. 60\. The increase of the expenditure of the MECyT as a result of the Project was1\.5 percent on average (with a minimum of 0\.12 percent in 2006 to a maximum of 2\.62 percent in 2010 when Project investment was at its highest)\. The resulting fiscal impact measured by this indicator is significantly lower than what was estimated in the PAD (4\.6 percent on average, with varying rates that peaked above 8 percent), chiefly because expenditure on education by MECyT increased at a faster pace than planned in the PAD, owing to the provisions set forth in the LEF passed in late 2005 which increased the share of public management of activities related to the coordination of the program in the provinces; and (v) management of training activities\. 18 expenditure on education as a proportion of GDP\. This suggests that the fiscal pressure exerted on the Government budget was limited and sustainable\. The increase in Provincial expenditure as a result of the development of rural education (increased enrollment at preschool, primary, and lower secondary levels) was minimal: 0\.9 percent on average during the life of the Project\. 61\. The expenditure increase was accompanied by an expansion in the supply of services in rural areas which is far more important, as evidenced by the increase in the number of teaching positions and classrooms during the period under review\. The share of teachers in rural areas relative to the national total increased from 17\.1 percent in 2005 to 18\.7 percent in 2012\. The number of classrooms at each level increased in tandem with the number of teaching positions in rural areas, climbing from 6,863 to 8,549 at the early childhood level (an increase of 24\.6 percent) between 2007 and 2012, from 29,788 to 34,730 at the primary level (16\.6 percent increase) and from 11,082 to 15,330 at the secondary level (a 38\.3 percent increase)\. This suggests that rural education was given priority while efficiency gains were realized\. 62\. The cost analysis shows that: (i) there was a relative reduction in the Government transfers to the Provinces for education corresponding to teachers’ salary payments (from 73\.9 percent in 2005 to 52\.1 percent in 2012) and a corresponding increase in the line items related to infrastructure and equipment; and (ii) there was great variability among Provinces in the allocation of resources especially with regard to teacher salaries and transfers to fund private education\. As a result, the level of expenditure per student varies greatly from one Province to another\. In 2012, Tierra del Fuego exhibited the highest level of expenditure per student, disbursing five times more than Salta at the opposite end of the spectrum\. These differences are partially explained by geographical, socio-demographic, and climate factors, but the most important reason is the variation in teachers’ salary levels\. 4\. Justification of Overall Outcome Rating Rating: Moderately satisfactory 63\. Relevance of objective and design are respectively high and substantial both pre and post 2011 restructuring\. Efficacy ratings are substantial pre and post restructuring\. Finally, the Efficiency rating is negligible pre and post restructuring\. The combination of these partial ratings yields an overall moderately satisfactory rating for both periods (Table 5)\. In turn, the overall ratings for the two periods are weighted by the disbursement percentages prior to and following the 2011 restructuring, yielding an overall weighted rating equivalent to moderately satisfactory\. 19 Table 5\. Weighted Project rating Pre-restructuring Post-restructuring Overall (Dec\. 2005 - Sept\. 2011) (Sept\. 2011- Dec\. 2013) Relevance of objective High High Relevance of design Substantial Substantial Coverage Substantial Substantial Efficiency Substantial Substantial Quality Modest Modest Governance Substantial Substantial Overall Efficacy Substantial Substantial Efficiency Negligible Negligible Overall outcome rating Moderately Satisfactory Moderately Satisfactory Rating value 4 4 Weight 65% 35% Weighted value 2\.6 1\.4 4\.0 Moderately Final rating Satisfactory 3\.5 Overarching Themes, Other Outcomes, and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 64\. In dispersed rural areas, about 36% of the population was estimated to be poor and vulnerable\. Low educational attainment levels are strongly associated with poverty\.19 The rural education policy precipitated an important change in the sector by prioritizing rural areas and adapting schools and programs to fit the context and necessities of a hitherto marginalized population\. At the same time, by improving learning conditions in rural schools the Project substantially increased access and retention\. Since an increase in educational attainment reduces the likelihood of falling into poverty the contribution of the project to poverty reduction could be significant but not measured\. (b) Institutional Change/Strengthening 65\. The Project contributed to institutional changes consolidating accountability among participating Provinces by: (i) implementing bilateral agreements between the federal government and the Provinces; and (ii) strengthening capacity in the Provinces\. c) Other Unintended Outcomes and Impacts (positive or negative) 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) 4\. Assessment of Risk to Development Outcome 19 The invisible poor: A portrait of rural poverty in Argentina World Bank 2010\. The population in dispersed rural areas represents 8% of total population of Argentina and 62% of rural area population\. In dispersed rural areas, it is estimated that 36% of the population are poor according to the unsatisfied basic needs methodology (UBN), 42\.8 percent have not completed even primary education, and a mere 7\.3 percent have completed secondary school\. And children are more at risk of not attending school: it is estimated that 5% of households have at least one child who is not at school\. 20 Rating: Moderate 66\. Overall, the risk that the increase in coverage and improvement in internal efficiency, quality and governance might not be maintained is moderate\. On one hand the National Program for Rural Education is well established in a legal framework and in the 2012-2016 National Education Plan which defines priorities\. In addition, all of the instruments and inputs are in place to improve the learning processes in rural schools\. On the other hand, the Provinces remain highly dependent on the national Government for their resources\. Even if the financing of the expansion of rural enrollment accounted only for 0\.2 percent of total expenditures in the early years of the Project and below 0\.1% in the subsequent years For instance, provincial budgets allocate insufficient funding for the maintenance of educational infrastructure and for new school supplies and learning materials\. In the event of a budget crunch, priorities may easily shift to urban areas and to secondary education where enrollment pressure is the strongest\. In contrast, the rural population is declining and the cost per student will probably remain high in rural schools\. 67\. The following activities will be pursued with Government financing ensuring that quality outcomes can be maintained : (i) the provision of school libraries and books for the schools which have not benefited from the Project; (ii) the provision of didactic materials and teaching equipment to the clusters; (iii) organization of trainings for the head of secondary schools; (iv) school development plans at the secondary education level; (v) infrastructure which was initially planned but not financed by the Project; (vi) meetings for the primary school teachers (from rural schools with one teacher); and vii) a national plan for improving teacher training\. 68\. Most of the implementation arrangements of the Project will remain in the follow- up operation ensuring that most of the governance outcomes will be maintained: (i) the implementing agency will be the NME through the DGUFI and most of the staff presently in charge of the Project will remain in their posts; (ii) the coordinating units in the Provinces will remain; (iii) the bilateral agreements that will delineate responsibilities between the national and the provincial Governments will be signed for five-year periods; and (iii) within this framework, subsidiary agreements will specify the activities of the follow-up operation, the monitoring indicators, and the targets to be reached\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately satisfactory 69\. The Bank’s preparation team worked in close partnership with the Borrower\. The Project was well prepared\. Its design supported Government policy and creatively built upon a decentralized approach with the provinces\. Moderate shortcomings were: (i) the lack of a robust results framework; and (ii) the underestimation of the delays in implementing the bilateral agreements\. 21 (b) Quality of Supervision Rating: Moderately satisfactory The Project was well supervised with regular field missions and in-depth supervisory missions\. Regular field visits were organized in the Provinces\. The Bank provided support when necessary, particularly on procurement issues\. There were some moderate shortcomings: - Monitoring and evaluation suffered a systemic lack of quality and timely information that was an issue throughout the education sector and was not corrected until the end of the Project; - The Project restructuring could have been performed sooner\. In 2009 and 2010, it was confirmed that the Project would be unlikely to achieve its PDO by the 2011 closing date and the Government and the Bank agreed that a 24-month extension was necessary\. However, it took 8 months after the midterm review for the request to arrive at the Bank (December 2010) and the restructuring was approved on 09/01/2011\. - At restructuring, the Bank missed an opportunity to define the content of the impact evaluations that should have been carried out during the last year of implementation\. As a result, no impact evaluation was performed in 2013\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately satisfactory 70\. Overall the Bank’s performance is considered moderately satisfactory\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory 71\. The Government provided its full support for the Project as evidenced by: (i) the approval of the 2005 Law for Educational Financing (LEF) and its enactment in 2007 and 2006 National Education Law (Law 26\.206) which recognized the rural education modality; (ii) the Federal Council of Education’s 2010 approval of the document “Rural Education within the National Education System” as part of resolution 128/10; (iii) the annual signings of all the bilateral agreements and annual program covenants with the provinces beginning in 2006; and (iv) counterpart funding (about 10% of total Project financing) and resources to the Provinces for the rural education modality\. (b) Implementing Agency or Agencies Performance Rating: Moderately satisfactory 72\. The DGUFI exhibited strong ownership of the Project and commitment to the achievement of its objectives\. The DGUFI was staffed with highly qualified professionals who demonstrated their experience in dealing with complex issues\. Designing and negotiating implementation plans and results with 23 autonomous provincial governments, 22 some with low capacity, was extremely challenging\. The Project had a slow start, but only the activities initiated or procured at the provincial level were affected\. When it was clear that the provinces needed more support to implement the infrastructure program the DGUFI took the appropriate actions to improve the processes, to reorganize itself, and to provide more technical assistance to the provinces\. The DGUFI made constant efforts to accelerate implementation and complied with the Bank’s requirements diligently\. There were moderate shortcomings: the coordination between DGUFI and line departments of the NME, mainly the DINIECE, could have been more efficient to develop monitoring tools and impact evaluation\. 73\. The performance of the Ministries at the provincial level was uneven: (i) in four provinces the implementation of the Project was highly satisfactory; (ii) in nine provinces, satisfactory; (iii) in seven provinces, moderately satisfactory; and (iv) in three provinces, unsatisfactory\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately satisfactory 74\. Since the Government performance is satisfactory and the implementing agencies at national and provincial levels are moderately satisfactory the outcome rating applies\. Lessons Learned - Embedding the Project into the national education policy is key to achieving results\. Project design should be flexible enough to allow staying the course and not slowing down progress\. - Bi-lateral agreements provide the flexibility necessary to stimulate ownership, to adapt education policy to different contexts, and to promote innovations at the Provincial level\. However, managing a national project in which implementation is decentralized in 23 Provinces remains a complex task\. Ensuring smooth implementation requires not only significant technical assistance for the Provinces but also a monitoring instrument that can quickly diagnose the issues, trigger a rapid response, and increase accountability\. - Educational statistics are key for programming and annual monitoring\. Dramatic improvements to the monitoring and evaluation system have begun through the Project financed improvement of the Federal Education Information Network\. The next step is to induce practices and behaviors conducive to quality improvement\. Common standards should also be introduced and annual testing systems should be used to measure learning outcomes and progress in the achievement of the Core Learning Priorities, particularly at the end of primary school\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (b) Co-financiers (c) Other partners and stakeholders (e\.g\. NGOs/private sector/civil society) 23 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component A 144\.79 140\.54 97 Sub-component A1 106\.01 115\.01 108 Sub-component A2 29\.17 15\.62 54 Sub-component A3 9\.61 9\.91 103 Component B 4\.83 8\.13 168 Sub-component B1 2\.14 5\.18 242 Sub-component B2 2\.69 2\.95 110 Total Baseline Cost 149\.62 148\.67 99 Physical Contingencies 0\.00 0\.00 Price Contingencies 0\.00 0\.00 Total Project Costs 149\.62 148\.67 99 PPF 0\.00 0\.95 Front-end fee IBRD 0\.38 0\.38 100\.00 Total Financing Required 150\.00 150\.00 100\.00 (b) Financing Appraisal Actual/Latest Type of Co- Estimate Estimate Percentage of Source of Funds financing (USD (USD Appraisal millions) millions) Borrower 90\.58 67\.43 74\.00 International Bank for Reconstruction 150\.00 150\.00 100\.00 and Development 1 Annex 2\. Outputs by Component Component A: Improving quality and coverage of rural education (US$ 234\.85 million incl\.US$144\.79 Bank financing) Sub-component A1: Improving operating conditions of rural schools i) Providing basic didactic materials and teaching equipment All rural schools received a standard package of didactic materials and teaching equipment according to their level and the size\. The Directorate of the rural education modality in the Federal Ministry of Education in coordination with Directorates of each educational level selected and developed all of the didactic materials\. Meetings were organized in the Provinces with teachers and school directors to adapt the materials, equipment, textbook contents, and book lists to their needs\. School level Didactic materials and teaching equipment Four sets of didactic games Library shelves Pre-school Library books (95 titles in 2008, 105 in 2009) Textbooks (25 teaching guides in 2008, 2 “impresiones” in 2012 and 2013) Individual school supplies Library shelves Library books (136 titles in 2008, 136 in 2009) Text books (115 text books in 2008, 36 in 2009, 7 teaching guides in 2012, Primary “impresiones” in 2012) and Dictionaries Science laboratory Individual school supplies Library shelves Library books (106 titles in 2008, 96 in 2009) Text books (36 in 2009, Dictionaries and Atlas, 22 teaching guides “impresiones” Secondary Science Laboratory PC, printer, TV, audio system, and DVDs Furniture for PC and TV Individual school supplies Didactic games Special education Equipment Teaching guides “Impresiones” Procurement was centralized at the national level except for the small individual school supplies procured locally\. The distribution was carried out by the Provinces according to the Operation Manual\. Selections of sets of didactic materials were made in 2007, 2008, 2009, and 2011 and distributed every year from 2008 to 2013\. 1  Education Selection 2007 Selection 2008 Selection 2009 Selection 2011 Total level Pre-school 1,805 1,733 1,671 2,052 7,261 Primary 3,893 1,974 5,011 1,060 11,938 Secondary 2,899 1,241 315 809 5,264 Equipment and didactic Distribution Year Level materials 2008 2009 2010 2012 2013 S09 + S07 + Preschool Set of games for preschool S11 + S08 NI12 S08 (plus S07 (except S07 from Preschool Library shelves preschool BA, SF, CBA) BA, SF, and CBA) S08 ( plus S07 from S07 (except Primary Library shelves primary BA, SF, BA, SF, CBA) and CBA ) S08 ( plus S07 from S07 (except Secondary Library shelves secondary BA, SF, BA, SF, CBA) and CBA ) Preschool Set of Books preschool S07 S08 Primary Set of Books primary S07 S08 Secondary Set of Books secondary S07 S08 S08 + Preschool Teaching guides Preschool S07 S09 +S11 S08 + Primary Teaching guides Primary S07 S09 +S11 S07 + S08 + Secondary Teaching guides Secondary S07 S09 +S11 Impresiones Primary Dictionaries Primary S07 S08) S08 + S09 + S11 Secondary Dictionaries Secondary S07 (except BA, SGO) S08 + S09 + Secondary Atlas S07 S11 (except BA, LR) TV+PC+Printer+voltage Secondary S07 S08 stabilizer 2  Audio system and DVD Secondary S07 S08 recorder/player TV programs S07 + Secondary Encuentro, Horizonte S08 S07 + S08 + Secondary Laboratories Secondary S09 +S11 + P7 Primary Laboratories Primary PR1736 Special Education Equipment, Special didactic games, and teaching AGR Education guides References: S07: Selection PROMER 2007 S08: Selection PROMER 2008 S09: Selection PROMER 2009 S11: Selection PROMER 2011 BA: Province of Buenos Aires SGO: Province of Santiago del Estero LR: Province of La Rioja SF: Province of Santa Fe CBA: Province of Cordoba NI12: Pre-schools that were integrated after the 2012 update\. PR1736: Schools which received the remaining laboratories in 2012\. AGR: Clusters selected\. Distribution Selection Level Year S07 S08 S09 S11 NI12 Preschool 1,991 2008 Primary 3,973 Secondary 3,780 Preschool - 2,007 2009 Primary - 2,022 Secondary 3,774 2,017 Preschool 1,989 1,978 22 1 2010 Primary 3,062 1,983 19 - Secondary 3,744 1,949 17 6 Preschool 1,805 1,733 1,671 2012 Primary 946 4,087 Secondary 2,899 1,241 315 809 Preschool 1 1 1,537 1,832 132 2013 Special 373 education *In addition 1,736 laboratories were distributed in 2012 3 The survey performed among 2,687 teachers participating in national meetings in August and September 2013 showed that: (i) about 50% received trainings; (ii) they valued that the didactic material and teaching equipment were specifically designed for rural education; (iii) they found the materials and equipment particularly useful; (iv) 25% used them every day; and (v) 20% were worried about the possible deterioration or loss of books and materials\. i) Providing minimum school infrastructure standards for all schools in rural areas This activity financed: (i) the expansion of existing schools to absorb additional enrollment; (ii) the replacement or rehabilitation of dilapidated schools; (iii) infrastructure for the provision of drinking water, electricity, and sanitation\. Initially, the project planned to allocate funding of this activity based on two criteria: the unsatisfied basic needs methodology (NBI, Necesidades Básicas Insatisfechas) and the education challenges\. This methodology was abandoned because the Provinces’ needs were not homogeneous enough to allow prioritization\. Instead, basic standards for school facilities were established and a survey of school rehabilitation and construction needs was performed by DINIECE in 2006\. The total cost was estimated at AR$831,770,762 (of which AR$141,835,980 was for replacement and the rest was for rehabilitation)\. The program’s implementation was slow\. The main reasons were the following: (i) many provinces were not able to determine their priorities because of a lack of planning capacity and construction specialists; (ii) inconsistencies in the documentation sent to the MECyT and a lack of interaction between the provincial staff and the construction inspectors; (iii) procurement difficulties at the provincial level (particularly in Santiago del Estero, Jujuy, Chubut, Rio Negro, and Santa Fe); (iv) delays between the transfer of funds and the signing of the construction contracts; and (v) difficulties with the construction processes\. In 2008, various measures were put in place which facilitated and accelerated the implementation of the program: (i) the improvement of the coordination between the Directorate General for Infrastructure and the Provinces; (ii) the reorganization of the processes at the national level; and (iii) the organization of meetings and training sessions at the provincial level\. The program initially planned was executed in all the Provinces except for Santiago del Estero and Jujuy where it was downsized\. In total, 473 school infrastructure projects in rural areas (for a total cost of AR$296,968,482) were financed by the Project and 81 (for a total cost of AR$84,969,404) by the Government\. 4 Investment in school infrastructure 11/30/2013 PROVINCE INVESMENT (AR pesos) % of Total Buenos Aires 55,748,016 21\.02% Córdoba 9,995,651 3\.77% Entre Ríos 1,992,592 0\.75% La Pampa 3,188,992 1\.20% Santa Fe 12,329,992 4\.65% Mendoza 17,823,061 6\.72% San Juan 11,707,592 4\.41% San Luis 0 0\.00% Chaco 14,431,904 5\.44% Corrientes 3,657,308 1\.38% Formosa 35,210,405 13\.27% Misiones 16,971,282 6\.40% Catamarca 1,588,519 0\.60% Jujuy 9,406,460 3\.55% La Rioja 4,716,379 1\.78% Salta 20,915,151 7\.89% Santiago del Estero 5,805,319 2\.19% Tucumán 25,417,093 9\.58% Chubut 0 0\.00% Neuquén 2,677,013 1\.01% Río Negro 2,603,556 0\.98% Santa Cruz 9,064,894 3\.42% Tierra del Fuego 0 0\.00% Total 265,251,176 Contract Total of $ Educational Level Type of Work Quantity Amount $ Redetermination Lodging Water 1 274,490\.00 0\.00 Expansion 1 73,141\.11 0\.00 Minor Replacement Parts 1 51,963\.00 0\.00 EGB 1-2-3 Water 2 1,328,710\.70 0\.00 Expansion 7 4,871,831\.97 77,988\.24 Expansion and Parts 18 18,474,296\.47 848,662\.62 Connectivity 9 477,909\.29 0\.00 Supplementary Building 1 968,682\.96 0\.00 I\. Santitation Potable Water 1 495,140\.48 0\.00 Replacement Parts (with M²) 8 2,046,526\.35 0\.00 Minor Replacement Parts 4 268,977\.20 0\.00 Substitution 2 1,712,189\.98 0\.00 5 EGB 3 Expansion 1 1,476,580\.26 143,870\.43 Expansion and Parts 2 2,158,989\.02 0\.00 EGB 3 + Multimodal Expansion 2 1,438,787\.60 0\.00 Expansion and Parts 2 1,783,894\.16 79,127\.83 Initial Expansion and Parts 7 4,892,207\.64 61,956\.30 Replacement Parts (with M²) 2 806,113\.62 0\.00 Initial + EGB 1-2-3 Expansion 5 4,654,979\.77 0\.00 Expansion and Parts 9 9,850,242\.70 501,106\.46 Sewers 1 65,731\.63 0\.00 GAS 2 137,792\.34 0\.00 I\. Sanitation Potable Water 1 248,017\.36 0\.00 I\. Sanitation Humid Centers 2 483,647\.41 0\.00 Replacement Parts (with M²) 5 2,327,724\.56 0\.00 Minor Replacement Parts 1 64,630\.00 0\.00 Substitution 2 1,896,872\.71 172,717\.00 Initial + Primary Water 31 1,967,695\.90 56,166\.98 Expansion 6 4,747,736\.72 59,777\.00 Expansion and Parts 36 36,286,977\.35 773,068\.70 I\. Sanitation Potable Water 5 1,069,902\.04 0\.00 I\. Sanitation Humid Centers 3 459,941\.82 0\.00 Electrical Installations 3 427,512\.28 0\.00 Parts Electrical System 1 74,640\.13 0\.00 Parts (with M²) 29 12,053,622\.44 436,258\.87 Minor Replacement Parts 1 74,803\.97 0\.00 Restoration 1 1,309,592\.00 0\.00 Substitution 9 11,756,018\.79 574,245\.35 Initial+Primary+ Water 32 1,155,119\.63 0\.00 Secondary Expansion 8 15,307,389\.54 994,905\.00 Expansion and Parts 15 16,517,770\.47 374,137\.80 Supplementary Building 1 1,330,020\.56 68,900\.00 I\. Sanitation Humid Centers 2 965,965\.12 0\.00 Replacement Parts Potable 2 277,020\.85 0\.00 Water System Replacement Parts (with M²) 4 1,122,548\.66 0\.00 Minor Replacement Parts 2 186,132\.70 0\.00 Substitution 3 7,208,315\.44 153,280\.46 Expansion and Replacement Middle 6 5,352,610\.88 92,921\.41 Parts Connectivity 5 302,594\.35 0\.00 Substitution 1 676,535\.70 61,271\.94 6  Expansion and Replacement Multimodal 2 2,121,216\.32 77,966\.52 Parts Primary Water 13 665,548\.28 0\.00 Expansion 4 2,576,775\.46 239,914\.92 Expansion and Replacement 30 28,159,574\.40 1,031,083\.22 Parts Connectivity 3 165,304\.69 0\.00 Supplementary Building 10 10,342,864\.38 0\.00 I\. Sanitation Potable Water 4 891,047\.46 0\.00 I\. Sanitation Humid Centers 4 1,792,832\.63 0\.00 Replacement Parts Sewer 1 63,018\.63 0\.00 Drainage System Replacement Parts (with M²) 22 6,939,858\.70 213,155\.34 Minor Replacement Parts 4 298,223\.58 0\.00 Substitution 25 27,903,008\.38 175,354\.00 Primary + Secondary Water 2 55,687\.21 0\.00 Expansion and Replacement 10 6,922,315\.40 268,290\.94 Parts Connectivity 2 95,671\.73 0\.00 I\. Sanitation Potable Water 2 282,260\.59 0\.00 Replacement Parts (with M²) 6 1,174,238\.68 86,373\.77 Minor Replacement Parts 1 59,971\.51 0\.00 Secondary Water 1 27,790\.33 0\.00 Expansion 1 226,785\.43 0\.00 Expansion and Replacement 18 17,941,992\.54 1,552,342\.97 Parts Substitution 3 4,301,958\.96 320,250\.65 General Total 473 296,968,482\.92 9,495,094\.72 The allocation of the Project resources did not fully correspond to the distribution of the needs as assessed in 2006\. Distribution of financing needs Distribution of the cost of Region according to 2006 infrastructure financed by the infrastructure survey Project CUYO 10\.66% 11\.1% NEA 21\.41% 26\.5% NOA 44\.18% 25\.6% PAMPANEA 18\.85% 31\.3% PATAGONIA 4\.9% 5\.4% The average cost for new construction was AR$ 6,121 per square meter (about US$ 1,000), with rehabilitation costing 60% of this amount per square meter\. The construction cost varied depending of the location: AR$ 8,000 in Patagonia, AR$ 7,500 in Cuyo and AR$ 6,000 to 6,200 in the NOA and NEA regions\. Before approving a project’s technical documents, the DGI (General Directorate for Infrastructure) compared the cost per square meter for the project to the average cost per square meter for projects in the same 7 geographical region, taking into account all sources of funding\. Any costs 10% or more above the average had to be justified and were subject to the DGI’s authorization\. Thus, the cost efficiency of the construction program was ensured by the initial control over the price of the pre-awarded works\.   ii)  Establishing clusters of rural schools to facilitate local organization and management DINIECE estimated the number of rural educational units at 17,425 in 2011\. About 1,688 clusters of rural schools had been established as of July 2011 with an average of 10 CUEA per cluster\. Quantity of Clusters and educational units by provinces Educational Jurisdictions Clusters Units per cluster units BUENOS AIRES 3,464 403 8\.6 CATAMARCA 494 54 9\.1 CHACO 1,070 103 10\.4 CHUBUT 117 11 10\.6 CORDOBA 1,836 143 12\.8 CORRIENTES 941 93 10\.1 ENTRE RIOS 1,006 67 15\.0 FORMOSA 1,080 82 13\.2 JUJUY 311 47 6\.6 LA PAMPA 232 13 17\.8 LA RIOJA 395 36 11\.0 MENDOZA 578 71 8\.1 MISIONES 936 65 14\.4 NEUQUEN 185 25 7\.4 RIO NEGRO 208 14 14\.9 SALTA 649 84 7\.7 SAN JUAN 223 35 6\.4 SAN LUIS 243 22 11\.0 SANTA CRUZ 35 4 8\.8 SANTA FE 1,291 72 17\.9 SANTIAGO DEL ESTERO (1) 1,546 166 9\.3 TIERRA DEL FUEGO 5 1 5\.0 TUCUMAN 580 77 7\.5 General Total 17,425 1,688 100 Note (1) Currently, the date from the Province of Santiago del Estero are in the verification process with the jurisdiction\. The figures are provisional\. Source: Actualización de Agrupamientos 2011\. DiNIECE\. Ministerio de Educación\. Realización: 24/05/2011 The table below summarizes how the clusters have been used in the provinces\. 8  Type of use of the clusters Some experiences in the Provinces Tucumán, Salta, Jujuy, Chaco, Chubut used the clusters to: (i) design proposals for training; (ii) organize common proposals for Exchange of experiences science fairs, spot, and artistic activities; and (iii) to exchange works created by students in secondary schools Santiago del Estero, San Juan and Jujuy used the clusters to design Pedagogic management curriculum proposals\. Provinces which participate in the PBL activities optimized the use Economies of scale of resources, like sharing technical assessment and travel resources\. Corrientes and Entre Ríos organized a meeting of school directors Organization of supervisors and supervisors by cluster\. Training sessions have been organized by clusters in many Teacher Training provinces\. Traveling teachers have been organized by clusters in some Increase coverage provinces\. iii) Supplying technological tools to permit schools and students to receive distance education through TV channels\. This activity was not implemented\. iv) Developing actions to increase awareness of cultural diversity as well as knowledge of the traditional language and culture of the indigenous population\. The component dedicated to indigenous education started slowly due to technical difficulties locating the indigenous population and identifying their needs\. This component commenced in earnest with: (i) the 2007 creation of the Autonomous Education Council for Indigenous Groups (CEAPI, Consejo Educativo Autónomo de Pueblos Indígenas); (ii) the Federal Council of Education’s decision 119/10 (September 2010) which defined the policy guidelines for the Bilingual and intercultural education modality; (iii) the study about the sociolinguistic situation of the bilingual schools (December 2010); and (iv) the first mapping exercise including the linguistic and cultural situation of 15,314 rural schools undertaken during the period from 2005-2009\.20 The Project’s main achievements are: (i) a specific and more detailed census and description of the intercultural and bilingual education system in 499 schools with indigenous children in 14 Provinces in 2011 and 2012 (the census showed an indigenous population of 237 at the preschool level, 313 at the primary level, and 172 at the secondary level); (ii) the implementation, mostly in 2012, of 146 school development plans (10 in preschool, 102 in primary education, 16 in secondary, and 18 combining all levels); (iii) 17 trainings organized for 1,260 teachers from 526 schools organized in 13 provinces; (iv) the organization of five regional roundtable discussions in 2010 to increase awareness of 20 In 2005, the mapping exercise included 1,200 schools with indigenous enrollment, 5,391 in 2006, 2,570 in 2007, 4,076 in 2008, and 3,700 in 2009\. 9 cultural diversity and knowledge of the traditional language, while also debating and formulating education policies for the indigenous population; and (v) an inventory of didactic materials specifically for the indigenous population\. The implementation of the intercultural and bilingual policy demonstrated mixed results in the provinces depending on their management capacity and the way in which it was integrated into their legal framework and procedures\. No systematic evaluation was performed, but the best results were observed in the Northeast and Northwest regions where the indigenous population is the highest\. Sub component A2: Expanding coverage and improving student promotion flow i) Expanding coverage of preschool education The provinces chose among different alternatives to expand coverage: multi-age classrooms, independent kindergartens, traveling teachers, teachers with dual certification, and attending children in their homes, among others\. The decision regarding which of these models to use was the result of an analysis of the local situation\. Thus, no universal solution was implemented\. 6,137 preschool teachers were trained on working with books in multi-age classrooms and the use of games in teaching\. The training was divided into monthly 8-hour training sessions and on-site classroom sessions for practice\.21 Two teaching guides (one to improve reading in multi-age classrooms and the other on using games in the learning process), created by the Preschool department at the national level were distributed to all preschool teachers\. ii) Reducing repetition in EGB1 (Primary education) a) Training on teaching methods in multi-grade schools and to improve reading and writing Primary school teacher training focused on: (i) reading and writing in multi-grade classrooms in grades 1 to 3; and (ii) "learning to learn” with books in grades 4 to 6\. This training was specifically designed (i) to improve the learning process in multi-grade classrooms; and (ii) to support isolated teachers\. The training was divided into monthly 8- hour sessions\. The training included an analysis and self-assessment of teaching practices\. Meetings were organized at provincial level and in the clusters\. Support materials for 21 The training in preschool, primary, and secondary education followed the same system: (i) an initial meeting was organized in the province to present the modalities, the curriculum proposal, the didactic materials, and the teaching equipment; (ii) classroom practice sessions as a first step to analyze the materials and use the teaching guides to experiment with students; (iii) a meeting organized in the clusters to exchange experiences and discuss teaching practices; (iv) classroom practice to adapt teaching methods and the use of didactic materials to the school’s and students’ needs; (v) further classroom practice and analysis of the improvements made; and (vi) a final meeting of the participants in the province to analyze their experiences and discuss working in multi-grade schools and addressing issues with the teachers\. The training’s duration was 40 hours\. 10 teachers were developed by the Area Plan Reading division in the national Ministry of Education\. 11,940 primary school teachers were trained\. b) Advanced specialization diploma in rural education (Postítulo) A new advanced specialization diploma in rural education was organized at the national level\. It consisted of a 400-hour training program organized at 47 teacher training institutions in 20 Provinces\. The national team first created the curriculum and teaching materials (one on Literacy and one on multi-grade education in rural contexts) and then conducted a training of trainers with 256 professors and 191 supervisors who were in charge of training teachers\. Some 6,043 teachers (about 13 percent of the 47,133 teaching staff in the 11,637 rural schools) enrolled, of which 2,735 graduated\. The evaluation performed in 2011 showed that participants highly valued the training program 22 : (i) 95 percent of the teachers who graduated stated that they received didactic tools for teaching in multi-grade classrooms; (ii) 82\.7 percent learned time, space, and resource management techniques; (iii) 51\.9 percent received tools to help them work more independently; and (iv) 49\.4 percent upgraded their knowledge of core subjects\. However, since there was no assessment of the training’s impact on the learning process in the classroom, it is not possible to determine how the training impacted education quality\. The postítulo model restricted teacher participation due to: i) the high time commitment on their part, which filtered out less- motivated teachers; ii) the very high trainer to teacher ratio, limiting the available spaces in the program; and iii) generalized teaching methods that were not specific enough to pedagogical models like Horizontes\. iii) Increasing attainment in EGB2 (Primary education grades 4 to7) The actions designed to accelerate the transition of students from grades 4 to 7 were implemented universally in urban and rural schools\. The measures consisted of teacher training, distributing teaching guides, and disseminating instructions\. Although these measures were not financed by the Project, their impacts on promotion rates were significant and the gap between rural and urban schools decreased significantly\. In general, most of the actions directed at improving learning conditions described in the previous paragraphs had an impact on educational attainment in EGB2\. iv) Expanding schooling to EGB3 (secondary education grades 7 or 8 to 9) The Horizontes program was an important step toward introducing lower secondary education (expansion of the previous seven-year primary school system to nine years) in rural primary schools\. With the promulgation of the 2006 National Education Law (Law 26\.206), provinces could choose between different sets of modalities to expand schooling to 22 Evaluación del Postítulo: Evaluación de la Especialización docente de nivel superior en educación rural para el nivel primario\. Ana Belèn Zapata 2011 11 EGB3 in rural areas\. Differences focused on school enrollment, the presence of permanent or traveling secondary education teachers, and the availability of connectivity\. In order to define the implementation modalities, the national team worked closely with curriculum teams, supervisors, and teachers at the provincial level\. The Project contributed to: (i) the recruitment of specialists (writers and editors) for the preparation of didactic materials (textbooks and teaching guides for Horizontes and a set of TV programs); (ii) production of the materials (printed for students and teachers and DVD format for TV shows produced in coordination with the Canal Encuentro); (iii) distribution of these materials to 6,168 schools; (iv) teacher trainings focused on activities aimed at knowledge sharing and alternative uses of specially developed materials such as printed guides, TV programs for students, institutional libraries, and teaching equipment (via 8- hour training sessions organized by clusters or through traveling teachers); and (v) technical assistance provided to 1,677 schools by technical provincial teams collaborating with the national Directorate of Educational Management\. Still, the program was implemented unevenly, with some provinces adopting the approach, while others were more resistant to the changes in methodology\. Provinces that did implement the program were able to expand coverage at the lower secondary level quite significantly, despite facing operational challenges such as insufficient numbers of specialized teachers assigned to rural schools, difficulty among technical teams and teachers to internalize and implement the pedagogical principles and concepts, weak linkages between the primary and secondary education levels that limited the possibilities for synergies and efficiencies in the use of resources as well as other missed opportunities, and inadequate technical assistance to the schools\. In some provinces, implementation was hampered by the inconsistency presented by transplanting the predominant vision of urban secondary education to rural areas\. Special education In special education, 2,893 teachers from 341 schools were trained to use the equipment and didactic materials provided to the schools\. The training was organized according to clusters in the nine participating provinces\. Provinces Clusters Salta 44 Tucumán 42 Catamarca 30 Santiago del Estero 88 Jujuy 21 Misiones 35 Corrientes 53 Formosa 32 Chaco 53 12 Creating School Development Plans in rural schools The school development plans were implemented in 16 provinces (out of 23)\. There were 1,072 school development plans (May 2012)\. Each school project received AR$ 4000 in funding\. This activity was initiated at the end of 2009\. This start-up delay was caused by changes to the schools that were initially selected and the appointment of staff to manage the activities in the provinces\. Number of school Number of school Provinces Provinces development plans development plans Buenos Aires 48 La Pampa 33 Catamarca 73 La Rioja 62 Chaco 22 Misiones 100 Chubut 46 Salta 77 Cordoba 133 San Juan 86 Corrientes 32 San Luis 32 Formosa 93 Santiago del Estero 80 Jujuy 22 Tucuman 132 The school development plans were targeted to multi-grade schools with low enrollment\. Each province carried out a selection process that was checked at the national level\. Some informal interviews conducted during school visits highlighted that it was necessary: (i) to increase the involvement of the communities to determine the main issues for intervention; (ii) to strengthen the connection with the curriculum; (iii) to provide more support to the teachers to enable them to maximize their potential to improve results; and (iv) to improve the integration of the school development plans school-level time management\. There is no evidence that the funding of the school development plans will be maintained\. Sub component A3: Strengthening line departments at the provincial level i) Strengthening line departments at the provincial level in the areas of planning/information management, pedagogy, administration, and monitoring The Project funded an average of 203 positions over seven years to strengthen the capacity in the Provinces\. This number varied each year according to the Project’s implementation needs, with a peak of 262 positions in 2011\. The distribution among provinces varied greatly according to their needs and the size of the program to be implemented\. The main functions funded were: (i) project coordinator; (ii) programming; (iii) administration and finance; (iv) infrastructure; (v) accounting; (vi) pedagogy; (vii) procurement; (viii) monitoring and evaluation; and (ix) bilingual education\. Many of these positions will be maintained with PROMER II\. 13 Table: Distribution of positions funded by the Project in the provinces Provinces 2007 2008 2009 2010 2011 2012 2013 Buenos Aires 5 17 17 18 17 10 Catamarca 6 5 11 16 15 8 5 Chaco 5 7 11 14 19 17 13 Chubut 3 5 7 7 7 6 2 Córdoba 11 16 19 23 20 23 16 Corrientes 9 9 15 20 14 13 13 Entre Ríos 3 5 3 3 3 2 2 Formosa 2 12 11 15 18 16 11 Jujuy 6 7 9 12 13 11 9 La Pampa 3 6 7 9 9 8 7 La Rioja 6 4 6 5 8 5 3 Mendoza 6 10 11 9 9 11 7 Misiones 10 10 14 15 14 18 14 Neuquén 1 2 5 6 3 4 Río Negro 2 2 2 2 2 Salta 3 9 12 15 15 17 12 San Juan 5 4 7 8 11 11 10 San Luis 2 5 7 6 7 6 Santa Cruz 2 2 4 5 3 Santa Fe 10 20 16 15 11 8 Santiago del Estero 10 14 16 14 12 13 8 Tierra del Fuego 1 1 1 Tucumán 8 15 21 18 23 22 19 Total 98 158 229 253 262 244 182 Provincial jurisdictions were characterized by administrative diversity and complexity in terms of using Project funds for implementation\. As a result, the Project had to fund technical assistance to make the necessary adjustments\. Coordinators, financial specialists, procurement specialists, and infrastructure specialists were invited to participate in training sessions and in meetings to promote horizontal cooperation and the sharing of experiences\. To simplify the work of the provincial administrations and increase accountability some adjustments were made to the Operating Manual after the mid-term review\. The changes were related to accounting policies, recordkeeping, and other issues related to procurement\. The changes related to procurement processes were adopted by the DGUFI for all internationally funded projects\. During execution, the project improved the use of the UEPEX system as a management tool both at the central and provincial levels\. 14 The Project has been continuously audited by various agencies including: (i) the Auditor General’s office annually for financial compliance and once (for the period 23/10/2006 to 31/12/2011) for management compliance; (ii) the Office of the Comptroller General through the Court of Auditors in the participating provinces under the Federal Public Network Control (annually); and (iii) annually by the internal Audit Unit of the Ministry of Education for both financial and accounting compliance\. All observations and recommendations resulting from these audits were examined with the provinces in regional and national meetings\. This process has ensured that the information has been systematized and integrated, increasing the probability that the lessons learned and corrective actions will be implemented\. ii) Developing a provincial plan of rural education in each province All the activities dedicated to develop rural education in the provinces were integrated in a single national plan (PNEOyFD) 8\. Component B: Enhancing the stewardship capacity of national Government (US$5\.35 million incl\.US$4\.83 million Bank financing) 3\.37% of the total credit Sub component B1: Strengthening line departments at the national level This component funded positions in the DGUFI to coordinate Project activities\. In 2009, the Project Coordinating Unit was reorganized, adopting a matrix scheme in which functions were defined in terms of areas -- Financial Management, Assistance to the Provinces, and Technical and Monitoring – and subordinated to the Project Coordinator\. The Assistance to the Provinces department was organized in regional teams with each team consisting of a generalist, a financial specialist, and a procurement specialist\. This reorganization contributed to the improvement of the planning, monitoring, and technical assistance to the provinces\. The provinces’ administrations became more responsive partners on all management issues and worked toward common goals\. Project Coordinating Unit positions Positions 2007 2008 2009 2010 2011 2012 2013 Project Coordinator 1 1 1 1 1 1 1 Technical Area Head 1 1 1 1 1 1 1 Planning Specialist 1 1 2 1 1 1 1 Technical Area Assistant 1 1 1 2 2 2 1 Administrative Assistant 3 3 1 2 3 3 4 Head of assistance and monitoring of the 1 1 1 1 1 1 1 Provinces Provinces Coordination and Monitoring 1 4 5 5 4 4 4 Specialist Provinces Coordination and Monitoring 1 1 1 2 2 2 2 Assistant 15 Procurement Area Head 1 1 1 Procurement Consultant 3 3 5 3 4 4 3 Financial Administration Head 1 1 1 1 1 1 1 Budget Specialist 1 1 1 1 1 1 Accounting Specialist 1 1 1 1 1 1 Treasury Specialist 1 1 1 1 1 1 1 Disbursement Specialist 1 1 1 1 1 Administrative and Financial Consultant 2 3 3 6 5 4 4 TOTAL 19 24 26 29 29 28 27 Sub component B2: Supporting the development and implementation of a system of data collection, analysis, dissemination, and use of information for policy decisions at the national level\. (i) Surveys and impact evaluation studies of rural and technical schools The DINIECE conducted a survey of the operating conditions of rural schools\. The purpose of the survey was to conduct a census of rural schools with one or two teachers that were isolated and located in remote areas or that were difficult to access\. Specific procedures and methodologies for data collection, processing, analysis, and reporting were used\. The Project financed nine studies for DINIECE related to specific aspects of rural education: - A policy study on organizing the school degree programs in the second cycle of the primary education level in Mendoza province (2008) - A training proposal in multi-grade rural schools in the province of Santiago del Estero (2008) - Improvements in educational conditions in rural areas: teaching processes that include the use of students’ native language for literacy in Spanish in the province of Corrientes (2009) - The implementation of a proposal to organize the supply of Basic Secondary Education in rural areas: provincial management and institutional aspects in the province of Misiones (2009) - Possibility of organizing multi-age classrooms in Entre Rios to expand preschool coverage in rural areas (2010) - Description of intercultural and bilingual education in rural areas (2010) - From training to teaching in multi-grade classrooms in rural Education in the province of Santiago del Estero (2011) - Secondary schools in rural areas and clusters as strategy for sustaining the educational trajectories of rural students in the province of Misiones (2012) - Multi-age classrooms in rural areas: Tensions and transformations in educational practices with the distribution of games for learning in the province of Tucumán (2012) The DINIECE progressively instituted a modern and efficient Federal Education Information Network through several steps: (i) the system was designed in 2006; (ii) the equipment procurement plan was drawn up in 2007; (iii) in 2010, the PCs, servers, printers were allocated to the to the provinces and development of the software, including the 16 template for the school survey and data collection, analysis, and comparison was completed; (iv) in 2011, the province of Cordoba piloted a system to collect data directly from schools through the web; (v) in 2012 the system was expanded to other provinces; (vi) in 2013, 20 provinces collected data directly from the schools and the web-based queries of the Federal Education Information Network were fully operational\. The difficulties encountered included: (i) Subcomponent B2 in support of the development of a data collection, analysis, and dissemination system and to provide technical assistance to the provinces started very slowly (the 06/21/2009 ISR could not find evidence of substantive activities in component B); (ii) it was technically complex to collect, validate, and standardize data from 23 provinces, some of whose education systems are structured differently; (iii) there were four leadership changes at the DINIECE between 2005 and 2009; and (iv) the Federal Education Information Network was an ambitious project because it allowed schools to load their data directly into the system via the Web\. (ii) The expansion of a sample of standardized national student assessments (Operativo Nacional de Evaluación ONE) to ensure adequate representation of rural schools\. The Federal Council of Education resolution No\.116/10, states that the National Operational Evaluation (ONE), which evaluates learners’ cognitive performance, should be carried out every three years\. As a result, the DINIECE conducted the ONE with rural representation in 2007, 2010, and 2013\. At the primary education level student learning in different knowledge areas (mathematics, social studies, science, and language) is evaluated in 3rd and 6th grade\. The students’ results are measured on a scale with three values: low, medium, and high\. The cognitive and expected capabilities are evaluated according to the curriculum and Priority Learning Areas (NAPs)\. Each test consists of 30 questions\. A probability sample representative of the provincial and national level was applied\. It is a complex sample that is stratified according to the public and private, urban and rural systems and clustered according to the size of the schools\. The results of the ONE for primary education are communicated by provinces to each of the provincial administrations, and they are disseminated to the public by regions\. In secondary education, the ONE is conducted during the last year in all secondary schools\. The results of the ONE for secondary schools are shared with each school\. The 2013 ONE for primary education was carried out in November, while the secondary education ONE took place in August\. The results of the latter will be available in the first semester of 2014, while the results of the primary education ONE will be available later\. Indicator C1: Improve the percentage of students in Grade 3 in rural schools achieving proficiencies in the nationally ratified standards of the Core Learning Priorities (NAP) 17 Grade 3 2007 2010 Discipline Low Medium High Low Medium High Spanish Country 29\.7 30\.7 39\.6 26\.9 32\.8 40\.3 Urban public 34\.1 33\.4 32\.4 31\.0 34\.7 34\.4 Urban private 12\.8 23\.5 63\.7 10\.6 29\.4 60\.0 Rural schools 36\.7 29\.7 33\.6 32\.6 30\.0 37\.5 Mathematics Country 31\.8 43\.1 25\.1 26\.2 45\.0 28\.8 Urban public 36\.6 43\.8 19\.6 29\.6 45\.4 25\.0 Urban private 15\.0 44\.4 40\.6 15\.5 47\.7 36\.8 Rural schools 37\.3 37\.1 25\.7 27\.0 38\.9 34\.2 Social Country 35\.4 38\.1 26\.5 33\.8 39\.5 26\.7 Sciences Urban public 40\.1 38\.3 21\.6 38\.1 38\.7 23\.1 Urban private 21\.1 40\.3 38\.5 21\.8 46\.5 31\.7 Rural schools 36\.5 33\.3 30\.3 34\.0 31\.5 34\.5 Natural Country 54 32\.8 13\.2 33\.2 48\.1 18\.7 sciences Urban public 59\.0 30\.2 10\.8 36\.6 47\.7 15\.7 Urban private 39\.3 43\.6 17\.1 22\.1 54\.5 23\.4 Rural schools 54\.3 27\.3 18\.3 34\.2 40\.6 25\.2 Indicator C2: Improve the percentage of students in Grade 6 in rural schools achieving proficiencies in the nationally ratified standards of the Core Learning Priorities (NAP); Grade 6 2007 2010 Discipline Low Medium High Low Medium High Country 33\.7 43\.1 23\.2 27\.7 49\.4 22\.9 Urban public 37\.9 45\.2 16\.9 31\.3 51\.7 17 Spanish Urban private 13\.2 37\.1 49\.8 11\.7 45\.5 42\.9 Rural schools 45\.0 41\.7 13\.3 38\.9 45\.9 15\.1 Country 36\.2 37\.4 26\.4 35\.7 40\.2 24\.1 Urban public 40\.1 39\.0 20\.9 40\.3 40\.8 18\.9 Mathematics Urban private 16\.8 33\.5 49\.7 18\.2 41\.0 40\.8 Rural schools 47\.3 35\.3 17\.4 44\.6 36\.4 19 Country 34\.9 39\.8 25\.2 38\.0 41\.8 20\.1 Urban public 39\.4 41\.0 19\.6 43\.2 41\.9 15\.0 Social Sciences Urban private 16\.2 37\.3 46\.6 20\.2 44\.3 35\.5 Rural schools 41\.8 37\.8 20\.5 45\.0 37\.5 17\.5 Country 44 39\.2 16\.8 44\.5 37\.5 18\.0 Natural Urban public 48\.6 38\.5 12\.9 49\.3 37\.0 13\.7 sciences Urban private 25\.2 43\.6 31\.3 27\.9 41\.4 30\.8 Rural schools 50\.7 35\.7 13\.6 50\.9 33\.2 15\.9 18 Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) The economic and financial analysis of the Rural Education Improvement Project (PROMER) is divided in two sections: (i) an analysis of the fiscal impact of the Project including its contribution to key results achieved by the rural education sector and comparing the fiscal performance of the Project to what was initially forecasted in the PAD; and (ii) a cost analysis of the education system, that takes into account each province as well as the characteristics of the rural education system\. However, it was not possible to measure the efficiency gains in rural areas or to do a cost benefit analysis of Project interventions because the Provincial education budgets do not distinguish between education in rural areas and total education expenditure\. I) Fiscal impact of the project In order to analyze the project’s fiscal impact, it should first be noted that expenditure by the National Education Ministry (MEN) (excluding tertiary education) and by provinces on education, measured in United States dollars, increased substantially between 2006 and 2013, averaging a 15 percent increase at the national level and 19 percent in the provinces each year during this period (Table 1)\. The measurement of the trends in dollars was used as a proxy indicator for the net real changes of the impact of price increases\. The fiscal adjustment underway in the country coupled with the devaluation of the peso in early 2014 suggest a roughly 20 percent reduction in expenditure on education at the national and provincial levels in FY 2014, and a rebound in 2015 with a year-on-year increase of 6 percent in both cases\. During the entire period, expenditure on education in the provinces increased beyond that spent at the national level, accounting for 89\.9 percent of total expenditure in the country (excluding universities) in 2006, and 92\.1 percent during the remaining years\. The expansion of rural enrollment in the provincial education system required widely varying increases in resources, accounting for 0\.2 percent of total expenditure in provinces in the early years and below 0\.1 percent in the subsequent years\. Increased expenditure was accompanied by an expansion in the supply of services, as evidenced by the increase in the number of teaching positions and secciones during the period under review\. Chart 1 shows that the share of teaching positions in rural areas increased steadily relative to the national total in five of the seven years between 2005 and 2012, starting with a proportion equivalent to 17\.1 percent of the total number of positions in the first year reviewed and reaching 18\.7 percent at the end of the period under review\. 1 Table 1\. Summary of the Fiscal Impact of the Project Millions of US Dollars* 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Expenditure by the National Education Ministry (excluding 855 1,286 1,332 1,266 1,349 1,807 2,052 2,120 1,695 1,798 tertiary education)** Rural Education Improvement 1\.0 11\.2 9\.4 19\.4 35\.4 37\.9 48\.4 42\.6 30\.7 16\.6 Project (PROMER) Investments - 0\.1 1\.0 5\.5 10\.1 22\.4 38\.6 34\.4 8\.9 - Goods and services 0\.2 8\.9 5\.1 8\.6 19\.1 8\.3 2\.7 1\.5 5\.7 5\.1 Recurrent costs 0\.8 2\.3 3\.4 5\.3 6\.2 7\.1 7\.0 6\.7 16\.1 11\.5 Increase in expenditure by the National Education Ministry as a 0\.12% 0\.87% 0\.71% 1\.53% 2\.62% 2\.10% 2\.36% 2\.01% 1\.81% 0\.92% result of the project Provincial education 7,638 9,713 13,737 14,136 16,196 21,212 24,140 24,726 19,771 20,966 expenditure*** Increase in provincial education expenditure as a result of increased rural enrollment 0\.20% 0\.00% 0\.21% 0\.08% 0\.09% 0\.09% 0\.03% 0\.07% n/d**** n/d**** (preschool, early childhood, primary, and secondary) Clarification: *Data expressed in United States dollars\. The average annual exchange rate taken from the webpage of the Central Bank of Argentina (BCRA) was used for all years, except for 2014, for which the estimated exchange rate is $8 and 2015, for which the projected average exchange rate is $9\. **Expenditure by the National Education Ministry for 2015 is estimated in accordance with the provisions set forth in the LEN (National Education Law)\. *** Reported provincial education expenditure for 2013-2015 is estimated in accordance with the provisions set forth in the LEN\. ****n/d: no data Source: CGECSE/SsPE/SE/M\.E\. based on budget information provided by school district authorities, DINIECE/SE/M\.E\., Budget Directorate/SsCA/M\.E\., Accounting and Finance Directorate /SsCA/M\.E\., UFI/SsCA/M\.E, DINIECE/SE/SsPE/ME, and BCRA\. 2 Chart 1\. Percentage of Teaching Positions in Public Schools, by Location (*) 450\.000 20% Ambito urbano Ambito rural 400\.000 18,7% 19% Ambito rural / total (eje derecho) 18,5% 350\.000 17,7% 17,6% 17,7% 17,6% 18% 17,1% 17,2% 300\.000 17% 250\.000 16% 200\.000 15% 150\.000 14% 100\.000 13% 50\.000 12% 0 11% 2005 2006 2007 2008 2009 2010 2011 2012 - Urban area - Rural area - Rural area/total area (right axis) Source: Compilation based on data extracted from DiNIECE Annual Reviews, Ministry of Education When these increases are analyzed by level of education (see Chart 2), there is a higher percentage over the period at the primary level (an increase from 20\.6 percent of teaching positions in rural areas in 2005 to 22 percent in 2012), followed by the early childhood and kindergarten level (15 percent of the teaching positions at this level were in rural areas in 2012), and, lastly, at the secondary level, which, despite still accounting for a share of rural teaching positions relative to the entire country that is lower than at all other levels of education (14\.1 percent during the last year reviewed), had the highest relative percentage increase in the period under review (the percentage for this education level was 10\.8 percent in 2006)\. The number of secciones at each level increased in tandem with the number of teaching positions in rural areas, climbing from 6,863 to 8,549 at the early childhood level (an increase of 24\.6 percent) between 2007 and 2012, while there was a 16\.6 percent increase at the primary level (29,788 in 2007 to 34,730 in 2012)\. The relative increase at the secondary level was substantially higher, with a 38\.3 percent increase in the number of secciones during the period (11,082 in 2007 to 15,330 in 2012)\. The number of secciones and rural teaching positions increased significantly, attaining a level of relative stability in the last few years, thus obviating the need to project short-term growth trends, except for a small group of provinces that continue to address the challenge of expanding rural secondary education\. 3 Chart 2\. Share of Teaching Positions in Rural Public Schools Relative to the Total Number of Teaching Positions, by Level of Education 26% Nivel Primario Promedio Nacional 24% Nivel Inicial - Jardin de Infantes Nivel Secundario 21,9% 22,0% 22% 21,5% 21,4% 21,4% 21,2% 21,1% 20,6% 20% 18,7% 18,5% 17,7% 17,6% 17,7% 17,6% 18% 17,2% 17,1% 16% 15,0% 14,8% 15,0% 14,2% 14,1% 14,0% 14,1% 13,8% 14% 13,2% 13,3% 11,7% 11,6% 12% 11,3% 11,3% 10,8% 10,7% 10% 2005 2006 2007 2008 2009 2010 2011 2012 - Primary school - National average - Early childhood and kindergarten - Secondary school Source: Compilation based on data extracted from the DiNIECE Annual Reviews, Ministry of Education The increase in supply can be analyzed in conjunction with a number of key results achieved by the rural education sector in the last few years\. The following succinct conclusions can be drawn from the data summarized in Table 2\. It is necessary to keep in mind that in all cases these are national averages that include high variability among provinces that constitute a very heterogeneous territory\. - Education coverage gaps at the early childhood education level fell significantly (73\.6 percent), and in 2012, 4,191 five-year-old children had no access to schools (15,861 in 2004)\. - Promotion rates in rural primary schools increased from 85\.3 percent in 91\.3 percent on average over the six years between 2004 and 2012\. As is often the case, this rate is lower in the first year of primary school (85\.5 percent in 2012)\. However, in this case, it accounts for a higher percentage increase with respect to the 2004 benchmark, (the promotion rate for Grade 1 students was 77\.3 percent in 2004)\. 4  - The rate for students who are over-age by two or more years in the second cycle of primary education in rural areas declined substantially from 21\.2 percent in 2004 to 17 percent in 2012, thus contributing to lower dropout rates\. - The rate of transition to basic secondary school in rural areas increased at an uneven pace during the period under review\. Between the first and second years of this level (Grades 7 and 8 of general basic education), the promotion rate increased by 8 percent from 77\.8 percent in 2004 to 84 percent in 2012, while between completion of primary school and the first year of secondary school, the transition rate fluctuated more and remained relatively stable at around 90 percent, without any obvious increases\. In any case, there was a marked increase in the number of students enrolled in basic secondary school, from 170,520 students in 2004 to 198,629 students in 2012 (16\.5 percent of the increase occurred during the period under review)\. Ideally, this examination should be supplemented with an analysis of the trends relating to learning outcomes in language and mathematics\. However, available information (the 2010 and 2013 Standardized National Assessment Tests – ONE) can be compared only at the aggregate level as it is not possible to make a distinction between the corresponding situation in rural areas\. In the framework provided, PROMER’s fiscal performance (Chart 3) accounted for 1\.5 percent of national expenditure on education on average during the period under review, with a maximum of 2\.62 percent in 2010 and a minimum of 0\.12 percent in 2006, the first year of project implementation\. The resulting fiscal impact measured by this indicator is significantly lower than the estimate in the PAD (4\.6 percent on average, with varying rates that peaked above 8 percent), chiefly because expenditure on education by Argentina’s Ministry of Education increased at a faster pace than planned, owing to the provisions set forth in the Education Financing Law (LFE) passed in late 2005\. Among other things, this law made provisions for an increase in the share of public expenditure on education in GDP (during a period of sustained GDP growth), with a 40 percent contribution from the central government\. As a result, allocations to the project continued during its implementation at the same time that the central government and the provinces increased educational resources at an unprecedented rate\. The breakdown of PROMER’s expenditure (Chart 4) shows that the share of allocations started increasing from the third year of implementation, reaching a maximum equivalent to 80 percent of project expenditure in 2012 and 2013\. These capital investments, especially in infrastructure, helped bridge coverage gaps as previously mentioned, and meet the needs required by the system to address sector demands in the short and medium term, at least with respect to early childhood and primary education\. 5  Table 2\. Selected Indicators for General Public Education in Rural Areas Level of Education Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012 Primary Education Primary Education ary Childho l) Educati Prim Early Coverage pending (Tota od 15,861 13,200 11,631 10,102 9,387 8,154 6,265 5,286 4,191 (number of students) Annual promotion rate 85\.3 85\.6 87\.8 88\.3 88\.8 89\.1 89\.8 90\.3 91\.3 (Grades 1-6) First Cycle of Annual promotion rate in 82\.5 83\.2 84\.9 85\.8 86\.1 86\.4 87\.3 88\.1 89\.3 this cycle Annual promotion rate for 77\.3 78\.2 80\.0 81\.0 81\.6 81\.8 83\.2 83\.8 85\.5 Grade 1 Second Cycle of Over-age rate (over-age by 21\.2 20\.9 20\.6 21\.1 21\.3 20\.4 20\.2 18\.8 17\.0 2 years or more) Number of students 275,362 268,202 279,844 278,848 282,319 280,707 279,417 281,375 277,271 enrolled Basic Secondary Cycle Transition rate from Grade 77\.8 82\.0 80\.4 78\.6 80\.4 81\.1 83\.7 85\.1 84\.0 7 to Grade 8 Transition rate from Grade 91\.6 92\.4 89\.4 83\.7 87\.1 88\.5 89\.1 89\.6 87\.6 6 to Grade 7 Number of students 170,520 173,036 183,824 169,071 179,188 185,980 193,501 199,436 198,629 enrolled Source: DiNIECE Annual Reviews, Ministry of Education 6  Chart 3\. Project Breakdown and Proportion of MEN Expenditure on Education\ 60 3,0% Costos recurrentes Bienes y servicios Inversiones 50 2,5% Proporción gastos MEN correspondientes al proyecto (eje derecho) 40 2,0% millones de USD 30 1,5% 20 1,0% 10 0,5% - 0,0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 - Recurring costs - Goods and services - Investments - Proportion of MEN expenditure relative to the project (right axis) Source: Compilation based on data extracted from Table 1 Chart 4\. Project Breakdown (Percentage Structure) 100% Costos recurrentes Bienes y servicios 80% Inversiones 60% 40% 20% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Recurring costs Goods and services Investments Source: Compilation based on data extracted from Table 1 7 Consistent with the initial cost plan, recurring expenditures were higher during the first year of project implementation (accounting for close to 80 percent of total project expenditure), and then fell to close to 20 percent, until 2014 when they began to rise again as project investment levels decreased\. Expenditure on goods and services declined as well from the start of project implementation until 2014, when its share relative to the total also increased\. From this perspective, it can also be stated that the facilities and infrastructure in place demonstrate a sustainable level of resources for the system in the rural areas in the coming years, primarily with respect to early childhood and primary education\. II) Cost analysis of the education system In order to carry out a cost analysis of the education system, that takes into account each province as well as the characteristics of the rural education system, it is important to begin by identifying how transfers from the central government are allocated to educational institutions and then examine a breakdown of the related expenditure within the education system\. Such an analysis is not confined to, but includes the rural sector, since under Argentina’s federalist system; the provinces are responsible for providing pre-university education at all levels and in all areas\. Throughout the period under review, there was a significant increase in central government transfers to the education sector in the provinces\. The vast majority of these transfers were effected on the basis of bilateral agreements between the central government and each school district, and included objectives and monitoring indicators\. Table 3 shows that when measured in real terms and using United States dollar equivalent values, as mentioned above, government transfers more than tripled between 2005 and 2012\. An analysis of the breakdown of central government transfers (Chart 5) reveals that over the period, there was a relative reduction in allocations for the payment of teachers’ salaries and a corresponding increase in the line items related to infrastructure and equipment\. Salaries and infrastructure account for 85 percent of central government transfers to the education sector, while the remaining 15 percent is used to fund study grants, school textbooks, teacher training activities and other projects carried out by the educational institutions themselves\. While central government allocations are made to the education sector as a whole, thus making it impossible to determine the share assigned to the rural area, the aforementioned change in the structure of allocations is consistent with the increased coverage and improvement in the educational levels and outcomes, as previously indicated\. Ideally, one should be able to link these trends to the targets and indicators incorporated in the inter- governmental bilateral agreements alluded to above, in order to identify the link between funding and the improved performance of the education sector\. 8 Table 3\. Central Government Transfers to School Districts, by Line of Expenditure (2005-2012) Millions of US Dollars* Line of Expenditure 2005 2006 2007 2008 2009 2010 2011 2012 Funding for Teachers’ Salaries 451\.5 504\.4 857\.8 749\.9 660\.6 735\.0 1,036\.6 1,070\.6 Infrastructure and Equipment 65\.8 140\.2 307\.5 267\.7 322\.4 340\.8 939\.2 643\.0 Study Grants 65\.4 61\.7 78\.3 129\.4 130\.6 16\.7 14\.7 17\.4 Teacher Training 14\.8 18\.5 30\.7 29\.2 52\.4 67\.3 105\.2 143\.4 School Textbooks 5\.1 20\.7 25\.0 13\.2 19\.0 8\.3 40\.5 26\.4 Projects carried out by 5\.4 29\.1 50\.2 54\.6 39\.0 76\.5 138\.9 125\.3 Educational Institutions Strengthening of Management 2\.0 2\.3 3\.5 10\.2 1\.1 1\.3 10\.5 11\.0 in the Provinces Statistical Information and Assessment of the Quality of 0\.8 0\.2 1\.3 0\.9 2\.3 5\.6 1\.1 1\.5 Education Total 610\.8 777\.2 1,354\.3 1,255\.1 1,227\.4 1,251\.5 2,286\.6 2,038\.5 Clarification: *Data supplied in US Dollars\. For each year, the exchange rate used was taken from the annual average supplied by the BCRA webpage\. Base Cash Amount for each year corresponds to the amount allocated each year, regardless of the financial year in which each line item was included\. Includes data from the Ministry of Education of Argentina, the Ministry of Federal Planning, Public Investment and Services of Argentina (National Plan 700 Schools/ more schools), ANSES (Conectar Igualdad Program)\. Source: General Coordination of Cost Studies of the Educational System (DNPE/SsPE/SE/ME) based on information supplied by the General Directorate of the International Funding Unit/SsCA/ME, Equity and Quality Secretariat/SE/ME, Conectar Igualdad Program/ME and Ministry of Federal Planning, Public Investment and Services of Argentina\. 9 Chart 5\. Breakdown of Central Government Transfers to School Districts, by Line of Expenditure (2005-2012) Percentage Share Source: Compilation based on data extracted from Table 3 An analysis of expenditure by the provinces points to significant differences in the uses of resources among the various provinces\. As shown in Chart 6, some school districts disburse more than 90 percent of their allocations to defray staffing costs (La Rioja, Jujuy and Tierra del Fuego), while in others with a more flexible budgetary structure, (City of Buenos Aires and San Luis), salaries account for less than 70 percent of total expenditure on education\. Central government transfers to fund private education account for the second largest line item in educational expenditure in the provinces\. In some cases, more than 20 percent of total expenditure is devoted to private education, while outlays for capital goods represent an average of 1\.9 percent of the total and are only marginally significant in almost all school districts\. 10 Chart 6\. Breakdown of Educational Expenditure in Provinces, According to Economic Category (2012) Percentage Share Clarification: The reported expenditure refers to activities funded exclusively with provincial resources\. Disbursements funded by non-automatic transfers are excluded\. Expenditure by the Ministries of Public Works in School Districts was added under the line item: “capital disbursements” Source: CGECSE/SsPE/SE/M\.E\. on the basis of information supplied by Subnational Governments\. There are also great variations in teachers’ salaries among the provinces\. Table 4 shows that disparities existing between urban and rural areas and that the relationship between these two sectors is not the same in all provinces\. For example, in some provinces, the gross salary of a grade school teacher with 10 years’ experience working in a rural area may be double that of a teacher at the same level in the urban area\. In other provinces, on the other hand, the difference may only be around 10 percent or 20 percent\. These disparities in salary levels may arise as a result of salary disputes, demographic considerations or differences in costs of living among the various school districts\. Specifically in the rural area, the differences may be attributable to difficulties in filling positions in remote areas, owing to a shortage of teachers with the necessary qualifications\. These shortages are most pronounced among middle school teachers\. 11  Table 4\. Teachers’ Salaries in Urban and Rural Areas, by Province (2013) Ordered by rural salary/urban salary ratio\. In US Dollars* School District Urban salary (1) Remote rural Rural salary / salary (2) Urban salary Tierra del Fuego 1,679\.90 1,841\.40 1\.10 Santa Cruz 1,627\.90 1,967\.10 1\.21 Santa Fe 1,262\.90 1,564\.40 1\.24 Chubut 1,198\.20 1,485\.60 1\.24 Santiago del Estero 757\.5 968\.5 1\.28 Neuquén 1,149\.80 1,474\.60 1\.28 Salta 1,001\.90 1,285\.40 1\.28 Córdoba 1,311\.20 1,728\.30 1\.32 San Luis 1,071\.80 1,420\.10 1\.32 Mendoza 966\.7 1,297\.60 1\.34 Misiones 885\.9 1,196\.40 1\.35 La Pampa 1,383\.70 1,938\.30 1\.40 Río Negro 1,068\.90 1,497\.60 1\.40 Buenos Aires 937\.8 1,334\.90 1\.42 Jujuy 892\.4 1,270\.70 1\.42 San Juan 939\.7 1,364\.10 1\.45 Entre Ríos 952\.7 1,396\.20 1\.47 Formosa 830\.2 1,328\.80 1\.60 Tucumán 1,040\.40 1,675\.60 1\.61 La Rioja 942\.7 1,520\.10 1\.61 Chaco 1,023\.00 1,658\.70 1\.62 Corrientes 917 1,565\.90 1\.71 Catamarca 782\.4 1,581\.50 2\.02 Clarification: *Data expressed in United States Dollars\. The average annual exchange rate of the Central Bank of Argentina webpage was used for all years\. 1) Gross salary of Grade School teacher with 10 years’ experience\. Provincial and Central Government funding\. “Urban” Salary\. 2) Gross salary of Grade School teacher with 10 years’ experience\. Provincial and Central Government funding\. “Remote Rural” Salary (maximum % for the area)\. Source: Gral Coord\. Cost Study (CGECSE)/ SsPE/ SE/ ME, on the basis of information supplied by the Provinces\. On the basis of available data, one can analyze the expenditure per student within the education system\. Table 5 provides data relating to public schools for the period 2005- 2012\. It can be observed that over that period, the unit expenditure expressed in dollars increased steadily at an average year-on-year rate of 21 percent\. This suggests that over the seven years under review, there was a cumulative increase of 270\.5 percent for the national average\. The most significant increase (382\.3 percent) occurred in Misiones Province, while the lowest (138\.9 percent) was in the Province of San Luis\. 12 Table 5\. Expenditure per Student in Public Schools (2005-2012) Figures quoted are in US Dollars* School Districts 2005 2006 2007 2008 2009 2010 2011 2012 Buenos Aires 672\.4 845\.3 1,023\.,4 1,469\.0 1,527\.6 1,656\.3 2,137\.9 2,405\.8 Catamarca 790\.2 1,061\.9 1,3538 2,043\.4 1,813\.3 1,955\.7 2,425\.9 2,824\.8 Chaco 569\.9 677\.5 939\.1 1,318\.3 1,334\.4 1,465\.3 1,827\.5 2,230\.5 Chubut 1,225\.2 1,372\.7 1,729\.5 2,226\.6 2,070\.8 2,618\.9 3,159\.5 3,512\.3 City of de Buenos Aires 1,143\.7 1,664\.3 1,922\.4 2,492\.7 2,506\.0 2,730\.1 3,720\.3 3,814\.2 Córdoba 547\.4 675\.3 867\.1 1,259\.0 1,262\.5 1,441\.6 1,848\.8 2,080\.3 Corrientes 479\.7 547\.9 699\.9 1,002\.1 963\.2 1,138\.9 1,647\.1 1,949\.5 Entre Ríos 594\.2 720\.6 937\.9 1,336\.6 1,312\.2 1,497\.5 1,985\.0 2,269\.1 Formosa 493\.5 729\.3 1,034\.1 1,334\.8 1,389\.8 1,582\.0 1,909\.4 2,216\.8 Jujuy 585\.4 733\.8 962\.5 1\.295,8 1,331\.4 1,631\.5 2,036\.9 2,356\.7 La Pampa 986\.5 1,208\.9 1,637\.7 2,353\.3 2,395\.0 2,929\.3 3,597\.2 4,384\.1 La Rioja 698\.7 805\.7 974\.9 1\.386,3 1,562\.3 1,803\.0 2,183\.7 2,640\.2 Mendoza 581\.0 735\.9 1,008\.9 1,298\.8 1,320\.1 1,478\.8 1,986\.2 2,350\.2 Misiones 337\.9 431,1 648\.0 799\.8 835\.8 1,109\.7 1,439\.0 1,631\.1 Neuquén 1,206\.9 1,483\.5 1,932\.3 2,804\.5 2,747\.4 2,990\.3 3,554\.7 4,351\.0 Río Negro 812\.0 1,051\.2 1,256\.7 1,666\.5 1,706\.6 1,992\.7 2,712\.8 3,066\.1 Salta 353\.9 421\.8 535\.3 719,0 744\.7 837\.2 1,074\.5 1,256\.7 San Juan 586\.7 714\.2 953\.7 1,295\.9 1,299\.7 1,470\.1 1,683\.2 1,926\.4 San Luis 877\.9 751\.1 910\.8 1,065\.0 972\.0 1,147\.2 1,493\.3 2,097\.7 Santa Cruz 1,103\.7 1,320\.7 2,169\.1 3,610\.2 3,332\.6 3,737\.4 4,674\.7 4,669\.3 Santa Fe 633\.6 814\.3 1,100\.1 1,535\.0 1,606\.1 1,850\.5 2,577\.8 2,836\.1 Santiago del Estero 508\.9 612\.1 722\.9 1,013\.6 1,031\.9 1,259\.3 1,591\.5 1,675\.7 Tierra del Fuego 1,863\.0 2,216\.6 2,937\.4 3,988\.7 3,706\.3 4,390\.2 5,760\.7 6,337\.5 Tucumán 467\.5 585\.1 739\.8 1,045\.3 1,068\.2 1,254\.3 1,607\.4 1,914\.9 Country average 658\.2 822\.8 1,042\.7 1,452\.7 1,475\.2 1,662\.2 2,154\.3 2,438\.5 Clarification: *Data expressed in United States dollars\. The average annual exchange rate taken from the BCRA web page was used for all years\. Source: CGECSE/SsPE/SE/ME on the basis of budgetary information supplied by Provincial School Districts, DINIECE/SsPE/SE/ME\. The level of expenditure per student varies greatly from one school district to the next\. In 2012, the province with the highest level of expenditure per student (Tierra del Fuego) disbursed more than five times that of the province at the other end of the scale (See Chart 7)\. As mentioned above, these differences may be partially explained by geographical, socio-demographic, climatological, and other factors\. However, the most important reason for the differences is the variation in teachers’ salary levels\. 13 Chart 7: Expenditure per Student in Public Schools (2012) Figures quoted are in US Dollars Source: Compilation based on data extracted from Table 5 Lastly, on the basis of a review of information supplied by the Cost Monitoring Units (UOCs) of the various school districts, there are four scenarios on which one may base an analysis of education labor costs in the different sectors (urban, rural settlements, and remote or sparsely populated rural areas)\. It must be noted that while this examination is not necessarily representative of the entire country, it is nevertheless an important step forward in analyzing the rural educational sector\. Based on the data derived from Table 6, one may calculate the cost per educational institution and per student, as well as analyze the differences in the average levels of early childhood, primary, and secondary education between urban and rural areas\. In the cases under review, the additional cost for rural settlements vis-a-vis urban areas was 2\.7 percent, 8\.7 percent, 15\.2 percent, and 18\.6 percent\. An analysis of sparsely populated or remote rural areas reveals even greater divergences, of up to 12\.9 percent, 45\.5 percent, 34\.8 percent, and 144\.3 percent over and above the cost for urban areas\. The wide disparity in the data makes it difficult to draw conclusions that may be applied to the rest of the country\. Furthermore, the data represent averages that include performance indicators associated with the different levels in the education system\. 14 Table 6\. Total Labor Cost and Average, by Area and Public Sector\. Four Cases (2012/2013) In pesos COST OF LABOR ACCORDING TO AREA (*)                                                Indicators Number of Labor Gap Enrollment CUEs Cost as Average Average between Cost of Annexes % of Monthly Monthly Urban Province Area Labor Total Cost by Cost by and Abs\. % Abs\. % Wage Instit\. Student Rural Bill Costs Remote Rural 34,021,769 22,628 15\.5% 114 15\.4% 17\.1% 298,437 1,504 12\.9% Rural Case 1 Settlement 23,940,325 17,502 12\.0% 79 10\.7% 12\.0% 303,042 1,368 2\.7% Urban 141,402,922 106,191 72\.6% 545 73\.8% 70\.9% 259,455 1,332 Total 1 199,365,016 146,321 100\.0% 276,392 1,345 Remote Rural 58,342,298 25,799 4\.6% 615 22\.1% 6\.5% 94,866 2,261 45\.5% Rural Case 2 Settlement 58,126,297 34,403 6\.2% 267 9\.6% 6\.5% 217,701 1,690 8\.7% Urban 775,262,393 498,765 89\.2% 1,903 68\.3% 86\.9% 407,390 1,554 Total 2 891,730,989 558,967 100\.0% 321,191 1,595 Rural 615,180 859 0\.4% 8 0\.5% 0\.5% 76,897 716 25\.3% Remote Rural 39,327,298 51,075 23\.5% 985 66\.2% 28\.8% 39,926 770 34\.8% Case 3 Rural Settlement 14,703,696 21,706 10\.0% 118 7\.9% 10\.8% 124,608 677 18\.6% Urban 81,967,170 143,452 66\.1% 378 25\.4% 60\.0% 216,844 571 Total 3 136,613,344 217,092 1,655 100\.0% 94,637 666 Rural 2,231,350 1,289 1\.8% 29 3\.9% 1\.9% 76,943 1,508 28\.8% Remote Rural 18,066,008 6,315 8\.9% 304 41\.0% 15\.1% 59,428 2,861 144\.3% Case 4 Rural Settlement 31,456,894 21,479 30\.2% 181 24\.4% 26\.2% 173,795 1,349 15\.2% Urban 68,186,204 41,947 59\.1% 227 30\.6% 56\.9% 300,380 1,171 Total 4 119,940,457 71,030 768 100\.0% 159,124 - Source: CGECSE on the basis of data supplied by Cost Monitoring U 15 Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Lending Gaston Mariano Blanco Sr Social Protection Specialist LCSHS-DPT Sr Financial Management Antonio Leonardo Blasco LCSFM Specialist Sergio Espana Consultant LCSHE Joseph Paul Formoso Senior Finance Officer CTRLA Maria Lucy Giraldo Senior Procurement Specialist LCSPT Tania N\. Gomez-Carcagno Executive Assistant INTOP Suhas D\. Parandekar Senior Education Economist EASHE Supervision/ICR Mario Cristian Aedo Inostroza Sr Education Economist ECSH2 Keisgner De Jesus Alfaro Senior Procurement Specialist LCSPT Diego Ambasz Senior Operations Officer LCSHE Sarah Ruth Bailey Junior Professional Associate LCSHS-DPT Sr Financial Management Antonio Leonardo Blasco LCSFM Specialist Ezequiel Cambiasso E T Consultant LCSPT Vanina Camporeale Operations Officer LCSHH Daniel Chalupowicz Financial Management Specialist LCSFM Sr Financial Management Regis Thomas Cunningham EASFM Specialist Sergio Espana Consultant LCSHE Maria Lucy Giraldo Senior Procurement Specialist LCSPT Tania N\. Gomez-Carcagno Executive Assistant INTOP Ana Maria Grofsmacht Procurement Specialist LCSPT Jose C\. Janeiro Senior Finance Officer CTRLA Efraim Jimenez Consultant EASIS Cecilia L'Avena Consultant LCSHE Marta Elena Molares-Halberg Lead Counsel LEGES Judith C\. Morroy Consultant LCSHH Luis M\. Schwarz Senior Finance Officer CTRLA Santiago Scialabba Program Assistant LCC7C Sr Financial Management Alejandro Roger Solanot LCSFM Specialist Ximena B\. Traa-Valarezo Consultant LCSSO Alexandria Valerio Senior Economist HDNED Janet K\. Entwistle Senior Operations Officer LCSHE Sara Troiano Junior Professional Associate LCSHS Mariela Alvarez Program Assistant LCC7C 1 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY02 63\.63 FY03 20\.28 FY04 43\.64 FY05 254\.60 FY06 213\.64 FY07 0\.00 FY08 0\.00 Total: 595\.79 Supervision/ICR FY02 0\.00 FY03 0\.00 FY04 0\.00 FY05 0\.00 FY06 63\.35 FY07 109\.81 FY08 99\.63 Total: 272\.79 2 Annex 5\. Summary of Borrower's ICR and/or Comments on Draft ICR As per the letter received on June 9th, 2014, the General Director of the International Financing Unit of the Ministry of Education, on behalf on the Borrower, agrees with the contents and ratings described in this Implementation Completion Report\. DINIECE also provided comments and informed that the institution considers that all the actions agreed during meetings with the Bank Team were adequately taken, including provision of quality information in a timely manner\. Introduction The Development Objectives of the Argentina Rural Education Improvement Project (PROMER)—Loan 7353-AR—are to support national Government policy to (i) improve the coverage, efficiency, and quality of the Argentine education system; and (ii) improve the governance of the Argentine education system through strengthening of the normative, planning, information, monitoring, and evaluation capacity at the national and provincial levels\. With regard to project implementation, passage in 2006 of National Education Law No\. 26\.206, which established the rural education system and extended compulsory schooling to the preschool and secondary levels, has been the most substantive modification\. In particular: - Article 17 of the National Education Law establishes that Rural Education is one of the modalities of the National Education System\. - Article 49 of the National Education Law establishes that Rural Education is the modality aimed at ensuring achievement of compulsory schooling through methods adapted to the needs and specificities of the population living in rural areas\. - Article 51 of the National Education Law establishes that the national Ministry of Education, together with the Federal Education Council, is responsible for defining the necessary measures to ensure that educational services in rural areas are of an equivalent quality to those in urban areas\. In this way, comprehensive attention to the specific needs and possibilities (potential) of the population living in rural areas was promoted, for all schools at all levels located in rural areas\. Implementation of the components of PROMER 1\. Component A: Improving Quality and Coverage of Rural Education\. 1\.1\. Subcomponent A\.1: Improving Operating Conditions of Rural Schools Provision of basic didactic materials and teaching equipment: 1 All schools received basic didactic resources, reference materials, and teaching equipment\. Development of this activity focused on the provision of (a) textbooks; (b) multimedia, computer, and furniture packages; (c) play areas; (d) laboratories; (e) reagents and other inputs; (f) microscopes and accessories; (g) printing of curriculum development materials for teachers and students; and (h) school supply kits (done in a decentralized manner)\. The regulations/criteria for purchase and distribution included in the Operating Manual were the same for all provinces\. Provincial meetings on the activities were conducted with directors and teachers, and schools were visited\. On these occasions it was possible to observe the specifics relating to implementation of the components\. In the case of local projects, there was a greater and more systematic presence over the last two years with a view to completion of a publication\. At the First National Meeting of Professors of Single-Teacher Schools [Primer Encuentro Nacional de Maestros de Escuelas Unidocentes] (held in August and September of this year), direct contact was made with professors and the particular situation in these schools was the topic of analysis\. For the selection, development, and production of didactic materials, the Coordinating Unit for the Rural Education modality took into account the “Core Learning Priorities” [Núcleos de Aprendizaje Prioritarios NAP], which form the framework for decisions on provincial curricula and the different departments under the ministry\. Once material was prepared on the modality, it was submitted to the “Curriculum Areas” teams for analysis\. In addition, it was also submitted to the directorates of each level and in the instances where it was deemed necessary, decisions were jointly made\. This joint work included all the stages of designing the materials and critical analysis of the output\. Minimum Standards for Schools The expansion, replacement, and rehabilitation of school buildings were financed with the aim of improving the condition of the existing school infrastructure\. At the beginning of project implementation, priority was established as follows: (i) provision of basic services (potable water, electricity, and heating); (ii) improvement of the infrastructure of schools in particularly dilapidated condition; (iii) expansion of existing buildings; and (iv) construction of new schools (when restoration would not have been feasible)\. The General Directorate for Infrastructure [Dirección General de Infraestructura DGI] was responsible for defining and disseminating the standards for implementation of the actions relating to infrastructure\. In this context, it reviewed and approved the technical documentation prepared by the provinces in accordance with the criteria, regulations, and procedures established in the Operating Manual\. In addition, the DGI gave its no- objection to the work certificates prior to payment and conducted monitoring and ad hoc supervision of the progress of the work, requesting of its counterpart units in the provinces fulfillment of the administrative, technical, legal, and financial requirements\. Distribution of the funds for the investment in infrastructure was not completed by quotas 2 because there was insufficient effective demand for works by the provinces in order to apply this approach\. The delay in implementation was due to various reasons, among which the following should be mentioned: (i) delays in decision making, in some cases stemming from the changes in management; (ii) difficulties identifying a shortlist of three competitive candidates in the provinces and selecting suitable technical personnel; (iii) challenges with project preparation; (iv) delays in the qualification process in the provinces regarding those invited to bid; (v) a scarcity of bidders owing to problems accessing the works or dealing with smaller contracts, with complex procedures, which are less appealing to businesses; and (vi) prioritization by the provinces of other lines of financing, whether because they correspond to programs with an approaching due date or because their implementation would be easier\. With respect to corrective measures, normative and organizational adjustments were made to improve program performance\. In this regard, there was skills redistribution within the technical teams from the General Directorate of Infrastructure, as a result of which the professional capacity to review PROMER projects was increased four-fold\. In addition, a new organizational model of linkages was established (outward and inward), introducing a matrix-based operating scheme through which the assignment of tasks to the professional project reviewers was based on the school district supported and not the project framework program\. This change significantly accelerated internationally financed programs, harmonized the technical evaluation criteria, promoted greater interaction among all the members of the DGI team, and facilitated exchanges with the provinces whenever there was a professional counterpart in this ministry for all the financing operations\. Regarding the priority established at the beginning of project implementation for execution of this activity, however, it was decided in 2009 that the “comprehensive participation” criterion would be incorporated\. In this context, procedures were made more flexible with the aim of reducing the processing time, better monitoring the work in the provinces, increasing opportunities for provincial technical teams to work in the DGI and thus make the necessary corrections to more quickly obtain the “technical skills\.” School Clusters In the last update of PROMER beneficiaries, done in July 2011, there were 1,687 school clusters, with an average of 10\.1 CUE/Anexos 23 per cluster\. Among the beneficiary schools, it was found that 7,261 were at the preschool level, 11,938 at the primary level, and 5,264 at the basic secondary cycle (CBS) level\. If we take into account the CUE/Anexos from the State sector in rural areas, along with kindergarten and/or common 23 All educational institutions in Argentina are assigned a Clave Unica de Establecimientos y Anexos (CUE/ANEXOS), a nine-digit unique identifying number issued by the Ministry of Education\. 3 primary and/or secondary education up to September 2013, we see that 93 percent are included in the July 2011 clusters\. The effective functioning of the clusters takes place in relation to specific actions\. There are as yet no benefits noted with respect to the structure of these clusters\. In this regard, work continues with the provinces to create an effective network structure based on an initial formal definition\. With respect to the technical, financial, and institutional sustainability of the clusters as a management unit to execute the rural dimension policy in the provinces, it can be mentioned that technical sustainability is the most advanced, as the clusters have been taken into account for decision making\. In November 2013, resources from the National Treasury were transferred to all single-teacher schools to complete activities by cluster\. Distance education No distance education projects or programs were implemented\. Indigenous education One of the objectives of National Education Law No\. 26\.206 is the integration of intercultural and bilingual education (IBE) into the national education system\. Against this institutional backdrop, the ME has proceeded with the restructuring of the Office of the Undersecretary with responsibility for Equity and Quality, incorporating a Coordinating Unit for IBE into the National Education Management Directorate\. This activity supported the execution of actions designed to improve education conditions in rural schools attended by indigenous students, through the hiring of individual consultants and through training sessions at the national and provincial levels\. IBE activities with respect to PROMER dovetailed into the gradual and phased introduction of the IBE modality in the provinces\. Execution levels and results varied across provinces based on their respective management capacity\. No comparison of the results obtained in each province was conducted\. Instead, technical assistance was provided to the school district teams, on the basis of their specific difficulties and capabilities, to help them make progress\. And yet, the best results and highest levels of execution were achieved in Northeast and Northwest Argentina, the regions with the highest indigenous enrollment rates\. In addition, the activity achieving the best results was the teacher training program\. 1\.2\. Subcomponent A2: Expanding Coverage and Improving Student Promotion Flow Expanding coverage of preschool education With a view to expanding coverage, technical assistance, teacher training, and teaching guides were provided in the provinces to share alternatives for organizing multi-age classrooms\. The provinces chose from among various alternatives, including multi-age classrooms annexed to primary schools, independent kindergartens, traveling teachers, 4 teachers with dual degrees, and schooling of children in their homes\. In view of the fact that the selection of these models was based on an analysis of the local situation, no universal solution was implemented\. Trends in the indicators for monitoring coverage reveal significant progress with respect to the education policy objectives to which these actions contributed\. At the preschool level in 2010, the expected coverage indicator (number of five-year-old boys and girls with no access to school) exceeded the 2013 target set by the project for this indicator (7,979)\. Since then, the indicator has continued trending downward, as the number of children with access to education from the first level of preschool education continues to increase each year\. Reducing repetition in Years 1, 2, and 3 of compulsory education The activities planned at the start of the Project were executed at the expected rates\. Activities were being conducted in accordance with the PROMER incorporation phases and all the institutions were covered based on its structure in August 2011\. That database was created for PROMER-financed activities, although provisions were made for subsequent databases for activities executed on the basis of levels and provinces\. Organization of school programs in Years 4, 5, and 6 of compulsory education – acceleration program This activity was not executed because once general activities had been implemented, it was not necessary to introduce the model provided specifically for rural schools\. The reason for not implementing this activity was linked to two related concurrent factors: first, alternative solutions were developed for all primary schools (urban and rural) by the primary education directorate, the unit within the MEN with responsibility for this activity and, second, the implementation of inclusive social policies that had an impact on the increase in overage levels, given their capacity to promote the return to school of adolescents and youth through cash transfers to families for each child enrolled (Asignación Universal por Hijo)\. During the project restructuring exercise carried out as part of the project expansion process, the project’s results matrix indicator used to monitor overage levels was dropped\. However, it bears noting that the analysis of the project’s various monitoring indicators continued to include the rate for students who are overage by two or more years among the primary education indicators\. Since 2009, there has been a downward trend in the value of this indicator, which has become more pronounced in recent years, attaining a value of 18\.8 in 2011, 2\.4 points below the baseline value at the start of the project\.24 Special education 5 This component and the activities (provision of equipment) that were developed were implemented in the provinces (Northwest and Northeast)\. The Coordinating Unit for Special Education continues to provide technical assistance that is related to an understanding of the need to adopt the cluster concept in order to design specific activities for rural schools\. 6 Expanding coverage in Years 7, 8, and 9 of secondary education This activity was implemented under the conditions that each province could provide at the secondary education level\. In 2010, the transition rate from Grade/Year 7 to Grade/Year 8 at the secondary level exceeded the target set for that year (83)\. During the last period, an upward trend was also observed, which made it possible to reach and exceed in 2011 the target set for 2013 (85)\. The transition rate from Grade/Year 6 to Grade/Year 7 increased by less than one percentage point year-on-year during the period 2009-2010 and achieved a value of 89\.6 during the period 2010-2011, still falling somewhat short of the target set for 2013 (93), despite coming very close\. School development plans (local projects) School development plans were implemented in the following provinces: Buenos Aires, 48 schools; Catamarca, 73; Chaco, 22; Chubut, 46; Córdoba, 133; Corrientes, 32; Formosa, 93; Jujuy, 22; La Pampa, 33; La Rioja, 62; Misiones, 100; Salta, 77; San Juan, 86; San Luis, 32; Santiago del Estero, 80; and Tucumán, 132\. These plans sought to supplement the proposed teaching method with respect to printed and audiovisual materials with this activity that is linked to rural development\. Each school received AR$4000 in funding\. 1\.3\. Subcomponent A3: Strengthening Education Management at the Provincial Level Strengthening line departments at the provincial level As part of the tasks designed to strengthen management capacity in provincial administrations, corrective measures were implemented in light of the observations made in the audit reports to achieve the following: (i) in order to address the diverse and complex nature of administrative proceedings for the disbursement of funds to each school district, coordinators and specialists from the provinces were invited to participate in technical training sessions aimed at promoting horizontal cooperation and the sharing of experiences, by taking advantage of similar visions; (ii) with a view to simplifying the work of the school districts and facilitating oversight of reports at the central level, modifications were made to the corresponding instructions during the second stage of project implementation; (iii) changes were made in the Operating Manual to the accounting policies, recordkeeping, and other issues pertaining to procedures and accountability, as well as to procurement processes carried out at the central level by DGUFI for all internationally funded projects; and (iv) the function and use of the UEPEX system as a management tool at the central and provincial levels were improved\. PROMER’s Coordinating Unit ensured ongoing monitoring of the adoption of the corrective measures provided by each provincial team in response to the observations\. In addition, as a result of visits to the provinces, the degree of progress achieved based on planned corrective actions was formalized in the Supervision and Technical Assistance Agreements (Actas de Supervisión y Asistencia Técnica)\. Although retaining the teams is 7 a provincial-level decision made by the Ministry of Education through the Education Office, there was a push to maintain the teams as a way to ensure continuity and make progress toward recognition of rural-focused activities as state policies\. Developing a rural education plan for each province Activities targeting rural schools were included in the National Plan for Compulsory Education and Educator Training (PNEOyFD), that is, if a rural education plan for each province has been integrated into all provincial policies\. The Coordinating Unit for Rural Education has the capacity to update this plan in the same context\. 2\. Component B: Enhancing the Stewardship Capacity of the National Government This component financed the strengthening of the relevant ME line departments involved in the management of the Project, with a view to (i) making ongoing management of the system as effective as possible; and (ii) ensuring that the technical and administrative conditions needed for its execution are in place\. 2\.1 Subcomponent B1: Strengthening Line Departments at the National Level The Project fully supported the national programs, and resources provided at the national level were aimed at strengthening administration, rural education, intercultural bilingual education, infrastructure, statistics and internal control activities of the ME’s directorates and departments involved in their implementation\. With respect to the resources initially earmarked for this subcomponent, although funds were reassigned to the relevant investment category, this funding accounted for 3\.37 percent of the total credit\. The resources provided by PROMER supplemented those for the rural education modality\. In fact, for some stages, it would have been necessary to hold on to some of the resources financed by the Project, which was not possible for reasons unrelated to financing restrictions\. The Coordinating Unit for Intercultural Bilingual Education viewed the allocated resources as inadequate\. Consideration is also being given to the possibility in the future of ensuring the continuity of efforts to strengthen the team at the national level\. 2\.2 Subcomponent B2: Monitoring and Evaluation In order to obtain information on the operating conditions of rural schools, the Rural School Census (RER) was conducted in the provinces\. The RER sought to survey rural schools with one or two teachers located in provinces in Argentina that were remote or difficult to access, and propose procedures and methodologies for collecting, processing, analyzing, and reporting education sector and background information\. The information gathered was used to meet the information needs of ME directorates and provincial governments\. 8 It was reported that INET and not the DiNIECE conducted the longitudinal survey of graduates of technical schools\. With regard to studies/surveys financed by PROMER, the DiNIECE implemented systems for the compilation, analysis, and reporting of education statistics, as well as for the financing of nine special studies for the assessment of specific aspects relating to the impact of the project’s activities: ‐ A policy to organize school programs in the second cycle of the primary education level in Mendoza province (2008); ‐ A training proposal for multi-grade rural schools in the province of Santiago del Estero (2008); ‐ Improvements in education conditions in rural areas: teaching processes that include the use of native languages to promote literacy in Spanish (2009); ‐ The implementation of a proposal to organize the Basic Secondary Education program in rural areas: provincial management and institutional aspects (2009); ‐ Possibility of organizing multi-age classrooms in Entre Ríos to expand preschool coverage in rural areas (2010); ‐ Description of intercultural and bilingual education in rural areas (2010); ‐ Training and teaching in multi-grade classrooms and the advanced specialization diploma in rural education (2011); ‐ Secondary schools in rural areas and clusters as a policy strategy for maintaining rural students on track academically in the province of Misiones (2012); ‐ Multi-age classrooms (secciones) at the preschool level in rural areas\. Tensions and transformations in educational practices with the distribution of games for learning (2012)\. The DiNIECE has been conducting standardized national student assessments (ONE) that include rural schools every three years since 2007\. Each school that participated in the ONE for secondary schools was informed of its respective results\. The 2013 ONE for secondary schools was conducted in August and the ONE for primary schools in November 2013\. The DiNIECE estimates that the final results [for primary education] will be available in late 2014, while results for secondary schools will be available in July or August of the same year\. Sustainability The allocation of national resources for certain activities is part of the national rural education policy and relates to the integration of the rural dimension into the education policy\. Resources are received from various sources and pooled\. Provinces have achieved varying degrees of progress\. With regard to teacher training in rural schools, it should be noted that the advanced specialization diploma was not identified as a general policy\. However, training sessions 9 linked to resources provided by PROMER were indeed general in nature, and the content developed surpassed the resources provided\. Consideration is being given to the continuity of the IBE modality in the context of the implementation of the 2012-2016 National Compulsory Education Plan (PNEO) and the National Educator Training Plan (PNFP)\. Five future activities have emerged from these plans\. They seek to generate strategies for achieving better results with respect to quality of learning, working in collaboration with the various representative bodies of the indigenous peoples\. It is essential for the IBE modality to institutionalize participation mechanisms to ensure ongoing involvement in the design of the action plan for each activity\. Management of PROMER PROMER’s Coordinating Unit assumed responsibility for general planning, administration of the fiduciary aspects and monitoring of same, reporting directly to the DGUFI\. Control and Auditing The entire operation was subject to internal controls, which were conducted by the Ministry’s Internal Auditing Unit (UAI)\. This unit is under the direct supervision of the minister, and is responsible for conducting audits and issuing recommendations in accordance with the powers vested by Law No\. 24\.156 (Law of September 30, 1992 on Financial Management and Control Systems), with a view to promoting and providing advice on the implementation of a system that ensures the continuity and adequate functioning of the administrative, financial, and operating controls and of electronic data processing, in a way that helps minimize operational risks and maximize Project efficiency and effectiveness in the use of public funds assigned thereto\. The regulatory framework established for the Project requires provincial school districts to notify provincial regulatory bodies and incorporate into the provincial budget the funds agreed to in the bilateral agreement concluded between the central government and provinces\. It also bears noting that the Coordinating Unit conducted supervisory visits and provided technical assistance in the provinces, in accordance with the transfers made and the reports submitted\. Each province was supervised at least once a year by relevant staff from the Coordinating Unit and UAI\. In sum, internal controls promoted a fairly secure environment for the achievement of the following objectives: - Effectiveness and efficiency of operations; - Reliability of financial reports, including reports on budget execution, financial statements, and other documents that are prepared for internal and external use; and - Compliance with the laws and regulations applied for their execution\. 10 Changes in the internal organization and structure of the Project’s Coordinating Unit\. In 2009, the Project’s Coordinating Unit was reorganized, adopting a matrix scheme in which departments and functions were identified and defined in terms of areas—financial management, assistance to provinces, technical assistance, and monitoring—subject to the authority of the Coordinating unit\. The Assistance to Provinces department was organized into regional teams, with each comprising a non-specialist, a financial specialist, and a procurement specialist\. This reorganization contributed to the planning, monitoring, and technical assistance in the provinces, providing them, in this way, with extraordinary interlocutors with the capacity to respond to all management-related issues, and, within the Coordinating Unit, to work toward common goals, viewing provincial management as a collective effort\. 11 Annex 6\. List of Supporting Documents Country Partnership Strategy for the Republic of Argentina (CPS) Period – 2010-2012 Evaluación del Postítulo: Evaluación de la Especialización docente de nivel superior en educación rural para el nivel primario\. Ana Belèn Zapata (2011) National Education Law (Law 26\.206) – (2006) National Plan for mandatory education and teacher training (Plan Nacional de Educación Obligatoria y Formación Docente, PNEDOyFD) ( December 5, 2012) PISA 2012 Results in Focus: What 15-year-olds know and what they can do with what they know: Key results from PISA 2012 OECD (2012) Project Appraisal Document on Proposed Loan in the amount of US$150 million to the Argentine Republic for Rural Education Improvement Project – PROMER (November 17, 2005) Raising student learning in Latin America, Emiliana Vegas and Jenny Petrow, World Bank (2008) The invisible poor: A portrait of rural poverty in Argentina World Bank (2010) The Law for Educational Financing (LEF) (December 20, 2005) Letter dated June 9, 2014 from Alejandro F\. Penillas, General Director of the International Financing Unit (June, 2014) " 1

APPROVAL

P112253

Page 1 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: AB5553 Project Name DJ-Power Access and Diversification, Additional Financing Region MIDDLE EAST AND NORTH AFRICA Sector Power (60%);District heating and energy efficiency services (30%);General energy sector (10%) Project ID P112253 Borrower(s) GOVERNMENT OF DJIBOUTI Implementing Agency Electricite de Djibouti (EDD) Tel: (253) 340-730 Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 26, 2010 Date of Appraisal Authorization April 14, 2010 Date of Board Approval June 15, 2010 1\. Country and Sector Background Country Background Djibouti is a small and poorly endowed country\. Its population is estimated at 818,000, more than half of which live in the capital, Djibouti Ville\. Most of the remaining population lives in a handful of secondary towns or live a nomadic life\. The rate of the population growth is estimated at 2\.4 percent per annum\. Djibouti’s social indicators are amongst the lowest in the world\. Recent data from EDAM-IS 1 studies show that poverty in Djibouti is both extremely high and increasing\. In 2002, about three fourths (74\.4 percent) of the population lived under the relative poverty line and 42 percent under extreme poverty, compared to 45 percent and 10 percent, respectively, in 1996\. While the surveys show that the most dramatic poverty incidence is in rural areas, Djibouti Ville shelters the largest number of poor people and contributes by itself to 65% and 57% of the relative and extreme poverty, respectively\. The country is poorly endowed with natural resources\. Djibouti has very limited arable land, rainfall and underground water, and no known oil or gas resources\. It benefits mainly from its strategic location on the Red Sea’s southern entrance for military and regional international shipping purposes\. Djibouti’s economy can be characterized as a ‘rent economy\.’ The economy is mainly based on the revenues that are generated directly and indirectly from the activities of the port and 1 «Enquête énergie auprès des ménages – Indicateurs sociaux (EDAM-IS)», Djibouti Bureau of Statistics, Djibouti\. 1996 & 2002\. Page 2 2 airport of Djibouti (both managed by Dubai Ports International since 2001) and related transport and logistics business, as well as from the rental of military bases to France since independence in 1977, and, most recently, to the US and Germany, including services associated with these bases\. External support by Dji bouti’s partners through grants and other soft financing facilities are also important sources\. This is reflected in the large share of the service sector in the economy, which accounts for three quarters of GDP\. Sector Background The power sector has been identified as a key bottleneck to poverty alleviation in Djibouti due to low access and high cost of access and electricity, which constitute barriers to access for the poor and poor overall competitiveness and growth prospects\. The consumer price for electricity service is the highest in the Middle East and North Africa Region (MNA) region, at an average of US$0\.30/kWh for residential consumers and US$0\.30/kWh for large users\. Such high prices are explained by the reliance on expensive imported fuels for power generation, high losses, high administrative overhead costs due to overstaffing and the high wages\. A Poverty and Social Impact Analysis (PSIA), conducted as part of initial project preparation, showed a strong correlation between electricity access and poverty in Djibouti\. Forty three percent of urban households do not have access to electricity, and 70% of these households are among the poor\. The electrification rate is low for MNA standards but high for African standards\. However, in the Djibouti context where a large part of the population lives in urban areas, the rate of electrification can be considered low given that it is mostly an urban population\. Electricity accounts for roughly 25% of household budget expenditures on average\. The PSIA had also identified the high connection charges of about $250 on average as a significant barrier to electricity access by the poor\. The Government’s goal is to: (i) improve efficiency and financial performance of the electricity utility through loss reduction measures; (ii) address key service delivery constraints through rehabilitation and extension of networks and administrative improvements; and (iii) explore new resources for power generation (e\.g\., renewable energy and interconnection with Ethiopia)\. 2\. Objectives It is proposed that the additional financing of US$ 6\.00 million provided to the Government of Djibouti would deepen the impact of the Project and scale up its activities\. The projects objectives are as follows: increase access of underserved populations to electricity services improve the efficiency of the power utility by implementing loss reduction investments through investments in metering and in transmission lines’ rehabilitation\. 3\. Key Development Issues and Rationale for Bank Involvement Page 3 3 The proposed Additional Financing will add US$ 6\.00 million to the Djibouti Power Access and Diversification Credit (“The Project”; Original IDA Credit no: 4120-DJI; Project ID P086379; Original Credit Amount US$ 7 million; Original Credit Approval Date November 1 st , 2005; effectiveness of original credit on March 29, 2006\.)\. Its aim is to finance activities that would scale-up the Project’s impact and development effectiveness, as defined under OP 13\.20\. The Project’s original development objectives (PDOs) were to: (i) increase access of underserved populations to electricity services, through priority investments in distribution and new electricity connections in Balbala (an area of the capital, Djibouti Ville); (ii) increase reliability of electricity services through the development of alternative sources of production and targeted technical assistance, by introducing a pilot wind farm of an estimated capacity of 3\.5 to 4\.5 MW near Arta, West of Djibouti Ville; and (iii) improve the efficiency of the electric utility, through technical assistance, by carrying out three studies, including an electricity tariff study, an electricity loss reduction study, and an commercial management study for the electricity and water sectors jointly\. The project was restructured in December 2008, with the original PDOs being amended\. By end 2008, delayed progress in implementing the Project’s wind component coincided with a severe cash crisis at Electricite de Djibouti ( EDD)\. In the absence of proportionate electricity price adjustments, this crisis, brought on by record international oil prices, led to unsustainable government budget transfers to cover the costs of fuel, and to risks of defaults by EDD in its payments to oil suppliers\. As an emergency measure, in order to avoid the interruption of the operation of EDD’s generation plants, the Bank’s Board of Executive Directors agreed that savings from the wind component ($4\.9 million) be channeled into the purchase of Heavy Fuel Oil and supplied to EDD, per the Government’s request\. At the time of amendment, adjustments were also made to cancel the planned tariff study under objective (iii) above, as African Development Bank (AfDB) had completed such a study in December 2008 and its need had therefore become redundant\. The PDOs of the Projects were therefore revised as follows: (i) to increase electricity access; (ii) to ensure the emergency reliability of power generation; and (iii) to provide some diagnostic tools to improving the efficiency of the power utility 4\. Description The project would achieve its objective through four components A) Component 1: Further expansion of electricity access in underserved areas of Djibouti Ville through a extension of the grid in the Balbala area already identified by the ongoing Project along with pilot installation of pre-paid meters, and B) Component 2: Deployment of loss reduction equipment; focusing on: Page 4 4 (i) Component 2a – a remote smart metering pilot (implementing a critical mass of around 5,000 smart meters to be implemented in a specific physical service area characterized by high losses and offering a sample of customer types); and (ii) Component 2b – Replacement of the 36km Arta 20kV safety line where much of the technical leakage is located\. The line to be replaced is a safety line that doubles the existing circuit and thus increases transmission reliability\. C) Component 3: Technical Assistance: consulting services for project supervision of component 1 and 2 and financial auditing services; and D) Component 4: Covering operating costs of the Project Management Unit (PMU)\. 5\. Financing Source: Total (US$m\.) BORROWER/RECIPIENT 0 IDA Grant 6\.00 Total: 6\.00 6\. Implementation The proposed additional financing would be implemented using the original Project’s implementation framework, procurement, and disbursement arrangements\. The Project Coordination Unit (PCU) has performed well under the current project and has acquired solid capacity in fiduciary, procurement, and safeguard policies and procedures applicable to Bank projects\. The continuation of implementation arrangements would also prevent a hiatus in knowledge, engagement and commitment of staff, which has often proven costly in other projects\. It is proposed that the cost sharing arrangements between IDA and the borrower with regard to the functioning of the PMU remain in place\. It is proposed that the lodging of the PMU within EDD be continued as well as its oversight by the Prime Minister’s Office\. 7\. Safeguard Policies (including public consultation) In accordance with the World Bank Safeguard policies on environment (OP/BPGP/ 4\.01) the project has been assigned “Category B”\. This safeguard policy continues to apply to the activities to be financed with the additional financing\. 8\. Contact point Contact: Pierre Audinet Title: Sr Energy Econ\. Tel: (202) 473-7485 Page 5 5 Fax: (202)-614 4022 Email: paudinet@worldbank\.org 9\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop

APPROVAL

P102262

Page 1 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE I\. Basic Information Date prepared/updated: 02/25/2007 Report No\.: AC2705 1\. Basic Project Data Country: Tanzania Project ID: P102262 Project Name: Zanzibar Secondary Education Program Task Team Leader: Ivar Strand Estimated Appraisal Date: January 29, 2007 Estimated Board Date: March 29, 2007 Managing Unit: AFTH1 Lending Instrument: Specific Investment Loan Sector: Secondary education (100%) Theme: Education for the knowledge economy (P) IBRD Amount (US$m\.): 0\.00 IDA Amount (US$m\.): 42\.00 GEF Amount (US$m\.): 0\.00 PCF Amount (US$m\.): 0\.00 Other financing amounts by source: BORROWER/RECIPIENT 6\.00 Financing Gap 0\.00 6\.00 Environmental Category: B - Partial Assessment Simplified Processing Simple [] Repeater [] Is this project processed under OP 8\.50 (Emergency Recovery) Yes [ ] No [X] 2\. Project Objectives The development objective is to improve completion of lower secondary education with successful performance among students\. 3\. Project Description Recognizing that secondary education benefits the young people receiving it and the country providing it, MoEVT has identified secondary education as its highest priority and requested the Bank to lead partners in supporting this sub sector\. At the same time, MoEVT is developing a sector program and this project will support and be integrated into this\. Given that this is the first separate project for Zanzibar and that the sector program will take some time to develop, it is intended that secondary education will be supported initially through a Specific Investment Credit\. USAID will be providing textbooks for science subjects\. To address more immediate needs, even as the SWAP is being discussed among the Government and donor partners, the proposed intervention will focus on three main outputs namely: (i) Improved access to and equity in secondary education; (ii) Improved quality of secondary education; and (iii) Project management\. Page 2 Component I: Improving access and equity to Secondary Education\. To meet the demand for school facilities to accommodate the projected increase in secondary school enrolment, the project will support: (i) Construction of new schools\. The project will construct classrooms in areas where very little provision currently exists or the facilities are dilapidated and the structures temporary\. It is expected that schools continue to be double shifted and as such this would add between 24000 student places depending upon the student classroom ratio\. As part of this program, science laboratories, computer labs, libraries, ten administrative blocks, toilet facilities and water, and twenty staff houses will also be built\. Site selection principles will take into account existing coverage and school-age population in the area\. The areas for the new school have been identified but specific sites are to be identified\. Construction is expected to commence about 12 months after Board approval\. What remains is to modify existing designs or to produce new designs for these schools\. Information on cost remains limited as the work undertaken by the MoEVT so far has mainly focused on completion and rehabilitation works, and as such there is limited information on the cost of new construction by Tanzanian or Zanzibari contractors\. The current unit rates used for project planning have been calculated through analysis of empirical data from a limited number of construction projects\. Communities have traditionally contributed extensively to primary schools, and also to a lesser extent, towards secondary school extensions (usually within a combined primary/secondary school), and ways in which communities will be engaged will be defined during preparation\. (ii) Construction of 10 "model" secondary schools\. These schools will be established in all of the ten districts of Zanzibar and their size will vary according to school-age population and enrollment in the various districts\. The model school concept builds upon a long running system of selective "biased schools" at Zanzibar\. There are very few of these biased schools currently and the provision of ten new model schools, one in each district, will significantly expand the capacity and make the distribution of quality secondary education more equitable on both islands (Pemba and Unguja)\. The model schools are defined by the availability of adequate facilities and innovative education programs that could meet the students learning needs\. These model schools will not necessarily differ from other schools in terms of buildings, but are likely to be served with better facilities in the form of laboratories and equipment\. The model school will have facilities that will include (a) at least six standard size well- ventilated and well-secured classrooms complete with furniture (b) a science block including laboratories for Chemistry, Physics and Biology (c) library and bookstore (d) Computer room (e) multipurpose hall and workshop (f) head teachers office with furniture and other office facilities (g) staff room with furniture (h) Hostels (i) ten staff houses and (j) adequate toilet facilities and potable water\. In addition to the functional requirements, it is necessary to define the space standards applicable to the various sub- components (classrooms, laboratories, computer rooms, library etc), the level of equipment provision, the quality and type of finishes required and the capital cost constraints before appraisal\. Page 3 (iii) Rehabilitation of seven secondary schools; four of them situated in Stone Town and three in Pemba\. In order to accommodate the expansion of enrolments, it will be necessary to increase the supply of secondary school teachers\. It is estimated that if all the secondary schools have to be equipped with academically and professionally qualified teachers, the system would need approximately 2414 new teachers for the next five years\. To increase the supply of teachers especially for Pemba, the project will support: Component II: Quality Improvement In addition to enhancing the physical learning environment at the secondary and teacher education levels, the project will support the provision of inputs aimed at improving the quality of education through provision of textbooks, reference books, equipment, and training of teachers through both pre-service and in-service training and improving the capacity of the teacher training institutions\. To enhance the quality of teaching at the secondary level, the project will provide support for pre-service and in-service training of teachers over a five year period\. Based on the demand for teachers, the project will finance the training of teachers mainly in the areas of science, mathematics, ICT and English language\. The training will focus on improved classroom instruction, with certification of unqualified teachers at par with those graduating from teacher training colleges\. Staff from Teacher Training College, the State University of Zanzibar and the Zonal Teacher Centers will be used in the professional development of teachers\. The in-service training program will be modeled on the successful Teacher Advancement Programme which has been carried out for the last five years\. Capacity of these Institutions to deliver the services will be strengthened through the provision of 10 long- and short-term training courses and the provision of teaching and learning materials such as textbooks, reference books, laboratory equipment and chemicals\. MoEVT will refine and cost its plans for in-service teacher training\., including: (a) secondary maths and science teachers; (b) English for primary teachers; (c) primary science and maths teachers; and (d) school head teachers and inspectors\. The plan will include course specifications, projected numbers and structures, costs, and implementation arrangements should be prepared in advance of the next mission\. MoEVT will also prepare structures to ensure ongoing monitoring and regulation teacher supply, and teacher deployment policies and practices\. Overall the project will enhance educational quality at the secondary education level by financing the provision of textbooks and reference books, science equipment and ICT equipment\. The schools will be provided with laboratory equipment and chemicals, 405 computers, 1,000,000 textbooks and other teaching and learning materials for both students and teachers and at least 135,000 volumes of library books\. MoEVT will revisit possible cost-sharing modalities for the sustainable provision of textbooks in key subjects Page 4 in all junior secondary schools in Zanzibar\. This includes\. (a) Examine current distribution and utilization mechanisms for textbooks on the mainland and in Zanzibar; (b) report on appropriate cost-sharing modalities in other countries; (c) calculating annual cost implications of implementing sustainable textbook provision and (d) recommend a cost-sharing strategy for Zanzibar\. This will be completed during implementation and prior to distribution of the books\. The policy decision to teach some subjects in English language at the upper primary level is intended to improve the pupils? readiness for secondary school\. The project will provide support for the development of curriculum and materials for the upper primary classes as well as in-service training of teachers at this level\. As has been described, pre- vocational education and training will be introduced to give the students an understanding of the skills required in the world of work and the project will provide institutional support to the Curriculum and Materials Development Division to undertake the work\. Government will prepare to implement the necessary changes in initial teacher education curricula to align with the revised structures, including: (a) preparing diploma level secondary teachers to teach to Form 4; (b) preparing primary teachers of maths and science to teach through English from standard 5; and (c) enhancing the English language skills of all primary teachers\. To strengthen the supervision process, the Department of Inspectorate which is now understaffed and lacks necessary equipment and facilities will be improved through training more Inspectors and the provision of vehicles, computers and associated accessories\. The Department will be responsible for supervising the teaching and learning process in the classrooms\. This component will cover issues of HIV/AIDS awareness and prevention, as well as gender and environmental issues among students and teachers\. The magnitude of the impact of HIV/AIDS pandemic in education sector in Zanzibar is not documented and the data of teachers and students affected are not available\. However, it is known that HIV/AIDS has affected all the sectors\. This will involve HIV/AIDS and environmental awareness and sensitization in secondary schools by updating all the teaching and learning materials, and conducting workshops for teachers and students\. The activity will be carried out to complement UNFPA-funded Moral Ethics and Environmental Studies\. Girls' performance at secondary education level especially in the area of science and mathematics subjects will also be emphasized\. 4\. Project Location and salient physical characteristics relevant to the safeguard analysis Zanzibar: Unguja and Pemba islands\. 5\. Environmental and Social Safeguards Specialists Mr Serigne Omar Fye (AFTS1) Ms Kristine Schwebach (AFTS1) Page 5 6\. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X II\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: 1\. A number of environmental and social issues have been identified during field visits, environmental screening and meetings with local representatives during project preparation\. The following activities were carried out during project preparation: (i) preparation of an Environment and Social Management Framework (ESMF) to summarize regulations, procedures and institutional responsibilities of different stakeholders; (ii) preparation of a Resettlement Policy Framework (RPF), to establish the resettlement and compensation principles, organizational arrangements, and design criteria to be applied to meet the needs of the people who may be affected by the project especially land acquisition to facilitate the construction of the Secondary Schools and Teachers Training College\. The Environmental Assessment process for the project has been undertaken through the following steps: (i) field visits to proposed project areas in both Unguja and Pemba, including meetings with Field Officers and CBO representatives; (ii) meetings with project staff in the Ministry of Education and Vocational Training of the Revolutionary Government of Zanzibar; (iii) preparation of the ESMF report\. 2\. The social aspects involved in the project include: (i) a field visit to proposed project areas in both Unguja and Pemba and including meetings with Field Officers and other stakeholders, and visits to existing projects; (ii) meetings with project staff in the Ministry of Education and Vocational Training of the Revolutionary Government of Zanzibar; (iii) preparation of the Resettlement Policy Framework (RPF) to establish resettlement and compensation principles, organizational arrangements, and design criteria to be applied to meet the needs of the people who may be affected by the project\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: 3\. Typical project impacts include: Page 6 - Impacts of material supply for construction: inadequate supervision of project contractors could create loopholes for environmental abuse through non-sustainable sourcing of building material\. - Impacts associated with operation of completed facilities: schools and colleges will require constant supply of inputs (energy, water, electricity), and will generate effluent (solid waste, water waste, sewage)\. The creation of institutions in formerly agricultural lands will change the local hydrological condition leading to more generation of surface runoff, with potential to trigger or aggravate soil erosion\. - By rehabilitating and equipping old dilapidated school buildings with modern teaching facilities the project will impact positively on delivery of quality education and thus facilitate production of better-equipped school leavers\. - Improvement of the safety and quality of life for students: Provision of quality facilities will further enhance the safety of occupants, decreasing the potential for occurrence of diseases associated with exposure and, the hazards associated with occupation of failing buildings\. - Improvement in enrollment rate: By increasing the number of classroom/places in the public, schools system, and positive impacts are associated with the anticipated significant increase in the enrolment rate at the secondary education level\. - Potential impact on HIV/AIDS awareness: Through increased enrollment in secondary education, additional opportunities for public health awareness and education for protection and prevention against HIV/AIDS will be available for secondary school students\. It is this age group that is particularly vulnerable to this epidemic\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. 4\. Three screening procedures are recognized based on the three types of construction: - Rehabilitation of schools outside Stone Town - Rehabilitation of schools within Stone Town - Development of new institutions 5\. Core criteria for monitoring this ESMF are as follows;- - Approved Architectural Plans/ Design Report: will be screened to determine how potential impacts of sub-projects will be addressed in the rehabilitation works\. - The Project Report: Based on the Project Reports, the DOE will screen potential impacts of sub-projects and advice on the adequacy or otherwise of the Impact Mitigation Plan proposed for each sub-component\. - The Contract for Construction: the MoEVT will supervise activities of contractors to ensure mitigation measures prescribed for implementation during construction have been implemented\. - The Resettlement Action Plan: the ESMF will monitor social impacts to ensure that if land is acquired, assets impacted, or a negative impact on livelihood results, then the RPF will be utilized to direct the process for preparing a RAP\. - The Facilities Management Plan: MoEVT Inspectorate will use to monitor progress in implementing Impact Mitigation during operation of completed sub-projects\. Page 7 - The project may result in two possible types of resettlement: (i) Economic Resettlement: when sections of land used by a particular person/group of people are acquired, but the household is not displaced entirely\. As most new school constructions will be undertaken on government land saved for temporary users, this is likely to be the main mode of resettlement\. Under such circumstances, economic resettlement will be undertaken to compensate individuals/families; and (ii) Physical Resettlement: may be undertaken when the entire land/buildings of a household are acquired, resulting in total displacement of a project affected household\. This type of resettlement is not expected to be widespread\. - For both cases, a Resettlement Policy Framework was prepared to mitigate negative impacts\. If it is determined that any resettlement, whether economic or physical, will occur, then a Resettlement Action Plan will be prepared based on guidance and standards set out in RPF\. During RAP preparation, impacted persons will be closely consulted to ensure that individuals/ families are able to maintain or improve their standard of living\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. N/A 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. Key stakeholders include affected communities\. A detailed process for consultation is described in the ESMF and the RPF\. These two frameworks have been disclosed in Zanzibar and distributed across the districts\. The screening frameworks will be disclosed to relevant communities in particular when the sites are being selected\. B\. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Date of receipt by the Bank 01/22/2007 Date of "in-country" disclosure 01/29/2007 Date of submission to InfoShop 01/29/2007 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Date of receipt by the Bank 01/22/2007 Date of "in-country" disclosure 01/29/2007 Date of submission to InfoShop 01/29/2007 * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: Page 8 C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? No If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? N/A Are the cost and the accountabilities for the EMP incorporated in the credit/loan? N/A OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process framework (as appropriate) been prepared? Yes If yes, then did the Regional unit responsible for safeguards or Sector Manager review the plan? N/A The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? N/A Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? N/A All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? N/A Have costs related to safeguard policy measures been included in the project cost? N/A Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? N/A Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? N/A D\. Approvals Signed and submitted by: Name Date Task Team Leader: Mr Ivar Strand 02/09/2007 Environmental Specialist: Mr Serigne Omar Fye 02/09/2007 Social Development Specialist Ms Kristine Schwebach 02/09/2007 Additional Environmental and/or Social Development Specialist(s): Approved by: Sector Manager: Mr Dzingai B\. Mutumbuka 02/09/2007 Comments: Page 9

APPROVAL

P001767

Report No\. PID6465 Project Name Mozambique-Economic Management\. Reform Credit (EMRC) Region Africa Sector Microeconomics Project ID MZPE1767 Borrower Government of Mozambique Implementing Agency Ministry of Planning and Finance Date this PID prepared May 21, 1998 Projected Appraisal Date June-July, 1998 Board Date January, 1999 Background Mozambique is successfully managing a transition from a centrally-planned to a market-driven economy and from war to peace\. The end of the war and the establishment of a democratic system have restored political stability, improving the development prospects for the country\. A series of wide-ranging economic reforms have been implemented since 1987, supported by substantial external assistance\. The pace of economic reform has accelerated markedly in the past two years, notably privatization and financial sector reform\. This has contributed to sustain economic growth and restore macroeconomic stability\. Real GDP growth has averaged over 6 percent in 1996-97, inflation has been brought down to single digits (from 54 percent in 1995 to 5\.8 percent in 1997), and social indicators are beginning to improve\. As a result of these positive developments, Mozambique qualified for the Heavily Indebted Poor Countries (HIPC) debt initiative in April 1998, with a completion point of June 1999\. Objectives The Economic Management Reform Credit (EMRC) seeks to support the Government's reform agenda, as outlined in the Policy Framework Paper for 1997-1999 The agenda targets rapid, poverty-reducing growth and reduction of the country's dependence on external aid\. The Government aims to achieve these objectives through (i) the consolidation of a stable macroeconomic framework; (ii) the development of human resources; and (ii) the development of the private sector\. Within this broad strategic agenda, the proposed EMRC will focus on structural and policy reforms aimed at improving the sustainability and efficiency of public sector operations, with a special focus on fiscal reforms, and improving the business environment for sustained, private sector-led growth\. Description  Since 1988, IDA has supported Mozambique through several phases of adjustment with five adjustment credits\. Two Economic Rehabilitation credits and the first Economic Recovery Credit supported the first phase of basic reforms that eased import controls and started liberalizing the price regime\. These reforms, initiated prior to the end of civil war in 1987, marked the shift from a centrally-planned economy to a market-oriented one\. The Second and Third Economic Recovery Credits supported the second stage of reforms, which were undertaken during the post-conflict stage from 1992 to 1997 and created the basis for a market economy\. Reforms included privatization of production, commercial and financial systems, addressed impediments to sustained economic growth through rationalization of the indirect tax and tariff regime, and established the basic legislative framework for an improved management of public resources\. The proposed Economic Management Reform Credit, the sixth adjustment credit for Mozambique, would build on satisfactory implementation of reforms under the previous credits and would initiate support for a third phase of structural reforms\. The proposed credit will consist of four main components: (i) measures to improve the efficiency of revenue mobilization and the incentive regime, through expansion of the tax base, elimination of distortions due to the current tax regime, and reduction in reliance on trade taxes for revenue purposes; (ii) measures to improve the management and efficiency of public expenditures, through an expenditure management and budget reform, the development of a medium-term expenditure framework, and the strengthened monitoring of state-owned enterprise equity; (iii) measures to encourage financial deepening, through improved coordination between fiscal and monetary policies; and (iv) measures to remove unnecessary administrative barriers to investment and at facilitating entry into productive and commercial activities\. Environmental Aspects The recommended environmental assessment category is C\. The proposed operation does not have a direct environmental impact\. Implementation The credit will be disbursed through Bank of Mozambique, in two equal tranches, upon compliance with benchmarks, yet to be defined\. Simplified disbursement procedures under adjustment credits will apply\. The Ministry of Planning and Finance will be responsible for coordinating the implementation of the reform program agreed under the credit\. Financing The specific amount of the proposed operation will be determined in line with Mozambique's projected external financing requirements at the time of appraisal\. As a balance of payments operation, the proposed credit will finance 100l of the foreign exchange costs of eligible imports\. Benefits and Risks The operation will assist in meeting Mozambique's financing requirements during 1999\. In addition, it will support the implementation of key structural reforms needed to consolidate macroeconomic stabilization and - 2 -  growth while moving towards fiscal sustainability\. Potential risks are linked with Mozambique's limited institutional and managerial capacity, which may slow down execution of several components of the program and potential opposition from some special interests\. The Government has achieved a great deal in mitigating these risks by informing the public about the benefits of reform and actively consulting private sector associations regarding reforms in the trade and tax regimes\. Contact Point: The InfoShop The World Bank 1818 H Street, N\.W\. Washington, D\.C\. 20433 Telephone No\. (202)458 5454 Fax No\. (202) 522 1500 Note: This is information on an evolving project\. Certain activities and/or components may not be included in the final project\. Processed by the InfoShop week ending May 29, 1998\. The proposed operation would be part of IDA's interim debt relief measures, approved by the Bank's Board in the context of the HIPC initiative for Mozambique and under which new World Bank financing approved prior to mid- 1999 will be 100 percent on grant terms\. -3 -

APPROVAL

P001923

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. P-6439-MAS MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$16\.0 MILLION TO THE REPUBLIC OF MAURITIUS FOR A HIGHER AND TECHNICAL EDUCATION PROJECT MARCH 2, 1995 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENT Currency Unit = Mauritius rupee (Mau\. Re) US$1 = Mau\. Rs 18\.0 WEIGHTS AND MEASURES Metric System Im\. - 1\.09 yd\. Isq\. m\. 10\.76 sq\.ft\. GOVERNMENT FISCAL YEAR ACADEMIC YEAR July 1 - June 30 October 1 - June 30 ABBREVIATIONS AND ACRONYMS Aff)B African Development Bank CAS Country Assistance Strategy ESMP Education Sector Master Plan GDP Gross Domestic Product ILO International Labor Office MPCU Master Plan Coordination Unit NIC Newly Industrialized Country PCR Project Completion Report PPAR Project Performance Audit Report TEC Tertiary Education Commission TEDP Tertiary Education Development Plan UNDP United Nations Development Programme UNESCO United Nations Educational, Scientific and Cultural Organization UoM University of Mauritius  FOR OFFICIAL USE ONLY REPUBLIC OF MAURITIUS HIGHER AND TECHNICAL EDUCATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Mauritius Beneficiaries: Ministry of Education and Science University of Mauritius Poverty: Not applicable Loan Amount: US$16\.0 million Terms: 15 years including 5 years of grace, at the standard variable interest rate Onlending Terms: Not applicable Financing Plan: (US$ million) Source Local Foreign Total IBRD 1\.0 15\.0 16\.0 Government 5\.4 5\.1 10\.5 Total 6\.4 20\.1 26\.5 Economic Rate of Return: 20% Staff Appraisal Report: 13487-MAS Map: IBRD 26791 This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE IBRD TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF MAURITIUS FOR A HIGHER AND TECHNICAL EDUCATION PROJECT 1\. I submit for your approval the following memorandum and recommendation on a proposed loan to Mauritius for the equivalent of US$16\.0 million to help finance a higher and technical education project\. The loan will be at the Bank's standard variable interest rate, with a maturity of 15 years, including 5 years of grace\. 2\. Background\. Mauritius has turned its economy from stagnation to relative prosperity due to rapid economic growth sustained over a long period that has absorbed its surplus labor\. GDP grew at over 7% per annum, and per capita income doubled to $2,700, between 1982 and 1993\. The proportion of the population living in poverty fell from 28% in 1981 to 10% in 1992, and income inequality also lessened\. This success is attributable to a stable political structure, a favorable macroeconomic environment, and an ample supply of literate but relatively low-skilled, low-paid labor\. However, future growth will depend on increasing labor productivity in industry and services by switching from a low technology base to a higher one\. A recent Bank study has identified the lack of personnel with secondary and higher education (especially technical education) as the major constraint to the shift to a more productive higher-technology society" Mauritius' Education Sector Master Plan (ESMP) was prepared with wide national consultation and technical assistance from UNDP, UNESCO, ILO, and the Bank\. In it the Government proposes to achieve four central objectives through a comprehensive and inter-linked program: (a) to improve access to all levels of education; (b) to enhance the quality of learning at all levels of education, (c) to foster continuing education; and (d) to strengthen sector planning and programming\. The Government is implementing the first phase (secondary education) of the ESMIP to meet these needs with support from the Bank and other donors\. 3\. Mauritius has achieved universal primary education, but the secondary gross enrollment ratio is only about 50%, well behind East Asian levels\. Higher education enrolls 5% of the 18 to 25 age group (three-fifths of whom study abroad helped by scholarships and tax rebates) compared to 37% and 19% respectively in Korea and Singapore\. The performance of the existing higher education system has suffered from the absence of a coherent policy framework and a lack of coordination among the four tertiary institutions (University of Mauritius (UoM), Mauritius Institute of Education, Mahatma Gandhi Institute and the Mauritius College of the Air)\. The institutions suffer from low quality and a focus on certificate and diploma programs, and hence are unable to attract the best Mauritian students\. Thus, the problem of quality needs to be addressed before expansion of enrollments, while in expansion priority should be given to science, See Technology Strategy for Competitiveness, AF31E, World Bank Report no\. 12518-MAU, September 22, 1994\.  - 2 - engineering and management\. Despite the existence of a formal consultative structure, there is little regular interaction between the UoM and the private sector, contributing to the poor perception of the UoM\. The faculty-employers councils have been relatively inactive\. The Government created the Tertiary Education Commission (TEC) to coordinate subsector activities and to develop a strategy to integrate tertiary education institutions into the national development strategy\. The ESMP presents a comprehensive analysis of the bottlenecks in higher education and proposes four avenues to overcome them: (a) increasing access to higher education; (b) enhancing the quality of learning, (c) fostering institutional capabilities; and (d) strengthening the managerial procedures of the system as a whole\. The same broad consultative process as for the ESMP was followed to produce the 1993 Tertiary Education Development Plan (TEDP)\. This plan provides for enrollment expansion, quality improvement and better coordination among institutions, including use of common facilities (the four tertiary institutions are located on adjacent campuses)\. The Government has now requested assistance for the second phase (university and technical education) of the ESMP and the Tertiary Education Development Plan\. 4\. Presently, university enrollments in engineering and science, areas where labor demand is strong, account for only about 40% of total enrollments\. This is because until recently the pool of secondary students taking science subjects to qualify for university admission was low, particularly among girls\. The introduction of "magnet" schools in 1992 has helped to increase the pool\. Expansion and improvements in university teaching and research programs in engineering, science, and management have also been hampered by the fact that fewer than 75% of the faculty hold graduate degrees\. This has curtailed the capacity to teach graduate programs, the amount and quality of research, and the contributions of the university to policy and strategy development for the productive sectors of the economy\. According to employer surveys, university graduates lack maturity and a broader perspective, and are weak in applied science and professional skills\. At the same time, employers faced with stiff competition are forced to reduce cost and increase automation in manufacturing, and are moving into off-shore banking, computer software, and printing\. Their demand for university-trained workers is increasing as are their efforts to engage university faculty in applied research and product development\. Strengthening the capacity of the university has become a national priority at this time\. 5\. As much as half of Mauritius' labor force has no more than primary school education\. Comparable figures for Singapore and Korea are much lower, at about 30% and 10% respectively\. The Mauritian labor force is thus at a disadvantage: with less education, it is less prepared for training in sophisticated skills and less adaptable to changes in technology and market preferences\. As regards vocational and technical education, a 1992 labor skills survey indicated the need to increase training in science and technology, engineering, agriculture, computer science, management, accounting, and complementary middle level technical skills, in response to demand in the private and public sectors\. Employers consider the present total supply of about 200 technicians a year to be inadequate to meet demand\. There is presently one functioning polytechnic (Flacq) supported by France, though two more are planned - one for engineering (Rose Hill) and one for non-engineering subjects (Droopnath Ramphul)\. All of these are at the  - 3 - secondary level, but under the proposed project, the polytechnics will take over about half of the post-secondary diploma programs from the University\. The quality and relevance of the polytechnic programs need to be improved\. Presently only 15% of the three-year curriculum is devoted to science and math; 50% of the time is set aside for laboratory practice, but there are no intemships or attachments in industry\. The technical teachers have weak science backgrounds and no industrial experience\. Linkages between industry and the polytechnics are weak\. 6\. Public expenditures on education amount to about 4\.3% of GDP, of which about an eighth goes to higher education\. A further 1\.2% of GDP is contributed by private households\. The public share compares to 4\.2% of GDP for Singapore, 4\.7% for Turkey, 5\.6% for Jordan and 8\.7% for Syria\. There seems to be no need to raise it to meet the needs of this proposed project\. The University has already started cost-recovery for part- time students and for non-academic expenditures\. 7\. Project Objectives and Description\. The main objective of the project is to support the Government's education sector program for higher and polytechnic education, which aims to produce the human resources required to support a more competitive economy\. The project will assist the Government's program by: (a) Strengthening the University of Mauritius through: (i) upgrading the quality of education at the University through upgrading staff and facilities, thus making the University more attractive for Mauritian students; (ii) increasing the number of quality graduates in all fields with particular emphasis on science, engineering and management; (iii) improving links with employers in order to: (a) make the curriculum more relevant to national needs and (b) increase the marketability of graduates; (iv) developing a viable post graduate education and research program to attract and retain quality faculty and produce new knowledge in areas strategic to Mauritius' development; and (v) enhancing the efficiency of University of Mauritius operations; and (b) Rationalizing Polytechnic Education through: (i) improving the quality of faculty, curricula and facilities; (ii) supporting the development of key non-engineering programs such as accounting and business, and strengthening linkages between the polytechnics and both UoM and the private sector; and (iii) strengthening the capacity of the Management Trust Fund which runs the polytechnics to formulate policies, monitor labor markets and consult with employers\. 8\. Project Financing\. Of the total project costs of US$26\.5 million, IBRD will finance US$16\.0 million, covering 70% of equipment and furniture, 70% of books, 70% of training, studies and research, 70% of consultants' services, and 25% of civil works\. The government is expected to finance US$10\.5 million\. In addition, France has agreed to finance, in parallel, US$4\.8 million for equipment and training for the Rose Hill polytechnic\. The Government will finance US$4\.0 million for civil works for Rose Hill,  - 4 - 9\. Out of the proposed loan, the Government of Mauritius has proposed to use up to US$ 1\.0 million (or 6% of the total loan) for advance procurement and retroactive financing of essential consultants' services and equipment\. Such advance procurement is necessary to complete the rehabilitation and equipping of the new Droopnath Ramphul polytechnic before its opening in April 1995\. All retroactive financing will be for expenditures after December 1, 1994\. 10\. Project Implementation\. The Master Plan Coordinating Unit (MPCU) will be responsible for overall coordination\. Set up in the Ministry of Education and Science in 1991 to coordinate all donor-financed projects, the MPCU is currently responsible for the AfDB-financed Education Project and the on-going IBRD-financed Education Sector Development Project (Loan 3578-MAS)\. It has considerable experience in project management and a good knowledge of Bank procurement and disbursement procedures\. 11\. The MPCU is headed by an Assistant Director, who reports directly to the Minister and will be ultimately responsible for this project\. Given the addition to MPCU's workload, a full-time manager will be appointed to assist the Assistant Director with the day-to-day management\. The manager will be assisted by an accountant and a procurement specialist responsible only for tasks related to this project\. The MPCU team will work in close collaboration with UoM and the Management Trust Fund which will be responsible for day-to-day implementation of the two project components\. The MPCU will: (a) consolidate annual work programs, budgets, and procurement schedules, to be transmitted to the Bank and other concerned parties for review; (b) prepare semi-annual progress reports; (c) prepare the annual and mid-term reviews; (d) maintain the project accounts and prepare withdrawal applications; (e) prepare for the annual audit, and (f) prepare bidding documents and carry out the procurement process\. In addition, the MPCU will monitor the agreed project performance indicators\. 12\. In order to facilitate project implementation, and taking into account the specialized nature of the project's two components, clearly defined management structures are being put in place\. Thus, if one component were to suffer from implementation delays, the whole project would not come to a standstill\. For each component, a coordinator has been appointed to oversee technical as well as implementation-related matters\. The coordinator will be assisted by a component manager for day-to-day management\. This person will be responsible for: (a) preparation of annual work programs, budgets, and procurement plans; (b) implementation of the agreed annual work programs; and (c) preparation of specifications and lists for needed equipment, materials and books\. The component coordinators will be responsible for transmitting this information to the MPCU for consolidation and procurement\. 13\. Project Sustainability\. The incremental recurrent costs resulting from this project will be only 1\.3% of the Ministry of Education's 1993-94 budget\. Mauritians studying abroad spend about US$20 million per year on education\. The improvements to the UoM, once they are reflected in higher quality and greater acceptability of graduates to employers, should encourage more students to stay in Mauritius, leading to significant savings for the Mauritian economy as the average cost of education at UoM will remain  - 5- much less than abroad\. Three additional factors will contribute further to sustainability\. First, total public education expenditures in Mauritius are around 4\.3% of GDP, which is low for a middle income country, and could increase to 5% if necessary without affecting other sectors significantly\. Second, the age pyramid of the population is changing\. Mauritius, which has already achieved 100% primary education enrollment, will have fewer and fewer pfimary school entrants in future due to fertility declines in the past two decades\. Finally, the Government has already introduced cost recovery at institutions of higher learning\. As part of the mid-term review, the Bank and the Government will assess the adequacy of the Government's action plan for sustainable financial arrangements in the higher and technical education sub sector\. 14\. Lessons from Previous Bank Involvement\. The PPARs and PCRs of the two completed projects (First Education Project - Cr\. 501/Ln\. 1333-MAS and Second Education Project - Ln\. 1 543-MAS) found that, in order to accommodate the Government's changing education policies and satisfy parental choices, extensive changes were made in project objectives and content during implementation\. The first lesson is that a clear vision and a policy framework for institutional changes and investments should be prerequisites for project design\. Secondly, project design should be sufficiently flexible to accommodate the needs of a rapidly changing economnic and social enviromnment\. Finally, a project should not support experimental and innovative activities for which little commnitment exists on the part of parents, who are the key decision-makers\. The two ongoing projects (Industrial and Vocational Training Project - Ln\. 3401-MAS and Education Sector Development Project - Ln\. 3578-MAS) took these lessons into account by obtaining a consensus on the policy action plan at the outset, providing a flexible financing mechanism, and including periodic and m-id-term reviews\. The proposed project also incorporates policy consensus and reviews and will, in addition, involve employers at all stages of the project and thus improve the linkages between education and the labor market\. Finally, arrangements have been made to speed up procurement and loan disbursement\. 15\. Rationale for Bank Involvement\. The Country Assistance Strateg was discussed by the Executive Directors on May 24\. 1994\. It endorses Mauritius' growth strategy, which is based on diversifying production and increasing productivity through acquisition of modern technology, while developing the financial sector\. This will require improving labor force quality with emphasis on increasing the supply of workers with higher and technical education\. The proposed project responds to that need and thus fits squarely with Mauritius' development strategy\. It is central to the Bank's support, proposed in the CAS, for the country's transition to a higher-skill and higher-technology- based economy with NIC status by the start of the twenty-first century\. The Bank's on- going policy dialogue and long-standing support for education and training have placed it in a partnership position vis-ci-vis the country's education sector\. The Bank has assisted with the development of professional leadership in the sector, advised on policy issues, conducted supporting policy analyses and helped to improve resource allocation\. Moreover, the Bank's global experience in the development of education is valued in Mauritius\. Its principal role, therefore, is to participate as a partner in the development of  - 6 - Mauritius' education and, as an external agency, to help stimulate the institutional and policy changes and reforms needed\. 16\. Agreements\. During negotiations, the Govemment gave assurances that it will: (a) implement the project according to its Letter of Higher and Technical Education Policy and the targets specified for key monitoring indicators; and (b) prepare a plan for the academic integration of the four tertiary education institutions by December 31, 1997 and implement it by December 31, 1999\. The recruitment of appropriate MPCU staff is a condition of effectiveness\. 17\. Environmental Aspects\. The project has no related environmental issues and has therefore been assigned to environment category C\. The Government of Mauritius is particularly sensitive to environmental concerns, as evidenced by its Environmental Monitoring and Development Project, Loan 3277-MAS, US$12\.4 million, signed in 1991)\. Construction, which has the greatest potential effect on the environment under the proposed project, is restricted to rehabilitation and expansion of buildings at existing sites\. Moreover, the quality of construction in Mauritius is good, as is that of water supply systems and services\. 18\. Program Objectives Categories\. The project responds to the human resource development objectives of the Government\. 19\. Benefits\. The economic rate of return for the project is 20% (the benefits are the increased eamings --representing increased productivity-- of better educated and trained workers)\. By improving and expanding higher and technical education, the project will raise the quality and skills of the labor force, making available a larger and better-educated pool of post-secondary graduates to facilitate the transition of the Mauritian economy to a higher level of productivity\. The number of annual university degree graduates will increase from about 200 to about 700, the number of technicians graduating annually from polytechnics will increase from 140 to 440, and the number of university faculty with graduate degrees will increase from 120 to about 220\. In addition, increased flexibility in higher and technical education and closer links with employers will help to meet the changing demands of an increasingly complex and dynamic economic environment\. Finally, the project will result in a more substantial role for UoM in national research and development and the advancement of knowledge relevant to Mauritius' economic and social growth\. 20\. Risks\. The project is subject to two main risks\. The first relates to the political willingness and ability of the Government to introduce some of the needed policy changes in higher education at this stage\. This risk has been addressed by prioritizing and agreeing on the key reforms needed\. The second risk is that UoM may fail to improve quality sufficiently to be competitive with overseas studies\. Elements of the project designed to minimize this risk include: (i) further twinning with reputed international universities; (ii) accreditation visits; and (iii) developing postgraduate and research programs\.  - 7 - 21\. Recommendation\. I am satisfied that the proposed loan will comply with the Articles of Agreement, and I recommend that the Executive Directors approve it\. Lewis T\. Preston President by Sven Sandstrom Washington, D C March 2, 1995 Attachments  Schedule A Page 1 of 2 Project Cost by Component (in US$ '000) Local Foreign Total % Foreign Total % Exchange Base Costs 1\. Strengthening the University of 3,831 15,555 19,386 80 79 Mauritius 2\. Rationalizing Polytechnic 1,768 3,256 5,023 65 21 Education Total Baseline Costs 5,599 18,810 24,409 77 100 Physical Contingencies 180 455 635 72 3 Price Contingencies 616 870 1,486 59 6 Total Project Costs 6,394 20,136 26,530 76 109 Figures do not add up due to rounding\. Project Cost by Category of Expenditure (in US$ '000) Local Foreign Total % Foreign Total % Exchange Base Costs Investment Costs 1\. Civil Works 3,809 1,270 5,0779 25 21 2\. Equipment & Furniture 37 4,480 4,517 99 19 3\. Training, Studies & Research 1,286 7,923 9,209 86 38 4\. Consultants' Services 359 3,098 3,457 90 14 5\. Books 107 2,040 2,147 95 9 Total Investment Costs 5,599 18,810 24,409 77 100 Recurrent costs - - - - Total Baseline Costs 5,599 18,810 24,409 77 100 Physical Contingencies 180 455 635 72 3 Price Contingencies 616 870 1,486 59 6 Total Project Costs 6,394 20,136 26,530 75 109 Figures do not add up due to rounding\.  Schedule A Page 2 of 2 Financing Plan (in US$ '000) Government IBRD Total Foreign Local Exchange Costs Amount % Amount % Amount % 1\. Civil Works 4,285 75\.0 1,428 25\.0 5,713 21\.5 1,369 4,344 2\. Equip\. & Furniture 1,439 30\.0 3,357 70\.0 4,796 18\.1 4,756 40 3\. Training, Studies 2,947 30\.0 6,876 70\.0 9,823 37\.0 8,356 1,467 and Research 4\. Consultants' 1,155 30\.0 2,695 70\.0 3,850 14\.5 3,433 418 Services 5\. Books 704 30\.0 1,643 70\.0 2,347 8\.8 2,222 126 Total 10,530 1 39\.7 16,000 60\.31 26,530 100\.0 20,136 6,394 Figures do not add up due to rounding\.  Schedule B Page 1 of 1 Summary of Proposed Procurement Arrangements (in US$ million) Procurement Methods Project Element ICB Other Total 1\. Civil Works 5\.7 5\.7 (1\.4) (1\.4) 2\. Equipment & Furniture 4\.0 0\.8 4\.8 (2\.8) (06) (3\.4) 3\. Training, Studies and Research 9 8 9\.8 (6\.9) (6\.9) 4\. Consultants' Services 3\.9 3\.9 (2\.7) (2\.7) 5\. Books 1\.8 0\.5 2\.3 (1\.3) (0\.3) (1\.6) TOTAL 11\.5 15\.0 26\.5 (5\.5) (10\.5) (16\.0) l Figures between brackets represent the amount financed by IBRD\. Disbursement Categories and Percentages (in US$ million) Category Amount of % of Expenditures to Loan Allocated be Financed 1\. Civil Works 25% (a) Part A 0\.82 (b) Part B 0\.48 2\. Equipment & Furniture 70% (a) Part A 1\.80 (b) Part B 1\.30 3\. Training, Studies and Research 70% (a) Part A 6\.00 (b) Part B 0\.20 4\. Consultants' Services 70% (a) Part A 1\.90 (b) Part B 0\.50 5\. Books 70% (a) Part A 1\.40 (b) Part B 0\.10 Unallocated 1\.50 Total Loan Amount 16\.00  Schedule C Page 1 of I Timetable of Key Project Processing Events (a) Time taken to prepare: Six months (b) Prepared by: Government with IBRD assistance (c) Appraisal mission departure: June 1994 (d) Negotiations: February 1995 (e) Planned date of effectiveness: July 1995 This report is based on the findings of an appraisal mission which visited Mauritius in June 1994\. The mission comprised Messrs\./Mmes\. Abdelwahed Zhiri, Mission Leader and Task Manager; Qaiser Khan, Human Resource Economist; Eileen Murray, Implementation Specialist; Philomene Lai Cheong, Administrative Assistant (AF3PH); Joseph Bredie, Senior Technical Educator (AFTHR); Girindre Beeharry, Economist/Consultant; and Gerald Pillay, Vocational Educator/Consultant\. Comments were received from Tom Eisemon, Lead Adviser (ESP) and from Jamil Salmi, Peer Reviewer (LAIHR)\. A pre- negotiation mission took place in October 1994\. Ms\. Hilda Emeruwa-Creppy and Kathy Li Tow Ngow assisted in processing the report\. Mr\. Francisco Aguirre-Sacasa and Mr\. David Berk are the Department Director and the Division Chief respectively of this operation\.  Schedule D Page I of 3 Run Time: 02/24/95 at 13\.18\.10 MAURITIUS Status Of Bank Group Operations In HAURITIUS PFDBR25 - Sunmary Statement Of Loans and IDA Credits (LOA data as of 1/31/95 - MIS data as of 02/24/95) By Country Country: MAURITIUS Amount in USS million (less canceLlations) Loan or Fiscal Undis- Closing Credit No\. Year Borrower Purpose Bank IDA bursed Date Credits 5 Credits(s) closed 20\.42 ALL cLosed for KAURITIUS TOTAL number Credits a 0 Loans 21 Loans(s) closed 218\.23 L31320-MU 1990 MAURITIUS HIGHWAYS II 30\.00 \.84 06/30/95(R) L32770-MU 1991 MAURITIUS ENVIRON HONIT\. & DEV 12\.37 8\.01 06/30/96 L33330-MU 1991 MAURITIUS AGRIC SERVICES 10\.00 9\.57 06/30/99 L34010-HU 1992 MAURITIUS IND AND VOCAT TRAINI 5\.40 4\.81 12/31/98 L34580-MU 1992 HAURITIUS SUGAR ENERGY DEVELOP 15\.00 15\.00 12/31/96 L35780-MU 1993 MAURITIUS EDUCATION SECTOR 20\.00 19\.16 12/31/98 L37360-MU 1994 MAURITIUS TECH ASST\. 7\.70 7\.70 06/30/99 TOTAL number Loans = 7 100\.47 65\.10 TOTAL*** 318\.70 20\.42 of which repaid 138 99 3 46 TOTAL held by Bank & IDA 179\. 72 16\.96 Amount soLd 4\.95 of which repaid 4\.95 TOTAL undisbursed 65\.10 Notes: * Not yet effective Not yet signed TotaL Approved, Repayments, and Outstanding balance represent both active and inactive Loans and Credits\. (R) indicates formally revised Closing Date\. (S) indicates SAL/SECAL Loans and Credits\. The Net Approved and Bank Repayments are historical value, aLL others are market vaLue\. The Signing, Effective, and CLosing dates are based upon the Loan Department offical data and are not taken from the Task 8udget fiLe\.  Schedule D Page 2 of 3 MAURITIUS - Statement of IFC Investments (as of January 31, 1995) Amount in US$ million Fiscal Obligator Business Loan Equity Total Year 1971/92 Dinarobin Inns and Tourism 6\.52 - 6\.52 Motels 1981 Grand Baie Hotel Limited Tourism 1\.53 0\.23 1\.76 1987 Socota Textile Mills Ltd Textiles 5\.00 0\.99 5\.99 1990 Saxon Management Tourism 2\.62 0\.98 3\.60 Limited 1990 Textile Industries Limited Textiles 3\.10 - 3\.10 1991 General Haulage Limited Industrial Services 0\.11 0\.3 0\.14 1992 Mauritius Commercial Capital Markets 10\.00 - 10\.00 Bank 1992 Big Game Fishing Tourism 0\.16 - 0\.16 Company 1992 Consolidated Steel Ltd\. Iron and Steel 0\.53 0\.19 0\.72 1993 Mauritius Fund Limited Financial Services - 5\.00 5\.00 Total Gross 29\.57 7\.42 37\.09 Commitments1 Total Commitments now 10\.40 6\.21 16\.61 held2 Total Undisbursed - 1\.01 1\.01 Commitments Gross commitments consist of approved and signed projects\. 2 Held commitments consist of disbursed and undisbursed investments\.  Schedule D Page 3 of 3 PROJECT IMPLEMENTATION AND DISBURSEMENT STATUS Mauritius' implementation performance in its investment operations has traditionally matched the high quality of its economic management\. Although a modest decline in quality was experienced in FY92-93, the portfolio stabilized in FY94\. The focus of new operations has become the achievement of more difficult institutional goals, often requiring the cooperation of various interest groups\. This sometimes leads to slow preparation of projects and delayed start-up of implementation\. For example, the preparation of the Industrial and Vocational Training Project was slow, as it required close cooperation between the Government and the private sector\. Efforts made in FY94 to resolve start-up difficulties are beginning to yield results\. In the Environmental Monitoring and Development Project (EMDP) the legislative and institutional prerequisites for progress have been met\. Staffing problems that delayed the inception of activities under the Agricultural Management and Services Project (AMSP) have been overcome\. The contract negotiations under the Sugar Energy Development Project (SEDP) have been concluded and project implementation has begun\. All projects have implementation manuals and a project workshop was held in August 1994 to launch the newest addition to the portfolio -- Technical Assistance to Enhance Competitiveness\. There are no problem projects and no issue of counterpart funding\. There are also no procurement problems\. The key problem of the Mauritian portfolio of recent years -- slow pace of implementation of a new range of projects including the two ongoing education and training loans -- is being resolved\. The disbursement ratio in FY94 was 19\.8% -- the same as in FY93 -- but this was only 64% of the forecast\. Consequently, although the Mauritian portfolio is returning to its status as one of the best in the Africa Region, there is need to sustain the efforts to get it back to its former superior rating\.  IBRRD 26791 MAURITIUS MAU RITI US Cononniers Poinonner Poin HIGHER AND TECHNICAL EDUCATION PROJECT ARTERIAL ROADS Tr/ \. MOTORWAY OTHER MAIN ROADS BUILT-UP AREAS R-py RESERVOIRS AND RIVERS NATIONAL CAPITAL OTHER TOWNS AND VILLAGES Valton ,r X ~~~~PORT / <) Coes Po-nt F*d _'/ / A ,,{ y/ \ >\,d, 5\.\ / 'I * @ // k / X <-- ~ ~ ~ ~ ~ ~ S MI\CUEI1EvL Pp MISO I 2 3 4 5 ~ ~ ~ ~ ~ REP P\. Grop, ny ud ment n th \lo sttu ofaytertryo n endorsement~e ore acetac 8ell s\c bounarie\.b MURIrg F\. t v \ / Le Cholo9d Ombre Souillas N~~~~~~~~~~~~~~~_K,1YA KILOMETERS 0 2 4 6 8 10 TANZANIA 5YHLE \. ae I I I I I t~~~~~~~~~~~~~~~ COhlO~~~~0\.ROS M LES 0 1 2 3 4 SI The boundaries, colors, denominotions onid any other information Tlnl Cacos9os shown on this map do not imply, on the part of The World Ba,nk o1asn Group, ony judgment on the legol status of ony territory, or any MADAGASCAR endorsement or acceptance of such boundaries\. M 9~n\. AAURITIUS Is\. FEBRUARY 1995

APPROVAL

P106143

Page 1 1 PROJECT INFORMATION DOCUMENT (PID) Report No\.: AB 3263 Project Name Water and Sanitation Departmental Restructuring Horizontal APL Umbrella Operation and Phase 1: Tolima, Norte de Santander, and Sucre Region LATIN AMERICA AND CARIBBEAN Sector General water, sanitation and flood protection sector (100%) Project ID P106143 Borrower(s) DEPARTMENTS OF TOLIMA, SUCRE, AND NORTE DE SANTANDER Implementing Agency Gobernación del Departamento de Tolima, Colombia; Gobernación del Departamento de Norte de Santander, Colombia; and Gobernación del Departamento de Sucre, Colombia Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 27, 2006 Date of Appraisal Authorization September 27, 2007 Date of Board Approval December 18, 2007 1\. Country and Sector Background Despite major improvements in the delivery of urban water and sanitation services over the last decade, Colombia faces continuing challenges in meeting its sector development needs\. Service deficiencies persist – potable water coverage is insufficient, service quality is highly variable and plagued by rationing and intermittent supply, less than half of all water supply is treated, and sewerage facilities in poor areas are woefully inadequate – and less than 10% of municipally generated wastewater is subjected to any kind of treatment\. Rural water supply and sewerage coverage is poor; only 44% of the population is connected to a public water supply system and less than one quarter have access to basic sewerage infrastructure\. In terms of solid waste, the needs are great, and although many intermediate-sized cities have seen marked improvements in service quality in recent years in terms of street cleaning, collection, and transport, solid waste management services have disproportionately benefited the wealthy and left many of the poor unserved and underserved\. In order to meet its sector development needs – which include ambitious sector targets which go significantly beyond the Millennium Development Goals – the Government has a series of key challenges: Increasing investment in both urban and rural areas \. The Government estimates that [TBD] is needed to diminish the regional and urban-rural service coverage disparities over the next 10 years\. Not surprisingly, investment needs for water supply and sewerage concentrated in poor rural and peri-urban areas and wastewater treatment infrastructure (which often suffer from a disconnect between those who bear the financial cost of investment, operation, and maintenance and those who reap the economic and environmental benefits of improved environmental health) are most pressing\. Improving performance of water companies \. Service quality issues in Colombia are primarily the result of the low price / low quality equilibrium at which many utilities deliver water supply and sanitation\. Tariffs are often well below operation and maintenance cost-recovery levels, political interference in public utility operation is widespread, and the management capacity to deliver high Page 2 2 quality service lacking\. Improving performance, while maintaining affordability for Colombia’s poor, is a key sector need\. Improving the use of subsidies \. While cross subsidies are an inherent aspect of the nationally-set tariff structure and have proven an effective mechanism for supporting service expansion in large urban areas, they have proven an insufficient tool to expand service delivery in many peri-urban areas or provide sufficient financing in municipalities with predominantly poor populations\. The approach begun under several previous Bank-supported operations to provide capital investment subsidies with a direct linkage to performance improvement has proven successful and is now being ramped-up on a national scale\. Making investment sustainable and efficient \. The Government recognizes the need to improve service delivery sustainability through the use of commercially independent and financial sustainable utilities\. The improvements in service quality which have resulted from the involvement of such “specialized operators” – be they public or private – is well established\. Public departments, on the other hand, (which account for more than 90% of water and sanitation enterprises) are too often characterized by ineffectiveness, poor quality of service, low coverage, and lagging performance\. The Government is challenged by the need to bring quality services to all Colombians and to provide incentives for utility improvement\. Nonetheless, the Government has shown leadership in the sector seen in few other countries in the region or worldwide, intervening in cases of poor performance and in some cases (e\.g\. Quibdo and Cali), placing utilities in receivership and implementing programs for utility restructuring\. Reducing sector fragmentation and moving towards regional solutions \. While the Colombian regulatory and institutional framework, which divides service delivery and regulation between municipal and national entities, is well developed and soundly designed, there is growing realization of the need to involve Departments – the intermediary level of public administration akin to provinces or states – as an articulator of regional strategies and as a potential important source of investment resources\. The clarity in terms of “rules of the game” for providing financing by the central government through the “Ventanilla Única” have been successful in imposing a sound set of investment criteria for subsidy-financing investment, and role out of a similar approach, combined with financial incentives for local governments to champion sector reform is now needed\. The Government’s New Strategy: The Departmental Plan Approach \. Colombia is remarkable among Latin American countries in that it has maintained a consistency of policies for the last decade\. Recent developments include (a) a clearly articulated strategy to improve coverage and services in rural and urban areas and to achieve the ambitious goal of universal service coverage for potable water; (b) a further commitment to the policy approach imitated under earlier Governments and supported by Bank loans related to utility “modernization,” the incorporation of commercially independent competent operators under long-term concession agreements; (c) the scaling up of the use of transparent and well- designed capital investment subsidies linked to performance improvement; and, a particularly important innovation to (d) leverage departmental resources to simultaneously increase investment, provide incentives for regionalization and modernization, and improve the use of public resources, many of which have been ineffectively used by local governments\. This policy approach is laid out in clear detail in the already-approved document of the Consejo Nacional de Política Económica y Social (CONPES) number 3463\. Specifically, the CONPES document includes and is based upon five key tenets: A major investment program with clear and transparent subsidies \. The recently-prepared National Development Plan (NDP) for 2007-2011 has identified a bold medium-term investment program to expand coverage and improve service quality in both urban and rural areas\. The approach is wholly Page 3 3 consistent with that supported under Bank Loan 7281-CO which provides capital investment resources – allocated at the departmental level based on poverty- and technically-weighted criteria – to be utilized to support investment in sector needs based on the eligibility criteria and methodologies developed during the preparation of 7281-CO\. Simply put, the Government has adopted the detailed technical work of the earlier Bank loan as national policy and will continue to support it through the new NDP\. A deepened and broadened approach to improving utility performance \. The CONPES document (see Annex 1) lays out the Government’s formal policy: the adoption of specialized operators for managing municipal utilities\. This approach – which does not discriminate for or against either public or private capital – is effectively the culmination of a policy initiative which began in 1994 with the Water Sector Modernization Project (Loan 7077-CO)\. The Government’s program now aims to align incentives and use resources from both higher levels of the public administration to leverage reform at the municipal level\. The use of implementation arrangements developed under the La Guajira Project \. The Government’s program aims to take the pilot approach developed under three cases – Magdalena, Sucre, and La Guajira – and bring it to scale nationwide\. Specifically, the approach involves (a) the pledging of multi-year public resources from departments and municipalities for counterpart financing and loan repayment; (b) the use of “ convenios de apoyo financiero ” which codify responsibilities and commitments of active institutions; (c) the use of 20- to 30-year concession contracts; (d) the use of independent technical management at the department level for the structuring of concessions; and (e) a fiduciary approach which focuses on transparency, accountability, and results\. The Government has asked the Bank to be involved – rather than other donors – particularly because the La Guajira operation is seen as the flagship of the three pilot projects already prepared\. The clear and transparent use of subnational resources in a fiscally responsible manner\. A core part of the approach involves the use of the Government’s rigorous subnational creditworthiness criteria to determine eligible borrowing amounts and financial structuring of the program at the Department level\. Specifically, the program uses the criteria established in Law 358 of 1997, Law 819 of 2003, and Decree 696 of 1998 to determine eligibility of departments to access credit sources\. The program will also include efforts to minimize the use of public indebtedness by (a) rightsizing investment; (b) incorporating a facility for carbon finance; and (c) shifting as much responsibility for investment as is politically, financially, and technically possible onto operators and consumers\. The mainstreaming of the clear and transparent “rules of the game” for investment developed under 7281-CO \. The program is wholly based on the harmonized and publicly disseminated set of procedures for investment developed within the MAVDT under Loan 7281-CO which currently guides all subsidy-financed investment in Colombia and provide technical, financial, economic, and environmental and social screening criteria for investment selection and implementation\. 2\. Objectives The objective of the proposed project (APL Phase I) is to improve the quality of water supply and sanitation services in urban, peri-urban, and rural areas of the three participating departments, moving towards complete coverage with continuous supply of potable water for urban areas and significant improvement in the coverage and quality of service in rural areas for water supply\. Specifically, the proposed operation will increase service coverage for water supply, sanitation, and wastewater treatment in urban areas by (a) consolidating a model for improved utility management under the Government- supported specialized operator model; and (b) delivering the necessary water and sanitation infrastructure\. Page 4 4 The project will be structured around the establishment of operator-based management arrangements in participating municipalities in large part through multimunicipal concessions\. In concrete terms, it is expected that by the end of implementation of the operation, the Project will have: (a) established management under long-term operation with investment contracts for the urban areas in the majority of both department’s municipalities through multi-municipal concession arrangements; (b) achieved [85]% coverage of piped, treated water supply services for urban residents in participating municipalities and [75]% coverage to potable water in rural areas; (c) achieved [65]% connection to sewerage networks and basic wastewater treatment of [50]% of municipally-generated wastewater treatment services for the urban population in participating municipalities\. 3\. Rationale for Bank Involvement The rationale for the Bank’s involvement is clear: the Bank, more than any of the other development financing institutions, is best positioned to support the Government’s program in large part because the policy foundation on which the program rests is the result of 15 years of Bank engagement in the water sector\. The Bank was asked by the Government to support the entire program – despite the great interests of other financiers in leading all or part of the department interventions – principally because an analysis was undertaken by the Government of the three pilot cases (Magdalena, Cesar, and La Guajira) and the design of the La Guajira operation (7434-CO) was seen as the best technical option for scaling up nation- wide\. In addition, the Program is fully consistent with the Bank CAS PR’s stated objectives of “Achieving Sustainable Growth” and “Improving Infrastructure Services” and further represents a rapidly-scalable model for providing investment financing to middle-income countries like Colombia with a proven track record of sector performance\. It is also consistent with the Bank’s broader water and sanitation engagement in LAC and elsewhere as the operation would support the Government’s efforts at public sector reform through the design and implementation of a transparent mechanism for transferring grant resources to local utilities, linking investment with reform, and establishing transparent and uniform rules for grant-based financing throughout the public sector\. In addition to the linkages to other lending operations, the proposed operation is directly linked to ongoing informal AAA being prepared jointly between the Bank and sector institutions, namely the CRA, Superintendency of Public Services, and MAVDT\. The ongoing work, which is expected to be completed in early FY08 (August) and published in both English and Spanish, aims to (a) undertake a comprehensive empirical analysis of the water and sanitation sector from an institutional perspective; (b) undertake a series of case studies (of 8 utilities) to better understand the details of successes and failures in operation with investment contracts; (c) support benchmarking efforts for water utilities; and (d) develop a program of impact evaluation of the department plans\. The Horizontal APL Approach \. Consistent with other horizontal APLs, the Bank would present to the Board of Executive Directors the first phase of a multi-phase APL to support the Government’s overall program of department-level interventions\. The Board would approve (a) the overall program concept up to an aggregate amount of US$ 400 million; and (b) the first phase of the APL for Norte de Snatander, Tolima, and Sucre for an amount of US$ 120 million\. Subsequent loans, up to the aggregate approved by the Board, would be submitted to the RVP for approval and distributed to the Board on a no objection basis\. Table 1 identifies the expected program of departmental plans, though their phases and grouping (each phase is expected to have multiple departments) will be determined during the initial phase of preparation\. 4\. Description of Components Page 5 5 Project Components \. The operation would consist of three loan agreements, one for each department, each with three core components: 1\. Urban Water Supply and Sanitation Services Improvement Component \. The core element of the operation would be the consolidation of the urban and peri-urban areas under a series of contracts with specialized operators and the provision of the required injection of departmental resources for expanding basic infrastructure and improving service management\. The basic model for contracting of specialized operators would be the negative concession / least-subsidy approach, which has been well established in Colombia and is currently supported under three Bank-financed Projects\. The operation would, in principle, work in all 40 municipalities of Norte de Santander 1 , the 25 municipalities of Sucre, 2 and the 476 municipalities of Tolima 3 \. In cases where specialized operators are already in place\, the operation would support, if necessary, the restructuring of the concession agreement to advance investment and meet outcomes in a shorter period of time than initially estimated at the time of the concession establishment\. In municipalities where no specialized operator exists, mayors who choose to enter the program would be supported by the department-level management unit in the structuring of a medium-term concession arrangement using the already-in- place model contract, tariff models, and supervision and oversight mechanisms used in the La Guajira operation, 7077-CO, and 7281-CO\. During the Appraisal mission, the specific municipalities which are expected to participate in the initial stage of Phase I would be identified and finalized\. The component would allow management-driven investment decision making by local private operators based on clearly established performance criteria to (a) improve the quality of drinking water; (b) improve the coverage of water supply and sanitation services; and (c) improve the continuity of service, with a medium-term goal of achieving continuous water supply service for the significant majority of the Department’s urban residents\. Investments financed would be typical for the sector and would include water sourcing works and basic treatment infrastructure, primary and secondary water supply networks including household connections and meters for water supply, primary and secondary sewerage networks, and basic wastewater treatment infrastructure\. Component funds would also be used to finance management tools – including commercial systems, cadastres, etc\. 2\. Rural Water Supply and Sanitation Services Component \. In all three of the departments which are expected to participate in Phase I, and typical for Colombia, the performance of rural and small-town water supply and sanitation services is particularly weak\. The operation would thus include a specific component dedicated to the financing of low-cost, appropriate solutions to bring potable water supply and basic sanitation to rural areas\. The approach would include the rollout of the existing national programs for rural water supply and sanitation which include (a) the constructor- operator model, in which capable construction firms are contracted to build and operate simple water supply and sanitation systems; (b) the microempresas comunitarias approach, which involves the development of community-based micro-systems for providing basic services; and (c) for hinterland areas of 1 Cúcuta, Abrego, Arboledas, Bochalema, Bucarasica, Cácota, Cachirá, Chinácota, Chitagá, Convención, Cucutilla, Durania, El Carmen, El Tarra, El Zulia, Gramalote, Hacarí, Herrán, Labateca, La Esperanza, La Playa, Los Patios, Lourdes, Mutiscua, Ocaña, Pamplona, Pamplonita, Puerto Santander, Ragonvalia, Salazar, San Calixto, San Cayetano, Santiago, Sardinata, Silos, Teorama, Tibú, Toledo, Villa Caro, and Villa del Rosario 2 Buenavista, Caimito, Chalán, Coloso, Corozal, Coveñas, Galeras, Guaranda, La Unión, Los Palmitos, Majagual, Morroa, Ovejas, Palmito, Sampués, San Benito Abad, San Juan Betulia, San Marcos, San Onofre, San Pedro, Sincé, Sincelejo, Sucre, Tolú, and Toluviejo 3 Alpujarra, Alvarado, Ambalema, Anzoátegui, Armero - Guayabal, Ataco, Cajamarca, Carmen de Apicalá, Casabianca, Chaparral, Coello, Coyaima, Cunday, Dolores, Espinal, Falan, Flandes, Fresno, Guamo, Herveo, Honda, Ibagué, Icononzo, Lérida, Líbano, Mariquita, Melgar, Murillo, Natagaima, Ortega, Palocabildo, Piedras, Planadas, Prado, Purificación, Rioblanco, Roncesvalles, Rovira, Saldaña, San Antonio, San Luis, Santa Isabel, Suárez, Valle de San Juan, Venadillo, Villahermosa, and Villarrica Page 6 6 concessioned municipalities, basic management arrangements with urban operators to provide training and basic operation and maintenance expertise on a pay-for-service basis\. 3\. Concession Structuring, Monitoring and Evaluation, and Project Management Component\. The operation would include a component for the establishment of project management capacity at the departmental level particularly in regard to (a) structuring and/or renegotiating existing concessions; (b) project monitoring, supervision, and evaluation; and (c) ensuring implementation of the safeguard policies\. The Government program is based on the use of independent program management services, and in principle the operation would support this approach, though some departments may have the in-house capacity to manage implementation\. Table 2: Project Components and Financing Sources Components Indicative Costs (US$M) % of Total Bank- financing (US$M) % Bank- financing Department of Tolima 1\. Urban Water Supply and Sanitation Services Improvement Component [TBD] [TBD] [TBD] [TBD] 2\. Rural Water Supply and Sanitation Services Component [TBD] [TBD] [TBD] [TBD] 3\. Concession Structuring, Monitoring and Evaluation, and Project Management Component [TBD] [TBD] [TBD] [TBD] Subtotal Tolima 64\.6 56\.0 Department of Sucre 1\. Urban Water Supply and Sanitation Services Improvement Component [TBD] [TBD] [TBD] [TBD] 2\. Rural Water Supply and Sanitation Services Component [TBD] [TBD] [TBD] [TBD] 3\. Concession Structuring, Monitoring and Evaluation, and Project Management Component [TBD] [TBD] [TBD] [TBD] Subtotal Sucre 63\.6 31\.0 Department of Norte de Santander 1\. Urban Water Supply and Sanitation Services Improvement Component [TBD] [TBD] [TBD] [TBD] 2\. Rural Water Supply and Sanitation Services Component [TBD] [TBD] [TBD] [TBD] 3\. Concession Structuring, Monitoring and Evaluation, and Project Management Component [TBD] [TBD] [TBD] [TBD] Subtotal Norte de Santander 74\.4 33\.0 Total Project costs 202\.6 100% 120\.0 100% 5\. Financing Page 7 7 Table 3: Financing Plan (US$m) Source Local Foreign Total Department of Tolima [TBD] [TBD] [TBD] Department of Sucre [TBD] [TBD] [TBD] Department of N\. Santander [TBD] [TBD] [TBD] Local Municipal Counterpart Financing [TBD] [TBD] [TBD] Republic of Colombia [TBD] [TBD] [TBD] INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT [TBD] [TBD] 120\.0 Total 202\.6 6\. Project Phases and Implementation The Bank support to the Government would aim to finance the implementation of the program of departmental plans set out in CONPES #3463\. 4 Bank support would be structured around a multiple-phase horizontal APL (non-consecutive and overlapping), with Phase I (the proposed Project) focused on three departments, Norte de Santander, Tolima, and Sucre 5 with components aimed at improving basic services in urban, peri-urban, and rural areas of the Departments through the specialized operator approach an d through the Government’s programs for microempresas comunitarias and rural water supply and sanitation, respectively\. The Program would bring to a national scale programs already supported under existing Bank Loans (Water Sector Modernization 7077-CO, Water and Sanitation Sector Support 7281-CO, and La Guajira Water and Sanitation Infrastructure and Management 7434-CO)\. Individual phases representing departments ready for implementation would be brought forward on a case-by-case basis and would be prepared in a rapid way with marginal incremental resources\. Though each departments would have its own Loan agreement, participating departments would be grouped (usually 3-5 departments per Phase) and presented to the RVP for approval together\. 7\. Sustainability Like most of the developing world, the key issue to enhancing the sustainability of water and sanitation service provision in Colombia is to move towards greater cost recovery for municipal service providers while maintaining affordability for users, especially the most poor\. The national tariff and regulatory framework establishes a mechanism of intra-system cross-subsidies to provide basic services at less-than- full cost to the poor (defined as Strata 1-3)\. While such an approach has served to keep the unit cost of water service to the served poor at reasonable levels, in many cities, an absence of Strata 4 and 5 (and often 3) households, deficiencies in the existing cross-subsidy scheme and stratification system, given the configuration of demand and lack of proper tariff studies (which the utilities are meant to undertake by law) are a serious challenge/constraint to the financial sustainability of service provision\. The Program seeks to directly improve the sustainability of service provision by supporting efforts to put in place capable management of urban utilities and putting those utilities on a direct path towards financial and 4 See http://www\.dnp\.gov\.co/archivos/documentos/Subdireccion_Conpes/3463\.pdf\. 5 Initial discussions with the Government (particularly DNP and MAVDT) indicate that these three departments will comprise Phase I\. This will be confirmed during the preappraisal mission and the teaem will advise management of the final composition of Phase I prior to the QER meeting\. Page 8 8 operational sustainability\. Such management, in part, reduces political interference in the provision of public services and enhances the technical capacity to resolve service problems\. Sustainability will be primarily addressed through (a) the incorporation of specialized operators who are capable and interested in maintaining high levels of services; (b) the provision of capital investment subsidies which will ensure the construction of appropriate required infrastructure; and (c) tariffs which will cover operation and maintenance costs\. 8\. Lessons Learned from Past Operations in the Country/Sector Project design reflects the Bank’s experience in the preparation and implementation of environmental management and urban water supply and wastewater treatment projects throughout the world, and specifically borrows on the lessons learned from the design of operations involving the financing of local infrastructure and reforms to institutional arrangements for local service provision in the wastewater sector, particularly in Colombia\. Some of the critical lessons learned and applied in this Project’s preparation include: The need for clarity in terms of institutional roles and responsibilities among the multiple stakeholders at the Central Government and local levels; The need for a clear and transparent institutional structure when passing resources between levels of government; The need for enhanced public consultation in design and public information during implementation of major infrastructure; The importance of integrating Project activities within a broader context of sectoral reform, with a focus on regulatory and legal issues; The need for effective coordination with other donors working in the sector; and The need to accompany investment with appropriate reform measures at a utility level to ensure institutional and financial sustainability of the investment Tariffs need to be set at such level that revenues will cover at least O&M costs; otherwise, the utilities will not be viable\. The proposed Operation with Investment model is already functioning successfully in Colombia and as such, the principles of institutional reform proposed under the Project have a proven track record in Colombia\. Selected wastewater treatment processes need to be based on appropriate (i\.e\. low cost, simple to operate and effective) technologies\. Experience from Colombia and elsewhere has shown that application of highly sophisticated processes results in systems collapse due to shortage of O&M financing capacity and difficulty of operation\. A significant period is required between signing a contract with a private operator and the improvement of service (the construction period)\. Public dissemination and outreach is thus critical\. The design of the operation has been undertaken specifically in the context of the ongoing Loans 7077- CO, 4507-CO, 7281-CO, and most importantly, the recently-approved La Guajria operation which established a model for the passing of public subsidies for capital investment to specialized operators working under negative-subsidy concessions\. 9\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Page 9 9 Environmental Assessment ( OP / BP / GP 4\.01) [X] [ ] Natural Habitats ( OP / BP 4\.04) [X] [ ] Pest Management ( OP 4\.09 ) [ ] [X] Cultural Property ( OPN 11\.03 , being revised as OP 4\.11) [X] [ ] Involuntary Resettlement ( OP / BP 4\.12) [X] [ ] Indigenous Peoples ( OD 4\.20 , being revised as OP 4\.10) [X] [ ] Forests ( OP / BP 4\.36) [ ] [X] Safety of Dams ( OP / BP 4\.37) [TBD] [TBD] Projects in Disputed Areas ( OP / BP / GP 7\.60) * [ ] [X] Projects on International Waterways ( OP / BP / GP 7\.50) [TBD] [TBD] 10\. Contact point Contact: David N\. Sislen / Menahem Libhaber Title: Sr\. Economist / Lead Water and Sanitation Specialist Tel: (202) 458-0305 / (202) 473-5327 Fax: Email: dsislen@worldbank\.org / mlibhaber@worldbank\.org 11\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 10 10

APPROVAL

P005715

Document or The World Bank FOR OFFICIAL USE ONLY Rbmw Ne\. 7696-TUE STAFF APPRAISAL REPORT REPUBLIC OF TUNISIA EDUCATION AND TRAINING SECTOR LOAN APRIL 6, 1989 Population and Human Resources Divisior\. Country Department II Europe, Middle East and North Africa Region This documen' has a trescdted disttlbutin and moy be used by recpients ooly in the perfon»nce of t heir offici'al duties\. Its contents may not otherwise be disclosed witkout Worid Bm authoriotio  REPUELIC OF TUNISIA EDtmIATIOHw Am! TEAIEINC SECTOR LMA STA"F APPRAISAL REPOT CURXERCy BQUIVALeNTS (As of Deember 1988) Currency Unit = Tuflsian Dinar (TD) US$1\.00 = TD 0\.86 TD 1\.00 = US$1\.16 tISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS Bac Baccalauréat High School Diploma CFP Centre de Formation Professi,,melle Vocational Training Center CRIP Centre de Ressources et d'Ingénierie Pédagogique Pedagogical Engineering and Resource Center ENI Ecole Normale d'Instituteurs Primary Teacher Training School ENS Ecole Normale Supérieure Higher Teacher Training Institute ITM Introduction aux Travaux Manuels Introduction to Practical Work MAS Ministère dts Affaires Sociales Ministry of Social Affaira MEN Ministère de l'Education Nationale Ministry of Educatior MESRS Ministère de l'Enseignement Supérieur et de la Recherche Scientifique Ministry of Higher Education OFPE Office de la Formation Professionnelle et de l'Emploi Office of Vocational Training and Labor TFP Taxe à la Formation Frofessionnelle Vocational Training Tax UTICA Union Tunisienne pour l'Industrie, le Commerce et l'Artisanat National Union for Industry, Trade and Crafts  FMOImciICL Un ONLY STAF PPISL eEPR- EICÂTioE AuD T1uliiUcSETRL IUELIC 0F TUISIA LOAN SU A BASIC DATA iv I\. I immouCic S 1 Il\. lu IDUCUIO WMD Au IUICC SECTRO 4 Overviev of the Sector 4 Major Issues iu the Education Sector 5 Acceta to Education 5 Quality of Education 6 Efficiency of Educational Administration 7 Budgetary Constraint 8 Major Isaues in Vocational Training 9 Training for Employment 9 Apprenticeship and Dual Training 9 Mobilizing Resources for Training 10 Relevance and Quality of Training Programs il Government Education/Training Strategy and Bank Lending il Government Strategy il Bank Lendin8 Strategy for the Sector il Experience vith Past Lending 12 III\. TEE RYOR PIOGEA 14 Objectives 14 Policy Actions in General Education 14 Introduction of a 9-year Basic Education Cycle 14 Restructuring Secondary Education 14 Teacher Training Refora 15 Reforn of Programs and Curricula 15 Institutional and Administrative Reforms 16 Policy Actions in Vocational Training 16 Institutional and Administrative Reforma 16 Measures Aiming at Improving Linkages vith Productive Sectors 17 Promoting Apprenticeship Training and Dual Training 17 Reforu of Programs and Certification 17 Changing the Status of Instructors 18 Reforu of the Vocational Training Tax 18 Projected Impact of the Refor 18 This report is based on the findings of an appraisal mission vhich visited Tunisia in December 1988\. The mission comprised Mr\. B\. Laporte (Senior Education Economist, mission leader), Mme\. C\. Kleynhoff (Operations Officer), Messrs\. G\. Za'rour (Senior Educator), P\. Mersier (Vocational Training Specialist), G\. Brest van Kempen (Architect)\. This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without Worid Bank: authorization\.  IV\. luE Eo Im LOU 20 Rationale and Objectives 20 The Investuont Progrea 20 Part A: Ministry of duceation 20 Rebabilitat4ou of Fxistina Priar7 and Secovlary 8chools 20 Construction of School Cantemns 21 Construction of Nev Schools (grade! 7, 8 and 9) 21 Co loel ta!ry EquUpumt Progr _ 21 Distribution of Books and Educational Katerials 22 Institutional Develop\.ent 22 In-service Training for Teacher^i 23 Part B: Office of Vocational Trairing and Emplcyment 24 Developuent of Sectoral Training Centers 24 V\. PROJECT COSTS, FIInCING, IPLBUUTION AuD DISBUiSUMEUS 26 Project Costa 26 Sumary of Project Costa 26 Basie of Cost Estimates 28 Custom Duties and Taxes 28 Contingencies Allovances 28 Foreign Exchange Component 28 Project Financing 28 management and Implementation 29 Management Structure 29 Implementation of the Project 29 Monitoring and Evaluation 30 Maintenance 30 Procurement 30 Technical Assistance 32 Statua of Preparation 32 Diabursements 33 Special Accounts 33 Accounts and Audits 33 VI\. REEEfTS MID lISES 34 VII AGREDIENTS TO BE RUCIED AT NEGOTIATIONS 35  1\. Policy Katrix 2\. Criteria for Selection of Sub-Projects 3\. Basic Education Statistica 4 Basic Data on the Vocational Trailda\g Sector 5\. Education Sector Invetaent end Curremt Budgets 6 Om Inves tent and Current Bud8ets 7\. Performance Indicators 8\. Impact of the Education Reforu 9\. Criteria for the Distribution of bocks and educational matertale\. I\. Technical Assistance Schedule II\. Implementation Schedule III\. latiuated Schedule of Loan Diabursement CTS I\. The Structure of the Education System prior to the Reforu II\. The Nev Structure of the Education System III\. Organizational Chart - MEN Central Administration IV\. Organizational Chart - OFPE Central Administration V\. Organizational Chart - MEN Regional Administration VI\. Organizational Chart - OFPE Regional Administration  EPMUIC Or TUJI DnUghZIDLAu TRAxinG SECTOI OA STAFF A?î RAISAL REPORT Borro9er: lepublie of Tunisia US$95 million equivalent Zama: Seventeen years, including f ive yearu gracc, at the standard variable inte:rest rate\. Description: The proposed sector loan would support the first nhaue of implementation of the Government's education and training sector reform and vould assist the Borrover in carrying out reform activities during th\.s phase\. The objectives of the refor\.« program are to make the provision of education more consistent vith the country's medium-term development needs, more equitable, and more cost-effective\. It would do this through three policy changes: (i) allocation of a larger share of resources to quality basic education cycle (grades 1-9); (ii) improvement in the quality and relevance of secondary education (grades 10-13) while better controlling access to it; (iii) promotion of pre-service aid in-service training in collaboration with companies in the productive sectors, and mobilization of additional resources for training\. The content and timing of the specific reform measures, prepared jointly with the Bank over the past year and reviewed at appraisal has been discussed and agreed with Government during negotiations and reflected in a supplemental letter\. The Loan would support the above-mentioned policies by financing a core set of hign-priority investments, vithin an agreed orerall investment program needed for a successful implementation of the -\.eform program\. These include: (i) rehabilitation of some 1,600 primary and 330 secondary schools; (ii) construction of 800 scnool cauteens; (iii) construction of some 130 new upper basic education schools of about 700 pupils each; (iv) distributioni of educational materials and reading books; and (v) technical assistance to improve the quality of programs and the efficiency of educational management\. Finally, the proposed loan would finance the development of sector specific vocational training centers in collaboration vith Industry Associations, based on a sub-project approach\.  jit) The education reform program supported by the proposed loan is expected to yield very significant development benefits for the country\. It would make the provision of education more consistent vith the country's medium-tera needs and resources, more equitable, and more cost-effective\. The reform progra\. vould restructure educaAion and training in Tnnisia so that a auch larger nuwber of children vould benefit \.rom sound education and training helping prepare them for active careers in a fast-changing economy\. It vould reorient the system in favor of basic education and would improve the quality and efficiency of educational inputs\. At the same time, collaborative training with industry associations vould be promoted\. This vould make training programs more job-related and vould make young people more employable\. Quantitativc benefita i-iclude an increase in the nurber of students enrolled in upper basic education of 123,000 over the 1992-96 Plan and 152,000 over the 1997-2001 Plan and a decrease in the number of drop outs, in grade 1 through 9 of 104,000 and 124,000 respectively\. A significant portion of the additional costs necessary to finance the expansion at the level of grades 7, 8 and 9 would be offset by a decrease in the number of atudents in primary education due to improved erficiency rates and by a reduction in the cost of training new teachers\. The total Ministry of Education (MEN) recurrent budget would grow at an average yearly rate of 3\.2 percent In real terms and its share of total Government budget would remain at its current level of about 25%\. Ri8ke: The reform program also entails some riska\. The firet risk is that some teachers may resaist the introduction of new educational methods and in particular the utilization of diagnostic tesluing and remedial instruction\. The improvements in pre- and in-service training for teachers should go a long way to ensure acceptance of the new methods\. The second risk is that unexpected pressures on the government budget may reduce the scope for austaining the steady lncrease in investment allocations the sector program calls for and which Parliament has already expressly approved\. This could slow down the implementation of the reforma, although the proposed loan financing safeguards the most critical software expenditures aimed at building quality improvements\. Finally, the Government may face strong opposition to forthcoming proposals, complementary to the basic education reforma to limit access to the upper levela of the education and training system\. However, the Tunisian public is increasingly iware of the trade-offs in this area and Government is adamant that the reform program will progresas teadily on track, as has indeed been the case with all past reform comm'tments made by Tunisia vithin the adjustment process\.  <iii) eati-ated Prolect Conte Local Poreigu Total - (US$ million) - A\. School Peha\.b:litation Progra <lUI) 12\.1 12\.0 24\.1 B\. Caateens for Primary Schoola (M1U) 4\.7 5\.1 9\.8 C\. School Construction (M< ) 40\.9 43\.7 84\.6 D\. Compl\.entary Bquipment Programa (MNi) 0\.6 1\.5 2\.1 E\. Distribution of Books and Naterials (<KN) - 4\.0 4\.0 F\. Inatitutional Developsent (M<N) 0\.0 1\.7 1\.7 G\. Teacher Training (MUl) 6\.4 1\.2 7\.6 H\. Development of Sectoral Training Centers (OFPE) 6\.0 11\.8 17\.8 Total Baseline Costa 70\.7 81\.0 151\.7 Physical Contingencies 7\.1 8\.1 15\.2 Price Contingencies 10\.2 5\.9 16\.1 Total Pro4ect Coste 88\.0 95\.0 183\.0 Financing Plan: Government 88\.0 8 \.0 IBRD - 0\.L 250 Total fL q 95L0 1830Q Estimated Diabursemente Bank Fiscal Year 90 91 92 ?3 94 95 ------------- (US$ Million) ------------ Annual 1\.2\.0 16\.5 19\.5 23\.0 17\.5 6\.5 Cuulative 12\.0 28\.5 48\.0 71\.0 88\.5 95\.0 Rate of Return: Not Applicable  - (iv) - EDUCATION AND TIAINIIG SECTOR LOAN SiAFF A PRAISAL REPORT BaaSc Data Couatry Data (1987) Per Capita GNP: US$1,210 Total Population: 7\.5 million Population £rovth rate: 2\.4% Education (1987-88) Enrollmentl/ Enrollment Ratiol/ Total Female Gross Netlr Female (000) as % Tot\. Gross Level Primary 1,339 44\.7% 117% 85% 107% (Grades 1-6) Lower Secondary 256 42\.8% 49\.5% NA 42\.9% (Grades 7-9) Upper Secondary 178 42\.8% 27% NA 23\.6% (Grades 10-13) University 44 37\.2% NA NA NA Public Expenditures on Education (1987) Central government education budget as a % of total government budget4/: 16\.0% Central government education budget as a % of GDP: 5\.1% Central goverrment investment budget for education as a % of government investment budget: 3*4% Central government recurrent budget for education as a % of government recurrent budget4/1 24\.0% 1, Public plus private schooling\. ai Total enrollments as % of population in relevant age group\. Net enrollments as X of population in relevant age group\. 4/ Including Debt Service V1 A  I\. INT9OW CTIOh 1\.01 After a decade of *trong grovth, the Tmisian econony *tarted to experience difficulties in the early 1980\. Oil production began to decline as expected asd vorld prices fell, but the economie adjustuents necessary to cope vith these changes vere slow in cominj\. By 1985, external financing for Tuimsia's high current account deficit became scarcer, threatening b balance of payments orisis\. After a br4ef period of denand restraint, the government introduced policy revisions that have broadened into a vide-ranging program of structural adjustment\. 1\.02 The Government's strong coumitment to the adjustfent program has been supported by the Bank thàrough a series of adjustment operations\. The Agricultural Sector Adjustment Loan (ASAL, US$150 million, approved by the Board in September 1986) focussed on the price and incentive framework and on public investment in the agricultural sector\. The Industry and Trade Policy Adjustment Loan (ITPAL, US$150 million, approved by the Board in February 1987) emphasized tariff adjustments, price decontrol, and fiscal reform\. A Structural Adjustment Loan (SAL, US$150 million, approved by the Board in June 1988) supports continued liberalization of trade and prod-cer prices, improvement in the system of direct and indirect taxation, and reforms in the financial system\. These reforms will be extended and deepened through a proposed ,econd Agricultural Sector Adjustment Loan and a proposed Public Enterprîse Rehabilitation Loan\. 1\.03 The Tunisian aovernment is continuing its economic adjustment program with a new emphasis on reform in the humar\. resources sector\. A major cc,ncern for the government is the continuing higli level of unemployment (over 14 percent in 1988) despite significant decreases in the price of labor relative to capital in the last five years\. One of the most significant features of this growing unemployment trend is the very low education level of the unemployed people -- 60% of the unemployed have less than 9 years of education\. The economic adjustment program is likely to increase un-employment in the short term as it reduces the size of the public sector\. In the medium and long-term, the demand for labor should increase as growth accelerates, and the impact of past and present family planning efforts should moderate the supply of labor at the same time as better education and training improve the profile of the labor force and its responsivenesa to changing demand conditions\. 1\.04 Tunisia has undertaken a massive ef\.'ort to develop its human resources, paying special attention to family welfare, education, and training\. As a result, from the early 1960s to 1985, infant mortality vas more than halved from almost '60 to 60 per thousand, lIfe expectancy at birth rose from 48 to 62 years, and adult literacy rates increased from 15 percent to 62 percent\. An active family planning policy led to a decline in birth rates of 27 percent between 1935 and 1985\. Mortality also declined by 45 percent, so population growth continues at 2\.5 percent a year\. The young age structure of tne population together with the increasing entry of women into paid work, caused the labor force to grow at 2\.8 percent a year in the mid-1980s -- slightly faster than population growth\.  - 2 - 1\.0' The education and training system is called upon to p'ay a major role in responding to the challenge cf a rapidly chA'zglng economy\. Given Tunisia's limited domestic market and the fact that most obvious import substitution industries are elrGady vell developed, the Governuent is actively pursuing an export driven growth strategy\. This places a premium on the availability of a highly skilled and vell educated labor force\. At the same time, intense vorld market competition -- in particular the development of a very active UEC market -- and rapid technological change require the best çossible use of human potential\. In order to be internationally competitive in the next century, Tunisia needs a labor force with much higher levels of mastery of math, science and language skills than is presently the case\. Ihere is an urgent need to step up investments in education and training to enhance the broad cognitive and problem solving skills and personal qualities that make workers trainable and more productive\. The Governinent is committed to a major improvement of the education and training system, at the same time as it reinforces its family plarning services\. 1\.06 Despite remarkable quantitative achievements in primary education (99 percent of the 6 year olds are enrolled _n grade 1), there are still serious shortcomings\. Only 1 in 3 children go beyond grade 6, 1 in 5 go beyond grade 9, and 1 in 20 progress to higher education\. The internal efficiency of the education system is seriously impeded by a lack of facilities in secondary education (only 50 percent of grade 6 students reach grade 7), together with the relatively poor quality of education prigrams\. Repetition rates are high (between 20 and 30 percent), and a sizeable number of children who drop out during pr4mary education will lapse back to illiteracy\. The Ministry of Education (MEN) has offered various vocational education programs, but in pract'ce these do not prepare 3tudents for specific jobs\. The type of labor force necessary for Tunisia's export develipment strategy, requires the teaching of problem solvlng skills up to a level that cannot be attained in six years\. A key prerequisite for broadening individual employment options and improving labor force productivity is access to an expanded and reinforced cycle of basic education (grades 1 through 9), whether it is followed by further formal education, vocational trair\.ing, or direct entry to the labor force\. 1\.07 In upper secondary schools (grades 10 - 13) there is a need to revamp course offerings, update programs and ensure complementarity between technical education offered by MEN and the vocational training programs run by the Vocational Training and Employment Office (OFPE)\. The OFPE vocational training system is hampered by weak labor market linkages and is not geared up to production of highly skilled labor that the economy requires\. Shortages of skilled and technical manpower, particularly of technicians, may inhibit the Government's effort to restructure the Tunisian economy and to sustain the export drive\. Shortages are particularly severe in industries which require high standards of quality control, modern production techniques and specialized machinery\. The skills distribution of the workforce is striking for the small proportion of professional occupation and particularly the low number of technicians\. Production and high level technicians represent only 3 percent of the total number of people employed in all branches of the economy\. There is an urgent need to develop training programns on the basis of labor market signals\. Productive sector involvement in program definition, skill certification, and management and financing of training institutions is also highly desireable\.  - 3 - 1\.08 To support the overall adjustmrnt proceus, the Government has decided to engage in far-reaching reforma of the education and training syetem\. These reforms will be introduced in two phases\. The firet phase, which will be supported by the proposed lcan, is designed to expand education and training, improve their cost-effectiveness, and make them more consistent vith the country's medium-term development needs\. Thi8 vouid be achieved through three ajor policy changes: (i) allocation of a larger share of resources to quality basic education cycle (grades 1-9); (ii) improvement In the quality nd relevance of upper secondary education (grades 10-13), vhile better controlling access to it; (tii) promotion of pre-service and in-service training in collaboration with companies in the productive sectors, and mobilization of additional resources for training\. 1\.09 The second phase of the reform, which is now being prepared with extensive consultation, would introduce measures related to higher education\. The higher education system, under the aegis of a separate Governaent department and with its independent budget, is still marked by serious inefficiencies\. The structure of programs and the content of curricula vere geared toward meeting the needs of a civil service whose foreseeable recruitment prospects are now severely limited\. At the same time, the needs of an export-oriented private sector are largeiy unmet\. Internal efficiency is extremely low and a growing number of students leave UniversJty without a diploma\. Public resources devoted to higher education have increased on an average of only 1\.1% per annum between 1982 and 1986, while enrollments have grown by about 7%\. In 1988, the Bank completed a review of Higher Education which emphasized the need to improve management, provide autonomy teo University departments, restructure higher education programs and curricula, and to address the problems of cost recovery and the role of the private sector\. The Government has already taken some initiatives such as the reduction\. and targeting of scholarahips, the introduction of a student loar\. system and the design of a new system which will provide more autonomy for University departments\. Further policy initiatives are being investigcted with Bank assistance\. in parallel vith the proposed reforma, the Governaent and the Bank are also discussing a set of institutional and policy reforms aimed at liberalizing labor markets and improving labor mobility\.  4- II\. TEE EDUCATION AUl TIAINING SECTOR Overviev of the Sector 2\.01 Education in Tunisia is almoat entirely a governuent activity -- in 1986-87, 99 percent of primary ochool *tudents and 91 percent of secondary achool students vere enrolled in governuent echools\. However, 45 percent of kinderga-tens vere run by municipalities, 34 percent vere private and the remaining 21 percent vere *emi-private\. 2\.02 The Tunisian educational system la structured as follova (Chart I\. Structure of the Education System prior to the reform): a primary education cycle of 6 years la folloved by a secondary cycle of 7 years' duration\. The latter is broken into a lover secondary cycle of 3 yearu and an upper secondary cycle of 4 years\. Entry to lover secondary school in based on an entrance examination in which passing rates have usually been lov\. This examination thus serves to restrict the number of students entering lover secondary school\. Students who do not get into lover secondarj achool can either go to special post-primary grades 7 and 8 - where manual vork la an important part of the curriculum - or to a three-year vocational education option which dose not permit entry into upper secondary school\. At the end of lower secondary echool (grade 9), students who do not proceed to upper general or technical secondary education can enter a three-year terminal technical/vocational education leading to a technician diploma at the end of grade 12\. Finally, at the end of grade 13, stueents have to pasa a high school diploma, the baccalauréat examination (Bat), to enter university\. 2\.03 A Basic Law of Education (enacted in 1958) stipulates tnxat public education in Tunisia is free at all levels\. But for pre-school education, which is not an integral part of public education, municipalities tend to charge lOTD/month (US$9)\. Private preschools charge between 20 and 25TD/month (US$25 to 30)\. Although parents do not pay tuition fees for primary and secondary education, they make a significant contribution in the form of school uniforms, books and materials, transportation, and fees for after-school remedial instruction\. In 1972, the educational system vas reformed with the goals of reducing the fiscal burden of education and orienting education towards market needs\. Limiting the growth of enrollment in the upper grades vas the main way of achieving the first goal\. To achieve the second goal, government introduced: (i) programs involving manual vork (ITM), firet in the primary school proper and later, around 1977-78, through the special post-primary &rades 7 and 8 referred to above; and (ii) the three-year vocational op:ion also referred to above\. At the same time, the existing technical education program in the upper secondary cycle was focussed on industrial speciae'zations\. 2\.04 The Ministry of Education is responsible for the design and development of educational policies\. The central administration of the Ministry covers all aspects of planning, development, implementation, inspection and evaluation of education programe (Chart III)\. Regional Delegations handle the implementation of policies and programs\. In the case of elementary education, 23 Regional Delegations had responsibility for about 3,500 schools in 1986-87 and in the case of secondary education 12 Regional Delegations had responsibility for some 400 secondary schools\. Basic data on general education is provided in Annex 3\.  -5 2\.05 Secondary technical education and vocational training are provided by KEN, the Office for Vocational Training and Labor (OFPE), technical ministries and public enterprises, and by private training institutions (Annex 4)\. In 1986-87, KEN provided formal technical/vocational education covering 25 different specializations to about 52,000 *tudents in grades 7 to 9 leading tu a skilled worker diploma; 26,000 students in grades 10 to 12 leading to a technician diploma; and 9,000 students in grades 10 to 13 leading to the technical Bac\. The best performers in the technician stream may enroll in a 13th year of training in order to obtain the Bac and to enter university education\. OFPE is a public enterprise under the Ministry of Social Affairs (MAS)\. Its main responsibilities are to design and implement employment promotion policies and programs, mad to provide training either directly or through other public and private institutions\. The Vocational Training Law stipulrtes that OFPE is also in charge of the coordination of all vocational training activities in Tunisia\. OFPE is financed through t sfers from the General Budget\. At the same time, a payroll tax (Taxe à la \.ormation Professionnelle, TFP), equal to 2 percent of the wage bill of companies in the public and private sector, is collected by the Treasury\. 2\.06 OFPE provides formal training (for about 4,500 trainees in 1986-87), and continuing vocational training (for about 3,000 people in 70 Vocational Training Centers (CFP) in 1986-87)\. OFPE also provides apprenticeship training\. In 1986-87, 18,000 out of an estimated 68,000 apprentices in the country vere registered with OFFE, but only 2,000 vere actually following courses in OFPE's training centers\. Technical ministries and public enterprises run training programs to meet the needs of their respective sectors\. In 1986-87, some 8,600 trainees were enrolled mainly with the Ministry of Agriculture, the Handicraft National Office, the Tourism National Office and the Ministry of Public Health\. Finally, a private vocational training sector operates with a capacity of about 20,000 training places in separate facilities, mainly for office/clerical skills\. Major Issues in the Education Sector 2\.07 Despite the achievements of the past decades, access to basic education is still denied to many, and there are still deficiencies in the quality of education programs and in the efficiency of educational administration and management\. At the same time, the current budgetary constraints make it unlikely that additional resources will be made available to the sector\. Access to Education 2\.08 There has been much improvement in the accessibility of schools to children\. The net enrollment ratio among 6-14 year olds increased from 60 percent in 1975 to 76 percent in 1984\. Today, practically al! 6-year old children are enrolled in first grade\. Nevertheless, significant differences exist in net enrollment ratios between urban and rural areas and between males and females, as evidenced by Table 1 in Annex 3\. 2\.09 There has been a steady increase in the absolute number of children in primary schools between 1981-82 (1 million) and 1987-88 (1\.3 million)\. However, the rate of increase in enrollment has been steadily declining -- 5\.8 percent in 1982-83 to 1\.5 percent in 1987-88\. The current rate of  -6 increase is belov the population growth rate and results from difficulties in maintaining achool attendance among the most marginalized groupu of children in underprivileged and dispersed rural and peri-urban communities\. The growth in enrollment in primary education (grades 1 through 6) has not been paralleled by an increase in the capacity of lover secondary schools (grades 7-9)\. The success rate in the lover secondary admission examiniation has generally been very low (27 percent in 1987), (Table 3 of Annex 3)\. This has resulted ln sharply increased repetition and drop-out rates especially in the upper grades (Table 2 of Annex 3)\. 2\.10 The vocationally-oriented programs at the level of lover secondary education 'special primary grades 7, 8 and the three-year terminal vocational education program) have been used as a means to retain children who would othervise be rejected from the system\. These programs do not prepare for specific jobs in the labor market, nor do they provide any sound technical knowledge\. The same can be said about the three-year technician training program at the level of upper secondary education\. There ls an urgent need to phase out the very inefficient and costly MEN vocational education programs and reallocate resources to an orderly expansion of lower general secondary education (grades 7 to 9)\. 2\.11 There is evidence that educational disparity among regtons, once a significant problem, is being reduced\. Furthermore, not all the disadvantaged areas are rural or non-communal -- the highest failure rates in public examinations are not all in rural or non-communal areas\. Although fewer girls than boys are enrolled in primary schools, the gap has been narrowing with a steady increase in the proportion of girls from 42\.3 percent in 1981-82 to 44\.7 percent in 1987-88\. At the secondary level, 32 percent of the scholarship students are girls -- about the percentage of girls among boarding students, but significantly lesa than the proportion of secondary school students who are girls (42\.8 percent)\. It is possible that parents are more hesitant to send girls away from home to boarding schools\. Providing more schools for grades 7, 8 and 9 in the disadvantaged areas would help reduce the gender gap as well as the disparity between regions\. There is an urgent need for extensive rehe\.oilitation of some 1,600 primary and 300 secondary schools\. Adequate facilities, including sanitary blocks and canteens, are important in schooling young children\. At the moment, some 800 primary achools can only provide cold meals to the students because they lack adequate canteens\. Ouality of Education 2\.12 There is a widcspread impression among educators in Tunisia that the quality of education has deteriorated\. A large number of students seem not to master the basic skills of reading, writing, and arithmetic by the end of primary achool\. Moreover, there are very high repetition rates throughout primary education (between 20 and 30 percent) The main causes of these quality problems are: programs and curricula; teacher training and teaching practices; and educational resources\. 2\.13 Programs and Curricula\. Primary school curricula have been subjected to changes through additions and deletions without benefit of an integrated approach\. For example the teaching of French has begun in either grades 2, 3 or 4 over the years because of fluctuating policies\. The frequent changes inject a feeling of instability among teachers and administrators as well as  - 7 - children and parents a\.J increase the cost and complexity of textbooks design and distribution\. There has also been nome inconsistency in whether elementary achool teaching of French should focus on terminology used in subjects that are taught in French in the eecondary achool, or on teaching French as a modern language\. 2\.14 Another problem is that curricula are overloaded (<able 4 of Annex3)\. Students at both primary and secondary levels suffer from fluctuating classroom schedules\. At nome grades the achedules are too heavy, and the discrepancies among grades should be eliminated\. There is also a need to strengthen the science and technology curriculum and to update programs in general\. 2\.15 Teacher Training and Teaching Practices\. Primary school teachers are 1-ained in eight Teacher Training Schools (Ecoles Nationales d'Instituteurs - ENI) which recruit at the end of grade 9\. Studies last four years, plus one year of internship-cum-study\. This system is costly (practically all students are boarderu and receive otipends) and duplicates much of the general secondary program\. Recently, however, in order to meet the demand for new teachers, the MEN has begun recruiting Bac graduates who attend approximately four weeks of in-service training during their first year of teaching\. There are reasons to belieie, both on economic and pedagogical grounds, that teachers should be recruited ar the baccalauréat level and provided with one year of intensive study followed by a second year of internship combined with further training\. 2\.16 Secondary teacher education takes place in two Higher Teacher Training Institutes (Ecole Normale Supérieure, ENS), one specialized in scientific subjects and the other in literary ones\. Admission to ENS is subject to the process of orientation that governe university admission for Bac graduates\. These ENS train secondary school teachers and trainers for the various ENI as well as inspectors and pedagogic assistants\. The program of studies i\. heavily subject matter-oriented throughout the four years\. Pedagogic training starts in the third year of study and is expanded during the fourth year to include a study of teaching methods, classroom observation and supervised practice teaching\. The present teacher training needs to be updated\. New subjects, such as evaluation and testing, need to be introduced as well\. A one-year program for pedagogical training of licenced graduates (Bac + 4) who are selected for secondary school teaching, should also be developed\. 2\.17 The existing pool of teachers should also receive intensive in-service training to acquaint themselves with the new elements of pedagogy being introduced\. At present, classroom teaching in secondary schools is directed towards above average students\. Those who cannot keep up are left behind to repeat the class\. There is a need to modify these practices and, in particular, to introduce diagnostic testing and remedial instruction\. Efficiencv of Educational Administration 2\.18 The structure of MEN has not generally been adapted to the very rapid development and increasing complexity of the education system\. Shortages of qualified staff have beset the implementation of educational policies and programs\. ,\.o9  2\.19 Oraanizational structure\. The MEN's General Directorate of Programs and Continuing Education has responsibility for curricula, textbooks, and in-service teacher training\. Curriculum development itself has been the vork f,f committees made up of inspectors, teachers, MEN officials, and other concerned groups\. Currently, there are no curriculum development specialists\. The committees have a role to play in setting up general guidelines and reviewing draft curricula, but the substantive ground work should be prepared by a professional curriculum unit\. Similarly, improvements in textbook preparation and production depend on securing professionals for editorial, design and layout, production, and distribution tasks\. The desireable comprehensive approach to curriculum development with integration of a textbook series would mean institutionalizing a cooperative process whereby a group of designers, artists and photographers work with editors and authors\. 2\.20 Ber'ause of the importance of having good teachers, teachers preparation and continuing professional education must be dealt with by a single unit in MEN\. Different aspects of teacher education are now handled by a variety of directorates\. Finally, the Directorate of Examinations is currently a purely administrative body and does not contribute to the academie content of examinations or to using the examination results to improve the quality and efficiency of education\. This Directorate's mandate should be redefined to include appropriate testing mechanisms and the introduction of diagnostic testing into the classroom\. 2\.21 Availabilitv of oualified staff\. In general, school directors and administrators at the regional and central offices are appointed with little Lanagement training\. MEN officials are aware that measures need to be taken to remedy this situation\. 2\.22 The duties of primary school inspectors are more administrative than pedagogic\. Furthermore, the number of teachers per inspector is high and increasing (179:1 in 1981-82 compared to 225:1 in 1987-88)\. Pedagogic guidance should be emphasized as it is important to the quality of education\. There also seems to be a shortage of well-trained inspectors who can promote good school management and promote efficient resource use\. Budaetarv Constraint 2\.23 During the Sixth Plan 1982-86, the largest share of public recurrent expenditure went by far to the education sector, which accounted for over 27% of total Government recurrent budget (Title I expenditure) or absorbed over one third of recurrent operating expenditures (excluding debt service)\. Education decisions were taken largely under the assumption that, as in the past, budgetary resources will somehow become available\. The need to adjust to fiscal constraints prompted the authorities to limit the growth of budgetary resources allocated to the educational ministries\. Annex 5 provides a breakdown of both investment and recurrent budgets by level of education over the period 1980-1989\. While the number of pupils in primary school grew by 14\.7 percent from 1982/83 to 1987/88, for the same period the recurrent budget for primary education increased by 4 percent, in real terms\. At the same time the share of non-salary expenditures in the recurrent budget decreased from 3\.4 percent in 1983 to 2\.6 percent in 1988\. This means that essentiJl educational materials have not been made available to the classroom\. In addition, existing schools are generally not equipped with  -9- adequate libraries and there is a need to provide a core of standard reading books, in addition to texta used in the classroom\. Given the inefficiencies described in this chapter, the Government is hard pressed to implement meamures capable of rapidly and substantially improving the sector's use of physical, human and financial resources\. Unlesa the Government acte promptly to inatitute an appropriate program of education sector reform, the continuation of present policies would translate into either larger claima on public expenditures or in further deterioration in the quality of education\. Major Isues in Vocational Training 2\.24 The serious unemployment situation which prevails today calls for rapid resolution of the problems besetting the vocational training sub-sector\. The main ones are: the weak relation between traini\.ig and employment, the slow development of apprenticeship training and dual training, the lack of resources for training, and the quality of training programs\. Trainina for Emalovment 2\.25 The role of the Ministry of Education and of the Vocational Training and Employment Office, the main provider of vocational training in Tunisia, have not always been complementary\. While the vocational education programs referred to above are also provided by MEN, OFPE has been pressed to train a growing number of achool leavers and school dropouts who do not necessarily gain productive employment after their training period\. OFPE has not been able to adequately train young people for specific jobs in the labor market or workers already in the work force, thus creating employer dissatisfaction with OFPE training graduates\. In future OFPE's training programa should be tightly linked to economic needs rather than being driven by the supply of school leavers\. 2\.26 Until recently, the government treated vocational training and labor market management separately\. With the recent creation of the OFPE, the Vocational Training Office and Labor Office were combined, providing a good opportunity (unique among countries in the sub-region) to focus on developing appropriate labor market linkages (Chart IV)\. Appropriate industrial representation in vocational training should be developed at the national level so that policies can be shaped jointly with OFPE officials\. Management committees should be estasiished in all training institutions, so that employers can have a grdater say and communicate more easily with the centers\. Finally, training agreements between OFPE and industry associations should be promoted\. This would help define the respective roles of the two parties in establishing the objectives of training courses, in certifying graduates and managing training centers\. ADvrenticeship Trainina and Dual Training 2\.27 There is a long tradition of apprenticeship training in Tunisia\. However, until 1972 this training was mainly unregulated with apprentices receiving all their training on the job without any oversight from specialized training organizations\. This type of training has not been successful\. Apprentices were not taught the theory of their trade, and their practical training was geared to very narrow production activities\. The apprenticeship training system is often used as a way to recruit unskilled labor below the minimum wage\.  - 10 - 2\.28 An Apprenticeship Training Law (No\. 72-57) vas passed in 1972\. This lav encourages enterprises in the modern sector to take apprentices by alloving them to pay apprentices less than minimum vage and by providing other financial incentives\. Despite these incentives, the apprenticeship training syste\. has developed 8lovly\. In 1987, mome 18,000 young vorkers out of a possible 68,000 had an apprenticeship training contract, of vhich only 2,000 vere actually released for the fev hours per veek needed to attend OFPE vocational training courses\. The apprenticeship training system needs to be developed further as it is an important source of training for the groving number of young people entering the labor market\. 2\.29 Another potential way of providing job skills to people is "dual" training\. Dual training combines on-the-job training and formal training provided vithin formal training institutions\. It should be tried, on a pilot basis and extended to major productive sectors\. Mobilizini Resources for Training 2\.30 The vocational training system is intended to play a major role in the economy\. A growing number of young people look at vocational training as a vay to gain productive skills, and employers are avare of the benefits of making the best use of their human resources, particularly in developing export markets\. Furthermore as the labor market becomes more flexible, employees vill change job more often, making adult training of prime importance for the future\. It is unlikely that the OFPE will be able to meet all these demands by itself and, accordingly, an increasing role should be assumed by employers and by the private vocational training sector\. 2\.31 The reluctance of some employers to get involved in training threatens Tunisia's economie development at a time when intense world market competition and rapid technological change require the best possible use of human potential\. Employers need to invest in training either directly by developing in-house training, or indirectly by sub-contracting -- whilst still bearing the full cost of training -- to public or private training institutions\. OFPE should provide extension services to companies to help them design and implement training plans\. 2\.32 Private vocational training is mainly geared towards the commerce and services sectors\. It is developing steadily (some 20,000 training places vere available in 1988) but not fast enough to meet the groving need for qualified manpower and from young people seeking jobs\. Private vocational training la regulated by the November 1958 Law which needs tO be revised to provide more flexibility and appropriate incentives for potential private investors\. The present legislation does not allow accreditation of training centers for more than a year, thus discouraging investment in facilities and equipment\. At the same time, OFPE could improve its advice to potential investors and its control over the quality of programs\. 2\.33 A 2 percent payroll tax, called the vocational training tax (TFP), has helped raise revenues for vocational training\. The amount actually collected in 1986 (TD 12 million) is roughly equal to total OFPE recurrent budget (Annex 6)\. Tax rebates (ristournes) totalling about TD 2\.4 million are given to companies which can demonstrate specific expenditure for training  - il - their staff\. The payroll tax has not proved to be efficient because: (i) it is not earmarked and Soes directly to the Treasury; (ii) it in perceived >y employers as just another commercial tas unrelated to training services received, if any; (iii) procedures for obtaining the tai credits are quite complicated and in any case many companies do not undertake any training at ail; (iv) the companies which do get tax rebates are large and could afford to train their staff even vithout tai credits; and (v) the relevance and quality of the training funded through tax credits are questionable\. There is an urgent need to revise the legislation to improve incentives for *mall and medium scale enterprises to undertake training\. Relevance and Oualitv of Training Proarama 2\.34 Program designers have not developed programs which are relevant to industry's needs, partly because they lack job profiles prepared in collaboration vith employers\. They also lack experience in methodology and technology, and rely on programs developed in foreign countries\. The structure of programs and curricula needs to be updated, and new programs need to be introduced as new trade specializations arise\. 2\.35 The quality of training is also hampered by the relatively low qualifications of instructors\. Salaries and benefits for instructors are based on MEN's general teacher scale rather than on industry and commerce\. The job status and salaries of instructors must be increased to attract and retain qualified staff\. At the same time, instructors should have had substantial vork experience in industry or should at least be provided with that experience during their teaching careers\. 2\.36 Finally, there is not, at present, any appropriate skills guild certification system\. Trainees should not be evaluated on the basis of the time they have spent ii\. a training institution, or on the basis of having completed certain formal course requirements\. Rather, they shoula be judged by the extent to which they have mastered specific skills\. Trainees need flexible training programs which use modular programs where learning is self-paced\. The mastering of specific skills should be evaluated through a national certification system to be developed in collaboration with professional associations in various sectors\. Government Education/Training Strategy and Bank Lending Government Strategy 2\.37 Overall government strategy for the sector is embodied in the Seventh Economic and Social Development Plan (1987-1991)\. But many reforms nov contemplated go beyond the measures proposed in this Plan and were developed with Bank analytical assistance\. The reform strategy is described in detail in the next Chapter of this report\. Bank LendinR Strateav for the Sector 2\.38 B&nk strategy is to support the Government's efforts to adapt the education/training sector to the economic and social needs of a rapidly changing society\. In the 70s and early 80s the Bank focussed on standard  - 12 - investment projects in general education and agricultural and industrial vocational training\. Over the past two years, the Bank ha\. become more involved in policy dialogue, and has advised on and supported a broad range of reforms in the education/training sector, working in close collaboration with Tunisia policy-makers and educators\. 2\.39 Present Bank *trategy calls for increases in the effici tcy of investmenta in human resources through major structural changes ,n the Government's policy framework and significant improvement in the management of educational resourcep\. It also calls for the business community and individuals to play , greater role in shaping the education and training system to their needs\. The Bank generally supports the proposed reform program presented in the next chapter, but it considers also that the higher education system urgently needs to be rationali23d\. This would ensure that the number of university students is kept in line with available financial resources and would prevent further deterioration in the quality of education\. The Government has opted for a two-phase approach, deferring to a second phase measures related to higher education access and financing\. This second phase is now being prepared for extensive political consultations, and the Bank remains closely involved\. ExDerience vith Past Lendin£ 2\.40 Bank lending for education in Tunisia (two IDA credits and three IBRD loans) has supported Government's programs to improve primary and secondary schooling, teacher training, the employability of school leavers, and formal and non-formal trade training for skilled workers\. The first project (Credit 29-TUN, US$5\.0 million in FY63) financed four new secondary schools, the expansion of one and an extension of a teachers' college for training lower secondary teachers\. The second project (Credit 94-TUN, US$13\.0 million in FY67) financed nine new secondary schools, expansion of six existing secondary schools and equipment for 27 secondary schools\. 2\.41 The third project (Loan 1155-TUN, US$8\.9 million in FY76) helped introduce practical vork (ITM) into grades 5 and 6, and helped introduce an experimental post-primary grade 7 and 8 program\. The project vas amended in March 1979, and the revised project provided: (i) workshops for 325 primary achools; (ii) the expansion or equipping of seven Primary Teacher Training Colleges (ENIs) so that they could train practical teachers for the workshops; and (Jii) technical assistance for planning studies\. The project was completed in March 1983\. The Project Performance Audit Report (PPAR), issued in June 1985, stated that the educational objectives had been attained, and that the dedication and continuity of the personnel in MEN's Project Implementation Unit had contributed to the success of the ITM Program\. However, the report indicated that the technical assistance element of the project was less successful, mainly because of the lack of counterparts in the education planning unit and the reluctance on the part of the Borrower to recyuit experts\. 2\.42 The fourth project (Loan 1961-TUN, US$26\.0 million in FY81) aimed to help Tunisia develop formal and non-formal trade training\. It was designed to help the Vocational Training Office add seven vocational training centers and one apprentice center, expand or equip 17 existing and three existing  - 13 - apprentice centers, and provide related technical assistance to reinforce planning and coordination\. In 1986, the loun agreement vas amended to: (i) reduce the loan taount from US$26 million to US$21 million because of savings generated by the strength of the dollar in the early 1980s; and (ii) delete the apprentice center component, equip tvo new vorkshops and purchase mobile training units\. Although implementation vas slow, all componente of the project vere completed in December 31, 1988\. A technical assistance program, to support the start-up of the training component of the proposed education and training sector loan in also financed under this loan (para\. 4\.17)\. A PPAR t8 being prepared\. 2\.43 The fifth project (Loan 2230-TUN, US$27,0 million in FY83) assists the Government implement the Sixth Plan strategies for agricultural education and training, and for primary schooling\. The project helps provide equipment to six existing Higher Level Agricultural Institutes, four Agricultural Secondary Schools, 15 Agricultural Training Centers and helps piovide TA and equlpment tc the National Agricultural Instructor Training Center and the Bureau of Aaricultural Education Studies and Planning\. The project also includes support for construction and equipment of four new ENIs and of a study of technician training requirements\. In 1988, the loan e3reement was amended to extend the benefits of the project to a number of institutions not included in the original design\. Implementation of this project is satisfactory\. The projected closing date is December 31, 1989\.  - 14 - \. \. 1mou PLOG Objectives 3\.01 The Government han embarked on a far reaching reforu progra\. to *ddreas the issues described it Chapter II above\. This refora prograu han been prepared in collaboration vith local, regional snd national administrations sad extensive consultations vith teachers and parent-teacher associations have taken place\. This process led to the publication of a formal report discussed vith and agreed by the Parliament and the Governmentl/\. Th objectives of the reform program are to msake the provision of education more consistent vith the couatry's mediu tern developaent needs, more equitable asd more cost-effective\. It vould do this through three major policy changes: (i) allocation of a larger share of resources to a self-contained basic education cycle of sound quality (grades 1 through 9); (ii) improvement in the quality and relevance of secondary education (grades 10 through 13) vhile better controlling acceus to it; (iii) promotion of pre- and in-aervice training in collaboration vith companies in the public and private sector and mobilization of additional resources for training\. 3\.02 The reform program, described in Annex 1, and summarlzed belov, comprises a number of specific measures designed to meet each of these objectives\. Performance targets, expressed in terme of enrollments, staff and facilities, are presented in Annex 7\. The new structure of the education system is presented in Chart II\. Policy Actions in 6eneral Education Introduction of a 9yvear Basic Eduertion Ceyle 3\.03 The principle of Basic Education is supported by the highest government authorities\. The above-mentioned Government report proposing the nev system places it vithir\. a broad process of educational reform\. Basic education is to consist of a cycle of formal schooling covering grades 1 through 9, with the aim that it vill become accessible to a larger number of students and ultimately become compulsory\. The Basic Education program calls for the cancellation, by June 1993, of the secondary achool admission examination at the end of grade 6 and for a gradual increase in the flov of students through grade 9\. Specifically, the passing rate from grade 6 to grade 7 (27 percent in 1987) vill be increased starting in 1992-93, reaching 70 percent by June 1995\. In parallel, MEN is progressively phasing out post-primary grades 7 and 8 and tne lover secondary vocational education cycle, vhich are presently offered to students who do not gain access to general lower secondary educ:tion (para\. 2\.10)\. Restructurina Secondarv Education 3\.04 The education reform program anticipates that nalf of the students vho have completed 9 years of oasic education vill then enter the labor market, either directly or after a job speciflc training period\. At the end of grade 9, students vill be selected on the basis of a competitive l/ Ministère de l'éducation nationale - Rapport sur l'Ecole de Base - Septembre 1988  - 15 - examination to be introduced by June 1996\. The promotion rate from grade 9 to grade 10, the firet grade of secondary education, vill be progressively decreased from its present level of 72 percent to 56 percent by 1994-95, so as to give approximately the same percentage of the age-group as nov to the upper secondary cycle and to tne baccalauréat\. 3\.05 The structure of secondary education vill alo be modified\. The 3-year technical/vocational training progrun lesding to a technician diploma at the end of grade 12 vill be progrtasively phased out\. MEl has already identified a number of vorkmhop facilities which vill become redundant under these reforme and vill be transferred to OFPE for vocational training activities\. At the saze time, secondary education vill comprise a two-year core program (corresponding to grades 10 and 11), followed by two years in one of three major streams: humanities, science and technically-oriented education\. Within each stream, specialized options vill be offered to students during the last two years of secondary education\. Under the new system, the distinction between general and technical education curricula will progressively disappear\. Technical education will increasingly emphasize general technical/ technological subjects\. There will be less emphasis on the importance of practicel training in heavily equipped workshops and increasing training in specialized laboratories\. MEl will leave specialized pre-employment training to more specialized organizations such as OFPE Teacher Trainini Reform 3\.06 Primary school teachers will be recruited at the bac level and provided with formal pedagogical training\. Some 200 bacheliers have been recruited this year in the various ENIs\. They will receive one year of intensive training followed by a one-year combined Ftudy and primary scliool internship\. Extensive in-service teacher training vill be phased in alongside the progressive implementation of the Basic Education Reform\. This viil allow teachera to be introduced to the reform and to the changes in curricula, programa of study, textbooks and instructional materials\. In all training, special emphasis will be given to diagnosing academic weaknesses in students and providing remedial instruction\. This should help reduce the high repetition and dropout rates\. 3\.07 The ENS teacher training program for secondary achool teachers will be revised in cooperation with the University faculties concerned\. The revisions will reflect the evolving needs and changes in secondary education with particular consideration to the needs of the teaehers of grades 7-9\. A one-year subject-specific pedagogic training of university graduates will be introduced\. Programs will be developed for the pedagogic training of graduates who have already started teaching without such training, and for upgrading the level of secondary school teachers who do not have a university degree\. Reform of Programa and Curricula 3\.08 The MEN Directorate of Programs and Continuing Education has set up sectoral committees to revise curricula and programs of study at all levels of pre-university education\. The philosophy and objectives of Basic Education will guide the creation of a new, comprehensive curriculum\. In developing the  - 16 - curriculum, a number of outatanding issues are expected to be settled: when to start teaching a secund language, the role of physical education and of manual vork (ITM), and how to alleviate the excessive load at some grade levels\. Work i\. still needed to finalize the sciences and technology curricula for grades 7-9 and to develop vew curricula for the varlous upper secondary education streama\. The implementation of Basic Education is scheduled to start in September 1989 vith the firet three primary education grades\. The curriculum for these three grades has already been finalized and the correspondin3 textboooka prepared\. The curricula for the remaining grades -- 4 through 13 -- and the corresponding textbooks vill follow grade by grade\. Institutional and Administrative Reforme 3\.09 MEN has recently decided to change the structure of its regional administration\. The regional units responsible hitherto for primary education anu secondary education are currently being merged into one siDgle regional administration (Délégation Régionale à l'Enseignement Primaire et Secondaire, Chart V)\. This new structure is expected to facilitate the implementation of the reform program and to promote greater efficiency in the utilization of administrative staff\. 3\.10 At the central level, MEN is developing an action program to institutionalize the process of curriculum deveïopment, which is now left to various committees (para\. 2\.19)\. At the same time, MEN is preparing an action plan to establsh a unit to manage the professional preparation and growth of teachers, with particular attention to training nLeeds assessment and training program development (para\. 2\.20)\. MEN has also decided that the Directorate of Examinations will assume a leadership positioe in the academic and technical aspects of the preparation and correct\. n of examinations\. 3\.11 As for the management of individual s^hoo'_s, MEN is the process of revising procedures and introducing new norms and standards\. These will promote greater accountability on the part of individual school principals, provide greater flexibility in the use of resources, and facilitate the flow of information from one administrative level to the other\. In parallel, MEN will step up its provision of in-service training to school administrators\. Policy Actions in Vocational Training Institutional and Administrative Reforme 3\.12 The Government has decided to create a High Level Vocational Training Committee to design and coordinate all vocational training policies\. Membership of the Committee will include representatives from the various ministries and organizations providing training, as well as representatives from industry, agriculture and services\. In 1988, the Government created the Office of Vocational Training and Labor (OFPE), with mandate to supervise labor market operations and coordinate training activities in the country\. This shows the determination of the Government to plan training programs in accordance with labor market signals\. An Orientation Law, which is expected to be passed in 1989, will provide a framework for vocational training policies, and vill strengthen the role of OFPE as coordinator of the entire vocational training system (para\. 2\.26)\.  - 17 - 3\.13 OFPE has mer,ed the separate regional administrations responsible respectively for employment and vocational training\. Chart VI shows the typical new structure of a regional employment and training services\. The essential features of this structure are: (i) special units in charge of developing cooperation with enterprises in the region; (ii) information and "career counsellng" units to provide assistance to young people seeking employment or training; and (iii) operational units which integrate employment placement activities and training placement activities vithin operational units (Agences de l'Emploi et ue la Formation Professionnelle)\. Measures Aiming at Improvina Linkaaes with Productive Sectors 3\.14 All the above-mentioned institutional reforms vill help make the vocational training system more responsive to its users in industry\. In addition, OFPE is trying to strengthen links with industry\. Representatives from productive sectors are to be included in OFPE board of directors\. And OFPE is negotiating training agreements with various industry associations\. These training agreements will allow employers to be closely associated to the design of training programs, to the provision of training through detachment of experienced technicians, to the certification process and to the management and financing of the sectoral training centers\. The last measure concerns the generalization of Management Committees within training Institutions (Comités de Parrainage) with appropriate employers representation\. Promoting ADprenticeshi:> Training and Dual Training 3\.15 OFPE is in the process of revising the apprenticeship training regulations\. The specifics of the new system to appear in the Orientation Law are: (i) chenging and broadening the eligible age range from 14 - 18 years old in the present system to 15 - 20 years old to allow more people to benefit from the system; (ii) expanding the benefits of the system to the agriculture sector; (iii) opening vocational training centers to apprentices; and (iv) giving recognition of training level to apprentices upon completion of their training period\. In addition, financial incentives will be provided to employers who will recruit new apprentices through the Employment, Promotion and Skill Acquisition Fund (para\. 3\.19)\. 3\.16 Finally, OFPE intends to promote dual training activities in collaboration with industrial establishments\. The first operation concerns the textile sector and an agreement has recently been signed between OFPE and the National Federation of Textile Industries (FENATEX) to provide training to employees in the sector\. Other agreements are expected to be signed vithin the next few months with other 'r\.dustry associations (para\. 4\.15)\. Reform of Proarams and Certification 3\.17 OFPE management has decided to upgrade the existing training programs and to develop new ones to meet the needs of industry\. The recent creation of the Pedagogical Engineering and Resource Center (CRIP) will strengthen OFPE's engineering and research capability\. CRIP is responsib]e for the identification, design anicd preparation of training programs\. Employers will be closely involved in all stages of program development and in particular in  - 18 - ensuring that the programe meet employer's needs\. In order to promote flexibility and efficiency, emphasis vill be placed on self-paced modular programs, vith each module aime' at the acquisition of professional techniques necessary for a specific aspect of a trade\. It ha\. alo been decided to set up a national system of certification\. This will be done sector by sector with industry representatives sitting on each board\. Certification vill deperni oni the naastery of profesMional techniques, rather than on the type of courses followed or t;e performance during the training period (para\. 2\.36)\. Chanzing the Status of Instructors 3\.18 The statua of vocational training instructors is being reviewed in order to attract more qualified and experienced professionals\. Vocational training instructors will be given a higher salary grading\. Experience in industry will be emphasized and higher salaries should help attract and retain qualified instructors from industry\. Existing OFPE instructors will undertake specific in-service pedagogical and practical training programs developed by the Rades Training Institute\. Finally qualifïed technicians from industry who are relessed to teach in training institutions will receive special incentives (para\. 3-19)\. Reform of the Vocational Trainina Tax 3\.19 The Government has decideà to modify the existing vocational training tax system\. The amount of the tax applied to manufacturing industries will be reduced from 2 percent to 1 percent of the total wage bill\. This wiyl reduce general revenues by 4 to 5 million TD from their current level but OFPE will continue to be funded through general budget transfers as in the past (para\. 2\.33)\. Non-manufacturing industries will continue to pay the 2 percent rate and half of the overall tax proceeds will be earmarked into a special fund -- Employment Promotion and Training Fund (Fonds Spécial de Développement de la Formation en Entreprise et de l'Insertion Professionnelle des Jeunes)\. lne other half will remain with the Treasury, as is presently the case with the whole tax\. This fund will be used to promote training undertaken by industrial companies, as well as to finance specific employment promotion programs\. Up to one third of the amount of the fund will be used to finance: (i) dual training activities undertaken jointly by industry and OFPE; (ii) apprenticeship training; (iii) firat year salaries paid to unemployed graduates recruited by companies through employment promotion programs (Stage d'Inititation à la Vie Professionnelle for example)\. The remaining two thirds would be used to: (i) finance training undertaken by small and medium scale companies; (ii) finance additional training by companies which already allocate the equivalent of 1 percent of their total wage bill to training; and (iii) pay salaries to qualified technicians released from their company to provide training in OFPE training centers\. The tax rebate system would be abolished\. Proiected ImDact of Prooosed Reform 3\.20 In addition to improvements in education quality, the reforms are expected to result in quantitative changes\. Annex 8 provides a summary of the impact of the reform program\. In primary education (the first 6 grades of basic education), improvements in the efficiency rate, especially in grades 5 and 6, wouild cause a decrease in the overall number of students by 60,000 over  - 19 - 1992-96 (8th Plan) and 109,000 over 1997-2001 (9th Plan)\. But the number of atudento enrolled in grades 7, 8 and 9 vould increase by 123,000 over 1992-96 and by 152,000 over the period 1997-2001\. The number of dropouts from grade 1 through 9 would be reduced by 104,000 and by 124,000 respectively over the same periods\. The reform would reduce the number of teachers for grade 1 through 6 by 1,500 during the 8th Plan and by 1,400 during the 9th Plan, and increase the number of teachers for grade 7 through 9 by 7,000 during the 8th Plan and 1,400 during the 9th Plan\. 3\.21 The financial impact of the proposed reform progran has been simulated using an education finance model developed vith Bank assistance in 1985\. as siiown in Annex 8, the proposed reform would require significant additional investments during the next two Plan periode -- TD 136 million over 1992-1996, and TD 38 million over 1997-2001, as compared to the base case scenario which projects the present system on the basis of past trends\. A portion of the additional investment costs necessary to finance the education reform would be offset by a relative decrease in the capacity needed for grades 1 through 6 due to the improved flow of students in thé system\. In the ten-year span covering the 8th and 9th National Plans (1992-2001), most of the additional recurrent expenditures involved in implementing the reform program for the Ministry of Education would result from large-scale hiring of teachers for the newly expanded, and ultimately universal, grades 7 to 9 (personnel salaries represent over 90 percent of MEN's recurrent budget), slightly offset by a decrease in the number of teachers for grades 1 to 6\. Estimated total additional recurrent expenditures generated by the introduction of basic education would amount to TD 71 million for the period 1991-96 and 143 TD million for the period 1997-2001, or a 3\.2 percent and 5\.7 percent increase over projected recurrent costs if the system remained unchanged (Aznnex 8)\. The total MEN recurrent budget would grow at an average annual rate of 3\.2 percent (in real terms) during the 8th and 9th Plans, as compared to an average annual real growth rate of 2\.7 percent if the basic education program was not implemented\. Tunisia's GDP is projected to grow at an average of 4 percent for the next several years\. The additional recurrent expenditures ger\.erated by the introduction of the proposed reforms would therefore be absorbed by projected budget revenue growth\. The share of total Government recurrent budget allocated to MEN is projected to remain at its current level of about 25 percent\. Finally, it should be noted that the unit recurrent cost per grade 9 completer would decrease by 25% by 1996 and by 30% by 2001\.  - 20 - IV\. TER PROPOSBD SECTOR IUVSlMiOnT LOau Rationale and Objectives 4\.01 The Bmnk han been discussing the package of education reforma outlined ln the preceding chapter and in Annz1, with the Goverument since late 1987\. The reform program which emerged from these discussions, and which the Governaent is comitted to implement, fully embodies the recomendations made by the Bank throughout these discussions\. The purpose of the proposed Loan is to support the reforma and assist the Governuent in carrying them out\. During negotiations, the Government provided assurances that the policy measures presented in Annex 1 vould be implemented vithin the time frame specified and that no later than October 31st of each year, progresa achieved in the reform program, the achool construc:ion program and the MENR proposed investment and recurrent budgets for the folloving year, including the level of uon-salary expenditures would be reviewed vith the Bank (para\.7\.01)\. Based on such review, all necessary measures to adjust such reform program, construction program and proposed investment and recurrent budgets would be taken\. The Investment Program 4\.02 The agreed reform program generates the need for an investment program\. This program, developed by MEN on the basis of school enrollment projections, provides a detailed assessment of additional infrastructure and equipment required for each level of the education system\. This investment program, presented in a formal report (para\. 3\.01) has been approved by the highest Government authorities\. The Bank reviewed the proposed program and agrees with its main parameters and the design, costing and phasing of all its major elements\. Taking into account the MEN implementation capacity, the investment program for basic education (grades 1-9) is estimated to cost TD 138 million (US$160 million) for the five years covered by the proposed loan (1990-1994)\. 4\.03 The proposed Bank financing -- US$80 million for the Ministry of Education would cover approximately 100% of the foreign exchange coats of this investment program\. This would cover the following investments: (i) Rehabilitation of some 1,600 primary and 330 secondary schools; (ii) Construction and equipment of 800 achool canteens; (iii) Construction and equipment of some 130 new upper basic education achools (grades 7, 8 and 9); (iv) Distribution of educational materials on the basis of pedagogical improvement plans; (v) Expert services and fellowships to improve the quality of programs and the efficiency of educational management; and (vi) Establishment of a major in-service teacher training effort within MEN\. With regard to OFPE, the agreed reform program will be supported by a financing in the amount of US$15 million for the provision of civil works, equipment and technical assistance for the development of sector dedicated vocational training centers in collaboration with industry associations and based on a sub-project approach\. Part A: Ministry of Education 4\.04 Rehabilitation of Existina Primarv and Secondarv Schools\. The proposed loan would finance the rehabilitation of some 1,600 primary schools r- 1  - 21 - and soue 330 secondary achools which require urgent attention (para\. 2\.11)\. For primary echools, the rehabilitation program consiste of minor work necesaary to make them function properly\. This includes repair of walls, windows and ceilings, waterpro3fing, plastering and painting and rehabilitation of sanitary blocks \.here necessary\. This program is based on a survey of all primary achools, completed in 1987 by MEN's regional administrations, vith assistance from the Ministry of Equipsent\. 4\.05 For s¢condary echools, the program includes: general rehabilitation of 330 achools, repair of electrical systems in 219 schools, repair of vater supply and distribution in 235 achools, repair of sanItary blocks in 279 *chools and repair of cafeterias in 112 achools\. A detailed assessnment of this program has been completed by the regional delegations of the Ministry of Equipment, ia collaboration with school directors, and vith help from specialized agencies\. 4\.06 Construction of School Canteens\. The proposed project vould finance the construction and equipment of 800 canteens in existing achools vhich, at present, can only provide cold meals (para\. 2\.11)\. Better meals would increase school attendance in rural and peri-urban areas and improve educational standards\. The design of these canteens vas developed by MEN's Division of Construction and Equipment to fit within the dimensions of a typical classroom\. Standard canteen equipment such as stove, tables, chairs, pots and pans would also be provided\. 4\.07 Construction of New Schools <grades 7\. 8 and 9)\. The proposed sector loan vould finance the construction of approximately 130 upper basic education achools, corresr,nding to the third cycle of basic education (grades 7, 8 and 9)\. As part of the proposed reform program, the total number of students in grades 7, 8 and 9 vill double by 1995-97 and the Government intends to build 314 nev upper basic education achools of an average size of 700 students each during the 7th and the 8th Plans\. During the five-year period covered by the proposed loan, September 1989 to September 1994, the MEN investment program includes the construction of 156 new schools\. On the basis of actual construction experience in 1988, it is estimated that 130 schools could be built over the 5-year period, or approximately 26 per year\. The proposed loan vould give priority to the creation of schools vithout boarding facilities in small towns located in the regions where enrollment ratios are belov the national average\. The design of the proposed schools revieved during appraisal, has been developed by independent architecte in col_aboration vith MEN architects\. It includes 12 standard classrooms, 4 specialized rooms, one socio-culturel block, one administrative block and housing for the directors\. 4\.08 Complementarv equipment programe\. The ;roposed loan vould also finance the procurement of some complementary equipment and spare parts to help develop a Maintenance Center for servicing MEN training equipment\. This center is being developed vith assistance from the Belgian bilateral aid program\. As a first step, the Center vill be responsible for the repair of all the existing training equipment\. It vill also play a major role in organizing a maintenance system for the entire MEN technical school system, as well as in training maintenance agents\.  - 22 - 4\.09 The proposed loan vould also finance the acquisition of mome 250 micro-computers\. They vould be used in 15 pilot sections in existing secondary lycées which teach computer science, and two training centers where computer instructors are being trained\. Lycées are also used as training centers to provide short intensive courses for computer science teachers\. This is part of a plan to develop computer science in grade 13\. Starting with academic year 1989-90, computer science will be offered at the baccalauréat as a new option\. The computer equipuent financed under the proposed loan would coL ement the equipment already provided vith assistance from the Italian bilu\.eral aid program\. 4\.10 The proposed loan vould also finance the acquisition of 46 vehicles\. These will be used by the 23 MEN regional administrations to strengthen pedagogical inspection and control\. School inspectors have not been able to perform their duties adequately, because of lack of transportation\. Also, the introduction of a new basic education reform together with the changes in teacher training programs will require increased supervision on the part of pedagogical inspectors\. 4\.11 Distribution of Books and Education Materials\. The availability of reading books and educational materials is a key ingredient in the quality of education (para\. 2\.19)\. The proposed loan would finance about US$4\.0 million worth of books and educational materials, made available to the schools on the basis of pedagogical improvement plans submitted by individual school principals to the Ministry of Education for approval\. These plans would specify the objectives to be reached in terme of learning achievements, \.he target group and the activities to be carried out\. During negotiations, the Governnent provided assurances that MEN would distribute books and educational materials on the basis of pedagogical improvement plans prepared in accordance with criteria specified in Annex 9 (para\. 7\.01)\. 4\.12 Iistitutional DeveloDment\. The proposed loan would finance 104 months of expert services and 160 months of fellowships\. These would be used to develop key MEN programs and services so as to improve the quality of education and strengthen the management of the education system\. Technical assistance would cover the eight areas described below (see also Schedule I) and detailed terms of reference have been prepared: (i) Curriculum Design and Develooment: experts will help the Directorate of Programs develop a curriculum unit\. This unit will integrate the various sections concerned and vill assume the publishing functions of editing, design, illustration, and production management and control\. The experts will help streamline curriculum development and prepare guidelines for project design\. Area specialists will advise on curriculum development aspects and guide relevant sub-units\. One of the main functions of experts will be to train relevant MEN staff, and fellowships will be provided to a few selected staff\. Finally, study tours will be organized for key higher-level MEN staff\. (ii) Textbook Development and Publishing: experts will help set up a publishing/editing unit within the Directorate of Programs\. This unit will be responsible for controlling quality, evaluating drafts and manuscripts, working with authors throughout the preparation of their manuscripts, controlling design and illustration, and managing the whole process of publication from the initial planning to authorization to the National  - 23 - Pedagogic Center to print\. Fellowvhips vill be available for selected staff in this unit and study tours vill be organized as appropriate\. In addition, an expert on educational materials evaluation vill give a seminar on the development and une of grids for evaluating manuscripts\. (iii) Teacher Trainina: experts vill assist the establishment vithin MEN of a department, responsible for all teacher training and for improving the *ffectivenesu of the teacher training syster\. A training needs assessment exercise vill be completed to develop specific plana and programs for in-service training of teachers in parallel vith the progressive revision of curricula and textbooks\. Experts vill also contribute to the implementation of new policies/practices in pre-service teacher training programa\. (iv) Measurement and Evaluation: experts will assist the MEN's Directorate of Examinations strengthen its leadership in the preparation and administration of national examinations\. The experts vill also assist in the development of a bank of test questions for selected grades\. These banks vill also enable the Directorate of Examinations to develop standardized tests reliable enough to provide comparable data to be used for comparative evaluation\. Efforts vill be made to improve the evaluation and examination of pre-service and in-service teacher training programs, and to increase the country's participation in studies and research\. Fellovships vill be available for MEN staff to pursue a formal program of study in the field of measurement and evaluation\. (v) Educational Management: experts will help MEN develop, in collaboration with universities, training programs for educational administrators, such as inspectors and principals\. Experts would organize and conduct seminars on selected topics in educational management\. Study tours would be organized for MEN higher-level staff to visit foreign ministries of education or educational centers\. (vi) Maintenance of Buildings: experts vill help the Division of Construction and Equipment design a system of preventive maintenance for ail MEN schools, and identify financial, material and human resources necesssay to implement the program\. This assistance vould include organizing seminars for central and regional MEN staff\. During negotiations, the Government provided assurances that no later than December 31, 1990, the MEN would prepare a preventive maintenance plan for all schools, and thereafter would maintain adequately all schools (para\. 7\.01)\. (vii) Studies: the reform program will be evaluated in the final year of implementation\. This evaluation will cover quantitative and qualitative aspects as well as organization and finance, The study will cover both basic education and secondary education, and vill propose measures to correct any shortcomings (para\. 5\.13)\. A provision for undertaking studies on specific topics is also included in the proposed loan\. Topics could include, for instance, the development of remedial instruction, or the advantages of producing educational materials within the country\. The actual terms of reference for these studies will be developed later\. 4\.13 In-Service Trainini for Teachers: an extensive program of in-service training for teachers has been developed by MEN\. This program aims at  - 24 - improving teaching standards and at familiarizing teachers with new programs and new pedagogy\. The program covers the four years of the transition and will provide short-term training (12 half-days) to 80,000 teachers, ald longer training periods over the summer vacation period to 10,000 teachers\. While the Government will pay for the program's salary costs, the proposed loan would cover equipment and material costs\. Part B: Office of Vocational Trainint and EUlo3ment 4\.14 Develooment of Sectoral Trainini Centers\. The proposed project would finance the conversion of existing vocational training institutions into sector dedicated training centers catering to the needs of specific industries and services\. This will enable OFPE to respond rapidly and flexibly to changing labor market demand and integrate the end usera in program design\. The conversions would be implemented on the basis of sub-projects prepared and appraised by OFPE and Industry Associations and presented to the Bank for approval\. A typical sub-project would be the development of a sector- dedicated training center, including minor refurbishing, and provision of training equipment and technical assistance\. 4\.15 The Pedagogical Engineering and Resource Center (CRIP), created recently as part of the reorganization of OFPE, would prepare, review and appraise sub-projects requests in accordance with agreed criteria (Annex 2)\. The most important criterium is the existence of a training agreement between OFPE and industrial associations\. This agreement would delineate respective roles of government and industry in defining training programs, certifying procedures, and managing and financing training centers\. The criteria also emphasize a new pedagogic oiganization\. The centers are expected to provide various types of training: pre-service training for young people who are expected to take specific jobs upon graduation, apprenticeship trainir\.g or dual training for people already in the work force\. Flexible training programs on a modular basis would be provided, allowing individuals to upgrade their skills progressively\. In addition, these centers are expected to be used as resource centers for the development of training programs and training of instructors for other centers\. Finally, the criteria emphasize the need for an adequate level of technical expertise and specific sources of technical know-how required to start up training activities in the centers\. 4\.16 During appraisal, OFPE and the Bank jointly -eviewed two sub-projects covering the leather and shoes ir\.dustries and agro-industries\. These two sub-projects have been prepared by CRIP in close collaboration with the relevant Industry Associations, and will involve conversion into sector specific training centers of existing underutilized institutions in Tunis (leather and shoes) and in Soliman (agro-industry)\. The capacity of these two centers is 150 and 250 respectively\. Total estimated cost for these two sub-projects is about US$2 million, or over 15 percent of the total amount of this component\. 4\.17 OFPE's sound performance in preparing the first two sub-projects to be financed under the proposed loan demonstrated its capacity to prepare further sub-projects for the remainder of the period\. It is anticipated that the proposed loan would finance approximately 12 sub-projects\. It is expected that the sector-dedicated training centers would have a demonstration effect  - 25 - on the rent of the syt, maind vould be usd as resource centere for developing progrms, as vell as for trainiung inatructors\. Durins negotiations, the Covernasat provided assurances that om vould prepare sub-projects ln accordance vith criteria specifled ln naaLM and provide the Bank vith detailed appraisal reporte for approval of each individual sub-project (para\. 7\.01)\. 4\.18 UNDP ban designed à techalcal aistance prograr Y to assiat Om iplememt its new organltational structure, *nd etremthen its human resources\. The progrm lo co-fînaneed by the Bmnk under the Fourth Education Project and executed by ILO\. It includes 40 oaths of expert services, 15 ontha of foreiga fellowhlps and the provision of related equipent\. It foeuses on three areas: (i) stren&theaing OmFPe administration at the central and regional level; (il) developing the training institute ln charge of the profeusional development of OFPE administrative and teaching staff; (iii) creating the netvork of vocational training engineering\. The progra, vould be completed by the end of 1989 when the proposed loan becomes effective\. In addition, 90 montha of technical assistance vould be available under the proposed project to assist in the developuent of sector dedicated training centers\. 1/ Strengthening the operational capacity of OFPE\. Project TUJ/88/010/B/Ol/11 approved on December 28, 1988\.  - 26 - V\. PIO3CT COSTS a VIAC iDC, IoPLnIENTATI0 AU» DISBUESITzS= Prolect Conte 5\.01 Su'ary of Prolect Conte Project costs are estimated at 157\.4 million Tunisian Dinars (TD) (US$183 million)\. The conte by project components are ehown in Table 5\.1\. Table 5\.1: SarY of Prolect Conte b' Como»nent TUN I \. A EDUCATION 8 TRAINING SECTOR LOAN PROJECT COST SUMMART ITUNISIAN DINARS MNllionl IUS$ Million) 1 Total --------------- --- ------------------- 2 Foreign Base Local Foreign Total Local Foreign Total Exchang\. Costs A\. SChOOL REHABILIIAtION PROGRAM IMOEI 1O 4 10 4 20 7 12 0 12 0 24 I 50 16 O CANTEENS FOR PRIMARY SCHOOLS IMOEI 4 0 4 4 8 4 4 7 5 1 9 8 52 6 C\. SCHOOL CONSTRUCTION ILEVELS 7\.8 AND 91 IhOEI 35 2 37 S 72 8 40 9 43 7 84 6 52 56 D\. COMPLEMENTARY PROGRAM FOR EQUIPMENT (MOE) OS 1 2 1 8 0 6 1 5 2 1 70 1 E DISTRIBUIION OF BOOMS AND MATERIALS IMOEI - 3 5 3 5 4 0 4 O 100 3 F INSTITUIIONAL DEVELOPMENT /MOEI O O T 5 I S O O 1 7 1 7 98 1 G IN-SERVICE IRAlINNG iMOEI 55 1 1 6 6 6 4 1 2 7 7 16 5 I DEVElOPMENT OF SECTORAt TRAINING CENTERS (OFPEI 5 1 10 2 15 3 5 9 il 8 17 8 67 12 Total BASELINE COSIS 60 8 69 7 130 4 70 7 810 151 7 53 100 Physçcal Contingencies 6 1 7 0 13 0 7 1 8 1 15 2 53 10 Price Contirngencies 8 8 Si 1 3 9 10 3 5 9 16 2 37 "l Total PROJECI COSTS 75 7 81 7 157 4 88 0 95 O 183 0 52 121 9 \. \. \. \. \. \. \. \. \. \. \. - - - - - - - \. - - - - - - - Na,ch 24\. 198s9 IS IS  - 27 - 5\.02 Conte by category of expenditures are given belov: Table 5\.2: Proleet Cote b Cl tepri of Deture IUN1SIA EDUCATION 8 TRAINING SECTOR LOAN SUMNARY ACCOUNTS COST SUMARY ITUNISIAN DINARS Millionl IUS$ million) 1 Total ------------------- ------------------- Z Foreign Base Local Foreign Total Local Foreign Total Excharn4 Costs 1\. INVESIMENT COSiS A\. CIVIL WORKS 48\.2 48\.2 96\.4 56\.0 56\.0 112\.0 50 74 B\. EQUIPhENT 5\.9 13\.8 19\.7 6\.9 16\.0 22\.9 70 15 C\. FURNITURE 1\.6 2\.0 3\.6 1\.9 2\.3 4\.2 55 3 O\. BOOKS AND EDUCATIONAL MATERIALS - 3\.5 3\.5 - 4\.0 4\.0 100 3 E\. EXPERTS SERVICES - 1\.9 1\.9 - 2\.2 2\.2 100 1 F\. FELLODSHIPS - 0\.4 0\.4 - 0\.5 0\.5 100 0 G\. IN-SERVICE TRAINING 5\.1 - 5\.1 5\.9 - 5\.9 4 Total BASELINE COSTS 60\.8 69\.7 130\.4 70\.7 81\.0 151 7 53 100 Physical Contingencies 6\.1 7\.0 13\.0 7\.1 8\.1 15\.2 53 10 Price Contingencies 8\.8 5\.1 13\.9 10\.3 5\.9 16\.2 37 il Total PROJECT COSTS 75\.7 81\.7 157,4 88\.0 95\.0 183\.0 52 121 Harch 24\. 1989 15:15  - 28 - 5\.03 Basin of Coet Eutimates\. The conts of construction and refurbiuhin8 are based on recently awarded contracts for similar work\. Technical assistance coste have been estimated on the basis of recent prices for comparable technical assistance in the region\. Local training costs have been estimated on the basis of actual In-service training costs in Tunisia\. Base cost estimates reflect prices projected for March 1989 when negotiations are scheduled\. 5\.04 Cuatons Duties Taxes\. All project costs are net of taxes\. Equipment and 8oode imported directly for use by Government ministries are exempt from duties\. 5\.05 Continaency Allowances\. Project costs include a contingency allovance for unforeseen physical additions of US$15\.2 million, equal to 10 percent of the project base cost\. Price contingencies between negotiations (March 1989) and the completion of project implementation are estimated at US$16\.2 million equivalent, or 11 percent of project cost\. Total contingencies represent 21 percent of the base cost\. Annual rates of price increases have been applied to foreign costs at the following rates: 6\.3 percent in 1989, 1\.5 percent in 1990, 1\.3 percent in 1991, 2\.3 percent in 1992, 3\.4 percent in 1993, and 5\.4 percent in 1994\. Annual rates of price increases have been applied to local costs at the following rates: 5\.8 percent in 1989, 5\.9 percent in 1990, 6\.5 percent in 1991, 6\.0 percent in 1992, 5\.7 percent in 1993 and 5\.5 percent in 1994\. 5\.06 Foreizn Exchange Comnones\. The foreign exchange component was estimated as follows: (a) civil vorks - 50 percent; (b) equipment - 70 percent; (c) furniture - 55 percent, (d) educational materials - 70 percent; (e) books - 100 percent; (f) experts services - 100 percent; (g) fellowships - 100 percent; and (h) in-service training - 0 percent\. These percentages have been determined by: (a) calculating the indirect foreign exchange content of minor works; (b) assuming that the majority of equipment and all books would be imported; and (c) assuming that all project specialists would be foreign\. The resulting foreign exchange component, contingencies included, is estimated at US$95\.0 million, or about 52 percent of total costs\. Proiect FinancinE 5\.07 The proposed Bank loan of US$95\.0 million would finance the equivalent cf 100 percent of foreign exchange\. The Government would finance the balance of project costs\. A breakdown of project financing is shown in Table 5\.3\.  - 29 - Table 5\.3: CID&mnLP11 Categories of expenditure -----US$ Million-------- Estim\. Bank Gov't Bank Total Financing (X) Civil Works 63\.9 60\.1 124\.0 48 Equipment 8\.0 17\.2 25\.2 68 Furniture 2\.2 2\.5 4\.7 53 Books and Educational Materials 0\.0 4\.3 4\.3 100 Experts Services 0\.0 2\.3 2\.3 100 Fellovehips 0\.0 0\.5 0\.5 100 Teacher Training 6\.8 0\.0 6\.8 0 Unallocated 7\.1 8\.1 15-2 53 Total 88\.0 95\.U 183\.0 52 5\.08 Retroactive financing of eligible costs incurred after January 1, 1989 up to a maximum of US$4\.0 million (4% of the loan amount) is recommended\. This will reimburse the Bank's share of advance payments to contractors for the 1989 construction program of upper basic education schools and expert services\. Ha t ement and Implementation 5\.09 Management Structure\. The proposed project has been designed to build on well established mechanisms and structures\. Departments within MEN and OFPE would be responsible for the implementation of specific components\. An advisor in the Minister's Private Office within MEN has been nominated as project coordinator\. Similarly a project coordinator who reports directly to the president of OFPE has been nominated for the vocational training component\. 5\.10 Imelementation of the ProAect\. The Project Coordinators will overview the vork of the implementing departments, monitor progress, and liaise with the Bank\. Project Coordinators would be assisted by an accountant And an administrative officer as appropriate\. During negotiations, the Government provided assurances that the Project Coordinators would be maintained as indicated above (para\. 7\.01)\. 5\.11 Under the pzoposed project, the Ministry of Equipment's regional offices, in close collaboration with MEN's regional offices would supervise the execution cf all civil works for MEN\. The General Directorate of Financial Affairs, Buildings and Equipment in MEN's central administration, staffed by 26 professior\.Als, would be responsible for the overall coordination and monitoring of the rehabilitation and new construction program\. The technical assistance program would be implemented by the relevant MEN directorates, and in particular, the General Directorate of Programs and Continuing Training, which is etaffed by 11 professionals\. The Directorate would also be responsible for the organization and implementation of the in-service teachers' training program\.  - 30 - 5\.12 The CkIP (Pedagogical Engineering and Resource Center) (see para\. 4\.15), ataffed by 50 professionals, would be responsible for identifying and designing sub-projects\. The Directorate of Equipment and Civil Works vould be responsible tor minor work involved in the development of sector dedicated training centers\. The Directorate of Institutional Training would be responsible for setting up and implementing training programs in these centers\. 5\.13 fonitokIn* and Evaluation\. Lvery yaar, the Government and the Bank vould reviev the progresa achieved in the reform progra,, the achool construction program and the proposed MEN investment and recurrent progra, for the following year including the level of non-salary expenditures\. Indicators of performance specified In Arnex 7 would also be reviewed\. In addition, an evaluation of the reform program would be completed no later thau\. December 31, 1993\. This study would cover the quanttitative and qualitative impact of the reform as well as its organiza'ion and finances (para\. 4\.12) and would be furnished to the Bank for review and commenta\. Based on such reviev, all neeessary measures to finalize such recommendations would be taken\. During negotiations, the Government confirmed these arrangements (para\. 7\.01)\. Naintenancz 5\.14 Maintenance of all physical facilities is the responsibility of the Ministry of Equipment, in coordination with MEN regional units\. An expert would be hired to analyze MEN needs in the area of educational building maintenance (para\. 4\.17)\. Procurement 5\.15 Contracts for equipment and educat'onal material would as far as possible be grouped to form bidding packages attractive to suppliers\. Invitations to bid will typically be grouped into approximately 15 packages, which could be supplied by one company\. Items suitable for International Competitive Biddinb (ICB), estimated at US$27\.5 million, will be procured in accordance with the Bank's "Guidelines for Procurement Under IBRD Loans and IDA Credits" (May 1985) and will be based on the "Sample Bidding Documents - Procurement of Goods" (March 1986)\. ICB will account for about 95 percent of the totel value of the project's equipment and vehicles and 100 percent of educational materials\. Detailed procurement arrangements are shown in T&Ple 5\.4\.  - 31 - Table S\.4: PrIo ud ai US$ Million - Category of Expenditures Procurement Method Total Coat ICa LCB Osher- X/ Civil vorks 135\.0 13S\.0 (65\.6) (65\.6) Equipuent and vehicles 25\.5 2\.0 27\.5 (16\.8) (2\.0) (18\.8) Purniture 5\.1 5\.1 (2\.7) (2\.7) Books and Educational Materials 2\.0 2\.8 4\.8 (2\.0) (2\.8) (4\.8) Expert Services 2\.5 2\.5 (2\.5) (2\.5) Pellovahipu 0\.6 0\.6 (0\.6) (0\.6) Teacher Training 7\.5 7\.5 (0\.0) (0\.0) Total 27\.5 140\.1 4\.8 10\.6 183\.0 Bank financing (l8\.8) (68\.3) (4\.8) (3\.1) (95\.0) a/ rigures in parentheses are the respective amounts financed by the Bank\. Procurement vould be as follovw: (a) Equipment, vehicles and educational materials, estimated at US$27\.5 million equivalent, vould be procured through ICB\. Domestlc manufacturers would be alloved a preferential margin of 15 percent, or the existing customs duty, vhichever is lover, over the c\.i\.f\. prices of competing imports\. Under ICB procedures, all bidding packages for goods over US$350,000 equivalent (about 80 percent of the total estimated value of goodp contracte) vould be subject to the Bank's prior reviev of procurement documentation\. The balance of contracts vould be subject to random reviev by the Bank after contract avard\. (b) Civil vorks contracts, estimated at US$135\.0 million equivalent, vould be relatively small and widely scattered and as such vould not be suitable for ICB\. On previous occasions, foreign contrac\.ors had not expressed interest in such contracts\. Moreover, Tunisian contractors can effectively execute these works\. These contracte vould be advertised and awarded by Regional Delegations under lo«al competitive bidding procedures, which are generally consistent vith the need for economy and efficiency in the execution of the works\. Regional  - 32- Delegations used these procedures for the 1988 construction program\. A sample bidding document, which vould be used for all civil vorks contracta, has been reviewed and deemed acceptable to the Bank\. No contract is expected to exceed US$1\.0 million equivalent\. Prior review of procurement documentation will not be necessary\. Standard documentation submission procedures will, however, be folloved\. A Regional procurement review has confirmed that Tunisia's local competitive procurement bidding rules and procedures are acceptable, provided no preferen-e is granted for purposes of bid comparis\.jon to any group of bidders, ail bidders are treated equally especially in terme of the requirements of furnishing bid and performance securities, bide are opened in public and foreign firms wishing to participate are allowed to do so in accordance with local procedures\. During negotiations, the Government provided assurances that these provisos would be respected (para\. 7\.01)\. (c) Furniture, estimated to cost US$5\.1 million equivalent, would be purchased through competitive bidding in accordance with local procedures (LCB); (d) Reading books, estimated to cost US$2\.8 million equivalent, would be acquired through direct contracts with publishers; and (e) Sundry items not exceeding US$100,000 equivalent in each contract and which, in the aggregate, would not exceed US$2\.0 million equivalent, could be purchased on the basis of a minimum of three quotations in accordance with procedures outlined in pare 3\.4 of the Bank Procurement Guidelines\. Tecbnical Assistance 5\.16 Consultants would be selected in accordance with principles and procedures acceptable to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executive Agency" (August 1981)\. To simplify management, MEN and OFPE would obtain comprehensive TA contracta for most expert services and fellowships\. At least three training institutions, selected from a shortlist acceptable to the Bark, would be invited to submit proposals\. Status of Preparation 5\.17 The average diabursement period for projects in Tunisia -- including education projecta -- is seven years from date of effectiveness\. The proposed project would be disbursed in about five years in accordance with Implementation Schedule II\. This rapid implementation reflects the fact that: (a) the design of standard achoola (for grades 7, 8 and 9) has already been completed and sites have been acquired for the new achools to be buJlt; and (b) the TA package has been fully defined and draft terme of reference have already been prepared\. Project Completion would be September 30, 1994, and the Closing Date would be March 31, 1995 (Schedule II)\.  - 33 - Diaburu_mmet 5\.18 The proposed loan vould diaburse over about 5 years (Schedule III)\. Disbursement vould be made against: (a) 65 percent of expenditures for civil works; (b) 100 percent of foreign expenditures for directly imported and 80 percent of local expenditures for locally purchased equipuent, vehicles, furniture, books and educational materials; and (c) 100 percent of expenditures for experts services and fellovships\. 5\.19 Disbursements for the above items would be made upon receipt by the Bank of fully documented applications, except for expenditures under contracta valued at lesa than US$350,000 equivalent, vhich would be made against certified statements of expenditures (SOE)\. Supporting documentation for SOE vould be retained until one year after loan closing by the implementing agencies and made available for review by the Bank during supervision\. Direct paymen- applications and application for special commitments would be accepted for minimum amounts of US$100,00O equivalent\. snecial Account 5\.20 To facilitate timely project implementation, the Government would establish, maintain and operate under terma and conditions satisfactory to the Bank, a Special Account in US$ at the Central Bank of Tunisia to which the World Bank would make an initial deposit of US$4 million, equivalent to a four-month average Bank disbursement\. The Special Account would be replenished on a monthly basis for a minimum amount of US$0\.6 million or when at least one third of the initial deposit has been withdrawn from the Special Account, whichever comes first\. Documentation for replenishment requests would follow the same procedure as in paragraph 5\.19\. In addition, monthly bank statements of the Special Account would accompany replenishment requests\. Accouats and Audits 5\.21 MEN and OFPE, in accordance vith acceptable accounting practices, would maintain separate accounts for the project, and would prepare, every semester, a detailed statement reflecting project expenditures during the period and projected expenditures for the forthcoming semester\. Within 45 days after the end of each semester, MEN and OFPE would submit copies of these statements to the Bank to facilitate supervision\. Project accounts, including the Special Account (para\. 5\.20) vould be audited in accordance with the March 1982 Bank "Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank"\. The Bank would be provided, vithin nine months of the end of each fiscal year, vith an audit report of such scope and detail as the Bank may reasonably request, including a separate opinion by the auditor on disbursements against a certified statement of expenses\. During negotiations, the uovernment provided assurances to this effect (para\. 7\.01)\.  - 34 - VI\. BhEFNITS AU» RISKS 6\.01 Benefits\. The eucation reform program supported by the proposed loan is expected to yield very significant development benefits for the country\. The reform program vould restructure education and training ln Tunisia so that a much larger 'iumber of children would benefit from sound education and training helping prepare them for active careers in a faat-changing economy\. It would reorient the system ln favor of basic education and vould improve the quality and efficiency of educational inputs\. At the same time, collaborative training with industry associations would be promoted\. This would make training programs more job-related and would make young people more employable\. Quantitative benefits include an increase ln the number of students enrolled in upper basic education of 123,000 over the 1992-96 Plan and 152,000 over the 1997-2001 Plan and a decrease in the number of drop outs, in grade 1 through 9 of 104,000 and 124,000 respectively\. A portion of the additional costs necessary to finance ne expansion at the level of grades 7, 8 and 9 would be offset by a decrease in the number of atudents in primary education due to improved efficiency rates and by a reduction in the cost of training new teachers\. The total MEN recurrent budget would grow at an average yearly rate of 3\.2 percent in real terme and its share of total Government budget would remain at its current level of about 25X\. 6\.02 Risks\. The reform program also entails some riaks\. The firat risk is that some teachers may resist the introduction of new educational methoda and in particular the utilization of diagnostic testing and remedial instruction\. The improvements in pre- and in-service training for teachers f'hould go a long way to ensure acceptance of these new methods\. The second risl; is that fiscal pressures on the government budget may reduce the scupe for sustaining the steady increase in investmetit allocations the sector program calls for and which Parllament has already expressly approved\. This could slow down the implementation of the reforma, although the proposed loan financing safeguards the most critical software expenditures aimed at building quality improvements\. Finally, the Government may face opposition to any plans to limit access to the upper levels of the education and training system\. However, the Tunisian public is increasingly aware of the trade-offs in this area and Government is adamant that the reform program will progreas steadily on track, as has lndeed been the case with all past reform commitments made by Tunisia vithin the adjustment process\.  - 35 - 7\.01 During negotiations, the Government provided assurances that: (a) The policy measures presented in matrix form in Azmez 1 vould be implemented vithin the time frame specified and that no later than October 31st of each year, progreas achieved in the refora progran, the achool construction progra and the proposed investaent and recurrent budgets for the folloving year, including the level of non-salary expenditures vould be revieved vith the Bank\. Based on sucb reviev, all necessary measures to adjust *uch refors progra\., construction prograu and proposed investuent and reccurent budgets vould be taken (para\. 4\.01)\. (b) MEN vould distribute books and educational materials on the basis of pedagogical improvement plans prepared in accordance vith criteria specified in Annex 9 (para 4\.11)\. (c) OFPE would prepare sub-projects in accordance vith the criteria specified in Annex 2 and provide the Bank vith detailed appraisal reports for approval of each individual sub-project (para\. 4\.17)\. (d) No later than December 31, 1990 MEN would prepare a preventive maintenance plan for all achools, and thereafter would maintain adequately all achools (para\. 4\.18>\. (e) The Proieat Coordinators (for MEN and OFPE) vould be maintained for the duration of the project (para\. 5\.10)\. (f) No later than December 31, 1993 an evaluation study vould be completed to assess the quantitative and the qualitative impact of the proposed reform program as vell as its organization and finances and vould be furnished to the Bank for review and comments\. Based on such review, al necessary measi;res to finalize such recommendations would be taken (para\. 5\.13)\. (g) The provisos concerning Local Competitive Bidding would be respected (pr--\. 3\.15)\. (h) Project accounts, including the Special Account, vould be audited annually by an auditor acceptable to the Bank and audit reports vould then be submitted to the Bank vithin nine months of the end of each fiscal year\. The audit vould be of such scope and details as the Bank may reasonably request, including a separate opinion by the auditor on disbursements against certified statements of expenses (para\. 5\.21)\. 7\.02 Subject to the above conditions, the proposed sector program provides a suitable basis for a Bank loan of US$95\.0 million to the Republic of Tunisia\.  - 36 - REPUBLIC OF TUNISIA zL\.I Page 1 of 5 EDUCATION AiD TRAINING SECTOR LOAN STAFF APPRAISAL REPORT 6 0VER ! REFORN Pl POLICY MATRIX OBJECTIVES MNASURES STATUS MINISTRY OF EDUCATION 1\. Restructure Education Phase out existing Specialized Completed System Grades 7 and 8 for children vho do September 88\. not have access to lover secondary education\. Phase out existing Lover Second\. Started Sept\. 88\. Vocational Education Cycle To be completed (Grades 7, 8 and 9)\. by June 91\. Introduce a 9-year basic Scheduled to education cycle (Grades 1 start Sept 89 for through 9) grades 1, 2 and 3 Full cycle to be set up by Sept 95\. Drogressively reduce enrollments Orientation in technician stream (gr\. 10-12) toward one single and increase enrollments in type of tech\. technical education (grades 10-13) educ\. (grades 10- 13) by June 93\. Introduce a core program Core program for grades 10 & 11, followed to start Sept\.93 by three streams vith options Whole cycle to for grades 12 and 13\. be in place by Sept\. 96\. Gradually integrate technical Pilot Project for sciences and humanities streamas everal lycées vithin secondary achools\. under preparation 2\. Improve Access to Progressively increase promotion Promotion rate to Basic Education rate from grade 6 to grade 7 increase from 45% and Restrict Access to 70X by June 95 to Secondary Education Phase out entrance examination Elimination of at 7th grade level\. examination by June 93\. Introduce examination for Entrance exam\. to entrance into secondary be introduced in education (grade 10)\. June 96\.  - 37 - EPULIC 0r TUISI- EDUCiTICO AUD TRAINING SECTOR LOAII Page 2 of S STAF APPRAISAL REPORT OBJECTIVES UIASURES STATUS Progressively reduce the rate of Promotion rate promotion fros basic education to decrease fron <grade 9) to upper secondary 70% to 502 by (grade 10)\. June 97 in order to *aintain constant enroll- mente grovth in secondary achools\. 3\. Improve Quality of Progressively phase out 5-year Firet Education primary teacher training which baccalauréat Itarts at grade 10 and replace it holders vith tvo-year pedagogical recruited in training for baccalauréat June 88\. holders\. Recruitement at grade 10 to be stopped by June 89\. Introduce a teacher training To start on an program offered to licenciera experim\. cal (Bac + 4)\. basis In Sept 90 Develop in-service teacher In-service training programa\. training programs for basJc edue\. to start Sept 89\. In-service training programs for upper second\. teachers to start Sept\. 90\. Develop new programs for grades 1ev programs for 1 through 9 in accordance vith grades 1, 2, 3 the nev basic education concept to start Sept\.89 and update secondary education folloved by one programs\. additional grade per year\. Introduction, at the experimental level, of scien- tific and technological education started Sept\. 88\. Generalization Sept\. 93\. Update secondary curricula September 89\. Increase availability of reading Distribution books and educational materials program scheduled in achools\. to start Sept 90\.  - 38 - REPUBLIC OF TUNISIA Ame 1 EDUCATION AUN TRAINING SECTOR LOAN Page 3 of 5 STAFF APPRAISAL REPORT OBJECTIVES MEASURES STATUS Develop a teutinj and evaluation Program to *tart systea\. Sept\. 91\. Introduce remedial education Introduction of methoda\. remedial courses atarting vith grade 2 in Sept\. 89\. 4\. Improve Efficiency Institutionalize curriculum Implementation of Educational development and textbook scheduled Administration preparation processes\. for 1990\. Group all responsibilities for Implementation teacher training vithin one unit\. scheduled for 1990\. Unify regional adrinistration Completed of primary and secondary Sept\. 88\. education\. Intensify training for school Program directors\. underway\. Intensify pedagogical inspection Program at basic and secondary education underway\. levels\. Creation of a High Level Comittee Completed in 1988 on Education, Higher Education and Research\. OFFICE OF VOCATIONAL TRAINING AND LABOR (0FPE) 1\. Improve efficiency of Definition of consultative Creation of a administration framework\. High Level Commit- tee on Vocational Training scheduled for 3rd quarter 1989\. Restructuring employment and Creation of the training administrations\. Vocational Training and Employment Office (OFPE) Law No\. 88-60 06/88 Integration of training and Creation of 23 employment services in the regional regions\. delegations for Vocational Training and Employment (August 1988)  - 39 - REPUBLIC OF TUNISIA Annex 1 EDUCATION AND TRAINING SECTOR LOAN Page 4 of 5 STAFF APPRAISAL REPORT OBJECTIVES MEASURES STATUS Strengthen OFPE's role in Orientation Law coordinating vocational *cheduled for 3rd training institutions\. quarter 1989\. 2\. Strengthen linkages Develop participation of Board Organization vith productive industry representatives to Decree schediled sectors the Board of OFPE\. for 3rd quarter 89\. Development of training Training agreements between OFPE and Agreements under industry associations\. preparation vith banking, textile, leather, and agro-industries\. Activate Committees Progressive within vocational training Implementation centers and progressively through Training restructure them into Agreements\. management committees\. Promote teaching by Implementation professionols in vocational through Training training centers\. Agreements and financial incentives provided through the Employment Promotion ar,d Training Fund\. 3\. Develop apprenticeship Redefine apprenticeship Orientation Law training and training system\. scheduled for 3rd dual training quarter 1989\. Financial incentives provided through the Employment Promotion and Training Fund\. Open vocational training Reorganization of centers to apprentices\. multi-purpose centers underway\. Develop dual training Dual training activities with productive activities defined sectors\. in the context of Training Agreements with Industry Association\.  - 40 - REPUELIC 0F TUNISIA S 1 pDUCATION AuD TRAINING SECTOR LOAN Page 5 of 5 STA"F APPRAItL tlO OBJECTIVES MEASURES STATUS 4\. Improve quality and Revine statua of vocational hev statua of efficiency of training training instructors\. personnel progra ocheduled for 3rd quarter 1989\. Intensify training of Strengthening instructora nd managerial of Rades staff nd organize in-company Tralning trainina for instructors\. Institute underway\. Develop vocational training Creation of the engineering and research\. Pedagogical Engineering and Resource Center (CBIP), (circular 72 10/88) Development of orientation Orientation Law functions and mechanisms\. scheduled for 3rd quarter 1989 and implementation of 6 regional orien- tation centers scheuuled for 3rd quarter 1989\. Development of an information Implementation system on professional in 1990\. insertion\. Develop certification procedures Orientation Law in collaboration vith employers scheduled for 3rd quarter 1989\. Implementation through Training Agreements vith Industry Associations\. 5\. Mobilize resources Reduction in the Payroll Tax\. Finance Law for training\. 1989\. Creation of the Employment To appear in the Promotion and Training Fund\. Finance Law 1990\. Revise legislation related to Investment Code the private vocational training for t'e services sector\. sector scheduled for 3rd quarter 1989\. Promote in-company training Creation of the activities\. Extension Services Center (Circular 72 10/88)  - 41 - REPUBLIC 0F TUNISIA Page 1 of 2 EDUCATION AD TRAINING SECTOR LOAN Criteria for Selection of Sub-Prolects The criteria agreed upon betveen the Bank and oFm for purposes of selecting vocational training aub-projects financed under the proposed loan are the folloving: (a) Trainina Agreément with Industrv Associations The evidence of appropriate consultations vith professionals from the relevant sectors and the existence of a training agreement vith *pecifie industry associations vill be required\. Such an agreement should specify the respective roles of the parties concerned with regard to the definition of training objectives and programs, the delivery of training, the certification process and the management and financing of sectoral training centers\. (b) Economic Relevance Criteria Proposals for developing sector dedicated training centers should be made on the basis of a detailed analysis of manpower requirements (in quantitative and qualitative terms) and a survey of existing training possibilities in the vocational training system including in-company training capability\. <c) Pedaaogical Orxanization Criteria Proposals should be very specific vith regard to the various missions of the proposed center and the pedagogic organization\. The type of training program proposed, and the mix of theory provided in the reater and practical training provided in industrial establishments should be tailored to needs of the various target groupe: young people coming out of the education system and being trained for a specific job, skilled workers already employed by industrial companies and apprentices\. Priority should be given to the design and development of modular training programs\. (d) Feasibilitv Criteria The feasibility analysis vill take into account the folloving factors: (i) evidence of a demand from industrial establishments and individuals; (ii) availability of qualified instructors and specific recommendations for recruiting and training them; (iii) status of buildings and workshops; and (iv) need for equipment in the propoLed specialization\.  - 42 - Page 2 of 2 (e) Transfer of Technolo&y Criteria Availability of an adequate level of technical expertise (both in quantitative and qualitative terua) vill be an essential criteria\. Industrial Associations consider that sectoral centers vill play an essential role regarding the transfer of technology and expect the best possible international expurtise in this respect\. Technical assistance inputs vill have to be identified: profiles, duration and sources of recruitment\. (f) Financial Criteria Availability of financial resources vill also be an important criteria\. A careful analysis of investment coste vith details concerning the need for minor civil vorks and the need for equipment\. Particular attention should be paid to the assessment of recurrent coste implications of proposed training activities\. The availability of local resources (OFPE, Industrial Associations) to cover instructor salaries, materials, maintenance costs, utilities and others vill be spelled out\.  - 43 - REUBIC 0FP TUNSIA EDUCATIO A iAiUNC sEcTOR LOA Pa&e 1 of 3 r UIC XC*EIOm STATIhTIIS Net enrollment ratios by ses for children in urban end rural areas ÂGE "RAig 6 TO 9 10 TO_L\. 6TO 14 URBA: MALES 90\.1X 88\.8% 89\.4S FEMALES 88\.3X 83\.1 85\.5% TOTAL: 89\.2X 86\.0X 87\.4% RURAL: MALES 77\.0X t6 1X 76\.6% FEMALES 59\.9X 45\.0% 52\.4% TOTAL: 68\.7X 61\.1X 64\.9% TOTAL: MALES 83\.1% 82\.5X 82\.8% FEMALES 73\.41 64\.51 8 7X TOTAL: 78\.41 73\.7X 75\.9X Ministry of Planning - based on 1984 census data\. Table 2 Percentage of repeaters and dropouts in primary grades (End of 1986-87) Grade 1 2 3 4 5 6 Repeaters Male 20\.9 21\.1 21\.7 22\.3 27\.5 38\.4 Female 19\.5 18\.8 17\.6 18\.5 23\.5 35\.8 Dropoute Male 1\.6 1\.9 3\.1 4\.3 8\.7 Female 3\.4 3,5 4\.7 6\.3 10\.4  REPULIC OF TUNISIA EDUCATIOIN AND TRAINING SECTOR LOAN Table 3 RATE OF SUCCESS IN JUNE 1987 EXAMTNATTOn FOR ADMISSOTN TO CRAnFR 7, RV RFGI0N c------- CAJIDATES PASSED TO GENERAL PASSED TO VOCATTONAT\. ATE OF SUCESS x x x x m\. X F\. x T\. XE\. X F\. x I\. ZN\. xF\. x T\. REGION MALES HALES FEN\. FEN\. TOTAL TOTAL HALES CANO\. FEN\. CAND\. TOTAL CANO\. NALES CANO\. FEN\. CAxD\. TOTAL CAMD\. CAXD\. CAXD\. CAS>\. TLUNIS 11,572 51\.0X 11,109 49\.02 22,681 10\.7X 3,638 31\.4X 3,884 35\.02 7,522 33\.22 1,040 9\.0o 1,032 9\.3x 2,072 9\.1K 40\.43X «4\.25s 42\.30% ARIANA 6,538 53\.72 5,644 46\.32 12,182 5\.8X 1,726 26\.42 1,657 29\.4x 3,383 27\.8s 603 9\.2x 533 9\.42 1\.136 9\.3x 35\.62x 38\.90E 37\.10E BEM AROUS 4,245 52\.6% 3\.821 47\.4X 8\.066 3\.8s 1\.496 35\.22 1,480 38\.7x 2,976 36\.9x 591 13\.92 513 13\.4X 1,104 13\.7X 49\.16E 52\.16X 50\.5ss ZAGHOUAN 2,177 62\.2X 1,325 37\.8X 3,502 1\.72 376 17\.3X 266 20\.12 642 18\.J% 234 10\.7X 100 7\.5s 334 9\.5x 28\.02x 27\.62X 27\.87X BIZERTE 7,259 56\.92 5,497 43\.12 12,756 6\.0X 1,732 23\.92 1,579 28\.7x 3,311 26\.0X 907 12\.52 625 11\.42 1\.532 12\.0X 36\.352 40\.092 37\.97x BIJA 4,280 58\.82 2\.994 41\.22 7,274 3\.42 831 19\.42 683 22\.82 1,514 20\.82 413 9\.6E 288 9\.6X 701 9\.6E 29\.07x 32\.43X 30\.452 JENDOUBA 5,556 60\.6X 3,615 39\.4x 9\.171 4\.32 1\.212 21\.J2 937 25\.9s 2,149 23\.4X 666 12\.02 339 9\.4% 1,005 11\.OX 33\.80E 35\.30x 34\.39x LE KEF 4,194 56\.02 3,298 44\.02 7,492 3\.5E 1,103 26\.3X 954 28\.9s 2,057 27\.5s 625 14\.92 480 14\.6X 1,105 14\.72 41\.20X 43\.48x 42\.21X SILIANA 4,499 61\.9X 2,765 38\.12 7,264 3\.42 928 20\.6X 685 24\.8s 1,613 22\.22 499 11\.1 300 10\.82 799 11\.0X 31\.7m 35\.62x 33\.20X KASSERINE 5,712 64\.2X 3,183 35\.82 8\.895 4\.22 1,432 25\.12 902 28\.3x 2,334 26\.2X 848 14\.82 499 15\.72 1,347 15\.1X 39\.92x $4\.02X 41\.30x SIDI BOUS 6,108 65\.82 3,170 34\.22 9,278 4\.4E 1,240 20\.3X 670 21\.1E 1,910 20\.6X 604 9\.9s 341 10\.82 945 10\.22 30\.19X 31\.092 30\.7m GAFSA 5,390 59\.2X 3,716 40\.8x 9,106 4\.32 1,299 24\.1X 906 24\.42 2,235 24\.2X 562 10\.42 402 10\.82 964 10\.6X 34\.53x 35\.20E 34\.80X TOZEUR 1,423 54\.2X 1,204 45\.8X 2,627 1\.22 237 16\.7X 260 21\.6X 497 18\.92 102 7\.22 85 7\.1E 187 7\.1E 23\.M22 28\.65E 26\.04X KEBILI 2,030 56\.3x 1,578 43\.72 3,608 1\.72 669 33 D0 509 32\.32 1,178 32\.62 312 15\.4E 257 16\.3E 569 15\.8X 48\.33E 48\.54s 48\.42X TATAOUINE 1,950 64\.4X 1,079 35\.6x 3,029 1\.4X 479 24\.6X 272 25\.22 751 24\.8s 263 13\.52 143 13\.3E 406 13\.4E 38\.05s 38\.46X 38\.20w REDENINE 5,007 61\.22 3,171 38\.82 8,178 3\.9s 1,319 26\.3E 907 28\.6x 2,226 27\.2X 650 13\.0X 340 10\.7E 990 12\.12 39\.32x 39\.33x 39\.33x GABES 4,162 59\.7x 2,813 40\.32 6,975 3\.3X 1,220 29\.32 971 34\.52 2,191 31\.42 652 15\.7X 384 13\.7X 1,036 14\.9 44\.982 48\.17X 46\.27X SFAX 8,436 57\.7x 6,186 42\.3X 14,622 6\.9s 2,682 31\.SX 2,247 36\.32 4,929 33\.72 874 10\.4X 549 8\.92 1,423 9\.7x 42\.15X 45\.20x 43\.442 MANDIA 5,317 63\.1X 3,115 36\.9x 8,432 4\.0X 1,160 21\.8x 836 26\.8X 1,996 Z3\.7X 672 12\.6X 312 10\.OX 984 11\.7E 34\.46X 36\.8s5 35\.34x KAIROUAN 7,626 64\.6X 4,179 35\.42 11,805 5\.62 1,577 20\.72 1,088 26\.0X 2,665 22\.6X 1,069 14\.0X 493 11\.8x 1,562 13\.2X 34\.702 37\.83u 35\.812 MONASTIR 5,001 52\.5s 4,524 47\.52 9,525 4\.52 1,289 25\.8s 1,337 s\.62 2,626 27\.6X 520 10\.42 419 9\.32 939 9\.9s 36\.17X 38\.82x 3r\.43x P GQ SOUSSE 5,739 54\.52 4,784 45\.52 10,523 5\.02 1,709 29\.8s 1,574 32\.92 3,283 31\.22 715 12\.52 551 11\.5x 1,266 12\.02 42\.24E 44\.42X 43\.23X 2 NABEUL 7,987 54\.5s 6,660 45\.52 14,647 6\.9x 1,899 23\.8x 1,817 27\.3X 3,716 25\.42 880 11\.0 679 10\.2X 1,559 10\.6E 34\.79x 37\.48x 36\.012 G\.TOTAL 122,208 89,430 211,638 31,253 25\.6x 26,421 29\.52 57,674 27\.3X 14,301 11\.7X 9,664 10\.8X 23,965 11\.32 37\.2sx 40\.35s 38 57> 0  - 45 - REPUBLIC OF TUNISIA ANNEX 3 EDUCATION AND TRAINING SECTOR LOAN Page 3 of 3 STAFF APPRAISAL REPORT Table 4 WEEKLY HOURS DISTRIBUTION OF THE 1987-88 PRIMARY CURRICULUM -------------------------------------------_--_---_-_--_____ GRADES I II III IV V VI -----------------------_----------_-________----_---------- ------------ ARABIC 11:00 14:30 14:10 7:25 6:20 5:50 ISLAMIC & MORAL EDUC\. 2:00 2:30 2:40 1:30 1:00 1:00 NATIONAI, & CIVIL EDUC\. 0:30 0:30 GEOGRAPHIC MEDIUM 0:40 0:20 GEOGRAPHY 0:45 0:45 HISTORY 0:45 0:45 ARITHMETI 4:10 4:00 4:00 3:30 3:00 3:30 SCIENCE AWAKENING 1:00 2:00 1:20 0:40 1:20 1:20 MANUAL EDUCATION 0:30 0:30 0:30 0:30 DRAWING 0:30 0:30 0:30 0:30 (0:45 (0:45 …__________ ___________ ___________ _________ -_ TOTAL OF SUBJECTS IN 19:10 24:00 23:50 14:25 14:25 14:25 ARABIC FRENCH 5:00 5:00 12:05 12:05 12:05 BREAKS/INTERMISSIONS 0:50 1:00 1:00 1:00 1:00 1:00 TOTAL--20:00--30:00-29:50 --27:30 -27:30--27:30 TOTAL 20:00 30:00 29:50 27:30 27:30 27:30  - 46 - REPUBLIC OF TUNISIA ALnox 4 EDUCATION AND TRAINING SECTOR LOAN STAFF APPRAISAL REPORT Basie Data on the Vocational Train1nn Soetor Table 1 1986!87 Enroll»nts - 1987 Graduates Skilled Work\. Technicans saccal\. Techn\. Total (Gr\. 7-91 (Gr\. 10-121 (Gr 10-13) Enrcl Grad Enrol Grad Enrcl Grad, rnrl Grad MEN 52,000 15,000 26,000 7,500 9,000 2,000 87 000 24,500 OFPE 7,500 6,500 7,500 6\.500 Other Minist\. 4,750 2,300 3,850 2,100 8,600 4,400 Private Sect\. 17500 3\.000 17\.500 3\.000 Total 56,750 17,300 54,850 19,100 9,000 2,000 120,600 38,400 Table 2: Trainino oroanized bv Soecialized Ministries: 1986/87 Enroll1ents Technicians Skilled Workers Iaul\. - Ministry of Agriculture 600 2,000 2,600 - Ministry of Social Affairs "Office National de l'Artisanat" 2,100 2,100 - Ministry of Youth and Sports 600 600 - Ministry of Health 2,000 2,000 - Ministry of Tourisu "Office Nationale du Tourisme" 900 900 - Ministry of Comunicati-ns 150 50 200 - Ministry of Transportation "Ecole de la Marine Marchande" 50 50 - Ministry of Fisheries "Office de la Piche" lSO 150 Total 3,850 4,750 8,600 Further details on regional distribution are given in Annex 3\. Table 3\. Number of ARorentices bv Sector in 1986/87 Number of % Apprent\. to Labor S etor Labor Force Aaorenticei Force Industry 345,100 25,890 7\.5 Construction 233,900 17,540 7\.5 Services 77,600 5,370 6\.9 Comerce 26,000 5,950 22\.9 Agriculture 174\.100 \.13\.0007 (Wage workers) Total 856,700 67,750 7\.9  - 47 - *DO"LIC 0?1011111 E19CltlOI ID SUAIIIU SIO LOA Elemtios S\.tcr nluestaut uld Car t l Ud\.t \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. (Curtat lisais 008) I ~~~~~~\. 1m9(it 0 1 98 13 18 10 95 18 18 91 1 1-IIlS?1? 01 WlCOI !UAlI? 2,915 4,U49 4,813 6,921 1,212 8102 l,l94 9,193 8\.1t tscoui 6,510 9,l38 11,117 11,221 11,145 11,411 IS,III 15,143 U0,l20 \. \. \. - --\. \. \. \. \. \. \. MOtAL ME)N: 9,535 14,141 22,010 24,154 25,021 21,913 24,674 24,031 21,220 2-liistil ce 01111 IDOCltlOI MOtAL Ml: 9,101 I,U4I 10,2 11,644 11,141 19,265 11,240 14,50 19,50 3-IgcATIOI SECTOR 19,135 22,645 33,052 35,178 31,010 46,330 35,922 31,336 48,120 1-IIIISTRY Dl EDICATIOI P11flsfi 1 SALIES 14,851 73150 92,149111,425 129,817 145,314 185,531 175,173 183,671 194,712 00-SiLAI? 1,341 1,416 2,017 2,327 2,2917 2,546 2,625 4,287 3,131 4,254 * tUAISIIOS 160 1,056 1,1174 1,440 1,1441 1,413 1,1473 1,181 1,255 2,546 X tOtAL 66,851 75,622 95,230 115,192 133,624 149,323 169,628 181,141 111,657 201\.512 SRC«\.ARY SALAIIS 52,089 60,800 78,428 94,080 111,543 121,915 131,119 136,471 148,274 162,482 00-SALAI S,092 5,397 6,657 7,577 8,115 9,640 9,435 I,901 9,497 10,730 tiAISEllS 2,141 2,162 2,033 2,140 2,480 2,539 1,134 2,074 2,225 5,960 TOTAL 9,3 u,l9 ',111104,117 119,13i 133,084 141,280 149,451 159,996 179,172 CUIlU UIlOlSflA?0 U 88111 1,679 1,89 3,225 2,41? 3,088 3,141 4,751 3,233 3,340 6,605 * U-IILAI? 1,111 1,1 4 714 912 1,026 1,150 1,050 1,378 1,1426 1600 Ill10m Si a 45 80 81 82 82 36 40 121 tOtlTL 2911 3,12' 4,044 3,1469 4,194 4,372 5,183 4,647 4,1806 8,326 S1 181 M UIUIl ul lIOtCtI * U 881811 \.111,419 131,4 113,812 2079192 241,511 209,349 300,480 317,311 335,285 363,799 M-UALUI? 7,120U l,9n 9,430 10,816 11,431 13,336 13\.110 14,571 14,654 16,594 S 188168W 3,057 3,104 3,292 4,001 4,000 4,094 3,289 3,291 3,520 1,627 tOIAL 121,84 14S,941 18, 11 , 222,770 256,956 286,719 316,799 335,239 353,459 3890121 2-1111811\.? W 111 11WDUCAt'O0 SU111 14,335 17,591 24,022 25,041 21,096 30,207 35,363 31,998 40,447 U\.115 lO-SAAIT 5,804 5,664 7,787 8,753 12,103 13,826 13,462 14,220 15,649 16,614 * ?IAIS1ESS 11,663 12,145 10,410 18,654 18,3617 19,79 19,515 22\.050 21,666 21\.5O 1 tOTAL 31,802 31,000 42,279 52,441 5,566 63,830 68,400 74,268 77,762 11,370 3-lD0CATIOI SICTOR 1I6,8I8 182,941 228,671 275,226 315,522 3$0,609 315,191 4119,507 431,221 400,390  - 48 - REPUBLIC OF TUNISIA Annex 6 EDUCATION ANO TRAININ6 SECTOR LOAN STAFF APPRAISAL REPORT OFPE Investtnt and Current Budgets (Current Dinars 000) 1982 1983 1984 1985 1986 1997 1988 …-- - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - _-_-_-_-_ - _- _ INVESTNENT BUDGET 3,700 2,700 2,172 1,707 NA RECURRENT BUD6ET \. SALARIES 6,425 7\.002 7\.758 8\.310 9,126 \. NON-SALARY 3,799 4,079 3,672 3,530 3,574 TOTAL 10,223 11,080 11,430 11,840 12,700 TFP 11 TOTAL ANOUNT NA NA NA 10,348 11,696 12,402 TFP PAID DY ENTERPRISES BENEFITTIN6 FROM TAI RE8ATE 4,257 5,273 6,565 6,943 7,720 TAX RE8ATE ANOUNT 1,893 2\.135 2\.355 2,210 2,348 I Vocatianal Training Tax  - 49 - AnLx 7 REPU8LIC OF TUNISIA EDUCATION AMD TRAINING SECTOR LOAN STAFF APPRAISAL REPORT PERFORMANCE INDICATORS Actga REFORM PROGRAC TARGET 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 PRIMARY EDUCATION (1-6) Total enrollments 1,326,000 1,355,000 1,377,000 1,399,000 1,416,000 1,432,000 Number of students per clast 30\.5 30\.5 30\.5 30\.5 30\.5 30\.5 Number of student-classes 43,466 44,414 45,129 45,848 46,381 46,874 Number of schools with lunch services 1,705 1,720 1,740 1,760 1,780 1,800 Nunbr of canteens 200 250 550 850 1,15W 1,450 Drop out rate in grade 5 8\.7% 8\.5% 8\.0% 7\.5% 7\.0% 6\.5% Drop ouit rate in grade 6 21\.1% 20% 20% 20% 15% 15% Net Enrollment ratio 85\.0% 85\.1% 85\.2% 85\.5% 85\.6% 85\.8% Girl enrollment as a % of total enrollments 45\.1% 45\.2% 45\.3% 45\.4% 45\.6% 45\.7% Number of teachers 45,600 46,850 48,000 49,750 51,400 52,100 SECONDARY EDUCATION FIRST CYCLE OF SECONDARY EDUCATION (7-9) Total enrollments Grades 7, 8, & 9 248,000 278,000 312,000 325,000 346,000 381,000 Vocational Education 43,000 29,000 ,1,000 0 0 0 Number of students per class 35\.4 35\.4 35\.4 35\.4 35\.4 35\.4 Number of student-classes Grades 7, 8, & 9 6,987 7,876 8,879 9,301 9,881 10,882 Vocational Education 1,500 1,017 393 0 0 0 Number of boarding students 34,200 36,800 42,000 45,500 51,900 57,200 Passing rate to grade 10 68% 68% 68% 68% 68% 68% Girl enrollment as % of total enrolliments 44\.3% 44\.4% 44\.5% 44\.6% 44\.7% 44\.8% SECOND CYCLE OF SECONDARY EDUCATION (10-13) Total enrollments 182,000 191,000 199,000 222,000 243,000 264,000 Number of students per class 31\.5 31\.5 31\.5 31\.5 31\.5 31\.5 Number of student-classes 5S800 5\.931 6\.181 6,895 7,534 8,153 Number of boarding students 28,600 30,000 31,200 34,900 38,200 41,500 Girl enrollment as % of total enrollments 44\.2% 44\.3% 44\.4% 44\.5% 44\.6% 44\./% FIRST ANO SECOND CYCLES OF SECONDARY EDUCATION (7-13) Number of schools 474 510 545 580 615 655 Number of boarding facilities 185 188 201 210 227 248 Number of teachers 25,800 26,700 27,800 29,150 31,350 34,250 Teacher/class ratio 1\.8 1\.8 1\.8 1\.8 1\.8 1\.8 Number of non-teaching staff 20,800 21,300 22,000 22,900 24,000 25,000  ANNEX 8 REPUIBLIC OF TUNISIA EDUCATION AND TRAINING SECTOR LOAN STAFF APPRAISAL REPORT In>act of the Education Refon Variance Current Syste Basic Education Basic Education - Currmnt Svst_ 8th Plan 9th Plan 8th Plan 9th Plan 8th Plan Rth Plan ENROLLHENTS \. DROPOUTS Enrollents: Pri\.ary Education (grades 1-6) 1,607,183 1,811,211 1,546\.173 1\.702,173 -61,010 -109,038 First Cycle Secondary Education (grades 7-9) 372\.429 412\.470 495,145 564, 507 122,716 152,037 Total Enrollients 1,979,612 2,223,681 2,041,318 2,266\.680 61\.706 42\.999 Dropouts: Primary Education 445,966 498,214 3 5,564 314,896 -130\.402 -183,318 lst Cycle Secondary Education 145,849 161,748 172,458 221,371 26,609 59,623 Total Dropouts 591,815 659,962 488\.022 536,267 -103\.793 -123,695 INVESTMENT BUDGET ML!ber of Additional primary school classrooms 2,758 3,489 1,894 2\.646 - 864 - 843 Additional ITN workshops 1,202 810 1,202 810 Secondary schools to be built 59 43 191 74 132 31 1 Investjnt ICosts: (in constant TO million) CD Priuary education 32,857 41,570 22,557 31,538 -10,300 - 10,032 ° ITM 30,050 20,267 30,050 20,267 lst Cycle Secondary Education: Construction 46,525 33,653 149,664 58,297 103,139 24,644 Equipuent 6,055 4\.380 19,478 7\.587 13,423 3,207 Total Cost lst Cycle Secondary Education 52\.580 38\.033 169,142 65\.884 116,562 27,851 Total Investment Costs 85,437 79,603 221,749 117,689 136,312 38\.086 RECURRENT BUDGET Additional needs in teachers 1/ Primary Education 6,179 7,420 4,712 5\.991 - 1,467 - 1,429 lst Cycle Secondary Education 2,770 1,532 9,768 2,950 6\.998 1\.418 Recurrent Costs: (in constant TO million) Primary Education 1,084 1,218 1,055 1\.153 - 31 - 65 lst Cycle Secondary Education 506 561 606 769 100 208 2nd Cycle Secondary Education 558 658 558 658 0 0 Administration 32 39 32 39 0 0 Total Recurrent Costs 2,180 2,476 2,251 2,619 71 143 1/ Based on 30 hour-posts for the lst and 2nd cycles and 20 hour-posts for the 3rd cycle of basic education\.  - 51 - DEPUELIC OF TuNISIA EtJUCATION Au TRAINIHG SECTOR LOAN Criteria for the Distribution of books and ucati 1a materiala The folloving criteria have been agreed betveen the Bunk and the Ministry of Education for selecting the *choola which qualify for receivina books and educational materiala under the proposed loan\. a\. Pedaaoaicai Imnrovement Plans Individual *choola vill be invited to submit pedagogical improvement plans to the MEN\. Typically a pedagogical improvement plan vill *pecify objectives in terms of learning achievement for the students, target group, set of activities aiming at meeting the objectives and mee2na necessary to implement these activities\. b\. TvyRe of achool Priority vill be given to basic education levels\. Primary schools (grades 1 through 6) and upper basic education schools (grades 7 through 9) vill be avarded up to tvo thirds of the total amount of the category, while secondary achools vill be avarded the remaining third\. In addition, priority vill be given to achools located in under- privileged areas, here defined as areas where school enrollmenta are below national average\. c\. Communitv Particioation Priority vill be given to schools which have been successful in mobilizing additional resources cor implementing the proposed pedagogical im1rovement plan\. This vould include mainly participation in the project by Parents Teachers Associations, the Business Community or other sources\.  - 52 - REPUDLIC OF TUNISIA EDUCATION AM TRAINING SECTOR LOAN STAFF APPRAISAL REPORT Tochnical Assistance Ex*erts (staff onths) CosDo nt 1989/90 lfMi/l 1991/U2 1992f93 19i3194 To MINISTRY OF EDUCATION I\. Curriculum Design nd Develoien t 19 il 6 36 II\. Textbook Developunt and Publishing 2 3 5 III\. Teacher Training 10 8 6 24 IV\. Neasurement and Evaluation 6 3 3 12 V\. Educational Management 4 2 6 VI\. Maintenance of buildings 1 2 3 VII\. Evaluation and studios 3 3 12 18 Subtotal MEN 42 3 Q 104 OFFICE OF VOCATIONAL TRAINING AND EMPLOYMENT Development of Sectoral Training Centers 15 23 23 18 12 91 Subtotal OFPE là j, 21 1l 21 TOTAL EXPERTS 27 5 41 i in9 Technical Assistance: Fellowshios and Studv Tours (staff months) Canonan± 1989/90 1990/91 1991/92 1992193 frta1 MINISTRY OF EDUCATION I\. Curriculum Design and Devolopuent 33 18 3 54 Il\. Textbook Doevolopment and Publishing 18 6 3 27 111\. Moaturement and Evaluation 30 12 3 45 IV\. Educational Management 9 6 6 3 24 V\. Maintenance of buildings 3 2 3 2 10 Total Fallowships and Study Tours IQ z U2 il lm  Page i1 o2 2 REPUBIL\.IC OF TUNISIA EDUCATION ANO TRAINING SECTOR LOAN STAFF APPRAISAL REPORT Inolenentation Schedule CY 89 - l 90 1 9 1 ; 1 9 9' \. Cooonent FY 89 90 91 92 93 94 MINISTRY OF EDUWCATION School Rehabilitation Proprar Minor Civil Works XXXXXXXXXX<KXXXXXXXXXXXXKXXXX Canteens for Primarv Schools 1 1 Construction XXXXXXXXXX KXXXXXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXXXI XXX Equipment/Furniture XXXXXXXXXXXXXXXXXXXXXXXXX>XXX XXXXXXXXXXX M XXXXXXX Construction of new schools (7\.8\.9) j Construction XXXXXXXXXXXXXXXXXXXXKX-KXXXXXXXXXXXX XXXXXXXXXXX XXXXXXXXX Equipment/Furniture XXXXXXXXXXXXXXXXXXXXXXXXXXXXX (XXXXXXXXXXX M LnXXXXXXX DUCXX Coolementarv Prooram for Eauipment Coçuter Education XXXXXXXXXXXXX Maintenance Center XXXXXXXXXXXXX Vehicles for Inspection XXXXXXXXXXXXXXXXXXXXXXXXXX Books\. Docunentation and Materials Reading Books for Secondary Schools XXXXXXXX XXXXXXXXXXXXXXXXX Educational Materials for I I Primary Schools XXXXXXXXXXXXXXXXXXXXXXXXXXXXX Institutional Develoopent 1 Foreign Fellowships XXXXXXXXXX MXXXXXXXXXXXK XXXXXXXXXXXXXXXXXXXXXXKXXX Expert Services XXXXXXXXXXXXXXXXXXXXXXKXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX In-service Training a 1 In-coun\.ry training XXXXXXXXXXXXXXXXXXXXXX (XXXXXXXXXXX XX M K <XXXXXXXXXOOOC XXX Equipment XXXXXXXXXXM XXXKXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXI\.UJXXXJ oQ Cr Project Comletion - September 30, 1994 1 o Closing Date - March 31, 1995 Ni t3-  SCHEDULE II Page 2 of 2 REPUUBLIC OF TUNISIA EDUCATION AND TRAINING SECTOR LOAN STAFF APPRAISAL REPORT In,le _mntation Schedule CY 89 l l 1 1 9 : Co\.oenent FY 89 90J 91 - 92 939 Develoment of Sectoral Trainino Centers Construction XXXXXXXXXkxxxxxxxxxxxx 'XXXXxXXXXX XKXXXXXXXXXXX XX XXXXXXXXXX X CCXX Equipuent XXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXCXXCX CCXXXX Expert Services XXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXX X XXXX XXXXXXXXXX"VXXXX Project Completion - Septeber 30, 1994IE E!_ Closing Date - arch 31\. 1995 *0 e-l Ni Ft l  ~~ 55 ~ ~ ~ S~chedule III REPUELIC OF TUNISIA EDuCATion AUD TAikinG SECTOR LOA latiaated Schedule ôf oan Diaburmement (US$ million> IBID Diabursementa Fiscalh Y«urtrOarter cmltv F790 Firet 0\.0 0\.0 Second 4\.0 4\.0 Third 4\.0 8\.0 Fourth 4\.0 12\.0 Fl91 First 4\.0 16\.0 Second 4\.0 20\.0 Third 4\.0 24\.0 Fourth 4\.5 28\.5 F792 Firet 4\.5 33\.0 Second 4\.5 37\.5 Third 5\.0 42\.5 Fourth 5\.5 48\.0 FY93 Firet 6\.0 54\.0 Second 6\.0 60\.0 Third 5\.5 65\.5 Fourth 5\.5 71\.0 FY94 First 5\.0 76\.0 Second 4\.5 80\.5 Third 4\.0 84\.5 Fourth 4\.0 88\.5 FY95 Firet 3\.0 91\.5 Second 2\.0 93\.5 Third 1\.5 95\.0 0754g/53  - 56 - REPUBLIC OF TUNISIA Chart I EDUCATION AND TRAINING SECTOR LOAN STRUCTURE DE L'ENSEIGNEMENT PRIMIRE ET SECONDAIRE EN TUNISIE VU\. PLAN UNIVERSITiE ET - _ ETAULLSSEMENTS D'ENSESNEMENT SUPEPIEUR MARCHE DE L'EMPLOÎ VDIPLOMSE D)r l'IN \. D'LTUIOft\.S \. , %F\.(O )NIAIRLI\. BACCALAUREAT 7c A SPEC-IALE l~~~~~~~~~~~ T H 2 2 « DlPLOtHE DE TEbNICtEN IA 4 UZ 4 Z zZ- 0~ 3 - E m A A Z 4f A ESEINEEN CONCOURS _ , ~~~~~~~~~~~~~~~~AUrTRES STRUCTURES,L DE FORMATION| - \. | ~~ORIENTATIO=N i---- -_ - & ~~~~~~~MARCHE DE| L'EMPLOI| P \.TRONC COMMUN| 2e^,ENSEIGNEMENT \. \. SECONDAIRE LONGC| AUTRES * - - w ~~~~STRUCTURES I r ~~~~~~DE FORMATION I Concours Ntfalbu d'Accus een 1 B Ann de l'Ensardeæmmt Secrc | e * $ ~~~~7csx Année:\.l -6ancm ENSEIGNEMENT| 1 5^mc ^ | PRIMAIRE | I -2-||sC I(6 nne«m parurI :Ê A-^ de 1'4ce de 6 am)  - 57 - REPUBLIC 0 TUNtSIA Cart II EDUCATION AND TIAIEXIH SECToR LOMN STAFF APPRAISAL REPORT n UVB= àTyUU DE L'E1 flf h&IE Er 8sC54DADEE 4e A Lettres et 4e A Sciences 4e A Sciences Sc\. Huaines Teebniques Gestion Sciences Kath Sciences Génie Génie Lettres Admin\. expn\. [conouiques Néca\. Elect\. 3e A Lettres et 3e A Sciences 3e A Sciences Sc\. Humaines Tecbniques |Gestion Sciences Math Sciences Génie Génie Lettres Admin\. Economiques _Mca\. Elect\. 0754 8 \.29e Anne I ~~~~~~~~~~1Tronc Commun 9e Annee |w 8e Année 7e Année 6e Année Eco'le de Base 5e Anée 4e Année 3e Année 2e Année lière_Année 0754g/03\.28\.89  - 58 - Fé_Tj~~~~" - \.è» |\* * to*uo 'It~~~~~~~~~~~~~l atita z bems Pri u\. 1 S vi et Imn8- 5 h i I musA hk\.uss *a Itrié Uflas Lum~~ am :et:wq Sq\.wui jf iai \. \.as S B hu tNê Pi i et IU_ l ta itlz h_«t et t4dn 1 Wnt~4 I _d 3_ d |I_ _ tI:W i~~ Ihis\., I \. lu8 tum iau I êgaus fpj "Imm * ! g 'huiuu\.wA- In i I " I I ,;tttx«!'' lU ~~~~utiwu W m oute ta k its , au \. I\. k IiitMà\.t ltv\.au \.8 ah Ciur *t Camal\.t 1Prison xssa t1 issu\. l t usse P I uss Las-sé UhtIs Plumas \.w\.48 *f la\.1 i - _ _ I i NiA d II N i r \. IUi lsa| Ssiis ttl1 d ieus ,8 _elo ato i ?ta " of 1\.51 huB*t\.lasz ils Pris msanti\. Mi I huas \.8 ha Pr *n Nufi a h -l | uisais e | Prim l huaL_ lau- â\. lian i ! à _ el tn | C l lissA hie\. tiesoL CeAlunA lieu\. \.1 agi PrnuIs S\.uiiU r5 , e i hlt *u I iet huiss 1aA hillui 1 Iumiua 1<1\. lsI sIlu LUklt I 1\. hI li_1 Ut I li\. et tlztin- AISA @_ *lft @ , i Utr41 \.8 ls hIani\.Met I n \. humas,? Us ticisias \.8 | &1# | i\.lS ttl_ t u i Métis I tsta ' | P ietin t | | t | Slta Iois \. ttr4à 8 M Sbete km loi à_ tFe ém bel@ *t l r*1 11 \.u F i as t^e"stém ' l ttFlr nIl f lasi lu ~~~~lIeclmai _ ! " l_ t ai\., | i\.smu i I |IIr4tj\. Sctid tectîse \.8 S\.eîiu lot f 2 ^s^ tzz~~~~~~~~~~~~le 11114 |tb nOr wm à|i t 1 thlS lzS^ I\.îuîatîc\. |asWeiîas Utun |\.,« mt lu,ussî si P\.iu\.uîui CeAluni *t i|tl ad C iS elalîcail ,maaae , trù + I I~~~~~~~~~~~~~~~~uuials \.-~ I !emesa\.& Setz | 1 - it " I ~~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~:arti omiq Ij <Sfl *54 : I \. i& u 1, tai | | ~~~~~~~~~~~~~~~éisen\.u | Itraell: il I I ll~~~~~~~~~~~~~~rîmn u~: I ~~~~~~~~~~~~~~~~~~~I >ft\.S h\.ne e l\. I I i~~~~~~~~~~~~~~~eîltl,  MJINIslN RI 11 ', A I AIRI , ',ti [At I OFFICE DE LA FORMIION PUOFESSIOMEtE 1l DE LEMI-OI r NSE1IL D AD'^OINISTRATION [PRE IDENT DIRE TEV A GNERGE RAL I DIRECTEUR J EN\.TAR I_ _ _ _ _ _ _ _ _ _ _ _ | ADJOINT I ERA I (Technique) (administrative) C\.I\.DIV\. COOR\. Cm\.RI 1-0- 1 1 Il D I - c s ~1 1 IDI3 A E | N P O ~ ~~~ ~~~~~~~~L N AS E I N s WACEI ~~ ~~ ~~~~~G S C A G 1 T R E I A R LEGEEJE 0 r E S I 1 E DtI_RECTIONS- E D\.P\.P\.D\. Direction des progr_mes et projets de développemnt R D\.P\.S\. Oirection de la planification et des statistiques E D\.F\.I\. Direction de la formation institutionnelle G O\.F\.E\.P\.Q\. Direction de la formation en entreprise et de I promotion des qualifications O O\.P\.S\.T\. Oirection, promotion supérieure du travail N D\.R\.E\.O Direction des réseaux d'emploi et d'orientation A O\.A\. Direction administrative L D\.F\. Direction financière E DE\.1r\. Direction équipement et travaux S D\. COOP\. Direction de la coopération D\.l\.O\.M\. Direction de l'informatique de l'organisation et des méthoees O\.I\.G\. Direction de l'inspection générale 2\. LES CENTRES C\.R\.I\.P\. Centre de res;ources et d'ingénierie pédagogique C\.A\.C\.E\. Centre d'assistance et conseil aux entreprises I F C\. Institut de la Formation des Cadres 3 DIV COORD\. R\.C\. Divisions de la coordination zentrale et régionale\.  - 60 - Chart V EDUCATION AND TRAINING SECTOR LOAN STRUCTURE OF REGIONAL ADMINISTRATION MINISTRY OF NATIONAL EDUCATION DIRECTEUI GEREAL| SOUs D1reEteur~ d Sous Directeur de l'Enseign\. Prim\. l'Enseian, ;econd er ae àer lce (Services Comuns) e e erv ce I Enoeiin\. Primaire I Enseign_ Secondair Chef de Service IAdminist-Financier Chef de Service de la Planification des Bâtiments et de l'EguiPement Chef de Service des Activités l Socio-Culturelles 0724g/p5  -61- Chart VI EDUCATION AND TEAIIING SECTOP LOAN OPCIIZATIONAL STEUCTUE0 OF om tlCIOIUL DFS%OB DRLGmE A L'BEPLOI ET LA FOXMATION PPOFESSIOMIELLE Coordination 1 Gestion des lSynthèse |Moyens | |Cont-rôle de Dépen es| Inforation Relations Programe Spéciaux Orientation avec Et Développement Profession Entreprises Régional Le Les Agences Lea B\.R\.A\. A l'Emplo4 e à la CF\.P Formation Professionnelle 0724g/p4  NOTES l

APPROVAL

P166814

The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics Project Information Document/ Identification/Concept Stage (PID) Public Disclosure Copy Concept Stage | Date Prepared/Updated: 28-Feb-2018 | Report No: PIDC148540 Feb 28, 2018 Page 1 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics BASIC INFORMATION A\. Basic Project Data Environmental Project ID Parent Project ID (if any) Project Name Assessment Category Support to the Preparation of Egypt’s First National P166814 C - Not Required Strategy for Development of Statistics Region Country Date PID Prepared Estimated Date of Approval MIDDLE EAST AND NORTH Egypt, Arab Republic of 28-Feb-2018 AFRICA Initiation Note Review Financing Instrument Borrower(s) Implementing Agency Public Disclosure Copy Decision Central Agency for Investment Project Ministry of Investment and Public Mobilization The review did authorize the Financing International Cooperation and Statistics preparation to continue (CAPMAS) Financing (in USD Million) SUMMARY -NewFin1 Total Project Cost 0\.00 Total Financing 0\.00 Financing Gap 0\.00 DETAILS -NewFin2 B\. Introduction and Context Country Context 1\. Over the last few years, Egypt has been implementing its political transition roadmap to ensure stability and economic growth\. A new constitution was adopted in a public referendum in 2013, followed by presidential and parliamentary elections in 2014 and 2015, respectively\. Feb 28, 2018 Page 2 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics 2\. The Government of Egypt (GoE) is undertaking a comprehensive and bold economic reform program to address long-standing structural macroeconomic imbalances, address social inclusion priorities and achieve high, sustainable and well-diversified growth\. Despite the significant progress to address social and economic issues, certain challenges still persist, notably the high poverty rates (27\.8 percent in 2015), high youth unemployment (26\.1 percent), striking inflation (core at 30\.8 percent), and lack of quality public social services\. A set of social protection measures were announced in October 2016 and in mid-2017 to mitigate the impact of the economic reforms on the most disadvantaged population through measures such as: (i) expansion of the new cash transfer programs (Takaful and Karama); (ii) improving the food subsidies system; (iii) extending the provision of school meals in public schools; and (iv) raising the minimum level of pensions\. 3\. The World Bank is supporting Egypt’s economic and social reforms through a number of lending operations and Analytical and Advisory (ASA) activities\. The economic reform agenda and the adoption of the national Sustainable Development Strategy, “Egypt 2030,” aiming to achieve Public Disclosure Copy “sustainable and inclusive growth” has heightened the importance of a fully coordinated statistical system\. The World Bank is working with Government of Egypt (GoE) on several fronts to support better data collection and monitoring\. One such areas is poverty monitoring where the Bank is building the capacity of staff of Central Agency of Public Mobilization and Statistics (CAPMAS), the principle statistical agency of the GoE, on welfare and poverty calculation methods aligned with the international best practice standards\. Another area of collaboration is support to GoE for the monitoring of Sustainable Development Goals (SDGs)\. Sectoral and Institutional Context 1\. The 2015 National Statistical System Assessment (NSS Assessment) for Egypt[1] noted the extensive use of statistics in policymaking in Egypt\. One example is the use of poverty statistics\. Poverty monitoring by CAPMAS has shown the persistently high poverty rate in Upper Egypt\. Accordingly, the GoE has prioritized public investments in Upper Egypt\. Small area estimates of poverty (poverty map) are also being used for geographic targeting of public expenditure and programs\. 2\. Despite the widespread use of statistics, Egypt does not have a strategic document that guides the collection and dissemination of statistics\. Such a strategic approach can ensure that the statistical system is coordinated, well-resourced, and prepared to collect and disseminate the data needed to design, implement, and monitor national development policies and programs\. One of the recommendations of the 2015 NSS Assessment was that CAPMAS should coordinate the production of a National Strategy for Development Statistics (NSDS)\. The NSS Assessment focused on the legislative and regulatory framework for national statistics in Egypt\. It also analyzed the institutional and organizational structure and the processes followed in production, management and use of statistics\. The NSS Assessment identified several strengths related to functioning of CAPMAS and the funding and planning of key statistical activities\. Notable challenges relate to coordination within the national statistical system\. The findings of the 2015 NSS Assessment thus provides a good starting point for developing an NSDS\. The African Development Bank, one of the partners supporting the NSS Assessment, has been providing technical assistance towards the preparation of the NSDS\. Feb 28, 2018 Page 3 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics 3\. The rising needs for statistical information resulting from the country’s development vision “Egypt 2030” and the implementation of the economic reform agenda further reinforce the crucial need for a fully coordinated and strong statistical system responsible for producing statistics that are timely, deep, and respond to emerging statistical needs\. Such a system can only be achieved under a comprehensive strategy for statistics in the country, which would allow Egypt to gain from the many benefits of the strategic planning\. The GoE and CAPMAS are also committed to bringing the national statistical system closer to international best practice standards\. Accordingly, CAPMAS has sought the support of the African Development Bank, PARIS21, UN Economic Commission for Africa and UNESCWA, and the World Bank to initiate the preparation of an NSDS\. [1] Conducted by multi-agency assessment team comprised of PARIS21, the United Nations Economic Public Disclosure Copy Commission for Africa (UN-ECA), the United Nations Economic and Social Commission for Western Asia (UN- ESCWA), and the African Development Bank (AfDB)\. Relationship to CPF 1\. The CPF (FY15-19) approved by the Board on December 17, 2015 is built around three areas of engagement: (i) improved governance, (ii) improved opportunities for private sector job creation, and (iii) social inclusion\. 2\. The support to the preparation of Egypt’s fist NSDS is aligned with two pillars of the CPF, notably improved governance and social inclusion, as it will help CAPMAS establish a sound statistical strategy; build the capacity of their staff; improve the quality of data collection and monitoring of national development programs; and enhance the dissemination of statistics to stakeholders and policymakers\. C\. Project Development Objective(s) Proposed Development Objective(s) The objective of this activity is to support the national statistical agency in designing the NSDS\. Key Results Key results from the project will be: 1\. Completion and dissemination of NSDS strategy 2\. Completion and dissemination of diagnostics of sectoral statistics 3\. Staff trained in preparing statistical assessments and strategies Feb 28, 2018 Page 4 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics D\. Preliminary Description Activities/Components 1\. The project will support CAPMAS in preparing and designing an NSDS with a focus on certain sectors relevant to the economic development of Egypt as outlined in the Egypt 2030\. It will identify the challenges and constraints to statistics development through sectorial and national diagnostics\. 2\. A Concept Note has been prepared that outlines the bottom-up or sectoral approach that will be used to design the Egypt NSDS (available as a good practice note http://nsdsguidelines\.paris21\.org/node/725)\. Using this approach, a number of sectors will be selected in different waves\. In each of these sectors, three things will be done\. A high level and intensive advocacy will be undertaken to create awareness about the need for production of good quality statistics and the need for using them to support policy, planning and decision- making processes\. Assessments of the state of statistics within sectors will include how the demand is determined (coordination between data producers and users), who produces statistics in the sector and how Public Disclosure Copy they are produced, managed and disseminated to users, and how statistics are used in the sector and beyond the sector\. Sector Statistics Plan (SSP) will be designed to support further development and use of statistics in the sectors\. The Sector Statistics Plans will then be used as building blocks for the design of overall and sector-inclusive NSDS\. 3\. The NSDS will align with global, national and sectoral development agendas\. At the global level the NSDS will align with the UN Fundamental Principles of Official Statistics and meet the needs for statistics arising from the need to monitor the Sustainable Development Goals (SDGs)\. At the national level, the NSDS will align with the Egypt Sustainable Development Strategy (SDS) 2030\. Finally, the NSDS will be designed to meet the statistical needs of sectoral development agendas\. 4\. As planned, the bottom-up approach to developing the NSDS is a time consuming and coordination intensive exercise\. The concept note outlines activities taking place over 1\.5 years\. 5\. A Supreme Council for NSDS will be established by a Decree from the Cabinet, and will outline the roadmap of the NSDS and monitor the design and progress of NSDS design team and Sector Statistics Committees\. The responsibilities of this Council will include: ï‚ Communication, including at political and highest executive levels, about the NSDS and its processes thereby ensuring political commitment to NSDS ï‚ review and approval of the NSDS roadmap and design structures ï‚ determine the nature and schedule of meetings/workshops required during the process ï‚ adoption of the vision of the national strategy for the development of statistics ï‚ set benchmarks, review and discuss work in progress ï‚ propose modalities for feedback to sectors and agree on reporting mechanisms ï‚ review and consolidate sectoral outcomes, identify gaps and feed these back to sectors; ï‚ review planned outputs in line with international concepts, frameworks, standards, guidelines and experiences; ï‚ participate in consultative meetings for integrating data/information from sectors; Feb 28, 2018 Page 5 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics ï‚ approve Sector Statistics Plans and the overall NSDS 6\. NSDS Design Team comprises of high level officials from CAPMAS, Central Bank of Egypt, Ministry of Finance, and Ministry of Planning to design and execute the NSDS\. The Under Secretary for Economic and Mobilization Studies at CAPMAS is the NSDS coordinator to ensure smooth implementation of the NSDS process\. The responsibilities of the NSDS design team will include: ï‚ identify the strengths, weakness, opportunities, and threats (SWOT) of the National Statistical Strategy (NSS) in Egypt; ï‚ propose for approval by the Inter-Agency Statistics Committee the vision for the NSDS for Egypt; ï‚ formulate reasonable goals and objectives for attaining the proposed vision and submitting to the President for approval; ï‚ prioritize statistical activities over the lifespan of the NSDS; Public Disclosure Copy ï‚ spearhead the design of the NSDS following internationally agreed standards and best practices; ï‚ mobilize and sensitize sectors about the strategic planning process for statistics; ï‚ support sectors in undertaking statistical advocacy; identifying core products and data gaps; and doing quality assessment of existing data in sectors; ï‚ support the integration of statistics from the different sources (censuses, surveys, and administrative sources) into a comprehensive database; ï‚ review and ensure adherence to international standards and initiatives in the production of statistics; ï‚ promote internal technical coordination in the production of statistical information and the building of team spirit; ï‚ provide for the interface between data users and producers to agree on data priorities and timely production and use of relevant statistical products; ï‚ support the review and formatting of sector plans according to agreed standards and identify areas with duplication of effort; ï‚ identify existing capacity gaps in the sectors that call for technical backstopping by CAPMAS\. 7\. Sector Statistics Committees (SSC) will be set up\. The NSDS will be sector-tailored in line with Egypt SDS 2030\. Nine SSCs are envisioned to be created and these will cover the following entities: CAPMAS; Central Bank of Egypt; Ministry of Finance; Ministry of Planning; Ministry of Education; Ministry of Health; Ministry of Local Development; Ministry of Environment; and Ministry of Agriculture\. Each SSC will assess the statistical need of their sector and identify the gaps\. Their responsibilities will include: ï‚ advocate for statistics in the sector (with support from the NSDS design team); ï‚ identify major data needs related to the sector – for informing sectoral policies, national development agenda and achievement of regional and international goals; ï‚ prepare a formal inventory of the different data systems being operated by the different stakeholders in the sector; ï‚ identify major offices in the sector currently collecting or compiling statistics; Feb 28, 2018 Page 6 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics ï‚ identify data gaps and priorities for addressing them in line with the sectoral policies, national and international goals; ï‚ identify data collected, methodology and procedures used, coverage, availability and access, levels of disaggregation, data quality, frequency of updating and utility; ï‚ work closely with the NSDS design team and consultants as per the work plan to: o conduct a stakeholder analysis; o identify the strengths, weakness, opportunities and threats (SWOT) of institutional statistical units/sections in line with those of the NSS; o develop vision, mission statements, and core values for statistical provision in sector; and o develop Sector Statistics Plans; ï‚ Develop strategic actions: organizational development, human resource development, IT infrastructure development, data improvement and management, monitoring, evaluation and reporting; and budget development in the sector and any other issues as requested by the Inter- Public Disclosure Copy Agency Committee; and ï‚ Present the plan at sectoral level to build consensus and prepare the final report to be submitted to the President of CAPMAS\. 8\. The NSDS preparation is estimated to cost USD 376,770\. The TFSCB funds will cover USD 159,420 with the balance being covered by government or funds from other agencies (mainly African Development Bank)\. TFSCB funds will finance four components: 1\. Component 1 (US$ 55,000): Sectoral Assessment\. This component will include an initial diagnostic of 9 sectors and will include the preparation of Sectoral Assessments for areas that are critical for the role they play in Vision 2030 and monitoring of SDGs (such as those covered by Ministry of Finance, Ministry of Planning, CAPMAS, Ministry of Education, and Ministry of Health\.) 2\. Component 2 (US$ 60,000): Under this component the preparation and costing of the National Strategy will be conducted\. This will be the lead responsibility of the NSDS design team\. This component will also cover the publishing of communication materials\. This component will also benefit from support by the African Development Bank\. 3\. Component 3 (US$ 39,320): This component includes capacity building activities for core NSDS staff (NSDS Design Team and SSC)\. The component will cover the cost of workshops on: (i) NSDS concept and processes; (ii) effective assessment of statistics for specific sectors; (iii) strategic foundation (vision, mission, core values), and strategic directions (goals, objectives and initiatives); (iv) implementation, and monitoring and evaluation of the strategy; and (v) study tour to countries (such as Uganda and Jordan) where sector-inclusive NSDS has been successfully designed to expose the team to firsthand experience on the how NSDS are designed and implemented on the ground\. 4\. Component 4: Project Implementation Support (US$ 5,100)\. The project will finance the cost of technical assistance, external financial audits, project management, and communication\. Feb 28, 2018 Page 7 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics SAFEGUARDS E\. Safeguard Policies that Might Apply Safeguard Policies Triggered by the Yes No TBD Project Environmental Assessment OP/BP 4\.01 X Natural Habitats OP/BP 4\.04 X Forests OP/BP 4\.36 X Pest Management OP 4\.09 X Physical Cultural Resources OP/BP 4\.11 X Indigenous Peoples OP/BP 4\.10 X Public Disclosure Copy Involuntary Resettlement OP/BP 4\.12 X Safety of Dams OP/BP 4\.37 X Projects on International Waterways X OP/BP 7\.50 Projects in Disputed Areas OP/BP 7\.60 X CONTACT POINT World Bank Contact : Nistha Sinha Title : Senior Economist Telephone No : 473-1391 Email : Contact : Gabriel Lara Ibarra Title : Economist Telephone No : 473-5206 Email : Borrower/Client/Recipient Borrower : Ministry of Investment and International Cooperation Contact : Tarek Ras Title : Program Manager Telephone No : 01222568004 Email : tras@Miic\.gov\.eg Implementing Agencies Implementing Central Agency for Public Mobilization and Statistics (CAPMAS) Agency : Head of Central Administration of Economic Contact : Tarek Rashad Title : and Mobilization Telephone No : 20-1006092221 Email : tarek_a@capmas\.gov\.eg Feb 28, 2018 Page 8 of 9  The World Bank Support to the Preparation of Egypt’s First National Strategy for Development of Statistics FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects Public Disclosure Copy Feb 28, 2018 Page 9 of 9

APPROVAL

P006116

RESTRICTED IILE wri Report No\. p-939 This report was prepared for use within the Bank and its affiliated organizations\. They do not accept responsibility for its accuracy or completeness\. The report may not be published nor may it be quoted as representing their views\. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF BOLIVIA FOR A THIRD LIVESTOCK PROJECT May 14, 1971  INTERN\.ATIOiHiL DEVEFL-FT H\.T ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF BOLIVIA FOR A THIRD LIVESTOCK PROJECT 1\. I submit the followJing report and recommendation on a proposed development credit in various currencies equivalent to US$6\.8 million to the Republic of Bolivia for a third livestock project\. PART I - HISTORICAL 2\. IDA first associated itself with the Bolivian livestock sector through a $2 million credit made on May 26, 1967, in order to help Bolivia realize the excellent opportunities that existed for expanding production in the Beni Department of beef for export\. The progress was smoother and faster than expected\. The Beni ranchers were keenly interested in borrowing for ranch development and in the specialized technical services provided\. As a result the credit proceeds were committed within two years from the effective date and, in the middle of 1969, it became clear that additional funds were necessary to preserve the momentum\. 3\. The Bolivian Government applied to IDA in August 1969 for a new credit for a second and larger project, comprising, in addition to a continued lending program for beef ranch development, processing, storage and marketing of meat and an initial program for small holder sheep development on the altiplano\. The Government and IDA recognized that appraisal and discussion of this project would take considerable time\. Consequently, it was agreed to seek the approval of the Executive Directors for a small, $1\.4 million, credit which would be made on the same terms and conditions as the first credit and would finance an interim long-term lending program exclusively\. This second credit was approved in December 1969 and signed on January 13, 1970\. Its proceeds are now expected to be fully committed by October 1971\. 4\. Simultaneously, the Government proceeded with the preparation of the proposed third project\. After project appraisal in November 1969, discussions were held with the Government about its livestock and meat policies\. The negotiation of the proposed credit took place in Washington at the beginning of January 1971, with a delegation headed by Mr\. Fernando Barthelemy of the Ministry of Finance and comprising Mlr\. Alberto Valdes Loma, General Manager of Banco Agricola de Bolivia (BAB), Mr\. Rafael Oviedo of the Ministry of Agriculture, and Mr\. Ewaldo Bruckner, Vice President of the Beni Ranchers' Federation\. However, the presentation of the credit to the Executive Directors had to be postponed in view of discussions between the Government, BAB, and  the Beni Ranchers' Federation about certain requests by some ranchers for temporary relief frcm interest payments on previous loans made by BAB and the Central Bank\. This matter has now been resolved satisfactorily with relatively minor rescheduling of interest by BAB\. 5\. The status as of March 31, 1971 of previous IDA credits and the one Bank loan is as follows: Credit Amount (US$ million) Loan No\. Year Borrower Purpose Bank IDA Undis- bursed 61 1964 Republic of Bolivia Power - 10\.0 _ 62 1964 Republic of Bolivia Power - 5\.0 - 107 1967 Republic of Bolivia Livestock - 2\.0 0\.03 148 1969 Republic of Bolivia Power - 7\.4 6\.3 635 1969 Compania Yacibol Bogoc Gas ) 23\.2 - 23\.2 1/ Transportadores (YABOG) Pipeline ) 171 1970 Republic of Bolivia Livestock - 1\.4 1\.1 Total now held by Bank and IDA 23\.2 25\.8 Total undisbursed 23\.2 7\.4 30\.6 1/ Not yet effective The power and livestock projects have been and continue to be executed punctually and efficiently, and no delays have occurred in the disbursement of the respective credits\. Conditions of effectiveness for the July 22, 1969 pipeline loan had not been fully met by October 17, 1969 when the Government nationalized the Bolivian Gulf Oil Company\. In late 1969, after the Government assured the Bank that it intended to pay reasonable compensation to Gulf, discussions bega-n among the several parties with a view to reconstituting the project\. The compensation issue was settled by decree to the satisfaction of Gulf in September 1970, and over the past three months, the agreements for the pipeline loan and related matters have been renegotiated\. The revised loan is expected to be presented to the Executive Directors for approval in the next few weeks\. The reconstitution of the pipeline project should lead to a substantial improvement in the investment climate in Bolivia, as well as in its export earnings\. 6\. The Bank is currently acting as Executing Agency for the United Nations Development Programme which is financing technical assistance to the Bolivian railways\. This should result in organi- zational and operational improvements and in the formulation of an investment program which could form the basis for a future credit by IDA for the railways\. The Government has also indicated that it would like further IDA assistance for the power sector, but discussions are in abeyance pending Government action on power rates\.  - 3 - In March 1971, a Bank mission visited Bolivia to study the mining and metallurgical sector and to determine how the Bank Group might assist its development\. The mission's report is in preparation\. Consideration of an education project is in abeyance because of the difficulty which the Government would have to make a financial contribution to it\. PART II - DESCRIPTION OF THE PROPOSED CREDIT 7\. Borrower: Republic of Bolivia\. Beneficiary: Banco Agricola de Bolivia (BAB)\. Amount: In various currencies equivalent to US$6\.8 million\. Purpose: To help finance credit programs for beef cattle and sheep ranchers, technical services related thereto, a study of meat processing and marketing, and construction and renovation of slaughterhouses and cold storage facilities\. Amortization: In 50 years, including a 10-year period of grace, through semi-annual instalments of 1/2 of 1 percent frcm November 15, 1981 through May 15, 1991 and of 1-1/2 percent from November 15, 1991 through May 15, 2021\. Service charge: 3/4 of 1 percent per annum\. Relending terms: The Borrower will relend the proceeds of the Development Credit in local currency to the Beneficiary for 16 years at 7-1/4 percent\. Loans to ranchers will be at 12 percent per annum\. Estimated economic 18 percent on investment in cattle return on the and sheep ranch development\. Project: PART III - THE PROJECT 8\. An appraisal report entitled "Third Livestock Development Project" (PA-51a) is attached\.  - 4 - 9\. Agriculture in Bolivia serves mainly subsistence needs\. It employs more than half of the working population but contributes little to export earnings\. Following redistribution of land after the 1952 revolution, agricultural production stagnated for some time but there have been significant increases in production in recent years, particularly in sugar, rice and cotton in the lcwlands\. While the emphasis in past agricultural development has been on import substitution, future agricultural development will have to be centered increasingly on the output of commodities with good export prospects, thus strengthening Bolivia's balance of payments as well as providing higher incomes and employment\. The outlook for beef exports is particularly favorable\. Beef production in the Beni Department, where there are 10-15 million hectares of open grassland with good rainfall, has increased significantly in recent years\. lWith better herd and pasture management, and the availability of long-term funds for ranch development, the ranchers in the Beni should be able to increase further the supply of beef for export markets\. However, if Bolivia is to exploit the export possibilities effectively, it will be necessary to restructure and expand present marketing arrangements\. 10\. The project will improve pasture and herd management on about 250 beef ranches through long and short-term lending by BAB and the provision of technical services\. Long-term loans to ranchers will be for 12 years including a 4-year grace period\. 4Ahile short-term loans were limited to maturities of up to 12 months under the earlier projects and were not financed by IDA, the present credit will assist in financing such loans for maturities of up to 24 months in order to meet ranchers' working capital requirements more adequately\. The project is expected to increase production in approximately 10 years by 10,400 tons of beef per year, of which a large proportion would be exported, with foreign exchange earnings of $5\.5 million equivalent\. The lending program for beef producers will cover not only the Beni Department, but also the Pando Department and scme adjacent provinces of other departments of north-western Bolivia\. The Inter-American Development Bank (IDB) on April 21, 1970 made a $5 million loan for livestock development in the eastern depart- ments of Santa Cruz, Chuquisaca and Tarija\. In order to ensure uniform standards of project administration, the Project Director in charge of technical services for the IDA-financed projects has been placed in charge also of the IDB project\. 11\. In addition to measures designed to increase production of beef, the project includes the employment of consultants to advise on cattle slaughter, processing, transport and marketing, and on the organization of meat grading and inspection\. Once the work of the consultants is completed, BAB will finance with proceeds of the Credit the construction of slaughterhouses and cold storage plants\. As a condition of effectiveness of the Credit, the Government will abolish all quantitative restrictions on the export of beef, and such restrictions will not be reintroduced,  - 5 - unless they are temporary and the Government demonstrates to IDA that they are imposed because of emergency ccnditions\. The Government has also undertaken that, with due regard to the recommendations of the ccnsultants, it will adopt a beef price policy acceptable to IDA establishing appropriate price differen- tials between different grades and qualities of meat\. Moreover, in view of the importunce of air transport as virtually the sole means of moving meat from the Beni, the Government will take measures to ensure the provision of adequate air transport and to keep air freight tariffs at an appropriate level\. 12\. The sheep industry, concentrated in the heavily populated but low-income highland, also offers favorable prospects of increased production\. The utilization of this potential is dependent, as in the case of beef, on improved techniques and the availability of long-term funds for new investment\. The project will improve pasture and herd management on about 150 sheep properties, owned by both cooperatives and individual farmers, through long and short-term lending programs on terms similar to those that apply to loans to beef ranchers\. The project is expected to increase annual production, in approximately 10 years, by 1,450 tons of mutton and 575 tons of wool\. The additional wool production would have a value of approximately $410,000 and could replace imports; the additional mutton, valued at $850,000 would be consumed locally\. The sheep sub-project will have considerable social benefits, providing additional income to over 3,000 families on existing small holdings in the economically depressed highlands\. 13\. The cost of the entire project is estimated at US$11 million equivalent, of which the foreign exchange component is estimated at 62 percent\. The proposed IDA credit of US$6\.8 million corresponds to this component\. The local costs of the project will be covered by BAB, the ranchers, the abattoir companies, and, in the case of consulting services, the Government budget\. 14\. The Government-owned Banco Agricola de Bolivia (BAB), through which the proceeds of the credit will be channelled, has been by far the most important source of long and medium-term agri- cultural credit and has served as a vehicle for assistance from the United States and the IDB\. It has a wide network of branches, an experienced staff and has disbursed the earlier IDA credits in a satisfactory manner\. Although BAB suffered losses in the 'fifties, its situation has since improved\. To improve BAB's liquidity position and help it to make its contribution to the project, the Government will relend the proceeds of the credit to BAB on terms permitting the capitalization of most of the interest during a 5-year grace period\. IWJith a view to improving its efficiency, BAB will consult with IDA concerning steps it will take to increase the number and responsibility of middle level executive personnel\. Relending of IDA funds to ranchers iwill be at 12 percent interest\. In order to place a floor under the real interest rate paid by ranchers, the Government has undertaken  - 6 - that, if the annual rate of inflation in Bolivia exceeds 8 percent, it will introduce indexing arrangements satisfactory to IDA\. 15\. Individual purchases of goods for on-ranch investment would be handled through existing commercial channels, which are well established and provide adequate competition\. All purchases of breeding livestock, much of which will probably be imported, would be subject to the approval of the Project Director, with respect to quality, suitability and price\. Plant, equipment supplies and contracts for the construction and renovation of abattoirs and cold storage facilities would be subject to international competitive bidding\. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 16\. The draft Development Credit Agreement between the Republic of Bolivia and the Association, a draft Project Agreement between the Association and Banco Agricola de Bolivia, the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement of the Association and the text of a Resolution approving the proposed Development Credit are being distributed to the Executive Directors separately\. 17\. In addition to the undertakings described in paragraphs 11 and 14 above, the draft agreements contain provisions normally included in livestock projects and followl the pattern of the earlier agreements relative to livestock development in Bolivia\. PART V - THE ECONOMY 18\. A report on the "Current Economic Position and Prospects of Bolivia" (WH-199) dated May 19, 1970 was distributed to the Executive Directors on June 1, 1970\. A new economic mission returned from Bolivia in early March, and a summary of its preliminary findings is attached\. 19\. Bolivia reached agreement in 1969 œith the holders of its external dollar bonds on a new schedule of debt service\. After certain delays, funds have now been transferred for bringing payments up-to-date under this agreement\. The settlement following the nationalization of the assets of the Bolivian Gulf Oil Company has been referred to in paragraph 5 above\. In the first part of 1971, Bolivia nationalized the assets of two U\.S\.-owned mining concerns, the International Metals Processing Company, and the Matilde Mine Corporation\. In both cases, the nationalization decrees provided for compensation to the former owners, and steps for arriving at the valuation of the assets are being taken\.  - 7 - PART VI - COMPLIANCE WITH ARTICLES OF AGREEHENT 20\. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association\. PART VII - RECOMENDATION 21\. I recommend that the Executive Directors approve the proposed Development Credit Agreement\. Robert S\. McNamara President Attachment Washington, D\.C\. May 14, 1971  PERMANDUM ON BECrT ECONOMIC DEvEOPmENTS iN BoLivIA 1\. A report on the "Current Economic Position and Prospects of Bolivia" (W1i-199) dated Ny 19, 1970, was distributed to the Executive Directors on June 1, 1970\. The report noted that the Bolivian econonm grew rapidly during the 1960's and identified rising investment and ex- ports as the main factors contributing to this growth\. The report con- cluded that continued efforts to raise rural living standards and raise the level of investment were required to realize Bolivia's substantial long-term growth potential and to distribute more widely the benefits of economic progress\. An economic mission visited Bolivia in February/ March 1971 and its report is in preparation\. The following paragraphs present a preliminary summary of the mission's findings\. Output Growth, Income and Em\.oyment 2\. Boliviats rapid economic growth which averaged almost 7 percent annually during 1962-68, began to slow down in 1969\. This slowdown appears to have been carried over into 1970 with the result that GDP growth rate fell to some b percent\. -With a population increase of around 2\.5 percent, some additional improvemernt in incore per head was made possible\. 3\. Underlying the recent slowdowr in economic growth was a decline in investment\. Public investment fell due to a shortage of funds, while lack of confidence following nationalizing of Gulf Oil properties appears to have exercised a restraining influence on private investment\. A full recession was avoided, however, due to strong export expansion: the U\.S\. dollar value of exports in 1970 rose by 13 percent over 1969, following an irncrease of 10 percen-t in the preceding year\. 4\. Despite the rapid economic growth in the 1960's, Bolivia has remained a verT poor country, and the rural income situation of the major- ity of the population has probably not improved very much\. Although the national income statistics are weak, there are other indicators which sup- port the validity of this conclusion: (i) cash wages paid to miners in- creased only moderately under the new system of reruneration introduced in 1965 for workers in COIaBOL, the state mining enterprise; (ii) as a result of a policy of austerity pursued by the public sector, which is the largest single employer, no general wage and salary readjustment was granted after the 1957 devaluation until late in 1970; (iii) observation of the standard of living of 70 percent of the total population living in the rural areas, principally in the Altiplano, suggests that any improvement which may have taken place rust have been minimal; (iv) open unemployment has increased since 1967 when it reached the high level of about 20 percent of the labor force\. Public Finances 5\. Current reverue of the Central Government rose by 23 percent in 1970, of which 85 percent originated in taxes on mineral exports whose prices were exceptionally favorable\. The 1970 revenue increase was con- siderably more than the average increase in recent years\. Current  - 2 - expenditures, also increased sharply (17 percent) as compared to recent years, but they rose less than the revenues\. These trends helped reduce the deficit on current budgetary account to $bl5 million in 1970, from $b5l million in 1969 and an annual average of $b83 million in 1965-1968\. 6\. The beneficial effect of this improvement in Central Government savings was, however, offset by a reduction in aggregate profits of public enterprises from $b420 million in 1969 to $b395 million in 1970\. This re- duction was caased by start-up losses of ENAF, the government-owned tin smelter, and is expected to be temporary\. Decentralized Government agencies maintained their savings at the average level of the previous two years\. Aggregate public sector savings in 1970 are estimated at $b482 million or in excess of 4 percent of GNP\. Although this represents a drop from the peak attained in 1969 it is nonetheless considerably above the average attained in recent years\. 7\. Public sector savings financed about LO percent of public invest- ment in 1965-70\. This proportion is expected to fall to 31 percent in 1971, primarily because the investment for which the Government is responsible has increased since the hydrocarbons sector passed entirely into public ownership\. Balance of Payments 8\. The recent trends in the balance of payments were influenced by exceptionally favorable terms of trade\. This trend continued into 1970 and largely as a result of this exports in 1970 exceeded those of the pre- vious year by some 13 percent\. Tin reached peak prices during the first half of 1970, antimonyts price rose to a level about three times higher than that of 1969, and the price for tungsten also reached record levels\. In addition, exports of other minerals grew rapidly, even in some cases like zinc, for which there was no special price increase\. Thus, out of an increase of US$36 million in mineral exports in 1970, US$26 million was due to price increases, and US$10 million to volume\. Non-traditional exports, consisting mainly of agricultural products, grew by 52 percent over 1969\. Cotton provided most of the increase, with other non-tradi- tional exports growing by close to 9 percent\. n,\. The slowing down in the rate of growth of economic activity men- tioned earlier had its repercussions on the demand for imports\. Imports, which grew by an average rate of almost 11 percent between 1964-68, dropped to 5 percent in 1969 and to only one-half this rate in 1970\. Even this small increase in imports in 1970 of under US$5 million created a problem in spite of the rising export earnings\. This occurred because disburse- ments of foreign loans declined due to the weak financial position of the public sector, foreign private investment disappeared, and there was a continuation of capital flight\. As a consequence, total improvement in international reserves amounted to only US$3\.1 million during 1970 after taking into account allocation of US$[\.9 million of fl-F Special Drawing  Rights\. By the end of 1970, the Central Bankl' net reserve position was equivalent to two and one-half months of merchandise imports\. Prospects 10\. There are several indicators pointing towards improved economic performance in the future, given political stability\. Unless the U\.So Government makes releases from its tin stockpile, price prospects for tin are considered to be favorable, as are those for other minerals\. Another factor is the reconstitution of the gas pipeline project which will add to investment and exports, and should boost private sector confidence\. A third favorable factor is the Government's recently approved first com- ponent of a tax reform program which aims at underpinning higher leve)sof public investment\. This factor is of particular importance since success in reaching a high growth rate depends on Bolivia's ability to raise do- mestic savings and additional external resources\. The willingness of external sources to increase their assistance will be enhanced if Bolivia can demonstrate that it is making maximum savings effort\. The Government intends to increase the proportion of public sector savings in total public investment to around 45 percent by 1976\. This would entail rais- ing public sector savings from their current level of about $bO\.5 billion to $bl\.2 billion\. As a first step it plans an ambitious increase in savings of almost 37 percent over the estimate for 1971\. In fact, there are considerable opportunities for increasing public savings at the Central Government level, both in terms of current revenues and expend- itures, as well as in most other public sector agencies\. The urgency of further fiscal efforts is dictated not only by the need to finance a rising proportion of an increasing level of public investment, but also by the fact that, as noted above, past improvement was in part the re- sult of special gains\. It remains to be seen whether political circum- stances will permit the Government to achieve its plans\. External Debt 11\. As of December 31, 1970, Bolivia had US$593 million of external public debt (including undisbursed), of which US$64 million are repayable in local currency\. Service on this debt, US$2b\.1 million, represented about 11 percent of exports of goods and services in 1970\. This rela- tively low percentage reflects the fact that in excess of three-fifths of existing debt was contracted on concessional terms\. Service on the existing public external debt is expected to decline only gradually, while at the same time new debt will be incurred\. Preliminary long-term pro- jections based on the assumption of accelerated growth indicate that service on both the existing and the new public external debt would reach the high level of 20 percent of exports in 1983 even if very favorable terms are obtained for nei debt\. This projection assumes increased capital inflow, a part of which will have to consist of supplierst  credits on conventional terms\. It also assumes the growth of exports at an annual rate of about 8 percent, compared to the exceptionally high rate of 12 percent in the sixties\. The projected debt service burden and Boliviavs poverty suggest that most official external capital assist- ance should be provided on soft terms\. Attachments: Basic Data Supporting Tables South America Department may 3, 1971  BASIC DATA Area 1,099,000 km2 Dnsity per square kilometer 4\.5 Population (1970j 4\.9 million Averageaniiiiu rate of growth, 1963-70 2\.6 percent Gross Domestic Product at Current Market Frices (1970) 11,710 million Average annual growth in real, CDP, 1964-70 6\.0 percent Per Capita GDP (1970) US$200 GDP at Market Prices by Industrial Origin perQent2 1960 1965 1969 Agriculture 31 29 27 Mining and Petroleum 10 10 12 Manufacturing 14 15 16 Construction 4 6 5 Electric Power 1 2 2 Transport 9 8 8 General Government 8 10 10 Commerce and other services 23 20 22 Total 100 100 100 Saving and Investment as Percent Average Average of GNP 1960-64 1964-68 1969 1970 Gross Domestic Investment 15\.2 16\.2 15\.5 12\.3 Gross Domestic Savings 8\.0 12\.2 12\.4 10\.8 External Savings or Resource Gap 7\.2 h\.0 3\.1 1\.5 Money Suppy 1967 1968 1969 1970 MillionsTof $b 11h6 1232 1340 1510 Change in percent 3\.4 7\.5 8\.8 11\.7 1967 1968 1969 1970 Cost of Living Index 100\.0 105\.9 109\.8 114\.2 Public Sector Finances 1967 1968 1969 1970 ($b milli-on-s)T Capital Expenditures 824\.0 1144\.0 1313\.0 1089\.0 Investment 582\.0 929\.0 1110\.0 905\.0 External debt amortization 242,0 215\.0 203\.0 184\.0  Financirig Savings on current account 242\.4 278\.6 470\.6 482\.2 Borrowing from banking system 179\.0 33\.0 126\.0 214\.0 Disbursements on external loans 524\.0 821\.0 743\.0 481\.0 Other (floating debt and balance) -121\.4 11\.4 - 26\.6 - 88\.2 Balance of Payments 1967 1968 1969 1970 (U\.S\.$ m i 1 1 i n) Current Account - 29\.1 49\.3 40\.3 - 12\.7 Exports FOB 153\.2 155\.5 172\.5 195\.3 Imports FOB -151\.8 -161\.5 171\.4 -175\.8 Other - 30\.5 - 43\.3 - 41\.4 - 6\.8 Amortization of Long-Term Debt - 20\.4 - 18\.1 - 17\.1 - 15\.5 Gross Capital Inflows 49\.5 67\.4 57\.4 28\.2 Private capital (long-term) 23\.6 35\.9 35\.2 1T\. Official capital 39\.7 65\.0 62\.5 4o\.5 Short-term capital, changes in reserves, errors and omissions - 14\.0 - 29\.1 - 40\.3 - 14\.1 Commodity Consumtion of Exports (Customs Statistics) 1964 1968 1969 1970 (percent of total exporTs7 M4tals 94\.9 81\.5 84\.3 89\.7 Tin 71\.2 54\.2 51\.7 47\. Antimony 4\.8 3\.5 5\.5 13\.7 Tungsten 1\.2 5\.8 5\.6 7\.7 Zinc 2\.7 1\.7 3\.9 6\.3 Copper 2\.8 4\.6 5\.5 5\.5 Silver 5\.4 6\.6 5\.5 4\.7 Lead 4\.3 3\.0 3\.5 3\.4 Other 2\.5 2\.1 3\.1 4\.1 Agricultural Products 4\.0 4\.1 3\.8 3\.9 Petroleum o\.6 14\.2 11\.6 6\.2 Other 0\.5 0\.2 0\.3 0\.2 Total 100\.0 100\.0 100\.0 100\.0 Foreign Exchange Pbsition of the Dec\.1968 Dec\.1969 Dec\.1970 Central Bank (US$ millionT Gross Reserves 46\.7 49\.2 54\.9 Gross Liabilities 14\.3 16\.4 18\.4 Net Reserves 32\.4 32\.8 36\.5  IMF Pbsition Dec\.1968 Dec\.1969 Dec\.1970 (US$ million) Quota 29\.0 29\.0 37\.0 Drawings outstanding 12\.0 15\.0 15\.0 Outstanding Public Medium and Long- Term (including undisbursed) External Debt Estimated Decembe'r3l, 1970 US$529 million Debt Service Ratio: 1970 11\.3 percent Exchange Rate US$1\.00 = $bll\.88  EXPENDITURE ON GROSS NATIONAL PRODUCT 1965-70, ESTIMATE FOR 1971 (Millions of Current Bolivian Pesos) Preliminary Estimate 1965 1966 1967 1968 1969 1970 1971 Consumption 6,332 7,OO4 8,012 8,790 9,83h 10,535 11,770 Investment 1,218 1,291 1,284 1,836 1,71h 1,438 1,850 Exports of Goods & Services l,5b0 1,743 2,015 2,010 2,138 2,517 2,630 Imports of Goods & Services 1,910 2,088 2,332 2,444 2,612 2,780 3,160 Gross Domestic Product 7,180 7,950 8,979 10,192 11,074 11,710 13,090 Net Factor Income Payments -35 -10 -192 -253 -252 -110 -105 Gross National Product 7,1L5 7,940 8,787 9,939 10,82? 11,600 12,985 Source: Ministry of Planning and mission estimates\.  PUBLIC SECTOR INVESTMENT AND ITS FINANCING 1965-70, ESTIMATE FOR 1971 (Millions of current Bolivian pesos) Preliminary Estimate 1965 1966 1967 1968 1969 1970 1971 I\. Resources 260\.4 94\.9 2?42\.4 278\.6 470\.6 482\.2 489\.1 Current Account Surplus of: a\. Central Government -68\.2 -108\.4 -77\.0 -89\.0 51 4 -15\.3 -62\.4 b\. Decentralized Institutions 25\.5 35\.5 30\.2 104\.3 88\.2 101\.8 127\.7 c\. Decentralized Enterprises 296\.1 157\.9 275\.9 252\.0 420\.2 395\.1 403\.9 d\. Municipalities 7\.0 9\.9 13\.3 11\.3 13\.6 0\.6 -4\.1 II\. Investment 616\.0 478\.0 582\.0 929\.0 1110\.0 905\.0 1587\.0 UI\. Financed By Credit 355\.6 383\.1 339\.6 650\.4 1639\.4 422\.8 1097\.9 a\. External Net 376\.6 214\.0 282\.0 606\.0 540\.0 297\.0 825\.0 (Disbursements on Project Loans) (369\.0) (424\.0) (472\.0) (772\.0) (743\.0) (481\.0) (1058\.0) (IJ\.S\. Government Transfers)(123\.0) ( 73\.0) ( 5?\.0) ( 49\.0) ( - ) ( ) ( - ) (Amortization) (]16\.0) (283\.0) (242\.0) (215\.0) (203\.0) (184\.0) (233\.0 ) b\. Internal Net 144\.0 154\.0 179\.0 33\.0 126\.0 214\.0 316\.0 c\. Other -164\.4 15\.1 -121\.4 11\.4 -26\.6 -88\.2 126\.9 Source: Ministry of Finance\.  BALANCE OF PAYHENTS 1965-1970, ESTIMAUT FOR 1971 (millions of U\.S\. dollars) Preliminary 1965 1966 1967 1968 1969 1970 Estimate 1971 CURRENT ACCOUNT Goods Gorts FOB 112\.2 130\.3 153\.2 i55\.5 172\.5 195\.3 203\.3 Isports FOB -126\.6 -138\.8 -151\.8 -161\.5 -171\.1 -175\.8 _205\.h t Won-Monetary Gold 3\.3 2\.8 2\.0 1\.6 i\.L 1\.5 \.5 Trade Balance -11\.1 -\.7 7 2\.5 21\.0 -0\.6 Services Freignt & Insurance on March\. -19\.0 -20\.1 -22\.2 -22\.5 -2h\.2 -25\.2 -31\.5 Investment Income, Not - 3\.6 - 0\.8 -18\.0 -23\.6 -18\.5 - 9\.3 - 8\.9 of whichs (Profit Remittances) (- 1\.0) ( 2\.9) (-13\.6) (-18\.7) (-12\.2) ( 0\.7) ( 0\.7) (Interest on Exist\. Debt) (-2\.6) (-3\.2) 4- h\.b) C- h\.9) (-6\.3) (-8\.6) (-8\.2) (Interest on New Debt) - ) ( - ) - ) ( - ) C ) C ) - ) Other Services Net -j5\.8 -6\.1 52 -5 - 7\.0 - 8\.b, 8\.5 Balance of Services -28\.1 -27\.3 -27\.3 -51\.6 -A9\.7 42\.9 -18\.9 Transfers\. Net 16\.o 21\.3 12\.9 6\.7 6\.9 9\.2 3\.0 Balance -23 5 -11\.7 -29\.1 -b9\.3 LO 3 -12\.7 -16\.5 CAPITAL ACCOUNT Private Direct Investment 5\.7 17\.1 22\.8 3\.,\.? 31\.2 1\.0 1\.0 Other Private Long Term, Net 1\.2 1\.7 1\.0 1\.7 1\.0 0\.8 0\.8 Private let 6\.9 -77_ T73T 35[\.9 35\.2 ThW 1 \. 8 T ?Iationalization - - -78\.6 -_30 Pablic Disbursements on Existing Debt 31\.1 35\.7 39\.7 65\.0 62\.5 tO\.5 9h\.8 Disbursements on New Debt - - - - - - 61\.8 Total Disburs\. 311 35\.7 397 65\.0 62\.5 0\. 5 9b 8 Amortization Existing Debt - 9\.8 -23\.8 -20\.4 -18\.1 -17\.1 -15\.5 -19\.6 Amortization Vew Debt - - - - - - 17\.2 J Total Amortiz\. _ 9\.8 -23\.8 -20\.4 -18\.1 -17\.1 -15\.5 -36\.8 Public Net 21\.3 11\.9 19\.3 146\.9 1,5\.1 25\.0 58\.0 "ationalization - - - - 78\.6 - 3\.0 International Reserves (_ - increase) - 1I4\.3 - 3\.2 8\.9 0\.5 -0\.5 - 3\.1 3\.3 Errors and Omissions 3/ 9\.6 -39\.2 -22\.9 -31\.0 -39\.8 -11\.0 -10\.0 4/ Balance 23\.5 11\.7 29\.1 L9\.3 40\.3 12\.7 16\.5 Gap to be Financed - - /h Includes some USSiS million of imports for gas pipeline project\. 77 Includes short-term private capital\. /3 Payment to 3ulf for pipe imported in 1969\. A Includes USDS5 million payment to Williams Brothers for technical services rendered in 1969, which have been classified as short-term debt\. Source: 1965-70 1MF Balance of Payments Yearbook, mission estimates\.

APPROVAL

P000493

Docu La Banque Mon A N'UTILISER QU'A DES FINS OFFICIELLES \. 39--C Rapport No\. 1585-CD -i EVALUATION D'UN PROJET DANS LA ZONE SAHELIENNE TCWA 4 aout 1977 '- 1 *\. - - TR ADUCTION NON-OFFICIELLE A TITRE D'INFORMATION cat Gna umsPa de I TAUX DE CHANGE Monnaie : franc CFA (FCFA) 1 dollar EU = 245 FCFA 1\.000 FCFA = 4,08 dollars EU POIDS ET MESURES (Système métrique) SIGLES ACDI Agence canadienne pour le développement international ASECNA Agence de sécurité pour la navigation aérienne BGAE Bureau de gestion des Aides Extérieures CLCCN Comité de lutte contre les calamités naturelles FAC Fonds d'aide et de coopération FED Fonds européen de développement ONDR Office national de développement rural PNUD Programme des Nations Unies pour le développement PZS Projet zone sahélienne SERARHY Service des aménagements ruraux d'hydraulique EXERCICE Gouvernement ler janvier - 31 décembre Projet ler- octobre - 30 septembre î A N'UTILISER QU'A DES FINS OFFICIELLES TCHAD EVALUATION D'UN PROJET ZONE SAHELIENNE TABLE DES MATIERES Pages RESUME ET CONCLUSIONS \. i - iv I\. INTRODUCTION \. 1 II\. DONNEES DE BASE \. \. 2 A\. Généralités \. \. \. \. 2 B\. Le secteur rural \. 3 Projet de secours contre la sécheresse \. 3 C\. Stratégie sectorielle \. 5 IliI\. LE PROJET \. \. \. \. \. \. \. \. \. \. 6 A\. Objectifs et description sommaire 6 B\. Caractéristiques des sous-projets \. 7 Amélioration de l'agriculture \. 7 Maintien et amélioration des services d'hygiène vétérinaire \.8 Entretien des points d'eau pastoraux \. 9 Expansion des activités forestières 10 Amélioration des prestations de services il C\. Organisation et administration \. 12 Rapports et supervision \. 13 IV\. ESTIMATIONS DES COUTS ET DISPOSITIONS FINANCIERES 14 A\. CoÛts du projet \. 14 B\. Modalités de financement \. 14 C\. Passation des marchés \. 17 D\. Décaissement \. 17 E\. Comptabilité et révision comptable \. 18 F\. Incidences financières pour l'Etat \. \.19 V\. AVANTAGES ET JUSTIFICATION \. 21 Risques \. 22 VI\. RECOMMANDATIONS \. 23 Le présent document fait l'objet d'une diffusion restreinte, et ne peut être utilisé par ses destinataires que dans l'exercice de leurs fonctions officielles\. Sa teneur ne peut être autrement divulguée sans l'autor ;ation de la Banque Mondiale\. w ANNEXES 1\. Précipitations et production agricole Tableau 1 Déficit en matière de précipitations pour 1976 Tableau 2 Le déficit des céréales en 1976/77 2\. Aménagement des bas fonds Tableau 1 Caût des Sous-projets Tableau 2 Calendrier indicatif des emplacements des aménagements des bas-fonds Tableau 3 Travaux d'aménagement, personnel de vulgarisation et coûts pour les semences et essais sur échantillons du sol Tableau 4 Topographie et coûts des pépinières villageoises Tableau 5 Taux de rentabilité économique 3\. Magasins villageois Tableau 1 Emplacement de magasins villageois de l'ONDR existants dans Zone sahélienne Tableau 2 Calendrier estimatif des emplacements des nouveaux magasins villageois Tableau 3 Coût d'un magasin villageois Tableau 4 Coût des sous-projets 4\. Centre de Développement rural - Lac Fitri Tableau 1 Coûts des sous-projets 5\. Opération Mara\.chage Tableau 1 Coûts du sous-projet Tableau 2 Taux de rentabilité économique 6\. Campagne de vaccination et médicaments Tableau 1 Population animale -2- Tableau 2 Coûts d'investissement Tableau 3 Coût de fonctionnement Tableau 4 Calcul du ratio avantages-coûts 7\. Equipnent pour la production des vaccins Tableau 1 Production et livraison de vaccins Tableau 2 Coûts du sous-projet 8\. Réparation des puits à ciel ouvert: Kanem Tableau I Coûts du sous-projet 9\. Fonctionnement des Stations de pompage Tableau 1 Caractéristiques des puits Tebleau 2 Coûts des sous-projets 10\. Surveillance hydrogéologique de la Nappe Phréatique Tableau 1 Coûts du sous-projet 11\. Mise en défens des massifs forestiers Tableau 1 Coûts des sous-projets 12\. Création de Pépinières forestières Tableau 1 Coûts des sous-projets 13\. Prospection des Roseraies Tableau 1 Coûts des sous-projets 15\. Aménagements de l'infrastructure aéronautique Tableau 1 Coûts du sous-projet 16\. Coûts du projet et son financement Tableau 1 Résumé des Coûts du projet et financement Tableau 2 Coûts du projet par genre de dépenses Tableau 3 Catégorie de décaissements et Calendrier des décaissements de VIDA 17 Avantages du projet Tableau 1 Sous-projets et critères de sélection TCHAD PROJET ZONE SAHELIENNE RESUME ET CONCLUSIONS Généralités i\. Le Gouvernement tchadien a sollicité l'assistance financière de l'IDA pour un projet dans la zone sahélienne en vue de réaliser de petits sous- projets\. Le projet a été conçu par l'IDA en décembre 1976, après la mauvaise récolte de cette année-là, mais c'est le gouvernement qui a tenu le rôle principal dans la préparation du projet\. Le présent rapport se fonde sur les constatations d'une mission d'évaluation qui s'est rendue au Tchad en février/ mars 1977\. Objectifs et descr'ption du projet ii\. Le projet a pour objectif principal le lancement d'un train de mesu- res visant à atténuer les effets de la sécheresse et à encourager uu à accélé- rer le développement des ressources agricoles, animales et forestières dans la zone du Sahel\. Il a en outre deux grands objectifs secondaires: aider les pouvoirs publics à mettre en vigueur dans le Sahel la nouvelle stratégie con- cernant le secteur rural et renforcer, en recourant à leur compétence, les organismes de l'Etat qui ont participé effectivement à la préparation du pro- jet, notamment le Comité de lutte contre les calamités naturelles\. Le projet sera exécuté en deux ans, sans possibilité de reconduction, mais les sous- projets particulièrement réussis et qui seront jugés dignes d'être élargis pourront éventuellement être incorporés à des projets de l'IDA\. Les sous- projets ont été sélectionnés en fonction des cinq critères mis au point pour le Projet de secours contre la sécheresse en Afrique de l'Ouest de 1973, à sa- voir: les sous-projets doivent avoir pour but d'atténuer les conséquences de la sécheresse, de reconstituer le potentiel productif des régions gravement sinistrées, procurer des avantages rapides et à un grand nombre de bénéficiai- res, être m0nifestement utiles et jouir de l'appui de la communauté, qui serait disposée à contribuer aux coûts, chaque fois que cela serait possible, en fournissant du travail ou des matériaux locaux\. Un critère supplémentaire a été ajouté: les sous-projets doivent pouvoir être exécutés par les organismes exis- tants, sans qu'il faille recruter un nombre excessif de cadres supérieurs\. Le projet permettrait de financer 14 sous-projets, situés en gros dans une bande de 200 km de large au nord de l'isohyète de 600 mm et comprendrait les éléments suivants: a) expansion des cultures par i) aménagement des bas-fonds (environ 2\.000 ha); ii) construction de 28 magasins villageois; iii) création d'un centre de vulgarisation et de recherche appliquée sur les cultu- res de décrue au lac Fitri; et iv) apport de facteurs de production destinés à développer la production maralchère près de N'Djamena; - ii - b) amélioration et entretien des services d'hygiène vétérinaire, par i) campagnes massives de vaccination et fourniture de médicaments en quantités suffisantes en 1977/78; et ii) rééquipement de l'usine de production de vaccins de N'Djamena; c) entretien des points d'eau pastoraux: i) réparation de 40 puits à ciel ouvert dans le Kanem; ii) exploitation de 12 stations de pom-\. page dans le Chari Baguirmi; et iii) surveillance hydrogéologique de la nappe phréatique; d) développement des activités forestières par i) mise en défens d'un massif forestier près de N'Djamena \.(environ 3\.500 ha), ii) création de quatre pépinières forestières; et iii) prospection des rôneraies; e) amélioration des prestations de services par l'Etat, par i) cons- truction et équipement d'un garage; et ii) aménagement de six pistes d atterrissage\. Certains éléments de quatre des sous-projets se dérouleront dans des zones pour le moment inaccessibles pour les services de l'IDA et les activités qui devraient être supervisées sur place ne s'étendront pas en dehors des zones sûres tant qu'il ne sera pas possible de se rendre sur place; par ailleurs, le centre de développement rural du\. lac Fitri ne commencera pas à fonctionner tant que l'accès à cette région ne sera pas assuré\. Au cours des négociations, le gouvernement a été avisé que conformément aux conditions pratiquées habi- tuellement par le Groupe de la Banque, les décaissements ne pourront s'effec- tuer que si le personnel de l'IDA a toute facilité pour superviser les activi- tés des sous-projets\. Exécution du projet iii\. L'organisation et la direction du projet n'entraineront la création d'aucun nouvel organisme\. La responsabilité globale de l'administration sera confiée au Comité technique de lutte contre les calEmités naturelles (CLCCN)\. Le contrôle financier incombera au Bureau de gestion des aides extérieures de la Direction du plan et du développement\. L'exécution des sous-projets relèvera des organismes compétents, tous représentés au CLCCN\. Coût estimatif et arrangements financiers iv\. On estime que pour les deux exercices à compter d'octobre 1977, le coût du projet se montera à 4 millions de dollars (net d'impâts), dont 58 % payables en devises\. Il est proposé que l'IDA accorde au gouvernement un crédit de 1,9 million de dollars, aux conditions habituelles, en vue de financer 48 % du coût du projet, à savoir 49 % des coûts en devises, estimés à 1,1 million de dollars, et 46 % des coûts en monnaie nationale, estimés à -iii - 0,8 million de dollars\. L'Agence canadienne pour le développement inter- national (ACDI) versera l'équivalent de 1,9 million de dollars sous forme de subvention qui sera décaissée à la même cadence que le Crédit de l'IDA pour financer 50 % des coûts\. Le reliquat des coûts du projet, estimé à 200\.000 dol- lars sera à la charge des bénéficiaires pour le sous-projet d'exploitation des stations de pompage et à celle de l'Etat pour les sous-projets de mise en dé- fens d'un massif forestier et de création des pépinières forestières\. v\. Le Crédit de l'IDA sera versé à un compte ouvert au nom du projet au- près de la Banque de développement du Tchad\. Le Bureau de gestion des aides extérieures autorisera le décaissement de ces~fonds sous forme de subventions aux organismes chargés d'exécuter les sous-projets\. Etant donné que le Tchad n'est pas en mesure de préfinancer les dépenses relatives au projet, l'IDA et l'ACDI financeront chacune à 50 % un fonds renouvelable de 250\.000 dollars, par l'intermédiaire du compte du projet\. Passation des marchés et décaissement vi\. Les marchés de véhicules et de matériel (estimés à 1,3 million de dollars) et de matériaux pour les travaux en régie (estimés à 0,2 million de dollars) seront passés par voie d'appel d'offres international, conformément aux directives de l'IDA, pour les marchés de plus de 50\.000 dollars\. Dans le cas des marchés compris entre 10\.000 et 50\.000 dollars et pour tous les mar- chés de bâtiments, la pessation se fera par appel d'offres, conformément aux procédures locales jugées acceptables par l'IDA\. Les soumissionaires pour la construction des garages seront présélectionnés\. Pour tous les marchés infé- rieurs à 10\.000 dollars, les achats seront faits directement après comparaison des prix\. Les services du consultant à court terme requis pour le projet de prospection des rôneraies seront obtenus selon des procédures jugées accepta- bles par l'IDA\. vii\. Chacun des quatorze sous-projets envisagés constituera une catégorie de décaissement; la révision comptable et l'établissement des rapports consti- tueront une autre catégorie\. Les fonds de l'IDA seront décaissés comme suit: 50 % des dépenses, à l'exception des trois sous-projets indiqués ci-après (1,5 million de dollars); pour les sous-projets de mise en défens d'un massif forestier et de pépinières forestières, 50 % des dépenses de véhicules et de matériel, des travaux de génie civil et des charges d'exploitation (0,1 million de dollars); 50 % du coût du projet de stations de pompage pendant la première année, puis 25 %, le solde étant à la charge des bénéficiaires (0,1 million de dollars)\. Une somme de 0,2 million de dollar sera non affectée\. Exception faite du fonds rencuvelable, dans le cas duquel les certificats de dépenses ex- post seront fournis, les décaissements s'effectueront au vu des documents d'im- portation, des marchés et des relevés de dépenses certifiés conformes\. Le re- liquat ion décaissé des fonds pourra être affecté à de nouveaux sous-projets identifiés et préparés par le CLCCN et approuvés par l'IDA\. - iv - Avantages et justification viii\. Environ 250\.000 familles bénéficieront du sous-projet de campagne de vaccination et médicaments, qui est de loin le plus important, puisqu'il repré- sente 27 % du total des coûts de base\. Son ratio avantages-coûts sera d'envi- ron 3:1 sur 12 mois en raison des coûts irréversibles élevés et de la rentabi- lité immédiate\. Les sept autres sous-projets dont on peut identifier les béné- '\.ficiaires directs toucheront 18\.900 familles, soit plus de 75\.000 personnes\. Les taux de rentabilité qui ont pu être calculés sont les suivants: pour l'aménagement des bas-fonds: 21 %; opération maraichage: 23 %; et réparation des puits: environ 19 %\. Ces trois sous-projets représentent 21 % des coûts de base du projet et leur taux de rentabilité moyen pondéré serait de 21 %\. Le projet aura en outre des avantages importants sur le plan institutionnel et au niveau de la formation en cours d'emploi, en renforçant le CLCCN et en donnant la possibilité d'acquérir une expérience pratique à du personnel qui a reçu une formation théorique\. Risques ix\. L'absence d'accès à la mer et la sécurité intérieure du Tchad posent un problème constant\. Le projet proposé présente en outre un risque particu- lier, étant donné que les activités liées au projet se déroulent dans la züne du Sahel, où la sécurité est particulièrement aléatoire dans certains secteurs\. D'un autre côté, les décaissements ne seront effectués que\. si les services de l'IDA ont toute facilité pour superviser le projet\. En outre, étant donné que chacun des sous-projets constitue une entité distincte, les retards, voire lns échecs, enregistrés par un sous-projet n'auront pas de conséquences graves pour les autres\. Le caractère novateur de certains des sous-projets crée un risque supplémentaire, en ce sens que les organes d'exécution n'ont rarement, ou jamais, eu la possibilité de prouver leur compétence\. Cependant, ces orga- nismes, qui --ont représentés au CLCCN, ont participé intégralement à la prépa- ration du projet et tiennent à s'acquitter honorablement des sous-projets qui leur seront confiés; il ne saurait y avoir de meilleure garantie sur le plan de la gestion, même s'il n'est pas possible d'éliminer entièrement le risque d'erreur dans l'exécution de travaux d'un caractère nouveau\. Enfin, il n'est pas certain qu'en dépit de ses bonnes intentions, le gouvernement puisse con- tinuer à financer les dépenses renouvelables lorsque le projet sera terminé\. Toutefois, seuls trois projets en subiraient les conséquences: la mise en dé- fens d'un massif forestier, les pépinières forestières et l'infrastructure aéronautique\. x\. Sous réserve des assurances et conditions citées au Chapitre VI, le projet justifie l'octroi par l'IDA d'un crédit de 1,9 million de dollars\. TCHAD PROJET ZONE SAHELIENNE I\. INTRODUCTION 1\.01 Le Gouvernement tchadien a demandé à l'IDA de l'aider à remédier aux conséquences de la mauvaise récolte de 1976 dans la zone sahélienne\. Le projet cons\.Lste à financer 14 petits sous-projets visant à: accélérer le développement de l'agriculture; maintenir et améliorer les services d'hygiène vétérinaire; en- tretenir les points d'eau pastoraux; développer les activités forestières; et améliorer les prestations de services de l'Etat dans la région\. Le projet n'a pas pour but de fcurnir des secours d'urgunce ni de parer à de futures sécheres- ses\. En fait, l'objectif à moyen terme du projet consiste à lancer rapidement un train de mesures visant à compenser la sécheresse, pour soutenir ou accélé- rer le développement des ressources agricoles, animales et forestières de la région\. Le projet a été conçu par l'IDA sur la demande des pouvoirs publics en décembre 1976\. La préparation du projet a été effectuée en majeure partie par le gouvernement, par l'intermédiaire de son Comité de lutte contre- les\.ca- lamités naturelles\. 1\.02 L'IDA a déjà financé des projets agricoles au Tchad: i) le Projet de développement de l'élevage (Crédit 309-CD, 2,2 millions de dollars) en 1972 qui, après des difficultés initiales, va s'achever bientôt de façon satisfai- sante; ii) le Projet de secours contre la sécheresse (Crédit 445-CD, 2 millions de dollars) en 1974 qui également s'achevera bientôt de façon satisfaisante; iii) le Projet d'irrigation Sategui-Deressia (Crédit 489-CD, 7,5 millions de dollars) en 1974, qui a été suivi par un crédit complémentaire de 8 millions de dollars en août 1976 et se deroule de façon setisfaisante; iv) le Projet de polders du lac Tchad (Crédit 592-CD, 5 millions de dollars) en 1975, qui se déroule de façon satisfaisante; et v) le Fonds de projets ruraux (Crédit 664-CD, 12 millions de dollars) en 1976, qui vient d'entrer en vigueur\. 1\.03 Le présent rapport a été établi à la suite du séjour effectué au Tchad en février/mars 1977, par une mission d'évaluation, composée de MM\. D\. Steeds, M\. Dia, K\. Meyn, D\. Notley et E\. Sinodinos (IDA)\. II\. DONNEES DE BASE A\. Généralités 2\.01 Le Tchad s'étend sur 1,3 m-lion de km2\. Sa population, de faible densité, n'atteint que 4 miliions d'habitants, dont 3,5 vivent en zone rurale:\. La moitié de la population rurale habite la zone sud-ouest ou zone cotonnière, comprenant les cinq'provinces situées en gros au sud de l'isohyète de 1\.000 mm, soit 10 % seulement de la superficie du pays\. Dans cette région, de petits exploitants cultivent les céréales, les légumineuses et le coton, et bénéficient de précipitations suffisantes et régulières\. Plus- au nord, à mesure que les pré- cipitations diminuent et deviennent moins régulières, l'agriculture non irriguée est de plus en plus aléatoire et cède le pas à la transhumance\. Cette région peut être divisée en deux zones: la zone de transition et le Sahel, séparées par l'isohyète de 600 mm, et dont la population rurale atteint respectivement 0,6 million et 1,2 million d'habitants\. 2\.02 Le Tchad est l'un des pays les plus pauvres du monde\. Son PNB est d'environ 1*20 dollars par habitant et dans les zones rurales, les revenus attei- gnent quelque 60\.dollars par habitant\. Le développement est freiné par la rigueur des conditions naturelles, l'insuffisance ûe l'infrastructure et par le montant élevé du taux de fret en vrac (34\.000 francs CFA (140 dollars)/t) de- puis l'océan\. Depuis quelques années, une rébellion intérieure et la sécheresse la plus catastrophique qui se soit produite depuis 50 ans ont encore aggravé la situation financière précaire du Tchad\. Le déficit du budget ordinaire ne cesse de s'accroitre depuis le début des années 1970, ce qui a empêché le Tchad de participer aux nouveaux investissements et même de financer intégralement ses dépenses courantes\. Dans certains cas, notamment pour l'entretien, les ouver- tures de crédit sont de plus en plus insuffisantes\. Cependant, depuis l'arrivée au pouvoir d'un gouvernement militaire énergique en avril 1975, le problème de la sécurité s'est stabilisé\. La situation pourrait encore s'améliorer comme il ressort des récentes réunions qu'ont tenues les chefs d'Etat du Tchad et des pays voisins\. Par ailleurs, des efforts ont 6té entrepris pour assainir les finances et s'ils se poursuivent, les participants à la dernière mission économique estiment que le budget pourra être en équilibre en 1982 et qu'il sera possible d'obtenir un léger excédent en compte courant au milieu des années 1980 (Rapport No 1340-CD)\. La découverte de gisements de pétrole abon- dants, l'intensification de la prospection et les possibilités d'exploitation permettent d'envisager l'avenir sous un aspect moins sombre\. Tant que la situa- tion des finances publiques ne s'améliore pas, il faudra cependait que le Tchad continue à faire appel à l'aide extérieure pour financer ses dépenses cou- rantes, en particulier les dépenses d'entretien\. Or, cette assistance n'est pas toujours disponible, c'est pourquoi il y a lieu de donner la priorité aux projets dont les dépenses courantes sont peu importantes et qui ont des résultats immédiats\. -3- B\. Le secteur rural 2\.03 Le secteur rural représente environ 55 % du PIB et 90 % des exporta- tions, dont les principales sont le coton, le bétail et les productions anima- les et le poisson\. En principe, le Tchad suffit à ses propres besoins en cé- réales et légumineuses\. Les années "normales", seules les importations de blé (12\.000 tonnes par an) et de sucre (20\.000 tonnes par an) atteignent un certain volume\. Malgré les obstacles et les problèmes, deux techniques culturales com- mencent à se généraliser; en effet, l'utilisation d'engrais et d'insecticides pour le coton et l'emploi de boeufs de trait ont plus que doublé entre 1973/74 et 1976/77, après une décennie de progrès constants bien que lents\. La récolte de coton est passée d'approximativement 100\.000 tonnes par an du milieu des an- nées 1960 à 1973/74, à un chiffre record de 175\.000 tonnes en 1975/76\. Malheu- reusement, elle est retombée à 150\.000 tonnes en 1976/77 en raison d'une mau- vaise répartition des précipitations\. Le Tchad se place maintenant au premier rang des exportateurs de coton d'Afrique de l'Ouest\. Si les nouvelles techni- ques se répandent dans la zone cotonnière, en revanche les méthodes culturales et l'élevage n'ont pratiquement pas évolué dans le Sahel\. Du reste, les auto- rités n'ont guère essayé d'encourager la modernisation ni même étudié la ques- tion jusqu'à une époque très récente\. Or, ce désintérêt peut aboutir à des ré- sultats positifs, puisque la production ne sera jamais très élevée dans cette région, toute amélioration relative sera un acquis substantiel\. La sécheresse 2\.04 Le volume annuel des précipitations diminue du sud au nord, de même que leur régularité; par contre les risques deviennent plus grands\. La hauteur des pluies de 1976 a été en général de 20 à 30 % inférieure à la moyenne à long terme et de surcroit, la répartition mensuellle a été défavorable\. La produc- tion de céréales de la zone du Sahel est estimée à 140\.000 tonnes, soit 60 % seulement de la récolte "normale" (Annexe 1)\. Le Tchad devra donc recevoir d'autres fonds de secours, moins importants cependant qu'en 1973\. De nombreux donateurs se sont déjà engagés à en fournir, mais aucun d'eux n'a offert le type d'assistance envisagé dans le projet de PZS\. Cependant, le Fonds européen de développement avait engagé une somme de 1,7 milliard de francs CFA (7 mil- lions de dollars) à répartir également entre les sous-projets; cette somme sera affectée à des activités complétant les sousprojets, et pour trois d'entre eux les prolongeant\. Projet de secours contre la sécheresse 2\.05 En 1973, après la pire sécheresse jamais enregistrée en 50 ans, la récolte de céréales de la zone du Sahel est tombée à 85\.000 tonnes, soit 35 % seulement de la récolte "normale"\. Un grand nombre de donateurs ont alors ex- pédié d'urgince des denrées alimentaires et ont participé à d'autres activités en vue d'atténuer les conséquences de la sécheresse\. L'IDA a financé le pro- jet de secours contre la sécheresse en Afrique de l'Ouest, qui a été réalisé sous forme de projet distinct pour chacun des six pays intéressés\. Au Tchad, ce projet (Crédit 445-CD) est presque entièrement terminé et s'est bien déroulé\. -4- 2\.06 Ce projet avait pour objectif principal de contribuer à rétablir l'infrastructure de production des zones particulièrement touchées, en aidant la pGpulation à reronstituer les exploitations et les troupeaux\. Le projet avait un important objectif secondaire, qui consistait à aider les autorités à tirer le meilleur parti possible du volume d'assistance financière attendu, en créant des organismes d'Etat appropriés\. Au moment de l'évaluation, la prépara- tion du projet n'était qu'amorcée et le projet, tel qu'il a été approuvé, con- sistait en une ligne de crédit devant servir à financer des sous-projets, pour la sélection desquels des critères explicites ont été institués\. Ces critères étaient les suivants: le sous-projet devait étre\. conçu pour atténuer les effets de la sécheresse, contribuer à reconstituer l'infrastructure de produc- tion des zones gravement sinistrées, produire rapidement des avantages, avoir un nombre relativement important de bénéficiaires et enfin, présenter une uti- lité manifeste et obtenir l'appui de la communauté locale\. Celle-ci devrait être disposée, partout où cela était possible, à participer aux frais en fournissant soit de la main-d'oeuvre, soit des matériaux locaux\. Des comités nationaux de coordination de haut niveau devaient être créés pour examiner les sous-projets et en approuver le financement, pour assurer la liaison entre l'organisme chargé de décaisser les fonds et l'agent d'exécution et pour éva- luer les progrès\. 2\.07 Or, à la fin de 1973 et en 1974, les pouvoirs publics ne parvenaient pas à faire face à tous les problèmes causés par la sécheresse, comme du reste dans les pays voisins, et n'étaient pas en mesure de mettre\.au point les sous- projets de type novateur qui auraient rempli les critères de sélection\. Le mon- tant total du crédit, soit 2 millions de dollars, a finalement été affecté, avec quelques modifications mineures par la suite, de la façon suivante: 30 % des fonds pour la mise en valeur des eaux souterraines (réparation et\. mise en ser- vice des bâtiments et stations de pompage); 25 % pour les magasins villageois (10\.000 tonnes) des réserves nationales de céréales d'urgence; 10 % pour les vaccins, les médicaments et la construction de deux postes vétérinaires; 10 % pour la construction de 12 centres régionaux de fourniture de facteurs de pro- duction agricole; 5 % pour l'opération maraîchage près de N'Djamena, 5 % pour les études et 15% pour les véhicules, le matériel et les fournitures des quatre Directions (génie rural, plan d'utilisation des sols, Bureau de l'eau et Plan)\. La construction des magasins villageois pour céréales et une étude pédologique ont fait l'objet d'un marché\. Les autres sous-projets ont été exécutés par des organismes d'Etat\. Dans l'ensemble, les sous-projets ont été exécutés avec compétence et avec une rapidité relative et la Direction du contrôle des fi- nances qui a vérifié les comptes du projet en avril 1976 a présenté un rapport satisfaisant, alors que 85 % des fonds du projet avaient déjà*été décaissés\. 2\.08 Le Comité national de coordination ne s'est pas réuni pendant l'exé- cution du projet, mais la Direction du Plan a supervisé le déroulement des tra- vaux et a assuré une liaison efficace entre les organismes de décaissement et les agents d'exécution\. A la fin de 1975, une direction de lutte contre les ca- lamités naturelles a remplacé l'Office des secours d'urgence créé à la suite de -5- la sécheresse de 1973\. En même temps, un Comité de lutte contre les calamités naturelles (composé de ministres) et une Commission technique, subordonnée au précédent (réunissant des directeurs de ministères et chefs des organismes semi- publics) ont été formés\. Cette dernière a joué un grand rôle dans la prépara- tion du présent projet et remplira, pendant l'exécution du projet, le rôle qui avait été confié au Comité de coordination maintenant dissous\. C\. Stratégie sectorielle 2\.09 Les pouvoirs publics ont annoncé qu'ils souhaitent modifier la com- position des investissements agricoles, axés presque exclusivement sur la zone cotonnière, et les répartir plus équitablement entre la zone cotonnière et la zone sahélienne\. Leur façon d'envisager la stratégie sectorielle dans cette dernière zone se dégage des décisions prises récemment et d'échanges de vues officieux\. Ils comptent désormais par contraste développer fortement les services fournis aux sous-secteurs de l'agriculture et de l'élevage avec l'as- sistance du Fonds européen de développement (voir par\. 2\.06), entreprendre la sélection des céréales secondaires et des légumineuses (les travaux viennent de commencer), profiter de l'abaissement du nombre de têtes de bétail pour encour-ger les pasteurs à former des associations pastorales (des études opé- rationnelles sont en cours), entretenir les points d'eau pour le bétail plu- tôt qu'en accrottre le nombre, étudier les moyens de faire participer les bénéficiaires au coùt des services qui leur sont rendus (comme dans le cas des nouveaux groupes d'hygiène vétérinaire en zone cotonnière), et développer les travaux dans les sous-secteurs des forêts et de la pêche\. Beaucoup de ces idées sont nouvelles et, si certaines n'ont pas encore été mises en pratique, elles signalent une évolution dont il faut se féliciter, 2\.10 Le gouvernement réétudie la question de la commercialisation et de la fixation des prix, particulièrement dans le cas du bétail\. Une nouvelle société d'économie mixte est en cours de formation\. Elle sera chargée d'organiser les exportations d'animaux sur pied et aura le monopole des exportations de viande réfrigérée\. L'Etat détiendra 51 % des actions\. Les négociants ont été invités à y participer, en échange de licences d'exportation et à ce jour,\.plus de 100 millions de francs CFA (400\.000 dollars) ont été souscrits\. \.Depuis février 1977, l'exportation d'animaux sur pied n'est plus interdite et les échanges habituels avec le Nigéria, supervisés par les gros négociants eux- mêmes, ont repris\. Le prix du bétail au producteur a augmenté en conséquence\. Il apparaît donc que le gouvernement cherche à supprimer les barrières arbi- traires au commerce intérieur et extérieur et à laisser jouer plus librement les forces du marché\. -6- iI\. LE PROJET A\. Objectifs et description sommaire 3\.01 Le projet a pour principal objectif le lancement rapide d'un train de mesures visant à atténuer les effets de la sécheresse et à encourager ou accélérer le développement des ressources agricoles, animales et forestières dans la zone du Sahel\. Il a également deux grands objectifs secondaires: aider le gouvernement à appliquer sa nouvelle stratégie concernant le secteur rural dans la zone sahélienne et renforcer, en recourant à leur compétence, les organismes d'Etat qui ont participé effectivement à la préparation du projet, à savoir le Comité de lutte contre les calamités naturelles et ses membres\. 3\.02 Le projet financera 14 petits sous-projets\. Il se déroulera sur une période de deux ans non renouvelable, mais les sous-projets qui auront rencon- tré le plus de succès et qui seront jugés dignes d'être étendus, pourront être incorporés dans la deuxième phase du Fonds de projets ruraux prévu pour l'exer- cice 1980\. Sur les 14 sous-projets proposés, deux seulement n'\.étaient pas en- tièrement mis au point\. Tous lQs projets ont été choisis en fonction des cri- tères décrits au paragraphe 2\.n6\. Toutefois, un seul d'entre eux satisfait intégralement ces critères (voir par\. 5\.01)\. Un critère supplémentaire a été utilisé pour déterminer l'envergure des sous-projets, à savoir qu'ils puissent être exécutés par les organismes existants et sans qu'il soit nécessaire de recruter de trop nombreux cadres supplémentaires\. Le projet permettra de fi- nancer: - l'accélération du développement de l'agriculture, par i) de petits travaux d'aménagement des bas-fonds (environ 2\.000 ha); ii) la cons- truction de 28 magasins villageois; iii) la création d'un centre de vulgarisation et de recherche appliquée sur les cultures de décrue au lac Fitri; et iv) l'achat de facteurs de production en vue de dé- velopper la production maraichère près de N'Djamena; - le maintien et l'amélioration des services d'hygiène vétérinaire par i) une campagne générale de vaccination, combinée à la fourniture d'un volume suffisant de médicaments en 1977/78; ii) et le rééqui- pement partiel de l'usine de production de vaccins; - l'entretien des points d'eau pastoraux par i) la réparation des 40 puits du Kanem; ii) l'exploitation de 12 stations de pompage du Chari Baguirmi; et iii) la surveillance hydrogéologique de la nappe phréatique; - l'expansion des activités forestières par i) la mise en défens d'un massif forestier près de N'Djamena (environ 3\.500 ha); ii) la création de 4 pépinières forestières; et iii) la prospection des rôneraies; -7 - - l'amélioration des prestations de services de l'Etat par i) la construction et l'équipement d'un garage; et ii) la remise en état de 6 pistes d'atterrissage\. 3\.03 La zone du projet s'étendra sur 200 km de large, au nord de l'isohyète de 600 mm (voir Carte 12896)\. Trois des sous-projets se dérouleront en partie plus au sud: la campagne de vaccination, la surveillance hydrogéolo- gique de la nappe phréatique et la remise en état de deux des pistes d'atter- rissage\. Un sous-projet, la prospection des rôneraies, sere exécuté au sud du périmètre du projet\. Ces quatre sous-projets se dérouleront en partie dans des régions difficilement accessibles pour -es services de l'IDA, et les sous- projets devant être supervisés sur place - aménagement des basfonds, magasins villageois - ne toucheront pas les zones dont l'accès ne peut être assuré\. Les deux autres projets - campagne de vaccination et médicaments, exploitation des stations de pompage - peuvent être supervisés gràce aux rapports d'acti- vité et à d'autres dossiers\. Par ailleurs, le centre de développement rural du lac Fitri ne commencera pas à fonctionner tant que l'accès à cette région ne sera pas assuré: c'est là une condition de décaissement des fonds affectés à ce sous-projet\. Au cours des négociations, il a été indiqué au gouvernement que conformément aux conditions usuelles, les décaissements ne seraient effec- tués que si les services de l'IDA reçoivent toute facilité pour superviser les activités des sous-projets\. B\. Caractéristiques des sous-projets Amélioration de l'agriculture 3\.04 L'eau, sa conservation et sa gestion sont des aspects clés de l'agri- culture dans les régions à pluviosité faible et variable\. Dans la zone du pro- jet, il existe quatre types d'emplacements relativement bien arrosés\. Premiè- rement, les ouadis, qui sont de profondes dépressions isolées de 5 à 20 ha, dans lesquelles la nappe phréatique n'est qu'à quelques mètres de profondeur\. On les trouve au sud de la préfecture de Kanem\. Ils sont presque entièrement exploités et l'intensification de leur mise en valeur est prévue dans des pro- jets récemment entrepris\. Deuxièmement, les polders, sur la rive nord du lac Tchad, sont remarquablement fertiles, mais leur drainage et leur -irrigation doivent être rigoureusement étudiés et exécutés\. Troisièmement, les terres adjacentes à des lacs peu profonds sont arrosées et fertilisées par les fluc- tuations saisonnières du niveau de ces lacs\. Les plus étendues sont situées pour la plupart autour du lac Tchad et du lac Fitri; elles sont fortement ex- ploitées pendant la saison'sèche, tant pour l'élevage que pour la culture du sorgho et des légumes\. Quatrièmement, des dépressions peu profondes ou "bas-fonds", bien arrosés soit par les eaux de ruissellement, soit par les crues des cours d'eau, parsèment la zone sahélienne\. On estimait récemment leur superficie à 22\.000 ha\. La mise en valeur est difficile au départ, car les sols sont souvent lourds et leur préparation nécessite une main-d'oeuvre importante\. Cependant, après la sécheresse de 1973, la superficie mise en cul- ture a triplé, pour passer à 2\.000 ha\. La culture du sorgho et des légumes en saison sèche sont les principales activités\. Le projet financera l'améliora- tion et l'expansion de la mise en valeur des bas-fonds (sur 800 ha et 1\.200 ha respectivement) (Annexe 2), par des levés topographiques, l'aménagement au moyen d'engins mécaniques de digues et de diguettes de niveau, la supervision de la construction des digues et des diguettes par les bénéficiaires, et la fourniture de stocks initiaux de facteurs de production agricoles et d'instru- ments à traction animale\. Les chefs de village organiseront la participation des cultivateurs\. Le projet financera également la construction, l'aménagement et la mise en service d'un Centre de développement rural au lac Fitri à l'aide du montant non affecté (voir Annexe 4); comme convenu au cours des négociations, le décaissement initial pourra se faire lorsque le gouvernement et l'IDA estime- ront que la sécurité dans cette région n'entrave pas l'exécution efficace du pro- jet et que le personnel de l'IDA peut s'y rendre pour superviser le projet\. 3\.05 Bien que précaire, l'agriculture pluviale est susceptible de recevoir quelques améliorations techniques, notamment par la sélection des semences, l'utilisation d'insecticides et, dans les zones où les sols sont lourds, la traction animale\. Un projet étalé sur cinq ans serait financé à cet effet dans le cadre de la quatrième phase du programme FED\. Dans l'intervalle, le projet financera la construction de 28 magasins de 72 m2, où seront entre- posés les facteurs de production agricole, les instruments et les céréales\. Ces villages qui ont demandé les magasins se sont engagés à fournir la main- d'oeuvre et des matériaux et bénéficiaient du programme du FED\. Le coût de la construction s'élèvera à 15\.000 francs CFA (60 dollars) au m2 (voir Annexe 3)\. Le projet fournira également un stock initial de 26 tonnes de mil par magasin\. Ce stock servira de réserve locale à utiliser pendant la période précédant la récolte\. Les cultivateurs rembourseront en nature à raison de 120 % de la quantité qui leur a été avancée\. 3\.06 La production maratchère près de N'Djamena, qui a fait l'objet d'expériences réussies du PNUD au début des années 1970, a été financée au titre du précédent Projet de secours contre la sécheresse (Crédit 445-CD)\. A l'heure actuelle, 150 cultivateurs, dont 50 exploitants privés et 6 associa- tions, cultivent 80 ha de légumes\. A la suite de cette expérience et vu la demande de facteurs de production et de services de vulgarisation dans la région, le projet financera la mise en valeur de 10 nouveaux ha et les servi- ces de vularisation et facteurs de production permettant d'ajouter 70 ha de légumes qui seront répartis entre 800 producteurs (voir Annexe 5)\. Ceux-ci seront tenus de payer comptant les engrais et insecticides\. Ce point a été confirmé pendant les négociations\. Maintien et amélioration des services d'hygiène vétérinaire 3\.07 Malgré son faible rendement, le bétail est la principale source de revenus et de nourriture pour la population rurale de la zone du projet\. Le grand nombre des maladies endémiques, notamment la peste bovine, la péripneu- monie et le charbon symptomatique contribuent fortement à maintenir le rende- ment à un niveau assez faible, mais ces maladies peuvent être contrôlées par -9- une action soutenue des services d'hygiène\. La Direction de l'élevage et des industries animales dispose du personnel nécessaire\. Des équipes mobiles opè- rent dans les zones facilement accessibles\. Ailleurs, les services sont four- nis dans des secteurs et des postes vétérinaires\. Le Direction a reçu une az- sistance financière extérieure considérable après la sécheresse de 1973\. Elle a mené des campagnes générales de vaccination jusqu'à la fin de 1976 et distri- bué gratuitement des quantités limitées de pierres à lécher et d'aliments concer- très complémentaires\. Toutefois, les fonds ne permettront pas en 1977 d'entre- prendre une campagne de vaccination limitée aux principales maladies, et la sé- cheresse de 1976 a particulièrement frAmpé les producteurs de bétail\. D'autres raisons font en outre que le recouvrement des coûts ne serait pas encore oppor- tun (voir paragraphe 4\.10)\. Le projet d'élevage IDA/FED envisagé financerait des services d'hygiène vétérinaire à partir de la fin de 1978 et instituerait un mécanisme de recouvrement des coûts, notamment lé coût tctal des médicaments\. Cependant, ce projet serait plus efficace si les services d'hygiène vétérinaire n'étaient pas interrompus pendant la campagne de 1977/78\. Le projet financera donc pendant un en la fourniture de vaccins et de médicaments, l'achat de 18 vé- hicules et de 20 chameaux, avec matériel, l'achat de 4 postes émetteurs- récepteurs radio et de matériel divers, la distribution gratuite de 200 tonnes de pierres à lécher et d'aliments concentrés, les frais d'utilisation des vé- hicules et du matériel et une année de salaire pour les 35 vaccinateurs tempo- raires (voir Annexe 6)\. A cause de la transhumance et vu la portée du projet d'élevage IDA/FED, la zone de ce sous-projet englobera la zone sahélienne et la zone de transition\. En outre, des vaccins seront achetés pour l'ensemble du troupeau national\. 3\.08 L'usine de production de vaccins de N'Djamena produit environ 10 mil- lions de doses par an, dont la moitié sont exportées\. Les prix sont fixés de fa- çon à permettre un recouvrement intégral des coûts\. Cependant, les coûts ne sont pas entièrement couverts depuis 1973, car le Tchad et, dans une moindre me- sure, certains autres pays, n'ont pas les moyens de payer les vaccins\. En consé- quence, l'entretien et le remplacement du matériel ont été insuffisants et il ne semble guère possible de recouvrer les arriérés de paiement\. Etant donné le mon- tant élevé des coûts antérieurs occasionnés par les bâtiments, le matériel et la formation du personnel local, le projet financera le matériel à remplacer et, dans le cas des vaccins bactéricides, le matériel permettant de moderniser et diversifier la production (voir Annexe 7)\. Les principaux articles à ache- ter seront des ballons de bouillon de culture, un autoclave, des -filtres, un petit lyophilisateur et un congélateur\. Ultérieurement, le rééquipement sera financé à l'aide du produit des ventes, mais le Tchad disposera des fonds jus- qu'en 1982 dans le cadre du projet d'élevage IDA/FED\. Entretien des points d'eau pastoraux 3\.09 Les points d'eau sont constitués par des puits de 25 m de profondeur maximum, faciles à creuser à la main dans des sols légers et sablonneux; des puits cuvelés à ciel ouvert allant jusqu'à 70 m de profondeur qui doivent être construits et entretenus par des équipes spécialisées au moyen de machines; et - 10 - une douzaine de stations de pompage profondes jalonnant les pistes de bétail\. La construction de puits cuvelés se poursuit depuis le début des années 1950 au titre de différents programmes d'aide extérieure, mais faute d'entretien, les crépines sont obstruées et les revêtements se sont détériorés\. Les stations de pompage, qui n'avaient pas été utilisées pendant plusieurs an- nées, ont été remises en état après la sécheresse de 1973 et équipées de nou- veaux blocs électrogènes diesel et de nouvelles pompes électriques submersi- bles\. 3\.10 Le Fonds de projets ruraux (Crédit 664-CD) financera l'équipe d'en- tretien des puits de la préfecture de Batha jusqu'à la fin de 1979\. Le projet proposé financera aussi jusqu'à la fin de 1979 la section des puits pastoraux de l'équipe d'entretien de la préfecture de Kanem, qui pourrait assurer 20 grandes réparations par an (voir Annexe 8)\. La réparation d'un puits reviendra à 2,5 millions de francs CFA (10\.000 uollars), soit le tiers du coùt d'un puits neuf\. Ces réparations seraient entreprises dans la sous-préfecture de Moussoro où, grâce à la grande expérience des pasteurs transhumants, les pertes su- bies par les troupeaux pundant la sécheresse de 1973 ont été relativement faibles et les prairies naturelles se sont peu dégradées\. Les travaux ne se- ront exécutés qu'aux emplacements approuvés par la Direction de l'élevage\. Le projet financera par ailleurs, comme complément de l'un des sous-projets ins- crits dans le précédent Fonds de secours contre la sécheresse (Crédit 445-CD), le fonctionnement et l'entretien des 12 stations de pompage situées sur leu pis- tes de bétail (voir Annexe 9)\. Cependant, 50 % seulement des coûts du sous- projet seront versés pendant la deuxième année et les 50 % restants seront fi- nancés par les bénéficiaires\. Confirmation de cette disposition a été obtenue au cours des négociations\. Ce sera là une condition de décaissement pendant la deuxième année\. Le projet financera en outre (voir Annexe 10) deux équipes mo- biles et leur matériel\. Ces équipes observeront la nappe phréatique et dresse- ront un inventaire des points d'eau, tant dans la zone sahélienne qu'au sud de N'Djamena\. Expansion des activités forestières 3\.11 Il était depuis longtemps nécessaire de protéger les ressources natu- relles, fragiles, de la zone sahélienne\. Cela est d'autant plus vrai depuis les récentes sécheresses\. Les programmes de reboisement financés par différents organismes d'assistance extérieure sont cependant très coûteux et leurs résul- tats décevants sur le plan technique\. En revanche, un programme pilote de mise en défens d'un massif forestier, lancé au milieu de 1975 avec l'assistance du PNUD, constitue ur exemple encourageant du type de collaboration qui peut être instauré avec les communautés vivant en forêt\. Une fois construits les pare-feu et les pistes d'accès, il a été possible de faire appliquer strictement un plan de défens du massif forestier\. Une Semaine nationale de l'arbre, lancée elle aussi en 1975 en vue d'encourager la plantation bénévole de jeunes arbres et de sensibiliser le public à l'importance de la forêt, a également rencontré, au sud de N'Djamena où sont implantées les pépinières, un succès inattendu pour un coût très faible\. A la suite de ces initiatives, mais vu la grave pénurie de personnel qualifié, le projet financera deux petits sous-projets et une étude - 11 - dans le domaine de la sylviculture\. Le programme de mise en défens d'un massif forestier (voir Annexe 11) sera étendu à 3\.500 ha supplémentaires situés à en- viron 80 km au sud de N'Djamena, pour un coût unitaire de 12\.000 francs CFA (50 dollars) par ha (voir Annexe 11)\. Pour que la Semaine de l'arbre et d'au- tres activités d'éducation écologique puissent être introduites dans la zone sahélienne, le projet financera la création et la mise en service de deux pé- pinières forestières et la réouverture de deux autres pépinières, de 2 ha cha- cune (voir Annexe 12)\. En outre, à la suite d'activités d'identification de projets financés par le FAC, le projet financerp la préparation d'un projet d'amélioration de l'exploitation de peuplements naturels de palmiers de rônier situés à 200 km au sud de N'Djamena (voir Annexe 13)\. Cette initiative permet- tra de développer les sources de bois de construction\. Un cadre de référence détaillé, jugé acceptable par le gouvernement et par l'IDA, sera préparé; cette disposition a été confirmée au cours des négociations et il a été convenu que les qualifications, l'expérience et les conditions d'emploi des consultants se- ront jugées acceptables par le gouvernement et l'IDA\. Amélioration des prestations de services 3\.12 Les transports terrestres dans la zone du projet, où la population est clairsemée et où les sols sont généralement sablonneux, sont difficiles et lents, surtout sur d'aussi grandes distancea\. Il est difficile et coûteux d'as- surer les services de l'Etat, en cas d'urgence et en temps ordinaire\. Par consé- quent, les transports aériens sont particulièrement importants\. Or, les pistes d'atterrissage ne sont pas entretenues depuis 1971\. Le projet financera donc de petits travaux de remise en état, revêtement essentiellement, de 6 pistes d'atterrissage situées près des chefs-lieux de préfectures (voir Annexe 15)\. Ce financement assurera pour 5 ans la liberté de mouvement des hauts fonctionnaires chargés d'administrer et de superviser les projets et la livraison des denrées alimentaires et autres fournitures d'urgence\. Le projet financera en outre la construction et l'équipement d'un garage destiné à la Direction de la lutte con- tre les calamités naturelles qui possède maintenant un parc de 228 véhicules peu utilisés ou neufs, y compris 138 camions (voir Annexe 14)\. Ces véhicules ont été fournis par plusieurs donateurs étrangers après la sécheresse de 1973 et, lorsqu'ils ne sont pas utilisés pour lutter contre les calamités, servent à transporter les fournitures destinées aux projets de développement\. Vu i'im- portance de ce parc, la Direction réaliserait sans doute d'importantes économies d'entretien et de réparation si elle possédait son propre garage\. Des plans préliminaires ont déjà été établis, mais la préparation du sous-projet n'est pas entièrement terminée et son utilité, bien que manifeste, n'a pas encore été chiffrée; par ailleurs, aucune disposition n'a encore été prise pour assurer le financement des fonds de roulement\. Chacune de ces phases, qui devraient être terminées le 31 décembre 1977, devrait être exécutée de façon satisfaisante pour que les décaissements soient effectués au titre de ce sous-projet\. - 12 - C\. Organisation et administration 3\.13 Aucun nouvel organisme ne sera à créer\. L'administration, la coordi- nation et l'examen des progrès des sous-projets seront confiés au Comité de lutte contre les calamités naturelles (CLCCN) qui se réunira semestriellement et fera rapport à cette occasion à l'IDA\. Le Bureau de gestion des aides exté- rieures, de la Division du Plan, sera chargé du contrôle financier, comme c'est le cas pour la plupart des projets de l'IDA\. L'exécution des sous-projets incombera aux organismes compétents, au nombre de huit: Organisme chargé Sous-projet de l'exécution 1\. ONDR - Office national de Aménagement des bas-fonds; magasins développement rural villageois; et Centre de développe- ment rural du lac Fitri; 2\. Direction de l'agriculture Opération maralchage; 3\. Direction de l'élevage et des Campagne de vaccination et médit,%a- industries animales ments; équipement pour la produc- tion de vaccins; 4\. SERARHY - Services des aménagements Réparation de puits; fonctionnement ruraux d'hydraulique des stations de pompage; 5\. Bureau de l'eau Surveillance hydrogéologique de la nappe phréatique; 6\. Direction des eaux et forêts Mise en défens d'un massif fores- tier; création de pépinières fores- tières; prospection des rôneraies; 7\. Direction de lutte contre les Construction et équipement d'un calamités naturelles garage; 8\. ASECNA - Agence de sécurité pour Aménagement de l'infrastructure la navigation aérienne aéronautique\. Les cinq premiers organismes participent déjà à l'exécution de projets financés par l'IDA et s'en acquittent de façon satisfaisante\. La Direction des eaux et forêts vient de lancer avec l'assistance technique du PNUD deux projets pilotes sur la gestion des forêts, dont les résultats sont concluants; les trois sous-projets envisagés dans le domaine des eaux et forêts prolongent les deux projets pilotes et l'étude de préparation de projet qui a fait suite à l'étude d'identification\. Au cours des négociations, les autorités ont -13 - donné l'assurance que des dispositions, jugées satisfaisantes par l'IDA, se- ront prises d'ici au 31 décembre 1977 pour qte l'assistance technique en ma- tière de gestion des forêts ne soit pas inte:rompue\. La Direction de la lutte contre les calamités naturelles est bien admïinistrée et a reçu les moyens de diriger la distribution des approvisionnements alimentaires d'urgence en 1977\. Si le CLCCN s'est révélé comme un organisme de préparation de projets efficace, c'est en grande partie grâce au dynamisme de la Direction\. L'ASECNA a depuis longtemps prouvé sa compétence technique dans le domaine de la sécurité aérienne\. Pour cinq des six pistes d'atterris\.-age qui doivent être remises en état, les travaux seraient sous-traités à la Direction des travaux publics qui participe à l'exécution de deux projets financés par l'IDA et donne satisfaction\. Les fonds du projet de remise en état de l'infrastructure aéronautique seront dé- caissés sous réserve que le gouvernement ait crnclu un accord, jugé satisfai- sant par l'IDA, stipulant que le sous-projet iera exécuté par l'ASECNA en col- laboration avec la Direction des travaux publics\. Chacun des trois organismes qui n'ont pas encore l'expérience des projets de l'IDA sera à même d'exécuter les travaux prévus\. Le graphique de l'Annexe 16 indique les ordres hiérarchi- ques et les flux de fonds du projet\. Rapports et supervision 3\.14 Il conviendrait de superviser chaque sous-projet en particulier, l'aménagement des bas-fonds et la mise en défens d'un massif forestier, lorsque de nouveaux investissements pourraient par la suite se révéler justifiés\. Le Bureau de gestion du Fonds de projet ruraux (Crédit 664-CD) et le Service de planification du Ministère du développement rural participeront à la supervi- sion et feront rapport au CLCCN\. Le CLCCN instituera, le 31 décembre 1977 au plus tard et avec l'accord de l'IDA, un mécanisme d'établissement de rapports et de supervision décrit dans ses grandes lignes à l'Annexe 18\. Le CLCCN sera également responsable par la suite de l'établissement des rapports en temps voulu\. Des assurances à cet effet ont été obtenues pendant les négociations\. - 14 - IV\. ESTIMATIONS DES COUTS ET DISPOSITIONS FINANCIERES A\. Corts du projet 4\.01 On estime à 970 millions de francs CFA (4 millions de dollars), dont 58 % en devises, les coûts totaux du projet, nets d'impÔt, pendant les deux ans de la période de décaissement (1977-79), et à l'exclusion de la contribu- tion en main-d'oeuvre bénévole apportée par les agriculteurs\. Tius les biens et services importés pour le projet seront exemptés de droits du douane comme habituellement dans le cas des projets financés par l'IDA au Thad\. On trou- vera le détail des coûts aux Annexes 2 à 15, leur montant glL\.al à l'An- nexe 16 et une récapitulation des coûts ci-après\. Les estimations ont été établies sur la base des prix en vigueur au milieu de 1977 et comprennent: a) des provisions pour dépassement des quantités de 10 % sur la plupart des pos- tes de dépenses autres que le personnel, les véhicules et le matériel, dont on connalt les spécifications et les quantités nécessaires; et b) une provision pour hausse des prix, calculée globalement pour les dépenses en monnaie natio- nale et en devises aux taux annuels suivants: travaux de génie civil, 9 %; tous autres postes, 7,5 %\. La hausse totale des prix est évaluée à 10 % des coûts de base\. B\. Modalités de financement 4\.02 L'IDA envisage d'accorder au Gouvernement tchadien un crédit de 1,9 million de dollars assorti des conditions habituelles; ce crédit couvri- ra 48 % des coûts totaux du projet, 49 % des coûts en devises estimés à 1,1 million de dollars (270 millions de francs CFA) et 46 % des coûts en mon- naie nationale, évalués à 0,8 million de dollars (196 millions de francs CFA)\. L'Agence canadienne de développement international (ACDI) fera en outre un don équivalant à 1,9 million de dollars qui sera décaissé pari passu avec le crédit de l'IDA à raison de 50 % des coûts dont la liste figure au para- graphe 4\.07 a)\. Le crédit n'entrera en vigueur que lorsque toutes les conditions préalables au décaissement du don de l'ACDI auront été remplies, à l'exception de l'entrée en vigueur de l'accord de crédit de l'IDA\. Le solde des coûts du projet sera financé par les bénéficiaires du sous-projet "fonctionnement des stations de pompage" à raison de 65\.000 dollars (16 millions de francs CFA) et par l'Etat pour les sous-projets concernant la mise en défens d'un massif fore-tier et la création de pépinières forestières, à raison de 94\.000 dollars (23 millions de francs CFA)\. 4\.G3 Le Crédit de l'IDA sera versé par l'intermédiaire d'un normpte qui sera ouvert à la Banque de développement du Tchad (BDT)\. L'ouvertura de ce compte est une condition d'entrée en vigueur\. Le Bureau de gestion des aides extérieures autorisera le décaissement de ces fonds, sous forme ide subventions, aux organismes chargés de l'exécution des sous-projets\. La contribution en es- pèces faite par les bénéficaires au fonctionnement des stations de pompage sera déterminée par les autorités sur les bases arretées pour le SERARHY, et recou- vrée par cet organisme au nom de l'Etat\. Récapitulation des coûts du orojet Pourcentage Monnaie Monnaie du coût total Pourcentage EÎiments du projet nationale Devises Total nationale Devises Total de base en devises -(en milliers de FCFA) -(en milliers de dollars)- Dévelouoement de l'agriculture Aménagement dom bas-fonds 52\.445 41\.088 93\.533 214 168 382 il 44 Magasins villageois 46\.798 13\.200 59\.998 191 54 245 7 :2 Centre de développement rural: lac Fitri 23\.378 30\.990 54\.368 95 127 222 6 57 Opération marafchage 10\.660 15\.421 26\.081 44 62 106 3 59 Total partiel 133\.281 100\.699 233\.980 544 411 955 27 43 Maintien et amélioration des services vétérinaires Campagne de vaccination et médicaments 76\.706 148\.899 225\.605 313 608 921 27 66 Equipement pour la production de vaccins - 35\.000 35\.000 - 143 143 4 100 Total partiel 76\.706 183\.899 260\.605 313 751 1\.06A 31 71 Entretien des points d'eau pastoraux Réparation des puits 19\.658 34\.948 54\.606 80 143 223 7 64 Fonctionnement des stations de pompage - 24\.137 27\.219 51\.356 99 111 210 6 53 Surveillance hydrogéologique de la nappe phréatique 5\.080 7\.016 12\.096 21 28 - 49 1 58 Total partiel 48\.875 69\.183 118\.058 200 282 482 14 59 Développement des activités forestières ie en défens d'un massif forestier 32\.098 8\.532 40\.630 131 35 166 5 21 Création de pépinières forestières 25\.399 23\.446 48\.845 103 96 199 6 48 Prospection Ue r6uraias 3\.679 8\.584 12\.263 13 35 50 \. 70 "oral partie! 61\.174 4A\.5A2 1l1\.719 24 1A 411 17 4f Amélioration des services Construction et équipement d'un garage 19\.800 90\.200 110\.000 81 1449 13 82 Aménagement de l'infra- structure aéronautique 17\.692 737 18\.429 72 3 75 2 4 Total partiel 37\.492 90\.937 128\.429 153 371 524 15 71 Vérification des comotes et établissement de rapports 1\.102 5\.023 6\.125 4 21 25 8 Estimation des coGts de base 358\.632 490\.303 848\.935 1\.463 2\.002 3\.465 100 58 Imprévus pour dépassement des quantités 15\.289 18\.787 34\.076 62 77 139 4 55 Hausse des prix 37\.405 49\.584 86\.989 153 202 355 10 57 Coût total du proiet 411\.326 558\.674 970\.000 1\.678 2\.281 3\.959 11- 58 - 16 - 4\.04 Le plan de financement est indiqué en détail à l'Annexe 16 et réca- pitulé ci-dessous: Total Bénéficiaires Etat ACDI IDA - -(millions de FCFA)---------- Aménagement des bas-fonds 95,2 - - 47,6 47,6 Magasins villageois 60,0 - - 30,0 30,0 Centre de développement 59,8 29,9 29,9 rural lac Fitri Opération maralchage 27,0 - - 13,5 13,5 Campagne de vaccirtion et 240,6 - - 120,3 120,3 médicaments Equipement pour la production 35,0 - - 17,5 17,5 de vaccin Réparation de puits 57,1 - - 28,6 28,5 Fonctionnement des stations 55,0 13,8 - 20,6 20,6 de pompage Surveillance hydrogéologique 12,6 - - 6,3 6,3 de la nappe phréatique Mise en défens d'un massif 41,9 - 11,0 15,4 15,5 \.forestier Création de pépinières 50,1 - 9,6 20,3 20,2 forestières Prospection des rôneraies 12,3 - - 6,1 6,2 Construction et équipement 110,0 - - 55,0 55,0 d'un garage Aménagement de l'infrastructure 20,3 - - 10,2 10,1 aéronautique Vérification et établissement de -- rapports Coût total de base et 13_8 20,6 424,3 424,3 provision pour dépassement des quantités Non affecté 87,0 2,1 2,4 41,2 41,3 Coût total du projet 97 159 23 465,5 465,6 En milliers de dollars 3\.959 65 94 1\.900 1\.900 Pourcentage 100 2 2 48 48 - 17 - 4\.05 L'expérience acquise à l'occasion de projets antérieurs prouve que le manque d'argent liquide freine sensiblement l'exécution des projets et par conséquent le rythme de décaissement des crédits de 'IDA\. Au cours des négo- ciations, il a été convenu que, dès l'entrée en vigueur du crédit, une somme initiale de 250\.000 dollars, prise à raison du 50 % sur le crédit de l'IDA et le don de l'ACDI, sera versée au compte du projet à la BDT et que ce montant servira de fonds renouvelable pour financer les dépenses du projet\. Une pro- cédure semblable a déjà été adoptée pour le Fonds de projets ruraux (Cré- dit 664-CD)\. L'IDA reconstituera le fonds renouvelable à mesure qu'elle re- cevra une preuve satisfaisante que des dépenses pouvant être financées au moyen du crédit ont été effectuées\. Si toutefois un déboursement du compte du projet ne remplissait pas cette condition, le gouvernement sera tenu de déposer dans le compte un montant correspondant\. Ce point a été acquis au cours des négociations\. C\. Passation des marchés 4\.06 Les marchés dépassant 50\.000 dollars et concernant l'achat de véhi- cules et d'équipement (dont le coût est estimé à 1,3 million de dollars) ainsi que des matériaux nécessaires aux travaux à effectuer en régie (dont le coût estimatif est de 200\.000 dollars) sercmt passés à l'issue d'un appel d'offres international conformément aux directives de l'IDA\. Les marchés coûtant entre 10\.000 et 50\.000 dollars et tous les marchés relatifs à la construction de bâti- ments seront passés à l'issue d'un appel d'offres selon les procédures locales jugées acceptables par l'IDA\. Les soumissionnaires présentant des offres pour la construction du garage seront présélectionnés\. Pour les contrats de moins de 10\.000 dollars, on procédera par achats directs après demande de prix\. Les services du consultant qui s'occupera de la prospection des rôneraies, sous contrat de courte durée, seront retenus selon des procédures jugées acceptables par l'IDA\. D\. Décaissement 4\.07 Les décaissements seront divisés en 14 catégories, une pour chacun des 14 sous-projets envisagés; des catégories supplémentaires seront créés pour le fonds renouvelable ainsi que pour la vézification des comptes et l'établissement de rapports\. Les fonds provenant du crédit de l'IDA couvri- raient- a) 50 % des dépenses, en dehors des trois projets faisant exception indiquées ci-après; total des décaissements dans ces catégories: 1\.510\.000 dollars; -18 - b) 50 % des dépenses de véhicules et de matériel, des travaux de gé- nie civil et des charges d'exploitation pour les sous-projets de mise en défens d'un massif forestier et de pépinières forestières; total des décaissements: 146\.000 dollars; c) pour le fonctionnement des stations de pompage, 50 % des dépenses effectuées dans les 12 mois suivant l'entrée en vigueur du Crédit et 25 % par la suite; total des décaissements: 84\.000 dollars\. Un montant de 160\.000 dollars ne sera pas affecté\. Le calendrier estimatif des versements trimestriels est donné au Tableau 3\. de l'Annexe 16\. Tout solde non décaissé sera disponible pour l'exécution de nouveaux sous-projets qui seront identifiés et préparés par le CLCCN et approuvés par l'IDA\. 4\.08\. Les décaissements se feront sur présentation de toutes lesÂpièces justificatives; toutefois, pour les dépenses de personnel et d'exploitation, l'emprunteur pourra soumettre un simple certificat de dépenses et conserver les pièces justificatives qui seront présentées aux missions de supervision de lIDA\. E\. Comptabilité et révision comptable 4\.09 Le Bureau de gestion des aides extérieures établira un système de comptabilité donnant, conformément à des principes comptables admis et sys- tématiquement appliqués, un tableau fidèle et exact de l'encaissement et du décaissement de fonds relatifs aux divers sous-projets\. Ces comptes seront dénommés "comptes PZS"\. Le Bureau sera chargé de vérifier que les demandes de retrait présentées par les organismes exécutant les sous-projets remplis- sent les conditions du Crédit et il aura le pouvoir de rejeter les demandes qu'il ne jugera pas satisfaisantes\. Les organismes responsables de l'exécu- tion des sous-projets tiendront chacun une comptabilité distincte retraçant au moins les encaissements, les décaissements et soldes, ainsi que les stocks éventuels et les coûts des sous-projets, y compris les coûts d'utilisation des véhicules et les carnets de route des véhicules\. La BDT tiendra une comptabilité séparée pour le projet et pour les fonds des sous-projets dont elle serait chargée\. Tous les comptes du projet et des sous-projets seront révisés chaque année\. Les réviseurs-comptables vérifieront également la comp- tabilité et le contrôle interne proposés au début de la période de décaisse- ment\. Le projet comprendra le financement des honoraires et dépenses des réviseurs-comptables indépendants ainsi que les frais de déplacement du Commis- saire financier de l'Etat\. Au cours des négociations, les autorités tchadien- nes ont donné l'assurance que a) les comptes du projet seront vérifiés par des réviseurs-comptables jugés acceptables par l'IDA; b) les comptes de chaque sous-projet seront révisés par le Contrôleur financier de l'Etat et pourront en outre être vérifiés par des réviseurs-comptables indépendants dans la me- sure où ces derniers le jugent nécessaires pour effectuer une vérification - 19 - complète des comptes du projet et pour s'assurer que les demandes de rembour- sement effectuées au titre de chaque sous-projet sont correctes et que l'uti- lisation des fonds est justifi,ée; c) le CLCCN soumettra à l'IDA les rapports des réviseurs-comptables indépendants et du Contrôleur financier dans les quatre mois suivant la clôture de chaque exercice financier; d) le rapport des réviseurs-comptables comportera tous les éléments et tous les détails que l'IDA pourra raisonnablement demander\. F\. Incidences financières pour l'Etat 4\.10 Deux des quatorze sous-projets s'autofinanceront à l'achèvement du projet: l'opération maraîchage et le fonctionnement des stations de pompage\. Deux des sous-projets concernent la réalisation d'études et n'entraîneront pas de frais renouvelables: la prospection des rôneraies et la surveillance hydrogéologique de la nappe phréatique, qui devraient permettre à l'avenir de réaliser des économies grâce à une meilleure planification des travaux de construction et d'entretien des ouvrages hydrauliques\. Deux des sous-projets (aménagement des bas-fonds et magasins villageois) portent sur des équipements qui seront entretenus\.par les communautés qui en bénéficieront et n'entrai- neront pas d'autres frais renouvelables; dans ces deux cas, on envisage l'ex- pansion des travaux financés par le projet dans le cadre de la quatrième phase du projet du FED\. Quatre des sous-prrjets entraîneront des coûts renouvelables qui seront financés dans le cadre de nouveaux projets actuellement en préparation: les services vétérinaires, lcs vaccins et la réparation des puits seront financés dans le cadre du projet d'élevage IDA/FED envisagé, qui comportera d'importants mécanismes de recouvrement des dépenses; le Centre de développement rural du lac Fitri sera financé pendant trois ans encore dans le cadre du Quatrième iED; ul- térieurement un projet de développement régional sera mis au point\. Sur les quatre autres sous-projets, deux comporteront des coûts de fonctionnement qui seront supportés par l'Etat, à savoir la mise en défens du massif forestier (3 millions de francs CFA ou 12\.000 dollars par an) et la création de pépiniè- res forestières (12 millions de francs CFA ou 49\.000 dollars par an)\. Le sous- projet de garage comportera d'importantes dépenses renouvelables, mais il ne sera entrepris que s'il permet de réaliser des économies appréciables (par\. 3\.12)\. Enfin l'aménagement de l'infrastructure aéronautique exigera des travaux d'entre- tien coûtant environ 4 millions de francs CFA par an (16\.000 dollars) ou un programme de remise en état tous les cinq ans\. En résumé, les coûts renouve- lables connus devant être financés par l'Etat jusqu'en 1982 s'élèveront à 19 mil- lions de francs CFA par an (77\.000 dollars)\. Ultérieurement, les coûts renou- velables augmenteront par suite de l'achèvement du projet d'élevage IDA/FED envisagé et de l'élément agricole de la quatrième phase *du projet du FED\. Tou- tefois, d'ici là, le budget de fonctionnement devra s'être nettement amélioré (par\. 2\.02)\. En outre, le gouvernement souhaite vivement étudier toutes les possibilités de recouvrement des coûts (par\. 2\.09), mais on lui a reproché de ne pas avoir jusqu'à présent investi suffisamment dans la mise en valeur du Sahel\. Le moment serait mal choisi, dès le début d'une phase de progression - 20- des dépenses de développement, pour pratiquer une politique trop vigoureuse de recouvrement des dépenses, mais le gouvernement devrait pouvoir commencer à re- couvrer ces coûts au début des années quatre-vingt\. Au cours des négociations, le gouvernement a donné l'assurance qu'il financera toutes les dépenses renouve- lables après l'achèvement du projet\. - 21 - V\. AVANTAGES ET JUSTIFICATION 5\.01 Le crédit financera 14 sous-projets qui ont été choisis selon les cinq critères établis dans le cadre du projet de Fonds de secours contre la sécheresse en Afrique de l'Ouest, plus un critère supplémentaire (voir par\. 3\.02)\. L'Annexe 17 explique en détail dans quelle mesure les sous-projets répondent aux critères de sélection, strictement interprétés; on trouvera le résumé ci- dessous: Nombre de sous-projets Critère répondant aux critères Atténuer les conséquences de la sécheresse 9 Reconstituer le potentiel productif 8 Procurer des avantages immédiats 10 Profiter à un grand nombre de bénéficiaires 7 Faire appel à la participation des bénéficiaires 6 Ne pas exiger le cadres supplémentaires 9 Un seul des sous-projets, l'aménagement des bas-fonds, répond aux six critères\. Cependant les autres sous-projets répondent à au moins un des critères et la plupart d'entre eux à plusieurs\. 5\.02 Le sous-projet "campagne de vaccination et médicaments" est de loin le plus important puisqu'il représente 27 % du coût de base total et touchera environ 250\.000 familles\. Les sept autres sous-projets, dont les bénéficiai- res directs sont identifiables, atteindront 18\.400 familles, soit plus de 75\.000 personnes (Annexe 17)\. 5\.03 Le sous-projet "campagne de vaccination et médicaments" aura un ratio avantages/coûts d'environ 3:1 sur 12 mois du fait que les coûts anté- rieurs sont considérables et que les avantages seront immédiats (Annexe 6)\. Le deuxième sous-projet par ordre d'importance (construction et équipement d'un garage) n'a pas encore fté entièrement préparé; les fonds ne seront décaissés que si les parties considèrent les travaux justifiés par les écono- mies qu'ils permettront de réaliser\. Les taux de rentabilité qui ont pu être calculés sont les suivants: aménagement des bas-fonds: 21 % sur 10 ans; opération maraîchage: 23 % sur 10 ans\. En outre, le taux de rentabilité du sous-projet de réparation de puits serait du même ordre que celui qui a été calculé pour le sous-projet de puits pastoraux du Fonds de - 22 - projets ruraux (Crédit 664-CD): 19 % sur 20 ans\. Ces trois sous-projets correspondent à 21 % des coûts de base et leur taux de rentabilité moyen pondéré sera de 21 %\. 5\.04 Le projet aura également un avantage institutionnel important en ce que le CLCCN, qui a déjà prouvé sa valeur lors de la préparation des pro- jets, s'en verra confier l'administration et aura ainsi une nouvelle occa- sion de faire ses preuves\. Sur le plan de la formation en cours d'emploi, le projet aura un avantage particulièrement précieux pour le Tchad, car il per- mettra à des cadres qui ont reçu une formation théorique d'acquérir une ex- périence pratique, chose qui ne leur est pas possible actuellement, faute de fonds\. Risques 5\.05 Tous les projets réilisés au Tchad présentent des difficultés en rai- son de la situation enclavée du pays et des problèmes de sécurité interne\. Un risque particulier au projet est que les activités du projet sont situées dans la zone du Sahel où le problème de la sécurité est très grave dans certains sec- teurs\. Les décaissements seront soumis à la condition que le personnel de l'IDA aura toute possibilité de superviser les travaux; en outre, les sous- projets étant distincts, tout retard ou même tout échec enregistré par l'un des sous-projets n'aura pas de graves répercussions sur les autres\. Un risque supplémentaire provient du caractère novateur de certains sous-projets, qui seront exécutés par des organismes n'ayant guère eu l'occasion de démon- trer leur compétence\. Toutefois, ces organismes, qui sont représentés au sein du CLCCN et ont participé intégralement à la préparation du projet, tiennent particulièrement k s'acquitter honorablement des sous-projets qui leur sont confiés; c'est là la meilleure assurance que l'on puisse avoir d'une bonne gestion même s'il est impossible d'éliminer le risque d'imperfections dans l'exécution de travaux d'un type nouveau\. Enfin, il n'est pas certain qu'en dépit de ses bonnes intentions, le gouvernement puisse continuer à financer les dépenses renouvelables lorsque le projet sera terminé\. Toutefois, seuls trois sous-projets en subiraient les conséquences: la mise en défens d'un massif forestier, les pépinières forestières et l'infrastructure aéronautique\. -23 - VI\. RECOMMANDATIONS 6\.01 Au cours des négociations, les autorités tchadiennes ont donné l'as- surance que: i) le CLCCN établira le 31 décembre 1977 au plus tard et en accord avec l'IDA, un système de contrôle et de rapports, selon les grandes lignes proposées dans l'Annexe 18 et qu'il veillera par la suite à ce que ces rapports soient soumis en temps voulu (par\. 3\.14); ii) au cas où un versement quelconque tiré sur le fonds renouvelable ne justifierait pas l'emploi de fonds du crédit, l'Etat déposera un montant correspendant au versement dans ledit compte (par\. 4\.05); iii) les comptes seront révisés selon les modalités indiquées au para- graphe 4\.09; iv) l'Etat financera tous les frais renouvelables après l'achèvement du projet (par\. 4\.10)\. 6\.02 Les conditions d'entrée en vigueur du Crédit seront les suivantes: i) les conditions auxquelles sont subordonnés les décaissements du don de l'ACDI sont remplies, hormis la condition relative à l'entrée en vigueur de l'Accord de crédit de l'IDA (par\. 4\.02); ii) un compte du projet a été ouvert à la BDT (par\. 4\.03)\. 6\.03 Certains sous-projets sont soumis aux conditions de décaissement suivantes: 1) pour le Centre de développement rural du lac Fitri, le gouvernement et l'IDA estiment que la sécurité dans cette région n'entrave pas l'exécution efficace du projet et que le personnel de l'IDA peut s'y rendre pour superviser le projet (par\. 3\.04); ii) pour la construction et l'équipement du garage, un plan définitif, une étude de justification et des dispositions concernant l'obten- tion des fonds de roulement, jugés acceptables par les parties, ont été proposés (par\. 3\.12); iii) en ce qui concerne le sous-projet d'infrastructure aéronautique, le gouvernement a pris des dispositions jugées satisfaisantes par l'IDA pour que l'ASECNA, en collaboration avec la Direction des travaux publics, soit chargée de l'exécution (par\. 3\.13)\. 6\.04 Sous réserve des assurances et conditions mentionnées, le projet jus- tifie l'octroi au Gouvernement tchadien d'un crédit de l'IDA de 1,9 million de dollars aux conditions habituelles\. Annexe 1 Page 1 TCHAD PROJET ZONE SAHELIENNE PRECIPITATIONS ET PRODUCTION AGRICOLE Précipitations 1\. Si des variations considérables ont été enregistrées à l'intérieur de la zone du Sahel, voire dans une même préfecture, le déficit pluviométri- que moyen, a été en 1976, de 25 % (voir le Tableau 1\.1)\. Ce pourcentage se rapproche en fait du coefficient des variations annuelles - 23 % à N'Djamena (626 mm par an) et 28 % à Abeche (465 mm par an) - mais la répartition des pluies a été particulièrement mauvaise en 1976 (voir le Tableau 1\.2), puisque au mois d'août, époque de floraison du mil, le déficit pluviométrique a atteint 65 à 85 %, ce qui peut rendre les fleurs improductives\. En septembre et en octobre, les pluies ont été relativement abondantes, mais sont tombées beau- coup trop tard pour améliorer les rendements, excepté dans certaines régions du sud du Sahel\. A l'appauvrissement des récoltes résultant du manque de pré- cipitations se sont ajoutés les importants dégâts causés par les oiseaux\. Céréales 2\. Durant une année dite "normale" la production céréalière de la zone du Sahel, est de l'ordre de 240\.000 tonnes, ce qui est à peine inférieur à la demande estimative\. Or, la récolte de la campagne 1976/77 est tombée à 140\.000 tonnes environ, soit 60 % de la production normale (voir le Tableau 2)\. Durant l'année 1973/74, où la sécheresse a été particulièrement grave (probabi- lité de 0,02),1/ la production serait tombée à 85\.000 tonnes, soit 35 % seu- lermeant de celle d'une année normale\. Ces chiffres sont peut-être légèrement sous-évalués mais peuvent être considérés comme relativement exacts\. En l'ab- sence de toute autre donnée sur la variabilité de la production végétale, on -,ut estimer à 0,10 la probabilité d'une récolte aussi mauvaise que celle de 1976\. Elevage 3\. Les pertes de bétail subies en 1973/74 ont été évaluées à 30 % envi- ron, bien qu'elles aient été nettement inférieures en ce qui concerne le petit bétail et les bêtes de somme\. Durant la saison sèche de 1977, les pertes de 1/ Essai de reflexion sur les stratégies antisécheresse possibles dans les pays sahéliens d'Afrique de l'Ouest, SCET International et SEDES, janvier 1976\. Annexe 1 Page 2 bétail ne devraient pas être exceptionnellement fortes, d'abord parce que les parcours sont en meilleur état qu'en 1974, ensuite parce que le troupeau, que l'on vient à peine de commencer à reconstituer, a été considérablement dimi- nué\. La production animale n'en marquera pas moins un recul, du fait que, du- rant la saison sèche, les pertes en poids vif seront supérieures à la normale et que l'on devra donc s'attendre à une baisse des taux de reproduction pour l'année suivante\. TCRAD Tableau I PROJET ZONE SARELIENNE PRECIPITATIONS ET PRODCTION AGRICOLE Dficit au Matière de Précipitationa pour 1976 (1) par année (2) var mois I\. Par Année Préfecture/ 1976 Moyenne à Différence Différence Station d'enreeistrement Long Terme 1/ Absolue Rela$ive 3/ (/Banneà (\.) Zone Sahelienne Kamas Mac 272 321 - 49 -15 Moussoro 209 2/ 361 -152 -42 Bacha Ati* 297 424 -127 -30 Yao 426 470 - 44 - 9 Oum-Hadjer 233 485 -252 -52 Djedda 339 432 - 93 -21 Ouaddai Abeche 253 465 -212 -46 Adre 459 621 -162 -26 Am-Zoer 140 496 -356 -72 Am-Dam 509 653 -144 -22 Chari-Bacuirui N'Djamena 650 626 * 24 4 aokoro 433 579 -146 -27 Zone Transitionneile Guera Mangalme 408 660 -252 -38 Bitkine 707 674 + 33 + 5 Mongo 718 801 - 83 -10 Melfi 761 871 -110 -13 Sources Direction de lutte contre les calamités naturelles, novembre 1976\. 1/ Tel que défini "moyenne jusqu'n 1972"; la période n'a pas été spécifiée et a probablement moins de 30 ans dans certaines stations d'enregistrement\. 2/ Exclu le mois d'octobre\. 3/ Pour les 12 stations d'enregistrement dans la zone sahelienne, les différences relatives de 1976 peuvent ître classées comm& suit moins de il % : 2 ; 11-20 Z : 1; 21-30 Z : 5 ; 31-40 Z : rien ; 41-50 Z ; Z plus de 50 Z 2\. 2- Par Mois (1975-1976)/1975 Station d'enregistrement juin juillet août septembre Total 1/ Total août seuiement 2/ (mm () (Z) Mao 1975 - 106 187 21 314 1976 18 49 64 60 191 39 66 Moussoro 1975 2 58 195 5 260 1976 30 77 28 74 209 20 96 Nokou 1975 4 l5 298 59 296 1976 8 50 38 84 180 39 32 Source: Rapport de la mission de reconnaissance aux préfecturade Lake, Kanem, Chari Baguirmi et Bacha orzanisie à la requite du gouvernement par les Nations Unies en collaboration avec le FED, FAC et USAID, N'Djamena la 30 octobre 1976\. 1/ Les données pour octobre 1976 n'ont pas été mises à la disposition de la mission de reconnaissance\. 2/ Le total de juin-septembre déguise la sévérité du déficit en août, mois où le mil est en fleur\. Octobre :\.976 était, contrairement à l'ordinaire, particulièrement pluvieux avec 81 m à Mac mais après le sévère déficit de pr6cipitat4ons en aet il 6tait trop tard pour avoir des effets rén\.diables sur les rendements\. TCHAD PROJET ZONE SAIELIENNE PRECIPITATIONS ET PRODUCTION AGRICOLE Le déficit des céréales en 1976/77, "l'année normale", et l'année de sévère sécheresse 1973/74 Préfectures Demandes des "L'année normale" 1973/74 1976/77 Difference entre les céréales Production Balance Production Balance Production Balance balances de 1976/77 et l'année normale -------------------('000 tonnes brut, c\.à\.d\. tel que récolte)-------------------------------------- Zone Sahélienne 1/ -10 - -11 - 11 - 1 B\.E\.T\. -0-i Lake 16 8 - 8 6 -10 6 - 10 - 2 Kanem 32 --16 2 - 30 4 - 28 - 12 Batha 49 50 4 1 18 -31 32 - 17 - 18 Chari Baguirmi 73 67 - 6 34 - 39 52 - 21 - 15 Ouaddai/Biltine 73 99 26 25 - 48 45 - 28 - 54 Sous-total 2/ 254 241 -13 85 -169 139 -115 -102 Guera 26 33 + 7 16 - 10 34 - 8 + 1 Total 280 274 - 6 101 -179 173 -107 -101 Zone Soudanienne 326 378 452 310 - 16 374 + 48 a 4 Total national 606 652 +46 411 -195 547 - 59 -105 Sources: Direction de lutte contre les calamités naturelles \.(DLCCN), Novembre 1976 (pour la demande et 1976/77 pour la production), l'UNDAT Il "Production et commercialisation des céréales, Volume 1 - Tchad, juillet 1974\. Estimations de la mission\. !/ Quelquefois dêfini par DLCCN pour inclure Guera - Strictement défini, avec la limite Sud à lisohyet de 60Om la zone sahélienne excluerait Guera aussi bien que le Chari Sud Baguirmi et le Sud Ouaddai mais les informations obtenues ne permettent pas de faire des distinctions entre les préfectures\. 2/ Cette ligne est la meilleure approximation de la situation dans la zone sahélienne bien que les informations comprennent les Régions de Chari Baguirmi et Ouaddai les mieux arrosées\. Annexe 2 Page 1 TCHAD PROJET ZONE SAHELIENNE AMENAGEMENT DES BAS-FONDS Généralités 1\. Les bas-fonds sont des plaines marécageuses qui s'étendent le long des cours d'eau dans le lit des vallées et sont relativement bien arrosés, du fait de l'écoulement cumulatif (bas-fonds proprement dits) ou par les crues (champs d'inondation)\. Le sol des bas-fonds est argileux, donc peu perméable et les plaines inondables sont généralement recouvertes d'alluvions déposés durant la saison des crues\. Depuis la sécheresse de 1973, les agriculteurs ont progressivement entrepris de cultiver ces terres marécageuses pour complé- ter l'agriculture pluviale\. Si l'étendue des terres marécageuses cultivées a triplé de\.,is troic ans, puisqu'elle est aujourd'hui de 2\.000 ha, elle ne re- présente encore que 10 % de la superficie totale exploitable\. La Division des sols de la D4rection de l'agriculture évalue à quelque 22\.000 ha les terres marécageuses comprises dans la zone où doit se dérouler le sous-projet (sous- préfectuies du Chari septentrional Baguirmi, du Batha iéridional et de l'Ouaddai septentrional)\. Les objectifs du sous-projet sont les suivants: aider les agriculteurs à choisir les terres marécageuses qui se prêtent le mieux à l'agriculture; améliorer la productivité du sorghr grâce à l'emploi de méthodes et de semences appropriées\. Le sous-projet 2\. Le but du sous-projet est de financer les deux premières années d'exé- cution d'un programme d'aménagement des bas-fonds portant sur cinq ans\. Les activités prévues pour les trois années suivantes seront financées grâce à une partie des 850 millions de francs CFA alloués par le FED pour le développe- ment agricole du Sahel\. La superficie totale des terres marécageuses qui doi- vent être mises en valeur dans le cadre du programme financé conjointement par l'IDA et le FED est de 5\.000 ha\. La contribution financière de l'IDA couvrira toutes les dépenses d'équipement et d'exploitation qui seront engagées au titre du programme de cinq ans (reproduction de photographies aériennes, achat de ma- tériel, de véhicules et d'outillage agricole), ainsi qu'un programme de vulga- risation portant sur 2\.000 ha dont 800 sont déjà en culture\. Le programme d'amé- nagement des bas-fonds comporte l'exécution d'un minimum d'activités d'amélio- ration des terres qui seront effectuées sur la base d'un simple levé topogra- phique\. Pour la construction des diguettes, le gros des travaux de terrassement sera fait à l'aide des tracteurs de l'Office national de développement rural (ONDR), tandis que les agriculteurs devront prêter bénévolement leur concours pour construire d'autres remblais et compacter les diguettes, en utilisant l'ou- tillage qui doit être fourni au titre du projet\. Le calendrier d'exécution du sous-projet se présente comme suit: (Tableau 2)\. Annexe 2 Page 2 a) Première année: mise en valeur de 900 ha, répartis comme suit: i) 500 ha de terres déjà cultivées situées dans la préfecture de Chari Baguirmi; ii) 400 ha supplémentaires, dont 300 dans la préfecture du Chari Baguirmi et 100 dans la préfecture du Batha\. b) Deuxième année: mise en valeur de 1\.100 ha, répartis comme suit: i) 300 ha de terres déjà cultivées, dont 200 dant la préfecture du Chari Baguirmi et 100 dans la préfecture du Batha; ii) 800 ha supplémentaires, dont 300 dans la préfecture du Chari Baguirmi, 200 dans celle du Batha et 300 dans celle de l'Ouaddai\. Le projet servira aussi à financer la création de huit très petites pépinières qui fourniront les plants requis pour l'édification de brise-vent, ainsi que l'exécution d'un petit programme de recherche comportant des essais de semences et d'engrais et le prélèvement d'échantillons du sol\. 3\. Le sous-projet sera exécuté par l'ONDR, dont l'accroissement du per- sonnel d'exécution sera financé au titre du projet\. La Division de la plani- fication du Ministère du développement agricole et pastoral sera chargée de superviser l'exécution du sous-projet et d'en évaluer les résultats, aussi bien durant la première phase (deux années financées par l'IDA) qu'à la fin de la réalisation du programme quinquennal IDA/FED\. Coût du sous-projet 4\. Le coût total du sous-projet (net d'impôts et y compris une provision pour dépassement éventuel des quantités) est estimé à 95,2 millions de francs CFA (389\.000 dollars), ventilés comme suit: (Tableau 1) Annexe 2 Page 3 Monnaie Devises en locale De ises Total pourcentage \.(milliers de FCFT7\._\. Véhicules et matériel 1\.927 25\.608 27\.535 93 Etude topographique, préparation et protection des sols 12\.569 - 12\.569 - Travaux d'aménagement, vulgari- sation et opérations initiales 26\.169 1\.980 28\.149 7 Fonds de roulement 2\.850 13\.500 16\.350 82 Recherche appliquée 6\.020 - 6\.020 - Contrôle et supervision 2\.910 - 2\.910 - 52\.445 41\.088 93\.533 44 Dépassement des quantités 1\.462 198 1\.660 12 Total 53\.907 41\.286 95\.193 44 Justification 4\. L'aménagement des bas-fonds permettra de compléter la production agri- cole et de compenser ainsi les mauvaises récoltes dues au manque de précipita- tions\. De plus, les activités agricoles pourront se poursuivre au-delà de la saison des pluies\. L'élément de vulgarisation orévu dans le sous-projet devrait apporter une aide à 4\.U00 familles d'exploitants, à raison d'un agent de vulga- risation pour 200 familles, en leur permettant d'améliorer les méthodes tradi- tionnelles de culture des bas-fonds, ce qui aura pour effet d'empêcher que les rendements ne diminuent après quelques années d'exploitation et pourrait même les faire augmenter\. Si l'on s'en tient aux méthodes traditionnelles, en effet, le rendement du sorgho tombera de 800 kg à l'ha environ durant la pre- mière année, à quelque 600 kg à l'ha au bout de cinq ans\. Actuellement, le rendement moyen des terres marécageuses cultivées est inférieur à 700 kg à l'ha\. Grâce aux modestes travaux d'aménagement prévus dans le projet et à l'amélioration des facteurs de production, il devrait être possible d'obtenir un rendement constant de quelque 1\.000 kg à l'ha, ce qui correspond à une rentabilité économique de 21 % (voir le Tableau 5)\. AI0®( 2 Table 1 PEJET_4ONE SAHELIENE• AENACMMW MES RAS YTNDS \.Cautse des Sous Proiets Unité Coût Année de PtJ t 1 Annie de Proit 2 Coût unitaire Quantite ur M-t:te dout Total ('000 FCFA) ('000 FCFA) ('000 FCFA) (%) Véhicules et matériel Restitution photo aerienne (sirie)No\. 8\.300 1 8\.300 - - 8\.300 100 Véhicule 4 roues motrices No\. 2\.400 1 2\.400 - - 2\.400 90 Camionnette ; tonne No\. 1\.560 1 1\.560 - - 1\.560 90 Matériel topographique g Série 2\.000 2 4\.000 - - 4\.000 90 Belacces e No\. 90 12 1\.080 - 1\.080 90 Outillage et outils y Somme 430 3\.840 4\.270 90 Petits outils 2/ 118,5 22,5 2\.666 27,5 }\.259 5\.,2 p0 Sous total i20 6 Z\.92\.135 93 Ovrations initiales Equipe topographique 2/ Equipe 1\.355 2 2\.710 2 2\.710 5\.420 - Personnel de vulgarisation Somme 3\.639 7\.510 11\.149 - Rettitution photo aérienne Z/ Somme 4\.000 - 4\.000 - Aménagement des bas fonds Ha 6,5 900 5\.850 1\.100 7\.150 13\.000 - Création des pépiniires villageois §/ No\. 4 1\.637 4 1\.512 3\.149 - Essais à l'aide d'engrais I/ Test 15 20 300 20 300 600 - Testa " " de semences & de te\.nres O/ Somme 3\.680 1\.740 5\.420 - Stock d'engrais i/ \. Tonne 100 20 2\.000 130 13\.000 15\.000 90 Stock de semences 1/ Tonne 30 15 450 30 900 1\.350 - Fonctionnement des vehicules' 12 '000km 70/50 15/15 1\.800 15/15 L\.800 3\.600 55 Fournitures de bureau Some 200 200 400 70 Etudes statistiques Somme 1\.000 1\.000 2\.000 - Suivi Somme 430 480 910 - Sous total 27\.696 1\.302 \.Ê 24 Imprévus d'ordre matériel \./ 765 895 1\.660 12 Total des coûts du sous zrojet 48\.897 46\.296 95\.193 44 Sources: Unité de conception du Ministère du développement agricole et pastoral; estimations de la mission\. SCoormémeut au zlar\. standard pour les magasin= vilia;eois (Annexe 3)\. /LA Détail est au Tableau 4\. 3/ Caracité de 300 kg\. / 300 charrues à 10\.000 FCFA, 12 charrettes i 30\.000 FCFA; 300 jougs à 2\.000 FCFA et 310 piquets en fer à 1\.000 CF % seront aquis l'API\. î Par ensemble pour 40 ha: 10 pelles à 2\.500 FCFA, 10 pioches à 2\.600 iCFA et 5 brouettes à 13\.500 FCFA\. Le détail est au Tableau 3\. f? Somme forfaitaire pour le programme total (5\.000 ha) à 800 FCFA/ha\. Dans les régions où il n'existe pas d'autres pépinières forestières; 15\.000 plants/pépiniére/an, le :tail :es coûts est au Tableau 4\. Entrepris par les cultivateurs qui reçoivent 15\.000 FCFA/test; 20 tests\. 10/ Pour 3\.000 ha, 50 kg/ha; constiturait un fonds de roulement\. 1/ Pour 3\.000 ha, 15 kg/ha; constiturait aussi un fonds -4e roulement\. 21/ Véhicule 4 roues motrices; 70 FCFA/ko; camionnette 1 t: 50 F=-A/km: chaque véhicule roule 15\.Z00 k\./an\. 0/ IM sur l'aménagement dee bas fonds et fonctionnement des véhicules\. 스 ANNEM 2 Tableau 3 TCUD PROMET ZONE SAREL=ME AMMAGEKENT DES BAS-FONDS Tràv»au:i d'aménagement, Personnel de vulgarisation et coûts mour les semences et essais sur échantillons du sol Article unité Coût unitaire Année de -Pro\.1et 1 Année de ProJet 2 - Quantité Coût Quantité Coût 1000 FCFA (1000 FCFA) (IOOOFCFA) a)A"nagement des bas-fonds Coût par ha Levé topographique 0\.50 2 1\.00 2 1\.00 Travaux de terrassement 2\.50 /1 2\.50 /1 Construction de diguettes 3\.oo 72 3\.oo 72 -Total du coCt/ha pour Iluiénagement des bas-fonds 6\.50 =3 0 b) Coût de la vuldarisation mour J'ONDR Agents de vulgarisation homme-mis 30 108 LI 3240 240 7,200 Agents de výilîarisation 6 31\.5 /4 189 30 /4 180 a ermer Dépensée de voyage des en- 30 7 /5 210 4\.5 /5 130 homme-mois - - Coût Total 3,639 a) Sememces et essais sur 'échantillons du sol Défrichement des terrains Levés remblais homme-mis 0\.250 100 25\.00 - Diguettes compactées homme-Mois 0\.250 160 40\.00 20 5\.00 Laboureur homme-mois 0\.250 120 30\.00 120 30\.00 Coût par hectare 95\. In 15\. M71 Total Dour-les 4 stations ( 2ha/chaque) - 760\.00 280\.00 Expérimentation station/essais 365 8 /6 2,920\.00 4 /6 1,460\.00 Total des coûts de l'expérimentation 3,680\.00 1,740\.00 Source: MirLi\.ý-,taýre du dévelop em nt &griýtole et rural, division de la platifidation\. i/ Comprend le salaire du conducteur de tracteur\. Ceci est le supplément monétaire de nourriture gratuite distribué par le PAM et payable pendant deux ins seulement\. 7/ Un vulgarisateur pour 100 ha au 200 agriculteurs, c'est-à-dire 9 agents la première année, 20 la seconde\. Neuf (9) &Dmrenti's zour 3-4 mois la !ère année du programme de formation et 3 pour la seconde année -4-\.i programme de fa=ation\. 5/ Deux enseignants pour la !ère année du programme de formation et 3 pour la seconde année du proig-rq--e ie formation\. 6/ L'API '"'expérimentation est conduite deux fois ( avant\. et azrès la récclte) et 11AP2,seullement une fzis 'I après \.i\.a récolte)\. ANNEXE 2 Tableau 4 TCRAD PROJET ZONE SAHELIENTNE AMENAGEMENT DES BAS FONDS Topographie et Coût des Pépinières V\.l\.lageoises Coût Année de Projet 1 Année de Projet 2 Articles Unité Unitaire Quantité Coût Quantité Coût (000 (000 (000 FCFA) FCFA) FCFA) a) Equipe tooographique Topographe homme/mois 50\.0 12 600\.00 Assistant homme/mois 25\.0 12 300\.00 Géomître home/mois 6\.5 24 156\.00 Chauffeur home/mois 25\.0 12 300\.00 1,356\.00 Total par équipe b) Pépinières forestières villageoises Barrière 25 x 25 mi 0\.012 100 1\.20 - Brouette No 13\.500 2 27\.00 1 13\.50 Pelles No 2\.500 4 10\.00 2 5\.00 Pioches No 2\.600 2 5\.20 1 2\.60 Arrosoirs No 4\.450 4 17\.80 2 8,90 Seaux No 0\.010 15,000 150\.00 15,000 150\.00 Main d'ouevre 1/ home/mois 5\.500 36 198\.00 36 198\.00 Coût total oar pépinière 409\.20 378\.00 c) Matériel topograohigue Tachom-tre No 1000\.00 1 1\.000\.00 Viseur No 500\.00 1 500\.00 Trépied No 100\.00 1 100\.00 Mâts de géomètres No 50\.00 3 150\.00 Aides géomîtres 2/ No 5\.00 10 50\.00 Double décomâtre et chaine de 100 m en gros 70\.00 Matériel de camping 3/ en gros 130\.00 Total par équipe 2' Sources: Ministère de Développement Agricole et Pastoral, Division de Planification\. 3 manoeuvres à 5\.500 FCFA/homme-mois 2/ Fabriqué localement 3/ Comnrprd 1 lits de ca--p, 3 noustiquaires, 2 glacières, 1 lampe à huile, 1 table et 3 chaises\. ,ANNEM 2 'Tableau 5 TCHAD PROJET ZONE SA%ELIENNE AMENAGEKENT DES BAS FONDS Taux de Rentabilité Ecoromique AP1 AP2 AP3 AP4 AP5 AP6 AP7 AP8-10 ilions de FFA- Coûts CoM\.1 d'investissement 1/ 20\.4 7\.1 (8\.1) - Opérations 2/ 20\.7 30\.2 4\.3 - - - - - Total des coûts 41\.1 37\.3 (3\.8) - - Ajustement FE 3/ 46\.5 0 - - - - Avantages, tonnes lère tranche , type 1\. 4/ 150 175 200 200 200 200 200 200 lère tranche, ty-pe 2 5/ - 80 96 112 128 144 160 160 2ème tranche, type 1 6/ - 90 105 120 120 120 120 120 2ème tranche, type 2 7/ - - 160 192 224 256 288 320 Accroissement de la production 150 345 561 624 672 720 768 800 - millions FCFA- - Valeur des avantages 8/ 4\.5 10\.4 16\.8 18\.7 20\.2 21\.6 23\.0 24\.0 Avantages Nets 9/ (42\.0) (30\.1) 22\.4 18\.7 20\.2 21\.6 23\.0 24\.0 Taux de Rehtabilité Economique Coûts 100% '20% 100% 120% Avantages 100% 100% 80% 80% Taux 21% i5z 14% 10% 1/ AP3, Valeur rsiduelle des véhicules\. matériel photographique aérien de restitution et topographique à 50%\. 2/ l'AP1 du tableau 1 mais exclu les essais, échanitllons? les études statistiques et le suivi et comprend seulement 40% du coût de la restitution de la photographie s,érienne\. De même pour l'AP2 mais aussi exclu les engrais et les stocks de semences en surmlus de ce qui est nécessaire pour 2000 ha\. L'AP3 reflète la 20 et dernière année des agents de vulgarisation dans ces bas-ftnds (1,200 ha, I agent/100 ha) travaux n'ont pas commencé jusqu'à AP2\. 3/ L'élément en devises a été augmenté de 1\.25\. / )Ja en culture ( 500 ha) avec un rendement moyen de 100 kg/h; "Sans le projet, le rendement tombe à 650 kg/ha l'AP2 et 600 kf/ha l'AP3 et ensuire; le rendement"avec le projet est constant à 1000 kg/ha\. 5/ Nouvellement cultivé ( U00 ha); la production n'est obtenue qu'à l'année de projet suivant le développement\. La production est estimée au taux de remdement accru comme si la terre avait été développêe sans le projet\. ( Ceci est possible si l'on considère l'aménagement spontané des bas-fonds); le rendement\." sans le projet" décline de 800 kg/ha la première saison à 600 kg/ha la 6ème siason; le rendement "avec le P-ojet" est 1,000/kg/ha constamment\. 6/ Tel qu'à la note 4/ 300 ha\. T/ Tel qu'aà la note 5/ 100 ha\. / 30 FCFA/kg, ce mui représente l'année "normale" pour la zone sahélienne ou elle importe une petite de graines ( Annexe 1, "ableau 2)\. Cette valorisation ne représente pas les effets d'une production sûre\. / Etant donné que tous les travaux doivent être entrepris pendant la saison sèche, après la récolte des cultures en sec, la main-d'oeuvre des cultivateurs est valorisée à 2\. ANNEXE 3 Page 1 TCHAD PROJET ZONE SAHELIENNE MAGASINS VILLAGEOIS Généralités 1\. Après la sécheresse de 1973, une douzaine d'entrepôts ont été cons- truits dans les principales villes du Sahel avec l'aide financière de la CEE et de l'IDA (Crédit 445-CD)\. Ces entrepôts, gérés par l'ONDR, servent de cen- tres régionaux de transit pour les divers facteurs de production destinés à être distribués aux agriculteurs\. La superficie totale des entrepôts couverts n'est que 1\.226 m2 (voir Tableau 1)\. Aujourd'hui, les pouvoirs publics désirent vivement faire droit à la requête des communautés villageoises qui souhaite- raient voir aménager, dans chaque village, de petits magasins destinés notam- ment à abriter les stocks de mil\. Le sous-projet a donc pour double objectif de financer la construction d'entrepôts couverts et fermant à clé - pour abriter les réserves d'insecticides et de semences, l'outillage et les atte- lages, et les stocks de mil - et de constituer un fonds de roulement permet- tant d'acheter du mil produit localement et qui sera distribué, à la fin de chaque campagne, aux agriculteurs qui le rembourseront ultérieurement en nature, moyennant une marge de 20 % pour couvrir leurs frais et compenser leurs pertes éventuelles\. Le sous-projet 2\. Le sous- rojet doit servir à financer la construction de 28 magasins villageois de 72 m , ce qui augmentera de 2\.016 m2 la superficie totale des installations d'entreposage\. Ces maçasins seront conformes aux normes adoptées par la Direction de l'agriculture, à savoir que les fondations seront en béton armé, cha ue magasin comportant trois compartiments d'une capacité utile totale de 58,5 m?, à raison de 16,5 m2 pour le mil, 21 m2 pour les insecticides et 21 m2 pour les instruments et l'outillage et d'autres facteurs de production\. Les parois du compartiment réservé au mil seront en moellons de ciment, tandis que les autres compartiments seront faits de briques de terre, recouv\.ertes d'un en- duit de ciment\. Les briques seront fournies et posées par les habitants du vil- lage\. Les portes et les fenêtres des bâtiments seront ?n acier et le toit recouvert de feuilles d'aluminium\. Les travaux seront effectués en régie\. Le Tableau 2 indique l'emplacement des entrepôts qui seront construits dans les provinces du Chari Baguirmi, du Batha et de l'Ouaddai\. 3\. Grâce au sous-projet, il sera possible de constituer un fonds renou- velable pour l'achat de 728 tonnes de mil, à raison de 26 tonnes par magasin\. Chaque magasin doit desservir quelque 400 familles, soit un total de 1\.700 per- sonnes, dans un rayon de 10 à 15 km\. Les quantités à entreposer ont été calcu- lées sur la base de 5 kg par personne et par mois entre juin et août\. ANNEXE 3 Page 2 4\. Le sous-projet sera exécuté par le personnel de l'ONDR, qui agira en étroite collaboration avec les communautés villageoises\. Les magasins seront la propriété de l'ONDR qui en assurera la gestion, laquelle pourra être éven- tuellement reprise par les communautés\. C'est le service de planification du Ministère du développement agricole et pastoral qui supervisera les travaux, ainsi que l'exécution des autres phases du sous-projet\. Coûts du sous-projet 5\. Le coût total du sous-projet est évalué à 60 millions de francs CFA (245\.000 dollars), net d'impôts, ventilé comme suit: Monnaie Devises en locale Devises Total pourcentaqa \.Tmilliers de FCFA) \. Travaux de construction 17\.540 12\.700 30\.240 42 Equipement 50 400 450 90 Achat de stocks de mil 21\.840 - 21\.840 - Surveillance/opérations initiales 7\.468 - 7\.468 - 46\.898 13\.100 59\.998 22 Justification 6\. Les services de vulgarisation et de fourniture de facteurs de produc- tion de l'ONDR étaient, il y a peu de temps encore, limités à la zone de cul- ture du coton\. La création des 28 magasins prévus au titre du projet constituera la première phase d'un programme de construction d'entrepôts couverts qui doit permettre à l'ONDR d'étendre à la zone sahélienne ses activités de vulgarisa- tion et de fourniture de facteurs de production\. Les principaux bénéficiaires du sous-projet seront les 400 familles d'agriculteurs habitant dans un rayon de 10 à 15 km de chaque magasin, soit 11\.200 familles au total, ou 12 % de la population rurale vivant dans la zone d'exécution du projet\. La construction des magasins a été demandée par les habitants des villages intéressés qui participeront donc aux travaux\. La constitution des stocks de mil, qui répond également aux voeux des villageois, assurera à ces derniers une petite marge de sécurité\. Ce qui est plus important encore pour la zone du Sahel, peu peuplée et inaccessible durant la saison qui précède celle des récoltes, ces magasins communautaires stimuleront la concurrence sur les marchés locaux\. ANNEXE 3 Tableau 1 TCHAD PROJET ZONE SAHELIENNE MAGASINS VILLAGEOIS Emplacement de magasins villageois de l'ONDR existants dans la Zone Sahélienne Préfectures Sous-Préfectures Canton Villages CaDacité M Chari-Baguirmi N'Djamena Rural Suburban Farcha 200 722/722 I Massakory Massakory 120 Dourbali Dourbali 120 Bokoro Moito Moito 72 Gambir Gambir 90 Bokoro Bokoro 120 Batha Ati Ati Ati 120 192/384 /1 Fitri Yao 72 Ouaddai Abeche Abeche Abeche 120 312/552 /1 O\.Chok Abougoudam 72 Adre Adre Adre 120 TOTAL 1,226 Sources: Unité du Ministère du développement agricole et pastoral\. l/ Capacité d'emmagasinage à l'intérieur de la région du projet sur la capacité totale d'emmagasinage dans la province\. ANNEE 3 Tableau 2 TCA PROJET ZONE SABELIENNE Magasins Villageois Calendrier estimatif des mplacements des nouveaux magasins villageois Préfecture 1/ Canton Population Nb d'ex- Superficie Nb de magasins Sous préfecture Rurale ploitation cultivée villageois Chari-Baguirmi: N'Djamena Rural Kadala 12,000 3,000 5,100 1 Madiago 40,000 10,000 17,000 3 Afrouk Mani 22,000 5,500 9,350 1 El Fass 9,000 2,000 3,400 1 Massaget 10,000 2,500 4,250 1 Karme 13,000 3,000 5,100 1 Karal 12,000 3,000 5,100 1 Massakory Tourba 33,000 8,000 13,600 2 Dourbali Dourbali 27,000 6,500 11,000 1 Bokoro Moito 16,500 4,000 6,800 1 Maigana 16,500 4,000 6,800 1 Bokoro 13,500 3,500 5,950 1 Amladoba 5,500 1,500 2,550 1 Batha: Ati Fitri 32,000 8,000 13,600 2 Salamat 8\.,000 2,000 3,400 1 Modogo 10,000 2,500 4,250 1 Kouka 30,000 7,500 12,750 2 Ouaddaï Abeche 0\.Chok 17,000 4,000 8,000 3 Adre Molou 37,000 9,000 18,000 2 Guergne 28,500 7,000 14,000 1 TOTAL 392,500 96,500 /2 170,000 28 Source: Division du Ministére de DéveloppezVrf Agricole et Rural 1/ La région du sous projet comprend les sous préfectures dans le Chari Baguirmi nord, Batha sud et Ouaddai nord qui sont généralement situés entre les sohyets 500 et 600 m\. 2/ Les bénéfices directs résultant de la construction des magasins villageois profiteront aux 400 familles d'agriculteurs résidants à proximité c\.a\.d\. 11,200 familles au total, ou 12% de la population rurale dans la région du sous projet\. ANNEXE 3 -ableau 3 TCHAM PROJET ZONE SAHELIENNE MAGASINS VILLAGEOIS \. Coût d'un maitàin lillaaeois Article Unité CoûIt itaire Quantité Coût total - \.T00 FCFA) (000 FCFA) Ciment t 42\.00 6 252\.0 Pierre m3 2\.00 10 20\.0 Sable m3 \.50 30 15\.0 Boue m3 \.50 /1 32 16\.0 Pierres crues No\. \.00s/1 8,000 40\.0 Renforcement en acier kg \.20 400 80\.0 Parpaing en béton No, \.10 500 50\.0 Verge en fer-clous de l eau kg \.02 100 2\.0 Tonneaux pour le transport ,To\. 2\.50 3 7\.5 Planches en bois blanc 4m/m m3 40\.00 \.5 20\.0 R\.ble en bois rouge m3 40\.00 \.5 20\.0 Tales en aluminium mi \.80 104 83\.2 Boulons pour fixer les tdles No \.10 150 15\.0 Portes en acier 2\.10xl\.25m No\. 30\.00 2 60\.0 Persiennes pour fenêtres 1 x lm N\. 1\.023\. Fenêtres pour ventilation No 15\.00 2 36\.0 0\.5 x 0\.25 m Nob 1\.00 6 6\.0 Sous-total: matériaux 716\.7 Transport de N'Djaména 2/ 40\.0 Approvisionnement total en matériaux 756\.7 dont distribution aux bénéficiaires ( non rémunérés) -56\.0 /1 Coûts en espèces de l'approvisionnement en matériaux 700\.7 Equipe de main-d'oeuvre spécialisé ( rémunéré à la pièce) 375\.0 Coût total 19075\.7 /3 Coût total par contrat au m2 1'5\.0/4 Source: Direction du Ministère du Développement agricole et rural\. l/ Les matériaux sont f,urnis gratuitement aux bénéficiares\. 2/ La distance moyenne est 200 km à 10 F/t/km ( en Régie) pour 20 t\. 3_/ Devises 214\.2 85% ciment 90% renforcement en acier portes et fenêtres 907 d\.e tales d'aluminium et accesoires Total par magasin villageois\. 4/ Le coût total, si la construction - en béton- était effectuée par un entrepreneur serait 30,000 FCFA/m2\. ANFE 3 Tableau 4 PROJET ZONE SAHELIENNE MAGASINS VTLAGEOTS Coûts des Sous Projets Coùt Année de Projet 1 Année de Projet 2 Coût - Rubrique Unité unitaire Quantité \. Coût Quantité CoÛt Total (Id~00 ('000 --('000 FCFA)-- FCFA) FCFA) Travaux de Génie Civil et Matériel Construction des magasins No 1,080\.l 12 12,960 16 17,280 30,240 Balances 2/ No 90 5 450 - - 450 Fonds de Roulement Achat de mil Tonne 30 312 9,360 416 12,480 21,840 Supervision et Opérations Initiales Sacs 3/ No 0\.3 2,000 600 - - 600 Transport du mil 4/ Tnnne 1\.0 312 312 416 416 728 Protection de l'inventaire Tonne 1\.5 312 468 728 1\.092 1\.560 Coûts de fonctionnement des véhicules 5/ 840 840 1,680 Location d'avion Heure 27\.0 25 675 25 675 1,350 Fournitures de bureau et frais divers 6/ 475 47,5 950 Supervision et suivi 7/ Somme 300 300 600 Sous-total 3,670 3,798 7,468 TOTAL 59,998 Source: Unité de conception du Ministère du développement agricole et pastoral; escmations de la mission\. 1/ A partir du tableau 3; 72 m~ à 15\.000 FCFA/m2, 2/ Une balance pour 5 magasins villageois pour faire l'inventaire\. 3/ Pour emmagasiner le mil avant l'achèvement de la construction des magasins vi\.lagec\.s\. 4/ Couvre simplement la période d'achat initiale\. Ensuite les bénéficiaires se chargeront de transporter leurs marchandises du magasin à leur ferme\. 5/ Deux véhicules 4 roues motrices pour le travail de vulgarisation, le contrôle d :ravaux de construction et l'achat initial du mil\. Le coût total est 2 x 750 km/mois x L' mois 70 FCFA/km\. 6/ Comprend 150\.000 FCFA/an pour les fournitures de bureau, et une partie des frais de personnel soit: une secrétaire et 2 chauffeurs pendant 6 moià/an\. 7/ 1 Z des coûts de construction; le suivi sera entrepris par l'Unité de la conception\. ANNEXE 4 Page 1 TCHAD PROJET ZONE SAHELIENNE CENTRE DE DEVELOPPEMENT AGRICOLE DU FITRI Généralités 1\. Situé à environ 280 km à l'est de N'Djamena, le lac Fitri est le centre d'un vaste système de drainage intérieur\. Le niveau du lac variant avec les saisons, les troupeaux du Batha peuvent y paltre pendant la saison sèche et on pourrait y pratiquer des cultures pendant la saison normalement morte pour l'agriculture\. L'exploitation des terres découvertes par le retrait des eaux du lac a une importance sinon capitale du moins très grande pour l'économie de la région, mais on n'a jamais étudié les moyens d'en améliorer la gestion\. 2\. Le gouvernement tient maintenant à mettre en valeur la région du lac Fitri\. Le sous-projet envisagé concernera exclusivement l'agriculture; le déve- loppement de l'élevage dans la région sera couvert par le projet d'élevage IDA/FED envisagé\. Dans une région peu peuplée, l'agriculture et l'élevage se disputent néanmoins les terres situées près du lac; la production est limitée par la superficie de ces terres et il faudra à tout prix augmenter la produc- tivité si l'on veut relever les revenus ruraux de la région\. L'augmentation des rendements permettra d'éviter la mise en culture des terres en bordure du lac qui menace actuellement les pâturages très appréciés de Bourgou dans lee bas-fonds\. Le sous-projet 3\. Les fonds du sous-projet serviront à financer la construction, l'équipement et le fonctionnement initial d'un centre de développement agri- cole\. Les frais d'exploitation pour les trois années suivantes, de même que le coût de l'assistance technique pendant la première phase de deux ans prévue dans ce sous-projet, seront financés dans le cadre de la quatrième phase du Programme du FED\. Une ferme expérimentale de 10 ha sera organisée pour tester des semences, l'efficacité des engrais et l'utilisati*on de l'eau; fournir aux exploitations des services de vulgarisation, des facteurs de production à crédit, simples mais améliorés ainsi que du matériel à traction animale; organiser de simples ouvrages d'amélioration des terres que les bénéficiaires exécuteraient sur 50-100 ha par an\. Après quelques années de fonctionnement, on obtiendra, grâce aux activités du centre, les données agronomiques de base nécessaires à l'élaboration d'un autre projet de développement agricole\. ANNEXE 4 Page 2 Coùt du sous-projet 4\. Le coût du sous-projet, net d'impôts, s'élèvera à environ 60 mil- lions de francs CFA (245\.000 dollars)\. Il ne peut toutefois pas être fait d'estimation avant que le programme de travail soit mieux défini et que l'on ait pris une décision quant aux éléments qui ejeront respectivement financés par l'IDA et le FED\. Le Tableau 1 montre qu,e certaines parties ont déjà été défi- nies tandis que d'autres, principalement celle qui se rapporte aux frais d'ex- ploitation initiaux, devront être précisées\. Dans l'attente de renseignements complémentaires et à partir du Tableau 1, la ventilation des coûts du sous- projet s'établirait comme suit: Monnaie Pourcentage nationale Deviseu Total devises ------------(milliers de FCFA)------------ Travaux de génie civil 6\.604 6\.096 12\.700 48 Véhicules et matériel 2\.363 19\.117 21\.480 89 Personnel 9\.064 - 9\.064 - Mise en route 5\.562 5\.562 11\.124 50 Total 23\.593 30\.775 54\.368 57 Justification 5\. Il va de soi que les terres proches du lac sont moins exposées à la sécheresse que le reste de la zone sahélienne, à la seule exception des envi- rons du lac Tchad et des oueds, principalement au Kanem, où la nappe phréatique se trouve près de la surface\. Les terres autour du lac Fitri étant relative- ment protégées contre la sécLeresse, il serait bon d'en augmenter la producti- vité étant donné que c'est la seule possibilité d'accroltre la production en saison sèche dans la région\. Les autorités n'ont pas encore entrepris d'acti- vités de développement agricole dans la région, mais le sous-projet envisagé fournirait le moyen d'entreprendre certaines activités simples à une échelle modeste et de tester les mesures qui pourraient être éventuellement incluses dans un futur projet de développement agricole\. L'utilité du type de travaux, qui seront entrepris dans le cadre de ce sous-projet, ne fait pas de doute\. La préparation n'est toutefois pas terminée\. TC,AD MiEX 4 Tableau 1 PROJET ZONE SAHELIENNE CENTRE DE DEVELOPPEMENT RURAL - LAC FITRI Cots des Sous Projets Unité Coût Année de Proiet 1 Année de Projet 2 Coit Z de unitaire Quantité Coût Quantité Coit Total Devises ('000 FCFA) ('000 FCA) ('000 FCTA) Travaux de Géni& Civil 1/ m2 35 100 3\.500 - - 3\.500 50 Logement pour le Chef du Centre 2 35 96 3\.360 - - 3\.360 50 Bureau et atelier de réparations M2 20 - - 168 3\.360 3\.360 42 Magasin pour les facteurs de production m2 13 72 1\.080 - - 1\.080 42 Magasin pour la région d'essais 2/ No\. 1\.400 1 1\.400 - - 1\.400 54 Puits Sous total 9\.340 3\.360 12\.700 48 Véhicules et Matériel Camionnette 3/4 de tonnes No\. 1\.560 1 1\.560 - - 1\.560 90 Tracteur 85 CV No\. 3\.800 1 3\.800 - - 3\.800 90 Outillage 3/ Série 2\.000 1 2\.000 - - 2\.000 90 Remorques 4/ Série 2\.000 - - 1 2\.000 2\.000 90 Pompe portable (20CV) 51 Série 2\.260 1 2\.260 1 2\.260 4\.520 90 Pompe portable (12CV) Série 1\.000 1 1\.000 - - 1\.000 90 Tracteur à main Série 1\.250 1 1\.250 1 1\.250 2\.500 90 Outils pour réparations Série i 300 1 300 - - 300 90 Outils agricoles Série 300 1 300 - - 300 90 Matériel topographique / Série 2\.000 1 2\.000 - - 2\.000 90 Matériel de bureau Série 300 1 300 - - 300 90 Mobilier (bureau et logement) Série 1\.200 1 1\.200 - - 1\.200 70 Sous total 15\.970 5\.510 21\.480 89 Personnel Vulgarisateurs Homme-année 500 4 2\.000 4 2\.000 4\.000 - :quipe pour tracteurs 7/ Equipe-année 522 1 522 1 522 1\.044 - Main d'oeuvre dans la région expérimentale Homme-année 90 7 630 7 630 1\.260 - Equipe topographique 8/ Equipe-année 1\.380 1 1\.380 1 1\.380 2\.760 - Sous total 4\.532 4,532 9\.064 - Opérations initiales Préparation du terrain 9/ Soma 188 - 188 - Travaux d'expérimentation 10/ Somme - 2\.000 2\.000 70 Fonds de roulement 10/ So - 3\.870 3\.870 70 Fonctionnement des véhicules '000 km 50 20 1\.000 1\.000 2\.000 55 Fournitures de bureau 10/ Somme 200 200 400 70 Analyses pédologiques 10/ Somme 1\.250 600 1\.350 - Location d'avions Heure 27 4 108 4 108 216 55 Suivi et évaluation Somme 300 300 600 - Sous total 3\.046 8\.078 11\.124 50 Total des coûts du sous roee 32\.888 21\.480 54\.368 57 Sourrs: Unités de conception du Ministère du développement agricole et pastoral; estimationa de la missions\. I/ Les coûts unitaires sonu fondés sur l'expérience de travaux similaires exécutés en régie en 1984-76\. 2/ Comme pour le plan standard pour les magasins villageois (Annexe 3)\. / Une charrue à 3 disque,un ripper et une charrue à disque à 0\.6, 0\.3 et 1\.1 million de FCFA respectivement\. 4/ Un de 5 tonnes et un de 3 tonnes à 1\.2 x 0\.8 million de FCFA respectivement\. 5/ Pompe à 1\.32 million de FCFA et les accessoiresà 0\.94 million de FCFA\. 6/ Comme pour l'ensemble standard pour l'aménagement des bas fonds (Annex 2)\. 7/ Un chauffeur et un assistant à 432\.000 et 90\.000 FCFA/an respecticement\. 8/ Un topographe, un assistant, 2 arpenteurs et un chauffeur à 600\.003, 300\.000, 180\.000 et 300\.000 FCFA respectivement\. 9/ 75 hommes-jours/ha, 250 FCFA/homme-jour\. 1\.0/ Les calculs préliminaires ont été fait mais la programme de traail et les estimations de coats doivent être revisés\. ANNEXE 5 Page 1 TCHAD PROJET ZONE SAHELIENNE OPERATION MARAICHAGE Généralités 1\. Le Projet de secours contre la sécheresse (Crédit 445-CD) a permis de financer l'achat de matériel (10 pompes et du petit outillage), des fonds de roulement (stocks de semences et d'engrais) ainsi qu'un véhicule et des fournitures de bureau destinés aux agents de vulgarisation, pour un sous- projet de production maralchère à la périphérie de N'Djamena\. Quelque 80 ha sont actuellement cultivés par 98 producteurs regroupés en 6 associations et par 47 exploitants individuels\. La taille moyenne des parcelles est d'environ 0,5 ha, mais l'expérience a montré que cette superficie est trop grande, compte tenu de la capacité des cultivateurs à la gérer et de leurs disponibilités en main-d'oeuvre familiale\. Les crédits pour les pompes, le petit outillage et les facteurs de production utilisés au niveau de l'exploitation ont des ar- riérés de remboursement d'environ 50 %\. Le sous-projet était géré par une sous-division de la Direction de l'agriculture dotée de personnel suffisant, compétent sur le plan technique et qui coupait sans'tarder les crédits des retardataires\. Elle a aussi rendu d'utiles services de commercialisation en regroupant les produits agricoles et en les transportant jusqu'au marché de N'Djamena; par contre, les envois pilotes de melons en France et au Cameroun se sont soldés par des pertes alors qu'ils devaient avoir une rentabilité élevée\. N'Djamena est et devra rester le principal débouché, mais il est encore possible d'augmenter fortement la production à des prix rémunérateurs; de nombreux habitants de la région se sont adressés à la Direction de l'agriculture pour demander des facteurs de production et des services de vulgarisation\. Le sous-projet 2\. Les fonds prévus pour le sous-projet serviront à financer: la con- struction de deux entrepôts de 60 m2 pour l'emmagasinage de facteurs de pro- duction agricoles et d'oufillage, l'aménagement et la mise en valeur initiale d'une parcelle "concentrée" de 10 ha qui sera cultivée par des producteurs abandonnant volontairement l'agriculture en sec, ainsi que des stocks d'engrais et d'insecticides pour une superficie additionnelle de 70 ha\. Les insecticides et les engrais ne seront plus fournis à crédit mais uniquement au comptant\. La Direction de l'agriculture continuera à gérer le sous-projet mais ne fe- ra pas d'exportations pilotes par voie aérienne, sauf par l'intermédiaire de compagnies représentées à N'Djamena\. ANNEXE 5 Page 2 Coût du sous-projet 3\. Le codt du sous-projet, net d'impôts, s'élèvera à 27 millions de francs CFA (110\.000 dollars), ventilés comme suit (Tableau 1): Monnaie Pourcentage nationale Devises Total devises ------------(milliers de FCFA)------------- Travaux de génie civil et matériel 4\.209 7\.166 11\.375 63 Fonds de roulement 680 6\.120 6\.800 90 Frais d'exploitation 5\.771 2\.135 7\.906 27 10\.660 15\.421 26\.081 59 Imprévus pour dépassement 437 474 911 52 des travaux Total 11\.097 15\.895 26\.992 59 Le personnel de la Direction de l'agriculture continuera à être payé par le gouvernement\. Justification 4\. En dépit de la forte augmentation de la production locale ces der- nières années, les légumes de bonne qualité continuent à être presque aussi chers sur le marché de N'Djamena que les produits importés\. Il est possible d'écouler sur place, à des prix rémunérateurs, une quantité accrue de produits et d'exporter des melons, à condition que des dispositions commerciales satis- faisantes soient prises\. Non seulement la situation du marché est favorable, mais il existe aussi une forte demande de facteurs de production, de services de vulgarisation et de commercialisation émanant des producteurs potentiels\. On évitera de retomber dans les erreurs du sous-projet de production maraî- chère antérieur, en attribuant aux cultivateurs des parcelles plus petites de 0,1 ha au lieu de 0,5 ha et en s'assurant que les engrais et les insecticides seront fournis uniquement au comptant\. Le taux de rentabilité économique sera de 23 % (Tableau 2); il serait ramené à 9 % si les coûts augmentaient de 10 % et atteindrait 36 % si les avantages s'accroissaient de 10 %\. ANNEM 53 TCHM Tablea4u 1 PROJET ZONE SABELIENNE OPERATION MARAICHAGE Coûts du Sous-Projet Unité coût Année de Projet 1 Année de Projet 2 Coût % de rnitaire Ouantiti Coüt Quantité Coût '"otal Dlevises ('000 ?CFA) ('000 FCTA) ('000 FCFA) Génie Civil et Matériel Entrepôt No\. 1\.800 1/ 2 3\.600 - 3\.600 50 Pompes Serié 941 1 941 - - 941 90 3/4 t pickup No\. 1\.560 1 1\.560 - - 1\.560 90 Petits outils So=» 2/ 2\.274 - - 2\.274 90 Construcdioneet mise en\. place de drains m2 3 1000 3\.000 - - 3\.000 36 Sous-total 11-33 11\.375 3 Fonds de Roulement Engrais Tonne 100 56 3/ 5\.600 - - 5\.600 90 Pesticides Litre 2 6004/ 1\.200 - - 1 200 90 Sous-total 6\.,00 6\.800 90 Coûts de Fonctionnement Aménagement deà terrains 5/ Somme - - 900 - - 900 - Agents de vulgarisation 6/ Homme-mois 30 56 1\.680 56 1\.680 3\.360 - Fonctionnement des véhicules '000 ka 50 14 700 5C 700 1\.400 55 Fonctionnement des pompes Somme 7f 773 773 1\.546 55 \. \. Fournitures de bureau Somme 350 350 700 70 Sous-total 4\.403 3\.503 7\.906 7 Imprévus d'ordre matériel 8/ 764 147 911 52 Total des coûts du sous-orajet 23\.342 3\.650 26\.992 59 Ï/ 60 M, construction entièrement faite en béton, 30\.000 FCYA/m2\. / Comprend 64 pulvérisateurs pour pesticides (2 pour 5 ha pour les 160 ha, à 10\.000 FCFA chacun, 64 brouettes à 13\.500 CFAF chacune, 100 pelles (10 unités/ha pour 10 ha) à 1\.750 FCFA chacune, 100 pioches à 2\.600 FCFA chacune, 100 houes en fer à 2\.000 FCFA chacun, 100 rateaux à 1\.350 FCFA chacun\. 3/ 700 kg/ha pour les 80 ha additionnels\. 4/ 7\.5 1/ha pour les 80 ha\. 5/ Préparation du terrain executée en régie pour las 10 ha de terrain pilote, 360 hommes-jours/ha à 250 FCFA/homme- jour\. 6/ 6 agents de vulgarisation: 2 pour 12 mois et 4 pour 8 mois à 30\.000 FCFA/mois\. 7/ 1\.800 heures/an à 430 FCFA/heure\. 8/ 10 Z pour petits outils, drains, aménagement des terrains, fonctionnement des véhicules et fonctionnement des pompes\. \.ANNEXE 5 Tableau 2 PROJET ZONE SAXELIENNE PEATION MARAICHAGE Taux de Rentabilité Ecenomiaue Api AP2 AP3 AP4 \. U AP6 AP7 AP8 AP910 --Millions FCFA---------------- ------- Coûts 1/ Travaux génie civ:Ll/matériel: -11\.4 - 3\.3 3\.3 6\.6\. 3\.3 4\.2 - 3\.3 Coûts de fonctionnement 2/ 18\.6 17\.1 17\.1 17\.1 17\.1 17\.1 17\.1 17\.1 17\.1 Main d'oeuvre 3/ - 2\.5 2\.5 2\.5 2\.5 2\.5 2\.5 2\.5 2\.5 2\.5 Total 32\.5 19\.6 22\.9 22\.9 26\.2 \.22\.9 23\.8 19\.6 22\.9 Ajustement pour devises h/ 37\.3 22\.4 26\.4 26\.4 30\.5 226\.4\.44 Avantages ---(tonnes ) Type 1: Rendement/ha \.5 10 12 14 15 15 15 15 15 15 production 6/ 50 120 140 150 150 150 150 150 150 Type 2: Rendement/haT/ 6 7 8 9 9 9 9 9 9 production 6 210 490 560 630 630 630 630 630 630 Production accrue 260 610 700 780 780 780 780 780 780 -(Millions FCFA)-\. Valeur des avantages /11\.7 27\.4 31\.5 35\.1 35\.1 35\.1 35\.1 35\.1 35\.1 Avantages nets • \.Q5\.8 5\.0 5\.1 8\.7 4\.6 8\.7 7\.6 12\.7 8\.7 Taux de rentabilité economique Coûts 100% 110% 100% 100% Avantages 100% 100% 90% 110% Taux 23% 9% 7% 36% 1/ L'APl- Coût tel qu'indiqué au tableau 1 AP3 et AP4- Remplacement ae petit\. outi\.s, ànaque aitéw f\. tous les 3 ans ensuite; AP5-Remplace=ent après 6 ans de 10 pompes non utilisées au maximu qui avaient été achetés en 1975/76; AP7- Remplacement de la pompe achetée un 1971\. CoQts tel qu'au tableau 1 y compris l'engrais et insecticide plus les semences à 1\.2 million FCA ( non indiqué au tableau 1 car les atocka existanta sont suffisants), plus les coûts de pompage pour les 10 pompes existantes; 1350 h/an, 400 FCFA/h\. 3/ Pour la région concentrée C type 1), 100 cultivateurs abandonneraient les cultures en sec à un coût d'opportunité de 50% du revenu annuel total/flLmille ou 25\.000 FCTA/cultivateur\. ý/\.Zacteur de devises augmenté de 1\.25\. 5/ Rendement moyen pour les lgres, au debut dm la cemvaie en y faisant attention- les cultures doubles seraient possibles mais n'ont pas été inclues ici\. 6/ 50% opérationnel l'Ael; c'est-à-dire 5 ha, type 1 et 35 ha type 2 au lieu de 10 ha et 70 ha comme l'AP2 ensuite\. / Rende\.men; moyen, avec plantation après que toutes les activités agricoles en sec ont été complétées\. Ces agricu\.l- teurs progressivement adopteront des plantations en début de campagne\. Les coûts d'opportunité et -\.es avan':ages ne sont pas inclus ici\. 8/ US eCFA/kg; les cultivateurs de type 1 obtiendront un prix moyen plus élevé s'ils récoltent plus tct\. Si les exportations étaient lancées avec succès, le prix moyen augmenterait considérablement\. Le prix actuel au producteur pour les légumes est 60 FC?A/kg\. ANNEXE 6 Page 1 PROJET ZONE SAHELIENNE CAMPAGNE DE VACCINATION ET MEDICAMENTS Généralités 1\. L'élevage est la principale ressource d'environ 1,8 million de personnes vivant dans la zone sahélienne et la zone de transition; le Tchad compte environ 3 millions de bovins, 900\.000 ovins, 1,7 million de caprins, 500\.000 chameaux et environ 500\.000 chevaux et ânes (Tableau 1)\. Les producteurs cherchent dans l'élevage avant tout un moyen de subsistance et, en augmentant leurs troupeaux, comptent se prémunir contre les risques de perte\. Les méthodes d'élevage traditionnelles se fondant sur la transhumance prédominent et se caractérisent par une faible productivité et des pertes inutiles\. Environ un tiers des bovins et 10 % du reste du cheptel national ont péri pendant la forte sécheresse de 197\.3\. 2\. Les services dont bénéficie le secteur de l'élevage sont médiocres\. Ils consistent principalement en campagnes annuelles de vaccination contre les principales maladies (peste bovine, péripneumonie bovine, fièvre charbon- neuse, charbon symptomatique, septicémie hémorragique, pneumonie des petits ruminants, maladies aviaires et rage)\. Très peu de producteurs sont touchés par les campagnes de dépistage et ont accès à des produits vétérinaires trypanocides pour traiter les maladies transmises par la mouche tsé tsé\. A la suite de la sécheresse de 1973, les services d'élevage ont étendu leur rayon d'action de manière à englober la distribution de petites quantités de pieres à lécher et de compléments alimentaires concentrés, avec l'aide financière du FED et de la Suisse\. Tous les services sont gratuits; jusqu'en 1973, le gouvernement percevait annuellement une taxe pour chaque tète de bétail, mais y a renoncé à la suite de la sécheresse et a été dédommagé principalement par le FED pour les recettes ainsi perdues\. Le gouvernement compte recouvrer auprès des bénéficiaires le coût total des services fournis, mais la nouvelle sécheresse de 1976/77 plonge les éleveurs une fois de plus dans une situation anormalement difficile; il ne sera donc guère justifié d'aggraver leur situation financière en les faisant payer à ce stade\. En revanche, il ést important de renforcer l'efficacité du service de l'élevage afin de minimiser les pertes dues aux maladies, d'alléger l'effet des pertes causées par la sécheresse et de permettre aux éleveurs de reconstituer rapidement leurs troupeaux\. Le recouvrement des coûts auprès des éleveurs sera progres- sivement introduit dans le projet IDA/FED envisagé\. 3\. Dans la zone du projet, la Direction de l'élevage est divisée en quatre circonscriptions vétérinaires habituellement dirigées par un vétéri- naire: a) Centre-ouest (N'Djamena); b) Nord-ouest (Mao); c) Centre (Ati); ANNEXE 6 Page 2 et d) Est (Abeche)\. Ces circonscriptions sont suddivisées à leur tour en 12 secteurs vétérinaires habituellement dirigés par un responsable diplômé en élevage (Massakory, Bokoro, Masserya; Mao, Moussoro, Bali; Ati, Oum-Hadjer, Mongo; Abeche, Biltine, Am Timan)\. Les 32 postes vétérinaires où travail- lent généralement des infirmiers de médecine vétérinaire représentent l'éche- lon le plus bas du service\. Des équipes mobiles travaillent dans les régions d'accès facile, mais ailleurs les services d'élevage sont dispensés par les secteurs et postes vétérinaires (Tableau 1)\. Le service peut se charger des campagnes de vaccination, mais il manque de véhicules et de moyens\. Une fois ces lacunes comblées, son efficacité ne pourra que substantiellement s'améliorer\. Le sous-projet 4\. Les fonds du sous-projet financeront: a) le remplacement de véhi- cules et de matériel; b)l'achat de quatre émetteurs/récepteurs; c) l'achat de vingt chameaux avec harnachement; d) une réserve d'un an de vaccins, de purges, de trypanocides et d'autres produits vétérinaires; e) la distribution d'environ 200 tonnes respectivement de pierres à lécher et de concentrés alimentaires; f) les frais d'exploitation des véhicules et du matériel; et g) une année de traitement pour 35 vaccinateurs temporaires\. Les deux tiers environ du cheptel seront vaccinés contre la peste bovine et la péripneumonie; quant aux autres maladies, il y sera fait face à mesure qu'elles se déclarent\. Coût du sous-projet 5\. Le coût total du sous-projet, net d'impôts, mais y compris les pro- visions pour dépascement des quantités, est de 240,6 millions de francs CFA (982\.000 dollars), ventilés comme suit (Tableaux 2 et 3): Monnaie Pourcentage nationale Devises Total devises ------------(milliers de FCFA)------------- Investissements - Véhicules et matériel 6\.350 60\.000 67\.230 91 - Chameaux avec harnachement 1\.100 - 1\.100 0 Total partiel 7\.450 60\.880 68\.330 89 ANNEXE 6 Page 3 Monnaie Pourcentage nationale Devises Total devises ------------(milliers de FCFA)------------- Frais d'exploitation - Salaires et traitements 7\.020 - 7\.020 0 - Frais d'exploitation des véhicules et du matériel 23\.136 29\.823 52\.959 56 - Vaccins 22\.438 33\.658 56\.096 60 - Médicaments et produits vétérinaires 2\.600 23\.400 26\.000 90 - Minéraux et aliments 12\.800 2\.400 15\.200 16 Total partiel 67\.994 89\.281 157\.275 57 Dépassement des quantités 6\.097 8\.928 15\.025 59 Frais d'exploitation 74\.091 98\.209 172\.300 57 COUT TOTAL DU SOUS-PROJET 81\.541 159\.089 240\.630 66 Justification 6\. Le maintien des services de santé animale est le meilleur m\.yen de soutenir le sous-secteur de l'élevage dans- la zone sahélienne et la a;Jne de transition étant donné l'infrastructure existant dans la région\. Bien que le personnel et l'infrastructure de base existent, ils n'atteindront leur pleine efficacité que si les services sont dotés de véhicules, de réfrigérateurs de vaccins et de produits de consommation comme des vaccins, des produits vété- rinaires et des médicaments, des pierres à lécher et des concentrés alimen- taires, ainsi que de l'essence\. Un service vétérinaire renforcé donnera les avantages mesurables suivants: réduction de la mortalité des veaux et des animaux adultes, et partant, augmentation de la production de lait et de viande, et accroissement du cheptel (Tableau 4)\. La fécondité du troupeau progressera aussi quelque peu, mais cet élément ne peut être chiffré sur une période de 12 mois\. En outre, le service de l'élevage gagnera progressi- vement la confiance des éleveurs de la zone du projet qui auront ainsi plus fréquemment recours à ses services, ce qui facilitera ultérieurement l'in- troduction de services payants\. Le sous-projet aura un ratio avantages- coûts de 3,3:1 pour 12 mois, sans taux de change de référence, et de 3,0:1 pour un taux de change de référence de 1,25, dans l'hypothèse où la moitié des bêtes supplémentaires abattues serait exportée et où la production ce lait supplémentaire serait consommée sur place\. Le ratio est calculé à ANNEXE 6 Page 4 partir du prix du bétail sur le marché et non pas à partir de l'avantage que constituerait la diminution de la mortalité; tous les avantages étant évalués sur une période de 12 mois à compter de la date des dépenses, le ratio est calculé sur la base de valeurs non actualisées\. AdÙ4EFXE\. 6 Tableau 1 TCHAD PROJET ZONE SAHELIENNE CAMPAGNE DE VACCINATION ET MEDIC»ETS POPULATIONI ANMlALE Bétail Ovins & Chamaux Chevaux Anes Caprins - - - - - - - - - - - - ('000 head) - - - - - - - - - - - A\. Région du projet desservie par des équipes mobiles Batha (partie de) 1/ 510 310 40 8 19 Kanem 430 800 70 20 40 Lake 300 150 3 20 20 Chari Baguirmi (partie de) 2/ 300 400 3 10 25 Sous-total 1,540 1,660 116 58 104 B\. Région du projet desservie oar les postes et secteurs de bétail Batha (partie de) 1/ 820 490 60 12 31 Chari Baguirmi (partie de) 2/ 160 210 - 5 13 Guera 150 80 - 10 10 Biltine 300 500 80 16 50 Quaddai 350 200 35 12 30 BET 10 70 75 - 3 Salamat 90 70 - 3 7 Sous-total l,880 250 58 144 C\. Total, de la région du projet 3i280 366 116 248 D\. Région cotonniére Mayo Kebi 230 550 - 15 10 Logone Occidental 25 100 - 3\.5 - Logone Oriental 35 120 - 4\.5 - Tandjile 40 90 -8 - Moyen Chari 70 130 - \.2 1 Sous-total 400 990 - 33 il E\. Région LCBC 3/ Chari Baguirmi (partie de) 2/ 140 190 1 5 12 F\. Total - Tchad 3 960 367 154 Source: Direction de l'élevage et des industries animales 1/ Conformément au recensement du SEDES en 1976\. 2/ Estimations de la mission\. 3/ Commission du bassin du lac Tchad\. TCHAD PROJET ZONE SAIIELIENNE CAMPAGNE DE VACCINATION ET MEDICAMENTS Coûts d'Investissement Z de Unité Coûit Unitaire No\. Total devises (FCFA '000) (FCFA '000) a~\. niacérielt et Véticuies Véhicule 4 roues motrices 1/ No\. 2,400 6 14,400 90 Camion 3\.5 tonnes 2/ No\. 2,820 9 25,380 90 Camion 6 tonnes 3/ No\. 4,200 3 12,600 90 Récepteur/émetteur No\. 1,723 4 6,890 90 Congélateur No\. 300 10 3,000 90 Conteneur frigorifique No\. 23 50 1,150 90 Trousse vétérinaire Séries 91 10 910 100 Matériel d'essais vétérinaire Séries 75 12 900 100 Hateriel divers Somme 2,000 100 Sous total 67230 91 Es\. Chameaux et hornais 55 20 1,100 0 Total des coûts d'investissement 68,3309 1/ Remplacement des véhicules existant à Att (2), Oum iadjer, Mongo, Abeche (2)\. 2/ Rempiacement des véhicules existant à Massakory, lao, Moussoro, Ati, Oum Hadjer, Mongo, biltine, Am Timan, Bokoro\. 3/ Remplacement des véhilcules-"existant ï Mao, Ati, Abeche\. ANNEXE 6 Tableau 3 TCUAD PROJET ZONE SAELIMNE CAMPAME DE VACCINATIO< ET MEDICAMENTS CoGt de Fonctionneent Unit& Coût Unitaire No\. Total Z de devises A\. Traitements et Salaires* Chef du troupeau de chameaux No\. 72 10 720 0 Vaccinateurs No\. 180 35 6\.300 0 Sous total 7\.020 0 3\. Véhicule et fonctionnoment au mattriaL Vehiculs 4 roues motrices _/ No\. 1\.680 14 23\.520 55 Camions de 3\. tonnes 3/ No\. 1\.440 il 15\.840 55 Camions de 6 tonnes 3/ No\. 3\.600 3 10\.800 55 Congélateurs, Karosène 4/ No\. 28 50 1\.424 70 Congélateurs pièces de rechan-,e L\. So 1\.375 90 Sous total 52\.959 56 C\. Vaccins Peste Bovine/paripneumaoni bovine '000 dosec 8,95 2\.500 22\.375 60 Cnarcon bactéridien c 10,80 1\.800 19\.440 60 Charbon symptomatique 92 1\.300 11\.960 60 16,84 25 421 60 13\.0 70 910 60 Volaille 1 , 2,4 100 240 60 Volaille 2 9,6 50 480 60 Rage - 90 3 270 60 Sous total 56\.096 D\. Médicaments Diparasitage des veaux r000 doses 60 250 15\.000 90 Dparasitage des jeunes animaux " 100 50 5\.000 90 Tripanocide du bétail 50 20 1\.004 90 Tripanocide des chameaux " 150 20 3\.00U 90 Divers 2\.000 90 Sous total 26AOO 90 E\. Suppléments de nourriture Pierres à liéchar 6/ t 100 120 12\.000 20 Concentrés t 16 200 3\.200 0 Sous total -5\.200 16 Total des coûts de fonctionnement 157\.275 57 (avant imprévus) 15\.025 59 Imprévus d'ordre matériel 10% 7/ Total des coOts de fonctionnement -- Total des coûts d'investissemenc - 240\.630 66 Total des coûts du Sous projet _ 1/ 24\.000 km/an à 70 FCFA/km\. 2/ 16\.000 km/an à 90 FCFA/im\. _i/ 24\.000 km/an à 150 FCFA/k\.m\. / 1 congélateur/karoséne d'un litre/jour à :S eC\.A/' 28\.470 FCFA/an\. 3/ 750 mèches à 1\.350 1\.012\.500 FCFA\. 250 verres à 950 237\.500 FCFA\. 10 brûleurs à 12\.500 125\.000 -CFA TOTAL 1\.375\.200 6/ 40\.000/animal 1 5 kç: 200 t/an, qui sera distribué par les véhicules des services vétàrinaires\. 7/ 10% sur les coûts de fonctionnement à l'exception des traitements et salàires\. ANNEXE 6 \.Tableau 4 TCHAD PROJET ZONE SAHELIENNE CAMPAGNE DE VACCINATIONS ET MEDICAMENTS Calcul du ratio avantages - couts Au taux de Au taux de \.change actuel -\.c*hange de référence ($EU1 =245:FCFA) ($EU1=306 FCFA) Avantages supplémentaires 1\. Valeur du Cheptel - Bovins 1/ 618 657 5/ - Camelins 2/ 148 157 5/ Total partiel 766 814 2\. Production du lait - Bovins 3/ 21, 21 - Camelins 4'/2 2 Total partiel 23 23 TOTAL DES AVANTAGES SUPPLEENTAIRES 789 837 TOTAL DES COUTS SUPPLEMNTAIRES 241 280 RATIO AVANTAGES - COUTS 3\.3:1 3\.0:1 1/ Réduction de la mortalité des veaux (3%) et des animaux adultes (1%), les veaux étant 15% du troupeau et les adultes 85%; valeur des veaux à 50 kg poids vif 8,000 FGFA; valeur des adultes à 200 kg poids vif 20,000 FCFA; 13,500 veaux x 8,000 FCFA: 108 millions de FCFA; 25,500 adultes x 20,000 FCFA=510 million de FCFA\. 2/ Réduction de_la mortalité des camelins (1%); 3,700 camelins x 40,000 FCFA = 148 millions de FCFA\. 3/ Augmentation de 1% des vaches (38% du troupeau) 11,400 vaches x 0\.60 (taux de fécondité) x 120 litres x 25 FCFA/litre= 21 millions de FCFA\. 4/, Augentation de 1% de femelles (18% du troupeau); 366,000 camelins x 0\.18 x 0\.01 150 litres x 25 FCFA/litre= 2,4 millions de FCFA\. 5/ 25% destiné à l'exportation, 25% pour la consommation locale et 50% pour le croit du troupeau\. ANNEXE 7 Page 1 TCHAD PROJET ZONE SAHELIENNE EQUIPEMENT POUR LA PRODUCTION DE VACCINS Généralités 1\. Le laboratoire Farcha, créé en 1952 dais les environs de N'Djamena, a entrepris un programme de recherche sur l'élevage et a un service de pro- duction de vaccins pour le Tchad et plusieurs autres pays (Tableau 1)\. Il est actuellement sous le contrôle de l'Institut d'élevage et de médecine vétérinaire des pays tropicaux (IEMVT), organisme de l'Etat français dont le siège se trouve à Paris\. On compte que fin 1977, le contrôle du laboratoire passera au Gouvernement du Tchad\. 2\. Les travaux de recherche, qui devaient être financés à parts égales par la France et le Tchad, ont été réduits ces dernières années, les difficultés budgétaires du Gouvernement tchadien ne lui ayant pas permis de maintenir sa contribution\. Sont associés au pro\.gramme de recherche, du moins sur le plan financier - les fonds étant en réalité fournis par le Gouverne- ment français - des activités d'éducation et des services de diagnostic par- ticulièrement utiles dont le Tchad et d'autres pays bénéficient gratuitement\. Par contre, le service de production de vaccins doit normalement s'auto- financer, le prix des vaccins couvrant toutes les dépenses et, pour d'autres pays que le Tchad, un montant supplémentaire est demandé pour amortissement des immobilisations\. Le Tchad a été exonéré du paiement de ce montant supplé- mentaire, étant donné qu'il a fourni une partie de l'actif initial\. Les prix sont relevés par le biais d'une formule compensant l'inflation des coûts\. L'analyse des recettes et des paiements du service de production de vaccins entre les années 1963 et 1971 montre qu'en moyenne les coûts ont été re- couvrés et qu'il est même resté un petit excédent\. 3\. Les activités du service de production de vaccins ont ensuite été pratiquement paralysées, le Tchad et, dans une moindre mesure, certains autres pays, étant dans l'incapacité de payer les vaccins\. Il en est résulté un double problème\. Tout d'abord, il est devenu très difficile de planifier la production dans la mesure où le système de "convention" exige que l'on con- vienne à l'avance des besoins de la saison suivante pour que les fournitures puissent être commandées; or, le Tchad a été dans l'impossibilité de remplir cette obligation\. Deuxièmement, le manque de trésorerie nuit au rééquipement\. Le coût des vaccins fournis sans paiement a été couvert dans un grande mesure par le secours étranger, mais des factures totalisant 72 millions de francs CFA restaient dues au 31 décembre 1976\. L'entretien et le remplacement du matériel ont été nécessairement réduits au minimum tandis que si les factures avaient été réglées, le problème du rééquipement ne se serait pas posé\. ANNEXE 7 Page 2 Le sous-projet 4\. • Les fonds du sous-projet serviront à financer le rééquipement nécessaire au service pour continuer à produire des vaccins de façon régulière\. Le matériel énuméré en détail au Tableau 2 représente une série d'articles nécessaires soit parce que le matériel actuel est hors d'état ou sur le point de l'être, soit, en ce qui concerne les vaccins bactéricides, parce qu'il faut moderniser l'équipement et, chose plus importante, diversifier la production\. Coût du sous-projet 5\. Le coût total du sous-projet, net d'impôts, est de 35 millions de francs CFA (143\.000 dollars), la totalité en devises\. Il n'est pas prévu de provisions pour dépassement des quantités, les spécifications et les quantités étant bien établies\. Justification 6\. Des campagnes de vaccination sont probablement le service le plus important qui puisse être fourni au secteur de l'élevage et il est donc néces- saire de disposer d'un stock assuré de vaccins de bonne qualité, adaptés aux conditions locales\. Le service de production de vaccins de Farcha a fait la preuve de sa compétence technique et a été en mesure de produire des vaccins à un prix bien inférieur à celui que demandent les entreprises commerciales\. Les difficultés financières actuelles ne sont pas dues au barème des prix adopté, qui permet de récupérer les coûts auprès des pays participants, mais aux défauts de paiement\. A l'avenir, l'achat de matériel sera financé au moyen du produit des ventes et, dans le cas du Tchad, dans le cadre du projet d'élevage IDA/FED envisagé\. Le sous-projet permettra d'utiliser pleinement les fonds irrecouvrables importants qui ont été investis dans les bâtiments, le matériel et le personnel local qualifié\. ANNEE 7 Tableau 1 TCIM\. PROJET ZONE SAHELIENNE EQUIPEKENT POUR LA PRODUCTION DES VACCINS Production et livraison de vaccins 1974 1975 1976 ----------'0O doses ------------- PRODUCTION Charbon bactéridien 1,553 2,386 2,070 Charbon symptomatique 2,362 3,716 2,457 Septicemie hemorragique bovine 750 383 973 Pleuripneumonie contagieuse bovine 1,001 872 129 " petits ruminants 48 152 49 Peste bovine 196 - 19 Peste bovine/CBPP 3,593 2,779 2,574 Rage 27 24 58 Clostridium septicum S dublin 17 VACCINS POUR LA VOLAILLE Typholde 15 Choléra 29 - - Maladie de Newcastle 90 119 267 Polyvalent (Newcastle/typholde variole) 320 116 344 PRODUCTION TOTALE 10,007 10,547 8,940 LIVRAISONS Cameroun 2,278 2,597 2,357 Lake Chad Basin Commission 444 710 788 Congo 76 163 141 Gabon 40 6 20 Guinea 200 - Mauritanie 1,000 500 500 Niger 71 61 10 Empire Centre Africain 805 879 372 Sierra Leone 75 30 10 Tchad 4,584 5,738 4,415 Zaire 17 - Kampuchea - -5 TOTAL DES LIVRAISONS 9,590 10,684 8,618 Source: Rapport d'activités du laboratoire de Farcha\. ANNEXE 7 Tableau 2 PROJET ZONE SAHELIENNE EQUIPEMENT POUR LA\.PRODUCTTON*DES VACCINS Coûts du Sous-Projet Colt Cout Rubrique Unité Unitaire - fob Quantité Total 1/ (FCFA '000) (FCFA '000) Equipement Fermenteur 20 - 30 1 No 5,500 1 5,500 Fermenteur 1 - 21 1 No 500 1 500 Centrifugeuse No 1,100 1 1,100 Distillateur No 130 1 130 Filtres seitz 25 litres No 1,450 2 2,900 10 litres No 280 2 560 5\.litres No 204 2 408 Autoclave horizontal No 5,500 1 5,500 Digesteur - 200 1 No 1,000 1 1,000 Répartiteur automatique No 900 1 900 Chambre froide No 1,000 1 1,000 Plaque chauffante électrique No 750 1 750 Becs plastique No 75 2 150 Lyophilisateur petite capacité No 1,'735 1 1,735 Four pasteur \. No 300 1 300 Déminéralisateur No 825 1 825 Congélateur No 1,275 1 1,275 Machine à imprimer No 250 1 250 Capsulatrices No 100 2 200 Compresseur - aspirateur No 65 1 65 Broyeur petite capacité No 150 2 300 Pompe No 250 1 250 Agitateur pour tubes à essais No 50 2 100 Bain-marie No 175 1 175 Microscope No 650 1 650 PH mètre No 160 2 320 Balance de précision No 75 1 75 Balance Roberval No 12 1 12 Sous-total 26,930 Transport, assurance fret 8,070 TOTAL 'n'Pm nm'\. 35,000 Source: Laboratoire de vaccins de Farcha 1/ 100 Z en devises\. ANNEXE 8 Page 1 TCHAD PROJET ZONE SAHELIENNE REPARATIONS DE PUITS: KANEM Généralités 1\. La préfecture du Kanem dispose de plus de 400 puits cuvelés moder- nes, dont 65 % ont été construits il y a plus de dix ans mais n'ont jamais été entretenus\. Vers l'ouest, la sous-préfecture de Nokou est équipée de 156 puits modernes mais dans cette région, les pertes de bétail ont été très graves et les pâturages naturels se sont considérablement détériorés pendant la sécheresse de 1973; il faut laisser les pâturages se régénérer avant toute reprise des activités d'élevage de sorte qu'il sera impossible de commencer la réparation des puits avant quelques années encore\. Dans le centre, la sous-préfecture de Mao ne dispose que de 31 puits modernes, mais bien que les pertes de bétail y aient également été considérables, les pâturages naturels ont peu souffert; la réparation des puits pourrait donc commencer dans cette zone bien que cette opération ne soit pas indispensable dans l'immédiat étant donné que la nappe souterraine n'est en général qu'à 10 ou 20 m de profondeur, ou encore moins dans les dépressions peu profondes (ouadis), et qu'il est possible de forer facilement des puits à la main\. A l'est, la sous-préfecture de Moussoro est équipée de 214 puits modernes, et les pertes de bétail y ont été relativement faibles grâce au savoir-faire des pasteurs transhumants; par ailleurs, les pâturages naturels se sont peu détériorés\. Dans la grande dépression de Bahr El Ghazal et au sud de la ville de Moussoro, la nappe sou- terraine affleure à moins de 15 m, mais vers l'est, elle s'enfonce à 30 à 40 m de profondeur\. C'est dans cette zone qu'il convient de commencer en priorité la réparation des puits\. 2\. La base du SERARHY à Mao, construite et équipée avec l'aide du FAC, est entrée en service en 1976\. En 1976/77, elle doit se charger de neuf réparations importantes et de la construction de cinq puits à l'emplacement de puits existants impossibles à remettre en état; toutes ces opérations in- téressent la sous-préfecture de Moussoro\. Il n'y a plus de crédits pour la section des puits pastoraux après 1977\. Le responsable de la base est un Tchadien formé dans le cadre du projet de puisatiers du PNUD; il sera assisté pendant trois ans d'un puisatier expatrié financé par le PNUD\. La base fonc- tionne sans difficultés, mais l'expérience enseigne déjà qu'elle est insuffi- samment équipée étant donné les problèmes particuliers de transport qui se posent dans le pays sableux de l'est du Kanem\. Le sous-projet 3\. Le sous-projet consiste à financer les grosses réparations de 20 puits par an pendant deux ans\. Les travaux consisteront à nettoyer ANNEXE 8 Page 2 les crépines obstruées ou à les retirer et les remplacer, à réparer le revête- ment de ciment et à reconstruire la margelle et les abreuvoirs pour le bétail\. Les travaux ne seront entrepris qu'aux emplacements approuvés par la Direc- tion de l'élevage et des industries animales\. Il est prévu de fournir un camion de 10 à 12 tonnes à quatre roues motrices et une grue à moteur, qui seront utilisés exclusivement pour effectuer les grosses réparations dans l'est du Kanem\. C'est le SERARHY qui sera chargé de l'exécution du sous- projet, puisqu'il dispose actuellement d'un nombre suffisant de cadres qui pourront prendre en main le programme de réparations \. que les réparations de tous les véhicules et installations peuvent être effectuées aux ateliers du siège\. Coût du sous-projet 4\. Le coût total du sous-projet, net d'impôts et y compris les provisions pour dépassement des travaux, est de 57,1 millions de francs CFA (233\.000 dollars), ventilés comme suit (Tableau 1): Monnaie nationale Devises Total Devises --(milliers de francs CFA)-- Matériel 1\.700 15\.300 17\.000 90 Réparations des puits 18\.462 21\.672 40\.134 54 Total 20\.162 36\.972 57\.134 65 Justification 5\. Le sous-projet sera exécuté dans la région du Kanem où les pâtu- rages naturels n'ont pas été trop détériorés ni les pertes de bétail très graves pendant la sécheresse de 1973; la nappe souterraine y est généralement trop profonde pour que puissent être construits des puits traditionnels\. Les réparations permettront de rétablir le débit de 40 puits cuvelés totale- ment ou partiellement inutilisés, qui seront choisis parmi les 140 puits de la sous-préfecture de Moussoro construits il y a plus de dix ans\.' Grâce au sous-projet, les pâturages naturels pourront être rendus à leur vocation et, par conséquent, les troupeaux pourront être plus largement dispersés autour des puits actuellement en service\. Chaque puits permettra d'abreuver 1\.000 têtes de bétail par jour au maximum pendant la saison des pluies, ce qui représente des troupeaux appartenant à environ 25 familles\. Au départ, les bénéficiaires du sous-projet contribueront, comme habituellement, à son exécution en assurant le logement et la nourriture aux équipes de réparation et, par la suite, en acquittant une charge qui sera déterminée par les groupes pastoraux reconnus dans le cadre du projet d'élevage de l'IDA et\. du FED\. Le taux de rentabilité sera du même ordre que celui du sous-projet de puits pastoraux du Fonds de projets ruraux (Crédit 664-CD), soit 19 % en 20 ans\. 劉 ANNEXE 9 Page 1 TCHAD PROJET ZONE SAHELIENNE FONCTIONNEMENT DES STATIONS DE POMPAGE: CHARI BAGUIRMI Généralités Il 1\. Après la sécheresse de 1973, le gouvernement a obtenu des fonds de diverses origines pour rééquiper douze stations de pompage inutilisées, si- tuées dans le nord du Chari, Baguirmi\. Ces stations sont à une distance d'en- viron 150 km de N'Djamena, implantées le long des deux principales pistes de bétail partant de Massakary au nord-est et de Dourbali au sud-est\. Onze des douze stations ont été équipées d'une pompe électrique submersible, de deux groupes électrogènes diesel, d'une centrale et d'un réseau d'alimentation en eau complété par un réservoir de 300 m3; 1,équipement de la douzième station est en cours actuellement\. Ces investissements se chiffrent à environ 25 mil- lions de francs CFA (100\.000 dollars) par station\. A l'exception des deux stations qui fonctionnent toute l'année, et sont situées à proximité des prin- cipaux marchés du bétail de Massakary et Massaguet, les stations fonctionnent neuf mais de l'année, de la mi-octobre à la mi-juillet\. Pour 11\.000 heures de pompage en 1975/76, leur débit moyen s'établit à 31 m3 d'eau par heure (voir leurs caractéristiques dans le Tableau 1)\. Les coûts de fonctionne- ment ont été financés en 1975/76 et en 1976/77 par le Fonds de secours con- tre la sécheresse (445-CD) dans le cadre duquel aucune disposition n'était prise en vue d'assurer le financement ultérieur des coùts de fonctionnement; par ailleurs, la situation politique n'a pas encouragé la prise en charge des coûts de fonctionnement par les bénéficiaires d'une activité qui est, en fait, l'une des les plus visibles des pouvoirs publics dans le nord du Chari Baguirmi\. Le sous-projet 2\. Le sous-projet consiste à financer le personnel technique, les pièces détachées et le combustible, ainsi que le personnel d'entr\.etien et leur transport, pour que le fonctionnement de douze stations de pompage soit assuré pendant deux ans\. Au cours de la deuxième année du projet, les décais- sements ne se feraient qu'à raison de 50 %0 de ces coûts, le solde étant fi- nancé par les bénéficiaires\. Telle est l'orientation que les pouvoirs pu- blics souhaitent donner au sous-projet, mais il faudra du temps avant qu'ils puissent récupérer l'intégralité des coùts sans voir surgir de difficultés\. C'est au SERARHY que sera confiée l'exécution du sous-projet, puisque cet organisme dispose de cadres capables de prendre en main la gestion du pro- jet, et d'un atelier où peuvent être effectués les principaux travaux de réparation\. ANNEXE 9 Page 2 Coût du sous-projet 3\. Le coût total du sous-projet, net d'impâts mais y compris les pro- visions pour dépassement des travaux, est de 55 millions de francs CFA (224\.000 dollars), ventilés comme suit (Tableau 2): Monnaie nationale Devises Total Devises - (Millions de francs CFA7 Personnel tchadien 14\.564 - 14\.564 - Stations de pompage 7\.038 23\.562 30\.600 77 Fonctionnement des véhicules 2\.786 3\.406 6\.192 55 Total partiel 24\.388 26\.968 51\.356 53 Dépassement des travaux 994 2\.686 3\.680 73 Total 25\.382 29\.654 55\.036 54 Les bénéficiaires financeront 25 % des coûts du sous-projet\. Justification 4\. Il importe certes que les stations continuent à fonctionner, mais il faudra que les autorités attendent quelque temps avant de pouvoir transférer aux bénéficiaires la prise en charge des coûts de fonctionnement sans voir surgir de difficultés\. Exception faite des deux stations équipant les marchés de Massakory et Massaguet, les stations sont actuellement utilisées en moyenne quatre heures par jour environ pendant toute la saison sèche, et tirent quel- que 120\.000 litres d'eau par jour et par station, ce qui suffit à abreuver 3\.500 têtes de bétail par jour\. Le pompage maximal en cours de saison fluctue d'environ cinq heures par jour aux stations dont le rendement est de 40 m3 par heure, à dix heures par jour à celles dont le rendement est de 20 m3 par heure; dans chaque cas, le pompage maximal permet d'abreuver environ 6\.000 têtes de bétail, soit six fois plus qu'à l'aide d'un puits cuvelé à ciel ouvert\. La fermeture des douze stations de pompage créerait une demande pour les puits cuvelés à ciel ouvert équivalant à 72 puits de ce type fonctionnant à plein régime, mais en pratique il en faudrait un plus grand nombre étant donné que le bétail devrait se répartir entre les divers points d'eau en service\. Le sous-projet aura une incidence favorable sur l'environ- nement, mais il rendra les pistes de bétail beaucoup moins pratiques et fera ainsi croître les coûts de commercialisation et les pertes pondé- rales du bétail\. Le coeur du problème tient à la demande effective encore inconnue pour les stations de pompage, dont le coût de fonctionnement moyen est de 2,3 francs CFA par tête et par jour\. Le sous-projet permettra au gouvernement de récupérer peu à peu et sans difficultés la totalité des coûts et de déterminer la demande effective\. 'lui1AD PROJET ZONE SAHELIENNE FONCTIONNEMENT DES STATIONS DE POMPAGE Charactéristiques des puits Puits cuvelés Profondeur Décharge Niveau statique Saison 1975/76 Totale connue de l'eau Nombre d'heures Quantité Décharge Combustible Huile travaillées pompée actuelle utilisé utiliàé (ni) (m3/hour) (mi) (mi) (m3/hour) --(litres)-- Route de stock Nord-est Am Tchokoro 46 20 23 760 15,258 20 4,940 200 Sounout el Kanem 1/ 46 38 19 Dapkaraye 58 40 33 1,384 55,654 40 8,996 350 Coz Dibeck 68 36 29 950 37,492 39 6,175 240 Karme 1/ 67 n\.a\. 35 Abou Zarazir 73 35 34 930 34,052 37 6,045 240 Route de stock Sud-est Abou Cueru 74 30 55 874 24,804 28 5,680 220 Bodo 136 30 53 980 28,470 29 6,370 250 Bokoyo 158 30 29 780 28,152 36 5,070 200 Loukdi 213 30 16 632 16,384 26 4,108 160 Marchés principaux 2/ Massakory 55 38 19 990 42,110 43 6,138 250 Massagutt n\.a\. n\.a\. n\.a\. 2,524 50,426 20 16,406 631 Total 10804 332,802 31 69,928 2,741 Sources: SERARIIY\. 1/ Pas complètement équipé pour la saison 1975/76\. 2/ Ouverts toute 'année\. ANNEXE 9 Tableau 2 nOJi ma anfa\.hJamma FNCTIONNME\.IT DES STATIONS DE FOMPAGE: CHARI SAGUIRMI Coitz des Sous Projets Rubrique Unité\. Coût Quantité Coût Z de uMitaire annuel devises Personnel local ('000 FCFA) ('000 ?CFA) :quipes de forage 1/ No\. 360 12 4\.320 - Equipes de mécancieis 2/ No\. 420 1 420 - Eq\.uipes de plombiers 3/ No\. 396 1 396 - Equipes d'électriciens 4/ No\. 252 1 252 - Equipes chargés de l'approvisionnement No\. 340 2 680 - Indémiités sur le terrain (20%) S 1\.214- Sous total 7\.282 - Stations de pomage Pièces de rechange 6/ No\. 450 12 5\.400 90 Combustible diesel 7/ 00 1\. 82 90 7\.380 70 Huile 7/ 00c 1\. 500 3\.6 1\.800 70 Réparations réticulées 8/ No\. 60 12 720 70 Sous total Q5\.300Q7 Fonctionnement des véhicules Approvisionnement en combustible Diesel 9/ No\. 990 1 990 55 Camion de réparations 10/ No\. 1\.350 1 1\.350 55 Supervision _1/ No\. 756 1 756 55 Sous total • 3\.096 55 Imprévus d'ordre matériel 12/ 1\.840 73 Total des coüts pour le fonctionnement des 27\.518 13/ 54 stations de pompage Sources: SERARY, estimations de la mission\. 1/ L puisatier (à 30\.000 FCFA/mois x 9 mis) et 1 aide (à 10\.000 FCYA/mois x 9 mois)\. 2/ 1 mécanicien (à 25\.000 FCFA/mois x 12 mois) et 1 aide (i 10\.000 FCFA x 12 mois)\. 3/ 1 plombier (à 23\.000 FCFA/mois x 12 mois) et 1 aide(à 10\.000 FCFA/mois x 12 mois\. 4/ 1 êlectricien(à 21\.000 FCFA/mois x 12 mois)\. 5/ 1 chauffeur (à 25\.000 FCFA/mois x 12 mois) et des manoeuvres pour charger (40\.000 FCFA/an)\. 6/ 10%/an pour les ensembles de générateurs diesel et pompes submersibles\. 7/ A partir du Tableau 1, pour 14\.000 heures/an c\.a\.d\. 10 à 1\.000 heures/an et Massakory et Massaguet à 4\.000 heures/an\. 8/ Réparations auxtuyeaux, valves, robinets et abreuvoirs\. 9/ 22 voyages, 4 t/voyage, 300 km voyage aller retour, 150 FCFA/km\. 10/ 30 voyages (2/mois pendant la saison et 1/scation de pompage hors saison), 300 km aller retour, 150 FCFA/km\. 11/ 36 voyages (3/mois) dans un véhicule à 4 roues motrices, 300 km aller retour, 70 FCFA/km\. 2/ 10% sur les stations de pompage et fonctionnement des véhicules\. 1/ Le coût pompé par m\.3 est: 27\.5 millions de FCFA/14\.000 heures à 30 a3/heure, ou 65 FCFA/m\.3; à 35 1/animal/jour, le coût de fonctionnement est environ 2\.3 FCFA/animal/jour\. ANNEXE 10 Page 1 TCHAD PROJET ZONE SAHELIENNE SURVEILLANCE HYDROGEOLOGIQUE DE LA NAPPE PHREATIQUE Généralités 1\. C'est au cours de la période 1963-1968 qu'a commencé l'observation systématique des niveaux de la nappe phréatique dans l'ouest et le sud du pays; aucune nouvelle observation n'a été faite jusqu'à la fin de 1974\. Deux études ont été entreprises en 1975: la première, intitulée "Niveaux de la nappe phréatique à proximité du lac Tchad", a été exécutée par l'ORSTOM, et a fait valoir les effets divers de la sécheresse de 1973 dans le Kanem et le nord du Chari Baguirmi; dans ces deux régions, le niveau de la nappe phréatique avait retrouvé en 1975 celui qui avait été relevé dix ans plus tôt, mais dans deux autres régions, il avait baissé de plusieurs mètres\. L'étude n'a pu trouver d'explication satisfaisante à ce phénomène et a recommandé l'aména- gement de stations de pompage d'observation le long de certains axes; le coÔt total du programme dépassait les 100 millions de francs CFA\. La deuxième étude, intitulée "Inventaire des ressources en eau souterraine et des points d'eau" a été entreprise par le FAC dans le sud du Tchad\. Elle compare les niveaux de la nappe phréatique en 1975 avec ceux qui ont été relevés dix ans plus tôt et fait un bilan quantitatif et qualitatif partiel de la situation des points d'eau améliorés\. En bref, ces études ont fait va- loir qu'il existait un problème d'alimentation des formations aquifères superficielles dans le Kanem et le nord du Chari Baguirmi et, plus généra- lement, ont mis en relief les difficultés pratiques que pose l'insuffisance considérable des renseignements sur le nombre et l'état des points d'eau améliorés\. Le sous-projet 2\. Le sous-projet consistera à financer deux équipes mobiles char- gées d'effectuer l'inventaire des nappes phréatiques, et leur matériel\. L'une des équipes couvrira le Kanem et le nord du Chari Baguirmi, relevant le niveau de la nappe phréatique au début et à la fin de la saison des pluies pour évaluer les fluctuations en cours d'année; elle comparera ces données avec celles qui ont été recueillies au milieu des années 1960, et notera l'état des points d'eau améliorés\. L'autre équipe couvrira le sud, de N'Djamena jusqu'à l'extrémité de la zone cotonnière\. Le sous-projet sera exécuté par le Bureau de l'eau du Ministère du tourisme, de l'artisanat et des ressources naturelles, dont l'hydrogéologiste en chef, financé par le FAC, supervisera les travaux sur 1\. terrain et sera chargé de classifier et d'ana- lyser toutes les données recueillies ultérieurement\. Les travaux sur le ter- rain seront confiés au personnel technique du Bureau de l'eau\. ANNEXE 10 Page 2 Coùts du sous-projet 3\. Le coût total du sous-projet, net d'impôts et y compris les pro- visions pour dépassement des travaux, est de 12,6 millions de francs CFA (51\.000 dollars), ventilés comme suit (Tableau 1): Monnaie % nationale Devises Total Devises -(Milliers de francs CFA- Matériel 458 4\.118 4\.576 90 Personnel tchadien 2\.420 - 2\.420 - Fonctionnement des véhicules et des bureaux 2\.193 2\.907 5\.100 57 Total partiel 5\.071 7\.025 12\.096 58 Dépassement des travaux 219 291 510 57 Total 5\.290 7\.316 12\.606 58 Seules sont incluses dans le coût du sous-projet, les indemnités de poste de l'hydrogéologiste en chef (financé par le FAC) et des deux techniciens (financés par le gouvernement)\. Justification 4\. L'observation régulière des niveaux de la nappe phréatique à Kanem et le nord du Chari Baguirmi pendant deux ans, dans le cadre du sous-projet, permettra de recueillir un important nombre de renseignements nouveaux, grâce auxquels il sera possible de résoudre le problème de l'alimenta- tion des formations aquifères superficielles et d'aborder la vaste question de l'utilisation de l'eau\. Dans cette région, où doivent se dérouler de nombreuses activités du projet d'élevage de l'IDA et du FED, et dans le sud où est exécuté l'élément du Fonds de projets ruraux (664-CD) ayant trait à l'alimentation en eau des villages, l'inventaire des points d'eau consti- tuera une base solide pour la planification des réparations de puits et le choix des emplacements des nouveaux puits\. ANNX 1\.0 TCHAD\. Tableau 1 PROJET ZONE SAHELIEN SURVEILLANCE UTDRGEOLOGIOUE DE LA MAPP PMEAITFTt- CoÛt du Sous Projet Rubrique unité aire Quantité C de ('000 FCFA) ('000 ?CFA) Matériel\. Véhicule 4 roues motrices No\. 2\.400 1 2\.400 90 Camionnette 3/4 tonnes No\. 1\.560 1 1\.569 90 Sonde électrique No\. 125 2 250 90 Jauges d'observation 1/ Soe 216 90 table de dessinateur No\. 150 1 150 90 Total 70 (par au) Personnel Staff Equipes mobiles 2/ No\. 420 2 840 Dessinateur 3/ ~ No\. 150 1 150 Allocations sur le terrain ,fSoe 220 Sous-total 1\.210 Fonctionnement des véhicules et des bureaux Fournitures pour dessin I/ Soome 150 90 Véhicule 4 roues motrices '000 km 70 20 1\.400 55 Camionnette 3/4 tonnes '000 km 50 20 1\.000 55 Sous total 2\.550 57, Imprévus d'ordre matériel 6/ \. 255 57\. '"otal des coûts annuels Sources: Bureau de l'eau, est Lmations de la mission\. 1/ 2 compteurs de resistiviti, 2 compteurs PH , 2 altimetres\. 2/ Un chauffeur à 25\.000 FCFA/aid et un aide à 10\.000 FCFA/mois, les deux pour dix mois\. 3/ 25\.000 FCFA/mois pour 6 mois/an\. / stimi pour 5 mois/an sur lu terrain; I hdrog6ologue à 12\.000 FCFA/=ois, 2 techniciens, et 2 chauffeurs à 3\.000 CFA/mais chacun\. 5/ Cartes,papier d'imprimerie, etc\. / 10% sur les véhicules et fonctionnement du bureau\. ANNÈXE 11 Page 1 TCHAD PROJET ZONE SAHELIENNE MISE EN DEFENS DES MASSIFS FORESTIERS Généralités 1\. A la suite de la forte sécheresse qui a sévi dans le pays en 1973, le rythme de destruction des peuplements naturels autour de N'Djamena s'est accéléré\. L'augmentation de la population de la capitale (due en partie à l'exode rural) a entratné un accroissement de la demande de bois de chauf- fage et de service et, vn conséquence, de l'abattage\. L'épuisement des pâturages a poussé les éleveurs à couper de jeunes branches pour nourrir leur bétail\. Ces facteurs, associés aux fréquents incendies de forêt, ont contribué à aggraver le déboisement autour de N'Djamena\. L'objectif du pré- sent sous-projet est d'arrêter et de renverser cette tendance en protégeant les peuplements naturels et en coordonnant l'exploitation des forêts existantes par les usagers, éleveurs, agriculteurs et ménages\. Le sous-projet permettra d'étendre un projet pilote de mise en défens du massif forestier actuellement en cours d'exécution et financé par le PNUD (projet Bougui), qui a permis d'aménager des pare-feu, des pistes d'accès et d'obtenir l'adhésion des habitants à un plan de mise en défensj des forêts\. Le sous-projet 2\. Le sous-projet prévoit une enquête sur les peuplements naturels et leur classification selon leur utilisation potentielle par rotation (charbon de bois, bois de service, pâturages, agriculture) sur une superficie de 3\.500 ha situés à 80 km au sud de N'Djamena\. Ensuite, le sous-projet permettra de fi- nancer la construction de pare-feu et l'ouverture de voies d'accès qui permet- tront aux négociants en charbon de bois et en bois de pénétrer dans certaines régions\. On commencera à exploiter les forêts par rotation, sur la base d'une coupe de 300 ha par an\. Le sous-projet sera géré par la Direction des eaux et forêts et exécuté par son Service de mise en défens des massifs forestiers qui a été organisé dans le cadre du projet pilote du PNUD\. Coût du sous-projet 3\. Le coût du sous-projet, net d'impôts, est de 41,9 millions de francs CFA (171\.000 dollars), ventilés comme suit (Tableau 1): ANNEXE 11 Page 2 Monnaie Pourcentage nationale Devises Total devises ------------(milliers de FCFA)------------ Véhicules et matériel 485 4\.365 4\.850 90 Travaux de génie civil 7\.700 3\.300 11\.000 30 Mise en défens des massifs forestiers 24\.718 1\.300 26\.018 5 Total 32\.903 8\.965 41\.868 21 La rémunération des techniciens supplémentaires (1 technicien cadre, 2 techni- ciens, 6 techniciens stagiairLs) sera financée par l'Etat (5,5 millions de francs CFA par an)\. Justification 4\. La mise en défens élémentaire d'un massif forestier, méthode selon laquelle les communautés participent à la protection et à l'exploitation sys- tématique de leurs forêts, est certainement la moins coûteuse et probablement la plus efficace pour arrêter et même pour renverser le processus de déboise- ment\. Cette idée simple n'est cependant mise en application que depuis peu\. Le succès du projet pilote du PNUD, qui a permis de résoudre les conflits d'intérêt entre les différents utilisateurs des forêts, donne à penser que le développement des forêts est en bonne voie\. ANNEXE 1l Tableau 1 PROJET ZONE SABELINNE XISE EN DEFENS DES MASSIFS ?»'RSTIERS Conts des sous prolets Coût Année de Projet 1 Année de Prolet 2 Coût % de Rubrique Unité unitaire Quantit Coût Quantité Colt Total Devises (en milars (en milliers Cen milliers de de FCFA) de FCFA) FCFA) atériel et véhicules Véhicule 4 roues matrices No\. 2\.400 1 2\.400 - - 2\.400 90 Matériel de bureau soe 200 - - 200 90 Matdriel topographique /1 some 2\.000 - - 2\.000 90 Matériel pour garage some 250 - - 250 90 Sous total Ç8 0 Travaux de ginie civil agasin en ciment No\. 3\.000 1 3\.000 - - 3\.000 50 Hangar en ciment \. No\. 3\.000\. 1 3\.000 - - 3\.000 50 Habitations traditionnelles No\. 500 8 4\.000 - - 4\.00,0 - Imprévus d'ordre matériel /2 1,000 - - 1\.000 30 Sous total U\. off - - -17M Total des investissements 15\.850 15\.850 A9 Administration des forêts Personnel local Ingénieurs forestiers homme-nnée 900 1 900 1 900 1\.800 - Personnel technique supérieur homme-ane 800 2 1\.600 2 1\.600 3\.200 - Personnel technique subalterne ho -nnée 500 6 3,0Ofl 6 3\.000 6\.000 - Nain-d'oeuvre houma-mis 6 700/3 4,200 700L 4\.200 8\.400 - Gardiens forestiers à cheval itoue-mois 10 12074 1\.200 120-4 1\.200 2\.400 - Pare-feu et défrichement des pistes homme-mois 5 240£5 1\.200 80/5 400 1\.600 - Sous total 12\.100 11\.-300 23\.400 - Fonctionnement des véhicules 'lhicu\.e 4 roues motrices '000 k:m 70 17 1\.190 17 1\.190 2\.380 55 Sous total des coûts de fonctionnement •3!0- 0\. 23\.'780 -5 Imprévus d'ordre matériel /6 119 119 238 51 Sous total des coÛta de 1'administration des forêts 13\.409 12\.609 26\.018 Total des coûts 29\.259 12\.609 41\.368 21 /l Voir Annexe 2, tableau 4 (c)\. /2 10% sur les travaux de génie civil\. /T 100 hommes pendant 7 mois\. /4 Les gardias possèdent leurs propres chevaux; 10 gardiens pendant 12 mois\. /3 80 pare-feu pendant 3 mois (APl) et 20 pare-feu pendant 4 mois (AP2)\. /6 10Z du coût de fonctionnement des véhicules\. ANNEXE 12 Page 1 TCHAD PROJET ZONE SAHELIENNE CREATION DE PEPINIERES FORESTIERES Généralités 1\. En 1975, une Semaine nationale de l'arbre a été organisée afin de sensibiliser l'opinion publique à l'importance de la foret et d'encourager la population à planter volontairement de jeunes arbres\. La réaction à cette campagne à N'Djamena et plus au sud a été bien meilleure que ne l'avait anti- cipé la Direction des eaux et forets; l'Etat veut maintenant créer des pépi- nières forestières dans quatre villes de la zone sahélienne: Mao, Massakory, Ati et Abeche - car il pense qu'une Semaine de l'arbre connaîtra le même succès dans ces villes dans la mesure où de jeunes plants y seraient disponibles\. La Direction des eaux et forêts est dotée d'un personnel technique en poste à Ati et à Abeche où se trouvent d'anciennes pépinières forestières désaffectées; elle ne dispose pas de personnel à Mao et à Massakory, où elle n'a jamais exploité de pépinières\. 2\. Depuis 1955, la Direction des eaux et forets a entrepris des travaux d'observation sur diverses variétés à Abeche (moyenne annuelle des précipita- ,tions: 465 mm par an; coefficient de variation: 28 %)\. Pour la plupart des essences, le taux de survie des plants après dix ans a été inférieur à 20 %; seuls l'eucalyptus microtheca, le dalbergia sisoo et l'azadiractha indica ont enregistré des taux supérieurs à 80 % et une bonne croissance; cette dernière essence, dans la mesure où elle n'a pas besoin d'un sol aussi riche, est celle qui convient le mieux\. Le sous-projet 3\. Le sous-projet permettra de financer la création et la mise en exploitation à Mao et à Massakory de pépinières forestières de 2 ha chacune et le réaménagement des anciennes pépinières d'Ati et d'Abeche\. Elles pro- duiront de jeunes plants d'épineux mieux adaptés aux conditions locales, tels que l'azadirachtha indica et dans une moindre mesure, l'eucalyptus microtheca et le dalbergia sisoo\. On n'effectuera plus d'études d'observation sur les différentes essences\. Le sous-projet sera dirigé par la Direction des eaux et forêts, qui sera également chargée de la distribution des jeunes plants aux planteurs volontaires\. Coùt du sous-projet 4\. Le coût total du sous-projet (net d'impOts), mais y compris les prdvisions pour dépassement des quantités, est de 50,1 millions de francs CFA (204\.000 dollars), ventilés comme suit (Tableau 1): ANNEXE 12 Page 2 Monnaie Pourcentage nationale Devises Total devises -----------(milliers de FCFA) ------------- Véhicules 1\.888 16\.992 18\.880 90 Travaux de génie civil 4\.029 4\.029 8\.058 50 Exploitation des pépinières 20\.142 3\.010 23\.152 13 Total 26\.059 24\.031 50\.090 48 La rémunération des techniciens supplémentaires (4,8 millions de francs CFA par an) sera financée par l'Etat\. Justification 5\. Le sous-projet donnera au gouvernement les moyens d'élargir la Semaine de l'arbre et de l'accompagner d'un programme relatif à l'exploitation des forets, aux abords de quatre villes de la zone sahélienne, pour faire prendre conscience à la population des problèmes écologiques\. C'est, pour l'Etat, le principal objectif du sous-projet\. Les jeunes plants produits dans les pépinières seront transplantés dans les villages et dans les cours d'écoles ainsi que dans les petites villes\. La production de bois de chauffage qui résultera du projet sera un avantage marginal\. ANNEME 12 Tableau 1 TCHAD PROJET ZONE SARELIENNE CREATION DE PEPINIERES FORESTIERES Coût des sous projets /L Rubrique Unité Coût Quantité Coût Z de unitaire Total D*«A (a milliers de (en mt1liers MArArl\. et véhicules (API) FCTA) de FCFA) Véhicule 4 roues motrices /2 No\. 2\.400 2 4\.800 90 Camionnette de 3/4 t /2 No\. 1\.560 2 3\.120 90 Ates No\. 10 16 160 - Petits outils /3 Série 200 4 800 90 Pots en polyethylène /4 '000 10 1\.000 10\.000 90 Sous total 18\.880 90 Travaux de ginie civil (API) Réhabilitation des puits /5 No\. 900 3 3\.050 54 Nouveaux puits /6 No\. 2\.800 1 2\.800 54 Hangar No\. 200 4 800 - Préparation du sol /7 Equipe 37,5 2 75 - ClSture /8 No\. 300 2 600 80 Imprévus d'otdre matériel /9 733 50 Sous total 8\.058 50 Total 26\.938 78 Fonctionnement des pépinières forestières (APi et AP2) (Par an) Personnel local Ingénieurs forestiers /10 homme-année 900 2 1\.800 - Personnel technique subaterne /Il homme-année 500 2 1\.000 - Comptable homme-année 600 1 600 - Aides forestiers hamme-annie 350 4 1\.400 - Manoeuvres homme-année 90 44 3\. 960 - Sous total 8\.760 Fonctionnement des vihicules Véhicule 4 roues motrices /12 '000 km 70 20 1\.400 55 Camionnette de 3/4 tonne /12 '000 km 50 20 1\.000 55 Ancs No\. 10 16 160 - Sous total 2\.560 52 Imprévus d'ordre matériel /13 256 52 Coût annuel total 11\.576 13 SOURCES : Direction des eaux et forêts; estimations de la mission\. /l Pour 4 pépinières de 2 ha chacune; les coûts par pépinière sont similaires sauf si indiqués autrement\. /2 Vhicules 4 roues motrices à Mao et Massakory; camionnettes à Ati et à Abeche\. /3 Par ensemble: 10 pelles à 2\.500 FCFA; 10 pioches à 2\.600 FCFA; 10 arrosoirs à 4\.450 FCFA; 5 brouettes à 13\.500 FCFA; petits outils à 37\.000 FCFA\. /4 250\.000 pots par pépinière\. /5 900\.000 FCFA à Ati et à Abeche; 1\.250\.000 FCFA à Mao\. /6 Massakory : 25-30 m\. /7 150 homme-jours par pépinière à 250 FCFA par jour; Mao et Massakory seulement\. /8 A ao et à Massakory : 12 rouleaux de 50 m à 23\.000 FCFA, plus les poteaux à 24\.000 FCFA\. /9 10% sur les travaux de génie civil\. /10 Mao et Massakory, où les nouvelles pépinières seront établies\. /rl Ati et Abeche; le personnel subalterne travaillera sous la personnel technique existant\. /12 10\.000 km/an/véhicule\. /13 10% sur \.le fonctionnement des véhicules\. ANNE-XE 13 Page 1 TCHAD PROJET ZONE SAHELIENNE PREPARATION DU PROJET DE PROSPECTION DES RONERAIES Généralités 1\. L'étude institulée "Préparation d'un projet de production de bois pour l'approvisionnement de N'Djamena" financée par le FAC et entreprise par le CTFT a permis de conclure que le développement de nouveaux massifs de bois de service plutôt que de bois de chauffage ou de charbon de boàs, aura très prochainement un caractère hautement prioritaire\. Trois projets éventuels relatifs au bois de service ont été étudiés: l'aménagement d'une plantation d'eucalyptus dans la zone cotonnière, la construction d'une scierie près de Sarh et l'amélioration de la gestion des massifs de palmiers Borassus situés entre le Logone et le Chari, près de Ngam\. Malgré le rang secondaire accordé au bois de chauffage et au charbon de bois dans l'ordre des priorités, le rapport a signalé que le déboisement autour de N'Djamena avait atteint un niveau tel qu'une mise en défense de la forêt naturelle était souhaitable et l'application d'un programme similaire à celui décrit à l'Annexe 11 ci-dessus a été recommandée\. De surcroit, le développement de nouveaux massifs de bois de service permettra de réduire la pression de la demande sur la foret naturelle située autour de N'Djamena et de faciliter l'amélioration de sa mise en défens\. L'étude a permis de conclure qu'une plantation d'eucalyptus serait peu rentable, mais qu'il conviendrait d'effectuer des études détaillées sur la scierie et les massifs de palmiers Borassus\. Le sous-projet 2\. Le sous-projet permettra de financer une étude relative aux massifs de palmiers Borassus près de Ngam, afin de déterminer comment on pourait amé- liorer leur mise en défens naturelle et quelle sera l'utilité de ces travaux\. Bien que le cadre de référence détaillé n'ait pas encore été élaboré, l'étude nécessitera le recrutement d'un consultant qui effectuera deux séjours d'envi- ron deux mois au Tchad (soit quatre hommes-mois)\. Lors de son premier séjour, il précisera quelles sont les données que le personnel de la Direction des eaux et forêts doit rassembler sur le terrain\. Vers la fin de son second séjour, il déterminera, le cas échéant, ce qui pourrait être fait entre la fin de son rapport et le moment où l'on décidera d'exécuter un projet de mise en défens du palmier Borassus\. Coût du sous-projet 3\. Le coût total du sous-projet (net d'impôts) est de 12,3 millions de francs CFA (50\.000 dollars), ventilés comme suit (Tableau 1): ANNEXE 13 Page 2 Monnaie Pourcentage nationale Devises Total devises -------------(milliers de FCFA)------------- Véhicules et matériel 342 2\.508 2\.850 88 Personnel et fonctionnement des véhicules 3\.389 6\.024 9\.413 64 Total 3\.731 8\.532 12\.263 70 Les traitements du personnel de la Direction des eaux et forêts en poste à Bongor (un technicien, six techniciens stagiaires et un chauffeur) resteront à la charge de l'Etat, bien que leurs indemnités de poste soient incluses dans les coûts du sous-projet\. Justification 4\. La forêt naturelle autour de N'Djamena se dégrade en raison de l'abattage excessif de jeunes arbres pour la fabrication de perches de 8 à 10 cm de diamètre servant à la construction des maisons traditionnelles\. Les prix du bois de service continuent d'augmenter rapidement et l'on devrait maintenant envisager d'autres solutions pour se procurer du bois de construc- tion\. Actuellement, les massifs de palmiers Borassus situés près de Ngam sont peu exploités, même si la plupart ne sont qu'à 20 ou 30 km du Chari\. La seule étude de la région jamais effectuée s'inscrivait dans une enquête de recon- naissance, mais il est probable qu'elle se prête à une exploitation plus in- tensive et l'étude envisagée permettra de préparer un projet à cette fin\. TCHAD ANNEXE 13 PROJET ZONE SABELIENNE Tableau i PROSPECTION DES RONERAIES CoQts des Sous pcojets Unit6 Coût Quantité Coût Z de unitaire Total devises ('df\.p FCFA) ('000 FCFA) Véhicules et matériel Véhicule 4 roues motrices No\. 2,400 ~ \. 2,400 90 Matériel de campement 1/ Série 60 6 360 90 Outils et matériel de prospection 1/ Série 15 6 90 80 Sous total 2,850 88 Personnel et fonctionnement des véhicules Consultant 2/ Homme-mois 1,700 4 6,800 80 Indemnités sur le terain - Personnel technique 3/ Home-mois 11\.5 42 483 - Manoeuvres 4/ Home-mois 7\.5 144 1,080 - Véhicule 5/ Homme-mois 70 15 1,050 55 Sous total 9,413 64 Total des coûts du sous projet 6/ 12,263 70 Sources: Direction des eaux et forgts, estimations de la mission\. 1/ L'ensemble de matériel de campement d'outils et de matériel prospection pour chaque personnel technique subalterne (6)\. 2/ 7\.000 EU/home-mois tout compris\. 3/ Pendant 6 mois, pour le personnel technique subalterne et le chauffeur\. 4/ 6 manoeuvres par subalterne technique\. 5/ 4 mois avec le consultant; 6 mois pendant la prospection sur le terrain\. 6/ Les dépenses de fonctionnement des véhicules et de personnel seront prises en charge à 50% l'APl, 50% l'AP2\. ANNEXE 14 Page 1 I TCHAD PROJET ZONE SAHELIENNE CONSTRUCTION ET EQUIPEMENT D'UN GARAGE Généralités 1\. A la suite de la sécheresse de 1973, un Bureau des opérations de se- cours d'urgence a été créé afin de coordonner l'aide fournie par de nombreux organismes\. Ce bureau a été remplacé en 1975 par le Comité de lutte contre les calamités naturelles qui a hérité de l'actif de son prédécesseur ainsi que des promesses d'assistance qui n'avaient pas encore été exécutées\. Actuel- lement, il dispose d'un parc de 228 véhicules dont 138 camions, fabriqués par cinq constructeurs différents, 90 véhicules légers comprenant des véhicules à quatre roues motrices, des camionnettes d'une capacité de 3/4 tonne et de petites automobiles\. A priori, un garage à même d'effectuer tous les tra- vaux, à l'exception des principales réparations mécaniques et spécialisées, serait nécessaire vu l'importance de ce parc composé de véhicules relativement neufs\. Malheureusement, la Direction ne dispose pas d'installations de ce genre et tous les travaux, même l'entretien courant, sont exécutés par des garages privés, ce qui entraine des coûts élevés et de longues périodes d'immobilisation des véhicules\. Le sous-projet 2\. Le sous-projet permettra de financer la construction d'un garage de 1\.020 m2, divisé en 10 aires de travail et comprenant des installations de stockage de pièces détachées, des bureaux et des salles de classe\. Le plan initial pour lequel on avait procédé à une évaluation détaillée des coûts se montant à 38,6 millions de francs CFA (158\.000 dollars) est actuellement réexaminé et il est probable qu'un plan plus modeste - environ 770 m2 - sera adopté; le coût de construction serait alors de 30 millions de francs CFA (122\.00 dollars)\. 3\. Le sous-projet permettre également de financer le matériel de base requis pour le garage, y compris des machines à souder, des presses hydrau- liques, une grue, un compresseur et un atelier mobile\. Une liste détaillée de 45 éléments a été envoyée à des fournisseurs éventuels afin d'avoir une idée de l'ordre de grandeur du financement requis; la même procédure a été utilisée pour une liste de petit outillage comprenant 90 éléments\. Le sous- projet financera d'autre part l'achat d'un stock de pièces détachées de base destinées au parc de véhicules actuel et, là encore, une liste de 85 éléments a été envoyée à des fournisseurs potentiels\. ANNEXE 14 Page 2 4\. Le financement requis pour le matériel de base, le petit outillage et les pièces détachées sera de l'ordre de 80 millions de francs CFA (326\.000 dol- lars); en conséquence, le coût total, y compris la construction du garage, atteindra environ 110 millions de francs CFA (450\.000 dollars)\. La composante en devises, qui représentera 100 % des coûts du matériel, des outils et des pièces détachées et 33 % des coûts afférents aux travaux de construction, atteindra environ 90 millions de francs CFA (370\.000 dollars), soit 82 % du coût total\. La taille optimale du garage, les quantités de matériel et de petit outillage, le stock de pièces détachées n'ont pas encore été déterminés exactement et à l'heure actuelle une équipe multidisciplinaire en poste à N'Djamena s'efforce de résoudre ces questions\. Justification 5\. Il existe actuellement trois grands garages privés à N'Djamena; l'entrée n'y est pas libre et ceux qui auraient la possibilité d'obtenir un rendez-vous peuvent se le voir refuser pour de nombreuses raisons\. Les garages existants ont en fait le monopole des services de réparation de véhicules et leurs coûts unitaires spnt très élevés\. A priori, il y a de bonnes raisons pour penser que le Comité de lutte contre les calamités natu- relles, avec ses 228 véhicules, pourrait réduire considérablement ses frais de réparation en exploitant son propre garage et ses propres ateliers de répara- tion\. Cependant, il n'est pas possible de faire une comparaison détaillée des coûts d'entretien et de réparation dans le garage envisagé et dans les garages privés existants\. En définitive, la préparation de ce sous-projet n'est pas encore terminée et sa justification, bien qu'apparente, n'est pas encore documentée\. Ces deux éléments sont des conditions préalables au décaissement relatif des fonds affectés à ce sous-projet\. ANNEXE 15 Page 1 TCHAD PROJET ZONE SAHELIENNE AMENAGEMENT DE L'INFRASTiUCTURE AERONAUTIQUE Généralités 1\. Jusqu'en 1971, l'Etat finançait l'entretien des pistes d'atter- rissage, confié à l'ASECNA\. Depuis lors, ces pistes ne sont plus entretenues, bien qu'en 1974 le trafic d'avions cargos de grande capacité ait été important en raison du pont aérien organisé pour le transport de produits alimentaires au titre des secours d'urgence\. Depuis quelques années, les financiers étran- gers ont rejeté de nombreuses demandes qui leur ont été adressées pour l'exé- cution de gros travaux de réfection sur les principales pistes\. Celles-ci ont donc continué à se détériorer et il est à présent urgent de procéder à certains travaux de réfection de petite envergure\. Le sous-projet 2\. Le sous-projet permettra de financer des travaux de réfection de petite envergure portant essentiellement sur le revêtement des pistes d'atterrissage d'Abeche, Am-Timan, Ati, Faya, Mao et Mongo, qui sont les chefs-lieux administratifs des préfectures\. L'organe d'exécution du sous-projet sera l'ASECNA; cette dernière se chargera d'effectuer les travaux à Faya, où elle dispose d'un personnel permanent et de matériel, mais dans le cas des autres pistes, ils seront exécutés par la Direction des travaux publics, sous sa supervision\. La Direction des travaux publics dispose de personnel et de matériel dans chacune des aut--q villes, et la réfection des pistes fera partie de son programme normal de 1 ix effectués en régie\. Coùt du sous-proj\.% 3\. Le coùt total du sous-projet (net d'impôts), y compris les pro- visions pour dépassement des quantités, est de 20,3 millions de francs CFA (83\.000 dollars), ventilés comme suit (Tableau 1); ANNÈXE 15 Page 2 Monnaie Pourcentage nationale Devises Total devises -----------(milliers de FCFA)------------- Main-d'oeuvre 12\.006 - 12\.006 - Matériaux 5\.504 320 5\.824 5 Fonctionnement des véhicules 180 419 599 70 Total partiel 17\.690 739 18\.429 4 Provisions pour dépassement des quantités 1\.769 74 1\.843 4 Total 19\.459 813 _20\.272 4 Justification 4\. La population du Tchad est clairsemée et la densité moyenne dans la principale zone sahélienne est de 3 habitants au km2\. Les conditions de transport par voie terrestre sont difficiles et les distances sont grandes (distances à vol d'oiseau de N'Djamena à Abeche: 640 km; à Am Timan: 600 km; à Ati: 360 km; à Mao: 240 km; à Faya: 800 km et à Mongo: 400 km), aussi l'avion est-il le mode de transport habituel pour les cadres de l'Etat comme pour les marchandises de première nécessité\. Après la grande sécheresse de 1973, toutes ces pistes ont été utilisées pour organiser le pont aérien et des avions cargos de grande capacité ont amené des secours alimentaires d'urgence jusqu'à Abeche, Faya et Mongo, tandis que les DC3 assuraient la liaison avec Am Timan, Ati et Mao\. Laissées sans entretien pendant six ans, les pistes d'Abeche, de Faya et de Mongo ne peuvent plus recevoir d'avions cargos lourds et, de surcrolt, à Ati et Mao, les transports par DC3 sont maintenant limités pendant la saison des pluies\. Une fois encore, en 1977, certaines de ces pistes vont devoir être utilisées pour la distribution de secours alimentaires d'urgence\. Le sous-projet permettra de remettre en état les six pistes d'atterrissage et de leur rendre leur capacité d'accueil antérieure pour cinq à six ans; le déplacement des cadres publics chargés de la direction et de la supervision des projets de développement s'en trouveront facilités et l'organisation de ponts aériens pour les secours alimentaires d'urgence et autres approvisionnements pourra être assurée\. ANN'EXE 15 TCHAD Tableau 1 PRoJET ZONE SAELIENNM AMENAGEMENTS DE L'INFRASTRUCTURE AERONAUTIQUE Coûts du Sous Proiet Pistas d'atterisage et objet Unité Coût Quantité Coût Z da TInItzeriti nei Devise (1000 PCFA) ('000 FCFA) Abeche 1/: Cut back 200 1\. 40 10 400 80 Gravier m3 13 8 104 - Main d'oeuvre Homme-mois 6 10 60 - Sous total 564 57 Am Timan 2/: Briques 3/ '000 3 561 1\.683 Mise en place et\. compactage m3 2 1\.700 3\.400 - Sous total 5\.083 - - Ati 4/: Bricaillon m3 0,65 1\.075 699 - Gravier m3 0,5 715 358 - Mise en place et compactage m3 1,2 1\.790 2\.148 - Sous total 3\.205 - Faya 5/: Essence - '000 1\. 110 3 330 70 Combustible diesel '000 1\. 90 2,1 189 70 Huile et divers Somme 30 70 Pièces de rechange Somma 50 70 Main d'oeuvre Homme-mois 6 8 48 - Sous total 647 65\. Mao 6/: Briques '00 3 360 1\.080 - Mise en place et compactage M 2,5 1\.100 2\.750 Sous total 3\.830 Mongo 7/: Gravier 23 0,5 3\.000 1\.500 Mise en place et compactage m3 1,2 3\.000 3\.600 Sous total 5\.100 Imprévus d'ordre matériel 8/ 1\.843 4 Total des coûts du sous-projet 9/ 20\.272 4 -Sources: ASECNA, Direction des travaux publics, estimations de la mission\. / Longueurde la piste d'atterrissage: 1\.800 m; largeur 35 m; surface actuelle: goudronnée; travaux à effectuer: boucher les trous\. 2/ Longueur: 1\.500 m; largeur: 20 m; surface actuelle: bricaillons; travaux à effectuer: revêtir 5 cm sur 34\.000 m2 (y compris le parking et la piste d'accès), c\.a\.d\. 1\.700 m' 3/ 330 briques/m3\. 4/ Longueur: 1\.300 m; largeur: 20 m; surface actuelle: bricaillon3 et gravier; travaux à effectuer: revêtir la surface de 5 cm sur 35\.000 m2 c\.a\.d\. 1\.790 m S/ Longueur: 2\.300 m; largeur: 40 m; surface actuelle: pierres; travaux à effectuer: nivellement et compactage; les fournitures sont données oendant 30 imurs ritqrables, 15 par an\. 6/ Longueur: 1\.100 m; largeur: 20 m; surface actuelle: briques crues; Jravaux à effectuer: revêtir 5 cm sur 22\.000 m2 (sans parking et pistes d'accès) c\.a\.d\. 1\.100 m 7/ Longueur: 1\.800 m; largeur: 30 m; ,surface actuelle: tout venant de carrière; travaux à effectuer: revêtir 5 cm sur 60\.000 m-, c\.a\.d\. 3\.000 m3\. 8/ 10 Z sur tous les articles\. 9/ Mise en oeuvre: 50 Z l'AP1, 50 Z l'AP2\. Tableaua I TCHIAD IOWn De mirms ns IA zaum SAMnE\.« CDUr DU PROJTT ET S0t< F12<ANCEMT &tnumb de Couts du Proiet et Ftnacmnt Source: Cout du oratet Sinanci gar Aamexe\.Tablem Anne Ane'a 2 Total tocal sÃ¥ndi\.- ACDI IDA etatreg/ Cauvernem~nt ------(?CrA milliers) -------- (EuS - FCA miler)- AcciliraCtoa du di'velooemnt de l'agricultiLre Am"agement deo bas-fouda 2\.1 48\.132 45\.401 03\.3 382 • 46\.767 46\.766 Maains vtllageos 3\.4 26\.440 33\.558 59\.99S 245 • 29\.999 29\.999 Caetr* de developpemmnt rural: Lac Fittri 4\.1 32\.888 21\.410 54\.368 222 - 27\.184 27\.184 Operacion omatchage 5\.1 22\.57 3\.W 26\.041 106 1 13\.041 Sou-tocal 13003 1\.942 233\. 9 -\. 1\. 1i\._9990 Stantien et amzlioration deo services d'hvuiÃ¥te vit4rinaire Camagne de vaccinacton et mudic nta 6\.3 223\.605 - 225\.605 921 - 112\.802 112\.803 Equipement paur la product:on de vaccing 7\.2 - 3 17 500 Sous-total Z Z 1\.064 100 130 303 Intretien det o>ints d'eau oastoraux ]Lparations de puits: KCnem 8\.1 35 803 18\.803 54\.606 223 - 27\.303 27\.303 Foactioanemnt de stattano de pafage: Chari Baguirmi 9\.2 25\.678 25\.678 51\.356 210 12\.839 19\.259 19\.258 Surveillanca hydrogÃ¥ologique de la appe phriatique 10\.1 \.336 3,7% 12\.0% \.1 \.:- \.044 Sous-total 6917 424 11 5 !j\.M \.52 g S\.l£ EaCmnuton del activtt's forestieret Iise en dÃ¥fense d'u masif forestier 11\.1 28\.140 12\.490 40\.630 166 11\.000 14\.815 14\.815 Creatton de p\.ptniires foretm rue 12\.1 33\.525 11\.320 48\.845 199 9\.600 19\.622 19\.623 Proespction des raneraie 13\.1 7\.357 4 12\.226 \.132 \.131 Saus-total \.2 1QL\.73g 46 4\.39 40\.569 Amlioraeton de* 5rmetation» de service de I'Etac Contructio et equtp\.eent d'un garat 14\. 110\.000 - 110\.000 449 55\.000 55\.000 An'nae~ent de ltafrantructure aeronauctque 13\.1 9\.21 214 \.429 \.j -1, 9\.214 Su&-cocal \.9\. U 2 U4 L 6 U 64\.214 verifieation et elabaractian deg raoorts\. LM 1-§j 3_3062 0 ~et gnatin du <øut de bane 64J-3 t\.1279 6A\.20 7\. 7&8\.Ã¥ -a M 0\. d'morde atariel \.167 7\.909 34\.076 1 9 920 16\.578 16\.578 de prix il:983 35\.006 36\.989 3 4515 i 11-237 sous-to0al 3 121\. 065 494 5 435 jLjj, j 1 Total des\.32td 970 000 3\.959 \. 46 _\.56 L 53 311 Tablen 2 OOrs 00 980m1 1r s0s FIsNCDer Coaita d ue ist ,at\. xee de \.de'eases Trav\.m de Vihicules de ?erson~el Fogctiom\. Total Total Deviaes Qeste Ctvl matértel 3eent 1 '000 ~ ~ \. \.CA)--------------- (1000 EM$) Aueáesenpt des bau-fonda: Cot de bae\. • 27\.535 16\.569 49\.429 93\.333 382 494 TmrÃ¥ue d'ordre vatirtel • • 1\.660 1\.660 7 12 Rausse attende des prix \. 2\.4\. 179 10\.887 4440 Coat total 3 t73 139 57\.26 10680 43 %amatins vtlla~eois: Cadt de bage 30\.240 450 29\.306 59\.998 245 22 t~~vue d'ordre mgiriael Hausee atzendue des prtz 4\.4, -24 -9 6 3 Cot total 34\.§jj\. 4 \.2\.25 67,~ j7 u Ceatre de dÃ¥veLojemsn CoÃ¥t de base 12\.700 21\.480 9\.064 11\.124 54\.364 222 57 rmre: La Ytrri lrevur d'ordre matertal 1\.270 2\.143 906 1\.112 5\.436 22 57 Hauøe'attedue des prix \.ljjj, \.2L 1\.j47 LU8 \.667 -U\.LL coÃ¥t total 1\.5,9 t2 \.L 1 13\.34, 66,471 Ogeraeton Mareichame: Co;it de bega 6\.600 4\.275 3\.360 11\.36 26\.081 106 39 Ifrivus d'ordre matÃ¥rtel 300 227 • 384 911 4 52 lug e attendue des prix _in 175 101 - A 10 u jg Caut total \.23 j, 1\.7 29\.41 Cøeme de veccinatiom et CoQt de base - 68\.330 7\.020 150\.255 225\.603 921 66 medtca :Icrévun d'ordre =cériel • - 15\.025 15\.025 61 59 Kau~ee attendua das prix \.jJ, 5_7 2\.39, 1\.0" 7 66 Cout total 734 L177L67 258\.777 J67n gj§A EÃ¥au \.aentpourlaa- CGrit de bas 35\.000 • • 35\.000 143 100 duction de vaccini: t'revivu d'ordre mcrteol asase attendue des pris \.623\. Cot total 1725\. z RÃ¥garation de puits: Coat de baea 14\.600 17\.000 12\.332 10\.674 54\.606 223 64 IffrÃ¥vus d'ordre entrial 1\.460 • • 1\.06& 2\.528 10 78\. Hausse attendue dee prix \.L=j 1\.275 \. 5a\. \.27j, CoQC total 1IL2, J\.25 13\.50 1302 §3,a" j\. oucionnnt des statioun Co4t de base • 14\.564 36\.792 51\.356 210 53 de 20~61e: Ifrdvu« d'ordre macirIel • • • 3\.680 3\.680 15 73 Rumse actendue des prix j 1\.675 4\.6 \.29 \.U 4 Cout total 6•\. •\. 6j1\.36 Uj rj, retllaco h~dtroo}o- Coüt de base • 4\.576 2\.420 5\.100 12\.096 49 38 ,LuC de la naOse ohrea- Iprivae d'ordre =eiartel •510 310 2 57 t : gause attondoe des prix 4\.j _7\. j, 1\.266 3 Coat total 4\.-919 LMjg 6=2 3\.7, R mi28 en defense d'un Co6t de hage 10\.000 4\.830 23\.400 2\.380 40\.630 166 21 asif forestter: Ifprvue d'ordre accriel 1\.000 • • 238 1\.238 5 35 Wusse atteadme des prix ,, \.jAj \.2 - Coit total 11\.90 Lg 16a0 Lj 4419 I89 eretei de oetëces Coeit da base 7\.325 18\.890 17\.520 5\.120 48\.845 199 48 foresieres: Ipr~vus d'ordre metirial 733 512 1\.245 5 51 Rausse attad~e des pri 7\.1,4X _i3648 4~ _a u CaGt total 1[7 fl6\.j§IK5439 4 Uoe"aeton deg ranerates: Couic de base • 2\.850 8\. 1\.050 12\.263 50 70 lørivus d'ordre mce'Criel - Hausse attdu das prix 24 -Ul 1\.297 Couti total 3\.064 93\.36Q Construccion et eautoemet Catie de base 30\.000 80\.000 110\.000 449 52 d'ur zaraag: twrivue d'ordre maciriel - Rase Atteadne das priz 2\.g00\.1 C0Ã¥t total 32700- 0 M1\.0 4_ me s Vts de linra- C<fùt de bags 18\.429 - • 18\.429 75 4 sttruture a6ronauttaue: ~ipr~vus d'ørdre uetiel 1\.843, 1\.843 8 4 Haue attene des prii \.J -\.818 Cot total 23\.090 Terification et Ilabora- tien desrasr: Coat total l Total du ZsVOIO: Codt de base 129\.894 295\.726 114\.62 318\.793 848\.933 3\.465 susreuwe d'ordre uaterlel 6\.606 2\.375 906 24\.189 34\.076 139 53 Hausse attendua den pri \.fl\.,J12 \. j31 15\.547 490 56 989 3/ \. jjj j7 Cosit total 4 311\.490 129\.085 L 1/ / \.a bauøø attendue des prix s'e,ève i 84\.429 alli~a dø FCrA; 2\.561 millione de FCFA ne 4ei ajouce sa total deo cocs du projet aft d'ihteatr -n chtffre road- Cette ag~natto a et e aifcee oro-raca alm dtfferuntes depene*g\. - - C4 1\.1 Il& I\. jul -14\.~\. gul \. - \.ia 1 \. \. in P lja,] - 04- M a \.~ \. um g\. g S I i ! I -a e 5 'i à\. e U e - TtAD ANNEXE I7 lableau 1 FONDS DE PROJETS DANS LA ZONE SAHEI\.ENNE AVANTACES DU PROJET sous Prolets et Critèref de Silection i du Atténuation Restoration Production Nombre Nombre coût de des de , des de Participation additionnel Sous-projets base effets de la base bénificon fem\.lles par les da personnel total la sécheres@* productive rapidement b'nificiairen bnéficiairea tadre ((o\.) (No\.) Accélération du developpeament de l'agriculture Aminagement des bas-fonds Il oui out oui 4\.000 Il out aucun magasins villageois 7 out non out 11\.200 2/ out aucun Cantre de d(veloppemant rural: Lac Fitri out non non 500 Mon aucun Opiration maraichage 3 out non out 800 3/ oui aucun Maintien et ailloraction des services d'hygiène yitérinaire Campagne de vaccination et médicaments 27 non out out 250,000 i/ non aucun Equipement pour la production de vaccins 4 non out out aucun non aucun Entretien des pointe d'eau pastoraux Réparation de puits: Kanem 7 oui out ou \. 500 5/ non aucun Fonctionnement de neetione de pompage: Ch&ari-saguirui 6 out non out 1\.800 k/ out aucun Surveillance hydrogéologique de la nappe phriatiqum 1 out out non aucun non i hydrogéologue 7/ Expansion des activités foregtidre\. Niae en difense d'un massif forestier 5 non out non 100 j/ out 1 ing'nieur 1/ Création de pépinières forestierea 6 non oui out aucun J}/ oui 2 ingânieurs 2/ Prospection des roneraies non oui non aucun non i consultant J/ Amélioration des prestations de service de 'Etat Construction et iquipement d'un garage 13 out non out acoun noU 1 chef 12/ Aménaement de l'infrastructure aironautique 2 out non oui aucun non aucun J/ 2\.000 ha, 0\.5 ha/famille\. / 28 magasins villageois, 400 familles dans un rayon de 10-15 km de chaque magasin\. 1/ 80 ha\. 0\.1 ha/famille\. f/ Population rurale dans la sons sahlienne: 1\.2 million, 4 personnes/famille\. tous sont propriÉtaires de bétail; population rurale dans la sone transitionnelle: 0\.6 imillion, 5 persunies par famille dont 507 aont des propriêtaires de bétail; un mInteam de 70% sont vaccins dans les 2 sonce\. 5/ 20 puits\. 25 familles/puit\. 6/ 12 stations de pomp\.ages\. l'equivalent de 150 famillss/atation de pompage\. 71 Met entrain J'atre r&ctute et le tianancement est assura par FAC\. i/ benificiaires diracts seulement\. 9/ A etise recrute et finance par le Guuverneimnt\. / Pas de benssficisiret directs, mais au mulis 4\.000 familles participerunt au plantage\. / Sera financi par FZS\. 12/ Le tinancement fait le point de@ discussions entre le Gouvernement et les agences d'aide exterieures\. ft ANNEXE 18 Page 1 TCHAD PROJET ZONE SAHELIENNE RAPPORTS A ETABLIR 1\. Les 13 projets étant très différents de nature, il convient d'établir cinq modèles différents, de rapports ainsi que des tableaux et un système de contrôle de gestion\. Certains organes chargés de l'exécution préparent déja des rapports dont la teneur donne toute satisfaction pour faire le point des sous-projets et il n'y a donc pas lieu de les remplacer\. En fait, tous les rapports devraient normalement s'inscrire dans les activités de gestion et ne pau faire double emploi avec d'autres documents\. Formes principales de rapports 2\. Les cinq formes principales de rapports et tableaux sont les suivantes: Modèle 1 Etat des décaissements - Il est destiné à faire le point des décaissements effectifs pour chaque sous-projet par rapport aux évaluations établies au moment de l'esti- mation, et ajustés pour tenir compte des hausses de prix et permettre l'établissement de prévisions réviGées\. Il comprendra également une récapitulation de l'ensemble du projet\. Modèle 2 Etat du programme - Il doit permettre de planifier les activités et d'en établir le calendrier sans trop s'atta- cher aux résultats chiffrés\. Il s'inspirera du calendrier d'exécution indiqué dans l'Annexe 16\. Les notes portées au verso préciseront les conventions à retenir pour remplir le formulaire de sorte que l'usage soit le même pour tous les sous-projets\. Modèle 3 Résultats - Ce tableau recueillera des chiffres plus détaillés sur les résultats du sous-projet, le temps étant indiqué horizontalement et les colonnes verticales faisant apparaître les chiffres au moment de l'évaluation, les plus récentes prévisions et les chiffres actuels\. Modèle 4 Etat des principaux travaux - Il complète l'état du pro- gramme et doit permettre de superviser l'exécution en temps voulu des principales activités\. Ce modèle sera simple et comprendra des colonnes indiquant les activités, les responsables chargés de prendre des mesures au vu des ANNEXE 18 Page 2 données sur l'achèvement du projet et permettra de faire le point de la situation\. Ce formulaire servira en outre à identifier périodiquement (au moins une fois par mois) les problèmes et constituera un document d'étude indi- quant les actions menées à bien et supprimées du formu- laire et les nouvelles actions engagées\. Modèle 5 Rapport sur le fonctionnement des véhicules - Il servira à aider les responsables à contrôler les dépenses importantes à ce titre\. Il sera rempli chaque mois pour chaque véhi- cule et comprendra les rubriques suivantes: Description des véhicules et des accessoires Date d'achat et prix Kilométrage Analyse de l'utilisation par type de route et par ob- jectif du déplacement Consommation d'essence et d'huile Etat des pneus Division régulière - Main-d'oeuvre et coÔt Pannes, réparations - Main-d'oeuvre et coût La principale source de renseignements sera le -arnet de route du véhicule, semblable à celui qui est déjà utilisé par l'Office de mise en valeur de Sategui- Deressia (Projet d'irrigation Sategui Deressia - Crédit 489-CD)\. CLCCN 3\. Le CLCCN recevra des copies des rapports relatifs aux sous-projets aussi souvent qu'il le demandera, mais tous les six mois au minimum, et fera prépare, les résumés éventuellement nécessaires pour le rapport sur l'ensemble du projet; le Bureau de gestion des aides étrangères récapitulera l'état global des décaissements\. Les missions semestrielles de supervision de l'IDA utiliseront les plus récents rapports établis par le CLCCN\. Sous-projets 4\. - On trouvera dans les paragraphes ci-après les rapports spéciaux à établir pour chaque sous-projet\. ANNEXE 18 Page 3 Aménagement des bas-fonds 5\. En ce qui concerne les améliorations matérielles à chaque emplace- ment, il conviendra d'indiquer les diverses phases des travaux prévus - prise de contact, levé topographique, etc\. - ainsi que les terres qui ont été amé- liorées\. Il conviendra de distinguer les bas-fonds déjà cultivés des bas- fonds nouvellement mis en valeur\. Les activités de supervision devront permettre l'établissement d'un rapport sur les rendements du sorgho dans chaque zone\. 6\. Le tableau relatif à la situation des magasins devra indiquer l'avancement des travaux dans chaque magasin et les résultats obtenus par rapport au plan ainsi que le coût effectif de chaque magasin\. 7\. La fourniture des facteurs de production (stocks d'engrais et de semences) sera suivie à mesure du renouvellement des stocks\. Il conviendra de préparer des rapports réguliers faisant apparaltre la valeur monétaire des stocks détenus vérifiée par sondage, les sommes dues et les soldes du fonds renouvelable\. 8\. Le principal résultat des essais (essais de semence, échantillonnage des sols et essais d'engrais) devrait être consigné dans des rapports spéciaux s'y rapportant\. Magasins villageois 9\. Le tableau portant sur ce programme indiquera les travaux prévus pour chaque magasin et leur état d'avancement ainsi que le coût effectif de chaque magasin\. Il conviendra d'évaluer qualitativement la participation des béné- ficiaires à la construction des magasins et les motifs expliquant leur colla- boration\. Il ne sera pas nécessaire de donner un tableau détaillé des résultats\. Centre de développement agricole du Fitri l0\. Les rapports à établir seront indiqués lorsque la préparation du sous-projet lui-même sera terminée\. Opération maraichage 11\. Le programme porte sur la construction de magasins et sur d'autres activités éventuellement nécessaires, notamment une surveillance spéciale destinée à mesurer les rendements de divers légumes cultivés dans les parcelles "concentrées", les zones existantes et les terrains situés en dehors de la zone du projet\. Il conviendra dans toute la mesure du possible d'évaluer la production et les prix pour chaque type de légume, du moins ceux qu'écoulent les services de commercialisation de la Direction\. ANNEXE 18 Page 4 12\. L'approvisionnement en insecticides et engrais se fera à l'aide d'une régie d'avance et il conviendra d'indiquer régulièrement la valeur des stocks et de la comparir au montant de la régie d'avance\. Campagne de vaccination et médicaments 13\. Le rapport annuel actuellement établi par la Direction de l'élevage et des industries animales suffira\. Toutefois, il conviendra de commencer dès que possible à utiliser les carnets de route des véhicules et de remplir lés tableaux sur le fonctionnement des véhicules, les dépenses de fonctionnement constituant une importante proportion des dépenses totales de la Direction\. Matériel de production de vaccins 14\. Aucun rapport spécial n'est nécessaire\. Réparation des puits - Kanem 15 Il conviendra de préparer un tableau portant sur ce programme, et d'y joindre éventuellement les rapports d'achèv\.ment ordinaires préparés sur les puits par le SERARHY\. Exploitation des stations de pompage Chari Baguirmi 16\. Les dossiers ou rapports ordinaires du SERARHY seront utilisés pour établir un rapport semblable à celui qui est indiqué dans l'Annexe 9, Tableau 1, qui pourra être complété pour recueillir des détails sur les réparations effec- tuées à chaque emplacement et sur leur coût\. Surveillance de la nappe phréatique 17\. Il conviendra d'utiliser les modèles 1, 2, 4 et 5\. Il est prévu d'établir dans le cadre du projet lui même d'autres rapports\. • Mise en défens d'un massif forestier 18 Il conviendra d'établir un rapport spécial sur les jeunes plants mis en terre, selon les essences, dans chaque pépinière, et de tenir un état de leur croissance et de la distribution des plants\. Prospection des rôneraies pour la construction des puits 19\. Il conviendra d'utiliser les modèles 1, 2, 4 et 5\. D'autres tableaux et rapports seront établis dans le cadre du sous-projet lui même\. ANNEXE 18 q Page 5 Canstructicn et équipement d'un garage 20\. A définir une fois que la préparation du sous-projet sera menée à bien\. Aménagement de l'infrastructure aéronautique 21\. Il conviendra d'utiliser les modèles 1, 2, 4 et 5\. Vérification 22\. Le modèle 2 doit indiquer les dates d'achèvement prévues pour l'éta- blissement des comptes définitifs de chaque sous-projet pris en particulier, les dates auxquelles le contr8leur financier de l'Etat doit effectuer ses vérifications et les dates auquelles les réviseurs-comptables extérieurs devront effectuer les leurs\. BIRD 13119 MAO f0 11 Aä - a n,i ABECHt eo - - All A A r i&-f-- 1~ -,roIf- 1,,, ~\ 1e '1 - 'r O 011 WIDJAMENA 1' 1\. 1N 4AGO \. ÄFF OAT bahPELNE A L AT I L l B Y E T C H A D PROJET ZONE SAHELIENNE Y ZONE DU PROJET AFRIQUE NIGER ~ E ATH A lu A - A q r - - EMPIRE CENTRAFRICAIN

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P007570

Document of The World Banik FOR OFFICIAL USE ONLY Report No\. 9495 PROJECT COMPLETION REPORT MEXICO POLLUTION CONTROL PROJECT (LOAN 2154-ME) APRIL 12, 1991 Infrastructure and Energy Operations Division Country Department II Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  POLLUTION CONTROL PROJECT (Loan 2154-ME) PROJECT COMPLETION REPORT CUR\.RENCY EQUIVALENT Currency Unit - Mexican Pesos (Values as of June 30th) 1982 US$1 PM 47\.75 1983 119\.96 1984 176\.41 1985 227\.49 1986 571\.40 1987 1,348\.50 Average Exchance Rate for the Project 1982 - 1987 US$1 - PM 413\.75 Exchange Rate for the Project 1982 - 1987 US$1 - PM 721\.1 ABBREVIATIONS FONEI Fondo de Equipamento Industrial GMCA Greater Mexico City Metropolitan Area NAFIN Nacional Financiera, S\.N\.C\. PEMEX Petroleos Mexicanos PED Project Execution Document SARE Secretaria de Agricultura y Recursos Hidraulicos SSA Secretaria de Salubridud y Asistencia SEDUE Secretaria de Desarrollo Urbano y Ecologia  THE WOILO BANK FrOR OFFICIAL USE ONLY Washingion\. DC\. 20433 U\.S A\. Oke i Ovgcgv\.CgqwwaI 0*Wat lVatwi"o April 12\. 1991 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Mexico Pollution Control Project (Loan 2154-ME) Attached, for information\. is a copy of a report entitled "Project Completion Report on Mexico - Pollution Control Project (Loan 2143-ME)" prepared by the Latin America and the Caribbean Regional Office with Part II of the report contributed by the Borrower\. No audit of this project has been made by the Operations Evaluation Department at this time\. Attachment This document has a restricted distribution and may be used by rmcipients only in the perfomnance of their oficial duties\. Its contents may not otherwise be disclosed without World Bank authoriation\.  FOR OFFICIAL USE ONLY MEXICO PROJECT COMPLETION REPORT POLLUTION CONTROL PROJECT (LOAN 2154-ME Table of Contents Page No\. PREFACE \. i EVALUATION SUMKARY \. ii PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE \. \. 1 1\.1 Project Identity \. 1 1\.2 Project Background \. 1 1\.3 Project Objectives and Description \. 3 1\.4 Project Preparation and Design \. 5 1\.5 Project Implementation \. 6 1\.6 Results and Lessons Learned for Future Environmental Projects \. 10 PART II: PROJECT REVIEW FROM THE BORROW4ERS' PERSPECTIVE \. iS 2\.1 Introduction \. 13 2\.2 Project Execution \. \. \. 15 2\.3 Performance of the Borrower \. \. \. 16 2\.4 Performance of the Bank \. 17 2\.5 Lessons Learned \. 17 2\.6 Economic-Financial Analysis \. \. 19 PART III: STATISTICAL DATA \. 21 Annex 1, Table 1 - Distribution of Loans by Size of Loan \. 24 Annex 1, Table 2 - Industrial Sector, Distribution of Projects \. 25 Annex 1, Table 3 - Location of Pollution Control Projects \. 26 Annex 1, Table 4 - Financial Impact of Projects on Participants \. 27 Annex 1, Table 5 - Cost of Total Project as a Percentage of Operating Profits \. \. \. 28 Annex 2, Table 1 - Estimated and Actual Project Financing Plan \. 29 Annex 3, Table 1-6 - Summary of Project Outcome \. 30 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  PROJECT COMPLETION REPORT MEXICO POLLUTION CONTROL PROJECT (Loan 2154-ME) PREFACE This report presents a review of the Pollution Control Project (Loan 2154-ME), the Bank's first loan fully dedicated to supporting environmental improvement in Mexico\. The US$60 million loan was approved in July 1982, became effective in February 1983, was substantially amended in February 1984 and was closed in December 1988\. Total disbursements were US$8\.7 million, and US$51\.3 million was cancelled\. The Project Completion Report (PCR) was prepared by the Latin American and Caribbean Country Department II, with the assistance of the Environment Department and in coordination with NAFIN, who prepared Part II of this document\. The PCR is based upon a review of the Staff Appraisal and President's Reports, loan documents, supervision reports, project files and on recent Bank reports on environmental sector policy and strategy in Mexico\. A PCR mission visited Mexico in November 1989 and conducted field investigations of a sample of industries that had subprojects financed under each subloan\. It also conducted a detailed review of the project files for each one of the subprojects financed, including records of the administrative actions taken by environmental authorities, of the pollution control problems that were addressed under the loan, and of the motivations for the investments made, the environmental standards applied for each investment program and the financial costs involved\.  - li - MEXICO POLLUTION CONTROIL PROJECT (Loan 2154-ME) PROJECT COMPLETION REPORT Evaluation Summary Introduction 1\. The Bank's first experience with pollution control financing in Mexico was under the Fourth Industrial Equipment Fund (FONEI) Project (Loan 1712-ME) approved in June 1979\. This loan included an experimental pollution control component of US$10 million of which about US$7 million was disbursed mainly for water treatment equipment\. 2\. The Government and the Bank initiated the preparation of a comprehensive pollution control project in 1980 and by July 1982 the Bank approved a US$60 million loan aimed at helping Mexico finance its efforts to deal with mounting pollution problems\. The Project was expected to mobilize US$131 million in local resources to help finance 80 to 100 industrial pollution control subprojects, 300 to 400 private emission t'-lng facilities and the purchase of air pollution monitoring equipment\. Proiect Obiectives 3\. The principal obiective3 of the proiect were to support: (1) The development anid introduction of more effective pollution control strategies; (2) More effective enforcement procedures; (3) The formulation and implementation of long term strategies to address priority environmental problems on a national scale; (4) Industrial investments aimed at reducing atmospheric and water pollution and dealing with solid wa3te pollution; and (5) Financial system funding of pollution control investments\. To achieve these objectives the loan would help finance: (i) investment in industrial pollution control equipment and civil works in the greater Mexico City Metropolitan Area (GMCA) and improved solid waste management; (ii) equipment to measure and control automotive exhaust emissions; and (iii) the establishment of a network of automatic air quality monitoring stations in the GMCA\.  - iii - Implemantation Experience 4\. A Maior Change in Institutional Arrangements\. During appraisal, responsibility for the technical and enforcement aspects of pollution control was vested with the line ministries (paras 1\.26 to 1\.28)\. A detailed Project Execution Document (PED) entitled, Program For Polluticn Control in Mexico was furnished by the Government on July 3, 1982 and the loan was signed on July 16, 1982\. Shortly after loan signature, to demonstrate progress in the face of mounting criticism about environmental deterioration, the new Government created a new ministry, the Secretariate of Urban Development and Ecology (SEDUE), that absorbed the coordinating and policy functions of the Secretariate of Health and Welfare (SAM), and the personnel and environmental tesponsibilities from the line secretariates\. Thus, the institutional framework that was carefully prepared for the project had ceased to exist in early 1983 before the Loan became effective\. 5\. The New Policy for Environmental Control and Enforcement\. The original strategy for environmental control called for the adoption of acceptable standards and their vigorous enforcement\. This policy was abandoned when SEDUE was created and a new model for the management of environmental issues was put in place\. The new policy called for the resolution cf industrial environmental problems by the negotiation of 'social contracts" between industrial associations and SEDUE which would define the environmental standards for the industry and set the time frame for their adoption (para 1\.5\.5)\. The negotiation process did not affectively begin until 1985 and in the absence of environmental standards and firm pressures for legal compliance, the project came to a standstill\. The standards that emerged from the negotiations process (mainly during 1987-1990) were never discussed with or reviewed by the Bank, and the limited number of standards to which the PCR mission had access appeared to fall short of Bank recommended standards\. 6\. The Pollution Control Project was prepared and appraised during a period of mounting economic difficulties\. Mexico's industrial sector and Bank assisted projects in various sub-sectors had been affected, by a change of Government and government priorities, rising inflation, successive devaluations and the financial crisis that erupted in 1982\. The peso cost in real terms of imported machinery and equipment underwent major increases of some 450 percent under successsive devaluations in an 18 month period starting in January 1982, and enterprises cash flow deteriorated because of higher inventory and debt service costs\. Investment in industry contracted in 1982 as GDP declined sharply (i\.e\. 5Z in real terms) from its high in 1981\. The Government's economic stabilization program of December 1982 sharply trimmed budgets and parastatal investment capability\. 7\. In the absence of the political priorities t, pursue pollution control aggressively (in line with the PED) SEDUE was reorganized in 1983 and again in 1985, and its management, professional and inspection staffs were reduced and its capacity to plan, establish technical standards and enforce regulations, was annually eroded\. By the close of the Project in 1988, SEDUE had been reduced to about half the manpower that it had ir 1983 with only 10 GMCA inspectors to cover all inspection and enforcement acivity and only about 80 inspectors to cover the balance of the country\. In the end, despite agreements reached with the Bank the standards, regulations and enforcement  - iv - capacity required for the success of the Project were never established (para 1\.5\.5 - 1\.5\.7)\. 8\. Bank Response to ChanRinR Prolect Conditions and Policy Direction\. A Bank mis8ion reviewed the new institutional structure in early 1983 and optimistically reported that the institutional changes wero fortuitous\. It predicted an initial delay of several months for SEDUE to sort things out and prepare the required environmental standards and regulations that would become the basis for a firm 'command and controln form of regulations, which are recognized as the precondition for successful pollution control efforts and ultimate disbursement of Loan funds (para 1\.6\.5)\. The Bank made special efforts to get the project back on track by establishing a special project account, expanding the basis for loan disbursements and retaining an expert on air pollution control to undertake two major project supervision efforts designed to help SEDUE\. 9\. These efforts did not succeed\. By 1985, it had become clear that the Loan was in substantial difficulty primarily due to the inability of SEDUE to take the measures required\. v The project was rated as a problem project and the Bank agreed, in July 1985, to cancel US$35 million of the Loan\. In effect, policy toward the reduction of air and water pollution had been altered and priorities on environmental enforcement had changed, resulting from a political decision to switch from a 'command and control' basis of enforcement of objectively determined standards to an environmental program based upon negotiated agreements with industry (para 1\.5\.5)\. In fact, the administrative, technical, and professional basis for environmental planning and enforcement was not created in SEDUE during the implementation period of the Loan\. These major issues were gen-\.rally not fully reflected in Bank supervision reports or fully addressed with the Borrower by management\. Achievement of Objectives 10\. Investment\. Total investment in pollution control, originally estimated at US$190\.9 million, was only US$18\.2 million equivalent\. This amount helped to finance 20 subprojects, which was less than 10 percent of the number of investment cubprojects originally expected\. 11\. Environmental Impact\. The project did not have any measurable impact on Government policy, strategy or institutional development nor in the final analysis did it impact the environment of the GMCA, whose air and water pollution continued to worsen significantly over the life of the project\. The project also had no impact on seriously deteriarating conditions of the Middle Lerma River Basin and it did not advance any solid waste management programs\. 12\. Attainment of Project Objectives\. The project did not succeed in fostering the introduction of effective pollution control strategies or effective enforcement procedures in the GMAC, nor did it advance the implementation of comprehensive longer term national strategies or significant industrial pollution control investment related to air water or waste 1/ Note: From Borrowers' perspective main constraints to project performance were related to the unfavorable economic climate and the Bank's high fixed interest rate (Part II Paras 4\.01 and 4\.02)\.  - v - management\. The project did succeed in financing a well functioning automatic air pollution measurement system in the GMCA\. 13\. Institutional ImDact\. Except in the area of establishing systems for measuring air pollution, the Bank has had no measurable impact on strengthening SEDUE or improving its capability to administrate air, water and solid waste pollution control programs\.  MEXICO POLLUTION CONTROL PROJECT (Loan 2154-ME) PROJECT COMPLETION REPORT PART Is PROJECT REVIEW FROM THE BANK'S PERSPECTIVE 1\.1 Project Identity Project Names Pollution Control Project Loan No: Loan 2154-ME Loan Amount: US$60 million (equivalent) Project Cost at Appraisals US$190\.9 million (equivalent) Actual: US$18\.2 million (equivalent) RVP Unit: Latin America and Caribbean Country: MEXICO 1\.2 Project Background 1\.2\.1 The Environmental Problem\. By 1980, the Greater Mexico City Area (GMCA) has become the third most populous urban center in the world\. With an estimated population of nearly 15 million, the area was projected to reach a population of at least 25 million in the 19909\. / The GMCA accounted for almost twenty percent of the country's total population, and about thirty five percent of its industrial production and motor vehicles\. While rapid and essentially environmentally uncontrolled industrial, urban and vehicular growth had created high levels of air, water and land pollution in the GMCA, similar forces were at work and similar degraded environmental conditions prevailed in Mexico's other major urban centers such as Guadalajara, Monterrey and Coatzacoalcos - Minatitlan\. 1\.2\.2 Air Pollution\. According to the air quality measurements available in 1979/80, the daily concentration levels of the four major contaminants associated with air pollution in the GMCA substantially exceeded World Health Organization (WHO) standards\. The contamination level was 600 percent of the WHO standard for ozone, 230 percent for carbon monoxide, 130 percent for sulphur dioxide and 490 percent for total suspended solids\. Industrial activities and high sulphur content fuel oil combustion wa said to account for almost all of the particulates, and about two-thirds of nitrogen 2/ In fact, with the new 1990 census which indicated that the GMCA had a population of 16 million, the population projections have been reduced\.  2- oxides\. Motor vehicles accounted for most carbon monoxide and about seventy five percent of hydrocarbon emissions, with inzastry accounting for the balance\. Adverse air quality conditions albc prevailed in the other major industrial areas of the coantry\. The Government had initiated a program to control emissions from new motor vehicles, and these were to be strengthened and augmented by a program of mandatory annual inspections\. 1\.2\.3 The adverse effects of uncontrolled emission of pollutants into the air are intensified in the GMCA by its location in a high (over 2,200 meters), sheltered valley with high solar radiation, poor combustion conditions and poor ventilation\. The impact of air pollution upon the general health of the population is observable and measurable and threaten to become worse in the years to come unless vigorous corrective actions are taken\. Respiratory illness, especially among children, increased cardiovascular diseases, and adverse effects on the human nervous system are among the serj\.ous consequences of long term exposure\. On a daily level, irritation of throat, nose and eyes, and increased asthmatic problems all make for reduced health standards\. Because cf the danger to children, foreign embassies curtailed family living within the GMCA and wealthy families leave the GMCA during weekends and the winter months\. 1\.2\.4 Water Pollution\. Municipal wastes and industrial effluents were judged to be a major source of the Mexico's water pollution\. In addition much of the domestic sewage was discharged into streams without any treatment\. The water bodies connected to the GMCA, the Toluca-Lerma urban industrial area, Guadalajara and Monterrey metropolitan areas, the Cuernavaca valley and Coatzacoalcos-Minatitlan were given highest priorities for industrial pollution control\. The harmful effects of polluted waters, i\.e\. spread of water-borne diseases and adverse impacts on aquatic life in these areas, had a negative impact on about half of Mexico's population\. The Lerma River Basin was cited for a rigorous program of enforcement across different source categories based upon setting of individual standards for discharge\. 1\.2\.5 Solid Waste Disposal\. Rapid urbanization and industrial growth had led to vast increases in the amounts of solid waste generated\. Of these, the industrial component included large quantities of toxic and hazardous waste materials which were discarded as part of municipal refuse or in several hundred unauthorized wayside landfill sites\. Such wastes percolated into the groundwater or formed the basis for airborne, bacterial laden dust\. The net effect on numan health was known to be highly negative\. 1\.2\.6 The Legal and Institutional Platform for Urban Environment Control\. The first comprehensive legislation for environmental protection was embodied in the 1971 Federal Law for Prevention and Control of Environmenta) Pollution\. The Law covered all types and sources of environmental pollution (including air, water, land, solid wastes and noise pollution), provided the framewoLk for control measures, and vested enforcement authority in the concerned ministries\. In general, the legislation provided a basis to plan and implement an effective environmental protection program\. The Law became partially operational during 1972-73 when detailed regulations were issued for control of dust and smoke particulates into the air (1972) and for control of water pollution (1973)\. Major gaps were the lack of prescribed standards for gaseous emissions from stationary sources and specific discharge standards for industry\. The 1971 Law was superseded by a Federal Law for Environmental  -:3- Protection in February lS82\. The new law provided for some needed streamlining in the diviston of responsibilities among ministries and for higher non-compliance penalties to facilitate effective enforcement, but otherwise preserved the basic concepts and approach of the 1971 Law\. The regulations issued in 1971 and 1973 continued to remain in effect under the new Law\. Complementary legislation was provided under the Sanitary Code of Mexico, specifying the responsibiliti6s of individuals, industrial and other establishments and federal and local agencies in maintenance of health and sanitation conditions\. 1\.2\.7 Under the 1982 law, SSA was assigned the overall responsibility for cuordinating the efforts of various government agencies in implementing the environmental protection and control regulations for all environmentai media\. In addition, SSA had the direct responsibility for monitoring air and land pollution, and formulating and implementing protection and control measures for these media\. The direct responsibility for monitoring and implementing water pollution control lay mostly with SARH, whicli was expected to consult and closely coordinate with SSA on all issues involving public health, formulation of standards and sanctions against violation of the standards\. The Secretariat of Public Works assisted states and local agencies in public works execution, including the construction of local water supply and sewerage systems\. The above actions were to be closely coordinated with the respective state and local government authorities to take account of particular regional considerations and to obtain their assistance in implementation\. 1\.2\.8 The Regulations to the 1982 Law did not establish specific emission standards, and :equirements for control of liquid discharges awaited comprehensive studies of \.e carrying capacity of each major stream or water body to set final standards, which would be a major research program\. The responsibilities of the different \.ainistries remained largely unchar%ed, but clarifications were provided to assign the overall responsibility for environmental protection to SSA and to remove some of the earlier ambiguities and duplications in responsibilities, particularly with respect to water pollution control in which both SSA and SARH are involved\. The SSA was also to serve as the coordinating body that would ensure that all agencies implemented environmental programs\. Because SAA's role was essentially one of coordination, what was missing was an efficient, forceful, central Secretariat with the professional capability to perform the normative, monitoring, policy setting, coordinating and enforcement roles\. It was within this legal and organizational framework that the Loan was approved\. 1\.3 Project Obiectives and Description 1\.3\.1 Project Objectives and Scope\. Loan 2154-ME was envisaged as the first phase of a multi-phased, long range, pollution control program that would address the health and other consequences of the high levels of environmental pollution in several areas of Mexico\. The loan was an expression of the high priority that the Government placed upon dealing with mounting pollution control issues\.  - 4 - 1\.3\.2 The Principal Oblectives of the Project: (1) Help in the development and introductton of more effective pollution control strategies\. (2) Support the introduction of more effective enforcement procedures\. (3) Formulation and implementation of appropriate longer term strategies for the resolution of pollution problems on a national scale\. (4) Encouragement of industrial investment aimed at reducing atmospheric and water pollution, and initiation of steps to deal with solid waste pollution\. (5) Provision of resources to help industry finance pollution control investment\. 1\.3\.3 Major Project Activities\. To achieve the above stated pollution related objectives the project intended to: (i) address the most serious industrial and vehicular air pollution problems; (ii) reduce water pollution in high priority river basins; (iii) begin to deal with land fill pollution; (iv) improve monitoring and enforcement in these areas; (v) train technical staff; and (vi) advance studies and modeling work to determine long- term strategies for air pollution control\. Under the air pollution component, the project expected to finance industrial and vehicular control; programs and a monitoring system in the GMCA and other industrial centers based upon improved monitoring of new standards and enforcement by better trained and expanded staff\. To achieve the water pollution abatement related objectives, the project intended to focus on enforcement initiatives to reduce contaminant discharges into selected high priority water basins, in particular the Middle Lerma River basin where it intended to address simultaneously the problem of muniLipal and industrial water pollution\. The project would also focus on high priority industrial polluters\. The Loan was intended to support increased staff training, improvements in methodology, and studies of water basin characteristics\. It was also expected that the Loan would support studies to identify the industrial solid waste disposal problem and propose possible solutions\. Altogether this constituted a very comprehensive and ambitious program, all the more so because the successful outcome of the project depended upon the existence of a large amo-nt of technical and planning work that had to be rapidly completed\. 1\.3\.4 Project Financing Plan\. To help achieve the major objectives and implement specific functional project activities, a Bank loan of US$60 million was expected to finance 28Z of a total prog\.-am with a total project cost of US$190\.9 million (equivalent)\. US$171 million would fi\.ance industrial pollution investments (of which the Bank would finance 31\.4Z) by 80 to 100 major industrial polluters\. About US$13 million was to be lent to 300 to 400 private automobile garages for the purchase of automobile emission testing and diagnostic equipment, and about US$6 million was to be provided for technical assistance and the purchase of laboratory and measurement equipment\.  - 5 1\.4 Proiect Preparation and DesiE 1\.4\.1 Proiect Identification and Preparation\. In the autumn of 1978, the Bank conducted an exploratory mission to discuss with the Mexican Government the possibilities of the Bank financing a pollution control project\. In September 1980, a mission visited Mexico to gather information necessary for the preparation of a pollution control project\. A detailed technical report with respect to the air pollution control component was prepared in October, 1980\. In June 1981, an appraisal mission further defined the project and a post appraisal mission in December 1981 completed appraisal of the Pollution Control Project (Loan 2154-ME)\. The mission estimated that the regulatory basis for the project would be rapidly established\. The actions that the environmental authorities were expected to take in about 18 months included, inter alia; making appropriate detailed measurements of pollution levels and sources, preparing a strategy for the implementation of the project including the setting of appropriate, detailed standards for permissible levels of discharges of industrial pollutants into the air and water from alternative industrial sources, setting standards and a strategy for the management of solid waste disposal and establishing and training an expanded inspection and enforcement capabilities\. In hindsight it would seem obvious that these judgements would have been optimistic even in a highly developed country with ample technical, administrative and financial resources available\. However, they were not challenged during the preparation and appraisal cycle\. 1\.4\.2 In May 1982 the Bank's Board approved a US$60 milli3n Bank loan with the following componer4ts: (i) US$39\.3 million for air pollution control\. Of thi\. amount, US$35\.2 million was allocated to industrial pollution control and the balance for automobile testing equipment, a new air monitoring system, studies and training; (ii) US$18\.0 million for water pollution control facilities; (iii) US$1\.9 for studiej relating to industrial solid waste and (iv) US$0\.9 to cover the Bank's front end fee\. A major condition of effectiveness was that the Borrower submit a satisfactory PED which would detail Mexico's program for control of pollution\. The PED was furnished to the Bank in July 1982 and upon review was found to be satisfactory\. 1\.4\.3 Project Design\. Overall the air pollution control loan component was designed to address the most serious sources of industrial and vehicular pollution\. It included proposa's for improvements in pollution monitoring and enforcement, the training and expansion of technical staff, developing approaches to control new sources of pollution and the completion of several studies and modeling tasks to aid in determining opti\.lm long term strategies\. It was expected that financial support under the loan would be provided to 80-100 major industrial sources of air pollution in the Mexico City and other major cities in their efforts to control pollution and that the auto inspection/maintenance program in the Mexico City area would be substantially strengthened\. In December 1982, a new Government assumed power and shortly thereafter changed dramatically the basic framework for environmental policy formulation and enforcement by creating a new ministry, SEDUE, which was staffed by professional and administrative staffs taken from the environmental departments of the line ministries that had been responsible for such activity (e\.g\. SEDUE assumed the responsibility for water pollution  - 6 - abatement programs that had been the responsibility of SARH, except in rural areas where SARH retained control)\. 1\.5 Project Im}lementation 1\.5\.1 Background\. Project preparation through appraisal was expeditiously managed, a detailed Project Execution Document (PED), entitled 'Programa para el Control de la Contamination en Mexico" (Program for Pollution Control in Mexico), wee curnished by the Government on July 3, 1982 and the loan was signed on Jul"' 1982\. Under the PED, it was expected that the environmental agencies hotusr ai the line ministries and operating with the assistance of an environn-,-'' roordinating group would rapidly produce effective standards for indu\. ard vehicular pollution control and plans and strategies for enforcement a propriate standards for air and water quality and solid waste management, It was expected that the menu of technical, legal and administrative tasks defined in the PED would be promptly completed and that the first US$15 million in loan fund would be disbursed in 18 months (para 1\.4\.1)\. 1\.5\.2 Institutional Performance\. The institutional framework for environmental management and protection that Mexico had in place when Loan 2154-ME was approved by the Board in May 1982 had been dramatically altered by the time the loan became effective in February 1983\. However, the Bank did not undertake a formal reappraisal of the project, the new environmental agency or its new mandate\. It relied instead upon a detailed review of the new institutional set-up for the project\. 1\.5\.3 A Bank supervision mission visited the field in early 1983 to assess SEDUE and the new administrative arrangements for environmental policy setting, development of regulations and implementation of enforcement strategies\. It reported that the creation of SEDUE would substantially simplify and strengthen operations in the environmental field and that the project would be delayed in its start-up by only several months\. It was further expected that once SEDUE had assumed the legal obligations previously held by SSA under the project, it would initiate the specific actions that were to be taken under the PED including the development of specific standards, strengthening of the regulatory framework, and increasing the number of inspections and technical capability of its staff; all of which were preconditions to successful loan implementation\. Concurrently, it was expected that SEDUE would: (a) take m3asures to increase availability and consumption of less polluting natural gas in urban areas; (b) reach agreement with major public enterprises on the pollution control measures to be achieved by them; (c) strengthen collection capability and methodology for standard setting; (d) rigorously apply a unified water quality control strategy in high priority basins; and (e) rapidly implement mandatory inspection of motor vehicles operating in the GMCA\. These constituted an ambitious menu of essential actions, and were included under the PED\. 1\.5\.4 In September 198,, a Bank supervision mission evaluated the prospects for the full implementation of Loan 2154-ME\. A mission report dated November 18, 1983 noted that progress had been slow in implementation of the project due to the country's serious economic problems and substantial reorganization of environmental programs into a new Ministry\. Investment credit demand for air pollution control component of the project was reduced  to an estimated US$14\.8 million with US$7\.1 million projected for industrial pollution control and the remaining US$7\.7 million projected for air monitoring and vehicle testing equipment\. Water pollution control investments estimates were similarly revised and the groundwork laid for the ultimate reduction in loan size to US$25 million in mid-1985, when US$35 million of the loan was canceled\. 1\.5\.5 The expected project implementation actions spelled out in the PED were never undertaken,\. and SEDUE's professional, technical and supervisory capabilities were sharply reduced by budget cuts and three major changes in senior management and related organizational restructuring\. Underlying the dramatic changes in SEDUE's institutional capability to perform under the PED were two major factors: First, the new Government adopted a new industrial pollution control strategy for the nation and abandoned the then existing strategy of enforcing compliance with national emission standards through firm and consistent on-site inspection and enforcement programs\. It replaced this "command and control" system with a new policy of negotiating subsectoral standards for emissions with each of the industrial associations along with a corresponding plan for compliance with the negotiated standards\. The agreements negotiated by SEDUE would form the basis for "social contracts" between the government and industry which when ratified would assume the force of law\. Second, the new Government was striving to reduce budgetary (para\. 6) expenditures and made SEDUE's activities a m&jor reduction target\. While there were subsequently many coordinating meetings to get Loan 2154-ME back on track, little progress was made\. The Pollution Control Project was never linked to SEDUE's new operational objectives and it had little impact on its institutional performance, except that the air pollution measurement equipment financed under the project did provide SEDUE with an improved data base for setting monitoring strategies and measuring outcomes of pollution control programs\. 1\.5\.6 Compliance with Loan Conditions\. During the almost six years of project operations, SEDUE essentially failed to comply with the PED agreement requiring them to establish and begin to implement the strategic, informational or operptional basis for dealing with the nation's broad ranging pollution control problems\. In some cases SEDUE failed to establish standards for control of air pollutants when technically adequate standards, developed in 1981 by their predecessor agencies, already existed in draft form\. It was the impression of the Bank's expert consultants during two reviews, in 1984 and again in 1986, that SEDUE's performance and its failure to adhere to the PED, was not a lack of professional capability and that, with some assistance that was offered by the Bank, SEDUE had an adequate background of studies and of professional skills to complete the tasks of preparing acceptable standards for emissions and to undertake strategic plarning tasks\. What appeared to be lacking was the willingness to sustain the prior Government's aggressive approach toward environmental clean up that was embodied in the PED agreement\. It is clear that SEDUE was slow to establish firm pollution control programs because the policy in force after 1983 was to move slowly and because SEDUE's enforcement capability was substantially reduced during the next half decade\. 1\.5\.7 SEDUE's capacity to undertake the expected environmental control actions continued to deteriorate as its staffing declined from about 5,000 to 2,500 employees by the end of 1988\. Also, SEDUE's low salary structure did not allow it to easily attract or retain qualified staff\. SEDUE  -8- had about 100 inspectors available on a country-wide basis of which about 10 to 15 were available to handle the 4,000 priority industrial installaticris that required inspection, supervision and technical assistance\. Clearly, on that basis a pollution control program of national scope, which was the objective of Loan 2154-ME, could not advance\. 1\.5\.8 Enforcement Strategies\. It was assumed that a strategy for pollution control enforcement would be rapidly developed under the PED, and that the strategy would be based upon some simple form of roll-back model, with improved inventory information and enforcement activity wherein highest pollution sources would be addressed first\. Neither the models nor the strategies were ever developed\. The Bank was never officially advised that the Government's policy regarding pollution control reduction had been changed and that the PED was no longer relevant\. Supervision reports continued to correctly point to slow economic growth and lack of enforcement activity as reasons why the Loan had no_\. been disbursed, but the main reason for non- enforcement of existing regulations, the change in policy away from enforcement of pollution control laws at national levels and toward negotiated agreements as a subsectoral level was not adequately addressed\. 1\.5\.9 Enforcement Results\. Based upon a review of the files of each of the 20 subproject financed under the loan and field visits to a sample of firms, the following information was obtained on the reasons why projects were advanceds Nature of Intervention Number of Projects Percent 1\. ComRany Initiative 8 40 Cost Reduction (4) (20) Same Cost Recovery (4) (20) 2\. Social Contract Signed 2 10 3\. Other Aaency Enforcement 3 15 4\. SEDUE Enforcement 6 30 5\. Other Reasons 1 5 TOTAL 20 100 Forty percent of the subprojects resulted from voluntary actions taken by industry\. These voluntary initietives were taken in cases where the projects applied technologies that reduced costs and/or provided some cost recovery in the form of reusable production materials or water\. Two companies undertook investments in line with signed industrial pollution control agreements, three projects with water pollution problems had been inspects by SARH\. In the six year period of project implementation only six investments, of the 20 financed, resulted directly from SEDUE enforcement of existing standards and regulations\. 1\.5\.10 Investment for Control of Pollution\. The appraisal estimated that about 622 of total resources would be directed toward the resolution of air pollution problems and 282 to water pollution problems, created by industry\. It was expected that some 80 to 100 industrial pollution control investments would be generated\. Ultimately, only 20 subloans were financed, of which about one-half were for water and one-half for air pollution\. (Annex  - 9 - 1 Page 1)\. Most subloans were for less than US$100,000 equivalent, and four large subprojects accounted for 20? of subproject financing\. In terms of industrial sectors in which investment occurred, 252 were petroleum based, 25? in non-metallic minerals, 15? in paper products, 152 in textiles and leather, 5? each for four other inc Astries (Annex 1 Table 2)\. There were 10 air pollution, 11 water pollution and 2 solid waste problems treated under the 20 projects financed\. Three projects treated multiple environmental issues\. 1\.5\.11 Location of Proiects\. In terms of subproject location, it was expected that the GMCA would be the focus of efforts and investments, in fact only 35? of the subprojects were located in the GMCA with 65Z broadly distributed around the country (Annex I, Table 3)\. This finding is consistent with SEDUE's lack of inspection/enforcement capability in the GMCA\. It is interesting to note that most subprojects were approved in 1986 (40Z of total), the year in which Mexico City suffered a major air pollution event that generated substantial efforts by PEMEX and others to improve the quality of fuels burned and transport equipment in the GMCA\. However, all but one of the projects approved in 1986 were outside of the GMCA, indicating that there was no build-up of enforcement of industrial pollution in the GMCA even in 1986\. 1\.5\.12 Financial aspects\. The financial costs of pollution control investment were high for many firms\. The cost exceeded annual profits in the year of investment for 502 of the investing companies, and it was a relatively small percentage of annual profits (less than 25Z) for only 35Z of companies\. The smaller companies tended to have higher costs relative to profitability\. Although the financial consequences of such investments were understood to be high, little attention was paid to the issue of fiscal or other incentives as a feature of the project\. In other projects financed by the Bank, incentives have been an element in stimulating demand for pollution control investment (para\. 1\.5\.14-16)\. 1\.5\.13 Other Proiects\. For the balance of the program, no requests were received from automobile garages to finance equipment for emissions testing and diagnostics, to reduce vehicular air pollution in the GMCA\. While two of the subprojects financed under the loan had funding components for solid waste facilities, these investments did not result from regulatory action\. Essentially nothing happened in the field of solid waste management as SEDUE never came to grips with the policy and regulatory issues involved\. The Government did procure an automatic air monitoring network and did undertake a variety of priority studies\. No technical assistance was financed\. 1\.5\.14 Commitment and Disbursement Performance\. The reason why demand for investment under Loan 2154-ME was low (i\.e\., US$5\.9 million actual versus UTS$57\.2 million estimated), has been variously attributed to two main factors: (1) Mexico's economic recession, starting in 1982, which reduced demand for productive credit and non-productive investments like pollution control were postponed even further; and (2) in the absence of vigorous enforcement of pollution control standards, investment was low\. Both were true, although it has been found in other projects that with vigorous policing of environmental regulations, investment rises even in the midst of a recession\. A third element was that there was nio incentives to promote participation in the program\. These had played an important role in stimulating environmental investment in other parts of the world\.  - 10 - 1\.5\.15 The Impact of Incentives\. When this pioneering project was appraised, there was only limited experience with the effects of incentive mechanisms on investment decisions by industry\. Since then, a large body of experience and literature has emerged (paras 1\.6\.7 - 1\.6\.8)\. Mexico experimented with incentives for environmental investment for one year (August 1987 to August 1988) when SEDUE was authorized to administer a program of investment in pollution control equipment\. The fiscal incentives in the form of a tax credit was equal to 20Z of the cost of pollution control equipment\. The program was reported to be an immediate success, as about 100 firms applied for pollution control investments under the incentive program, more that five times the number of projects that Loan 2154-ME was able to attract in six years\. While the fiscal impact of this incentive program wp never determined, a rough approximation can be made\. If the average coL of a project financed under the SEDUE incentive program was equal to US$700,000 (i\.e\. the average cost of a project financed under Loan 2154-ME) then the cost to the Government of tax revenues forgone under the incentive program would be about US$14 million for the 100 pollution control projects\. In terms of potential benefits, if this program had focussed on the worst case polluters, it could have eliminated something close to one-half of industrial based environmental problems and associated health and welfare issues\. a 1\.5\.16 Experience with environmental incentive programs in Europe has shown that incentives of about 52 to 62, granted for limited periods of time to advance clean-up, can be very effective, if supported by well functioning "command and control" operations\. Based on this experience, it is possible that a smaller, limited term incentive program (costing as little as US$3\.5 to US$5 million per 100 projects) could have generated a large volume of projects for Loan 2154-ME\. If, as a result of such incentives, the Loan had been fast disbursing, then, the real cost of incentives, net of commitment fees paid for the slow disbursing loan, could be as low as US$1\.5 to US$3 million and less, netting out some of SEDUE's costs of operations\. Moreover, the direct and indirect benefits achieved as a result of a more rapid clean up of air or water in the GMCA can be substantial given negative impacts of Mexico's high levels of environmental pollution on public health\. 1\.6 Results and Lessons Learned for Future Environmental Proiects 1\.6\.1 Project Results\. The Bank had made its impact during Loan preparation in 1979-1982 as it worked with the Government to structure an approach to overall pollution control\. Thereafter, the Bank's impact on the environmental policy was small as the institutional development purposes and strategy underlying the Loan did not correspond with the new Government's concept of supporting slower change through negotiated agreements (i\.e\., "social contracts") with industrial associations over the peried from 1984 through 1990\. In 1989 the new Government determined that environmental planning and enforcement be decentralized and that communities play a larger role in determining the quality of their environment\. Tin human and institutional infrastructure for this line of action has not been prepared which will both complicate and offer opportunities for any future programs that the Bank may consider\. 1\.6\.2 There is no clear evidence that the small number of 20 projects financed under Loan 2154-ME made a positive measurable contribution 3/ SEDUE had estimated that some 225 industrial plants accounted for about 85% of the sector's pollution problems in the GMCA\.  - 11 - to the improvement of air, water or land fill site quality in Mexico\. The amounts involved in investment by industry (US$5\.9 million) was far too small over the five year disbursement to have a measurable impact\. Indeed, in the Mexican context such small amounts could have been available from other credit sources\. 1\.6\.3 Precondition for Project Success\. Projects designed to support industrial and vehicular pollution abatement programs are hard to implement under the best circumstances\. For such projects to have a reasonable prospect for achieving these objectives and rapid disbursement, the following conditions would have to be in place at project start-up; (a) Adequate institutional structure, including trained professional staffs, operating under a policy mandate to plan and to establish program priorities and plans of action; (b) Laws and operating regulations that clearly set appropriate national environmental standards and provision of regulatory oversight, adequate manpower and budget allocations to support firm monitoring and enforcement of standards; (c) Adequate scientific and laboratory capability to: (i) prepare base line data including measures of environmental quality, and types, volumes and sources of pollution; (ii) prescribe the measures that would need to be taken to achieve needed improvements and (iii) assess the results of enforcement activity on environmental quality; (d) The administrative mechanisms and/or economic incentives for encouraging society to clean up its pollution mess should be fully confirmed and the system operationally in place; (e) The potential benefits vs\. costs of time-dated "incentive approach" to stimulate firms to take early, voluntary measures for pollution abatement should be calculated and the program, established and in place; (f) The availability of loan funds at appropriate close to market terms; and (g) A sound economic environment, and a profitable and growing industrial sector\. 1\.6\.4 At the start-up of Loan 2154-ME in 1983, only Condition (f) was in place\. The situation did not improve as the new government sharply reduced SEDUE staff and enforcement activities in 1983-85 and SEDUE moved away from a policy of 'command and control" enforcement toward a series of negotiated agreements with each industrial association, which were not completed until 1989\. Evidence available in Bank supervision reports indicated that the loan was in fact ready for cancellation in late 1984\. At that time, it had become clear that SEDUE was not implementing the PED, and prospects for project success had virtually disappeared\. Meanwhile, commitment fee costs were mounting on a large uncommitted balance\.  - 12 - Performance ratings in supervision reports did not fully reflect the deteriorating situation and the continued non-compliance with major loan conditions until 1985\. The increasing seriousness of the situation underlying the loan appeared not to be recognized\. ComEpliar\.ce and Incentives, Alternative Approaches 1\.6\.5 Compliance\. Loan 2154-ME was advanced on the assumption that centralized command and control regulations would enforce a uniform rollback from all sources of Fpllution to ensure that required pollution reduction was achieved and ambient standards would be reached\. The Bank's environmental experts considered the command and control approach to be administratively and technologically the simplest form to administer with highest prospects for public acceptance, as it appears to be fair\. It was then and continues to be the most commonly used system worldwide\. 1\.6\.6 Recent advances in the administration of environmental policy need to be considered in the future\. These include administrative mechanisms that (i) maximize the degree of influence of market forces in giving enterprise the choice to pollute or pay and (ii) minimize the aggregate cost to industry of achieving a predetermined level of environmental quality\. There is also a new body of economic literature and some experience with a variety of penalties, incentives, certificate and taxing schemes which is relevant to structuring future programs\. 1\.6\.7 In line with the above incentive based approaches to inducing a rapid pace of industrial investment for environmental clean-up should be adequately explored during loan preparation\. Systematic efforts should be made to approximate the economic and social costs of the high levels of pollution including: medical costs of pollution related illness, shortened lives and reduced quality of health of the human population, high costs of inspection, enforcement, negotiation and adjudication of environmental enforcement efforts and finally, in the case of a Bank loan, the excess costs of commitment fees on a slow disbursing loan\. The economic and social costs of slow action would need to be offset against the budgetary cost of an incentive scheme that would reduce the industrial sector's objections to the adoption of appropriate standards and speed up the pace of investment in environmental clean up\.  13 - PROJECT COMPLETION REPORT ENVIRONMENTAL POLLUTION CONTROL PROJECT LOAN_2154-ME PART IO\. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 2*1 INTRODUCTION 2\.1\.1 In July 1982, the loan agreements for Loan 2154-ME were signed by the World Bank and Nacional Financiera, the latter the financial agent for the Federal Government, and Fondo Nacional de Equipamiento Industrial (FONEI), the executing agency of the Project\. It should be noted that in view of the progress in modernization made by the Mexican Financial System, FONEI was integrated into the organizational structure of Nacional Financiera (NAFIN) in 1989, enabling NAFIN to take advantage of and to complement the experience of FONEI\. From then on, regional financial coverage has come from the Mexican Banking System, promoted by state agencies\. Moreover, the fusion of various development funds in the institutional structure has made global financing for economic activity possible\. 2\.1\.2 Loan 2154-ME comprised three components: Part (A) was the installation of pollution control equipment, the change in production processes or in the technology to reduce air and water pollution, the relocation of industrial plants, the conversion of facilities to use natural gas as energy, and the investigation of ways to contribute to environmental pollution control; Part (B) was to finance the purchase of mechanical automotive workshop equipment and diagnostic equipment for automotive revision workshops designed to reduce the level of gaseous pollutants thrown into the atmosphere by the combustion of automotors; and Part (C) financed staff training from the Secretariat of Health and Welfare, private companies, and intermediary banking institutions in matters of emissions control of air, and water pollutants, studies and programs related to pollution control, and laboratory and monitoring equipment for large urban environments\. Since 1982 actions related to pollution control in all its aspects were to be carried out by the Secretariat of Urban Development and ecology; it is important to note that with Part (C) the pollution control measures applied in 1987 by this Secretariat were to be identified\. 2\.1\.3 The objective of the project was to support the activities oriented toward reducing the environmental pollution indices through financing the purchase and installation of air and water pollution control equipment, so as to prevent the increase of pollutants brought about by industrial plants I This is a translation of the Borrower's Report which is available in Spanish in the project files\.  - 14 - and to reduce the levels of environmental poisoning observed at the end of the 1970s and the beginning of the 19809\. 2\.1\.4 The loan was identified in a favorable economic environment but was formalized at the beginning of a serious economic crisis affecting the country\. Between 1982 and 1987 we can locate the serious point of the crisis and the rupture of the development model followed up to then\. The national and international financial and economic happenings of tlLs decade led to the stoppage of productive investment, capital flight, constant increases in domestic and foreign interest rates, the depression of real salaries, high unemployment, and a critical shortage of capital\. Formation of capital decreased as a result of the sudden economic upset\. 2\.1\.5 The project was ident :'ed in 1978, when the domestic economy was in full upsurge, with annual growth rates measured in terms of gross domestic product very close to those of developed countries\. However, the economic environment, marked by an apparent economic strength whose availability of resources was based on projections of income derived from exports of hydrocarbons and foreign credits, suddenly changed\. The economic imbalances that have taken place since 1982 in the world economy, have had a negative impact on the Mexican economy and Loan 2154-ME was affected by it\. It should be enough to remember that the loan was contracted at a fixed rate of 11%, which was financially negative to the situation the country was living in\. Similar to this example, a great number of external conditions influenced the taking of drastic adjustment measures to the economy by the national authorities\. 2\.1\.6 One of the first measures, and probably one of greater impact on the project, was the reduction in the country's expense and investment budget, which, due to the development model, marked the tendency of the economic activity in general\. Faced with the reduction of investment demands by public entities, companies doing business with them, directly or indirectly, put the brakes on their productive processes: this had a negative impact on the investment demand for equipment or activities related to the Pollution Control Project\. On the other hand, the reduction of structures in gover\.ment agencies prevented the Secretariat of Urban Development and Ecology, created in 1982, from obtaining the expected results from its supervision, monitoring, control, and sanction activities as well as those oriented toward the regulation of pollution emissions from industry and automotor vehicles\. 2\.1\.7 At the same time, alternatives for placing the funds for feasible projects identified with the objectives of the Project were sought, such as: Waste water Treatment Systems in the cities of Quer6taro, Qro\. and MinatitlAn and Coatzacoalcos, Ver\., in the amount of Mex$16\.1 million; equipment for 2/ Note: See Part I, Evaluation Summary Paras 1, 2 and 5 for details on timing of the project cycle\. The Project identified in 1978 was the Fourth industrial Equipment Fund Project (Loan 1712-ME) approved in June 1979 which included a small pollution equipment component\. Preparation for this project was begun in 1981\. F"  - 15 - environmental quality laboratories in the cities of Altamira, Tamps\., and Ldzaro CArdenas, Mich\., and atmospheric monitoring networks in Guadalajara, Jal\., and Monterrey, N\.L\., for a total investment of US$3\.8 million\. For others of lesser importance, the unfavorable economic situation for the recuperation of this type of investments was hampered, and formalization was not carried out within this project\. 2\.2 PROJECT EXECUTION 2\.2\.1 Within this recessive environment and great economic disadjustments, project objectives were truncated\. The lack of resources made it impossible for a large number of companies to meet their credit commitments\. At the same time, the public sector faced budget cuts for current expenses and investment like never before, such that PONEI and SEDUE were unable to take actions that would meet, at a minimum, the proposed objectives, especially because of the elimination of public sector structures\. This had a negative impact on the project as it could not hire enough staff for project evaluation, promotion, and control activities (para\. 4\.02)\. 2\.2\.2 The situation described above forced companies to earmark their resources for productive processes in view of the inability to invest in assets for pollution control, the development of technology, or training for the same purpose\. In spite of this, efforts by SEDUE to carry out the Project efficiently continued, even if results were to be seen only in the medium term, as in the case of the Mandatory Vehicle Revision Program, the installation of the Environmental Monitoring Network, and the legal framework structured in accordance with the reality of the country with respect to environmental pollution control -- the creation of SEDUE itself is proof of the effortr made and of the priority given to the environmental pollution problem, not only in cities of greater urban and industrial concentration, but also in areas as those already mentioned (para\. 4\.03)\. 2\.2\.3 Since the rest\.ictions imposed on public expenditures prevented strengthening the organizational and financial structures of the agencies involved in the Project, thus, in the absence of fiscal credit mechanisms during the execution of the same, greater emphasis was placed on the formalization and strengthening of the legal and institutional framework in the medium term -- the strategy was identified more in terms of agreement with industrial chambers than in coercive aspects and direct fiscal support\. The idea was to induce investment in pollution emission control equipment without losing sight of public and private finances in the middle of a serious economic crisis\. In this regard, it is important to note that during the identification and appraisal of the project fiscal expenses that could have been generated with this type of support were not clearly quantified\. However, when the loan was approved, the economic conditions were already very different from when the project was identified\. It should be mentioned that the process of identification, appraisal, approval, and effectiveness of the loan took five years\.  - 16 - 2\.3 PERFORMANCE OF THE BORROWER 2\.3\.1 The project was developed at the end of a stage in which it was estimated that (a) economic growth during the 19809 would be sustained, and (b) industrial modernization would follow the stage of growth consolidation\. This process would allow for the necessary resources to fight the harmful effects of industrial growth\. 2\.3\.2 With respect to the environment, the levels of air and water pollution that affected almost 30% of the population directly, were beginning to reach alarming levels, especially in the large urban concentrations, even higher than those registered a decade earlier in the industrial cities of developed countries\. 2\.3\.3 Because of the above, Mexico requested the financial assistance of the World Bank for the Industrial Pollution Control Project, designating FONEI as the executing agency (para\. 1)\. FONEI, historically a promoter of industrial development in the country, had a small structure compared to the size the pollution problem had reached and with the level it would reach by the mid 1980s\. Howevor, FONEI, with its characteristic efficiency and with the use of its vast experience in second-level operations, was able to promote the Project before the Industrial Chambers, but because the economic recession undermined the financial situation of the domestic companies, credit to control polluting emissions fell into second place\. 2\.3\.4 In 1982, the new Administration, upgraded to State Secretariat level the measures developed to make up and strengthen the legal and institutional framework to control the emission of solid, liquid, and gaseous pollutants into the environment, as well as atmospheric pollution produced by noise or by new or existing sources as well as that generated by motor vehicles\. However, the scarcity of human resources in SEDUE for surveillance activities (paras\. 4\.02 and 6) prevented the success of the strategy formulated for such end\. The idea was that with the surveillance activity to check compliance with the pollution emissions norms, the Secretariat's coercive power would be supported by the promotion and coordination activities of FONEI and SEDUE, respectively\. 2\.3\.5 Notwithstanding the above, direct promotion with the industrial associations in the areas identified by SEDUE as highly polluting continued, as did correspondence with those companies catalogued by SEDUE as polluters\. In view of the impact of the economic crisis of the 1980s, these measures found little support from the companies (para\. 4\.03)\. 2\.3\.6 In view of the facts, in July 1985, it was requested that US$35 million be cancelled from tha originally approved US$60 million loan\. This was as a result of the vertical fall in the demand for investments\. One year later an additional US$11\.4 million was cancelled for the same reason\.  - 17 - 2\.4 PERFORMANCE OF THE BANK 2\.4\.1 During project implementation the Bank maintained a close relationship and dialogue with the Borrower and the executing agency, which allowed a better understanding of the graveness of the crisis that began in 1982\. This relationship contributed to the understanding of the efforts undertaken to execute the Project within the environment described in the previous paragraphs, so much so that the Bank proposed the design and development of alternative projects to invest the resources in activities related to the Project\. 2\.4\.2 It should be noted that from project identification in 1978 to its loan approval in 1982, four important years passed by -- in the year the project was identified economic activity registered a high growth rate and toward the year of loan effectiveness, in 1983, economic conditions had radically changed\. 2\.4\.3 On the other hand, the interest rate agreed to with the Bank became a negative factor for the performance of the project, too, fixed at 11%\. The economic environment in which it was immersed prevented the executing agency from having a sufficient enough intermediation margin to offer available resources to investors\. 2\.5 LESSONS LEARNED 2\.5\.1\. Implementation of this type of project within distorted economic scenarios requires a more profound analysis and the adoption of immediate measures to avoid assigning resources under conditions unfavorable to the country; a profound evaluation of these situations might have suggested a review of the Bank's systems since within recessive frameworks it would have more economic and financial merit for the subprojects to offer the same resources of the loan in execution to attend to contingent programs, which should be included in loan agreements in order to give continuity to these projects\. 2\.5\.2 In preparation of this project, the lack of an adequate legal and institutional framework was underestimated\. Therefore, similar projects should emphasize, condition, or financially support maintenance and strengthening of the same, ensuring, in all cases, that a positive impact on public health could be obtained in the long term with projects to control the levels of environmental pollution\. 2\.5\.3 With respect to the lapse of time from when the loan was ident!\.fied and approved, the lack of opportunity and the imbalance presented by such in the implementation of the project is undeniable\. It would be convenient to review the priorities of projects that would benefit directly, and in the shortest possible time, public health and which at the same time would oe less profitable to investors; in such cases fiscal credit could complement support of the global scheme to this type of project\. In this regard it is important to quantify the weight on public finances that a tax  - 18 - exemption program or fiscal credit for investment in assets to control environmental pollution would havo\. 2\.5\.4 The establishment and revision of interest rates for this type of loan :;iould be updated in accordance with the internal and external economic conditions\. Likewise, the resources of these projects should be offered at more attractive rates with respect to other projects, in view of the benefit to public health and the low profitability of this type of investment\. 2\.5\.5 Projects related to pollution control should emphaoize aspects of intangible benefits and complex quantifirition (public health, environmental cleanup, cleanup of aquiferous layers, reduction of expenses and specialized medical care, improvement in life quality, increase in productivity levels by employment factors, etc\.), whereas the financial merits could take secondary or reference positions, based, above all, on the magnitude of the problem and the long-term effects it would have on the population\. 2\.5\.6 Promotion of this type of project and its acceptance will be achieved in the measure that the resources are offered at preferential costs attractive to the manufacturers\. The present economic conditions of the country, as well as the existence of a greate'r ecological awareness and a strengthened legal and institutional framework, favor the implementation of this type of investment\. Within this context, the manufacturer would be in a position to alternate these actions with thone carried out to solve his problems in the production process, which are \.f greater priority to him\. 2\.5\.7 Training, as a tool without which the implementation of projects becomes difficult, should be given greater importance and priority by the Bank within its training and information systemz, an well as in the loan agreements themselves\. 2\.5\.8 On the other hand, the present scheme of credit offering contemplates the financing of projects, through t\.'s Environmental Improvement Program, that have as their objectives controllirn; \.he generation and emission of atmospheric pollutants\. In this respect, it i: interesting to note that there are no restrictions for awarding financial supoyirt in the industrial zone denominated as III-A (controlled growth), which joins the greater number of industries in the country\. Indeed, the present legal framework (and the economic upsurge registered in 1989) foretells an increase in the demand of these resources\.  - 19 - 2\.6 ECONOMIC-FINANCIAL ANALYSIS 2\.6\.1 The achievements of the Environmental Pollution Control Project were analyzed by a group of companies that received assistance from the executing agency, FONEI\. The study encompassed 18 of 20 companies that received financing, and these are as follows: NAtMEOTE COMPANY AMOUNT OF FINANCING (Mex$ million) Papeles Ponderosa, S\.A\. 294\.0 Sociedad Cooperativa Industrial Cementos Hidalgo, S\.C\.L\. 286\.3 Negro de Humo Negromex, S\.A\. de C\.V\. 1,248\.0 Triturados El Roble, S\.A\. 44\.8 Fundidora M6xico\. S\.A\. de C\.V\. 25\.0 Unicab Industrial, S\.A\. de C\.V\. 34\.8 Fundiciones Altzairu, S\.A\. de C\.V\. 7\.1 San Ildefonso\. FAbrica de Tejidos de Lana, S\.A\. de C\.V\. 13\.7 Cementos Anahuac, S\.A\. de C\.V\. 881\.0 Ingenio La Margarita\. S\.A\. de C\.V\. 14\.5 Quimica Potosi, S\.A\. de C\.V\. 79\.9 Productos Lince> S\.A\. 37\.0 Celulosa de Fibras Mexicanas, S\.A\. de C\.V\. 55\.0 Cementos Portland Moctezuma, S\.A\. de C\.V\. 380\.0 Pitsa San Juan, S\.A\. de C\.V\. 700\.0 Esquim, S\.A\. de C\.V\. 32\.0 Vidriera M6xico, S\.A\. 44\.1 Protexa, S\.A\. de C\.V\. 31\.1 Note: The detailed case history of each of the companies in the sample is available in the project file\. The case studies include technical details on the equipment procured, standards set by SEDUE and company compliance with environmental regulations\. 2\.6\.2 Of the projects financed, 12 were to improve the environment (decrease dust and smoke) and 6 to rationalize water consumption\. Financial support was mainly channelled to companies located in highly polluted areas because 11 of the companies studied are in Zone III; of the rest, 5 are located in Zone I and 2 in Zone II\. 2\.6\.3 In the environment of economic crisis registered between 1982 and 1987, the majority of the companies analyzed were able to carry out their investment projects\. Of the 18 cases studied, 16 concluded their projects in accordance with their Investment Programs\. The two missing projects belonged to Unicab Industrial, S\.A\. de C\.V\. and Productos Lince, S\.A\., which did not carry out their projects because, in the case of Unicab Industrial, the cempany closed down in January 1990 due to lack of markets for its products\. The financial assistance awarded to this company was cancelled\. In the case of Productos Lince, the project was suspended due to problems with the manufacturer of anti-pollution equipment (TEISA, S\.A\. de C\.V\.) who did not comply with the specifications of the equipment to be manufactured; the project was suspended until the equipment adequately met specifications\.  - 20 - 2\.6\.4 As a consequence of the same economic situation that brought about a reduction in the government's Expense and Investment Budget and prevented SEDUE from having the necessary resources to supervise and sanction the established norms to the polluting companies, it is noted that most of the cases studied did not have the certificates issued by this agency regarding compliance with the established norms for each case\. The controls of the companies are of an internal nature and were developed by their own technical staff, and these controls are also used for submission to SEDUE to prove that they comply with the norms established by it\. 2\.6\.5 According to the reports submitted, 16 of the companies studied are carrying out their projects and functioning under normal conditions\. Results obtained with respect to reduction of pollution levels and cost savings are satisfactory as to the established goals and SEDUE's request\. Of the credits awarded, seven have been paid off up to now\. 2\.6\.6 Based on the above and considering the results obtained, it should be noted that even though the projects were carried out within an environment of economic crisis, the original objectives were reached 90S and 1OOZ of the time, which indicates that this type of project should be continued, with positive results foreseen, especially since there is more and more ecological awareness in the country\.  - 21 - PART III STATISTICAL DATA  - 22 - IXI-CO POLLUTION CONTROL PROJECT (Loan 2154-ME) PROJECT COMPLETION REPORT PART- III 1\. Proiect Cost and Outeome Item Actual Actual Actual as Z of Expectations Appraisal Estimate Total Project Costs 190\.9 17\.4 9\.1% (US$ million) Loan Amount 60\.0 8\.7 13\.7% (US$ million) Date Physical Components n/a n/a n/a Completed Proportion by that Date n/a n/a n/a Economic Rate of Return n/a n/a n/a Institutional Performance Satisfactory Unsatisfactory n/a 2\. Proiect Timetable Item Date Planned Date Revised Date Actual - Identification 06/80 - 06/80 (Executive Project Summary) - Preparation 06/80 - 06/80 - Appraisal Mission 06/81 - 06/81 - Loan/Credit 04/82 - 04/82 Negotiations - Board Approval 05/82 - 05/82 - Loan/Signature 07/82 - 07/82 - Loan/Effectiveness 02/83 - 02/83 - Loan/Closing 12/88 - 12j88 - Loan/Completion 12/85 08/85 12/87  - 23 - 3\. Disbursement Cummulative Estimate and Actual Disburgement (US$ million) FY83 PY84 PY85 PY86 FY87 FY88 FY89 Appraisal Estimate 2\.4 12\.9 28\.4 43\.5 53\.7 58\.5 60\.0 (Cunmulative) Actual \.89 3\.89 6\.23 \.34 1\.74 - (-4\.4)b/ Disbursements / Actual \.89 4\.78 11\.01 11\.35 13\.09 13\.09 8\.69 Disbursements (Cuizulative) Actual as S of 372 37Z 39Z 262 242 222 14\.42 Estimate Al Front end fee, actual disbursement for project purpose was US$7\.8 million\. b/ Repayment of unutilized balance in Special Account\. Date of Final Disbursement (final loan account adjustment) April 1989\. 4\. Use of Bank Resources A\. Staff InDuts (Staff Weeksj State of Prolect Planned Revi6ed Final Ccnle Through Appraisal n\.a\. n\.a\. 30\.5 Appraisal through n\.a* n\.a\. 36\.0 Board Approval Board Approval n\.ea n\.s\. 14\.7 Through Effectiveness Supervision n\.a\. n\.a\. 43\.7 TOTAL - - 124\.9  - 24 - 5\. Sups mision Mission Month/Year Number of Dave in Field Saecial- Performance Persons ization Ratinei 06/82 1 \.1 H n\.a\. 02/83 1 \.2 H 3 09/83 2 9,0 H,C 2 06/84 3 20\.0 H,C 2 03/85 n\.a\. n\.a\. H 2 09/85 1 5\.0 H 2 01/86 2 11\.0 C 3 11/86 Desk Update 0 H 4 12/86 1 10\.0 H 3 TOTAL 11 55\.3  6\. Estimated and Actual Project Financing Plan Actual Project Industrial Polution Equipment for Lab Equipment & as a Percentage Prolect6 Auto Garages Technical Assistence Front Total Project of Estimated Estimated Actual Estimated Actual Estimated Actual End Estimated Actual Total Prolect (US million & 2) World Bank 53\.2 5\.9 4\.4 -0- 1\.5 1\.9 \.9 $60\. 31\.42 $8\.7 47\.82 14\.52 Z FONEI 79\.8 -0- -0- -0- 4\.5 -0- - 84\.3 44\.22 -0- -0- -0- t Beneficiaries 38\.0 7\.3 -0- -0- -0- -0- - 38\.0 19\.92 7\.3 40\.1 19\.2 Intermediary -0- \.1 -0- -0- -0- -0- - -0- 02 \.1 \.5 nla Government -0- -0- 8\.6 -0- -0- 1\.2 - 8\.6 4\.52 1\.2 6\.6 13\.9 Other -0- \.9 -0- -0- -0- -0- - -0- 9 4\.9 ;Ra Total 171\.0 15\.1 13\.0 -0- 6\.0 3\.1 \.9 190\.9 100\.0 18\.2 100\.0 9\.5  26 -nnex 1 Table 1 MEXICO POLLUT1ON CONTROL PROJECT (Loan 2154-ME) PROJECT COMPLETION REPORT Distribution of Loans by Size of Loan (US$) Amount of Loan Number of Loans Percentage Less than 100,000 12 60 100,000 to 500,000 4 20 500,000 to 1,000,000 1 5 More than 1,000,000 3 15 Total 20 100 Distribution of Loans By Prolect Size (USS) Proiect Size Number of Loans Percentage Less than 100,000 11 55 100 000 to 500,000 4 20 500,000 to 1,000,000 1 5 1,000,000 to 2,000,000 1 \.5 More than 2,000,000 3 1 Total 20 100 Type of Environmental Issues Treated 8Y Investament Projects Air Water Solid Waste 10 11 2 Notes Three projects treated multiple environmental issues\.  -27 ex I Table 2 MExICo POLLUTION CONTROL PROJECT (Loan 2154-HE) PROJECT COMPLETION REPORT Industrial Sector, Distribution of Proiects Sector Percentage of Projects Machinery & Equipment, Metal Prod\. 5 Basic Metals Industries 5 Non-Metalic Minerals (mainly cement) 25 Chemicals & Plastics (petro based) 25 Paper & Paper Products 1S Textile & Leather Products 15 Food Products S Mining and Petrol Extraction S 100  28 Annez 1 Table 3 POLLUTION CONTROL PROJECT (Loan 2154-ME) PROJECT COMPLETION REPORT Location of Pollution Control Proiects State (or Mexico City) Number of Proleqts Percentage of Projects Mex\.co City (D\.P\.) 2 10 Mexico 5 25 Nuevo Leon 3 15 Queretaro 2 10 Guansquato 1 5 Oaxaca 1 5 San Luis Potosi 1 S Tamaulipas 1 S Puebla 2 10 Tlaxcala 1 5 Morelos 1 5 2o 100  - 29 - Table 4 POLLU-TioN CONTROL PROJECT (Loan 2154-2E) PROJECT COKPLETION REPORT Xinancial Impact of Proiects on Particiiants\.-2/ 1\. Cost of Total Proiect As a Percentage of Pre-Tax Proilts Number Percentage A\. Cost of Project - Greater than annual profit S 10 50 3\. Cost of Project - Equal to 502 or more of annual profits 1 5 C\. Cost of Project - Equal to 252 to 492 of annual profits 2 10 D\. Cost of Project - Equal to 1OX to 242 of annual profits 2 10 E\. Cost of Project _ Eqtl to 92 or less of annual profits S 25 20 1002 Based upon the audit financial statements for the year in which loan application was approved\.  - 30 - JAnnex 1 Table 5 HEXICO POLLUTION CONTROL PROJECT (Loan 2154-ME) PROJECT COMPLET12N BEPORT 1I\. Cost of Total Project As a Percentage of Og'erating Profits-&/ 11\.gber Percentage A\. Cost or Project - Greater than annual profit 9 45? B\. Cost of Project - Equal to 502 or more of annual prcfits 2 10 C\. Cost of Project - Equal to 252 to 492 of annual profits 1 5 D\. Cost of Project - Equal to 10? to 24? of annual profits 2 10 S\. Cost of Project - Equal to 92 or less of annual profits 6 30 20 100t ai Used as an indicator of each flow from operations\. Operating profits do not include profits (losses) from foreign exchange transactions which account for the profits or (losses) of a number of participating fims\. V\.  PROJECT COMPLETION REPORT MEXICO POLLUTION CONTROL PROJECT (LOAN 2154-HI) ESTIMHTED AND ACTUAL PROJECT FINANCING PLAN Actual Project Industrial Polution Equipment for Lab Equipment & as a Percentage Proiects Auto CaraRes Technical Assistance Front Total Project of Estimated w Estimated Actual Estimated Actual Estimated Actual End Estimated Actual Total Prolect ' (US iAlion & t) Vorld Bank 53\.2 5\.9 4\.4 -0- 1\.5 1\.i \.9 $60\. 31\.4? $8\.7 47\.8Z 14\.5Z FONEI 79\.8 -0- -0- -0- 4\.5 -0- - 84\.3 44\.22 -0- -0- -0- Bcneficinries 38\.0 7\.3 -0- -0- -0- -0- - 38\.0 19\.92 7\.3 40\.1 19\.2 Intermediary -0- \.1 -0- -0- -0- -0- - -0- 0? \.1 \.5 nla Governmeat -0- -0- 8\.6 -0- -0- 1\.2 - 8\.6 4\.5? 1\.2 6\.6 13\.9 Other -0- \.9 -0- -0- -0- -0- - -0- \.9 4\.9 nla Total 171\.0 15\.1 13\.0 -0- 6\.0 1\.1 \.9 190\.9 100\.0 18\.2 100\.0 9\.5  HEXICO ENVIROIMENTAL POLLUTION CO TROL PROJECT hit 3 (LOAN 2154-tEa Page 1 of 6 Sumary of Proiect Outcome cW0uAw C \.A1 P o LL 1 * I 0 E W I I t SEM rDI vgziwzw em Acrnagvr (Wx\.) WE\. 0Me VAuAIT CE ami? m r m ut w"AP ZCArT ?uncm oncarmtn fra or OirECFIm SUAlEU s m mjw W I-W 1m \. - waruf JAuis noss OrAw mr7AnZet 07t sorn ow PR DIOS so mtl 01 VIeS$ * m ZWAUAZW Of A M WtsES 13 n S\.A\. Cn#w na To St\. Smjns to \.$I ao \.sip \.n I sfL1FlAD A C INAR *eSu Pn2\.J5 tl UArMAL orns aum ast #to ofn *jit 4 10 INtO ffl0 Zm1 co= TMQ ,usW syrmTV 3nnaiu o ilk t toa aEMw a aIu=swrA m PAM\. 012 Joe W\. 13 v\. \. is Cmamsm SON\. s1u10 4 will 0\.n1 aiil - to ham A flA 7 or\. r a a Earn\. am 02U103 10\.000 c 1\.1CC tv \. St 1*8210207 s\.en18 019381 amtO 113 IIALAEON OJA 07£ 4DM0- lont 0m no tIe\. S0Woim So ut W in 1 eussafSa aruzz;O\. w nm c flMus 4\. War0o 5\. St533 fltClmUh aa Vr nme nTAmh \. 04 Et tm g 5AW\. DM cowcm 10Sr\. AM 5121 a 0 oAID M 8U5513 co 50m)1 SW -t\. to W gm 11USD C oawur o 7150J Or AW\. 1001 1003 UV 7 * t mS low ITCaw, n\.1\. 8 fl E n\.n a\. C\.,\. COMM= ?AIIIYnM lam eas Sf31 CAS3C00\.1 \.mm m Vh1UIPIU 513* or r 9291u4 AA m m Svrt r 3n StaMI so mumt am\. IN mmt\. arTn wAin em u ma\. In R1ODI107I 381 t uMsaft D M ton u cor o \.muaFf SmemW AI a \.Aw n=2 5 m wmm\.  Annex 3 Page 2 of 6 CLEAWEI CUOSJAWE P O L u T I O N L J V e L S IASES rTAK VIEN VESMNT IN ACutEVtEN (CE\.) EST\. PSULTS VARIATION ro crcUL vzrI BENEFTS OllIr OMPANV LATIO POJETr DESOm apTON PROCRN OF OBJECrTSS SAMPLE Mut OSTAIPE I ESTALISME K1Ns OBTAIN SIUATION IN100 EL JWs MmUW LEON Q tRlCON OP INSTRUL sODI 9 * *1 PRO=? PAID OJT S\.A\. PLAmT 1R( xUtWoLITrAN QUALMI, ARA OF EDEEr I o 10 mr u21mi 972 CEO DI O cocai AREA PU Ftdt 10 sOLvE DoSw 1ItSsC1 THE PUGOUS OJLDEI INSTALUATI O? 781\. E*T7 SP1INMES\. DECRuSE Is WT EmISSIONS AND ITS (SE IN A EZMLI E SOWD AS 1R1N FILLIN\. FMIVWII01WA WTIC00 STATE STALLATION or SM0U AMD soo0 902 4 11 AD DMST 15 ag z EITICTINt PAID 0F S\.A\. Ds C\.v\. DoSM PAInC DOLLITON \.AITcCLEs CO7N 01 EqVIVRT 20 ELD(IRATE POLLOTION POLLI EmISSIONS 'VEOtrT 01 Pr00v ST sEL1IU at ULV PROOD=T SF1 1WI AND SU?W HIAL\. ro D SUM AND DUST NWC4 IESsrIut\., ICDo STASrAT SAUATZON Or rEAIMr Ion Ion0 * IN JAN PAD 0n S\.A\. DS C\.V\. PLAtr ro MMSc FOLWTCIO *990 ItS Vis o? AmSILVA (P\.M\., CWAear CIO= GREASS, OeIs ETC\.) urnr DM WE 1 DISCRO iN IN Dan\. LACe OF UAITS\. FUWECIONES ALTEAI, lMRU C1 STrA INSTALnON O? A DST AND l002 100ion * at111 5im vrr PAID 01 S\.A\. DE C\. T\. Ss ABSORTIN CYcON VErI ESTABUsR EnEYIoN IN JWR TE R\.TEWJ AtRAg A NOMS ACWRDl ITS PrtoDDUTE C_SSIPY AND A UAW TO INTsNAL PROCESS\. DODEix ASMAIDE to LDCaTE IESURUONTS\. POLLDYtI ItSSEON\.  Annex 3 Page 3 of 6 MUflAWW CCILU P O LL OTLO a r L o V rL S IWM=rTAJM v1lmvrsrwr SE {auWD0 04\.) Ur\. USSLI VA"ION To COL7 151x 31177 Cr11 01eAMw i~427W PEOII rnumtaw 1102\.5 or 08\.IMV uArz W Nrs_AI 2 JMAJISrED mugs 0M141A51 SEIVTN s nimo, wci Cun unasruri w Or i Bo nu 10 * gmn ruua n1r St I fllDA AUt kT AMWO 5TA USD n U\. Si\. a C\.9\. I01Ua1Wt M53\. SOt 3 012 20 iNExmTZ dIDSAUNEaC IME0 S111 ZUSYAUAIEW AND,0* fMf11- O0N JRUSf 0am1 a J2 api\.13 35 asimh a 73 N0lEui Wml 5100w o InSIA07 E 503 S\.A\. n C\.Vr\. EU? Oil *ll1-02OT Or F STAGES OVmD? 2R\.13 kg 1\.24 &glbr - go ESUSrAUIS A1707 JO Msme (10 Mr, *mVui 2 CAMUM OMa a 33\.74 kg 2\.3 kSjhr - to 1395 A02RDiW ?UI PI Jl ASs CrCA\., PILIW\. 2 918517\. 20 IETZvuL MUTF OF JI1309IM1M FtMPUMM,to 6 Ion WSlES\. f 017595 St CA8W 01 MT ZS O JSUNS ZE8WI Li mrA3frA, 0171 CAE Ogf A SIM0 TO 102s &Es353&= or Pam off 5\. C\.V\. MT== 511 SW 7W! of * 9 5101? 5231~~~~~~~~W WEK01AL a~~~~~~~~~~~rmsmrsa A PDL= ID EWIALL A T4aa\.namY 12 a#nm Isuc rcosr1 tsrnEl0/esF I\.n cAR\. CAn, JOW= Jr egr rJ JO ns~~~~~~~~~~~~~~~~*32  Annex 3 Page 4 of 6 O8WAW cunUW * oLL U 1 r s o V t I 7 I L 5 S5I TAM WiNtsim' L ACWitW of"\.) tSr\. mtum RAItU ViC ID CiOL vrm WrnSV cm aWAl 1M8012ealsirmW P2003 D OP 0xtvZS SAI mm 01MU 2 tSTAZLIS 30 OIi QuCA Mt &\.L\. tun mIX, uAzuarmnu nAO inOt loot Wtrl vim nXhliE oil is Po= 5\.A\. K 0\.1\. stvIZrnN eNSAAM ZSVUS5KD soIL\. 50- tlPr soum 0 xru 21=09 COMM aDZ AND VA 50 WUxLm Tic\. ii"C t sDmUz \. AG= Wmam WA3L1M P0tU ull,S\.A\. tnaU1LPAS 5 SVNAUJVL CY $pl PROJECT VA S 55P Z XD Si FP5IDD s ID COOT AND SWCUM SU5P50 Dow ID 895\.13 31UW, 051\. AID IzIRCAL LLASIJ oIn cIswinmsw\. Dovm FEn ssi irwr - mu\. S\.A\. Ds c\.r\. m AN APmAP*UM srTmw vm in CVLUIZSA SEf fEIS lLCAWAU 5*5 AUd VM OF A LNOITA LaS 1013 03 13" Atli 200 mpI * 54 IMIDWIVA IM KCREAN zN PAID 0ON inLOANS, S\.A\. DsSLIPUCUL SW\.15- PZSAViN 5\.5\.1\. so mphl 92 usI * 33 OFer7 WAT\. 345 1OLL02IM C\.V\. tSISIM ID Mol Il \.I\.A\. J0 mphs Id ughs 40 50W\.205 10 A&V LATUS AND tIUrn re7 COMw -O St 3\.5\.1\.0\. I ashl 2 migi 4100 KfiZZln flDoViUS *100153OF WUAIREN ST FiLUWRM HUM\. P\.R\. -9 1 0 CLAsSmCAIMO OF rLUm iM TEN\. S000\. toe - 17 NATIUALI\. Aml Um-USE L S\.A\.A\.E\. 3 slit 1\.2 m#fi - 40 DhvszMN13 of lviM= SD?r\. low0 p 730 sell - 2s i7mIIL Simt it PBX, \.0N8 OUS *50 msph so pall 30 to 415W to AND P00075W cows t00 U\. n 0\. - in mDSU\. or  Annex 3 Page 5 of 6 C 0VPLUH CWOLAWCS P O L L U J I O L V 1 L S UESTA UlINVW?IUT IN ACrIE VEW (Mr\.) W\. RSULTS VARIATION To acmr Vin SEEIT\. CwrE * NPANr LOCATON FROICr CRIPTION PROCUN OP oDliVE S SAI8PLE NON OSrTAIN t NASLISHD POVU OBTANME sIfIUNI C1oS PORTLAN WROSr O UALIATION 0DM DT 1001 100 YS 2 J3\.85 &S 5\.82 kg/h - 5 DUST COLECTORI Zs Io * CIUL, S\.A\. DI C1ZEGS, DWS, AN OM 3 27\.59 kg 6\.52 kgIh - 6 DECREAS in C\. O\. cEImc OsTOma ESaSSIzO or RtOWE Or ANf 8171- PVULLS ANT INI rn\.1 ID WADAI DUlST A2' nsPB PARTICaS MM A CASES, AND ALW ITS to Rwa= DTM cEilU- MS in i PRO- 7108 Ug ME AIIOSPUZ\. OXTIO pFx=S\. PM SN JU\. qUIRTARO ZSTALLATION 0oJ AIOLOCECAL 1003 on raIORE 300C 0c 07 Anssw O rEo, USm Or SU- m Io= S\. DR C\.r\. TI3W PAN ro AVOID P\.m\. *\.5 - U\.5 5\.2 0 SES6pIID£ SOLIDS' MAER CEZERD C4JmANIIO# o0 TVATR SUM\. SOLIVS 5 pp\. 104\.75 ppM 4\.75 SPIUMArS AID ST YeT CaOAST DRAINED DTlD sN JON SIJDl\. SOIDS UN i UN JDEPR 0 oRr oY or 0FO AR2XVCTURL I RIM IN STW$AT OF n127INIeIT\. ABSEr AuSS 0 0WID OILS in PURSES\. W qORTAM\. IISiNA7 s pp 2\. 12 MP - 58 f SFJNIW AOD GarS oIs lo Fp\. *2 pm\. 4392 A VII AREA\. ,cam 100 Pt-CO NA D50S IOD 5il 2\. 11 \.1t ISQUl\. S\.A\. DR C\.V\. RosS ENrAUATION OF EW Tos 1002 M MNW Srr\. CARUED OUTr 7n=0 AGtIUNr\. INERNaL KSRE- COWL or pa FS MI ABSRS 33W A *OS ro aEn IDICATE POLLmInO sWNATma W POLLUON 58\.9 - 9\.9 OSRCGLNA7ED SOL= ZR NS NSMUranl ABSORTION ON Tof onSSIO MOT\. mrTum oXES\. Or NITA= VAPOUS I TEE AUESPDUI\. VWIEA OCSDI, S\.A\. HUCOR Cm WnTAUATON OF A AtE= 1001 lOOt CWuLS VI PATI 0W fstlUwU STSTMIID UStASIW Ns or svs iLI To ZIIRIU SOLM\. OIlS\. GRAK U4SI*1 AN 'S sms or in a MMTE MU ATr\.  AnneX 3 Page 6 of 6 W5aWi GAA s LL r I O L IV L S t rUUt5 rAm VIINSJU ZN A(UVDW (Ka\.) ssT\. uLts VAIU2ZW to ro ar mn I S aW cMAIN LOAr2W n AaM DcarmoR FROMx or OsinzS csAI NM 2 OrIUJ g spm nAM=\. S\.A\. o m ar LaW IWAUION aOF apenar AOtt toot agmms \.wf C\.v\. TD MSg ISSM9S zRtl IYU Il ATXSMSAnt or LiSTSm MM hO\. SW AjuwnZc mr, I: ID ZUW* svwmn aw~ os, ACDS, AiD onnR l oIL\. am= OIP __ I Z 11 S NO Off CISL C132IflCSTO SWIN 131 WARMA$IM MM AOD MN RAS OF SLOTMN 2WsSIZOVS MD71 13 U MWIU\.

APPROVAL

P160554

COMBINED PROJECT INFORMATION DOCUMENTS / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) ADDITIONAL FINANCING Report No\.: PIDISDSA19643 Date Prepared/Updated: 28-Sep-2016 I\. BASIC INFORMATION A\. Basic Project Data Country: Madagascar Project ID: P160554 Parent P149323 Project ID (if any): Project Name: AF Social Safety Net Drought Response (P160554) Parent Project Social Safety Net Project (P149323) Name: Region: AFRICA Estimated 07-Nov-2016 Estimated 10-Nov-2016 Appraisal Date: Board Date: Practice Area Social Protection & Labor Lending Investment Project Financing (Lead): Instrument: Borrower(s): Implementing ONN/PNNC-SEECALINE, FID Agency: Financing (in USD Million) Financing Source Amount International Development Association (IDA) 15\.00 IDA Credit from CRW 20\.00 Financing Gap 0\.00 Total Project Cost 35\.00 Environmental B - Partial Assessment Category: Appraisal The review did authorize the team to appraise and negotiate Review Decision (from Decision Note): Other Decision: Is this a No Repeater project? Page 1 of 11 B\. Introduction and Context Country Context Madagascar is one of the poorest countries in the world with respect to both the breadth and depth of poverty\. Almost 78 percent (2015) of Madagascar➢❨ s population of 24\.2 million people live on less than US$1\.90 per day\. These 19 million people make Madagascar the country with the sixth highest number of poor in the world \. A stunningly high proportion of close to 60 percent of the population is estimated to be extremely poor based on the minimum food intake methodology\. This means that close to 13 million Malagasy people live on resources that fall below the cost of about 2,100 calories a day\. Madagascar also has the world➢❨ s fourth highest rate of chronic malnutrition , with almost half of all children under five stunted\. The ➢❨ Deep South➢❨ is the poorest and most isolated part of the country\. Three regions belong to the ➢❨ Grand Sud➢❨ : Androy, Anosy and Atsimo Andrefana\. An analysis of the socio- economic situation of the eight drought-affected districts of the South confirms the severe underperformance of the region in all human development related aspects\. Almost half of the children ages 6 to 10 never go to school, alphabetization rates for people ages 15 and higher are much lower at 43,7 percent against 71,6 percent at the national average, and average food consumption per capita is about 1/3 lower than the national average\. Vaccination rates for children 12 to 23 months are between 31percent and 37percent, compared to a national average of 51percent\. The South is also characterized by a fragile social and political context (e\.g\. trafficking of cattle/gold/gems, abuse of human rights) with increased insecurity due to roaming gangs and a general sense of lawlessness\. Sectoral and institutional Context The South is one of the most under-served regions of the country with respect to public investment\. The Public Expenditure Review (PER) of the health and education sectors conducted by the World Bank and UNICEF in 2014/15 shows that the poorest regions have thelowest amount of spending on these key sectors (see Annex VII)\. The low amount of education and health expenditure in rural areas as compared to urban areas is indicative of large inequities in the distribution of public resources, mostly driven by the inequitable distribution of investments and human resources across the country\. Cuts in public spending to social sectors during the crisis resulted in large increases in out-of-pocket household spending, in particular on education\. This had far-reaching consequences for children➢❨ s enrollment in primary schools and learning outcomes, as well as the utilization of health services\. Furthermore, investments in economic infrastructure (roads, water, electricity etc\.) have been largely absent in the last decades\. Instead, a substantial amount of humanitarian aid has been brought into the country to support the population of approximately 6\.4 million people, largely through food aid\. In addition to the already harsh living conditions in this region, the more recent phenomenon of El Niño caused a prolonged, severe drought, particularly affecting the South\. The population of this region has already suffered through several successive years of poor crop yields, starting with a major locust invasion in 2013\. The last two years have seen droughts that are more severe and broader in scope than predicted\. Poor crop yields and the subsequent decimation of livestock have had a devastating impact on the population in the South\. The Ministry of Agriculture in collaboration with the World Food Program (WFP), the United Nations Food and Agriculture Organization (FAO), and UNICEF have been assessing the situation periodically over the past year\. According to data collected in late February 2016, they estimated that: Page 2 of 11  ➢❨¢ 1,140,000 people are in a situation of food insecurity (about 80 percent of the population of the Southern districts), of which more than half are in a situation of severe food insecurity\. This is 14 percent higher than in March 2015; ➢❨¢ 45,000 children between 6 months and 5 years suffer from Moderate Acute Malnutrition (MAM); 10,000 suffer from Severe Acute Malnutrition (SAM) with faster rising trends in the past year; ➢❨¢ In a number of communes, moderate acute malnutrition of children is now above the 15- percent mark signaling an emergency in terms of nutritional outcomes\. In some pockets of the Androy region, large food consumption gaps are likely, in line with Emergency (IPC Phase 4 ) expected outcomes between October 2016 and January 2017 ; ➢❨¢ Crop yields will be nil for maize and at 20 percent of the historical average for cassava, the main staples of the poor in the South\. The AF will provide cash transfers, livelihood recovery grants and nutrition services to over 65,000 extreme poor households (approximately 300,0000 people) in the most drought-affected communities of the regions of Androy and Anosy of Madagascar\. Over time, the AF will transition from emergency response to early recovery through safety net and nutrition services that will be increasingly aligned with the ongoing safety net services and enhanced community- based nutrition services of other regions, thus moving towards a more development oriented approach\. The AF will scale up the following components of the SSNP over a three year period: ➢❨¢ Subcomponent 1\.3: Early Recovery Response to Natural Disasters (original $4 million, additional $30\.9 million ) - scale-up through cash transfers, nutrition treatment and prevention services, and livelihood recovery grants\. In light of the high rate of moderate acute malnutrition among children under five and the fact that the initial credit of the IDA-funded Emergency Support to Critical Education, Health and Nutrition Services Project (➢❨ PAUSENS➢❨ , P131945) will close in December 2016, the subcomponent will include financing for key nutrition interventions; ➢❨¢ Component 2: Strengthening Safety Net Administration, Monitoring, and Social Accountability (original $6\.5 million, additional $3\.1 million)- scale-up funding for project management; and ➢❨¢ Component 3: Building the institutional capacity for coordination, monitoring and evaluation of the social protection system (original $3\.3 million, additional $1 million) ➢❨ scale- up to strengthen the Government➢❨ s presence in the South of Madagascar\. C\. Proposed Development Objective(s) Original Project Development Objective(s) - Parent The project development objective (PDO) is to support the government in increasing the access of extremely poor households to safety net services and in laying the foundations for a social protection system\. Key Results The following are the key results indicators being measured as part of the Additional Financing: PDO LEVEL INDICATORS: Page 3 of 11  a) REVISED: Direct project beneficiaries: end target revised upward to include additional population to be targeted by the AF b) NEW: Pregnant/lactating women, adolescent girls and/or children under age five-reached by basic nutrition services (number): added to account for new nutrition activities under the AF Breakdown Indicators: -Children under age five treated for moderate or severe acute malnutrition (number) -Pregnant/lactating women, adolescent girls and/or children under age five- reached by basic nutrition services (number) INTERMEDIATE LEVEL INDICATORS: a) NEW: Percentage of safety net beneficiaries in the South using the livelihood grant for productive activities: added to account for new safety nets activity in the South under the AF b) NEW: Children 0 to 59 months monitored at the community nutrition sites: added to account for nutrition activities under the AF c) REVISED: Beneficiaries of Safety Nets programs (number): End target revised upward to include additional population to be targeted by the AF Breakdown Indicator: -Beneficiaries of Safety Nets programs - Female (number) D\. Project Description The AF will scale up the activities under the "Early Recovery Response to Natural Disasters Subcomponent (1\.3) of the Social Safety Net Project\. It includes the following new activities: a\. The payment of cash transfers to about 65,000 drought-affected households (300,000 people) in the selected five districts\. Based on updated beneficiary lists of the nutrition program, the FID will enroll eligible households for the cash transfer program in October 2016 so that first cash payments can start in November 2016 to about 45,000 pre-identified households with children 0-5 years of age\. Monthly payments will be made to the female head of the household\. An additional 20,000 households with children 6-12 will be enrolled in 2017 to receive payments as soon as possible\. All cash payments will be delivered through third party entities such as microfinance institutions, mobile banking agents, or NGOs, based on a competitive selection process\. The cash transfers will evolve in the second year into conditional cash transfers linked to health and/or education services where available and will continue over a two year period\. To harmonize the emergency cash program with the regular Human Development Cash Transfer (HDCT) Program implemented under Component 1\.2 of the project, the cash transfer will be reduced to the level provided under the ongoing HDCT program with bi-monthly payments to the female household head\. b\. Beneficiary households will also receive livelihood recovery grants to allow for the purchase of inputs/assets for livelihood recovery\. The first livelihood grants will be made available during the first three months of the emergency response (during November 2016 to January 2017) due to the fact that this time coincides with the planting season in the south, and that the precipitation forecast for the coming season is favorable\. FAO, USAID and others are working on ensuring the provision of seeds\. A second and larger livelihood recovery grant will be provided to beneficiaries in 2017, based on some orientation in business development and as far as possible in collaboration with micro-finance organizations\. Beneficiaries will be accompanied Page 4 of 11 over several months by local organizations to follow through on the livelihood activities\. c\. Funding for emergency response in light of an expected strong cyclone season due to La Nina in 2017\. The AF will also include up to US$ 2 million to prepare for emergency response to the expected effects (floods, cyclones, etc\.) of La Nina\. Activities include, as previously under subcomponent 1\.3, cash for work activities as well as the rehabilitation of damaged small-scale social infrastructure\. d\. Support for community-based nutrition services for treatment and prevention to about 74,000 children under five years of age and 19,000 pregnant/lactating women\. During the first year of the project, nutrition services will focus primarily on providing a treatment and management package for moderately acute malnourished children (MAM)\. This includes screening of children, messaging on MAM to primary caregivers, six two-month treatment cycles for children under five who have MAM which includes lipid-based food supplementation (Plumpy-Sup) for the child, a protective food ration for the family to ensure compliance of the MAM treatment , and household level follow-up of families with cases of MAM\. In addition, there will be referral from the community nutrition sites to health facilities for treatment of SAM cases\. In year two and year three, treatment of MAM cases will focus on a screening of children, messaging on MAM to primary caregivers, lipid-based food supplementation for the child, and household level follow-up of families with cases of MAM\. A more comprehensive nutrition package will be also be gradually scaled-up to include preventative services\. This package will harmonize with other parts of the country and is currently being refined as part of the preparation of the new HNP IDA operation\. These activities may include (but not limited to) a) growth monitoring, b) behavior change communication around reproductive, maternal and child health/ nutrition (RMCHN), acute malnutrition and chronic malnutrition, c) intensive counseling, d) food diversification education including culinary demonstrations, d) early stimulation activities for children 0-30 months to increase impact on early child development outcomes and e) scale-up of effective prototypes currently being tested around behavior change, including messaging to mothers, more effective behavior change communication models at the community nutrition sites, training/coaching of service providers and women➢❨ s cooperatives/income-generating modalities (for more detail, see Annex II)\. Components 2 and 3 of the SSNP will be also be scaled up under the AF\. US$3\.1 million will be added to Component 2 of the SSNP to ensure proper management of the safety net activities under the AF\. This will include the opening of an additional FID office in the South (Fort Dauphin ) and a satellite office in Ambovombe, as well as funding for logistics, training of trainers, communication, payment fees etc\. Furthermore, Component 3 will get an additional US$ 1 million to enable the MPSPWP to carry out its coordination, monitoring and evaluation function in the South\. This includes the rehabilitation of the two local offices, provision of transport, operating costs and technical assistance to enhance the Ministry➢❨ s presence in the region and facilitate coordination, particularly between the humanitarian and the development partners\. It also includes funding for program monitoring and evaluation\. Component Name Comments (optional) Page 5 of 11  E\. Project location and salient physical characteristics relevant to the safeguard analysis (if known) Anosy and Androy regions F\. Environmental and Social Safeguards Specialists Paul-Jean Feno (GEN07) Peter F\. B\. A\. Lafere (GSU01) II\. Implementation Institutional and Implementation Arrangements Subcomponent 1\.3 and Component 2 are implemented by the Government of Madagascar➢❨ s Intervention Fund for Development (FID)\. The nutrition activities that will be included under the component 1\.3 as part of the AF (for a total amount of $8\.5 million) will be implemented by the Project Implementation Unit (PNNC) of the National Community Nutrition Program (ONN) under the leadership of the National Nutrition Office (ONN)\. This is the same entidy that is managing the implementation of the nutrition component of PAUSENS\. The MPSPPW is responsible for the implementation of Component 3, as under the SSNP\. As such, all three institutions will carry the fiduciary responsibilities for their respective activities\. A Memorandum of Understanding (MOU) between the FID, ONN and the MPSPWP outlines the roles and responsibilities of the involved institutions, as well as the mechanisms for coordination, communication and monitoring\. III\.Safeguard Policies that might apply Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment Yes The policy is triggered because of the project OP/BP 4\.01 intended activities foreseen in component 2, which will rehabilitate or rebuilt school infrastructure in a cyclone proof way, with designs developed by FID and the Ministry of Education, as well as rehabilitate the back log of damaged community infrastructure that has been accumulated from past disasters\. Because of the site specific nature of the project, and its intended localized impacts, the Borrower has prepared an ESMF, built from similar active projects conducted by FID before in Madagascar\. Once ready, the ESMF will be consulted upon and cleared by the Bank prior to its public disclosure both in country and at the InfoShop before appraisal\. Natural Habitats OP/BP 4\.04 No The project is not being implemented in natural habitats and does not affect them\. Forests OP/BP 4\.36 No The project does not involve forests or forestry and does not affect them\. Pest Management OP 4\.09 No The project does not involve pest management\. The Project will promote organic fertilizers (manure and composts) without using chemical fertilizers and Page 6 of 11  pesticides (which would in any case be very expensive, inaccessible to the poor beneficiaries and not available in all project areas) Physical Cultural Resources Yes It is unlikely that there are physical cultural resources OP/BP 4\.11 in the project area, nevertheless, in the likelihood that such an encounter occurs during project implementation, provision of chance finds approach is been embedded in the ESMF that the borrower will apply as mitigation measures to avoid any potential adverse impacts on these physical cultural resources\. Indigenous Peoples OP/BP No The Policy is not triggered due to the fact that, 4\.10 although the project has a national coverage, given the budget constraint, the identified project activities in component 2 (rehabilitation and/or rebuilding of school and other local infrastructures affected by the cyclones) will be rather implemented in the following geographycal regions, namely, center- south, extreme-south and south-east located far away from the South-West where the Mikea community live\. Involuntary Resettlement OP/ Yes The Policy is triggered due to the civil works BP 4\.12 activities to be carried out under the rehabilitation and reconstruction of damaged infrastructure after disasters and Productive Safety Net\. Although up until now FID has been genuinely dealing with such small scales issues, the matter fact is that under this project, the volume of activities likely to lead to issues of land acquisition remains yet unknown\. Given the unknown footprint of the project, the Borrower has prepared an RPF to set forth the basic principles and prerogatives to be followed once details characteristics of the project sites are known\. Like the ESMF, the RPF has been consulted upon and cleared by the Bank prior to its public disclosure both in-country and at the InfoShop before appraisal\. Safety of Dams OP/BP 4\.37 No N/A Projects on International No N/A Waterways OP/BP 7\.50 Projects in Disputed Areas OP/ No N/A BP 7\.60 IV\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: Page 7 of 11  There are no potential large scale, significant and/or irreversible impacts associated with the original project or with the activities proposed for the additional credit\. The majority of activities financed under the AF are expected to have no environmental and social safeguard impacts as they consist of small cash transfers, capacity building & training, as well as the provision of technical assistance, materials, equipment and operational costs\. The scaling up of Components 2 and 3 of the Project is not expected to lead to any additional environmental or social safeguards impacts\. The proposed AF willl significantly scale up Component 1\.3 "Early Recovery Response to Natural Disasters" and would use similar instruments such as cash transfers and complementary measures like nutrition services\. Under this component, the AF activities are expected to have in siting environmental and social safeguard impacts as they focus on rehabilitating and reconstructing damaged infrastructures in the affected communities to respond to rapid-onset disasters like those produced by cyclones and flooding\. In the aftermath of a disaster, existing community infrastructure like classrooms/ schools, health centers, market places and feeder roads could be rehabilitated\. This part of the project activities could produce some adverse negative impacts\. Likely adverse impacts include air, soil and water pollution, loss of vegetation, soil erosion, traffic accidents, and potential loss of livelihoods and/or land required for future infrastructure investments\. The cash for works activities meant to provide cash to targeted poor families in exchange for their participation in small group community work activities may not expose them to significant risks of HIV/AIDS, other health or safety hazards, or cause damage to the existing physical and social environment\. Parts of the activities financed under this AF is similar with the parent project (P149323)\. No new environmental risks are expected to arise and the amendment is not foreseen to trigger any new safeguard measures\. Overall, the potential adverse environmental and social risks and impacts of both the original project and the proposed AF are expected to be small in scale and site specific, typical of category B projects\. The proposed AF remains Category B\. The same three safeguard policies from the original project maintained triggered: OP/BP 4\.01 (Environmental Assessment), OP/BP 4\.12 (Involuntary Resettlement) and OP/BP 4\.11 (Physical cultural Resources) and the current Environmental and Social Management Framework (ESMF) and Resettlement Policy Framework (RPF) for the parent project are sufficient and manage the risks and potential impacts under the proposed AF\. These Safeguard framework instruments of parent project (ESMF and RPF) were approved by the Bank and disclosed on 27-Feb-2015 in the country and to infoshop 06-Mar-2015 before Appraisal\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: As in the activities under the original project, the planned activities under the AF are not expected to incur any potential indirect and/or long term impacts\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. The proposed project activities for the AF are of the same nature and/or scale as the original Page 8 of 11  project and adverse impacts are expected to be minimal\. No alternatives have been considered\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. Since the exact physical locations of future civil works activities, namely reconstruction/ rehabilitation of small scale rural sub-projects as well as their potential localized adverse environmental and social impacts and risks will only be identified during implementation of the proposed project, the Borrower disposes the safeguard instruments of the original project which are the Environmental and Social Management Framework (ESMF); and its Resettlement Policy Framework (RPF)\. The ESMF outlines an environmental and social screening process for future sub-projects to ensure that they are environmentally and socially sound and sustainable\. The RPF outlines the policies and procedures to be followed in the event that resettlement action/ compensation plans will need to be prepared to mitigate potential adverse social impacts due to land acquisition\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. Key stakeholders include: women, youth and vulnerable groups, the beneficiary municipalities and local communities, including possible private firms to be procured to undertake some of the activities\. The original Social Safety Net Project preparation process included a participatory consultative process\. Extensive public consultations have been conducted during the preparation of ESMF and RPF to take into account the views and perceptions of communities and various stakeholders regarding the design and scope of the project\. The ESMF and RPF of the parent project will be re-disclosed both in-country and at the Infoshop prior to effectiveness of the AF\. B\. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 23-Feb-2015 Date of submission to InfoShop 30-Sep-2016 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure Madagascar 30-Sep-2016 Comments: The relevant documents for the AF would be disclosed prior to appraisal\. Resettlement Action Plan/Framework/Policy Process Date of receipt by the Bank 23-Feb-2015 Date of submission to InfoShop 30-Sep-2016 "In country" Disclosure Madagascar 30-Sep-2016 Comments: The relevant documents for the AF would be disclosed prior to appraisal\. If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: Page 9 of 11 C\. Compliance Monitoring Indicators at the Corporate Level OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) Yes [ ] No [ ] NA [ ] report? OP/BP 4\.11 - Physical Cultural Resources Does the EA include adequate measures related to cultural Yes [ ] No [ ] NA [ ] property? Does the credit/loan incorporate mechanisms to mitigate the Yes [ ] No [ ] NA [ ] potential adverse impacts on cultural property? OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/ Yes [ ] No [ ] NA [ ] process framework (as appropriate) been prepared? If yes, then did the Regional unit responsible for safeguards or Yes [ ] No [ ] NA [ ] Practice Manager review the plan? Is physical displacement/relocation expected? Yes [ ] No [ ] TBD [ ] Provided estimated number of people to be affected Is economic displacement expected? (loss of assets or access to Yes [ ] No [ ] TBD [ ] assets that leads to loss of income sources or other means of livelihoods) Provided estimated number of people to be affected The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] with the borrower and the same been adequately reflected in the project legal documents? Page 10 of 11 V\. Contact point World Bank Contact: Andrea Vermehren Title: Lead Social Protection Special Contact: Jumana N\. Qamruddin Title: Senior Health Specialist Borrower/Client/Recipient Name: Contact: Title: Email: Implementing Agencies Name: ONN/PNNC-SEECALINE Contact: Christian RANAIVOSON Title: National Director Email: chri\.ranaivoson@gmail\.com Name: FID Contact: Rasendra Ratsima Title: Directeur General Email: "FID - Rasendra RATSIMA" <dirgen1@fid\.mg>, VI\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop VII\. Approval Task Team Leader(s): Name: Andrea Vermehren,Jumana N\. Qamruddin Approved By Practice Manager/ Name: Dena Ringold (PMGR) Date: 28-Sep-2016 Manager: Country Director: Name: Cristina Isabel Panasco Santos (CD) Date: 29-Sep-2016 Page 11 of 11

APPROVAL

P176327

 The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 16-Jun-2021 | Report No: PIDC31546 May 25, 2021 Page 1 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) BASIC INFORMATION A\. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Ethiopia P176327 Ethiopia Integrated Disaster Risk Management Project (P176327) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) AFRICA EAST Feb 07, 2022 Apr 29, 2022 Urban, Resilience and Land Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Federal Democratic Republic Basins Development of Ethiopia Authority, Ministry of Urban Development and Construction Proposed Development Objective(s) The Project Development Objective is to support the Government of Ethiopia to strengthen institutional capacity and coordination for disaster risk management, reduce flood risks and improve flood risk management, and strengthen financial protection against disasters\. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 300\.00 Total Financing 300\.00 of which IBRD/IDA 300\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 300\.00 IDA Credit 150\.00 IDA Grant 150\.00 May 25, 2021 Page 2 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) Environmental and Social Risk Classification Concept Review Decision Substantial Track II-The review did authorize the preparation to continue Other Decision (as needed) B\. Introduction and Context Country Context 1\. Ethiopia has achieved rapid and inclusive economic growth while undergoing significant socio-demographic change\. Ethiopia, a landlocked country bridging the Horn of Africa (HoA), North Africa and the Middle East, is a federal parliamentary republic divided in ten ethno-linguistically based and politically autonomous regional states and city administrations\. Ethiopia is Africa’s second most populous country with a total population of more than 115 million\. Population growth has continuously slowed in recent years but still stands at a high 2\.6%\. The majority of the population lives in rural areas, and the share of the urban population (21%) is among the lowest in the world, well below the average for Sub-Saharan Africa (41%)\. Ethiopia is one of the most rapidly urbanizing countries\. With urban population growth averaging over 5% in the past ten years, the urban population has increased from 15\.2 million in 2010 to 23\.8 million in 2019, expecting to reach more than 42 million (or 30% of the total population) by 2030\. The economy experienced strong, broad-based growth averaging 9\.4% a year from 2010/11 to 2019/20\. Ethiopia is one of the most equal countries in the world and low levels of inequality have, by and large, been maintained throughout the period of economic growth\.1 The Covid-19 pandemic, however, has slowed Ethiopia’s growth to 6\.1% in 2019/20, and there are signs that school closure and other containment measures that disproportionately affected the poor will widen inequality gaps\.2 2\. Ethiopia has made remarkable progress in poverty reduction, but disparities remain between urban and rural areas\. Since 2000, when Ethiopia had one of the highest poverty rates in the world, the share of people living below the national poverty line has nearly halved from 44% to 23\.5% (2016)\. Underpinned by strong and sustained economic growth, poverty reduction was particularly high in urban areas, where the poverty rate in recent years declined from 26% in 2010 to 15% in 2015\. Conversely, progress was more modest in rural areas, with a decrease in poverty from 30% to 26% over the same period\. Urban poverty reduction was the result of solid growth in employment and increasing returns to self-employment, while agricultural growth drove reductions in rural poverty, bolstered by pro- poor spending on basic services and effective safety nets\.3 1 World Bank, 2015\. Ethiopia Poverty Assessment 2014 2 Tiruneh, 2020\. COVID-19 school closures may further widen the inequality gaps between the advantaged and the disadvantaged in Ethiopia\. Blog, Cambridge Partnership for Education 3 Bundervoet et al\., 2020\. Ethiopia Poverty Assessment - Harnessing Continued Growth for Accelerated Poverty Reduction\. May 25, 2021 Page 3 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) 3\. Chronic food insecurity, in combination with climate-related disasters (flood and drought) exacerbated by conflicts and other shocks (locust invasion), are undermining Ethiopia’s gains in growth and poverty reduction\. Ethiopia has been suffering from chronic food shortage\. About 8\.5 million people currently face high levels of food insecurity, driven by economic decline, Covid-19 measures, desert locust, as well as disaster and conflict-related displacement\.4 The Covid-19 pandemic had limited health impacts compared to other regions,5 but the measures put in place to contain the Covid-19 spread had negative impacts on food security, and severe social and economic consequences, especially in urban areas, where household incomes declined most, primarily due to reduced demand which affected income generation from self-employment, wage-employment, and household enterprises\.6 The desert locust outbreak in 2020 – reportedly the worst in several decades, which affected large parts of the HoA following a wetter than usual rainy season – destroyed crops and pastures in rain-fed areas of the Amhara, Tigray, Afar, Somali and Oromia regions, further reducing food availability and impacting the food security and livelihoods of the affected population\. Control campaigns have meanwhile tamed the locust upsurge, but a renewed outbreak poses a significant risk for agricultural production and food security\. Finally, the conflict in Tigray, whose outbreak coincided with the peak harvest period, has led to a sharp increase in the number of people in need of emergency food assistance, and is threatening to undermine the economic and social development outcomes achieved in Ethiopia in recent years\. Sectoral and Institutional Context 4\. Ethiopia is exposed and vulnerable to climate-related hazards, most notably droughts and floods\. Prone to multiple natural hazards, including droughts, floods, and landslides as well as earthquakes, volcanoes, and wildfires, Ethiopia ranks 23rd in the world for mortality risk from multiple hazards with an estimated 70% of its population at risk\. From 1970 to 2018, 105 disasters were recorded, affecting more than 45\.8 million people\.7 Droughts are a prevalent hazard in Ethiopia with more than 19 periods of widespread and severe food shortages recorded in the past 100 years\. Models show that on average about 1\.5 million people are affected by drought each year, but this number can be substantially higher in dry years (e\.g\. about 5 million people are affected by a 1-in-10-year event)\. Flooding poses a threat to large parts of the country\. Lowland, highland, and urban areas alike are affected by recurrent flooding, especially during and following intense and sustained rainfalls in the June-September rainy season\. Modelled impacts show that floods annually affect about 250,000 people and damage about US$ 200 million of buildings and US$ 3\.5 million of cropland\.8 5\. Floods are a recurrent hazard in many parts of Ethiopia, and there are indications that they have increased in frequency and intensity since the early 2000s\. Despite having received little attention compared to droughts, floods are a recurrent seasonal phenomenon in many parts of Ethiopia\. While historical records are fragmented9, there are clear signs that since the early 2000s floods have become more frequent and intense in terms of number of casualties and people affected\.10 Between 2000 and 2010, damaging flood events were recorded in every year besides 2001, and affected 80% of woredas in all regions of the country\.11 Flood statistics as well as flood models indicate that the Somali, Gambella, Oromia, and Amhara regions are particularly prone to flooding, i\.e\. more frequently affected than others \. 4 IPC, 2020\. IPC Acute Food Insecurity Analysis October 2020 – September 2021, Issued December 2020\. 5 As of 19 April 2021, the country reported 3,370 coronavirus-related deaths\. 6 UN, 2020\. The Socio-Economic Impact of Covid-19 in Ethiopia\. 7 DFRI Country Notes – Working Paper\. 2012\. Ethiopia: Disaster Risk Financing and Insurance Country Note\. 8 World Bank/GFDRR, 2019\. Ethiopia Disaster Risk Profile 9 Weldegebriel and Amphune, 2017\. Livelihood resilience in the face of recurring floods: an empirical evidence from Northwest Ethiopia 10 EM-DAT, 2021 11 EM-DAT, DesInventar, 2020\. Ethiopia Country Profile May 25, 2021 Page 4 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) 6\. Severe flooding in the 2020 rainy season damaged physical assets and affected peoples’ lives and livelihoods\. Heavy and prolonged belg and kiremt rains between April and September 2020 led to severe flooding and landslides in many parts of Ethiopia, with Afar, Oromia, Gambella, SNNP, Somali and Amhara regions most severely affected\. 12 According to records by the National Disaster Risk Management Commission (NDRMC), 288 people died, an estimated 1,017,854 people were affected and 292,863 people were displaced by the floods, which were reportedly the most severe in decades\. As a systematic local data on the floods damage is not available, the World Bank conducted a remote flood damage assessment of the 2020 floods\. The analysis showed that the floods inundated in total 1\.02 million ha of land, predominately in Afar region, which accounts for almost 40% of the total flooded area\. The floods affected an estimated 38,600 buildings, 1,350 km of the road network and 164,000 ha of cropland\. Direct flood damage to just these assets is estimated at US$ ± 357\.5 million\.13 Damage was by far the highest in Oromia region (US$ ± 116\.5 million), followed by Afar (US$ ± 57\.3m) and Somali region (US$ ± 44\.9 million)\. 7\. Climate-related shocks and disasters compound Ethiopia’s development challenges and undermine progress in poverty reduction\. Ethiopia has achieved remarkable progress in poverty alleviation, but studies show that economic growth and development progress are strongly associated with the hydrological variability in the country\. During the 1984–5 drought, for example, GDP declined 9\.7%, agriculture output 21%, and gross domestic savings 58\.6%,14 and it took a decade for affected Ethiopians to return to their pre-disaster wealth, and asset-poor households to restore livestock holdings to pre-famine levels\.15 The economic implications of floods and the interlinkage between poverty and flooding in Ethiopia have not been studied in detail\. Global analysis shows that, in absolute terms, Ethiopia is among the top ten countries worldwide, with an estimated 2\.8 million poor people (at $1\.90/day) exposed to 1/100 year flooding events\.16 Case studies from flood-prone areas in the Northwest of Ethiopia moreover show that the poor are disproportionately vulnerable to flooding, given their savings are predominately in immobile assets (housing), and their livelihoods (agriculture, livestock) are more susceptible to flooding\.17 The 2020 floods also made evident the vulnerability of poor populations\. In Afar, one of the most heavily affected regions, which accounts for over 43% of the total displaced, rapid needs assessments show that the floods killed more than 16,000 heads of livestock, and compounded the already serious humanitarian situation, with the main priorities including shelter and non-food items, water, sanitation, and essential health services to meet the basis needs of the affected population\.18 8\. The institutional set up for DRM in Ethiopia is fragmented and inadequate to meet the challenges of the country’s changing risk environment\. The NDRMC is the formal focal government institution responsible for coordinating disaster response, risk management, preventive measures, and recovery programs\. The institutional arrangements for DRM underwent multiple changes in the past 50 years, reflecting the evolving strategic priorities and mandates in Ethiopia and the wider policy shift from drought and emergency relief towards a proactive, multi- sectoral, and multi-hazard approach in disaster management\. The NDRMC, formally established in 2016, emerged from predecessor institutions, notably the Relief and Rehabilitation Commission (1973-1995), the Disaster Prevention and Preparedness Commission/Agency (1995-2007), and the Disaster Risk Management and Food Security Sector (2007-2016)\. The NDRMC is currently structured under the Ministry of Peace as a part of ongoing efforts to streamline disaster and security related agendas in Ethiopia\. The NDRMC is mandated to coordinate across ministries at federal 12 Joint Government-Humanitarian Response Plan, Ethiopia – 2020 Kiremt Season Floods\. 13 Flood damages were estimated using maximum damage figures for Ethiopia by the European Joint Research Centre (JRC): Huizinga, J\., de Moel, H\., Szewczyk, W\. (2017)\. Global flood depth-damage functions\. Methodology and the database with guidelines\. JRC Technical Reports, EUR 28552 14 World Bank 2006\. Ethiopia: Managing Water Resources to Maximize Sustainable Growth 15 Dercon, 2004\. Growth and Shocks: Evidence from Rural Ethiopia\. 16 Rentschler and Salhab, 2020\. People in Harm’s Way\. Flood Exposure and Poverty in 189 Countries\. 17 Weldegebriel and Amphune, 2017\. Livelihood resilience in the face of recurring floods: an empirical evidence from Northwest Ethiopia 18 UNOCHA, 2020\. Afar Region: Flood Snapshot, as of 15 August 2020\. May 25, 2021 Page 5 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) levels, and the respective institutional units have been established, but it faces a challenge in effective DRM mainstreaming across sectors due to insufficient institutional weight, while limited resources and capacities across the different levels of government inhibit the NDRMC from providing the necessary ground support for disaster preparedness, response, and recovery\. These overarching challenges in Ethiopia’s DRM set up became particularly evident during the floods in 2020, as the NDRMC was overwhelmed by requests from the affected regions and was overburdened with the provision of ad hoc support\. 9\. Multiple government entities play their respective roles in flood risk management; however, their coordination is a challenge for proper monitoring and sharing of hydromet information, integrated planning, and smooth implementation of investments\. The Ministry of Water, Irrigation and Energy (MoWIE) is the overarching institution for flood risk management, mandated for water resource management, irrigation, flood protection, and the provision of meteorological services\. It fulfills this mandate in coordination with a range of parastatal agencies and authorities structured under MoWIE, including the Irrigation Development Commission, the Water Development Commission, the Basins Development Authority (BDA), and the National Meteorological Agency (NMA)\. The BDA is responsible for the major river basins, where it leads flood management efforts, including the construction and operations and maintenance of flood protection measures (e\.g\. river training, dykes, retention basins), river and flow monitoring, and river basin management plans\. Urban floods are under the responsibility of the Ministry of Urban Development and Construction (MUDCo), resulting in coordination challenges related to the protection of cities from river floods and the encroachment of settlements into flood hazard areas\. Weather and climate services are provided ‘in house’ through NMA, which facilitates coordination of Early Warning Systems (EWS) for hydro -meteorological events\. The Flood Task Force, a coordinating body headed by the NDRMC, is activated mainly in the event of flooding to provide operational guidance, monitor the flooding situation, and disseminate early warning information to at-risk populations\. 10\. During the past ten years, a DRM policy and strategy have been put in place, but gaps persist in their programming and delivery\. A National Policy and Strategy on Disaster Risk Management was developed in 2013\. The policy marks a milestone in the transition from a mere crisis response towards more integrated approaches in DRM\. The DRM Strategic Program and Investment Framework developed in 2014 was intended to operationalize the DRM policy by identifying priority investment areas with estimates of the financing needs to be provided by the Government of Ethiopia (GoE) and development partners\. Furthermore, a Guideline for Mainstreaming Disaster Risks into the Development Planning Process and Future Investment Decisions (2017) was prepared to enhance cross-sectoral coordination\. However, the DRM Strategic Program and Investment Framework remains to be used, programmed, and budgeted, while policy coordination is weak in practice, reflecting the general policy delivery gap of DRM in Ethiopia\. This is closely linked to the missing regulatory and implementation framework\. Although recommended in the National Policy and Strategy on Disaster Risk Management, a national law on DRM to assign ministries and government entities their respective roles and mandates related to DRM has not been drafted or issued\. The GoE is cognizant of the challenges in DRM and determined to address the underlying deficiencies\. The National Planning Commission of Ethiopia is currently updating its 10-year development plan (2021-2030) and it is expected that DRM will have a more prominent role than in the previous Growth and Transformation Plans\. The strategic reorientation is informed by a comprehensive review of the DRM system\. Under the leadership of the Ministry of Peace, a reform task force is investigating legislative, policy, and directive gaps to determine how the DRM system and its institutional structure may be enhanced to better fulfill its mandate and meet the DRM challenges\. 11\. The GoE's investments related to DRM with the support of donors and development partners have, for a long time, heavily focused on emergency response to droughts as well as water resource management and irrigation, but relatively little to address the issue of flood disasters\. Given the recurrence of droughts and the predominant May 25, 2021 Page 6 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) challenges related to water scarcity and food insecurity, investments in Ethiopia for a long time focused on drought response and irrigation\. Recent years have seen some investments in multi-purpose infrastructure (integrated drought and flood management), including smallholder drainage, groundwater recharge, as well as small-scale flood protection in combination with water harvesting, such as water-spreading weirs\. Comparatively little public investment has gone into programmatic flood protection (such as dykes or retention basins) and the country lacks medium to longer-term investment strategies and programs for flood risk management\. Data infrastructure and services for early warning and stream flow monitoring improved in recent years, but the geographic coverage of observation and gauging stations remains low\. The lack and under-exploitation of hydrometeorological services and data presents a fundamental impediment for flood risk assessment, and the design of flood protection and drainage infrastructure\. 12\. The GoE currently has limited pre-arranged and earmarked financial instruments to provide timely and sufficient financial resources to meet the needs resulting from disasters\. There is a federal level contingency budget line for emergency response, although this is not exclusively committed to disasters and of limited size, depleting quickly following significant shock events\. The Amhara and Oromia region have small contingency funds in place, but their exact purpose, size, and institutional arrangements with federal government bodies are not clearly established\. Other risk finance instruments mostly focus on drought-related agriculture risks, are of small scale, and externally financed\. In the event of disasters, the regional governments make requests to the federal government for resources, which are difficult to service with limited resources\. Additional post-shock finance is mostly sourced through development partners and some diversion of funds from other government budgets\. Diverted budget funds, however, risk the disruption of other long-term development efforts, and bi-annual needs assessments are often insufficient, late, and difficult to plan for\. The federal government’s Productive Safety Net Programme (PSNP) delivers cash and/or food transfers to 7-8 million rural Ethiopians for six months every year and is scaled up annually to provide emergency cash and food transfers in response to chronic drought and other events\. PSNP was introduced to gradually move away from the ad-hoc humanitarian appeals in addressing food insecurity in Ethiopia\. As a result a multi-year planning approach with predictable multi-year financing mechanism has been put in place\. 13\. The World Bank has provided longstanding support in the various elements of DRM and broader disaster and climate resilience, but gaps remain in addressing systemic issues of the DRM system and in leveraging investments to specifically address flood risks\. The longstanding flagship Productive Safety Net Program (PSNP), launched in 2005 and now in its fifth phase, has been addressing food insecurity and drought shock response, while supporting public works for watershed rehabilitation and soil and water conservation\.19 Several projects in the agriculture and environment sectors include investments in small scale, multi-purpose infrastructure (e\.g\. irrigation, water harvesting, water-spreading weirs, smallholder drainage), land restoration, soil and water conservation, and (micro) watershed management, which partially address recurrent drought and flood-related challenges\.20 The World Bank’s urban engagement also provides technical assistance activities on DRM at the city level, i\.a\. by enhancing the capacities for risk-sensitive urban development and emergency contingency planning\.21 While many of these investments have auxiliary albeit small benefits in flood mitigation, a more strategic and comprehensive approach to reduce and manage flood risks is desired\. 19 Since its inception, the PSNP has become one of the largest safety net programs in the world and has continued to evolve, seeking out better and more efficient means of graduating households from food insecurity\. PSNP is enhanced by the Strengthen Ethiopia’s Adaptive Safety Net Project (SEASN), which aims to support the GoE to expand the geographic coverage of the safety net to additional drought-prone woredas and strengthen the capacity to function as an integrated shock responsive safety net system under a common framework for humanitarian food assistance\. 20 cf\. Lowlands Livelihood Resilience Project (LLRP), Ethiopia Resilient Landscapes and Livelihoods Projects (RLLP) or Integrated Agriculture Development Project (I-ADP) 21 Urban Institutional and Infrastructure Development Program (UIIDP) May 25, 2021 Page 7 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) 14\. The proposed Integrated Disaster Risk Management Project (IDRMP) (the Project) will fill critical gaps related to DRM in general and flood risk management in particular, which has so far received limited attention despite floods having long been recognized as one of the major disasters in the country affecting the lives and livelihoods of the poor and vulnerable for many years\. The Project follows a request from the Ministry of Finance22 issued against the flood events during the 2020 rainy season mentioned above, for the World Bank’s technical and financial assistance including investments in flood protective measures in disaster-prone areas\. In line with the evolving policy paradigm for integrated approaches in disaster and flood risk management, the Project seeks to address Ethiopia’s underlying challenges of DRM by leveraging physical investments in flood risk reduction and early warning, strengthening institutional DRM capacities at the federal and regional level, and enhancing financial preparedness and disaster risk financing\. While previous and ongoing World Bank operations have been supporting elements of DRM in Ethiopia, this Project aims at building the foundation to reduce disaster risks, with a focus on floods, and to improve overall DRM systems, for strengthening the longer-term disaster and climate resilience of the country\. Relationship to CPF and Other Higher Level Objectives 15\. The Country Partnership Framework (CPF) for the Federal Democratic Republic of Ethiopia (FY18 –FY22) indicates the importance of building resilience to address the country’s development challenges\. The CPF highlights the leading role of Ethiopia’s federal government in incorporating climate change and resilience into its development strategy and acknowledges the progress made in natural resource management and reducing the vulnerability to climate shocks, in particular droughts\. The proposed project supports Objective 2\.7\. of the CPF to enhance the management of natural resources and climate risks, which among others states that World Bank operations will continue to support resilience to drought and flooding, and introduce policies that reduce climate and disaster risks\. 16\. The proposed Project supports the World Bank’s twin goals to end extreme poverty and promote shared prosperity in a sustainable manner\. The Project intends to reduce the exposure and vulnerability of poor populations to flooding, which is one of the major and recurrent disasters in Ethiopia\. Further, the Project will leverage the support for institutional strengthening and financial preparedness to reduce the congruence of poverty and disaster risk and mitigate the welfare impacts of disasters\. The Project also follows other higher goals and strategies: World Bank Group's Gender Strategy (FY16-23)23; IDA 19 priorities related to climate co-benefits, jobs, gender; and, the World Bank New Generation Africa Climate Business Plan\. 17\. The proposed Project is in line with World Bank Group document “From COVID-19 Crisis Response to Resilient Recovery - Saving Lives and Livelihoods while Supporting Green, Resilient and Inclusive Developmentâ€?, which highlights the importance of looking into long-run goals of greener, resilient, and inclusive development\.24 The unequal effects of Covid-19, the recession and climate shocks are compounding each other, creating potentially permanent scars on productivity, human capital and economic mobility\. The document proposes to move from crisis to recovery and build foundations for sustainable growth, with “greenâ€?, “resilientâ€?, and “inclusiveâ€? as three important dimensions to achieving a more sustainable and equitable recovery and long-term development paradigm\. The proposed Project considers all measures suggested under the “Resilientâ€? pillar of the paper, i\.e\. risk identification, risk reduction, residual risk management, and inclusion of vulnerable groups, as well as relevant measures under “Greenâ€? 22 The request letter, with the subject header “Support towards the recent Flooding Events in Ethiopiaâ€?, was submitted by the St ate Minister to the World Bank Country Director on October 6, 2020\. 23 http://documents1\.worldbank\.org/curated/en/820851467992505410/pdf/102114-REVISED-PUBLIC-WBG-Gender-Strategy\.pdf 24 World Bank Group\. “From COVID-19 Crisis Response to Resilient Recovery - Saving Lives and Livelihoods while Supporting Green, Resilient and Inclusive Development (GRID)â€? 2021\. May 25, 2021 Page 8 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) and “Inclusiveâ€? pillars\. As seen in many flood protection projects around the world involving rehabilitation/construction of embankments, dykes, levees, the Project is expected to create a number of temporary employment opportunities to the local communities, which would contribute to quicker recovery from the economic shocks of Covid-19\. 18\. The proposed Project will support the GoE in its efforts to reduce poverty through quality growth and build longer-term disaster and climate resilience, as described in its Ten-Year Perspective Development Plan (2021 – 2030)\. It will support the operationalization and implementation of the National Policy and Strategy on Disaster Risk Management developed in 2013 and the Disaster Risk Management Strategic Programme and Investment Framework developed in 2014\. The Project will also enable the GoE to implement the Sendai Framework for Disaster Risk Reduction 2015-2030 and its Nationally Determined Contributions (NDCs) in response to the Paris Agreement, and contribute to the Sustainable Development Goals relevant to DRM\.25 The Project is in line with regional strategies on DRM, such as the AU DRR Strategy and Programme of Action26, which is guiding the Africa countries to implement the Sendai Framework of Action 2015-2030, and the Intergovernmental Authority on Development (IGAD) Regional Flood Risk Management Strategy\. 19\. The Project will contribute to the above high-level objectives by strengthening the institutional and technical foundation to operationalize and mainstream DRM as well as to plan and implement flood risk reduction and management activities\. While there have been significant investments in humanitarian and emergency response in Ethiopia focusing primarily on food insecurities and in strengthening its distribution systems, the country is still at a nascent stage in planning and operationalizing forward-looking disaster risk reduction and management activities in a scalable manner\. C\. Proposed Development Objective(s) 20\. The Project Development Objective is to support the Government of Ethiopia to strengthen institutional capacity and coordination for disaster risk management, reduce flood risks and improve flood risk management, and strengthen financial protection against disasters\. Key Results (From PCN) 21\. The achievement of the PDO will be monitored and measured through the following key results indicators, all of which would be disaggregated by gender, where applicable: (a) Strengthened institutional capacities and coordination on disaster risk management; (b) People benefiting from reduced risks from floods (number); (c) Land area benefiting from reduced risks from floods (area); (d) People who can take action to protect their lives, livelihood and property based on flood early warnings (number); (e) Operationalize regional contingency funds to finance disaster preparedness and emergency response (number)\. 25 Disaster risk management cuts across different aspects and sectors of development\. There are 25 targets related to disaster risk management in 10 of the 17 sustainable development goals, namely: Goal 1, 2, 3, 4, 6, 9, 11, 13, 14, and 15\. 26 https://au\.int/sites/default/files/documents/33005-doc-sendai_framework_for_drr_2015-2030-en\.pdf May 25, 2021 Page 9 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) D\. Concept Description 22\. This Project envisages to equip the GoE with necessary frameworks and approaches to strategize and prioritize long-term and scalable disaster risk reduction investments focusing on floods, while actually implementing a first batch of urgent and most prioritized sub-projects on flood protection\. Furthermore, it also intends to strengthen DRM coordination among federal level agencies and between federal and regional level governments as well as to build the capacities of the DRM offices in regional governments to be able to better implement local level disaster risk management initiatives\. 23\. The proposed Project is an Investment Policy Financing (IPF) for an IDA credit of US$ 150 million and IDA grant of US$ 150 million\.27 An IPF is proposed as the financing instrument due to the following reasons: (a) Physical infrastructure shares a major portion of the scope and the GoE is still at nascent stage of flood risk management programming and implementation to apply a Program for Results (PforR) instrument; (b) there is currently no strong and operational ‘government program’ on DRM or flood risk management to build a PforR on; and (c) the operation is planned to involve multiple government entities, both vertically and horizontally, which is found to be complex to be implemented through a PforR\. The financing instrument choice of an IPF has been agreed with the Ministry of Finance\. The Project is proposed to be implemented over a period of five years\. Component 1: Strengthening DRM capacities and coordination 24\. This component aims at strengthening the capacities of selected institutions involved in DRM as well as the coordination on DRM among federal level agencies (including various sectors) and between federal and regional level governments\. For the strengthening of institutional capacities and coordination for the federal level agencies, key activities and expected outcomes will be prioritized through further discussions with the stakeholders\. For the strengthening of DRM offices in the regional governments, a capacity and needs assessment will be carried out for a group of representative regions to identify required institutional strengthening and policy and regulatory reforms on DRM, including areas such as risk identification and assessment, disaster damage and loss assessments, DRM institutional setup and policy/regulatory framework, planning and budgeting, information systems and knowledge management, disaster risk financing mechanism, emergency preparedness and response capacities, etc\. Activities envisaged under this component include technical assistance and capacity building for strengthening the above institutional capacities and coordination\. 25\. The current review of the DRM policy, institutional, and regulatory framework by the Ministry of Peace may result in specific recommendations for changes in the DRM system in the coming years\. During project preparation, close dialogue will be held with the Ministry of Peace and other relevant stakeholders to understand the reform recommendations for potential support under this Component\. Depending on the nature of the expected outcome of the activities, Performance-based Conditions (PBCs) may be proposed to better incentivize the initiatives and to ensure sustainability of the outcome and impact\. Component 2: Investments in Flood Risk Reduction and Management, and Strengthening Flood Preparedness 26\. This component focuses on physical investments and associated technical assistance to reduce flood risks and improve flood risk management\. The MoWIE and MoUDCo have provided the Bank with initial lists of almost sixty potential investment schemes with a value exceeding US$ 500 million\. These will be screened and prioritized, both spatially and by a range of technical, economic, financial, and socio-economic criteria\. Spatially, projects will need to 27 The budget allocation among the components will be further discussed with the Government; however, it is envisaged that Component 2 on Flood Risk Reduction and Management will share the largest portion\. May 25, 2021 Page 10 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) be centered around flood risk ‘hotspots’ in GoE priority basins, regions and woredas, whilst taking into account the need to be complementary to other existing and planned Bank operations, both in country and regional\. 27\. A Strategic Investment Framework for flood risk management to guide risk-informed prioritization of flood risk management investments will be developed during project preparation\. The Framework will consider prioritization criteria such as technical, economic (including cost-efficiency), financial, environmental, and social aspects\. Project readiness and institutional capacities for implementation, operation, and maintenance will also be considered\. The Framework will further take into account the targeting of poor/vulnerable communities to better contribute to poverty reduction\. Development of this Framework will be supported through an already mobilized Trust Fund under the Japan-World Bank Program for Maintaining Disaster Risk Management in Developing Countries, administered by the Global Facility for Disaster Reduction and Recovery (GFDRR)\. 28\. Sub-component 2\.1: Basin-level flood risk management investments\. Initial discussions with the MoWIE have focused on support for the Awash basin, the most intensively developed river basin in Ethiopia with many of the highest economic value assets in the country\. Major cities such as Addis Ababa, Dire Dawa, and Adama, major irrigation schemes and irrigated agriculture farms (including the cane farm of the Ethiopian Sugar Corporation), sugar factories, textile industries, and agro-processing plants are all located in this basin\. A second priority initially identified was the Omo basin (Southern Nations, Nationalities and Peoples, and Oromia regions)\. Investments would include channel widening and river training and the construction of embankments, dykes, levees, retention ponds/ lakes, and other hydraulic structures\.28 Where possible, nature-based flood management solutions, hybrid green/gray and multi- use infrastructure will be developed to enhance climate resilience and leverage co-benefits with relevant sectors, for example water storage/harvesting structures to attenuate flood flows and subsequently store water for dry season use (integrated drought and flood risk management)\. 29\. Sub-component 2\.2: Urban flood risk management investments\. The MoUDCo has provided an initial list of over forty potential urban flooding schemes with varying levels of size and information availability from Urban Local Governments across the country\. Consideration of such schemes will include readiness status and will need to be coordinated with the implementation arrangements for the Urban Institutional and Infrastructure Program (UIIDP), which includes a minor element of climate- and disaster-resilient infrastructure and equipment to enhance urban resilience, including urban drainage and flood control systems\. Investments could include the upgrading and rehabilitation of urban drainage infrastructure, including small bridges and roads, culverts, retaining walls, embankments, and upstream flood flow attenuation/diversion structures (e\.g\. check and sand dams, retention ponds), with a general prioritization of larger scale investments that form part of integrated, catchment-oriented schemes\. 30\. Sub-component 2\.3: Hydromet services and impact-based early warning systems\. This sub-component will improve the quality of select hydromet services and develop impact based early warning services for priority basins and urban areas identified in sub-components 2\.1 and 2\.2 by strengthening the technical capacity of the NMA, BDA and the NDRMC and their operational collaboration by clarifying their respective roles and responsibilities\. Based on the needs of users and building on the existing systems, this sub-component seeks to address identified gaps in the hydromet value chain to provide such services in the most cost-effective manner, including the strengthening of user engagement, data collection and data management, analytics, modeling and forecasting capability as well as the 28 During the identification mission, the use of the Project Preparation Advance (PPA) to expedite project preparation to advance technical studies and designs was well supported by the MoF\. Therefore, the team will further discuss with MoF and the potential implementing agencies for the mobilization of PPA, for use in conducting required environmental and social assessments, preparing required environmental and social policy instruments, preparing technical studies and designs, staffing of Project Implementation Units, etc\. May 25, 2021 Page 11 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) development of services and their delivery to decision makers and community level users\. Strengthening early response mechanisms including the possibility of introducing forecast-based financing will be explored\. Close attention will be given to the sustainability and capacities in maintaining and operating hydromet systems, innovative partnerships with NGO/civil societies, the academic and private sector as well as gender specific requirements in accessing and utilizing such information services\. The sub-component will also increase the institutional and technical capacity of federal and sub-national government entities to manage and exploit hydrometeorological services and data to make informed and timely decisions to take anticipatory actions and mitigate disaster risks\. 31\. Sub-component 2\.4: Flood risk management capacity building and technical assistance\. It is recognized that the infrastructure schemes financed under this project are likely to need to be accompanied by scheme specific technical assistance to introduce or strengthen proactive infrastructure operation and maintenance arrangements and procedures, as well as taking into consideration how such infrastructure should be operated from a basin perspective (IWRM)\. Capacity building support will also be provided in terms of flood hazard/risk assessments to inform the updating or development of flood risk management plans, river basin management plans or (risk-sensitive) land use plans\. The capacity building and technical assistance will also include broader aspects of early warning systems and strengthening community-level flood resilience building, including early warning dissemination, awareness raising, contingency and evacuation planning, etc\. Component 3: Enhancing Financial Protection 32\. This component aims to strengthen Ethiopia’s disaster response capacity, with a focus on regional capacity to reduce the dependency on the limited federal funding available\. This component will support GoE to establish, capitalize, and operationalize regional contingency funds to respond to frequent and localized shocks\. These funds will compliment and reduce financial pressures on the response needs at the federal level, which can focus on the more severe events\. Setting-up these funds will require the development of legal and regulatory frameworks and a costing analysis to inform financing needs\. During the project preparation, the team will perform a review of the use of regional contingency funds, including an analysis of the institutional and legal frameworks to understand the implications of decentralizing disaster risk finance further\. This review will also assess the ability of such funds to leverage private capital (through risk transfer) to make them more shock-responsive\. This work will complement that of the ongoing EU program29 which is supporting NDRMC to strengthen the contingency funds in Amhara and Oromia region, and establish contingency funds in the SNNPR, Somali, and Sidama region\. Furthermore, since the GoE has no overarching legal framework in place to regulate regional disaster risk financing, the Project will support the MoF and their partners under the Building Resilience in Ethiopia (BRE)30 program in the creation of a disaster risk finance strategy for Ethiopia\. For the establishment, capitalization, and operationalization of the regional contingency funds, use of PBCs will be considered to promote the regions to capitalize the funds using its own budget, to ensure ownership and sustainability\. Component 4: Contingent Emergency Response 33\. A Contingent Emergency Response Component or CERC will be included in the project in accordance with Investment Project Financing (IPF) Policy, paragraphs 12 and 13, for Situations of Urgent Need of Assistance and Capacity Constraints\. This will allow for rapid reallocation of uncommitted funds in the event of an eligible emergency as defined in OP 8\.00\. For the CERC to be activated, and financing to be provided, the Government will need: (a) to submit a request letter for CERC activation and the evidence required to determine eligibility of the emergency, as defined in the CERC Annex to the Project Operational Manual; (b) an Emergency Action Plan, including the emergency 29 https://ec\.europa\.eu/trustfundforafrica/region/horn-africa/ethiopia/decentralisation-disaster-risk-management-ethiopia_en 30 https://devtracker\.fcdo\.gov\.uk/projects/GB-GOV-1-300363 May 25, 2021 Page 12 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) expenditures to be financed; and (c) to meet the environmental and social requirements as agreed in the Environmental and Social Commitment Plan and CERC Annex\. Component 5: Project Management and Implementation Support 34\. This component will support strengthening the institutional capacities for Project management and implementation support as well as operating costs incurred by implementing agencies on technical, environmental and social, fiduciary, gender, citizen engagement, monitoring and evaluation aspects of Project activities\. The component will also finance technical and Project audits, all through the provision of technical advisory services, training, operating costs and acquisition of goods\. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 Yes Projects in Disputed Areas OP 7\.60 No Summary of Screening of Environmental and Social Risks and Impacts \. 35\. The project is anticipated to reduce the risks of flooding and disasters through both structural and non-structural means\. Non-structural flood control measures are especially environmentally beneficial as they do not attempt to regulate the natural flooding patterns\. However, the structural flood control measures such as river channel modifications, dikes and levees, overflow basins, floodways and drainage works can have negative environment, health, and safety risks\. One of the main environmental impacts of structural flood control measures arise from the alteration or elimination of the natural pattern of flooding\. Floodplains are productive environments because flooding makes them so; flooding recharges soil moisture and replenishes the rich alluvial soils with flood deposits of silt\. Hence, reduction or elimination of flooding has the potential for impoverishing floodplain (recession) agriculture, natural vegetation, wildlife and livestock populations on the floodplain, and floodplain and riverine fisheries which are adapted to the natural flood cycles\. River channel modifications can cause several negative environmental impacts as measure that increase the velocity of flow increase the erosive capacity of the water\. Problems of erosion and sedimentation can arise both on-site and downstream\. Paving the river channels (to reduces or eliminates all factors that retard flow) cane pose many aesthetic and ecological problems, including a reduction of groundwater recharge and disruption of aquatic populations\. Channel smoothing and clearing as well as dredging also have a great impact on aquatic organisms and fisheries by disrupting their habitats\. Furthermore, disposal of dredging spoils can create another set of problems\. Although river channel improvement, levees and dikes can alleviate flooding problems in the treatment area, flood risks are likely to increase downstream (i\.e\. they tend to pass floodwater on to downstream areas)\. Dikes built on the floodplain affect the hydrology of the area and can have impacts on wildlife and livestock habitat and movement\. 36\. The flooding and disaster risk management structures which will be financed in urban areas of Ethiopia such as drainage canals can also have adverse impacts if not well designed, constructed and operated\. Clandestine solid waste dumping in drainage ditches could cause waterlogging due to drainage blockages\. Poor drainage of rainwater creates breeding sites for disease vectors such as mosquitoes\. If solid waste blocks the drainage system, it leads to flooding in the streets resulting in bad odor and inconvenience\. Construction of the flood risk management structures such as dikes and drainage canals can contribute to environmental pollution as such air pollution, construction waste pollution, noise pollution and water pollution\. Different occupational health and safety risks may occur during construction works including physical & biological hazards that could cause potential for accident or injury or illness\. May 25, 2021 Page 13 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) \. CONTACT POINT World Bank Ko Takeuchi, Iain Menzies Senior Urban Development Specialist Borrower/Client/Recipient Federal Democratic Republic of Ethiopia Implementing Agencies Basins Development Authority Temesgen Adugna River Training Team Leader mamushketema9200@gmail\.com Ministry of Urban Development and Construction Amlaku Ayele Head, Urban Revenue Enhancement, Fund Mobilization and Finan adamuayele@gmail\.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Task Team Leader(s): Ko Takeuchi, Iain Menzies May 25, 2021 Page 14 of 15  The World Bank Ethiopia Integrated Disaster Risk Management Project (P176327) Approved By APPROVALTBL Practice Manager/Manager: Country Director: Doina Petrescu 17-Jun-2021 May 25, 2021 Page 15 of 15

APPROVAL

P009417

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 9069 PROJECT COMPLETION REPORT BANGLADESH FERTILIZER TRANSPORT PROJECT (CREDIT 1096-BD) OCTOBER 12, 1990 Infrastructure Operations Division Asia Region Country Department I This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Official Exchange Rate Currency Unit 1980 1983 1984 1985 1986 1987 1988 US$1 = Tk 15\.48 23\.76 24\.95 26\.00 29\.89 30\.63 32\.85 Tk 1 = US$ 0\.065 0\.042 0\.040 0\.039 0\.034 0\.033 0\.030 WEIGHTS AND MEASURES 1 foot = 0\.305 meters 1 mile = 1\.609 kilometers ABBREVIATIONS BADC - Bangladesh Agricultural Development Corporation BIWTA - Bangladesh Inland Water Transport Authority BIWTC - Bangladesh Inland Water Transport Corporation BR - Bangladesh Railways BG - Broad Gauge CPA - Chittagong Port Authority ERR - Economic Rate of Return GOB - Government of Bangladesh ICB - International Competitive Bidding MG - Metre Gauge OCC - Operations Control Centre PCA - Port of Chalna Authority PCR - Project Completion Report PDP - Primary Distribution Points PIU - Project Implementation Unit TTB - Telecommunication and Telegraph of Bangladesh FISCAL YEAR July 1 - June 30  FOR OMCIAL USE ONLY THE WORLD BANK Washington\. D\.C\. 20433 U\.S\.A\. Ofiee of Directouciiewal Operatons Evakhatr n October 12, 1990 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Bangladesh Fertilizer Transport Proiect (Credit 1096-BD) Attached, for information, is a copy of a report entitled "Project Completion Report on Bangladesh - Fertilizer Transport Project (Credit 1096- BD)" prepared by the Asia Regional Office with Part II of the report contributed by the Borrower\. No audit of this project has been made by the Operations Evaluation Department at this time\. Attachment This document has a restricted distribution and may be used by recipients only in the performance I of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT BANGLADESH FERTILIZER TRANSPORT PROJECT (CREDIT 1096-BD) Table of Contents Page No\. Preface \. Evaluation Summary \.ii PART I - Project Review from the Bank's Perspective \. 1 I\. BACKGROUND \. 1 II\. THE PROJECT \. 2 A\. Origin of Project \. 2 B\. Project Preparation and Appraisal \. 2 C\. Project Objectives, Description and Organization\. 2 III\. PROJECT IMPLEMENTATION \. 3 A\. Implementation of Physical Components \. 3 B\. Implementation of Other Components \. 4 C\. Factors that Affected Project Implementation \. 4 D\. Time and Costs \. 4 E\. Project Results \. 6 IV\. INSTITUTIONAL PERFORMANCE \. 7 A\. Borrower and the Executing Agencies \. 7 B\. Consultants \. 7 V\. IDA PERFORMANCE\. 8 A\. Project Formulation and Design\. 8 B\. Supervision\. 8 C\. Covenants\. 8 VI\. CONCLUSIONS AND PROJECT SUSTAINABILITY \. 9 PART II - Project Review from the Perspective of the Executing Agencies (Prepared by the Executing Agencies of the Borrower) \. 11 I\. Bangladesh Agricultural Development Corporation \. 11 II\. Bangladesh Railways \. 15 III\. Bangladesh Inland Water Transport Authority \. 18 IV\. Chittagong Port Authority \. 20 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Page No\. PART III - Summary of Statistical Data \. 21 1\. Related IDA Credits \. 21 2\. Project Timetable \.23 3\. Credit Disbursement \.24 4\. Project Implementation \.26 5\. Project Costs and Financing \.28 6\. Project Results \.31 7\. Status of Covenants \.35 8\. Use of IDA Resources \.37 ANNEX A - Economic Reevaluation \. 39  BANGLADESH FERTILIZER TRANSPORT PROJECT (CRLDIT 1096-BD) PROJECT COMPLETION REPORT PREFACE This is the Project Completion Report (PCR) for the Fertilizer Transport Project in Bangladesh, for which Credit 1096-BD in the amount of SDR 19\.10 million was approved on January 22, 1981\. The credit was closed on June 30, 1987, three years behind schedule\. Of the total amount approved, SDR 7\.04 million was not disbursed, and the last disbursement was on January 21, 1988\. The PCR was jointly prepared by the Infrastructure Operations Division, Country Department I of the Asia Regional Office (Preface, Evaluation Summary, Parts I and III), and by the Executing Agencies of the Borrower (Part II)\. Preparation of this PCR was started during the Bank's final supervision mission of the project in November 1987, and is based, inter alia, on the Staff Appraisal Report; Credit, Guarantee and Project Agreements; supervision reports; correspondence between the Bank and the borrower; and internal Bank memoranda\. This PCR was reviewed by the Operations Evaluation Department (OED) but the project will not be audited at this time\.  - ii - BANGLADESH FERTILIZER TRANSPORT PROJECT (CREDIT 1096-BD) PROJECT COMPLETION REPORT EVALUATION SUMMARY INTRODUCTION AND BACKGROUND 1\. The socio-economic setting against which the project was identified and prepared is discussed in paras 2-22 of the December 31, 1980 President's Report (PR)\. Paras 1\.09-1\.17 and 2\.01-2\.15 of the October 15, 1980 Staff Appraisal Report (SAR) respectively describe the transportation and the fertilizer distribution systems\. 2\. When the project was appraised in April 1980, the Bank was familiar with constraints on project implementation in Bangladesh\. The Bangladesh Inland Water Transport Project (Credit 424 of 1973), expected to have been completed in December 1974, was not completed until October 1979\. The Second Inland Water Transport Project (Credit 735 of 1977), expected to have been completed by February 1980, had barely begun, and the project was not completed for another five years\. Project Performance Audit Reports on the two projects (OED Reports No\. 4026 of June 30, 1982, and 5778 of June 28, 1985) discuss in detail the reasons for time overruns, and for partial achievement of project objectives\. These included government reluctance to use IDa funds to finance technical assistance studies, weak implementation capability, and poor performance of contractors\. The SAR acknowledged the constraining effect of these factors and noted (para 1\.16) that "execution by GOB of many projects has been extremely slow\." OBJECTIVES AND PROJECT COMPONENTS 3\. Intended: (a) to improve the availability of fertilizer to farmers by expediting fertilizer handling and distribution; (b) to reduce the cost of fertilizer distribution; (c) to increase the efficiency and capacity of the transport sector; and (d) to encourage private sector participation in fertilizer distribution and transport\. To achieve these objectives, the project would (i) rationalize the Bangladesh Agricultural Development Corporation distribution system; (ii) improve transport handling contracting procedures to allow more competition and provide lower cost and more dependable service; and (iii) remove major physical bottlenecks in the fertilizer distribution system (SAR, para 3\.02)\. 4\. Achieved: (a) Distribution of fertilizer increased from around 840,000 tons in FY81 to over 1\.5 million tons in FY88; (b) average fertilizer distribution costs (in constant 1981 prices) declined from Taka 302 per ton in FY81 to Taka 165 per ton in FY88; (c) capacity on specific transport links increased significantly (e\.g\., Chittagong Port traffic increased from 5\.4 million tons in FY80 to 10\.8 million tons in FY88), and efficiency improvements were  - iii - achieved both in overall transport system improvements (Baghabari Port development reduced cost of fertilizer transport to the Northwest from Tk 550 per ton to Tk 300 per ton) as well as in the use of existing transport equipment (turnaround of railway wagons utilized in unit trains reduced from 22 days to 5 days, and locomotive utilization in fertilizer movements improved from 94 miles per day to 138 miles per day)\. IMPLEMENTATION EXPERIENCE 5\. The project was implemented by four different agencies (SAR, paras 3\.26- 3\.29): Bangladesh Agricultural Development Corporation (BADC), Bangladesh Railway (BR), Bangladesh Inland Water Transport Authority (BIWTA), and Chittagong Port Authority tCPA,\. implementation experience with the different project elements under different executing agencies is summarized below\. The project consisted of the following components (SAR, paras 3\.03-3\.09): (a) Port Improvements Establishment of an inland port at Baghabar\. (BIWTA)\. Completed in June 1983, with a year's delay, due to land acquisition problems (PCR, Part II, para 3\.2)\. Development of fertilizer depots (BADC)\. The project involved construction of depots at Baghabari, Shiromoni, Rajshahi and Natore\. Construction work was scheduled to conmence in September 1981 and to be completed by December 1983\. Actual work did not begin before October 1983 and was completed in stages between June 1985 and March 1987\. Major causes for delay were problems with land acquisition, late appointment of supervision consultant, and poor interagency coordination (PCR, Part II, para 1\.3)\. Test dredging and the Karnafuli River at Chittagong (CPA)\. Begun in April 1981 and completed on schedule in March 1982 (PCR, Part II, para 4\.2)\. Studies for bulk fertilizer handling facilities at Chalna\. Not done under the project\. Work was handled by Chalna Port Authority independently (PCR, Part II, para 1\.5)\. (b) Unit/block train operations was the project's second major component\. BR was the executing agency for the following subcomponents (SAR, paras 3\.30-3\.35): Wagon rehabilitation and workshop improvements\. Only 416 wagons had been rehabilitated against the planned 600 wagons\. Major causes for the shortfall were poor management of wagon stock, delays in procurement of materials, and management decision to shift rehabilitation work from Saidpur to Paharthali Workshop (PCR, Part I, para 3\.8)\. Rail wagon ferry improvements\. Procurement of wagon ferry barge was completed 2\.5 years behind schedule, conversion of a floating barge into a workshop was not completed due to failure of the contracting firm, and provision/upgrading of an additional tug was not implemented due to failure in following IDA procurement guidelines\.  - iv - Rail siding improvement\. Completed in conjunction with the setting up of fertilizer warehouses at different locations (PCR, Part TI, para 1\.4)\. Operations control center\. Implementation was incomplete at closure of the credit but has now been completed by BR\. ow'S\. \.b 6\. The estimated project cost was US$40\.8 million, with about US$20 million representing foreign costs (SAR, para 3\.20)\. Actual project cost is 564\.41 million Taka (PCR, Part III, 5)\. Comparison of the two figures is not meaningful because of project scope modifications during implementation (PCR, para 3\.5)\. Estimated project completion was set at June 30, 1984\. Actual project completion is not given in the PCR but the final closing date was set, after three extensions, to June 30, 1987 (PCR, para 3\.4)\. The principal causes for delay were problems with land acquisition, poor interagency coordination, and lengthy bureaucratic procedures\. As appraised, the project has an estimated ERR was 332 (SAR, para 4\.04)\. The PCR (para 3\.7) gives a reestimated ERR of 30Z\. Institutional strengthening had mixed results (PCR, paras 4\.01-4\.02)\. SUSTAINABILITY 7\. The PCR (para 6\.02 to 6\.04) concludes that project benefits are likely to be sustained without further interventions, however this will depend to some extent on BR's efforts to provide improved services to shippers of fertilizer\. FINDINGS AND LESSONS 8\. The PCR confirms the lessons drawn from the First and Second Inland Waterways Projects (OED Reports No\. 4026 and 5778), as well as from the First and Second Highway Projects (OED Report No\. 7954) which demonstrated the need for thorough preparation, adequate appraisal, simple design, sufficient time for implementation, systematic supervision, and adherence to covenants\. 9\. Like previous projects, this too illustrates the difficulties in the pursuit of improved transport services in an environment lacking adequate and suitable staff, not equipped with the necessary mechanisms for interagency coordination\. and not fully familiar with IDA's procurement guidelines and selection procedures\.  BANGLADESH FR TILIZER TRANSPORT PROJECT (CREDIT 1096-BD) PROJECT COMPLETION REPORT PART I - Project Review from the Bank's Perspective Project Identity Project Name Fertilizer Transport Project Credit No\. 1096-BD RVP Unit Asia Country Bangladesh Sector Transport I\. BACKGROUND 1\.1 This Pro;ect Completion Report (PCR) presents the results of the Fertilizer Transport Project (Credit 1096-BD) which has proved to be an important IDA initiative in the transport sector in Bangladesh\. The project involved four separate executing agencies, was multimodal in that it addressed problems in rail, inland water and road transport, and also required initiatives in various institutional aspects of the transport sector, such as transport contracting procedures\. Many of the problems encountered in implementing the project are directly related to this multifaceted nature of the project\. 1\.2 In recent years, the focus of IDA assistance in Bangladesh has been on agriculture, which dominates the national economy, and this is consistent with the country's needs and the Government of Bangladesh's (GOB) priorities\. As there is no possibility of achieving acreage expansion due to heavy population pressure on limited land, particular emphasis has been placed on projects that provide agricultural inputs\. Emphasis has also been placed on projects in other sectors which facilitate agricultural development or which increase access to rural areas\. These included projects in the transport sector, which is critical to the efficient functioning of the rural economy\. As one of these, the Fertilizer Transport Project was designed to improve the supply and reduce the cost of fertilizer to the end user, i\.e\., the rural farmers of Bangladesh, by selective investments in the facilities used for the transport and storage of fertilizer, and through improvements in the institutional arrangements for fertilizer distribution\. 1\.3 IDA's lending operations in the fertilizer subsector have included a Fertilizer Industry Rehabilitation Project (Credit 1023-BD) approved in 1980 and 2 Fertilizer Imports Projects (Credit 944-BD and Credit 1044-BD) approved in 1979 and 1980\. In addition, IDA also participated in the Ashuganj Fertilizer Production Project (Credit 527-BD) along with 9 other agencies\. In the tranzvort sector, IDA's involvement in the highway subsector was through the Higlways Project (Credit 408-BD), Highways II Project (Credit 964-BD) and the First Roads Rehabilitation and Maintenance Project (Credit 1827-BD) The first Rural Roads and Markets Improvement and Maintenance Project (Credit 1940-BD) became effective in April 1989\. In the inland water transport subsector, IDA financed the Inland Water Transport Rehabilitation Project (Credit 424-BD) and the Inland Water Transport II Project (Credit 735-BD) IDA has also been assisting in the development of Bangladesh's main seaport at Chittagong (Credit 1247-BD)\.  - 2 - II\. THE PROJECT A\. Origin of the Pro3ect 2\.1 The problems affecting fertilizer production, marketing, distribution and pricing in Bangladesh have been a major focus of IDA's assistance programs\. While the major constraint to increased fertilizer consumption has been on the supply side, the distribution system has also been handicapped by poor planning and coordination and a lack of adequate transport and storage facilities\. A fertilizer marketing and distribution study (financed under Technical Assistance Credit 409-BD) completed in 1977, provided the basis for formulating a comprehensive and improved marketing and storage program for the Bangladesh Agricultural Development Corporation (BADC), an autonomous agency responsible for the procurement, distribution and marketing of agricultural inputs including fertilizers\. Deficiencies in the country's transportation system were also identified\. Elimination or at least reduction of transport bottlenecks and the use of least-cost fertilizer distribution patterns by different transport modes together with iMprovements in coordination, could make a significant difference in ensuring that farmers obtained fertilizer when required and at reduced cost\. It was against this background that the project was conceived\. B\. Project Preparation and Appraisal 2\.2 A project identification mission visited Bangladesh in October 1978\. In July 1979, a consulting firm submitted a report on the proposed Fertilizer Sector Credit Transport Identification, which recommended improved contracting procedures by BADC; use of an improved mix of transport modes for lifting fertilizer from the factories; provision of additional storage space and a rail siding at Shiromoni; development of inland water port facilities at Baghabari; running of unit/block trains for transport of fertilizer; and, provision of adequate storage (godown) capacity at strategic locations to enable handling of unit trains\. A transport sector identification mission which visited Bangladesh in November 1979, envisaged transport components either as part of the fertilizer sector credit or as a separate transport project\. The possible components identified by this mission included improved maritime and riverine port facilities; acquisition of barges, coasters, and trucks; rehabilitation of railway wagons; and road decking of certain railroad bridges\. Also identified was the need for test dredging of the Karnafuli River at Chittagong Port\. On November 16, 1979, IDA agreed that the proposed Fertilizer Transport Project was suitable for its consideration\. Project preparation was assisted by various studies: the proposed deepening of Karnafuli River by Farleigh and Co\.; another by J\. Peltz and Partner of requirements for communications at riverine ghats; an assessment by Chantiers Navals de Nameche of Selgium that Tugboat ISHAKHAN supplied by them earlier to Bangladesh Railways (BR) could be modified and reengined; and an assessment of telecommunications requirement by J\. Albestson (consultant) The Fertilizer Transport Project was appraised by a mission which visited Bangladesh in February 1980\. C\. Project Objectives, Description and Organization 2\.3 The overall objectives of the project were to improve the availability of fertilizer to farmers by expediting its handling and distribution and thus reducing its cost\. The project sought to achieve these objectives by rationalizing BADC's distribution system, improving transport contracting procedures and removing major physical bottlenecks in the fertilizer distribution  - 3 - system\. For this purpose, the project envisaged assistance to various agenciess BADC, BR, Bangladesh Inland Water Transport Authority (BIWTA), and Chittagong Port Authority (CPA)\. The physical components of the project, for each agency, were: (a) BIWTA - construction of Baghabari Riverine Port; (b) CPA - trial dredging of Karnafuli River at Chittagong Port: (c) BADC - (i) construction of storage warehouses at Baghabari, Shiromoni, Rajshahi and Natore; (ii) provision of rail spurs at Shiromoni, Rajshahi and Natore and improvement of rail siding facilities serving fertilizer factories at Ghorasal and Ashuganj; (d) BR - (i) rehabilitation of 600 freight cars; (ii) acquisition of a new wagon ferry barge; (iii) conversion of a barge into a floating workshop; (iv) modification and repair of the tug ISHAKHAN; (v) provision of telecommunication at Bahadurabad Tistamukh Ghats across Jamuna River; and (vi) setting up of an Operations Control Centre (OCC)\. 2\.4 As the project was to be carried out by several agencies, organizationally it was envisaged that each agency would appoint a project manager and that coordination and monitoring would be undertaken by a committee formed by representatives of each of the agencies and headed bv the Chairman of BADC\. It was also envisaged that Project Implementation Units (PIUs) would be established by BADC and BR\. According to the project implementation schedule, project completion was envisaged by June 30, 1984 with disbursement continuing up to December 31, 1984\. In the event, the credit was closed June 30, 1987 with disbursements continuing through December 31, 1987\. II\. PROJECT IMLDEENTATION A\. Impleuntation of Physical Components 3\.1 When credit disbursements closed on December 31, 1987, all physical components of the project pertaining to CPA, BIWTA and BADC had been completed\. The trial dredging of Karnafuli River was completed on schedule by CPA and the results were fully evaluated; BIWTA's inland water port at Baghabari became operational in 1983; BADC's storage warehouses at Baghabari, Rajshahi, Natore and Shiromoni were constructed, rail spurs were provided to serve the warehouses at Shiromoni, Rajshahi and Natore and rail siding facilities at Ghorasal and Ashuganj fertilizer factories were improved\. The implementation of BR components was, however, not satisfactory and only one component, namely, acquisition of a new wagon ferry barge was fully completed\. Other components like rehabilitation of wagons, conversion of a barge into a floating workshop,  - 4 - provision of telecommunications at the Ghats, and setting up of an Operations Control Centre were only partially completed\. Acquisition of a new tug for the wagon terry was not accomplished\. B\. Implementation of Other Components 3\.2 Apart from the phystcal components mentioned above, a number of other components of the project were implemented\. Running of unit/block trains for fertilizer traffic has been accomplished, however, BR has not been able to fully utilize unit trains due to partial implementation of BR's physical components\. Limited progress has been made in improving the management of rail ferry operations\. The allocation of fertilizer movements to different transport modes has been rationalized to achieve least cost transport, transport contracting procedures have been significantly improved and lifting contracts between BADC and fertilizer factories have been improved to allow better coordination between fertilizer production and transport\. The studies related to bulk handling of fertilizers at Chalna and of inventory management were also undertaken though not under the project; these were conducted independently by Chalna Port\. C\. Factors that Affected Project Implementation 3\.3 The major factors which adversely affected project implementation were the following: (a) delay of over 20 months in the appointment of the supervision consultant for construction of warehouses by BADC; (b) inadequate and inappropriate staffing of BR's PIU and frequent changes (six in six years) of the Project Director; (c) inadequate and unsatisfactory monitoring of project implementation by the PIUs of BADC and BR as well as by the Project Coordination Committee; (d) inter- and even intra-agency coordination problems relating to BR, the Telecommunications and Telegraph of Bangladesh (TTB) and BADC; (e) GOB's decision in 1983 not to go ahead with those BR components for which commitments had not yet been entered into--these included acquisition of the tugboat and provision of telecommunications, and these components remained frozen for over a year when GOB rescinded the decision; and (f) inadequate appreciation and observance cf IDA's procurement guidelines and selection procedures by BADC and BR\. Selection of the supervision consultant by BADC and evaluation of bids for acquisition of a tugboat by BR are the two most notable examples of procurement problems which caused delays running into years\. D\. Time and Costs 3\.4 The project, as originally envisaged, was to be completed by June 30, 1984 with credit disbursements up to December 31, 1984\. Due to incomplete project implementation, the closing date was extended 3 times to June 30, 1987  - 5 - with disbursement extending up to December 31, 1987\. While Chittagong Port dredging was completed on schedule, there was a delay of about 10 months on the part of BIWTA in commissioning of the inland port at Baghabari due to delay in acquisition of land\. Several other components of the project were completed after considerable delay and some have remained incomplete\. Amongst the major components that incurred delays were the following: (a) Appointment of the supervision consultant for construction of warehouses by BADC was done in October 1982, 20 months behind schedule\. (b) Construction of the storage warehouses was completed 4 1/2 years after the appointment of the supervision consultant agairst the three years envisaged, and this delay was due to heavy rains and floods, late release of land by BR at Rajshahi and Shiromoni, and a court injunction on land at Natore\. (c) Procurement of a wagon ferry barge by BR was completed in July 1985, 2 112 years behind schedule, primarily due to inadequate design of the barge and delay in inspection of the work done by BR officials\. (d) Rehabilitation of wagons was only partially completed at closure of the credit (416 wagons against the planned 600 wagons)\. The major causes that contributed to the component remaining incomplete were the inordinately long time taken by BR to identify individual wagons to be rehabilitated and in providing them to the workshop; excessive delay in procurement of materials and spare parts; decision taken by BR in 1987 to undertake further rehabilitation work on Metre Gauge (MC) wagons at Paharthali Workshop, rather than at the originally nominated Saidpur Workshop; and inadequate monitoring of performance\. (e) BR's component relating to the conversion of a barge into a floating workshop remained incomplete until closure of the credit due to sinking of the original barge nominated; stoppage of work due to floods; demise of the Managing Director of the contracting firm and consequent succession dispute; and, faulty preparation of conversion plans, etc\. The machinery, equipment and tools procured are consequently lying unused\. (f) Another project component relating to BR which was only partially completed when the credit closed was the provision of telecommunication at the ferry landing ghats on Jamuna River and for the Operations Control Centre\. The major factors contributing to the delay were inordinately high prices quoted for undertaking this turnkey project as originally envisaged, and the consequent need to resort to invitation of tenders under international competitive bidding (ICB), GOB's decision to freeze the work for over a year and poor coordination between BR and TTB\. (g) Yet another project component pertaining to BR that remained unimplemented was acquisition of a tugboat\. The project had envisaged that an existing tugboat (ISHAKHAN) would be repaired, modified, and reengined by the original builder, but this decision had to be changed when the firm quoted a price that made consideration of the alternative of acquiring a new tugboat more attractive\. Accordingly, quotations were invited for modifications of the tug as well as for a new tug first  - 6 - from six firms shortlisted for the purpose and then, when a number of other firms expressed interest, under ICB\. At this stage, in 1983, GOB decide not to go ahead with those project components pertaining to BR for which commitments had not already been entered into\. This caused over a year's delay and the tender could only be floated in May 1985\. Non-observance of procurement guidelines and selection criteria necessitated re-invitation of bids for the second time, and then the contract could not be awarded as the lowest evaluated bidder could not fulfill the conditions of award\. The award was not made to the second lowest bidder due to disagreement between the IDA and BR on whether or not the conditions stipulated had been met\. BR wished to award the contract to the third lowest bidder, and this difference could not be resolved\. That brought the credit to a close\. 3\.5 The actual cost of the project when the credit closed amounted to Tk 564\.41 million which was 10\.7Z less than the appraisal estimate of Tk 631\.73 million\. This is attributed to currency exchange variations favoring the US dollar; non-completion of some project components for the reasons mentioned; and non-utilization of the provision of Tk 8 million for studies of bulk handling of fertilizer at Chalna Port and for inventory management, and of Tk 6\.05 million for improvements to the Ashuganj rail siding as different sources of financing were utilized for these elements\. However, for certain project components (like provision of rail sidings, test dredging of Karnafuli River and tele- communications facilities for BR), the actual costs incurred were considerably higher than appraisal estimates due to incorrect initial estimates, increase in the scope of work and cost escalation\. As regards disbursements, against a provision\.of SDR 19\.10 million, the actual disbursement amounted to SDR 12\.06 million and the balance of SDR 7\.04 million was cancelled\. Some costs incurred by GOB were not reimbursed by IDA due to delays in submission of disbursement requests beyond the closing date, and due to costs having been incurred after the closing date\. This situaticn was allowed to develop even though Government and the agencies had considerable advance notice of the credit closing date\. E\. Project Results 3\.6 Implementation of the project, though incomplete in certain areas, has resulted in achievement of project objectives in a very substantial measure The new distribution system developed by BADC has succeeded in rationalizing the choice of transport mode as evidently by the reduction in the average cost of fertilizer transport from Tk 300 per ton in FY81 to Tk 165 per ton in FY88\. BADC has also improved its contracting procedures for transport as evidenced in recent comparisons between BADC and Food Department contracting procedures in the inland water transport sector\. Setting up of Baghabari Port has reduced costs in distribution of fertilizer to the north-west of Bangladesh which were earlier being transported by water-cum-rail route via Khulna Port (Tk 300/ton vs Tk 550/ton)\. Dredging of Karnafuli River has enabled handling of bigger ships and more traffic at Chittagong Port (10\.8 million tons in FY88 against 5\.4 million tons in FY80) and has led to reduction in lighterage costs\. Imported t Laftic handled at port jetties has gone up from 0\.9 million tons in FY80 to 1\.7 million tons by FY88\. Rehabilitation of railway wagons, though incomplete, provision and improvement of rail sidings and spurs and construction of large fertilizer storage facilities together with better telecommunication facilities have resulted in running of unit/block trains by BR which has substantially improved utilization of locomotives and wagons, and has reduced the costs of BR's operations\. Turnaround of railway wagons used for transport of fertilizer has  - 7 - improved from 22 days to only 5 days\. For fertilizer movements, locomotive utilization has improved from 94 miles per day to 138 miles per day\. 3\.7 As a result of the above as well as other investments in the fertilizer industry, the availability and consumption of fertilizer in the country has considerably improved\. Against fertilizer distribution of 842,000 tons in 1980-81, the figure achieved in 1987-88 was 1\.5 million tons, an increase of 80Z\. In the same period, the production of cereals in the country went up from 13\.2 million tons to 16\.3 million tons\. In FY81 when the project commenced, the cost of movement and handling of fertilizer was estimated as Tk 302 per ton: at constant prices, this cost has come down to Tk 165 per ton in FY88\. In FY81, the extent of subsidy given by GOB was Tk 1,017 million amounting to 25Z of the cost; this came down to Tk 354 million or only 4\.6Z of the cost in FY86 and to Tk 655 million or 8\.7Z of cost in FY88\. While not all of these reductions in transport cost and fertilizer subsidies stem solely from this project, the increased volume of fertilizer in itself providing some scale economies, the project has contributed to improvements in the fertilizer distribution system\. The economic rate of return (ERR), estimated as 33Z at the time of project appraisal, is now estimated to be 30Z\. IV\. INSTITUTIONAL PERFORMANCE A\. Borrower and the Executing Agencies 4\.1 The framework actually evolved for implementation and coordination by GOB and its executing agencies largely corresponded to what was envisaged, but the expectations regarding its effectiveness did not fully materialize\. While the position in regard to CPA and BIWTA was generally satisfactory, certain deficiencies persisted throughout in BR's PIU related to adequacy and appropriateness of staffing and frequent changes of incumbents (there were six Project Directors in six years)\. Inter- and intra-agency coordination problems that were actually encountered far exceeded expectations, and caused frequent delays in implementation of the project\. The Project Coordination Committee was not effective in resolving problems, and generally was active only when IDA supervision missions visited Bangladesh\. 4\.2 Throughout the implementation period, the project was beset with problems related to procurement and selection, largely in respect of components pertaining to BR and, to a lesser extent, in respect of those pertaining to BADC\. IDA guidelines regarding procurement and selection criteria and procedures were often not understood and frequently not observed by these agencies\. In this regard, it may be noted that more frequent exposure of GOB and implementing agency personnel to IDA procurement policies and guidelines through seminars and other training activities is necessary\. B\. Consultants 4\.3 Consultants were appointed by BADC to supervise construction of godowns and by BR for trial running of unit/block trains, for installation of tele- communications at the ghats, and for establishment of the Operations Control Centre\. By and large, the consultants provided useful and satisfactory service which helped the implementation of the project\. In addition, consultants were used by IDA during appraisal to advise on technical aspects of the project and  - 8 - during implementation for project supervision\. Overall, the consultants' performance was satisfactory and their inputs were useful and necessary\. V\. IDA'S PERFORMANCE A\. Project Formultion and Design 5\.1 IDA's contribution to the project formulation, design and implementation arrangements was quite considerable\. At the stage of project formulation and appraisal, IDA rightly utilized consultant services extensively\. Most of the cost estimates developed were fairly accurate except those for trial dredging, telecommunications and the tugboat\. As the project involved several agencies, IDA rightly anticipated coordination problems and insisted on establishment of a Project Coordination Committee, comprising representatives of concerned agencies\. This mechanism, however, proved inadequate and largely ineffective in resolving the nature and the quantum of coordination problems that were actually experienced which led to long delays in decision making and project implementation\. Monitoring of the progress of the project by the Committee was also considerably deficient\. It was only when supervision missions visited Bangladesh that coordination problems could be resolved, decisions reached, and project implementation given a push\. In retrospect, it appears that for projects involving a large number of agencies, IDA should consider evolving a better mechanism for achieving coordination and for monitoring; this could perhaps be accomplished by appointing a consultant project coordinator who would act as Secretary to the Project Coordination Committee\. Such a professional, charged with adequate authority, can not only provide the necessary mechanism for achieving coordination, but can also resolve day-to-day problems and expedite decision-making and project implementation\. B\. Supervision 5\.2 Nine supervision missions visited Bangladesh after the credit became effective in July 1981 and up to its closure in December 1987, a period of nearly six and a half years\. This works out to one supervision every eight-nine months which is less than the normal rate for the average IDA-financed project\. In fact, some supervision missions visited Bangladesh after a period of almost a year and even then could devote only limited time to the project\. Considering the fact that the project was a multi-agency one having serious inter-agency and intra-agency coordination problems, and the fact that the general situation in Bangladesh in the area of project implementation was weak, the need for frequent and intensive supervision was obvious\. Experience had shown that project implementation improved every time a mission visited Bangladesh, but in between such visits, progress was slow\. Seen against this background, IDA's supervision of the project was not adequate\. Frequent changes in the Task Manager in IDA (five in seven years), made the position still worse\. It is evident that in Bangladesh, not only is frequent supervision necessary, but also it is nPcecsary to build up trust by committing the same officer to supervise for a reasonable length of time\. C\. Covenants 5\.3 The Development Credit Agreement had specified two conditions for credit effectiveness\. These related to the onlending conditions of the credit to various agencies and approval by GOB of the Project Proforma\. Both these  - 9 - conditions were complied with after a delay of about three months\. Other covenants related to employment of consultants, preparation of a national storage plan for fertilizer, improvement of transport contracting procedures, running of unit/block trains, improvement of the management structure at the ferry crossing, renting of communication channels by TTB to BR, setting up of PIUs and the Project Coordination Committee, were generally complied with though after the stipulated deadlines had passed in several cases\. VI\. CONCLUSIONS AND PROJECT SUSTAINABILITY 6\.1 The Fertilizer Transport Project was conceived at an appropriate time and its preparation was done fairly well\. Implementation of the project was, however, considerably delayed for various reasons\. Some of the more important lessons which can be derived for similar projects are: (a) The Borrower and the executing agencies should be acutely aware of the need for adequate and suitable staff being posted in their PIUs as only then can timely project implementation and monitoring be ensured\. During project implementation, changes in key personnel should be kept to a minimum\. (b) Multi-agency projects usually involve serious problems of coordination which have an adverse effect on project implementation\. While it is necessary that the Borrower should evolve appropriate mechanisms to achieve coordination, expedite decision making and -nsure adequate monitoring, IDA should in such cases, consider appointing a project coordinator in order to help resolve day-to-day problems, arrange coordination and ensure satisfactory monitoring\. (c) For projects involving several agencies and with coordination and other problems, IDA must ensure adequate supervision\. In such cases, supervision missions should be strengthened and the frequency and duration should be increased\. It is interesting to note (see Part III 8\.b) that supervision staffing and frequency reduced when the project encountered increasing problems, and this indicates a need to improve the effectiveness of project monitoring during implementation\. Frequent changes of Project/Task Managers also needs to be avoided\. (d) Inadequate or incorrect appreciation and observance of IDA's procurement guidelines and selection procedures often lead to delays and higher costs\. In such cases, IDA has to enter into prolonged correspondence with the Borrower and the executing agencies\. In countries where such problems are frequently encountered and where IDA's involvement is considerable, the possibility of having a centralized procurement agency for different projects may be explored\. Project Sustainability 6\.2 Two broad areas of fertilizer transport were covered under the project: (a) improvements in rail transport of fertilizer comprising investments in BR and rail sidings with associated warehouse facilities; and (b) port improvements at Chittagong and Baghabari to facilitate fertilizer imports and transport on inland waterways\. Of the total project costs, approximately three quarters was accounted for by the former, i\.e\., rail transport improvements\. In assessing  - 10 - project sustainability, it is necessary to examine these two broad areas separately\. 6\.3 Sustainability of the investments in rail transport will depend on the extent to which BR is able to secure a significant share of the total requirements for fertilizer transport\. As a result of recent changes in the Government's fertilizer distribution policies, essentially an increased reliance on private sector distribution channels, BADC is now responsible for distributing less than 25 percent of the total fertilizer traffic, as opposed to its former near monopoly over fertilizer distribution\. The remaining fertilizer is now being distributed by private dealers who procure it at the factory rate (or at the ship in the case of imports), and this privately distributed fertilizer has now almost entirely moved away from rail transport to truck or barge movements\. Of the fertilizer distributed by BADC (25 percent of total) only about a fifth (5 percent of total) is moved by rail\. The change in fertilizer distribution policy became effective in July 1989, and hence the decline in rail transport of fertilizer could well be a short-term phenomenon\. In the future, BR will be stepping up marketing activities and establishing specialized services for private fertilizer dealers\. The3 economies of unit train movements of fertilizer have been clearly established under this project; the added dimension that needs to be addressed now is the need to consolidate small private consignments in a manner that is responsive to the needs of small private dealers who now number over 200 small firms or individuals\. 6\.4 Sustainability of the investments in Chittagong Port and Baghabari Port pose fewer uncertainties\. The dredging carried out for CPA has provided a relatively stable channel and maintenance dredging is unlikely to require excessive maintenance expenditures and would be well within the dredging capability of the Port\. Baghabari Port does suffer from a higher degree of siltation and sustainability of the investments in this port will depend on the success of BIWTA in maintaining the channel to allow year round navigation\. Under the proposed Third Inland Water Transport Project, IDA is seeking to strengthen BIWTA's dredging capability, and specifically to ensure that approaches to Baghabari and other inland ports are adequately maintained\.  - 11 - BANGLADESH FERTILIZER TRANSPORT PROJECT (CREDIT 1096-BD) PROJECT COMPLETION REPORT PART It - Project Review from the Perspective of the Executing Agencies (Prepared By the Executing Agencies of the Borrower) This part presents four separate project completion reports prepared by each of the four GOB agencies involved in the implementation of the various components of the project\. The four agencies are: - Bangladesh Agricultural Development Corporation - Bangladesh Railway - Bangladesh Inland Water Transport Authority - Chittagong Port Authority Their individual reports do not necessarily represent the views of either IDA or of the other agencies involved in the project\. I\. BANGLADESH AGRICULTURAL DEVELOPMENT CORPORATION 1\.1 Introduction\. The overall objective of the Fertilizer Transport Project was to improve the availability of fertilizer to farmers by expediting handling and distribution and to reduce the cost of distribution\. So far as BADC were concerned, the project envisaged: (a) construction of storage godowins at Baghabari, Shiromoni, Rajshahi and Natore; and (b) provision of railway sidings to serve the godowns at Shiromoni, Rajshahi and Natore and augment rail siding facilities at the fertilizer factories located at Ghorasal and Ashuganj\. The project also envisaged (i) undertaking studies for bulk fertilizer handling facilities at Chalna, (ii) improvement of movement contracting procedures, and (iii) rationalization of the fertilizer distribution system by using the least cost mode of transportation\. Running of unit/block trains with fertilizer traffic was sought to be achieved in order to expedite distribution and reduce costs\. 1\.2 For the BADC component of the project, the costs estimated at tlhe time of appraisal, amounted to Tk 204\.80 million including Tk 125\.62 as local costs and Tk 79\.18 as foreign exchange costs\. 1\.3 Implementation of the Project\. The work of construction of warehouses was scheduled to commence in September 1981 and to be completed by December 1983 while acquisition of land, appointment of supervisicn consultant, prequalification of contractors and award of contracts was to precede this\. In  - 12 - the event, the work could commence only in October 1983 with a delay of about 2 years and was completed in stages between June 1985 and March 1987\. The following factors contributed to the delay: (a) general delay in land acquisition; (b) delay in the appointment of supervision consultant\. The consultant was appointed in October 1982 about 22 months behind schedule, partly due to delay in receiving IDA approval for finalization of terms of reference and partly due to delay in finalization of draft agreement and related formalities; and (c) other causes like unusually early and heavy rainfall during the 1984 monsoon, power problems causing delay in piling work, increase in the scope of work, labor problems at Baghabari, court injunction on the land at Natore, occupation of the Rajshahi site by existing buildings of Bangladesh Railway and of the Shiromoni site by boulders of the Railway\. 1\.4 As regards the rail sidings, the work was done by BR as BADC's contractor\. Sidings were made operational in conjunction with the setting up of the warehouses at different locations\. Augmentation of the rail siding facilities was also done at Ghorasal and Ashuganj fertilizer factories\. 1\.5 As regards other items envisaged in the project, the position is as follows: (a) The study for bulk handling facility at Chalna was not undertaken as this work was handled by Chalna Port Authority independently; (b) For improving contracting procedures, several steps were taken by BADC including pre-qualification of contractors; increasing duration of barge/coaster handling contracts from one to two years; introduction of minimum pickup and delivery rates by factory; improvement of lifting procedures from fertilizer factories, etc\.; (c) Likewise, the fertilizer distribution system has been rationalized by adopting the following measures: (i) least-cost routes for distribution of fertilizer to Primary Distribution Points (PDP) and Transit Points have been developed and implemented; (ii) all the three modes of transportation are being utilized for distribution of fertilizer from the Ghorasal factory; (iii) direct shipment of fertilizer by truck from the Ashuganj factory to the Comilla area is being allowed; (iv) despatch of fertilizer from factories and/or Chittagong Port to northwestern districts of Dinajpur, Rangpur and Bogra by all-rail routes is being undertaken subject to limitations of the ferry service at Bahadurabad-Tistamukh ghat; and (v) running of unit trains commenced in 1985-86 when BR made wagons available in rake formation\. Over the years, despatches by block  - 13 - train are being increasingly used and such trains now account for about 50- of the total despatches by rail\. 1\.6 Costs\. Annex II\.1 is a statement showing the appraisal estimates of the BADC component of the project together with actual costs incurred\. It will be observed from this statement that: (a) actual costs incurred were Tk 218\.94 million against the appraisal estimates of Tk 204\.80 million; (b) as against the appraisal estimates of Tk 135\.18 million for construction of warehouses, the actual expenditure incurred amounted to Tk 128\.77 million due to reduction in the total warehouse capacity created from 32,000 tons to 28,500 tons and non-construction of ancillary buildings and other facilities at Natore as the same were already available; (c) rail siding costs were envisaged in the project as Tk 51\.10 million against which actuals have amounted to Tk 84\.47 million due to increase in the scope of work at Shiromoni and revision of cost estimates by BR taking into account the latest costs; (d) against the provision of Tk 10\.52 million made for supervision consultant, actual expenditure incurred was Tk 5\.70 million, of this amount, Tk 0\.74 million is yet to be paid for want of funds; and (e) no expenditure was incurred against the provision of Tk 8\.0 million allocated for the appointment of consultants for the Chalna Bulk Handling Study and for the inventory management study\. 1\.7 Benefits\. Several anticipated project benefits have been realized, including: (a) increase in the distribution of fertilizer from 875,000 tons in 1980-81 to 1,515,000 tons in 1987-88; (b) increase in the storage capacity by 28,500 tons has helped in improving the availability of fertilizer; (c) movement of fertilizer by least-cost mode of transport; (d) increasingly greater dispatches by block/unit trains leading to faster transit and distribution; and (e) very significant reduction in the cost of distribution of fertilizer\. Movement and handling costs at constant prices have come down from Tk 301\.58 per ton in 1980-81 to Tk 164\.51 per ton in 1987-88\. 1\.8 Other Comments\. Both before and during implementation of the ptoject\. IDA's performance has been excellent\. Relations between BADC and the IDA remained extremely cordial all along\. 1\.9 As a result of closing of the credit in December 1987, it has not been possible for BADC to pay outstanding dues to BR, supervision consultant and contractor, and claim reimbursement\.  - 14 - Annex 11\.1 BANGLADESH FERTILIZER TRANSPORT PROJECT (CREDIT 1096-BD) SUMKARY COST (BADC COMPONENTS) Appraisal Estimates vs\. Actual Costs Estimate as per Appraisal Actual Expenditure Incurred Component Foreign Local Total Foreign Local Total Baghabari (a) Warehouse 5\.72 10\.32 16\.04 8\.19 9\.20 17\.39 Shiromoni (a) Warehouse including Pontoon gangways 24\.77 36\.33 61\.10 30\.94 31\.91 62\.85 (b) Rail siding 11\.03 16\.60 27\.63 28\.60 15\.03 43\.63 Natore I (a) Warehouse 9\.46 18\.84 28\.30 8\.07 9\.17 17\.24 (b) Rail siding 1\.58 2\.74 4\.32 5\.56 3\.91 9\.47 Rajshahi (a) Warehouse 10\.57 19\.17 29\.74 14\.39 16\.90 31\.29 (b) Rail siding 1\.99 5\.60 7\.59 8\.88 6\.63 15\.51 Ghorasal (a) Rail siding 0\.86 4\.65 5\.51 9\.24 6\.62 15\.86 Ashugani (a) Rail siding 1\.88 4\.17 6\.Q5 -- -- -- Consultancy (a) Warehouse supervision 5\.02 5\.50 10\.52 5\.70 -- 5\.70 (b) C\.A\. inventory management 1\.50 0\.50 2\.00 -- -- (c) Khulna bulk handling 4\.80 1\.20 6\.00 -- -- -- Total BADC 79\.18 125\.62 204\.80 119\.57 99\.37 218\.94 Note: Total IDA share of the actual expenditure stands at Tk 119\.57 million\. Out of this, only Tk 103\.56 million have been disbursed by IDA\. Balance Tk 16\.01 million could not be reimbursed due to closure of the Project\. Consequently, BADC could not pay the outstanding dues of Bangladesh Railway, consultant and contractors\.  - 15 - II\. BANGLADESH RAILWAY 2\.1 Introduction\. BR's component of the project envisaged running of unit/block trains for fertilizer traffic in order to reduce the cost of distribution\. For this purpose, the project envisaged rehabilitation of 600 freight wagons\. The project also sought to improve the Bahadurabad-Tistamukh Ghat ferry in order that more fertilizer and other traffic could be moved between the eastern and the western parts of the country\. For this purpose\. the project envisaged (a) acquisition of a new barge, (b) conversion of a barge into a maintenance workshop, (c) rehabilitation of a tugboat, and (d) ancillary facilities\. In addition, improvement of communications at the ghats and setting up of an Operations Control Centre was planned\. BR was also required, as contractors for BADC, to provide rail sidings to serve BADC godowns at Shiromoni, Natore and Rajshahi and to improve rail sidings at the fertilizer factories at Ghorasal and Ashuganj\. 2\.2 Imp1ementation of the Project\. The status of implementation of the project components is as follows: (a) up to June 1988, 213 broad gauge (BC) and 203 meter gauge (MC) wagons out of 225 BC and 375 MC wagons had been rehabilitated (60\.52); (b) regarding conversion of a barge into a maintenance workshop, the contractor completed 68- of the structural work, and equipment and machinery has also been procured; (c) although the project had originally envisaged rehabilitation of the Tug Ishakhan, later on, it was decided instead to procure a new tugboat; but the proposed tugboat was not procured as the tender for supply remained undecided due to difference of opinion between BR and IDA; (d) a new barge was pror\.red in 1985; (e) some ancillary facilities were provided at Chittagong and at Saidpur Workshop; (f) as regards establishment of an Operations Control Centre, up to June 1988, only 622 of the work was completed; the work was, however\. continued by the contractor and is now completed though the system has not yet been handed over to BR officially; (g) improvement of rail sidings at Ghorasal and Ashuganj and provision of rail sidings at Shiromoni, Natore and Rajshahi have been completed; and (h) unit trains are running regularly and about 60Z of fertilizer traff-c is now moving by these trains\. 2\.3 BR's Performance and Lessons Learned\. During the implementation (f *he project, quarterly reports outlining the progress and problems encountered were submitted to IDA\. The implementation of the project was delayed, and the bottlenecks which delayed the project implementation were duly reported\. As regards the lessons learned from this project, it may be stated that the project director should have been made more responsible in the execution of work\. This  - 16 - could surely help quick implementation of the project\. The execution of work got abnormally delayed due to the formality of decisions by higher authorities\. 2\.4 Actual Versus Appraisal Costs\. A statement is attached as Annex 11\.2 showing actual versus appraisal costs\. The actual cost of the project was about Tk 12 million less than the appraisal cost due to rehabilitation of the tugboat not having been undertaken and price escalation\. 2\.5 Benefits Anticipated and Benefits Realized\. (a) by running unit trains with fertilizers, the turnaround of wagons and locomotives has shown considerable improvement\. The turnaround of wagons used on unit trains is 5-6 days on MC and 2-3 days on BC against 35 days/20 days for other wagons, respectively; and (b) improvements envisaged for Bahadurabad-Tistamukh Ferry could not be achieved as the new tug proposed to be acquired was not acquired and mobile workshop was not commissioned\. 2\.6 During the implementation of the project, IDA's performance was good as was the relationship between BR and IDA\.  - 17 - Annex 11\.2 BANGLADESH FERTILIZER TRANSPORT PROJECT (CREDIT 1096-BD) (RELATED TO BR) Appraisal vs\. Actual Costs up to June 1988 (Amount in Millions of Taka) Appraisal Costs Actual Costs Component Foreign Local Total Foreign Local Total 1\. Wagon rehabilitation 31\.46 44\.86 76\.32 55\.48 35\.09 90\.57 2\. Telecommunication 4\.69 8\.61 13\.30 23\.25 12\.54 35\.79 3\. Tug Rehabilitation 9\.61 9\.82 19\.43 -- 0\.08 0\.08 4\. Barge acquisition 9\.30 3\.80 13\.10 5\.89 6\.86 12\.75 5\. Floating Workshop 6\.30 15\.30 21\.60 4\.75 4\.80 9\.55 6\. Ancillary Facilities 3\.85 3\.85 7\.70 -- 2\.02 2\.02 7\. Consultancy for Telecom 1\.40 0\.16 1\.56 0\.58 1\.99 2\.57 Total 66\.61 86\.40 153\.01 89\.95 63\.38 153\.33  - 18 - III\. BANGLADESH INLAND WATER TRANSPORT AUTHORITY 3\.1 Introduction\. Considering the acute necessity of a river port connecting the northern districts of Bangladesh with the rest of the country by waterways, BIWTA prepared a project for establishing a river port at Baghabari\. This project formed a component of the Fertilizer Transport Project financed by IDA\. Apart from land acquisition and land development for the port, the project provided for two pontoon jetties, two pontoons, four spuds, a transit shed office and residential buildings and internal roads and parking area\. 3\.2 Project Implementation\. The project was implemented by BIWTA and the work was completed by June 1983, about a year behind original schedule due to delay in acquisition of land and physical possession of it\. During the implementation of the project, no major problem was faced\. 3\.3 Costs\. Against the appraisal cost of Tk 34\.52 million and the Project Proforma estimate of Tk 39\.29 million, the actual cost incurred was Tk 36\.60 million\. Details of the costs are indicated in the statement at Annex 11\.3\. The actual costs incurred were 6\.8Z less than the Project Proforma estimate but were about 61 more than the appraisal estimate mainly due to some increase in the scope of work under ancillary facilities\. An amount of Tk 17\.83 million (US$0\.785 million) was not reimbursed by IDA\. 3\.4 Benefits\. By establishing a river port at Baghabari, a waterways communication system between northern Bangladesh and the rest of the country has been established leading to greater economic trade and development\. The port has helped bring down the cost of distr thillon of fertilizer and other commodities to and from Pabna, Bogra and other districts in the western part of country\. Traffic handled at Baghabari Port has :;'adually been growing from about 76,000 tons (including 30,00C tons of fertilizf-\.) in 1983-84 to 247,000 tons (including 123,000 tons o$ fertilizer) in 1986i37 and 306,000 tons (including 153,000 tons of fertilizer) in 1987-88\. Other commodities handled like food grains, petroleum products and other foods have al3o registered considerable growth\. 3\.5 General\. Both prior to and during the imipiementation of the project, IDA's performance was very satisfactory and relati\.ria between BIWTA and IDA were extremely good\.  - 19 - Annex 11\.3 BANGLADESH FERTILIZER TRANSPORT PROJECT (CREDIT 1096-BD) Statement Showing Cost of Establishing Baghabari River Port (Cost in Million Take) Target Quantity Estimated Cost Achievement As As Si per IDA per IDA Actual Expen- No\. Physical Components Unit PP * Appraisal PP Appraisal Quantity diture 1\. Land acquisition acre 40 -- 3\.20 3\.20 35\.62 2\.82 acre 2\. Land fill cft * 5\.00 -- 11\.10 11\.10 4\.03 9\.34 million million 3\. Roads and parking sft * 0\.28 -- 10\.09 10\.08 0\.96 6\.97 million million 4\. Pontoons and gangways: (a) pontoon no\. 2 } 2} (b) pontoon jetty no\. 2} __ 6\.28 6\.28 2 7\.14 (c) spud no\. 4 ) 4) 5\. Transit sheds sft 0\.01 -- 2\.32 2\.32 0\.0099 2\.71 million million 6\. Ancillary facilities -- -- -- 6\.30 1\.24 -- 7\.62 Total 39\.29 34\.52 36\.60 -~- Cost Summary Local Cost Foreign Exchange Cost Total 1\. IDA appraisal costs 18\.58 15\.94 34\.54 2\. Actual costs 18\.77 17\.83 36\.60 Variation +0\.19 +1\.89 +2\.06 * cft - cubic feet, sft - square feet, PP - Project Proforma  - 20 - IV\. CHITTAGONG PORT AUTHC(ITY 4\.1 Introduction\. Since a considerable part of the requirement for fertilizer is met by imports, which were expected to go up, a reduction in the cost of handling imported fertilizer at the country's main port of Chittagong was sought to be achieved by enabling ships with greater tonnage to enter the Port and by reducing the need for lighterage\. This required dredging of the access channel\. The project, therefore, envisaged trial dredging at the outer bar to 30 feet below chart datum and to widen and deepen slightly the Gupta Bend\. The rest of the channel was to be dredged as necessary\. 4\.2 Implementation of the Project\. Trial dredging of Karnafuli River commenced in April 1981 and was completed on schedule in March 1982 within the period of 12 months envisaged\. Australian consultants supervised the dredging\. An intensive programme of monitoring surveys was carried out concurrently in order to assess the resiltation rates\. Trial dredging results revealed that the average annual siltation rate was much lower than the earlier theoretical forecast\. On completion of trial dredging, the consultant recommended that CPA should own one trailing suction hopper dredger having 3,500 M3 for regular maintenance of the channel\. On further study, CPA reduced the capacity of the dredger to 2,500 M3 and the same is currently being procured under bilateral assistance\. 4\.3 Benefits\. Trial dredging has enabled Chittagong Port to handle deeper vessels within the Port which has led to quicker turnaround of vessels and lesser lighterage cost\. Prior to the trial dredging, the maximum allowable draft of vessels entering the Port was about 21 feet in the dry season and 25 feet during the monsoon\. This has increased to 25 feet and 30 feet, respectively, after dredging\. Dredging of some shallow patches in front of the general cargo berths has made entry of deeper draft ships possible resulting in significantly improved port operations\. Calculations indicate that benefits started accruing within 6 months of the commencement of trial dredging, and a saving of 1,436 ship days was effected within less that 2 1/2 years\. It has been estimated that this amounted to a saving of Tk 823 million because of reduction in ships' waiting time and of Tk 291 million as saving of lighterage cost aggregating to Tk 614 million\. The main objective of the Project, namely, reduction of cost of fertilizer transport was successfully accomplished with respect to fertilizer imports through Chittagong Port\. 4\.4 Costs\. The project appraisal costs for the CPA component were estimated as US$5\.39 million (including US$5\.16 million for dredging and US$0\.316 million for supervision)\. Against this, the contract amount was respectively US$9\.294 million and US$0\.315 million aggregating to US$9\.609 million\. The actual cost incurred was US$8\.010 million including US$7\.546 for dredging and US$0\.464 for supervision\. The actual costs exceeded the appraisal estimates due to increase in scope of work as well as increases in unit costs\. 4\.5 Conclusion\. The project was well conceived and well executed\. Throughout the implementation phase and before it, CPA had excellent cooperation from IDA\. CPA is now in a position to undertake dredging on its own\.  - 21 - PART III - Summary of Statistical Data (Prepared by IDA) 1\. Related IDA Credits Year of Credit Title Purpose Approval Status Highways (408-BD) The project consisted of: (a) 06/28/73 Audited OED (4BANPAOO9) construction of the Sitalakhya Report No\. Bridge and Feni Road sections 7954 of the Dhaka-Chittagong Highway and improvements to the war-damaged Surma River Bridge in Sylhet; (b) study of second bridge over the Surma River at Sylhet and prefeasibility studies of other high priority river crossings; and (c) the strengthening of the Roads and Highways Department\. Highways II The project sought to reduce 12/13/79 Audited OED (964-BD) (4BANPA076) vehicle operating costs Report No\. between the main population 7954 center of Dhaka and Chittagong through the construction of bypasses around the towns of Comilla and Chandina\. Inland Water Transport Provision of spare parts, 08/07/73 Audited OED Rehabilitation tools and equipment required Report No\. (424-BD) (4BANPA034) in support of Bangladesh's 4026 inland water transport rehabilitation program, and modification or repair of the offshore oil terminal at Chittagong\. Inland Water To help improve the efficiency 07/12/77 P C R 0 E D Transport II of the inland water transport Report No\. (759-BD) sector, including the 5778 (4BANPA057) operations and finances of BIWTA and BIWTC and the preparation of a medium-term investment program\. Fertilizer Imports To finance the import of 06/28/79 PCR 12/27/82 (944-BD) fertilizer for FY80, to (4BANPA063) improve fe r t i l i z e r distribution and marketing, and to establish a more effective pricing system for fertilizer\.  - 22 - Fertilizer Industry To assist in increasing 05/20/80 Closed Rehabilitation production at three operating (1023-BD) fertilizer plants (Ghorasal (4BANPA074) and Fenchuganj Urea plants and Chittagong TSP plant) through plant rehabilitation, staff training, and provision of spare parts, catalyst and chemicals\. Fertilizer Imports II To finance the import of 06/12/80 Closed (1044-BD) fertilizer and fertilizer raw (4BANPA068) materials during fiscal year 81, to improve fertilizer distribution and marketing, and to establish a more effective pricing system for fertilizer\. Roads Rehabilitation Rehabilitation and improved 06/23/87 Supervision and Maintenance road maintenance including (1827-BD) road rehabilitation works on (4BANPA126) about 305 km of roads and bridges in the northwest of Bangladesh, and deferred maintenance works on about 335 km of other major roads in the northwest\. Chittagong Part Project Construction of two multi- 05/21/82 Supervision (1247-BD) purpose berths, provision of (4BANPA093) equipment and spares, maintenance facilities and training facilities\. Rural Roads and Markets Improvement of around 500 km 05/05/89 Supervision Improvement and rural roads, construction of Maintenance Project some 3,700 m of culverts and (1940-BD) bridges and improvements to (4BANPA158) infrastructure for some 65 growth centers\.  - 23 - 2\. ProJect Timetable Item Date Planned Date Actual Identification 11/26/79 11/26/79 Appraisal Mission 02/05180 02/05/80 Credit Negotiations 09/15/80 09115180 Board Approval 01/22/81 01/22|81 Credit Signature 02/21/81 02/13/81 Credit Effectiveness 05/13/81 07/24/81 Credit Closing 06/30/84 06130/87 Credit Completion 12/31/84 12/31187 Comments 1\. The Project Brief had identified the following as main issues: (a) improvement in BADC's contractual procedures for fertilizer transport; (b) assurances on coordination between different agencies affected by the project; and (c) procurement procedures for acquisition of trucks\. 2\. At appraisal, it was agreed that BADC would revise its contractual procedures for transport of fertilizer and that the project would not support acquisition of trucks\. Financing of Shiromoni Complex, retroactive financing for landfill at Baghabari and the procedure for onlending of IDA funds to different agencies were some issues identified at that time\. 3\. During the credit negotiations, the issues identified earlier were resolved and it was agreed that (a) IDA would finance Shiromoni Complex, (b) BADC would improve its contracting procedures for fertilizer transport, and (c) BADC will enter into contracts for lifting fertilizer from the fertilizer factories\. Issues raised at this stage included BADC, BR and TTB signing a Memorandum of Understanding for the telecommunications component, and BADC and BR signing a Memorandum of Understanding for unit train operations and provision of rail sidings and spurs as preconditions for Board approval\. These conditions were duly fulfilled\. 4\. The two preconditions for credit effectiveness were approval of the Project Proforma of different agencies involved and the onlending procedures\. Both these issues were satisfactorily resolved before the credit became effective\. 5\. At the time of the original completion date of the Project (06/130/\.4), it was seen that except for test dredging of Karnafuli River and setting up of Baghabari Port, most of the components of the project were not completed\. Amongst the incomplete components were construction of BADC warehouses, rehabilitation of wagons, conversion of a wagon ferry barge into a mobile workshop, acquisition of a new barge, acquisition of a new tugboat and provision of telecommunications\. This necessitated extension of the credit closing date up to December 31, 1985 in the first instance, then up to June 30, 1986 and then again up to June 30, 1987 with disbursement continuing up to 6 months thereafter against commitments already made\. While issues involved with most of these  - 24 - components were resolved, unresolved issues at the time of final credit closing included BR not placing order for a new tug, non-completion of work of mobile floating workshop and rehabilitation of wagons\. 3\. Credit Disbursements Cumulative Estimated and Actual Disbursements (USS million) Actuals as Appraisal Estimates Actuals Percentage of Estimates During During During Year the Year Cumulative the Year Cumulative the Year Cumulative FY 1981 1\.4 1\.4 (1\.1) (1\.1) FY 1982 8\.5 9\.9 -- -- -- -- (6\.5) (7\.6) FY 1983 10\.5 20\.4 6\.35 6\.35 60\.5 31\.1 (8\.0) (15\.6) (5\.55) (5\.55) (69\.4) (35\.6) FY 1984 4\.0 24\.4 0\.50 6\.85 12\.5 28\.1 (3\.1) (18\.6) (0\.47) (6\.02) (15\.2) (32\.4) FY 1985 0\.6 25\.0 1\.20 8\.05 200\.0 32\.2 (0\.5) (19\.1) (1\.15) (7\.17) (230\.0) (37\.5) FY 1986 1\.38 9\.43 -- -- (1\.41) (8\.58) FY 1987 -- -- 1\.85 11\.28 -- -- (1\.68) (10\.26) FY 1988 -- -- 1\.95 13\.23 -- -- (1\.60) (11\.86) FY 1989 -- -- 0\.27 13\.50 (0\.20) (12\.06) Note: Figures in parenthesis indicate SDRs\. US$ SDR Total Credit Amount 25\.00 19\.10 Amount Disbursed 13\.50 12\.06 Amount Cancelled 9\.21 7\.04 22\.71 19\.10 Date of Final Disbursement: January 21, 1988  PLANNED AND ACTUAL DISBURSMENT SCHEDULES 90I 20 25\.0 20\.4/ 20 115 -- 13 * - ~~~~~~~~~~~~~~~~13\.50 10 999\.43 - __ _ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 00 8\.05 - - -~ 0,0 \. / ~~~~~6\.35 6\.85_- 5\. 0 FY2O FY81 FY82 FY83 FY84 FY65 FY66 FY87 FY88 FY89  - 26 - 4\. Project Iplementation S\. Appraisal Actual of No\. Project Component Estimate PCR Estimate (A) Bangladesh Railway 1\. Rehabilitation of 600 wagons Sept\. 1980-April 1983 Sept\. 1980-Dec\. 1990 * 2\. Telecommunications Sept\. 1980-Sept\. 1982 Sept\. 1982-March 1989 * 3\. Tugboat modification/ acquisition Sept\. 1980-Feb\. 1982 Sept\. 1980 ** 4\. Procurement of a wagon ferry barge Jan\. 1981-Dec\. 1982 Jan\. 1981-July 1985 S\. Conversion of a barge into a floating workshop Nov\. 1980-Dec\. 1982 Nov\. 1980-Dec\. 1990 * 6\. Ancillary Works Dec\. 1980-Dec\. 1982 Dec\. 1980-June 1986 (B) Bangladesh Agricultural Development Corporation 7\. Appointment of supervision consultant Sept\. 1980-Jan\. 1981 Sept\. 1980-Oct\. 1982 8\. Construction of Baghabari warehouse Sept\. 1981-Apr\. 1983 Oct\. 1983-June 1985 9\. Construction of Natore warehouse Sept\. 1981-Aug\. 1983 Oct\. 1983-Mar\. 1986 10\. Construction of Rajshahi warehouse Sept\. 1981-Sept\. 1983 Oct\. 1983-Dec\. 1986 11\. Construction of Shiromoni warehouse Sept\. 1981-Dec\. 1983 Oct\. 1983-Mar\. 1987 12\. Factory railroad siding improvements Jan\. 1981-Dec\. 1981 Jan\. 1981-Sept\. 1987 (C) Chittagong Port Authority 13\. Chittagong test dredging Sept\. 1980-Mar\. 1983 Sept\. 1980-Mar\. 1983 (D) Bangladesh Inland Water Transport Authority 14\. Baghabari Port construction Sept\. 1980-Aug\. 1982 Sept\. 1980-June 1983 * PCR estimate\. ** Order for acquisition of a new tugboat not placed till the closure of the credit\. Co=ments 1\. General\. Project implementation on the whole was very slow\. The following items contributed to the delay in implementation: (a) There was initial delay of three months in the credit becoming effective due to late clearance of project by GOB\. (b) Implementation was adversely affected as a result of GOB decision in 1983 not to go ahead with those BR components for which commitments had  - 27 - not been made\. These included acquisition of a tugboat and provision of telecommunications\. Work on these items could start only when GOB rescinded its decision after over a year of debate\. (c) BR's Project Implementation Unit remained deficient of several key personnel and there were also frequent changes in the incumbent for the position of BR's Project Director\. td) Lack of timely and adequate inter-agency liaison delayed implementation of the project\. Inadequate liaison between BR and TTB resulted in delay in implementation of the telecommunication component\. 2\. BR Components: (a) Implementation of BR's project components was extremely slow\. In fact, several components like rehabilitation of wagons, telecommunication and conversion of a barge into a floating workshop remained incomplete when the credit closed\. Acquisition of a new tugboat was also not completed by closure of the credit\. (b) Rehabilitation of 600 wagons was to be undertaken by BR at Saidpur Workshop where input of certain machinery and equipment was made under the project\. BR took a long time in identifying individual wagons to be rehabilitated and in providing them to the workshop\. Rehabilitation work was, moreover, completed only partially at Saidpur and later, in 1987, BR decided to undertake further rehabilitation work on Metre Gauge wagons at Paharthali Workshop near Chittagong where the normal workload was already heavy\. No preference was then given to this work and the monitoring of progress of the work was very inadequate\. (c) The work of conversion of a barge into a floating workshop suffered considerable delay due to demise of the contractor and succession dispute that ensued\. Inadequate and unsatisfactory arrangements for timely inspection of completed work by BR officials caused further delay, non-payment of contractor's bills and the final abandonment of the work by the contractor\. 3\. BADC Components\. There was an initial delay of nearly two years in the selection and appointment of the supervision consultant by BADC which led to a corresponding delay in the commencement and completion of actual work of warehouse construction\. Construction work was further delayed due to heavy and early rains in 1984, a court injunction on land at Natore, late release of land by BR at Rajshahi, late release of land at Shiromoni by BR, who were storing boulders at that site, and labor problems at Baghabari\. 4\. CPA Component\. There was no delay in project implementation\. 5\. BIWTA Component\. Delay in implementation of BIWTA component was mainly due to delay in acquisition of land at Baghabari\.  - 28 - 5\. Project Costs and Financing A\. Project Costs (Amount in Hillion Taka) Appraisal Costs Actual Costs No\. Item Foreign Local Total Foreign Local Total Bangladesh Inland Water Transport Authority 1\. Baghabari Port 15\.94 18\.58 34\.52 17\.83 38\.77 36\.60 Total BIWTA 15\.94 18\.58 34\.52 17\.83 18\.77 36\.60 Bangladesh Agricultural Development Corporation 2\. Baghabari Warehouse 5\.72 10\.32 16\.04 8\.19 9\.20 17\.39 3\. Shiromoni Warehouse 24\.77 36\.33 61\.10 30\.94 31\.91 62\.85 4\. Natore Warehouse 9\.46 18\.84 28\.30 8\.07 9\.17 17\.24 5\. Rajshahi Warehouse 10\.57 19\.17 29\.74 14\.39 16\.90 31\.29 6\. Shiromoni Rail Siding 11\.03 16\.60 27\.63 28\.60 15\.03 43\.63 7\. Natore Rail Siding 1\.58 2\.74 4\.32 5\.56 3\.91 9\.47 8\. Rajshahi Rail Siding 1\.99 5\.60 7\.59 8\.88 6\.63 15\.51 9\. Ghorasal Rail Siding 0\.86 4\.65 5\.51 9\.24 6\.62 15\.86 10\. Ashuganj Rail Siding 1\.88 4\.17 6\.05 11\. Consulting-Supervision 5\.02 5\.50 10\.52 -- 5\.70 5\.70 12\. Consulting-Inventory Management 1\.50 0\.50 2\.00 13\. Consulting-Chalna Bulk Handling 4\.80 1\.20 6\.00 -- -- -- Total BADC 79\.18 125\.62 204\.80 119\.57 99\.37 218\.94 Chittagong Port Authority 14\. Dredging 67\.86 12\.18 80\.04 120\.22 120\.22 147\.85 15\. Supervision 2\.97 0\.53 3\.50 4\.92 2\.77 7\.69 Total (c) CPA 70\.83 12\.71 83\.54 125\.14 30\.40 155\.54 Bangladesh Railway 16\. Wagon Rehabilitation 31\.46 44\.86 76\.32 55\.48 35\.09 90\.57 17\. Barge Acquisition 9\.30 3\.80 13\.10 5\.89 6\.86 12\.75 18\. Tug Rehabilitation 9\.61 9\.82 19\.43 0\.08 -- 0\.08 19\. Floating Workshop 6\.30 15\.30 21\.60 4\.75 4\.80 9\.55 20\. Ancillary Facilities 3\.85 3\.85 7\.70 -- 2\.02 -- 21\. Telecommunications 4\.69 8\.61 13\.30 12\.54 23\.25 35\.79 22\. Technical Assistance 1\.40 0\.16 1\.56 1\.99 0\.58 2\.57 Total (d) BR 66\.61 86\.40 153\.01 63\.38 89\.95 153\.33 Contingencies 23\. Price Contingency 52\.99 60\.64 113\.62 - 24\. Physical Contingency 24\.61 17\.60 42\.21 -- -- -- Total (e) CONTINGENCIES 77\.62 78\.24 155\.86 -- -- -- GRAND TOTAL 310\.18 321\.55 631\.73 352\.49 211\.92 564\.41  - 29 - Comente 1\. The overall cost of the Project was Tk 564\.41 million which was Tk 67\.32 million (10\.7Z) less than the appraisal estimates (Tk 631\.73 million)\. The reasons for this are listed below\. (a) some components of the project (e\.g\., wagon rehabilitation, acquisition of a tugboat, conversion of a barge into floating workshop) were not completed; (b) provision of Tk 8 million for studies in respect of bulk handling of fertilizer at Chalna and for inventory management was not utilized as they were financed through other sources; (c) provision of Tk 6\.05 million for improvement to Ashuganj rail siding was not utilized as it was provided from other sources; (d) BADC warehouses actually constructed had a capacity of 28,500 tons against the provision of 32,000 tons in the project; and (e) ancillary buildings and some other facilities at the site of BADC godown at Natore and at ferry ghats were not provided as the existing facilities were considered adequate\. 2\. The items where significant cost increases, vis-a-vis appraisal estimates, were registered included the following: (a) for provision of the rail spur at Shiromoni, actual costs incurred were Tk 43\.63 million against provision (without price and physical contingencies) of Tk 27\.63 million due to increase in the scope of work and cost escalation; (b) costs actually incurred for provision of rail sidings at Rajshahi and Natore, and for improvement of rail siding facilities at Ghorasal were considerably higher than appraisal estimates due to cost escalations (Tk 40\.84 million vs\. Tk 17\.42 million); (c) costs actually incurred for test dredging of Karnafuli River were considerably higher than appraisal estimates due to an increase in the scope of work and price escalations (Tk 83\.54 million vs\. Tk 155\.54 million); and (d) costs for BR's telecommunications facilities were considerably higher than appraisal estimates due to price escalation (Tk 13\.3 million vs Tk 35\.79 million)\.  - 30 - B\. Pro3ect Financing (Amount in Millions of Taka) Planned (Credit Agreement) Final Percentage Percentage Source Amount of Total Amount of Total IDA 387\.5 61\.3 331\.1 58\.7 Domestic 244\.3 38\.7 233\.3 41\.3 Total 631\.8 100\.0 564\.4 100\.0 Comments 1\. As a percentage of the total costs, actual financing of the project by IDA (58\.71) was lower than planned (61\.31) while the actual domestic financing (41\.31) was higher than planned (38\.71)\. 2\. In terms of takas, the amount of IDA financing (Tk 331\.1 million), was Tk 56\.4 million or 14\.51 less than appraisal estimates (Tk 387\.5 million); in terms of SDR, however, IDA financing (SDR 12\.06 million) was 36\.91 less than the credit amount of SDR 19\.1 million, the balance of SDR 7\.04 million being cancelled\. This is explained by currency exchange variations over the project period greatly favoring SDR/US dollar (US$l being equal to Tk 15\.5 in 1980 and Tk 32 in 1987), and the following project specific reasons: (a) actual project costs incurred (Tk 564\.4 million) being less than appraisal estimates (Tk 631\.8 million); (b) noncompletion of some components of the Project like wagon rehabilitation, tug acquisition, floating workshop, etc\.; (c) reimbursement claims of Tk 10\.7 million (Tk 5\.3 million of BADC and Tk 5\.4 million of BR) not being entertained by IDA due to the claims being made, often after considerable delay, beyond the closing date of the Credit; and (d) BADC not claiming reimbursement to an extent of Tk 10\.7 on\.  - 31 - 6\. Project Results A\. Direct Benefits Estimated at Estimated with No\. Indicator Appraisal Estimate Closing Date Full Development 1\. Reduction in As a result of During 1980-81, when As rehabilitation the cost of implementation of the the project commenced, of all 600 wagons handling and project, it was the cost of movement has not been done, distribution envisaged that there and handling of m o v e m e n t o f of fertilizer\. would be saving in fertilizer was about fertilizer in transport a n d Tk 302 per ton; at unit/block trains is handling costs\. The constant prices, the not being arranged extent of saving was, cost has reduced to Tk to the extent h ow e v e r , n o t 165 per ton in 1987- feasible\. The cost specified\. 88\. of distribution of fertilizer will reduce further when more fertilizer is moved by unit trains\. 2\. Reduction in With reduction in the In FY81, the extent of The need for subsidy the cost of cost of distribution subsidy given by GOB is likely to reduce production of of fertilizer, it was was Tk 1,017 million further in the years foodgrains\. envisaged that the amounting to 252 of ahead with further extent of government the cost; this has reduction in the subsidy would come come down to as low as cost of distribution down\. The extent of Tk 354 million (4\.62 that will result reduction in subsidy, of the cost) in FY86 from running more however, was not and to Tk 655 million unit/block trains\. specified\. (8\.7Z of the cost) in FY88\. 3\. Increase in Due to better Availability and use Availability and use production of availability and of fertilizer has of fertilizer is foodgrains\. greater use of improved from 842,000 likely to increase fertilizer, it was tons in FY80 to further\. envisaged that 1,515,000 tons in foodgrain production FY88\. This has led to in the country would an increase in the increase\. production of cereals from 13\.2 million tons in FY80 to 16\.3 million tons in FY88\.  - 32 - 4\. Reduction in As a result of With the running of Further reduction in BR's cost of t r a n s p o r t o f unit/block trains of BR's cost of moving operation\. fertilizer in unit/ fertilizer, there has fertilizer traffic block trains, it was b e e n m a r k e d will take place when envisaged that improvement in BR's a greater proportion utilization of utilization of wagons of fertilizer moves rolling stock ana and locomotives used by unit/block trains locomotives will on such trains\. The as more wagons get improve which would turnaround of wagons rehabilitated\. reduce BR's cost of has improved from 22 operation\. The days to 5 days while turnaround of wagons utilization o f was anticipated to locomotives has improve from 22 days improved from 94 miles to 7 days while per day to 138 miles utilization of p e r d a y \. locomotives was Consequently, the cost anticipated to of BR's operations for improve from 110 movement of fertilizer miles per day to 220 has come down miles per day\. significantly\. S\. Increase in It was anticipated As a result of trial Chittagong Port has t r a f f i c that test dredging of dredging, Chittagong not yet procured a handled by Karnafuli River would Port started handling dredger as was Chittagong increase draft and larger ships of up to o r i g i n a \. 1 y Port with enable bigger ships 18,000 tons\. Overall a n t i c i p a t e d \. reduction in (18,000 tons) being traffic handled by Further reduction in ljg>erage\. handled at Chittagong that port increased lighterage is Port\. Not only would from 5\.4 million tons anticipated when the overall traffic in FY80 to 10\.8 dredger is procured handled increase but million tons in FY88\. a n d adequate the extent of Imported traffic maintenance dredging lighterage would handled at jetties has is possible\. reduce\. increased from 0\.9 million in FY81 to 1\.7 million in FY88 thereby reducing the need for lighterage\.  - 33 - B\. Economic Impact I\. Economic Rate of Return (ERR) Appraisal PCR Component Estimate Estimate a/ (a) Component I - Baghabari Port Development 371 39? (b) Component II - Shiromoni Improvements 502 26Z (c) Component III - Chittagong Port Dredging 231 322 (d) Component IV - Unit Train Operation 23Z 12? (e) Component V - Wagon Ferry Improvement 382 -- b/ (f) Component VI - Additional Storage Facility 242 282 Overall 33? 302 a/ Details of Economic Reevaluation provided in Annex A\.l-A\.6\. b/ ERR was not reevaluated since the component was not implemented, and all costs incurred were included in component IV\. II\. Underlying Assumptions Appraisal Estimate PCR Estimate (a) Component I - Baghabari As a result of The assumptions made at the Port Development construction of Baghabari time of appraisal have Port, Baghabari will proved to be correct and the become the fertilizer same have been retained\. supply centre for the Eastern Pabna and Southern Bogra districts\. With the commissioning of Baghabari, movement of fertilizer and foodgrains going into the Port's hinterland via the lenger and round about route through Khulna/Shiromoni will be avoided\. (b) Component II - Shiromoni (i) If Shiromoni were not (i) Same estimates at Improvements improved, a new river appraisal with cost of each port facility at Tk 30 port being Tk 40 million\. million would have to be added for each 0\.2 million tons of cargo\. (ii) Growth of traffic (ii) Actual traffic that was will be 15? until year 5 handled up to year 8, and and 10? until year 8 when 15? growth for next 10 years capacity is reached\. when capacity has been reached\.  - 34 - (c) Component III - (i) As a result of test (i) Same as appraisal Chittagong Port Dredging dredging, the Port will estimate\. be able to handle larger s h i p s c a r r y i n g fertilizer, foodgrains and oil products and the need for lighterage of these commodities will be considerably reduced\. (ii) Dredger to be (ii) Procurement of dredger provided in FY82\. to be arranged in FY91\. (Costs incurred also include dredging undertaken in FY89)\. (d) Component IV - Unit (i) By running unit/block (i) Same as appraisal Train Operation trains with fertilizer, estimate\. the turnaround time of b;oth wagons and locomotives will sharply reduce\. This will enable a reduction in the number of wagons and locomotives required and in the cost of operation\. (ii) Each wagon and (ii) Based on recent actual locomotive will be performance, each wagon and available for 310 days in locomotive will be available a year\. for 275 days in a year\. (e) Component V - Wagon With augmentation of the Economic reevaluation not Ferry Improvement ferry capacity, transport undertaken as this component of fertilizer to north- has remained largely west regions of the unimplemented an d country can be arranged consequently ferry capacity by all-rail route, thus augmentation has not taken eliminating the existing place\. additional transportation by inland waterways\. (f) Component VI - Availability of storage Same as appraisal estimate\. Additional Storage facilities at Rajshahi Facilities and Natore with railroad spurs would lead to greater fertilizer use, m o r e f o o d g r a i n production, and reduction in transport and handling cost\.  - 35 - Comments: Since some components of the Fertilizer Transport Project have not been fully implemented, the overall benefits arising from nearly 95Z of the investments actually undertaken have fallen a little short of appraisal expectations which were based on likely benefits from about 962 of the investments\. This is primarily because appraisal estimates of overall benefits had taken into consideration benefits from improvements in the wagon ferry, while PCR benefits do not include any benefits stemming from improvement in the wagon ferry since inputs in terms of an additional tugboat and a floating workshop have not been provided\. C\. Studies Purpose as Defined Study at Appraisal Status Impact of Study Bulk fertilizer Evaluation of The study in As a result of the handling various methods of question is not study necessary facility at handling fertilizer undertaken under facilities for bulk Chalna Port and final the Fertilizer handling of fertilizer engineering for the Transport Project traffic at Chalna Port selected alternative but was done was developed and is to enable bulk independently by being used by BADC\. fertilizer handling Chalna Port facility being Authority\. developed at Chalna Port\. Couments: During the implementation of Fertilizer Transport Project, IDA agreed to drop the study in question as Port of Chalna carried out the same independently and provided the necessary facilities for bulk handling of fertilizer\. 7\. Status of Covenants Covenant (Sect\. No\. Deadline of Credit for No\. Agreement) Subject Compliance Status 1\. 3\.02(a) BR to employ consultants to design June 30, 1981 Complied with fertilizer unit/block train though after a operation and to assist in initial delay of four operation of such trains\. years\. 2\. 3\.02(b) BR to employ consultants to assist Complied with\. in installation of telecommunication system for Operations Control Center\. 3\. 3\.02(c) BADC to employ consultants for Jan\. 31, 1981 Complied with but supervision of construction of in October 1982\. godowns\.  - 36 - 4\. 3\.02(c) BADC to employ consultants to assist Jan\. 31, 1981 Dropped since work in studies and design of fertilizer was done bulk handling facilities at Chalna independently by and for improvement to fertilizer Chalna Port under warehouse management and inventory USAID financing\. control practices\. 5\. 3\.02(d) CPA to employ consultants to assist Complied with\. i\. the supervision of test dredging of the channel to Chittagong and in the monitoring of channel siltation\. 6\. 3\.04(c) Borrower to prepare a Project Complied with\. Completion Report\. 7\. 3\.05(a) BADC to furnish to IDA the National Jan\. 31, 1981 Complied with in Storage Plan for fertilizer\. May 1981\. 8\. 3\.08 BADC to improve arrangements for Complied with\. contracting for distribution of fertilizer by road and inland water transport\. 9\. 3\.08(a) After December 31, 1980, but prior Complied with\. to Jan\. 1, 1982, BADC to award all new fertilizer transport contracts in Comilla and Noakhali districts through competitive bidding procedure\. 10\. 3\.08(b) After December 31, 1980, fertilizer Complied with\. transport contracts should be awarded by BADC only after a formal prequalification procedure\. 11\. 3\.09(a) BADC and BR to undertake unit/block Aug\. 30, 1981 Complied with train trials from Ghorasal or though after a Ashuganj within two months of delay of four appointment of Operating Consultant\. years\. 12\. 3\.09(b) BADC/BR to enter into contract for Oct\. 31, 1981 Partially complied unit/block train operation\. \. with\. 13\. 3\.10(a) BR to make recommendations for Mar\.31, 1981 Complied with improving management structure of after three years Bahadurabad-Tistamukh Ghat ferry\. delay\. 14\. 3\.10(b) BR to put into effect Sept\. 30, 1981 Complied with recommendations for improvement of after a delay of management structure of Bahadurabad- three years\. Tistamukh ferry\. 15\. 3\.10(c) BR to replace steam shunting engines Dec\. 31, 1981 Complied with\. with diesel shunters at Bahadurabad- Tistamukh ferry\.  - 37 - 16\. 3\.11 TTB Board to rent to BADC and BR Complied with communication channels controlled by partially\. OCC, operate and maintain them and permit BADC and BR to provide their own specialized telecommunications equipment for OCC\. 17\. 3\.12(a) BADC and BR to maintain a Project Complied with\. Implementation Unit\. 18\. 3\.12(b) BIWTA and CPA to assign a Project Complied with\. Manager\. 19\. 3\.12(c) A Project Coordination and Complied with\. Monitoring Committee to be set up under the chairmanship of Chairman, BADC\. 20\. 3\.13 CPA to consult IDA within seven Complied with\. months of completion of initial dredging regarding result of monitoring of siltation of channel and program of maintenance of the channel\. 21\. 4\.03 BR to ensure that wagons Largely complied rehabilitated under the project are with\. used exclusively for the operation of unit/block trains for fertilizer distribution\. Comentss Most of the covenants were complied with fully although a few were complied with partially\. The deadline for compliance was not always met\. 8\. Use of IDA Resources A\. Staff Inputs a/ Staff Weeks Stage of Final Project Cycle Total b/ Through Appraisal 92\.0 Appraisal through Board Approval 30\.0 Board Approval through Effectiveness 6\.5 Supervision 177\.2 Total 305\.7 a/ Data on planned inputs were unavailable\. b/ Estimated\.  - 38 - B\. Missions Special- Perform- Stage of Number Days ization ance Project of in repre- Rating Types of Cycle Month/Year Persons Field sented a/ Status b/ Problems c/ Through Sept\.-Oct\. 1979 4 24 ECN, FNA,RWS, -- __ Appraisal EGR Feb\. 1980 4 21 ECN,FNA,EGR -- -- Appraisal April 1980 4 10 ECN,RWS,EGR -- -- through Board July 1980 1 10 ECN -- -- Approval Board Feb\. 1981 2 5 FNA,EGR -- -- approval through April 1981 2 7 FNA,EGR -- -- effective- ness July 1981 3 18 FNA,ECR,RWS -- -- Supervision Nov\.-Dec\. 1981 3 14 FNA,EGR,RWS 2 MT June 1982 4 11 FNA,EGR 2 MT Oct\. 1982 5 6 FNA,EGR,ECN 2 MT May 1983 1 12 RWS 2 MT Nov\.-Dec\. 1983 1 15 RWS 3 MT Oct 1984 1 18 RWS 3 MT Sept\.-Oct\. 1985 2 11 EGR,RWS 3 MT Sept\.-Oct\. 1986 1 15 RWS 3 MT Nov\. 1987 2 25 FNA,RWS 3 MT a/ ECN = Economist; EGR - Engineer; FNA - Financial Analyst; and RWS = Railway Specialist b/ 1 = problem free or minor problems; 2 = moderate problems; 3 = major problems c/ MT - management  - 39 - ANNEX A ECONOMIC REEVALUATION A\.1 Baghabari Port Development A\.2 Shiromoni Improvements A\.3 Chittagong Port Dredging A\.4 Unit Train Operation A\.5 Additional Storage Facilities A\.6 All Components  - 40 - ALNNEX A\.I OU¶1LIZZ T1110DP? P5OJWr eRoJCC CUeLE7 104 RW t EC0WIC EVA\.AL\.UAION OP 9A0 9 OEv fL\.rO \. \. ___\.__\. T?,#t¢C P,oj*ec4toflS 6reft o / Co°t- */ (Thou,o\.d teoo) (MlF I :oK Of rob *) (Mi I lo\. of rTapib*) Fort\.1,4o, Otb*\. T'6ff'c Pa\.,I\. Othe, T'Iff;c total Coo tel Opoleta\.0 Total a/ b/ C/ d/ G/ '/ 1900-s1 0 0 000 000 0 00 2r50 00o 27so 2\. 1961-62 0 0 0\.00 0o00 0 00 16 3 000 I6 36 3 1062-3 0 0 0\.00 0o00 0\.00 o5\.S 0 00 s5 S5 4 1963-64 30 46 026 9 65 19 1 06 oo04 s7 3 t164-61 it 73 20 It 1' r7 38\.47 7 94 0\.12 a o0 6\. 16e-66 L0S 00 28 30 1U\.S5 46 n2 2 94 0\.09 3 07 7\. 965\.-7 123 124 31 04 21\.71 52\.76 0\.00 0 35 0 38 6\. 1917-6 130 130 32 49 22\.s4 55\.01 0o00 0 o0 0 07 e 137 137 33 56 23 90 57 41 0\.00 0 40 0 40 1o 145 145 35 52 24 6 601? 0\.00 0 40 0 40 it\. 145 145 355 2 24 65 60\.17 0\.00 050 05o 12\. 145 145 3552 24 S 60\.17 0o00 0\.50 0 0 13\. 145 145 3s 52 24 65 60\.1? 0\.00 0\.50 0 0 * 145 145 35 52 2465 60\.17 0o00 0\.50 0 so 15 145 145 3552 245 60\.17 000 0o0 0 so to 145 14S 3552 24 6 so 617 000 0oo 0 o 17 145 145 35 52 24\.65 60\.17 0o00 0 60 0 60 is 145 145 35 52 24 5 0 L601 000 060 060 1 145 14S 5 3552 2465 60\.17 000 060 0 60 20 145 145 3 552 24 65 60 I? 000 060 0 so 21\. 145 145 35\.52 24 65 60\.1? 000 060 0 60 22\. 145 145 35 32 2465 60\.1? 0\.00 060 0 60 am () \. 38 90 S/ Actual tAo up \.a to yar F\. SS seoeoh 'eat\. a to Its, 10 fto'oofto'\. c*seSity of *oeaa\.t d*-alo_\.ant a0 sommood to be '*eal\.d\. hi Aetual ton\.6\.^ ue to yoau 7, SS reeth St* \. to yes, 10 Thee\.#tep\. copeat, y of \.aeent daeelo _ee4 -a seammoed tob re ,ached\. et Th\. s\.eeas so, ton aso;\. is celeulate4 es tth 4\.f'e'\.nCo - t,lane\.f% coa% betese QC 'erel/Aahugsnj and leckabo- \.i SI\.i'o\.i/Nhulne (nlan et*ata and rg I)\. rob* S4?/tom, and Cho,meal/lAs enj 0nd fegabe\.i ( -ln ve\.) \.kich seusla Trb\. 302/ton trh ea\.ng :\. Ter, 245/to\. d/ rho eafage per ton seeine s talcyulated as tha d4 "e'0Ca -- t\.anae\.tA C44t batleo 0heh1e/Mera1 anY4\.l n tah*du,abae F,,to 6tehgberi (\.a\.l\.,ad)\. rTah 340/ton, aJ0 t-a 4Ct \.land aate outv\. Tabs 170 ton\. eoc is tabs 171/ton 0/ Aetual oeo% incu-\.ad */ Acuatee 60 to 6\. and ae\.tated thsrasfto, 6/ All Co1a1 sW\. W tenaf1'ts %NMW§ IOU \. \.b*n -,l*lLa tO \.46 *a\.g-\.  - 41 - AMEX A\. 2 OAN*LADO4 FMTZLLrZE TRANSPORT PRO\.JECr (Constant qn6 prices) ge\.e\.ft (MliI\.oft Of Takes) 9/ Costs (Mill;oo oi rkehe) f/ F\.t\. I ZO *'55s^o t T,sff;c Oa\.st-0 A^o'd Year (Thousand tons) Se-Gs tnCaatment t'@It Cs; el Milnte"en Total */ i/ c / */ i\. Xqo0-a1 0 0 0 0 0 0\.0 0\.0 0\.0 0\.0 2\. 1968162 0 00 00 0\.0 0\.0 0\.0 0\.0 _\. 1982-61 0 0 0 0\.0 0 0 15\.$ 0\.0 15\.$ '\. 1963-4i 0 00 0 0 0 0 37 8 0\.0 37 6 S\. 084t-08 0 00 47 e *76 9\.3 0\.0 9\.3 6 1965-641 145 i60 0\.0 L6\.0 24\.1 0\.0 24\.1 7\. 1988-67 116 12\.2 0\.0 12\.2 36\.6 0\.0 36\.6 6\. 1967-66 125 ;2\.6 0\.0 12\.0 0\.0 0\.0 0\.0 9\. 196-69 144 144 0 0 14\.4 0\.0 4\.3 A 3 10\. 1969-90 166 16\.6 0\.0 16\.6 0\.0 4\.3 4 3 11\. 191 19 t 40 0 59\.1 0\.0 4 3 4 3 12\. 220 22\.0 0\.0 22\.0 0\.0 4\.3 4 3 13\. 250 25\.0 0\.0 21\.0 0\.0 4\.3 4\.3 14\. 266 28\.8 0 0 28 6 0\.0 4\.3 4\.3 15\. 331 33\.1 0 0 33\.1 0\.0 4\.3 4\.3 16\. 381 38\.1 40\.0 78\.1 0\.0 4\.3 4\.3 17\. 438 43\.6 0 0 43\.6 0\.0 4\.3 4 3 16\. 50t 50 0 0\.0 50\.0 0\.0 4\.3 4\.3 19\. 00 50 0 0 0 50\.0 0\.0 4\.3 4\.3 20\. 500 50\.0 0\.0 50 0 0\.0 4\.3 4 3 2t\. 500 50\.0 0 0 50\.0 0 0 * 3 4 3 22\. 500 50 0 0 0 50 0 0 0 4 3 4 3 egtt (I) * 26\.12 of Aetual traffle handled uo to yea, 6 end 155 G,oath at* for -*ts 10 year* -ts eses hity of ie ot a \.ached\. b/ Eati \.ted at robe 100 per ton c/ If Se;\.o; *S, \. ret*^t*seoi\.d\. so new ,\. at fec\.'ty canti'g Yalks 40 million VW ad hav, to be 0dd for *eah 200,000 tons of csago 4/ Actual costa\. *1 Actual* up to yrose a end 41 of \._\.a\.I :,\.t , \.0\.aft, f/ All ceost and benefits theough tIS he,\. bs\. *1stae to 1966 Pricee  BANLDESH FERTILIZ TRAIWPOfRT PROJECT FROJEC COELETIN REPORT ECOldIC EVALLTIVN OF iIMAG6 POlT REIWt (Cae4tent 196 Pric") Traffic Projctiose a/ senofita ;/ Coat* */ CrTou"d TeaO) (I\.H11ion of Taken) (4ll-l on of labs\.) 0\.1 oil Proc\.r\.nt Na\.n\.nce Ycr Fertilizer Foodgreine Product Fertiliaer Foodgrine Product Total Capital Drodgor Dredger Total il c d/ */ f/ \./ I\. 1960-8i 0 0 0 0\.0 0\.0 0\.0 0\.0 64\.2 0 0 0 0 64 2 2\. 1961-62 73 0 592 22\.8 0 0 92 4 115\.1 176 1 0 0 0 0 176 1 3 1962-83 0 57 490 0\.0 19 9 6 6 80 5 6 4 0 0 0 0 6 4 4 1963-64 0 132 114 0\.0 33 3 14 4 47 6 0 0 0 0 0 0 0 0 S\. 1964-65 0 0 625 0\.0 0 0 74\.4 74 4 0 0 0 0 0 0 0 0 6 196S-61 114 0 649 25\.1 0 0 71 4 96 5 0\.8 0 0 0 0 0 O 7 19"-67 0 112 236 0\.0 288 24 3 53\.1 00 00 00 00 * 1967-88 0 471 460 0 0 120\.2 46 9 167 1 0\.0 0 0 0 0 0 0 9 0 5CO 475 0\.0 125 0 47\.5 172\.5 160\.0 0 0 0 0 160 0 10 25 475 490 50\.0 11\.6 49 0 217\.8 0\.0 0\.0 00 00 11 SO 450 510 10\.0 112\.5 51\.0 173 5 0 0 10000 150 0 1150 0 12 75 425 525 15\.0 106\.2 52\.5 173\.7 0 0 0 0 150\.0 1500 la 100 400 540 200 0 100\.0 54\.0 174 0 0 0 0 0 1500 150 0 14 130 375 56O 25\.0 93 6 56\.0 114\.6 0 0 0\.0 150 0 150 0 15 160 350 50 32\.0 87\.5 50\.0 177\.5 0\.0 0 0 150 0 1500 16 190 325 600 36\.0 81\.2 60\.0 179\.2 0\.0 0 0 150 0 150 0 17 230 300 620 4 0 75\.0 62 0 16b3\.0 0\.0 0 0 1500 1500 O 1i 260 275 640 52\.0 606 64 0 164 6 0 0 0 0 150 1500 19 290 250 660 50\.0 62 5 66\.0 186\.5 0\.0 0 0 150 0 ISO O 20\. 330 225 660 66\.0 56\.2 60\.0 190\.2 0\.0 0 0 150 0 150 0 21\. 370 200 700 74\.0 50\.0 70 0 194\.0 0\.0 0 0 150 0 150 0 22\. 4C0 200 700 80\.0 50 0 70\.0 200\.0 0\.0 0\.0 150 0 150 0 gm (S) 34\.25 */ lecreeansl treffic mot reqiring lighIteing *ith channel deepning (actual\. up to year 8)\. b/ Ecoeoic cost of I igaterso is oat,eted to bo Tlk- 20 per on\. el bcmsic cost of lighterae is seet\.mted to be TaO& 250 per tm\. 4J Bmoic cost of lighterage is eet\.eted to be la&& 100 per on\. eJ Actul costs incurred\. f/ Likely cost of dredger propoee for procurtent (CPA' eat_ats)\. e/ Us of dredger cpitel cost\. h/ Cost of drodedg undert_an an 1968-09 *iAll cost\. and benef\.ts through 19M ha\.e been inflated to 1960 prices  BA LADESH FERTILIERt TRAEPRT PROJECT PROJECT COMPLETION REPORT ECON9UC EVMLATION OF LINT TRAIN WUATION (Constant 1988 price\.) Fertilizer NDeiI Train Operation Uni t/8lock Train Operation Benefit\. enft\. / Costs / Traffic (Thoueand) (Thousand) (Thoucnnd) (nMll\.on of Taka) (H l,on of Tabs) Projction -_- --- __________________________----------- ----------------------- ---------------------------- - ------------- (Theunand Wagm Days Locomv itve eao9n Days Locomtivo Wagon Days Locomotive leer oen) Rnequirod DIa A Required Required Days Rhquired Sawed Days Sawed Wagon& Locomat-w Total Tot" */ h/ C/ d/ */ f g a/ h/ 1\. 19O-81 0 0\.00 0\.00 0\.00 0\.00 000 0\.00 0\.0 0 0 0 0 0 9 2\. 19B1-82 0 0\.00 0\.00 0\.00 0 00 0\.00 0\.00 0 0 0\.0 0 0 0 0 3\. 1962-83 0 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.0 0\.0 0\.0 12 7 4\. 1983-84 0 0\.00 0\.00 00o 0\.00 000 0\.00 0\.0 0\.0 0 0 31 0 S\. 1984-856 0 33\.00 0\.12 7\.50 0 06 25 50 0\.06 5\.5 1 4 6 9 23 4 6\. 1965-11 75 82\.50 0\.30 18\.80 0\.15 63\.70 0\.1S 12 7 3 2 15 8 41 6 7 1986-87 96 107\.0 0a 39 24\.50 0\.20 83\.30 0\.19 15\.5 3 8 19 3 90 2 8 1987-U8 222 244\.20 0\.89 55\.50 0 44 188\.70 0\.45 34 7 9 0 43 7 18 8 9 300 130 00 1\.20 75\.00 0\.60 255\.00 0\.60 45 9 11 7 57 6 0 0 10 400 440 00 1\.60 100\.00 0\.80 340\.00 0\.80 61\.2 15 6 76\.8 0 0 t 500 55iO\.00 2\.00 125 00 1 00 425\.00 1\.00 76\.5 19\.5 96 0 0 0 (S) * 11 7 / Actual up to year 8 and esti_mted for next 3 years when capacsty \. sning (actualt up to year 8) b/ Traffec tone divided by 30 tons average per wagon multiply by 22 days turn around (available agons)\. c/ Traffic tons divided by 1\.000 ton per train multiply by 2 directions sultiply by 300 k1\. average haul divided by 150 h_e\. per day per a\.a\.lable locomot-ve\. d/ Traffic ton divided by 20 to"n avrage per wagn multiply by 5 days turn around (ursilablo wsgon-)\. e/ Traffic ton divided by 1,000 ton por train multiply by 2 directions multiply by 300 kb\. average haul divided by 300 1_\. per day per availableo loc t-ve f/ Cost per agon day equals, Tk 1 -0 equal capital cost (lb 400,000) multiply by capital recovery factor at 12T over 30 years (0\.124) d-eded by swvalablo days (oecluding operating ad mintenaace cost)\. g/ Cost per locomotive day equal\. Tn 19,500 equals capital coet (Tb 400,000,000) multiply by capital recovery factor at 121 over 20 years (0\.134) mult,ply by a\.a\.labla days ( ecluding operating an m_intnene cost)\. h/ Total economic cost consist of coot of agon rehabilitation (Tk 83\.4 *illion) plus coet of railroad sidings C( 68\.6 million) plus coat of OCC (M 38\.6 million) wehich ttaa Tb 190D\.6 million\. i/ All costs aW benefit\. through 198 have been inflated to 1968 prices\. In  - 44 ANNEX A\. 5 BANOLAO6SI Ft!tLIZ1R tRANPORT PROJECT PROJECT COMPLETION REPORT ECONOMIC EVALUATION OF ACITIONAL STORAGE FACtITtES ( Constant 1968 Prics ) Benefits (Million of Takes) f/ Coete (MillUon of Takes) f/ VaIue of Throughaut lrv\.vn*,t a\.d !,cnem\.sd toti r1\.1te Year Thousand tons Handing Sa--go Ploduction Benefits Capitol Maintenance Costs a/ b/ c/ d/ */ t 1980-81 0 0 0 0 0 0\.0 0\.0 0\.0 0\.0 2\. 1981-82 0 0 0 0\.0 0\.0 0\.0 0\.0 0\.0 3\. 1962-83 0 0 0 0 0 0\.0 9\.9 0\.0 9\.9 * 1983-84 0 0 0 0\.0 0\.o 11\.6 0\.0 11\.6 3 1984-65 0 0 0 0 0 0\.0 17\.7 0\.0 17\.7 S\. 1985-86 33 1\.1 21\.8 22\.9 19\.4 0\.0 19\.4 ?\. 19846-87 17 0\.2 10\.5 10\.7 25\.4 0\.0 25\.4 S\. 1987-86 26 0\.8 15\.9 16\.7 0\.0 0\.3 0\.3 o\. 1968-89 33 1\.0 19\.8 20\.8 0\.0 1\.5 1\.5 10\. 1969-90 AO 1\.2 24\.0 25\.2 0\.0 1\.5 1\.5 11\. '0 l\.S 30\.0 31\.5 0\.0 1\.5 1\.S 12\. 60 18 36\.0 37\.8 0\.0 1\.5 1\.5 13\. 60 1\.8 36\.0 37\.6 0\.0 1\.5 1\.5 14\. so 1\.8 36\.0 37\.6 0\.0 1\.5 1\.5 15\. 60 1\.8 36\.0 37\.8 0\.0 1\.5 1\.5 te\. 60 1\.6 36\.0 37\.8 0\.0 1\.5 1\.5 17\. 60 1\.3 36\.0 37\.8 0\.0 1\.5 1\.S 18\. so 1\.8 36\.0 37 6 0\.0 1\.5 1\.5 19\. 60 1\.6 36\.0 37\.6 0\.0 1\.5 1\.5 20\. sO 1\.6 36\.0 37\.6 0\.0 1\.5 1\.5 21\. 60 1\.6 38\.0 3r\.6 0\.0 1\.5 1 5 22\. 60 1\.6 36 0 37\.6 0\.0 1\.5 I S ER (I) * 26\.35 */ Actual up to tho yOer 1907-88 and *etisatod for later yeares u to a maximum of 5 tie-\. the total cepWity (12,000 tons)\. b/ e tiated at rtlke 30 *er ton\. c/ With add;tional aerehouw caecsity and aneileb,lity, fertilizer use i- estimated to increeae by 5t\. The slug of foodgraing is rtak 8,400/ton\. fertilizer Take d\.800/ton and the outowt to fartiliaer ratio i n*atbliehed is etabli shed st 2\.0 benef;t pee ton equals Take 12\.000 d/ Actual costs of additional storage end *,l Ieu-a at Rjoahahi and Notogr\. */ Aetual* up to 1968-4 and 211 of capital cost t'\.s*\.a'\. f/ All costs end benefit\. through 966 ha\.e besf *-'$ to 1t98 prices\.  - 45 - ANNEX A\.6 SANCLADESH FERTILIZER TRANSPORT PROJECT PROJECT COMPLETION REPORT ECONOMIC EVALtWATION OF ALL COMPONEWTS (Conntant 1988 prices) Net Cash Flow* a/ Additional Baghabari Shiromoni Chittagong Unit Train Your Storage Port Improvements Port Dredging Operations Total I 0\.00 (27\.50) 0\.00 (64\.16) (0\.86) (92\.52) 2 0\.00 (16\.38) 0\.00 (61\.00) 0\.00 (77\.38) 3 (9\.94) (15\.55) (15\.54) 82\.04 (12\.74) 28\.27 4 (11\.59) 10\.24 (37\.80) 47\.63 (31\.00) (22\.52) 5 (17\.73) 28\.61 38\.32 74\.38 (16\.54) 107\.03 6 3\.52 43\.75 (8\.14) 95\.70 (25\.74) 109\.09 7 (14\.42) 52\.41 (24\.62) 53\.15 (70\.86) (4\.35) 8 18\.42 54\.96 12\.75 167\.08 24\.89 276\.09 9 19\.30 57\.06 10\.10 12\.50 57\.60 156\.56 1O 23\.70 59\.77 12\.30 172\.80 76\.80 345\.37 11 30\.00 59\.67 54\.80 (976\.50) 96\.00 (736\.03) 12 36\.30 59\.67 17\.70 23\.70 0\.00 137\.37 13 36\.30 59\.67 20\.70 24\.00 0\.00 140\.67 14 36\.30 59\.67 24\.50 25\.80 0\.00 146\.27 t5 36\.30 59\.67 28\.80 27\.50 0\.00 152\.27 16 36\.30 59\.67 73\.80 29\.20 0\.00 198\.97 17 36\.30 59\.67 39\.50 33\.00 0\.00 168\.47 16 36\.30 59\.67 45\.70 34\.80 0\.00 176\.47 19 36\.30 59\.67 45\.70 36\.50 0\.00 178\.17 20 36\.30 59\.67 45\.70 40\.20 0\.00 181\.87 21 36\.30 59\.67 45\.70 44\.00 0\.00 185\.67 22 36\.80 59\.67 45\.70 50\.00 0\.00 191\.67 ERR (I) - 26\.41 39\.12 26\.12 31\.75 11\.74 29\.76 a/ All cnah flows through 1986 have been inflatd to 1988 pricec

APPROVAL

P160911

Document of The World Bank FOR OFFICIAL USE ONLY Report No: PAD2026 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$ 145\.5 MILLION TO THE REPUBLIC OF BOTSWANA FOR AN BOTSWANA EMERGENCY WATER SECURITY AND EFFICIENCY PROJECT February 15, 2017 Water Global Practice Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Regional Vice President: Makhtar Diop Country Director: Paul Noumba Um Senior Global Practice Director: Guang Zhe Chen Practice Manager: Jonathan S\. Kamkwalala Task Team Leader(s): Rosemary Mukami Kariuki  ABBREVIATIONS AND ACRONYMS BD Bidding Documents BOBS Botswana Bureau of Standards BOD Biochemical Oxygen Demand BTC Board Tender Committee BWP Botswana Pula COD Chemical Oxygen Demand CIWA Cooperation in International Waters CLR Country Learning Report CPF Country Partnership Framework CPS Country Partnership Strategy DEA Department of Environmental Affairs DA Designated Account DPA Designated Project Account DSAP Dam Safety Action Plan DWA Department of Water Affairs EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan FIRR Financial Internal Rate of Return FM Financial Management GDP Gross Domestic Product GFDRR Global Fund for Disaster Risk Reduction GIZ German Aid Agency GoB Government of Botswana IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IEG Independent Evaluation Group IFC International Finance Corporation IFRs Interim Financial Reports ISP Implementation Support Plan IWRM Integrated Water Resource Management M&E Monitoring and Evaluation MCs Management Centers MFED Ministry of Finance and Economic Development MLWS Ministry of Land Management, Water and Sanitation Services MoA Ministry of Agriculture MTC Management Tender Committee NCB National Competitive Bidding NDP National Development Plan NPF New Procurement Framework NPV Net present value NRW Non-Revenue Water NSO National Strategy Office O&M Operation and Maintenance PDO Project Development Objective PE Procuring Entity MLWS - PMO MLWS - Programme Management Office WUC - PMO WUC - Project Management Office POM Project Operational Manual PPP Public Private Partnership PPSD Project Procurement Strategy for Development PU Procurement Unit RAP Resettlement Action Plan RAS Reimbursable Advisory Services RPF Resettlement Policy Framework SADC Southern African Development Community SAP Safeguards Action Plan TA Technical Assistance ToR Terms of Reference VC Vulnerable Communities VCP Vulnerable Communities Plan WAVES Wealth Accounting and Valuation of Ecosystem Services WSRP Water Sector Reform Program WSS Water Supply and Sanitation WUC Water Utilities Corporation WWTP Waste Water Treatment Plant  The World Bank Emergency Water Security and Efficiency Project (P160911) BASIC INFORMATION Is this a regionally tagged project? Country(ies) Lending Instrument No Investment Project Financing [✔] Situations of Urgent Need of Assistance or Capacity Constraints [ ] Financial Intermediaries [ ] Series of Projects Approval Date Closing Date Environmental Assessment Category 01-Mar-2017 31-May-2021 A - Full Assessment Bank/IFC Collaboration No Proposed Development Objective(s) To improve availability of water supply in drought vulnerable areas, increase the efficiency of WUC, and strengthen wastewater management in selected systems\. Components Component Name Cost (US$, millions) Component 1: Improve Availability of Water Supply and Efficiency of Services 114\.05 Component 2: Improve Wastewater and Sludge Management 21\.65 Component 3: Sector Reform and Institutional Strengthening 20\.75 Contingency 3\.55 Organizations Borrower : Ministry of Finance and Economic Development Page 1 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Implementing Agency : Ministry of Land Management, Water and Sanitation Water Utilities Corporation Safeguards Deferral Will the review of safeguards be deferred? [✔ ] Yes [ ] No PROJECT FINANCING DATA (IN USD MILLION) [✔] [ ✔ ] IBRD [ ] IDA Credit [ ] IDA Grant [ ] Trust [ ] Counterpart Funds Parallel Funding [ ] Crisis Response [ ] Crisis Response Financing Window Window [ ] Regional Projects [ ] Regional Projects Window Window Total Project Cost: Total Financing: Financing Gap: 160\.00 160\.00 0\.00 Of Which Bank Financing (IBRD/IDA): 145\.50 Financing (in US$, millions) Financing Source Amount Borrower 14\.50 International Bank for Reconstruction and Development 145\.50 Total 160\.00 Expected Disbursements (in US$, millions) Fiscal Year 2017 2018 2019 2020 2021 Annual 2\.00 15\.00 30\.00 50\.00 48\.50 Page 2 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Cumulative 2\.00 17\.00 47\.00 97\.00 145\.50 INSTITUTIONAL DATA Practice Area (Lead) Water Contributing Practice Areas Gender Tag Does the project plan to undertake any of the following? a\. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF No b\. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment No c\. Include Indicators in results framework to monitor outcomes from actions identified in (b) No SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1\. Political and Governance  Low 2\. Macroeconomic  Low 3\. Sector Strategies and Policies  Moderate 4\. Technical Design of Project or Program  Moderate 5\. Institutional Capacity for Implementation and Sustainability  Substantial 6\. Fiduciary  Moderate 7\. Environment and Social  Substantial 8\. Stakeholders  Low Page 3 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) 9\. Other 10\. Overall  Moderate COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✔] No Does the project require any waivers of Bank policies? [ ] Yes [✔] No Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 ✔ Natural Habitats OP/BP 4\.04 ✔ Forests OP/BP 4\.36 ✔ Pest Management OP 4\.09 ✔ Physical Cultural Resources OP/BP 4\.11 ✔ Indigenous Peoples OP/BP 4\.10 ✔ Involuntary Resettlement OP/BP 4\.12 ✔ Safety of Dams OP/BP 4\.37 ✔ Projects on International Waterways OP/BP 7\.50 ✔ Projects in Disputed Areas OP/BP 7\.60 ✔ Legal Covenants Sections and Description Schedule 2, Section I\. A\. 1\. (b) - The Borrower shall ensure that the MLWS PMO shall at all times be comprised of qualified and experienced personnel in adequate numbers, and to this end, except as otherwise agreed with the Bank, no later than two (2) months after the Effective Date, the Borrower shall contract additional expertise in areas such as financial management, procurement, monitoring and evaluation, all with qualifications and terms of reference acceptable to the Bank\. Page 4 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Sections and Description Schedule 2, Section I\. A\. 2\. (b) - The Borrower shall ensure that the WUC PMO shall at all times be comprised of qualified and experienced personnel in adequate numbers, and, to this end, except as otherwise agreed with the Bank, the Borrower shall ensure that no later than two (2) months after the Effective Date, WUC PMO shall contract additional expertise in areas such as financial management, procurement, contract management, environmental and social safeguards, monitoring and evaluation, engineering, and project coordination, all with qualifications and terms of reference acceptable to the Bank\. Sections and Description Schedule 2, Section I\. F\. 1\. - The Borrower shall implement (and cause WUC to implement) the Project in accordance with the Safeguards Action Plan (SAP) and shall, to that end, if any activity under the Project would require the adoption of a Supplemental Safeguards Instrument: (a) prepare (or cause WUC to prepare) such Supplemental Safeguards Instrument in accordance with the applicable Resettlement Policy Framework (RPF), Vulnerable Communities Plan (VCP) and Dam Safety Action Plan (DSAP); furnish such Supplemental Safeguards Instrument to the Bank for review and approval; (b) thereafter adopt such Supplemental Safeguards Instrument prior to implementation of the activity; and thereafter take such measures as shall be necessary or appropriate to ensure full compliance with the requirements of such Supplemental Safeguards Instrument\. Sections and Description Schedule 2, Section I\. F\. 2\. -The Borrower shall, (a) no later than two (2) months after the Effective Date: (i) prepare in accordance with terms of reference and process acceptable to the Bank, the RPF in form and substance satisfactory to the Bank; (ii) furnish said RPF to the Bank for its review and approval; and (iii) adopt and disclose the RPF in the Borrower’s territory; and (b) thereafter, implement (or cause WUC to implement) the Project in accordance with the RPF\. Sections and Description Schedule 2, Section I\. F\. 3\. - The Borrower, prior to initiating the carrying out of any civil works for any subproject, shall: (a) (i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, any Resettlement Action Plan (RAP) required for such subproject under the RPF and furnish said RAP to the Bank for its review and approval; (ii) adopt and disclose such RAP in the Borrower’s territory; (b) if any activity under the Project would involve Affected Persons, ensure that: (i) no displacement (including restriction of access to legally designated parks and protected areas) shall occur before resettlement measures under the applicable RAP, including, in the case of displacement, full payment to Affected Persons of compensation and of other assistance required for relocation, have been taken; and (ii) provide from its own resources, any financing required for any measures under sub-paragraph (i) above including any costs associated with land acquisition required for the Project; and (c) thereafter implement (or cause WUC to implement) the Project in accordance with such RAP\. Page 5 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Sections and Description Schedule 2, Section I\. F\. 4\. - The Borrower shall: (a) prior to commencement of bidding for civil works for any subproject: (i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, the Environmental and Social Impact Assessment (ESIA) required for the subproject under the SAP in form and substance satisfactory to the Bank; (ii) furnish said ESIA to the Bank for its review and approval; and (iii) adopt and disclose the ESIA in the Borrower’s territory; and (b) thereafter, implement (or cause WUC to implement) the Project in accordance with such ESIA\. Sections and Description Schedule 2, Section I\. F\. 5\. - The Borrower shall: (a) prior to commencement of bidding for civil works for any subproject: (i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, the Environmental and Social Management Plan (ESMP) required for the subproject under an ESIA, in form and substance satisfactory to the Bank; (ii) furnish said ESMP to the Bank for its review and approval; (iii) adopt and disclose said ESMP in the Borrower’s territory; and (iv) incorporate said ESMP in the bidding documents; and (b) thereafter, implement (or cause WUC to implement) the Project in accordance with such ESMP\. Sections and Description Schedule 2, Section I\. F\. 6\. - The Borrower shall, if a Vulnerable Communities Plan (VCP) shall be required for any Project activity on the basis of the SAP: (i) prepare (or cause WUC to prepare) said VCP in accordance with the requirements of the SAP with terms of reference and processes acceptable to the Bank and in form and substance satisfactory to the Bank; (ii) furnish said VCP to the Bank for its review and approval; (iii) adopt and disclose the VCP in the Borrower’s territory; and (iv) ensure that no works under said activity shall commence until all measures required to be taken under such VCP prior to the initiation of said works shall have been taken\. Sections and Description Schedule 2, Section I\. F\. 7\. - The Borrower shall no later than two (2) months after the Effective Date:(i) prepare (or cause WUC to prepare) in accordance with terms of reference and process acceptable to the Bank, a Dam Safety Action Plan (DSAP) for the Project, in form and substance satisfactory to the Bank; (ii) furnish said DSAP to the Bank for its review and approval; and (iii) adopt and disclose said DSAP in the Borrower’s territory; and (b) thereafter, implement (or cause WUC to implement) the Project in accordance with the DSAP\. Sections and Description Schedule 2, Section I\. D\. - No later than two (2) months after the Effective Date, the Borrower shall, and shall cause WUC to adopt the Project Operational Manual, in form and substance satisfactory to the Bank, and thereafter, Page 6 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) carry out the project, and cause WUC to carry out its respective Parts of the Project in accordance with the POM, which shall include a financial management manual, monitoring and evaluation manual, procurement manual, and shall contain detailed arrangements and procedures for: (a) institutional coordination and day-to-day execution of the Project; (b) Project budgeting, disbursement and financial management; (c) procurement; (d) monitoring, evaluation, reporting and communication; and (e) such other administrative, financial, technical and organizational arrangements and procedures as shall be required for the Project as the same may be further updated from time to time with the prior written agreement of the Bank\. Conditions Type Description Effectiveness Article V, 5\.01 - The Subsidiary Agreement has been executed on behalf of the Borrower and WUC in accordance with Section I\.B of Schedule 2 to this Agreement\. Type Description Disbursement Schedule 2, Section IV, B, 1 (a) - Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: from the Loan Account until the Bank has received payment in full of the Front-end Fee; Type Description Disbursement Schedule 2, Section IV, B, 1 (b) -“Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: for payments made prior to the date of this Agreement, except that withdrawals up to an aggregate amount not to exceed two million USD ($2,000,000) may be made for payments made prior to this date but on or after July 1, 2016, for Eligible Expenditures under Category (1)\. PROJECT TEAM Bank Staff Name Role Specialization Unit Team Leader(ADM Rosemary Mukami Kariuki Water Supply and Sanitation GWA01 Responsible) Page 7 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Procurement Specialist(ADM Chitambala John Sikazwe Procurement GGO01 Responsible) Financial Management Tandile Gugu Zizile Msiwa Financial Management GGO25 Specialist Anna Cestari Team Member Water Resources GWA03 Carolina Dominguez Torres Team Member Economist GWA07 Senior Water Supply and David Malcolm Lord Peer Reviewer GWA09 Sanitation Specialist George Ferreira Da Silva Team Member Disbursement WFALA Helen Z\. Shahriari Safeguards Specialist Social Safeguards GSU05 Jemima Harlley Team Member Program Assistant AFCS1 Kisa Mfalila Safeguards Specialist Environmental Safeguards GEN01 Loungo Lolo Tibone Team Member Operations Analyst AFMBW Lead Water Supply and Martin P\. Gambrill Peer Reviewer GWAGP Sanitation Specialist Nathalie S\. Munzberg Safeguards Advisor Safeguards OPSPF Senior Water Resources Shelley Mcmillan Peer Reviewer GWA01 Specialist Lead Water Supply and Sudipto Sarkar Peer Reviewer GWA02 Sanitation Specialist Zoe Kolovou Counsel Lawyer LEGAM Extended Team Name Title Organization Location Page 8 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) BOTSWANA BOTSWANA EMERGENCY WATER SECURITY AND EFFICIENCY PROJECT TABLE OF CONTENTS I\. STRATEGIC CONTEXT \. 11 A\. Country Context \. 13 B\. Sectoral and Institutional Context \. 15 C\. Higher Level Objectives to which the Project Contributes \. 18 II\. PROJECT DEVELOPMENT OBJECTIVES \. 18 A\. PDO\. 18 B\. Project Beneficiaries \. 19 C\. PDO-Level Results Indicators\. 19 III\. PROJECT DESCRIPTION\. 20 A\. Project Components\. 20 B\. Project Cost and Financing \. 22 C\. Lessons Learned and Reflected in the Project Design \. 25 IV\. IMPLEMENTATION\. 26 A\. Institutional and Implementation Arrangements \. 26 B\. Results Monitoring and Evaluation \. 27 C\. Sustainability \. 28 D\. Role of Partners\. 28 V\. KEY RISKS \. 29 A\. Overall Risk Rating and Explanation of Key Risks\. 29 VI\. APPRAISAL SUMMARY \. 30 A\. Economic and Financial (if applicable) Analysis \. 30 B\. Technical\. 32 C\. Financial Management \. 34 D\. Procurement \. 35 E\. Social (including Safeguards) \. 35 F\. Environment (including Safeguards) \. 37 G\. Other Safeguard Policies \. 38 Page 9 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) H\. World Bank Grievance Redress \. 38 VII\. RESULTS FRAMEWORK AND MONITORING \. 40 ANNEX 1: DETAILED PROJECT DESCRIPTION \. 48 ANNEX 2: IMPLEMENTATION ARRANGEMENTS \. 74 ANNEX 3: IMPLEMENTATION SUPPORT PLAN \. 93 ANNEX 4: SAFEGUARDS ACTION PLAN \. 97 Page 10 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) I\. STRATEGIC CONTEXT A\. Country Context 1\. Botswana, an upper middle-income country, has been one of the world’s fastest growing economies\. Since independence, economic growth has been sustained, averaging 8\.7 percent between 1966 and 2008 –among the highest of any country over this period\. Gross National Index per capita has steadily increased-- from power purchasing parity US$4,935 in 1980 to US$14,792 in 2013, driven largely by diamond exports\. This heavy reliance on commodities nonetheless renders the country vulnerable to international market fluctuations, as experienced during the global financial crisis in 2009 and, more recently, the collapse of commodity prices in 2015\. The country is also water stressed and has suffered from repeated droughts\. The 2015-2016 El-Nino related drought has affected Botswana and its regional trade partners quite significantly\. Lower export receipts and higher food import costs caused Gross Domestic Product (GDP) growth to turn negative in 2015 (-0\.3 percent), and entailed large budgetary shortfalls (a fiscal deficit of 6\.3 percent of GDP in 2015)\. Thus, Botswana has become increasingly resource constrained and is in a weaker position to finance the infrastructure investments required to address increase the supply of water to areas affected by the drought\. 2\. Over the past few decades, good governance and prudent macroeconomic and natural resource management have led to impressive economic and social gains\. Botswana’s efforts to redistribute wealth through education, health programs and infrastructure development, have contributed to a substantial decline in poverty levels\. Between 2003 and 2010 the share of population below the national poverty line fell from 30\.6 to 19\.4 percent\. Rural poverty fell furthest— by around 21 percentage points, during a period which also experienced significant rural-urban convergence\. However, vulnerability remains particularly acute in rural households that depend on subsistence agriculture, particularly when rains fail or are late – food inadequacy affected an estimated 38\.8 percent of the population in 2014\. According to staff estimates, the drought in 2015 reduced by 2\.5 percent the purchasing power of the bottom 40 percent of the population through its impact on beef production and imported maize prices\. While the Government has provided drought relief to affected households1, these recent economic and climatic shocks may have put another third of the population (classified as vulnerable but non-poor in the 2015 Poverty Assessment) at greater risk of falling into poverty\. 3\. The Government intends to sustain its positive poverty reduction trajectory by diversifying sources of growth\. Through the realization of sustainable employment creation, it also aims to achieve more inclusive socio-economic outcomes\. Under its eleventh National Development Plan (NDP 11) it will place emphasis on infrastructure development, including water and sanitation which are vital to private sector led commercial and industrial development; as well as livelihoods and human development\. This will build on significant achievements to date\. For example, three of four Millennium Development Goal targets for both water and sanitation were met: around 95 percent of the population now have access to an improved drinking water supply; and 79 percent of the urban population have access to improved 1 A supplemental budget of US$44 million was allocated towards drought relief in 2015\. Page 11 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) sanitation2\. However, sustained access to an improved water supply service is not assured as many communities are served by systems that are affected by chronic drought\. Given high and rising levels of water stress, and climate variability, achieving the NDP 11 objectives will therefore require greater attention to long term water security\. The latter is also essential for Botswana to maintain its positive trend towards meeting Sustainable Development Goal targets in many areas\. 4\. Situations of Urgent Need of Assistance\. In July 2015 Botswana declared a drought emergency following a second year of poor or failed rains across most of the country\. In 2014 the Standard Precipitation Index (SPI) was minus one (-1) and in 2015 it was minus two (-2) (see Annex 1)\. The meteorological department rated the 2015 drought extremely severe– “the worst in the last 34 years”\. After another year of inadequate rainfall, a follow up assessment extended the drought emergency for an additional year, and rated the drought severe\. The Government of Botswana has therefore approached the World Bank for support in improving water supply availability to drought affected communities as well as building Botswana’s medium to long term resilience to chronic drought3; and a path to long term water security\. 5\. Since the onset of the 2015 drought, “hotspots” in the central, southern and western parts of the country have been significantly impacted\. In addition to dams, rivers and well fields running dry, extremely low levels of rainfall, and or late rains, have led to significant loss of crops (a 70 percent decline in cereal crop) and declining grasslands have affected both livestock (a 20 percent mortality rate in 2015) and wildlife4\. Nationwide, dam levels fell below 20 percent of design capacity – the Gaborone dam fell to 1\.6 percent, the lowest since 2000\. Ground water recharge rates (less than 5mm year) have also been affected, and boreholes in several wellfields have run dry or become saline\. As a result, water rationing arrangements (three times a week for eight hours during peak periods) are in place for most large settlements in the country\. More than 20 settlements are now being served by water bowsers at high cost\. In addition, many households have installed storage tanks, pumps and are purchasing water from private water vendors\. 6\. Droughts in Botswana are chronic— six of the last ten years have been moderately to severely dry\. Acute events, such as the current drought, which has stretched for a period of three years, further aggravate the water balance\. As noted above, in order to mitigate drought impacts and adapt to climate change, urgent measures are required to strengthen resilience and achieve water security\. Ongoing efforts include the study and design of potential inter-basin transfers from sources such as the Lesotho highlands and the Chobe-Zambezi basin\. The Government intends to invest an additional US$1\.2 billion in the sector over the 2017 to 2023 period for a combination of measures, including an emergency water supply program— of which this Project will comprise US$160 million (about 13 percent of the investments planned over the NDP 11 period)5\. Key priorities to be supported include investments in water supply availability to alleviate immediate drought impacts and improve resilience; water source 2 Rural sanitation still lags behind—42 percent of rural households have access to adequate sanitation\. Source: Joint Monitoring Program, 2015 3 The entire Southern Africa region is experiencing a drought and the World Bank is actively engaged in helping SADC with the response\. Several IDA countries in SADC will receive supplemental finding from the Crisis Response window, 4 Food and Agriculture Organization, 2016 5 Over the last 10 years the Government invested around US$1\.5 billion in the sector\. Page 12 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) protection and wastewater reuse; and strengthening of water resources management, groundwater monitoring, conservation, demand management and loss reduction measures\. B\. Sectoral and Institutional Context 7\. Botswana has a semi-arid climate\. Rainfall levels are low (at 250 - 450mm), unevenly distributed (with 5 year deficits recorded in some areas), and highly variable from year to year (30 percent below normal in 2015)\. Most rivers are seasonal, and despite limited availability, groundwater abstraction has increased from less than 150 cubic mega meters (Mm3)) in 1990 to 195 Mm3 in 2013/14\. Groundwater now accounts for three quarters of the country’s water requirements, particularly in western Botswana, where groundwater is the main resource\. In general, water resources are constrained, fragile, and subject to many competing demands: in 2013 agriculture and mining were the main users, accounting for 42 percent and 23 percent respectively, while domestic consumption accounted for 25 percent\. As water is central to Botswana’s continued economic success and sustained development gains, demand is projected to rise further6\. However, in the context of chronic drought and climate change, managing rising demand— to reduce pressure on already constrained resources, is a priority\. 8\. In order to offset growing reliance on its groundwater resources, the government has constructed a number of dams (e\.g\. Dikgatlhong, Thune and Lotsane) and has developed several water transfer schemes including the 400km-long North-South Carrier – phase 1 (NSC-1), which brings water from the Motloutse River in the North-East to major villages and towns along the eastern corridor of Botswana\. This is being expanded from its existing 25Mm3/year capacity, and it is proposed that a second phase (NSC-2) will deliver an additional 45Mm3 per year\. The Government is studying other long term options including a third phase of the NSC (NSC-3) to abstract water from the Chobe-Zambezi; importing water from the Lesotho highlands; and desalinating sea water in Windhoek, Namibia\. These surface water systems are gradually being inter-linked with groundwater systems to allow aquifers to recover, and provide for alternate use or back up supply\. 9\. Improving water security is a top priority, as Botswana is one of four Southern Africa nations that could become “highly water stressed by 2040” under a business as usual scenario7\. Climate change projections indicate that the country will face: a rise in temperature of up to two degrees Celsius (January 2016 was the hottest month on record; a decline in river flows of up to 13 percent; and a reduction in rainfall of about 3 to 9 percent\. A climate risk assessment carried out by the Bank in 2010 (using multiple measures, over multiple temporal scales) concludes that there is a definite bias towards increased droughts, and groundwater recharge (less than 5mm per annum) is likely to decline\. High open-water evaporation rates, ranging from 1,900 mm to 2,200 mm per annum (Food and Agricultural 6 Water demand is forecast to reach 285\.8(Mm3) a year by 2030 (compared to only 193\.4Mm3 in 2000\. 7 Baseline water stress measures competition for surface water calculated as withdrawals over renewable supply\. The Water Resources Institute ranking of 147 water stressed countries globally Indicates that water stress levels for Botswana, Namibia, and South Africa are expected to reach between 40-80 percent by 2040\. Namibia and Botswana are the two countries in the ranking expected to face the greatest increase in water stress\. Page 13 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Organization, 2009) also contribute to relatively low annual rates of groundwater recharge and surface runoff, thus diminishing opportunities for storage8\. Measures to protect, conserve and manage surface and ground water sustainably are therefore critical\. 10\. Climate variability is already a major constraint to the agriculture sector\. Crop production is rainfall dependent and only a small portion of land is under irrigation (around 1 800 ha) 9\. As a result, agricultural productivity varies from year to year\. In 2015 and 2016, the drought caused a 44 percent drop in cereal production (including a loss of 70 percent for maize)10\. In addition, livestock losses due to the ongoing drought were estimated at 20 percent per year in 2015 and 2016\. Climate variability is also a threat to Botswana’s current high level of household access, as the drought has led to extensive water rationing affecting most of the large settlements\. As the Government moves to diversify its economy, closer attention to water resource management will be essential, particularly for water intensive sectors\. 11\. Substantial investments are required to align water security requirements with the growing demands of Botswana’s increasingly prosperous population\. Greater rainfall variability and declining groundwater availability suggest that additional investment in surface water infrastructure will be a priority, including: additional storage and transmission, interlinking surface and groundwater supplies; and developing water transfer schemes such as those noted in paragraph 10\. However, as many settlements are small and scattered and water must be transported over long distances (often at high cost), the task of responding to recurrent droughts is further compounded\. 12\. Recognizing the importance of water for Botswana’s development, in 2009 the Government of Botswana (GoB) initiated a Water Sector Reform Program (WSRP) with the intention of leveling services for all water users in the country through a uniform standard of water and wastewater service\. With the support of a technical assistance program funded by the World Bank11, WSRP aimed to provide: (i) clear separation of responsibilities between the delivery of water and sanitation services, and the management of water resources; and, (ii) piped water supply to all of its citizens by the year 2016\. Prior to these reforms the responsibility for service delivery, including sanitation, sewerage, and wastewater, was divided between the Water Utilities Corporation (WUC), District Councils, and the Department of Water Affairs (DWA) in the Ministry of Land Management, Water and Sanitation Services (MLWS)12\. 13\. As a result of this fragmentation, the operational and financial performance of water schemes across the country, was uneven\. For DWA and District Council schemes, costs often exceeded (up to 1\.5 times) revenue from customers, tariffs were low, and collection rates well below billing\. Despite receiving Government subsidies equivalent to about 70 percent of customer revenue, due to inadequate 8 Botswana Climate Variability and Change: Understanding the Risks\. World Bank, November 2010\. 9 Second Botswana National Water Master Plan\. 10 Food and Agriculture Organization, 2016 \. 11 World Bank, ‘Technical advice for Reform of the Water and Sanitation Sector’, Volume 1 & 2, Government of Botswana, 2009\. 12 Prior to 2009, WUC was responsible for urban water services in Gaborone, Jwaneng and Lobatse in the South and Francistown, Selebi Phikwe and Sowa in the North\. District Councils and the DWA were responsible for 540 water supply systems serving all other urban and rural areas\. Page 14 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) maintenance and inefficient management, over time these systems deteriorated\. In contrast, WUCs performance was solid and its financial position, strong\. In 2008 WUC’s non-revenue-water was about 11 percent of production, 95 percent of the bills were collected, and customers received a high-quality service (24/7)\. 14\. The WSRP re-aligned these roles and responsibilities through a phased approach implemented between 2009 and 2013\. WUC assumed responsibility for water supply, reticulation, and wastewater treatment for all 540 DWA and District systems, which are clustered under 16 Management Centers (MCs)\. DWA’s mandate changed to water resource planning, development and management, including large water infrastructure such as dams and transfer schemes\. Steps to improve operational and financial efficiency through modern management methods, the introduction of innovative, appropriate technology options, and tariff setting and pricing (to adequately reflect scarcity and opportunity costs) were also initiated, however these have yet to be completed\. 15\. The consolidation of water supply and wastewater treatment schemes under WUC has contributed to the deterioration of WUC’s operational and financial performance\. From 2009 to 2015 WUC’s customer base grew significantly from 83,000 to 415,000, and production increased to over 102 million cubic meters of water (from 70,000 in 2009)\. Billing also increased to about Botswana Pula (BWP) 1,000 million in 2015 compared to BWP 300 million in 2009, but overall collection rates declined as more rural customers were added13\. Years of underinvestment and poor maintenance have resulted in an asset base in dire need of replacing and upgrading\. Non-Revenue Water (NRW) has increased from about 11 percent of production (in 2008) to about 40 percent; labor productivity has moderately improved, but there are still 7 staff per thousand connections— largely due to small and scattered settlements\. Prolonged periods of water rationing arising from chronic drought have also added to the financial stress of the utility\. 16\. With respect to wastewater, the majority of systems inherited by WUC in 2013 suffer from operational issues related to under-dimensioning and lack of critical maintenance, particularly those formerly operated by municipal authorities\. Treated wastewater amounts to an estimated 20 to 30 Mm 3 per annum and only 10 per cent is currently reused\. WUC intends to develop capacity for greater reuse and recycling14\. This will reduce environmental degradation as increased reuse will require more stringent compliance with Botswana standards— untreated effluent discharged to the environment is a threat to already constrained ground and surface water sources\. Greater water reuse will also contribute to demand management by reducing the need for development of new sources\. 17\. Overall, since the start of the WSRP, WUC has reported increasing operating losses of more than BWP 350 million per year\. Currently it is only able to recover about 75 percent of its operating cost, in particular due to increasing energy and chemical costs15\. 13 WUC Annual Reports - 2014 and 2015\. 14 Government has set an ambitious target of 96 percent reuse of wastewater outflows by 2030 but existing inflow and outflow data is scarce\. 15 Unlike in the 2012/2013 financial year where the Government provided a revenue grant of BWP 200 million, during 2013/2014 financial year no revenue grant was received as it was intended that this Page 15 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) 18\. In order to improve the performance and capacity of sector institutions, the GoB will support the institutional reform and restructuring of WUC, and advance a number of urgent policy and regulatory reforms initiated under the WSRP\. These include implementation of the Integrated Water Resource Management Water Efficiency Strategy (2013–2030) and the Water Policy (approved by Parliament in August 2016), which provides a framework for enhancing access to good quality water, promoting sustainable development of water resources, and ensuring that water is allocated more efficiently across different user sectors\. The policy calls for establishment of a Water Resources Council and improved regulatory capacity\. The Water Resources Council will be responsible for overseeing and allocating water resources and developing water related policies, while the water supply and sanitation (WSS) Regulator will be responsible for ensuring financial sustainability by guiding and monitoring water tariffs16\. C\. Higher Level Objectives to which the Project Contributes 19\. The Project supports the Bank’s twin goals of eliminating extreme poverty and boosting shared prosperity by reducing vulnerability of drought affected communities, improving economic opportunity, contributing to sustainable livelihoods, and a better quality of life for Botswana’s population\. The Country Partnership Framework (CPF) FY16-20 (Report No\. 104953), approved by the Board in November 2015, acknowledges that to achieve sustainable development; poverty reduction; and improved inequality, Botswana needs to address key challenges in infrastructure, services and policies, particularly in the water and sanitation sector\. The Project is aligned to one of the three key strategic areas of engagement for Bank support under the CPF– Strengthening Human and Physical Assets—, which has a sub-objective of ‘improving efficiency and sustainability of water supply and sanitation services’\. 20\. The Project is also aligned to Botswana’s Vision 2036, in particular, the pillar on Sustainable Environment through which Botswana aims to ensure sustainable and optimal use of natural resources, including water resources, to transform the economy and uplift its people\. Vision 2036 outlines the need for a shift towards improved efficiency in water supply and demand management; improved water resource management, including instruments for water efficiency and water allocation; and the promotion of artificial recharge of aquifers\. NDP 11, which has the overarching objective of: ‘Inclusive Growth for the Realization of Sustainable Employment Creation and Poverty Eradication’, is designed to support the first five year of activities (2017-2023) of Vision 2036\. funding would be sourced through a bond\. As this did not happen, much of WUC’s planned investment under NDP 10 was deferred and operating losses rose to BWP 350 million\. 16 At present, WUC has proposed a pricing structure, which has to be approved by the MLWS— a block tariff system with rising water tariffs for higher user bands\. Self-providers pay for water rights attained from the Water Apportionment Board, but not for raw water abstraction\. However, the 2016 Water Policy calls for a raw water extraction fee for all water withdrawals to help fund water management activities and encourage conservation\. Page 16 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) II\. PROJECT DEVELOPMENT OBJECTIVES A\. PDO To improve availability of water supply in drought vulnerable areas, increase the efficiency of WUC, and strengthen wastewater management in selected systems\. B\. Project Beneficiaries 21\. The Project will improve the availability of water supply and the quality of sanitation services in select settlements prioritized because of their location in drought affected areas\. It is estimated that around 460,000 people in select settlements will benefit from augmentation or rehabilitation of existing water supply systems; and about 177,00017 people will benefit from improved wastewater treatment and sludge management systems\. 22\. In addition to these direct beneficiaries, the Project will also build capacity in MLWS and WUC to improve efficiency and security of water supply through actions to support the on-going reform process, in particular by improving the operational and financial performance of the utility\. This includes actions to reduce NRW; manage demand; and, increase wastewater reuse\. WUCs capacity for strategic planning, capital development, innovation and public private partnerships (PPPs) will also be strengthened\. 23\. With respect to improving long term water security and strengthening WRM, the DWA will benefit from support for: ongoing policy, legislative and regulatory reform; improved water quality and quantity measurement and monitoring; and strategy formulation in relation to drought management, climate change and water resource management\. DWA’s capacity for strategic planning, resource regulation and enforcement will also be strengthened\. C\. PDO-Level Results Indicators 24\. The following Project Development Objective (PDO) indicators will be used to monitor implementation progress: a\. Direct project beneficiaries (number), of which female (percentage) b\. Additional water made available by the investments under the project (cubic meters) 17 As the beneficiaries in Letlhakane MC have: (i) increased water supply; and (ii) improved sludge management facilities, the number of total Project beneficiaries is adjusted (to remove double counting) accordingly\. An estimated total of 580,000 people will therefore benefit from the water and sanitation investments under project\. Page 17 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) c\. People benefiting from improved water supply through measures aimed at alleviating drought impact (number) d\. Revenue to operating cost ratio (number) e\. Average annual COD removal efficiency from wastewater at WWTPs (percentage) III\. PROJECT DESCRIPTION A\. Project Components 25\. The Project is designed to respond to Botswana’s ongoing drought and reduce vulnerability to drought in the medium to long term\. The drought declared in July 2015 was the worst in the past 34 years and has been extended for an additional year (July 2016 - July 2017)\. As droughts in Botswana are chronic, the acute dry spell has further aggravated the water balance\. For groundwater in particular, impacts will not be alleviated in the short term as recharge rates are already low, and are projected to decline further with climate change18\. The proposed sub-projects are located in the western, eastern and southern part of Botswana, which are the driest and/or most populated parts of the country\. The Project includes critical investments in water supply to urban and rural areas, that are needed to mitigate drought impacts, and wastewater treatment investments needed to comply with effluent standards and prevent pollution of vital downstream water sources\. 26\. The proposed investments were selected from a list of “hot spots” identified by GoB as part of its NDP 11 planning process\. Several of these priority subprojects were first proposed to the World Bank for financing in 2014, however, the proposed International Bank for Reconstruction and Development (IBRD) Project did not move forward due to financing and capacity limitations and was eventually dropped\. These have now been incorporated in the NDP 11 emergency water supply program which this Project will support\. In addition to the “hot spots” list, the Project also draws on financial and operational performance data for each of WUC’s 16 MCs19\. This data will be used to support operational efficiency improvements in underperforming MCs as a means of improving demand management, reducing losses, increasing access to services (particularly for vulnerable populations)\. These actions are vital for the sustainability of services, and conservation of already scarce water resources\. 27\. The Project is organized under three components, as follows: Component 1: Improve Availability of Water Supply and Efficiency of Services; Component 2: Improve Wastewater and Sludge Management; and Component 3: Sector Reform and Institutional Strengthening\. 18 Botswana Climate Variability and Change: Understanding the Risks\. World Bank, November 2010\. 19 The operational snapshots rank MCs based on five key indicators: (1) non-revenue water; (2) water quality compliance; (3) number of reported bursts; (4) staff per 1000 connections; and (5) operating cost coverage ratio (revenues / costs)\. It was noted that for all regions water supply coverage is high (generally >90 percent) and water services are close to 24 hours per day\. Page 18 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 28\. Component 1: Improve Availability of Water Supply and Efficiency of Services (US$114\.05 million including taxes) - will support immediate and medium term investments and measures to mitigate the impact of the drought by improving availability of water in settlements that have experienced extended periods of rationing and/or been forced to rely on water bowsers\. Specific investments will include: (i) water source management, optimization and development, including interlinking of existing water sources (surface and ground) and water supply schemes to ensure backup supply and more sustainable production; (ii) expansion of water supply systems to reach underserved or drought affected communities; and (iii) measures to improve operational efficiency, including reducing technical losses along transmission lines\. The budget for this component provides for implementation of safeguards actions (ESMPs, RAPs and ESIAs), alongside the design and supervision services for the civil works\. It will be implemented by the WUC and is supported by institutional strengthening activities (under Component 3) aimed at improving the long-term sustainability of service provision and managing water demand\. 29\. The proposed measures are intended for settlements in drought affected areas where boreholes are running dry, becoming saline, or being mined/overdrawn, as a result of the drought\. However, as droughts in Botswana are chronic (six of the last ten years were drought years) the investments are also designed to address medium term needs and avoid having to resort to short term solutions (such as bowsers or emergency boreholes) every time a drought occurs\. As Botswana relies heavily on groundwater (60 percent) and recharge rates are low (less than 5 mm per year) the proposed investments aim at reducing the stress on water sources by bringing water from more secure sources – e\.g\. underutilized dams or well fields that have a sustainable yield\. 30\. Component 2: Improve Wastewater and Sludge Management (US$21\.65 million including taxes) - This component will support strategic investments in refurbishment/rehabilitation of wastewater treatment facilities, to protect surface and groundwater sources; and enable scaling up wastewater reclamation and reuse in Francistown and Lobatse through design and build contracts\. In Letlhakane sludge management facilities will be rehabilitated and expanded to avoid transporting waste to the nearest facility which is 200 km away in Serowe\. The Francistown and Lobatse wastewater treatment facilities require urgent attention to prevent environmental contamination caused by discharge of inadequately treated wastewater into nearby water courses\. Due to inadequate treatment of wastewater at the Mambo wastewater treatment plant (WWTP) in Francistown, a key water supply dam (Dikgatlhong) located 50 km downstream may be at risk of pollution\. The Tati River, into which the Mambo WWTP discharges, is seasonal and the effluent discharged during the dry season can cause local contamination\. 31\. Given the limited water resources available in Botswana, the proposed measures will protect and conserve existing water supply\. A key objective of the investments in Mambo and Lobatse is to bring the effluent to a quality level where it can be re-used\. Many users, including mines, local stadia, golf courses and other businesses have expressed their interest in re-using the treated water if WUC can ensure that effluent meets the standards set by law\. In addition to improving treatment and operational efficiency (as measured by effluent quality), the Project also includes (under Component 3) activities to enhance WUC’s capacity to holistically manage, treat, dispose of, and reuse wastewater and sludge through strategic investments in new or improved technology options\. This component will be implemented by WUC\. Page 19 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 32\. Component 3: Sector Reform and Institutional Strengthening (US$20\.75 million)\. The Component will support reforms initiated under WSRP in 2009 by strengthening the institutional, policy, and legal framework as a means to improving long-term water security and increased efficiency of services\. As such, policy and strategies need to be directed toward improving allocative efficiency, enhancing technological developments, strengthening service delivery, improving water resources stewardship and strengthening water demand management\. In addition, capacity for implementation will be strengthened to ensure a timely and efficient response to the drought\. Activities financed under Component 3 will include: 33\. Sub-component 3\.1\. Sector Reform\. This will support the development or roll out of sector policies, legislation and institutions\. In order to conform to new institutional mandates, the sector is in the process of developing or updating several key legal, strategy and policy instruments\. Prioritized activities will enable implementation of the development agenda outlined in NDP 11, with a strategic focus on improving water security and developing resilience to droughts and water shocks, through strengthened water resources management and planning capacity, and more effective WRM instruments\. This sub-component will be implemented by MLWS\. 34\. Sub-component 3\.2\. Institutional Strengthening and Capacity Building\. This Sub-component will enable MLWS (DWA) and WUC to increase their capacity to implement sector policies and strategies; strengthen their overall operational performance; and, improve their corporate governance and management: (a) Support for MLWS (DWA) will include capacity for water resource planning and monitoring, groundwater development, and regulation; (b) Support for WUC will include institutional restructuring, business strategy development, efficiency improvements (e\.g\. through demand management, cost recovery, energy reduction, non-revenue water, and innovative ICT use); refinement of water supply, sanitation and waste water supply guidelines; and training and reskilling WUC staff in underperforming MCs\. This Sub-component will be implemented by MLWS and WUC\. 35\. Sub-component 3\.3\. Forward Planning – Technical Assistance and Studies\. This Sub-Component includes: (a) technical assistance required to develop a pipeline of strategic national investments aimed at improving long-term water security (e\.g\. Chobe-Zambezi and Lesotho-Botswana Transfer Schemes); (b) strengthening the pipeline of investments such as the Western Region Master Plans, through feasibility studies; detailed designs; environmental and social assessments, transaction design, expert panels\. A sound investment pipeline will allow Government to advance its vast water investment program more rapidly, and assist in closing the large investment gap\. This sub-component will be implemented by MLWS and WUC\. 36\. Sub-component 3\.4\. Project Management\. This Sub-component includes support for adequate project implementation capacity in the MLWS Programme Management Office (MLWS - PMO) and WUC Project Management Office (WUC -PMO), including funding for both PMO’s capacity (staffing and technical assistance) to support Project implementation\. In addition, the Project will finance inputs required to ensure the effectiveness of implementing agencies including (as needed), equipment, running costs, logistical support, and other operating requirements\. Responsibilities of the MLWS - PMO and WUC - PMO include project management and coordination, procurement and financial management, project monitoring and evaluation, social and environmental safeguards management and oversight, and strategic project communications and outreach\. This Sub-component will be implemented by MLWS and WUC\. Page 20 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) B\. Project Cost and Financing 37\. The Project will be financed through an IBRD loan\. The loan will support investments in water supply, wastewater treatment, sludge management and support for sector reform, estimated at US$145\.5 million (exclusive of taxes)\. GoB will finance taxes in the amount of US$14\.5 million\. The total Project cost is therefore US$160 million\. 38\. In view of the nature of most subprojects, mainly targeted at drought affected/vulnerable villages, and given the poor operational efficiency of systems in many MCs, Ministry of Finance and Economic Development (MFED) will on-grant loan proceeds to WUC\. This decision takes into account WUCs poor financial performance over the past few years following its conversion into a national utility responsible for both rural and urban water supply; and unexpected costs arising from its response to the drought— many communities are spread over long distances and some rural households are not in a position to pay for services\. GoB intends to improve the financial performance of WUC, including through institutional strengthening measures supported under Component three of the Project to support the ongoing restructuring\. 39\. With respect to Components 1, 2 and parts of Component 3, for which WUC will be the implementing agency, MFED will enter into a subsidiary agreement with WUC\. Similar arrangements were used under the recently closed IBRD financed energy sector project for which Botswana Power Corporation (BPC) was the implementing agency\. The agreement will detail the fiduciary requirements governing the use of loan proceeds on-granted to WUC by MFED\. Funds for parts of Component 3 which support DWA, will be managed by the MLWS - PMO, which will coordinate project implementation on behalf of the Government\. 40\. The Project will leverage funding from various sources, such as the International Finance Corporation (IFC), and the Water Global Practices Multi Donor Trust Fund, to support measures to improve WUC investment planning process, diversify sources of capital funding, and engage the private sector\. Global Fund for Disaster Risk Reduction (GFDRR) funding will support the preparation of a drought mitigation and climate change adaptation strategy for the water sector; and provide specific support for improvements to the hydro-meteorological and groundwater monitoring systems\. This funding will complement an on-going regional Groundwater Study, supported by the Cooperation in International Waters (CIWA) Trust Fund managed by the Southern African Development Community (SADC) Water Facility, which aims at increasing data and information on Botswana’s groundwater resources, among others\. 41\. The Government will be responsible for counterpart financing to cover value added tax, acquisition of land, and any compensation due to project affected people\. Land and compensation costs associated with proposed subprojects will be identified and budgeted on an annual basis once these costs are known\. Year 1 investments support subprojects are not expected to require counterpart financing for land and compensation\. However, GoB will set aside a contingency budget to cater for any costs that may be identified through ESIAs that are currently being prepared\. Page 21 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 42\. The Government has requested retroactive financing in the amount of US$2 million to advance the work required to prepare environmental and social safeguards, technical packages and bidding documents\. 43\. Although specific subproject investments have been identified, the Project will provide flexibility in order to accommodate any new priorities arising from the extension of the drought emergency, and to enable a quick “scale up” through additional IBRD financing or parallel or co-financing from other development partners\. Page 22 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Table 1\. Project Costs and Financing Project Components Project cost IBRD Financing Trust Funds Counterpart Funding Total Costs 160\.00 145\.46 0 14\.54 - Component 1 114\.05 101\.83 0 12\.22 - Component 2 21\.65 19\.33 0 2\.32 - Component 3 20\.75 20\.75 0 0 - Contingency 3\.55 3\.55 0 0 Total Financing Required 160\.00 145\.46 0 14\.54 C\. Lessons Learned and Reflected in the Project Design 44\. The Project has taken into account the following lessons learnt from ongoing projects, advisory and analytic services, and Independent Evaluation Group (IEG) findings\. 45\. Country level\. The Country Learning Report (CLR) for the FY09-FY13 Country Partnership Strategy (CPS) concludes that results achieved under the CPS were significantly below expectations\. Program performance was rated Moderately Unsatisfactory as most outcome indicators were overly ambitious and initial delays in implementation meant that most objectives were not achieved at the end of the CPS period20\. Lessons include: a\. Candid risk assessments and other diagnostics on capacity can help to ensure that capacity constraints are understood early on, and risks are mitigated\. In complex projects, senior/on the ground presence is required\. Establishing a PMO is essential in environments where the intensity of implementation support is high and capacity is limited\. b\. Establish clear, relevant and measurable indicators to ensure objective assessment of program/project performance\. Over-ambitious objectives undermine actual achievements, if there is insufficient baseline data to support achievements reported\. Support for baseline data collection is therefore essential and to the extent possible, data monitoring and management systems should be integrated\. 46\. At Project level\. Lessons from the recently completed Morupule B Generation and Transmission Project are aligned with those from the CPS review\. These include: (i) ensuring that the implementing agencies have adequate capacity for all phases of the project; (ii) taking early procurement action; (iii) giving thorough attention to environmental and social safeguard concerns; (iv) providing a satisfactory policy framework, especially regulations, for timely and adequate tariff setting to ensure financial viability of utility/sector; and (v) ensuring strong ownership of the project and reforms\. The project completion report for the most recent Project in the water sector – the Second Water Project 20 The CLR was further downgraded to Unsatisfactory by the IEG due to the slow pace of implementation at the beginning of the CPS\. IEG notes that the World Bank failed to identify capacity constraints at initial stages and thus did not mitigate this risk\. Page 23 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) (completed in 1978) similarly emphasizes the importance of building on preparatory design work done by the client\. 47\. These findings are also echoed in an IEG review of project implementation experience across Small States which notes that limited capacity is cited frequently as a factor in poor project performance accounting for low scores on institutional development impact21\. Botswana is a small state that faces capacity constraints for a variety of reasons, including limited trained manpower in specialized areas in particular\. These constraints have intensified as a result of the additional demands on staff, arising from the drought\. In line with these lessons from the report, the Project will contract additional expertise to boost capacity as and where required\. 48\. Finally, the Project also takes into account lessons from recent World Bank supported analytical work within the sector: The Wealth Accounting and Valuation of Ecosystem Services Project (WAVES, 2015) and the Water Sector Technical Assistance program (2008), which identify the need for sustained support in order to institutionalize reforms\. The Project will therefore build on and advance policy and institutional reforms initiated by GoB with support of these programs as elaborated in Component 3\. IV\. IMPLEMENTATION A\. Institutional and Implementation Arrangements 49\. MLWS primary role is to formulate, direct, and coordinate policies and programs for land management, as well as water and sanitation development\. In the water and sanitation sector, MLWS is responsible for ensuring the delivery of clean water for drinking purposes and for allocation of water for agricultural, commercial and industrial development through its departments and parastatals\. DWA and the WUC are responsible for day to day implementation of the Government’s water programme\. MLWS coordinates these activities through a MLWS -PMO headed by a Programme Coordinator\. Within MLWS, DWA takes the lead on water resources policy and management\. In addition, DWA is responsible for monitoring and regulating water resource use; and developing long term strategic water supply schemes\. WUC (established by the Water Utilities Corporation Act of 1970) is currently responsible for delivering water to domestic, mining, manufacturing, and commercial customers countrywide; although mining and energy users in remote areas often develop ground water supplies independently\. WUC also has operational responsibility for wastewater and water treatment, pumping, storage and distribution to customers, and has partial responsibility for sanitation services\. 50\. The Project will be implemented by MLWS and WUC\. On behalf of the Borrower, MLWS will be responsible for overseeing project implementation\. It will do so through its existing MLWS -PMO, which will have overall responsibility for coordination of Project activities, and consolidation of monitoring, reporting for the project\. This will include preparation of a consolidated work plan, procurement plan, monitoring reports, financial reports, and other reports required for the Project\. MLWS - PMO will be 21 Making the Most of World Bank Assistance to Small States: A Synthesis of Evaluation Findings, IEG, 2006\. Page 24 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) responsible for the implementation of Component 3 institutional and capacity building activities that fall under the mandate of MLWS (DWA)\. Based on the division of responsibilities for all Component 3 activities agreed between MLWS (DWA) and WUC, the annual work program and procurement plan will identify the specific activities and budgets allocated for WUC and MLWS (DWA) –including training, capacity building, technical assistance and studies\. Each entity (MLWS - PMO, and WUC) will be responsible for identifying and preparing inputs to the annual work program (e\.g\. TOR, budgets)\. As MLWS - PMO will be responsible for enabling the implementation of MLWS (DWA) activities under Component 3, it will procure additional monitoring and evaluation (M&E), procurement and financial management capacity to support this function\. These activities will be complemented by grant funding from other development partners, where available\. MLWS will ensure cooperation and integration of these activities\. 51\. WUC will be responsible for the implementation of all subprojects under Components 1 and 2, which largely involve rehabilitation and augmentation of existing water and wastewater systems currently managed by WUC\. In addition, it will be responsible for a subset of the institutional and capacity building activities under Component 3\. Responsibility for the day to day management of WUC implemented activities will be delegated to the existing WUC -PMO housed in the Technical Services Department\. WUC will strengthen the capacity of WUC - PMO by contracting additional expertise in such areas as financial management, procurement, monitoring and evaluation, social and environmental safeguards and project coordination\. WUC - PMO will implement the proposed subprojects and activities through existing structures under the supervision of WUC’s management team\. Sub-projects and activities supported by the Project will be coordinated by the responsible Project Engineers with support of General Managers of the relevant Management Centers under the leadership of the Director of the Technical Services Department\. As these activities form part of the overall NDP 11 work program, in line with current practice, where necessary WUC will also support the MLWS - PMO and MLWS (DWA), in the execution of their obligations under the Project\. B\. Results Monitoring and Evaluation 52\. To the extent possible, Project results indicators and data collection will be aligned with existing monitoring and reporting systems in the sector\. At the national level, Project indicators will be aligned with the monitoring and evaluation framework being developed by the National Strategy Office (NSO) as part of the NDP 11\. This effort is being supported by a Bank Reimbursable Advisory Services (RAS) agreement currently being negotiated with the Government\. At the utility level, proposed indicators will be drawn from existing WUC data on outputs monitored across all MCs; and supplemented with other sector Indicators\. This approach is intended to enable the Government and the World Bank to monitor and aggregate results beyond the project\. MLWS is expected to be responsible for reporting results under the NDP and is therefore intending to develop a comprehensive M&E system for the sector under the Project\. Project alignment with WUC operational indicators will also help ensure that data collected is used to monitor operational efficiency\. The Results Framework for the Project is included in Section VII\. Page 25 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) 53\. Overall responsibility for consolidating M&E data for the project will lie with MLWS - PMO\. An M&E expert and computerized management information system will be procured through the project to enable timely monitoring, reporting and communication of results during execution of the project\. Key M&E requirements are: qualitative and quantitative information on the execution of selected subprojects or activities; progress in procurement and contractual matters, accounting and financial recording, and any other Project reporting requirements\. As monitoring of Project activities will be undertaken by WUC or MLWS (DWA) for activities they are respectively responsible for, arrangements for data gathering at these levels will be coordinated by MLWS - PMO\. C\. Sustainability 54\. As noted above, the Project is aligned with the Governments national development planning process\. NDP 11 outlines priority actions for the coming five years (2017-2023) and allocates resources based on the thematic areas identified in Botswana’s Vision 2036\. This includes Project subprojects or activities included in NDP 11 as part of the Government’s emergency water supply program\. Water security is a key priority for NDP 11 and the Government has therefore allocated around US$1\.2 billion for strengthening the sector over the 2017-2023 period\. 55\. The activities proposed for support through this Project will leverage and complement other activities proposed for Government financing\. The proposed IBRD loan is therefore supplemental financing to enable the GoB to accelerate the pace of: immediate (critical) physical investments; key policy and institutional reforms; operational efficiency improvements; and the long term water security agenda\. It will also help strengthen capacity for climate change adaptation, drought mitigation and integrated water resources management (IWRM)\. 56\. Institutional strengthening measures planned for WUC will ensure that there is sufficient capacity to deliver efficient services; manage demand; sustain existing and planned investments; and plan for long term infrastructure needs\. In its role as custodian for water resources, MLWS (DWA) will strengthen capacity to manage and monitor water resources; plan and negotiate long term strategic investments (e\.g\. inter-basin transfers); and complete or revise policies, strategies and regulations that are critical to the sustainability of the sector\. D\. Role of Partners 57\. The Project has benefitted from the World Bank’s recent engagement with partners in the delivery of advisory service and analytics: a\. Sector Engagement: The World Bank has been working with several partners to advance the water security agenda in Botswana\. Through the CIWA trust fund (financed by Sweden, United Kingdom, European Union, Denmark, and the Netherlands), it is currently assisting the Government to study several long term water supply options including the Lesotho-Botswana Page 26 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) transfer and the Chobe-Zambezi transfer\. Through CIWA the Bank is also collaborating with other partners including SADC (regional Groundwater study); and United States Agency for International Development, for the Okavango Multi-sector Options Study\. Further development of the long term water security options identified in studies supported under the Project, could be financed through potential partnerships with other Development Partners (e\.g\. African Development Bank, Agence France de Developpement, European Investment Bank, Japanese, Chinese or Korean development agencies)\. Currently development partners supporting the sector include the Governments of China, Japan and Korea\. b\. Country Engagement: As the project is aligned with both the Botswana NDP 11 and the SADC Region’s El Nino Response Action Plan, coordination with partners has been undertaken in both respects22\. The World Bank participated actively in the consultative process leading up to the preparation of the NDP 11, which has also engaged a wide range of stakeholders in the development community, Government, and non-governmental organizations (NGOs) (NGOs in identifying national and sectoral priorities\. With respect to the ongoing SADC El Nino drought response, the World Bank has worked with SADC and other development partners to assess risks, challenges and actions required to support the alleviation of immediate impacts across the region\. V\. KEY RISKS A\. Overall Risk Rating and Explanation of Key Risks 58\. The project risk is rated “moderate”\. 59\. As a result of its stable political and governance environment and sound macroeconomic management, Botswana has maintained steady progress in meeting its economic and social objectives\. Effective checks and balances exist, institutions on the whole remain robust, inclusive, and transparent, and stakeholders are involved, widely consulted and well informed of government programs\. While these risks are “low”, the Government wishes to improve its standing (e\.g\. as measured by global rankings) in order to tackle emerging economic and fiscal challenges\. It is therefore taking steps (with support of a World Bank-funded Public Sector Reform RAS) to “reinvent itself” through a program of core reforms aimed at achieving efficient and effective service-delivery\. With respect to “moderate” risks, the GoB has taken a series of steps to roll out critical sector strategies and policies identified in the 2009 water sector reform program (supported through a World Bank technical assistance (TA)\. The Project therefore includes measures to advance these sector reforms building on actions already taken\. NDP 11 identifies measures to ensure that an adequate policy, strategy and regulatory framework is in place; and to restructure, reskill and equip sector institutions to manage services more effectively\. These actions underpin the water and wastewater investments planned under the project\. 22 The World Bank is supporting RIASCO to prepare an El Nino Response Action Plan in support of SADC’s humanitarian appeal for El Nino Page 27 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) 60\. As this is the first IBRD investment operation being undertaken by the water sector, a rating of “substantial” is assigned for institutional capacity for implementation and sustainability and environment and social safeguards\. While staff of the Ministry (previously Ministry of Minerals, Energy and Water Resources) have managed small grants (e\.g\. CIWA), WUC has had no recent experience with IBRD financed activities (the last World Bank financed project closed in the 1970s)\. While the two implementing agencies lack familiarity with World Bank operations, WUC has a track record of preparing and implementing subprojects— as demonstrated by the pipeline of ready subprojects that the World Bank will support\. As many of the subprojects have been prepared to some level, this will accelerate the time taken to complete the Project\. A procurement review conducted by the World Bank concludes that WUC has similar processes and procedures for engaging consultants and contractors for environmental and social impact assessments, design, supervision, and construction works\. As there are competent professionals in both implementing agencies, the Project will mitigate this risk by strengthening capacity through training, knowledge sharing, awareness raising\. It will also establish additional capacity in MLWS - PMO and WUC - PMO to ensure that the IBRD requirements for implementation of sub-projects are in place\. 61\. Finally, other risks to sustainability include: (i) groundwater depletion – this will be mitigated through measures to: protect and manage groundwater sources, including inter-linking surface water sources and wellfields (as an alternate or back up supply), introducing measures for artificial recharge, strengthening demand management, groundwater monitoring and mapping, drought preparedness, climate change adaptation, and supporting a raw water abstraction strategy; and (ii) operational and financial performance – this will be mitigated through support for institutional restructuring measures to allow the corporation to improve staff productivity, boost billing and collection, reduce technical losses, optimize water supply production and wastewater treatment processes; and reduce operating costs\. A business strategy, capital investment book and financial recovery plan will also be prepared\. VI\. APPRAISAL SUMMARY A\. Economic and Financial (if applicable) Analysis 62\. The results of the economic and financial analysis show that the Project is economically and financially viable with returns at a present value of US$72 and US$3 million, respectively, when a 6 percent rate of return is used\. This analysis is presented in detail in Annex 1 and complemented with sensitivity analysis\. 63\. The cost benefit analysis carried out for Component 1 and 2 was undertaken from an economic and financial perspective\. From an economic perspective, it was evaluated by converting financial cash flows into economic cash flows to eliminate distortions caused by taxes, subsidies and other externalities\. From a financial perspective, it was evaluated by estimating costs and benefits at market prices, in the same way WUC will be paying or receiving from each input\. 64\. Cost-benefit analysis\. The economic/financial feasibility analysis of the Project compares estimated economic/financial benefits of the Project with economic/financial costs\. As the project costs Page 28 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) are given, the primary analytical challenge of this analysis is to most accurately estimate the expected benefits that are likely to occur as a result of project implementation\. The net benefit is the difference between the incremental benefits and the incremental costs of two scenarios: “without” and “with” the project\. The “without” project scenario considers that utility consumers will face continuous deteriorating services\. The “with” project scenario considers the project and its associated targets\. Annex 1 describes in detail the current situation and the changes expected to be achieved once the investments under Component 1 and 2 are implemented\. 65\. Discount rate\. The analysis was done using two discount rate assumptions: 6 and 10 percent\. The 6 percent discount rate assumption corresponds to the recent World Bank guidance regarding discount rates for use in economic analysis23\. 66\. Economic analysis\. The investments under Component 1 and 2 aim at addressing the immediate drought impact by making available greater volumes of potable water in selected areas in Botswana, which are suffering from low levels of consumption per capita\. It will also increase the quality of the effluent in selected wastewater treatment facilities\. Benefits expected from the proposed water supply investments include: (i) elimination of water rationing (including savings from coping costs); (ii) additional water sales arising from increasing demand from existing connections (as water demand per connection is expected to increase once water rationing is eliminated); (iii) additional water sales arising from greater availability of water derived from technical losses reductions in a number of investments included under the Project; and (iv) savings in operating costs due to reductions in technical losses in the Masunga and Ghanzi water supply scheme\. Investments in wastewater treatment include the upgrading of existing facilities to comply with effluent standards so that it can be reused for agriculture and other purposes and/or reclaimed; and, the expansion of WWTP and ponds to allow for higher volumes of sludge and wastewater to be treated\. Hence, the benefits of the wastewater treatment system evaluated in the economic analysis include: (i) increased revenues when higher wastewater treatment occurs; (ii) increased quality of the effluent from wastewater treatment facilities; (iii) avoided cost of sludge transportation from Letlhakane to Serowe; and (iv) increase in WUC’s revenues from greater emptying of septic tanks at the Letlhakane wastewater treatment ponds\. 67\. Besides direct preventable economic losses, there are many other potential benefits that are not factored into the cost-benefit analysis described here\. This is either because estimating such benefits is difficult due to the lack of data or it is challenging to quantify the value of those benefits because they might not be financial or economic in nature\. For instance, the Project is expected to enable greater volumes of wastewater reuse and reclamation, a benefit that is not estimated in this economic analysis due to lack of data\. Similarly, environmental benefits from higher volumes of wastewater treated at prevailing standards; the impact on women and girls; the expected decrease in morbidity and mortality rate; the potential revenue and economic benefits from higher reclamation and/or reuse of wastewater treated are not captured in the economic benefits estimates\. Therefore, the 23 Based on estimated GDP per capita growth rates\. The economy in Botswana is expected to rebound with projected GDP growth rates of 3\.7 and 4\.3 percent respectively in 2016 and 2017, driven mainly by an expected improvement in diamond prices as developed economies stabilize and fiscal stimulus that will propel non-mining activity\. World Bank\. Discounting Costs and Benefits in Economic Analysis of World Bank Projects\. May 9, 2016\. Page 29 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) estimated benefits of the project described in this analysis can be considered conservative and it can be reasonably assumed that the actual benefits will be larger than the ones estimated here\. 68\. The project is economically viable when analyzed as a whole, as well as component by component\. Indeed, the cost benefit analysis for all subprojects analyzed generated positive rates of return\. The economic internal rate of return (EIRR) is 11\.4 percent\. A summary of the present value of benefits and cost, and the NPV of the Project, under the two discount rate scenarios, is shown in Table 2\. Table 2\. Summary results of the economic analysis Results Component 1 and Component 2 Discount rate 6% Discount rate 10% Present value of benefits (US$, millions) 400 240 Present value of costs (US$, millions) 329 231 Net present value (US$, millions) 72 9 Benefit-cost ratio 1\.2 1\.0 69\. Financial analysis\. The financial benefits of the Project were measured in financial terms as the increase of revenue for WUC\. Revenues were measured as volume of water billed times the average tariff per cubic meter, and then adjusted by the collection revenue rate of 95 percent\. No tariff adjustments were assumed for the financial projections\. Increased revenue will come from: (i) additional water sales arising from increased demand from existing connections; (ii) additional water sales arising from greater availability of water derived from NRW reductions; (iii) savings in operating costs due to reductions in technical losses in the Masunga North East and Tutume Sub District water supply scheme; (iv) increase in revenues when additional wastewater treatment occurs; (v) avoided cost of sludge transportation for Letlhakane WWTP; and, (vi) increased revenue from sludge emptying at Letlhakane WWTP\. In addition, as the WUC will receive the funding from the Project as a grant, the investment costs have not been factored into the costs\. The financial internal rate of return (FIRR) of investments under Component 1 and Component 2 is 18\.5 percent\. Table 3 summarizes annual values of the project financial benefits and their present values, using a 6 and 10 percent discount rate\. Table 3\. Summary results of the financial analysis Results Component 1 and Component 2 Discount rate 6% Discount rate 10% Present value of benefits (US$, millions) 224 136 Present value of costs (US$, millions) 262 159 Net present value (US$, millions) 3 2 Benefit-cost ratio 0\.86 0\.85 70\. Sensitivity Analysis\. A sensitivity analysis was carried out to measure the impact on the economic and financial results when changes in the production and treatment costs and NRW reduction forecasts occur, assuming a 6 percent discount rate\. Given the benefits accounted for in this economic analysis, changes in certain parameters does not compromise the economic viability of the project\. The Project remains economically and financially viable under a 30 percent increase in production and Page 30 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) treatment costs\. Similarly, a 30 percent deviation (in both directions) from the NRW targets was evaluated\. The Project remains viable even if the utility misses the NRW target by 30 percent\. B\. Technical 71\. The Project will support priority investments, included in the Government’s NDP 11, which are intended to (i) support the emergency response to the ongoing drought, the worst to hit Botswana in 34 years; and (ii) improve medium to long term resilience against chronic droughts\. The civil works and the technical assistance financed under the project, will support the Government and WUC in their efforts to manage water supply more sustainably vis a vis the scarce water resources of Botswana, thus improving water security in the long term\. The scope includes (i) critical investments in water supply and wastewater treatment infrastructure, including targeted measures to protect and secure water resources for the long term; and (ii) institutional strengthening and capacity development measures to improve efficiency and sustainability of water services as well as sustainable development and management of surface and ground water resources\. 72\. The ongoing drought has increased levels of water stress in many parts of Botswana\. Dammed reservoirs, rivers, and well fields have been running dry\. Existing sources need to be better managed, new sources developed and schemes inter-linked in order to ensure sustainable exploitation of water resources, and to avoid overdrawing surface and ground water reserves\. Enhancing and inter-linking existing supply systems will provide the redundancy necessary in case of outages or declining yield\. In parallel, improved sanitation and wastewater treatment capacity will help to prevent contamination of clean sources and to allow re-use\. The Project will enable greater re-use of treated wastewater by improving the quality of the effluent in three WWTPs, reducing the stress on fresh water reserves\. 73\. The proposed activities identified under Components 1 and 2 represent key infrastructure investments for improved water supply and wastewater treatment in high-priority service areas\. The investments encompass interconnection of both schemes and sources, pressure management to reduce losses, improved water quality and, for WWTP, improved effluent quality\. Coupled with institutional support activities under Component 3, the works will support service delivery improvements and operational efficiencies in MCs\. Each proposed investment is further detailed in Annex 1, including estimated costs and their level of technical readiness— in terms of designs, environmental and social safeguards and bidding documents (BDs)\. 74\. In order to speed up the response to the on-going drought, the investments identified for implementation have been selected because they are at an advanced stage of preparation, some of the interventions have been in the pipeline for the last few years and have now been included as priority investments in NDP 11\. A subset of projects that are ready for implementation in year 1 have been prioritized for detailed review by the Bank’s technical and fiduciary staff\. Designs and bidding documents are being readied to launch procurement processes\. Environmental and social safeguards documents are being reviewed and necessary assessments, including the impact of proposed pumping on the aquifers, will be updated or prepared and disclosed as needed prior to the launch of bidding\. Page 31 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) 75\. In support of these investments, Component 3 will provide support for medium and long-term sustainability of investments under the Project, including measures to strengthen the operational capacity of MLWS (DWA) and WUC to adequately perform their functions\. The project will support purchasing of monitoring equipment for ground water as well as surface water resources\. MLWS (DWA) will benefit from training in water resource planning and management, increased knowledge of IWRM priorities; and systems for adequately monitor water resources\. WUC will benefit from support to the process of institutional restructuring, including re-skilling of absorbed staff; improving financial sustainability; and business strategy development\. 76\. Particular focus will be given to supporting (i) NRW (currently about 40 percent) management efforts, which include pipeline and asset management, pressure reduction and control, repair to visible leaks, and application of active leakage control strategies\. A Leakage Control Unit was established in 2014 and aims to install meters (including pre-paid meters) for all customers; (ii) innovation in wastewater and sanitation, including refining approaches to sanitation service delivery options and developing capacity for wastewater management, a responsibility assumed by WUC in 2013; and (iii) pricing and tariff setting - it is intended that tariff adjustments, along with measures to improve other performance dimensions, will continue\. Adjustments to the wastewater tariffs are also planned24\. In addition, a raw water pricing strategy will be supported, options for a drought tariff explored, and models for water supply and wastewater tariff setting developed\. C\. Financial Management 77\. WUC\. Financial Management (FM) systems and arrangements at WUC are capable of producing periodic reports for monitoring the financial aspects of the project\. The auditing arrangements are also considered acceptable\. In view of this, WUC’s FM system will be used for the implementation of the project, with the already laid-down oversight arrangements by MLWS and WUC’s Board\. WUC has an acceptable FM system that is capable of producing reliable and regular unaudited interim financial reports (IFRs) and other financial reports\. 78\. MFED will maintain a Designated Account (DA) at the Bank of Botswana for the receipt of the Loan Proceeds\. WUC will maintain a local currency Designated Project Account (DPA) in a commercial bank for the implementation of Bank-financed components of the project\. Disbursements by MFED into this account will be on quarterly basis and based on the approved work plan\. 79\. The key risk to be mitigated is the high level of vacancies identified during the assessment\. Staffing requirements will be agreed with WUC as part of the capacity required for the WUC - PMO\. WUC is also intending to fill current vacancies\. 24 Tariffs for the 540 schemes transferred to WUC had previously been set independently and therefore varied across the country\. Due to these variations some customers were paying up to 300 percent more than others for the same quantity and quality of water\. As part of the reform, tariffs were consolidated in four schedules in April 2015\. Page 32 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) 80\. WUC’s annual audit report together with the auditors’ management letter and management’s response are to be submitted to the World Bank within six months of the end of each reporting period, that is, by September 30, each year\. 81\. MLWS\. MLWS has FM systems and arrangements that are capable of producing periodic reports for monitoring the financial aspects of the project\. The operation of the DA will follow Government approved procedures\. 82\. The assessment of MLWS capacity has revealed a need to strengthen staffing arrangements\. The current staffing arrangements cannot absorb the new project\. MLWS is currently preparing consolidated government accounts, which might prove to be difficult to use to report on project level expenditure\. To mitigate this risk, separate project sub-accounts will be required for auditing project expenditures\. 83\. In conclusion, both implementing entities meet the minimum World Bank requirements for Financial Management, with the following identified risks to be mitigated: (i) Staffing arrangements need strengthening; and; (ii) as both implementing entities are new to the World Bank procedures; training on the World Bank’s financial management and disbursement guidelines will be necessary\. D\. Procurement 84\. All procurement to be financed under the proposed project will be carried out in accordance with the World Bank’s new Procurement Framework (NPF) that became effective on July 1, 2016 (in particular the Procurement Regulations for investment project financing (IPF) Borrowers, July 2016) and the provisions stipulated in the Legal Agreement\. A Project Procurement Strategy for Development (PPSD) was prepared to determine the approach to market, the selection methods and consequently the procurement plan\. The project will carry out implementation in accordance with the ‘Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD and IDA and Grants’, dated July 1, 2016 (the Anticorruption Guidelines)\. 85\. An assessment has been done of the MLWS Procurement Unit and the WUC Procurement Unit\. Key issues for procurement include: (i) procurement planning not formalized and reinforced as a core part of project management leading to implementation delays; (ii) the current MLWS - PMO and WUC - PMO staffing structure may not be suited to implementing capital projects; and (iii) the absence of a formal role of the MLWS - PMO in contract monitoring may impede speedy resolution of contractual matters\. 86\. Proposed corrective measures to mitigate the overall risks include: (i) in conjunction with technical departments, regularly update the procurement plan and agree on responsibilities for its implementation; (ii) assigning a dedicated procurement officer to support project procurement and; (iii) formalizing the role of procurement officers in contract monitoring and developing a contract monitoring plan\. Page 33 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) E\. Social (including Safeguards) 87\. The Project is being implemented under OP 10\.00, paragraph 12 on Projects in Situations of Urgent Need of Assistance or Capacity Constraints\. Safeguards have been deferred and the World Bank has agreed on the elements of an environmental and Social Safeguards Action Plan (SAP) with the Government\. The SAP outlines activities to be undertaken during implementation in compliance with Bank policy\. The SAP is included in Annex 4 and the Integrated Project Information Document/Safeguards Data Sheet (PID/ISDS) was disclosed on October 25, 2016\. 88\. The Project will rehabilitate or augment systems in areas that already have access to services, but are underserved due to inadequate wastewater treatment or water shortages arising from the drought\. The project will increase water supply to predominately built-up settlements with medium density development\. As it is expected that the bulk of the investments will be in-situ rehabilitation and upgrading or extending infrastructure to new water sources, this will largely involve transmission, storage, and pumping equipment\. The majority of transmission lines are to be placed within existing rights of way of existing road reserves\. However, there will be also new lines inter-connecting boreholes or some population areas such as some villages\. The focus will be on ensuring that any physical activity undertaken in built up areas is well managed; and that land take for new transmission routes or sites for equipment follows required procedures to be documented in the Resettlement Policy Framework (RPF) that will be prepared and disclosed within two months after effectiveness\. In addition, civil works will only start after the necessary safeguards documents have been prepared and disclosed\. 89\. World Bank Safeguard Policies and the Botswana Laws and Regulations will be adopted as standards for implementing social safeguard aspects of the project as required in the RPF\. The following World Bank Safeguard Policies are triggered: (i) Physical Cultural Resources OP/BP 4\.11; (ii) Involuntary Resettlement OP/BP 4\.12; and (iii) Indigenous Peoples OP/BP 4\.10\. 90\. Physical Cultural Resources (PCR) OP/BP 4\.11: This policy is triggered\. The Borrower will ensure that the initial environmental and social assessment screens for potential impacts on the physical cultural resources and include Chance Find Procedures in the ESIAs and bidding documents to ensure mitigation of any new discovery of physical cultural resources\. 91\. Involuntary Resettlement OP/BP 4\.12: This policy is triggered\. The project will undertake measures to mitigate the impact of the drought by equipping and connecting existing water sources to settlements that have experienced extended periods of rationing and/or been forced to rely on water bowsers as well as the expansion to under-served or drought affected communities\. As the vast majority of infrastructure will be in-situ rehabilitation and upgrading, the extent to which any civil works under the project will require land acquisition and/or impact people’s access will be determined during project preparation, including through the ESIA and planned social assessments\. The proposed civil works may require land for temporary or permanent usage\. The land acquired for this purpose may lead to loss of assets, sources of income or means of livelihoods, especially in rural communities - whether or not project affected people must move to another location\. To ensure proper mitigation measures are set forth during the first year of implementation, based on the findings of ESIA, the national laws on land as well as OP 4\.12 and social assessments will be applied\. To enable this, within two months of effectiveness, the Borrower will prepare a Resettlement Policy Framework (RPF) to guide the Page 34 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) preparation of site specific RAPs\. In addition, for a number of sites where land is acquired social audits will be carried out\. Just as the other safeguards documents, the RPF will be fully consulted upon, reviewed and cleared by the Bank and publicly disclosed both in-country and the World Bank’s external website prior to the start of civil works\. 92\. Indigenous Peoples OP/BP 4\.10: In the context of the Republic of Botswana this refers to “Vulnerable Communities (VC)”\. There is a lack of sufficient detail on the proposed routing and development of infrastructure to be supported by the Project\. However, as there may be VCs present or having a collective attachment to the proposed project sites, OP 4\.10 has been triggered\. Where relevant, if for any given activity, VCs were or are found to be present or to have a collective attachment to the area of the proposed project activity, a social assessment will be undertaken and a Vulnerable Communities Plan (VCP) will be prepared, based on prior informed consultations, disclosed, and implemented prior to the start of civil works in full compliance with the requirements of OP/BP 4\.10\. 93\. Projects in Disputed Areas OP/BP 7\.60: This policy is not triggered\. The project will not finance any activities located in any known areas under territorial dispute as defined in OP 7\.60\. F\. Environment (including Safeguards) 94\. As noted above, a SAP outlining activities to be undertaken during implementation has been prepared\. The SAP is included in Annex 4 and the Project Information Document/Integrated Safeguards Data Sheet (PID/ISDS) was disclosed on October 25, 2016\. 95\. World Bank Safeguard Policies and the Botswana Environmental Impact Assessment Act and Regulations of 2011 will be adopted as standards for implementing safeguard aspects of the project\. The project is classified as an environmental risk category “A”\. The key risk is potential environmental impacts likely to be generated from rehabilitation and expansion works at the Mambo WWTP\. Currently, the treated effluent from the plant is discharged into the Tati River, a tributary of the Shashe River, which feeds into the Dikgatlhong Dam located at a distance of 3 km below the confluence of the Shahe and Tati River\. Since the Dikgatlhong Dam supplies potable water to the city of Gaborone, it is essential that the quality of discharged effluent from the Mambo WWTP stringently complies with legislated standards during the construction and operational phases of the project\. Most other subprojects are in locations that are predominately built-up with medium density development\. It is expected that the vast majority of infrastructure developed will be in-situ rehabilitation and upgrading\. In most subprojects, it is expected that new pipelines will be placed within existing rights of way\. 96\. The following World Bank Safeguard Policies are triggered (i) Environmental Assessment OP/BP 4\.01; (ii) Projects on International Waters OP/BP 7\.50; and, (iii) Safety of Dams OP/BP 4\.37\. 97\. Environmental Assessment OP 4\.01\. This policy is triggered due to the potential environmental and social impacts associated with the project investments\. The proposed investments include rehabilitation of existing WWTPs which may generate adverse impacts during the construction phase due to the location of the Mambo WWTP upstream of the Dikgatlhong Dam which supplies raw water to the city of Gaborone\. Disposal of sludge from existing WWTPs during the construction and operational Page 35 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) phases of the WWTPs may also impact the environment within the area of influence of the project\. Based on the preliminary screening of the proposed project activities, assessment of the baseline characteristics of potential project sites, and available Environmental Impact studies, the project is classified as Category A\. As there may be adverse impacts within the project’s area of influence this would require a full environmental and social assessment\. ToR for an ESIA for Mambo WWTP have been prepared and have been disclosed\. 98\. Natural Habitats OP/BP 4\.04\. This policy is not triggered\. However, during the implementation phase of the project, the proposed activities will be screened to determine if the activities are likely to alter or cause destruction of any critical or sensitive natural habitats\. The team will also look for potential opportunities to generate positive impacts on natural habitats though project activities, should such opportunities present themselves\. 99\. Forests OP/BP 4\.36\. This policy is not triggered since the project will not support civil works located within forested areas or plantations as defined under OP 4\.36\. 100\. Pest Management OP 4\.09\. This policy is not triggered since the project will not involve procurement of pesticides or fertilizers and does not have the potential to lead to increased use of pesticides or fertilizers\. 101\. Safety of Dams OP/BP 4\.37\. This policy is triggered as the project will rely on the performance of existing dams\. Water from the Ntimbale dam will be used to supply 50 plus villages in the Masunga/Tutume area\. The Letsibogo Dam will also be used to supply additional water to five villages in the Selebi Phikwe area\. A Dam Safety Action Plan will be prepared to support compliance with the policy\. G\. Other Safeguard Policies 102\. Projects on International Waterways OP/BP 7\.50\. OP 7\.50 is triggered because the treated effluent from the Mambo WWTP discharges into the Tati River, which flows into one of the major tributaries of the Limpopo River–the Shashe River\. Preliminary assessment of the likely impacts of the effluent to the water quality of the Limpopo River, indicates an improvement in the quality of effluent discharged into the Limpopo River as the wastewater to be collected will be treated in newly rehabilitated WWTPs, in compliance with the national standards Chemical Oxygen Demand (COD) or Biochemical Oxygen Demand (BOD)\. The effluent is discharged into Tati River (a tributary of the Shashe River) and finally into the Limpopo River\. The Shashe River contributes about 12\.2 percent of the Limpopo’s mean annual runoff\. It originates from the northwest of Francistown on the border between Botswana and Zimbabwe and flows southeast along the border for approximately 362 km until it reaches the confluence point with the Limpopo River where Botswana, Zimbabwe and South Africa meet\. The Limpopo River is classified as an international waterway\. The Mambo WWTP, from which the effluent will be discharged is located close to the national Tati River which originates in Botswana and is the recipient of the treated wastewater from the plant\. The Dikgatlhong Dam is located 3 km below the confluence of the Tati River with the Shashi River and 50km from the Mambo WWTP\. It is a key source Page 36 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) of water supply to the city of Gaborone\. The project will support rehabilitation works at the Mambo WWTP to ensure that the quality of discharged effluent from the plant stringently complies with legislated discharge standards and that the overall quality of the Shashe River is not adversely affected by contaminants during both the construction and operational phases of the project\. As the project will have a positive impact on the quality of effluent discharged; and no new water sources will be developed by the Project, an exception to the Policy was granted by the Regional Vice President, Africa Region on September 1, 2016\. H\. World Bank Grievance Redress Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS)\. The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns\. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures\. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond\. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www\.worldbank\.org/en/projects-operations/products-and-services/grievance-redress-service\. For information on how to submit complaints to the World Bank Inspection Panel, please visit www\.inspectionpanel\.org\. Page 37 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) VII\. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY : Botswana Emergency Water Security and Efficiency Project Project Development Objectives To improve availability of water supply in drought vulnerable areas, increase the efficiency of WUC, and strengthen wastewater management in selected systems\. Project Development Objective Indicators Unit of Responsibility for Indicator Name Core Baseline End Target Frequency Data Source/Methodology Measure Data Collection Name: Direct project ✔ Number 0\.00 580000\.00 Annually Project reports; Data WUC beneficiaries showing population in the service area and the proportion that is female\. Female beneficiaries ✔ Percentage 0\.00 50\.00 Description: Direct beneficiaries are people or groups who directly derive benefits from an intervention (i\.e\., children who benefit from an immunization program; families that have a new piped water connection)\. Please note that this indicator requires supplemental information\. Supplemental Value: Female beneficiaries (percentage)\. Based on the assessment and definition of direct project beneficiaries, specify what proportion of the direct project beneficiaries are female\. This indicator is calculated as a percentage\. Name: Additional water Cubic 0\.00 14500\.00 Annually Management center reports WUC made available by the Meter(m3) investments under the Page 38 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Unit of Responsibility for Indicator Name Core Baseline End Target Frequency Data Source/Methodology Measure Data Collection project (per day) Description: Difference between baseline and end of project production (m3) in project areas and for selected schemes\. Name: People benefiting Number 0\.00 460000\.00 Annually Project reports; Data on WUC from improved water supply people in the service area through measures aimed at who are benefiting\. alleviating drought impact Description: People benefiting are considered those with more hours of water supply per day (i\.e\. reduction of water rationing) than they were receiving prior to the investment\. Name: Revenue to operating Number 0\.75 0\.90 Bi-Annually WUC Reports WUC cost ratio Description: The objective of the indicator is to measure the ability of WUC to cover its operating costs with its revenues\. A ratio below one indicates that WUC is not able to cover its operating costs with its revenues\. For the purpose of calculation total annual operating revenue and expenses should be taken into account, including revenue and expenses from water supply and wastewater treatment for all customer categories\. Baseline data is for 2014/15\. Name: Average annual COD Percentage 70\.00 85\.00 Bi-annually WUC Reports, MC reports WUC removal efficiency from (Letlhakane, Francistown, wastewater at WWTP Lobatse) Description: Based on WUC effluent standard for ephemeral streams (COD equal to or less than 75 mg/L\. Will be calculated for Lobatse, Francistown and Letlhakane WWTP only\. Intermediate Results Indicators Page 39 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Unit of Responsibility for Indicator Name Core Baseline End Target Frequency Data Source/Methodology Measure Data Collection Name: Piped household ✔ Number 0\.00 75000\.00 Annually Management Center Reports WUC water connections that are benefiting from rehabilitation works undertaken by the project Description: Number of piped household water connections benefiting from rehabilitation works\. This indicator is measured as the number of piped household water connections benefiting from rehabilitation works\. Rehabilitation works are undertaken so that existing customers see the quantity and/or quality of their water supply services enhanced\. Name: Water delivered to Cubic 30000\.00 39500\.00 Bi-annually Management Center Reports WUC consumers (per day) Meter(m3) Description: Measured as water produced minus technical losses (estimated at 30% of production)\. Name: Additional Cubic 0\.00 2620\.00 Semi-annually Treatment Plant Records WUC wastewater treated in the Meter(m3) facilities rehabilitated under the project (per day) Description: Name: Policies, legislation, Number 0\.00 8\.00 Annually Project reports, Studies, DWA and regulations drafted or Dissemination material, approved (to be specified) Government records\. Page 40 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Unit of Responsibility for Indicator Name Core Baseline End Target Frequency Data Source/Methodology Measure Data Collection Description: This indicator will capture the status of policies, legislation, strategies, guidelines and regulations supported under the project Name: Laboratories for Number 0\.00 5\.00 Annually Project reports WUC monitoring quality of WWTP effluent fully operational Botswana Standards DWA Description: This indicator will assess whether laboratories supported by the Project are equipped and staffed to monitor compliance with Botswana Standards Name: Feasibility studies Number 0\.00 6\.00 Annually Project reports DWA and/or master plans for future investments prepared under the project Description: This indicator will record the number of feasibility studies and master plans not implemented under the project, but prepared to build a future investment pipeline\. Name: Number of Number 0\.00 50\.00 Bi-annually Minutes of meetings (gender WUC consultations held with balance to be recorded) communities under the project Description: Consultations will be carried out with Community Liaison Committees (CLCs) on a number of issues, such as safeguards, demand management, sub-project Page 41 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Unit of Responsibility for Indicator Name Core Baseline End Target Frequency Data Source/Methodology Measure Data Collection design, policy dissemination, tariffs and pricing Name: Citizens feedback on Percentage 80\.00 100\.00 Bi-annually Call Center Reports WUC service delivery registered and addressed by the service provider in accordance with Greivance Redress service standards Mechanism Description: Name: Reduced technical Percentage 40\.00 35\.00 Bi- Annually WUC Annual Reports WUC losses in selected schemes under the project MC Quarterly Reports Description: Technical losses are measured as percent of water supplied to the distribution system that is not delivered to consumers\. Measured for selected schemes (Masunga-Tutume, Ghanzi)\. Page 42 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Target Values Project Development Objective Indicators FY Indicator Name Baseline End Target Direct project beneficiaries 0\.00 580000\.00 Additional water made available by the investments under the project (per day) 0\.00 14500\.00 People benefiting from improved water supply through measures aimed at alleviating 0\.00 460000\.00 drought impact Revenue to operating cost ratio 0\.75 0\.90 Average annual COD removal efficiency from wastewater at WWTP 70\.00 85\.00 Female beneficiaries 0\.00 50\.00 Intermediate Results Indicators FY Indicator Name Baseline End Target Piped household water connections that are benefiting from rehabilitation works 0\.00 75000\.00 undertaken by the project Water delivered to consumers (per day) 30000\.00 39500\.00 Additional wastewater treated in the facilities rehabilitated under the project (per day) 0\.00 2620\.00 Policies, legislation, and regulations drafted or approved (to be specified) 0\.00 8\.00 Page 43 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) Indicator Name Baseline End Target Laboratories for monitoring quality of WWTP effluent fully operational 0\.00 5\.00 Feasibility studies and/or master plans for future investments prepared under the project 0\.00 6\.00 Number of consultations held with communities under the project 0\.00 50\.00 Citizens feedback on service delivery registered and addressed by the service provider in 80\.00 100\.00 accordance with service standards Reduced technical losses in selected schemes under the project 40\.00 35\.00 Page 44 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) ANNEX 1: DETAILED PROJECT DESCRIPTION COUNTRY : Botswana Emergency Water Security and Efficiency Project Sector Context 1\. As highlighted in the main text of the PAD, water is central to Botswana’s continued economic success and sustained development gains\. However, water resources are constrained, fragile, and subject to many competing demands\. Due to a growing and increasingly prosperous population, as well as the development of industrial and other commercial uses (especially mining), demand continues to rise\. By 2030 demand is forecast to reach 285\.8 mega cubic meters (Mm3), or about one and a half times the 193\.4Mm3 annual demand in 2000\. Currently agriculture and mining are among the main water users, accounting for 42 percent and 23 percent respectively in 2013-2014, with domestic use, accounting for 25 percent in the same period\. The water supply industry extracts about 47 percent from the environment while the remaining 53 percent is extracted by self-providers, mostly agriculture and mining\. Both ground and surface water (rivers and dams) resources are utilized, however as most rivers are ephemeral, groundwater now accounts for three quarters of the country’s requirements\. Most water sources are in northern Botswana, while most people live in the south eastern region in and around Gaborone and Francistown\. 2\. As the climate is semi-arid, rainfall levels are low, unreliable, unevenly distributed, and highly variable from year to year\. The average annual volumetric runoff is about 700Mm3, with rainfall ranging from zero mm in western and central Botswana to over fifty mm per annum in the north\. Surface water resources are restricted to ephemeral and perennial rivers and water stored in reservoirs\. The perennial rivers (Limpopo, Chobe, Zambezi and Okavango) are shared watercourses, and their management and use are subject to the SADC Protocol on Shared Water courses\. Groundwater resources are limited in quantity and quality, and are unevenly distributed over the country\. Botswana’s total groundwater resources are estimated at around 100 billion m3 with an average annual recharge of 1,600Mm3\. Most well fields are located in the eastern and north eastern part of the country\. Some areas, such as Western Botswana (where there is no surface water) rely entirely on groundwater (and extremely low recharge rates)\. Recharge is virtually zero in western Botswana rising to 40mm in the north\. Groundwater depth relates to rainfall level (and recharge rates): around 20m in northern Botswana to more than 100m deep in south western Botswana\. Groundwater abstraction has increased by a third, from less than 150 Mm 3 in 1990 to 195Mm3 in 2013/2014\. 3\. Botswana is one of four Southern Africa nations that could become “highly water stressed by 2040” if business as usual continues25\. Six of the last ten years have been drought years, with some dry spells lasting as long as 3 years\. Recurrent and protracted droughts, such as the one ongoing, are a 25 Baseline water stress measures competition for surface water calculated as withdrawals over renewable supply\. The Water Resources Institute ranking of 147 water stressed countries globally Indicates that water stress levels for Botswana, Namibia, and South Africa are expected to reach between 40-80 percent by 2040\. Namibia and Botswana are the two countries in the ranking expected to face the greatest increase in water stress\. Page 45 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) constant reminder of this fragility\. Based on the Standard Precipitation Index (SPI), 2015 and 2014 were rated severely dry and moderately dry years (respectively)\. And precipitation in 2012 and 2013, which were marginally above the SPI mean, did not allow a full recovery after 2011 (another dry year)\. At the sub-national level, the analysis of precipitation highlights variations from district to district\. The Southern (five subprojects), Ghanzi (three subprojects) South East, Kgalagadi, Kgatleng districts have experienced a string of moderately to severely dry years since 2011\. The Central (two subprojects) and North East (three subprojects) districts have experienced a severely dry 2015 which followed a moderately dry 2014\. Figure A1\.1 below shows the chronic nature of droughts based on SPI data from 1980\. Figure A1\.1 - Standard Precipitation Index for Botswana26 – 1980-2015 (October to January) c\. 4\. The meteorological department rates the 2015 drought “extremely severe”– the worst in the last 34 years and a drought emergency declared in 2015 has been extended for a second year27\. Drought hotspots in the central, southern and western parts of the country have been significantly impacted\. In addition to dams, rivers and well fields running dry, extremely low levels of rainfall (and or late rains) have led to significant loss of crops – a 70 percent decline in cereal crop when compared to 2014; and declining grasslands – which have affected both livestock (a 20 percent mortality rate in 2015 and again in 2016) and wildlife\. Nationwide, dam levels fell below 20 percent of design capacity – the Gaborone dam fell as low as 1\.6 percent in 2015, the lowest since 2000\. Ground water recharge rates have been low, boreholes or wellfields in several subproject areas have run dry or become saline\. The drought has prolonged periods of water rationing in many water supply systems\. Most major settlements have had rationing schedules in place for 2-4 years\. Many settlements are now being served by water bowsers at high cost\. 5\. Climate change projections for temperature include a rise of up to two degrees Celsius (January 2015 was the hottest year on record); a decline in river flows of up to 13 percent28; and a reduction in 26 Drought and Household Food Security Outlook, 2015/6, Ministry of Local Government and Rural Development\. 27 Department of Meteorological Services (DMS), May 2016\. 28 Botswana’s Second National Communication to the United Nations Framework Convention on Climate Change (UNFCCC), December 2011\. Page 46 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) rainfall of about 3 to 9 percent (or a 19 percent decline in cereal production)\. A climate risk assessment carried out by the World Bank in 2010 (using multiple measures, over multiple temporal scales) concludes that there is a definite bias towards increased droughts, and declining groundwater recharge rates\. In addition to low rainfall, high open-water evaporation rates— ranging from 1,900 mm to 2,200 mm per annum (Food and Agricultural Organization 2009), also lower groundwater recharge and surface runoff levels, diminishing opportunities for storage\. While droughts and storms are expected to increase (in frequency and severity) in western and northern Botswana, in south-mid eastern Botswana (part of the Limpopo basin), precipitation is likely to decrease, but with an increased risk in flooding29\. 6\. Climate variability is a risk to GOB’s economic diversification agenda\. It is already a major constraint to the agricultural and mining sectors\. Cereal production is rainfall dependent and only a small portion of land is under irrigation (around 1 800ha – Second Botswana National Water Master Plan)\. As mines and power generation are location specific, securing a sufficient water supply, typically groundwater, is a determining factor\. As households, institutions and commercial establishments face serious water constraints during droughts, frequent droughts are a threat to current high levels of access— universal access has been achieved in urban areas, and access is also high in rural settlements\. In the coming years, greater emphasis on climate change adaptation, and managing chronic drought will be required\. The Draft National Water Conservation and Water Demand Management Strategy (2016- 2021) note that this will require a significant shift to “…a water-wise and water-efficient society through changes in people's attitudes to water, how water is planned, managed and used…”\. Project Description 7\. The Project includes the three components: Component 1: Improve Availability of Water Supply and Efficiency of Services; Component 2: Improve Wastewater and Sludge Management; and, Component 3: Sector Reform and Institutional Strengthening\. Several subprojects included under all components had earlier been prepared by WUC to be included in their financing cycles under the National Development Plans\. However due to funding constraints these projects were not implemented\. These projects have the objective of improving supply while addressing water security as well as water quality challenges\. The following describes each component and its proposed investments: 8\. Component 1: Improve Availability of Water Supply and Efficiency of Services (US$114\.05 million including taxes)\. This component will support immediate as well as medium term investments and measures to mitigate the impact of the drought by improving availability of water to settlements that have experienced extended periods of rationing and/or been forced to rely on water bowsers\. Specific investments will include: (i) water source management, optimization and development, including interlinking existing water sources (surface and ground) as well as of supply schemes to ensure backup supply and more sustainable production; (ii) expansion of water supply systems to reach underserved or drought affected communities; and (iii) measures to improve operational efficiency, including reducing technical losses along transmission lines\. This component will be implemented by the WUC\. The component includes safeguards assessment and management as well as design and supervision services for the civil works\. All investments will be coordinated and will be supported by institutional strengthening activities (under Component 3) which aims to improve the long-term 29 Botswana Climate Variability and Change: Understanding the Risks\. World Bank, November 2010\. Page 47 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) sustainability of service provision and water demand management\. The investments proposed under this Component are detailed in Table A1\.1\. Table A1\.1\. Description of Component 1 Investments Infrastructure Description of the investment Description of works Implementation Readiness – Management investments Cost estimate Preparation status including 30 Center (US$ million) Safeguards Selebi-Phikwe This investment is to improve Construction of 120 km to To be procured in Year 1 (Y1) to Serule water water supply for about 29,840 connect Selebi Phikwe to Designs completed and bidding transfer beneficiaries in Mmadinare, Serule pipelines and documents ready scheme Serule, Damuchojena, Gojwane, additional distribution, US$20 million Topisi and Moreomabele villages, associated offtakes; three Environmental and social as well as boarding schools in the booster stations; storage assessment to be concluded\. area\. The investment is designed tanks and elevated tanks for Land acquisition for servitudes 3 to reach a production capacity of a total of about 14,000 m and facilities or social audit to 3 5463 m /day by connecting to storage ensuring supply of be done in accordance to the the existing valve chamber in potable water to five RPF\. ESMP and DSAP to be Selebi Phikwe\. The project will villages: Serule, Gojwane, prepared\. interconnect three clusters: Mmadinare, Moreomabele, Cluster 1 in Mmadinare currently Topisi and Damuchujena, supplied from Mmadinare and for boarding schools in Treatment Plant; Cluster 2 in the area\. Damuchujena currently supplied from boreholes; and Cluster 3 in Serule, Moreomabele, Topisi and Gojwane currently supplied by Selebi-Phikwe from Molodi well field\. Water for the Project is from treatment plant in Selibi Phikwe which get water from Letsibogo dam\. 30 These costs include design and supervision, environmental and social safeguards, and construction works Page 48 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Infrastructure Description of the investment Description of works Implementation Readiness – Management investments Cost estimate Preparation status including 30 Center (US$ million) Safeguards Boteti This investment is to improve Equipping of seven To be procured in Y1 Southern and water supply for about 23,360 boreholes with electrical Designs completed and bidding Central Cluster beneficiaries in eight villages submersible pumps; documents ready\. Villages Water (Mokoboxane, Kedia, Mopipi, construction of 31km of Supply Scheme Xhumo, Toromoja, Mmadikola, boreholes interconnecting Environmental (inclusive of US$20 million Rakops, and Xere)\. Production pipework; construction of groundwater assessment) and capacity will be increased to 18km gravity fed raw water social assessment to be 3/ 2224m day\. The system is transmission main from the concluded\. Land acquisition for currently supplied by ground raw water collector tank to servitudes and facilities or social water from Xago well field the water treatment plant\. audit to be done in accordance through six low yielding 127 km of distribution mains to the RPF\. ESMP to be 3 boreholes\. Seven boreholes will - gravity\. About 3200 m prepared\. be equipped to improve the storage and balancing pumping regime of the aquifer capacity\. Design and and improve its sustainability\. construction of a Reverse Osmosis (RO) treatment Letlhakane plant and associated mechanical, electrical and telemetry, booster station)\. Mosu, This investment is to improve Design, installation and To be procured in Y1\. Mokubilo and quality and reliability of water commissioning of a Reverse Mmea villages supply for about 5,400 Osmosis Plant to address Bidding documents ready\. US$0\.3 million beneficiaries in Mosu, Mokubilo salinity and improve water and Mmea villages\. The villages quality from the borehole\. Environmental (inclusive of are interconnected and the WUC will request the groundwater assessment) and supply capacity will increase to contractor to consider Solar social assessment to be 3 474m /day\. A new borehole (BH) power supply for the plant\. concluded\. Land acquisition for BH 7955 was equipped but the servitudes and facilities or social water is saline and requires audit to be done in accordance Letlhakane treatment\. There are no other to the RPF\. ESMP to be sources in the vicinity of these prepared\. villages\. Ghanzi This investment is to improve Review and confirm or To be procured in Y2\. township water supply for about 41,470 update the 2008 design\. water supply beneficiaries in Ghanzi township Investment to include a Designs completed but to be 3 expansion by extending and rehabilitating 1000 m elevated tank, 44 reviewed and bidding US$8\.4 million the reticulation network\. km of new reticulation documents to be updated\. Production capacity is network, and rehabilitation 3 of 10 km of reticulation Environmental and social 2,710m /day\. network\. assessment to be concluded\. Water losses for the township Land acquisition for servitudes average 21 percent of production and facilities or social audit to and the project target is to be done in accordance to the Ghanzi reduce water losses to 15 RPF\. ESMP to be prepared\. percent of production\. Page 49 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Infrastructure Description of the investment Description of works Implementation Readiness – Management investments Cost estimate Preparation status including 30 Center (US$ million) Safeguards Kuke water This investment is to improve Equipping BH Z9000 (with To be procured in Y1/2\. 3 supply Master water supply for about 930 yield of 20m /hr) with PV Plan project beneficiaries in Kuke settlement\. power source; installation of Designs completed and bidding US$1\.9 million The current operational BH 487 12km supply mains from documents ready\. cannot meet the demand source to Kuke settlement; 3 3 estimated at 59 m /day its yield construction of a new 75m Environmental (inclusive of continues to decline (it currently elevated tank; construction groundwater assessment) and 3 supplies about 20 to 32 m /day)\. of 12 km reticulation social assessment to be A new well, will be put on line to network to the eastern part concluded\. Land acquisition for improve the pumping regime of of Kuke\. servitudes and facilities or social the existing well and reduce audit to be done in accordance Ghanzi drawdown\. This investment will to the RPF\. ESMP to be end bowsing to Kuke\. prepared\. Bere This investment is to improve Equipping BH 9135 with PV To be procured in Y1/2\. Settlement water supply for about 626 power source, installation of water supply beneficiaries in Bere settlement\. 5 km supply mains from Designs completed and bidding augmentation The existing demand is met by an source to the settlement\. documents ready\. 3 project existing well BH9134 which is Construction of a new 75m US$0\.7 million under stress\. The project will elevated tank on a 15m Environmental (inclusive of equip another existing well BH stand\. groundwater assessment) and 3 9135 (yield of 8m /hr) located 5 social assessment to be km from the village\. The concluded\. Land acquisition for additional well will be run servitudes and facilities or social alternatively with BH9134\. audit to be done in accordance Together they will supply about to the RPF\. ESMP to be 3 35 to 40 m /day\. The project prepared\. aims to reduce water supply disruptions and also to improve energy efficiency\. This Ghanzi investment will end bowsing to Bere\. Page 50 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Infrastructure Description of the investment Description of works Implementation Readiness – Management investments Cost estimate Preparation status including 30 Center (US$ million) Safeguards North East and This investment is to improve Upgrading of the North East To be procured in Y1\. Tutume Sub efficiency and reliability of water and Tutume Sub-District District water supply for about 181,000 water supply scheme, Designs completed and bidding supply beneficiaries in 52 villages\. The including water tanks, documents ready\. upgrading North-East Water Supply Scheme upgrading of offtake to project in recent years experienced Goshwe Tank; 6 km pipeline, Environmental and social US$22 million acute water shortages\. The Power Supply to Kalakamati assessment to be concluded\. villages are supplied by surface booster pump station, Land acquisition for servitudes water from Ntimbale Dam and village storage upgrades, and facilities or social audit to groundwater from Maitengwe improvement to be done in accordance to the wellfield\. To increase supply the chlorination and sludge RPF\. ESMP and DSAP to be pumping capacity from Ntimbale handing systems at the prepared\. Dam will be increased from 7,000 treatment plant\. 3 3 m /day to 14,000 m /d\. The existing WTP has already capacity 3 to treat 14,000m /day\. The existing transmission system Masunga from the treatment plant is also to be retrofitted to convey 3 14,000m /day\. Sowa Water This investment is to improve Equipping of five boreholes, To be procured by end of Y2\. Supply Master water supply for about 10,140 50km pipeline, 200mm Plan beneficiaries in Nata, Manxotai, gravity line (designed with Designs need to be (connection to Maposa and Sepako\. The water pumping capacity to cater audited/updated and bidding Nata Cluster) source is the Dukwi Wellfield for growing demand) documents need to be 3 with a capacity of 2,640 m /d\. connecting a proposed 2M prepared\. US$18\.5 Demand estimates for Gweta, liter RC ground tank to 3 million Tsokatshaa and Zoroga are also existing 1000m tank at Environmental (including included in the Nata 2M liter tank Dukwi Water works\. Water ground water assessment) and to allow for future expansion\. in the 2ML tank will be lifted social assessment to be 3 to a proposed 300m concluded\. Land acquisition for elevated GS tank to give servitudes and facilities or social gravity head for reticulation audit to be done in accordance Masunga to demand areas in Nata, to the RPF\. ESMP to be Manxotai, Maposa and prepared\. Sepako\. Page 51 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Infrastructure Description of the investment Description of works Implementation Readiness – Management investments Cost estimate Preparation status including 30 Center (US$ million) Safeguards Mmathethe This investment is to improve Construction of 48km of To be procured in Y2\. US$9 million water supply for about 8,280 pipelines (13 km from beneficiaries in Mmathethe, Goodhope to Mmathethe Designs Ready\. Magoriapitse and Metlojane\. via Magoriapitse) and Currently these large villages are reticulation network, 1 Environmental and social supplied by BH 5648, which booster station at assessment to be concluded\. 3 produces 170 m /d and is Magoriapitse, construction Land acquisition for servitudes 3 operated for 12 hrs, and by of 200m elevated tank, and facilities or social audit to supplemental bowsing\. The telemetry system\. be done in accordance to the project will finance the RPF\. ESMP to be prepared\. connection of these systems to Goodhope pipeline so that the supply can increase by up to 3 1296 m /day and bowsing can be discontinued\. The pipeline from Lobatse to Goodhope was constructed and completed in Lobatse 2014\. The investment will extend this pipeline to Mmathethe\. Mokatako This investment is to improve Construction of one booster To be procured in Y1\. US$0\.3 million water supply for about 1,307 pump station, construction 3 beneficiaries in Mokatako, which of a 50m sump, Designs Ready\. is currently supplied with electrification of booster 3 27m /day, partly from a local station, palisade fencing and Bidding documents to be 3 borehole, BH 1255 (12m /day) associated works\. prepared\. the rest by bowsing\. The supply is expected to be increased to Environmental (including 3 78m /day with the sole groundwater assessment) and operation of Mokatako booster social assessment to be station; BH 1255 will be kept only concluded\. Land acquisition for as stand by\. The booster pumps servitudes and facilities or social will be pumping into an existing audit to be done in accordance 3 100 m elevated tank\. The to the RPF\. ESMP to be booster system will be supplied prepared\. by ground water from three boreholes: BH10946 from Sedibeng wellfield and BH10944 and BH10943 from Lepprung Lobatse wellfield\. All three boreholes have sufficient and reliable yield\. Page 52 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Infrastructure Description of the investment Description of works Implementation Readiness – Management investments Cost estimate Preparation status including 30 Center (US$ million) Safeguards Kanye/ WUC plans to improve water Adjust design to include an To be designed in Y1 and Moshupa supply for about 78,000 optimized solution to reduce procured in Y2 US$3 million beneficiaries in Kanye and losses, ensure adequate Moshupa by investing in new supply and sustainable Environmental (inclusive of sources as well as supply exploitation of the aquifers\. groundwater assessment) and efficiency (reduce losses)\. The social assessment to be 3 current supply is 10,926 m /day concluded\. Land acquisition for and can be increased up to servitudes and facilities or social 3 14,426m /day by drawing more audit to be done in accordance water from three wellfields to the RPF\. ESMP to be (Selokolela, Ramonnedi and prepared\. Kgwakgwe)\. At the same time, losses will need to be reduced by Kanye introducing pressure zoning and by replacing old pipes\. Malwelwe/ Improve water supply to this Revisit designs to improve Designs to be updated and Molepolole/ area by investing in groundwater loss reduction; and equip procured in Y2\. Thamaga/ abstraction and improved and/or connect six Thebephatswa operational efficiency\. This additional boreholes; build Environmental (inclusive of Airbase investment is to improve water interconnecting pipelines ground water assessment) and US$10 million supply for 98 000 beneficiaries in from boreholes; upgrading social assessment to be Molepolole, Thamaga and of Malwelwe Sump; concluded\. Land acquisition for Thebephatswa Airbase\. Decline upgrading of Malwelwe servitudes and facilities or social in borehole yields at Booster station; audit to be done in accordance Gaotlhobogwe Wellfield has construction of new pipeline to the RPF\. ESMP to be resulted in water supply from Malwelwe to prepared\. shortages\. Demand is about Gaothobogwe; upgrading of 3 18,000 m /d against a supply of the pump station at 3 11,136 m /d from Gaotlhobogwe WTP; and Gaotlhobogwe, Malwelwe and provision of additional East Suping Wellfield and storage at Gaotlhobogwe\. Ramaphatle boreholes – i\.e\. 3 deficit of 7,019 m /d\. The additional boreholes will increase 3 water supply to 15,660m /d, 3 leaving a deficit of 2,495 m /d\. For water sustainability water restrictions will be applied as and when necessary until additional supply to Thamaga is made Molepolole available in 2017\. The system is supplied by ground water through 24 wells\. 9\. As outlined in Table A1\.1 above, the proposed measures are intended for settlements in drought affected areas where boreholes are running dry, becoming saline, or being mined/overdrawn, as a result of the drought\. However, as droughts in Botswana are chronic (six of the last 10 years were drought years) the investments are designed to address medium term needs by ensuring that a sufficient supply Page 53 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) (and/or back up supply) of water is in place, and avoid having to resort to short term solutions (such as using bowsers) every time a drought occurs\. As Botswana relies heavily on groundwater (60 percent) and the recharge rate for groundwater is low (average of only 5 mm per year) the proposed investments will bring water from more secure sources – e\.g\. dams or well fields that are reliable\. Measures to reduce losses and manage demand will also be taken, including those in Component 3\. 10\. Component 2: Improve waste water and sludge management (US$21\.65 million including taxes)\. This component will support strategic investments in refurbishment/rehabilitation of wastewater treatment plants to protect surface and groundwater sources and enable scaling up wastewater reclamation and reuse in Francistown and Lobatse through design and build contracts\. In Letlhakane sludge management facilities will be rehabilitated and expanded— to reduce transport costs to the nearest facility which is 200km away in Serowe\. The Francistown and Lobatse wastewater treatment plants require urgent attention to prevent environmental contamination, caused by discharge of inadequately treated wastewater into nearby water courses\. Due to inadequate treatment of wastewater at the Mambo WWTP (Francistown) a key water supply dam for Gaborone (Dikgatlhong) may be at risk of pollution\. The Tati river into which Mambo discharges is ephemeral and the effluent discharged during the dry season may also cause local contamination (e\.g\. nearby boreholes)\. 11\. Given the limited water resources available in Botswana, the proposed measures will protect and conserve existing water supply, thereby reducing demand for the development of new sources\. A key objective of the investments in Mambo and Lobatse is to bring the effluent to a quality level where it can be re-used\. Many customers, including mines, local golf courses and other businesses have expressed their interest in re-using the effluent if WUC can treat it to adequate standards, which are set by law\. In addition to improving treatment and operational efficiency (as measured by effluent quality), the Project also includes (under Component 3) activities to enhance WUC’s capacity to holistically manage, treat, dispose of, and re-reuse wastewater and sludge through strategic investments in new or improved technology options\. This Component will be implemented by WUC\. Table A1\.2\. Description of Component 2 Investments Infrastruc Description of the investment Description of works Readiness Management ture Preparation status investments including Safeguards Cost estimate Center (US$ million) Page 54 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Mambo This investment is to improve Design and construction To be procured in Y1 WWTP operational performance of the works for the rehabilitation of rehabilitation WWTP and limit pollution of the existing Mambo WWTP TORs for a design US$16 downstream water sources\. The including: inlet works and pre- and build contract to be million wastewater received from treatment, primary treatment updated and tender to be Francistown and Tatisiding is currently de-nitrification tanks, trickling launched\. not treated to the required BOBS 93 filters and humus tanks, sludge standard\. The effluent that is digesters, control and Full Environmental discharged into Tati River which feeds instrumentation; water re-use Impact Assessment into the Dikgatlhong dam (50 km system, and other auxiliary (including analysis of the away) is high in COD, ammonia, facilities\. impact on ground and phosphate, turbidity, solids, total surface water sources) to coliforms and fecal coliforms\. The be prepared\. ESMP to be Project aims to improve wastewater prepared\. treatment so that the effluents conforms to standards for discharge All works will be built into the environment as well as for within the footprint of the potential re-use by nearby businesses\. existing facilities\. Land is Given the physical distance and the not encroached and there ephemeral nature of the Tati river, the is no claim to the land\. Francistown water quality at Dikgatlhong dam currently remains unaffected, and complies with the BOBS 32: 2009 requirements\. The WWTP serves about 120,000 people\. Page 55 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Letlhaka This investment is to improve Rehabilitation of the To be procured in ne operational performance of the WW existing 5 ponds, inlet, screens, Y2\. wastewater and sludge management facility\. This grit chamber and discharge treatment large village of about 22,000 people facility for septage\. Design and Design and build ponds is fast growing\. Most houses have construction for expansion of contract\. expansion cesspits requiring regular emptying\. sludge ponds\. US$5 A centralized sewer system (with Environmental million ponds) is currently serving (including analysis of businesses and two institutions\. The the impact on ground Project will finance the rehabilitation and surface water and expansion of ponds to allow sources) and social higher volumes of sludge to be assessment to be Letlhakane treated, and avoid haulage of sludge concluded\. Social to Serowe which is located more audit to be done in than 200 km away\. accordance to the RPF\. ESIA and ESMP to be prepared\. Lobatse This investment is to improve Desludging of two pump To be procured in WWTP operational performance of the stations, dewatering and Y2 rehabilitation WWTP and limit pollution of desludging of three primary US$0\.65 downstream water sources\. At anaerobic ponds, construction Design and build\. million present wastewater treatment in of drying beds, refurbishment Lobatse is non-compliant with the of effluent recycling pump All works will be required BOBS 93 standard\. The station, replacement of three built within the project will benefit a population of inlet works pumps, installation footprint of the about 35,000\. of ultrasonic flow metering existing facilities\. Land Lobatse devices, palisade fences, is not encroached and maintenance of existing ones\. there is no claim to the land\. ESIA and to be prepared\. 12\. Component 3: Sector Reform and Institutional Strengthening (US$20\.75 million)\. The Component’s objective is to strengthen the institutional, policy, and legal framework as a means to improving long-term water security and increased efficiency of services\. As such, policy and strategies need to be directed toward improving allocative efficiency, enhancing technological developments, strengthening service delivery, and improving water resources stewardship and water demand management\. In addition, the capacity of project management offices for timely implementation of Project activities will be strengthened to ensure a timely and efficient response to the current drought emergency\. 13\. Component 3 will therefore focus on advancing the reforms initiated in 2009 (Sub-Component 3\.1); developing capacity for water resource management and efficient service delivery by strengthening the operational capacity of MLWS (DWA) and WUC (Sub-Component 3\.2); and, supporting long-term water supply and sanitation investment planning by developing a pipeline of strategic investments aimed at achieving long-term water security (Sub-Component 3\.3)\. In addition, it will support Project implementation (Sub-Component 3\.4)\. Activities funded by the Project will build on or complement grant funding from other development partners, such as GFDRR, the German Aid Agency (GIZ) and CIWA\. Page 56 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 14\. Sub-Component 3\.1\. Sector Reform\. This will support DWA in the development or roll out of sector policies, and review of legislation to advance the reforms initiated by the Government in 2009\. In order to conform to the new institutional arrangements, the GoB intends to develop or update several key legal, strategy and policy instruments\. Recognizing that competition for water resources is growing and it is likely that in the future not every sector’s demands can be met, this Sub-Component aims at further strengthening the water resources management framework, supporting the establishment of regulatory functions, and developing regulatory tools (e\.g\. a water abstraction and pricing strategy)\. Priority actions include: updating the 2006 National Water Master Plan; adoption of the IWRM-Water Efficiency Strategy (2013–2030); finalizing the National Water Conservation and Water Demand Management Strategy (2016-2021); and disseminating and implementing the recently adopted 2016 Water Policy\. 15\. The National Water Master Plan: The Government will update the National Water and Wastewater Master Plan\. The most recent update (completed in 2006) extended the projection of water demand and potential supply made in 1991 for a planning period of thirty years\. The Government is seeking funding from the Korean Government to update the Master Plan\. The Project will complement these efforts by supporting complementary activities as outlined below\. 16\. The IWRM-Water Efficiency Strategy (2013–2030): was developed to enable IWRM implementation and seeks to “improve people’s livelihoods and welfare through efficient, equitable and sustainable water resources development and management”\. The Project will enable the roll out of the strategy\. This will complement support to DWA for the development of institutional arrangements for decentralized catchment management\. 17\. The draft National Water Conservation and Water Demand Management Strategy (2016-2021): emphasizes the need for Botswana to become a water-wise and water-efficient society, by changing people's attitudes to water, how water is planned, managed and used\. A coordinated approach involving all key stakeholders will be initiated through the Project to improve water allocation, water demand management and shared benefits from water resources\. The need to develop capacity for water accounting as a tool to enhance water allocation efficiency is also a priority\. 18\. The Water Resources Council31: in line with the 2016 Water Policy, the establishment of a Water Resource Council is planned\. The project will support this effort as well as identify measures to increase capacity for enforcement of the various laws\. 19\. The 2016 Water Policy: provides a framework to enhance access to safe water by all users and promote the sustainable and long-term development of water resources to support economic growth, diversification and poverty eradication\. The Project will provide support for the implementation of the Water Policy, as well as support for the development of regulatory capacity for water, wastewater and sanitation services, including addressing gaps in knowledge, improving decision-making tools, revising 31 The Water Resources Council will be an autonomous entity supported by MLWS, in particular the DWA\. It will allocate water resources among users, monitor water resources, and develop water related policies\. Through the separation of service delivery activities, the Council is expected to ensure independence and equity in the sustainable allocation of water resources\. Page 57 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) rules and procedures, introducing bulk water charging, and enabling more effective enforcement, for both surface and groundwater\. 20\. Raw water pricing model: As part of demand management the project will promote efficiency in water use, and support the development of a raw water pricing model\. An important step toward this has been taken by recent recognition of groundwater as a strategic resource\. Elements of a water pricing strategy are provided for in the 1968 Water Act and 1970 WUC Act which are to be revised with Project support\. Improved water pricing is essential for sustainable groundwater abstraction and management\. 21\. Sub-component 3\.2\. Institutional Strengthening and Capacity Building\. This Sub-Component will enable DWA and WUC to increase their capacity to implement sector policies and strategies; strengthen their overall operational performance; and, improve their corporate governance and management\. 22\. Support for DWA will be provided in the areas of water resource management and monitoring (ground water and surface water); and water quality monitoring\. These efforts will be complemented by capacity building for the implementation of the: Water Policy, National Water Conservation and Water Demand Management Strategy 2016-2021, Water Abstraction Strategy, National Water Master Plan, National Wastewater and Sanitation Master Plan, and the 2016 Water Policy\. As several of these are still under preparation, capacity building will be phased accordingly\. 23\. The Project will provide support to boost DWA’s role in water resource management and monitoring by improving data collection and data management, particularly for groundwater\. Activities will include: hydrological and groundwater modelling for drought, climate change, recharge estimation, balance estimation, sediment transportation; analyzing options for water pollution control and development of an action plan; and support for post-auditing of well fields studies for the efficient and sustainable use of groundwater\. In addition, the Project will support the introduction of a catchment area approach by financing needed studies for the demarcation of catchment areas countrywide\. The results of a GFDRR supported assessment will inform the determination of requirements for surface water and groundwater monitoring\. 24\. Support for WUC will be provided in the areas of demand management; operational and financial performance, including a financial recovery plan and optimization of water supply and wastewater treatment production processes; and PPPs\. This will allow a shift towards water demand management, including reduction of non-revenue water (estimated at about 40 percent)\. In this regard, in addition to the support provided under Sub-component 3\.1 on water pricing and Component 2, this sub-component aims at strengthening demand management from WUC by further implementing WUC’s NRW strategy and undertaking a demand management options study\. WUC intends to explore options for scaling up reuse and recycling\. Treated wastewater amounts to an estimated 20 to 30Mm3 per annum but only between 5 to 10 percent is currently reused\. Wastewater treatment investments under Component 2 will improve the quality of the treated effluent - to comply with stringent Botswana Bureau of Standards (BOBS) standards\. 25\. Demand Management: In 2012 WUC drafted a Leakage Management Strategy Report, which emphasizes the need for network sectorization and pressure management to reduce NRW which Page 58 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) increased from about 19 percent of production to about 40 percent between 2009 and 2015\. Between April 2015 and April 2016, the Corporation implemented a pressure management pilot in Gaborone West (the “Somarela Thoti” Pilot supported by GIZ, Department for International Development, and First National Bank of Botswana)\. Activities included network sectorization, installation of pressure reducing valves, leak detection and control, and household and industrial awareness campaigns\. The pilot resulted in savings of about 2Mm3 of potable water and BWP 10 million\. The Project will support the scale-up of the Somarela Thoti initiative by expanding it to three major urban areas with substantial physical losses and suffering from high pressure (Selibi Phikwe, Francistown, and Gaborone East)\. In addition, the Project will provide support for network sectorization in nine other urban centers; calibration of bulk-water meters countrywide; and, training (for management and operational staff) on water loss reduction and demand management\. The Project also incorporates support for the development of a demand management study, looking primarily at feasible options for further demand management in Botswana – including but not limited to rain water harvesting, grey water retrofitting from institutional/commercial/industrial facilities, and building codes\. 26\. Operational Efficiency Improvements: The Project will support WUC’s effort to improve its operational and financial performance\. The consolidation of over 540 water supply and wastewater treatment schemes under WUC (2009 to 2013) has contributed to the deterioration of WUC’s operational and financial performance\. In order to sustain the benefits of the investments in water and wastewater rehabilitation under Components 1 and 2, activities will support improved management of the asset base through improved maintenance planning (including dam safety action plans)\. Efforts will also aim to improve labor productivity currently around seven staff per thousand connections (due in part to the scattered nature of settlements)\. Finally, efforts will also be made to improve tariff setting, billing and collection and reduce energy and chemical use\. These measures will help to improve the revenue to operating cost ratio\. 27\. Institutional Restructuring: The project will support WUC’s ongoing institutional restructuring to ensure sustainability of existing systems and project investments; and improve the performance of the utility as a whole\. Activities will include: (i) development of a long-term capital investment book to improve forward planning; (ii) a detailed assessment of the existing financial situation, leading to the development of a financial recovery plan; (iii) development of a short and medium term business strategy, including modernization of approaches to managing water supply, wastewater treatment, sludge management, and wastewater reuse and reclamation and sanitation; (iv) support for the implementation of performance based staff contracts; and (v) support for the optimization of water supply and wastewater treatment process, including development of an energy reduction strategy, solar water supply pumping and biogas utilization for wastewater treatment and preparation of water services and wastewater manuals and guidelines\. 28\. Public Private Partnerships: Recognizing the importance of continue investing in water supply, wastewater treatment, and wastewater reuse, and in light of growing financial constraints the GoB is increasingly interested in turning to the private sector for technology and innovation, and the transfer of knowledge\. In particular, the Government is exploring options for attracting private sector engagement for wastewater reclamation and/or reuse for major WWTPs32\. The Project will seek to engage the 32 IFC is reviewing options for engaging the private sector for the Glen Valley Reclamation Project\. The Glen Valley WWTP (Gaborone), has an average treated effluent of 55,000 m3/day\. Page 59 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) private sector through design-build contracts under Component 2 to rehabilitate existing facilities (e\.g\. Mambo WWTP)\. Other engagements with the private sector such as the reduction of NRW, will also be explored\. As MLWMSS and WUC have limited experience in engaging the private sector, the Project will provide for capacity building for PPPs –in coordination with the MFED PPP unit in the country\. In addition, the Project will provide budget for transaction advisory services should a transaction materialize\. 29\. Sub-Component 3\.3\. Forward Planning – Technical Assistance and Studies\. The aim of this Sub- component is to advance the Governments water security agenda, by supporting the planning and development of projects for future financing\. This will mainly involve technical assistance and studies\. A sound investment pipeline will allow Government to advance its vast water investment program more rapidly and assist in closing the large investment gap\. Activities will include: Support to DWA for nationally strategic technical studies required to develop a pipeline of priority investments aimed at improving long-term water security such as the Chobe-Zambezi and Lesotho-Botswana Transfer Schemes\. Support to WUC will include the development of a Water Master Plan for the Western Region (including Ghanzi, Tsabong and Maun MCs) and support for other feasibility studies; detailed designs; environmental and social impact assessments; and expert inputs such as transaction design for PPPs, expert panels (e\.g\. for deep groundwater aquifer development), and technical assistance for setting up complex institutional/financing arrangements\. 30\. Sub-component 3\.4\. Project Management\. This subcomponent will ensure that adequate project implementation capacity is built in both the MLWS - PMO and WUC - PMO\. This includes support for project management and implementation, including funding for procurement of additional expertise\. The Project will finance inputs required to ensure the effectiveness of the MLWS - PMO and WUC -PMO, including (as needed) equipment, running costs, logistical support, and other operating requirements\. Responsibilities of the MLWS - PMO and WUC - PMO include project management and coordination, procurement and financial management, project monitoring and evaluation (including impact evaluation), social and environmental safeguards management and oversight, and strategic project communications and outreach\. This will include: ï‚ Core MLWS - PMO and WUC - PMO experts, including but not limited to Project coordinator, financial management, social and environmental safeguards, M&E, and procurement\. ï‚ External project audits as required\. ï‚ Independent technical, economic, and financial reviews of the Project as required\. ï‚ Preparation of the Project Operational Manual (POM), including procurement, FM, M&E, technical, safeguards and other sections as required (to be completed two months after Project effectiveness) ï‚ Project procurement systems, and other requirements for effective procurement ï‚ FM systems, and other requirements for effective FM ï‚ Preparation of environmental and social safeguards instruments, including RPF, ESIA, ESMP (as appropriate), and social audits ï‚ Data collection and studies for project evaluations, baseline beneficiary surveys, and alignment with the national M&E systems ï‚ Project reporting, as required by the legal agreement and POM, including but not limited to the preparation of the Project mid-term review and implementation completion report (ICR) ï‚ Design and implementation of the Project’s information and communication activities Page 60 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) ï‚ MLWS - PMO and WUC - PMO running costs, including logistics, equipment, and other operating requirements associated with the Project implementation ï‚ Gender balanced community consultation and communication activities with project beneficiaries, affected people and primary stakeholders\. Balanced participation of men and women should be ensured\. Economic and Financial Analysis 31\. This economic and financial analysis assesses the economic and financial benefits and related costs arising from investments implemented under Components 1 and 2 (Table A1\.3)\. The results of the economic and financial analysis show that the Project is economically and financially viable with returns in present value of US$72 and US$3 million, respectively, when a 6 percent rate of return is used\. The FIRR is 18\.5 percent and the EIRR is 11\.4 percent\. This analysis is presented in detail in this Annex, complemented with sensitivity analysis\. 32\. The cost-benefit analysis carried out for Component 1 and 2 was undertaken from economic and financial perspectives\. From an economic perspective, it was evaluated by converting financial cash flows into economic cash flows to eliminate distortions caused by taxes, subsidies and other externalities\. From a financial perspective, it was evaluated by estimating costs and benefits at market prices, in the same way WUC will be paying or receiving from each input\. The cost-benefit analysis estimates the economic/financial feasibility of the Project by calculating the net present value (NPV) of cost and benefit streams and by determining the EIRR/FIRR of the Project\. Table A1\.3\. Component 1 and 2 investments, expected benefits and cost estimates Component 1\. Availability of water supply and efficiency of services (US$114\.05 million) Management Infrastructure Investments Expected benefits Investment Center Estimates (US$ million) Selebi-Phikwe Selebi Phikwe to Serule water Expansion of the water transfer scheme to increase 20\.00 transfer scheme availability and reliability water supply; and, reduce NRW Letlhakane Boteti Southern and Central Equipping of boreholes and construction of a water 20\.00 Cluster Villages water supply treatment plant, among other works, to meet insufficient scheme water supply and decrease water rationing Letlhakane Mosu, Mokubilo and Mmea Construction of needed pipeline to increase availability 0\.30 villages and reliability water supply Ghanzi Ghanzi township, Kuke, Bere, Rehabilitation and upgrading water treatment, 10\.95 transmission and distribution infrastructure to increase availability and reliability water supply Masunga North East and Tutume Sub Upgrading of the North East and Tutume Sub-District 22\.00 District water supply water supply scheme to increase availability and reliability upgrading project water supply; and, reduce physical losses Masunga Sowa Master Plan (Nata Construction of the Dukwi-Nata Cluster Villages water 18\.50 Manxotai and Maposa supply scheme to increase availability and reliability water scheme) supply; and, reduce physical losses Lobatse Mmathethe and Mokatako Expansion of the water transfer scheme to increase 9\.30 availability and reliability water supply; and, reduce NRW Kanye Kanye/Moshupa Drilling, equipping and construction of interlinking 3\.00 pipework to increase availability and reliability water supply Page 61 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Molepolole Malwelwe/Molepolole/Tham Connection of boreholes and construction of interlinking 10\.00 aga/Thebephatswa (Phase 2) pipework to meet insufficient water supply and decrease water rationing Component 2: Improve wastewater and sludge management (US$21\.65 million) Francistown Mambo WWTP rehabilitation Refurbishment and upgrade of WWTP to meet standards 16\.00 and enable wastewater treated effluent reuse/reclamation Letlhakane Wastewater treatment ponds Expansion of available ponds to receive and treat more 5\.00 expansion 3 sludge (about additional 900 m /day)\. This will avoid haulage of sludge to Serowe, which is located more than 100 km away Lobatse Lobatse WWTP rehabilitation Refurbishment and upgrade of WWTP to meet the WMA 0\.65 98 standard\. Capacity of the WWTP to be expanded by 3 about 1,700m /day; and enable wastewater treated effluent reuse/reclamation Total 135\.70 Methodology and assumptions 33\. This economic and financial analysis evaluates the economic impact of improvements in water supply and wastewater treatment in eight MCs (Ghanzi, Francistown, Kanye, Letlhakane, Lobatse, Masunga, Molepolole, and Selebi Phikwe) benefiting from physical investments made under Component 1 and 2\. 34\. Cost-benefit analysis33\. The economic/financial feasibility analysis of the Project compares estimated economic/financial benefits of the Project with its economic/financial costs\. As the Project costs are given, the primary analytical challenge of this analysis is to most accurately estimate the expected benefits that are likely to occur as a result of project implementation\. 35\. From the economic analysis, costs include the investment costs of schemes under Component 1 and 2, which will be incurred during the project life; maintenance and rehabilitation cost, calculated as a percentage of the investment cost (4 percent used); and operational costs for the water supply and wastewater treatment facilities financed under Component 1 and 2\. 36\. The net benefit is the difference between the incremental benefits and the incremental costs of two scenarios: “without” and “with” the Project\. The “without” Project scenario considers that utility consumers will face continuous deteriorating services\. The “with” Project scenario considers the proposed Project and its associated targets\. 37\. In case the Project will not be implemented (the “without” Project scenario), for the purposes of the analysis it is assumed that the quality of service provision will not change and/or will decline and so 33 Cost-benefit analysis is a method for comparing the economic pros and cons of policies and programs to help policymakers identify the best or most valuable options to pursue\. Cost-benefit analysis monetizes all major benefits and all costs associated with a project so that they can be directly compared with each other as well as to reasonable alternatives to the proposed project\. A cost-benefit analysis is generally considered the most comprehensive approach and, in many ways, the gold standard\. World Bank, Investment Project Financing Economic Analysis Guidance Note, 2014\. Page 62 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) will the efficiency with which the service is provided\. At present, people in the project areas consume between 25 liters per day (in Bere settlement) and 65 liters per day (Kanye), for an average weighted per capita consumption in the project areas of 47 liters per day, which is below the national average per capita consumption of 53 liters per day\. WUC is often required to complement consumption by bowsing water to project areas, which requires transportation over long distance given the scattered nature of settlements\. Since 2012 WUC has not been able to provide a continuous water supply due to the chronic drought, which has led to 8 hour water rationing three days a week in most MCs\. This situation has led to various coping strategies including installing household water reservoirs\. Currently, the influent received at the Mambo WWTP from nearby towns–Francistown and Tati Siding- includes industrial waste, which is partially treated and does not meet the BOBS standards\. Consequently, the effluent that is currently discharged to Tati River, is high in COD, ammonia, phosphate, turbidity, total suspended solids, total coliforms, and fecal coliforms\. The Tati River is a tributary of the Shashe River which feeds into the Dikgatlhong Dam (located 50km downstream)\. Since the Dikgatlhong Dam supplies potable water to the city of Gaborone, it is essential that the quality of discharged effluent from the Mambo WWTP stringently meets the national legislated standards during the construction and operational phases of the Project\. Physical losses in the schemes under the Project are estimated at between 30 to 40 percent, but there is inadequate information for estimating accurate losses for all the subprojects as some do not have accurate data on physical losses\. Years of underinvestment and poor maintenance have resulted in an asset base that is in dire need of replacement and upgrading, in particular in those systems that were not under WUC management before the sector reforms\. Without investments under Components 1 and 2 the services that are provided to customers will deteriorate\. For instance, it can conservatively be assumed that technical or physical losses will continue to escalate, as seen in recent years, emergency maintenance will increase as a result of system and equipment failures, and the current quality of effluent from WWTPs will be the same if not worse\. 38\. Under the Project (the “with “Project scenario) the selected investments were carefully chosen\. The activities were appraised measuring their flow of costs and benefits for the lifetime of the proposed infrastructure investments, estimated at 40 years for most of the investments to be made in water supply and wastewater treatment rehabilitation and expansion\. The Project will make available an average of 75 liters per capita per day for each of the schemes, eliminating the need for bowsing and building household reservoirs as continuity of water supply is expected to be improved\. As mentioned earlier, investments under Component 2 aim at improving the quality of wastewater treated effluent to comply with Botswana Standard 93\. 39\. The capacity building activities under Component 3 are important as they will help to improve IWRM, the governance of the water and wastewater, and will also help improve the efficiency and quality of services, because they essentially create and/or strengthen the enabling environment in which WUC and MLWS operate\. Despite anticipated benefits from institutional strengthening and capacity building activities the economic and financial analysis focuses only on the investment under Components 1 and 2\. 40\. Costs and benefits are expressed in constant prices as of 2016\. Page 63 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 41\. Discount rate\. The analysis was done using two discount rate assumptions: 6 and 10 percent\. The 6 percent discount rate assumption corresponds to the recent World Bank guidance regarding discount rates for use in economic analysis34\. Economic Analysis 42\. Benefits\. Project beneficiaries include existing consumers who will benefit from improved water supply and improved wastewater services\. Other beneficiaries include participating MCs benefiting from investments made under Components 1 and 2\. The Project will contribute to improve WUC’s efficiency as it will support efforts towards financial and operational sustainability\. 43\. Water Supply Benefits\. The Project aims at address immediate drought impact and enhancing water security\. Benefits expected from the proposed investments include: (i) elimination of water rationing; (ii) additional water sales arising from increasing residential and non-residential demand; (iii) additional water sales arising from greater availability of water derived from decreased technical losses in the Masunga North East and Tutume Sub District and Ghanzi water supply schemes; and (iv) savings in operating costs due to reductions in technical losses in the same scheme\. The total number of beneficiaries at full capacity of the infrastructure implemented under the Project is about 460,000\. In addition, investments under Component 1 will benefit industrial, commercial, and government institutions; for instance, the works for the Selebi Phikwe scheme are expecting to benefit four large boarding schools in the area, which have a seasonal population of about 7,000 students\. 44\. Elimination of water rationing\. Due to the on-going drought and limited water supply capacity of some schemes, services are not continuous in most MCs and water supply is rationed (three days a week for eight hours)\. From the customer perspective, water rationing has mainly been addressed in one of the following three ways: (i) drilling new water wells; (ii) buying water from water vendors; and (iii) building storage tanks to store water\. For the Project, the rationing cost or coping costs used in this evaluation is the last one (the cost of building and operating storage tanks estimated at US$150 per reservoir), plus the average tariff per cubic meter (used as a proxy for the willingness to pay for the water that is not consumed due to rationing, see Table A1\.4)\. The total rationing cost is estimated as the volume of water rationed times the unit rationing cost\. Table A1\.4\. WUC Tariff schedule for potable water 3 Price per m per block of consumption Average price 3 3 Minimum (BWP per m )) (BWP per m ) Schedule charge if consumption is 20 0-5 >5-15 >15-25 >25-40 >40 3 m /month 1 50 7\.2 19\.2 25 40 50 19\.1 2 20 2 8 13 20 25 8\.8 3 20 2 8 13 20 22 8\.8 34 Based on estimated GDP per capita growth rates\. The economy in Botswana is expected to rebound with projected GDP growth rates of 3\.7 percent and 4\.3 percent respectively in 2016 and 2017, driven mainly by an expected improvement in diamond prices as developed economies stabilize and fiscal stimulus that will propel non-mining activity\. World Bank\. Discounting Costs and Benefits in Economic Analysis of World Bank Projects\. May 9, 2016\. Page 64 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 4 20 2 6 11\.5 15\.5 22 7\.4 3 Source: WUC, 2016\. Tariffs as of April 1, 2015\. In BWP per m Note: Schedule 1 only applies to GoB entities; Schedules 2, 3, 4 apply to domestic, commercial and industrial customers based on their MC\. 45\. Additional water sales arising from increasing residential and non-residential demand\. Due to the rehabilitation and extension of water supply infrastructure, leading to additional water production, it is expected that existing household connections will increase their water consumption (incremental demand) from an average of 47 liters/pp/day to about 75 liters/pp/day at Project closing\. The incremental demand from existing water connections is expected to generate additional sales for WUC\. 46\. The estimated demand from households, based on 2015 WUC operational data, is as follows: assuming that 80 percent of household connections are metered, 95 percent of the metered connections are billed, 95 percent of bills are collected, and 62 percent of the water consumption is residential\. The average household tariff per m3 applicable varies by water supply as there are currently three schedules for residential customers (schemes 2, 3, 4 in Table A1\.4), and it ranges between 7\.4 to 8\.8 BWP/m3\. Hence, based on the existing and projected capacity of the schemes it is expected that the additional residential consumption accounts for about 3\.5 Mm3 per year\. 47\. Similarly, to calculate the increase in non-residential consumption 2015 WUC data is used\. About 38 percent of the water produced in 2015 was used by non-residential customers (16 percent commercial and industrial sector and 22 percent government institutions)\. The tariff applicable to government consumption represents a high subsidy to WUC operations as it is more than twice the average tariff applicable to residential and industrial customers: BWP 19\.1 per m3 (Table A1\.4)\. It is estimated that annual government, commercial and industrial sectors will consume an additional 2\.2 Mm3 /year by 2021\. 48\. Additional water sales arising from greater availability of water derived from decreased physical losses\. The Masunga (North East and Tutume Sub District) and Ghanzi water supply schemes to be rehabilitated under the Project will lead to reductions in technical losses, which in turn will lead to a greater amount of water billed and collected\. The average level of existing technical losses in the Masunga and Ghanzi water supply scheme is 40 percent and Project investments will aim to reduce losses to 25 percent given the advanced state of dilapidation of the infrastructure\. If the indicated investments are not implemented, given the current condition of the systems it is forecasted that technical losses will continue to increase from about 1\.1Mm3 per year lost at the moment\. Under a conservative scenario it is assumed a 1 percent point increase per year if measures are taken to reduce technical losses\. The estimation of additional water sales is based on reductions in technical losses, assuming that 80 percent of the water saved is billed and 95 percent of water billed is collected\. Additional water sales are valued at the current average water tariff applicable to the respective MC\. 49\. Savings in operating costs due to reductions in technical losses \. The benefits of savings on operating costs are estimated as unitary operating costs times the volume of water produced, which will be lower due to water loss reduction\. The unit water supply operating cost reported by WUC for 2015 is about BWP 6 per cubic meter of water supply treated, including energy, staff, chemicals and other operating costs\. This savings only apply to reductions in technical losses in the Masunga and Ghanzi water supply schemes\. Page 65 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Table A1\.5\. Present value of economic benefits of water supply investments 6 1 Benefit (US$, million) % 0% 5 3 Elimination of water rationing 8 5 3 2 Additional water sales arising from increasing residential and non-residential demand 6 2 Additional water sales arising from greater availability of water derived from decreased technical 1 9 losses 3 1 1 Savings in operating costs due to reductions in technical losses 7 2 1 7 Total 24 7 50\. The estimated economic benefits of the water supply investments to be implemented under the Project, using 6 and 10 percent discount rates, are presented in Table A1\.5\. 51\. Wastewater Treatment Benefits\. The Project includes wastewater treatment investments in Francistown and Tatisiding (Mambo WWTP), Letlhakane (Letlhakane WWTP), and Lobatse (Lobatse WWTP)\. The total number of direct and indirect beneficiaries of those investments is about 177,000\. These subprojects include: upgrading of existing facilities to comply with effluent standards so that the wastewater treated can be reuse for agriculture and other purposes; and expansion of wastewater treatment facilities to allow for higher volumes of sludge and wastewater to be treated\. As such, the Project will not finance new or rehabilitated connections to the sewerage system\. Hence, the benefits of the wastewater treatment system include (i) increase in revenues from higher volumes of wastewater treated due to higher volumes of water supply; (ii) increased quality of the effluent from wastewater treatment facilities; (iii) avoided cost of sludge transportation; and, (iv) increased revenue from sludge emptying at Letlhakane WWTP\. 52\. Increase in revenues from higher volumes of wastewater treated due to higher volumes of water supply\. Wastewater treatment revenues are calculated based on the wastewater service charge\. Service charges are estimated by multiplying the volume of water billed to households with sewerage service by current wastewater treatment tariff (Table A1\.6)\. As of 2015, only 19 percent of household connections were connected to the sewer\. At Project completion, it is expected that more than 25,000 cubic meters per day of wastewater will be treated in the WWTPs under the Project at the prevailing standards: 15,000 in Francistown/Mambo WWTP; 3,180 from Letlhakane WWTP; and, 6,000 from Lobatse WWTP\. Table A1\.6\. WUC Tariff schedule for wastewater treatment 3 Block of consumption (in m per month) Schedule Minimum charge 0-5 >5-15 >15-25 >25-40 >40 All Not applicable 0\.5 2 3 4 5 3 Source: WUC, 2016\. Tariffs as of April 1, 2015\. In BWP per m per month 53\. Increase in quality of the effluent from wastewater treatment facilities\. The value of this benefit is difficult to measure\. However, the wastewater surcharge paid by the consumers is used as a Page 66 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) proxy on the willingness to pay for improved quality of the effluent\. As indicated in Table A1\.6 this is a minimum fee paid based on the water consumed per month\. For purposes of the calculation, only the fee paid by the direct beneficiates of the wastewater treatment investments has been considered, although the benefitting population is expected to be larger given that the dams and rivers where the effluent is disposed are used by a larger amount of people\. Also, it is important to note that this benefit does not take into account greater volumes of wastewater reused and/or reclaimed as no accurate data is available\. 54\. Avoided cost of sludge transportation for Letlhakane WWTP\. In the case of the Letlhakane wastewater and sludge treatment improvements there will be an avoided cost of haulage of sludge to the nearest treatment facility located in Serowe, about 200 kilometers from Letlhakane\. At present the cost of transportation is about BWP 900 per trip, paid directly by the household to a private emptier and sludge transportation company\. Due to the inadequacy of the ponds at Letlhakane more than 70,000 m3 per year is transported to Serowe\. 55\. Increased revenue from sludge emptying at Letlhakane WWTP\. The increased amount of sludge treated by the ponds in Letlhakane once the rehabilitation and expansion under the Project is completed will improve WUC’s revenue stream\. About 1,000 m3 per day of additional sludge is expected to be treated\. The fee to be paid to WUC is about BWP 100 per a 10 m3 truck\. 56\. The estimated economic benefits of the wastewater treatment investments to be implemented under the Project, using 6 and 10 percent discount rates, are presented in Table A1\.7\. Table A1\.7\. Present value of economic benefits of wastewater treatment investments Benefit (US$, million) 6% 10% Increased quality of the effluent from wastewater treatment facilities 88 51 Increase in revenues from higher volumes of wastewater treated due to higher volumes of 98 57 water supply Avoided cost of sludge transportation for Letlhakane WWTP 86 52 Increased revenue from sludge emptying at Letlhakane WWTP 5 3 Total 276 163 57\. Other Benefits\. Besides direct preventable economic losses, there are many other potential benefits that are not factored into the cost-benefit analysis described here\. This is either because estimating such benefits is difficult due to the lack of data or it is challenging to quantify the value of those benefits because they might not be financial or economic in nature; for instance, access to improved water supply provides dignity\. Some of the benefits excluded from the economic analysis are referred below\. 58\. Enabling greater volumes of wastewater reuse and reclamation\. As demand for water increases in the future of Botswana, it will become necessary to optimize the use and reuse of all water sources and minimize losses and wastage\. The top priority for use of treated effluent is to replace water supply demand currently using potable water but which does not require water of potable quality for the particular application\. Investments included under Component 2 will enable greater volumes of wastewater to be reused and reclaimed\. Rehabilitating existing facilities so that they comply with the BOBS Standards for treated effluent, will enable increased wastewater reuse\. Current levels are Page 67 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) between 5 to 10 percent country wide - mainly for agriculture and industry purposes\. Depending on the technology used and public perception and acceptance, the treated effluent could also be potentially used for potable water\. For the purposes of this economic analysis this benefit is not estimated due to lack of data on wastewater flows, the market for it, and cost and pricing related information\. 59\. Environmental benefits from higher volumes of wastewater treated at prevailing standards\. The Project will also produce public health and environmental benefits in those MCs where existing wastewater (including sludge treatment) facilities will be rehabilitated and upgraded\. These environmental benefits will be reflected, for instance, in the reduction of environmental pollution loads and reduction in greenhouse gas emissions\. The environmental and associated socio-economic benefits that Component 2 will bring include: water pollution control; savings on medical costs, due to reduction of illnesses from improper wastewater discharge and lack of treatment; savings on maintenance costs of the roads after adequate sewage collection is in place; potential scale up of commercial and industrial activity; potential benefits from water quality improvement along the rivers; and savings in public and household health expenditure due to increased labor productivity\. Not enough data is available at the moment to calculate these benefits\. 60\. Environmental benefits from recharging of groundwater sources\. Some of the schemes included under Component 1 are designed to allow one or more sources of groundwater water to be used as an alternative and/or back-up source should the need arise\. As such, the Project will release pressure on existing boreholes and allow for the alternative/ back-up source to recharge so as to ensure the protection and sustainability of these groundwater sources\. During project implementation groundwater assessments will be conducted as part of environmental impact assessments, so that the sustainability of the source is confirmed; this data will allow economic benefits to be assessed\. 61\. Impact on women and girls\. A key impact of the Project is the reduction of the time spent by families on water collection from stand posts and bowsers (when delivery is not directly done at the household)\. Water collection is generally the responsibility of women and young girls: the Project will free time for them to engage in productive or educational activities generating substantial additional wealth and increasing the likelihood of girls receiving formal education\. The Project will also create opportunities for women to participate in water committees and other community-based organizations and so contribute to a fairer gender balance in the management of water services\. 62\. Decrease in morbidity and mortality rates\. The economic analysis does not consider the impact of improved water and sanitation services on both morbidity and mortality associated water borne and water related diseases\. In addition to the expected reduction in diarrhea incidence, literature suggests that the effects of improved water and sanitation on child mortality go beyond their direct diarrheal effect\. By lowering the exposure to fecal-transmitted diseases, access to improved water and sanitation also considerably lowers the risk of malnutrition as well as the risk of severe infection with other (not fecal-transmitted) diseases, enhancing the chances of survival for protected children35\. Depending on the type of intervention, 10 to 27 lives per 1,000 births could be saved could among under-five year old population due to investments in water supply and sanitation\. The morbidity and mortality benefits are not estimated as part of this economic analysis\. 35 The Impact and Cost of Water and Sanitation Infrastructure\. Isabel Günther and Günther Fink\. Policy Research Working Paper, 5618\. March 2011\. Page 68 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 63\. Therefore, the estimated benefits of the Project described in this analysis can be considered conservative and it can be reasonably assumed that the actual benefits will be larger than the ones estimated by this economic analysis\. 64\. Project costs\. The Project costs are the investments required for the various project activities, and the corresponding operation and maintenance costs associated with ensuring that the investments can generate the water and wastewater services in the short, medium, and long-term\. A four percent maintenance and rehabilitation cost per year was assumed to ensure that the investments made under the Project are sustained over time\. In addition, unit operation costs per cubic meter were multiplied by the respective volumes of additional water consumed (residential and non-residential and water savings from technical losses) and increasing wastewater treatment due to more water supply in the system and increasing wastewater treated in the three WWTP financed under the Project\. The present value of the costs associated with the economic benefits estimated under this financial analysis are presented in Table A1\.8\. Table A1\.8\. Present value of the costs associated with the estimated economic benefits Cost (US$, million) Component 1 and Component 2 6% 10% Production costs (additional water sales residential and non-residential) 28 17 NRW associated production costs 18 13 Wastewater treatment 99 59 Investment cost and associated maintenance and rehabilitation costs 184 142 Total 329 231 65\. Consolidated Results of Economic Analysis\. The Project is economically viable when analyzed as a whole as well as component by component\. Indeed, the cost benefit analysis for all subprojects analyzed generate positive rates of returns\. The results of the analysis are robust, given that not all of the possible benefits of the Project were included because of the difficulty in quantification and valuation\. For example, when the benefits of a reduction in greenhouse emissions are included the EIRRs increase significantly\. The EIRR of the Project is 11\.4 percent\. A summary of the present value of benefits and cost, and the NPV of the Project, under the two discount rate scenarios, is presented in Table A1\.9\. Table A1\.9\. Summary results of the economic analysis Results Component 1 and Component 2 6% 10% Present value of benefits (US$, millions) 400 240 Present value of costs (US$, millions) 329 231 Net present value (US$, millions) 72 9 Benefit-cost ratio 1\.2 1\.0 Financial Analysis Page 69 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 66\. Results of the financial analysis show that the Project is financially viable when the utility expands access to services and achieves reductions in technical losses for selected schemes under the Project\. Under the set of assumptions considered36, the IRR of the activities considered under the financial analysis is 18\.5 percent and the NPV is US$3 million, using a 6 percent rate of return\. 67\. Financial Benefits\. The financial benefits of the Project were measured in financial terms as the increase of revenue for WUC\. Revenues were measured as volume of water billed times the average tariff per cubic meter, and then affected by a metering ratio of 80 percent and the collection revenue rate of 95 percent\. No tariff adjustments were assumed for the financial projections\. The increase of revenues will come from: a\. Additional water sales arising from increasing demand from existing connections; b\. Additional water sales arising from greater availability of water derived from technical losses reductions in the Masunga North East and Tutume Sub District and Ghanzi water supply schemes; c\. Savings in operating costs due to reductions in technical losses in the Masunga North East and Tutume Sub District and Ghanzi water supply schemes; d\. Increase in revenues when higher wastewater treatment occurs; e\. Avoided cost of sludge transportation for Letlhakane WWTP; f\. Increased revenue from sludge emptying at Letlhakane WWTP; 68\. Consolidated Results of Financial Analysis\. The FIRR for the Project is 18\.5 percent\. Table A1\.10 summarizes annual values of the Project financial benefits and their present values, using a 6 and 10 percent discount rate\. Table A1\.10\. Summary results of the financial analysis Component 1 and Component 2 Results for each discount rate 6% 10% Present value of benefits (US$, millions) 224 136 Present value of costs (US$, millions) 262 159 Net present value (US$, millions) 3 2 Benefit-cost ratio 0\.86 0\.85 69\. Sensitivity Analysis\. A sensitivity analysis was carried out to measure the impact on the economic and financial results when changes in the production, treatment cost and technical loss reduction forecasts occur, assuming a 6 percent discount rate\. Given the benefits accounted for in this economic analysis, changes in certain parameters does not compromise the economic viability of the Project\. 36 Most of the assumptions made to calculate the economic benefits and costs are kept for the financial analysis, unless otherwise stated\. Page 70 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 70\. Changes in production and treatment costs\. A 30 percent increase and decline in production and treatment cost for water supply and similar for wastewater treatment were considered\. The Project remains economically and financially viable under a 30 percent increase in these costs, as seen in Table A1\.11\. Table A1\.11\. Sensitivity analysis for variations in production and treatment costs Economic Results Financial Results Scenario EIRR (%) NPV FIRR NPV Increase of 30% 8\.7 36 5\.1 -2 Base scenario (existing costs) 11\.4 74 18\.5 3 Decrease of 30% 14\.1 111 129 49 71\. Changes in technical losses - trends\. A 30 percent deviation (in both directions) from the NRW targets was evaluated\. The Projects remains viable even if the utility misses the NRW target by 30 percent, as seen in Table A1\.12\. Table A1\.12\. Sensitivity analysis for variations in technical losses targets Economic Results Financial Results Scenario EIRR (%) NPV FIRR NPV Overachieving targets by 30% 11\.8 78 37\.1 8 Base scenario 11\.4 74 18\.5 3 Missing targets by 30% 11\.0 69 6\.1 -1 Page 71 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) ANNEX 2: IMPLEMENTATION ARRANGEMENTS COUNTRY : Botswana Emergency Water Security and Efficiency Project Project Institutional and Implementation Arrangements 1\. In 2009, the GoB restructured the water supply and sanitation sector in order to separate service delivery and policy functions\. The reform effort was supported by World Bank technical assistance through a RAS (2008)\. Through the reform water and sanitation services were consolidated under WUC (which previously managed five urban schemes)\. By 2013 WUC had assumed responsibility for all 540 waters supply schemes and all wastewater systems nationwide from MLWS (DWA) and District Councils\. However, WUC and District Councils still retain joint responsibility for ensuring access to sanitation services at household level\. 2\. Currently, MLWS is responsible for the formulation, direction, coordination, development and implementation of national policies and programs for land management, water and sanitation\. The Ministry carries out these responsibilities through various divisions, departments and parastatals\. In the water sector the DWA, MLWS - PMO and WUC are responsible for water matters\. Other key agencies include the Department of Geological Survey (DGS), Department of Local Government and Development (DLG&D), Local Authorities, Ministry of Agriculture (MoA) and the Department of Waste Water Management and Pollution Control (DWWMPC)\. The Permanent Secretary is the officer in charge of the Ministry and there are various officers under his supervision\. All projects implemented under the Ministries portfolio are managed by the MLWS - PMO\. The MLWS - PMO is headed by a Programme Coordinator\. 3\. With respect to the Project, as Borrower and Implementing Agency, MLWS will take the lead role in overseeing implementation through its MLWS – PMO, which will be responsible for overall Project coordination, and consolidation of monitoring and reporting functions\. This includes the preparation of a consolidated work plan, procurement plan, monitoring reports, financial reports, and fulfilling other legal requirements for the Project\. 4\. MLWS - PMO will also be responsible for enabling the implementation of Component 3 institutional and capacity building activities that fall under the mandate of MLWS (DWA)\. Based on the division of responsibilities for all Component 3 activities agreed between MLWS (DWA) and WUC, a Component 3 work program and procurement plan identifying the specific activities and budgets allocated for WUC and MLWS (DWA)— including training, capacity building, technical assistance and studies, will be prepared and updated annually\. Each entity (MLWS - PMO, and WUC) will be responsible for preparing the inputs to the annual work program and procurement plan (e\.g\. TOR, budgets)\. The MLWS - PMO will consolidate information provided by WUC and MLWS (DWA) for the Project as a whole\. To do so, MLWS - PMO intends to procure additional M&E, procurement and financial management capacity\. 5\. The DWA, a unit within MLWS, is the Government lead on water resources policy and management, including the IWRM Strategy, the National Water Master Plan, the Sanitation Master Plan Page 72 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) and draft Water Conservation Policy\. In addition, it is responsible for monitoring and regulating water resource use; and developing long term strategic water supply schemes\. 6\. With respect to the Project MLWS (DWA) will be responsible for the day to day implementation of priority sector reform and capacity building activities identified under Component 3\. This includes updating, revising or rolling out policy, regulations, legislation, plans and strategies to strengthen climate change adaptation, drought and water resources management\. For this purpose, DWA has assigned existing focal points to lead the implementation of these activities; but it will work through the MLWS - PMO to execute these functions\. As noted above MLWS - PMO will assign procurement and financial management staff to support DWA in the execution of tasks identified under Component 3 of the Project\. DWA focal points will report to the Deputy Secretary responsible for the MLWS - PMO who will provide the necessary support for the implementation of all MLWS activities\. 7\. WUC was established by the Water Utilities Corporation Act of 1970 with the mandate of providing potable water to Botswana’s urban centers\. As a corporation, WUC is expected to operate on commercial lines, including accessing both private capacity and private finance to support the delivery of water services\. However, since the 2009 reforms, when its mandate was expanded to include 540 schemes nationwide, including many small and remote rural schemes, it has been receiving subsidies from GoB\. WUC is responsible for delivering water to domestic, manufacturing, and commercial customers countrywide; mining and energy users in remote areas often develop ground water supplies independently\. WUC also has operational responsibility for waste water and water treatment, pumping, storage and distribution to customers, and has partial responsibility for sanitation services 8\. With respect to the Project, WUC will be the implementing agency for Component 1, 2 and part of 3\. In this capacity, WUC will be responsible for the bulk of project implementation\. WUC will discharge this implementation function through its WUC - PMO, which currently falls under the Technical Services Department\. As part of an ongoing institutional restructuring effort, the capacity of both MLWS and WUC - PMO’s will be strengthened\. As responsibility for the day to day management of WUC activities will be delegated to the WUC - PMO, a dedicated team of experts will be contracted to support: financial management, procurement, monitoring and evaluation, environmental and social safeguards and project coordination functions\. These experts, will be dedicated to the implementation of the Project\. WUC - PMO will implement the proposed subprojects and activities through its existing structures under the supervision of the Technical Services Department and WUC’s management team\. The execution of investments and activities supported by the Project will therefore be led by designated Project Engineers as part of the overall NDP 11 work program\. In line with current practice, where necessary WUC will also support the MLWS – PMO and MLWS (DWA), in the execution of their obligations under the Project\. 9\. Project Oversight Arrangements\. High level project progress updates will formally be communicated weekly, monthly and quarterly by the Project teams\. Firstly, the portfolio will be reported through MLWS - PMO during the existing weekly Ministers’ Dashboard meetings\. These meetings chaired by the MLWS - PMO coordinator are held every Friday of the week\. In preparation for these meetings, progress updates for WUC will be coordinated by the WUC - PMO as the secretariat and submitted to MLWS - PMO every Thursday, as is common practice (progress updates for DWA follow the same process)\. All project managers and the MLWS - PMO and WUC -PMO managers are members of this dashboard meeting\. They will track weekly progress and report progress on behalf of WUC\. The Page 73 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) existing progress reporting templates that have been adopted by MLWS - PMO will be adopted as reporting tools\. 10\. Lastly, the Project team will generate information for the GoB quarterly report called “His Excellency‘s” report\. The MLWS PS and his executives, the DWA executive and the WUC executive management form the team that presents this report to Office of the President\. This report is also coordinated by the respective strategy offices for WUC, DWA and WUC\. MLWS overall performance is graded on the basis of the outcomes from this report\. Financial Management 11\. The World Bank conducted an FM assessment of WUC and MLWS as required by the World Bank’s policy on Financial Management, OP 10\.0037\. WUC and MLWS will be the implementing entities for the proposed Emergency Water Security and Efficiency Project\. The main objective of the assessment, which included a review of the budgeting, accounting, internal controls, flow of funds, financial reporting, auditing arrangements at WUC and MLWS, and completion of FM assessment questionnaire by some officials of the entities, was to ensure that acceptable financial management arrangements are in place for the implementation of the Project\. Acceptable FM arrangements ensure that: a\. Funds are used for the intended purposes in an efficient and economical way, b\. All transactions and balances are correctly recorded to support preparation of regular and reliable financial statements that are subject to auditing arrangements acceptable to the World Bank, and c\. Internal controls are considered capable of safeguarding the entity’s assets\. 12\. WUC and the Government through MLWS will implement the Project\. The implementing entities’ Finance units will be responsible for the FM aspects of the project implementation\. WUC, established in 1970, is wholly owned by the Government and dominates the water sector by providing potable and wastewater services in Botswana\. Overview of the Project and implementation arrangement 13\. The Project is estimated to cost about US$160 million to respond to the Government’s ongoing drought emergency by rehabilitating, augmenting and upgrading water supply and sanitation services\. A detailed description of the Project and components is provided in Annex 1\. 14\. For the FM implementation of the Project, WUC and MLWS will use their existing FM systems with appropriate oversight by MFED\. The following table shows the identified FM risks and the proposed mitigating measures\. The risk rating is moderate\. A further review will be conducted to assess any changes that may affect this rating following the 37 merger of the Water and Sanitation functions in the Ministry with Land Management\. Page 74 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Table A2\.1: FM Risk Mitigation Assessment Negotiation/ Residual effectiveness Risk Rating Risk mitigation measures condition risk (Y/N) Entity Level M The World Bank will conduct a comprehensive M N The FM units responsible for the training on the World Bank’s FM and Disbursement FM of the Project are not familiar policies and procedures by effectiveness of the with and therefore has limited loan agreement\. Staff in the Finance and the knowledge of the World Bank’s FM Internal Audit units will be encouraged to and Disbursement policies and participate in the World Bank’s periodic training procedures\. program in FM and disbursement, and in courses organized by Bank recognized training institutions\. MFED will be responsible for the preparation and submission of withdrawal applications and is familiar with the World Bank’s procedures\. Project Level\. Variations to the M Through review of the Project scope against the M N Project scope and supplier price desired objective and sign off by both parties\. variations might affect the budget Contingent budget provision for unavoidable estimates variations\. Control Risk\. Budgeting: due to the M WUC procurement procedures provides guidelines L N nature of the Project, the risk that on scope variations of the projects\. budget process may not be based Variations are approved by management tender on realistic cost estimates and committee and board tender committees\. procedures for approvals and variations may not be clearly laid out\. Accounting\. No identified risk at N this stage\. WUC and MLWS prepares monthly financial statements reviewed by the audit committee of the Board\. WUC uses the SAP accounting software, and MLWS uses GABS accounting software which are capable of producing the required financial reports\. The Finance units are headed by the professionally qualified accountants with sound track record in finance\. Internal Controls and staffing\. The M WUC has an effective Internal Audit Unit\. The L N risk that accounting policies and Internal Audit that has unrestricted access to the procedures may not be followed chairman of the Audit Committee\. That oversees consistently might weaken the WUC’s internal control systems and their control environment\. effectiveness\. The FM assessment has identified The Ministry also has Internal Audit supplied by the vacancies in the FM unit that MFED\. Through Component 3 of this project the might compromise staffing arrangements will be strengthened\. implementation of the Project\. Page 75 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Negotiation/ Residual effectiveness Risk Rating Risk mitigation measures condition risk (Y/N) Funds Flow\. The risk of timely M WUC will maintain a separate bank account for the M N settlement of contractors and funds received from MFED under the IBRD Loan for supplier’s invoices and certificates the implementation of the World Bank financed as a result of likely placement of components of the Project\. The quarterly funds in fixed deposits\. disbursement from MFED will be based on the contractors’ agreed schedule of payments and cash forecasts\. Financial Reporting\. Timeliness of M WUC produces timely quarterly financial L N reporting to MLWS that could statements and submits same to the Audit impact on the submission of IFRs Committee for discussion\. WUC will produce to MFED and the World Bank\. quarterly IFRs through its system and submit the reports to MFED through MLWS\. Quarterly submission of the reports will be as agreed with Government in the loan agreement\. Auditing\. No specific audit risk, N both implementing entities are mandated by their establishing Acts to produce annual audited financial statements Overall FM Risk Rating M The overall FM residual risk is "Moderate" with the M implementation of the FM actions described in Table 28 below\. The country, entity, and project levels inherent risks are mitigated by use of WUC’s FM system, assessed as satisfactory for the implementation of the Project, and the functioning oversight arrangements provided by MLWS and MFED\. Risk Rating: H (High), S (Substantial), M (Moderate), L (Low) 15\. Major strengths\. The Project FM is strengthened by the adequate external audit arrangements and the noted timely production of the financial statements and audit thereof within a period of four months\. External auditors’ observations and recommendations are followed-up promptly by the Audit Committee\. 16\. Weaknesses and action plan\. WUC and MLWS have not been involved in the implementation of World Bank financed projects, the World Bank’s FM specialist will deliver workshops on the World Bank’s financial management and disbursement, policies and procedures, including reporting requirements\. The assessment has also revealed a high vacancy rate at WUC and limited capacity on MLWS to absorb the Project\. This will be addressed under the capacity building support in Sub- component 3\.4\. 17\. Budgeting\. WUC’s budget cycle starts in June of each year with budgets compiled in three parts, namely, revenue, minor capital and major capital items\. Capital items from BWP 250 000 are accompanied by project appraisal documents for presentation to management tender committee that consists of executive directors\. These budget items are also accompanied by draft timetable showing dates and period of implementation\. The heads of department are responsible for the analysis and Page 76 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) control of the expenditures for which they are accountable\. These procedures are assessed to be adequate for the project implementation\. 18\. MLWS use the GABS for budgeting, accounting and financial reporting\. MLWS will defend the Project’s annual budget under the Ministry’s budget, but as a line item\. The Ministry will also submit “Project Memo” to MFED on quarterly basis, requesting for funds to finance the World Bank’s eligible expenditure\. 19\. Accounting\. WUC Finance unit is headed by the Chief Financial Officer, a professionally qualified accountant\. WUC uses the SAP accounting software and the financial statements are prepared in accordance with International Financial Reporting Standards (IFRS)\. MLWS is headed by a highly qualified Finance Manager with Masters in accounting\. MLWS uses GABS accounting software (run son Oracle)\. The systems are adequate to record and report on uses of the Project funds\. 20\. Staffing\. WUC has six critical positions in the finance department\. However, of concern is that three of these positions are vacant at the time of the assessment\. The assessment has also revealed a limited capacity at MLWS to absorb this Project\. This has been highlighted as one of risk to be mitigated\. Both WUC and MLWS will contract additional expertise to ensure there is adequate capacity for financial management\. Internal control and internal audit arrangements 21\. Internal control\. Approval and authorization controls are documented in the policies and procedures manual and compliance therewith is monitored by well experienced accounting staff\. The financial and accounting policies and manuals, including the payment, purchasing manual and procedures stock purchasing, payments processing will be adopted for the Project\. 22\. Internal audit\. The internal audit department is headed by the Head of Internal audit at director level\. The director reports to the Board functionally, through the Internal Audit Committee, and to the Chief Executive Officer (CEO) administratively\. The department has six established positions\. The review of audit committee charter, internal audit charter and internal audit manual gives assurance that this oversight function can relied upon\. The review of the audit operational plan 2015/2016 and 2016/2017 has revealed adequate coverage of the business operations\. However, four randomly selected reports between July 2015 and April 2016 revealed a number of audit actions that were not adequately addressed in the follow up audit\. Financial reporting 23\. The Project will produce and submit IFRs to the World Bank on quarterly basis\. These reports are designed to provide sufficiently detailed and timely information to the Project management, the coordination committee, MFED, and MLWS, and will include: a\. A narrative summary of the Project implementation highlights; b\. Sources and uses of funds by disbursement categories; c\. Uses of funds by project component/activity- both actual and cumulative; Page 77 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) d\. The DA activity statement; e\. Summary of payments made for contracts subject to the Bank’s prior review; and f\. Summary of payments made for contracts not subject to the Bank’s prior review\. 24\. The accounting systems are capable of producing the quarterly reports\. The reports will be submitted to the World Bank through MFED within 45 days of the end of the reporting period\. Funds flow and disbursement arrangements Figure A2\. 1\. Funds Flow Diagram IBRD Withdrawal Application MFED Designated Account (DA) Consolidated IFR for WUC & MLWS IFR for MLWS WUC IFR sent to MLWS WUC MLWS Dedicated Project Finance Warrant Account (DPA) Contracts, Suppliers, Service Providers Page 78 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 25\. Flow of funds\. Upon the signing of the Loan Agreement, the World Bank will open a Loan Account in its books, in the name of the Government\. Funds will flow from the World Bank (Loan Account) into a DA maintained by the Government through MFED at the Bank of Botswana\. For the implementation of the World Bank financed components of the Project, WUC will maintain a local currency DPA into which funds will flow from the DA based on IFRs\. MLWS will spend from the DA through the existing government procedures\. 26\. Disbursement arrangements\. The Project will use the Advance Disbursement method whereby withdrawals from the loan account will be deposited in the DA for payment of the Bank financed eligible expenditures\. Disbursements from the loan account will be based on quarterly IFR documents to be prepared and submitted by WUC and MLWS to MFED\. The IFRs will be supported by documentation as may be required by MFED\. For withdrawal from the loan account, MFED will be responsible for submitting withdrawal applications supported by IFRs, within 45 days of the end of each reporting period\. The Government will also have the option of using: (i) the Direct Payment disbursement method involving direct payment from the Loan Account on behalf of the Government to suppliers of goods and services that have a value above a set threshold; (ii) the Reimbursement disbursement method, whereby the Government makes payments for the World Bank eligible expenditures and submits withdrawal applications for reimbursement; and (iii) the Special Commitment method whereby the World Bank at the request of the Government, will issue special commitments to suppliers of goods under the World Bank financed components\. Upon the effectiveness of the loan agreement and submission of a withdrawal application, the World Bank will disburse an amount equivalent to six month’s expenditure into the DA\. Subsequent disbursements will be based on forecasted six-monthly estimated expenditure, taking into account the balance in the DA at the end of the reporting period\. Table A2\.2 Eligible Expenditures Category Amount of the Loan Allocated Percentage of Expenditures to be (expressed in USD) financed (exclusive of Taxes) Goods, works, non-consulting services, 145,500,000 100% consulting services, Training and Operating Costs under the Project Total 145,500,000 Auditing arrangements 27\. Audited financial statements\. WUC’s financial statement will be acceptable to the World Bank without a requirement for a separate audit report for the Project\. The auditors will, however, express an opinion on the quality of IFRs produced and submitted to the World Bank during the period covered by the audit\. The financial statement will also include a summary of all the withdrawals from the loan account during the period with assertion that the loan proceeds had been used for the intended purposes and in accordance with the Bank legal agreements\. The Government will prepare the audit terms of reference in consultation with the World Bank to ensure adequate coverage of the scope of the audit\. However, should the auditors opt to apply International Standard on Related Services (ISRS) 4400, being the Engagement to perform agreed upon procedures regarding the Bank funded activities, the arrangement will be acceptable to the Bank\. WUC will be required to submit the normal audit report, management letter and the supplementary audit carried by Auditors under ISRS 4400\. Page 79 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) 28\. MLWS produces a consolidated government accounts which might not be detailed enough to disclose the Project activities\. To mitigate this risk, project specific accounts will be produced for the activities implemented by MLWS\. The accounts will be audited by the office of the Auditor General\. The following table identifies the audit reports that are required to be submitted to the Bank by the Government and the due date for submission\. Table A2\.3: Audit reports Audit report Due date Continuing Entity Financial Statements- April-March (WUC) September 30 each year Special opinion on the: (i) Quality of the IFRs used for withdrawal from the Loan Account As part of the annual audit report (ii) Operation and usage of the DA (iii) Delivery of specified/agreed output/services- of the Project Project Specific accounts – April – March (MLWS) September 30 each year 29\. Supervision plan\. Based on the Project’s “Moderate” FM risk rating, the Bank will carry out the onsite FM supervision of the Project twice a year\. In addition, the Bank’s FM specialist will carry out desk-based quarterly review of the IFRs and the annual audit reports\. 30\. Governance and accountability\. WUC’s governance arrangements and the oversight provided by the Government through MLWS, MFED, and other stakeholders, which include the general public, are considered adequate for the implementation of the Project\. The Head of Internal Audit and the external auditors have unlimited access to the chairman of the board\. The internal audit director also has access to the audit committee, the board or directly, depending on the issues at stake\. 31\. Overall conclusion\. Based on the proposal to use WUC and MLWS’s FM system for accounting and reporting the Project receipts, expenditures and asset management, including commitments, the overall conclusion of the assessment of the system is that the proposed FM arrangements meet the Bank’s minimum requirements for financial management under OP 10\.00\. Procurement 32\. Procurement risk is rated “Moderate”\. For MLWS - PMO and WUC - PMO key issues for procurement include: (i) procurement planning not formalized and reinforced as a core part of project management leading to implementation delays; (ii) the current Procurement Unit (PU) staffing structure may not be suited to implementing capital projects; and (iii) the absence of a formal role of the PU in contract monitoring may impede speedy resolution of contractual matters\. A PPSD was prepared to determine the approach to market, the selection methods and consequently the procurement plan\. The PPSD concluded that both implementing agencies have the skills required for successfully planning, procuring, monitoring contracts and implementing large scale capital investment programs\. However, measures must be put in place to ensure adequate human and institutional capacity to manage the procurement planning process, procurement document preparation, evaluation, award process and contract supervision of the various packages\. In addition, there is adequate capacity, both in terms of numbers and capability, of contractors and consultants to compete for the packages, which are considered attractive because their values are high and complexity is within range of what has been executed before\. Page 80 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 33\. Risk Mitigation Action Plan\. Proposed corrective measures to mitigate the overall risks include: (i) in conjunction with technical departments, develop a procurement plan and agree on responsibilities for its implementation; (ii) assigning a dedicated procurement officer to support project procurement; and (iii) contracting additional expertise to increase capacity; and (iv) formalizing the role of procurement officers in contract monitoring and developing a contract monitoring plan\. Actions indicated in Table A2\.4 are proposed to mitigate the procurement risk and facilitate the implementation of the Project\. Table A2\.4\. Procurement Management Action Plan to Mitigate Procurement Risk Risk Mitigation/Action Responsibility Procurement planning not formalized and In conjunction with technical departments, MLWS/WUC reinforced as a core part of project develop a procurement plan and agree on management leading to implementation responsibilities for its implementation\. delays\. The current PU staffing structure may not be Assigning a dedicated procurement officer to Bank/MLWS – PMO and WUC - suited to implementing capital projects\. support project procurement and contracting PMO additional expertise as needed\. The absence of a formal role of the PU in Formalizing the role of procurement officers Bank/MLWS – PMO and WUC - contract monitoring may impede speedy in contract monitoring and developing a PMO resolution of contractual matters\. contract monitoring plan\. 34\. All procurement to be financed under the proposed project will be carried out in accordance with the World Bank’s New Procurement Framework (NPF) that became effective from July 1, 2016 (in particular the Procurement Regulations for IPF Borrowers, July 2016) and the provisions stipulated in the Legal Agreement\. The Project will carry out implementation in accordance with the ‘Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD and IDA and Grants’, dated July 1, 2016 (the Anticorruption Guidelines)\. 35\. The Public Procurement and Asset Disposal (PPAD) Act of 2002 established the PPAD Board which is responsible for all public procurement and asset disposal\. The PPAD Act applies to MLWS\. Being a state owned entity, WUC procurements are subject to the WUC Tender Regulations and Procurement Procedures of July 2016\. 36\. The PPAD Board or its committees established at Ministerial level (called MTCs) are responsible for adjudication (approving key procurement decisions like recommendations for contract award) of all procurements done at Ministry level\. In practice the accounting officer (Permanent Secretary) at Procuring Entity level recommends to PPADB the staff within his/her entity to serve on the MTC\. These staff though based at Ministry level serve on the MTC as agents of PPADB and not as agents of their Ministry\. MTCs are therefore accountable to PPADB and not to the head of a Ministry\. Various thresholds exist for procurements that can be adjudicated at Ministry level and those to be adjudicated at PPADB level\. The current threshold for MLWS is BWP 300,000,000 (US$30,000,000)\. 37\. A Procurement Unit is in place at MLWS and it is tasked with managing all procurement processes\. It is comprised of a Procurement Manager and assisted by a Procurement Specialist\. As PUs are the responsibility of the procuring entity, most of PPADBs interventions are targeted at MTCs and DATCs and not PUs\. Page 81 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 38\. At WUC there exists the Board Tender Committee (BTC) and the Management Tender Committee (MTC) responsible for approving awards of contracts in BWP 5m to BWP 20m for the BTC and between BWP 0\.25m and BWP 5m for the MTC\. The BTC recommends to the full Board all procurements in excess of BWP 20m\. 39\. PPADB conducted an Organisation for Economic Co-operation and Development - Development Assistance Committee self-assessment in 2007 and key areas arising included the need to distinguish clearly between ICB and NCB tenders; the possibility of establishing rules of participation of SOEs in procurement; strengthening procurement planning from being project based to an operational function; the dual and sometimes contradictory roles of PPADB as a regulator and also approval body for contract awards; the need for an information management system to collect and disseminate procurement data; and, the need for a training program for private and public sector stakeholders\. 40\. Over the last nine years PPADB has addressed these issues through two five-year strategic plans: 41\. The 2008-2013 strategic plan that focused on gradual devolution of procurement authority to Ministerial Tender Committees (MTCs) and District Administration Tender Committees (DATC); capacity building to Procuring Entities (PEs), committees of the Board and the contracting community\. 42\. The 2013-2018 strategic plan that will focus on stakeholder satisfaction by devolution to a procurement regulatory authority, improved public confidence in the procurement system, improved quality of service, achieving value for money; optimizing of key processes through improving and simplifying processes and reducing costs of tendering; improved corporate governance processes and internal efficiency ; financial sustainability through contributing 10 percent of the government grant; high performance culture by being a center of excellence\. National Procurement Procedures: A review of the Public Procurement and Asset Disposal (PPAD) Act of 2002, the Public Procurement and Asset Disposal Regulations of 2006 and the Public Procurement and Asset Disposal – Independent Complaints Review Committee Regulations of 2006 concludes that Botswana’s national procurement procedures meet the Banks New Procurement Framework provided the following are included in national bidding documents and contracts: (i) the Bank’s right to review and access documentation; (ii) the Bank’s Anti- Corruption Guidelines; and (iii) the Bank’s right to sanction, inspection and audit rights\. 43\. Procurement of works\. The civil works to be procured under this Project include construction of water reticulation pipelines, tanks and associated infrastructure; borehole pump installation works; supply and installation of water treatment facilities; installation of photo-voltaic energy systems; rehabilitation and construction of waste water treatment plants and sewerage ponds and associated works\. All works are estimated in aggregate at not more than US$125 million\. 44\. Procurement of goods\. Goods to be procured under this Project include Water quality monitoring equipment; surface and groundwater monitoring equipment for IWRM and; assorted laboratory equipment Goods are estimated in aggregate at not more than US$5 million, United Nations’ agencies and direct contracting may also be considered with the Bank’s prior review and approval\. 45\. Procurement of services (other than consultants’ services)\. Services (other than consultants’ services) to be procured under the Project will include loss reduction services and demand management\. Services are estimated in aggregate at not more than US$2 million\. Page 82 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 46\. Selection of consultants\. Consultants’ services required for firms and individuals by the overall project are estimated in aggregate at not more than US$30m to cover consultancies for design and construction supervision; sector and policy studies; development of master plans and feasibility studies; environmental and social safeguards services and; project management support\. 47\. Training\. This category will cover all costs related to the carrying out of study tours, training courses, and workshops, that is, hiring of venues and related expenses, stationery, and resources required to deliver the workshops as well as costs associated with financing the participation of community organization in short courses, seminars and conferences including associated per diem and travel costs\. Training projects would be part of the Annual Work Plan and budget and will be included in the Procurement Plan\. Prior review of training plans, including proposed budget, agenda, participants, location of training, and other relevant details, will be required only on annual basis\. 48\. Operating costs\. Incremental operating costs include expenditures for maintaining equipment and vehicles, fuel, office supplies, utilities, consumables, allowable travel per diems and, allowable travel and accommodation expenses, workshop venues and materials\. These will be procured using the borrower's administrative procedures, acceptable to the Bank\. 49\. Procurement Manual\. The procurement procedures and standard bidding documents to be used for World Bank-funded procurement will be presented in the Procurement Manual in line with the guidelines of the Bank38\. The Procurement Manual will include the component descriptions, institutional arrangements, Regulatory Framework for procurement, approval systems, activities to be financed, procurement and selection methods, thresholds, prior review and post reviews arrangements and provisions, filing and data management and the Procurement Plan for the first 18 months for all project components\. The Procurement Manual will be updated from time to time by the MLWS\. It will form an integral part of the POM\. 50\. Assessment of the MLWS and WUC PU’s capacity to implement procurement\. The MLWS PU comprises a Procurement Manager and a Procurement Specialist\. Both have experience in development partner procurement and large capital projects\. WUC PU comprises the Logistic and Materials Management Manager who oversees 20 staff tasked with Inventory Control and Purchasing\. Assigning dedicated procurement staff to assist project procurement, formalizing procurement planning and involving procurement staff in contract monitoring as seen as key to implementation success\. 51\. As all WUC procurements irrespective of value will be approved within WUCs structures of full Board, BTC or MTC delays are not anticipated\. However, procurement in excess of MLWS threshold will be adjudicated by PPADB and prior planning to account for this has to be taken into account\. 52\. Procurement supervision\. Given the country context and the project risk indicated above, an Annual Post Procurement Review will be conducted in addition to the semiannual supervision missions by the World Bank\. The Annual Post Procurement Review will be carried out either by the World Bank or World Bank-appointed consultants\. The frequency of procurement supervision missions will be once 38 The procurement manual will form part of the Project Operational Manual to be prepared within two months of effectiveness\. Page 83 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) every six months and special procurement supervision for post procurement reviews will be carried out at least once every twelve months\. 53\. To enhance the transparency of the procurement process, the recipient shall publish the award of contracts procured generally within two weeks of receiving the World Bank’s no-objection to the recommendation of award of contract, in accordance with the Procurement and Consultants Guidelines\. Additional procedures, as elaborated in the Procurement Manual, will govern the disclosure under other procurement and selection methods\. 54\. Procurement Plan\. The borrower has prepared a draft Procurement Plan to guide project implementation\. The Procurement Plan will be updated annually or as required to reflect the actual project implementation needs and improvements in institutional capacity\. Goods and Works and non-consulting Services 55\. Prior Review Threshold\. Procurement decisions subject to prior review by the Bank as stated in Appendix 1 in the Procurement Guidelines\. Table A2\.5 Prior Review Threshold Procurement Method Prior Review Threshold (US$) Procurement Method MODERATE RISK PROJECT Threshold (US$) Works 1\. ICB > 7,000,000 > 15,000,000 2\. NCB > 200,000–< 7000,000 As per Procurement Plan 3\. Shopping (small < 200,000 As per Procurement Plan contracts) 4\. Direct contracting n\.a\. All Goods and non-consulting services (excluding consultant services) 1\. ICB > 1,000,000 > 3,000,000 2\. NCB >100,000 – <1,000,000 As per Procurement Plan 3\. Shopping <100,000 As per Procurement Plan 4\. Direct contracting n\.a All 56\. Procurement Packages Subject to World Bank Prior and Post Review with Selection Methods and Time Page 84 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Table A2\.6\. Procurement Packages Subject to World Bank Prior and Post Review Review Expected Estimated Ref Contract Procurement Approach to by Bank Bid-Opening Cost No\. (Description) Method market (Prior/ Date (US$) Post) WORKS 1 Masunga MC - Sowa Water Supply Request for Open Prior March 2019 Master Plan 16,650,000 Bids International (connection to Nata Cluster) 2 Lobatse MC - Mmathethe Water Request for Open Prior December Supply 8,100,000 Bids International 2017 3 Lobatse MC -Mokatako Water Supply Request for Open Post June 2017 270,000 Proposals National 4 Selebi Phikwe MC -Selibi Phikwe - Request for Open Prior June 2017 18,000,000 Serule Water Transfer Scheme Bids International 5 Masunga MC - North East/Tutume Request for Open Prior May 2017 19,800,000 Water Transfer Scheme Bids International 6 Letlhakane MC - Boteti Southern and Request for Open Prior June 2017 Central Cluster Villages Water Supply 18,000,000 Bids International Scheme 7 Letlhakane MC – Mosu, Mokubilo Request for Open Post May 2017 270,000 and Mmea Villages Water Supply Proposals National 8 Ghanzi MC - Ghanzi Township Water Request for Open Prior November Supply Expansion 7,560,000 Bids National 2017 8 Ghanzi MC - Kuke Water Supply Request for Open Post November Master Plan Project 1,710,000 Bids National 2017 10 Ghanzi MC – Bere Settlement Water Request for Open Post November Supply Augmentation 630,000 Bids National 2017 11 Kanye MC - Kanye/Moshupa Water Request for Open Post April 2018 2,700,000 supply Project Bids National 12 Molepolole MC - - Request for Open Prior April 2018 Malwelwe/Molepolole/Thamaga 9,000,000 Bids International Thebephatswa (Phase 2) 13 Francistown MC - Mambo Waste Request for Open Prior July 2017 Water Treatment Plant 14,400,000 Proposals International Rehabilitation 14 Lobatse MC - Lobatse Waste Water Request for Open Post April 2018 585,000 Treatment Plant Rehabilitation Proposals National 15 Letlhakane MC – Letlhakane Waste Request for Open Post April 2018 4,500,000 Water Treatment ponds expansion Proposals National GOODS Water quality monitoring equipment Request for Open April 2017 1 1,200,000 Post (WUC) Bids International Ground water monitoring equipment Request for Open April 2017 2 460,000 Post (WUC) Bids International IWRM Equipment for surface and Request for Open November 3 2,000,000 Bids International Prior 2017 groundwater monitoring Equipment for Operational Request for Open November 4 2,600,000 Bids International Prior 2017 Forecasting and Early Warning NONCONSULTING SERVICES Page 85 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Review Expected Estimated Ref Contract Procurement Approach to by Bank Bid-Opening Cost No\. (Description) Method market (Prior/ Date (US$) Post) Request for Open Loss reduction support program 1,450,000 Bids International Prior April 2017 Selection of Consultants 57\. Prior Review Threshold\. Selection decisions subject to prior review by World Bank as stated in appendix 1 to the Guidelines Selection and Employment of Consultants\. Table A2\.7\. Prior Review Threshold for Consultants Selection Method Threshold Prior Review Threshold MODERATE Selection Method RISK PROJECT (US$) (US$) 1\. QCBS and QBS ≥ $300,000 >1m 2\. FBS, QBS, LCS, and CQS < $300,000 >1m 3\. Single Source (Firms) n\.a\. All 4\. Individual Consultants n\.a\. >300,000 5\. Single Source (Individual Consultants) n\.a\. All Note: QCBS = Quality-and-Cost-Based Selection (Section II of the Consultants’ Guidelines); LCS = Least-Cost Selection (Para 3\.6, of the Guidelines); CQS = Selection based on the Consultants’ Qualifications (Para 3\.7 of the Guidelines); FBS= Selection under a Fixed Budget (Para 3\.5 of the Guidelines); QBS = Quality-Based Selection (Para 3\.2 of the Guidelines) 58\. Short list comprising entirely of national consultants\. Short list of consultants for services, estimated to cost less than US$300,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of Paragraph 2\.7 of the Consultant Guidelines\. All terms of reference irrespective of the value of the consultancy assignment are subject to prior review\. Table A2\.8 Consultancy Assignments with Selection Methods and Time Schedule Expected Estimated Procurement/ Prior or Proposal Ref Approach to Submission/ Description Amount Selection Post No\. market Opening (US$) Method Review Date Review and Roll out of Non-Revenue Water Open Strategy (WUC) QCBS Prior 900,000 International Review of Billing and Collection strategies, Open CQS National Post including benchmarking (WUC) 100,000 Review of water supply and (sanitation) Open wastewater manual (WUC) CQS National Post 200,000 Page 86 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Energy reduction Strategy – with focus on Open climate change mitigation, solar pumping and CQS National Post biogas utilization (WUC) 100,000 Engineering Services for Masunga MC - Sowa Open June 2018 Water Supply Master Plan - Connection to QCBS Prior International Nata Cluster (WUC) 1,850,000 Engineering Services for Lobatse MC - October Open Mmathethe Water Supply (WUC) QCBS Prior 2017 International 900,000 Engineering Services for Lobatse MC - Open Mokatako Water Supply (WUC) CQS National Post May 2017 30,000 Engineering Services for Selebi-Phikwe MC - Open May 2017 Selibi Phikwe - Serule Water Transfer Scheme QCBS Prior International (WUC) 2,000,000 Engineering Services for Masunga MC - North Open East/Tutume Water Transfer Scheme (WUC) QCBS Prior May 2017 2,200,000 International Engineering Services for Letlhakane MC - Open May 2017 Boteti Southern and Central Cluster Water QCBS Prior International Supply (WUC) 2,000,000 Engineering Services for Letlhakane MC - Open Mosu Water Supply (WUC) CQS National Post May 2017 30,000 Engineering Services for Ghanzi MC - Ghanzi Open Township Water Supply Expansion(WUC) QCBS Prior July 2017 840,000 International Engineering Services for Ghanzi MC – Kuke Open Water Supply Master Plan project (WUC) CQS National Post May 2017 190,000 Engineering Services for Ghanzi MC –Bere Open Water Supply Augmentation (WUC) CQS National Post May 2017 70,000 Engineering Services for Kanye MC - Open Kanye/Moshupa Water Supply (WUC) CQS National Post July 2017 300,000 Engineering Services for Molepolole MC - Open July 2017 Malwelwe/Molepolole/Thamaga QCBS Prior International Thebephatswa Water Supply (Phase 2) (WUC) 1,000,000 Engineering Services for Francistown - Open August 2017 Mambo Waste Water Treatment Plant QCBS Prior International Refurbishment (WUC) 1,600,000 Engineering Services for Lobatse Waste Water Open November Treatment Ponds Rehabilitation (WUC) CQS National Post 2017 65,000 Engineering Services for Letlhakane Waste Open November Water Treatment Ponds Expansion (WUC) QCBS National Prior 2017 500,000 Water and Sanitation Policy dissemination IC Open program (MLWS)/DWA) National Post June 2017 50,000 Water Act Training and outreach facilitator IC Open December and dissemination program (MLWS)/DWA) National Post 2017 50,000 National Conservation strategy advisory and IC Open November technical assistance (MLWS)/DWA) National Post 2018 50,000 Page 87 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Update of the 1968 Water Act, including CQS Open alignment/amendment of related pieces of National Post June 2017 statutes (MLWS)/DWA) 50,000 Finalization and dissemination of National CQS Open December Water Conservation and Demand National Post 2017 Management Study (MLWS)/DWA) 50,000 Development of water abstraction and pricing QCBS Open December strategy (MLWS)/DWA) International Prior 2017 450,000 Regulatory Capacity Building (MLWS)/DWA) QCBS Open December International Prior 2017 500,000 Water quality monitoring programs QCBS Open December (MLWS)/DWA) National Post 2017 300,000 Demarcation of catchment areas study CQS Open November (MLWS)/DWA) National Post 2018 200,000 Study and design of aquifer recharge options QCBS Open December (MLWS)/DWA) International Prior 2017 400,000 Study and design of saline groundwater use QCBS Open December options (MLWS)/DWA) International Prior 2017 400,000 Support for implementation of Institutional QCBS Open December Strengthening (WUC) International Prior 2017 300,000 Development of WSS capital investment QCBS book, business strategy, financial recovery Open September Prior 2017 plan, and WSS services strategies (including International stand posts, sanitation), (WUC) 800,000 Optimization of WSS treatment processes QCBS Open November (WUC) Prior 2017 1,350,000 International Support for development of Public Private CQS Open November Partnerships (WUC) Post 2017 280,000 International Western Region Master Plans - Tsabong, QCBS Open November Ghanzi and Maun (WUC) Prior 2017 1,800,000 International Pre-feasibility studies and technical assistance QCBS Open November for Chobe-Zambesi Transfer Scheme (MLWS) Prior 2017 525,000 International Pre-feasibility studies and technical assistance QCBS November Open for Lesotho-Botswana Transfer Scheme Prior 2017 International (MLWS) 525,000 Study on Effluent Reuse options at CQS Open December institutional level (MLWS)/DWA) 200,000 International Post 2018 Groundwater desalination options and CQS Open December feasibility study (MLWS)/DWA) International Post 2018 200,000 PPP technical implementation support, QCBS Open transaction advice (WUC) Prior June 2017 800,000 International Audits (technical, financial, procurement) LC Open December National Post 2017 100,000 Page 88 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Economic and financial review consultant IC Open National Post June 2017 100,000 Project Operational Manual consultant IC Open National Post March 2017 10,000 Project procurement systems consultant IC Open National Prior June 2017 50,000 Financial management systems consultant IC Open National Prior June 2017 50,000 Environmental and Social Safeguards IC Open instruments, Resettlement Policy Framework International Prior June 2017 Dam Safety Action Plan monitoring (WUC) 450,000 Project monitoring, reporting and ICR IC Open January consultant National Post 2021 100,000 Communication consultant (WUC) IC Open October National Post 2017 200,000 Community consultation and development of CQS Open Grievance Management Systems (WUC) National Post June 2017 100,000 Project Management (WUC and DWA) IC Open National Prior June 2017 3,000,000 Monitoring and Evaluation 59\. To the extent possible, Project results indicators and data collection will be aligned with existing monitoring and reporting systems in the sector\. At the national level, Project indicators will be aligned with the monitoring and evaluation framework being developed by the NSO as part of the NDP 11\. This effort is being supported by a Bank RAS currently being negotiated with the Government\. At the utility level, proposed results indicators will be drawn from an existing set of WUC indicators; and supplemented with Bank core sector Indicators\. This approach is intended to enable the Government and the World Bank to monitor and aggregate results beyond the Project\. Alignment with WUC operational indicators will also help ensure improvement is data used to monitor operational efficiency\. The Results Framework for the Project is included in Section VII\. 60\. Overall responsibility for consolidating M&E data for the Project will lie with MLWS - PMMO\. An M&E expert and computerized database will be procured through the Project to enable timely monitoring, reporting, and communication of results during execution of the Project\. Key M&E requirements are: qualitative and quantitative information on the execution of selected subprojects or activities; progress in procurement and contractual matters, accounting and financial recording, and any other Project reporting requirements\. As monitoring activities will be undertaken by WUC for tasks it is responsible for, and by MLWS (DWA) for activities it is responsible for, arrangements for data gathering at these levels will be coordinated by MLWS - PMMO\. Currently, WUC M&E systems focus on collecting and compiling operational data from its MCs for monitoring operational efficiency, and informing maintenance, investment planning and other decisions\. For the purpose of this Project, WUC will engage a full time M&E specialist to support the collection of baseline; compile and update output data from subprojects; track implementation progress Page 89 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) across the Project; and assist WUC in fully integrating and utilizing data gathered through the Project for management purposes\. \. Page 90 of 109  The World Bank Emergency Water Security and Efficiency Project (P160911) ANNEX 3: IMPLEMENTATION SUPPORT PLAN COUNTRY : Botswana Emergency Water Security and Efficiency Project Strategy and Approach for Implementation Support 1\. The Implementation Support Plan (ISP) provides the framework for the World Bank's operational approach to supporting MLWS’s and WUC’s implementation of the Botswana Emergency Water Security and Efficiency Project and monitoring implementation progress\. The ISP has been developed taking into consideration: (a) the risks identified for the Project; (b) the limited experience of MLWS and WUC staff with respect to Bank and internationally financed projects; (c) the importance of large civil works contracts in overall implementation and in the achievement of the PDOs; (d) the importance of environmental and social safeguards; and (e) the role of WUC financial sustainability in the long-term sustainability of project investments and the reliability of water supply in the context of extended drought\. The ISP team reflects these key considerations\. 2\. To support project implementation a POM will be prepared and implemented by the MLWS and WUC\. The POM will provide overall guidance on project implementation and will include information such as the detailed project description, financing plan, roles and responsibilities for implementing agencies, the role of the Bank during implementation, key actions required to meet the project development objectives, fiduciary requirements - procurement, financial management and environmental and social safeguards and the M&E arrangements\. The Bank will support implementation through regular missions and will provide guidance on implementation arrangements\. To ensure timely response from the Bank team, particularly with respect to procurement, existing service standards will be incorporated into the POM\. 3\. Five core activities form the foundation of the ISP: hands on operational support; fiduciary – financial management procurement, and safeguards training; adequate technical assistance – including detailed design and procurement processes; regular and appropriate arrangements for M&E ; and, semi- annual implementation support missions to Botswana, involving Bank staff and technical consultants\. This approach will provide comprehensive support and oversight for project implementation and enable quick and responsive interactions between project officials and Bank staff\. Implementation Support Plan and Resource Requirements 4\. Hands on operational support\. Because the MLWS and WUC have not implemented a Bank- financed project directly, the Bank team will need to provide extensive hands on operational support, in addition to those provided during the semi-annual missions, especially in the first two years of implementation\. Also, intergovernmental knowledge sharing and learning will be encouraged throughout all stages of implementation, in particular regarding PPPs and M&E systems\. In between semi-annual missions, regular interaction with the client will continue to enable timely implementation of activities\. 5\. Fiduciary, procurement, and safeguards training\. Fiduciary, procurement, and safeguards training will be provided as part of the operations clinic during the Project launch\. Fiduciary, Page 91 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) procurement, and safeguards staff are all based in Pretoria and thus will allow timely support to the PMT as well as the implementing entities\. During the semi-annual implementation support mission, the fiduciary, procurement, and safeguards team will join field trips (as needed) and provide hands-on support to county counterparts\. 6\. Technical designs support and procurement process\. Given the advanced status of preparation of the key works to be financed, during the first 12 months of implementation the focus will be placed on supporting the comprehensiveness and quality of the technical designs and the procurement processes for the contracting of qualified, capable and financially sound contractors through competitive and transparent processes in compliance with Bank procurement guidelines\. Dedicated backup consultants will be hired in the first 6 months (e\.g\. wastewater consultant, environmental specialist, and water supply engineer) to ensure a smooth start to the project\. 7\. It is expected that the contracting of a significant amount of works under the Project will be finalized or well underway after the first year of project implementation\. Therefore, the focus of ISP during the second year (and onwards) will be on supporting a smooth start of works contract execution and the implementation of ESMPs, as well as providing quality enhancement reviews for the strategic studies under development under Component 3\. The World Bank team will work closely with the client to ensure that service standards (e\.g\. timely approvals, clearances, no-objections) are maintained\. 8\. M&E support\. The task team will work closely with the MLWS and WUC to plan and implement the required Project monitoring and evaluation arrangements\. The Bank team in collaboration with the Client will assess current capacity for M&E, and propose measures to strengthen capacity\. The Bank team has shared model terms of reference for experts to assist the implementing entities to strengthen their capacities for M&E, including through hands-on training and development of computerized systems for tracking and reporting on inputs, activities, outputs, and results\. Semi-annual implementation support missions and mid-term review\. While the operations analyst based in the country office will provide general implementation support for all operational aspects, semi-annual missions will be organized to review the progress and mitigate any risks in advance\. Semi-annual missions will be completed by TA missions as needed\. A formal midterm review will be organized about 30 months into implementation to assess Project implementation progress and make any changes necessary to accelerate implementation\. 9\. The main inputs and focus with regard to support to implementation are summarized in the tables below\. Table A3\.1 Technical Requirements for Implementation Support Resource Time Focus Skills Needed Estimate Partner Role (US$) Contract launch and management Team leader 320,000 GFDRR for Confirm reporting and monitoring and Engineer drought evaluation formats Institutional development response First twelve Confirm financial reporting and reform specialist TA for PPPs months Confirm safeguard monitoring and FM Specialist reporting Procurement Specialist Technical assistance procurement Social Safeguards Specialists Page 92 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Environmental Safeguards Specialist M&E specialist Operations Analyst Contract management Team leader 320,000 TA for PPPs Safeguards Engineer Ongoing procurement Institutional development Civil works and engineering issues, if any and reform specialist Monitoring and evaluation FM Specialist 12-48 WUC financial results Procurement Specialist months Project financial management Social Safeguards Specialists Environmental Safeguards Specialist M&E specialist Operations Analyst 48-60 Contract closings Team leader 200,000 months Safeguards Engineer (Year 5) Civil works and engineering issues, if any Institutional development M&E and reform specialist WUC financial results FM Specialist Project FM Procurement Specialist ICR preparation Social Safeguards Specialists Environmental Safeguards Specialist M&E specialist Operations Analyst Mid-term Contract management Team leader 120,000 review Progress on civil works Engineer Safeguards Procurement Project sustainability FM specialist WUC financial results Environmental specialist Social specialist M&E specialist Utility institutional specialist Financial analyst Team assistant Implementa Project results and evaluation Team leader 80,000 tion Financial and economic analyses Engineer completion Institutional development reporting and reform specialist ICR author Financial analyst Economist Team assistant Page 93 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Skills Mix Required Number of Staff Comments Skills Needed Number of Trips Weeks* Task Team Leader 24 6 Pretoria, South Africa Water supply and sanitation specialist (institutional 20 8 Nairobi support) Water supply and sanitation specialist (investment 15 8 Washington, DC implementation support) Waste water specialist (investment 10 4 Washington DC implementation support M&E Specialist 16 6 Nairobi FM Specialist 15 4 Pretoria, South Africa Procurement Specialist 15 4 Pretoria, South Africa Social Safeguards Specialist 10 3 Pretoria, South Africa Environmental Safeguards Specialist 10 3 Pretoria, South Africa Team assistant 4 - Country office based Note: * Number of staff weeks required per year in the first two years of implementation\. Page 94 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) ANNEX 4: SAFEGUARDS ACTION PLAN The following section outlines the requirements of the Environmental and Social Safeguards Action Plan that has been prepared to ensure compliance with safeguards in line with the World Bank’s Operational Policy OP 10\.0 paragraph 12\. Background 1\. The Botswana Water Security and Efficiency Project is prepared and implemented according to Paragraph 12 of the World Bank’s Operational Policy 10\.00, which allows for certain exceptions to the requirements of the Investment Project Financing policy, including deferral of safeguards requirements, if the Bank deems the client to be in urgent need of assistance\. In July 2015, Botswana declared a drought emergency, following poor or failed rains across most of the country\. The meteorological department rated the drought “extremely severe”– the worst in the last thirty-four years\. The drought emergency has since been extended for a second year\. Given the urgency and in light of Water Utilities Corporation’s (WUC) human and financial capacity constraints, the team’s proposal to defer the preparation of required safeguard instruments to the implementation stage was approved by the Regional Vice President, Africa Region on June 16, 2016\. The deferral enables the client to receive the necessary resources to complete the preparation process and shorten the response time\. 2\. Botswana is a water stressed country and is one of the four Southern Africa countries that will become highly water stressed by 2040 –under a business as normal scenario\. The ongoing drought has increased levels of water stress in many parts of the country, which have seen dams, rivers and well fields run dry\. Drought hotspots in the central, southern and western parts of the country have been significantly impacted, leading to (i) a 70 percent yield decline in cereal crop compared to 2014, and (ii) severe rationing of water–lasting up to a week in some settlements\. Nationwide, dam levels fell below 20 percent of design capacity–the Gaborone dam in particular dropped as low as 1\.6 percent (the lowest level since 2000)\. Boreholes have also been affected by the slow rate of ground water recharge following several years of low rain\. Many settlements are now being served by water bowsers at high cost\. In light of the modest human and financial capacity of the main implementing agency –the Water Utilities Corporation (WUC)–the initial response was insufficient to meet increased demands brought about by the drought\. 3\. In line with the deferral, this SAP is intended to guide the preparation of safeguards documentation during implementation\. The SAP is guided by the dual objective of ensuring that there is a roadmap for safeguards compliance during project implementation and providing clear guidance to the GoB on the actions and instruments required to expedite implementation of the Project activities\. It is a project-level safeguards planning document that provides a time-bound plan setting forth the steps, sequential planning and coordination of project activities, and preparation/disclosure requirements for the relevant safeguard instruments, to ensure that the Project is in compliance with the World Bank’s safeguard requirements\. 4\. The deferral of safeguards granted for the Project postpones the disclosure of safeguard instruments to the implementation phase of the project\. A Resettlement Policy Framework (RPF) and site-specific safeguard instruments (Environmental and Social Management Plans-ESMPs, and/or Page 95 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Resettlement Action Plans-RAPs or Social Audits) will be required during implementation\. These instruments are required for all investments financed under the Project\. The safeguard instruments would need to be ready, acceptable to the Bank and disclosed as required below\. While the RPF will be disclosed within 2 months of the start of the Project to guide preparation of specific actions\. ESIAs will be prepared to inform the preparation of ESMPs, RAPs or social audits and VCPs if required\. ESMPs will be disclosed, before issuing bidding documents to ensure that the cost of mitigation measures is reflected in the bidding documents\. In addition, all RAPs will be disclosed and implemented prior to the start of civil works\. Given the specific risks associated with the Mambo WWTP, terms of reference for the ESIA have been disclosed\. 5\. Key factors to consider are: a\. The Project is rated a Category A primarily due to the investments in Mambo WWTP (Francistown) required to prevent pollution of the Dikgatlhong Dam, which supplies water to Gaborone\. All other subprojects are rated Category B\. b\. An initial review of safeguards documents prepared for Year 1 investments confirms that these are of an acceptable quality\. However, where necessary these documents will be updated or social audits conducted, to ensure compliance with safeguard policies\. 6\. Project Description\. The PDO is to “improve availability of water supply in drought vulnerable areas, increase efficiency of WUC, and strengthen wastewater management in selected systems\.” 7\. The Project is designed to respond to Botswana’s ongoing drought and reduce vulnerability to drought in the medium to long term\. The drought declared in July 2015 was the worst in the past 34 years and it has been extended for another year (in July 14, 2016) with a slightly lower level of severity39\. 8\. The Project includes critical water supply investments in urban and rural areas that are needed to mitigate drought impacts and wastewater treatment investments or to comply with effluent standards thus preventing pollution of vital downstream water sources\. 9\. Proposed water supply and wastewater infrastructure investments amount to US$136 million\. They include measures to rehabilitate, augment, and upgrade water supply and wastewater/sludge treatment schemes; and, improve the operational efficiency of WUC, particularly in underperforming MCs\. In addition, support for US$20\.75 million is included to strengthen the institutional capacity to plan and deliver services, and enable the reform of key policies and legislation\. The Project is organized under three components, as follows: Component 1: Improve availability of water supply and efficiency of services; Component 2: Improve wastewater and sludge management; and Component 3: Sector Reform and Institutional Strengthening\. 10\. Component 1: Improve Availability of Water Supply and Efficiency Services (US$114\.05 million including taxes) - This will support immediate as well as medium term investments and measures to 39 The Southern Africa region is experiencing a widespread drought\. The Bank is actively engaged in helping SADC with its El Nino response, including providing several IDA countries with supplemental finding from the Banks Crisis Response Window, Page 96 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) mitigate the impact of the drought by improving availability of water to settlements that have experienced extended periods of rationing and/or been forced to rely on water bowsers\. Specific investments will include: (i) water source management, optimization and development, including interlinking of existing water sources (surface and ground) as well as of supply schemes to ensure backup supply and more sustainable production; (ii) expansion of water supply systems to reach underserved or drought affected communities; and, (iii) measures to improve operational efficiency, including reducing technical losses along transmission lines\. This component will be implemented by the WUC\. The component includes safeguards assessment and management as well as design and supervision services for the civil works\. All investments will be coordinated and will be supported by institutional strengthening activities (under Component 3) aimed at improving the long-term sustainability of service provision and managing water demand\. 11\. The proposed measures are intended for settlements in drought affected areas where boreholes are running dry, becoming saline, or being mined/overdrawn, as a result of the drought\. Given the chronic nature of drought, the investments are designed to address the medium term needs by ensuring sufficient supplies (or back up supplies) are in place to avoid resorting to short term solutions (such as using bowsers) every time a drought occurs\. As Botswana relies heavily on groundwater (60 percent) and the recharge rate for groundwater is low (average of 5 mm per year) the proposed investments will bring water from more secure sources – e\.g\. dams or well fields that are reliable\. 12\. Component 2: Improve Wastewater and Sludge Management (US$21\.65 million including taxes) - This component will support strategic investments in refurbishment/rehabilitation of wastewater treatment to protect surface and groundwater sources; and enable scaling up wastewater reclamation and reuse in Francistown and Lobatse through design and build contracts\. In Letlhakane sludge management facilities will be rehabilitated and expanded— the nearest facility is 200km away\. The Francistown and Lobatse wastewater treatment facilities require urgent attention to prevent environmental contamination caused by discharge of inadequately treated wastewater into nearby water courses\. Due to inadequate treatment of wastewater at the Mambo WWTP (Francistown) a key water supply dam (Dikgatlhong) may be at risk of pollution\. The river into which Mambo discharges is seasonal and the effluent discharge during the dry season can cause local contamination\. 13\. Given the limited water resources available in Botswana, the proposed measures will protect and conserve existing water supply, thereby reducing demand for new sources\. A key objective of the investments in Mambo and Lobatse is to bring the effluent to a quality level where it can be re-used\. Many users, including mines, local golf courses and other businesses have expressed their interest in re- using the treated water if WUC can treat it to adequate standards, which are set by law\. In addition to improving treatment and operational efficiency (as measured by effluent quality), the Project also includes (under Component 3) activities to enhance WUC’s capacity to holistically manage, treat, dispose of, and re-reuse wastewater and sludge through strategic investments in new or improved technology options\. This component will be implemented by WUC\. 14\. Component 3: Sector Reform and Institutional Strengthening (US$20\.75 million)\. The Component’s objective is to strengthen the institutional, policy, and legal framework to support Botswana to achieve long-term water security and increase efficiency of service delivery\. Botswana faces major challenges in ensuring the sustainable development and efficient utilization of its scarce water resources to support further economic growth, diversification and the eradication of poverty\. As Page 97 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) such, policy and strategies need to be directed toward improving allocative efficiency, enhancing technological developments, and improving water resources stewardship and water demand management\. Activities financed under Component 3 will include: 15\. Sub-Component 3\.1\. Sector Reform\. This will include the development or roll out of sector policies, legislation and institutions in support of the reforms initiated in 2009\. In order to conform to the new institutional set-up in the context of increasing water scarcity, the water sector is in the process of developing or updating several key legal, strategy and policy instruments\. Prioritized activities will enable implementation of the development agenda outlined in NDP 11, with a strategic focus on improving water security and developing resilience to droughts and water shocks\. In addition, the Sub- Component will support the improvement of water resources management and planning capacity, including strengthening the effectiveness of WRM instruments\. 16\. Sub-component 3\.2\. Institutional Strengthening and Capacity Building\. This Sub-Component will enable DWA and WUC to increase their capacity to implement sector policies and strategies; strengthen their overall operational performance; and, improve their corporate governance and management\. Support for MLWS (DWA) will include strengthened capacity for water resource planning and monitoring, groundwater development, monitoring, and regulation among others\. Support for WUC will include support for the institutional restructuring, business strategy development, efficiency improvements (e\.g\. through demand management, cost recovery, energy reduction, non-revenue water, and innovative ICT use); and refinement of water supply and waste water supply guidelines\. Activities will focus on training and reskilling WUC staff in underperforming MCs\. This sub-component will be implemented by MLWS (DWA) and WUC\. 17\. Sub-Component 3\.3\. Forward Planning – Technical Assistance and Studies\. This Sub- Component includes support for technical studies required to develop a pipeline of priority investments aimed at improving long-term water security (e\.g\. Chobe-Zambezi and Lesotho-Botswana Transfer Schemes)\. This could include feasibility studies; detailed designs; environmental and social impact assessments, transaction design for PPPs, expert panels for deep groundwater aquifer development, and the like\. A sound investment pipeline will allow Government to advance its vast water investment program more rapidly and support the development long-term drought response/climate resilience investments\. This sub-component will be implemented by WUC and MLWS\. 18\. Sub-component 3\.4\. Project Management\. This subcomponent includes support for adequate project implementation capacity in the MLWS - PMO and WUC - PMO, including funding for MLWS - PMO and WUC -PMO contracted experts and technical assistance\. In addition, the project will finance inputs required to ensure the effectiveness of implementing agencies including (as needed) office space, equipment, running costs, logistical support, and other operating requirements\. Responsibilities of the MLWS - PMO and WUC - PMO include project management and coordination, procurement and financial management, project monitoring and evaluation (including impact evaluation), social and environmental safeguards management and oversight, and strategic project communications and outreach\. This sub-component will be implemented by WUC and MLWS\. 19\. Project Locations and Some Salient Social and Environmental Characteristics\. It is expected that the Project will be implemented in at least 70 villages located within eight (8) WUC Management Centers as follows: Page 98 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) a\. Selebi Phikwe and Letlhakane - located in the Central District of Botswana\. b\. Ghanzi - located in the Kalahari Desert in the western part of Botswana\. c\. Masunga - located in the North-East and Tutume Sub-District of Botswana\. d\. Molepolole - located in the south east of Botswana in the Kweneng District, e\. Kanye - located in mountainous region of Southern Botswana, and f\. Lobatse - located in South-Eastern Botswana, 70km south of the capital city Gaborone and situated in a valley running north toward Gaborone\. g\. Francistown – located in the eastern region of Botswana 20\. As the Project will rehabilitate and augment systems that serve settlements that are predominately built-up with medium density development, it is expected that the vast majority of infrastructure will entail in-situ rehabilitation and upgrading along transmission lines, in existing plants, and storage or pumping stations\. However, there will be some new transmission lines connecting some of the sources to the population centers and/or villages as well as pipes inter-connecting boreholes\. The following section describes the proposed activities by location\. As the Project supports the Governments drought response, and the drought has been extended by an additional year, the description of actual investments may be adjusted during design and in accordance with ESIAs to improve the outcome\. Water Supply a\. Selebi-Phikwe MC: Selebi Phikwe to Serule water transfer scheme: Construction of water supply pipelines, a booster station and collector tanks to supply identified villages with improved drinking water quality from the water treatment facility for the Letsibogo Dam with the objective of improving efficiency and reliability of water supply for Serule, Damuchojena, Gojwane, Topisi and Moreomabele villages\. b\. Letlhakane MC: Boteti Southern and Central Cluster - Village water supply scheme: Equipping and electrifying 7 boreholes and booster stations, inter-connecting pipework between the boreholes, (i) installing a Reverse Osmosis water treatment unit at the well field site, (ii) installing a clear water pumping station, (iii) transmission mains, (iv) water storage tanks, and (v) installing associated mechanical, electrical and telemetry equipment\. c\. Letlhakane MC: Mosu, Mokubilo and Mmea Village Water Supply Scheme: Placing a portable Reverse Osmosis water treatment unit on an existing new borehole\. d\. Ghanzi MC: Ghanzi Town Water supply expansion: Erection of a 1000 m3 elevated tank, rehabilitation of existing network and extension of reticulation to the southern part of Ghanzi town\. e\. Ghanzi MC: Kuke Water Supply: Equipping boreholes with Photovoltaic power source, installation of 12km supply mains from source to the settlement, construction of a new 75m3 elevated tank, construction of reticulation of water to the eastern part of the settlement\. Page 99 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) f\. Ghanzi MC: Bere Water Supply Augmentation subproject: Equipping boreholes with Photovoltaic power source, installation of 5km supply mains from source to the settlement, construction of a new 75m3 elevated tank on a 15m stand\. g\. Masunga MC: North-east and Tutume sub-district Water Supply: Construction of a pump station at Kalakamati, Increased storage at Mbalambi and Zwenshambe, construction of a command reservoir/storage tank at Jackalas I and upgrading of both the Ntimbale Treatment Works Pump station and Mbalambi Pump station\. Water will be sourced from Ntimbale dam\. h\. Masunga MC: Sowa Water Master Plan (connection to Nata Cluster): Design audit and construction of the Dukwi- Nata Cluster Villages water supply scheme\. The project will rehabilitate and upgrade the transmission mains and water storage tank at Dukwi waterworks, which currently experience frequent breakdowns resulting in significant water losses\. Rehabilitation of networks will be done at three major villages of Nata, Dukwi and Mosetse\. i\. Lobatse MC: Mmathethe Water Supply: Construction of about 48km of pipelines from Goodhope to Mmathethe via Magoriapitse, installation of 3 pumps in pump station, construction of a 200m3 elevated tank and telemetry system\. j\. Lobatse MC: Mokatako Water Supply: Design and construction of booster pumps station, collector tank, palisade fencing and associated works\. k\. Kanye MC: Kanye/Moshupa Village Water Supply: The Project will electrify and equip four existing boreholes to serve 2 villages and construct an interlinking pipework, connecting the four additional boreholes in Selokolela Wellfield to Kanye Water Supply\. The proposed interlinking pipelines will deliver water into existing concrete water tanks\. l\. Molepolole MC- Molepolole/Malwelwe/Thamaga/Thebephatswa Water Supply: Equipping and connection of six (6) additional boreholes in Malwelwe wellfield, construction of interlinking pipework, upgrading of existing Malwelwe booster pump station, upgrading of existing 315mm diameter pipeline to accommodate increased flow from the six additional boreholes, and upgrading of Gaotlhobogwe Treatment Plant Pump Station\. Wastewater m\. Francistown MC: Mambo WWTP: Design and construction works for the rehabilitation of the plant to improve the operational performance of the WWTP and improve the quality of effluent discharged to the river system\. n\. Lobatse MC: Lobatse WWTP: Desludging of 2 pump stations, dewatering and desludging of 3 primary anaerobic ponds, construction of drying beds, refurbishment of effluent recycling pump station, replacement of 3 inlet works pumps, installation of ultrasonic flow metering devices, and maintenance of existing ones\. o\. Letlhakane MC: Letlhakane wastewater treatment ponds: Construction of 10 new oxidation ponds including maintenance and rehabilitation of existing facilities\. 21\. Possible Social and Environmental Impacts/Risks\. The World Bank Safeguard Policies and the Botswana Environmental Impact Assessment Act and Regulations of 2011 are adopted as standards for implementing safeguard aspects of the Project\. Based on the assessment of the baseline conditions of Page 100 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) the four subproject sites visited (in Francistown at the Mambo WWTP; in Letlhakane at the Wastewater Treatment ponds; in Lobatse at the WWTP; and, in Masunga at the Ntimbale Dam), and the initial screening of the proposed project activities, the Project is classified as environmental risk Category “A”\. Adverse impacts could potentially be generated from during the rehabilitation works at the Mambo WWTP and during the operational phase of the plant\. Currently, the influent received at the Mambo WWTP from nearby towns–Francistown and Tati Siding- includes industrial waste, which is partially treated and does not meet the BOBS 93 discharge standards\. Consequently, the effluent that is currently discharged to Tati River, is high in COD, ammonia, phosphate, turbidity, total suspended solids, total coliforms, and fecal coliforms\. The Tati River is a tributary of the Shashe River which feeds into the Dikgatlhong Dam (located 50km downstream)\. Since the Dikgatlhong Dam supplies potable water to the city of Gaborone, it will be essential that the quality of discharged effluent from the Mambo WWTP stringently meets the national legislated standards as stipulated by the Bureau of Standards (BOBS 93) as well as the maximum limits stipulated in the World Bank’s Pollution Prevention and Abatement Handbook both during the operational phases of the Project\. 22\. Although the overall Project will result in significant positive environmental and public health impacts, there are uncertainties relating to the performance of the Mambo WWTP with respect to ecological flows current impacts of treated wastewater discharged into the river system that feeds into the Dikgatlhong Dam; and inadequate management of sludge generated from the wastewater treatment processes\. As such, ToR for a comprehensive, full-scale environmental and social assessment are being developed to establish a wider project area of influence that goes beyond the physical boundaries of the planned investments, makes provision for undertaking accumulative impact assessments, and generates good quality data for monitoring different water quality parameters at different locations during the operational phase of the wastewater treatment plant\. 23\. The following World Bank Safeguard Policies are triggered: (i) Environmental Assessment OP/BP 4\.01, (ii) Physical Cultural Resources OP/BP 4\.11, (iii) Involuntary Resettlement OP/BP 4\.12, (iv) Projects on International Waters OP/BP 7\.50, (v) Dam Safety OP/BP 4\.37; and (vi) Indigenous Peoples (OP/BP 4\.10)\. The applicable safeguard policies have been confirmed\. 24\. Environmental Assessment OP/BP 4\.01: This policy is triggered due to the potential environmental and social impacts associated with the project investments\. The proposed infrastructure investments will include rehabilitation of existing wastewater treatment plants which could potentially generate adverse impacts which are likely to go beyond the physical boundaries of the planned investments during the rehabilitation of facilities\. Disposal of sludge from existing wastewater treatment plants during the rehabilitation and operational phases of the wastewater treatment plants may also impact the environment within the area of influence of the Project\. 25\. Physical Cultural Resources (PCR) OP/BP 4\.11\. The Borrower will ensure that the initial environmental and social impact assessments screen for potential impacts on the physical cultural resources include Chance Find Procedures in the environmental and social plans and bidding documents to ensure mitigation of any new discovery of physical and cultural resources\. 26\. Involuntary Resettlement OP/BP 4\.12\. The Project will undertake measures to mitigate the impact of the drought by equipping and connecting existing water sources to settlements that have experienced extended periods of rationing and/or been forced to rely on water bowsers as well as the Page 101 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) expansion to under-served or drought affected communities\. As the vast majority of infrastructure will be in-situ rehabilitation and upgrading, the extent to which any civil works under the Project will require land acquisition and/or impact people’s access will be determined during project preparation, including through the ESIA and planned social assessments\. The proposed civil works may require land for temporary or permanent usage\. The land acquired for this purpose may lead to loss of assets, sources of income or means of livelihoods, especially in rural communities whether or not project affected people must move to another location\. To ensure proper mitigation measures are set forth during the first year of implementation, based on the findings of the ESIA, the national laws on land as well as OP 4\.12 and social assessments, within two months of effectiveness, the Borrower will prepare a Resettlement Policy Framework (RPF) to guide the preparation of site specific RAPs once such details are known before any civil works start\. In addition, for a number of sites where land is acquired social audit will be done before any civil works start\. Just as the other safeguards documents the RPF will be fully consulted upon, reviewed and cleared by the Bank and publicly disclosed both in-country and the Banks external website\. 27\. Indigenous Peoples OP/BP 4\.10 In the context of the Republic of Botswana this refers to “Vulnerable Communities (VC)”\. There is a lack of sufficient detail on the proposed routing and development of infrastructure to be supported by the Project\. However, as there may be VCs present or having a collective attachment to the proposed project sites, OP 4\.10 has been triggered\. Where relevant, if for any given activity, VCs were or are found to be present or to have a collective attachment to the area of the proposed project activity, a social assessment will be undertaken and a Vulnerable Communities Plan (VCP) will be prepared, based on prior informed consultations, disclosed, and implemented prior to the start of civil works in full compliance with the requirements of OP/BP 4\.10 28\. Projects on International Waterways OP/BP 7\.50\. This policy is triggered because the sources of water and the rivers into which treated effluent from the Mambo WWTP will be discharged connect with tributaries of an international waterway, the Limpopo River\. Effluent discharges into the Tati River, which flows into one of the major tributaries of the Limpopo River – the Shashe River\. The Shashe contributes about 12\.2 percent of the Limpopo’s mean annual runoff\. It originates from the northwest of Francistown on the border between Botswana and Zimbabwe and flows southeast along the border for approximately 362km until it reaches the confluence point with the Limpopo River where Botswana, Zimbabwe and South Africa meet\. 29\. The Dikgatlhong Dam, located 50 km downstream of the Mambo WWTP is a key source of water supply to the city of Gaborone\. The Project will support rehabilitation works at the Mambo WWTP to ensure that the quality of discharged effluent from the plant stringently complies with legislated discharge standards and that the overall quality of the Tati and Shashe Rivers is not adversely affected by contaminants during the rehabilitation of the Project\. 30\. The findings from site visits and a preliminary assessment of the likely impact of effluent from the wastewater treatment plant on the water quality of the Limpopo River, indicate that there will be significant improvement in the quality of the effluent discharged into the Tati River from the investments supported by the Project\. With the installation of preliminary treatment equipment and upgrades at the Mambo Wastewater Treatment Plant, the rehabilitated wastewater treatment plant will be able to comply with the national standards (BOD and COD) before discharging into the Tati River\. COD is used to measure the efficiency of the treatment, in line with international best practice in case of Page 102 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) wastewater influenced by industrial pollution from different sources\. This will be a key indicator for the Project\. The Project will not support new sanitation connections, and therefore the wastewater treatment plant will not receive incremental hydraulic load as a result of its interventions\. 31\. In accordance with paragraph 1(a), OP 7\.50 is applicable since the Limpopo River is an international waterway, and considering that the Project intervention at the Mambo WWTP will involve rehabilitation of an existing WWTP\. Further, OP 7\.50 is also applicable in accordance with paragraph 1(b) because the wastewater discharge location is the Tati River, a tributary that runs exclusively within Botswana and which is part of the Limpopo River basin\. Considering that the Project will improve effluent quality from the Mambo WWTP an exception to OP 7\.50 was granted by the Regional Vice President on September 1, 2016\. 32\. Natural Habitats OP/BP 4\.04\. This policy is not triggered\. However, during the implementation phase of the Project, the proposed activities will be screened to determine if the activities are likely to alter or cause destruction of any critical or sensitive natural habitats\. The team will also look for potential opportunities to generate positive impacts on natural habitats though project activities, should such opportunities present themselves\. 33\. Forests OP/BP 4\.36: This policy is not triggered since the Project will not support civil works located within forested areas or plantations as defined under OP 4\.36\. 34\. Pest Management OP 4\.09: This policy is not triggered since the Project will not involve procurement of pesticides or fertilizers and does not have the potential to lead to increased use of pesticides or fertilizers\. 35\. Safety of Dams OP/BP 4\.37: This policy is triggered as the Project will rely on the performance of two existing dams\. Water from the Ntimbale dam will be used to supply 50 plus villages in the Masunga/Tutume area\. The Letsibogo dam will also be used to augment the supply to Selebi Phikwe MC\. 36\. Projects in Disputed Areas OP/BP 7\.60: The Project will not finance any activities located in any known areas under territorial dispute as defined in OP 7\.60\. Therefore, the policy is not triggered\. 37\. Safeguard Instruments, Mitigation Process and Implementation Schedule\. The proposed investments to be included under the Project will need to be supported by environmental and social assessments\. The appropriate safeguard instruments will need to be prepared based on the level of environmental impacts and risks, in order to guide implementation, monitoring and reporting\. ESIAs and/or associated ESMPs will prepared and disclosed in-country and on the Banks external site and ESMPs included in bidding documents\. With respect to social safeguards, within 2 months of effectiveness an RPF will be prepared to guide the preparation of RAPs or social audits during implementation\. Implementation of RAPs or social audits will be required prior to the start of civil works\. Although there are no known VCs present or having a collective attachment to the proposed project sites, the policy has been triggered to make provisions for any findings\. If for any given activity, VCs were or are found to be present or have a collective attachment to the area of the proposed project activity, a social assessment will be undertaken and a VCP will be prepared, based on prior informed consultations, disclosed, and implemented prior to the start of civil works\. Finally, with regard to dam Page 103 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) safety, the Bank has reviewed the latest (2015) annual dam safety reports for the Ntimbale and Letsibogo Dams as well as the Policy and Procedure Statement – Dam Safety and Maintenance by Water Utilities Corporation (2016) and considers that some remedial/ safety improvement works should be undertaken\. Sufficient dam safety and maintenance programs should also be put in place\. The recommended actions will be documented in a time bound and costed Dam Safety Action Plan, prepared in in accordance with the Dam Safety Policy\. The Dam Safety Action Plans will be finalized within 2 months of effectiveness\. 38\. As required, GoB will set aside funds in its annual budget for compensation of project affected people and acquisition of land\. This will enable timely compliance with the applicable safeguards prior to the start of any civil works under the subprojects\. In addition, the Project will provide funding for the implementation of safeguards actions, including preparing assessments, plans and audits, and conducting supervision and consultations\. Dam safety remedial actions including refurbishment of monitoring instruments and preparation of dam safety and maintenance program will be incorporated in the TOR/technical specifications for relevant tendering packages associated with the relevant subprojects (Masunga and Selebi Phikwe)\. 39\. Year 1 investments\. In order to comply with National Laws (e\.g\. Environmental Impact Assessment law) and World Bank Safeguard Policies, the first-phase of investments (Year1) will need to have existing environmental and social impact assessments reviewed or updated as necessary\. WUC and MLWS have advanced the preparation of environmental and social studies for some subprojects in line with national EIA and permitting requirements\. The Bank is currently reviewing all existing ESIAs and ESMPs to ensure that the quality is consistent with OP 4\.01 before either updating or disclosing them in- country and on the World Bank’s external website\. This review process will be completed prior to board presentation and any recommendations for updating existing safeguards document will be discussed, and necessary actions and support agreed, with the client\. The level of detail and scope of each ESMP will be determined by the type of activities to be implemented\. This will be indicated in the TORs for ESMPs\. In line with overall safeguard requirements for the Project the disclosure of the approved documents will be required prior to issuing bidding documents\. ToRs for the ESIA for Mambo WWTP have been disclosed\. 40\. In line with OP 4\.11/BP and OP/BP 4\.12, all safeguards instruments will be subject to national consultations and approved by the relevant GoB institution (e\.g\. DEA for environmental documents) before the Bank’s clearance and approval\. The table below summarises the requirements of each sub- project with regard to the World Bank safeguard requirements\. Table A4\. 1 Summary of environmental and social management instruments required by investments under Component 1 Management Infrastructure Safeguard Requirements to comply with World Bank Safeguard Policies Center investments Cost estimate (US$ million) Page 104 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Management Infrastructure Safeguard Requirements to comply with World Bank Safeguard Policies Center investments Cost estimate (US$ million) Selebi- Selebi-Phikwe Site-specific environmental and social assessment to be carried out\. An Phikwe to Serule water Environmental Management Plan to be prepared, consulted and disclosed in country transfer scheme and at the Bank’s external site prior to issuing bidding documents\. The ES should be US$ 20 included in the bidding documents\. RAP or social audit (if required) will be prepared million prior to civil works\. Compliance with the Dam Safety policy is required\. A Dam Safety Action Plan outlining outstanding activities from the 2015 dam safety report, including a budget and timeline will be prepared\. Mitigation measures associated with the ESMP and Dam Safety Action Plan to be incorporated in the Bidding Documents\. Letlhakane Boteti Site-specific environmental and social assessment to be carried out\. An Southern and Environmental Management Plan to be prepared, consulted and disclosed in-country Central Cluster and at the Bank’s external site prior to issuing of bidding documents\. Mitigation Villages Water measures associated with the ESMP to be incorporated in the Bidding Documents\. Supply Scheme RAP or social audit (if required) will be prepared prior to civil works\. US$ 20 million Letlhakane Mosu, Site-specific environmental and social assessment to be carried out\. An Mokubilo and Environmental Management Plan to be prepared, consulted and disclosed in-country Mmea villages and at the Bank’s external site prior to issuing of bidding documents\. Mitigation US$0\.3 measures associated with the ESMP to be incorporated in the Bidding Documents\. million RAP or social audit (if required) will be prepared prior to civil works\. Ghanzi Ghanzi Site-specific environmental and social assessment to be carried out\. An township water Environmental Management Plan to be prepared, consulted and disclosed in-country resource study and and at the Bank’s external site prior to issuing of bidding documents\. Mitigation supply expansion measures associated with the ESMP to be incorporated in the Bidding Documents\. US$8\.4 RAP or social audit (if required) will be prepared prior to civil works\. million Ghanzi Kuke water Site-specific environmental and social assessment to be carried out\. An supply Master Plan Environmental Management Plan to be prepared, consulted and disclosed in-country US$1\.9 and at the Bank’s external site prior to issuing of bidding documents\. Mitigation million measures associated with the ESMP to be incorporated in the Bidding Documents\. RAP or social audit (if required) will be prepared prior to civil works\. Ghanzi Bere Site-specific environmental and social assessment to be carried out\. An Settlement water Environmental Management Plan to be prepared, consulted and disclosed in-country supply and at the Bank’s external site prior to issuing of bidding documents\. Mitigation augmentation measures associated with the ESMP to be incorporated in the Bidding Documents\. US$0\.7 RAP or social audit (if required) will be prepared prior to civil works\. million Masunga North East Review and Update of existing EIA to ensure compliance with requirements of a and Tutume Sub full-scale site specific environmental and social assessment\. An Environmental and District water Social Management Plan will be required\. This will also to address sedimentation at supply upgrading the WWTP as interventions to control soil erosion in the catchment are inadequate\. US$22 million Compliance with the Dam Safety policy is required\. A Dam Safety Action Plan outlining outstanding activities from the 2015 dam safety report, including a budget and timeline will be prepared\. Mitigation measures associated with the ESMP and Dam Safety Action Plan to be incorporated in the Bidding Documents\. RAP or social audit (if required) will be prepared prior to civil works\. Page 105 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Management Infrastructure Safeguard Requirements to comply with World Bank Safeguard Policies Center investments Cost estimate (US$ million) Masunga Sowa Water Site-specific environmental and social assessment to be carried out\. An Supply Master Plan Environmental Management Plan to be prepared, consulted and disclosed in-country (connection to and at the Bank’s external site prior to issuing of bidding documents\. Mitigation Nata Cluster) measures associated with the ESMP to be incorporated in the Bidding Documents\. US$18\.5 RAP or social audit (if required) will be prepared prior to civil works\. million Lobatse Mmathethe Site-specific environmental and social assessment to be carried out\. An US$9 million Environmental Management Plan to be prepared, consulted and disclosed in-country and at the Bank’s external site prior to issuing of bidding documents\. Mitigation measures associated with the ESMP to be incorporated in the Bidding Documents\. RAP or social audit (if required) will be prepared prior to civil works\. Lobatse Mokatako Site-specific environmental and social assessment to be carried out\. An US$0\.3 Environmental Management Plan to be prepared, consulted and disclosed in-country million and at the Bank’s external site prior to issuing of bidding documents\. Mitigation measures associated with the ESMP to be incorporated in the Bidding Documents\. RAP or social audit (if required) will be prepared prior to civil works\. Kanye Kanye/ Site-specific environmental and social assessment to be carried out\. An Moshupa Environmental Management Plan to be prepared, consulted and disclosed in-country US$ 3 million and at the Bank’s external site prior to issuing of bidding documents\. Mitigation measures associated with the ESMP to be incorporated in the Bidding Documents\. RAP or social audit (if required) will be prepared prior to civil works\. RAP or social audit (if required) will be prepared prior to civil works\. Molepolole Malwelwe/ Site-specific environmental and social assessment to be carried out\. An Molepolole/ Environmental Management Plan to be prepared, consulted and disclosed in-country Thamaga/ and at the Bank’s external site prior to issuing of bidding documents\. Mitigation Thebephatsw measures associated with the ESMP to be incorporated in the Bidding Documents\. a (Phase 2) RAP or social audit (if required) will be prepared prior to civil works\. US$10 million Note: A detailed description of Component 1 Investments is provided in Annex 1, Table A1\.1 Table A4\.2 Summary of environmental and social management instruments required by investments under Component 2 Management Infrastructure Safeguard Requirements to comply with World Bank Safeguard Policies (OP 4\.01) Center investments Cost estimate (US$ million) Page 106 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) Management Infrastructure Safeguard Requirements to comply with World Bank Safeguard Policies (OP 4\.01) Center investments Cost estimate (US$ million) Francistown Mambo WWTP A full-scale site specific environmental impact assessment: terms of reference (ToR) have rehabilitation been prepared for an Environmental Impact Assessment with the associated US$16 million Environmental Management Plan\. As this Project is rated Category A, the assessment will cover the Project area of Influence including the dam area, and accumulative impacts\. - Tati river is a sensitive environmental receptor, due to the existing water supply dam located 50km from the discharge point\. - Sludge management requires a comprehensive E&S assessment to determine the quantity generated, treatment, transport and disposal/usage\. Mitigation measures associated with the ESMP to be incorporated in the Bidding Documents Lobatse Lobatse WWTP A site specific environmental and social assessment is required: An Environmental rehabilitation Impact Assessment study report with the associated Environmental Management Plan US$0\.65 will be prepared million Sludge management is a key significant environmental issue that requires a comprehensive E&S assessment to determine the quantity generated, treatment, transport and disposal/usage\. Mitigation measures associated with the ESMP to be incorporated in the Bidding Documents Letlhakane Letlhakane A site specific environmental and social assessment is required: An Environmental and Waste Water Social Impact Assessment study report with the associated Environmental and Social treatment Management Plan will be prepared\. pond expansion A RAP or social audit (if required) will be prepared, disclosed and implemented prior to US$5 million civil works\. Sludge management requires a comprehensive E&S assessment to determine the quantity generated, treatment, transport and disposal/usage\. Mitigation measures associated with the ESMP to be incorporate in the Bidding Documents\. Note: A detailed description of Component 2 Investments is provided in Annex 1, Table A1\.2 41\. Institutional Arrangements for Implementing Safeguards\. The proposed implementation arrangements for the Project require WUC to be responsible for preparing, implementing, and monitoring all the safeguard instruments under the Project\. WUC has a designated Safety, Health, Environmental and Quality (SHEQ) unit which is tasked with the responsibility of carrying out environmental and social assessments for all water supply and sanitation infrastructure investments in Botswana; including supervision, monitoring and reporting on the implementation of the mitigation measures in compliance with the Botswana EIA law\. The unit is staffed with an environmental manager, a principal environmental officer, and a senior environmental officer\. WUC has the experience of carrying out environmental and social assessments in line with the national EIA Act and regulations but has limited experience in the application of the World Bank Safeguard Policies\. Page 107 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) 42\. Borrower’s institutional capacity to prepare, implement and monitor safeguard instruments\. At the national level, the Botswana Department of Environmental Affairs (DEA) is the regulatory agency and competent authority responsible for enforcing environmental regulations and ensuring that all infrastructure investments in Botswana are in compliance with the national EIA law and\. DEA works closely with environmental officers at the line Ministries and other Government agencies who are responsible for site level environmental management of project activities\. For this Project, the Safety, Health, Environmental and Quality (SHEQ) unit at the WUC will be required to ensure compliance with these laws\. To support the implementation of these safeguards requirements, the implementing agencies (WUC and MLWS) will procure the services of a dedicated environmental specialist and social specialist\. These specialists will support the implementation, monitoring and reporting of the mitigation measures described in site-specific ESMPs and RAPs\. They will work with staff in WUC - PMO and support the SHEQ unit in the execution of all safeguards actions\. Recruitment of these specialists is a legal covenant to be implemented within 2 months of effectiveness 43\. Annual Audits on the implementation of ESMPs will be prepared by WUC and submitted to DEA for approval before submitting to the Bank\. WUC will bear the full responsibility of preparing the studies\. During the project implementation period, supervision and monitoring will be crucial to ensure that the proposed mitigation measures are implemented\. WUC (with DEA oversight) will be responsible for monitoring of the environmental and social aspects of the Project\. Indicators for monitoring changes in the physical, biological, and socio-economic environments should be developed during the preparation of the design stage site specific ESIA and ESMPs, and the monitoring component fully elaborated as part of the detailed site specific assessments\. Table A4 3\. Actions, responsibilities, and implementation schedule - Summary Safeguards Action Plan SN Action Responsibility Due Date 1 Review all existing site-specific ESIAs and WUC Principal Review of all existing Year 1 ESIAs and ESMPs will ESMPs for the prioritized year 1 project Environmental be completed - by Board Presentation\. activities\. and Social Officer (completed) To be sent to the World Bank for review\. Recommendations for required improvements will be provided to the client for action\. 2 Prepare ToR for a full the ESIA of the WUC Disclosed\. proposed rehabilitation of the Mambo WWTP\. 3 Prepare an RPF to guide the preparation of WUC Principal Legal Covenant – RPF to be completed within 2 the site specific RAPs or Social Audits\. Environmental months of effectiveness\. and Social Officer/s 4 Finalized site-specific ESMPs and/or RAPs WUC Principal Year 1 Site-specific environmental and social and social audits for all the prioritized Year Environmental assessment to be carried out and Environmental 1 Project investments\. and Social Management Plans and RAPs prepared, consulted Officer/s and disclosed in-country and at the Bank’s external To be sent to the WB for review\. site\. All mitigation measures associated with the ESMP to be included in the Bidding Documents for civil works\. All social audits to be completed and site specific RAPs fully implemented prior to the start of civil Page 108 of 109 The World Bank Emergency Water Security and Efficiency Project (P160911) works\. 5 All required site specific ESMPs and RAPS WUC Principal All site specific Environmental Management Plan finalized and disclosed and compensation Environmental to be prepared, consulted and disclosed in-country paid to project affected people\. and Social Officer and at the Bank’s external site prior to issuing of bidding documents\. Mitigation measures associated with the ESMP to be incorporated in the Bidding Documents\. All requirements in site specific RAPs to be fully implemented prior to the start of civil works\. 6 ToR for recruitment of Environmental and WUC Principal By Negotiations (completed)\. Social Specialist/s to the WUC - PMO Environmental finalized\. and Social Officer 7 Finalize the selection of Environmental and WUC Prior to Effectiveness\. Social Specialist/s for the WUC - PMO\. 8 Recruitment of Environmental and Social WUC Legal Covenant -Within 2 months of Effectiveness Specialist/s to WUC - PMO\. or as otherwise agreed with the Bank\. 9 The client will hire independent dam WUC Experts to be selected prior to Effectiveness\. ToRs specialists to carry out the actions and selection of dam specialists are subject to specified based on the dam safety Bank’s review\. inspection reports and Bank’s recommendation and provide a written Expert recommendations will form an input to report of findings and recommendations ToRs /technical specification for relevant tendering for any remedial works and safety related packages to be prepared in 9\. Below\. measures necessary to upgrade the dams to an acceptable standard of safety\. 10 As recommended in 9 above, a dam safety WUC Dam Safety Action Plan to be prepared within 2 action plan outlining any remedial work to months of effectiveness\. Any mitigation measures be done including dam safety instruments to be incorporated in bidding documents for the will be prepared\. These actions will be relevant packages\. incorporated into the bidding documents for the relevant subprojects\. 12\. Incorporate required actions to identify WUC Updated ToR for ESIAs, RAPs and ESMPs and/or and address VC issues in the ToR for the other documents\. relevant ESIAs, ESMPs or RAPS\. 13 If required a VCP will be prepared based on WUC VCP disclosed in country and on Banks external prior, free, informed consultations\. The website prior to civil works\. plan will be disclosed and implemented according to the IP policy\. Page 109 of 109

APPROVAL

P004386

 ICRR 10016 Report Number : ICRR10016 ICR Review Operations Evaluation Department 1\. Project Data : OEDID : OEDID: L3051 Project ID : P004386 Project Name : Land Mobilization Project Country : Papua New Guinea Sector : Other Agriculture L/C Number : Loan 3051-PNG Partners involved : IBRD, Govt\. of PNG, Govt\. of Australia Prepared by : John Heath, OEDST Reviewed by : Luis Landau Group Manager : Roger Slade Date Posted : 03/12/1998 2\. Project Objectives, Financing, Costs and Components : Objectives (a) Create a clear policy and legislative environment to promote investment in land; (b) Enable customary land owners to participate more in the development of their own land; (c) Provide effective land services (surveying, valuation, registration etc\.) to all land users; (d) Transfer land administration from the national government to provincial governments; and (e) Optimize the use of alienated land\. Components (a) Construction and equipment of offices and staff houses; (b) Technical assistance to raise land administration quality standards; and (c) Incremental recurrent costs, including staff salaries Costs (a) Total project cost —Appraisal US$42\.8 million —Actual US$28\.7 million (b) Loan amount US$19\.6 million of which US$451,000 was cancelled 3\. Achievement of Relevant Objectives : (a) After a long delay some progress was made in the drafting of improved legislation; but apart from the Consolidated Land Law of 1996 no new legislation has been approved by Parliament; (b) No steps were taken to increase participation of customary land owners in the development of their own land; (c) Very little progress was made in improving land services \. A system was developed for processing information on land transactions; although it is suitable for PNG circumstances there has been little progress in implementation--throughout the country there are still backlogs at every stage of the land transaction process; (d) Government has begun to transfer some land administration functions from the center to the provinces but progress is very patchy and maintaining quality control for the decentralized functions has been hampered owing to persistent budget problems; (e) There is no evidence of any improvement in the use of alienated land; the 1989-92 survey of land availability was not completed and the (partial) results were not used for planning purposes \. 4\. Significant Achievements : The consolidation of disparate pieces of land law is nearly complete, and the Consolidated Land Law of 1996 has been enacted\. 5\. Significant Shortcomings : The designers of the project assumed that the existing land tenure system was a major constraint on economic and social development in PNG without looking at the bigger picture, considering alternatives, or having a detailed discussion of the issue with stakeholders\. Although the long-term objectives of the government's Land Mobilization Program are probably valid, in the short-run, there are a number of institutional weaknesses that remain to be strengthened\. The project failed because it was much too ambitious given government's weak implementation capacity\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev \.: Partial Negligible Owing to weak government commitment there was no real progress in building institutional capacity\. Sustainability : Uncertain Uncertain Bank Performance : Deficient Unsatisfactory Borrower Perf \.: Deficient Unsatisfactory Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : Do not launch land administration projects without adequate foundation in sector work and a full and well-informed discussion with stakeholders of future land tenure options; do not assume in advance of such discussion that “irregularâ€? land administration is necessarily a major development constraint\. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : The ICR gives a complete, clear and internally consistent account of the project\. No comment receive from Government and cofinanciers\.

APPROVAL

P040208

Report No\. PIC2128 Project Name Tunisia-Private Industry Support (&+) Infrastructure Upgrading Project Region Middle East and North Africa Sector Industry Project ID TNPA40208 Borrower Republic of Tunisia Implementing Agency Ministry of Industry (MOI) Contact: Mr\. Mohamed Fadhel Zerelli Director General for Industry, MOI Tel: 216\.1\.890\.319/892\.313 Fax: 216\.1\.285\.947/792\.420 Date This Update Prepared February 1996 Date Initial PID May 1995 Project Appraisal Date February 1996 Project Board Date June 1996 Background and PSD strategy 1\. Tunisia is at a critical point in its economic development, and both Government (GoT) and private sector are keenly aware of it\. Economic performance, helped by private sector exports in textiles and agro-industry, has improved following an extensive reform program over the last eight years, which has gone far to liberalize the economy and orient it outward by removing restrictions and administrative controls over external trade, prices and credit\. In line with this, the public sector has given way to the private sector in a wide range of activities\. 2\. However, international experience has shown that, while policy reform is a necessary condition for international competitiveness, it does not by itself guarantee the ability to compete in global markets\. The spread of new technologies, even in traditional labor-intensive sectors such as textiles and garments, is reducing the share of labor in total costs and putting a premium on quality, speed, and reliability of delivery and services\. Thus, unless policy reforms are supported by measures aimed at enhancing exporters' capacity to produce goods that conform to international norms for price and quality, sustainable export and economic growth may not materialize in Tunisia\. 3\. While Tunisia has managed to diversify its economy and acquire some new comparative advantages, competitors (such as Turkey, Thailand and Eastern European countries) have been more successful in strengthening their traditional comparative advantages in labor-intensive products, while also exporting higher value-added products\. Accordingly, Tunisia's performance is endangered by a lack of diversification of exports and by the lack  of international competitiveness of many industrial enterprises established under high protective barriers\. 4\. GoT and private sector agree that it is necessary to pursue integration with the world economy and, in particular, the European Union (EU)\. To this end, it has recently initialed a free trade agreement (FTA) with the EU, involving full trade liberalization over a 12 year period starting in 1997\. The scope and pace of trade liberalization are now defined clearly by the free trade agreement between Tunisia and the EU, as well as by Tunisia's recent accession to the GATT/WTO\. 5\. GoT is fully aware of the necessity of meeting the challenge of such a free trade zone and subsequent cooperation agreement\. Since it is seeking to manage and keep to a minimum the disruption and costs which the FTA is expected to cause in the short term, in particular to the industrial fabric, GoT has put in place a program (Programme de Mise a Niveau -- PMN) to upgrade the competitiveness of industrial enterprises to international standards\. The European Commission (EC) is playing a leading role in supporting the Tunisian upgrading process, with a program for enhancing competitiveness under preparation, as well as the establishment of a Euro-Tunisian business center (Euro-Tunisie Entreprises - ETE)\. Critical to the mise a niveau process is the strengthening and upgrading of Tunisia's support infrastructure for industry, to make it more efficient and responsive to the needs of private enterprises; GoT has requested Bank support for this effort\. 6\. The Bank's PSD strategy in the short-term is to work in parallel on two fronts: (a) support further reform in legal and regulatory frameworks to foster further private sector development, through the proposed Economic Competitiveness Adjustment Loan currently under preparation; and (b) support GoT's efforts to upgrade private firms' competitiveness, through this proposed project, which will parallel finance the EC's program for enhancing competitiveness, and possible subsequent operations\. Rationale for Bank Involvement 7\. The recent PSA and other ESW identify the main issues to be addressed to make the economy more competitive\. They respond to the priorities of GoT, which regards the Bank as a valuable source of policy advice and technical analysis\. Moreover, at GoT request and in preparation for Bank support for PSD, the Bank has been executing agent for a set of studies, financed by a Japanese grant, reviewing the needs to upgrade enterprises and strengthen support agencies\. The Project is being developed in close cooperation with the EC, as a component of the EC's Programme for Enhancing Competitiveness (PEC), reinforcing the two institutions' partnership for development\. -2-  The PMN and the EC Programme for Enhancing Competitiveness 8\. GoT has put in place the PMN to assist self-selecting (volunteering) viable enterprises to upgrade to international standards\. GoT has established a quadripartite Steering Committee (SC), including representatives of relevant ministries as well as representatives of the financial and enterprise sectors and a representative of the labor union, and chaired by the Minister of Industry, to oversee its PMN\. A coordinating entity, the Bureau de Mise a Niveau (BMN) has also been set up, reporting to the Cabinet of the Minister of Industry and serving as technical secretariat to the SC, to guide firms seeking competitiveness upgrading through the process\. 9\. A diagnostic study, covering inter alia market potential, management capability, technical performance and know-how, and financial strength as well as competitiveness, will be prepared by specialist consultants for each firm; where actual or achievable competitiveness is shown, preparation of a competitiveness upgrading plan (CUP) would follow, covering areas such as quality, productivity, environmental issues, recapitalization, organization and management, as well as physical investments\. The firm will implement this plan with support and appropriate technical assistance from various primarily private sector sources, whether domestic or foreign, coordinated through the BMN\. Access to financing under the PMN is conditioned on implementation by the firm of the agreed CUP\. The sectoral technical centers (STCs) are viewed as essential players in the program, both directly as providers of services to firms, and as facilitators of access to specialized foreign assistance\. 10\. The European Commission (EC) is playing a leading role in supporting the upgrading process, with a Programme for Enhancing Competitiveness (PEC) under preparation, to support the development of venture capital, provide technical assistance to the process, and provide training to the banking system\. The EC is also putting in place a Euro-Tunisian business center (ETE), which will undertake diagnoses of firms and provide them with appropriate technical assistance, as well as promote joint ventures between Tunisian and European firms\. 11\. The PEC comprises the following components: (a) fostering the development of the Tunisian capital market, through the provision of venture capital, through the EIB; (b) support to the Bureau de Mise a Niveau (BMN), in particular through: (i) the organization of study tours for Tunisian decision makers and of workshops in Tunisia on themes relating to the mise a niveau process; and (ii) the provision of direct technical assistance to the BMN\. The EC has requested Bank support for and participation in part (i) of this component; (c) a broad training program for the banking system, addressing each bank's individual needs as well as areas of general concern; (d) financing for a program manager to cordinate EC involvement in PSD issues in Tunisia; and (e) the Bank project to upgrade the private industry support infrastructure\. The Bank and EC would provide parallel financing -3 -  through their respective operations; the EC may partly finance the TA and training component of the Project\. 12\. The objective of the proposed Project is to put in place an efficient and market-responsive system of support agencies, providing appropriate assistance to the private sector, consisting mainly of small and medium enterprises (SMEs), and in particular to firms seeking to become internationally competitive\. The Project will be one component of the EC program aimed at supporting Tunisian efforts, through the PMN, to improve the international competitiveness of viable private sector enterprises\. 13\. The Project will provide finance, and possibly technical assistance, to support: (i) the institutional reform and strengthening of existing industrial support agencies, namely the four existing sectoral technical centers; (ii) the creation of additional technical centers; (iii) the establishment of the national metrology system; and (iv) the institutional reform and strengthening of the export promotion center, CEPEX\. 14\. Assistance to Existing Industrial Support Agencies\. The Project will provide finance to support the reform of the four sectoral technical centers (STCs) providing assistance to the industrial sector (CETTEX -- textiles, CETIME -- engineering and electrical industries, CNCC -- leather and shoes, and CTMCCV -- building materials, ceramics and glass)\. The Project will help develop Tunisian capacity to provide specialized advice to industry, often through transfer of know-how from foreign consultants, and sustain the impetus received from the recent reform of their Boards, three-quarters of the members of which are now from the private sector\. 15\. New Sectoral Technical Centers\. The establishment of new STCs will also be assisted\. It is currently proposed that four new STCs be established: for wood and furniture, for chemical industries, for wrapping and packaging, and for food processing industries\. Feasibility studies are currently underway for these new STCs, under terms of reference acceptable to the Bank, the results of which are expected by mid-July 1996\. New STCs will be established along similar lines to the reformed existing STCs\. 16\. Metrology\. In addition, an accreditation system is being set up for product certification (to ISO 9000 standards, etc\.)\. Most STCs are ready to perform product certification; they will be involved in this activity as well as in the related activities of the national metrology system (NMS) which is also to be established\. The proposed NMS is currently being defined after which specific needs for industrial metrology can be defined\. The Project will finance equipment for the NMS, mainly for industrial metrology, in addition to the metrology investments undertaken by individual STCs to meet their sectors' needs\. The inclusion of this component in the project along with the STCs will help ensure the availability to SMIs of needed services in the areas of quality assurance and product certification\. - 4-  17\. CEPEX\. The Project will provide financial assistance to support the reform of the export promotion center (CEPEX)\. The issues, and therefore the solutions, with respect to CEPEX are similar to those regarding the existing STCs; the main differences concern the fact that CEPEX serves all exporters or potential exporters, whether industrial or not, and performs more services for GoT\. Project Cost, Financing and Implementation 18\. The total estimated project cost is some US$53 million equivalent, with direct and indirect foreign exchange costs accounting for about 77 percent of total costs; the Bank loan would finance around 47 to 56 percent of total project costs (US$25-30 million equivalent)\. Cofinancing for the Project is expected\. A project implementation unit (PIU) will be established in the Ministry of Industry, supervised by a Project Director, to administer the project on behalf of GoT\. Environmental Aspects 19\. In accordance with O\.D\. 4\.01, this project has been classified in category "B"\. Please see attached Environmental Annex\. Lessons of Bank Experience 20\. Design of the project reflects conclusions of a review of completed projects in industrial technology development (TD), namely: (a) the impact of a technology project on TD hinges on the existence of a clearly defined strategy, where TD is seen as part of the overall process of industrialization; (b) the framework of incentives is a crucial determinant of success; (c) the strengthening of industrial technology capabilities may need intervention to promote research and development activities; (d) involvement in TD projects has resulted not only in the development of institutions and financing mechanisms but in the reform of technology policy; (e) successful development of institutions and mechanisms has hinged on the creation of solid management, with administrative and monitoring capabilities built- in to the technology functions; (f) the Bank's role has been critical when the success of the project depends on a sustained commitment in areas where financial returns are difficult to quantify or limited in the short term; and (g) technology policy as it relates to industry has a major role in determining competitiveness and productivity, and cannot be seen in isolation from macro-economic, trade, industrial and regulatory policies\. Risks 21\. There is a risk that the institutional reform of the existing STCs and CEPEX may not be fully implemented, allowing the STCs and CEPEX to continue past practices rather than reorient their activities clearly toward satisfying the expressed needs of private sector firms\. The consultation process underway with key - 5 -  representatives of the concerned sectors (who make up the majority of the boards of the STCs and half of CEPEX's board), the STCs and CEPEX, and GoT during the preparation of the performance contracts should mitigate this risk\. Also, GoT is now fully convinced of the need for, and soundness of, the proposed reform\. Contact Point: Public Information Center The World Bank 1818 H Street N\.W\. Washington D\.C\. 20433 Telephone No\.: (202)458-5454 Fax No\.: (202)522-1500 Note: This is information on an evolving project\. Certain components may not necessarily be included in the final project\. Processed by the Public Information Center week ending April 25, 1997\. - 6 -  Annex Environmental Annex Upgrading the competitiveness of private industrial enterprises to international standards requires a review not only of the financial soundness of these enterprises and their support institutions but also of their technological, environmental, and management performance\. This includes in particular an assessment of: the production process; the quality control system; the consumption and use of raw material, water, and energy; the production and management of waste; and the degree of compliance with environmental and quality requirements and standards (both national and international)\. The support institutions (the STCs) should be prepared to provide the best example as well as the best service and advice in these areas\. Training on environmental issues, institutional strengthening and other enhancement/mitigation measures will be an integral part of the technical assistance and investment support program to STCs and other beneficiary agencies under the project\. The establishment of a national metrology system will be also supported under the project\. The project will have an overall environmental positive impact by enhancing STCs' environmental capacity and performance and by helping improve compliance of private industrial firms assisted by the STCs with relevant Tunisian and international environmental requirements and standards\. -7-

APPROVAL

P087094

INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No\.: AC384 Date ISDS Prepared/Updated: March 24, 2004 I\. BASIC INFORMATION A\. Basic Project Data Country: Bosnia-Herzegovina Project ID: P087094 Project Name: BIODIVERSITY Task Team Leader: Christian Albert Peter CONSERVATION PROJECT Estimated Appraisal Date: November 9, Estimated Board Date: July 5, 2005 2004 Managing Unit: ECSSD Lending Instrument: Specific Investment Loan Sector: Forestry (50%);Sub-national Theme: Biodiversity (P);Other government administration (25%);Central environment and natural resources government administration (25%) management (P);Environmental policies and institutions (S);Land management (S);Participation and civic engagement (S) Safeguard Policies Specialists in the task team: Social Specialist: Environmental Specialist: Loan/Credit amount ($m\.): 0 Other financing amounts by source: ($m) GLOBAL ENVIRONMENT FACILITY 4 BILATERAL AGENCIES (UNIDENTIFIED) 2 B\. Project Objectives [from section 3 of PCN] The Global Environmental Objective is to preserve BiH's globally significant biodiversity and critical forests and mountain ecosystems\. The Development Objective is to increase the area in forest and mountain ecosystems under formal protection status, and to develop mechanisms in order to conserve these ecosystems in the long term\. Indicators would include: (i) area under formal protection, (ii) PAs managed according to sustainable management plans, (iii) revenues generated from economic activities in PAs, (iv) sustainable land-use practices applied in project areas, and (v) cross-border cooperation in PA management\. C\. Project Description [from section 4 of PCN] Project activities will be refined during project preparation, but are closely linked with the parallel development of the National Biodiversity Strategy and Action Plan (funded by GEF and the FDCP), which is scheduled to start in June 2004 and will take 18 months\. The information already available at  present will be used and does not require the NBS being completed before moving forward with project preparation\. Component 1: Biodiversity Conservation through Expanded Network of Sustainably Managed Protected Areas The objective of this component is to strengthen management planning, and improve facilities and infrastructure, of existing National Parks (NPs) (Sutjeska and Kozara), while enhancing the overall protected area network through creation of new PAs in the and the Una River watershed\. Without pre- empting results of NBS development and action plan, these areas are already recognized as high priority and are expected to be identified as such in the NBS\. Sutjeska and Kozara NPs, will be the first parks to receive financial and technical assistance for plan implementation\. This assistance would be expected to include, inter alia, upgrading of visitor and park management facilities, creation of trail systems, training and equipping of park management staff (rangers and administrative staff)\. For the proposed new PAs, the project will support their creation, support the development and implementation of management plans\. It will drawing on up-to-date concepts for multiple-use landscape planning, as well as new participatory approaches to include all relevant stakeholders\. Implementation support will be similar to that described for Sutjeska, tailored to each park's needs\. Component 2: Institutional Strengthening to Enhance Capacity for Successful Management of Protected Areas and their buffer zones\. (a) Building capacity of national and local institutions and other stakeholders to manage protected areas and to preserve biodiversity within production landscapes\. To achieve an overall PA density of even 5% implies a 10-fold increase compared to current formal protection levels, and therefore, it is likely that significant capacity will have to be developed, so that the PAs established in Component 1 as well as their buffer zones are sustainably managed\. Therefore, it is likely that considerable capacity will have to be developed, so that the PAs established in Component 1 as well as their buffer zones are sustainably managed\. Preparation will focus on identification of critical management skill gaps for PAs and buffer zones, and develop targeted training programs, tailored to the needs of the specific PAs, for all stakeholders\. Since the identification of optimal mechanisms for sustainable financing of PAs is expected to be a longer term process, the project will fund the introduction of and continuous experimentation with various financial and cost recovery mechanisms\. The project would then fund the implementation of training in sustainable landscape and park management, administration, and sustainable financial management, as well as workshops and study tours\. (b) Supporting a community outreach program which would target land users and civil society to raise awareness of conservation issues in- and outside protected areas\. To enable groups and individuals to carry out activities that contribute to sustainable use of natural resources in project areas, a small grants program will be established, modeled on the successful approaches in Croatia and Romania\. The grants program would focus on assisting users to implement management plans which incorporate sustainable use and conservation concerns\. Grant funding could also be provided for activities oriented towards sustainable approaches to tourism and leisure activities (including liaison with a pilot study on "Eco-tourism in BiH" funded by Japan)\. For agricultural land, a synergy can be sought in particular with the applied studies being conducted by FAO in three rural pilot areas in BiH, two of which are near or adjacent to PAs\. For forest land, synergies should be sought with the FDCP, which will focus on the sustainable management of forests and will include the identification of "high conservation value forests"(HCVFs), and forest productive landscapes near established or future PAs\. Project design will take into account models for sustainable management of productive agricultural and forest land in environmentally sensitive areas and ecological corridors\.  This component will not only build capacity, but will enable the various sectors and stakeholders to come closer to each other, communicate with one another, and establish common activities\. Functioning networks of people will thus be created not only within the same sector, but also across the three primary stakeholder communities (government, civil society, and the private sector)\. Component 3: Integration of BiH into transnational biodiversity conservation activities: Through technical assistance, workshops, study tours, and local/regional travel, the project would develop the framework required to implement trans-boundary cooperation activities with neighboring countries (Serbia and Montenegro as well as Croatia)\. Opportunities for these initiatives are realistic for two areas: (i) in the southeast between the already existing NPs Sutjeska (BiH) and Durmitor (Serbia and Montenegro); and (ii) in the northwest, where proposals exist to establish a NP to protect the Una River, which in parts represents the border between BiH and Croatia\. Component 4: Project management (implementation, monitoring & evaluation): (a) Implementation\. Implementation of the project will be undertaken by the existing PIUs devoted to the FDCP, which are subordinated to the two Entity MAWMFs\. Close cooperation with the Ministries of Environment will be critical, considering that the GEF project involves multiple sectors\. Taking into account that the FDCP will be completed in 2006, opportunities for mainstreaming the PIU functions will be developed during the first year of BCP implementation\. (b) Monitoring & evaluation\. A detailed monitoring and evaluation (M&E) program will be developed during project preparation\. D\. Project location (if known) At this stage of preparation, four specific areas have been selected for direct investment support: (i) Sutjeska National Park, in Republika Srpska, which already has National Park status, and a management plan; (ii) Kozara Protected Area, also in RS; (iii) Igman-Bjelasnica, where a detailed Social Assessment has been carried out, and a feasibility study has been completed, recommending National Park creation, and (iv) Una River watershed, where the Government of the Federation has already taken a decision to declare a PA\. Construction of new roads in/approaching park areas is unlikely\. Construction, if any, would be limited to minor civil works and rehabilitation, requiring normal mitigation measures\. As is normal with protected area management planning, an assessment of land use and vegetation would be carried out identifying critical ecosystems, and a management plan would be prepared (with local people) whose objective would be to ensure that critical ecosystems are protected while ensuring that peoples' livelihoods are also sustained\. There would be no conversion or degradation of critical natural habitats\. The purpose of the management plan would be to preserve these and to permit recovery of threatened ecosystems\. In addition, the risks related land mines will be addressed through including measures for any investment so as to avoid or clear landmines and plan for safety measures\. Other potential areas are to be determined during preparation, based on the priority setting exercise in the IDA-financed Forest Development and Conservation Project\. However, it is likely that the BCP will only finance preparation of management plans, including environmental and social assessments which would be required prior to `protected area' designation\. Due to the limited funding, the project will likely not finance direct investments to `operationalize' these management plans\. E\. Borrower's Institutional Capacity for Safeguard Policies [from PCN]  As other Ex-Yugoslav countries, Bosnia and Herzegovina has for a long time lagged behind in developing its capacity to address safeguard policies appropriately\. Reasons for this, include economic difficulties, political instability, and military conflict\. Nevertheless, since two years BiH is receiving technical assistance from the European Union to harmonize environmental legislation with EU directives as well as to build up and strengthen institutional capacity\. The Entity Ministries of Agriculture, Water Management and Forestry have demonstrated during the implementation of the Forestry Project (1998-2003) that they have the capacity to carry out environmental assessments (in the context of forest road construction) and elaborate and implement environment management plans\. In-country expertise for social assessments exist, capacity for addressing social and environmental safeguards will be strengthened during implementation of the Forest Development and Conservation Project (FDCP)\. II\. SAFEGUARD POLICIES THAT MIGHT APPLY Applicable? Safeguard Policy If Applicable, How Might It Apply? [Y] Environmental Assessment (OP/BP 4\.01) See below under the Environmental Assessment Category\. [N] Natural Habitats (OP/BP 4\.04) [N] Pest Management (OP 4\.09) The project will promote (through component 3) the use of biological or environmental control methods and is not expected to finance any pesticide\. Integrated Pest Management issues will be analyzed in the context of the project's environmental assessment\. [Y] Involuntary Resettlement (OP/BP 4\.12) Any establishment of new protected areas will need to involve local communities in broad and sustained participatory processes\. Thorough participation is critical because, while there will probably be little or no actual resettlement, it is likely that there will be some restrictions to traditional access as a result of PA formation\. The project will assist the government to undertake thorough social assessment exercises in any potential PA\. Where access restrictions are an issue, a Process Framework will be used to mitigate the impact of these restrictions\. If the social impacts of PA formation are too difficult for mitigation, the PA would not be established\. A Process Framework will be prepared as part of project preparation for the Igman- Bjelasnica Protected Area\. This Process Framework will be prepared and disclosed as a condition for appraisal\. The Process Framework will describe the participatory process by which project affected people will be consulted with in order to agree on the limits and scope of activities in the protected areas, the criteria for eligibility, mitigation measures to assist the affected population, potential conflict resolution mechanisms, etc\. It will also describe the arrangements for implementing and monitoring the process\. It should be noted that for the largest area proposed for PA status ­ the Igman-Bjelasnica area ­ an initial detailed Social assessment has been carried out during preparation of the FDCP (see Project Appraisal Document, Annex 11 for Summary)\. This assessment indicated broad support for this PA, with the vast majority of respondents/participants emphasizing the opportunities that the park could create, vs\. the potential threats\. This  area will also be the subject of the piloting of a new methodology for consultation processes, to be established under the FDCP, prior to FMBCP approval\.  [N] Indigenous Peoples (OD 4\.20) [Y] Forests (OP/BP 4\.36) The project will (in a positive way) contribute to the improvement of livelihood of stakeholders depending upon or interact with forests\. Specifically, and consistent with OP 4\.36, the project aims to harness the potential of forest ecosystems to reduce poverty in a sustainable way integrate forest conservation effectively into sustainable development and protect vital local and global environmental services and values of forests\. [ ] Safety of Dams (OP/BP 4\.37) [ ] Cultural Property (draft OP 4\.11 - OPN 11\.03) [ ] Projects in Disputed Areas (OP/BP/GP 7\.60)* [TBD] Projects on International Waterways (OP/BP/GP 7\.50) The project is likely to establish a National Park to protect the Una River, which is an international river\. However, the activities to be supported are unlikely to trigger the safeguard policy\. This will be investigated further as the activities under the project are refined\. Environmental Assessment Category: [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) An initial categorization of B is appropriate\. While certain project details are lacking, there may be potential adverse environmental impacts to environmentally important areas in the implementation of the physical improvement components of the project\. It is projected that these impacts will be site-specific and few if any will be irreversible\. Given the nature of this biodiversity project, whereby important ecosystem functions are identified in advance and management frameworks for protection established, it is anticipated that mitigating measures will be integral to project design and implementation\. A detailed environmental assessment will be prepared (including evaluation of alternatives from environmental considerations) in accordance with the format given in OP 4\.01 Annex B and C\. Additionally, the EA will describe the procedures and arrangements for environmental screening and assessment of the subprojects under the small grants component\. III\. SAFEGUARD PREPARATION PLAN A\. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared\. September 20, 2004 B\. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS\. Not applicable *By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas  C\. Time frame for launching and completing the safeguard-related studies that may be needed\. The specific studies and their timing1 should be specified in the PAD-stage ISDS\. The safeguard-related studies will be the Environmental and Social Assessments for the new areas and the Process Framework\. The EA part of this work will begin after PDF-B resources are approved and obtained , likely in May 2004\. IV\. APPROVALS Signed and submitted by: Task Team Leader: Christian Peter 03/24/2004 Approved by: Regional Safeguards Coordinator: Ronald Hoffer 03/25/2004 Comments Sector Manager: Marjory-Anne Bromhead 03/25/2004 Comments 1Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons\.

APPROVAL

P113342

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No\.: AB4262 Project Name Grenada OECS Education Development Project - Additional Financing Region Latin America and the Caribbean Sector Education Project ID P113342 Borrower(s) Government of Grenada Implementing Agency Ministry of Education (MOE) Environment Category [ ] A [ ] B [X ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared 14 October 2008 Estimated Date of Appraisal Authorization 27 October 2008 Estimated Date of Board Approval 25 November 2008 I\. Key development issues and rationale for Bank involvement New challenges are emerging as the MOE moves towards universal access to secondary education\. The Education system in Grenada has realized many accomplishments over the last decade, but with ongoing changes new challenges have emerged\. Some of these challenges relate to infrastructure reconstruction following damages incurred by Hurricane Ivan in October 2004\. Others relate to the need for better student support and improved education quality as the system expands to provide universal secondary school access\. More low achieving students are entering secondary school, and teachers are seeking ways to address their learning needs, as well as to improve literacy and numeracy skills of primary-age students to ensure that future students are better prepared for secondary education\. Greater input from trained school counsellors is also required\. Grenada’s student achievement continues to be low\. Some progress has been made to improve education quality\. However, due to the effects of Hurricane Ivan and the emphasis placed on reconstruction, the quality of education has suffered\. Poor student performance on 2007 CXC exams in math and language reinforces the urgent need for the proposed training in literacy and numeracy\. Only 10 percent of those students who sat the CXC exams in 2007 passed at least 5 subjects, including math and English\. Management of schools and support to school management needs to improve\. New school management teams were introduced and are initially working well\. They have helped schools, through whole school evaluation, to identify teacher training and counseling needs which are included in this additional financing proposal\. However, they require additional training to better support teachers and school principals and to ensure that the district education officers work with the schools in a coordinated way, in particular to ensure better student performance\. Page 2 Rationale for Bank involvement: The Bank has a long-standing history working with the Government of Grenada, first on the Basic Education Reform Project and then on preparation and implementation of the ongoing OECS Education Development Project (OEDP)\. The OEDP was approved on June 27, 2003 and became effective on January 28, 2004 \. The main thrust of this project was on improvement of education quality and management, the key development issues identified for the sector\. On November 16, 2004, immediately following Hurricane Ivan, the project was restructured to address emergency civil works needs\. The first objective was revised to include replacement and rehabilitation of secondary schools damaged by the passage of the hurricane, and a significant portion of the loan and credit was redirected to finance this task\. The other two objectives remained the same, but the expected outcomes were significantly scaled down and the activities were funded mostly by a grant from DfID through parallel project funding\. The MOE has achieved or surpassed most of the project’s targets after its restructuring\. Progress has been made in: (i) increasing the number of new secondary school places; (ii) increasing transition rates from primary to secondary in previously identified underserved areas; and (iii) improving the gross completion rate for Form V\. Though there has been progress towards strengthening the quality of teaching and learning, and management at different levels of the education sector, this has been less than originally anticipated due to the scaling down of project activities in these areas after Hurricane Ivan\. The Bank has worked closely with the MOE over the years and recognizes the technical team’s commitment to carrying out quality enhancing activities using the DfID seed grant and government funds\. The proposed additional World Bank financing would support their ongoing efforts, allowing the Government to fulfill the original goals of the OEDP while responding to the emerging needs as the MOE transitions to universal secondary education\. It would focus on scaling up the aspects that were curtailed when the project was restructured and which could not be covered by the DfID grant, namely improving education quality and strengthening management\. II\. Proposed objective(s) The proposed additional financing would support the OEDP’s key development objectives to: (i) increase equitable access to secondary education; (ii) improve the quality of the teaching and learning process; and (iii) strengthen management of the sector and governance of the schools\. The additional financing would place special emphasis on scaling up the aspects that were curtailed when the project was restructured, namely improving quality and strengthening management\. III\. Preliminary Description The additional resources would be allocated to support teaching and learning and strengthen the school management teams and project administration\. The proposed activities would fall under Components 2, 3 and 4 of the ongoing OEDP\. Under Component 2, Improving the Quality of Teaching and Learning , support for literacy and numeracy activities would include: (i) certificate training of some 60 primary and secondary Page 3 teachers in literacy and numeracy through an online modality and in-service training for additional primary and secondary teachers; (ii) strengthening of instructional support through the acquisition and development of basic pedagogical resources to enhance teaching of Mathematics and Language Arts and facilitate parental assistance in the learning of Mathematics, as well as the development of a standardized performance measurement system; and (iii) training in materials production to strengthen the capacity of the Materials Production Unit to develop instructional materials for use in schools, and upgrading of equipment for said purpose\. Also under Component 2, the additional resources would finance more training for Technical and Vocational teachers in secondary schools and the improvement of student support services through training of 20 Counseling Assistants (qualified teachers) to Bachelor’s degree level and of five school counselors from Bachelor’s to Master’s degree level\. Under Component 3, Strengthening Governance and Management , the additional resources would finance training for the recently formed school management teams and members of the district teams to provide added support for the implementation of literacy and numeracy programs in schools\. Under Component 4, Project Management , the additional resources would continue to support the Coordinating Project Unit (PCU) and MOE under the current arrangements, and for the monitoring of project outputs and outcomes\. III\. Safeguard Policies that might apply Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment ( OP / BP 4\.01) [] [x] Natural Habitats ( OP / BP 4\.04) [ ] [x] Pest Management ( OP 4\.09 ) [ ] [x] Physical Cultural Resources (OP/BP 4\.11) [ ] [x] Involuntary Resettlement ( OP / BP 4\.12) [] [x] Indigenous Peoples ( OP/BP 4\.10) [ ] [x] Forests ( OP / BP 4\.36) [ ] [x] Safety of Dams ( OP / BP 4\.37) [ ] [x] Projects in Disputed Areas ( OP / BP 7\.60) * [ ] [x] Projects on International Waterways ( OP / BP 7\.50) [ ] [x] Piloting the Use of Borrower Systems to Address Environmental and Social Issues in Bank-Supported Projects (OP/BP 4\.00) [ ] [x] IV\. Tentative financing Source: ($m\.) IDA 1\.9 IBRD 0\.0 Borrower/Recipient 0\.0 Total: 1\.9 * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 4 V\. Contact point Contact: Cynthia Hobbs Title: Senior Education Specialist Tel: 202 473 8580 Fax: 202 614 0855 Email: chobbs@worldbank\.org Location: Washington DC

APPROVAL

P154431

PROJECT INFORMATION DOCUMENT (PID) ADDITIONAL FINANCING Report No\.: PIDA25344 Project Name AF for AR Provincial Public Health Insurance Development Project (P154431) Parent Project Name Provincial Public Health Insurance Development Project (P106735) Region LATIN AMERICA AND CARIBBEAN Country Argentina Sector(s) Health (90%), Public administration- Health (10%) Theme(s) Health system performance (46%), Child health (18%), Injuries and non-communicable diseases (18%), Gender (18%) Lending Instrument Investment Project Financing Project ID P154431 Parent Project ID P106735 Borrower(s) National Ministry of Health Implementing Agency National Ministry of Health Environmental Category B-Partial Assessment Date PID Prepared/Updated 11-May-2015 Date PID Approved/Disclosed 12-May-2015 Estimated Date of Appraisal 13-May-2015 Completion Estimated Date of Board 07-Jul-2015 Approval Appraisal Review Decision (from Decision Note) I\. Project Context Country Context Since its economic crisis of 2002, Argentina has been reducing poverty and sharing the gains of rising prosperity\. The middle class grew by 68 percent between 2004 and 2012, reaching 53\.7 percent of the population\. Total poverty (measured at US$4-a-day) declined from 31\.0 percent in 2004 to 10\.8 percent in 2013, while extreme poverty (measured at US$2\.50-a-day) fell from 17\.0 percent to 4\.7 percent\. But income inequality, measured by the Gini coefficient, remains high reaching 42\.5 in 2012; while the proportion of the population with unsatisfied basic needs reached 12\.5 percent in 2010\. Despite the reduction in poverty and inequality, substantial differences in poverty rates and access to services persist, particularly across provinces\. Sectoral and institutional Context Page 1 of 6 Argentina’s health system has historically been split into three distinct regimes, with two of them involving formal (social or private) health insurance and the other – the public sector – providing health services used mostly by the uninsured\. The three regimes are: (i) the contributory social insurance sector that includes the Obras Sociales schemes run by trade unions and professional organizations, as well as the Comprehensive Medical Assistance Program (PAMI) for retirees and pensioners that have worked in the formal sector – jointly covering 57 percent of the total population; (ii) the contributory private health insurance sector covering 5\.1 percent of the population; and (iii) the public sector, providing services used mostly by the remaining 37\.9 percent of the population that are not covered by any formal health insurance schemes\. There is a very clear correlation between being poor (or otherwise vulnerable) and the probability of being excluded from the formal health insurance schemes\. According to data from the National Survey of Urban Households (2013), the “uninsured rate” (percentage without formal health insurance) for people living in extremely poor areas is 65\.5 percent, compared to 25\.5 percent for those living outside these extremely poor areas\. There are also substantial geographical disparities, with the uninsured rate much higher in the poorer provinces (mostly in the North) than in the richer ones (mostly in the South)\. The uninsured (those without formal health insurance) still have access to free, non-contributory (tax-financed) health care at health facilities in the public sector\. User fees are prohibited at public facilities, and enrolment or registration is not necessary to access their services\. Services received from health facilities in the public sector – except where there are risk-pooling mechanisms involving enrolment for the uninsured such as Plan Nacer or the Sumar Program – often have a number of deficiencies, such as variable quality\. In the absence of payments flowing to public health facilities from insurance or risk-pooling schemes, inputs are usually received in-kind and in fixed amounts, and salaries are fixed\. And, providing more or better services to the uninsured does not lead to more in-kind inputs or cash being received by public health facilities, nor to higher salaries (or cash bonuses) for the health facility personnel\. These personnel, furthermore, do not have any autonomy in decision-making regarding the mix of in-kind inputs\. These constraints typically have adverse effects on performance and on the quality of services rendered\. Public health service providers have also tended to under-emphasize the provision of preventative services – despite their high cost-effectiveness – to those not enrolled in any insurance or risk- pooling scheme\. In part, this is because these individuals are hard to track and monitor, since they are not enrolled or registered\. As an example, the National Risk Factors Survey of 2009 found that the percentage of uninsured women that had breast cancer screening in the previous two years was 37\.7 percent, as compared to 58\.3 percent for women with formal health insurance\. The same survey found that 54\.8 percent of the uninsured had received a cholesterol check, compared to 82\.4 percent of those with formal health insurance\. In effect, until public risk-pooling mechanisms were established starting in 2004, there was a two- tier health care system, where the poor and uninsured were excluded from effective health coverage\. Many of the uninsured are still not covered by public risk-pooling mechanisms\. In effect, nominally Argentina has Universal Health Coverage (UHC) because health care (at the public facilities) is available to all for free\. But in practice, the country has a substantial way to go before being able to achieve effective UHC\. In 2004, the Government embarked on a series of reforms on the road to effective UHC, aimed at establishing provincial risk-pooling schemes – provincial public health insurances – for the otherwise uninsured, starting with the flagship Plan Nacer program\. Plan Nacer was supported by two successive Bank loans as part of an APL series: the Provincial Maternal-Child Health Investment Project Phase I (P071025, US$135\.8 million) and Phase II (P095515, US$300 million)\. Page 2 of 6 These loans were approved in April 2004 and November 2006 respectively, and have now both closed\. Plan Nacer was one of the first large-scale programs worldwide to use a Results-based Financing (RBF) approach in the health sector\. Subsequently, various other RBF programs in the health sector around the world have been modeled after it\. Under Plan Nacer, provincial public health insurances were created, covering a basic package of pre-defined cost-effective maternal and child health services\. Eligible beneficiaries consisted of uninsured pregnant and lactating women (up to 45 days after delivery), as well as uninsured children under six\. A rigorous Impact Evaluation (IE) of Plan Nacer found that it had a substantial positive impact on key health indicators – of utilization, quality and outcomes\. Plan Nacer was succeeded by the Sumar Program – financed by the current PHIP Project for which the AF is proposed\. The project design retains the essential features of Plan Nacer, but includes new population groups not covered by Plan Nacer – children aged 6 to 9 years, youth aged 10 to 19 years and women aged under 65 without formal health insurance\. Additional benefit plans of mostly preventative health services have been defined for these new groups\. About 73 percent of the total PHIP loan proceeds is for Component 1, which finances results-based capitation payments to the provincial public health insurances\. These payments are co-financed by the provinces and the National Government, whose contributions have been rising over time\. Incentives are provided at two stages – at the provincial level as well as the health provider level – and are based on outputs and results instead of a traditional health system based on inputs and fixed budgets\. The size of the capitation payments received at the provincial level is based in part on provincial performance, as measured by fourteen tracer indicators (e\.g\. indicators of prenatal care and immunization coverage in eligible women and children, following pre-determined quality protocols)\. The financing received by the provinces via this mechanism is used to make payments to the health facilities on a fee-for-service basis, and payment for each service is conditional on adherence to pre-defined quality protocols\. The achievement of performance indicators by both provinces and health facilities is verified by an external audit firm\. Components 2 and 3 of the Project finance key inputs – such as technical assistance (TA), support for information systems and selected medical equipment\. The mix of these inputs is carefully chosen, taking into account key gaps at the provincial and health facility levels in the delivery of services covered under the capitation payments of Component 1 – hence aiming to enhance the impact of these capitation payments\. TA focuses on institutional and management strengthening\. Like Plan Nacer, the Sumar Program is very cost-effective, costing little compared to the provincial health budgets\. Total expenditures under the Sumar Program amount to about 2 percent of provincial health budgets, on average\. One of the reasons for the program’s high impact and cost- effectiveness is the high degree of flexibility and autonomy in the use of the funds at the health facility level\. The financing usually represents the only source of funding where the health service providers have autonomy in the use of the funds\. The Sumar Program represents a further step towards effective UHC for everyone in Argentina, by expanding health insurance coverage to include additional groups of people (uninsured adult women, older children and adolescents) – albeit with significantly smaller health service benefit plans than those covered by most formal health insurance programs\. While the Sumar Program is the main vehicle for achieving effective UHC in Argentina, other public schemes involving capitation payments to the provinces – mostly operating independently of the Sumar Program – do exist\. For example, Incluir Salud, managed by the National Ministry of Health, covers a broad range of services (including expensive and high-complexity curative services) for around 1,100,000 extremely vulnerable and uninsured people including women with seven or more children; the population with severe disabilities; and older people receiving a non- contributory pension\. A portion of the program’s financing is transferred to the provinces in the Page 3 of 6  form of capitation payments, with an incipient incentive mechanism at the provincial level but not yet at the provider level, unlike in the case of the Sumar Program\. Other public schemes involving capitation payments also exist, across all provinces as well as for individual provinces\. The only major population group in Argentina now that is not covered by any type of insurance or risk pooling mechanism consists of adult men aged under 65, and expanding coverage to include this group would be one of the logical next steps on the road to UHC\. As Argentina moves towards effective UHC for everyone, there is also a need for an integrated approach involving the Sumar Program and the other schemes with capitation payments – both public (e\.g\. Incluir Salud) and otherwise (e\.g\. the Obras Sociales) that operate more or less independently of the Sumar Program, to avoid fragmentation and inefficiency in the use of existing resources\. II\. Proposed Development Objectives A\. Current Project Development Objectives – Parent The PDOs are to: (a) increase utilization and quality of key health services for the uninsured target population; and (b) improve institutional management by strengthening the incentives for results in Participating Provinces and among Authorized Providers\. III\. Project Description Component Name Component 1: Supporting Provincial Public Health Insurance Comments (optional) Component Name Component 2\. Institutional and Management Strengthening of the National and Provincial Ministries of Health Comments (optional) Component Name Component 3: Building capacity of the National and Provincial Ministries of Health to deliver services Comments (optional) IV\. Financing (in USD Million) Total Project Cost: 260\.61 Total Bank Financing: 200\.00 Financing Gap: 0\.00 For Loans/Credits/Others Amount Borrower 60\.61 International Bank for Reconstruction and Development 200\.00 Total 260\.61 Page 4 of 6 V\. Implementation Institutional Arrangements for the new activities under the proposed AF would be as follows: (i) The MSN would update the PHIP resolution to incorporate the new population sub-group under the Project – eligible adult men aged under 65\. (ii) Each Participating Province would sign an addendum of the Umbrella Agreement in order to incorporate the new population sub-group\. (iii) Participating Provinces would sign an addendum of the Annual Performance Agreements, incorporating the GHI for this sub-group and the updated IPPs; updated IPPs would be re-consulted and re-disclosed before any new activity takes place in the Participating Province\. (iv) Capitation pilots under Component 1: For the purpose of implementing these pilots, a Pilot Agreement would be signed between the MSP and the health service provider incorporating the agreed results to be achieved, the related payments and the verification mechanisms\. In addition, the Operations Manual would contain full details of the pilot design, the requirements to be met by a Province in order to be eligible for these pilots, the selection criteria for providers and how the results are going to be measured and evaluated\. Implementation Arrangements for the newly included population sub-group would be, as under the parent Project, GHI capitation payments would be transferred from the MSN to the MSP in two steps: (a) a share of the financing (60 percent) would be provided after effective coverage is verified, and: (b) the remaining share (40 percent) would be transferred based on provincial performance as measured by achievement regarding several pre-defined tracer indicators, except during an initial startup period (until December 31st, 2015) when the full 40 percent would be transferred regardless of provincial tracer performance\. Implementation Arrangements for Component 2 would change as follows: Under the AF and starting in March 2016, financing of the PHIU staffing would decline from 70 percent to 60 percent, and then to 55 percent in March 2017\. These changes would be reflected under the Umbrella Agreements to be signed by the Participating Provinces\. As for the PCU, currently 60 percent of PCU staffing is financed\. But starting in March 2016 financing would decline to 50 percent, and then to 45 percent starting in March 2017\. VI\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 ✖ Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ Comments (optional) The Project has triggered OP/BP 4\.01 on Environmental Assessment due to the potential Page 5 of 6  environmental concerns around the handling of health care waste resulting mainly from the expansion of already-included high-complexity health interventions to new sub-groups of beneficiaries\. Therefore, the Project's Environmental Category was upgraded from C to B\. For social safeguards, the OP/BP 4\.10 on Indigenous Peoples policy was triggered under the original project, and an Indigenous Peoples Planning Framework (IPPF) was developed and published in 2010\. In order to reflect the scaling up of Project’s activities, the IPPF was updated and re-consulted on April 9th, 2015\. VII\. Contact point World Bank Contact: Andrew Sunil Rajkumar Title: Sr Economist (Health) Tel: 458-1904 Email: arajkumar@worldbank\.org Contact: Vanina Camporeale Title: Senior Operations Officer Tel: 5260+3675 / Email: vcamporeale@worldbank\.org Borrower/Client/Recipient Name: National Ministry of Health Contact: Dr\. Federico Kaski Fullone Title: Secretary of Promotion and Health Programs Tel: 541143799002 Email: fkaski@msal\.gov\.ar Implementing Agencies Name: National Ministry of Health Contact: Dr\. Federico Kaski Fullone Title: Secretary of Promotion and Health Programs Tel: (5411) 4379 9002 Email: fkaski@msal\.gov\.ar VIII\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Page 6 of 6

APPROVAL

P118981

Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: AB5287 Project Name Tamil Nadu Road Sector Project – Additional Financing Region SOUTH ASIA Sector Roads and highways (90%); Sub-national government administration (10%) Project ID P118981 Original Project Name: Tamil Nadu Road Sector Project Original Project ID: P050649 Borrower(s) GOVERNMENT OF INDIA Implementing Agency Highways Department of The Government of Tamil Nadu Address: Tamil Nadu Road Sector Project, TNHB Building, II Floor, 48 Dr\. Muthulakshmi Salai, Adyar, Chennai - 600 020 Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared December 8, 2009 Estimated Date of Appraisal Authorization November 2, 2009 Estimated Date of Board Approval March 23, 2010 1 \. Country and Sector Background 1\.1 Tamil Nadu has a population of approximately 62 million and an area of 130,058 sq\. km\. Road transport is the dominant mode of transport in the State accounting for about 80% of both freight and passenger trips, facilitating trade within the State and with its neighbors as well as generating substantial employment in its own right\. The primary road network extends over 25,545 km, including 4,873 km of National Highways, 9,384 km of State Highways and 11,288 km of Major District Roads\. 1\.2 Increasing Demand for Road Transport \. Demand for road transport has increased rapidly with vehicle registrations growing by about 14% annually during the 1990’s and by about 10% annually since year 2000\. Demand is projected to grow at least at 8-9% per year for the foreseeable future\. 1\.3 Road Network Deficiencies\. Despite the growing demand, infrastructure supply has not kept pace leading to serious network deficiencies\. About 48% (9,869 km) of the State Highways and Major District Roads are of less than two lane width (7 m)\. Due to the economic importance of these roads, the Government of Tamil Nadu has decided to widen all State Highways to two lanes and the Major District Roads of single lane width to either intermediate lane or two lane width depending on traffic and other considerations\. The State also has about 36,096 km of Other District Roads which are generally single lane\. Page 2 2 1\.4 Inadequate Attention to Maintenance Management and Financing\. The inadequate capacity of the road network has been further exacerbated by inadequate maintenance\. In the past, for several years, funding for road maintenance had been less than 65% of the requirement, according to Finance Commission norms\. However, in the recent years, the funding for maintenance has been at par with the requirements, according to Finance Commission norms\. In the State, about 20% of the State Highways and Major District Roads are in poor condition\. The road inventory and condition database is being updated to reflect the actual status of road needs which can then be used in prioritization of maintenance works\. There is a concern that the limited funds earmarked for maintenance are not being effectively utilized\. A major portion of the funds is spent on the gang labor force, whose productivity is thought to be low\. In mid-2002, Government of Tamil Nadu reduced the number of gang labors but again increased their number in 2007\. 1\.5 Weak Institutions to Manage and Operate Roads\. As part of project preparation of Tamil Nadu Road Sector Project, in 1999 the Government of Tamil Nadu commissioned an independent institutional review of the main road agency in the State, the Highways Department\. This identified a number of weaknesses in the financial, institutional and regulatory environment in which highways are managed\. Based on the recommendations of the Institutional Development Study, a strategy has been developed to implement certain reforms in the areas of organizational structure and management, core processes, information management as well as financial and regulatory environment\. These institutional development activities are at various stages of development or implementation\. 1\.6 Inadequate Attention to Road Safety\. As is the case elsewhere in India, rapid motorization combined with inadequate enforcement of driving and vehicle road worthiness regulations as well as inadequate infrastructure are leading to rapid rise in the number of deaths and injuries from road accidents\. The most vulnerable road users – pedestrians, bicyclists and motorcyclists – are especially at risk\. The underlying causes of this poor sector outcome are the lack of coordination between key stakeholders as well as insufficient funding and planning of remedial actions\. Recently, a road accident database management system has been developed which would be extremely useful for management decision making as well as for identification of black spots and arriving at design interventions\. The Government of Tamil Nadu has also started improvements of black spots through its budget funds\. 1\.7 The Government of Tamil Nadu has approved a road safety policy in 2007 which emphasizes the importance of engineering, education, enforcement and emergency medical relief as part of its action plan to reduce road accidents\. A Citizen’s Charter confirming the commitment of Highways Department towards the citizens of India, of their vision and mission to provide safe, reliable and environment friendly network within the State has been brought out\. In 2002, a Highways Act was enacted which considerably strengthened the Highways Department’s ability to enforce its right of way, prevent ribbon development, utilize simplified land acquisition procedures and to enter into agreements with private companies to undertake road maintenance and development\. The Government of Tamil Nadu has set up the Tamil Nadu Road Development Company in partnership with Infrastructure Leasing and Financial Services to facilitate identification, preparation and implementing road projects in a commercial format with active participation from the private sector\. Similarly, the Tamil Nadu Urban Development Page 3 3 Fund has been set up by the Government in partnership with Industrial Credit and Investment Corporation of India to facilitate funding and financing urban infrastructure wherever feasible through private participation\. Government of Tamil Nadu, either on its own or through the above facilities, has implemented or initiated preparation of some other road/bridge projects under the commercial format\. 1\.8 The Highways Department and the Government of Tamil Nadu more widely are starting to address some of areas of weakness in their core processes\. In procurement, the Tamil Nadu Transparency in Tenders Act, 1998 provides for transparency in public procurement and regulation of the procedures for inviting and accepting tenders and ensuring integrity of tender process and competitiveness\. A Commissionerate of Tenders, comprising senior officers from the technical and finance departments, is in position to streamline the acceptance and approval of tenders\. In information technology, the Government has introduced computerization, e-mails and internet access to all important departments including Highways Department\. On the website of Highways Department, key information on policies and programs, tenders, various projects, organization table and responsible persons etc\. are displayed\. The Highways Department is making a concerted effort to provide access to all its staff from the headquarters level to the division level to a reliable computer network\. 2 \. Objectives The Project Development Objective (PDO) is to improve the quality and sustainability of the core road network of Tamil Nadu\. This objective is to be achieved through implementation of the following three project components: A) Road Upgrading Component consisting of widening and strengthening of about 750 km of existing state highways to two lane roads B) Road Maintenance and Safety Works Component consisting of periodic maintenance works covering about 2000 km of state roads C) Institutional Strengthening and Policy Development Component consisting of implementation of Institutional Strengthening Action Plan, strengthening of road maintenance planning and implementation, road safety, training, equipment, and pre- investment studies The implementation progress by component is: a) Road upgrading: The overall progress of works in five contracts which are under implementation is about 86%\. For one contract [i\.e construction of Tsunami Bridge], bids have been invited\. For the remaining one contract [i\.e 4 km-long Kumbakonam Bypass], bids are expected to be invited shortly\. b) Road maintenance and safety works: 849 km of roads have been improved\. Works on 117 km of roads are in progress\. For improvement of about 413 km of roads on performance-based maintenance contracts, bidding documents are being prepared\. Page 4 4 c) Institutional Strengthening and Policy Development: Activities have focused on the institutional framework of the Highways Department and on capacity building\. Activities in the component are now concentrating on providing tools to strengthen the operational capacity of the Highways Department\. These include Road Management System (RMS), Integrated Human Resource, Project and Financial Management System (P&FMS), Geographic Information System (GIS), Road Accident Data Management System (RADMS)\. 3 \. Rationale for Bank Involvement The Bank is in a unique position to respond to the opportunities and challenges posed by the Indian States today since the Bank can: (a) use the leverage of its lending volume and advisory capabilities to accelerate the institutional and policy reform process; (b) ensure that community participation, social development and environmental concerns are fully reflected in project design; and (c) provide and catalyze the critical long term capital needed in the transport sector to support accelerated growth\. Based on extensive previous experience in the country, the Bank has developed a state level approach to improve road investment, management and financing\. Since the Bank is involved in the implementation of other similar state highway projects and preparation of several other state roads projects in India, it can provide the Government of Tamil Nadu with valuable experience\. Also, the Bank emphasizes transparency of all processes, adoption of streamlined procedures, adherence to practical time schedules and dissemination of “best practice” in road construction and management\. 4 \. Description Tamil Nadu Road Sector Project was declared effective on October 31, 2003, with a loan amount of US$ 348 million\. The project has experienced significant cost overrun\. The proposed additional financing would help finance the costs associated with cost overrun\. The cost overrun is primarily due to (a) increased costs of the upgrading works due to increase in the prices of construction materials and delays in execution of contracts, (b) appreciation of Indian Rupee vis- a-vis the US Dollar, and (c) addition of a Tsunami affected bridge for which amendment to the Loan Agreement was carried out\. Due to unprecedented hike in international oil prices, the prices of oil-based materials have escalated\. The prices of other road construction materials have also skyrocketed due to higher transportation charges\. Delays in execution of contracts and vast number of road works being undertaken in the country also contributed to the increase in prices of key input materials\. These have resulted into requirement of more than expected ‘price contingencies/escalation’\. The other primary reason for cost overrun is appreciation of Indian Rupee\. At the time of appraisal of project, the exchange rate was 1 US$ = Rs\. 48\. During the course of the project, Indian Rupee has appreciated to the level of about 1 US$ = Rs\. 39\. Page 5 5 The table below presents the breakdown of the increase in costs\. (in million US$) Item Amount of increase % of total increase Upgrading works 41\.5 73 Savings/overrun in all other items (-) 8\.4 (-) 14\.8 Exchange rate fluctuation 23\.8 41\.8 Total 56\.9 100 5 \. Financing The financing plan is presented below\. (in US $ million) Source Original Loan Proposed Additional Financing Total IBRD 348 50\.7 398\.7 Government of India/ Borrower 102 6\.4 108\.4 Total 450 57\.1 507\.1 6 \. Implementation The project is being implemented by the Highways Department which established a dedicated project management team headed by a Project Director and fully staffed with engineers, finance officers, environmental and social officers and an information systems specialist\. To oversee implementation of resettlement action plan including land acquisition, a separate Social Development Cell is in place\. Supervision consultants, technical review consultants, design consultants and technical assistance consultants have been assisting the project management team in implementing the project components\. The Government of Tamil Nadu has established an Empowered Committee, headed by the Minister for Highways to deal with policy and inter-departmental issues\. The Project Steering Committee, chaired by the Secretary (Highways), is empowered to take decisions on all procurement based on recommendations of an Evaluation Committee\. 7 \. Sustainability The project’s financial sustainability will depend on the continued commitment by the Government of Tamil Nadu to provide increased and sustained levels of maintenance funding there by reducing the percentage of roads in poor condition\. The physical sustainability of the project will be maximized by the high quality of design and construction supervision\. The project has and will apply international standards for design, construction supervision and technical review to help ensure the quality of construction\. The project’s institutional sustainability will be supported by the reforms of the Highway Department to be developed and implemented under the project\. The introduction and development of enhanced road management measures will help ensure the sustainability of the project’s benefits, and facilitate a more effective and sustainable use of scare funds\. Moreover, performance based maintenance Page 6 6 contracting will be piloted under the project\. The social and environmental sustainability of the project outputs are being addressed through proper application of the various appropriate safeguard procedures during project design together with adequate supervision and monitoring of the actions recommended under the RAP and EMP during implementation\. A road safety component seeks to ensure that road safety outcomes are improved in the State as a whole\. 8\. Lessons learned from past operations in the country/sector Previous projects in the road sector financed by the Bank and ADB have demonstrated that successful operations require: (i) sufficient implementation readiness at the time of project approval to ensure quality at entry; (ii) adequate institutional capacities for project management and contract administration, (iii) client ownership for implementing institutional development measures; (iv) experience with Bank procurement procedures and timely procurement decisions; (v) stronger capabilities and capacities than many domestic contractors and consultants possess; and (vi) timely land acquisition, utility shifting and implementation of resettlement and rehabilitation activities to prevent delays in civil works progress\. Based on lessons learned, the design of the current project included the following – (i) utilization of international experienced consultants for the civil works design during project preparation to ensure quality at entry; (ii) undertaking the IDS study prior to appraisal to identify the key institutional changes that need to be introduced to improve the effectiveness and efficiency of the road agency and procurement of technical assistance for most of the institutional and road management related services is well advanced; (iii) carrying out a procurement assessment of the Highways Department and a procurement plan was agreed to overcome identified deficiencies; (iv) ensuring project readiness for implementation by completing detailed engineering for most civil works contracts by appraisal and ensuring readiness for inviting bids before negotiations\. (v) up-front preparation of the RAP was done for planned mitigation of adverse impacts, and advanced initiation of land acquisition to avoid delays in construction activities\. 9\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP 4\.01, BP 4\.01, GP 4\.01) X Natural Habitats (OP 4\.04, BP 4\.04, GP 4\.04) X Forestry (OP 4\.36, GP 4\.36) X Pest Management (OP 4\.09) X Cultural Property (OPN 11\.03) X Indigenous Peoples (OD 4\.20) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP 4\.37, BP 4\.12) X Projects in International Waters (OP 7\.50, BP 7\.50, GP 7\.50) X Projects in Disputed Areas (OP 7\.60, BP 7\.60, GP 7\.60) X Page 7 7 10\. Contact Point Contact : Pratap Tvgssshrk Title : Transport Specialist Tel : 5785+840; 91-11-41177840 Email : tpratap@worldbank\.org Location : New Delhi, India For more information contact: The Infoshop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop

APPROVAL

P008700

W CJUD~ C gDocument of The World Bank IFOIR OFFXCIAL USE ONLY Report No\. P-1986-RO REPORT AND RECOMMENDATION OF TIHE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRIJCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN' TO THE BANK FOR AGRICULTURE AND FOOD INDUSTRY OF ROMANIA WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA FOR THE IALOMITA-CALMATUI IRRIGATION PROJECT Februarv 2, 1977 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS 1\. Official Rate lei 4\.97 = US$1\.00 lei 1\.00 = US$0\.20 2\. Tourist Rate lei 12\.00 = US$1\.00 lei 1\.00 = US$0\.08 Conversion Rate for Traded Goods lei 20\.00 = US$1\.00 lei 1\.00 = US$0\.05 FISCAL YEAR January 1 - December 31 GLOSSARY OF ABBREVIATIONS BAFI Bank for Agriculture and Food Industry  FOR OFFICIAL USE ONLY INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE BANK FOR AGRICULTURE AND FOOD INDUSTRY OF ROMANIA, WITH THE GUARANTEE OF THE SOCIALIST REPUBLIC OF ROMANIA, FOR THE IALOMITA-CALMATUI IRRIGATION PROJECT 1\. I submit the following report and recommendation on a proposed loan to the Bank for Agriculture and Food Industry of Romania, with the guarantee of the Socialist Republic of Romania, for the equivalent of US$60 million, to help finance an irrigation project\. The loan would have a term of 15 years, including three years of grace, with interest at 8\.5 percent per annum\. PART I - THE ECONOMY 2\. The latest economic memorandum for Romania (818a-RO) was circulated to the Executive Directors on December 29, 1975, and an agricultural sector survey (953a-RO) was circulated on November 15, 1976\. Country social and eco- nomic data are given in Annex I\. Updated economic information is based on the findings of a special economic mission in March 1976 and a basic economic mission in October/November 1976\. 3\. Since the founding in 1947 of the People's Republic of Romania, which in 1965 was reconstituted as the Socialist Republic of Romania, eco- nomic management has been organized along socialist principles which have in- cluded state and cooperative ownership of almost all productive resources, and the absence of private enterprise\. Economic activity is directed by means of obligatory development planning, coordinated by the central authorities\. Pro- ductive enterprises operate within the framework of the development plan which defines the scope of their activity, the outlines of their production and in- vestment goals and their targets for operating efficiency\. The plan is elabo- rated within a five-year time frame, each year having a separate Annual Plan\. The country began its latest Five-Year Plan in January, 1976\. 4\. The technical and functional Ministries are the State's chief agents for the administration of economic activity\. They are assisted by subordinate units known as Centrals, which coordinate and supervise activities within a common branch or industry without being directly engaged in production\. Enter- prises subordinate to the Centrals are responsible for production which is controlled through a system of physical production targets\. Production enter- prises generally are not authorized to engage directly in foreign trade and rely on specialized foreign trade enterprises for this purpose\. In agricul- ture, large State farms and cooperatives are the predominant units of pro- duction\. This document has a restricted distribution and may be used by recipients only in the perfonmance of their omcial duties\. Its contents may not otherwise be disclosed without World Bank authorzation\.  - 2 - 5\. Economic development is of paramount concern to the Romanian Gov- ernment\. Rapid industrialization is a major objective with priority being given to heavy industry including steel, engineering products and chemicals\. To achieve their growth objectives, the Romanian authorities have made consid- erable efforts to mobilize domestic resources for development and to maintain a high rate of capital formation\. In the 1971-75 Five-Year Plan, planned and actual investment rates of around 30 percent of GNP were the norm\. As a consequence, consumption has been restrained, and the development of the consumer goods industry has been less strongly emphasized than that of heavy industry\. In 1975, heavy industry (led by engineering and metal working, chemicals and ferrous metallurgy) accounted for about 55 percent of industrial production\. 6\. As a result of this strategy, a marked change has been achieved in the structure of Romania's economy\. Rapid industrial growth, which over the last decade has averaged more than 13 percent per annum, has expanded the share of the labor force employed in industry (including power and construc- tion) from about 14 percent in 1950 to approximately 40 percent in 1975\. During the same period, the share of labor force engaged in agriculture declined from 74 percent to around 38 percent; and while agricultural output almost tripled, its share in GNP amounted to only 15 percent in 1975\. 7\. Notwithstanding the emphasis on industrialization, more than half of the population (about 57 percent in 1975) still lives in rural areas and agriculture remains a key sector of the economy\. Apart from supplying food, industrial inputs and the residual labor increment for industrial growth (which requires an expansion in agricultural productivity), the sector also supplies about one quarter of the nation's convertible foreign exchange earnings\. These earnings, which are largely used to buy imported inputs for industry, have often been jeopardized as a result of unstable production growth in agriculture\. The maintenance of the industrial development program, therefore, is dependent on the performance of the agricultural sector\. 8\. Romania's population growth is around one percent per annum\. Thus, the impact of rapid economic growth on per capita incomes has been only mar- ginally diluted by the population increase\. In the last decade, GNP growth has averaged nine percent per annum, implying a growth of about eight percent per annum of per capita GNP\. It is estimated that GNP per capita in 1975 was US$1,300 based upon official national income information and using the World Bank Atlas methodology\. 9\. The organization of production in both the urban sector and in agri- culture is such that all labor is employed and there is no open unemployment\. There is, however, some seasonal labor surplus, mainly in agriculture\. Income distribution is also relatively equal\. In 1975, average monthly wages were 1,813 lei (over $90 equivalent) up nine percent over the previous year\. About 87 percent of all monthly wages in 1974 were within the range of 1,300-2,500 lei\. Four percent were under 1,300 lei and about nine percent were above 2,500 lei\. Prices for essential consumer goods and services such as basic foodstuffs, rents and urban transport are relatively low and most social  services, notably education and health care, are provided without charge\. Con- tinuous efforts are made to increase the standard of living\. Romania also pursues an active regional policy which has sought to bring a balanced develop- ment of both human and natural resources to all parts of the country\. 10\. The official exchange rate of lei 4\.97 per US$1 is used only for accounting purposes\. The rate used for tourist transactions is lei 12 per US$1, having been revalued from a rate of lei 14\.38 per US$1 in October 1974\. Beginning in July 1973, a trading rate of lei 20 per US$1 has been used to convert the prices of all traded goods; this rate is considered representa- tive of the average cost of convertible foreign exchange\. The rate of lei 20 per US$1 has also been used to convert national income statistics from lei to dollars\. Consequently, this rate has been used as the base rate for calcula- tion in the appraisal\. Recent Developments 11\. Since the National Party Conference of 1967, which set the stage for major qualitative advances in Romania's economic and social development, there have been important new emphases in Romania's economic management\. Measures were taken to improve the institutional basis of planning (e\.g\. by creating centrals to assist in plan administration), to increase the effi- ciency of economic management and to improve upon the quality of production in industry\. In agriculture efforts were made to raise productivity and stabilize growth through irrigation, mechanization and the expanded use of chemical fertilizers\. To promote the growth of foreign trade and technical- economic cooperation the Government has concluded trade and cooperation agree- ments with a wide range of countries\. In this context, Romania has also made positive efforts to expand its multilateral external relations and to pursue full cooperation with international agencies, including UN, UNCTAD, UNESCO, FAO, UNIDO, GATT and more recently, the IMF and the Bank\. 12\. Measures aimed at continued improvement of the management system include a reorganization (involving a reduction from 217 to 95 in number) of industrial centrals and a concentration of their planning, control and research functions\. The pursuit of purely physical goals in production and trade, while still an important element in the system, is being supplemented by much greater emphasis on productive and investment efficiency, product quality, pricing and foreign competitiveness\. To eliminate wasteful invest- ment and production expenditure's, a Superior Court of Financial Control has been established, among other things, to oversee a new system of financial control\. 13\. Foreign trade has expanded rapidly in recent years both in volume and in regional diversity\. There has also been a tendency to move away from trade on a bilateral basis toward trade involving multilateral payments\. During 1971-75, total foreign trade grew at approximately 18 percent per  - 4 - annum in current prices\. In 1975, however, after the very rapid growth in the value of trade of 33 percent in 1974, trade grew by only 6\.6 percent, with exports increasing by 9\.6 percent to US$5\.34 billion and imports by 3\.9 percent also to $5\.34 billion\. This slower increase in 1975 was explained chiefly by the floods of July 1975 which resulted in a smaller exportable surplus of agricultural goods and necessitated cancellation of some imports\. About 54 percent of 1975 trade was with the convertible currency area\. Over- all trade deficits have generally remained small; in 1975 the deficit was only US$135 million, while the deficit with the convertible currency area was US$260 million\. In recent years, imports from eastern European socialist countries have been slightly lower than Romania's exports to that region\. In Romania's trade with western industrialised countries, on the other hand, ex- ports have typically been considerably less than imports\. These deficits have generally been increased by deficits on the invisibles account with western countries\. The target for 1976, however, is to attain a trade surplus and indications as of the end of September 1976 were that this target would be met\. 14\. The structure of Romania's trade with the developed market econo- mies remains essentially unfavorable\. Raw materials and agricultural commod- ities, both of which are subject to unstable price and production conditions, comprise about 60 percent of total exports to these countries\. At the same time imports from these countries are largely of machines and equipment and other manufactures\. Because of the present low level of reserves, any insta- bility in export performance, as frequently arises from shortfalls in agricul- ture (paragraph 7 above), tends to place the import program in immediate jeopardy\. 15\. Preliminary estimates for 1976 indicate that all major targets of the 1976 Annual Plan have been met\. National income is estimated to have risen by 10\.5 percent, gross industrial production increased by about 11 percent, and gross agricultural production was a record, exceeding the flood affected 1975 level by 16 percent\. Improved performance is also expected in the external trade sector, where preliminary nine month estimates indicate that improvements in the country's trade balance were ahead of plan targets for that period\. In November 1976, Romania's National Assembly approved the country's 1977 Annual Plan and Budget, which calls for continued high rates of growth\. National income is expected to rise by 11\.3 percent and gross industrial production by 10\.5 percent\. The Plan provides a range of 1\.9- 13\.6 percent growth for the gross farm output\. This wide range is provided because of the uncertain impact climatic conditions might have on production\. Investments in the national economy are expected to increase by 16\.7 percent and total foreign trade volume by 15\.5 percent\. 16\. A campaign to increase efficiency in the utilization of existing capacities and to effect significant economies in the consumption of raw materials and intermediate goods is being implemented throughout the economy\. Targets have been established to reduce by 30 percent the previously antici- pated construction and assembly costs of industrial projects between 1976-80\.  - 5 - Substantial, but as yet unspecified savings have also been prescribed for most other industrial inputs during 1976-80, while maintaining the global produc- tion targets as set in the Five Year Plan\. External Assistance 17\. The expansion of Romania's trade with the non-socialist industrial countries has led to an increased need to obtain convertible currencies to pay for imports from those countries\. Romania has met this need both by bor- rowing abroad and by mounting a major effort to expand exports and tourism\. Gross inflows of convertible currency through medium- and long-term loans were US$810 million in 1975, consisting mostly of financial and suppliers' credits with relatively short repayment periods\. This gross inflow repre- sented a net inflow of some $440 million after accounting for the country's repayment obligations\. 18\. As part of its effort to expand its foreign trade and cooperation relationships, Romania has also taken active steps to attract long-term pri- vate capital\. A regulation passed in 1972 defines the conditions under which foreign firms can establish joint ventures with domestic enterprises, prefer- ably in foreign exchange earning or saving industries\. As of November 1976, six joint venture agreements had been signed, involving direct foreign invest- ment of about US$10 to 15 million\. Romania also receives medium-term trade credits from U\.S\. Eximbank and trades under ECGD, COFACE, and HERMIES credit guarantees with the United Kingdom, France and the Federal Republic of Germany, respectively\. Romania succeeded in securing a US$60 million, eight-year loan from Kuwait as part of a general cooperation agreement\. In addition, Romania has access to non-convertible currency investment credits from the International Investment Bank, Moscow\. 19\. As it stands, therefore, Romania's access to long-term finance in convertible currencies is still very restricted\. The IBRD is the only major source of such long-term development finance, though Romania is making efforts to improve its access to the major financial markets\. The Bank's presence on a significant scale would have a positive influence in this regard and might serve as a catalyst for involving other lenders in Romania\. This could serve both to increase the total amount of Bank-sponsored funds available to Romania and to build outside confidence in the country, thereby enhancing in the long-term its independent access to the world's financial markets\. Prospects 20\. The 1976-80 Five-Year Plan reflects Romania's continued strategy of rapid growth\. Investment rates of some 30 percent of GNP are to be maintained, and the major thrust is in industry\. The plan targets are impressive\. National income is expected to grow at 10-11 percent per annum and gross industrial out- put by 10\.2-11\.2 percent per annum, with more rapid growth in heavy industry\. Continued emphasis is to be maintained on foreign trade which is expected to double in real terms, with the aim of securing a continued transfer of tech- nology needed for the modernization and diversification of Romanian industry\.  - 6 - Greater emphasis than in the 1971-75 Plan is to be given to developing the infrastructure in agriculture, particularly with regard to irrigation and drainage and the plans for fertilizer production envisage an increase in supply sufficient to double the 1974 application rates by 1980\. 21\. Romania has good potential for further economic growth\. Endowed with important natural resources (fuels, some minerals, timber, rich soils and sources of irrigation water for agriculture, and a favorable climate for agri- culture and tourism) and located conveniently with respect to its major inter- national markets in the East and West, the country has built a broad indus- trial infrastructure (power, metallurgy, chemicals) which will serve as a base for the expansion of secondary manufacturing sectors such as machine building and consumer durables\. Above all, Romania has a hard-working and increasingly skilled population\. In order for Romania to attain its growth objectives, however, it will have to rely on a major expansion of exports of manufactured goods in order to finance an increasing dependence on imported raw materials and fuel\. 22\. Economic growth and structural change call for the introduction of new technologies, improvements in the quality of products, more efficient use of materials and factor inputs, and reductions in production costs\. The in- creasing diversity and complexity of Romania's economic structure require con- tinuing improvements in the efficiency of economic planning and coordination and further refinements in economic management\. To keep up with these changes and requirements, large programs of education and manpower training have been mounted, investments in scientific and technological research have been emphasized, and efforts are being made to strengthen technical cooperation with industrialized countries and international organizations\. Creditworthiness 23\. As of June 1976, Romania's total medium and long-term external debt amounted to US$2,900 million\. Most of these debts (US$2,864 million) were denominated in convertible currencies, the major creditor countries being Germany, France, UK and Italy\. While the total debt does not appear excessive in relation to the volume and growth of external trade, average maturities are relatively short and convertible debt service payments are estimated to be in the order of US$550 million a year during 1975-76\. The convertible debt service ratio was approximately 17 percent in 1975\. 24\. The organization of economic activity in Romania, the pursuit of a development strategy involving high investment and saving rates, and rapid income growth ensure Romania's capacity to service external debt with domestic resources converted into foreign exchange for that purpose\. Moreover, the country's major efforts to expand exports (particularly to convertible cur- rency areas) are increasing the foreign exchange available for debt service\. Convertible export earnings rose from US$830 million in 1971 to US$2,839 million in 1975, and are expected to be about US$3,250 million in 1976\. The preferential trade status accorded to Romania by the European Communities  - 7 - in June 1973 should facilitate in the long run the further expansion of such exports as should the granting of most favored nation status by the U\.S\. In 1973, the Government also restricted the use of short-term credit facilities from western suppliers in an effort to improve the structure of the country's external debt\. Because of unusually high scheduled repayments, the convertible debt service ratio is expected to be 21 percent in 1978, 19 percent in 1979 and 24 percent in 1980\. However, assuming a continuation of present export and debt management policies we estimate that the debt service ratio will peak in 1980 and decline thereafter to about 15 percent by 1985\. The country's present outward-looking posture, the success of both its domestic growth and foreign trade policies, and its potential for continued development, all support the judgment that Romania is creditworthy for substantial Bank lending\. 25\. When Romania joined the Bank, most pre-war foreign debts of the country had been settled\. Settlements which were still under discussion at that time concerned claims in the United Kingdom and in the United States\. With regard to the settlement of these claims, the final payments of U\.S\. claims began in September 1975 and were completed in October 1976 based upon agreements reached in May 1975\. Settlement of British claims proved more difficult, but a final agreement was signed in January 1976\. The Bank has also been informed recently of certain Swedish claims concerning public loans from the pre-war period, nationalized Swedish property and other interests such as concessions granted to Swedish companies before the Second World War\. The eleventh and most recent meeting to discuss these claims was held in Bucharest in October 1976 and further discussions are planned at a date to be established through diplomatic channels\. PART II - BANK GROUP OPERATIONS IN ROMANIA 26\. The proposed loan would be the Bank's tenth to Romania and would bring total Bank commitments to Romania to US$520 million\. Disbursements under the Bank's initial loans were slow during 1975, but this situation improved considerably during 1976\. Annex II contains a summary statement of Bank loans to Romania and notes on the execution of ongoing projects as of December 31, 1976\. 27\. Foreign exchange, especially in convertible currencies, continues to be a major constraint and one of the major objectives of Bank lending con- tinues to be to help alleviate the country's shortage of foreign exchange by providing long-term external capital and by financing projects which will ex- pand foreign exchange earnings or savings\. Bank lending also aims at sup- porting the Government's efforts to introduce new industrial technologies to improve the quality of products and production efficiency, to reduce produc- tion costs and to provide for necessary electric power development\. Market  - 8 - aspects and marketing, especially for export goods, are also emphasized\. Special attention is given to agriculture which is heavily dependent upon favorable weather and where productivity levels are still comparatively low\. 28\. A number of projects are under consideration for future lending\. Projects for bearings production, polyester fibers, glass fibers and pork production and processing have been appraised and are expected to provide the basis for loan proposals during 1977\. In addition, projects for further irriga- tion works, grain storage and poultry production, chemical and tire plants, and seamless pipes have been proposed, and further power projects will also be considered in context of a sector investment study currently being prepared by the Government\. 29\. In addition to lending, the Bank (through EDI) has assisted Romania by conducting industrial and transportation project appraisal training courses for Romanian officials in Belgrade in October 1973 and in Bucharest in January/ February 1975, November/December 1975, January/February 1976 and October/ November 1976\. Additional courses, including one in agricultural project appraisal, are planned\. 30\. The projects, for which assistance has been committed or is being considered, represent only a small portion of Romania's total need for ex- ternal financing and of its total disbursed convertible debt\. However, they will provide a substantial net addition to the inflow of convertible currency finance, and may set a pattern for obtaining longer term convertible finance from other sources\. The disbursed IBRD debt outstanding to the Bank is ex- pected to constitute about 12 percent of Romania's total projected convert- ible currency debt in 1980; the Bank's share in Romania's debt service pay- ments in 1980 would be about 3 percent\. PART III - THE AGRICULTURAL SECTOR IN ROMANIA Agriculture 31\. Romania continues to be a highly agrarian country in which progress in other sectors (especially in industry) depends upon stable growth in agri- cultural production to provide both convertible foreign exchange earnings and industrial raw materials\. In 1975, agriculture accounted for 15 percent of national income and 38 percent of the labor force (compared with 74 percent in 1950)\. About 14\.9 million hectares, or almost two-thirds of the land area, are used for agriculture; and of these, 8\.5 million hectares are in Wallachia, the region composed of the southern plains of the Danube Valley\. Approximately 63 percent of all arable land is used for grain production (mainly maize and wheat), while industrial crops (mainly sunflower) are the next most important\. Vegetables are also produced, often in large-scale com- mercial greenhouses, for domestic consumption and export\. Livestock accounts for a relatively high 42 percent of agricultural production\.  -9- 32\. Investment in agriculture as a percentage of total investment in the economy has lagged behind that in other sectors with 12\.7 percent of actual total investment in the 1966-70 plan period and 14\.1 percent in the 1971-75 plan period\. The proportion of investment for agriculture in the 1976-80 plan period is expected to be 11\.6 percent of the total\. However, the average annual investment in agriculture during the 1976-80 plah period is expected to increase by about 50 percent in absolute terms above the average investments from 1971 to 1975\. In addition to investment, the Government has also taken other measures, including institutional reforms, price incentives, and pro- duction targets and delivery schedules to stimulate agricultural production\. Growth achieved in agricultural production has been slower than in other sec- tors and has been characterized by year-to-year variations\. The major problems of Romanian agriculture are the instability of its output and low productivity\. The proposed project would support improvements in both of these areas\. The Need for Irrigation Infrastructure 33\. Instability in agricultural production results from vulnerability to erratic weather conditions and the lack of infrastructure to mitigate their impact\. Excessive precipitation and flooding during planting and harvest sea- sons, and inadequate rainfall during summer growing seasons, have resulted in year to year fluctuations in national output of the order of 10 to 20 percent\. Fluctuations of production in particular regions can be even greater\. Only production of vegetables has increased steadily, reflecting the relatively more controlled conditions under which they are produced\. The Government is well aware of this problem and has placed high priority within the agricultural sector on solving it\. Forty percent of agricultural investment in the 1971-75 Five-Year Plan was for land reclamation, irrigation and drainage; the compar- able figure for the 1976-80 Five-Year Plan is about 20 percent, reflecting a relative decline in infrastructure investment and increasing emphasis on investments to make productive use of irrigation facilities already estab- lished\. Since 1965, total irrigated land has been increased from about 0\.2 million hectares to 1\.5 million hectares in 1975; and, the relative reduction in the share of the agricultural budget allocated for irrigation notwithstand- ing, another 1\.1 million hectares are expected to be brought under irrigation during the 1976-80 plan period\. This continued emphasis on irrigation re- flects the high priority which is being given to reducing vulnerability to weather and to stabilizing production in agriculture\. Execution of two earlier Bank-financed projects in irrigation is proceeding satisfactorily (see Annex II), and the proposed project would continue Bank support in this subsector\. Agricultural Productivity 34\. While some productivity gains have been made in recent years, agri- cultural productivity per worker remains less than one-third of that of indus- try\. In addition to improving its irrigation infrastructure, Romania is also taking measures to improve productivity through upgrading the quality of farm mechanization, increases in the supply and utilization of fertilizers, and the promotion of agro-industrial enterprises to provide processing and marketing outlets for increased farm production\. Steps are also being taken to reduce inequality between State farms and cooperatives in access to farm  - 10 - inputs\. State farms, which own 30 percent and cultivate 14 percent of agri- cultural land, received about 42 percent of on-farm investment in the 1971-75 Plan period\. Productivity on State farms is correspondingly higher than that on cooperatives, but the Government is now moving toward elimination of the disparities between the two types of farm organization in order to stimulate general improvement in agricultural productivity\. Eighty percent of the land to be irrigated under the project is owned by cooperatives\. Sector Organization 35\. State enterprises and cooperatives account for the major portion of agricultural production; individual farmers play a much less significant role, except in the production of a few selected commodities\. State enterprises are generally large scale, capital intensive farms which have been favored in terms of land allocation, fertilizer distribution and investments in irriga- tion and mechanization\. There were 390 such farms in 1975 employing about 252,000 people and cultivating 2\.1 million hectares of agricultural land\. Workers on the farms are employed on salaries which are fixed by law but may also receive bonuses for exceptional performance\. The state farms are gene- rally well managed by a director (usually an agricultural engineer) who is ap- pointed by the Director General for State Farms of the Ministry of Agricul- ture and is responsible to a workers' council\. The Ministry of Agriculture determines the production plans for individual state farms; it also has a role in determining the use of their profits, a portion of which are remitted to the state treasury\. 36\. In 1975 there were 4,400 agricultural production cooperatives with about 3\.4 million member families and cultivating about 9\.0 million hectares\. Workers in cooperatives are guaranteed a minimum salary, which is lower than the salaries of their counterparts on state farms by about 20 percent\. Sala- ries of cooperators may be supplemented with the cooperator's shares of profits in excess of plan targets\. More than one member of a family frequently works (on a full- or part-time basis) in the cooperative, and some family members are employed outside of the cooperatives\. Cooperators are also allowed to farm about 0\.15 hectares each in and around their villages for their personal use, and they are allowed to own livestock\. Production on personal plots is always intensive, and produce is either self-consumed or sold to consumption cooperatives to supplement other income of the cooperators\. A cooperative is managed by a General Assembly of cooperators and its elected President; it reports to the District Director General for Agriculture, the local represen- tative of the Ministry of Agriculture\. 37\. Agricultural production has been increased much more by State farms than by cooperatives in the last decade\. Gross agricultural production of State farms rose by 61 percent and that of cooperatives by 29 percent from 1965 to 1973\. Although land area in different kinds of production units has not changed significantly since 1962, use of fertilizer and other inputs has been increased much more on State farms than on cooperatives\. Investments per hectare also have been much larger on State farms than on cooperatives\. In 1975, 22\.6 percent of the arable land on State farms was irrigated compared with only 13\.7 percent on cooperatives\. Crop yields per ha average 20 to 30  - 11 - percent higher on state farms than cooperatives\. However, it appears that marginal productivity of capital inputs has on average been higher on coop- eratives than on state farms and that there are opportunities for greatly increasing productivity of cooperatives by expanding the irrigated area and using additional capital inputs to apply improved technology\. 38\. Individual farmers number only about 150,000 families and own about 10 percent of total agricultural land\. Their land is often located in moun- tainous regions\. The individual farming subsector has not received strong government support but is significant in production of potatoes (16 percent of production), meat (13 percent of production), milk (20 percent of produc- tion), eggs (14 percent of production) and wool (12 percent of production)\. 39\. At the national level, the state institution in the agricultural sector is the Ministry of Agriculture and Food Industry\. It plays a major role in preparing the Five-Year Plan for the sector and is the supervisory institu- tion for plan implementation\. In each district, the Ministry is represented by a general directorate, which is responsible for all agricultural activity in the district including both cooperatives and State farms\. Marketing is organized nationally under 13 centrals accountable to the Ministry and respon- sible for processing and marketing specified commodities\. Each central obtains produce at the district level and allocates it among domestic retail, process- ing, storage and export channels\. A foreign trade company is responsible for the exports of each central\. The Borrower 40\. The Borrower for the proposed loan would be the Bank for Agricul- ture and Food Industry (BAFI), which is the Government's specialized agency for financing projects in agriculture, irrigation and food processing\. BAFI was established in 1968 as a channel for, and administrator of, all invest- ment funds provided under the State plan for the agricultural sector\. Finan- cing in agriculture had previously been done by a department of the National Bank of Romania\. BAFI is involved in all phases of project appraisal, execu- tion and supervision, and it has a large technical and economic staff located in Bucharest, in 39 county (judet) branch offices and in 100 sub-branches throughout the country\. One of BAFI's more important functions is that of fiscal agent administering, for the account of the national budget, all government investments in State farms and enterprises\. BAFI also receives interest-free funds from the State budget for investment lending to coopera- tives (and in some cases State Farms) and repays the Government as it re- ceives repayments of the sub-loans\. BAFI has thorough review and approval procedures for all investment projects\. In addition to BAFI's review, all agricultural investments for more than Lei 10,000,000 (US$500,000) are re- viewed and approved by the Ministry of Agriculture and those greater than Lei 70,000,000 (US$3\.5 million) must be approved by the Council of Ministers\. BAFI also provides short-term credit to, and maintains settlement accounts for, all cooperative and state agricultural enterprises; it also acts as fiscal agent for the Government for collection of state revenues from these  - 12 - enterprises\. As the Government's channel for investment financing in agricul- ture, BAFI's primary source of funds is the State Budget; the Guarantee Agreement therefore includes a provision (Section 2\.02) that the Guarantor shall provide all necessary funds for the implementation and operation of the project\. PART IV - I'HE PROJECT 41\. The project is part of Romania's 1976-80 Plan for increasing irri- gated land and was proposed for Bank financing in September 1974\. A feasibil- ity study for the project was submitted to the Bank in January 1976 and the project was appraised in April 1976\. Negotiations were held in Washington in November and December 1976\. The Romanian delegation was led by H\.E\. Nicolae Nicolae, Ambassador to the United States, and included representatives of BAFI and of the Ministry of Agriculture and Food Industry\. Project Description 42\. The objectives of the project are to increase and stabilize agricul- tural production in the judets (counties) of Ialomita and Braila 120 kilo- meters northeast of Bucharest and west of the Danube in eastern Romania (see map) and to increase labor productivity\. This would be accomplished through construction of a 148,500 hectare irrigation system and related facilities\. Irrigation water would be pumped from the lower Danube by a floating pumping station and water would be further lifted and distributed through the canal system by seven fixed pumping stations\. About 28,000 hectares of State farms and about 120,500 hectares cultivated by cooperatives would receive water distributed through concrete-lined canals to 115 pressure pumping stations\. The pressure pumping stations would supply water to distribution networks of buried pipes for sprinkler and furrow irrigation\. Also included in the project would be portable on-farm sprinkler and furrow irrigation equipment, surface drainage works to serve 82,350 hectares, tile drainage for 14,400 hectares, erosion control works on 44,700 hectares, land leveling of 40,000 hectares, reclamation of 2,650 hectares of saline land and drainage of 2,500 hectares of depressions, power lines serving the irrigation system, operation and maintenance equipment, and farm machinery\. Annex III contains a loan and project summary; the Appraisal Report (No\. 1228-RO, dated January 10, 1977) is being distributed separately to the Executive Directors\. Project Execution and Operation 43\. The Ministry of Agriculture and Food Industry (MAIA), through its various departments and trusts, would be responsible for planning, construc- tion and supervision of all project activities\. Planning and design of irrigation works would be carried out by the Institute for Land Reclamation Studies and Design (ISPIF), and construction by the Construction Trust for Land Reclamation Works (TCIF)\. Both organizations are part of the Ministry's Department of Land Reclamation and Agricultural Construction (DIFCA)\. The  - 13 - irrigation works would be operated and maintained by the Ministry's Central for Operation of Land Reclamation Works (CELIF)\. BAFI would serve as financ- ing agency for all project works under the arrangements noted in paragraph 39 above\. All agencies are competent to carry out the proposed works satisfac- torily\. Project Cost and Financing 44\. The estimated total cost of the project is US$195\.0 million, with an estimated foreign exchange component of US$44\.6 million (excluding $15\.4 million of interest during construction on the Bank loan)\. The cost estimates are based on unit rates of work that are prevalent in Romania under the system of regulated prices of materials and wages\. The cost of equipment and materials which are likely to be procured from foreign suppliers, has been estimated at the international prices expected to be prevailing at the end of 1976\. Because detailed engineering has already been carried out, physical contingencies have been provided at 7\.5 percent for irrigation and drainage works and at 5 percent for other minor items\. Price contingencies on foreign exchange cost are based on annual increases of 8 percent for 1977 to 1979, and 7 percent thereafter\. Due to near zero inflation under the Romanian system of administered prices, annual price contingencies on local costs are one percent\. 45\. The proposed Bank loan of US$60 million would finance the foreign financing requirements of the project, including US$15\.4 million of interest during construction and other charges on the loan; it would cover 29 percent of the total financing requirements of the project, including interest during construction on the Bank loan\. The remaining project costs would be financed by the Government budget (US$109\.8 million), loans from the Bank for Agricul- ture and Food Industry (US$28\.6 million), and cooperatives (US$12\.0 million)\. 46\. The proposed loan would be made to the Bank for Agriculture and Food Industry (BAFI) with the guarantee of the Socialist Republic of Romania, and would be for a term of 15 years, including three years grace, at an in- terest rate of 8\.5 percent per annum\. It is the normal practice in Romania for the State to invest virtually all funds in agricultural infrastructure projects through BAFI without formal lending agreements and to recover in- vestment costs from project beneficiaries through a variety of financing mechanisms including the incomes of state farms, taxes, pricing mechanisms for traded commodities, and payments by cooperatives for mechanization services\. For this reason, BAFI would act as a channel for, but would not actually relend, the proceeds of the Bank loan, and funds would be made available to BAFI from the state budget for repayment of the Bank loan\. With regard to on-farm irrigation for cooperatives, however, it is Romanian practice for BAFI to finance such investments from its own resources with agricultural credit subloans to the cooperatives at a rate of interest of 3 percent per annum; recovery of funds for these components of the project would be made through subloan repayment\. As in the earlier cases of the Sadova-Corabia, Flood Recovery and Rasova-Vederoasa projects, this may be considered a real rate of  - 14 - interest because of the near-zero rate of inflation in Romania\. Since BAFI receives most of its funding from the government budget at very low rates, its overall borrowing cost is below one percent which allows it to operate profit- ably despite the negative spread on the Bank loan\. Audit 47\. BAFI would keep separate accounts for all project expenditures and its transactions are subject to continuous control by internal auditors ap- pointed by the Ministry of Finance and to an annual audit by inspectors from the Court of Superior Control which reports directly to the Council of Minis- ters and the President\. BAFI's accounting system and the audit of its trans- actions are satisfactory and BAFI's audited operating and financing results would be sent to the Bank not later than five months after the end of BAFI's fiscal year (Sections 6\.01(c) and (e) of the Loan Agreement)\. Procurement 48\. Although Romanian laws provide for international competitive bidding and for joint ventures involving foreign and domestic enterprises, in practice all irrigation works are constructed by Romanian Construction Trusts, which are experienced and familiar with local conditions, methods and regulations\. Therefore, only procurement of equipment and materials equivalent in cost to the estimated direct and indirect foreign exchange cost of the project would be financed under the proposed loan\. Items costing US$45 million including contingencies (Annex 7, table 1 of the Appraisal Report) would be procured following international advertising and competitive bidding in accordance with the Bank Guidelines\. Romanian manufacturers would be allowed a margin of preference of 15 percent or the applicable custom duty, whichever is lower, but the application of the preference is not expected to significantly affect the outcome of bidding\. It is expected that foreign suppliers would win con- tracts for most construction equipment (canal trimming and lining machines, tile laying machines, dewatering equipment and some motor scrapers) estimated to cost about US$6\.5 million\. Other items to be procured through interna- tional competitive bidding (estimated to cost US$38\.5 million) are available domestically and, based on experience with previous Bank-financed projects, it is expected that Romanian manufacturers would be successful in bidding for these items\. The remaining equipment and materials (estimated to cost US$41\.3 million) would be procured under Romanian procedures and would not be eligible for disbursement under the proposed Bank loan\. Disbursements 49\. The Bank loan would be disbursed for (i) 100 percent of the foreign expenditures for imported equipment and materials procured through interna- tional competitive bidding, (ii) 100 percent of the ex-factory prices of goods manufactured locally and procured through international competitive bidding, and (iii) interest and other charges during construction until December 14, 1981\.  - 15 - International Water Rights 50\. There is no international agreement among the Danube river riparian states for the use of its water for irrigation but a convention exists for development of the river for mutual benefits, and for protection of navigation and water quality\. The International Water Commission for the Danube, of which Romania is a member, is mainly concerned with schemes which may interfere with navigation and water quality\. The maximum diversion for the project, in July, would amount to about two percent of the minimum river flow in that month\. The Government has confirmed that diversions for the project would not reduce the Danube flow below the agreed minimum to sustain international navigation\. There is, therefore, no reason to expect that the project would raise issues on the use of Danube waters, and no agreement of other riparians would be required\. Environment and Health 51\. The project area is free of endemic diseases such as malaria and bilharzia\. The project would not adversely affect the environment or public health\. Construction of irrigation works, with variable water flows in the canals, and a piped distribution network would not promote mosquito breeding and spread of malaria\. Some of the lakes in the project area have therapeutic qualities, but none of the waters draining from the project would flow into them\. Fertilizer and salt draining from the project area are not expected to damage the quality of the Danube's waters\. Benefits and Risks 52\. The project would contribute to Romania's overall effort to increase and stabilize agricultural production through investment in irrigation and re- lated farm development\. Without the project, production in the project area under rainfed agriculture could be expected to fluctuate from year to year with an annual average gross production of about US$28 million\. The project is expected to increase the gross value of output to a relatively stable US$67\.5 million annually (an increase of 142 percent)\. This would be achieved through (i) an increase in area available for production by three percent, (ii) a 10 percent increase in cropping intensity made possible by irrigation, and (iii) increases in the yields of various crops ranging from 55 to 150 percent\. The benefits of stabilizing output have not been quantified but are considerable\. The project would also reduce underemployment in the project area and would increase labor productivity by 250 percent\. About 41,200 members of cooperatives and 16,200 employees of state farms would participate in the project\. This group would not share directly in the benefits of the project, which accrue to the state, as their incomes are regulated to corre- spond with those of workers with similar skills elsewhere in the economy\. Benefits to the project participants are indirect in the sense that they flow back to the population at large over a period of time through increases in public services and general compensation packages\. It is expected that direct and indirect collections from beneficiaries (which include inter alia water  - 16 - charges, profits of state farms credited to the national budget, contribu- tions of state farms to a depreciation fund kept by BAFI, net returns to the government from investments in the development fund for cooperatives, repay- ment of loans to cooperatives for on-farm development and profits made by government trading companies buying output at relatively low domestic prices and exporting them at much higher world market prices) would enable recovery of all project investments\. The economic rate of return of the project is estimated at 16\.3 percent\. The rate of return is relatively more sensitive to variations in project benefits than to changes in investment costs\. If project benefits were reduced by 20 percent with costs unchanged, the rate of return would be 12 percent\. 53\. The risk of not attaining project benefits is low\. Designs have been prepared in detail\. The Government has satisfactory plans to supply the farms with the necessary complementary inputs and supporting agricultural services\. Farm workers are receptive to new technology and would have ade- quate incentives to participate in the project\. Anticipated crop yields are comparable to or lower than the average yields obtained from other irrigated areas in the region\. The marketing system is well organized\. Attainment of the project's objectives is therefore reasonably assured\. PART V - LEGAL INSTRUMENTS AND AUTHORITY 54\. The draft Loan Agreement between the Bank and the Bank for Agricul- ture and Food Industry of Romania, the draft Guarantee Agreement between the Socialist Republic of Romania and the Bank, the report of the Committee pro- vided for in Article III, Section 4(iii) of the Articles of Agreement and the draft resolution approving the proposed loan are being distributed to the Executive Directors separately\. 55\. A special condition of effectiveness of the loan is the approval by the Council of Ministers of the technical and economic indicators of the project (Section 7\.01 of the Loan Agreement)\. This approval of detailed project parameters is normal under Romanian planning procedures and will provide the legal basis for financing and implementation of the project\. 56\. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank\.  - 17 - PART VI - RECOMMENDATION 57\. I recommend that the Executive Directors approve the proposed loan Robert S\. McNamara President Attachments February 2, 1977 Washington, D\.C\.   TA8LE 3A ANNEX I RONANIA, REP OF - SOCIAL INDICATORS DATA SHEET Pag=eof3 pgea LAND AREA (THOU KM2)…P\. \. 1---'-of\.3\.p\.ge\. --------------- ROMANIA\. REP OF REFERENCE COUNTRIES (1970) TOTAL 237\.5 MOST RECENT ** AGRIC\. 149\.0 1960 1970 ESTIMATE YUGOSLAVIA ITALY GRMaNAY FED\. UEP GNP PER CAPITA (USS) \. \. 1300\.0 820\.0 2000\.0 4420\.0 POPULAII ON AND VITAL STATISTICS POPULATIUN (MID-YR\. MILLION) l1\.4 20\.3 21\.3 20\.4 53\.7 61\.6 POPULATION DENSITY PE' SQUARE Km\. 77\.0 85\.0 89\.0 80\.0 I1S\.0 Z40\.0 PER SQ\. AM\. AGRICULTURAL LAND 127\.0 134\.0 140\.0 138\.0 295\.0 439\.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV\.) 23\.9 19\.0 19\.3 21\.0 18\.6 17\.3 CRUDE DEATH RATE (/THOU, AV\.) 10\.9 6\.9 10\.3 9\.1 9\.7 11\.6 INFANT MORTALITY RATE (/THOU) 75\.7 49\.4 35\.0 55\.5 29\.6 23\.6 LIFE EXPECTANCY AT BIRTH CYRS) 65\.9 67\.7 68\.6 67\.r 70\.9 70\.3 GROSS REPRODUCTION RATE 1\.2 1\.3 1\.3 1\.3 1\.3 1\.2 POPULATION GROWTH NATE (0) TOTAL 1\.2 1\.0 1\.0I 1\.0 0\.8 1\.0 URdAN R3\.8 3\.4 2\.3a 4\.6 9\.8 4\.1 URdAN POPULATIUN (I OF TOTAL) 32\.0 40\.8 43\.0 38\.7 51\.5 82\.4 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 27\. 91 25\.9 25\.z2 28\. 24\.4 23\.2 15 tO 64 YEARS 64\.919 65\.5 65\.6 64\.3 65\.2 63\.6 65 YEARS AND OVER 7\.212 8\.6 9\.2 7\.4 10\.4 13\.2 AGL DEPENDENCY RATIO 0\.5 0\.5 0\.5 0\.6 0\.5 0\.6 LCONOMIC DEPENDENCY RATIO 0\.7/b 0\.7/a o\.r71 \. 0\.91/ 0\.9 FAMILY PLANNING ACCEPTORS (CUMULATIVE\. THOU) \. \. \. USERS (T OF MARRIED WOMEN) \. \. \. EIPLOYMENT TOTAL LABOR FORCE (THOUSAND) 9600\.0 9900\.0 10200\.0 \.- 19600\.0 26500\.0 LABOR FORCE IN AGRICULTURE (1) 66\.0 49\.0 38\.0 *- 19\.0 8\.9 UNEMPLOYED (0 OF LABOR FORCE) \. \. \. \. 3\.1 0\.7 INCOHE OISTRIBUTION I OF PRIVATE INCOME RECeO BY- HIGHEST 5s OF HOUSEHOLDS \. \. \. 15\.1 HIGHEST 290 OF HOUSEHOLDS \. \. \. 41\.4 LOWEST 200 OF HOUSEHOLDS \. \. \. 6\.6 LOWEST 400 OF HOUSEHOLDS \. \. \. 18\.4 UISTRIBUTION OF LAND OWNERSHIP 1 UWNED VT TOP IOX OF OWNERS \. \. \. IS\.I]e 0 OANED BY SMALLEST 100 OWNERS \. \. \. e4\.s\. HEALTH AND NUTRITION POPULATION PER PHYSICIAN 740\.Oc 680\.0 630\.0 1000\.0 550\.0 580\.0 POPULATION PER NURSING PERSON 300\.0 200\.0 \. 350\.0j/ 4ro\.0 t 350\.0 POPULATION PER HOSPITAL BED 140\.0 /d 120\.0 /d 120\.01± 1800\. 90\.0 90\.0 PER CAPITA SUPPLY OF - CALORIES (C OF REQUIREMENTS) 105\.0 118\.0 116\.0/f 124\.0 126\.0 121\.0 PROTEIN (GRAMS PER DAY) 81\.0 92\.0 9\.0 92\.0 100\.0 e\.o -OF WHICH ANIMAL ANO PULSE 24\.0 28\.0 \. 29\.0 42\.0 56\.0 DEATH RATE C/THOU) AGES 1-4 4\.9 9 2\.4 \. 2\.6 1\.0 0\.9 LUWCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 97\.0 112\.0 108\.0/e 94\.0 107o /d 129\.0 j,b SECONDARY SCHOOL 25\.0 46\.0 65\.0Th 45\.0 59\.01± 66\.01lab YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) IZ\.0 12-13 12-13 12\.0 13\.0 15\.0 vOCAT IONAL ENROLLMENT (I OF SECONDARY) 54\.0 58\.0 64\.0/R 72\.0 28\.0 48\.0/a ADULT LITERACY RATE (C) \. 98\.0/h 85\.0 97\.0 99\.0 HOUSING PERSONS PER ROOM C URBAN ) \. 1\.3/b \. \. \. 0\.7/c OCCUPIED DWELLINGS WITHOUT PIPED WATER CI) \. 88\.0/b\.c \. \. \. 0\.3/d ACCESS TO ELECTRICITY (C OF ALL DWELLINGS) \. 49\.Olb \. \. \. 100\.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (0) \. 21\.0b \. CONSUNPTION _ _ _ _ _ _ RAOIO RECEIVERS (PER THOU POP) 109\.0 152\.0 148\.0 163\.0 218\. 318\.0 PASSENGER CARS (PER THOU POP) \. \. \. 35\.0 190\.0 220\.0 ELECTRICITY (KRWH/YR PER CAP) 414\.0 1615\.0 2221\.0 1288\.0 2266\.0 4128\.0 NEWSPRINT (DG/YR PER CAP) 2\.1 2\.6 3\.0 4\.3 5\.3 17\.7 SEE NOTES AND DEFINITIONS ON REVERSE  ANNEXtl I Poge 'F of 3 paso0 NOTES coir- otherwise -otd, data for 1960 refer to any year bet\.ssn 1959 and 1961, for 1970 betwoco 1968 sod 1970 end for Moot Recent fati-atee between 1973 and195\. rho taicolctio ot f the\. figureo to underdloat\. [Ih, Fed:ral Republic 00 ho\.ey \.o boon nalo-ted as an objective cocotry bttaces it to 00 inucralodiropoa\. Country itth major trade tten RUMANIA 19ol0 1962\. /b Ratio of ppoplation coder 15 aod 65 ood oust to totoi labor force; L\. Including danrtsraj Id Goosroneot 1970 0 Ratio of popolacloo coder 15 cod 65 end over to total lohor forte lb 1966, /c Isoide onlyIs Id Govermet hosPitalo\. MSOT RiECENT EITTlArfi Ia /1970-75, lb 1970-74\. /0 Ratio of population coder 15 and 65 end over to total labor force\. __________________ __ dGcovorooct hoepito1 entablis henors; Is Unoadjoneed; proljios\.ry enrisesre\. i974-75; If 1967- 71 overge; /g 1972; /b 1974, Olficiol osio est 100 paros\.t\. YMOGSI\.AVIA 1970 /a Agricultore laod held by social ecotot 'Knanbinste; lb Aigrclture lend bold by private seal1-holdere '10 bettors\. oaeiooos", to Soolodingnidwives, a\.soitaot midwives,\. acincant nussad nor-iogsaiire\. lEvy ~~~~~~1970 Lo Ratio of population credr 15 and 65 sod over to totld labor force, *b HoePitsi personnel, I\. Including rura hoepita1 and nedital reetars; /d 6-10 and 11-18 years of age respectively\. GIRiANYf ffD1\. REP 190 /s loclcdieg the rolevot data relating to E\.alto for which aeperato dots boos not bean supplied, lb 6-10 and 11-is yeara of age resptrio-ly, /c Inside only\. R14, Jacuary 4\. 1977 DEFINITIONS OP lSOCIL INDICATORS Laod Area (tboc fee2) POpolston Per ourstog petroo - Popolation, divded by niaber of practicing Total -Total ourfovo, aroo ocoPriinig land area aod iol\.ad waters, male sod f_eslo graduate ocoe, trai-d' or 'certified" oen,and Attic\. M-Mot retool octLoaco of agrjicltural area used tnporeetly or \.oiliary pereouel with training Or \.operienet\. Penonaoetlv for crops\. Panturec,\. tenet & kItchen gardens or c lho Peculation cet hcsPito1 hod - Pupolatioc divtdad by meeker of bospita1 bode tel low, avIlabl to public and private general sod epeoialieed hospital and rehsbglitarton centers, eoclcdse ourstog hcmne and eotablinlhneta for GSP ocr capita (tS) \.- GNP Pet "apita csti,oaten at ourroot earket prices, cuatodiL1 aed preo-otin- care\. _aclte hs sane, coovdro con, nothd a- orld Rank Atlas\. (1973-75 Per cpt e o y ofca rtee (M of reqciromestel - Cmaputod fran energy kati\.); 1960, 1970so 1975os eqialn ofOt icod supplies available to toutr'y per capita par dap, avatleble eupplteo cooprissdMs\.eti production, imports less enports, PEclrinan vtl taitisand changes to, stock, netsppliessclude so Toal fend, eed,' qu\.oti- Poeclcion(oidyr\. illio) -Ae of July first' it not availablo, tie cud to food proceseing end l e In distrbution, rquIrenata o--raco of tw eod-yeor cecteo,1960, 1970 and 1975 data\. \.er ectimaled by FAO baocd on physiological ooede for Porna ac\.tivity aod h-akth considering envirosocnt1 teoporsture, body esighta, age asd looclococ densty - cr ovuave In, - Mid-year popoection per rqoare kilo- ecdiotribotiono of population, asd allowing 10%\. fOr wate at houe0 ccr(00 bh ire; f oa re hold level\. Popclecion deoscoy - cot square ins of egric\. land - CanPuted a above for Per capita sooc1y of proteis (jtrans Per dayl - Protein conteot of per sgriccIctai\. lood only\. ceptia Par suPply of food per day\. not supply of food Ia deftoed an above\. require-enc ford:oil conotrien ectabliahed by USIA Eno-cic Vital ututlecico Research S-rcc- providefra oieins alwneof 60 grane of total Crudo hitch rats net thouo-d, avorace - Aoocol live birthe per thooseed protoie per day, end 20 grees of anisoal and pulse protein, of wbtch Mf ed-yecr pupclutiuo1 tee-year arithotic -vonagoo ending in 1960 end 10 graew should be animal procoin, these otandards are lower thso those 1970\. cod fieporaerg soi\. iv 1975 for cost - reeteItoef 75 gram of total proteio and 23 grams of anleal prottein as \. Crde et aoprcono vro-ou deaths pr thbu\.acod of id- argsfrtewld pooedb iiothe Third World,Sned '$rvy your pu""itilc, e-Yelv "cIth'tic avcg ,ndig in 1960 end 1970 end Per acc 'roi sunei " fr I ai al nd ocice Prototo supply of food cc-you urovcdioc c1975 fo r most recent \.stinoco derivedfr naeUcaic adfpoleen in grams per day\. inisont coclc aeCtol- Annual deacho of ofaer und-r one yer of ~ sbrae(tl!_) TLaonI_1- - Arncal deatho per thousand In age grup uige portihoucoo Ioc birthe\. t- yan, children in this ago group\. sugg-oced an an indicetor of Life P \.no at hith (yr\.) - Average oanber of yeare of life renainig mlontritcon\. cc birch; _sucify five-year -\.avgrie endiog in 1960, 1970 and 1975 for developing conrisEd-taion trouureprnccccoo rot - overegenumber oflive daughtersa wae ill Adlu,ted erlletratio - prieaocho noleto l gsa hoar c her nrosi rproductive period if hbe eperie:nces presor ego percentege oftprimary schoolag populaton, incldes children aged upcfc fertilit rc,usoly-tfIveyeraere coig in 160, 6\. er u dutdfor different longtha of primary ed-ceion; I197i and 1975 ford devloioi co\.erriec for -eutries with universal Id\.atio, nero11ent cay exceed 10072 Pouato c o hrot ()- toteI - Conpoud annual growth racee of mid- ames\. crn popln ace below or aho- the official school age\. yea popultin o 19060, '1960-70, sod\.1970\.75\. Adlstderooetratic - seconar achooll - Canputed as above, population growt roe(7-urban - Capted lika growth rare of total secondary ed-cation reuie at leant four years of approved primary popuci, dfferent definitions of urban aresn maay affect canprar- ieotr_ottn, provIdes general, voctional or tean\.her tratoteg biiy fdaaamn% cccre Intution fr cpiln of 12 to 17 yearn cf age, correspondence Urban populatioo (2 fttl% Ratio of urhan to total population cursee aregeesrel eoclded\. different definitIons of urbn ara a fetcnaaiiyo oe Years o shooline eroidd (first and second level) - Tnta1 yearn of among vooctries\. sc~~~~~~~~~hooling, at esondary level, -octtonel i\.torution may be par- Aie structure fe enet) - Children (0-14 years), worhiog-age (15-64 yeare), tially orI nltly encluded\. an eirod (65 years aed -vor) as percentages of ntd-yeer population\. Vocational enrolleent (2 of -econdary) - Vocational institutions Age deoendeney rat - Ratic of population under 15 end 65 and over to include teenhnica, ind-tcria1 or thbnr programs which operate those of agen 15 throush 64 iedependently or so departments of secondary teuti Lotions\. Econaic deodec r i - Ratio of populocine under 15 and 65 and ovr Adult literacy rate (7\.1 - Literate edulte (able to reed end unite) a to the labor forco en ago group of 15-64 yerar\. percentage of total odolt poPulation aged 15 years and over\. Fonilo P pl -nini _ acotr (cumlative, thou) -\.Cauatv -aber of aoceptcrn of birth-ccetro1 devices undot \.supice\. of national fosily H\. i\.g Pan-e I prugr cire inception Pesn a oa u oI -Acruge nuber of persons per rmoo io f'oetly \.aenim - unero (% of \.mared w-neo - Perceetgee of earned occupied conveotina1 duellingo in urban areas, d-w lingo aeclude -2oe of child-bearing ago (15-44 years) wh o us hitch-conftrol devices ean-pern-nst otructores and unoccupied parts\. to all married w,nen in --m age group\. OcEted ~Idwelng ithot i aod wster1% Occpied cnetoa dweling touban d r:s\.re,wchu nide or outside piped tnclny,osot wa~~~~~~~~~~~~~~\.ter facilitiec en percentage If all occupie dwellings\. Total labor frce (tussd) - EconoivlIy active per\.eono, includiog Acsccectity7,oaldwlng)-Cnostaa w ig amdfor\.ce end uv lydbt eocluIng hou--ive, otudeoc,o, etc\., wiheetiiyi iigqatr oprsr of tcta dwelligo i defIitionsr - -ario-o cI\. tren ore eet canparal\. urbae and rura areas, Lahbor torce In agriculture (7* - Agrivulturo1 labor force (in foesing, Rrtal deslinoon connected to eleocricity (2) - i puted en abov o fcctrY, hunting end fishing) as percentage of total labor force -rura dwellings only\. Iloptovled M2 of labor force) - hemnployed are usually defined as persOes who ore able sod wiJlling to tohe a job, out of a job on a gi\. day, Consanotlo rotalcedin, f jMh- an nhIog woI-p,rk fo aspciIe eluopeio Radio reteivers (Per thou se) A ll types f rscetvers for radio brod- so ecoedig oneweek \.ay nlotyh caprble betwee ncoustress dos to tes \.tst general pu Pi prthousanrd of Population, secludes different defieilt-no uonlyd so ancurce\. of date, g\. , employ- -niosed receiver in countries add to yeasra wh\.n registraino mont ofiec oatiscis\. oavle ouroyn, caP\.uIsry nemployenet in\.ra\.ce\. radio nets we In effeet, data for recent Years may non he cisparable locnea ditribution- Percentage of private tnane (both im caah a\.nd\.kind) Pass\.enger earn (eer thou pop) - Pea\.eeger Odes eanpriac \.t\., cars\. receivod by richeot 5%, cicheut 20%, poorest 20%, and P--reot 40%of eseting less than eight person, -ocode aabulances, heerses and honoehold-\. military vehicle\. Electriciry (kwhlyr per cap) -Janea noonro f industrial, tan- Dli,rtuioni of land owne\.rship - Percentages of land owed by wealthiest nerniel, public and pri'tvace " elcrcit to hilwte ors Per caplts, 1%and porsoc I0M of laed ownrs\. generally base\.d on predUttion date, without alwnefor Ilos\.sa in \.grids but elbowing for imports and enporta of electricity\. Health aed SurtonfearInt (kg/yr Pagr cap) - Per naPita anua tonsuo-ption to kilagr-n Population Per PhYician - PoPulation divided by nonber of pr-ntising estimated fran dreaotct prodcclti plus met imports of newaprint\. Phytlcisno qualified fran a edicaI school 00 eInvernity level\.  ANNEX I Page 3 of 3 pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1975 ANNUAL RATE OF GROWTH (% constant prices) US$ Mln\. % of GNP 1961-65 1966-70 1971-75 GNP at Market Prices 22,755 100 9\.0 7\.7 n/ 11\.3 Gross Fixed Domestic Investment 6,850 30 11\.3 2/ 11\.2 2/ 11\.2 2/ Exports of Goods 5,341 23\.5 9\.0 10\.9 / 23\.6 Imports of Goods 5,342 23\.5 10\.7 J 12\.7 - 22\.3 LABOR FORCE IN 1975 GOVERNMENT FINANCE Mln\. % General Government (lei bill\.) % of GDY - Agriculture 3\.9 38 1975 1975 Industry 4\.0 40 Services 2\.3 22 Total Receipts 238\.6 52\.5 Total Expenditure 236\.2 52\.0 Total Surplus 2\.4 0\.5 RETAIL PRICES 1971 1972 1973 1974 1975 (1966 - 100) 101\.6 101\.6 102\.4 103\.7 103\.9 BALANCE OF PAYMENTS (Mln\. US$) 1971 1972 1973 1974 1975 MERCHANDISE EXPORTS 1975 Exports of goods 2,102 2,884 3,667 4,858 5,341 Imports of goods 2,102 2,910 3,424 5,049 5,342 US$ Mln\. % Trade balance 0 -26 i243 -191 -1 Capital goods 1,351 25 Net Services -23 -31 -107 -168 -134 Consumer goods 860 16 Foodstuffs 566 11 Balance on goods Intermediate goods 577 11 and services -23 -60 +136 -359 -135 Raw materials 1,986 38 Industrial 1,682 32 Net MLT Capital 5 24 83 643 437 Agricultural 304 6 Disbursements 350 516 589 1,055 817 Amortization -345 -492 -506 412 380 Total 5,341 100 Residual Balance -18 -36 +219 +284 +302 RATE OF EXCHANGE EXTERNAL DEBT\. June 30, 1976 Official Rate: Tourist Rate: US$ Mln\. Total 2,900 US$ 1\.00 = lei 4\.97 US$ 1\.00 - 12\.00 of which convertible Lei 1\.00 = US$ 0\.20 Lei 1\.00 -- 0\.08 currencies 2,864 Official Trading Rate: DEBT SERVICE RATIO FOR 1975 US$ 1\.00 = Lei 20 Convertible currencies only 17\.2 Lei 1\.00 - US$ 0\.25 1/ Net National Income 2/ Current Prices 3/ Gross Domestic Income Country Programs Department 1 Does not include interest payment obligations Europe, Middle East and North Africa Region February 2, 1977   ANNEX II Page 1 of 3 pages STATUS OF BANK GROUP OPERATIONS IN ROMANIA A\. STATEMENT OF BANK LOANS (As of December 31, 1976) Amount in $ millions Loan Less Cancellations Number Year Borrower Purpose Bank IDA Undisbursed Ln\. 1020-RO 1974 Investment Fertilizer 60\.0 - 44\.7 Bank Ln 1027-RO 1975 Investment Special 70\.0 - 65\.8 Bank Steel Ln 1028-RO 1975 Investment Thermal 60\.0 - 24\.0 Bank Power Ln 1082-RO 1975 BAFI A' Irrigation 70\.0 - 4o\.6 Ln 1083-RO 1975 BAFI Agriculture 30\.0 - 19\.8 and Credit Ln 1169-RO 1976 BAFI Flood 40\.0 - 3\.6 Recovery Ln 1170-RO 1976 Investment Flood 20\.0 - 8\.0 Bank Recovery Ln 1242-RO 1976 Investment Hydropower 50\.0 - 50\.0 Bank Ln 1247-RO 1976 BAFI Irrigation 60\.O - 59\.8 Total 460\.0 316\.3 of which has been repaid Total now outstanding 46o\.o - Amount sold 1\.6 - - of which repaid 0\.0 1\.6 - Total now held b/y Bank - 458\.4 - Total undisbursed 316\.3 - 316\.3 1/ Bank for Agriculture and Food Industry 2/ Excluding exchange adjustments  ANNEX II Page 2 of 3 pages B\. PROJECTS IN EXECUTION Ln No\. 1020 Bacau Fertilizer Project; US$60 million Loan of June 28, 1974; Effective Date: December 31, 1974; Closing Date: December 31, 1978\. By agreement between the Bank and the Borrower, the project site was changed from Tecuci to Bacau which is more advantageous from the point of view of controlling effluents\. After a slow start, due mainly to the change of site, lack of familiarity with Bank procurement procedures, and the floods of spring 1975, the project is now proceeding satisfactorily\. Ln No\. 1027 Otelinox Special Steel Project; US$70 million Loan of July 10, 1974; Effective Date: April 4, 1975; Closing Date: December 31, 1979 Execution of the project was delayed several months, primarily be- cause of the complexity of two large bid packages and because of the Romanians' lack of familiarity with international competitive bidding procedures under the Bank's Guidelines\. Progress on procurement has been closely monitored by several Bank supervision missions, and US$50,000 allocated for procurement consultants but not used has been cancelled\. The contract for the cold mill has been signed and construction has begun\. Bids for the hot mill have been received and are being evaluated\. Ln No\. 1028 Turceni Thermal Power Project; US$60 million Loan of July 10, 1974; Effective Date: November 6, 1974; Closing Date: June 30, 1979 There have been minor delays in construction and steps have been taken to reduce these\. Project execution is in general according to plan and satisfactory\. Due to increase in costs of imports, local goods and labor rates, the project cost is now likely to exceed the estimate at appraisal by 19 percent\. Delays in procurement and related procedural problems have been resolved, and the rate of disbursement is likely to lag only slightly behind the original estimates\. Training of future operational staff has begun\. Fi- nancial performance has been satisfactory despite a reduction in energy sales growth in response to energy conservation measures\. Ln No\. 1082 Giurgiu-Razmiresti Irrigation Project; US$70 million Loan of February 6, 1975; Effective Date: May 5, 1975; Closing Date: December 31, 1978\. Construction of project works is progressing satisfactorily and about 60 percent of the project has been completed more or less on schedule\. International procurement was delayed initially by the Romanians' lack of familiarity with international bidding procedures required by the Bank, and by a delay in appointing consultants to assist with this work\. All contracts have now been awarded\.  ANNEX II Page 3 of 3 pages Ln No\. 1083 Sadova-Corabia Agricultural Credit Project; US$30 million Loan of February 6, 1975; Effective Date: April 29, 1975 Closing Date: December 31, 1979\. Progress of the project is satisfactory\. Contracts for purchasing refrigerated trucks, building materials, steel products, and electrical cables have been awarded\. Contracts for chemicals were not awarded after interna- tional competitive bidding because the Romanians judged all bid prices to be too high; the Bank has asked that these contracts be retendered\. Bids for the premix feed mill have been received, formula testing has been carried out as part of bid evaluation and the Romanians are now preparing bid evaluations for submission to the Bank\. Ln No\. 1169 Flood Recovery Prolect (Agricultural Component); US$40 million Loan of November 12, 1975; Effective Date: December 2, 1975; Closing Date: June 30, 1979\. Project execution is proceeding well and disbursements are ahead of schedule\. International competitive bidding for most items was combined with that for the Giurgiu-Razmiresti Irrigation Project as noted above, and con- tracts for these items have been awarded\. Ln No\. 1170 Flood Recovery Project (Industry, Mining and Transport Com- ponent); US$20 million Loan of November 12, 1975; Effective Date: December 2, 1975; Closing Date: March 31, 1977\. Disbursements under the loan have been slower than anticipated because of difficulties encountered in Romania in preparing and assembling documentation on procurement of imported industrial machinery\. Interna- tional competitive bidding for procurement of earthmoving machinery under this loan was combined with that for the Giurgiu-Razmiresti Irrigation Project above, and contracts have been awarded\. Disbursements have improved consider- ably since September 1976\. Ln No\. 1242 Riul Mare Retezat Hydropower Project; $50 million of April 28\. 1976: Effective Date: July 26, 1976; Closing Date: December 31, 1981\. Project execution has begun and access roads to the dam site are well advanced\. Civil works for the dam and underground power station have begun\. Procurement is underway and the first contracts have been awarded\. Ln No\. 1247 Rasova-Vederoasa Irrigation and Agriculture Development Project; $60 million of April 28, 1976; Effective Date: November 3, 1976; Closing Date: June 30, 1981\. Advertisement for international competitive bidding has been com- pleted and the Bank has approved tender documents\. Bids are expected in February 1977\. EMENA February 2, 1977  ANNEX III Page 1 of 3 pages ROMANIA IALOMITA-CALMATUI IRRIGATION PROJECT Loan and Project Summary Borrower: Bank for Agriculture and Food Industry (BAFI)\. Guarantor: Socialist Republic of Romania\. Beneficiaries: Cooperatives and state farms\. Amount: US$60 million, in various currencies\. Terms: Amortization in 15 years, including 3 years of grace, at an interest rate of 8\.5 percent per annum\. Project The project consists of construction of irrigation infra- Description: structure and supply of related facilities to serve an area of about 148,500 ha\. It includes: (a) a floating pumping station with capacity of 110 m3/sec, and seven fixed pumping stations; (b) a system of concrete-lined main, branch and distribu- tary canals; (c) about 115 pressure pumping stations to supply water to about 2,760 km of distribution pipeline; (d) about 17 surface drainage networks and 23 related pumping stations to serve about 82,350 ha, and sub- surface drainage networks to serve about 14,400 ha; (e) portable furrow and sprinkler irrigation equipment, operation and maintenance equipment, and farm machinery; (f) about 240 km of 110 kv and 20 kv power lines; and (g) land leveling works on about 40,000 ha, soil erosion control works on about 6,100 ha, and windbreaks to protect about 38,600 ha\. (h) about 400 observation wells to monitor groundwater levels; (i) construction of buildings for operation and main- tenance of the irrigation system\.  ANNEX III Page 2 of 3 pages Cost Estimates Item Estimated Cost/ Foreign Local Foreign Total as % ------(US$ million)----- of Total Irrigation Works 89\.7 28\.3 118\.0 24 Drainage Works 16\.9 2\.8 19\.7 14 Miscellaneous Works 12\.7 1\.8 14\.5 12 Land Compensation 1\.0 - 1\.0 - Operation and Maintenance Equipment and Farm Machinery 5\.8 3\.0 8\.8 34 Engineering and Administration 12\.0 - 12\.0 - Base Cost 138\.1 35\.9 174\.0 21 Physical Contingencies 9\.5 2\.5 12\.0 21 Price Contingencies 2\.8 6\.2 9\.0 69 Total Project Cost 150\.4 44\.6 195\.0 23 Interest and Other Charges accruing before December 14, 1981 - 15\.4 15\.4 100 Total Financing Requirements 150\.4 60\.0 210\.4 29 /1 Discrepancies due to rounding\. Financing Plan: US$ million Local Foreign Total State Budget 109\.8 - 109\.8 Bank for Agriculture and Food Industry 28\.6 - 28\.6 Cooperatives 12\.0 - 12\.0 IBRD - 60\.0 60\.0 Total 150\.4 60\.0 210\.4 Estimated Disbursements: Calendar Years 1977 1978 1979 1980 1981 ------------(US$ million)---------- Annual 5\.0 27\.0 19\.0 4\.2 4\.8 Cumulative 5\.0 32\.0 51\.0 55\.2 60\.0  ANNEX III Page 3 of 3 pages Procurement: Although Romanian laws provide for international competi- tive bidding and for joint ventures involving foreign and domestic enterprises, in practice all irrigation works are constructed by Romanian Construction Trusts, which are experienced and familiar with local conditions, methods and regulations\. Therefore, only procurement of equipment and materials equivalent in cost to the estimated foreign exchange cost of the project would be financed under the proposed loan\. Items costing US$45 million including contingencies (Annex 7, table I of the Appraisal Report) would be procured following international advertising and competitive bidding in accordance with the Bank Guidelines\. Romanian manufacturers would be allowed a margin of pref- erence of 15 percent or the applicable custom duty, which- ever is lower, but the application of the preference is not expected to significantly affect the outcome of bidding\. It is expected that foreign suppliers would win contracts for most construction equipment (canal trimming and lining machines, tile laying machines, dewatering equipment and some motor scrapers) estimated to cost about US$6\.5 million\. Other items to be procured through international competi- tive bidding (estimated to cost US$38\.5 million) are avail- able domestically and, based on experience with previous Bank-financed projects, it is expected that Romanian manufacturers would be successful in bidding for these items\. The remaining equipment and materials (estimated to cost US$41\.3 million) would be procured under Romanian procedures and would not be eligible for disbursement under the proposed Bank loan\. Economic Rate of Return: 16\.3 percent\. Appraisal Report: No\. 1228-RO Irrigation Division EMENA Projects Department EMENA February 2, 1977  ANNEX IV ROMANIA IALOMITA-CALMATUI IRRIGATON PROJECT SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Project first identified by the Bank: August 1975 (b) Time taken by the country to prepare the project: Two years (January 1974 to January 1976) (c) Agency which prepared the Project: Ministry of Agriculture (d) Date of first Bank mission to consider the Project: August 1975 (e) Date of departure of Appraisal Mission: March 29, 1976 (f) Date of completion of negotiations: November 8, 1976 (g) Planned date of effectiveness: About May 16, 1977 Section II: Special Bank Implementation Actions International procurement for the project is to be consolidated with that for the Rasova-Vederoasa Irrigation and Agricultural Development Project (Ln\. No\. 1247)\. Tender documents have been approved by the Bank, and bids are expected by February 1977\. Section III: Special Conditions A special condition of effectiveness of the loan is the approval by the Council of Ministers of the technical and economic indicators of the project\. This approval of detailed project parameters is normal under Romanian planning procedures and will provide the legal basis for financing and imple- mentation of the project (para\. 56)\. EMENA February 2, 1977   F,~~~~~~~~, z siw_~3rSd\. r ]N '~' -\.-IvIJ :X\.07 - I \J~y' t, / 0 8 > - \. \. -\. £ S iS \ 1 W H, \. 1~~~~~~~~~~~~S'N VINt ~ \.5 W08\. iO-l-3111 95 ,t , \./ Rzr ri ~ ~ >R ~~ '- -b \.isos5- lJ<%'

APPROVAL

P006310

Document of The World Bank FC FOR OFFICIAL USE ONLY Report No\. 3020a-BsR STAFF APPRAISAL REPORT NORTHEAST BRAZIL CEARA SECOND RURAL DEVELOPMENT PROJECI November 11, 1980 Projects Department Latin America and Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency Unit - Brazilian Cruzeiro (Cr$) US$1\.00 - *Cr$43\.68 (February 28, 1980) Cr$1\.00 - US$0\.02289 Cr$1 million - US$22,894 WEIGHTS AND MEASURES 1 meter (m) = 3\.28 feet 1 kilometer (km) = 0\.62 mil2s 1 hectare (ha) 2 - 10,000 m = 2\.47 acres 1 square kilometer (km ) = 100 ha = 247\.1 acres = 0\.386 sq\. miles 1 cubic meter (i3) 1\.31 cubic yards = 264\.2 US gallons I kilogram (kg) = 2\.2 pounds 1 ton = 1,000 kg = 2,205 pounds GLOSSARY AND ACRONYMS (see next page) GOVERNMENT OF BRAZIL FISCAL YEAR January 1 to December 31 POLONORDESTE PROGRAM FISCAL YEAR April 1 to March 31 * Average Exchange Rates: 1975 1976 1977 1978 1979 US$1\.00 : Cr$ 8\.128 10\.786 14\.138 18\.317 27\.581  FOR OFFICIAL USE ONLY GLOSSARY OF ABBREVIATIONS BB = Banco do Brasil (Bank of Brazil) BEC = Banco do Estado do Ceara (Bank of the State of Ceara) BNB = Banco do Nordeste do Brasil (Bank of the Northeast of Brazil) BNCC = Banco Nacional do Credito Cooperativo (National Cooperative Credit Bank) CEPA-CE = Comissao Estadual de Planejamento Agricola - Ceara (Ceara-State Agricultural Planning Commission) CIBRAZEM = Companhia Brasileira de Armazenamento (Brazilian Storage Company) COBAL = Companhia Brasileira de Alimentos (Brazilian Food Company) CODAGRO Companhia Cearense de Desenvolvimento Agropecuaria (Ceara Agricultural Development Company) DAER-CE = Departamento Autonomo de Estradas de Rodagem do Ceara (Ceara Highway Department) DNOCS = Departamento Nacional de Obras Contra Secas (National Department of Works Against Drought) EMATER-CE = Empresa de Assistencia Tecnica e Extensao Rural - Ceara (Ceara Technical Assistance and Rural Extension Company) EMBRAPA = Empresa Brasileira de Pesquisa Agropecuaria (Brasilian Agricultural Research Company) EMBRATER Empresa Brasileira de Assistencia Tecnica e Extensao Rural (Brazilian Technical Assistance and Rural Extension Company) EPACE Empresa de Pesquisa Agropecuaria do Ceara (Ceara Agricultural Research Company) FSESP = Fundacao Servicode Saude Publica (Foundation for Public-Health Services) FUNRURAL = Fundo de Assistencia ao Trabalhador Rural (Assistance Fund for Rural Workers) INCRA = -Instituto Nacional de Colonizacao e Reforma Agraria (National Institute for Colonization and Agrarian Reform) ITERCE = Instituto de Terras do Ceara (Ceara Land Institute) PIASS = Programa de Interiorizacao das Acoes de Saude e Saneamento (Program for the Interiorization of Health & Sanitation Activities) POLONORDESTE = Programa de Desenvolvimento de Areas Integradas do Nordeste (Development Program for Integrated Areas in the Northeast) RPU Unidade Espacial de Planejamento (Regional Planning Unit) SS Secretaria de Saude (State Secretariat of Health) SOEC Superintendencia de Obras do Estado do Ceara (Ceara Superintendency of Works) SUDENE Superintendencia de Desenvolvimento do Nordeste (Northeast Development Superintendency) This document has a restricted distribution and may be used by recipients only in the performance of their offiial duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   NORTHEAST BRAZIL CEARA SECOND RURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No\. I\. THE AGRICULTURAL SECTOR IN BRAZIL \. 1 A\. The Sector in the Economy nomy\. \. 1 B\. Government Agricultural Policies \. \. 2 C\. Agriculture in Northeast Brazil \. 2 D\. Bank Involvement in the Agricultural Sector \. \. 3 II\. THE STATE OF CEARA AND THE PLANNING SUB-REGIONS \. \. 3 A\. The State \. \. 3 Location and General Features \. 3 Land Tenure and Use \. 4 Agricultural Production \. \. \. 4 Agricultural Services \. \. *\. 5 Social Infrastructure \. 6 Physical Infrastructure \. 6 Rural Development \. \. \. \. \. \. \. 6 B\. Planning Sub-Regions \. \. \. \. 7 III\. THE EXECUTING AGENCIES \. \. 7 Institutions to be Engaged in the Project \. \. 7 State Framework for Executing Special Programs in Ceara \. 8 IV\. THE PROJECT \. 9 A\. Origin \. \. \. 9 B\. Brief Description \. 10 C\. Detailed Features \. 11 Agricultural Services \. \. 11 Rural Extension \.11 Agricultural Experimentation \.12 Cadastral and Land Surveys, Land Titling and Purchase \. \. 13 Agricultural Cooperative Society Development 15 Social Infrastructure \. \. \.16 Education and Vocational Training \. 16 Health and Sanitation \. \. 18 This report is based on the findings of a pre-appraisal and an appraisal mission in December 1979 and February 1980, composed of Messrs\. G\. Ashkenazi, J\. Coates, P\. Ram, Ms\. D\. M\. Dowsett, Messrs\. W\. Matthey, B\. Liese, Ms\. J\. de Regt (Bank) and Messrs\. E\. Calderon, U\. Dekel, E\. Velez-Koppel, N\. Fisher and Ms\. M\. Koch-Weser (Consultants)\.  - ii - Table of Contents (Continued) Page No\. Physical Infrastructure \. 20 Feeder and Access Roads \. 20 Small-scale Irrigation Schemes \.22 Marketing Activities \.23 Small-scale Non-agricultural Enterprises \. 24 Project Coordination and Management \. 25 Activities Planned Parallel to the Project \. 25 Credit \.0\.0\. 25 Input Supply and Mechanization Services \. 26 Agroindustry Development \. 27 Improved State Coordination of Special Rural Development Programs \. \. \. \. \. 27 V\. PROJECT COSTS AND FINANCING\. 28 Cos t Estimates \. 28 Financing \. \. 28 Procurement \.&\. 30 Disbursements \. \. \.*\. \. \. \. \. 31 VI\. PROJECT IMPLEMENTATION \. 31 Coordination and Management \. 31 Operating Agreements and Procedures \. 33 Implementation Schedule \. \. 34 Accounts and Auditing \. O- \. 34 VII\. PRODUCTION, DEMAND, MARKETING AND PRICES \. 35 Production - \. \. \. \. \. \. 35 Demand \. \.o\. \. \. 36 Marketing and Prices \. \.38 Small-scale Non-agricultural Enterprises Production and Marketing \.38 VIII\. FINANCIAL ANALYSIS \. \.39 Illustrative Farm Types \. 39 On-farm Operations \. \.O\.*\. \. \. 40 Producer Income \. \. \. \. **\. O\. 41 Non-farm Activities \. \. 42 IX\. ECONOMIC BENEFITS AND JUSTIFICATIONS \. \. 43 Economic Rate of Return \. \. 43 Employment \.45 Project Risks \.o\. \.*\. \. 45 Fiscal Impact \. \. \. 46 X\. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATION \. 47  - iii - Table of Contents (Continued) ANNEX 1: Design Standards for Roads ANNEX 2: Annual Phasing of Project Costs ANNEX 3: Estimated Schedule of Bank Disbursements ANNEX 4: List of Executing amd Collaborating Agencies ANNEX 5: Implementation Schedule ANNEX 6: Project Coordination and Management Chart ANNEX 7: Cost and Benefit Streams for Economic Analysis ANNEX 8: Agricultural Planning, Technical Coefficients and Illustrative Farm Models ANNEX 9: Component Key Indicators ANNEX 10: Planning Sub-Regions Main Characteristics ANNEX 11: Related Documents Available in Project File MAPS: 1\. Project Area and Existing Infrastructure No\. 14875 2\. Potential Land Use and Rainfall No\. 14876 SUPPLEMENTARY STAFF WORKING PAPERS 1\. Project Area Summary Data 2\. Rural Extension 3\. Agricultural Experimentation 4\. Cadastral and Land Surveys, Land Titling and Purchase 5\. Agricultural Credit 6\. Input Supply, Mechanization Services, and Agroindustrial Development 7\. Cooperative Society Development 8\. Education and Vocational Training 9\. Health and Sanitation 10\. Feeder and Access Roads Development 11\. Small-scale Irrigation Schemes 12\. Marketing Facilities and Services 13\. Marketing Channels, Storage and Prices 14\. Small-scale Non-agricultural Enterprises 15\. Agricultural Development and Production Technology 16\. Producer Income, Cash Flow Analysis and Employment 17\. Economic Analysis 18\. Project Coordination and Management   NORTHEAST BRAZIL CEARA SECOND RURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT I\. THE AGRICULTURAL SECTOR A\. The Sector in the Economy 1\.01 Although agricultural production in Brazil has been growing at a lower rate than the GDP as a whole, agriculture continues to be a very important sector in the economy\. The national agricultural work force numbers 12\.8 million, or 39\.5% of the economically active population, and 43\.1 million ha (out of a national territory of 8\.5 million km ) are in agricultural use\. About 56% of Brazil's merchandise exports are agricul- tural and they account for more than 50% of the country's export earnings\. Brazil is the world's largest exporter of coffee, orange juice, and cane sugar, and the third largest producer of soybeans\. It is also a major supplier of cotton, peanuts, cocoa, castor oil and sisal\. 1\.02 The most important products for the domestic market include manioc, maize, rice, wheat, beans, potatoes, vegetables, bananas, citrus fruit, dairy products, poultry, beef and pork; coffee, sugar, soybeans, cotton, and cocoa are also important for the domestic market\. With the exception of wheat, Brazil is largely self-sufficient in basic food production, although some staples such as beans are imported seasonally\. More than half of the wheat consumed in Brazil is still imported\. 1\.03 From 1967 to 1974, the agricultural sector performed well in meeting domestic demand for food and fiber as well as in supplying a rising volume of export commodities, with output growing at 5\.7% annually despite adverse weather conditions in three of the seven years\. Farm output increased 4\.2% over 1975/76, an increase due more to productivity gains with livestock (12\.2%) than crops (0\.4%, though 9% if coffee is excluded)\. Until 1978, the value of agricultural output increased steadily, more as a result of an expansion of production area than of improved productivity\. In 1978, agricultural output declined by 2%, largely due to a severe drought in the south resulting in substantial crop losses\. In 1979, the agricultural sector showed a 3\.5% growth rate, compared to 6\.5% for the industrial sector and 6% for the economy as a whole\. Despite increased attention to productivity and increasing market integration, sub- sistence and semi-commercial production and use of rudimentary technologies continue to be widespread, particularly in the Northeast, North and Center- West\. Because of the large rural population (para\. 1\.05), the agricultural sector remains a substantial source of labor for the other sectors of the economy\.  - 2 - B\. Government Agricultural Policies 1\.04 Agricultural development has been assigned a high priority in Brazil's Third National Development Plan (1980-84)\. Major policy objectives include: (a) increased basic staple and export production, with special emphasis on small and medium producers; (b) the creation of an integrated system of production, storage, transport and marketing; (c) the expansion of agricultural research activities and the increased use of modern inputs and appropriate technology; and (d) the decentralization of agricultural policy execution, increasing the participation of the private sector and state and local governments\. Recent measures have tended to confirm the government's commitment toward stimulating agricultural production and raising rural incomes, particularly among small producers\. These measures have included: (a) the strengthening of the research and extension services with a new emphasis on the needs of small farmers; (b) the support of special regional programs, such as the Development Program for Integrated Areas in the Northeast (POLONORDESTE), that focus on poorer regions and small-scale farmers; and (c) the announcement of a series of actions (pacote agricola) in May 1979, which included increased access to institutional credit\. How- ever, Brazil's high inflation rate and large public sector deficit during the late 1970s are forcing the government to restrain public expenditure and interest rate subsidies\. In December 1979, a new economic package was announced, which lowered the interest rate subsidy on agricultural credit\. The package also removed export subsidies and included a 30% devaluation of the cruzeiro\. These measures, partially aimed at stimulating agricultural export growth, and introduction of a large-scale alcohol production program demanding increased cultivation of sugarcane, demonstrate new economic priorities\. C\. Agriculture in Northeast Brazil 1\.05 The nine states of Northeast Brazil have a population of about 35 million, two-thirds of whom live in rural areas\. The population has recently been growing at a net rate of 800,000 inhabitants per year\. Much of the region has a semi-arid climate with periodic serious droughts and is made up of exten- sive areas of poor soils\. Nonetheless, the Northeast is a significant agri- cultural region, with 40% of Brazil's agriculturally employed population and a major share of the national production of cocoa, cotton, manioc, beans and sugar\. In 1979, about 30% of the area harvested in Brazil was in the Northeast\. Though some crops such as sugarcane are grown predominantly on large farms, virtually all food and industrial crops also are produced widely by small farmers; many crops are mainly produced by small farmers\. Their technology is unsophisticated and yields are poor\. The difficulties facing them include lack of credit for working capital or investment, limited agricultural extension services, market isolation and weak linkages with the regional economy, in- security of land titles and, in some areas, a difficult physical environment\. These problems are compounded by a highly skewed pattern of land ownership\. For instance, less than 1% of the total number of farm establishments account for 40% of the area, whereas in some areas up to 80% of the rural labor force own no land at all\. Among northeastern states, the proportion of land holders who own less than 10 ha ranges from about 49% in Ceara to nearly 88% in Maranhao\.  - 3 - 1\.06 Various Government programs have been directed at speeding economic development in the Northeast\. The Government operates a special agency, the Northeast Development Superintendency (SUDENE), and a special development bank for the Northeast, Bank of the Northeast of Brazil (BNB)\. Substantial fiscal and monetary incentives have been made available over the past two decades for both industry and agriculture\. Programs to generate jobs in the industrial sector have not, however, kept pace with population increases, and continuous population movement from rural to urban areas has been coupled with consider- able movement to the more industrialized Center-South and to the Center-West of Brazil\. Prior to the mid-1970's Government programs directed to the rural population of the Northeast concentrated on public works, with substantial efforts in drought-prone areas to develop dams and ponds\. More recently, how- ever, efforts have also been initiated to strengthen the institutions offering the support services required to develop more productive farming systems\. Such efforts are the POLONORDESTE program (which the Bank has helped finance), Sertanejo, and DNOCS and CODEVASF programs\. POLONORDESTE is a wide-ranging program aimed at raising living standards through a series of area based inte- grated development projects where a comprehensive range of measures is intro- duced\. The Sertanejo project operates in semi-arid zones with a view to reduc- ing the vulnerability of specific areas to drought\. DNOCS activities are intended to create permanent employment in drought areas through irrigation systems (see paras\. 3\.02-3\.05 for further description of the programs as they operate in the state of Ceara)\. CODEVASF, a government-owned company, is in charge of the development of the Sao Francisco Valley, and does not operate in Ceara\. D\. Bank Involvement in the Agricultural Sector 1\.07 The Bank has so far made 19 loans, totalling US$693\.7 million, for agriculture and rural development in Brazil\. These include two, amounting to US$125\.3 million, for agro-industries; two, totalling US$60\.5 million, for livestock development; one for US$18\.2 million for grain storage; one for US$40 million for agricultural research; one for US$100 million to improve agricultural extension services; and twelve totalling US$349\.7 million for various settlement, irrigation and rural development projects, nine of which are located in the Northeast, including the Ibiapaba Rural Development Project in Ceara\. Five additional agricultural and rural development operations are currently at a relatively advanced state of preparation: two rural development projects and an agricultural credit project in the Northeast; a second agri- cultural research project and a Northwest agricultural development project\. Additional agricultural and rural development projects are under consideration for possible future Bank financing\. Completion reports have been issued for the grain storage and the two livestock development projects\. II\. THE STATE OF CEARA AND THE PLANNING SUB-REGIONS A\. The State Location and General Features 2\.01 Ceara has a total population (1980) estimated at about 1\.9 million of which about 55% are rural, and a land area of about 146,800 km \. It is the  third largest state in population and fourth in land area among Northeast states\. The metropolitan area of the capital city, Fortaleza, which is situated on the coast, has a population of over one million and accounts for the bulk of the state's light industry\. The characteristics of the state's various sub-regions are described in some detail in Annex 10\. A great part of the area of Ceara (about 37%) could be classified as flat to slightly undulat- ing, 29% as slightly undulating to steeply undulating; 24% as steep slopes; and the rest (10%) as having a variable topography\. Average annual precipita- tion ranges from more than 1,600 mm in the uplands to about 660 mm in the semi-arid "sertao" regions; or from excessive, during the four wettest months of the year, to very deficient (see Map No\. 14876)\. A relatively wide range of soil types are found in the state; these soils may be classified from fertile in the southern, or Cariri Region to relatively infertile in the coastal, or Litoral Region (see Map No\. 14876)\. 2\.02 Some 29% of the population live in small towns and cities and the remaining urban population is concentrated in metropolitan Fortaleza on the coast\. The average per capita income in 1975 in the rural areas was estimated at US$160, one of the lowest in the Northeast\. The services sector accounts for nearly 60% of the state GDP, agriculture for 27% and industry for the re- maining 13%\. The traditional industries include food processing, textiles and clothing and the more recent ones include some non-metallic mineral, metal and chemical processing\. However, agriculture is still the main economic activity in Ceara; in 1975, more than one million people worked in agriculture (65% of the state labor force), and about 70% of them were temporary workers\. Land Tenure and Use 2\.03 Distribution of agricultural land by farm size is similar to the average pattern found elsewhere in the Northeast\. Of a total 304,000 farmers in Ceara, about 278,000 (91%) have less than 100 ha, and only about 108,000 (39%) of these are land owners, while about 170,000 are nonowner producers\. Nevertheless, these small farmers are producing, on about 24% of the arable land of the state, roughly 60% of the basic foods and 50% of the primary mate- rials for industry, and they represent about 70% of the rural labor force\. Farms with less than 10 ha dedicate about 49% of their total area to agricul- ture, these percentages falling sharply in larger farms\. Agricultural Production 2\.04 While agricultural potential is reasonably good along the higher rainfall sections of the coastal belt, in several humid highland areas and in a few river valleys, more than half (51%) of the state's land area falls within the drought-prone "sertao" or semi-arid zone\. Fruits, beef, cotton, manioc, beans, corn, and sugar, in that order, are presently the state's most important agricultural products in terms of value\. In recent years, cashew nuts, coffee and various fruits have also been introduced on an in- creasing scale, and the coastal fishing industry has expanded\. Production details, for 1979, are as follows:  -5- Quantity of Value of % of Area Production Production Total Crop (ha '000) (000' tons) (Cr$ million) Value Cotton 1,181\.8 191\.4 3,217\.0 12\.7 Bananas 36\.0 144\.0 541\.4 2\.1 Beans 342\.0 104\.8 1,691\.5 6\.7 Corn 408\.1 172\.2 888\.6 3\.5 Manioc 176\.0 1,760\.0 2,428\.8 9\.6 Sugar Cane 54\.1 41\.3 19\.2 0\.1 Fruit Trees 125\.3 637\.2 8,920\.8 35\.2 Beef - 100\.0 7,608\.1 30\.1 TOTAL 2,323\.3 - 25,315\.4 100\.0 Overall, the performance of the agricultural sector in Ceara during the last decade has been weak\. Although growth in food production exceeds slightly the rate of population growth, the state is importing increasingly large quantities of sugar, rice, meat, wheat flour, beans and other products\. In addition, yields of various important crops, such as cotton (which represents about 13% of the total value of agricultural production), have been declining\. Agricultural Services 2\.05 Agricultural extension services are provided by the state Technical Assistance and Rural Extension Enterprise (EMATER-CE), which with a total staff of about 830 is estimated to currently provide some form of assistance to about 85,600 farmers\. Three federal banks -- the Bank of Brazil (BB), the Bank of the Northeast of Brazil (BNB) and the National Cooperative Credit Bank (BNCC) -- and one State bank, the Bank of Ceara (BEC), supply rural credit to the state's farmers\. In 1976-79, they supplied 95% of the total rural credit in Ceara\. About 33% of recent rural credit has been long term for investment purposes and 67% was short-term production financing\. About 43% of the credit went for for crops, 26% for livestock, 31% for agroindustrial installations, marketing and miscellaneous needs\. Government operated input supply and mechanization (through CODAGRO), marketing (through CEASA), and storage (through CIBRAZEM), services are available scattered throughout the state, but their total impact is relatively small\. Forty-seven agricultural cooperative societies, of which 24 deal only with cotton processing and marketing, function in the state; most of these cooperative societies are in poor condition although they receive some technical assistance from EMATER-CE, the National Institute for Colonization and Agrarian Reform (INCRA), the state Organization of Cooperatives (OCEC) and the Central Cooperative Society (COCENTRAL)\. The state's newly founded Land Institute (ITERCE) is just beginning to get organized in order to carry out land cadastral surveys, titling, and purchase for subsequent redistribution\. The State Agricultural Research Enterprise (EPACE) is in charge of 12 well located agricultural research stations\. Research work is mainly concentrated in field crops but some experiments are also carried out on fruit crops and animal husbandry\. The National Agricultural Research Enterprise (EMBRAPA) also operates part of its national research network in the State and additional research is managed by the Federal University of Ceara, the Sugar and Alcohol Institute (IAA) and the Brazilian Coffee Institute (IBC)\.  -6- Social Infrastructure 2\.06 Health services are very poorly developed and are characterized by a relatively high infant and child mortality rate (127/1,000), and a wide incidence of endemic diseases\. Health services are mainly available to the urban population\. The water supply system is also very unsatisfactory and only about 35% of the urban population are connected to water supply services\. There are no sewerage facilities in small towns and cities, and only 5% of the population of Fortaleza is connected to a central sewerage system\. Education facilities are still more readily available to the urban population than to the rural population, and there is a shortage of schools and of qualified teachers\. Only 45% of the people over 15 years of age are literate\. The share of school age children (7-14 years old) actually attending school is only 45%, and about 36% in rural areas\. Physical Infrastructure 2\.07 The state system of main roads, secondary roads, access tracks and federal paved highways totaled some 40,000 km in 1978\. Most of the secondary and tertiary roads are poorly maintained and, being without proper drainage, many are impassable during the rainy season\. Some 1,435 km of largely an- tiquated railway lines are also in use in the State\. Postal and telegraph services exist in each municipality\. Electrical transmission lines cross the state and bring electricity to the municipal centers and a part of the small towns in rural areas\. Rural Development 2\.08 In the past, little attention was paid to the State's small farmers\. However, the worsening situation in the agricultural sector and the increase in rural outmigration coupled with changing national policies emphasizing the importance of small-scale agriculture, have recently focused more attention on small farmers\. The eight state's planning sub-regions have been included as priority areas of the POLONORDESTE program\. The Sertanejo program is operating in six centers and DNOCS activities already encompass about 8,000 ha, with some 1,650 participating families\. Todate, however, the Bank-financed First Rural Development Project in Ceara, (Ibiapaba), initiated in 1976, is the state's most comprehensive effort aimed specifically at improving economic and social conditions for the rural poor\. By the end of its implementation period, it is hoped that the project will have benefitted some 5,800 small farmers\. Agricultural credit and cooperative society support components had relatively slow starts, and the delays in Federal funding have been chronic\. However, implementation is presently advancing satisfactorily\. Already some 4,150 farmers (of which about 2,950 are nonowners) are participating in rural extension activities; 85 extension agents work in the area; some 26 new health posts, 46 primary schools, 410 km of roads and 500 km of electricity distribu- tion lines have been built in the project area\. Overall, more farmers than anticipated participate in several of the project activities, and substantial progress is being made in the majority of the components\. The impact of the project is being felt all over the area\. Yield improvements are, for some crops, higher than expected, and farm management improvements are being introduced by the agricultural extension service\. The Project Coordination  -7- - 7 - Unit in CEPA-CE, and the Project Field Coordinator are leading project execu- tion and are gradually becoming more effective in identifying and tackling coordination and execution problems\. Some officials are paying close attention to project development, and they provide adequate support to the Technical Unit\. Partially based on the experience with the Ibiapaba Projeci\. high priority has been assigned to the proposed Ceara Rural Development Project\. Furthermore, special efforts were made in the design and preparation of the proposed project to solve the main problems (such as project management capacity and funding) encountered during the implementation of the Ibiapaba project\. B\. Planning Sub-Regions 2\.09 The state government has divided Ceara into eight sub-regions, or Regional Planning Units (RPU), to facilitate and better focus its rural devel- opment programming\. The physiographic and socio-economic characteristics that distinguish the eight RPU's are briefly described in Annex -10, with a summary of key comparative indicators following: Regiona\. nlLanAis Units, Comparative Indicators Population Farm Operators Average Annual Area No\. Z of % % No\. % of Precip\. Temp\. Ki2 % of State ('000) StateRPural Urban ('000) State (mm) (CO) 1\. Litoral 26,000 18 2,362 40 32 68 76,310 25 1,080 27 2\. Ibiapaba 4,800 3 207 3 81 19 17,740 6 1,210 18 3\. Baturite 3,800 2 190 3 81 19 14,160 5 1,170 20 4\. Baixo Jaguaribe 11,900 8 329 6 74 26 20,960 7 865 27 5\. Sertoes Cearenses 33,800 23 918 16 68 32 50,820 17 805 28 6\. Sertoes do QuiXeramobim e Medio Jaguaribe 27,500 19 590 10 77 23 40,000 13 760 27 7\. Sertoes dos Inhamuns e Salgado 21,500 15 562 10 71 29 34,630 11 735 27 8\. Cariri 17,500 12 732 12 61 39 49,430 16 8$0 20 -_ SOTAL 146,800 100 5,890 100 55 45 304,050 100 _ _ III\. THE EXECUTING AGENCIES Institutions to be Engaged in the Project 3\.01 As the proposed project embodies a state-wide planning framework, many existing agencies would be involved in yearly project planning and im- plementation\. Agencies providing development services in rural areas -- such  - 8 - as the banks, BB, BNB and BNCC; the extension service, EMATER-CE; the research company, EPACE; the Organization of Cooperatives (OCEC); and the State Secre- tariat of Planning and Coordination (SEPLAN), Education (SE), and Health (SS); and the State Highway Department (DAER) -- would be directly involved in the project\. Other agencies such as the State Input Supply Company (CODAGRO), the Federal Storage Company (CIBRAZEM), the Brazilian Coffee Institute (IBC), and the Sugar and Alcohol Institute (IAA), and many others would be indirectly involved\. The effectiveness of these agencies in rural development has been hampered by limited resources and/or the fact that orientation toward inte- grated rural development is just emerging in the state\. The proposed proj- ect is meant to strengthen these agencies and increase their effectiveness\. State Framework for Executing Special Programs in Ceara 3\.02 The Federal Government has initiated a number of special rural programs for the Northeast in recent years\. The main programs which are being executed in Ceara are concerned either with areas of high drought risk or with areas of major agricultural development potential\. They include the POLONORDESTE (Development Program for Integrated Areas in the Northeast); Northeast Irrigation; Sertanejo and PRODECOR (Development for Rural Communi- ties) programs\. 3\.03 The POLONORDESTE program is a wide ranging program aimed at raising living standards through a series of area based integrated rural development projects\. Priority areas of special need or high agricultural potential were selected and a variety of measures have begun to be introduced, encompassing physical and social service infrastructure and agricultural development ser- vices\. The main target groups are the landless, small and medium landowners\. POLONORDESTE works through existing institutions with a view to creating the conditions for self sustaining development activity\. Prior to the initiation of the proposed project, six regions, which cover about 70% of Ceara, had been included as priority areas of POLONORDESTE\. Projects have, however, been initiated so far in only four of the areas\. The projects receive general guidance from a State Council involving all concerned agencies\. Management and day-to-day coordination, as well as monitoring and evaluation, are carried out by a special Technical Unit within the State Agricultural Planning Com- mission (CEPA-CE)\. In 1979, over 9,000 small farmers received agricultural extension and about 6,500 received credit or advances against production in the POLONORDESTE projects in Ceara\. This was significantly below planned levels, as was the development of health and education facilities\. In 1979-80, some US$16\.0 million equivalent were spent, and from January 1976 to September 1979, less than 40% of planned expenditure was applied\. Overall, the relatively scarce human resources and limited institutional coordination and capacity have been important constraints for such an innovative program\. 3\.04 The Northeast Irrigation Program is intended to raise production and incomes and create permanent employment in drought affected areas\. Irrigation systems from dams are developed and family production units organized\. Such units typically have 2-5 hectares of irrigated land and, on average, 3\.5 per- manent jobs are created, including 2\.5 taken by family labor\. Nine areas have so far been covered by this program in Ceara, and overall irrigated area was about 8,000 ha with some 1,650 families participating in 1977\. The program is being executed by the National Department for Work Against Droughts (DNOCS)\.  - 9 - The irrigated area is still only a fraction of the almost 56,000 hectares ori- ginally planned for construction by 1979\. In financial terms it has been the largest of the special programs, and in 1978 about US$18\.9 million equivalent were allocated for activities in Ceara\. 3\.05 The Sertanejo Program is operating in 6 centers in the semi-arid zone, with a view to raising agricultural production and incomes, and reducing the vulnerability of the area to drought\. In addition to supporting irrigated production, it encourages the production of existing and new drought resistant crops, including fodder; the introduction of soil and water conservation mea- sures; and the improvement of the commercial and cooperative systems\. The main target groups are small and medium landowners\. Each project center has a team of technicians responsible either to DNOCS or to the state Government\. A special Sertanejo credit line has been available to individual farmers for investment and production purposes\. In the two years to March 1979, less than US$0\.5 million had been applied, about half the planned expenditure\. 3\.06 The PRODECO0 program is also concerned with the improvement of living conditions in rural areas\. It has more of a community development bias than the other special programs, but is still concerned with the promotion of productive activities in crop, small livestock and fish production\. The main target groups are the landless and small landowners, and every development proposal must originally be put forward by a community, and then be implemented with guidance from the PRODECOR technical team of the Ministry of Agriculture, which works in close collaboration with the community\. In 1978, about US$1\.3 million equivalent was spent on 319 projects throughout Ceara involving 21,865 families -- about 36% of the funding provided by PRODECOR and 64% by the com- munities themselves\. IV\. THE PROJECT A\. Origin 4\.01 Ceara, which is the fourth largest state in the Northeast, has about 6\.9% of Ehis region's area and 16\.1% of its population with almost 35 inhabi- tants/km \. Its annual rate of population increase is higher than the North- eastern and Brazilian averages\. The state is relatively underdeveloped, lack- ing adequate physical and service infrastructure\. However, large areas have natural advantages and related development potential\. For example: (a) Ceara is bordered by four states (Piaui, Pernambuco, Paraiba and Rio Grande do Norte) which with Ceara's own urban and rural population provide a large market for Ceara produce; (b) the state's road system is, relative to other neighboring states, well developed; (c) the state has several areas with still undeveloped potential for cash crops such as fruit and annual cotton; and (d) there are a large number of small farmers\. Therefore, in its search for ways to expand food supply and raw materials for industrial use, the new state government, which came to office in March 1979, concluded that agricultural development programs should focus mainly on small farmers\. Accordingly, II PLAMEG, the State Development Plan for 1979-83 was prepared with predominant attention aimed at raising the output and incomes of the small farmer segment of the  - 10 - rural population\. After the new Government came to office, the state requested Bank collaboration in project identification, preparation and financing\. Several Bank preparation assistance missions followed and the project was appraised in January 1980\. B\. Brief Description 4\.02 What distinguishes the proposed Ceara Rural Development Project from its predecessors in Ceara and other Bank-financed projects in Northeast Brazil is the fact that it has been prepared within the framework of a statewide plan- ning exercise\. In Ceara, as in all other Northeastern states, various federal and state programs have been planned and implemented without an overall longer term perspective or strategy, or without a clear definition of each state's relative assets and constraints\. The Bank agreed to the state-wide planning approach for the proposed project in order to try to: (i) assure that Special Programs are devised within a general framework of state-wide needs and priorities; (ii) better assure that the limited natural, human and financial resources be used for top priority tasks; (iii) avoid competition between programs for scarce managerial skills; and (iv) assure that these programs complement each other instead of overlap\. The some 278,000 small farmers of the state would provide the potential "target population" for the project\. It is estimated that about 20% of them (or about 60,000 farmers) would benefit directly from the production oriented components of the project over a five-year period\. These direct participants would be limited to operators of farms of less than 50 ha in the areas of Ibiapaba, Baturite, Litoral, Cariri, and Baixo Jaguaribe and to farms of less than 100 ha in the agriculturally less attractive regions of the Sertoes Cearenses, Quixeramobim e Medio Jaguaribe, and Inhamuns e Salgado\. Most of the rural population of the state, or more than two million people, would benefit in some way through the project improved physical infrastructure, and about half a million people through the social infrastruc- ture and other services that would be provided\. The proposed project would begin by concentrating activities in areas with the highest development potential of the state, often where sufficient basic infrastructure already exists and especially where the spill-over effect would be higher\. Because of existing limiting factors, the project would mainly include activities designed to set in motion specific actions meant to break rural development bottlenecks and resolve difficulties that impede rural development, rather than providing the entire range of production and social services and infrastructure in every part of the state\. The approach used has been to define broad (though clear) development targets for a five-year period, with greater detail by component for at least the first year of the project (though some components have been planned in detail for the entire five year project)\. Subsequent detailing of the broad development targets would be taken into consideration yearly, and the program should be able to adapt itself to changing necessities\. 4\.03 Overall, the project aims at: (a) increasing productivity and incomes, broadening employment oppor- tunities and generally improving the standard of living of 60,000 farm families and of about 1,100 operators of small-scale non- agricultural enterprises these being the estimated direct beneficiaries of the project;  - 11 - (b) raising agricultural and rural industry production in Ceara to cater for local and export markets; (c) developing further the technical and administrative capacity of institutions involved in agriculture and rural development in the state, and encouraging the development of distinct small farmer orientation within these institutions; and (d) serve as a "pilot" operation to test possibilities of planning and implementing state-wide rural development programs in other states of the Northeast\. 4\.04 The proposed project would seek to achieve these objectives, over a five-year implementation period, by providing: (a) agricultural extension, experimentation, and land surveying, titling and purchase services; (b) cooperative society development for about 12 cooperative societies; (c) social infrastructure, with expansion of education and vocational training services and health and sanitation facilities and services; (d) physical infrastructure, through an expansion of the o intenance and upgrading of feeder and access roads, the development of marketing facilities and of small irrigation schemes; (e) technical assistance to small-scale non-agricultural enterprises; and (f) project coordination and management, including administration, monitoring and evaluation and special studies\. 4\.05 A Project Coordination and Management Unit (PCMU) would be responsi- ble for project management, monitoring and evaluation\. Individual project components would be executed by existing line agencies under the general guidance and coordination of the PCMU\. Federal, state and private agencies and municipal governments would be involved as direct executors or major col- laborators in execution\. Where implementation/management skills of executing agencies are weak, they would be boosted by the project, the institutional strengthening thus having significance beyond the project\. Each executing agency would have a project liaison officer responsible for project matters and relations with the PCMU\. The project's main objective of increasing the incomes of the 60,000 direct farmer beneficiaries and small-scale non- agricultural enterprises would be achieved through an increase in productivity supported by the provision of improved services\. C\. Detailed Features Agricultural Services 4\.06 Rural Extension\. Since rural extension is essential for the pro- motion of improved technology and credit, EMATER-CE, the state Technical  - 12 - Assistance and Rural Extension Agency, would be expanded and strengthened under the project by increasing the number of field offices and the number of extension agents who would maintain direct contacts with the project partici- pants\. The number of local extension offices would be increased from the current 99 to about 130 during the project, and the extension staff serving small farmers would expand from 79 agricultural technicians to 331, and from 39 social extensionists to 165\. Activities to be carried out under the proj- ect are incremental to and within the overall national rural extension policy defined in the Bank-assisted Agricultural Extension Project financed with Loan 1568-BR\. The proceeds of that loan are being used to finance some incremental staff, vehicles and other materials and equipment, all of which were taken into consideration while planning the additional rural extension component activities of the proposed project\. 4\.07 Based on the previous EMATER-CE experience, and especially that gained in the Bank supported Ibiapaba project, some modification in the struc- ture and methodology of the local extension system would be introduced\. For example, a state-wide specialization of function would be gradually developed\. Agricultural extensionists (middle level agricultural technicians) would be trained to provide, on a fixed schedule of periodic visits, agronomic advice to groups of 15-25 project farmers organized around contact farmers and demon- stration fields\. Through these visits and demonstrations, agricultural exten- sionists would promote the adoption of improved production techniques (tech- nical packages) developed by the extension and research services\. The agri- cultural extensionists would work with lower-level field assistants, on an experimental basis, in two regions (RPUs) only, and in all regions would be backed by subject matter specialists (higher level agronomists with specialized expertise) who would also supervise and coordinate the diffusion of new produc- tion technology\. Farm management and credit extensionists would assist farmers in farm management, and in preparing and processing credit proposals\. Social extensionists would also work with contact families in close collaboration with the agricultural extensionists, but would focus primarily on nutrition, health, education and community development\. Each agricultural extensionist would eventually work with 8 to 10 contact farmers, (through whom he or she would contact 180-220 farmers); each farm management and credit extensionist would work with about 300 farmers, while each social extensionist would work with about 6 groups of 40 farm families each, or a total of 240 families\. In their group work approach, extensionists would get the support of a sociologist who would help them take local social factors and leadership patterns into account to enhance the effectiveness of their work\. Intensive staff pre- and in-service training and farmers' short courses would also be included in the agricultural extension program\. 4\.08 Items to be financed under the project include salaries and expenses for incremental staff, equipment and vehicles, incremental operating costs (transportation, materials and supplies); establishment and operating costs of demonstration plots on selected farms; staff training costs and costs of farmers' short courses\. Total project agricultural extension costs for five years would amount to about US$25\.7 million (21\.5% of project's baseline costs)\. This would be over and above the maintenance of funding from other sources (including Loan 1568-BR) for existing extension services, such funding amount- ing to an estimated US$8\.7 million equivalent per year\. 4\.09 Agricultural Experimentation\. The state Agricultural Research Company, EPACE, would be the component executing agency\. It would, under the project,  - 13 - reorient and enlarge its on-going agricultural research and experimentation program in order to support and guide proposed agricultural development\. The research would concentrate on the testing and adapting of improved agronomic practices for individual crops and trees and for different farming systems involving crops grown in consortia\. During the five year project, some 150 additional experiments would be carried out on 40 different production systems\. Some of the new experiments would be implemented on the existing four experi- mental stations (see map 14875); others would be sited on land owned by project participating farmers, and carried out in close cooperation with the agricultural extension staff\. EPACE and EMATER-CE will jointly provide training to the extension agents for planning and implementation of the extension service demonstration fields\. These activities would be over and above those planned and being implemented under the Agriculture Research I Project being supported from Loan 1249-BR, which include civil works, farm and laboratory equipment, consultants' services, fellowships and partial financing of more basic agriculture research at selected national and state research station\. In Ceara, these include the National Center for Research on Sheep and Goats at Sobral and the state stations doing adaptive research at Quixada and Barbalha\. 4\.10 The Litoral research station, located in Pacajus, and serving also the RPUs of Baturite and Baixo Jaguaribe, would carry out experiments with sugar cane, bananas, manioc, vegetables, corn, beans, sorghum, fruits and cashew\. The Ibiapaba research station located in Tiangua will carry out expe- riments with peanuts, sugar cane, manioc, vegetables, beans, fruits and coffee\. The Central Sertao research station located in Quixada and serving the RPUs of Sertoes Cearenses, Sertoes de Quixeramobim e Medio Jaguaribe, and Sertoes dos Inhamuns e Salgado, would carry out additional experiments with cotton, corn, beans, sorghum, sheep, goats and cows\. The experiments related to livestock would focus on some small animals suitable to local mixed production family farms\. The Cariri research station located in Barbalha, would carry out addi- tional experiments with cotton, sugar cane, corn, manioc, beans and sorghum\. Also, some of the research stations would provide high quality fruit crop material for propagation, and would assist the Secretariat of Agriculture in establishing an efficient nursery inspection program\. A central nursery, would also be established by EPACE in the Litoral research station and would produce during the project's first five years some 272,000 high quality, disease and pest free, saplings of citrus, coconuts, and soursop\. The saplings would be supplied to project participants intending to expand their fruit plantations\. Returns from sale of saplings would commence in the third year, and from year six income would be sufficient to fully cover operating costs as well as to begin to recuperate investment costs\. 4\.11 Items to be financed under the project include construction of two storage units of 2,000 t\. each, equipment for sorting and cleaning of seeds, materials, and incremental salaries and operating costs for carrying out the incremental research work and for producing saplings\. Total component costs during project life amount to about US$1\.9 million (1\.6% of project's baseline costs)\. This would be over and above the maintenance of funding for on-going agricultural research in Ceara, such funding amounting to an estimated US$1\.5 million equivalent\. 4\.12 Cadastral and Land Surveys, Land Titling and Purchase\. The pro- posed cadastral and land surveys and land titling subcomponents would aim at  - 14 - clarifying the occupancy situation of about 300,000 ha of public lands and at legalizing the land tenure situation by providing land titles to about 6,550 farmers, each occupying less than 100 ha\. Since current cadastral data, a key input in the titling process, are scant in much of the state, and in order to enable the initiation of titling activities, the cadastral review would be carried out prior to land surveying and titling\. Lack of definitive title is a serious constraint to farmers in developing permanent increases in their income\. Especially for small farmers, who have little political or economic power, security of tenure increases the incentive to invest, and facilitates access to production services, particularly credit\. The component field work would also enable ITERCE to advise the Project Coordination and Management Unit (PCMU) on problems encountered by landless farmers in their rental or sharecropping arrangements, and on possible improvements which the project might subsequently promote\. The titling activity would include the promotion of this service among small farmers, the identification and listing of target farmers, the measuring and mapping of the occupied lands, and the undertaking of the legal and administrative steps necessary to grant titles\. For the execution of this subcomponent, the present staff of ITERCE would be gradually expanded and trained, but specific tasks such as topographical surveys would be contracted with specialized firms\. 4\.13 The other important activity to be carried out under this component would be land purchase by INCRA in collaboration with ITERCE and subsequent settlement of these lands by non-owners or very small owners, often counting on the active participation of cooperatives or project-organized groups of small farmers\. Some 100,000 ha would be acquired over the five-year project life, benefitting an estimated 3,700 farming families living already in the area of, or actually on, the land purchased\. The target, through quite significant in absolute terms, is a relatively modest first step in a state of over 14 million ha\. Overall coordination and supervision of the land distribution settlement scheme would be done by the PCMU through its Field Operations Section\. The detailed planning and design would be done by the state Agricul- tural Planning Commission, CEPA-CE\. Because the actual execution of the settlement component would be the responsibility mainly of the existing cooperative societies, a Settlement Coordination Unit would be established in each cooperative\. The settlement program requires the participation of several institutions such as ITERCE, INCRA, CEPA-CE, the cooperative societies and EMATER-CE\. Therefore, to avoid delays during the planning and implementa- tion process, the participating institutions would enter into agreements clearly setting out respective responsibilities and component procedures\. Specific lands for settlement have not yet been selected and, consequently, particular settlement schemes have not been identified\. However, general settlement policies have been agreed upon\. INCRA has been carrying out settlement projects in Ceara during recent years and detailed settlement procedures exist\. Also, general settlement policies for project participants have been agreed upon\. 4\.14 Total component costs during project life would amount to about US$21\.9 million (18\.4% of baseline costs) of which about US$8\.5 million for land purchase (not subject to Bank disbursement)\. The project would finance the incremental staffing, operating and maintenance costs of the component including costs of establishing field offices, of contracted surveying services,  - 15 - and of vehicles and materials needed\. In the case of the settlement subcompon- ent, the project costs include the purchase of land (financed with local funds), and the settlement design, coordination and supervision costs\. On-farm develop- ment (including land clearing costs and purchase of light farm equipment and materials for housing) would be financed with the credit which, though not part of the project, would be extended to project participants (para 4\.40- 4\.43)\. During negotiations, assurances were received that sufficient resources (about US$8\.5 million during the five-year project period) would be made available for land purchase\. The provision to the Bank of the signed agree- ment between the state, ITERCE, INCRA, and other agencies participating in the component is a condition for disbursement for the component\. 4\.15 Agricultural Cooperative Society Development\. There are 66 coop- erative societies in Ceara, of which 47 are agricultural cooperatives with a relatively wide range of activities including onlending of credit, marketing of produce and input supply\. Most of the cooperative societies specialize in one or two activities and only a very few are active in all fields\. Coop- eratives receive promotion, organization, and accounting advice from specia- lized agents of EMATER-CE, INCRA, COCENTRAL and OCEC\. As part of the project, the state intends to reinforce this support, and through this help increase the small farmer participation in about 12 of the 47 agricultural cooperative societies\. The three cooperative societies to participate in this activity during the first year have already been selected\. The final objectives of project support would be to develop greater financial and managerial self- sufficiency in the cooperatives as a mechanism for improving services to small farmers and, where cooperative society strength and demand warrant, to expand the range of their services such as participating in the coordination of land purchase and settlement activities\. 4\.16 OCEC will act as the executing agency and will also coordinate activities of other institutions participating in this component\. Execution of the component would be accompanied by intensified coordination by the Secretariat of Agriculture of the activities of the various agencies currently associated with cooperative development, seed production and marketing of inputs and produce including (in addition to OCEC and EMATER-CE), the National Cooperative Credit Bank (BNCC), INCRA, COCENTRAL, CODAGRO, and others\. The proposed development plan will consist of the following distinct activities: (a) Field study and preparation of detailed development plans, this work to be undertaken during the first year of project implemen- tation to confirm criteria and select cooperatives to benefit under the project and to formulate the cooperative-specific development plans\. A specialized local or foreign consulting firm would be contracted to carry out this work; (b) Technical and managerial assistance to be provided to a selected group of 12 agricultural cooperative societies\. Assistance would concentrate in the areas of general and financial management (in- cluding accounting), and co perative education to farmer members, geared to promote their active participation in cooperative acti- vities\. Four teams consisting each of a field cooperative exten- sionist, a management consultant and a financial (accounting) advisor will help strengthen these cooperatives over a period of 2 to 3 years each;  - 16 - (c) Production of improved seeds by cooperative members who demonstrate willingness and capacity to introduce improved production techno- logies\. EMATER-CE and OCEC would provide intensive technical assistance to farmers in the agronomic and managerial aspects of seed production, processing and marketing\. Farmers would finance production costs with credit, while the project would provide the necessary sorting machinery and storage facilities\. About 8,300 hectares of crops would be planted and seed production in the fifth year of the project is estimated at some 7,565 tons; and (d) Produce marketing and input supply facilities to cooperatives having a predominance of small farmer members and willing and able to establish and manage communal storage and warehousing facilities\. The main purpose of this activity would be to reduce the dependence on existing market middlemen and to help increase the share of the final product price going to the small farmers\. A total of 20 marketing posts (costing around US$7,000 each) would be established by 12 cooperative societies and 3 to 6 farmer groups\. 4\.17 Total component costs during project life would amount to about US$1\.5 million (1\.3% of baseline costs)\. The project would finance consultants services; salaries and travel costs, during the project period, for the incre- mental field staff working with the selected cooperatives (some of this staff would be seconded to the cooperative society and gradually paid for, according to a pre-arranged schedule, by the society concerned); construction, minor equipment and vehicle purchase; costs of pre- and in-service training for cooperative society staff; and miscellaneous operating and materials costs\. Assurances were received at negotiations that the field study, to be carried out by the consultants satisfactory to the Bank, and the subsequent preparation of the cooperative society development plans would be completed and provided to the Bank for comment by April 1, 1981\. Conditions for disbursement for this component are the provision to the Bank of the signed agreements between the state and the agencies participating in the component\. Social Infrastructure 4\.18 Education and Vocational Training\. The project would expand educa- tion and vocational training activities in the 76 municipalities not covered by activities being carried out under the Ibiapaba Rural Development Project and the Northeast Basic Education Project being financed by the Bank\. This compo- nent would mainly bring qualitative improvements to the basic rural primary education system, as well as help develop more relevant, employment-oriented second level agricultural education, and expand vocational training\. It would also help expand the non-formal adult education programs and strengthen the state's education planning and management capacity\. The project would finance the: (a) construction, furnishing and equipping of: (i) 110 new and 450 remodeled classrooms in primary rural schools for a total of 7,700 new and 31,500 improved places for students assuming two shifts; (ii) 17 rural education centers, with 34 classrooms for a total of 2,380 student places in two shifts; and (iii) two  - 17 - Regional Education Offices (DEREs); (b) remodelling and equipping of 3 second- ary agricultural schools for 720 student places; (c) provision of canteen equipment for school meals at 380 existing schools; (d) printing and distribu- tion of about 132,000 student textbooks, about 319,000 student workbooks and 4,000 teacher manuals; (e) acquisition of about 350,000 student learning packages and 15,000 teacher instructional packages; (f) training/upgrading of 3,000 currently unqualified teachers, about 20 coordinators for the rural education centers, about 110 municipal school supervisors and about 110 technical/administrative personnel for project related duties at the DEREs and the Municipal Education Office (OME) levels and 330 rural health education tutors; (g) provision of training courses for artisans and workers in small-scale non-agricultural enterprises assisted under the project; (h) salaries, opera- tional costs and material expenditures for the teacher/administrator upgrading programs and for project administration and supervision at SEC, DERE and OME levels; and (i) technical assistance in education management to help identify further constraints and elaborate proposals for overcoming these constraints\. Direct beneficiaries of the component would include some 78,000 basic education students, 720 secondary level agricultural students, 3,000 basic education teachers, and about 100 school supervisors and 110 administrative personnel\. The estimated total cost of the component amounts to about US$6\.9 million (5\.8% of the project baseline costs) over the five year implementation period\. 4\.19 The component would be managed by PRORURAL 1/ within the state Secretariat of Education and executed by the technical divisions of the Secretariat in collaboration with the nine DEREs, which exercise supervisory functions for municipal education in their respective areas, and the OMEs in the 76 target municipalities, all of which would be reinforced and provided with appropriate financial support and technical assistance\. School designs would conform to prototypes satisfactory to the Bank to be developed by SE and CEBRACE (the Brazilian Center for School Construction and Equipment)\. Primary schools, in accordance with criteria evolved for the Northeast Basic Education Project, would be located in areas where the school age population justifies the construction and double shift operation of a one or two classroom school; and the Rural Education Centers in nodal population zones of ready access to a group of existing basic education schools over which each Center would exercise supervisory, advisory and course validation functions\. Final year students in secondary agricultural schools would be provided with a satisfactory field experience program\. During negotiation assurances were obtained that: (i) before initiating education component activities in a particular municipality, the state will have entered into an appropriate component execution agreement with the municipality concerned; and (ii) by September 30, each year, satisfactory site plans and justification of the proposed location of project schools and rural education centers would be provided to the Bank prior to their respective construction as part of the next year's annual operating plan\. 1/ The unit in SE responsible for the implementation of Rural Education Programs\.  - 18 - 4\.20 Since a key element in the qualitative improvement of education would be the retention in the project schools of the teachers whose training/ upgrading would be financed from the proceeds of the loan, it is of critical importance that changes be introduced into the present teaching service system whereby rural teachers may be hired and fired at the discretion of the munici- pal authority, and are paid salaries significantly below the legal minimum\. The Federal Government is aware that this constitutes a major issue which, because of financial constraints, not all states are able to resolve\. The Government is therefore planning to supplement from 1980 onward the salaries of full time municipal teachers in the Northeast\. Hence, the component execution agreements to be entered into between the state and respective municipalities (see para 4\.19) would specify, inter alia, that the heads of the 76 Municipal Governments would by December 31, 1983, present to their respective legislative bodies bills to establish teachers' charters (Estatuto do Magisterio) to define teachers' rights and duties, privileges and obligations\. 4\.21 The project would also finance the training of artisans for tertiary sector occupations as well as for the small-scale non-agricultural enterpri- ses assisted by the state Center for the Support of Small and Medium Enter- prises (CEAG-CE)\. Funds are included for courses and follow-up activities to promote associations of artisans, cooperative societies and other promotion activities\. The courses would include technical and legal information, would be administered by the state Foundation for Social Activities (FUNSESCE), which would also be responsible for coordinating the manpower demand studies and the training programs, and would provide with its own staff training in handicrafts and tertiary sector occupations, and would contract other institu- tions such as the Fundacao Padre Ibiapina in the Cariri Region to provide training in the secondary sector occupations\. Training for small-scale non-agricultural enterprises would be undertaken in close coordination with CEAG-CE\. 4\.22 Conditions for disbursement under the education component are that: (a) the Bank had been provided with agreements between the state and agencies participating in the component (SE, FUNSESCE, and other institutions to be sub-contracted for occupational training); and (b) with respect to disbursement for individual project schools or centers, that the Bank had been provided with satisfactory evidence that the respective sites had been legally acquired\. Assurances were given by the state that consultants hired to pro- vide technical assistance in education management (para 4\.18) would be hired under terms and conditions satisfactory to the Bank\. 4\.23 Health and Sanitation\. The health sub-component would provide at full development, a wide coverage low cost health delivery system to serve directly about 400,000 people and indirectly another 800,000 -- 100% of the beneficiaries of the project's production components and about 30% of the re- maining rural population\. The health component would be administered by the Secretariat of Health (SS) and would include the following: (a) the construc- tion and equipment of about 200 rural health posts and of 3 health centers; (b) the upgrading of existing rural health posts (80) and health centers (29); (c) the training of 500 rural health attendants, 150 traditional midwives and 180 outreach health auxiliaries and the organization of public health seminars for the project staff; (d) the strengthening and better equipping of the regional health administration network; and (e) 24 months of technical  - 19 - assistance in health administration, to help identify constraints in the state and regional health systems and elaborate and implement proposals for overcoming these constraints\. The project would finance construction and equipment costs; training participant travel and boarding, and materials costs of the training program; technical assistance; and equipment and operating costs (including limited salary complements for key supervisory positions) for health component supervision\. 4\.24 The proposed sanitation sub-component would provide for: (a) the design and construction of about 100 rural water supply systems providing potable water to some 125,000 people; (b) the construction of some 14,000 pit latrines; (c) the strengthening of state and local capacity to maintain the water systems; and (d) the training of village water system operators\. The water systems would range in complexity from very simple systems (deep well, pump, storage tank, public hydrants) in villages with up to 500 inhabitants, to systems including elevated storage tanks, more extended distribution and some house connections in towns with up to 2,000 people\. Water systems design would be carried out directly, or in some cases, contracted out by a special unit in SS\. Construction of the systems would be carried out by local contractors or agencies (para\. 4\.25)\. SS would be responsible for providing, through regional offices, supervision and maintenance backstopping\. 4\.25 Overall, SS would manage the health sub-component (establishment of rural health posts, staff training, and technical assistance) and the construction of rural water supply systems and of pit latrines\. However, the foundation for Public Health Services (FSESP) would continue to manage health services in the municipalities in which it operates\. Therefore, an agreement defining respective execution responsibilities and implementation of project activities, would be reached between SS and FSESP\. SS would appoint a high ranking fulltime component coordinator, with direct access to the Secretary of Health who would be responsible for supervision and coordination of health and sanitation activities\. SS would also establish a Coordination Committee, chaired by the component coordinator, in which the department heads of SS line departments will be members\. A new Rural Water Supply and Sanitation Unit will be set up in SS, under the component coordinator, and will be responsible for the planning, design, construction, and operation and maintenance back-stopping for this subcomponent\. 4\.26 The execution of the component would be built upon village or com- munity health associations which would: (i) contribute land, funds, labor and/or local materials to help finance construction of the health posts and water systems; (ii) operate and manage the water systems through locally hired operators; (iii) collect user charges -- and, as necessary, enter into agreements with the municipal governments for complementary funding -- to offset operating costs; and (iv) in some cases, provide a basis for greater community involvement in other project development activities\. Each local health post would be staffed with a paid health attendant\. Local health services would be simple, focusing on the provision of pre-natal care, vacci- nations, health and nutrition education, and selected curative treatments\. The hea'th post would also provide a valuable mechanism for executing paral- lel Government endemic disease and nutrition programs\. Project training  - 20 - would be directed toward the rural health attendants, regional health service supervisors, health center attendants, and rural water supply operators\. To- tal component costs would amount during project life to about US$12\.6 million (10\.6% of project baseline costs), of which US$5\.0 million would be for health activities and US$7\.6 million for rural water supply and sanitation\. 4\.27 The details of the state's proposed new definition of the attributions of the Regional Health Offices were discussed during negotiations\. Assurances were received from the state during negotiations that: (i) the pre-investment studies of the water supply systems to be implemented during the following year would be provided to the Bank by September 30 of each year; (ii) prior to starting construction of a particular water system, the recipient community would have already established its health society, and agreed formally to assume the responsibility for financing the operating and maintenance costs of the systems; and (iii) consultants hired to provide technical assistance in health administration (para 4\.23) and the execution of the sanitation sub- component, would be hired under terms and conditions satisfactory to the Bank\. A condition for disbursement is that the Bank has been provided with satisfactory agreements between agencies and foundations participating in the implementation of the component\. Physical Infrastructure 4\.28 Feeder and Access Roads\. The project would seek to: (a) carry out spot improvements on about 2,250 km of high priority municipal access roads and improve their all-weather serviceability; (b) provide for the improved maintenance of the extensive municipal road network; and (c) identify collector feeder roads for which improvement to a high standard would be justified\. The component would include: (a) engineering, design and construction of essential spot improvements (mostly drainage works) on the priority municipal access roads, to Class F standard (Annex 1); (b) purchase of road maintenance equipment and spare parts needed to reinforce DAER-CE's mechanized maintenance assistance to municipalities; the provision for 2-3 years of an additional maintenance specialist engineer at each DAER-CE regional office to assist in maintenance training and the initiation of the maintenance program; and provision of training for municipal foremen in planning and executing manual road maintenance tasks; and (c) consulting services to identify and present collector feeder roads for possible BNDE/DNER financing\. DAER-CE would be responsible for overall execution of the component through its 10 field maintenance offices\. Total costs of the component would amount to about US$32\.9 million (27\.5% of project baseline costs)\. 4\.29 Assurances were provided at negotiations that DAER-CE would contract consultants for the preparation of engineering designs and supervision of construction for spot road improvements under terms and conditions satisfactory to the Bank\. There are sufficient consulting firms in Ceara and neighboring states to carry out this work, and past experience in preparing similar designs for the Ibiapaba project area has been satisfactory\. Construction of the road improvements would be contracted annually in a number of lots indi- vidually suitable for small local contractors or, in aggregate, interesting to road contractors already operating in the area on state or national road improvement projects\. Local road contractors, aware of the growing volume  - 21 - of such works, have expressed interest in entering this field of smaller road works\. Assurances were received during negotiations that by April 1, 1981, the Bank would be provided with the plan for contracting consultants for preparation of designs and supervision of construction for the roads in the first year's program\. Such plans would be specified for each year thereafter as part of the annual operation plans provided to the Bank (para\. 6\.09)\. 4\.30 Maintenance of municipal roads is the responsibility of each muni- cipality, only few of which own a grader or dump-truck to undertake such work\. DAER-CE furnishes some sporadic assistance by providing motorgraders to municipalities from its regional offices, if available, and charges at least for fuel consumption\. Most of the small amount of funds that the municipalities receive from the national road fund, as well as some other municipal taxes are generally programmed for minor road improvements rather than road maintenance and only a few roads receive any regular care\. Both the municipal road maintenance efforts and DAER-CE's capacity to support municipalities need to be reinforced\. The state gives high priority to this\. The project would, therefore, finance the purchase of road maintenance equipment and spare parts sufficient to support maintenance of the municipal road network\. The equipment would be operated and maintained by DAER-CE\. The project would also finance an initial stock of hand tools for each municipality which would become responsible for their replacement as part of their agreement for state assist- ance in road maintenance\. Since releases of municipal shares of national road funds by DNER are frequently irregular, the state would, through the Ceara Development Fund, advance money to the municipalities when needed to help them meet their immediate costs under the agreed municipal road maintenance program, until their national road fund shares are received\. During negotiations, assur- ances were obtained from the state that: (a) all equipment procured under the project would be used solely for the maintenance of municipal and state roads in the project area, in accordance with a maintenance program acceptable to the PCMU; (b) DAER-CE would post one technical assistant to each of its regional operations to participate in organizing DAER-CE's increased support to municipalities and to provide the long-term technical assistance which the municipalities would need in implementing a system of improved maintenance; (c) it would enter into contractual arrangements with each municipality, before the start of any project-financed road improvements, whereby such municipali- ties would undertake to submit annually and execute (with defined DAER-CE's assistance), a program for maintaining at least the improved access and feeder roads and would allocate sufficient funds for this purpose from the municipal share of the national road fund; and (d) by April 1, 1981, the state would provide, for Bank comment, a five-year plan for advancing to and recuperating from the municipalities funds for road maintenance 4\.31 Municipal road maintenance foremen, trained by the project, would be responsible for supervising execution of the municipal share of agreed road maintenance programs\. Training would be provided by a contracted team, which would be organized and supported by the Federal Training School in For- taleza, but who would actually conduct the training, together with DAER-CE staff, at the various regional residences and in the municipalities\. In  - 22 - addition to the technical assistants to be posted at each field maintenance office to assist municipalities with road maintenance (para 4\.30), DAER-CE would contract a road maintenance engineer for each residence, for a period of 2-3 years, to assist in initial training and to provide subsequent supervision and assistance to the DAER-CE resident staff and to municipal foremen in implementing their programs\. Consultants would be contracted -c help DAER-CE identify and evaluate higher standard collector roads (para 4\.28) for improve- ment to Class D or E standards according to the requirements of the BNDE/DNER feeder road manual (Annex 1)\. During negotiations, assurances were received from the state that: (i) not later than December 31, 1981 and December 31, 1982, it would furnish the Bank for review and comment the results of the consultants' studies on the improvement of collector roads for each respective year; and (ii) by June 30, 1983 and June 30, 1984 respectively, it would have completed improvements on those roads studied\. 4\.32 Small-Scale Irrigation Schemes\. The project would seek to introduce and foster improved irrigation and would include the studies and technical assistance for some 83 small supplementary irrigation schemes, with 5-20 small farmers each irrigating 1-3 ha, who are willing and able to organize to- gether for the implementation, operation and maintenance of the systems\. Water sources will be deep wells, small earth dams or existing public dams built and operated by DNOCS\. The potential schemes would be identified by EMATER-CE extension agents, and would be limited to those for which any probable new com- munal off-farm works or investments could be readily financed through credit to small, organized farmers' water associations or groups or for which other financing was already available\. On-farm works would also be financed by banks, through either individual or group loans, depending on the situation\. Operation and maintenance of these systems will be fully borne by the farmers\. A recently created unit within the Secretariat of Planning and Coordination, the CRH (Coordenaduria de Recursos Hidricos) will coordinate and supervise com- ponent activities, prepare preinvestment studies and take part in preparation of basic studies and design, together with other agencies such as the Ceara Superintendency of Civil Works (SOEC), the Ceara Development Superintendency (SUDEC), EMATER-CE and CEPA-CE\. Total irrigated area under this component would be about 2,500 ha and about 1,120 families are expected to benefit from it\. Per family cost will be about US$5,000 and total cost about US$5\.7 million, of which US$1\.3 million (1\.1% of baseline costs) would be for tech- nical assistance and US$4\.4 million for off- and on-farm investments to be financed by long term agricultural credit (see paras 4\.40-4\.43)\. 4\.33 Agreement was reached during negotiations that prior to the initiation of detailed studies and technical assistance for any small-scale irrigation scheme with estimated off-farm and on-farm investments totalling more than US$100,000, a preliminary analysis of the scheme would be pro- vided to the Bank for agreement prior to inclusion in the project\. Details of other smaller schemes prepared under the project would be made available to the Bank for review during the course of project supervision\. Assurances were also received that prior to starting detailed engineering assistance for any particular scheme, the recipients would have already been established  - 23 - as a group, and demonstrated interest and willingness to assume the respon- sibility for financing the construction, operation and maintenance costs of the systems during and after project execution\. Assurances were also given that consultants hired to assist CRH in project execution would be contracted on terms and condition satisfactory to the Bank\. 4\.34 Marketing Activities\. In addition to the establishment of district level marketing posts in cooperative societies (paras 4\.15 - 4\.17), marketing activities would also include: (a) expansion of the guaranteed crop purchasing mechanism (Compra Anticipada da Producao - CAP) into several areas not presently covered (the project would finance incremental costs including salaries of two regional supervisors, 9 field agents, and 2 auxiliaries phased in over five years and the maintenance of 9 small operations centers); (b) expansion and strengthening of the produce classification system (the project would finance the installation and maintenance of 2 product analysis centers and 5 product classification posts, the recuperation and maintenance of 5 centers and 25 classification posts, and the establishment of two mobile supervision and classification units); and (c) establishment of 3 central wholesale market- ing warehouses to supply retail outlets in rural areas with competitively priced foodstuffs and basic consumer goods\. Total component costs would amount to about US$2\.4 million (2\.0% of baseline costs)\. 4\.35 The CAP program is already administered by CODAGRO within the exist- ing POLONORDESTE projects\. It provides small farmers with advances for tra- ditional crops and a guaranteed market for their output, at no less than the official minimum price\. Results of the first two years of CAP's implementa- tion in Ceara have been fair\. Coordination problems between EMATER-CE and CODAGRO, and delays in the arrival of funds have demonstrated weaknesses in the program\. Under the project, administrative procedures would be decen- tralized and the management structure of CODAGRO would be strengthened\. The product classification system is directly managed by the Secretariat of Agricul- ture and Supply which maintains classifying teams at key locations around the state where high volumes of production and processing of agricultural products are expected\. Identification of product grade and quality is a precondition to warehousing and obtaining financing under the official minimum price scheme\. The inadequate equipping and distribution of classification services have hampered small farmers' use of minimum price financing in the past\. The rural wholesale marketing of basic consumer goods would be implemented by the federally administered Brazilian Food Company (COBAL)\. Under the scheme, COBAL would expand its program to ensure the availability of a balanced supply of staple food products in remote areas at reasonable prices\. Support would be given to community and cooperatively owned stores established under the cooperative development component, in an attempt to offer alternatives to current retail services which in some rural areas, are monopolistic and linked to marketing and credit services\. In parallel with rural social extension, health and nutrition education efforts, products would be supplied to a series of small rural outlets which would sell them at predetermined prices\. COBAL, which would select the outlets and provide managerial assistance and control the prices, would also, prior to the construction of the first warehouse, carry out pilot activities in the area to be supplied, using rented facilities\. 4\.36 During negotiations, assurances were obtained that satisfactory location and construction plans for the wholesale marketing warehouses would be provided to the Bank prior to the initiation of construction\.  - 24 - Conditions for disbursement under this component are: (i) the Bank had been provided with operating agreements between the state and participating agencies in the component (such as CODAGRO and COBAL); and (ii) for marketing warehouses the Bank had been provided with satisfactory evidence of the acquisition of the respective sites\. Small-Scale Non-Agricultural Enterprises 4\.37 The project would support the development of small non-agricultural enterprises performing a variety of activities including food processing, carpentry, sewing and leather work, and services such as those provided by mechanics, electricians, stone masons and small retailers\. Development of these micro-enterprises would provide employment options for persons not absorbed by the agricultural sector, and respond to increased demand for agri- cultural inputs and services and consumption items resulting from project- initiated growth\. The executing agency would be the Center for Assistance to Small and Medium Enterprises in Ceara (CEAG-CE), which is part of the Fede- ral level Brazilian Center of Assistance to Small and Medium Enterprises (CEBRAE)\. The component would provide: (a) equipment and staffing during the project period for two regional offices and four local offices in areas of concentration of small non-agricultural enterprises; and (b) training for field staff providing assistance to small enterprises\. Skill training and remedial education for entrepreneurs and potential small-scale non-farm enter- prise employees would be provided under the vocational training subcomponent (para 4\.21)\. The costs to be financed include equipment, materials and incre- mental salaries for the local technical assistance offices\. The component would provide for the phased establishment of regional CEAG-CE offices in Crato and Sobral, and four local offices in smaller cities\. Some 16 addi- tional technical assistance staff would be hired over the life of the project\. Staff would identify those enterprises to be assisted, provide guidance in managerial and production matters, assist in the preparation of investment proposals for the banks, and serve as a link between the entrepreneur and sources of information and expertise, such as CEAG-CE and other research and technical institutions\. Staff would be trained by CEAG-CE, which maintains an acceptable training program\. Training for the entrepreneurs and their employees would be coordinated by FUNSESCE under the vocational training sub- component and executed by the Fundacao Padre Ibiapina in the Cariri RPU, the National Services for Apprenticeship in Commerce and Industry (SENAC and SENAI respectively), and other existing specialized agencies\. 4\.38 It is expected that around 1,100 small non-farm enterprises would benefit directly from support provided under this component\. Half of these enterprises would be located in the perifery of the larger towns in the area of assistance of a particular CEAG-CE office\. The other half would be loca- ted in smaller villages in the interior of the municipalities, with activi- ties tied much more closely to the agricultural sector, but more difficult to assist\. Credit requirements (not financed under the project), estimated at around US$2\.3 million, would be provided by local branches of BNB, BB and BEC, with which CEAG-CE already maintains a close working relationship\. Total technical assistance component costs are estimated at about US$1\.3 million (1\.1% of baseline costs)\. Assurances were obtained that project financed assistance by CEAG-CE would be provided only to small enterprises with less than 10 employees, fixed assets of under 200 MVR (about US$9,000), monthly  - 25 - sales under 85 MVR (about US$3,820) and a maximum monthly owner income, from other sources of under 8 MVR (about US$360)\. During negotiations, assurances were also obtained that the state would enter into such agreement with local banks as necessary to ensure the availability of credit for the development of the small enterprises assisted under the project\. A condition of disbursement for this component would be the provision to the Bank of a signed agreement between the state and the executing agencies involved\. Project Coordination and Management 4\.39 A new Project Coordination and Management Unit (PCMU) is being created within CEPA-CE\. The PCMU would be in charge of coordinating project planning and implementation, and of carrying out project monitoring, evalua- tion and control (paras 6\.01 to 6\.08)\. This unit would include a headquarters staff in Fortaleza and eight Regional Coordination Offices, one in each project region (RPU)\. The project would cover the costs of equipping, staff- ing and providing necessary materials and contract services to maintain the PCMU during the five-year project period\. A state government decree formaliz- ing the project coordination and management set-up has been published and the selection of qualified key personnel for the PCMU completed\. Assurances were received during negotiations that the terms and conditions of employment of consultants, which will be contracted by the PCMU for various studies on either technical or evaluation issues, would be satisfactory to the Bank\. Total component costs would amount to about US$10\.9 million (9\.1% of project baseline costs) of which about US$3\.0 million are for special studies to be carried out on such subjects as soil conservation, the state water balance (especially ground water potential in arid and semi-arid areas), produce marketing, baseline agro-economic information, and sociological matters related to project implementation\. Activities Parallel to the Project 1/ 4\.40 Credit\. The 60,000 small farmers expected to receive direct exten- sion under the project would be eligible for agricultural credit\. As only a part of extension participants normally apply for and receive bank credit, it is estimated that credit would be used by about 36,150 small farmers by the fifth year of the project\. Agricultural credit would include: (i) Seasonal Short-term Credit to help cover costs of inputs and other seasonal costs for the production of short cycle crops; the estab- lishment of semi-permanent crops; and the maintenance and improve- ment of established permanent crops (under present credit regulations up to an estimated average of 75% of total production costs, including labor can be financed by credit granted by official banks); and (ii) Medium and Long-term Credit for land clearing, storage facilities, small irrigation schemes, traction animals, small farm tools, equipment, and other on-farm development costs\. Credit would be made available either by the Federal Government under its current POLONORDESTE credit line or under its "normal" rural credit program for Northeast Brazil (para 4\.42), without Bank participation in financing\. Funding for this component could be included in the future under a modified region-wide Northeast/POLONORDESTE credit project which the government is preparing for possible Bank financing\. 1/ These activities would not be financed under the project, but are complementary to it\.  - 26 - 4\.41 The delivery of credit will be linked to a strengthened agricul- tural extension and technical assistance service provided by EMATER-CE\. Spe- cial farm management and credit extensionists will assist farmers in the pre- paration of loan applications and in the development and implementation of the farm plans\. Funds will be channeled to the farmers by two federal banks, Banco do Brasil (BB) and Banco do Nordeste do Brasil (BNB), ari possibly the state bank, Banco do Estado do Ceara (BEC)\. Plans already exist to increase the current network of 97 bank branch offices to 110 agencies, these to be complemented with 73 new credit "mini-branches"\. Banco Nacional do Credito Cooperativo (BNCC) would also contribute mainly with short-term credit to the cooperative societies\. Total incremental agricultural credit requirements for the first five years of project are estimated to be a total of some US$44\.9 million equivalent, of which 42% would be incremental seasonal short-term credit and 58% medium and long-term investment credit\. 4\.42 At present, POLONORDESTE credit carries an interest rate to the farmer of 10% per annum, unindexed\. The repayment period for working capital credit varies with the crop cycle; for investment credits the term can be up to 12 years (though usually less for small loans)\. Considering Brazil's high inflation rates, the prevailing interest rates for POLONORDESTE credit are highly negative in real terms\. Although the Government moved, in December 1979, to begin to reduce agricultural interest rate subsidies in Brazil, it did not change rates for POLONORDESTE or other "special program" lines\. The gap bet- ween POLONORDESTE rates at 10% and the "normal" rural credit rates for small farmers in the Northeast (now 21-26% compared to 13-15% previously) has in- creased\. Hence, in addition to the general undesirability of the highly subsidized rates, the new situation adds the difficulty of assuring that the more highly subsidized credit line actually goes mainly to small farmers new to the banking system\. The establishment of additional control and supervi- sion mechanisms to control access to the POLONORDESTE line could well prove counter-productive and offset efforts to simplify procedures and make lending to small farmers less costly and more attractive to local bankers\. The agri- cultural credit required for this project would, therefore, be considered for Bank financing only if and when the POLONORDESTE line can be brought into the Government's overall program to gradually reduce interest rate subsidies and unify the rate structure\. 4\.43 During negotiations, assurances were received from the Government that it would take all necessary steps to ensure the annual availability of adequate seasonal and investment crop credit to the small-scale farmers (including share-croppers and tenants) participating in the project\. Assur- ances were also received that a Project Credit Statistics and Monitoring System would be set up not later than June 30, 1981, and that the Project Evaluation Unit would, on a yearly basis, evaluate the implementation of the credit component\. 4\.44 Input Supply and Mechanization Services\. Agricultural development activities under the project should result in increased demand for input supplies, especially fertilizers, pesticides, seeds, and improved disease- free planting material for various fruit crops\. Moreover, some project bene- ficiaries will also need mechanization services for land clearing and prepa- ration\. These inputs would be supplied by the state's Agricultural Develop- ment Company (CODAGRO) and some of the cooperative societies\. CODAGRO has 120 sale post outlets and 15 tractor stations throughout the state, but does not monopolize (nor is likely to) the provision of farm inputs and mechanization services\. Its presence is viewed by the state as an important  - 27 - means to assure that at least the inputs and mechanization services required for state-supported development efforts are available when and where needed and that, where there are other suppliers, prices remain competitive\. For this project and the rest of the state agricultural development program, existing CODAGRO machinery (192 chain tractors and 87 wheel tractors) will probably be sufficient, especially since the tendency among farmers is to shift from manual labor to the use of animal traction before shiftahg to mechanization\. However, the situation is a dynamic one and in order to assure mechanization services are available when needed and justified, the PCMU would review the situation annually and recommend appropriate measures to the state\. The state policy is for the provision of inputs to be self-financing, so the Bank would not finance input supply, except for the construction of 20 supply miniposts as part of new marketing facilities provided under the cooperative societies component (para 4\.16)\. 4\.45 Agro-Industrial Development\. Agro-industrial development is an integral part of the Ceara rural development program, especially as cotton, sugar cane and manioc are major agricultural products, and as fruits, mainly for processing, are being introduced\. In order to ensure sufficient processing capacity is available for the project's produce, a survey on agro-industrial production and installed capacity was conducted\. The findings revealed that existing agro-industries are, for the time being, operating with excess capacity (the cotton industry operates at 49% of its capacity of cotton lint production and only 23% of its capacity of oil-extraction, and the sugar industry operates at 63% of its capacity)\. However, the PCMU would review annually the project-generated agro-industrial processing needs, and inform the state authorities in charge of industrial planning and development where and when new installations are needed\. 4\.46 Improved State Coordination of Special Rural Development Programs\. The State Rural Development Council intends to establish the broad objectives, strategies and interventions for rural development in the state, includ- ing specific targets for the 60,000 small farmers who will be direct benefi- ciaries of the proposed project\. For that reason, all special federal and state-financed rural development activities oriented towards small farmers would be planned and programmed in collaboration with the proposed project, even though those special programs may continue to maintain separate financial and, in some cases, administrative identities\. This effort to fully coordinate planning and programming of the Special Rural Development Programs will, how- ever, take several years to accomplish, given the multiplicity of sources of finance and institutions involved\. Starting with the planning/programming exercise for 1981/82, CEPA-CE will concentrate on fine-tuning coordination among the proposed project and the other main special programs in the state (e\.g\., previously initiated POLONORDESTE, Sertanejo, Water Resources and Irrigation projects)\. The following year (1982/83), other special programs will be incorporated into the overall coordination process (e\.g\., Coloniza- tion, PRODECOR, Zona Canaviera, etc\.), and so on\. 4\.47 Specifically, with regard to the POLONORDESTE Program for 1980/81, separate Plans of Operations were prepared for the proposed project and the previously existing POLONORDESTE project because, as a practical matter, the POLONORDESTE planning/programming exercise preceded completion of prepara- tion of the proposed project\. However, for 1981/82 and subsequent years, one combined set of Plans of Operations would be prepared, with the source of financing for each activity clearly specified\. POLONORDESTE program method- ology would be used in elaborating the Annual Plans of Operations, quarterly  - 28 - and annual reports\. Those regions not previously part of POLONORDESTE (Litoral and Baixo Jaguaribe) would enter the program with the same planning/ programming and supervision procedures used\. Mloreover, from 1980/81 onward, the administrative system for POLONORDESTE and the proposed Ceara Second Rural Development Project would be one and the same\. The same Technical Unit would coordinate activities, both at the level of the CEPA-CE and the executing agencies\. The only distinction made between POLONORDESTE and the proposed project would be of an accounting nature, since not all activities (i\.e\., those previously initiated and to be maintained with other financing) in all municipalities would be eligible for Bank reimbursement under the proposed Ceara Rural Development Project\. V\. PROJECT COSTS AND FINANCING Cost Estimates 5\.01 Total project costs over the five-year project period (mid-1980 to mid-1985) are estimated at US$163\.1 million, including a foreign exchange cost of US$29\.6 million or about 18%, and taxes of about US$3\.21 million\. Physical contingencies totalled an equivalent of 8\.8% of baseline costs, and price contingencies are equivalent to 27\.6% of baseline costs\. Physical contingencies of 7% have been added to the rural extension, agricultural experimentation, cadastral and land surveys, land titling and purchase, cooperative societies development, and project administration components; 10% to feeder roads (in addition to a roughly 10% physical allowance already built into baseline costs), education and vocational training components; and 15% to the health and sanitation, small-scale irrigation technical assistance and non-agricultural enterprise assistance components\. Price contingencies have been calculated in US dollar terms as follows: for equipment and civil works, 10\.5% in 1980, 9\.0% in 1981, 8% in 1982, and 7% per year thereafter; for other materials and supplies, salaries and such (including land and this in addition to roughly a 20% allowance already built into the baseline cost estimate of land), 8% per year\. A summary cost table is given overleaf, and the annual phasing of project costs is shown in Annex 2\. Financing 5\.02 The proposed Bank loan of US$56\.0 million to the Federative Republic of Brazil would finance 35% of project costs net of taxes or about 34% of project costs including taxes\. The balance would be provided by the Federal Government, mainly through the POLONORDESTE program, by the State Govern- ment, and by IFAD (International Fund for Agricultural Development)\. Nego- tiations for a US$25 million loan are being conducted by IFAD and the Brazilian Government in November 1980\. Assurances have been received from the Federal and State Governments that adequate funds would be made available promptly and in order to reasonably maintain previously initiated rural development activi- ties in the state and for effective and timely execution of the project, and adequate operation and maintenance of the facilities and services provided under the project\. Assurances were received from the state that it would arrange for the timely acquisition and necessary financing of any additional land or rights-of-way which are needed for project works\. The loan would be for 15 years, including three years of grace, and would cover 66% of the project's foreign exchange costs of US$30 million equivalent (with the balance to be financed by IFAD), as well as US$36 million of the local costs\.  - 29 - NORTHEAST BRAZIL CEARA SECOND RURAL DEVELOPMENT PROJECT Total Project Costs 1/ (US$ 000') Project Activit-' % of Total % Baseline Foreign 1\. Agricultural Services Local Foreign Total Cost Exchange 1\.1 Rural Extension 22,664 3,090 25,754 21\.5 12 1\.2 Agri\. Experimentation 1,751 194 1,945 1\.6 10 1\.3 Land Cadastral Surveys, Titling and Purchase 2/ 20,584 1,376 21,960 18\.4 6 1\.4 Cooperative Society Development 1,339 149 1,488 1\.3 10 Sub-total 46,338 4,809 51,147 42\.8 9 2\. Social Infrastructure 2\.1 Education and Vocational Training 5,932 1,047 6,979 5\.8 15 2\.2 Health and Sanitation 9,490 3,163 12,653 10\.6 25 Sub-total 15,422 4,210 19,632 16\.4 21 3\. Physical Infrastructure 3\.1 Feeder and Access Roads 22,016 10,844 32,860 27\.5 33 3\.2 Small-Scale Irrigation Schemes 1,208 134 1,342 1\.1 10 3\.3 Marketing and Storage Facilities 1,930 482 2,412 2\.0 20 Sub-Total 25,154 11,460 36,614 30\.6 31 4\. Small-Scale Non-Agricultural Enterprises 1,189 162 1,351 1\.1 12 5\. Coordination, Management and Studies 9,814 1,090 10,904 9\.1 10 6\. Baseline Costs 97,917 21,731 119,648 100\.0 18 7\. Contingencies 7\.1 Physical 8,632 1,895 10,527 8\.8 18 7\.2 Price 27,074 5,943 33,017 27\.6 18 Sub-Total 35,705 7,838 43,544 36\.4 18 Total Project Costs 133,623 29,569 163,192 3/ 136\.4 18 1/ Excluding credit for agricultural development and small-scale non-agri- cultural enterprises\. 2/ Costs of state purchases of land for redistribution to small farmers would be counted as a "project cost" but would not be elegible for Bank disbursements\. 3/ Including about US$3\.25 million of local taxes\.  - 30 - 5\.03 Since Brazil is still making a vigorous effort to mobilize domestic resources, it would be appropriate for the Bank to give assistance in finan- cing a part of the local currency expenditures in projects such as the pro- posed, which have high priority and yet have a relatively low foreign exchange content\. The situation typically arises in agriculture and rural development projects in Brazil in view of the high capability of the Brazilian economy to produce a relatively high percentage of the inputs required for investments of the type involved\. If the Bank is to be effective in supporting a project of this kind, it seems reasonable for it to finance at least 35% of the costs even though this entails financing a part of the local currency expenditures\. It is also worth noting that the state of Ceara is highly committed to the project and it is participating in project financing with at least US$4\.5 million (about 3% of total project costs)\. Moreover, the State and the Federal Governments would continue to finance essential complementary activities not included in project costs co-financed by the Bank (such as electrification trunklines, telecommunications, rural credit and credit to small-scale non agricultural enterprises) at a cost of about US$72\.0 million over the project period\. 5\.04 To help assure the prompt start of the project, various activities will commence during the second half of 1980, such as the recruitment and training of staff for the project management and coordination unit and exten- sion service, engineering design of feeder roads, and the initial activities of various other components\. For this reason, retroactive financing of up to US$2\.0 million equivalent is proposed to help cover eligible expenditures after June 30, 1980, but before the loan is signed\. Procurement 5\.05 The equipment, materials and vehicles required over the project execution period by the numerous agencies responsible for the different project components (totalling about US$10\.0 million) are locally produced and readily available\. Such items would be procured in accordance with local procurement and bidding procedures, which are acceptable\. Construction works (totalling US$22\.0 million without contingencies) for the feeder roads would be grouped into appropriate construction lots\. The Bank would review the standard construction bidding and contract documents before the first round of bidding, but awards would be reviewed on an ex-post basis\. Contracts for these works and for any civil works required for the village water supply, coopera- tive society development, marketing, and education facilities (an additional US$9\.0 million) would be awarded to prequalified bidders on the basis of competitive bidding advertised locally and in accordance with procedures which are satisfactory\. Brazil has a competitive local construction industry capable of carrying out the project works\. Since the individual construction works are relatively small and quite dispersed, foreign contractors are not expected to be interested, though they would not be excluded from bidding\. All of the other construction works included in the project (for health posts, and the like, totalling some US$0\.7 million) would be small and of varied design as well as geographically dispersed\. Consequently, they would be carried out through a combination of self-help, force account and local bidding\. Consultancy services, most of which are expected to be local, would have a total cost of approximately US$3\.3 million equivalent (about US$3,850 per man-month)\.  - 31 - Disbursements 5\.06 The proceeds of the Bank loan would be disbursed against 55% of expenditures for each project component, excluding the land purchase sub- component, through June 30, 1983, after which date the disbursement per- centage would be adjusted to result in an overall rate of 36% of total expenditures for those components disbursed against over the project execu- tion period\. Disbursements would be made to the Central Bank of Brazil, against withdrawal applications covering statements of expenditures initiated by the various implementing agencies under the project and certified by the PCMU\. The incremental staff positions for which project financing of salaries is planned were specifically defined at appraisal\. Supporting documentation for salaries, administrative expenses and minor construction under force account would not be submitted to the Bank but would be retained by the PCMU and made available for inspection by the Bank during the course of project supervision missions\. Standard documentation covering civil works, vehicles and equipment and technical assistance would be submitted to the Bank\. Details of the documents required were reviewed during negotiations\. Dis- bursements are expected to occur over about five years\. The estimated dis- bursement schedule is given in Annex 3\. VI\. PROJECT IMPLEMENTATION Coordination and Management 6\.01 The various components of the proposed project, would be executed by existing agencies traditionally responsible for the respective activity-- e\.g\., EMATER-CE for extension, EPACE for agricultural research, and the like\. A detailed list of these agencies is given, by project component, in Annex 4\. In order to coordinate and guide rural development activities in Ceara, a State Rural Development Council is being created\. This Council is composed of the Secretaries of those state Secretariats involved in rural development, representatives of the principal executive agencies of the Special Programs being implemented in the state and of state and federal banks, and headed by the Governor of the state\. This Council would give overall guidance to rural development activities, while day-to-day coordination, administration, evalua- tion and monitoring of the project would be undertaken by a Project Coordina- tion and Management Unit (PCMU) in the CEPA-CE (para 4\.39)\. Assurances were received from the state during negotiations that it would maintain, for the implementation period of the project, the PCMU with appropriate staff and resources and would fully support other state agencies participating in the project\. 6\.02 The PCMU would have four sections\. The first would be responsible for planning, the second for field operations, the third for monitoring, evaluation and studies, and the fourth for administration and finance, which will also render services to the other units of CEPA-CE\. The PCMU staff would comprise, at full development in year 5, an executive coordinator, 48 tech- nical specialists (an increment of 29), in the Fortaleza headquarters, 16 regional field coordinators of technical specialist standing, 2 each for every RPU (an increment of 10), and administrative support personnel\. Though this may appear to be a rather large staff, it should be noted that the unit will gradually replace several existing region-specific POLONORDESTE project units and coordination staff\. Also, the unit would, in effect, assume primary  - 32 - coordination responsibilities for all state rural development activities\. An organization chart of the PCMU is provided in Annex 5\. The proposed staff, allocation of staff responsibilities and management organization structure would be such that the headquarters technical staff would not be overburdened with administrative tasks at the expense of more valuable troubleshooting, decision-making and innovative activities in the field\. 6\.03 The planning section staff would: (a) assist project executing agencies in the preparation of their annual state-wide rural action plans and of the specific project component operating plans, in order to link project feedback effectively to state-wide planning, and to avoid overlapping of activities and waste of resources; (b) cooperate with and/or sub-contract CEPA-CE staff in carrying out the annual overall state agricultural planning; and (c) consolidate, in cooperation with CEPA-CE and the executing agencies, the yearly plans into a continually adjusted state-wide five-year rural development plan, including specifically the elements of that plan to be financed under this project\. 6\.04 Operations staff would help promote and coordinate implementation activities of the numerous executing agencies\. To achieve this, there would be three sub-divisions of function within the operations section: (a) produc- tion and marketing (agricultural extension and experimentation, land tenure restructuring, input supply, credit and advance purchase of production, seed and sapling production, and produce sorting and marketing); (b) physical infrastructure and engineering (roads, small-scale irrigation, and construc- tion of buildings); and (c) non-agricultural services (health, sanitation, education and vocational training, non-agricultural enterprises, social organization and community development)\. The staff assigned to each function would assist the relevant executing agencies to coordinate project activities and supervise the progress of the respective component\. In order to provide administrative continuity and a communication link between the PCMU, the executing agencies, and beneficiaries, and to ensure speed and efficiency in project execution, the regional field coordinators would be a part of the operations staff\. Their role as a two-way communication channel should provide "grass-roots" feedback to project administration and executing agen- cies on yearly project planning and on implementation progress and problems\. 6\.05 The monitoring, evaluation and studies section would, at full development, include 8 technical specialists supplemented by temporary student interns\. This section would have three main tasks\. Firstly, staff would monitor the results of each component and advise the project executive coor- dinator of achievements as well as short-falls relative to expectations\. Standardized forms would be completed quarterly by executing agencies and forwarded to the monitoring group for synthesis into quarterly project reports that would be distributed to the PCMU management and operational staff, the State Rural Development Council, Regional and Federal officials and the Bank\. Assurances were received during negotiations that: (a) the PCMU would standardize data requirements among participating agencies, establish coding and analysis procedures and provide a report on the recommended procedures to the Bank for review and comment prior to their implementation, but not later than April 1, 1981; and (b) the quarterly project reports would be provided to the Bank promptly upon their completion\. The monitoring staff would also organize, administer, process, and analyze in the first,  - 33 - third and fifth project years, a farm productivity survey\. The farm survey would cover a small sample of participant and non-participant farmers in the state\. It would be conducted with a fixed format, pre-coded questionnaire centered on production technology, farm inputs, institutional contact and support, and produce marketing\. The PCtGU would require assistance from consultants in initiating this work\. During negotiations, assurances were received that the recommended survey design and analysis procedures would be communicated to the Bank, for review and comment prior to implementation but no later than April 1, 1981\. 6\.06 The second main task of the monitoring, evaluation and studies unit would be project evaluation, which would complement and draw on project monitoring results and would involve a continuous advising of project manage- ment of the extent and quality of project progress and implementation dif- ficulties\. On-going evaluation "products" would comprise reports of topic- specific evaluation studies, evaluations of PCMU monitoring and farm survey results, and a major mid-project evaluation report (during project year 3)\. The evaluation team would also prepare and contract uninvolved third-party institutions for a post-facto evaluation report of the project to supplement the project completion report\. Assurances were received during negotia- tions that the project mid-term evaluation report, and the project completion report would be provided to the Bank, the former not later than June 30, 1983, and the latter within six months of project completion\. 6\.07 The third main task of this section of the PCMU would be to plan, contract and interpret technical and social studies relevant to project implementation, and to resolve unforseen bottlenecks\. To fulfill these functions, the group will also establish a project data bank and keep track of completed and ongoing research of potential value to rural development project implementation in the state\. The main studies already defined, to be carried during the first years of the project, are: soil conservation, state water balance (especially ground water potential of arid and semi-arid areas), and sociological studies meant to help guide project implementation\. Assurances were received during negotiations that the detailed terms of reference of these studies would be approved by the Bank, and that these reports should be provided to the Bank, within three months of their completion\. 6\.08 The administration and finance section, with two professionals and appropriate support staff, will perform administrative and accounting tasks for the PCMU and the other units of CEPA-CE\. Operating Agreements and Procedures 6\.09 The project covers a broad range of related activities\. Since the timing and scope of some would undoubtedly require adjustment as experience is gained, flexibility in project yearly planning and execution would need to be maintained\. For this reason, and to help assure continued timely budgetary support, the state plans to furnish to the regional and federal authorities by May 1 each year, its preliminary estimates for budget requirements of the Special Programs to be implemented in the following year\. By June 15 each year the Federal authorities would notify the state on the amounts allocated to those Programs\. Each participating agency would subsequently prepare jointly with the PCMtU an annual plan detailing the activities and expected expenditures under the project for the next  - 34 - year; the annual plans would coincide with the POLONORDESTE's April 1 to March 31 fiscal year\. The integrated package of annual plans, as reviewed and approved by the State Rural Development Council would be submitted to the regional and federal authorities and serve as a basis for yearly budget allocations\. Assurances were received at negotiations that the Federal and State Government would take all necessary steps to ensure the compatibility and coordination of rural development activities in the state\. Assurances were also received that the proposed project annual operating plans would be submitted to the Bank no later than September 30 each year for review and comment, and that the Bank would be advised of the approved plan by the beginning of the applicable POLONORDESTE fiscal year\. 6\.10 Consistent with a commonly used system in Brazil, the state Govern- ment would enter into written agreements (convenios) with certain executing agencies to specify their respective responsibilities under the project and help assure timely project completion\. Such agreements are normally employed when: (a) the executing entity concerned is not directly part of, or respon- sible to, the state Government; (b) the executing agency is largely auto- nomous; or (c) special responsibilities (e\.g\., counterpart funding, adoption of new procedures) need to be spelled out\. In the proposed project, agree- ments would be particularly useful in assuring adequate participation of, and coordination among, the agencies involved in cadastral surveying, titling and land purchase, cooperative society development, education and vocational train- ing, sanitation and health, marketing, and non-agricultural enterprise components\. Each project executing agency has nominated a qualified staff member to be responsible for providing liaison with the PCMU and for coordinating execution of the agency's project activities\. During negotiations, assurances were received from the state that it would enter into and maintain during the project execution period all such agreements as are necessary to assure active cooperation of the various agencies participating in the above mentioned components\. The signing of the agreements would be a condition of disbursement for each of these components (paras\. 4\.14, 4\.17, 4\.22, 4\.27,4\.36 and 4\.38)\. Implementation Schedule 6\.11 A chronogram of the main project activities is given in Annex 5\. Accounts and Auditing 6\.12 Each of the participating agencies would maintain accounts of its project expenditures, which would be audited annually by Government auditors according to standard Government practice for POLONORDESTE projects, which is satisfactory\. The PMCU would maintain accounts of its own project expen- ditures as well as statements of expenditures by each participating agency\. Assurances were received during negotiations that copies of the audited statements of project accounts of the various participating agencies would be provided to the Bank through the PMCU within six months of the end of their fiscal year\. Assurances were also received that these reports would include specific reference to the adequacy of procedures used for the verifi- cation and preparation of statements of expenditure for disbursement requests\.  - 35 - VII\. PRODUCTION, DEMAND, MARKETING, AND PRICES Production 7\.01 The estimates of project-generated production increases are closely related to the agro-ecological conditions of the various regions in the state, which vary considerably in productivity and potential\. In the semi-arid Sertao areas, where about 75% of the proposed beneficiaries live, the impact of the project would be to substitute gradually higher yielding annual varie- ties for existing varieties of perennial cotton; raise yields on traditional crops through improved inputs and management; and increase the area of cultivation where possible, especially of higher value crops such as rice\. In the highland Serra regions, with some 15% of project beneficiaries, the project would promote expansion of the area planted in high value crops (vegetables, sugar cane, rice), irrigated where feasible; and improvement and expansion of stands of fruit trees (urucu, oranges, soursop), raising existing yields through the use of improved seeds, planting stocks and fertil- izers, and improved management\. In the Litoral or coastal region, with 10% of project beneficiaries, the thrust of the proposed project would be to improve and expand existing stands of fruit trees (cashews, coconuts) as well as increase productivity in traditional crops (mainly manioc) through improved management and inputs\. Generally, it was assumed that yield increases under the project would be quite modest and gradually achieved in up to six or seven years\. Unnecessary crop losses would be reduced principally through better farm management, coupled with improved seeds, disease and pest control methods, and use of fertilizers and other inputs\. Estimated yields at full development are still below levels attained by the most progressive farmers in the project area; however, they reflect best estimates of what could be achieved, on average, within the constraints imposed by climatic and soil conditions\. 7\.02 A summary of expected production and productivity derived from assumptions contained in about 33 farm models is given in para 8\.05\. The project would build on development already initiated in POLONORDESTE projects and by progressive farmers and would assist more small farmers to participate in these trends\. At estimated February 1980 farmgate prices, incremental annual production at full development is expected to amount to US$70\.6 million\. Approximately 29% of the value of incremental production would come from cotton, 9% from vegetables, 21% from fruits, and 40% from traditional subsistence crops\. Because of the "demonstration effect" of project extension activities and infrastructure development production increases are also probable from other farmers in the project area\. 7\.03 The most important crop produced in the state is cotton\. This is followed in importance by manioc, beans, cashew and corn, which together with cotton account for some 70% of the total value of state agricultural produc- tion (excluding animal products)\. The project would support the expansion of cotton production, and attempt to stem and reverse the long term trend in falling yields which has resulted from degeneration of types grown and poor crop management\. Adopting existing trends, project farmers would gradually begin to reduce their dependence on the traditional cropping system of perennial cotton, corn, and beans, and, wherever possible, crops such as rice, vegetables, and fruit trees would be introduced\.  - 36 - Demand 7\.04 Ceara has traditionally been a net exporter of cotton and various fruits (bananas, cashew) and a net importer of sugar, rice, meat, beans and other foodstuffs\. Cotton, the principal agricultural crop, is absorbed by the local textile industry, and cotton importing states of which Sao Paulo, Pernambuco, Minas Gerais and Rio de Janeiro are the most important\. Of an estimated 1979 cotton production of 196,500 tons, some 52,000 tons was pro- cessed within the state, the remainder being shipped to other parts of the country after ginning\. Little cotton has been exported in recent years, due to unfavorable international prices\. These are expected to increase some 35% over the next 10 years, however, improving the possibilities for exports\. Nevertheless, it is expected that incremental project production could in any case be absorbed by the national textile industry\. 7\.05 Vegetables and fruits, produced principally in the more humid hilly micro regions in the state, are marketed in the main urban centers of Ceara and neighboring states\. Depending on absorption capacity, vegetables and fruits are channelled to Fortaleza, Teresina, Natal or Joao Pessoa\. These goods are marketed through Government-operated (CEASA) wholesale fruit and vegetable markets outside the various cities which maintain a price and quantity information system run by the Agricultural Market Information System (SIMA)\. The availability of this type of service helps direct the flow of produce to the urban areas with shortages\. An estimated 19,000 tons of vegetables were produced and consumed in the state in 1979\. It is expected that the incremental annual project production of 9,500 tons of vegetables in 1990 will be easily absorbed by the increase in demand from the expanding urban centers in the region\. Fruit produced in the state is either consumed within the state, shipped fresh to other Northeastern cities for consumption, or processed in the various fruit packing industries located in Ceara, Pernambuco and other neighboring states\. The state produces only 30% of its current annual consumption of 30,000 tons of oranges\. Incremental project production of 5,400 tons is expected to be easily absorbed\. Cashew nuts are processed in the state for a nation-wide and export market, and incre- mental project production of 8,400 tons will be absorbed by this industry\. Pineapples and bananas produced in Ceara are among the most important fruits exported to other states, and it is expected that the approximately 100,000 additional tons of these fruits produced annually as a result of the project will be absorbed in the fresh fruit and processing markets in Ceara and nearby states\. 7\.06 Traditional foodcrops--beans, corn, rice and manioc--are consumed principally on the farm, with excess production sold for urban consumption\. The current state consumption of corn (about 313,000 tons) is expected to continue to exceed production in the 1980's, and incremental project produc- tion of 74,000 tons will be easily absorbed\. Production of manioc, about 1\.8 million tons in 1979, exceeds local demand, and the excess is processed into flour and exported to other states though wheat flour continues to be imported\. Incremental production of 160,000 tons will be used in this fashion\. State bean production, of some 105,000 tons currently, lags behind consumption\. State production is projected, however, to cover internal consumption require- ments by the late 1980's, and excess production would be exported to deficitary  - 37 - regions in other states\. Beans are one of the main staples of the Brazilian diet and no problems are expected with the marketing of incremental production of 36,100 tons\. Current state rice production of some 50,000 tons is well below demand projections in constant prices, and is expected to remain that way into the 1980's\. Incremental project production of 5,000 tons would be consumed within the state\. The table below summarizes agricultural production forecasts\. Estimated Ceara Production, Demand in 1979 and 1988 and Incremental Project Production at Full Development Expected Value Estimated State Estimated 1/ Incremental of Incremental Production State Demand Balance Project Project 1979 1988 1988 1988 Production Production Crop (tons) (tons) (tons) (tons) (tons) (US$ million) Cotton 196,500 267,100 96,800 170,300 53,900 20\.2 Corn 172,200 440,000 681,400 (241,400) 71,300 8\.4 Beans 104,800 180,000 162,900 17,100 35,300 13\.1 Manioc 1,760,000 2,470,000 1,893,100 576,900 172,100 5\.4 Rice 49,500 112,000 436,300 (324,300) 9,000 1\.7 Bananas 144,000 270,000 178,300 91,700 22,800 2\.0 Vegetables 18,500 28,800 47,100 ( 18,300) 9,500 6\.5 Oranges 8,200 12,500 50,600 ( 38,100) 5,400 \.7 Soursop n\.a\. n\.a\. n\.a\. n\.a\. 4,900 \.7 Urucu n\.a\. n\.a\. n\.a\. n\.a\. 830 \.8 Coconuts 78,700 131,000 15,100 115,900 5,700 1\.0 Pineapples n\.a\. n\.a\. n\.a\. n\.a\. 7,300 \.8 Guava n\.a\. n\.a\. n\.a\. n\.a\. 10,000 \.7 Passion Fruit n\.a\. n\.a\. n\.a\. n\.a\. 1,400 0\.2 Cashew Nuts 516,800 973,000 n\.a\. n\.a\. 8,500 2\.8 Castor Beans 15,000 20,000 n\.a\. n\.a\. - 500 -\.1 Coffee n\.a\. n\.a\. 63,600 n\.a\. 600 \.7 Sugar Cane n\.a\. 2,600,000 6,236,100 (3,636,100) 32,500 \.3 Other Fruits n\.a\. n\.a\. n\.a\. n\.a\. 37,000 4\.7 TOTAL - - - - 70\.6 1/ The growth rate of demand for the various products is based on (i) pro- jected average annual population growth rates of between 1\.8 and 4\.3% between 1979 and 1988; and (ii) an average yearly income growth rate of between 6 and 12%; growth rates vary depending on whether metro- politan Fortaleza, other urban areas, or the rural areas in the state are considered\.  - 38 - Marketing and Prices 7\.07 Marketing mechanisms differ between the Sertao and the Serra areas due to the different nature of the crops involved\. Channels for the sale of cotton, and excess production of corn and beans in the Sertao are closely tied to traditional financing agents (local store owners) and usually con- trolled by the large local landowners\. Produce is usually owed to the local store or landowner)for consumption financing received before harvest\. Collec- tion and transportation to urban markets are usually done by trucker/inter- mediaries\. These procedures often do not provide the farmer with an equitable share of the value of production\. The project would attempt to provide farmers with more options for both production finance and marketing of pro- duce\. It would help increase farmers' bargaining power and prices by assisting cooperative societies to intervene in marketing and by providing the option of institutional crop financing\. In the small, densely settled Serra regions, where the principal products sold are fruits, vegetables, and sugar cane, the Government has established a system of producers' wholesale markets, served by a market information system, and aimed at channelling production to the large population centers in the Northeast region\. Collection, transportation, and distribution are fairly efficient, with intermediaries responding quickly to price differentials\. The system should be able to absorb incremental project production without major bottlenecks or decreases in farmgate prices beyond normal seasonal fluctuations\. This centralization of marketing activi- ties has permitted a certain concentration of intermediaries, with the market- ing of a given product dominated by three or four wholesalers for each whole- sale market\. Monopsonist power has often forced the farmers to accept a rather low proportion of the final consumer price in return for a guaranteed market for perishable goods for which farmers have so far no alternative use, marketing organization or storage possibilities\. 7\.08 Small farmers have virtually no participation in the minimum price purchase scheme, and direct Government involvement started only recently with the Advance Crop Purchase Mechanism (CAP)\. Administered by CODAGRO, in conjunction with E4ATER-CE, the program provided some thousand farmers with working capital financing and a guaranteed market for traditional subsistence crops during the 1978/79 season\. This program is aimed especially at assist- ing sharecroppers in the sertao and will be supported under the project (para 4\.35)\. Small-Scale Non-Farm Enterprise Production and Marketing 7\.09 Non-farm enterprises in the project area are engaged in (a) the production of simple items such as furniture, tinware, manioc flour, jams and preserves, signs, shoes, and clothing; (b) retail activities on a small scale; and (c) services such as those provided by mechanics, welders and electricians\. It is estimated that the impact of the project would be to increase output from these types of enterprises by 25% to 30%\. Principal outlets for production are the local, usually weekly, open markets held in municipalities, and the large regional centers such as Crato-Juazeiro, Sobral, Limoeiro do Norte - Tabuleiros do Norte\. The market for artesan goods (wood and leather work, embroidery) is nationwide\. Increased demand for small non- farm enterprise products is also expected to result from the growth in farmer incomes resulting from the investment activities of the overall rural develop- ment project\.  - 39 - VIII\. FINANCIAL ANALYSIS Illustrative Farm Types 8\.01 The project area is suited for a wide variety of crops and cropping patterns, reflecting the broad range of ecological, physical and socio-economic conditions\. Based on field surveys and information gathered by INCRA, CEPA-CE EMATER-CE and EPACE, 33 illustrative farm types were studied representing seven of the eight project regions\. Some 8 illustrative farm types had pre- viously been analysed for the Ibiapaba region, financed by Loan 1488-BR, and for which the proposed statewide project would carry on certain activities after completion of the Ibiapaba project\. The assumed distribution of farm types, and their cropped areas for the pre-project and with project situltions are giveur in the following: Ttatl, Cron4Aa l*1O~1 C,god Amu Per Par* (ooo ha) Pl Ihnbgr of unit rw Troe Pro-Proj\. With Proi\. Farmers Pre-Prol\. With tral\. r\. Litoral Non-owner (Litoral) 1\.7 3\.0 5\.971 10\.1 17\.t Non-owner (Sertao) 2\.3 3\.0 3,043 7\.0 9\.1- Owner 0\.1 - 25 ha (Litoral) 7\.0 6\.5 1,885 13\.2 12\.2 Owner 0\.1 - 25 ha (Sortso) 5\.7 7\.0 883 5\.0 Sub-total 11\.782 35\.3 45\. U\. BetuLite l;on-owuer (Serra) 3\.4 4\.0 1,116 3\.6 4\.9 Non-owner (Sertao) 5\.0 6\.5 2,190 10\.9 14\.2 owner 0\.1 - 10 he (Serre) 3\.8 3\.5 592 2\.2 2\.1 Owner 10\.1 - 50 ha (Serra) 8\.4 9\.9 262 2\.2 2\.4 Owner 0\.1 - 25 ha (Sertao) 8\.7 11\.0 543 4\.7 4\.0 Sub-totel 4,703 23\.8 29\. II1\. Baizo J\.tuavribe Son-owner (Sertao) 4\.5 6\.0 1\.776 8\.0 10\.7 Owner 0\.1 - 25 ha (Sertao) 6\.0 6\.0 1,398 8\.4 4 Owner 0\.1 - 10 ha (Aluviao) 5\.0 5\.0 705 3\.5 3\.5 Owner 0\.1 - 25 ha (Litoral) 6\.3 7\.0 407 2\.5 2\.1 Sub-total 4,286 22\.4 25\.4 IV Sertoem Coarenses N1on-owirr (Sertao) 3\.3 4\.0 5,536 1B\.3 A N-- on- er (\.ertao) 3\.0 4\.0 157 0\.5 0\.6 Owner 0\.1 -0 ha (Sortao) 3\.6 *L\.S 2,352 8\.5 10\.6 Owner 20\.1 - 50 ha (Sertao) 5\.0 5\.0 196 1 \.0 1\.0 Sub-total 8,241 28\.3 34\.3 V\. Sertoes do Non-owner 6\.3 7\.0 5,504 34 7 38\.5 Quixera:obin e Owner 0\.1 - 25 ha 3\.2 4\.0 2,063 6\.6 8\.2 Medlo Jaguarlbe Owner 25\.1 - 100 ha 11\.2 14\.0 1\.306 14\.6 18\.3 Sub-total 8,873 55\.9 65\.0 VI\. Sertoes do az-owner 7\.8 9\.0 369 2\.9 3\.3 Inhaurrs e Non-owner 5\.2 8\.0 3,389 17\.6 27\.1 Salgado Owner 0\.1 - 25 ha 4\.6 5\.5 2,337 10\.7 12\.8 Owner 0\.1 - 25 ha 5\.0 6\.0 197 1\.0 1\.2 Owner 25\.1 - 100 ha 12\.5 15\.0 1,330 16\.6 20\.0 Owner 25\.1 - 100 ha 11\.9 15\.0 103 1\.2 1\.5 Sub-total 7\.725 50\.0 65\.9  _ 40 - Total Croo,ed Area CropCed Area Per Fare (ha) (000' ha) nitc ?sr\. ?IW J With PT*_ I Tn\. t_?\. *aWith ,I,\. stZ\. Cartit KOU-4wn (V41e) 3\.7 6\.2 1,755 6\. 7\.5 lion-owr (Chapada) 6\.2 4\.5 9eo 6\.0 4\.4 %on-owner (Sert\.a) 5\.2 6\.0 2,696 16\.0 16\.2 Ow0e 0\. 1 - 25 1,4 (Vale) 535 5\.0 240 1\.3 1\.2 Owner 0\.1 - 25 ha (Vale) 4\.6 5\.7 237 1\.1 1,4 Ownet 0\.1 - 25 ha (Set*"e) 7\.7 10\.0 1,982 15\.3 19\.8 Owner 25\.1 50 he (Chzapa) 1\.5\.0 9\.1 35' 3\.3 3\.2 Sub-totai 8,243 49\.6 33\.7 771\. bhiapeb Nutid Zone 5\.1 5\.1 I/ 2,220 11\.3 11\.3 Carreaco Zone 6\.1 4\.1 IX 4,1eo 17\.0 17\.0 Sub-total 6,400 28\.3 28\.3 Grand total 60,253 293\.6 347\.4 D Data Is a* average for the 2\.220 farmers Ltr the hurtd zon, and the 4,180 farmers i irn the terTsaco\. The ipact ef this project vould be to achieve a modest itcrease in the vields atrained in the previous project in Ibiapaba (Loan 1488-3R), for project farmers and some additional farmcrs of the cyp* assisted La Che previous project (sa\. Repert We\. 1580-a Bit *o Anut 22\. 1977), bet _C n\.e\.eaarily further incroa,e ta the On-farm Operations 8\.02 It is estimated that the financial rates of return to the farmers participating in the project could range from about 10% in the case of a small non-owner farm type in the difficult Sertao area to 50%\. The higher returns appear in farm types which include high value crops such as fruit and vegeta- bles, for which good prospective markets exist (paras 7\.02 to 7\.06)\. The details of the agrotechnical assumptions for the farm models, as well as farm operating results and cash flows for three representative examples of the farm types, are provided in Annex 8\. 8\.03 Considered as costs in all the analyses are the on-farm investments (such things as initial land preparation, establishment of permanent tree crops and purchase of minor tools and equipment) and the expected operating costs of farming activities\. Prices for inputs, labor and production were assumed to be at levels prevailing on local markets, averaged over the past three years\. No price differential was included at the farmgate level between perennial and annual cotton, because the only distinctions made here are based on the quantity of roughage and general presentation of the product\. Expected financial rates of return on incremental net farm benefits are summarized as follows: latsns\.sl Croyyed Ares Per Farr (ha) Planning Fnctl1 Unit Fars Type Prm-Prof\. Wtth Troi\. Patc of Fe!urn I\. Litoral Non-owner Litoaral) 1\.7 3\.0 41 Non-owner (Sertc) 2\.3 3\.0 24 Owner 0\.1 - 25 ha (Litoral) 7\.0 6\.5 2t Owner 0\.1 - 25 ha (Sertao) 3\.7 7\.0 20 TI\. Baturite Non-o\.ner (Serra) 3\.4 4\.0 18 Non-owner (Sortao) 5\.0 6\.5 24 Owner 0\.1 - 10 ha (Serra) 3\.8 3\.5 17 Owner 10\.1 - 50 ha (3erra) 8\.4 9\.9 37 Owner 0\.1 -- 25 ha (Sertao) 8\.7 11\.0 ;s 11T\. 8aixo Jituaribe Xon-o'ner (Sertao) 4\.5 6\.0 43 ONer 0\. I - 25 ha (Sertao) 6\.0 G\.a 13 Owner 0\.1 - 10 ha (Aluviao) 5\.0 5\.0 30 Owner 0\.1 - 25 ha *1\.±ttral) 6\.3 7\.0 32  - 41 - Regional Cropped Area Per Farm (ha) Planning Financial Unit Farm Type Pre-Prol\. With Proj\. Rate of Return (%) IV\. Sertoes Cearenses Non-owner (Sertao) 3\.3 4\.0 24 Non-owner (Sertao) 3\.0 4\.0 10 Owner 0\.1 - 20 ha (Sertao) 3\.6 4\.5 21 Owner 20\.1 - 50 ha (Sertao) 5\.0 5\.0 19 V\. Sertoes do Non-owner 6\.3 7\.0 28 Quixeramobim e Owner 0\.1 - 25 ha 3\.2 4\.0 28 Medio Jaguaribe Owner 25\.1 - 100 ha 11\.2 14\.0 30 VI\. Sertoes do Non-owner 7\.8 9\.0 22 Inhamuns e Non-owner 5\.2 8\.0 19 Salgao Owner 0\.1 - 25 ha 4\.6 5\.5 28 Owner 0\.1 - 25 ha 5\.0 6\.0 21 Owner 25\.1 - 100 ha 12\.5 15\.0 27 Owner 25\.1 - 100 ha 11\.9 15\.0 25 VII\. Cariri Non-owner (Vale) 3\.7 4\.2 46 Non-owner (Chapada) 6\.2 4\.5 18 Non-owner (Sertao) 5\.2 6\.0 33 Owner 0\.1 - 25 ha (Vale) 5\.5 5\.0 50 Owner 0\.1 - 25 ha (Vale) 4\.6 5\.7 36 Owner 0\.1 - 25 ha (Sertao) 7\.7 10\.0 48 Owner 25\.1 - 50 ha (Chapada) 15\.0 9\.1 41 VIII\. Ibiapaba 1/ 8 Models - 1/ _ 1/ - 1! 1/ See Report No\. 1580a-BR of August 2, 1977 for the analysis of 8 farm models for the Ibiapaba project\. The estimated returns presented for that project would be further enhanced by the various continued improve- ments in off-farm services and infrastructure planned for the proposed state-wide project\. Producer Income 8\.04 As a result of the project, the estimated income from agricultural activities could increase from a weighted average, in US$ of 1980, of about US$900 equivalent per family before the project to about US$1,595 equivalent at full development or within roughly 8 to 12 years\. All of the expected participants are estimated to have incomes currently below the rural relative poverty cut-off line in Brazil, that is, about US$330 per capita, or US$1,650  - 42 - per family\. An estimated 45% of project participants families would have at full development, incomes over the current poverty level\. However, the income estimates cover only the principal activity of the farm operation and represent averages by farm type and size; obviously, some farmers in each type or size group will have incomes above the average\. Also, some of the smaller scale farmers in particular are likely to have some additional incom' from share- cropping, renting or laboring on other farms, mainly before the project but also to a lesser extent after project inception\. Because these supplementary incomes could not be easily measured, the difference in estimated incomes between the "without project" and "full development" situations of the smaller scale farmers may overstate in some cases, the overall net income increase\. On the other hand, the estimated income increases projected under the project would be underestimated to the extent that the real debt service burden to the farmer would be deflated since credit is not indexed to offset inflation\. It should be stressed that the cases analyzed are purely illustrative examples\. 8\.05 "Without project" and "full development" income levels, including the inputed value of family labor and value of on-farm consumption, as income are as follows: Estimated Weighted Farm Income _ Expected Participants Without At Full Regional Planning Project Development Number % of Total (US$ equivalent rounded) I\. Litoral 470 1,115 11,782 19\.7 II\. Ibiapaba 2,295 2,610 6,400 10\.6 III\. Baturite 1,470 2,600 4,703 7\.8 IV\. Baixo Jaguaribe 845 1,610 4,286 7\.1 V\. Sertoes Cearenses 365 670 8,241 13\.7 VI\. Sertoes do Quixeramobim e Medio Jaguaribe 745 1,455 8,241 14\.7 VII\. Sertoes do Inhamuns e Salgado 790 1,635 7,725 12\.8 VIII\. Cariri 950 1,950 8,243 13\.6 Weighted Average/Total 900 1,595 60,253 100\.0 Non-Farm Activities 8\.06 Many farmers supplement their income by working as laborers on other farms or in small-scale industrial or commercial activities in the region\. These many small operations include the processing of manioc root into flour, the production of cheese and butter, and of jams and preserves\. Also, some family members work in artesan activities, such as embroidery, leather work and  - 43 - lace making\. The project seeks to support the development of these off-farm activities with technical assistance training\. Rates of return from various illustrative small-scale enterprises analyzed under this component varied from 28 to 55%, with the net income of the small-scale enterprises increasing at least 50% over five years\. IX\. ECONOMIC BENEFITS AND JUSTIFICATIONS Economic Rate of Return 9\.01 The economic rate of return for the directly productive aspects of the project has been estimated at about 19%\. For various aspects of the pro- ject, such as improved health and sanitation and education and vocational training components which would have significant benefits which are not readily quantifiable (para 9\.06), no economic rate of return was calculated\. The details of the cost and benefit streams used in the economic analysis are given in Annex 7\. Other details of the economic analysis are available in the Project File\. 9\.02 The cost stream used in the economic evaluation of productive acti- vities included: (a) all investment and incremental operating costs on farms and in small non-farm enterprises (based on the phased aggregate of the dif- ferent types of participants); (b) the off-farm investment and incremental operating costs directly related to agricultural and small non-farm enterprise development during the project period; and (c) recurrent costs of services after the 5 years of project implementation, necessary to sustain projected development\. The cost stream thus includes 100% of project costs for research, marketing, cooperative society development, land purchase and titling, small- scale irrigation, feeder roads and small non-farm enterprise development; 90% of rural extension costs (excluding social extension costs); 65% of administra- tion, monitoring and evaluation costs; and 50% of the cost of studies\. The cost stream excludes costs of education and vocational training and health and sanitation\. Overall, about 77\.0% of total project costs were included in the cost stream\. 9\.03 It should be noted that some of the project investments would have significant benefits not measured by the incremental production of the 60,000 direct farm family participants and some 1,100 non-farm enterprises\. For example, the extension and research activities are certain to have demonstra- tion effects on other farmers in the state, particularly since the direct participants represent only about 20% of the total number of small farmers in Ceara and will be located in almost all the municipalities of the state, thereby multiplying the chances of diffusion of successful new production techniques\. Additionally, project roads could be expected to benefit not only other farmers, but also other economic activity in the state and lead to bet- ter access to improved social services\. The roads would also have an impact on production by helping improve the penetration of extension services, the farmers' access to markets and credit and production inputs and, hence, the likelihood of adoption of improved farming techniques\. 9\.04 The benefit stream used in the rate of return analysis included all of the incremental production of the project participants, such estimates being derived from the aggregate of the phased incorporation into the project,  - 44 - over five years, of the various participant farmers and non-farm enterprises and phased increases in production by the different types of participants\. The prices used in the economic analysis were based on projected farmgate prices adjusted to reflect, among other things, the impact of project transport and marketing components\. These projected farmgate prices were compared to border prices (discounted to take into account transport, handling and insu- rance costs) and were adjusted in the case of cotton, coffee, oranges, rice, sugar cane, corn and bananas which are traded goods\. Labor was priced--at the market wage rate, a conservative assumption, made to reflect possible labor shortages at periods of peak demand in an area in which seasonal underemploy- ment is prevalent\. The foreign exchange costs and benefits were adjusted up- ward by 15% to reflect trade-distorting tariffs, subsidies, advance import deposits, export taxes and quantitative restrictions\. Of the products pro- duced under the project, Brazil is net exporter of cotton, orange juice, coffee, sugar and bananas\. Price differentials between short and medium staple cotton were taken into consideration in the economic analysis\. 9\.05 To measure the impact of possible changes in the economic environ- ment on the project's stream of costs and benefits, several sensitivity tests were made, the results of the most significant are as follows: Internal Economic Rate of Return (%) Best Estimate : 19 Costs up by 20% and Costs up by 20% 16 benefits down by 20% : 13 Benefits down by 20% 15 Delay of one year in Costs up by 10% and farmers' participation : 16 benefits down by 20% 14 Inclusion of demonstration benefits : 22 The estimated return of the project is enhanced by its expected contribution to export earnings\. Brazil is a net exporter of cotton, coffee, oranges, sugar and bananas and it is expected that in the years of project maturity the in- cremental annual value of these products will be substantial, on the order of US$23\.0 million equivalent\. On the other hand, the foreign exchange component of project costs is relatively small\. With regard to the sensitivity of project returns, even if costs were increased and benefits reduced by 20%, the inter- nal economic rate of return would still be an acceptable 13%\. If demonstration benefits are included, the "best estimate" rate of return would increase to about 22% (i\.e\., reflecting incremental production derived indirectly from demonstration effects and use of the project-improved services and infra- structure by farmers other than the "direct participants"\.) 9\.06 In addition to direct benefits accruing to the estimated 60,000 pro- ject farm family participants and 1,100 small scale enterprises, and to demons- tration benefits (para 9\.05), the benefits of the social infrastructure com- ponents (education and vocational training and health and sanitation services) would have a wide coverage and would accrue to some 1\.2 million of the rural population living in the micro-regions selected for project activities\.  - 45 - Though impossible to quantify, the benefits of the improved health and educa- tion services would be reflected in the improved capacity of project partici- pants to achieve project production targets, and also in the improved income prospects and social welfare of the state's rural population\. Employment 9\.07 A survey of the present situation and patterns of employment in Ceara shows that, similar to most other Northeastern states, there is a sub- stantial flow of migration from rural to urban areas\. In the case of Ceara, much of this flow is to the metropolitan area of Fortaleza\. Furthermore, while unemployment of off-farm workers occurs in many areas, there is a general shortage of available workers on most farms during peak season\. How- ever, the farm labor force is generally utilized inefficiently, and the pro- posed project activities would improve in the first instance the family em- ployment situation\. Expansion of agricultural activities and-better utili- zation of on-farm labor resources by most participating farmers, would create new agricultural employment opportunities equivalent to some 46,000 worker- years annually; this amount would almost totally (96%) be met by family labor\. In addition, the development by the project of 1,100 small non-farm'enterpri- ses would create employment opportunities for some 2,200 workers (about 2 additional employment opportunities per enterprise)\. Additional employment opportunities in services and commerce are also expected to be generated as the project develops\. 9\.08 The project aims to improve farm family income, and considers the whole family as a productive unit\. In addition to providing additional work opportunities on the farm for the women and children, the small-scale non- agricultural enterprises component would enable family members, and especially women, to engage in remunerative activities not necessarily tied to the farm, such as embroidery, lace making, and production of preserves\. The ex- tension service and health programs focus on the needs of the whole family, with the social extensionist dealing principally with non-agricultural aspects of village life\. Women participated at all levels of the preparation team and will be actively included in the implementation team, ensuring that continued attention will be given to the role of women\. Project Risks 9\.09 The proposed project is complex, and there are clearly risks asso- ciated with the large number of agencies and activities involved and the varying and difficult socio-economic and ecological conditions within the state\. However, these risks were recognized during project preparation and the state has taken special care to analyze the proposals from technical, economic, institutional and policy points of view\. The risk of not achieving adequate coordination among and active participation by participating agen- cies should be lessened by the arrangements being made by the state to use existing agencies for project planning and implementation, to involve direct- ly high level officials of the principal participating agencies in-the State Rural Development Council, and to establish a special Project Coordination and Management Unit\. The state views the project as an important-part of its intermediate and long-term development strategies and it has very strong political commitment to it\. Another project risk is that the execution  - 46 - of this state-wide rural development project will depend on the annual detail- ing of plans of operations for each component, and the annual updating of a moving state-wide five-year rural development plan\. While for some activities this should not represent serious problems, for others, which are new, signi- ficant upgrading of the execution and planning capacity of the institutions involved will be required\. Another problem which may contribute to delays in project implementation is the present situation of the POLONORDESTE program, through which most project financing will be channelled\. As noted in para 3\.03, this program suffers from a number of administrative weaknesses, par- ticularly at the regional and federal levels\. Although key officials have committed themselves to improving management of the program, the speed with which necessary corrective measures are adopted will affect the quality and rate of implementation of all POLONORDESTE-financed projects, including that now proposed\. There is also, for some crops, the additional risk that expected yields (and hence expected producers' incomes) would not be attained because of unusually adverse natural conditions or unforeseen technical problems\. However, the highly diversified agricultural plans, the various alternative farm types, the project experimentation and extension services, and the mar- keting arrangements made should help alleviate risks and resolve problems of these types\. Overall, the potential of the project to benefit some 400,000 lower income people with its directly productive components, as well as an even larger number with improved health and education services, and the steps being taken to strengthen the project-execution capacity of executing insti- tutions, make the risks acceptable\. Fiscal Impact 9\.10 Existing Government agricultural development policies do not call for low-income farmers to pay for costs in agricultural services or social infrastructure, though villages often do contribute to the maintenance of such facilities once infrastructure is developed\. The costs of the roads are recovered indirectly through various taxes and license fees on road users\. Many of the costs associated with the project -- i\.e\., on-farm development, land clearing and development for the settlement schemes, small non- agricultural enterprises -- would be partially recovered through the credit system\. The extent to which these costs will be recovered in real terms is difficult to estimate because of the current inflationary environment in Brazil and the Government's policy of providing heavily subsidized agricul- tural credit\. Assuming continuing inflation, real recovery of on-farm costs related to the project could well be low\. On the other hand, either a more rapid decline in inflation or a continuation of the gradual reduction in the size of agricultural credit subsidies -- linked to a gradual dismantling of control over agricultural prices -- would result in higher real cost reco- very\. Although the increased production of the beneficiaries of the project would probably enable them to bear the burden of positive real interest rates for credit received, the Government has so far chosen, particularly in view of the relatively low incomes of the target beneficiaries for special rural development programs, to maintain a considerable subsidy in agricultural credit\. 9\.11 Following the project disbursement period, project activities would give rise to additional recurrent costs to the Government in order of about US$4\.3 million per annum\. These expenses would be incurred principally for  - 47 - agricultural extension and experimentation, but would also include some residual project administration costs as well as the continued operating costs of the improved health system and the training and formal education facilities\. The additional recurrent expenditures are expected, however, to be totally offset by additional revenues of roughly US$5\.8 million annually generated as a result of a value added tax, the Tax on Product Circulation (ICM), and the Assistance Fund for Rural Workers (FUNRURAL) which would apply to most incremental production from direct participants in the agricultural components of the project\. X\. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATION 10\.01 During negotiations, assurances were received from the Federal Government that: (a) it would take all necessary steps to ensure the annual availability of adequate seasonal and investment crop credit to project bene- ficiaries (para 4\.43); (b) it would provide adequate funding to assure maintenance of current- ly on-going rural development activities in the project area, and timely and effective execution of the project and adequate operation and maintenance of the facilities and services developed under the project (para 5\.02); (c) it would provide the Bank with quarterly project progress reports promptly upon their preparation (para 6\.05); (d) it would provide the Bank with a project mid-term evaluation report by June 30, 1983, and with a project completion report within six months of project completion (para 6\.06); (e) it would take all necessary steps to ensure the compatibility and coordination of rural development activities in the state (para 6\.09); (f) it would advise the Bank of the approved project work program by the beginning of the applicable POLONORDESTE fiscal year (para 6\.09); and (g) it would provide appropriate periodic audit statements satisfactory to the Bank within six months of the end of the fiscal year (para 6\.12)\.  - 48 - 10\.02 During negotiations, assurances were received from the state of Ceara that: (a) consultants for assisting in the field study and development plan of cooperative societies, education and vocational training, health and sanitation, feeder and access roads, small irrigation schemes and project coordination and administration components would be contracted on terms and conditions satisfactory to the Bank (paras 4\.17, 4\.22, 4\.27, 4\.29, 4\.33 and 4\.39); (b) the PCMU would furnish to the Bank the cooperative society develop- ment plans by April 1, 1981 (para 4\.17); (c) by September 30 each year, it would send to the Bank for approval the site plans for the schools and rural education centers to be built in the next project year, including the justification for the location (para 4\.19); (d) prior to initiating component execution in a project municipality, it would enter into appropriate agreement with the municipality providing, inter alia, that the head of Municipal Government would, by December 31, 1983, present to the respective legisla- tive body a bill to establish a teachers' charter (Estatuto do Magisterio) to define teachers' rights and duties, privileges and obligations (paras 4\.19 and 4\.20); (e) by August 31 each year, pre-investment studies of the rural water supply systems to be implemented during the coming year, would be presented to the Bank, and that prior to starting construction of a particular system, the recipient community would have established its society or group, and agreed to finance the operation and maintenance costs of the system during and after project life (para 4\.27); (f) the PCMU would provide for Bank comments, by April 1, 1981 for the first year and subsequently by September 30 each year in the annual plan of operations, the plan for contracting consultants for design and supervision of construction of the roads to be designed and built in the coming year (para 4\.29); (g) all road maintenance equipment procured under the project would be run and maintained by DAER-CE and used solely for maintenance of municipal and state roads in the project area (para 4\.30); (h) by April 1, 1981, the state would provide, for Bank comment, a five-year plan for advancing to and recuperating from the munici- palities funds for road maintenance (para 4\.30);  - 49 - (i) an agreement would be signed between DAER-CE and each municipality before the start of any project-financed road improvements, where- by such municipalities would undertake to submit annually and exe- cute (with defined DAER-CE's assistance), a program for maintaining at least the improved access and feeder roads and would allocate sufficient funds for this purpose (para 4\.30); (j) by December 31, 1981, and December 31, 1982 the state would provide, for Bank comments, the results of the consultants' studies on improvement of collector roads for each respective year; and by June 30, 1983 and June 30, 1984 respectively, it would have completed improvements in those roads studied (para 4\.31); (k) required personnel would be contracted and posted in each DAER-CE office (paras 4\.30 and 4\.31); (1) prior to preparation of detailed plans for any small-scale irrigation scheme requiring more than a total of US$100,000 in off-farm and on-farm investments, the Bank would be provided with a preliminary analysis of the scheme for comment (para 4\.33); (m) prior to starting engineering assistance for a particular small- scale irrigation scheme, the recipients would have already been organized as a group, and agreed formally to assume the responsibility for financing the construction, operation and maintenance costs of the system during and after project execution (para 4\.33); (n) the location and construction plans for the 3 central wholesale marketing warehouses would be provided to the Bank for agreement prior to the initiation of construction (para 4\.36); (o) the state would assure, through agreements with local banks, adequate credit to non-farm enterprises assisted under the project; and assistance by CEAG-CE under the project would be provided only to small-scale non-agricultural enterprises with less than 10 employees, fixed assets of under 200 MVR, monthly sales under 85 MVR and a maximum monthly owner income, from other sources, of under 8 MVR (para 4\.38); (p) by June 30, 1981, a project Credit Statistics and Monitoring System would be established (para 4\.43); (q) it would provide adequate funding to assure maintenance of on-going state-funded rural development activities in the project area and it would arrange for timely acquisition and necessary financing of any additional land or rights-of-way needed for project works (para 5\.02); (r) it would adequately maintain the PCMU and support the other state agencies participating in the project (para 6\.01);  - 50 - (s) it would standardize data requirements among participating agencies and would provide the Bank, for review and comment, with the details of monitoring/data analysis and farm survey plans prior to their implemintation but no later than April 1, 1981 (para 6\.05); (t) the terms of reference of the studies carried out aned/or contracted by the PCMU should be approved by the Bank and that these studies would be provided to the Bank within three months of their com- pletion (para 6\.07); (u) it would take all necessary steps to ensure the compatibility and coordination of rural development activities in the state (para 6\.09); and (v) it would enter into and maintain all such special agreements as are necessary to assure full and active cooperation of the various agencies participating in the project components (para 6\.10)\. 10\.03 Conditions of disbursement for schools and education centers in the education and vocational training component would be that the Bank had been provided with satisfactory evidence that the respective sites had been legally acquired (para 4\.22); and for the warehouses in the marketing component that the respective sites had been legally acquired (para 4\.36)\. Conditions of disbursement for the land cadastral surveys, titling and purchase; agricul- tural cooperative society development, education and vocational training, health and sanitation, marketing and small non-agricultural enterprises components would also be the provision to the Bank of the agreements between the state and agencies participating in the respective component (paras 4\.14, 4\.17, 4\.22, 4\.27, 4\.36 and 4\.38)\. 10\.04 With the above assurances and conditions the project is recommended for a Bank loan of US$56 million\. The loan would have a term of 15 years with a grace period of three years\.  NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Design Standards - Municipal Roads BNDE/DNER FINANCED FEEDER ROADS -t PROJECT FINANCED Cross-Slope of Natural Full Length Road Improvements Spot Improvements Description Cround Ciass D Class E Class F Design Speed 50% 60 50 Not (km/h) 20X 40 40 applicable 70% 30 30 Min\. Radius for 5% 110 70 no improvement unless Horizontal Curves (m) 20% 50 45 exceptional conditions 70% 30 40 require widening at curve Max\. Grade (%) 5% 6 8 no improvement unless roadbed material 20% 8 10 and grade combine to make ascent 70% 10 12 impossible during the rains\. Minimum Stopping Sight 5% 75 Distance (m) 20% 50 70% 50 - Min\. Platform 5% 7\.0* 6\.0* 3\.50m plus ditches 3/ Width (mi) 20% 7\.0* 6\.0* 3\.50m plus ditches 3/ 70% 7\.0* 6\.0* 3\.50m plus ditches 31 Stream Crossings - Culverts & Culverts and Culverts and paved fords unless depth and Bridges Bridges or Fords duration of high water dictates a bridge\. Surfacing C Gravel Gravel or se- Spot selected material where essential lected material for vehicular passage Approximate ADT (v\.p\.d\.) - 50-100 0-75 > 0 1/ To be applied for collector road improvements 2/ Priority on water crossing, drainage improvements and steep grades\. 3/ Passing bays as required * Includes ditches  - 52 - - iUANN 2 CEARA RURAL DEVELOPMENT PROJECT Annual Phasing of Project: Costs- (US$ 000') ,Baseline Foreign Project Activity Year I Year II Year III Year IV Year V Total Cost X Exchange Z 1\. Agricultural Services 1\.1 Agric\. Extension 1,494 3,149 5,141 7,150 *8,820 25\.754 21\.5 12 1\.2 Agric\. ExperimentatiOn 303 426 416 405 395 1,945 1\.6 10 1\.3 Land Cadastral Surveys, Titling and Purchase 2,114 3,429 6,516 6,275 3,626 21,960 18\.4 6 1\.4 Cooperative Society Development 233 308 328 358 261 1,488 1\.3 10 Sub-total 4,142 7,312 12,402 14,188 13,102 51,147 42\.8 9 2\. Social Infrastructure 2\.1 Education and Vocational Training 1,583 1,543 1,499 1,270 1,084 6,979 5\.8 15 2\.2 Health and Sanitation 2,580 2,631 2,619 2\.620 2,203 12,653 10\.6 25 Sub-total 4,163 4,174 4,118 3,890 3,287 19,632 16\.4 21 3\. Physical Infrastructure 3\.1 Feeder & Access Roads 6:018 7,091 9,386 5,422 4,943 32,860 27\.5 33 3\.2 Small-Scale Irrigation Schemes 230 244 239 308 321 1,342 1\.1 10 3\.3 Marketing and Storage Facilities \.260 710 653 639 150 2,412 2\.0 20 Sub-total 6,508 8,045 10,278 6,369 5,414' 36,614 30\.6 31 4\. Small-Scale Non-Agric\. Enterprises 159 133 245 396 418 1,351 1\.1 12 5\. Coordination, Management and Studies 1,196 2,219 2,446 2,374 2,669 j0,904 9\.1 1\. Total Baseline Costs 16,170 21,883 29,488 27,217 24,890 119,648 lo\.O 18 6\. Contingencies 6\.1 Physical 1,438 1,955 2,653 2,371 2,110 10,527 8\.8 18 6\.2 Price 930 3,401 7,476 9,653 11,557 33,017 27\.6 18 Sub-total 2,368 5,356 10,129 12,0Z4 13,667 43,544 36\.4 18 Total Project Costs 18,538 27,239 39,617 39,241 38,557 163,192 136\.4 18 1/ Including local taxes but excluding agricultural credit and credit for small-scale non-agricultural enterprises\.  - 53 _ ANNEX 3 NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Estimated Schedule of Bank Disbursements (US$ millions) Cumulative Calendar Quarter Disbursed Amount Balance of Year Ending During Quarter Disbursed Loan 1980 Sept\. 30 0\.0 0\.0 56\.0' Dec\. 31 0\.0 0\.0 56\.0' 1981 March 31 1\.5 1\.5 54\.5 June 30 2\.0 3\.5 52\.5 Sept\. 30 2\.5 6\.0 50\.0 Dec\. 31 2\.5 8\.5 47\.5 1982 March 31 2\.5 11\.0 45\.0 June 30 2\.5 13\.5 42\.5 Sept\. 30 2\.6 16\.1 39\.9 Dec\. 31 3\.4 19\.5 36\.5 1983 March 31 3\.4 22\.9 33\.1 June 30 3\.4 26\.3 29\.7 Sept\. 30 3\.4 29\.7 26\.3 Dec\. 31 3\.4 33\.1 22\.9 1984 March 31 3\.4 36\.5 19\.5 June 30 3\.4 39\.9 16\.1 Sept\. 30 3\.4 43\.3 12\.7 Dec\. 31 3\.2 46\.5 9\.5 1985 March 31 3\.2 49\.7 6\.3 June 30 3\.2 52\.9 3\.1 Sept\. 30 3\.1 56\.0 0\.0'  - 54 - ANNEX 4 NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT List of Executing and Collaborating Agencies Executing Main Collaborating Activity/Component Agencies Agencies 1\. Agricultural Services - Agricultural Extension EMATER-CE EMBRATER - Agricultural Experimentatian EPACE EMBRAPA - Land Surveying, Titling and ITERCE INCRA, CEPA-CE, Purchase EMATER-CE - Input Supply CODAGRO EMATER-CE - Agricultural Credit BB, BNB, BNCC EMATER-CE - Cooperative Society Development OCEC INCRA, EMATER-CE - Seeds and Sappling Production OCEC, EPACE EMATER-CE - Produce Sorting and Marketing SAAB OCEC 2\. Social Infrastructure - Education & Vocational Training SEC, FUNSESCE Municipalities - Health and Sanitation SES SOEC 3\. Physical Infrastructure - Feeder and Access Roads DAER-CE Municipalities - Small-scale Irrigation Schemes CRH SOEC, SUDEC - Marketing and Storage Facilities CODAGRO, COBAL EMATER-CE 4\. Small-scale Non-agricultural Enterprises CEAG-CE FUNSESCE 5\. Project Coordination & Management PCMU in SEPLAN  -55- ANNEX 5 NORTHIEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Implementation Schedule PROJECT YEAR Component/Activity IV 1\. Aricultural Services 11 Agricultural Extension - Recruitment and Training of Agents - Provision of Extension Services _ - Training of Farmers 1\.2 Aaricultural Experimentation - Experimentation - Establishment of Observation/ Demonstration siteas on farmers plots 1\.3 Land Cadastral Surveys, Titlins and Purchase - Establishment of Pield Units and Implementation of Cadastral Surveys |_| - Surveying and Titling of Parmers Holdings - Land Purchase and Planning of Settlments _ _ 1\.4 Cooperative Society Development - Field Study and Coop\. Society Development Plan - Technical and Managerial Assistance _ - Production of Improved Seeds ___ - Setting up and Operation of Production Marketing and Input Supply Facilities - 2\. Social Infrastructure 2\.1 Education & Vocational Training - Construction and tquipping of Schools and Learning Centers - Training and Upgrading of Personnel - Training of Farmers 2\.2 Health and Sanitation - Upgrading and Construction of Physical Infrastructure - - Training of Personnel - 3\. Physical Infrastructure 3\.1 Roads - Planning ____ - Building and constructing 3\.2 Small-scale Irrigstion Schemes -Planning|_ - Construction _ _ _ _ 3\.3 Markatinat Activities - Expansion of the Guaranteed Crop Purchasing Mechanism - Planning and Construction of the Expansion of the Produce Classi- fication System_____ - Planning and Construction of the Wholesale Marketing System 4\. Small-scale Non-agricultural Enterprises - Recruitment and Training of Staff - Training of Entrepreneurs 5\. Pro1ect Coordination and Management - Setting up of the PCMU - Carrying out Planning | | | _ -Supervision and Monitoring of Implementation _ |_____| _ - Carrying out of Evaluation Studies | |--____ - Carrying out of Mid-term and Post- Proj ect Evaluation - Carrying out of Special Studies | __ __ _ _  -56 - tortheast StarfI ZIF Projeclt Uortr\.tcn C rd KanJ3erar'r Char:t Stacte Council \.for trCotrs of £1 State Integrarad Rural - LDevLopazen _-_______-_- _ \._ \. _\. _\._\. _\. _\.~~~~~~~~~~~\. -_\. _\. < t _ 1 Secretary for P1a=L3a3 r Coo7Cl1tica CEPA-CE 1 Cowxultativ* Cotacil for 1tt3c ted Rural Co?rdinator for Integrated D&vdlop=&c for S\.ajL Rural Development Thdt for Integraced Eu-Ll Unlt_for_Monitoring_ Evalu- lopa a t Planningi -t r_ t ation and Special Studies State Planning aucr Coordiratioi La,s\., Couulitrive ?eglowa 1 Ragion" Covordinstcr for Coaueil for Iutegratad In - Itegrated RuraL DOewlopuatI 1=21 Develcpm\.t J| tRagionial Technical Planning l and Coordiuatioe Utit In Regional Plannfcg and field IMp,anrarSE100 g P~~~~~~ield l cpletm-rtatian  NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Cost and Benefit Streams for Economic Analysis (in USS '000 - efficiency prices) ------------------------------------------YEARS --------------------------------------------------------------- I/ 1 2 3 4 5 6 7 8 9 10 11 12 13-25 Incremental Benefit Streams Net Farm Benefits -18,160 -5,035 5,070 13,363 22,460 27,038 30,607 32,190 33,882 35,242 35,532 35,657 35,726 Net Small-Scale Non-agricultural Enterprises Benefits \. 117 - 122 - 192 - 310 - 521 1,197 1,482 1,640 1,640 1,640 1,640 1,640 1,640 TOTAL -18,277 -5,157 4,878 13,053 22,338 28,235 32,089 33,830 35,522 36,882 37,172 37,297 37,366 Cost Streams Rural Entension 1,435 3,026 4,941 6,872 8,477 5,934 5,637 5,356 5,088 4,833 - - - Agricultural Experimentation 322 453 443 431 421 - - - - - - - - Cadastral and Land Surveys, Land Titling and Purchase 2,320 3,765 7,143 6,889 3,974 - - - - - _ - _ Agri\.-Cooperative Society Development 248 328 350 382 378 - - - - - - - - Feeder and Access Roads 6,812 8,025 10,623 6,137 5,594 2,238 2,238 2,238 2,238 2,238 2,238 2,238 2,238 Small-Scale Irrigation Schemes 267 283 277 357 373 - - - - - - - - Marketing Activities 413 737 717 738 160 112 104 104 104 104 - - - Small-Scale Non Agri\. Enterprises 207 168 296 457 484 315 315 315 315 315 - - - Coordination, Management and Studies 1,048 1,720 1,869 1,u22 2,016 1,613 1,210 806 403 202 - - - TOTAL 13,072 18,505 26,659 24,085 21,877 10,212 9,504 8,819 8 ,148 7,692 2,238 2,238 2,238 Net Benefit Stream - 31,349 -23,662 -21,780 -11,032 461 18,023 22,585 25,011 27,374 29,190 34,934 35,059 35,128 a Internal Rate of Return 19% \. 1/ Net of Taxes SOURCE: WORLD BANK Mission, June 1980  - 58 - Annex 8 NORTHEAST BRAZIL Page 1 CEARA RURAL DEVELOPMENT PROJECT U,ricultural Planning, Technical Coefficients and Illustrative Farm Models Planning Process 1\. Comprehensive planning for the various types of agriculture practiced within the state was accomplished by dividing the state into eight Regional Planning Units (RPUs), according to agroecologic characteristics, (see Annex 10) and developing a special development strategy for each region\. Agricultural diff- erences within regions remain very wide, however\. Characterization of existing cropping patterns and cultivation techniques was based on an on-farm survey of 600 farms, executed by CEPA-CE in 1978 in the four RPUs of Inhamuns e Salgado, Quixer- amobim e Medio Jaguaribe, Cariri and Baturite\. This survey was updated and amplified during project preparation\. Within each RPU, the area of greatest agricultural potential was identified and activities in this area were planned to start in the initial years of project implementation\. There are three basic systems of agriculture being practiced in the state: (a) Sertao systems, in which perennial cotton is intercropped with various annual crops, usually corn and beans, livestock is grazed on an extensive basis, and development is constrained by lack of moisture\. Rainfall is usually around 600 mm/year\. Where water is available, due to proximity to a river or lake, rice is cultivated in the 'vazante', the moist region that remains around the edge of a lake as waters recede; (b) Serra systems, located in the various hilly regions of Baturite, Ibiapaba and Cariri, which have higher rainfall (higher than 1,000 mm/annum) and more streams, are based on the intensive cultivation of high value vegetable crops, bananas and some fruit such as urucu and oranges\. Sugar cane is grown in the flat areas, contiguous to the hills, where streams flowing from the higher rainfall areas permit irrigation; and (c) Litoral/Vale and Aluviao systems, in areas where soils and rainfall are more favorable than the sertao products, but climatic and soil conditions also permit extensive cultivation of fruit trees (coconut, carnauba, cashew, soursop, and oranges)\. Crop Selection and Farm Model Development 2\. Crops to be developed within a given RPU, and their relative weights within a farm model, were selected with the aid of linear programming techniques\. Crop budgets were developed for the various potentially attractive crops and intercropping systems, with technological options and yields set at levels to reflect five years of on-farm development, and differentiated by farm size, ownership status, and micro-regions\. Farm models were then defined with maximum constraints on family and hired labor availability, total area under cultivation, and area suitable for a crop with critical soil and water requirements (rice, vegetables)\. Minimum constraints were placed on areas under certain traditional intercropping systems, which are unlikely to disappear due to their drought resis- tant characteristics (perennial cotton/corn/beans is the main example)\. Within these boundaries, the linear program maximized the revenue obtained by the farmer in the fifth year of the development of his farm\. This planning was then adjusted to fit into a natnra'i development trend for farms, evolving from those characterized in survey results to the proposed system\.  -59- Annex 8 Page 2 3\. Some 33 illustrative farm models were defined in order to represent potential agricultural development in the eight RPUs of the state \. Within a given-planning region, models were developed in order to reflect different agricultural potential as limited by climate and soils; tenancy differences between sharecroppers and\. owners; the impact of land purchase on development; and farm size differences\. All regions have one or more representative share- cropper models, and various sizes of farm owner models where different cropping patterns warranted them\. Expected Development Impact 4\. The agricultural impact of the proposed project would vary within each of the three agricultural systems: (a) in the appropriate areas of the sertao farmers would be encouraged to plant certain annual cotton varieties which have shown drought risistance and much higher yields than the tree cotton varieties, using improved seeds, better management techniques including diseases and pest control, and fertilizers whaere appropriate; in other sertao areas tree cotton would continue to be grown, attempts to stem and reverse the long-term trend in falling y-ields would be made, improved seeds will be produced and research in adequate farming practices will be strengthened; rice would be encouraged where moisture is available; (b) in the serra regions, the project would promote expansion of fruit trees, vegetables and sugar cane, using irrigation where water is available; use of improved planting stock for fruit trees would be encouraged, as would use of improved seed, organic and chemical fertilizers and other chemical inputs; and (c) in the litoral, vale and aluviao regions, the emphasis would be on the expansion of fruit crops and substitution of perennial cotton varieties with herbaceous (annual) varieties\. Existing stands of cashew, urucu, soursop, oranges and coconuts would be improved, with support provided for fruit tree diversification within the farm, a trend which already exists\. Improved fruit tree maintenance techniques and fertili- zation\. would also be introduced\. Detailed input-output data are given in Table 1 of this Annex\. 5\. Rates of return to on-farm investment were calculated on the farmer benefit from incremental production, net of family labor costs imputed at the market wage\. These rates of return varied between 15 and 50% with the highest returns going to farms in the serra and litoral regions, with fruit and vegetable potential, as could be expected\. A review of the financial and income results of the analysis is presented in Chapter VII of the main report\. The type of analysis used is shown for three of the models, in tables 2, 3 and 4, as are summary tables for all the models, and crop budget data for the project\. The three models chosen represent the results of: (i) a sharecropper purchasing land in the high plains in Cariri; (ii) a small owner-operator in the cotton producing sertao of Quixeramobim, the center of cotton production for the state; and (iii) a small owner-operator in the Litoral , diversifying into the production of fruit trees\.  COV7ECOCaCC j Ca  -- 000 flOft flOflCOOft 000\.0 C 5Q700C= * COO ftftp*ft ft 000 ft - * ft oft ft ft - ft 0 ft 00CC CC 00000CC ft SCCOCO 0 CCC 0000 ft 000000 0 w CCC ft = CC = - 0\.0\.00\. 0\.00 0 ' em: * 0\.0 '0 C 0:ft0 005 "rWOCCW ftft OW WWZ\.,W J   CCCCCA 0CO00C'ftOO0O 0CC O1CCJ ft C, ft rr C" 'a CO CC rrrr' 0\. ftCC 0 -'-- o S CC oCft 0 CC S \.1 \.1 - SC C C C *;2  \. £": \. \. \. -- \.Ca C CCCCCCCCC CCC * L F I\.'- ft j C [C * Is \.1 Ca COCO I * C C CC C C * Oft C CCCCCCCCCC\.CCC CU' 0010 I#\. CA ' 00 5 [ I N CO CCCCCCCC CCC 20 C\. r CO 5\. CCCC C\. CC @C Ii - '0'0 I 00 -\. no *1 C C C C C C - Cl * C C C C C C C C C C I Ca 00 C CCCCCCCCCCC CCC Ca U' 00 3" C C Ca CCCCCC CftOC - C C CCCCCCCC C 0\. -- -  \. e - 0 V0 2\. C C C C C C C C C C C C C C Sn * C C C C C C C C 00  I * CCC* CC  C \.CCCCCCCCCCCCCCCCAC a : * C C C C C C C C C C C C C C C  CC Os C II *5 I - CO\. III j 0 I 0 L1 CC 3 C C CCC CC C Ca C \.CCCCCCCCCCCC CCC CO I 00 - Ca Ca Ca S CCCCCCCCCCCCCCCCC Ca '0'0 ft CCCCCCC C CCC CC CC Ca C *A C1C ICC F= CaM C - C C C Ca Ca ! C -J 0 - *C 'IC0 Ca C CO C C C C ft C Ca C C C C C C C (ft C CA ft ft C C C C C C C C C C C C C C C C C I Ca Ca \.C Oft C - C F C C CCCCCC CCC C C C C CU' 00 Ca C CSC C C C C C CC C C r Ca 0 CaC CA C C C ftC C C Ca CN jft Ca - COFI' - CaftCO Can I, OCI Ca Ca %CCC COCCI II "" C\. CCCC C C C CCCCCC C C C C C C C C C C C C 0CC I ft C IC, Ii ft C C CO Ca LC\.CI CO CC ft C C C C C C C Ca C Ca C ft C Ca 2 C C C C C C C C C C C C C C C C C  Ca C CC C C C C C C C C C C  IIr I Ii  I Ca C C C ft C Ca C 2 B C Ca IF SC CS C C C C C Ca C C 38C 3 - I-Il C C C C C C C C C C C C C C C C C oaoI C C C C C C C C C C C C C C C C C I§CCIC'O CI[ r IF 0 Ca C CS C C C - C Ca - C CO CO@C C - p II C CA CO Ca ftC CC 0 - * - IiII Ca Is OCI CC CCOCC CACCaU 00 C COO 10\.1 *09  Annex 8 - 61 - Table 2 Page 1 of 5 NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Region 8 -; Cariri Farm Model Two (Non-owner, Chapada) Cropping Pattern, Financial Analysis and Cash Flow Projections Cropping Pattern (ha) Development Years Crops Base Year 1 2 3 4 5 Moco Cotton, Corn, Beans \.7 \.7 \.6 \.5 \.4 \.4 2nd/3rd year Moco Cotton 1\.5 1\.3 1\.2 1\.0 \.9 \.8 Manioc, Beans 2\.0 1\.9 1\.8 1\.6 1\.5 1\.5 2nd year Manioc 2\.0 1\.9 1\.8 1\.7 1\.6 1\.5 Pineapples - \.1 \.2 \.3 \.3 \.3 Total Cropped Area 6\.2 9\.9 5\.6 5\.1 4\.7 4\.5 Farm Size: 6\.2 ha  NORTHEAST BRAZIL CEARA STATEWIDE RURAt DEVELOPMENT PROJECT - REGION 8 (CA*1RX FINANCIAL , ANNUAL FARM BUDGET MODEL TWO (LNDLS CHAP) (TN CR) --------------------------------------------------------------------------- CALENDAR YEAR --------------------------------- 1979 1980 1981 1982 1983 1984 1986 1989 1994 (BASE YR) WITHOUT PROJECT- S E 4 8 43 4 8 4 8 4 8 4 8 _3 4 8 4 GRTOS VALUlE 41,358 41\.358 41,358 41\.358 41\.358 41\.358 41\.358 41\.358 41\.358 -tOTAL TNrLOW 4i,358 41,358 41,358 41,358 41,358 41,358 4i,358 41\.358 4t,358 - ON-rARM CONSUMPTION 5,161 5,161 5\.161 5,161 5\.161 5\.161 5\.t61 5\.16t 5\.161 - NET INFLOW 36,197 36\.197 36\.197 36,197 36,197 36\.197 36\.197 36\.197 36\.197 DIRECT PRODUJCTION COST 1\.803 1,803 1\.803 1,803 1\.803 1\.803 1\.803 1,803 1\.803 I - TOTAL OUTFLOW 1,803 1,803 1,803 1\.803 1,803 1\.803 1\.803 1\.803 1\.803 C' NtT FARM CASN FLOW 34,394 34,394 34,394 34,394 34\.394 34,394 34\.394 34\.394 34\.394 £ ON-FARM CONSUMP7ION 5,161 5\.161 5,161 5,J61 5\.161 5\.161 5\.161 5\.161 5\.161 * NON-PROOUCTION OUTFLOW 5,161 5\.161 5,161 5\.161 5\.161 5\.161 5\.161 5\.161 5,161- - LESS IMPUTED FAMILY LABOR COST 24\.908 24,908 24,908 24\.908 24,908 24\.908 24\.908 24\.908 24\.908 NEr FARM BENEFIT 14\.647 14,647 14,647 14\.647 14\.647 14\.647 14\.647 14\.647 14\.647 1/ A static \. wlthout project situation implies that the long-term trend of N ^ slowly declining agricultural yields would have been halted by improvements in overall agricultural services that would have occurred without the project\. o  NORTHEAST BRAZIL CEARA STATEWIDE RURAL DEVELOPMENT PROJECT - REGION 8 (CARIRI FINANCIAL , ANNUAL FARM BUDGET MODEL TWO (LNOLS CHAP) (IN CRI ----------------------------------- ------------- ----------------------- CALENDAR YEAR --------------------------------- 1979 19BO 1981 1982 1983 1984 1986 1989 1994 (BASE YR) WITII PROJECT GROSS VALUE 41\.358 40\.654 55\.099 68\.435 67\.631 68\.377 68\.377 68\.377 68\.377 TOTAL INFLOW 41,358 40,654 55\.099 68\.435 67\.63t 68\.377 68,377 68\.377 68\.377 ON-FARM CONSUMPTION 5\.161 4\.619 4,770 4\.770 4\.770 4\.770 4\.770 4\.770 4\.770 - NFT INFLOW 36\.197 36\.035 50\.330 63\.665 62\.862 63\.607 63\.607 63,607 63,607 DIRECT PRODUCTION COST 1,803 4\.048 4\.764 5\.655 5\.949 6\.168 6 294 6\.294 6\.294 t INVESTMENTS 0 57\.786 47,461 9\.961 9\.961 9\.961 9\.961 9\.961 9\.961 0 - I07AL OUTFLOW 1,803 61\.834 52,225 15\.616 15\.910 16\.129 16\.255 16\.255 16\.255 w -NrT FARM CASH FLOW 34,394 -25,799 -1\.896 48\.049 46,952 47,478 47;352 47\.352 47\.352 ON-FARM CONSUMPTION 5,161 4\.619 4\.770 4\.770 4,770 4,770 4\.770 4\.770 4\.770 + NON-PRODUCTION OUTFLOW 5,161 4\.619 4\.770 4\.770 4,770 4\.770 4\.770 4\.770 4\.770 -tFSS IMPUTED FAMILY LABOR COST 24\.908 22\.716 20\.868 18\.999 18\.166 18\.115 18\.115 18\.115 18\.115 NET FARM BENEFIT 14\.647 -43,895 -17\.994 33,820 33\.556 34\.133 34\.007 34\.007 34\.007 't lb P OQ a- c ID ~4fl5 m 0 Fh  NORThEAST BRAZIL CEARA STATEWInE RURAL DFVFI\.nPMFNT PPODECT - REGION 8 (CARIRI * FINANCIAL , ANNUAL FARM BUDGET MODEL TWO (LNOLS CHAP) (IN CR) -------------- ----------------------------------------------------------- CALENDAR YEAR --------------------------------- 1979 1980 1981 1982 1983 1984 1986 1989 1994 (BASE YR) INCRFMFNTAI GROSS VALUE 0 -703 13,742 27\.078 26,274 27\.019 27,0t9 27\.019 27\.019 TOTAL INFLOW 0 -703 13,742 27\.078 26\.274 27,019 27\.019 27\.019 27,019 ON-rARM CONSuMPTION 0 -542 -391 -391 -391 -391 -391 -391 -391 NET INrLOW 0 -162 14\.133 27,469 26\.665 27\.411 27\.411 27\.411 27\.411 DIRECT PRODlJCTIUN COST 0 2\.245 2,962 3\.852 4,146 4\.365 4\.491 4\.491 4,491 INVESTMENTS 0 57\.786 47\.461 9\.961 9\.961 9\.961 9\.961 9,961 9,961 - tOTAL OUTFLOW 0 60\.031 50,423 13,813 14\.107 14,326 14\.452 14\.452 14\.452 = NFF FARM CASI FLOW 0 -60,193 -36,290 13\.655 12\.558 13\.084 12,958 12\.958 12\.958 ON-rARM CONSUIMPTION 0 -542 -391 -391 -391 -391 -391 -391 -391 * NON-PROflL)CTION OlUTFLOW 0 -542 -391 -391 -391 -391 -391 -391 -391 - LESS IMPUTED FAMILY LABOR COST 0 -2\.193 -4\.041 -5,909 -6\.742 -6,793 -6,793 -6\.793 -6,793 NET FARM BENEFIT 0 -58\.542 -32,641 19\.173 18,909 19\.486 19,360 19,360 19\.360 INTERNAL RATE OF RETURN 17\.98 %\. > Cl m oQ I oo I) 0) 0 1-h  NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT CARIRI MODEL TWO (LANDLESS CHAPADA) ----------------------------------- DEBT SERVICES AND CASH FLOW PROJECTION -------------------------------\.------ (IN CR$'000) YEAR W-0 PROJ 1980 1981 1982 1983 1984 1985 1986 1987 (i} CASH TNFLrjCW ________________ YAL`'E OF PRODUCTION 36-2 36\.0 50\.3 63\.7 62\.9 63\.8 63\.6 63\.6 63\.6 INYEST4ENT LOAN 0-0 57\.8 47\.5 10\.*0 10\.0 10\.0 10\.0 10\.0 10\.0 £\.HYrT TERM LCAN 0\.0 20\.0 19,3 18\.5 18\.1 18\.2 18\.3 18\.3 18\.3 I3TAl INFLOW 36\.2 113\.8 117\.1 92\.2 91\.0 91\.8 91\.9 91\.9 91\.9 (II) CASH OUTFlOW INVESTMENT COSTS 0\.0 5?\.8 47\.5 10\.0 10\.0 10\.0 10\.0 10\.0 10\.0 OFERATING COSTS 1\.8 4\.0 4\.8 5\.7 5\.9 6\.2 6\.3 6\.3 6\.3 ___________ ----------- ---______ ----------- ----------- ----------- ----------- O TOTAL OUTFLOQ 1\.8 61\.8 52\.3 15\.7 15\.9 16\.2 16\.3 16\.3 16\.3 ui (iTT) N-T CASH FLOW ____________________ NE' CASH FLOW 34\.4 52\.0 64\.8 76\.5 75\.1 75\.6 75\.6 75\.6 75\.6 (IV) DEBT SERVICES' IN,LlOAN PRINCIPAL PMT\. 0\.0 0\.0 0\.0 0\.0 8\.3 15\.0 16\.5 17\.9 19\.3 1NVFS TTMENT LOAN INTEREST 0\.0 5,\.8 10\.5 11\.5 12\.5 12\.7 12\.2 11\.6 10\.8 5H T,LOAN P:RINCIPAL PMT\. 0\.0 20\.0 19\.3 18\.5 18\.1 18,2 18\.3 18\.3 18\.3 SF'ORT TERM LOAN INTEREST 0\.0 i\.0 1\.0 0,9 0\.9 0\.9 0\.9 0\.9 0\.9 TOTAL DEBT SERVICES 0\.0 26\.8 30\.8 31\.0 39\.8 46\.9 47\.9 48\.7 49\.3 (V) CASH BALANCE CASH BALANCE 34\.4 25\.2 34\.0 45\.5 35\.3 28\.7 27,7 26\.9 26\.3 ANNUAL INIDEPTErNESS 0\.0 77\.8 124\.6 133\.8 143\.4 145\.3 140\.3 133\.8 125\.9 INTEREST RATE ON SHORT TERM LOAN IO PA FOR 6 MONTHS INTFREST RATE ON INVESTMENT LOAN 10% PA SHORT TERM LOAN REPAID AT END OF SEASON INVESTMENT LOAN REPAID OVER 10 YEARS WITH 3 YEARS GRACE wIwI> 1/ Short-term loan covers cash operating costs and a proportion of family-labor costs\. U m z va-ily la,or is financed from cash balance items, reflecting proceeds from short- 0 N 0 term loan and cash generated from farm activities\. UL  - 66 - ANNEX 8 Table 3 Page 1 of 5 NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Region 6 Quixeramobim Farm Model Two (Owner, 0-25 Category) Cropping Pattern, Financial Analysis and Cash Flow Projections Development Years Base Year 1 2 3 4 5 Moco Cotton, Corn, Beans: \.5 \.5 \.6 \.7 \.7 \.7 Moco Cotton, Corn, Beans, Broad Beans \.5 \.3 \.1 - - - Moco Cotton 2nd Year 2\.0 1\.8 1\.7 \.1\.5 1\.4 1\.3 Corn, Beans \.2 \.1 - - - - Herb Cotton, Corn, Beans: - 1\.0 1\.1 1\.3 1\.4 l\.5S, Manioc, Beans - \.25 \.25 \.25 \.25 \.25 Manioc 2nd year - - \.25 \.25 \.25 \.25 Total Cropped Area 3\.2 4\.0 4\.0 4\.0 4\.0 4\.0 Farm Size: 16 ha  NORTHEAST BRAZIL CEARA STATEWIDF RURAL DFVFIOPMENT PROJECT - REGION 6 (O/MJ) FINANCIAL , ANNUAL FARM BUDGET MODEL TWO '(0-25) (IN CR) ----------------------------------------------------------- CALENDAR YEAR --------------------------------- t979 1980 198t 1982 1983 1984 1986 1989 1994 (BASE YR) 11 WI THOUT PROJECT GROSS VALUE 14\.872 14\.872 14,872 14\.872 14,872 14\.872 14\.872 14\.872 14\.872 TOTAL TNFLOW 14\.872 14\.872 14,872 14\.872 14\.872 14,872 14\.872 14\.872 14\.872 - ON-FARM CONSUMPTION 3\.248 3,248 3\.248 3\.248 3\.248 3\.248 3\.248 3\.248 3,248 ' NEl INFLOW 11\.624 11,624 11\.624 11\.624 11\.624 11\.624 11\.624 11\.624 11\.624 olRECT PRODUCTION COST 674 674 674 674 674 674 674 674 674 - TOTAL OUIFLOW 674 674 674 674 674 674 674 674 674 = NET FARM CASI FLOW 10,950 10\.950 10,950 10\.950 10,950 10,950 10\.950 10\.950 10\.950 a ON-FARM CONSUMPTION 3,248 3\.248 3\.248 3,248 3,248 3\.248 3,248 3\.248 3,248 S + NON-PRODUCTION OUTFLOW 3\.248 3,248 3\.248 3,248 3,248 3\.248 3,248 3\.248 3\.248 - LESS IMPUTED FAMILY LABOR COST 6\.229 6\.229 6,229 6\.229 6,229 6\.229 6\.229 6\.229 6\.229 NET FARM BENEFIT 7\.969 7,969 7\.969 7,969 7,969 7,969 7\.969 7\.969 7\.969 1/ A tatic without project situation implies tlbat the long-term trend of slowly declining agricultural yields would have been halted by improvements in overall agricultural services that would have occurred without the project\. CD x Li 0 O 0 t X O n a  NORThIEAST BRAZIL CEARA STATEWIDE RURAL DEVELOPMENT PROJECT - REGION 6 (O/MJ) FINANCIAL , ANNUAL FARM1 BUDGET MODEL TWO (0-25) (IN CR) ------------------ -__ 7 ---- _- ------------------------------ CALENDAR YEAR ------------------------------- 1979 1980 1981 1982 1983 1984 1986 1989 1994 (BASE YP) WI714 PROJECT GROSS VALUE 14\.872 22\.734 29,403 34,963 39\.376 43\.707 43,818 43\.818 43\.818 T TOTAL INFLOW 14,872 22\.734 29\.403 34\.963 39,376 43\.707 43\.818 43\.818 43\.818 DN-FARM CONSUMPTION 3,248 4,645 4,645 4\.645 4,645 4,645 4,645 4\.645 4\.645 NET INFLOW 11,624 18\.089 24,758 30,319 34\.731 39\.062 39,173 39\.173 39\.173 DIRECT PRODUCTION COST 674 1\.723 3,083 4,588 5,432 6,267 6,323 6\.323 6\.323 INVESTMENFS 0 15,942 5,294 5\.294 5\.294 5,294 5\.294 5\.294 5\.294 - TOIAL OUTFLOW 674 17\.665 8,377 9\.882 10,726 11\.561 11\.617 11\.617 11\.617 - NET FARM CASII FLOW 10\.950 424 16,381 20,437 24,005 27\.502 27\.556 27\.556 27,556 ON-FARM CONSUMPTION 3,248 4,645 4,645 4,645 4,645 4\.645 4,645 4\.645 4\.645 * NON-PRODllCTION OUTFLOW 3\.248 4,645 4\.645 4,645 4,645 4,645 4\.645 4\.645 4,645 - LESS IMPUTED FAMILY LABOR COST 6\.229 10,506 13,042 14,916 16,537 18\.072 17\.950 17\.950 17\.950 -NET FARM BENErIT 7\.969 5,438 7,984 10,166 12,112 14,075 14\.251 14\.251 14\.251 P0 LaI OR (D O c  NORTHEAST BRAZIL CEARA STATEWIDE RURAL DFVELOPMENT PRO-ECT - REGION 6 (O/MJ) FINANCIAL , ANNUAL FARM BUDGET MODEL TWO (0-25) (IN CR) ---------------------------------------------------------------------------- CALENDAR YEAR --------------------------------- 1979 1980 1981 1982 1983 1984 1986 1989 1994 (BASE YR) INCREMFNTAL GROSS VALUE 0 7,862 14\.531 20\.092 24\.504 28\.835 28\.946 28\.946 28\.946 TOTAL INFLOW 0 7\.862 14,531 20\.092 24\.504 28\.835 28\.946 28\.946 28\.946 ON-FARM CONSUJMPTION 0 1,397 1\.397 1,397 1\.397 1\.397 1,397 1\.397 1,397 NFT INFLOW 0 6,4fi4 13,134 18\.694 23\.107 27\.438 27\.549 27\.549 27\.549 DIRECT PRODUCTION COST 0 1\.049 2,409 3,914 4\.758 5\.592 5\.649 5\.649 5\.649 INVFSTMFNTS 0 15,942 5\.294 5,294 5\.294 5\.294 5\.294 5\.294 5\.294 0 - TOTAL OUtFLOW 0 16\.991 7\.703 9\.208 10\.052 10\.886 10\.943 10\.943 10\.943 NFT FArM CASH FLOW 0 -10\.526 5,431 9\.487 13\.054 16\.552 16\.605 16\.605 16\.605 ON FARM CONSUMPTION 0 1\.397 1\.397 1\.397 1\.397 1\.397 1\.397 1,397 1\.397 4 NON-PRODuCTlON OUTFLOW 0 1\.397 1,397 1,397 1,397 1\.397 1\.397 1\.397 1\.397 - tESS IMPUIED FAMILY LABOR COST 0 4,278 6\.814 8,687 10\.308 11\.843 11\.721 11\.721 11\.721 - NET FARM BENEFIT 0 -13,407 15 2,197 4,143 6\.106 6\.282 6,282 6,282 INIERNAL RATE OF RETURN 28\.54 ^/ OQ O : M(DX 0 U,t3  NORTHEAST PRAZIL CEARA RURAL DEVELOPMENT PROJECT O\.MEDIO JAGUARIlBE MODEL TWO (0-25) TIWhT SERVYCFES AND CASH F1,OW PPniVFCTrnN -----------------------------------\.-- (IN CR$'000) YEAR W-O PROJ 1980 1961 1982 1993 1984 1985 if" 1987 ----------------------------------------------------------------------__-----__-------------------------_--------------------_---_-\.- (I) CASH INFLOW VALUE OF PRODUCTION 11\.8 18\.1 24\.8 30\.3 34\.7 39\.1 39\.1 39\.2 39\.2 INVESTMENT LOAN 0\.0 15\.9 5\.3 5\.3 5\.3 5\.3\. 5\.3 5\.3 SHORT TERM LOAN 1, 0\.0 9\.2 12\.1 14\.6 16\.4 18\.3 18\.2 18\.2 1E\.2 TOTAL INFLOW 11\.6 43\.2 42\.2 50\.2 56\.4 62\.7 62\.6 62\.7 62\.7 (II) CASH OUTFLOW INVESTMENT COSTS 0\.0 15\.9 5\.3 5\.3 5\.3 5\.3 5\.3 5-3 5\.3 OPERATING COSTS 1/ 0\.7 1\.7 3\.1 4\.6 5\.4 6\.3 \.3 4\.3 6-3 ICTAL OUTFLOW 0\.7 17\.6 8\.4 9\.9 10\.7 11\.6 11\.6 11\.4 -11\.6 (III) NET CASH FLOW ____\._______________ NET CASH FLOW 10\.9 25\.6 33\.8 40\.3 45\.7 51\.1 51\.0 51\.1 51\.1 (IV) DEBT SFRRVICES INY\.LOAN FRINCIPAL FMT\. 0\.0 0-0 0\.0 0\.0 2\.3 3\.0 3\.8 4\.5 \.3 INVESTMENT LOAN INTEREST 0\.0 1\.6 2\.1 2\.7 3\.2 3\.5 3\.7 3\.9 3\.9 SH,T\.LOAN PRINCIPAL PMT\. 0\.0 9\.2 12\.1 14\.6 16\.4 18\.3 19\.2 18\.2 18\.2 SHORT TERM LOAN INTEREST 0\.0 0\.5 0\.6 0\.7 0\.8 0\.9 0\.9 0\.9 0\.9 TOTAL DEPT SERVICES 0\.0 11\.2 14\.8 18\.9 22\.7 25\.7 26\.6 27\.5 25\.4 (V) CASH BALANCE ________________ CASH VALANCE 1/ 10\.9 14\.4 19\.0 22\.3 23\.0 25\.4 24\.4 23\.6 22\.8 ANNUAL INDEBTEDNESS 0\.0 25\.1 33\.3 41\.1 48\.2 53\.1 55\.3 58\.8 57\.6 INTEREST RATE ON SHORT TERM LOAN 10% PA FOR 6 MONTHS INTEREST RATE ON INVESTMENT LOAN 10% PA SHORT TERM LOAN REPAID AT END OF SEASON INVESTMENT LOAN REPAIB OVER 10 YEARS WITH 3 YEARS GRACE 1/ Short-tern loans covers cash operating costs and a proportion of family labor costs\. PT'milv lall- 4- f4-anced from cash halance it"'n, reflcctino nrncepds from short-term loan and cash generated from farm activities\. In  -71- ANNEX 8 Tao±e 4 Page 1 of 5 NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Region 1 (Litoral) (Owner, 10-25 category) Cropping Pattern, Financial Analysis and Cash Flow Projections Cropping Pattern (ha) Development Years Crops Base Year 1 2 3 4 5 Manioc, Beans 2\.0 1\.8 1\.6 1\.4 1\.2 1\.0 Manioc 2ndByear 2\.0 1\.8 1\.6 1\.4 1\.2 1\.0 Cashew (old) 3\.0 3\.0 2\.0 1\.0 - - Corn, Beans - \.5 \.6 \.7 \.9 1\.0 Guava - - \.25 \.5 \.5 \.5 Coconut - - \.25 \.5 \.5 \.5 Soursop - - - 1\.0 _ 2\.0 2\.0 Total Cropped Area 7\.0 7\.1 6\.3 6\.75 6\.8 6\.5 Farm Size: 18 ha  NORTHEAST BRAZIL CEARA STATEWIDE RORAI, DEVELOPMENT PROJECT - REGION I (LIT) FINANCIAL , ANNUAL FARM BUDGET MODEL FIVE (10-25 LIT) (IN CR) -----------'-------- ---------------------------------------------------- CALENDAR YEAR --------------------------------- 1979 1980 1981 1982 1983 1984 1986 1989 1994 (BASE YR) WITMOlUt PROJECT - GROSS VALUE 53,300 53,300 53,300 53,300 53\.300 53\.300 53\.300 53\.300 53\.300 IOTAL INFrlOW 53\.300 53,300 53\.300 53\.300 53\.300 53\.300 53\.30b 53,300 53\.300 - ON-FARM CONSUMPTION 4\.972 4,972 4\.972 4\.9'2 4\.972 4\.972 4\.972 4\.972 4\.972 - NET INFLOW 48\.329 48,329 48\.329 48\.329 48\.329 48\.329 48,329 48,329 48\.329 DIRECI PRODUCTION COST 1\.468 1,468 1\.468 1\.468 1\.468 1\.468 \. 1,468 1\.468 1,468 - TOTAL OUIFLOW 1,468 1\.468 1\.468 1\.468 1\.468 1\.468 1\.468 1\.468 1\.46& - NFT rARM CASH FLOW 46\.861 46\.861 46\.861 46\.861 46\.861 46\.861 46\.861 46\.861 46\.861 ON-FARM CONSUMPTION 4\.972 4,972 4\.972 \.4\.972 4\.972 \.4\.972 *4\.972 4\.972 4\.972 + NON-PROOUCTION OUTFLOW ,4,972 4,972 4,972 4\.972 4\.972 4\.972 4\.972 4\.972 4\.972 - LESS IMPUTFD FAMILY LABOR COST 17,712 17,712 17\.712 17,712 17\.712 17\.712 17\.712 17\.712 17\.712 * NEr FARM BENEFIT 34,121 34,121 34,121 34\.121 34\.121 34\.121 34,121 34,121 34\.t2t 1/ A static without project situation Implies that the-long-term trend of slowly declining agricultural yields would have been halted by improvements in overall agricultural services that would have occurred without the project *o:  NORTHEAST BRAZIL CEARA STATEWIDE RURAL DEVELOPMENT PROJECT - REGION 1 (LIT) FINANCIAL , ANNUAL FARM BUDGET MODEL FIVE (10-25 LIT) (IN CR) -CALENDAR--YEA---R------------------------------------------------------- CALENDAR YEAR -------------------------------- 1979 1980 1981 1982 1983 1984 1986 1989 1994 (BASE YR) WITH PROJFCT GROSS VALlJE 53,300 55,752 49\.277 41\.970 59\.486 97,038 156,456 189,386 189\.386 - TOTAL INFLOW 53,300 55,752 49\.277 41,970 59\.486 97\.038 156,456 189,386 189\.396 ON-FARM CONSUMPTION 4\.972 4,972 4,972 4,972 5,369 5\.440 5,918 6,003 6\.003 NET INFLOW 48\.329 50\.781 44,306 36\.999 54\.117 91\.598 150,537 183\.382 183\.382 DIRECT PROODUCTION COST 1,468 3\.444 3\.683 4,020 10\.704 17,138 21,375 23\.640 23,640 INVESTMENTS 0 16,447 31,614 48\.315 36,142 15\.873 5,222 5,222 5\.222 rOTAL OLJTFLOW 1,468 19,891 35,297 52\.335 46\.846 33,011 26,597 28,862 28,862 NET FARM CASH FLOW 46,861 30,890 9,009 -15,336 7\.271 58\.587 123\.941 154\.521 154\.521 ON-FARM CONSUMPTION \. 4,972 4,972 4,972 4\.972 5,369 5,440 5\.918 6\.003 6,003 NON-PRO[)llCTION OUTFLOW 4,972 4,972 4,972 4,972 5,369 5\.440 5\.918 6,003 6\.003 - LESS IMPUTED FAMILY LABOR COST 17,712 18\.950 17,852 16,500 18\.834 22\.860 28\.134 32,292 32\.292 = NET FARM BENEFIT 34,121 16\.912 -3,872 -26,864 -6\.194 41\.167 101\.725 128,232 128\.232 ID H CD lb0 WU o X  NORIHEAST BRAZIL CEARA STATEWIDE RlURAL DEVELOPMENT PROJECT - REGION I (LIT) FINANCIAL , ANNUAL FARM BUDGET MODEL FIVE (10-25 LIT) (IN CR) ----- ------------------------------------------------------------------ CALENDAR YEAR -------------------------------- 1979 1980 1981 1982 1983 1984 1986 1989 1994 (BASE YR) JNCREMFNTAL GROSS VALUE 0 2\.452 -4,023 -11\.330 6\.185 43\.737 103\.155 136\.085 136,085 TOTAL INrLOw 0 2\.452 -4\.023 -11\.330 6\.185 43\.737 103\.155 136\.085 136\.085 - ON-FARM CONSUMPTION 0 0 0 0 397 468 947 t\.032 1\.032 NET INFLOW 0 2,452 -4,023 -11,330 5\.788 43\.269 102\.208 135\.053 135\.053 DIRECT PRODUCTION COST 0 1\.976 2,215 2\.552 9\.236 15,670 19\.901 22\.172 22\.172 INVESTMENTS 0 16\.447 31\.614 48\.315 36\.142 15\.873 5\.222 5\.222 5\.222\. - TOTAL OlJTFLOW 0 18,423 33,829 50\.867 45\.378 31\.543 25\.129 27\.394 27\.394 NET FARM CASM FLOW 0 -15\.971 -37,853 -62\.197 -39\.590 11\.726 77\.079 107\.660 107\.660 ON-FARM CONSUMPTION 0 0 0 0 397 468 947 1\.032 1\.032 + NON-PRODUCTION OUTFLOW -0 0 0 0 397 468 947 1\.032 1\.032 - LESS IMPUTED FAMILY LABOR COST 0 1,238 140 -1\.212 1\.122 5\.148 10\.422 14\.580 14\.580 * NET FARM BENEFIT 0 -17\.209 -37\.992 -60\.985 -40\.314 7\.046 67\.604 94\.11t 94\.1t1 INTERNAL RATE OF RETURN 27\.77 %\. 00 * I' CDr 0 H ID 1h I-I  NORrHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJICI LITORAL MODEL FIVE (JO025 LITORAL) DEEBT SERVICES AND CASH FLOW PROJECTION (IN CRS'O00) YEAR U-O PROJ 1980 1981 1982 1903 1984 1985 1986 1987' (I) CASH INFl'OW VALAIF OF PRODUCTION 48\.3 50\.8 44\.3 37\.0 54\.1 91\.6 121\.4 150\.5 161\.01 INVESTMENT LQAN 0\.0 16\.4 31\.6 48\.3 36\.1 15\.9 5\.9 5\.2 5\.2j SHORT TERM LOAN 0\.0 16\.8 16\.2 15\.4 22\.1 30\.0 32\.0 37\.1 38\.6| TOTAL INFLOW 48\.3 84\.0 92\.1 100\.7 112\.3 137\.5 159\.3 192\.8 204\.81 (II) CASH OUTFLOW INVESTMENT COSTS 0\.0 16\.4 31\.6 48\.3 36\.1 15\.9 5\.9 5\.2 5\.2 OPFRATING COSTS 1\.5 3\.4 3\.7 4\.0 10\.7 17\.1 18\.6 21\.4 22\.1l TOTAL OUTFLOW 1\.5 19\.8 35\.3 52\.3 46\.8 33\.0 24\.5 26\.6\. 27\.3 3 (III) NET CASH FLOW NET CASH FLO\. 46\.8 64\.2 56\.8 48\.4 65\.5 104\.5 134\.8 166\.2 177-51 (IV) DEBT SERVICES INV\.LOAN PRINCIPAL PMT\. 0\.0 0\.0 0\.0 0\.0 2\.3 6\.9 13\.8 18\.9 21\.2: INV'ESTMENT LOAN INTEREST 0\.0 1\.6 4\.8 9\.6 13\.2 14\.6 14\.5 13\.6 12\.3j SH\.T\.LOAN PRINCIPAL PMT\. 0\.0 16\.8 16\.2 15\.4 22\.1 30\.0 \ 32\.0 37\.1 38\.61 SHORT TERM LOAN INTEREST 0\.0 0\.8 0\.8 0\.8 1\.1 1\.5 1\.6 4\.9 1\.9! TOTAL\. DEBT SERVICES 0\.0 19\.3 21\.8 25\.8 38\.8 53\.0 \. 61\.9 71\.5 74\.0 (V) CASH BALANCE CASH BALANCE 46\.8 44\.9 35\.0 22\.6 26\.7 51\.5 72\.9 94\.7 103\.51 ANNUAL INDEBTEDNESS 0\.0 33\.2 64\.2 111\.7 154\.5 176\.0 177\.0 173\.6 161\.41 INTEREST RATE ON SHORT TERM LOAN 10Z PA FOR 6 MONTHS INTEREST RATE ON INVESTMENT LOAN 10% PA SHORT TERM LOAN REPAID AT END OF SEASON 1NHFSThENT LOAN REPAID OVER 10 YEARS WITH 3 YEARS GRACE S t~I 1/ Short term loan covers cash operating costs and a proportion of family labor costs\. o Family labor is financed from cash balance items, reflecting proceeds from short-term loan and cash generated from farm activities\.  Annex 9 - 76- Page 1 of 4 NORTHEAST BRAZIL CEARA, RURAL DEVELOPMENT PROJECT Component Key Indicators Principle Obiectives Key Indicators 1\. General - To increase productivity and incomes, broaden - improvements in the standard of living of opportunities and to generally improve the target small farmer families measured in standard of living of 60,000 farmers and their terms of elementary health, nutrition, edu- families, these being the estimated direct ben- cation, security of land tenure and basic eficiaries of the project infrastructure standards - To raiis agricultural production in Ceara to - increases in production and productivity, cater for local and export markets particularly of food crops - To develop further the technical and admini - performance of marketing and storage strative capacity of institutions involved in systems agriculture and rural development in the state, and hopefully to encourage the development of distinct -mall farmer orientation within these institutions; and - To serve as a "pilot" operation to test possi- - improved administrative efficiency of the bilities of planning and implementing state- state, regional and municipal levels in wide rural development projects in other terms of (i) the quantitative and quali- states of the Northeast tative relationship offset vs\. reached project targets and (ii) maintenance and recurrent cost coverage 2\. Agricultural Servicas 2\.1 Agriculturel Extension - number of farmer groups reached - Formation of farmers groups in order to transfer - number of farmers agricultural technology developed by agricultural - character of farmer groups: research and/or other sources - turaover of membership - \.% of group attending individual meetings - Improvements in regional agriculture through better - 7\. of man attending use of inputs, e\.g\., seeds, saplings, fertilizers, - % of women participating pesticides, new nurseries, and through production - seasonal variations in participation methods adjusted to regional conditions, better - socio-economic stratification of groups cultivation, disease control, harvesting and - Z of participants with credit storage methods - 7 of participants without credit - 7 of adoptors of innovations\. - Help project participants receive and apply ade- - number of extension agents quately rural credit - number of farmers attended by each field team (ratio producers/extension - Introduce new farm management techniques to help agents) project participants maximize their income\. - number of demonstration plots established with the participation of farmer groups - introduction of fixed agenda to field field visits - coincidence of extensionists work with monthly action schedule - functioning of support services (vehicles, gasoline, etc\.) - 7\. of time spent in office and/or on processing of credit - number of plans for community action prepared beneficiaries groups and extension agents - diversification of production due to the introduction of new cultures - increases in production and productivity - beneficiary participation in local decision- making processes\. 2\.2 Agricultural Research and Experimentation - Development of new technologies, - number of experimental and demonstration departing from current small farmer\. plots production systems through 150 experi- - results obtained from experimental and ments on 40 different production systems demonstration plots over 5 years - efficiency in the transfer or new tc eommunicate research =::ults to small farmers, research results for extension staff in cooperation with the agricultural extension - number of visitors per observation st1e service\. - adoption role of new technology on the - Production and marketing to farmers of 272,000 part of small farmers citruse,coconut and soursop saplings - results obtained by small farmers from the use of new recommended systems\. - number of saplings produced - number of small farmers using selected saplings  - 77 Annex 9 ?age 2 of 4 Principle Objectives idiators 2\.3 Land Cadastral Surveys, Titlinc and Purchase number of ha of o c,oanc , has been clarified c - I to - number of small farmer iamilies benefitting from land purchase, "expropriation on grounds To clarify the occupancy situation of about of social interest', distribution of state 300,000 he of public lands land (terras devolutas): (i) surveyed; To provide 6,550 farmers wfth less than 100 (ii) with rental contracts ha and occupant in front of legal tenure, - number of farmers benefitting from with lend titles regularized sharecropping or small - To increase the security of landless farmers, rental contracts through tenure arrangements -reunt of land under agricultural use - To purchase and settle 100,000 ha with - number of small farmers simultaneoyusly previously landless farmers under coopera- benefittir from project land tenure tives or farmer group systems, to tha benefit eguliation fr d product and mare of 3,700 farm families ~ ~ ~ ~ rgularizatiort end preduction and marketinLg of 3,700 farm families inputs 2\.4 Agricultural Cooperative Society Development agriculturo l exploogidarmer groups developinag - To select and assist 12 cooperative societies - Progress of study and cooperative develop- in the state to improve their services to ment plan (year 1) small farmers, through: - Number of cooperatives assisted a) technical and managerial assistance and - Number of small farmers reached by each training; cooperative b) produce marketing and input supply - Number of marketing posts functioning facilities (20 marketing posts); - Amount of input supply channelled through c) production of improved seeds; cooperatives d) selective expansion of\. the range of - Amount of produce marketed through cooperative services to be extended assisted cooperatives in land purchase and settlement - Relation of costs to the small farmer activities, of cooperative services to those of alternative marketing channels - Number of units, storage racititiss and laboratories for seed selection, created or expanded under the project - Number of fields established for seed production - Quantities of seeds produced\. 2\.5 Agricultural Credit - To reach over 5 years 36,150 small farmers, - Amounts and types of credit extended owing or operating less than 100 ha in - Number and types of farmers below poverty line their majority with a per capita of less farmers taking credit than US$ 330 per year, with incremental - Debt service performance seasonal short-term and medium and long- - Role of farms producing according to estimate term investment credit of Cr$ 1,805\.5 - Efficiency of small farmer credit application million over 5 years and disbursement service on the part of the banks - To expand small farmer use of institutional - % of farmers participating in agricultural extension credit to facilitate adoption of new tech- activities taking credit niques - % of credit-taking farmers adopting recommended - To reduce dependence on traditional high innovations interest rate charging money lenders - Role of compliance with original credit farm plans - Impact of credit on family economics and nutrition for different strato of target group farmers 3\. Social Infrastructure 3\.1 Education and Vocational Training 3\.1\.1 Education - Improve access to basic education for the - Number of basic education schools re- rural population in 76 project municipalities modeled or constructed and equipped - Improve the quality of basic, and of secondary - Number of CERU constructed and equipped agricultural education (and functioning) - Improve the efficiency of basic and of secondary - Introduction of new basic education curric- agricultural education ulum in rural schools - Strengthen education planning and administration - Introduction of revised curriculum, including at state, DERE and OME levels work experience courses in secondary agri- cultural schools - Implementation of training courses for unqualified basic education teachers and CERU coordination (number of teachers trained or training; type/stage of course; outcomes) - Implementation of training courses for school supervisors, rural health education tutors - Acquisition/distribution of textbooks,teacher's guides, workbooks, teaching/learning packages (numbers acquired, schools to which distributed) - Number of secondary agricultural schools remodeled/equipped - Type and amount of technical/financial support afforded - Increase in student places; evaluation of performance of project institutions; develop- ment of mechanization system at basic education level (CERU)  Annex 9 -78- Page 3 of 4 Principle Obiectives Key Indicators 3\.1\.2 Vocational Training - Improvements in small farm family incomes/ - Number of courses given living condition, through training and access - Number of persons trained to the labor market - Number of persons trained active in the - preparation of those trained to organize In labor market associative/cooperative ways - Forms of absorption of those trained in - Provide remedial education and skills upgrading the labor market, and incidence of utili- to local entrepreneurs zation of their services - Number of groups organized and % of trained persons engaged in promoted forms of association - Number of associations strengthened in the context -of the project 3\.2 Health and Sanitation 3\.2\.1 Health - At full development, wide coverage low cost - Number of persons attended, particularly in the health care delivery system to serve about NCH target group 400,000 people through - Number of facilities constructed - construction of 200 rural health posts - Number of personnel trained - construction of 6 health centers - Number of trained personnel in service - upgrading of 80 existing health posts Number of facilities functioning on a regular basis - upgrading of 23 existing health centers - Provision of medical and other supplies - training of 250 rural health attendants - Uninterrupted and adequate coverage of recurrent - training of 250 traditional midwives costs for salaries, maintenance, etc\. - training of 180 outreach health auxiliaries - Efficiency of che supervision system - public health seminars for SES staff - Efficiency of the referral system - strengthening and equipping of regional - Responsiveness of SES state level administration health administration in processing requests of its rural 'delegacias'\. - 24 months of technical assistance in health administration to help identify and overcome constraints in the state and regional health system 3\.2\.2 Sanitation - Reduction of morbidity and mortality - Number of water supply systems, caused by water borne diseases and installed and functioning intestinal parasites, through provision - Number of laterines installed of 100 rural water supply systems, and used 14,000 pit laterines and filters to a - Number of filters, installed total of 125,000 persons and used - Development of a sanitary education - Number of families benefitting program aiming at improved hygienic from water supply, laterines and practices\. filters - Strengthening of state maintenance - Mechanism used in the determination capacity of local needs for such systems - Correct use of installed systems - Coincidence of farmers benefitting from this component and of those benefitting from production and marketing inputs - NUmber of beneficiaries recorded by health and sanitation education campaigns 4\. Physical Infrastructure 4\.1 Feeder and Access Roads - To ensure all weather serviceability of - Maintenance level of priority municipal about 2, 800Okm of high priority municipal access roads access roads - Average area served per km municipal - To provide maintenance of the extensive road (per municipality) municipal road network - Ratio of adequately maintained roads - To identify collector feeder roads for to total of municipal roads which improvement to a high standard would - Average maintenance costs per km/year be justified of municipal roads, specified per class\. - To strengthen DAER-CE's mechanized assistance to municipalities, and training municipal farmer in planning and executing manual road maintenance tasks - To provide consulting services to identify and present collector feeder roads for possible BNDE/DNER financing\.  Annex 9 Page iof 4 Principle Oblectives Key indicators 4\.2 Small-scale Irrigation Systems - Rational use of superficial nd underground - Number of irrigation systes established vater resource in irrigation and agricul- and in use turn of 'vazantes', under the coordination - Number of small farmer families benefitting of the state governmat from component - To ensure stable sources of watar (reser- - Total area irrigated and average area irri- voirs or wells), with a capacity to irri- gated per family gate a minimum area of 10-15 he during a - Effective participation of small farmers in period of 2 years without winter rainy programed actions season, benefitting a group of approxi- - Employment generation end more evenly distri- mately 5-20 farmers per each of a total buted labor demnd at the small farm level of 83 aystams - Increases in,production and family income through more intensive use of land and labor on small farms - Social organization for work distribution, maintenance and conflict management 4\.3 Msrketing - Provide CAP assistance to small farmers - Number of farmers receiving CAP and sharecroppers - % of sharecroppers - 7 farmers repaying advance - Number of farmers selling produce to CAP - Supply low income urban/rural fmailies - Number urban/rural stores included in progras with basic consumption goods - NHmber of families benefitting - (Cr$) total sales - (CrS) Average sales/store - Improve classification facilities for - Number of posts installed agricultural produce - Number of posts improved - Number of posts receiving produce - (Tons) Volume produce per post, average\. 5\. Small-Scale Non-4ericultural Enterorises - Provide 575 urban and 520 rural enterprises - Number urban/rural enterprises visited with technical assistance and credit - Number credit requests prepared - Number credit requests approved by bank - y of enterprises in default on loans - Expand and strengtnen CEAG-CZ' technical - Number urban enterprises per extension agent assistance capacity in the interior of the state - Number rural enterprises per extension agent - Time per enterprise by extension (urban/rural) - Number extension agents trained - Create 2,200 new employment opportunities - Number new employees per enterprise 6\. Proiect Coordination and Management Monitoring\. Evaluation and Studies - Integrated and timly project implementation - Compliance\.with PCMU staffing provisions through efficient state and field level project - 50% of technical experts' time spent in coordination and management field - To strengthen administrative implementation capacity - provision of adequate support services at the state and regional levels of project executing - Integrated PCMi - Executing agency work in agencies (i) annual planning; (ii) project implemen- tation; (iii) project monitoring - To provide state-wide coordination of planning - Observation of montnly operational scanedule and implementation of all smal farmer oriented - Local participation and feedback to project development management - Proolem-solving at adequate administrative leve Ls - Efficient internal administration on the part of executing agencies - Effective links oetween monitoring, evaluacion and studies and (i) annual planning criteria; (ii) on-going project implementation - Development of executing agencies' monitoring formats - Studies carried out and their impact on project implementation - Timely elaooration or Annual Operating Plans - Timely approvaL of Annual Operating Pland and disbursement on tne part of PN  - 80 Annex 10 Page 1 of 6 NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Planning Sub-Regions Main Characteristics 1\. The State Government divided Ceara into 8 sub-regions, or Regional Planning Units (RPU)\. The main physiographic and socioeconomic characteristics that distinguish the various RPUs are given in the following paragraphs\. 2\. The Litoral extends along the humid coastal region in the north of the state, and is further subdivided into the immediate coastline subregion ahid the sertao and serra (foothills) subregions further inland\. Some 57% of the area's soils are suitable for agriculture, rated from "fair" to "suitable with some limitations"\. The rainy season lasts from mid-January to mid-June\. Several small rivers which flow into the sea, also create small lakes within this region\. DNOCS, the National Department for Works Against Drought, has developed-"in the region a system of dams (two large dams and 14 small ones) with a total storage capacity of over 650 million m3 of water\. Thorny and stunted vegetation is dominant (Caatinga Hiperxerofila)\. Population density is 91 km2\. Only\.,27% of the total labor force are engaged in agriculture, 17% in industry and 56% in services and other activities\. Of the estimated total number of 76,310 farm operators, 54,420 (71%) are non-owner operators\. 3\. Agricultural production on large plantations is characterized by cattle husbandry which alternates with the cultivation of cashew trees, carnauba and coconut palms\. Fishing is also an important activity in this RPU\. The principal farming system for small farmers is intercropping ("consorcio") of manioc/corn/ beans\. Slash and burn agriculture is widely employed and subsistence farmers with hand planting between the stumps, corn and beans being planted only during the first year and the manioc harvested after 12-18 months, depending principally on market conditions\. The fallow period varies from 3-10 years depending on the size of the property, and also on natural fertility level, which often has some historical relationships with the property size\. Sugar cane is grown to a limited extent on better soils\. Perennial cotton is grown in some transition zones to the Sertao; a few more progressive farmers are also planting annual cotton in favored soils\. Planting techniques are unadvanced with land preparation, though some use of animal traction for cultivation may be encountered\. Fertilizer is seldom used by small farmers\. Agroindustrial activities include the processing of cashew nuts, sugar cane, manioc and cotton\. 4\. EMATER-CE operates in the Litoral through 2 regional and 16 local offices with some 114 extension agents; EPACE, with 2 experimental stations; and CODAGRO, through 3 farm machinery posts and 19 sale outlets\. The commercial banking system (dominated by Bank of Brazil and Bank of the Northeast) provided in 1978, 5,758 loans to farmers in the Litoral\. Federal and state paved roads extend through the Litoral, with municipal feeder roads connecting to remote areas\. Electrical power is supplied to all municipal centers, while rural areas are only partially served\. There are 33 health posts in the region serving the rural population\. School infra- structure is of very mixed quality and, school buildings exist in most parts of the areas, however, students most often travel long,distances, and there is a serious lack of trained teachers\.  Annex 10 - 81 - Page 2 of 6 5\. The Ibiapaba RPU in which a rural development project is under execution with support from Loan 1488-BR is located in the northwestern part of Ceara, bordering the state of Piaui\. Mainly a high plateau (Serra da Ibiapaba) with altitudes from about 500 m in the west to some 800 m in the east, the area is broken by a steep escarpment dropping to a low-lying area in the east with an altitude of about 200 m\. Some 70% of the Ibiapaba soils are suitable for ag- riculture, rated as "good" (14), "fair" (12%) and "suitable with limitations" (44%)\. The rainy season lasts from late December to early June\. Small rivers, draining rainfall water, either westward to Piaui or eastward to larger rivers, flow through the area\. The dominant vegetation type is dense Caatinga (bush) with transition to flora typical to humid, high altitude regions\. 6\. The region's population density is 43/km2, and 79% of the total labor force are engaged in agriculture, 10% in industry and 11% in services and other activities\. Some 68% of Ibiapaba's 10,820 farm properties are smaller than 50 ha, and of a total of 17,740 farm operators, 10,470 (59%) are non-owner operators\. 7\. In the humid highland areas, farms are generally of small to medium size, and produce sugar cane, bananas, tropical fruits, coffee and some vegetables\. Farms in the drier areas of the high plateau and in the Sertao are usually larger and simpler in their organization, producing mainly manioc and livestock, with some subsistence crops, as well as vegetables where irrigation is possible\. Intensification of land use has begun as has the use of improved farming practices and broader introduction of new cash crops (coffee, fruits and vegetables)\. Farm incomes are, however, still below the area's physical potential\. 8\. EMATER-CE operates one regional and 7 local offices with some 85 extension agents in the Ibiapaba area; EPACE has one experimental station and CODAGRO operates one farm machinery post and 9 input supply outlets\. The banking system provided, in 1978, 1,605 loans to area farmers\. Federal and state paved roads form a large cross through the region and feeder roads (partly Bank-financed) connect remote areas; local roads are, however, still not adequately maintained\. Electrical power is supplied to all municipal towns, and to some rural areas\. There are 26 health posts in the region serving the rural population and more are planned under Loan 1488-BR\. Rural primary education still suffers from a lack of well qualified teachers\. 9\. Baturite is an area located in the north-central portion of the state, and subdivided into Sertao and Serra (highland)\. Only 39% of the area's soils are suitable for agriculture (13% are "fair" and 26% "suitable with limitations") and the rest is pastureland and forest\. The rainy season extends from January to late July\. A network of small rivers drains the Serra region into larger rivers in the adjacent Litoral and the sea\. Floresta Subferenifolia (with permanent foilage), Floresta Subcadicifolia (with deciduous leaves) and Caatinga Hyperxerofila are the typical vegetation of the area\. In 1980, population density of the Baturite region was estimated at 50/km2, and 76% of the total labor force are engaged in agriculture, 4% in industry and 20% in services and other activities\. About 68% of the region's 6,110 farm properties are smaller than 50 ha, and of a total of 14,160 farm operators, 9,020 (64%) are non-owner operators\. 10\. Vegetables and fruits are grown quite intensively in parts of the upland area\. However, rice, corn and cotton are the chief field crops in the Baturite region\. Planting techniques reflect the steep terrain with shallow soils\. Though relatively high rainfall allows better yields than in the Litoral and Sertao, the topography generally limits potential improvements to fertilization, use of certified seeds and insect control\.  - 82 - Annex 10 Page 3 of 6 11\. EMATER-CE operates in Baturite through one regional and 10 local offices with some 33 extension agents; EPACE has one experimental station; and CODAGRO operates one farm machinery post and 10 input stores\. In 1978, some 1,796 bank loans were made to farmers in the region\. State paved roads serve the area, but connecting feeder roads to remote areas are poorly maintained\. Electrical power is supplied to all municipal towns, but only partly to rural areas\. There are only 3 rural health posts in the region, though there is a reasonable supply of school infrastructure in the RPU\. 12\. The Baixo (Lower) Jaguaribe RPU lies in the Northeastern portion of the state, bordered by the state of Rio Grande do Norte and the Atlantic Ocean\. Only 46% of the area's soils are suitable for agriculture, but mostly with limitations\. The rainy season extends from mid-January to mid-July\. Two medium sized rivers (one the Jaguaribe) are the principal components of the surface water system\. DNOCS has built in the region two large dams and one smaller dam, with a total storage capacity of 86 million m3 of water\. Carnauba and Caatinga Hyperxerofila are the principal vegetation in the area\. 13\. The region's population density was estimated in 1980 at about 28/km2, and 61% of the labor force are engaged in agriculture, 22% in industry and 17% in services\. Of the region's 20,107 farm properties, 66% are smaller than 50 ha\. Only 6,730 (32%) of the 20,960 farm operators are nonowner operators\. 16\. The climate, soils and vegetation of this region are similar to the Sertao areas, although the Baixo Jaguaribe has relatively larger areas of better soils\. The basic Sertao consorcia (cotton/corn/beans) are common, however, some pure stands of annual cotton and manioc are grown, and manioc often substitutes cotton in the three-crop concorcio\. More mechanization than in the Sertao is used, and animal traction is also common\. The use of irrigation has considerable potential\. 15\. EMATER-CE operates one regional and 7 local offices with some 67 extension agents in the Baixo Jaguaribe; EPACE has one experimental station; and CODAGRO has one farm machinery post and 10 input supply posts\. As in other regions, Federal and State paved roads provide a reasonably good core for transport but feeder roads to remote areas are often in urgent need of maintenance\. Elettrical power is supplied to all municipal towns, and to some rural areas\. 16\. The Sertoes Cearenses area is located in the center-west portion of the state\. Some 44% of the area's soils are suitable for agriculture and rated from "good (1%) to "fair" (7%) and "suitable with limitations" (36%)\. The rainy season lasts from January to May\. Three principle rivers are flowing through this RPU\. Along these rivers, DNOCS has developed a system of 19 large dams (one of them is a very large dam with a storage capacity of over one billion m3) with total storage capacity of 1\.6 billion m3 of water\. The dominant vegetation type is Floresta Subcaducifolia and Caducifolia and a transition vegetation from Floresta to Caatinga\. 17\. The region's population density was estimated in 1980 at 27/km2, and 60% of the total labor force are engaged in agriculture, 18% in industry and 22% in services and other activities\. About 46% of the region's 29,310 farm properties are smaller than 50 ha\. Among the 50,820 farm operators in the area, some 28,880 or 57% are nonowner farmers\.  Annex 10 - 83 - Page 4 of 6 18\. Agricultural activities in the Sertoes are characterized by cattle raising, as the chief occupation, and a mix of cotton, corn and beans (cowpeas), manioc and castor beans\. Perennial cotton is persently the most important crop, usually interplanted in the first year with corn and beans\. Rice production is found in the lower and wetter lands\. In some parts of the region, bananas, sugar cane and cashew nuts are also grown\. Overall, however, low annual rainfall poses a serious limitation on agriculture\. No fertilizers are used and insecticides are employed only by the more advanced farmers\. Agricultural extension agents reach only a very small portion of farmers in the area\. For some crops, average yields show a downward trend\. Since immediate potential for introduction of new crops is rather limited, improvement in farm incomes will probably have to concentrate on more efficient insect and pest control; use of improved varieties (e\.g\., gradually replacing the low-yield perennial cotton with available drought-resistant annual cotton); application of improved seeds with better spacing; timely cultivation; and increased use of animal traction\. 19\. EMATER-CE has 2 regional and 14 local offices, with some 123 extension agents in the area\. EPACE does not have an experimental post in this region, but since environmental conditions are similar to other Sertao areas of the state, the experi- mental station in the Quixeramobim/Medio Jaguaribe area can well serve this region\. CODAGRO has 2 farm machinery posts and 22 input sale outlets\. Commercial banks in the region provided 8,138 loans to farmers in 1978\. Electrical power is not supplied to all municipal towns, and there is only a partial supply to rural areas\. There are only 21 health posts serving this very large region's rural population, and rural education facilities are also weak\. 20\. The Sertoes do Quixeramobim e Medio (Middle) Jaguaribe region is located in the central portion of the state\. Some 44% of the area's soils are suitable for agriculture (rated from "fair" 14% to "suitable with limitations" 30%)\. The rainy season lasts from mid-January to early June\. Three main rivers cross this RPU but with low flows\. DNOCS has developed a system of 11 dams in the area with a total water holding capacity of 2\.37 billion m3\. The dominant vegetation is of three types, namely, the Floresta Caducifolia, the Floresta Ciliar or Carnauba Palm, and the transition type from the Floresta to the Caatinga type vegetation\. 21\. The region's population density was estimated in 1980 at 22/km2, and 81% of the total labor force are engaged in agriculture, 4% in industry and 15% in services and other activities\. Of the region's 22,720 farm properties, 51% are smaller than 50 ha\. Among the 40,000 farm operators in the area, 19,450 or 49% are nonowners\. 22\. Agricultural activities in this region are similar to those in Sertoes Cearenses\. Variation of the cropping system is small, as interplanted corn and beans, manioc, and beans predominate\. This pattern has not changed in the last decade\. Improvements could include the use of better technologies and application of insecticides, better quality seeds and occasionally fertilizers\. 23\. EMATER-CE operates in this region through one regional and 15 local offices with some 108 extension agents; EPACE has one experimental station; and CODAGRO operates 3 farm machinery posts and 14 sale outlets\. The banking system in the region provided 7,333 loans to farmers in 1978\. Federal and state paved roads extend through the region and feeder roads connect more remote areas; most of these latter roads are, however, in urgent need of maintenance\. Electrical power is supplied to most municipal towns, but to only some rural areas\. There are only ll rural health posts in this large region serving the rural population, and although the school system offers somewhat better coverage, it also suffers from underqualified teachers and poor facilities\.  - 84 - Annex 10 Page 5 of 6 24\. The Sertoes dos Inhamuns e Salgado region is located in the south-central part of the state\. Some 49% of the area's soils are suitable for agriculture with less than 1% "good" soils, 18% "fair", and 31% "suitable with limitations"\. The rainy season lasts from mid-January to the end of May\. Several rivers cross the area, some are with a very scant flow during the dry season\. A system of four dams was built by DNOCS with a total holding capacity of 2\.8 billion m3\. The dominant vegetation is Floresta Ciliar or Carnauba, and a transition vegetation from Floresta to Caatinga and Caatinga Hipoxerofila\. 25\. The region's population density was estimated in 1980 at 26/km2; and 79% of the total labor force are engaged in agriculture, 4% in industry and 17% in services and other activities\. Of the region's 25,000 farm properties, 62% are smaller than 50 ha\. Among the 34,630 farm operators in this RPU, some 13,560 (39%) are nonowner operators\. 26\. This region is similar to the two other Sertao regions, with cotton, corn, beans and manioc the predominant crops, traditionally interplanted\. In better soils, where water is available, rice and bananas are also grown\. Rudimentary farming methods prevail and recommendations for improvements would be similar to those in the other Sertao regions\. 27\. EMATER-CE has, in Sertoes dos Inhamuns e Salgado, two regional and 14 local offices and some 187 extension agents; EPACE does not operate any experimental stations in the area; but CODAGRO has 2 farm machinery posts and 10 sale outlets\. Farmers in the region received in 1978 some 8,457 loans\. Federal and state paved roads are extending through the region and feeder roads connect remote areas\. Elec- trical power distribution is relatively well developed, but only partiallyrKin rural areas\. There are only 9 rural health posts in the region serving the rural population, and education services in this RPU suffer most of the same weaknesses as in the other RPU' s\. 28\. Cariri etends along the state's southern border with the state of Pernambuco to the south, the state of Piaui to the west and the state of Paraiba to,\.the east\. It includes the valleys and foothills, Chapada (plateau) and Sertao areas\. A relatively high share, 63% of the area's soils are suitable for agriculture, rated from "good" (less than 1%) to "fair" (25%) and "suitable with limitations" (28%)\. The rainy season lasts from mid-December to mid-May\. Several small rivers cross the region; some drying completely for part of the year\. Four DNOCS-constructed dams in the area have a total storage capacity of 85 million m3; in addition, numerous small dams have been built by individual farmers and are used for irri- gation of small plots\. The predominant vegetation types are Caatinga Hipoxerofila and Campo Cerrado (Bush Savanna), the latter mainly along the southern border of the region\. 29\. The region's population density was estimated in 1980 at 421km2; and 64% of the total labor force are engaged in agriculture, 11% in industry and 257% in services and other activities\. About 64% of the region's 29,420 farm properties are smaller than 50 ha\. Among the 49,430 farm operators in the area, 27,140 or 55% are non- owner farmers\.  - 85 - Annex 10 Page 6 of 6 30\. The central valley with its good soils is suited to production of a variety of crops, vegetables and fruits\. Sugar cane, corn, rice and annual cotton are grown either in pure stand or intercropped with common beans\. Fertilizer appli- cation is increasing among the farmers in Cariri, and for sugar cane it is widely used\. Insecticides are also used, even by small farmers\. The area's agriculture is the most advanced in the state, but there is still considerable potential for more efficient use of farm inputs, improved cultivation systems using mechanization or animal traction, application of better seeds and introduction of new varieties of fruits and crops\. 31\. EMATER-CE operates one regional and 16 local offices in the Cariri region with some 62 extension agents; EPACE has 4 experimental stations and CODAGRO operates 2 farm machinery posts and 22 sale outlets\. About 6,400 bank loans were made to farmers in 1978\. The Federal and state paved roads provide a reasonably extensive network and feeder roads connect remote areas\. Electrical power is supplied to municipal towns, but rural areas are not adequately served\. There are 23 health posts in the region serving the rural population, and school activities though of relatively poor quality, are found in all parts of the region\.  - 86 - ANNEX 11 NORTHEAST BRAZIL CEARA RURAL DEVELOPMENT PROJECT Related Documents Available in Project File 1\. Projeto de Desenvolvimento Rural Integrado do Ceara 2\. Assistencia Tecnica e Extensao Rural 3\. Pesquisa Agropecuaria 4\. Credito Rural 5\. Organizacao Fundiaria 6\. Assistencia Tecnica ao Cooperativismo 7\. Abastecimento de Sementes 8\. Abastecimento Rural de Produtos Basicos 9\. Classificacao de Produtos Agricolas 10\. Educacao 11\. Treinamento e Formacao de Mao de Obra 12\. Saude (2 Vol\.) 13\. Saneamento 14\. Rodovias Vicinais (2 Vol\.) 15\. Pequenos Sistemas de Irrigacao 16\. Comercializacao 17\. Pequenos Negocios Nao Agricolas (3 Vol\.) 18\. Organizacao 19\. Estudos Especiais 20\. Diagnostico da Situacao Presente (6 Vol\.) 21\. Programas especiais 22\. Medidas de Apoio a Agropecuaria, a Organizacao Agraria e ao Credito Rural 23\. Miscellaneous Documents  40- R A ZItL CEARA RURAL DEVELOPMENT PROJECTJ EXISTING SOCIAL AND ECONOMiC INFRASTPUCTURE KB RA Z IL 'A'CRC-REASJ57 -3- -ki' -'LATL0H 3 RANJAC ~ ~ ~ ~ ~ ~ ~ RAT A(TAVAI E~~~ A C/JZ ""-I'NE'-- !MORALI SAN AN 0 ~~~~~~~~~~~~~3 oITAPIPCC\.A K 4ARACCTR K S D0S C CEARA - MTW 4z flO COREAL o MEEL C~~~~~~~~~A-A ,JLTAzIA D A ON A," CI`ARLE*NTARA /7~~~~~UR\jB0lUI DOANARNOTLEQ, 7 A CANTARATy~J\.~\. J ~ C" [ CL A _ FORTALEZA ITALCAV E CAJI T EAN JATA 0OARB CR TR AAAGUF-ACVI 7 - CARONE IBAPINA 0AEJEAEES ' SAC TSRA WA - ~~~~~~~~,ENFSAS /O~~~~~~RA TOO 0 SAMPAC ) *CARTNAJSAL C`T,TEA-/~ MO~~"EA~U D\. RJI ICROLNCA VTI C""RE "E AO NOR AR ADLJe * '-" ~~~~ TA TA '-p0 '~~ANTA-UITR-A --7-j O~~~~~~/ ~ ~ ~ 2 5'I~~~~~ANCCITRA-ABA '"~~~~~~~~CN~NEK RORANGA H DR ND[A p A- 'K OJISACA ~~~~~~~~~~~N' RJSSAS~~ARCA MCI ' CITAT RRBi I'/ * K, 7 SAC SCAC EITO '"'S~JIAPINA 310 'U" Al~~~~~~~~~~~~~~~~~~~O CAIE TB 1) - 'N> ~~~~~~~~~~~~~ K,~~~~~~ K~~~~~ SC~~N ANO ,TTES R 'POOANGA'NVNCA 7 RECTA STANCA ~ ~ ~ ~ ~~~~~~~~~~~~~~~~~~~~ IXR BSEICT M AREDTO NORCTE ( A' '"'"'' - ' "'- -9-' ,\. PRESTO~~~~~~~~~~~~~~~~~~O \. NAOOPATANTE ALTO SANTO HALH ENER ARNEIROS - -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~PQETCRER - 0 CFSTC\.~~~~~~~~~~~~~~~~ CIA O2 '-K ERESRVCEREOE - C '" CU LANRASTA~F OCAt& CNOIC[NRSTUCIJE om KTTNITIR ACTORS C~~~~~~EGiNTAL HOETALTH VETER CAIMEOS AC CAT6 EXERMNTL TTIN / VA B' ECTENO, C 5155~~~~~~~~~~~MAIQ-OA/RGINA XTNSO ANNI AR,BAAIfXIS NES- SANEPCF TERV STAT CTSCA BAT"A"IA 0AAGAACLACTTJRANE OF CR'E ERTSA:INESCITE VS 75 DV~~~~~~~~~~~~~~~~~~A RE FA AS 'VLEGFECNATIOAL C/SIKPFRACTVERTVE KILCMETE~~~~~~~~~~C PERNAMBUCO~~~~~~~~~C \AS 0 Fl,0CNAL TIES NGUN C99I\., 9V,APrOO,AV APES REBO\.JNCARIES EWE ER S/Sates\. ary,aw,,n' o~~~rhoAq~~'s:a ~ SA E R-TEG NV 'SAN DO NORTE ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ACTISN NDSNT 41' 40'~~~~~~~~~~~~~AARP OCTA~RI T~ NL,~SA VELA-3AKVFTHE' C/OFCEsR   :I 39I 1 0BRAZIL CEARA RURAL DEVELOPMENT PROJECT Ij IE,A \.SOILS AND RAINFALL B R A Z A,11r-1,A5T 3 W - __ AORT4LE[A ~~~~~~~~~~~~~~~~~~~~6 , -\o0 *::::\., \. \ -oA*o sooS 0 L ] S1 UAIR[E FOR AGRIURY T RAL UASSUE _7\.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~SIA E FO AG ~LTRAIE SEROIS7 t-7~~~~~~ ~~~~~~~~~~~~~~~~~~~ TH-< LIMIT-PAEDRATDNS ;@ve\.v \. *~~~~~~~~~~~~~~~~= ~SIT_v;]/!ABLE FO WEDIE RGADSTR \.Rf 1 r SOUNDAARIES EETW-EN CEARA Al\D PIATU (ILR)fw*ETERS ~ ~ ~ ~ ~ ~ ~ ~ ~ v PNLA AVRG RA NFL (A M CO1 1- PERNAMBUCO~~~~~~~~~~~~~~~~~~~RVR Tr,s h sp has oske- preoa\.ed bZtoe World bank otath e<latts 0,0/; se IheGresi sn/s i 2 tfOO, sass z ,o Jdpt,er tcrthe:'a9 ztat/s of a n er\.to7 or anvo dnor se het 0r: or 50~5p5't~5O¼aCc5\.,opra7bnda\.s 6 y _ CP 41' 4CA TCVEAIHER 03AD5

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APPROVAL

P003484

 Shuikou hydroelectric project Report No: ; Type: Report/Evaluation Memorandum ; Country: China; Region: East Asia And Pacific; Sector: Electric Power & Other Energy Adjustment; Major Sector: Electric Power & Other Energy; ProjectID: P003484 The Implementation Completion Report (ICR) on the Shuikou Hydroelectric Project (Loan 2775-CHA, approved in FY87), was prepared by the East Asia and Pacific Regional Office and reviewed by the Operations Evaluation Department (OED)\. The Borrower contributed with a detailed self-evaluation report, a summary of which is included as Annex 2\. The loan, in the amount of US$140 million, was fully disbursed and closed on June 30, 1993, with a delay of one year\. It was the first of two loans for the Shuikou Hydroelectric Project (the second being Loan 3515-CHA, approved in FY93)\. The project objectives were: (i) to develop a major hydroelectric site to supply peak power generation to the Fujian and East China grids, (ii) to introduce the latest technology for dam and power station construction, (iii) to link the East China and Fujian power grids and promote their effective integrated operation, and (iv) to upgrade the capability of the Fujian Provincial Electric Power Bureau (FPEPB) in financial management and management of large civil works contracts\. The project comprised: (a) construction of the Shuikou dam on the Min River; (b) installation of seven generating units of 200 MW each and related transformer station; (c) construction of a 500 kV transmission line between Shuikou and Hangzhou in Eastern China; (d) resettlement of about 63,000 people and reconstruction of their production systems and communities; (e) consulting services for engineering and construction management; and (f) various technical studies and training\. The 500 kV transmission line to Eastern China was dropped soon after project start-up, when the Government and the Bank realized that electricity demand in the Fujian area was growing faster than expected and that the full output of the Shuikou plant would be consumed locally\. The project met all its physical objectives, albeit with some delays due to procurement problems and delays in the manufacturing of the turbine-generator units (the last unit is expected to be commissioned by end-1996, 18 months behind schedule)\. The resettlement of about 67,000 persons in rural areas and 17,000 in Nanping city (subsequently added to the project) was successfully implemented between 1988 and 1992: by mid-1995 about 34,000 new jobs had been created, average income had increased, and per capita housing space had grown (by about 26 percent)\. Although higher than estimated resettlement costs caused a project cost overrun of about 7 percent (in US dollars), the re- estimated economic rate of return (15\.1 percent) is in line with the appraisal estimate thanks to higher than forecast tariffs\. Institutional objectives were also met: Bank-financed studies and training led to the upgrading of FPEPB's capabilities in management of the large civil works contract and systems operations as well as financial management\. Moreover, FPEPB met the loan's self-financing and debt service coverage covenants\. In view of the above, OED rates project outcome as highly satisfactory and its institutional development as substantial\. Sustainability is rated as likely in light of the good quality of the civil works and installed equipment, the satisfactory completion of the resettlement program, the competency of FPEPB's technical staff, and the adequate level of prevailing tariffs, which ensure cost recovery and FPEPB's financial solvency\. OED rates Bank performance as highly satisfactory (as in the ICR): the Bank maintained a very good dialogue with the Government and FPEPB throughout the project cycle and was particularly responsive in helping FPEPB deal with project implementation problems\. It showed flexibility in agreeing to the elimination of the 500 kV tie-line and restructuring the project accordingly, when it became clear that electricity demand in Fujan was growing much faster than planned–a development which could clearly not be forecast by the Bank in light of demand growth in the early 1980s and China's macroeconomic prospects at the time of project appraisal\. Two important lessons can be drawn from this project: (i) a two-stage approach can be a viable option for the financing of large monolithic power projects with long execution time, as it reduces the need for early debt repayments before plant commissioning; and (ii) resettlement programs should be implemented as early as possible, to reduce or eliminate the time lag between reservoir filling and full restoration of income, particularly if the resettlement program requires substantial land development for agriculture\. The quality of the ICR is satisfactory, although it should have included key indicators necessary for monitoring future project operation and performance\. The project may be audited together with other power projects in China\.

APPROVAL

P000257

Document de La Banque Mondiale A N'UTILISER QU' A DES FINS OFFICIELLES Rapport No\. 1660a-UV J PROJET DE DEVELOPPEMENT URBAIN EN HAUTE-VOLTA 3 janvier 1978 • 1 D~partement des projets d'urbanisme TRADUCTION NON-OFFICIELLE A TITRE D'INFORMATION Le present document fait l'objet d'une diffusion restreinte, et ne peut etre utilise par ses destlnataires que dans l'exerclce de leurs fonctlons officielles\. Sa teneur ne peut etre autrement dl•ulauee sans l'autorisation de Ia Banque Mondiale\.  TAUX DE CONVERSION l dollar EU = 245 francs CFA La parite franc CFA (Communaute financiere africaine) - franc fran~ais est fixe (50 francs CFA pour 1 franc fran~ais); par contre, le franc CFA flotte par rapport au dollar des Etats-Unis\. Le present rapport a ete etabli en fonction des taux de conversion suivants 1 dollar EU = 245 francs CFA 1 million de francs CFA = 4\.082 dollars EU SIGLES ACDI Agence canadienne de developpement international BND Banque nationale de developpement CCCE Caisse centrale de cooperation economique CESAO Centre d'etudes economiques et sociales de !'Afrique de !'Ouest CNPAR Centre national de perfectionnement des artisans ruraux FAC Fonds d'aide et de cooperation FED Fonds europeen de developpement FONASEN Fonds national d'assainissement et d'entretien HER Hydraulique et equipement rural KfW Kreditanstalt fur Wiederaufbau ONE Office national des eaux OPEV Office de promotion de l'entreprise voltaique ORO Office regional de developpement PNUD Programme des Nations Unies pour le developpement SACS Service d'assistance, conseil et soutien EXERCICE FINANCIER ler octobre - 30 septembre  roa OfJ'ICIAL USI ONLY HAUTE-VOLTA EVALUATION D'UN\.PROJET DE DEVELOPPEMENT URBAIN Table des matieres Pages RESUME ET CONCLUSIONS ••••••••••••• • •••••••••••••••••••••• i - iv I\. INTRODUCTIONÂÂÂÂÂÂÂÂÂÂ~ 1 II\. DONNEES GENERALES Â: LE ROLE DU SECTEUR URBAIN DANS LE DEVELOPPEMENT NATIONAL ••••••••••••••••••••••••• 2 A\. Migration et croissance urbaine 2 B\. Gestion du developpement urbain \. 4 c\. A la recherche de solution : !'experience de Cissin •••••••••••••••• ; •••••• 7 D\. Application, par etapes, de la politique nationale de developpement urbain •••••••••••• 8 III\. LE PROJET 9 A\. \. •\. -~- \.•\.•\. ~---\.•\.•\. Â\. Objectifs  \. ~ - 9 B\. Pr incipaux elements du pro jet •••••••••••••• ; ••• 10 C\. Caracteristiques detaillees du projet •••••••••• 12 IV\. ORGANISATION ET EXECUTION •••••••• • •••••••••••••••••••••• 20 A\. Ministere des travaux publics, des transports et de l'urbanisme ••••••••••••• 20 B\. Municipalites •••r•••••••: •••••••••••••••••••••• 21 C\. Office national des eaux ••••••••••••••••••••••• 23 D\. Comite interministeriel de coordination •••••••• 23 E\. Execution \. - \.•\. 24 Le present rapport a ete etabli a la suite du sejour effectue en Haute-Volta au mois de fevrier 1977, par une mission d'evaluation composee de M\. Cohen (chef de mission), Mme Tager et MM\. Biderman, Delapierre, Mould et I\. Nahmias (consultant)\. ÂÂ\. Le present document fait !'objet d'une diffusion restreinte, et ne peut ~tre utilise parses destinataires que dans l'exercice de leurs fonctions offi- cielles\. Sa teneur ne peut ~tre autrement divulguee sans i'autorisation de la Banque Mondiale\. This document hu a rati'Stell amtlution and may be Ulld by recipients only in Âthe performance of their oftleial duties\. Its contenll may nOt otherwise be disclosed without World Bank authorization\. I l \. Table des matieres (suite) l - 2 - Pages V\. COUTS ET FINANCEMENT DU PROJET; " RECOUVREMENT DES \. DEPENSES •••••••••••••••••••••••••••••• 25 A\. ÂÂCoOts estimatifs \. \. 25 B\. Financement \.••••••\.••••••••••••••••••••\.•••••••••••• 27 c\. Recouvrement des d~penses ••••••••••••\.•••••••••••••• 30 D\. Passation des march~s ••••••••••••••••••••••••••••••• 37 E\. D~caissements •\.•\.••••••••••••••••••••••••••••••••••• 37 F\. Supervision \.•••••••\.••••••••••••••••••••••••••\.•• 38 ''I G\. Contr8le et ~valuation \.•\.••\.•\. ~ \.•••\.•••••••••\.• 38 ' VI\. \. \.JUSTIFICATION DU PRO JET ••••••••••••• ~ •••••••••••••••••••• 39 VII\. ACCORDS ET RECOMMANDATIONS \. v \. \. 42 ANNEXES 1\. Le secteur urbain \.2\. Organisation communautaire expansion de l'exp~rience de Cissin 3\. Projet de d~veloppement industriel et de finances 4\. Organisation et gestion \.des institutions participant a l'ex~cution du projet \.  5\. Normes -techniques et coOts- estimatifs d~tailles 6\. Charges mensuelles et population-cible 7\. Recouvrement des coOts et marges brutes d'autofinancement 8\. Assistance technique 9\. Evaluation ~conomique \. 10\. Contr\.EJ!e et evaluation \. 11\. Supervision 12\. Aide aux municipalites 13\. Programme de pret destin~ ala construction SCHEMAS Phases de la construction - Habitat traditionnel No 17303 Plan type d'une parcelle - Habitat traditionnel No 17304 CARTES : Situation des projets de l'IDA 13626' Ouagadougou 13630 Bobo-Dioulasso 13631' Plan Âd' amenagement indicatif 13632 1 I I 'j •  HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN RESUME ET CONCLUSIONS i\. Le Gouvernement de la Haute-Volta a demands l'aide financiere du Groupe de la Banque, sous forme d'un credit de l'IDA, pour l'aider a mettre a execution sa politique nationale de developpement urbain gr~ce a un programme d'investisseme nt dans l'infrastructur e, de formation et "d'apprentissag e" dont l'execution se fera par etapes dans trois centres urbains : Ouagadougou, Bobo- Dioulasso et Gaoua\. Il s'agit du premier credit consenti par l'IDA au secteur urbain de la Haute-Volta, l'un des "pays les mains avances''\. L'objectif du projet est de reprendre l'experience realisee dans le quartier de Cissin, a Ouagadougou, dans le cadre d'un projet pilate d'amenagement de quartiers spon- tanes et de mise en place de trames d'accueil Âfinance par le PNUD, et de l'etendre a d'autres quartiers en ameliorant certains de ses aspects\. C'est ainsi que le projet adopte les methodes a faible coOts utilisees a Cissin pour l'etablissemen t de l'infrastructur~ en les transposant a une Âechelle dix fois plus grande, et met d'autre part Â1•accent sur le recouvrement des coOts, le renforcement des institutions municipales locales et l'execution par tranches de toutes ses composantes\. Le projet a pour double objectif d'accroitre les aptitudes des institutions locales et nationales a assurer des services urbains a faible coOt et d'apporter en matiere de logement~ approvisionnem ent en eau et drainage; des ameliorations dont beneficieront quelque 100\.000 personnes\. ii\. Le gouvernement poursuit, dans le secteur urbain, deux objectifs : ameliorer les conditions d'existence de la population et accroitre le nombre des emplois productifs\. Le projet de developpement urbain vise precisement le premier de ces objectifs et, en ce qui concerne le deuxieme, est etroitement lie a un projet d'artisanat et de petites entreprises devant etre finance par l'IDA\. Ces projets, prepares de concert et con~us de fa~on a se compl~ter, seront mis ~ execution simultanement de sorte que des composantes de chacun d'eux deviendront operationnelle s en m@me Âtemps dans tel au tel quartier de Ouagadougou et de Bobo-Dioulasso \. iii\. Les pouvoirs publics, dans les efforts qu'ils deploient en vue d'ame- liorer les conditions d'existence de la population dans un secteur urbain ca- racterise par une croissance rapide, se trouvent confrontes a des obstacles serieux, parmi lesquels des ressources budgetaires insuffisantes pour permettre d'attribuer au developpement urbain les credits necessaires dans un pays tradi- tionnellement rural, une penurie de personnel qualifie, la situation financiere mediocre des institutions locales qui\.ne leur permet pas d'assurer l'entretien des investissements realises dans le passe et mains encore d'en entreprendre de nouve~ux, et la necessite d'etendre d'urgence aux populations rurales defa- vorisees les services de sante, d'education et autres services sociaux dont  - ii - elles ont grand besoin\. Le projet de Cissin a ete realise selon des methodes a faible cout permettant d'ameliorer, les conditions d'existence dans les milieux urbains en faisant appel a !'effort personnel eta l'entraide communautaire\. C'est a la fin de 1975, a la suite de journees d'etudes, au niveau national, qui leur ont permis d'evaluer le projet, que les pouvoirs publics ont adopte cette approche qui devait constituer la pierre de touche de la politique natio- nals dans ce secteur\. A cette date, il avait ete demands a l'IDA de pr@ter son concours et le projet actuel a ete prepare en 1976 avec le soutien financier du mecanisme de financement de la preparation des projets\. iv\. Le projet comprend les elements suivants : a) Travaux d'amenagement des guartiers spontanes : Amenagement de bornes-fontaines, travaux de drainage et de construction de routes en terre dans deux quartiers de Ouagadougou (7\.000 par- celles) et un quartier de Bobo-Dioulasso (4\.000 parcelles), au total 11\.000 parcelles couvrant 432 hectares; b) Trames d'accueil : preparation et installation de !'infra- structure dans environ 1\.110 nouvelles parcelles, couvrant 50 ha a Bobo-Dioulasso, notamment bornes-fontaines, travaux de drainage et construction de routes en terre et projet pilate destine a 100 families a Gaoua; c) Adduction d'eau : installation de bornes-fontaines dans trois quartiers supplementaires de Ouagadougou ou vivent quelque 20\.000 personnes; d) Prets pour la construction de logements : ces prets sont des- tines ala construction eta !'amelioration des logements; e) Eguipements collectifs : construction de centres communautaires, marches, renovation de 65 ecoles et 17 dispensaires a Ouagadougou et Bobo-Dioulasso, realisation d'un projet pilate de developpe- ment communautaire destine a l'enseignement communautaire, la sante publique et les activites feminines; f) Aide aux municipalites : assistance technique pour la forma- tion d'un personnel d'entretien, !'amelioration de la gestion financiers et de la procedure de recouvrement des impots, la reorganisation des services de la voirie et des batiments, le renforcement des bureaux municipaux de !'habitat; le materiel necessaire aux activites d'entretien, 11 camions pour le ramas- sage des ordures et fournitures necessaires a la pulverisation d'insecticides;  - iii - ' g) Assistance technique a la Direction de l'urbanisme : 168 hommes-mois d'assistance technique pour !'execution du pro jet, 1 a formation et la preparation d' un deuxieme projet; des services de consultants charges \.du projet d'execution\. et de la supervision; l'achat de materiel et les coOts de " fonctionnement du Bureau du projet; h) Contr6le et evaluation : une etude permettant d'evaluer la performance des composantes du projet pendant et apres son execution\. v\. Les coOts estimatifs d'amenagement de quartiers non lotis et de mise en place des trames d' accueil varient, allant d' environ 63\.600 francs CFA (260 dollars) a 131\.872 francs CFA (538 dollars); ils comprennent le coOt d'achat des terrains au taux municipal en vigueur qui est de 10 au de ' 100 francs CFA le m2, suivant qu'un droit de jouissance cautumier lui est au non attache\. Les charges mensuelles, y compris le coOt de la consommation d'eau, les impots municipaux et le remboursement des pr@ts a la construction de logement, representent de 15 a 25 % di\.J revenu mensuel moyen des menages dans les quartiers spontanes\.  vi\. Le coOt total du projet est estime a 2\.656,2 millions de francs CFA (10,8 millions de dollars), y compris les provisions pour imprevus\. Les depen- ses en devises representent 55 ~o de ce montant\. Les impots s' elevent a 437,9 millions de francs CFA (1,8 million de dollars), sait 16% du coOt total du projet\. Le credit de l'IDA, d'un montant de 8,2 millions de dollars, sera consenti auÂgouvernement pour financer 90% du coOt total du projet net d'im~ pots (2\.218,3 millions de francs CFA au 9,1 milJ,ions de dollars)\. Il finan- cera Â100 % des coOts en devises (6 millions de dollars) et 72 ~6 des coOts en monnaie nationale et nets d'impots (745,2 millions de francs CFA au 3 mil- lions de dollars)\. Le solde, soit 209;3 millions de francs CFA (0,9 million de dollars), sera fourni par l'Etat\. vii\. Pour taus les marches d'un montant superieur a 50\.000 dollars et por- tant sur !'acquisition demateriel et de\.vehicules, il sera fait appel ala concurrence internationale conformement aux Directives de la Banque ( 2 ,J mil- lions de dollars, impots compris, mais Ânon compris les prov1s1ons pour impre- vus)\. Ces marches seront groupes en lots d~'au mains 50~000 dollars toutes les fois que possible\. Les travaux de recalibrage du marigot de Zogona, dont le coOt s'eleve a 1,1 million de dollars, serant egalement adjuges apr~s ~ppel a la concurrence internationale\. Les marches portant sur les travaux de genie civil relatifs a !'adduction d'eau, au bornage des parcelles et au drainage hors-site (1 million de dollars) ainsi qu' a la construction des equipements collectifs\. et la reparation des bureaux (0 ,3 million de dollars) ne seront pas suffisamment impartants pour attirer les entrepreneurs internationaux et seront done adjuges dans le cadre d'un appel a la concurrence locale et conformement a des procedures locales de publicite jugees acceptables par l'IDA\. Les tra- vaux de construction de routes en terre et de drainage (1 million de dollars)  - iv - a realiser dans chacu\.n des quartiers interesses seront executes en regie par le Ministere des travaux publics, des transports et de l'urbanisme\. Lesser- vices de consultants seront fournis conform~ment a des procedures jugees ac- ceptables par l'IDA (1,9 million de dollars)\. viii\. L'execution du projet s'etendra sur environ 3 ans et demi\. La Direc-l tion de l'urbanisme au sein du Ministere des travaux publics sera chargee de la realisation des travaux de genie civil\. La selection des menages, !'attri- bution des parcelles, la distribution des permis urbains d'habiter et la per- ception des redevances parcellaires incomberont au bureaux municipaux de l'habitat de Ouagadougou et de Bobo-Dioulasso\. Le projet pilate de Gaoua sera conc;u par la Direction de l'urbanisme\. Les elements portant sur !'adduction d'eau et les travaux de recalibrage du marigot de Zogona seront respectivement executes par !'Office national des eaux et le Fonds national d'assainisseme nt et d'entretien (FONASEN) qui est un service de la Direction de l'Hydraulique du Ministere du developpement rural\. ix\. L'Emprunteur sera le Gouvernement de la Haute Volta, lequel trans- mettra les fonds ala Direction de l'urbanisme, aux municipalites, a l'Office national des eaux et au FONASEN\. x\. Le projet permettra d'ameliorer les conditions de vie de quelque 100\.000 personnes a faible revenu vivant a Ouagadougou et Bobo-Dioulasso\. Le taux de rentabilite economique du projet, etabli sur la base de 75 % du coOt total, est de 34 %\. Le taux de rentabilite economique de l'amenagement des quartiers spontanes oscille entre 24 et 40 ~o, suivant le quartier, et entre 24 et 37 % pour les trames d'accueil\. Le taux de rentabilite economique de la composante adduction d'eau est de 37 ~o\. xi\. Le projet comporte des risques considerables, en raison de la penurie de personnel qualifie et de la faiblesse des institutions existantes\. Cepen- dant, il est tenu compte de ces contraintes dans la version finale du projet qui reflete egalement les possibilites qu'offre de ce point de vue le projet, qui permettra a la Haute-Volta de disposer des moyens necessaires a la mise en oeuvre du developpement urbain\. Ces risques meritent d'~tre pris etant donne le vif inter~t exprime par le gouvernement a l'egard de ce projet et les avan- tages considerables qui en decouleront\. xii\. Sous reserve des accords enonces aux paragraphes 7\.01 et 7\.02, le projet justifie l'octroi par l'IDA d'un credit de 8,2 millions de dollars\.  HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN I\. INTRODUCTION 1\.01 Le Gouvernement de la Haute-Volta a demande 1' aide financiers de l'IDA pour mettre a execution sa politique de developpement urbain qui a pour objectif l'amelioration des conditions de vie de la population grflce ala four- niture de services urbains a f,aible coOt et a la creation d'emplois productifs\. Il s'agit du premier credit accorde par l'IDA au secteur urbain en Haute-Volta\. Le projet concretise les efforts deployes par le gouvernement pour renouveler, en la developpant sur une plus grande echelle, !'experience du projet pilate realise par le PNUD dans le quartier de Cissin, a Ouagadougou, et qui a prouve qu'il etait possible de fournir une infrastructure et des logements a faible coOt grace a des methodes axees sur la participation des populations et !'ef- fort collectif\. Le projet vise done a etendre !'experience de Cissin a d'au- tres quartiers de Ouagadougou et de deux autres villes, Bobo-Dioulasso et Gaoua, et a renforcer les aptitudes des institutions nationales et locales a offrir des services urbains grace a !a realisation en plusieurs phases d'un programme portant sur la formation, les investissements dans !'infrastructure et l'apprentissage\.  1\.02 Le projet est lie a un projet d'artisanat et de petites entreprises finance par !'IDA et realise par le gouvernement et la Banque\.nationale de developpement\. Les deux projets ant ete prepares de concert'et se completent, et !'execution de certaines de leurs composantes respectives se fera simulta- nement dans les memes quartiersÂde Ouagadougou et Bobo-Dioulasso\. 1\.03 Les autorites voltaiques ant prepare le projet en 1976, avec !'aide de consultants dont les services etaient finances par le Mecanisme de finance- ment de la preparation des projets, et en collaboration etroite avec le PNUD et le Centre des Nations Unies pour !'habitation, la construction et la planification\. 1\.04 Le present rapport est fonde sur l~s bonclusions de la mission d'evatuation composee de M\. Cohen (chef de mission), Mme Tager, MM\. Biderman, Delapierre et Mould, et M\. I\. Nahmias (consultant) qui se sont rendus en Haute-Volta en fevrier 1977\.  - 2 - II\. DONNEES GENERALES : LE ROLE DU SECTEUR URBAIN DANS LE DEVELOPPEMENT NATIONAL A\. MIGRATION ET CROISSANCE URBAINE 2\.01 La Haute-Volta, avec une population de 6 millions d'habitants et un PIB moyen de 110 dollars par habitant en 1976 est l'un des 25 pays "les mains avances", selon la classification des Nations Unies\. C'est un pays a economie essentiellement rurale, dont plus de 90 % de la population active est composee d'agriculteurs travaillant leur propre terre et de conducteurs de troupeaux; en 1975, 8,2 % seulement de la population vivait dans les zones urbaines\. La productivite agricola, qui est faible - elle fo~rnit mains de 35 % du PIS - a encore baisse pendant la secheresse qui a sevi de 1971 a 1973, ce qui a eu pour effet d'accelerer encore l'exode rural\. 2\.02 Les pouvoirs publics, pour renverser cette tendance, s'efforcent de suivre en matiereÂde developpement\. agricola une strategie ayant pour objectifs d'atteindre un niveau de production alimentaire suffisant pour repondre aux besoins de la population, d'accrbitre la prpduction de toutes les cultures dans les zones non irriguees, d'eliminer l'ohchocercose des terres fertiles actuellement infestees par cette maladie et de mettre a execution un programme de developpement regional auquel participent\.onze organisations de developpe- ment regional\. D'autre part, ils encouragent les migrations vers la region du sud-ouest, relativement peu peuplee et fertile, de families vivant a l'heure actuelle sur le plateau de Massi, au la population est trap dense\. Cependant, taus ces efforts auront essentiellement des effets a moyen et long termes qui n'affecteront pas de fa~on notable l'exode rural dans le proche avenir\. 2\.03 La lenteur de la croissance de cette economie rurale a suscite le depart de nombreux Voltaiques\. Environ ZOO a 250\.000 personnes fuient chaque annee les campagnes : 100 a 150\.000 travailleurs saisonniers, 40 a 50\.000 tra- vailleurs migrants temporaires (mains de 5 ans) et 20 a 25\.000 migrants perma- nents, partent ainsi, a la recherche d'emplois dans les villes et dans les pays africains riverains tels que le Ghana et la COte d'Ivoire\. Il est cer- tain que si elles ne trouvaient pas dans ce~ pays des possibilites d'emplois salaries, l'exode des populations voltaiques rurales vers les villes voltai- ques serait beaucoup plus massif qu'a l'heure actuelle\. Ces migrations ont eu pour effet de depeupler certaines regions et d'accelerer la croissance de quel- ques centres urbains au sein du pays\. Les deux villes principales, Ouagadougou (220\.000 habitants) et Bobo-Dioulasso (150\.000 habitants) enregistren~ a 1' heure actuelle un taux d' expansion de 7 ~o par an, mais certaines zones non loties, a la peripherie des villes, accusant un taux de croissance pouvant atteindre 20 % par an\.  - 3 - 2\.04 Au cours de la derniere decennie, le taux de la croissance urbaine a atteint 5% par an pour un taux national de 2,7 %, et selon les previsions, la population urbaine passerait de 500\.000 habitants en 1975 a 1,7 million d'ha- bitants en l'an 2000, dans la meme periode son importance par rapport ala population nationale doublerait •\. Plus de 50 % de cette croissance peut etre attribuee a l'exode rural qui, ces dernieres annees, a ete accelere par le de- nuement extreme dans lequel se sont trouvees les populations des zones rurales accablees par la secheresse\. La croissance urbaine correspond done a un depla- cement des menages des zones rurales vers les zones urbaines eta l'entassement traditionnel des populations a la peripherie des quelques villes dont le taux de croissance s'accelere de plus en plus\. Ouagadougou, Bobo-Dioulasso et Koudougou (ville de 60\.000 habitants) regroupent a 1 'heure actuelie 86 ~~ de la population urbaine totale, soit 430\.000 personnes\. Le reate de la popula- tion vit dans de petits centres semi-urbains, tels que Dedougou, Fada N'Gourma Gaoua et Ouahigouya, petites agglomerations d'environ 10\.000 habitants c~acune\. 2\.05 Ouagadougou et Bobo-Dioulasso se sont ainsi developpees auteur d'un noyau administratif et commercial entoure de quartiers residentiels\. A la pe- ripherie de ces quartiers, les qu;;Irtiers spontanes s'etendent dans toutes les directions\. La difference entre les vi\.eux quartiers du centre et les zones pe- ripheriques d'installation spontanee porte ala foissur le regime de la pro- prieta fonciere et \.le plan meme du quartier •\. Les vieux quartiers possedent d'autre part Âun embryon d'infrastructure, notamment quelques rues revetues, un eclairage public, des bornes-fontaines publiques et des caniveaux de drainage\. Mais du point de vue sanitaire, ces quartiers presentent tout autant de 'risques que les zones non loties \.de la peripherie car l'entretien et la reparation des services existants ne sent pas assures par les municipalites\. 2\.06 Les quartiers spontanes couvrent a l'heure actuelle environ 1\.500 ha (1\.300 a Ouagadougou et 200 a Bobo-Dioulasso) et abritent une population d'en- viron 150\.000 personnes (120\.000 a Ouagadougou et 30\.000 a Bobo-Dioulasso)\. Ces zones a densite plus faible couvrent plus de 50\.% de la superficie de la capitale et on y trouve de 40 a 90 personnes par hectare vivant dans des huttes en terre groupees par famille\. Il s'agit pour la plupart de jeunes families, et le foyer moyen comporte \.6,4 personnes recemment emigrees ala ville\. La plupart de ces quartiers ne possedent pas de canalisations d'eau, le ramassage des ordures n'y est pas\. assure, rien n'est prevu pour les dechets,\.ni pour le drainage des eaux de pluies et i1 n'y existe ni eccles ni cliniques\. Ouagadougou possede 58 bornes-fontaines Âdont 4\. seulement se trouvent situees dans les quartiers spontanes\. L'eau potable s'achete a des vendeurs prives qui eux~memes s'approvisionnent aux bornes~fontaines des quartiers du centre et la revendent aux residents des quartiers spontanes 5 fois plus cher\. Les menages achetent ainsi environ 7 a 10 litres d 'eau par personne et par jour a ces vendeurs pendant la plupart de l'annee et consomment d'autre part de l'eau qu'ils vent chercher a des puits peu profonds et pollues\. Pendant\.les deux a trois mois que dure la saison chaude, lorsque ces puits sent a sec, il arrive a ces menages d 'acheter jusqu 'a 15Â-20 litres d 'eau Âpotable par habitant et par jour\.    - 4 - 2\.07 Dans les quartiers spontan~s, les,m~nages re~oivent des chefs tradi- tionnels la permission d'occuper une parcelle d~sign~e, contre paiement d'une commission, soit en argent, soit en especes, au titre des droits de jouissances coutumiers\. Il est tr~s rare qu'ils paient des imp8ts et leur existence n'est pas officiellement reconnue par !'administration municipale\. En 1976, environ 83% des menages de Ouagadougou poss~daient le logement qu'ils occupaient; les locataires ne repr~sentaient qu'une faible minorite\. S'il est vrai que les zones d'installation spontanee ne sbnt soumises ~ aucune juridiction munici- pale, par contre, les chefs traditionnels continuent d'y exercer une autorit~ consid~rable : ce sont eux qui determinent 1~ dispasition des logements et le type de construction, et qui influencent !'attitude des populations\. Ce sont, par exemple, eux qui inspirent les r~actions de la communaut~ vis-a-vis des ameliorations propos~es par le gouvernement et les organismes prives\. 2\.08 La croissance urbaine ne s'est pas accompagn~e d'une augmentation de la productivite de la main-d'oeuvre ni d'une amelioration considerable du revenu des migrants qui sont restes en marge du secteur moderne\. Environ 80 % de la population urbaine, composee de 120\.000 personnes, travaillent dans les nombreuses branches du secteur traditionnel et le revenu mensuel moyen d'un menage s'el~ve ~ 10\.000 francs CFA (40 dollars)\. Quelque 37\.000 personnes seulement travaillent dans le secteur moderne\. La majorite des residents des quartiers spontanes sont sous-employ~s au sein du secteur traditionnel\. Quatre-vingt-dix pour cent de la population de Ouagadougou est illettr~e, mais un taux d'alphab~tisation plus elev~ ne changerait pas grand-chose ~ la situa- tion du fait qu'il serait tr~s- difficile de trouver un emploi productif dans le secteur moderne puisque ce dernier est tres limite\. En dehors de !'adminis- tration publique, qui emploie environ 19\.000 personnes, il existe tr~s peu de possibilites d'emploi dans les petites entreprises\. L'absence de formation, l'impossibilite d'acceder au credit, les coOts elev~s des transports et de la commercialisation et les d~bouch~s limites qu'offrent les march~s locaux sont autant d'obstacles ~ la croissance du secteur prive moderne, represent~ ~ l'heure actuelle par environ 18\.000 personnes\. Beaucoup de ruraux, qui ant quitte les campagnes pour Ouagadougou dans l'espoir de trouver un emploi dans le secteur public, ant vu leur r@ve d~~u\. D'autres, se rendant au Ghana au en C8te d'Ivoire, se sont arr~t~s pendant quelque temps~ Bobo-Dioulasso, la capitale commerciale, qui se trouve dans la region du sud-ouest, relative- ment prosp~re\. B\. Gestion du developpement urbain 2\.09 Institutions - Le developpement urbain est confie ~ plusieurs mlnls- t~res qui s'en partagent la responsabilite : le Mini~t~re des travaux publics, des transports et de l'urbanisme, le Ministers de l'interieur qui contrele toutes les activites municipales~ le Minist~re du developpement rural dont le D~partement de l'hydraulique contrele !'adduction d'eau dans les zones rurales et urbaines\. Le Minist~re des travaux publics, par l'entremise de sa Direction de l'urbanisme, propose des politiques et des projets de d~veloppement urbain  - 5 - qui Âsant examines par le Conseil national de l'urbanisme avant d'etre soumis a !'approbation du Conseil des ministres\. Les decisions concernant le deve- loppement urbain-sont fortement centralisees puisqu'il appartient au President et au Conseil des ministres d'examiner taus les documents juridiques portant sur !'infrastructure urbaine, et notamment les plans des sites pour l'amenage- ment des quartiers\. 2\.10 La Direction de l'urbanisme, laquelle est chargee de !'execution des projets urbains, ne possede ni un personnel ni un materiel suffisants pour axe- cuter Ies taches qui lui sont confiees\. Le projet pilate du PNUD a absorbe la plupart des ressources dont elle disposait pour une periode de trois ans, malgre un element important d'\.assistance technique\. A ce!a vient s 1 ajouter Ie depart d'un grand nombre de Voltaiques qui ant quitte la Direction de l'ur- banisme pour continuer leurs etudes au pour occuper des emplois dans le secteur prive\.  2\.11 Le Ministers de l'interieur et le Departement de l'hydraulique du Ministere du developpement rural supervisent les municipalites et !'Office national des eaux (ONE), ce qui est une fonction importante, mais ne jouent pas un grand rOle dans ~es taches _quotidiennes d'execution des programmes de developpement urbain\. Ils \.participent aux delibe\.rations du Conseil national de 1' urbanisme et du Conseil des ministres mais ne mettent au point aucune politique d I action ni programme VlSant le S8CteUr Urbain o \. 2\.12 Au niveau local, les municipalites sont chargees a) de l'entretien des rues et des canaux de drainage et des installations de services sociaux, notamment des ecoles et _des dispensaires; b) de l'assainissement du milieu, autrement dit de services sanitaires tels que ramassage des ordures, pulveri- sation d'insecticides et elimination des dechets; c) de la lotte centre 'Ies incendies; et d) de la reglementation de l'amenagememnt des terres et de la construction des logements\. Cependant, en raison de leurs ressources budge\.,- taires mediocres, elles n'ont pas pu s'acquitter efficacement de leurs taches et parfois m@me les ant totalement negligees\. 2\.13 La municipalite de Ouagadougou dispose d'un budget de 347,5 millions de :francs CFA seulement _(1,4 million de dollars), ce qui represents 6,50 dol- lars par habitant, pour une ville de 220\.000 personne\. La moitie environ de ce montant est dest\.inee aux depenses de personnel, 17 ?~- aux- services et 3 ~~ seulement aux investissements\. Cette insuffisance des recettes fiscales est due Âa plusieurs facteurs\. : f aible ni veau de 1' assiette  des revenus imposab les, taux d'imposition peu eleve, calcul des impots aussi peu frequent qu'inexact et procedures de recouvrement des imp6ts inefficaces\. La municipalite manque de materiel, de main-d'oeuvre qualifiee et des fonds necessaires au finance- ment des depenses d'exploitation pour am~liorer la situation\. En 1976 un de- cret municipal a ete promulgue et un nouveau Âprefet-maire de Ouagadougou a ete nomme qui- a pour tlkhe de- reorganiser \.1' administration munic ipale et de lui donner un nouvel elan\. Le processus a demarre mais il exige un soutien tech- nique et financier _consid~rable~\.    - 6 - 2\.14 La municipalit e de Bobo-Dioula sso, ville qui avant l'accession du pays a l'independa nce etait la capitale et possede une tradition plus ancienne en matiere d'admihistr ation et d'entretien municipal, se trouve dans une si- tuation legerement plus favorable\. Cependant, tout comme a Ougadougou, il faudrait assurer \.la formation de son perso~nel, financer l'achat de materiel et d'outils et lui fournir l'assistanc e necessaire en matiere de gestion et de reforme fiscale afin que cette ville en pleine expansion ameliore et developpe ses activites\. 2\.15 Programmes de developpement urbain - Ces institution s ant eu a faire face a des obstacles aussi nombreux que serieux dans les efforts qu'elles ant deployes pour mettre en oeuvre des programmes de developpement urbain\. Notam- ment, il leur a ete difficile, dans un pays a economie rurale, de prelever sur des ressources budgetaires deja modestes des fonds pour les consacrer au deve- loppement urbain\. A cela est venu s'ajouter l'absence quasi totale de main- d'oeuvre qualifiee dans les dorimines touchant l'urbanisme , tels qu'architec - ture, planificati on, ingenierie, et !'inaptitud e des institution s municipales deja incapables d'entreteni r les investissem ents existants, d'en entreprendr e de nouveaux\. Taus les efforts deployes pbur assurer des services urbains se sont heurtes a ces problemes, ce qui a conduit a des solutions partielles per- mettant seulement de procurer des services limites dont seuls ant beneficie les groupes a revenu eleve\. Avant l'amenageme nt du quartier de Cissin, il n'existait pas de politique nationale de developpement urbain a proprement parler, dans le cadre de laquelle les pouvoirs publics auraient pu s'efforcer de repondre a la demande de services; pratiquemen t aucun dialogue n'avait ete amorce entre les divers organismes qui ant un role a jouer dans le secteur urbain\. 2\.16 Les domaines de l'enseignem ent primaire et de la prestation de soins de sante offrent un exemple typique de la situation qui existait et qui dans ce secteur se trouvait encore aggravee du fait que les inter~ts et les respon- sabilites des divers ministerep et organismes semblaient se chevaucher\. La strategie nationale de developpement met l'accent sur le secteur des "services sociaux" - la collectivit e au le village etant la cellule centrale - qui en- globe toute une gamme d'activites , allant du forage des puits a l'alphabeti sa- tion des populations \. Les ministeres, quant a eux, tendent a exercer leurs fonctions selon une optique plus ttaditionne lle et sectorielle \. Le manque de coordinatio n et l'absence d'une orientatio~ bien nette de la politique d'action sont les problemes les plus aigus et leur ~olution a ete au centre des preoc- cupations de l'Etat\. C'est sans conteste dans les zones rurales que les be- soins se font le plus sentir, e~ eel~ pour taus les services, et cependant la tendance veut que les maigres ressources et le peu de personnel qualifie dont on dispose pour la sante et l'enseignem ent soient affectes aux zones urbaines\. Cela dit, les fbnds mis a la disposition des programmes urbains existants res- tent limites et les operations entreprises touchent des groupes tres restreints\. L'entretien des ecoles et des dispensaire s \.n'a jamais ete assure et les condi- tions de sante et de securite dans ces etablisseme nts sont souvent deplorables \. Dans ces conditions, il conviendra it de remettre l'execution d'un programme de constructio n a plus tard pour s'occuper d'urgence des amelioratio ns a apporter aux installatio ns existantes et formuler plus clairement une politique et une strategie nationales\.  - 7 - 2\.17  Devant cette situation, les pouvo\.irs publics ont accords une atten- tion croissante au developpement urbafn, d 'aut ant que la de man de de logements, d'adduction d'eau clans les villes, de drainageet de services sociaux a consi- derablement augments depuis quelques Âannees\. \. Les inve\.stissements d 'infra- structure realises pendant la pe:dode coloniale et tout Âde suite apres !'ac- cession du pays a l'independance, en 1960, ne suffisent plus asatisfaire les besoins d'une population urbaine en pleine expansion\. D'autre part, les pou- voirs publics doivent accroUre les aptitudes des institutions nationales et municipales a mettre au point et a executer des politiques et des programmes a la mesure de ces besoins\. C\. A la recherche de solution !'experience de Cissin 2\.18 E\.n 1973, le Gouvernement voltaique, avec l'aide du PNUD, a lance un programme de trois ans dont l'objet etait d'ameliorer les conditions de loge- ment des menages pauvres, dans le quartier de Cissih\.  Le projet prevoyait 600 parcelles assainies et dotees de services de base ainsi que l'amenagement d 'une zone adjacente non lot ie de 8 ha ou 266 families de etaient etablies ~  Les travaux d 'infrastructure initiaux comprenaient la construction de\. routes, de petits travaux de drainage minimum, la construction de latrines et de puits\. Des permis\. urbains d'habiter ont ete delivres aux menages, Âce qui a encourage la\. participation des habitants du quartier et stimule la creation d'organisa- tions et d 'activites collectives\. Les investissements cbllectifs dans 1 'in- frastrupture et les investissements prives dans la constructionÂet la renova_- tion des logements ont permis d'ameliorer considerablement les conditions de viedes gens du quartier\. 2\.19 Cet effort pilate, s'il a ete d'une envergure modeste, a neanmoins remporte un grand succes et a mis d'autre part en evidence la penurie extreme, dans toute la ville, de parcelles dotees des services de base\. Pour les 600 parcelles offertes environ 1~800 demandes ont ete re~ues pendant les deux semaines d'inscription\. Des organismes de quartier, appeles les caisses popu- laires, ant fait leur apparition, tout d'abord dans une sec:tion de Cissin, pour 0 s'etendre en\.suite a une zone plus grande et elles comptept a l'heure actuelle 1\.600 membres\. Mais ce qui est encore' plus important, le projet a demontre qUI il etait pOSSible d I ameliiJrer leS logements et\. la COmmunaute a deS COCtS plus faibles avec des methodes autres que les methodes conventionnelies et que les menages etaient prets a participer a ces efforts\. 2\.20 ÂA la fin de 1975, le projet de Cissin avait attire !'attention des pouvpirs publics et suscite 1' interet d 1 autres pays\. En novembre 1975, le Ministre des travau'x Âpublics a organise Âune Âconference internationale pour\. evaluer les resultats de !'experience de Cissin et decider de la mesure dans  laquelle elle pouvait etre renouvelee a un!3 echelle plus grande\. Cette eva- luation n 1 a pas ete totalement Âpositive - lei:r: \.9i!3positions portant sur les aspects econorniques et financiers duÂprojet, telles que le recouvrement des  - 8 - coats et !'octroi de pr~ts pour ia construction et !'amelioration de loge- ments, demandent a ~tre remaniees - mais le gowvernement n'en a pas mains adopte le projet de Cissin comme mod~le pouvant servir de cle de voate a s~ politique d I action en mati~re de services urbains\. LI importance de cette expe- rience peut egalement servir a_ d'autres secteurs, et le Ministere de !'educa- tion, par exemple, a adopte les methodes de construction utilisees a Cissin (briques en terre stabilisee) pour la construction des ecoles rurales\. Ce projet pilate represente un pas important dans la formulation de methodes peu coateuses permettant d'aborder le d~veloppement urbain, mais pour le renou~ veler a une plus grande echelle et en y apportant des ameliorations, il faudra sans doute etre pr~t a surmonter des obstacles considerables\. D\. Application;-par etapes, de la politique nationale de developpement urbain 2\.21 Les pouvoirs publics sont conscients du fait que, pour etendre !'ex- perience de Cissin et en faire un\. programme national de prestation de services urbains viables, il faudra a) renfotcer les institutions urbaines, et notamment la Direction de l'urbanisme ainsi que \.les municipalites de Ouagadougou et de Bobo-Dioulasso, grace ala formation de personnel, a l'achat du materiel neces- saire et a une assistance technique dans des domaines specialises; b) ameliorer les methodes de recouvrement des_ depenses et de perception des impots pour as- surer le remboursement des investissements publics dans 1 'infrastructure et le maintien des services; et c) ameliorer les conditions sanitaires, non seulement dans les quartiers dont l'amenagement est prevu dans les projets individuels mais dans des zones urbaines enti~res au les services sont mediocres\. Ces quartiers, qui par definition ne sont pas directement affectes lors d'une ope- ration pilate, posent un probleme beaucoup plus critique d~s que les operations d'amelioration et d'amenagement de trames d'accueil se font a une echelle plus grande\. Cependant, en raison des contraintes en matiere de main-d'oeuvre et de credits budgetaires, il n'est pas possible d'entreprendre ces travaux d'ame- nagement simultanement et il convieht de les realiser par etapes, selon un plan de renforcement et de developpement progressifs des reseaux d'infrastructure, des institutions et des mecanismes financiers\. Done, le projet de 1' IDA tra- duit, dans taus ses details, !'effort deliber~ qui est deploys en vue de mettre au point un projet qui tienne compte de taus ces obstacles serieux\. 2\.22 Le principe de !'intervention par etapes est ala base de la politi- que de developpement urbain du gouvernement et du projet propose\. Il repose sur un certain nombre de facteurs : 1) il n'est pas possible a court terme d'ameliorer !'infrastructure dans toutes les villes; 2) dans une m~me ville, il n'est pas possible d'amenager taus les quartiers a la fois; 3) dans un meme quartier, il n'est pas possible d~entreprendre a la fois toutes les ameliora- tions d I infrastrUCtUre et CeS derrii~reS d0i Vent etre effectUeeS par etapeS, selon leur ordre d'urgence et ie nombre d'habitants desservis; 4) dans une premi~re phase, les normes d'infrastructure doivent etre maintenues a un degre minimum tout en permettant des ameliorations progressives; 5) en ce qui con- cerne le developpement des institutions et ia formation, il convient de proce- der graduellement, !'experience acquise fournissant les elements de base qui  - 9 - permettront de renforcer progressivement le\.s aptitudes des organismes locaux a planifier et executer des programmes; et 6) la premiere phase d'activite ne permet pas de fournir la totalite des services mais, compte tenu des priorites actuelles dans les domaines des services de sante ruraux et de l'enseignement primaire dans lea campagnes, il convient de reserver !'intervention directe pour des phases ulter ieures\. II I\. LE PRO JET A\. Objectifs 3\.01 Suivant les principes de Cissin, les objectifs du projet sont les suivants a) aider le gouvernement a appliquer sa politique du developpement urbain par etapes; b) fournirune infrastructure de services minimum aux menages a faible revenu dans les zones l;Jrbaines; c) renforcer les organes nationaux et locaux charges du developpe- ment urbain, au moyen d'un programme de formation, d'un apport d'assistance technique et de l'achat de materiel;  d) mettre en place un systeme de recouvrement des depenses enga- gees au titre des servic~s urbains, qui permettrait de realiser d'autres projets de ce genre; et e) ameliorer lea services d'entretien et la procedure de percep- tion des imp8ts des municipalites\. 3\.02 Ce projet est etroitementÂlie au projet d\.'artisanat et de petites entrepris~s, dont lea objectifs sont : a) \. stimuler les investissements dans les petites entreprises; i l s' agit plus particulierement de venir en aide a celles qui sont sit\.uees dans les quartiers a amenager et qui peuvent contribuer a ameliorer le mode de vie des habitants; b) rendre plus efficace la Banque nationals de developpement (BND), en tant qu'intermediaire financier, particulierement des petites et moyennes entreprises; c) organiser et executer un programme d'assistance technique aux \.petits entrepreneurs et aux ;artisans par 1' intermediaire du Centre national de perfectionnement des artisans ruraux (CNPAR) et de !'Office de lp\.promotion de l'entreprise voltaique (OPEV)\.   - 10 - 3\.03 A eux deux, ces projets sent le resultat d'un vigoureux effort du gouvernement decide a ameliorer les\.conditi ons de vie urbaine et la producti- vite en Haute-Volta \. Ils doivent servir a rendre les etablisseme nts publics mieux a meme d'executer, dans l'avenir, des programmes de ce genre, axes sur l'aide aux pauvres des villes\. B\. Principaux element~ du projet 3\.04 Le projet est compose des elements suivants : a) Travaux d'amenagement : Amenagement d'une infrastruct ure urbaine de base, comportant notamment la constructio n d'un reseau d'adduction d'eau, d'un systeme de drainage et de routes en terre dent beneficiero nt 11\.000 parce11es (chiffre approximat if) dans les quartiers spontanes sur une superficie de 432 ha a Ouagadougou (7\.000 parcelles) et a Bobo-Dioulasso (4\.000 parcelles); b) Trames d'accueil : Preparation et installatio n de !'infra- structure de quelque 1\.100 nouvelles parcelles, zone resi- dentielle delimitee couvrant 50 ha contigus au quartier a amenager a Bobo-Dioula sso\. Une trame d'accueil pilate pouvant lager 100 familles sera mise en place a Gaoua; c) Adduction d'eau : En plus du reseau d'adduction d'eau construit dans les quartiers amenages et la trame d'accueil, l'eau ,sera fournie a quelque 20\.000 personnes vivant dans trois autres quartiers spontaries de Ouagadougou; d) Prats a la constructio n : Financement de prets pour !'amelio- ration des logements et poui 1~ lancement des constructio ns; e) Services sociaux et eguipements collectifs : Renovation de 65 eccles et 17 dispensaire s dans les deux villes; construc- tion dans les quartiers de centres communautaires, de marches; Âprojet pilate de developpement communautaire destine a finan- cer des experiences d'enseignem ent communautaire, de sante publique et d'activites feminines dans les quartiers; et achat\. d'insectici des, de pulve~isateurs et d'une camionette pour les application s d'insectici des a Ouagadougou et Bobo-Dioula sso\. f) Aide aux municipalit es i) fourniture d'une assistance technique pour - la formation de travailleur s charges de l'entr~tien;  - 11 - -!'amelioration des methodes de gestion et de perception des impots; - la reorganisation des ser~ices technique~; et - le renforcement de\.s bureaux de l'habitat; ii) equipement : - camions de ramassage des ordures pour la municipalite de Ouagadougou; - outils pour la reparation de vehicules, outils de serrurerie, de menuiserie et de construction; et vehicules et equipement des bureaux municipaux de 1' habitat; iii) renovation du garage municipal de Ouagadougou ou sont gardes les vehicules d'entretien; et iv) fourniture pendant deux ans pour le ramassage Âdes ordures des fonds'de demarrage necessaires a Ouagadougou, et pour la pulverisation d'insecticides ainsi que pour les bureaux municipaux de l'habitat dans les deux villes; g)\. Aide ala Direction de l'urbanisme i) assistance technique pour !'execution du projet; ii) services de consultants charges d'une etude de facti- bilite et d'un projet d'execution du projet propose ainsi que de la preparation d'un deuxieme projet; iii) fourniture des fonds de demarrage necessaires au Bureau du projet deÂla Direction de l'urbanisme pen- dant une periode de trois ans (1978-1980); iv) achat de materiel, de fournitures diverses et de vehicules; et h) Con~role et evaluation : Services de consultants locaux   charges\.d'effectuer une etude pour evaluer \.la performance des compos antes du pro jet pendant et apres son execution\.  - 12- c\. Caracteristigues detaillees du projet Amenagement des quartiers non lotis 3\.05 Les principes de Cissin - entraide mutuelle et participation des po- pulations 1 normes d 'infrastructure corre\.spondant a leurs moyens et Âutilisation de materiaux locaux - seront appliques pour !'execution du projet et, le cas echeant, pourront @tre modifies\. Les sites dont l'amenagement a ete retenu et la zone affectee a Âla trame d'accueil sont indiques sur les cartes des villes beneficiant du projet (voir les Cartes 12842 et 12843)\. 3 \.06 Des amenagements seront apporte~ sur une superf icie de 300 ha a Ouagadougou : 200 dans le quartier de Cissin et lOOÂdans celui de Zogona; il en sera de m@me a Bobo-Dioulasso au 132 ha seront mis en valeur dans le quar- tier de Sonsuribugu\. Ces zones se trouvent a la peripherie des deux villes; dans le cas de Ouagadougou, il s'agit d'anciens peuplements qui detent de la fin des annees 50\. Sonsuribugu (ce qui veut dire "en situation temporaire 11 -"en langue Bobo) est un quartie\.r relativement recent de Bobo-Dioulasso qui s'est rapidement developpe depuis !'expulsion des Voltaiques hors de COte d'Ivoire\. Ces quartiers ant ete choisis en priorite en fonction des criteres suivants : le gouvernement souhaitait terminer l'amenagement de Cissin pendant la premiere phase des operations\. Il avait aussi ete estime que, compte tenu de !'experience acquise par le PNUD dans ce quartier, il y serait plus facile que dans d'autres d'augmenter la portee des activites projetees\. Le quartier de Zogona a ete retenu, le gouvernement lui ayant donne priorite absolue du fait qu'il s'agit d'!lots insalubres\. A Bobo-Dioulasso, le choix a porte sur Sonsuribugu, quartier non loti le plus vaste et le mieux place pour accueillir de nouveaux residents selon un processus de densifica:tion\. 3\.07 Le schema d'amenagement se fera en fonction du plan existent du quar- tier les routes et les sentiers-pietons seront realignes et elargis pour donner plus librement acces aux sous-quartiers\. Toutes les parcelles seront a mains de 120 m d'une voie carrossable\. L'emprise des routes secondaires et tertiaires sera respectivement de 15 au 10m\. L'evacuation des pluies se fera par un reseau lateral de caniveaux en terre\. Des bornes-fontaines seront mises en place taus les 400 m, chacune desservant environ 1\.500 personnes\. l' evacua- tion des dechets humains se fera au moyen de puits perdus creuses par le pro- prietaire lui-m@me conformement aux normes rriunicipales\. A Ouagadougou, la municipalite etendra le ramassage des ordures menageres aux zones du projet au moyen de camions dont l'achat est financ~ dans le cadre du credit\. Les dimensions des parcelles seront reduites; de 450 m2 en moyenne elles ne seront plus que de 300 m2, ce qui permettra de densifier les quartiers, sans que soit bouleversee la parcelle voltaique traditionnelle comportant plusieurs petites habitations groupees dans la cour familiale et un jardin potager (voir le schema 11304)\. Grace ace processus, il sera cree environ 4\.700 parcelles de plus qui seront attribuees en fonction des prit~res decrits ci-apres au para- graphe 3\.12\. La densite des quartiers augmentera, passant de la superficie de vingt parcelles a 1 'hectare a Cissin a une moyenne d'environ 23,3 parcelles (186 personnes) a !'hectare (voir Tableau 2, Annexe 5)\.  - 13- 3\.08 L' amenagement des quartiers non lot is et la densification  necessite- ront la demolition de 10 % au maximum des logements actuels et le relogement de families en des lieux proches de leurs anciennes parcelles\. Les families deplacees recevront de nouvelles parcelles, aux memes prix que les residents non deplaces de ces quartiers\. Elles recevront une aide au relogement sbus forme d'un don d'un montant de 35\.000 francs CFA (143 dollars) qui serviront a entreprendre la construction d'une nouvelle maison\. Ce don viendra s'ajouter au pret a la construction de 30\.000 francs CFA qui sera octroye sur demande a taus les residents de quartiers a amenager (voir paragraphs 3\.15 Âci-apres)\. Les residents actuels qui, selan le droit valtaique, ant des droits de jauis- sance surÂla terre (regime coutumier), recevront un permis urbain d'habiter cantre versement d'une somme de 15\.000 francs CFA\. Ce perrnis est un bail de location a lang terme renauvelable qui donne droit de revendre\. Les residents restants et les nouveaux residents Âauxquels le Bureau municipal de !'habitat accardera des parcelles recevrant un permis urbain d'habiter pravisoire cantre versement de l'acampte et un permis urbain d'habiter apres paiement du prix total de la parcelle\. Les redevances parcellaires comprendrant les frais d'acquisition de la terre tels qu'ils ant ete fixes selan le regime fancier anterieur par decret du gouvernement en 1970 : les residents detenteurs de droits de jouissance coutumiers paieront 10 francs CFA/m2 (0,04 dollar), et taus les autres residents 100 francs CFA/m2 ( 0,40 dollar)\. Ce sant la les arrangements qui ant ete canclus au caurs des negociatians\. 3 \.09 L' infrastructure hars-site a mett re en place pour les operations  d'amenagement des parcelles necessitera la construction de vaies d'acces, de conduites d'eau et d 'auvrages d 'evacuation des eaux dans les quartiers de Zagana et de Sonsuribugu\. 11 n'est pas necessaire d'effectuer des travaux hors-site dans le cas du quartier de Cissin\. A Zogana, les principaux travaux hars-site a realiser sant le recalibrage des 4 km du marigot 'de Zogana qui constitue un risque grave pour la papulation de taute la ville et le betan- nage de ses rives sur 2 km\. L'amenagement et !'augmentation de la papulation par le processus de densification dans le bassin versant de 1\.400 ha exigent que Âsaient ameliare le reseau de drainage et renfarce les trois pants exis- tants\. 11 faudra aussi proceder a la construction d 'auvrages de drainage a Sansuribugu au les terrains\. sont en pente et au les pluies sont relativeme\.nt plus frequentes\. 3\.10 ÂTrames d'accueil :Des trames d'accueil serant mises en place sur 50 ha aux abords de Sansuribugu; elles desserviront 1\.126 nouvelles parcelles d'une superficie mayenne de 300m2\. Les parcelles seront de trois dimensions 240, 300 et 360 m2, afin d'attirer des graupes de papulation a revenus diffe- rents, de satisfaire la demande generals de logements a taus\. les niveaux de revenu et de faire !'experience de parcelles de moindre dimension\. Ce terrain sera 'desservi par un reseau d'adductian d'eau date de barnes-fantaines \.publi- ques et qui pourra  eventuellement ~tre branche dans la proportion de 20 ~6 sur les lagements de particuliers\. Les narmes des serv,ices serant a peu pres les memes que celles utilisees dans les zones renavees\.  - 14 - 3\.11 Le projet comporte auss\.i la creation de trames d 1 accueil pilotes qui desserviront une centaine de families a\. Gaoua, ville de 6\.000 habitants, situee dans la riche zone agricola du sud-ouest\. Cette operation tend a demontrer que les methodes utilisees a Cissin, notamment la construction de maisons au moyen de briques de terre stabilisee, peuvent etre appliquees a petite echelle, et vise a les faire connattre dans la region du sud-ouest\. 3\.12 Les nouvelles parcelles seront attribuees en fonct ion de criteres mis au point par le Bu~eau du projet et les Bureaux municipaux de !'habitat\. On sait que les revenus mensuels moyens des menages sont d'environ 10\.000 francs CFA dans les quartiers spontanes; neanmoins, de nouvelles en- quetes sur les revenus des menages dans ces q1,\.1artiers sont maintenant en cours; elles serviront a determiner des criteres de revenus plus precis pour !'attri- bution des nouvelles parcelles\. On ne dispose pas de donnees courÂantes sur la repartition des revenue dans les villes; pour y remedier, il a ete decide d 1 appliquer un systeme (s'inspirant de\.l'experience de Cissin) qui attribuera la majeure partie des nouvelles parcelles aux families dont le revenu se situe entre 15\.000 francs CFA (60 dollars) et 20\.000 francs CFA (82 dollars), le re- venu mensuel maximal accepte etant d'environ 40\.000 francs CFA (163 dollars)\. Lorsque les families auront ete classees selon le montant de leurs revenue, les noms de celles qui satisfont aux\.criteres publies seront places dans une urne et le prefet-maire tirera au sort publiquement les noms des families a qui seront offertes de nouvelles parcelles\. Un accord est intervenu a ce propos lors des negociations\. Adduction d 1 eau 3\.13 Il est prevu que le reseau actuel d'adduction d'ea~ de Ouagadougou sera prolonge a partir du centre de la ville;et alimentera ainsi trois quar- tiers, Tampouy, Tanghin-Sambin et Hambdallaye, au sont loges quelque 20\.000 residents\. Ces quartiers seront plus completement reamenages dans les opera- tions futures\. Ces prolongements necessitent la construct ion d 1 une canalis a- t ion principale contournant les trois reservoirs situes au nord du pays (voir la Carte 12842) avec des branchements vers les reseaux de distribution de cheque quartier\. Ace premier stade\.des bornes-fontaines seront construites le long des grandes arteres a intervalles de 400 m\. 3\.14 Ces prolongements et la mise en place des reseaux desservant les quartiers mentionnes dans le projet\. achemineront de l'eau potable venue\.de la station centrale d'epuration situee au nord-est de la ville; sera ainsi ali- mentee en eau potable la majorite de la population qui consomme pour le moment de l'eau puisee dans des puits pollues ou\. une eau non traitee provenant des reservoirs publics\. A l 1 heure actuelle, l'eau fournie a Ouagadougou vient du barrage de Lumbila, situe a quelque\. 14 km de la ville\. Il est garanti que jusqu'en 1981, cette source d 1 eau suffira a satisfaire la consommation future projetee, d'environ 20 litres par\.p~rsonne et par jour, compte tenu des pro- longements qui sont envisages dans ce projet (voir l 1 Annexe 4)\. Le gouverne- ment et !'Office nationale des eaux examinant actuellement une etude portent sur diverses solutions qui permetttaient d 1 accrottre la production apres l'an~ nee 1981; l 1 une des solutions pourrait etre de mettre en place des conduites  - 15 - alimentees par la Volta noire et la Volta-blanche qui desserviraient les re- gions du sud-est du pays\. Le gouvernement attache beaucoup d'importance a cette question et il a indique qu'il y aurait suffisamment d'eau pour permet- tre pendant longtemps d'utiliser efficacement les prolongements proposes\. Prats a \.la construction de logements 3\.15 Taus les menages des zones reamenagees et des trames d'accueil pourront beneficier des prets offerts en vue d'ameliorer les logements et d'amorcer la construction de maison\. Les menages qui s'installent sur de nou- velles parcelles auront droit a !'octroi desdits prets jusqu'a concurrence de 65\.000 francs CFA (265 dollars), et les menages qui resteht sur leurs parcel- lea pourront recevoir une somme ne depassant pas 30\.000 francs CFA (122 dol- lars) au titre des ameliorations a apporter a leur logement\. Les residents qu'il faudra deplacer recevront des dons d'une valeur de 35\.000 francs CFA (143 dollars), s'ils en font la demande, 30\.000 francs CFA supplementaires sous forme de pret\. Des garanties ont ete obtenues a propos de ces arrange- ments au cours des negociations (voir Annexe 13)\. Services sociaux et eguipements collectifs 3\.16 Pour que soit satisfaite la forte demande de services sociaux dans les zones rurales, notamment les services de sante et l'enseignement primaire, il convient d'utiliser des services communautaires peu coOteux dans les centres urbains relativement mieux desservis\. Le manque de personnel et les contrain- tes financieres, joints a l'inefficacite des operations actuelles, font que, pour !'instant, i l parait peu judicieux de lancer un grand programme d'equipe- ments collectifs dans le cadre du proj~t, tant que la politique du gouverne- ment en matiere de services sociaux n' aura pas ete plus nett'ement def inie\. Le projet s '\.efforcera d 'ameliorer les services sociaux par divers moyens ne necessitant ni le recrutement de personnel supplementaire ni de gros engage-: ments budgetaires repetes pour les institutions nationales ou municipales\. Il_ faudrait, dans une premiere phase, faire des efforts en matiere d'adduction d'eau et d'assainissement du milieu, afin d'ameliorer la situation en ce qui concerne la sante des populations! 3\.17 Le projet comporte les operations suivantes a) La reparation et la renovation de 40 eccles et 10 dispen- saires a Ouagadougou et de 25 ecoles et 7 dispensaires a  Bobo-Dioulasso\. Ce 'programme comporte !'installation des latrines et de points d'eau, la reparation de plafonds et de toits prets a s'ecrouler et la construction de clotures entourant les eccles\. Ces ameliorations repondent au besoin urgent de renover les installations actuelles, service dont les municipalites ont eteincapables de s'acquitter et four- niront une formation sur le tas pour la mise au point des programmes d 'entretien municipaux, dans le cadre de 1' aide  aux municipalites\.  - 16 - \. b) La construction de 19 centres communautaires un par 25 ha dans les quartiers ~ r~nover et d~ns les trames d'accueil, sauf 1~ au il en existe deja\. Ces centres, d'une superficie de 40 m2, recevront un equipement minimal et serviront a accueillir les activites communautaires et une antenne municipale\. La creation de ces petits centres n 'est qu' une phase initiale : ult~rieurement, des Âcentres plus grands et mieux equipes seront construits dans ces quartiers\. c) La construction de six marches couverts dont quatre ~ Ouagadougou et deux ~ Bobo-Dioulasso, chacun d'environ 350 m2 et comprenant 100 etaux fermes de trois c6t~s\. Ces march~s seront construits par des stagiaires venus des quartiers qui suivent les programmes de formation technique du CNPAR, dans le cadre du Projet de 1 'artisanat et de la petite entreprise\. d) Un projet pilate de developpement communautaire servira ~ financer de petites operations dans les domaines de l'ensei- gnement communautaire, la sante publique et les activites feminines\. Toutes ces activites ser;ont identif iees et mises au point pendant l'ex~cution du projet par le Bureau du projet, avec les services du gouvernement concernes ainsi qu'avec les caisses populaires et d'autres groupes communau- taires\. Cette approche experimentale est conc;ue de fac;on ~ laisser ~ ces operation$ une certaine souplesse et ~ encou- rager les essais, afin de rendre le gouvernement mieux a meme d'evaluer dans quelle mesure les collectivites peuvent participer aux services sociaux\. e) La fourniture d'insecticides, de pompes pulv~risatrices et d'une camionnette aux\. municipalites de Ouagadougou et Bobo-Dioulasso\. Ce mat~riel permettra de relancer, pour la premiere fois en quatre ans, le programme public de desinfection; c'est 1~ uri ~lement compl~tant les mesures prises au titre du projet pour proteger la sant~ des popu- lations et assainir l'environnement\. L'aide aux municipalites 3\.18 Le projet prevoit l'ex~cution d'un programme d'aide aux municipali- t~s de Ouagadougou et de Bobo-Dioulasso qui vise ~ am~liorer les services d'assainissement et d'entretien du milieu, la perception des impOts et l'ex~­ cution des travaux d 'habitat\. Ces programmes sont conc;us ~ partir d 'une ana- lyse des besoins de chaque municipalit~ et de ce fait, ils ant chacun des ca- racteristiques diff~rentes\. Il est indispensable toutefois de renforcer ces deux municipalit~s si l'on veut qu'elles puissent s'acquitter de leurs respon- sabilit~s en tant qu'organes d'execution de la politique de developpement urbain que le gouvernement entend appliquer\. L'aide qui sera fournie pendant  - 17 - \ l'~xecution du projet doit permettre aux municipalites de se charger progres- sivement des responsabilites croissantes que les problemas de logement leur imposent et, en meme temps, dans l'immediat, d'ameliorer les moyens dent elles disposent pour assurer les operations d'entretien et de retablir leur situation financiers\. L'aide aux municipalites comprend les elements suivants : a) Fourniture de 54 hommes-mois d'assistance technique pour chaque municipalite en vue de : i) La reorganisation des services de la VOJ\.rl\.e et des bllti- ments\. Cette reorganisation comporte !'attribution de responsabilites a chaque service concerne des departe- \. ments et la nomination de fonctionnaires de niveau moyen a telle au telle activite precise; ii) la formation au sein des services\.de la voirie et des blltiments d'ouvriers municipaux charges de l'entretien\. Ce programme de formation sur le tas pendant deux ans est con9u de maniere a ameliorer les connaissances tech- niques du personnel municipal\. La formation portera essentiellement sur la reparation et l'entretien de vehicules, sur la maniere d'utiliser l'outillage et sur des procedures d'entretien programmees des canivaux muni- cipaux, des blltiments publics et autres installations; iii) !'amelioration du recouvrement des impots et de la ges- tion financiers\. Dans chaque municipalite, un expert passera six mois a examiner les methodes de recouvrement des impots, notamment l'assiette et les taux d'imposi- tion, ainsi que les pratiques financieres, particulie- rement l'etablissement du budget; cet expert aura aussi pour tache de recommender de meilleures methodes\. et, si necessaire, une reforme de la politique budgetaire\. Cet\. examen devra etre entrepris avant le mois de juin 1978 et les recommendations en decoulant devront pouvoir etre etudiees en juin 1979\. Des garanties ant ete obtenues a ce propos lors des negociations;  iv)  le renforcement des Bureaux municipaux de 1' habitat rendu necessaire par les nouvelles procedures d'etablissement du Âcadastre, !'attribution des parcelles et la mise au point d'un systeme de recouvrement des redevances aupres des beneficiaires\. b) Il est prevu 1 'achat du materiel suivant i) 11 camions de ramassage des dechets pour la municipalite de Ouagadougou qui pourra ainsi assurer !'evacuation des ordures menageres dans toute la ville et ce, dans  - 18 - de meilleu res conditio ns et pour un moindre coOt que l'entrep rise privee qui en est chargee a l'heure ac- tuelle\. Le contrat de ramassage des ordures menagere~ qui est applique actuelle ment represen te 13 % du budget municip al, alors qu'il contribu e pour mains de 30% au ramassage des ordures dans la ville; ii) l'outill age necessa ire aux service s de la voirie et des batimen ts des deux municip alites\. Ces outils sent ceux qui servent a la reparati on des vehicul es, aux travaux de charpen terie, de serrure rie et a la constru ction, et que le persone l utiliser a lors de !'execu tion des pro- grammes de formatio n en cours d'emplo i; iii) des vehicul es et du materie l pour les Bureaux mun1c1paux de !'habit at, notamment deux voitures par bureau, des meubles, des classeu rs, des machines a ecrire et des machines a calcule r\. c) Renovation et agrandis sement du garage municip al au sent entrepo ses les vehicul es d'en~retien a Ouagadougou\. Ces vehicule s ne sent pas protege s des intempe ries et i l n 'y a pas de place suffisan te pour les grandes reparati ons et l'entret ien\. d) Frais de premier etabliss eement au titre : i) des service s de voirie de Ouagadougou pendant deux annees\. Cette aide initiale est necessa ire pour organis er efficace ment les operatio ns municip ales de ramassage des ordures menageres; par la suite, ces depens\.es seront financee s au moyen des recettes municip ales, notamment la taxe sur le ramassage des ordures menageres; ii) des activite s des Bureaux municipaux de !'habit at dans les deux villes pendant deux annees\. Cette aide est necessa ire pour le lancement des operatio ns qui, au bout de deux annees, seront autofina ncees\. iii) de la pulveri sation d'insec ticides pendant deux ans dans les deux villes\. 3\.20 Pris ensemble, ces element s d 'aide aux municip alites doivent servir a rendre plus efficace s les service s municipaux indispe nsables \. II est essen- tiel, dans l'immed iat, d'ameli orer ces service s si l'on veut que le develop - pement urbain s'effect ue dans de bonnes conditio ns lors de !'execu tion de projets ulterieu rs\.  - 19 - Aide ala Direction de l'urbanisme 3\.21 La Direction de l'urbanisme beneficia d'une aide pour les activites suivantes preparation et execution de projets, formation du personnel, achat de materiel et de vehicules, prise en charge des depenses ordinaires\. Â- Cette aide presente les caracteristiques suivantes : a) fourniture de 12 hommes-anneeset 4 hommes-mois d'assistance technique pour !'execution du projet et la formation duper- sonnel, a savoir : ingenieur-chef de travaux (3 ans), compta- ble (40 mois),ÂOrbaniste (1 an), socio-economiste (2 ans) et specialiste des caisses populaires (3 ans)\. Selon des ren- seignements recants concernant le recrutement de consultants par des bureaux d'etude en Haute-Volta, le coOt par homme- annee d'assistance technique est estime a 80\.000 dollars; b) les services de consultants charges d'une etude de factibi- lite, la prise de photographies aeriennes et les !eves topo- gtaphiques ont ete finances par le mecanisme de financement de la preparation des projets en 1976/77\. Le recrutement de consultants qui seront charges du projet d'execution de !'infrastructure est en cours\. De plus, i l sera ajoute a cela 30 mois de services de consultants pour la preparation d' un deuxieme projet et le recrutement de consultants pour de breves periodes; c) achat du mater-iel et des vehicules necessaires pour l'execu- tioÂn du pro jet; d) prise en charge, pendant trois ans, de 1978 a 1981, des frais de premier etablissement du Bureau du projet au sein de la Direction de l'urbanisme, y compris les traitements du personnel voltaique supplementaire\. Controle et evaluation 3\.22 Il est prevu dans le ptojet d'effectuer une 'etude de contrO!e et d'evaluation, qui sera organisee par un bureau de consultants local\. Ce ser- vice necessite le recrutement pendant deux annees d'un specialiste local de la recherche appliquee, d'une equipe de huit enqu~teurs a plein temps pendant 18 mois; les fonds couvriront deux \.annees d'evaluatioh (y compris le temps consacre aux travaux sur ordinateur)\. Ces activites seront completees par une assistance technique en matiere de methodes d'analyse et de recherche \. economique qui sera fournie par le Centre des Nations Unies pour le logement, !a construction et !a planifi\.cation, a New York\.  - 20 - IV\. ORGANISATION ET EXECUTION 4\.01 La responsabilite de 1 'execution du projet sera partagee entre le Ministere des travaux publics, des transports et de l'urbanisme, principal agent d'execution, les municipalites de Ouagadougou et de Bobo-Dioulasso, l'Office national des eaux (ONE) et le Fonds national d'assainissement et d'entretien (FONASEN)\. Les services responsables de l'execution du projet sent presentes dans le Tableau 1\. tableau-1\. Elements du projet et agents d'execution Element Agents d'execution Amenagement des quartiers Direction de l'urbanisme/Bureaux non lotis municipaux de l'habitat Trames d'accueil Direction de l'urbanisme/Bureaux municipaux de l'habitat Reseau d'adduction d'eau ONE Travaux de drainage du Fonds national d'assainissement marigot de Zogona et d'entretien (FONASEN) Prl§ts a la construction Direction de l'urbanisme/Bureaux de logements municipaux de l'habitat/BND Equipements collectifs Direction de l'urbanisme/\. Departement municipal des Services de la voirie et des b~timents Aide aux municipalites Â\. Municipalites Aide a la Direction de Direction de l'urbanisme l'urbanisme ContrOle et evaluation Bureau d'etude voltaique A\. Ministere des travaux publics, des transports et de l'urbanisme 4\.02 Il sera cree, au sein de la Direction de l'urbanisme, un Bureau du projet, charge au premier chef de taus les elements du projet (a l'exception des services d'adduction d'eau et des travaux de drainage du marigot de Zogona)\. Ce Bureau du projet aura a sa t~te le directeur de 1 'urbanisme aide d 'un directeur adjoint\. Ces arrangements ant ete confirmes lors des negocia- tions\. Comme l'envergure de ce'projet est dix fois superieure au projet pilate  - 21 - de ~issin, il faudra renforcer considerablement le personnel de cette Direction particulierement en matiere d'ingenierie et de comptabilite\. Comme il a ete convenu avec le gouvernement, la preference sera donnee aux ressortissants vol- taiques et !'assistance technique sera fournie progressivement de maniere que des Voltaiques scient a meme d'etre promus a des pastes du projet en fonction de !'experience acquise\. II est prevu toutefois que si le pays ne dispose pas de ressortissants experimentes, il sera fait appel a des expatries, comme il est indique au paragraphs 3\.21\. 4\.03 Le Bureau du projet veillera a !'execution du projet dans les trois villes\. Il aura notamment pour t~ches precises a) la supervision du projet d'execution; b) la preparation et !'evaluation des dossiers d'appels d'offres et des contrats; c) le centrale de !'execution des travaux de genie civil, y compris la construction des equipements collectifs et des marches; d) la supervision du programme de prets et le centrale du projet pilate de developpement communautaire; e) l'aide aux Bureaux municipaux de !'habitat et le centrale des operations de ces bureaux; et f) la gestion des fonds du projet et le centrale des decais- sements faits a ce titre\. B\. Municipalites 4\.04 Les municipalites de Ouagadougou et de Bobo-Dioulasso sont respon- sables de a) la fourniture de services dans !'ensemble de la ville, par exemple, les services d'hygiene, le ramassage des ordures menageres, l'entretien des eccles et des dispensaires et les services de pulverisation d'insecticides; b) les activites relatives a !'habitat presentees ci-dessous; et c) la reorganisation et le renforcement des services de la voirie et des batiments, de la perception des impots et de la gestion financiers\. L'aide specifique apportee aces activites est decrite dans les paragraphes 3\.16 a 3\.19\. ____________________________________ _\.:\. --------- - - -  - 22 - 4\.05 La prestation de services municipaux sera assuree par le Service de la voirie et des batiments, sous la responsabilite du directeur de ce departe- ment et du prefet-maire\. Le personnel du departement recevra une formation sur le tas prodiguee par le personnel d'assistance technique, ce qui lui permettra d'accroitre l'etendue, la frequence et l'efficacite des operations dans chaque ville\. 4\.06 Les activites liees a !'habitat seront executees par les Bureaux mu- nlclpaux de !'habitat qui seront constitues dans le bureau domanial de chaque municipalite\. Leur personnel sera augments et il beneficiera d'une assistance technique\. Des garanties ant ete obtenues a ce propos lors des negociations\. Chaque bureau comptera trois sections : Comptabilite : Cette section sera dirigee par un comptable vol- taique et supervisee par le comptable du projet a la Direction de l'urbanisme\. Elle sera chargee de fixer les methodes de recouvre- ment et de !'enregistrement des acomptes et des redevances parcel- laires\. Cette section aura aussi pour fonction d'instituer un sys- teme qui fournisse immediatement a !'interesse l'etat de son compte courant\. Des bureaux de perception seront organises dans chaque centre communautaire; certains des agents seront en paste fixe, d'autres se deplaceront de porte a porte\. Service technique : Cette section, composee d'un personnel voltaique, continuera d'etre chargee d'identifier et d'enregistrer les titres de propriete, de rassembler les dossiers et de dresser les listes des candidats, de donner suite aux demandes d'indemnisation a sou- mettre ala CommissianÂdu maire, de preparer les contrats pour la signature et de delivrer les permis urbains d'habiter necessaires au transfert des titres de propriete\. Section du developpement communautaire : Cette section, qui sera creee, sera supervisee par un expert du developpement communautaire qui aidera le directeur du bureau a definir les procedures de liai- son appropriees ainsi que les procedures relatives aux activites a !'intention des beneficiaires, dans la zone du projet\. La Section de !'aide communautaire sera chargee des activites suivantes ~ 1) publicite du projet : consultation des habitants des quartiers a amenager, portant, entre autres points, sur les objectifs du projet et la participation et les responsabilites des residents; 2) fixation des criteres de selection; 3) definition des procedures d'attribution des parcelles;  - 23 \.;\. 4) etude des dossiers des candidats a soumettre au Comite de selection; 5) notification aux beneficiaires; et 6) aide aux residents pour la signature des contrats\. Cette section travaillera en liaison avec l'expert des caisses populaires, au Bureau du projet en vue de coordonner et faciliter les contacts dans les quar- tiers inclus dans le projet\. c\. Office national des eaux 4\.07 L'Office national des eaux sera charge de preparer, executer et en- tretenir les investissements en matiere d'adduction d'eau prevus dans le pro- jet\. Cet office, tel qu'il est decrit dans l'Annexe 4, agit en tant qu'entre- prise publique, supervisee par le Departement de l'hydraulique du Ministers du developpement rural\. Cree en 1970, il emploie un personnel uniquement voltaique; il est bienÂgere et enregistre des benefices adequats depuis sa creation\. Il compte actuellement trois divisions techniques; l'une est affec~ tee a Ouagadougou, la deuxieme a Bobo-Dioulasso et la troisieme a des reseaux de moindre importance\. Ces divisions ant pour taches de superviser la prepa- ration des projets d'executton, les travaux de construction et les services d'entretien et de reparation\. Le directeur general supervisera la preparation et l'evaluation de taus les documents d'appels d'offres\. La\. fourniture d'eau par les reseaux de distribution qui auront ete agrandis se fera suivant les procedures actuellemerit en vigueur : des marchands d'eau retribues par l'ONE vendent l'eau aux bornes-fontaines; le prix varie selon la quantite\. Ce sys- tems a bien fonctionne par le passe : les pertes d'eau sont tres legeres et la comptabilite est bien tenue\. D\. Comite interministeriel de coordination 4\.08 L'execution du projet sera coordonnee par un Comite interministeriel de coordination preside par le ministre responsable de l'urbanisme\. La crea- tion de ce comite a ete proposee par le gouvernement\. Il se reunira au mains six fois par an et sera compose des membres suivants : le Ministre des finances ou son representant, le directeur general de l'Interieur, le prefet-maire de Ouagadougou et le sous-prefet de Bobo-Dioulasso; le directeur de l'urbanisme, les responsables des Bureaux municipaux de l'habitat, ledirecteur general de l'ONE, le\.directeur du patrimoine fancier, le directeur general de la BND et le directeur general du Fonds national d'entretien et d'assainissement (FONASEN)\. Selon qu'il sera juge necessaire,\.les representants des autres rinstitutions interessees, dont la liste est donnee ci-apres, participeront egalement aux travaux du Comite\. Il s'agit des representants des Ministeres de l'education et de la sante et des affaires sociales, du prefet de Gaoua,  - 24 - d'uA represent ant de l'equipe de contr6le et d'evaluat ion, du directeur du CNPAR et du directeur de l'OPEV (qui assureron t taus les deux la liaison avec le Projet d'artisan at et de petites entrepris es)\. Le Comite intermin isteriel de coordinat ion devra veiller a ce que taus les services participa nt au projet s'acquitt ent de leurs responsa bilites selon le programme d'executi on du projet et il devra approuver les rapports trimestri els que le Bureau du projet doit soumettre a l'IDA\. Comptabi lite et verificat ion des comptes 4\.09 Pendant les negociati ons, 1 'assuranc e que chaque organisme d 'execu- tion tiendra une comptabi lite et des ecritures distincte s pour chaque element du pro jet a ete obtenue\. De m~me, i l a ete gar anti que les comptes seront verifies chaque annee selon des procedure s jugees acceptabl es par 1' IDA et que chaque etat verifie des comptes sera presente a l'IDA dans les quatre mois au plus apres la clOture de l'exercic e\. Le gouvernement a aussi donne !'assu- rance que le Bureau du projet preparera et soumettra a l'IDA des rapports trimestri els sur l'etat d'avancement des travaux comprenant notamment les resultats du contrOle de l'evalu~tion\. E\. Execution 4\.10 11 faudra environ trois ans et six mois pour mener a bien Â1 'execu- tion du projet\. Le calendrie r detaille d'executi on du projet figure au Tableau 6 de l'Annexe 5\. Ce calendrie r a ete con~u de fa~on a maintenir 1' impulsion donnee a la preparati on en cours sur le Âsite du projet, 'qui est presque terminee dans le quartier de Cissin\. Un architect e-urbani ste a tar- mine le plan de masse en decembre\.  Pendant le troisieme trimestre de 1' annee / civile 1977, l'on s'est occupe d'obtenir une assistanc e technique pour le Bureau du projet et de recruter des consultan ts qui seront charges du projet d'executi on\. Le Bureau du projet devrait etre mis en place au grand complet au cours du premier trimestre de 1978\. Ces preparat ifs et !'assista nce tech- nique necessair e seront finances par le mecanisme de pre~aration du projet qui, a cet effet, a accorde une avance de 330\.000 dollars au gouvernement\. 4\.11 Afin de garantir que les travaux de genie civil seront executes effi- cacement et a moindres frais, la construct ion de routes et de caniveaux secon-  daires sera faite en regie par les bureaux regionaux du Departement des travaux publics du Ministere des travaux publics a Ouagadougou et Bobo-Dioulasso\. La construct ion des principau x ouvrages de drainage et des branchements du reseau d'adducti on d'eau sera confiee a de petites entrepris es, qui beneficie ront de l'aide de l'OPEV\. La construct ion de centres communautaires dans les quartiers sera executee par des stagiaire s du CNPAR qui initieron t les habitants des quartiers aux methodes de construct ion\. Les services de la voirie et des bdtiments des municipa lites procedero nt a la reparatio n et a la renovatio n des ecoles et des dispensa ires municipaux\. Les travaux de drainage hors-site dans la zone de Zogona seront executes par le FONASEN qui assurera\. aussi l'en- tretien des ouvrages ainsi installes \.  - 25 - V\. COUTS ET FINANCEMENT DU PROJET; RECOUVREMENT DES,DEPENSES\. A\. CoOts estimatifs 5\.01 Le coat total estimatif du projet, y compris les taxes, est de 2\.656,2 millions de francs CFA (10,8 millions de dollars)\. Son coat en devi- ses (55 %) s'eleve a 1\.473,1 millions de francs CFA (6 millions de dollars)\. Les taxes s'elevent a 437,9 millions de francs CFA (1,8 million de dollars), soit 16 %Âdes coats estimatifs du projet qui sont resumes dans le tableau de la page suivante • \. 5\.02 Les coOts d'amenagement des quartieJ;s-spontanes, des trames d'ac- cueil et d'adduction d'eau ont ete estimes en fonction\.de !'etude de factibi- lite du present projet effectuee d'aoat a decembre 1976 par une equipe de consultants\. Cette etude a permis d'etablir le coat preliminaire de la con- struction de routes, de !'adduction d'eau, du drainage, du bornage et de !'in- frastructure hors-site dans cinq quartiers de Ouagadougou et deux de Bobo- Dioulasso, parmi lesquels una ete retenu dans chaque ville au titre de !'exe- cution de la premiere phase\. En outre, l'amenagement Âdu quartier du Cissin a ete ajoute par les pouvoirs publics une fois 1' etude de factibilite terniinee\. Les coOts dont i l a ete tenu \.compte pour Cissin sont fondes sur une analyse\. des coOts moyens de !'infrastructure des cinq autres quartiers de Ouagadougou et sur les renseignements disponibles a la suite du projet du PNUD execute dans le m@me quartier\. Apres examen de 1' etude, la mission d' evaluation a conclu que la quantite des travaux de construction etait peut-8tre sous-estimee et a en consequence recommande qu'il soit tenu compte d'une provision pour depassement des quantites de 25 % en c;e qui concerne !'ensemble des travaux  d 'infrastruc- ture et de construction ,J:! y compris les\. equipements collectifs, provision qu'il convient de majorer de 10% pour ce qui est du projet d'execution\. Les estimations de coOts relatives a !'assistance technique et au materiel reposent sur des marches recants et les \.entretiens des membres de la mission avec les services des agences d'execution\. 5\.03 Les provisions pour hausse des prix ant ete fondees sur une majora- tion annuelle constante a partir des prix de base de juin 1977\. et \.les provi- sions pour depassement des quantites ant ete etablies conformement aux dernie- res directives de !'IDA, ce qui semble @treune solution realiste dans le cas de la Haute-Volta : 1977-79, 7,5 % pour le materiel et 9 % pour les travaux de genie civil; 1980, 7 % pour le materiel et 8 ~a pour les travaux de genie\. ci vii\. Les provisions\. pour hausse des\. prix representant 13 % du coat total du projet\. A 1 'exception des travaux de drainage "hors site" de Zogona, pour les- quels la provision n'est que de 10 % (compte tenu des etudes techniques preliminaires)\.  - 26 - HAUTE• VOLTA: PROJET DE DEVELOPPEMENT URBAIN RgSUME DES COUTS ESTIMATIFS (Prix juin 1977) Millions de FCFA Millions de dollars Depenses Oeoeruies monnaie Depenses II!Onnaie Olpenses I!!!!!6ts nationals devises Total\. \.,\.!!!!e6ts nstional\.e devises Tot\.il I\. Aliriinazement des gusrtiers non\.,\.lotis Ouagadougou 105\.2 233\.3 166\.5 505\.0 0\.43 0\.95 0\.68 2\.06 Bobo-Oioulasso J!:\.! \.§!\.& \.2hQ\. \.ll!& \.2:\.!! 9\.:& Q\.:1! \.Q\.:R TOTAL PARTIEL 132\.0 294\.3 217\.5 643\.8 0\.54 1\.20 0\.89 2\.63 ti\. Trames d' accueil Bobo-Dioulasso 9\.8 23\.7 19\.2 52\.7 0\.04 0\.10 o\.o8 0\.22 Gaoua !\.:\.!\. \.b1\. \.b1\. \.§\.:\.!\. \.9\.:\.QQ\. ~ \.2\.:\.Q!\. ft\.:\.!!! TOTAL PARTIEL 10\.9 26\.2 21\.7 58\.8 0\.04 O\.ll 0\.09 0\.24 III\. Adduction d' eau 18\.2 23\.8 39\.7 81\.7 0\.07 0\.10 0\.16 0\.33 IV\. Prets a 1a construction de lozements 91\.2 - 203\.0 294\.2 0\.37 - 0\.83 1\.20 v\. EguiEements co11ectifs 28\.8 28\.0 59\.6 116\.4 0\.12 0\.11 0\.25 0\.48 VI\. Aide aux mtmicipalites 36\.5 70\.8 279\.1 386\.4 0\.15 0\.29 1\.14 1\.58 VII\. Assistance technigue 4\.5 75\.6 241\.1 321\.2 0\.02 0\.31 0\.98 1\.31 VIII\. PreEaration du Erojet en 1976 3\.0 0\.7 23\.8 27\.5 0\.01 0\.00 0\.10 0\.11 IX\. Pro;Jet definitif et ;erojet d'e:dcution 3\.5 ~5\.9 94\.2 133\.6 0\.01 0~15 0,38 0\.54 x\. Coutrole/evaluation 12\.0 9\.3 24\.5 45\.8 o\.os 0\.04 0\.10 0\.19 Codt total du projet sans imprevus ~ ~ 1,204\.2 2,109\.4 !:1!\. !:19\. !\.:\.!! !:,g_ (prix jilin 1977) Imprews Depassemant des qusntites: 25% pour travaux de construction 36\.3 70\.8 69\.0 176\.1 0\.15 \. 0\.29 0\.28 0\.72 ~0% pour ingenierie \.!1\.:\.2\. \.1\.:\.2\. \.1\.:\.i \.ll:\.i \.9\.:\.QQ\. ~ Q\.J!i ~ \. TOTAL PROVISIONS POOR\. DEPASSEMENT DES gUANTI'l'ES 36\.7 74\.4 78\.4 189\.5 0\.~ 0\.30 0\.~2 0\.77 60\.6 106\.2 357\.3 0\.25 0\.43 0\.78 1\.46 Provisions pour bausse des prlz - 190\.5 TOTAL PROVISIONS IMPREVUS 97\.3 180\.6 268\.9 546\.8 0\.40 0\.73 1\.10 2\.23 COUT TOTAL PROJET 437\.9 745\.2 1,473\.1 2,656\.2 1\.79 3\.04 6\.01 10\.84 11 10% pour travaux deÂdrainage hors-site de Zogons\.  - 27 - 5\.04 11 n'a pas dtd tenu compte du coOt de !'acquisition de terrains du doniaine public par les bdndficiaires du projet dans le tableau des coOts du projet ni dans le rdsumd du plan de financement dtant donnd qu'aucun des orga- nisnies participant a l'exdcution du projet n'affecte de fonds's l'achat de terrains\. En accord avec la loi en vigueur en Haute-Volta, les bdndficiaires paieront a la municipalitd dont ils ddpendent un prix fixd officiellement en dchange du permis urbain d'habiter qui leur sera attribud et qui dquivaut a un bail a long terme transmissible\. B\. Financement 5\.05 Le crddit de !'IDA de 8,2 millions de dollars qui serait versd a l'Etat servira a finance:r 90 % de !'ensemble des coOts du projet nets d'impots (2\.218,3 millions de francs CFA, soit 9,1 millions de dollars)\. 11 couvrira 100 ~~ des coOts en devises (6 millions de dollars) et 72 % des coOts en mon- naie nationale nets d'impots (745,2 millions de francs CFA, soit 3 millions de dollars)\. L'Etat financera le reste des ddpenses, soit 209,3 millions de francs CFA (0,9 million de dollars)\. Le plan de financement envisagd est rd- sumd dans le tableau de la page suivante\. 5\.06 Le Gouvernement de la Haute-Volta mettra a la disposition des orga- nismes d 'exdcution les fonds accordds dans le cadre du crddit\. 'Les fonds af- fectds par l'Etat en faveur des diffdrents organismes seront prdvus dans le budget national\. Il s'agira soit de dons, soit de pr€1ts dont les conditions de remboursement feront !'objet d'un accord dont les termes varieront en fonc- tion des dldments envisagds, comme cela se passe habituellement en Haute-Volta\. Ces dispositions ant etd confirmees lors des negociations et \.santÂexplicib3 es dans les paragraphes ci-apres\.  5\.07 Les fonds consacres a !'infrastructu re, au projet d'execution; ala supervision, aux prets ala construction de logements, a l'aide aux municipa- lites, aux marchds et aux centres communautaires seront accordds sous la forme de prets aux organismes d'exdcution et devront etre rembourses au gouvernement central par les municipalites en dix-sept ans a un taux d •Âinter€1t de 6 % compte tenu d'un differe d'amortissement \. de cinq ans\.l/ Une fois terminees, les ins- tallations seront transferees aux municipalite~ a qui il appartiendra d'assurer le service de la dette\. Cependant, trois exceptions sont prevues : 1) taus le\.s investissement s relatifs a !'adduction d'eau, projet d'execution et supervision compris, au titre desquels les fonds seront prates a l'ONE a 6% sur vingt ans, 1/ Aucun interet intercalaire ne sera impose par le gouvernement\.   - 28 - HAUTE-VOLTA : PROJET DE DEVELOPPEMENT URBAIN RESUME DU PLAN DE FINANCEMENT ----------- Millions de FCFA -------- -----------Millions de dollars--------- Gouvernement de Fonds Gouvernement de Fonds Coiit Haute-Volta accordes Coiit Haute-Volta accordes Prets ~ ear l'InA total Prets Dons ear l'IDA f\.LEMENTS DU PROJET ~ I\. Amenagement des quartiers non lotis 1/ 889,4 807,9 81,5 531,4 3,63 3,30 0,33 2_,17 II\. Trames d 'accueil \. 88,4 88,4 54,4 0,36 0,36 0,22 III\. Adduction d'eau 124,3 124,3 78,7 0,51 0,51 0,32 IV\. Prets ii 1a construction de 1ogements 347,2 347,2 2'39,6 1,42 1,42 0,98 v\. Equipements collectifs 162,1 22,6 139,5 108,1 0,65 0,08 0,57 0,44 VI\. Aide aux municipalites 432,4 105,7 326,7 411,1 1,74 0,43 1,31 1,68 VII\. Assistance technique 367,4 367,4 362,4 1,52 1,52' 1,48 VIII\. Preparation du projet (1976) 27,5 27,5 24,5 0,11 0,11 0,10 IX\. Proj'et d'execution et etudes techniques 161,6 161,6 157,5 0,66 0,66 0,64 X\. Contro1e/eva1uation 55,9 55,9 41,3 0,24 0,24 0,17 TOTAL 2\.656 1 2 1\.657! 7 998,5 2\.009 1 0 10,8'!_ 6,76 4,08 8,20 !/ Sont inclus dans 1'e1ement don de cette composante du projet 25% de l'investissement relatif aux travaux de drainage "hors-site" de Zogona, qui sont consideres comme mesure d'hy~iene publique\. Le reste des fonds necessaires ii cet investissement sera fourni sous 1a forme d'un pret au Fonds national d'assainissement et d'entretien (FONASEN)\. ~ - - -  - - - - -- - - - - - - - - - - -  - 29 - compte tenu d'un differe d'amorti ssement de trois ans;l/ ii) les fonds neces- saires aux travaux de drainag e "hors-s ite", projet d'execu tion et supervi sion compris , relatifs au marigot de Zogona au titre desquel s les fonds seront prates au FONASEN a 6\.% sur vingt Âans, compte tenu d'un differe d'amort isse- ment de trois ans;l/ et iii) les fonds destine s a la remise en etat des ecoles et dispens aires, au program med'hyg iene et de desinfe ction publiqu es eta !'as- sistance techniqu e qui seront retroced es aux municip alites sous forme de dons\. 5\.08  Les fonds prevus au titre de !'assist ance techniqu e en faveur de la Directio n de l'urbani sme et de la prepara tion, du control e et de !'evalua tion du projet, et du Fonds pilate de developpement communautaire seront distribu es sous la forme de dons du gouvernement central aux organismes d'execu tion\. 5\.09 Les ressourc es financie res dont ont besoin les municip alites pour finance r les investis sements necessa ires et le service de ces dettes seront obtenue s de la fac;on qui est precisee dans la prochain e section eta l'Annexe 7 portant sur le recouvrement des coOts\. 5\.10 D'apres le plan de financement du projet et les indicati ons relative s aux sources et a l'emplo i des fonds (Annexe 7); le gouvernement central devra effecte r environ 647,2 million s de francs CFA (2,6 million s de dollars ), imp6ts non deduits , au budget des differen ts organismes pendant la periode d'execu tion du projet de la fac;on indiquee ci-desso us\. Credits budgeta ires accorde s par l'Etat au titre du financement des depenses du projet 1976 1977 1978 1979 1980 1981 TOTAL Million s de FCFA 3,0 3,2 231,2 206,5 203,3 647,2 Million s de dollars 0,01 0,01 0,94 0,84 0,83 2,64 5\.11 Les depenses fiscales devant etre en fin de compte compensees par les recette s fiscales , la contribu tion nette de l'Etat au financement du projet est de 209,3 million s de francs CFA (0,9 million de dollars )\. Afin de garanti r que les fonds necessa ires au financement des depenses du \.projet seront disponi bles rapidem ent, !'IDA deposer a, immediatement apres !'entree en vigueur du credit, sur un compte special que\. le gouvernement ouvrira aupres de la Banque central e, un premier montant ne depassa nt pas !'equiv alent de 400\.000 dollars qui servira de fonds de rouleme nt\. L' IDA aliment era le fonds apres avpir \.veri fie que les demandes de decaisse ment sont recevab les\. Les arrangements ont ete conclus lora des negocia tions\. 1/ Aucun interet interca laire ne sera impose par'le gouvernement\.  - 30 - C\. Recouvrement des depenses 5\.12 Le projet met tout particulierement !'accent sur le recouvrement des depenses; les resultats qui devraient @tre obtenus dans ce domaine devrai~nt permettre de garantir que des programmes analogues pourront @tre executes ulte- rieurement et que ces programmes pourront @tre elargis de sorte que la majorite des personnes necessiteuses puissant en profiter\. La perception de redevances au titre des amenagements urbains realises doit contribuer a une repartition plus efficace et plus equitable des investissements aussi bien entre les zones urbaines et rurales qu'a l'interieur m@me des zones urbaines\. Lors de \.l'eta- blissement des normes techniques et des redevances; les responsables se sont attaches a maintenir un certain equilibre entre les diverses solutions envisa- geables, en fonction de la solvabilite des acheteurs 9 de la possibilite d'exe- cuter ailleurs un projet analogue et de l'equite\. Au cours de la preparation et de !'evaluation du projet, ils ont envisage des normes techniques legerement superieures et d'autres baremes d'affectation et de recouvrement des depenses; les normes et les redevances recommandees sont toutefois le resultat d'un do- sage des facteurs precites\. Les raisons des choix qui ont ete faits sont expliquees a 1 'Annexe 6\. On trouvera dans le tableau qui suit les mecanismes de recouvrement des depenses proposes, qui sont decrits par ailleurs dans le reste de cette section et aux Annexes 6 et 7\. Il est prevu deux sources de recouvrement des depenses, a savoir les personnes beneficiant directement du projet et la population urbaine\. Les personnes beneficiant directement du projet paieront le prix d'achat du terrain, le coOt de l'amenagement des par- celles des zones du projet, des pr~ts a la construction, du projet d'execution, les frais de gestion des Bureaux municipaux de !'habitat, la construction des marches et les branchements sur le reseau de distribution d 'eau par le biais des redevances d'utilisation\. Les residents de Zogona paieront pour leur part une partie des depenses d'investissement necessaires a la realisation des travaux de drainage hors-site\. La population de Ouagadougou et de Bobo- Dioulasso paiera, par le biais des imp6ts municipaux, les depenses d'investis- sement relatives a !'infrastructure hors-site, les equipements collectifs et !'assistance aux municipalites\. Les seules depenses qui ne seront pas recou- vrees ni au pres des personnes benef iciant directement du pro jet ni au pres de la population urbaine sont les depenses afferentes a !'assistance technique fournie ala direction de l'urbanisme et aux municipalites, au Fonds pilote de developpement communautaire, au contr6le et a !'evaluation\. Tousles elements pour lesquels les depenses realisees ne seront pas recouvrees sont consideres comme faisant partie des activites de renforcement des institutions entreprises au titre du projet\.  - 31 - Mecanismes de recouvrement des depenses Elements Moyens de recouvrement 1\. Terrain R~devances parcellaires 2\. Infrastructure des zones du Redevances parcellaires projet a !'exception de !'adduction d'eau Adduction d'eau dans les Redevances d •Âeau zones du projet et hers-site 3\. Infrastructure hers-site Depenses non recouvrees sauf  (a !'exclusion de dans le cas de l'investissement !'adduction d'eau) relatif aux travaux de drainage de Zogona pour lequel il est prevu un recouvrement partie! des Âdepenses 4\. Projet d'execution et supervision Redevances parcellaires 5\. Pr~ts a la construction Contribution des beneficiaires 6\. Equipements collectifs Depenses non recouvrees sauf : - Marches Taxe de marche mensuelle 7\. Aide aux municipalites Depenses recouvrees indirecte- sauf ment parÂle biais des imp6ts locaux - Assistance au Bureau Frais de gestion compris dans municipal de 1 'habitat les redevances parcellaires a\. Assistance technique Depenses non recouvrees 9\. Contr6le et evaluation Depenses non recouvrees  - 32 - Amenagement des guartiers non !otis et trames d'accueil 5\.13 Le coat de la mise en place de 1' infrastruct ure dans les zones du projet (sauf en ce qui concerne !'adduction d'eau), du projet d'execution , de la supervision des travaux et le coat de la reinstallat ion des personnes de- placees ainsi que les redevances foncieres aux municipalit es seront recouvres directement aupres des participant s au projet\. Les depenses d'investisse ment relatives aux travaux d'adduction d'eau dans les zones du projet et les tra- vaux hors-site seront recouvrees par le biais des redevances d'eau payees par les consommateurs installes dans les differentes zones du projet (voir Annexe 7)\. Les autres depenses relatives a !'infrastru cture hors-site ainsi que le co9t des equipements collectifs ne sont pas a la charge des benefi- ciaires\.l A !'exception des residents beneficiant de droits de jouissance fanciers coutumiers qui n'auront a verser que 15\.000 francs CFA, taus les be- neficiaires devront verser un acompte de 15\.000 francs CFA (61 dollars), soit environ 20 % du coat total de l'amenagement de la parcelle, le reste devant ~tre recouvre par le biais des redevances parcellaire s assorties d 'un inter~t de 8 1/2 % sur une periode de remboursement de dix ans, etant entendu que le beneficiair e ne sera pas penalise s'il rembourse la somme due avant la date fixee\. La difference entre !'ensemble des coats d'amenagement des parcelles pour les personnes jouissant de droits de propriete coutumiers et les 15\.000 francs CFA qu'elles auront verses sera ajoutee aux depenses afferentes aux parcelles a la charge des autres residents en fonction de la superficie de la parcelle\. Le taux d'inter~t est le taux dont sont assortis habituellem ent les credits logement dans les pays membres de !'Union monetaire ouest-afric aine (UMOA) et de la Banque centrale des Etats de 1' Afrique de 1' Ouest (BCEAO)\. 11 ressort des estimations de la BCEAO que le taux d'inflation atteindra probable- 1/ L'investisse ment necessaire ala realisation des travaux de drainage ex- terieurs dans le quartier de Zogona constitue la seule exception\. La ville entiere devrait beneficier de cet investissem ent important qui devrait permettre d'assainir une zone particuliere ment favorable a la reproductio n d' agents pathogenes; en' outre, cet investissem ent procurers des avantages directs a la zone de 500 ha qui se trouve a proximite imme- diate des installatio ns de drainage qui seront installees\. Aux fins de repartition et de recouvrement des\. coats, il a ete decide avec le gouver- nement qu'une partie des depenses d'investisse ment (25 %) serait consi- deree comme une subvention non recouvrable en faveur de !'ameliorat ion de !'hygiene publique et que le reste (75 %) serait recouvre de la fagon suivante : la moitie de ces depenses par le biais d'imp8ts d'amenagement des terres pergus par le FONASEN, et un autre quart aupres des benefi- ciaires habitant a proximite immediate de la zone interessee\. Par conse- quent, une part proportionn elle de ces depenses a ete imputee aux habi- tants d'une zone de 100 ha a Zogona, qui est restructure e dans le cadre du projet\.  - 33 - re~sort des estimations de la BCEAO que le taux d'inflation atteindra probable- ment 10% en 1977, pour descendre par la suite a environ 1:%!/ au cours de la la periode\. de remboursement des redevances parcellaires •\.  Ces redevances com- prendront egalement une commission de service en vue de couvrir les depenses des Bureaux municipaux de 1' habitat et une surtaxe de 20 %\. qui compensera les ~ defauts de paiement\. Les beneficiaires pourront, s'ils le desirent, obtenir des pr@ts a la construction a des conditions identiques a celles qui ant ete exposees ci-dessus\. 5\.14 On trouvera au Tableau 3 (page 34), a titre d'indication, les chif- fres correspondent aux redevances parcellaires qui seront per~ues dans les quartiers amenages et les trames d'accueil et qui ant ete calcules en fonction de la superficie des parcelles et du revenu des menages concernes\. 11 est pro- pose de percevoir des redevances differentes a Cissin et Zogona, etant donne que les coOts du drainage seront plus eleves dans ce dernier quartier\. Par contra, on prevoit d'qppliquer pour Bobo-Dioulasso un tarif uniforme afin de simplifier les operations de recouvrement des coOts\. 5\.15 L'ensemble des redevances destinees a financer l'amenagement des par- celles, des pr@ts a la construction et des autres depenses relatives au\. loge- ment (redevances d'eau et imp6ts municipaux) representera environ 15 a 25 % des revenue estimes des menages habitant la zone du projet\. La part du revenu mensual que consacreront ces menages aux depenses liees au logement est tout a fait raisonnable en Haute-Volta, pour un menage urbain disposant d'un faible revenu\. S'il le desire, un menage peut reduire ces redevances d'un tiers en choisissant de ne pas demander de pr@t a la construction et compte tenu de l'eventail des superficies des parcelles proposees\. Les tedevances parqellai- res correspondent a l'amenagement de !'infrastructure ne representente que 5 % du revenu\. On ne dispose actuellement\.d'aucune donnee sur la repartition des revenue et il est par consequent impossible de demontrer avec precision a par- tir de que! percentile de la repartition des revenue un menage est en mesure de payer les depenses d'amenagement d'une parcelle\. Cependant, l'extr@me modicite du coat des travaux d'infrastructure fait que les parcelles situees dans les zones amenagees sont a laportee de toutes les personnes qui vivant actuellement dans ces quartiers\. En outre, l'eventail des coOts et des super- ficies des nouvelles parcelles des zones amenagees et des trames d'accueil fait que presque taus les menages de Ouagadougou ou de Bobo-Dioulasso peuvent se permettre d'acheter au mains une si ce n'est deux des trois categories de parcelles proposees dans le projet\. On prevoit qu'\.un grand nombre de person- nee se portent candidates a !'acquisition de ces parcelles compte tenu de la demande de logements residentiels enregistree par le passe et du coOt peu eleve du programme propose\. L'economie de la Haute-Volta etant tres'ouverte, on peut prevoir que le taux d'inflation sera tres proche du tauxd'inflatl\.on mondial prevu\.  - 34 - Sqlvabilite desÂmenages : Redevances mensuelles et part du revenu des menages consacree au paiement de ces redevances!/1/ (245 FCFA = 1 dollar) Redevance parcellairel/ Residents actuels 240 m2 300m2 360 m2 Cis sin 860 (8 ~6) 1\.103 (10 %) 1\.345 (12 %) Zogona 1\.231 (11 %) 1\.566 (14 %) 1\.902 (17 %) Bobo-Dioulasso 894 (8 ~6) 1\.045 (lo ~cl) 1\.396 (13 %) Pr@ts a !'amelioration et ala constru'ction des logements 457 (4 %) Consommation mensuelle d'eau - 336 (3 %) Imp6ts municipaux mensuels 150 (1 %) Nouveaux residents 240m2 300 m2 360 m2 Cissin 860 (5 ~cl) 1\.103 (17 %) 1\.345 (18 ~c~) Zogona 1\.231 (17 %) 1\.566 (19 %) 1\.902 (11 %) Sonsuribugu 894 (5 ~~) 1\.045 (16 %) 1\.396 (18 %) Pr@ts a !'amelioration et ala construction des logements 991 (6 %) Consommation mensuelle d'eau - 336 (3 %) Imp6ts municipaux mensuels 150 (1 %) 1/ En 1979 le revenu mensuel moyen d'un menage parmi les residents actuels est : \. Cissin ; 11\.000 FCFA (44 dollars) Zogona 13\.000 FCFA (53 dollars) Sonsuribugu 11\.000 FCFA (44 dollars) Revenu mensual moyen d'un menage parmi les nouveaux residents en 1979, pour taus les quartiers : 16\.500 FCFA (68 dollars)\. 2/ Les pourcentages entre parentheses correspondent a la part du revenu mensual\. 3/ On trouvera a l'Annexe 6 (par\. 2 et 3) des details sur la composition de ces redevances et les conditions de paiement en vigueur\.  - 35 - 5 \.1\.6 Les dispositions administratives prevues au titre du\. recouvrement des coats en ce qui concerne les elements d'infrastructure sent enoncees au paragraphe 5 \.12 et aux Annexes 4, 6 et 7\. Les recettes constituees par les fonds verses au titre de 1' apport initial, des redevances parcellaires et du remboursement des pr~ts a la construction serviront a amortir les pr~ts accor- \. des par le gouvernement central pour la mise eri place de 1' infrastructure dans les zones du projet et dans les zones exterieures, les pr~ts a la construction, la construction d'equipements collectifs et le programme d'aide aux municipa- lites\. Ces fonds verses par les beneficiaires procureront des recettes suffi- santes pour que les obligations contractees au titre du service de la dette dans le cadre du projet scient respectees\. La necessite d'augmenter les re- cettes municipales est evoquee au paragraphe 5\.20\. 5 \.17 GrAce a 1 'organisation de t rames d 'accueil et a 1 'amenagement des quartiers existants, des excedi:mts seront constitues rapidement; ces fonds supplementaires representeront environ 629 millions de francs CFA pour la pe- riode 1978-1983 (2,57\.millions de dollars) a Ouagadougou et environ 375 mil- lions de francs CFA (1,53 million de dollars) a Bobo-Dioulasso\. Lors des ne- gociations, i l a ete garanti que : a) cheque municipalite ouvrira un compte d 'epargne portent inter~t (Fonds de developpement de 1 'habitat) et credrtera chaque annee ce compte des fonds excedentaires (ou imputera a ce compte les deficits) qui ressortiront\. du compte d'exploitation du Bureau de !'habitat; b) que les fonds seront utilises en vue \.de financer les frais administratifs, les impayes (jusqu 'a 20 % des mont ants a recevoir) et le service de la dette pour les pr~ts contractes dans le cadre des investissements realises dans les zones du projet\. Adduction d'eau 5\.18 Toutes les depenses d'investissement relatives a !'adduction d'eau seront recouvrees \.par le biais des redevances d'eau payees par les consomma- teurs residant dans les zones du projet\. Du point de vue du recouvrement des depenses proprement dit, il ne faudrait pas conclure que les tarifs actuels correspondent de fac;on adequate aux besoins du secteur considers dans son en- semble, mais 1 'augmentation des recettes perc;ues a la suite de !'execution du projet (decoulant de la perception de redevances) permettra en tous cas de fi- nancer environ 96 % de toutes les obligations contractees au titre du service de la dette dans le cas des investissements afferents aux travaux d'adduction d'eau a l'interieur eta hers-site et les coats d'entretien renouvelables en rapport avec ces investissements\. La plupart des residents auront une  borne-fontaine a mains de 200 m de leur habitation, ce qui reduira sensible- ment le r6le des vendeurs d'eau ainsi que le prix paye par les consommateurs\. On a estime que la baisse des prix (qui pourrait etre de 80 %) provoquerait une augmentation de ia consommation par personne de 11 litres par jour dans les quartiers amenages et les trames d'accueil et de 9 litres dans les autres quar- tiers\. Il s 'agit la d 'estimations tout a fait raisonnables\.  Ces ventes sup- plementaires d'eau rapporteront a !'ONE des recettes suffisantes pour lui per- mettre d'amortir tous les investissements relatifs aux travaux d'adduction d'eau entrepris dans le cadre du projet (voir ace sujet le tableau des sources et de 1 'utilisation des fonds donne a 1 'Annexe 7)\.  - 36 - Eguipements collectifs et aide aux municipalites 5\.19 Exception faite des marches, le coOt des equipements collectifs ne sera pas recouvre\. Le montant des depenses engagees au titre de la construc- tion des marches sera totalement recupere par le biais des taxes de marche per~ues chaque mois par les municipalites\. Lars des negociations, les pouvoirs publics ant donne !'assurance que les taxes demarche seront augmentees de fa~on a creer des recettes suppiementaires pour financer les depenses d'entre- tien et d'autres frais (voir Annexe 7, p\. 7)\. En ce qui concerne les projets pilotes de developpement communautaire, les beneficiaires devront payer les services directs, en fonction des activites entreprises\. Enfin, dans le cas de !'element concernant !'aide aux municipalites, i l se peut que !'ameliora- tion des services fournis, tels que le ramassage des ordures, encourage la population urbaine a payer les impOts municipaux\. \. Imp8ts municipaux 5\.20 Il est un fait que les mecanismes de recouvrement des depenses pre- cites creeront des\.recettes suffisantes pour que les autorites puissent faire face aux obligations qu'elles ant contractees au titre du service de la dette dans le cadre du projet; mais les municipalites ant besoin d'ameliorer consi- derablement leurs methodes de taxation et de perception des imp8ts afin d'ar- river a une bonne situation financiere globale\. L'insuffisance de recettes publiques qui se fait sentir actuellement au niveau local en Haute-Volta est imputable aux faibles revenus dont disposent en general les contribuables, a l'elasticite insuffisante des sources de revenus, ala faiblesse des taux d'imposition et aux methodes inadequates appliquees actuellement dans le cadre de !'evaluation et de la perception des imp8ts (voir Annexe 4)\. Le gouverne- ment a conscience de la necessite de trouver un remade a cette situation\. Les ameliorations apportees a !'infrastructure et les investissements prives decou- lant du projet devraient faire augmenter la valeur des biens-fonds dans les zones du projet et contribuer a accroitre le revenu imposable d'une population a faible revenu\. Ces changements pourraient se traduire a long terme par une augmentation des recettes procurees par l'impOt fancier si les methodes d'eva- luation et de perception etaient ameliorees\. La legalisation de !'occupation des terrains situes dans les zones du projet facilitera probablement la per- ception des imp8ts\. Afin d'aider le gouvernement a ameliorer la situation en ce qui concerne les recettes municipales, le projet comprend un element assis- tance technique portant sur l'examen des methodes actuelles de recouvrement des imp8ts et sur la formulation de recommandations ace propos (par\. 3\.19(iii))\. Cette etude et les mesures qui seront prises a la suite des recommandations seront suivies avec beaucoup d'attention lors de !'execution du projet\.  - 37 - D\. Passation des marches 5\.21 Taus les marches de plus de 50\.000 dollars portant sur l'achat de materiel et de vehicules seront attribues apres appel a la concurrence inter- nationals conformement aux directives de la Banque Mondiale (2,1 millions de dollars, avec les impots, mais sans les provisions pour imprevus)\. Ces marches seront groupes, dans la mesure du possible, en lots d'au mains 50\.000 dollars\. Le marche relatif au recalibrage du marigot de Zogona (1, 1 million de dollars) sera egalement attribue apres appel a la concurrence internationals\. A la de- mande du Gouvernement voltaique, une preference sera accordee aux entrepre- neurs nationaux lors de !'evaluation des offres, conformement aux directives de la Banque Mondiale\. Les marches relatifs aux travaux de genie civil por- tent sur !'adduction d'eau, le bornage des parcelles et le drainage hors-:-site (1 million de dollars) et la construction d'equipe!ments collectifs et les re- parations de bureaux (0,3 million de dollars) ne seront pas suffisamment im- portants pour interesser des entrepreneurs internationaux et seront done attri- bues sur appels d'offres nationaux lances conformement ala procedure suivie habituellement en Haute-Volta, jugee acceptable par l'IDA\. La construction des routes en terre et les travaux de drainage (1 million de dollars) seront executes en regie par le Ministere des travaux publics\. Les consultants se- ront engages selon une procedure jugee acceptable par l'IDA (1,9 million de dollars)\. E\. Decaissements 5\.22 Le credit de l'IDA servira a financer les depenses,relatives aux travaux de genie civil, a l'achat de vehicules et de materiel, aux services de consultants, aux frais d 'exploitation et aux prets a 1 'amelioration et ala construction de logements\. Les fonds de l'IDA, qui serviront a financer ces cinq categories, seront decaisses de fagon a couvrir : a) 80% du coOt des travaux de genie civil, y compris !'infra- structure mise en place dansles zones\. du projet et hors-site, la construction d'equipements collectifs, la reparation et res- tauration des ecoles et des dispensaires existents; b) 100% du prix c\.a\.f\. au 90Â% des coOts en monnaie nationale des vehicules et dt\.i materi\.el, y compr is les outils, les vehi- cules et les autres fournitures; c) lOO % du coOt total au 90 % des coOts en monnaie nationale de !'ensemble des services de\.consultants, y compris l'as \. sistance technique, le projet d'execution, la preparation du projet, les operations de centrale et d'evaluation;  - 38 - d) 75 % des frais d'exploitation du Bureau du projet et des Bureaux municipaux de !'habitat, y compris l'entretien des vehicules et les traitements du personnel local sur presen- tation des pieces justificatives\. e) 100 % de la valeur des pr~ts a la construction sur presenta- tion des pieces justificatives\. 5\.23 Une premiere avance sur les fonds du mecanisme de financement des travaux de preparation du projet a ete utilisee au titre de la preparation du present projet en 1976/77; cette premiere avance portait sur un montant de 100\.000 dollars\. Une deuxieme avance de 230\.000 dollars a ete approuvee qui servira a financer le projet d'execution, la preparation des plans de masse, ainsi que le coat initial de !'assistance technique dont beneficie le Bureau du projet; ces fonds seront disponibles a partir'de juillet 1977 jusqu'a la date d'entree en vigueur du credit\. Ces deux avances seront remboursees lors- que le credit entrera en vigueur\. 5\.24 On trouvera au Tableau 7 de l'Annexe 7 un calendrier des decaisse- ments tels qu'ils devraient @tre effectues au titre du credit accorde par l'IDA\. F\. Supervision 5\.25 On estime que la superv1s1on du projet par les services de l'IDA durant la periode d'execution necessitera 150 semaines de travail, a raison d'environ 50 semaines de travail au cours de la premiere annee, y compris le temps passe au siege\. G\. Contr6le et evaluation 5\.26 Les operations de contr6le et d'evaluation du present projet seront confiees a un bureau de consultants voltaique dont les taches, coordonnees avec celles du Bureau du projet, porteront sur 1 'execution des enqu@tes dans les zones du projet, afin de determiner le rythme de progression des travaux de construction et d'amelioration des logements ainsi que les repercussions des differents elements du projet sur la structure economique et sociale\. Ces etu- des seront executees tout au long de la periode d'execution; elles ant debute en fevrier 1977 avec la mise au point des modalites et !'administration d'un recensement de base dans le quartier de Cissin\. Le principal charge de re- cherches de 1 'equipe de contr6le et d 'eValuation present era les conclusions des etudes au Bureau du projet pour qu'il puisse en @tre tenu compte dans !'execu- tion du projet\.  - 39 - VI\. JUSTIFICATION DU PROJET 6\.01 Le projet trouve sa justification dans les avantages nombreux et va- ries qui ~n decouleront, ceci pour des coOts modestes, et dont beneficiera une tres grande partie de la population Lirbaine voltaique\.  L'amelioration de deux quartiers spontanes a Ouagadougou (300 ha) et d'un autre a Bobo-Dioulasso (132 ha) et l'amenagement de trames d'accueil sur une superficie de 50 ha a Bobo-Dioulasso permettront d'ameliorer directement les conditions de vie de quelque 11\.000 menages, soit environ 88\.000 personnes, grace a la mise en place de !'infrastructure elementaire, ala legalisation des permis urbains d'habiter\. eta la fourniture de credit pour la construction ou !'amelioration des logements\. En outre; la mise en place d'un reseau d'adduction d'eau ele- mentaire dans trois autres quartiers spohtanes de Ouagadougou touchera un nom- bre estimatif de 20\.000 personnes\. Au total, les composantes du projet -\. amenagement des quartiers, trames d'accueil et adduction d'eau- s'adresseront a 76\.000 personnes a Ouagadougou et plus de 33\.600 personnes a Bobo-Dioulasso, ce qui represente dans chaque cas un tiers de la population de la ville\. 6\.02 Outre les avantages directs dont beneficiera une fraction Âconsidera- ble \.des populations urbaines a faible revenu, le projet serviTaa demontrer qu'il est possible d'obtenir des resultats en utilisant des methodes a faible coOt pour s'attaquer au developpement urbain et de renouveler ces experiences dans d'autres endroits; en outre, il \.renforcera les institutions interessees en leur permettant d'acquerir de !'experience dans ce domaine\. Grace a !'in- troduction d'un systeme de recouvrement des coOts engages pour les ameliora- tions urbaines, le projet contribuera d'autre part a assurer une repartition plus efficace et plus equitable des ressources d'investissements, d'une part entre les zones urbaines et rurales, et d'autre part au sein~m@me des zones\. urbaines\. Evaluation economigue des travaux d'amenagement et de !'installation des trames d'accueil 6\.03 Les taux de rentabilite economique des travaux d'amenagement et de !'installation des trames d'accueil sent fondes sur !'augmentation prevue de la valeur des biens fanciers, a la suite de la realisation du projet\. Certes, la valeur des biens fanciers constitue un etalon imparfait lorsqu'il s'agit de mesurer les avantages decoulant du projet du fait qu'elle ne represente pas la valeur totale des avantages que les personnes et la societe retirent d'une amelioration de leur cadre total de vie\. Mais en !'absence de donnees il n'a pas ete possible d'evaluer les effets moins tangibles, bien que peut-etre plus importants, qu'aura le projet, tels que la reduction des taux de maladie et de mortalite et l'accroissement de la productivite qui en decoule\. Les taux de rentabilite fondes sur\. !'augmentation de la valeur des biens fanciers ne don- nent\.par consequent qu'une simple indication partielle du merite economique du pro jet\.  - 40 - 6\.p4 La valeur des terrains, dans les zones du projet qui ne sont pas ame- liorees et dans celles qui le sont, a caracteristiques d'emplacement egales, est fondee sur les estimations etablies par les consultants pour\. le projet d'amenagement du quartier de Cissin finance par le PNUD, ajustees a la baisse en raison de la portae plus vaste, du present projet, ainsi que sur des entre- tiens avec des fonctionnaires du Bureau du cadastre et de la Direction de l'urbanisme de Ouagadougou et avec les autorites municipales de Bobo-Dioulasso (Voir Annexe 9)\. 6\.05 L'analyse economique est fondee sur les coOts du projet, notamment sur la totalite des coOts d'infrastructure dans la zone du projet, une partie des coOts de !'infrastructure hors-site dans certains cas, le coOt du projet d'execution et de la supervision des travaux, les provisions pour travaux sup- plementaires imprevus et les coOts d'exportation et d'entretien\. Les coOts de materiaux de construction et le coOt de la main-d'oeuvre pour la•construc- tion ou !'amelioration des logements (y compris les coOts de reinstallation des residents deplaces), les coOts d'\.administration du projet (Bureaux municipaux de l'habitat) !'assistance technique (deduction faite des coOts de preparation du deuxieme projet) et le prix de marche des terrains "sans le projet" (ce dernier correspondant, estime,\.t-on, aux coOts d'opportunite) ant egalement ete inclus\. Conformement a la pratique, les coOts des equipements collectifs qui seront construits dans les zones du projet n'ont pas ete inclus\. Taus les coOts utilises dans l'analyse economique sont exprimes en fonction des prix de juin 1977, nets de taxes et d'impets\. 6\.06 Les taux de rentabilite economique des travaux d'amenagement et d'installation des trames d'accueil dans les deux villes prevues dans le projet, fondes sur les avantages et les coOts decrits plus haut, sont les suivants : Ouagadougou Amenagement du quartier de Cissin 40 % Amenagement du quartier de Zogona 24 % Bobo-Dioulasso Amenagement du quartier de Sonsuribugu 31 % Trames d'accueil )\. 6\.07 L'analyse de sensibilit~ indique que ces taux deÂrentabilite sont relativement insensibles a une augmentation des coOts de l'ordre de 20% et quelque peu plus sensible a une reduction des benefices de l'ordre de 20 %, mais il est peu probable que la valeur des biens fanciers soit inferieure aux chiffres utilises\.  - 41Â- 6\.08 Les taux de rentabHite eleves traduisent l'ampleur de la demande, face a une offre extremement limitee de parcelles amenagees d'un coat modeste, d'ou le nombre tres eleve de families pretes a payer les charges qui leur sont demandees, ce qui en soi peut entrainer une sous-estimation de la valeur eco- nomique globale du projet\. Il n'en reate pas mains que le projet permettra d'accroitre considerablement l'offre de terrains amenages, ce qui ralentira leur plus-value, a long terme\. Evaluation economique\. des travaux d'adduction d'eau 6\.09 Un taux de rentabilite economique distinct, correspondent au reseau de-distribution -d'eau prevu dans trois autres quartiers de Ouagadougou qui ne seront pas totalement amen ages, a egalement ete calculeÂ\. Les avantages calcu- les dans la pr'esente analyse sont exprimes en termes d 'une economie de coOts realisee par les consommateurs a la suite de la difference importante entre le prix de l'eau vendue par les vendeurs et qui constitue a l'heure actuelle leur source d'approvisionnement et l'eau qu'ils pourront acheter directement ala borne-fontaine (lorsque le projet sera realise)\. Le projet prevoit en effet des bornes-fontaines publiques, placees a intervalles suffisamment rapproches pour que les populations n'aient pas besoin de s'approvisionner aupres des vendeurs, ce qui leur coOte pluscher\. La consommation actuelle est estimee a 11 litres par habitant et par jour: (ce qui Ârepresente une moyenne ponderee entre la saison seche et le reste \.de 1 ÂÂannee) et les economies realisees sur cette quantite ant ete ajoutees a l'economie realisee sur une consommation supplementaire d'environ 9 litres par jour et par personne (imputable a la baisse du prix) pour obtenir une estimation globale des avantages\. 6\.10 Les coOts\. utilises dans la presente analyse comprennent les coOts d'infrastructure, les provisions pour depassement de quantites le coat du pro- jet d'execution, de la supervision des travaux de construction, les coOts d'ex- ploitation etd'entretien, e~primes aux prix en vigueur en juin 1977, nets de taxes et d'impots\. 6\.11 Le taux de rentabilite economiqueÂobtenu a partir des avantages et coOts indiques ci-dessus\.est de 37 %\. L'analyse de sensibilite a indique que\. le taux de rentabilite ne tomberait pÂas au-dessous de 31 % pour une aug- mentation des coOts au une diminution des avantages de 20 %\. Taux global de rentabilite 6\.12 D'apres les calculs, le taux global de rentabilite, etabli sur la base de 75% du coOt total du projet, est de 34 %\. L'analyse de sensibilite a indique que le taux de rentabilite ne tomberait pas au-dessous de 21 % compte tenu d'une augmentation des coOts de 20% et d'une diminution des avan- tages de 20 ~o\.  - 42 - Risgues 6\.13 Le projet comporte des risques importants en raison des contraintes considerables qui existent en matiere de personnel et de ressources disponi- bles et de la faiblesse des organes d'execution\. Le projet de Cissin a certes donne de bans resultats, mais il s'agissait d'un projet pilate, d'une portee limitee et dont les dispositions financieres demanderont a ~tre ameliorees pour en faire un programme de developpement urbain de portee plus vaste, transpose dans d'autres regions\. Ce dernier point, c'est-a-dire le passage d'un projet pilate affectant mains de 1\.000 families a un vaste projet affectant !'exis- tence de plus de \.12\.000 families, et de plus de 100\.000 personnes, exigera de la part du gouvernement des efforts soutenus, et un degre tres pousse de coor- dination entre le Ministers des travaux publics et les municipalites de Ouagadougou et de Bobo-Dioulasso\. Pendant toute la duree des travaux de pre- paration du projet, le Gouvernement voltaique, au niveau presidential et mi- nisterial, a manifeste pour le projet le plus vif interftt\. Les pouvoirs pu- blics s'etaient fixe des objectifs plus ambitieux et envisageaient d'ameliorer un nombre plus important de quartiers\. Mais pour donner au projet une meil- leure chance d'atteindre les objectifs deja considerables qu'il s'est fixes, ce nombre a du @tre r~duit\. 6\.14 Specifiquement, les risques portent sur le recouvrement des coOts et la perception des imp6ts\. Comme \.il a deja ete indique, le projet se propose d'introduire un systeme de recouvrement de redevances parcellaires au titre  des amenagements urbains, et cela pour la premiere fois en Haute-Volta\. II n'existe en effet aucun precedent, particulierement en ce qui concerne les po- pulations a faible revenu qui ne paient presque jamais d'imp6ts municipaux au nationaux\. 11 sera done extrftmement important que les Bureaux municipaux de !'habitat de chacune des villas concernees fonctionnent \.de fa9on efficace, au niveau du quartier\. Si ces bureaux ne parviennent pas a percevoir les rede- vances parcellaires, la viabilite financiers de ces operations sera compro- mise pour l'avenir\. 11 en vade m@me des recettes fiscales et il est imperatif que les municipalites ameliorent la methode de perception des imp6ts sans quai elles ne disposeront pas des ressources financieres necessaires pour faire face a leurs responsabilites et fournir aussi bien qu'entretenir les services qu'il leur appartient d'assurer\. 11 sera done indispensable que les prefets- maires de Ouagadougou et de Bobo-Dioulasso s'interessent de fa9on positive au renforcement du r6le que jouent a long terme les institutions municipales dans la mise en oeuvre de la politique nationale de developpement urbain\. VII\. ACCORDS ET RECOMMANDATIONS 7\.01 Au cours des negociations, des decisions ont ete prises a propos des points suivants : a) le projet d'execution et les dispositions prises en vue de !'execution du projet devront ~tre juges satisfaisants par l'IDA (par\. 3\.07-3\.10 et 4\.01);  - 43 - ' b) les dispositions relatives a l'octroi d'un titre legal aux residents des quartiers amenages et des trames d'accueil (par\. 3\.08); c) les conditions de vente des parcelles, les criteres retenus en vue du choix des menages et de la repartition des par- celles (par\. 3\.12 et 5\.13); d) les dispositions pour le programme de pr@ts ala construction\. (par\. 3\.15); e) la creation d'un Bureau du projet a la Direction de l'urbanisme; f) la creation de Bureaux municipaux de l'habitat dotes d'un per- sonnel ~dequat au sein du Bureau domanial respectif des muni- cipalites de Ouagadougou et de Bobo-Dioulasso (par\. 4\.06); g) les dispoÂsitions relatives a 1' examen des propositions presen-\. tees par les consultants en ce qui concerne !'amelioration des methodes de perception des recettes, d'evaluation des biens fanciers et d'imposition (pa:r\. 3\.19); h) les dispositions relatives a la retrocession du pr@t aux muni- cipalites de Ouagadougou et de Bobo-Dioulasso, a l'ONE et au FONASEN (par 5\.06-5\.07); i) l'ouverture d'un compte special ala Banque centrale (par\. 5\.11); j) les dispositions relatives au recouvrement des coOts (par\. 5\.12 et 5\.13); et k) le dep6t des excedents provenant des comptes des Bureaux muni- cipaux de l'habitat sur un compte d'epargne rapportant des interets (Fonds de Âdeveloppement de l'habitat) (par\. 5\.17)\. 7\.02 L'entree en vigueur du credit propose dependra aussi de l'element suivant  signature et remise des accords de pret subsidiaire entre le gouvernement et les municipalites de Ouagadougou et de Bobo- Dioulasso, le gouvernement et l'ONE, le gouvernement et la FONASEN\. 7\.03 Compte tenu des accords ci-dessus, le projet justifie l'octroi par l'IDA d'un credit de 8,2 millions de dollars au Gouvernement de la Haute~Volta\.  ANNEXE 1 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN LE SECTEUR URBAIN Bilan de l'evolution demographigue 1\. L'economie de la Haute-Volta est l'une des plus rurales du monde; en 1975, 8,3 ~o seulement de ses habitants vivaient dans les zones urbaines\. On peut m@me dire que la Haute-Volta est le pays le mains urbanise de la region sahelienne de l'Afrique de l'Ouest, au pourtant la moyenne de la population vivant dans les zones urbaines ne depasse pas 14 ~\.;\. Environ 90 ~o des Voltaiques vivent de l'agricultur~ et travaillent leurs terres, loin de l'economie commerciale urbaine exigue\. 2\. Oepuis son acces a l'independance en 1960 et malgre son caractere rural, la Haute-Volta a enregistre lin taux de croissance Âurbaine rapide et soutenu qui a atteint 5,1 % par an de 1970 a 1975 suivant de pres celui des pays cOtiers africains qui s'urbanisent rapidement, tels que le Ghana et la COte d'Ivoire, ou les taux de croissance urbaine ant ete de 5,3% et de 6,3 % respectivement durant la m~me periode\. La croissance urbaine de la Haute-Volta s'est surtout concentree dans quelques grandes villes : Ouagadougou, Bobo-Dioulasso et Koudougou\. En 1975, la totalite du secteur urbain ne comptait que 500\.000 personnes, dont environ 220\.000 vivaient a Ouagadougou, 120\.000 a Bobo-Oioulasso et quelque 50\.000 a Koudougou\. La capitale, Ouagadougou, a enregistre une croissance annuelle de 7 % durant les dix dernieres annees et s'est rapidement transformee de petite agglome- ration en centre administratif et economique\. Les centres secondaires n'ont\. pas suivi ce rythme et neÂse sont developpes que d'environ 3% par an\. 3\. Une grande partie de cette croissance a ete alimentee par les migra- tions des campagnes vers les villes\. On peut attribuer a ces migrations envi- ron 56 ~o de la croissance urbaine annuelle, les 44 9o restants provenant d' un accroissement naturel\. Ces chiffres sont prochesÂde l'evolution des mouve- ments de population des campagnes vers les villes dans la region sahelienne\. Toutefois, la part des migrations dans la croissance de Ouagadougou est beau- coup plus elevee, avec pres de 68 % et s'explique par l'attrait des possibi- lites d'emploi\. Cette evolution a entrains d'autre part une modification de la composition ethnique de la ville; celle-ci, jusque-la peuplee surtout de Mossis, compte a present une population beaucoup plus melangee, ce qui donne a penser que les migrants refluent de toutes les parties du territoire vers la capitale\.  ANNEXE 1 Page 2 Projections demoqraphiques 1/ 4\. Sur la base de !'evolution indiquee plus haut, des taux de fecondite variables, de la diminution de la mortalite infantile et d'un ralentissement des migrations vers la C8te d'Ivoire, i l est probable que les taux de crois- sance demographique en Haute-Volta augment\.eront jusqu' en 1990, portant la population de 6 millions d'habitants en 1975 ~ 11 millions en l'an 2000\. Selon les previsions, a l'interieur de cette tendance generale, la part de la population urbaine doublera presque, passant de 8,3 % a 15,7 % au cours des 25 prochaines annees, s'alignant elle aussi sur l'accroissement prevu de la popu- lation urbaine sahelienne, qui passera de 14 % a 24,1 % durant la m~me periode\. En valeur absolue, la population urbaine passerait de 500\.000 a 1\.791\.009, ce qui representente une augmentation de plus du triple\. 11 faudra lui fournir des emplois et mettre en place des services urbains correspondent a ses be- soins\. Pour !'ensemble du Sahel, environ 8,2 millions d'habitants devront ~tre absorbes par le secteur urbain\. 5\. Des accroissements absolus de cette ampleur impliquent des taux eleves de croissance annuelle\. Selon le\.s projections, la population urbaine de la Haute-Volta augmentera approximativement de 5 % jusqu'en 1990, et de 1975 a 2000, son taux annuel moyen d 'expansion sera de 5, 2 ~0\. Ces projections sont sans doute incertaines, maisÂil n'en est pas mains evident que des migra- tions importantes des campagnes vers les villes se poursuivront au Sahel, et particulierement en Haute-Volta, durant cette periode\. Les revenus agricoles pourraient bien enregistrer des ameliorations importantes, par suite de ia realisation des grands programmes de developpement rural prevus dans plusieurs regions, mais les reactions de la population a ce genre d'ameliorations ne sont pas toujours previsibles : les habitants quittent les campagnes quand ils ont besoin d'argent, mais ils les quittent aussi lorsqu'lls en ont\. Il est done raisonnable de prevoir que d'importants mouvements migratoires se poursuivront, portant les centres urbains a des dimensions difficilement con- cevables il y a dix ans\. Possibilites d'emploi 6\. Le principal motif de l'exode rural est la possibilite de trouver ailleurs un emploi\. Les Voltaiques ant emigre dans toute !'Afrique de !'Ouest a la recherche d'emplois\. Beaucoup d'entre eux, cependant, s'arr§tent a Ouagadougou au a Bobo-Dioulasso ou font etape dans les deux villes avant de quitter le territoire, s'efforgant d'abord de chercherun emploi urbain dans un environnement familier\. La majorite de ces migrants quittent la Haute-Volta 1/ Les projections sont fondees sur des estimations des Nations Uni7s, de la FAO et de la BIRD\. ----------------------------~Â'~ '=ÂÂÂ~ÂÂ~Â--~~~~----------------------------------------  ANNEXE 1 Page 3 pour le Ghana et la C6te d'Ivoire, dans une large mesure en raison des sa- laires plus ~lev~s qu'ils peuvent gagner dans ces pays ~ ~conomie plus dyna- mique, mais certains restent a Ouagadougou et a Bobo-Dioulasso et travaillent dans le secteur informel, qui est maintenant la source la plus importante d'emplois urbains\. 7\. Quoique les statistiques de l'emploi ne soient pas tres fiables, on estime, de diverses sources qu'en 1975, la population active totale ~tait d'environ 2,6 millions de personnes\. Sur ce total, au mains 90% ~taient employ~s dans l'agriculture, soit 2,34 millions de personnes\. Sur une popu- lation urbaine de 500\.000 habitants, 25 % environ peuvent ~tre consid~r~s comme ~conomiquement actifs\. La populatio\.n active urbaine est done estim~e a environ 120\.000 personnes, dont quelque 19\.000 etaient employ~s dans le secteur public\. Les employ~s du secteur priv~, soit environ 99\.000 personnes, se r~partissent done entre le secteur moderne et le secteur traditionnel\. La part a affecter a chacun de ces secteurs est cependant extr~mement difficile ~ d~terminer avec un raisonnable d'exactitude, en raison du caractere degr~ saisonnier du s~jour dans les villes, de l'age moyen de la population active, compos~e en majorit~ de jeunes et du manque de sources industrielles impor- tantes d'emplois dans le secteur moderne; i l est done probablement raisonna- ble d'estimer que sur l'ensemble de la population active, 18\.000 personnes seulement travaillent dans le secteur priv~ moderne, les 81\.000 personnes restantes exer~ant leurs activit~s dans le secteur traditionnel\. Ce dernier chiffre est saisonnier et cache un sous-emploi assez important : les milliers de personnes qui poussent des charrettes, rassemblent du bois de chauffage et essaient de vendre quelques maigres produits agricoles dans les marches urbains\. Les statistiques concernant d'autres activit~s du secteur tradi- tionnel, telles que les emplois de menuisiers ou de tisserands, indiquent un revenu mensuel moyen de quelque 10\.000 francs CFA (40 dollars), qui peut sembler extremement bas~ mais qui, si on le compare au PIB annuel de 110 dol- lars par habitant, explique aussi bien l'attrait exerce sur les migrants ruraux que la croissance rapide de Ouagadougou et de Bobo-Dioulasso durant les dix dernieres ann~es\. Ouagadougou 8\. La ville de Ouagadougou, jusque-la le centre du Royaume des Mossis, qui s'y sont install~s au cours du XVIIe siecle, est devenue aujourd'hui la capitale de la R~publique ind~pendante de Haute-Volta\. C'est au d~but du XXe siecle que des Europ~ens sont venus s'y etablir et qu'un paste militaire fran~ais a ~te install~ dans la ville ancienne\. Sa population, qui ~tait de quelque 19\.000 habitants en 1914, est passl3e ~ 50\.000 habitants en 1956\. A cette ~poque, elle etait d~ja consider~e comme la capitale de la colonie fran~aise et etait reli~e ala cate d'Ivoire par le chemin de fer de la  ANNEXE 1 Page 4 Regie Abidjan-Niger\. Lorsqu'elle a accede a l'independanceÂen 1960, elle comp- tait 1\.me population de quelque 60\.000 habitants et abritait un corps diplomati- que restraint et une petite communaute d 'expatr ies\. Le centre commercial de la Haute-Volta est reste a Bobo-Dioulaaso, dans la region du sud-ouest, pres des frontieres du Ghana, de la Cote d'Ivoire et du Mali\. 9\. Pendant la periode qui a suivi !'independence, la croissance de Ouagadougou a pris un aspect different\. Les migrations temporaires vers la ville, qui jusque-la etaient le fait des hommes, sont devenues des migrations de menages, ameliorant 1 'equilibre entre le nombre des hommes et celui des femmes dans la population\. Cette derniere a rajeuni, car de nombreux enfants sent nes et ant ete eleves dans des quartiers en expansion rapide\. Dans\. la Âville meme, on t~ouve encore le contraste entre les vieilles zones loties ob vit une proportion plus grande de menages et leszones non loties de squatters, ob vivent de nombreux hommes non maries\. Toutefois, malgre la tendance aÂune stabilisation, la population a ete constante, avec de moins en mains de mi- grants temporaires et de plus en plus d'enfants dont les besoins en matiere d'education et de sante exigent !'attention des pouvoirs publics\. 10\. L' expansion de la ville dans toutes les directions est le temo:ignage le plus\.spectaculaire\.de cette croissance\. Les quartiers traditionnels des Mossis, au centre de la ville (voir Carte 12842) et qui groupaient le plus gros de la population d'Ouagadougou, sont aujourd'hui entoures d'immenses zones non loties ou seÂsont installes des squatters\. Ces zones qui s'etendent meme au-dela des reservoirsÂqui bordent le cote septentrional de la ville, abri- tent plus de la moitie de la population et regroupent plus de la moitie des quartiers d'habitation\. Ces peuplements peripheriques, malgre leur caractere semi-rural, avec leurs huttes de terre, leurs jardins et les animaux pa\.turant a proximite, abritent des familles qui ant vecu dans la ville depuis l'inde- pendance, notamment des familles de petits fonctionnaires\. Bien qu'il s'agisse de peuplements illegaux, ne disposant que d'un petit nombre de services urbains, une part assez importante de la population active du secteur moderne y vit\. Si cette tendance se poursuit, le centre dit legal, compose de lotissements, ne representera qu'une faible partie de la zone urbaine totale\. Bobo-Dioulasso 11\. Par contraste avec les orlglnes tribales et politiques de Ouagadougou, Bobo-Dioulasso a toujours le lieu de rencontre de diverses cul- tures et un centre d'activites economiques\. Son nom meme, qui evoque la croisee des chemins pour les tribus de Bobo et de Dioula, a continue de carac- teriser une ville riche de son heterogeneite et qui est un pOle d'attraction pour les habitants de toutes les regions d'Afrique de !'Ouest\. Elle a ete jusqu'a 1947, la capitale de la colonie de Haute-Volta, puis a ete remplacee par Ouagadougou\. Durant la premiere moitie du XXe siecle, de grands investis- sements ont ete effectues dans !'infrastructure, particulierement dans un  ANNEXE 1 Page 5 vaste reseau de canaux\.de drainage des eaux de pluie, des routes goudronnees et des batiments publics\. Ces travaux, acheves avant l'independance grace a la main-d'oeuvre fournie par la colonie penitentiere, continuent de donner a Bobo-Dioulasso l'apparence d'une petite ville ,bien developpee, m~me si la superficie totale actuellement habitee depasse de loin celle d~ la petite ville coloniale d'autrefois\. Une tradition de planification urbaine a persists qui se traduit par l'amenagement ordonne de nouveaux quartiers, composes de lotis- sements et un reseau d'assainissement public qui fonctionne assez bien\. Elle a ete reprise par la municipalite de Bobo-Dioulasso, soutenue par des institu- tions gouvernementales, mais s'est ralentie progressivement parce que des con- traintes financieres ant empeche la municipalite de suivre le rythme de crois- sance de la population urbaine\. 12\. Outre ses institutions municipales relativement solides, la vil~e a aussi la chance d'~tre dotee d'une source fiable d'approvisionnement en eau, situee a'une trentaine de kilometres du centre, qui lui fournit de l'eau en abondance\. Cette eau est acheminee vers la ville et distribuee par un reseau de canalisations, dont la mise en place a ete financee, il y a plusieurs annees, par une aide de l'Allemagne\. Des precipitations saisonnieres, mais abondantes maintiennent les eaux souterraines a des niveaux relativement eleves pour une ville du Sahel et permettent ainsi d'alimenter de fa~on satisfaisante les puits des cours au vont s'approvisionner les menages\. 13\. Comme on l'a indique plus haut, c'est surtout la vitalite economi- que de cette ville qui exerce un attrait sur les migrants des campagnes\. Une petite zone industrielle moderne, modeste mais en expansion est venue com- pleter un grand marche et un secteur informel naissant dans les quartiers d'habitation\. De nombreux Âhabitants de Haute-Volta qui vive~t et travaillent en C6te d'Ivoire ant investi leurs gains en devises dans des entreprises situees a Bobo-Dioulasso; les revenus relativement eleves des menages ant attire des marchands venus de pays aussi eloignes que la Nigeria et le Senegal\.  ANNEXE 2 Page 1 HAUTE-VOLTA  PROJET DE DEVELOPPEMENT URBAIN \. ORGANISATION COMMUNAUTAIRE : EXPANSION DE L'EXPERIENCE DE CISSIN Introduction 1\. Par suite de contraintes particulierement severes en matiere de main- d'oeuvre et de finances, la strategie de developpement national des pouvoirs publics a mis de plus en plus !'accent sur les efforts personnels de la popula- tion voltaique\. Les mihisteres et organismes ayant mandat de promouvoir le developpement communautaire ant insists particulierement sur le theme de l'autonomie car le developpement communautaire couvre des activites diverses, qui vont du creusement des puits a l 1 alphabetisation fonctionnelle\. Les pou- voirs publics ant utilise une approche collective pour ameliorer les con'ditions de vie de la population, mais en fait !'experience de la mobilisation communau- taire est, au mieux, fragmentee\. Le projet de Cissin represente une\. etape import ante dans cette direction\. La presente annexe passe en revue br ie\tement 1 1 historique du projet et de la participation communautaire et esquisse le rOle elargi que jouent les habitants des quartiers dans le Projet de developpement urbain\. 2\. En 1973, le gouvernement, aide par le PNUD, a lance une experience triennale en matiere de trames d'accueil et de modernisation des logements, en vue d'ameliorer les conditions de vie des populations\.urbaines pauvres\. Cet effort conjoint, entrepris dans le quartier de Cissin, a Ouagadougou, visait a etudier divers moyens de faire face a la croissance de pluÂs en plus rapide et incontr0lt3e de la capitale\. La participation communautaire a represents un Âelement cle dans toutes lesÂphases du projet\. L'assurance d'une certaine ga- rantie de la propriete fonciere a ete le principal stimulant qui a encourage la prise de responsabilite sur les plans individuel et collectif\. Les coope- rative's de quartier' CreeeS danS le but de mobiliser 1 I epargne privee SOnt devenues par la suite le principal circuit de cette participation\. 3\. La premiere phase du projet de Cissin prevoyait 600 parcelles assai- nies de 375 mZ et l'amenagement d'une superficie adjacente de 8 ha, ott vivent 266 families\. les travaux initiaux d'infrastructure ant ete limites au minimum juge essentiel pour satisfaire aux besoins elementaires et constituer la base d 1 une legislation de 1 1 occupation de la parcelle\. Il s 1 agissai t de routes non rev~tues et de pistes, de fosses de draingae, du bornage des parcelles, de reserves de terre pour les installations communautaires et de puits collectifs\. Les ameliorations de ce systene de base devaient @tre entreprises progressi- vement par les organisations communautaires des quartiers\. Les menages  ANNEXE 2 Page 2 de~aient payer quelque 70 % des coOts d'infrastructure : 25\.000 francs CFA, soit 102 dollars, pour les trames d'accueil et 15\.000 francs CFA, soit 61 dol- lars, pour les quartiers modernises, quoiqu'il n'y ait pas eu de calendrier de paiements mensuels ni de mecanisme de remboursement\. 4\. Cinq interventions fondamentales oht constitue la premiere operation : a) Routes en terre\. Dans la mesure du possible, les routes ant ete con9ues de fa9on a minimiser la demolition des logements exis- tants\. Les menages qui devaient ~tre deplaces ant re9u des par- celles aussi proches que possible de leurs logements anterieurs; b) Boisage des parcelles\. Les statistiques provenant de plusieurs etudes socio-economiques entreprises au titre du projet sugge- rent que les regimes de colonisation des terres dans des zones spontanees refletent de fortes traditions rurales et ethniques\. Ainsi, les limites des parcelles ont suivi, dans toute la mesure du possible, des groupements sociaux existants; c) Assainissement •\. Un reseau de fosses de drainage en terre a ete creuse par les habitants des lieux, sous la direction des agents du developpement communautaire\. Les\. participants sont devenus les proprietaires de la terre et s'en sant servi pour la fabri- cation des briques; d) Puits collectifs\. Le reseau d'adduction d'eau de la ville ayant une capacite limitee, les puits collectifs restent la principals source d'approvisionnement en eau;_ et e) Amelioration des parcelles\. Les normes et criteres de cons- truction, fixees au minimum, a \.!'exception d'une reglementation municipals concernant la construction de latrines, visent sur- tout la securite, !'amelioration de !'hygiene et un confort de base\. Les autres points de reglementation ant ete les sui- vants : i) orientation nord-sud du logement; ii) utilisation de briques de Cissin pour la construction d'habitations; et iii) construction d~un mur autour de chaque parcelle\. 5\. Les formalites relatives a !'obtention du permis de construire eta !'octroi d'un pr~t font maintenant l'objet d'une seule demarche au Bureau municipal du logement qui a ete cree aux fins du projet\. La Banque nationale de developpement (BND) n'accorde des pr~ts\. qu'aux travailleurs salaries; c'est pour cette raison que le systems des caisses populai~es a ete lance en avril 1976\.  ANNEXE 2 Page 3 I 6\. La presence constante d'un agent du developpement communautaire, la collaboration avec les chefs traditionnels et la consultation des habitants de la region ant eu une importance cruciale pour reduire au maximum, au debut du projet, les problemes de deplacement des familles interessees\. Un comite, comprenant les chefs traditionnels, les representants designes des quartiers et des expatries, a examine les dossiers en question et a pris des decisions qui ant ete, dans une large mesure, acceptees par les habitants\. 7\. Quoiqu'il soit de dimensions modestes, le quartier de Cissin s'est revele tres populaire et a mis l'accent sur la forte penurie de logements dont souffre la ville\. Durant deux semaines, pres de 1\.800 demandes ont ete enre- gistrees pour les 600 parcelles\. Les criteres de selection limitaient les can- didats aux families ayant un revenu inferieur a 36\.000 francs CFA (147 dollars) et il a ete procede a un tirage au sort public pondere pour atteindre les familles dont les revenus se situaient entre 6\.000 et 18\.000 francs CFA (24- 73 dollars)\. Quarante-neuf parcelles ont ete attribuees aux families ayant des droits fanciers traditionnels\. Le tableau suivant indique la repartition des beneficiaires en fonction du niveau de revenu Francs CFA/mois Dollars E\.U\. Ot tO ' 0- 6\.000 0- 24 9 6\.000-12\.000 24- 48 40 12\.000-18\.000 48- 73 22 18\.000-24\.000 73- 98 11 24\.000-30\.000 98-122 12 30\.000-36\.000 122-146 6 8\. Une etude de l'investissement dans l'amelioration aes parcelles, ef- fectuee en aoat 1975, a indique que les detenteurs de parcelles dans les regions ameliorees ant investi en moyenne 37\.000 francs CFA (151 dollars) pour les tra- vaux d'amelioration\. Le tableau ci-apres montre l'ampleur de l'investissement ainsi que l'apport en main-d'oeuvre\. Les statistiques de l'etude n'indiquent pas, toutefois, si le detenteur de la parcelle a participe lui-m@me a la cons- truction au a laue la main-d'oeuvre\. -------- ----- ---------'-'-~~--'  ANNEXE 2 Page 4 Quartiers ameliores Investissements prives dans l'amelioration des parcelles Main-d'oeuvre en ~~ de Francs CFA Dollars E\.U\. Nombre de parcelles l'investissement total 0- 10\.000 0- 41 69 (28 Ot) tO 65 % 10\.000- 20\.000 41- 81 43 (17 Ot) tO 64 ~~ 20\.000- 30\.000 81-122 24 (10 01) 10 41 % 30\.000- 40 \.000 122-163 18 ( 7 01) ID 31 9~ 40\.000- 50\.000 163-204 12 ( 5 01) 10 34 % 50\.000- 70\.000 204-285 21 ( 9 Qt) 10 29 ~ti 70\.000-100\.000 285-408 12 ( 5 9~) 23 9~ 100\.000-150\.000 408-612 6 ( 2 %) 25 9~ Au-deHl de Au-deH1 de 150\.000 612 9 ( 4 ~o) 24 % TOTAL/1 214 (87 9~) TOTAL DES PARCELLES DANS LES QUARTIERS AMELIORES 247 Ll 13 % n'ont pas repondu\. 9\. Vers la fin de 1975, le projet de Cissin avait attire l'attention des pouvoirs publics et avait interesse d'autres pays que la_Haute-Volta\. Par la suite, les pouvoirs publics tint reuni une conference internationals pour etudier les realisations du projet et proposer des recommandations pour la deuxieme phase\. Tout en reconnaissant le caractere pilate du projet, le be- soin d'ameliorer la fa~on de l'aborder et de poursuivre l'experience, ils ont approuve le projet de Cissin comme etant la pierre angulaire de leur politique d'action en matiere de services urbains\. L'experience de Cissin a egalement inspire les autres secteurs : c'est ainsi que le Ministers de !'education con- struit actuellement des ecoles dans les zones rurales en utilisant les metho- des de construction du projet de Cissin\. Les Caisses populaires 10\. La premiere phase de ce projet represente une grande etape dans le developpement de la politique de l'Etat en matiere de logement; toutefois, le caractere pilate de l'experience de Cissin a limite necessairement son effi- cacite et souligne ses faiblesses\. La difficulte de l'acces au credit a cons- titue un obstacle important ala construction et a !'amelioration des loge- ments\. Les circuits officials etant fermes aux non salaries dans le projet  ANNEXE z Page 5 deÂCissin, le PNUD a dO creer de petites cooperatives d'epargne\. Dans le cadre d'un effort general visant a stimuler la participation communautaire, un reseau de caisses populaires a ete cree pour : a) exploiter l'epargne privee au cour;3 d'une premiere phase, b) investir dans des projets communautaires au cours d'une deuxieme phase, et c) enfin, fournir des prets au logement aux tra\.vail- leurs non salaries\. 11\. Sur la base d'une experience du meme ordre entamee par le Centre d'etudes economiques et sociales de !'Afrique de !'Ouest (CESAO) et l'Agence canadienne de developpement international (ACDI) a Bobo-Dioulasso, une campagne d'information publique s'adressant initialement aux chefs traditionnels a ete lancee en mai 1976\. Plusieurs sessions ant eu lieu au Cissin, decrivant la conception de ce projet, les avantages et les responsabilites collectives de ses participants\. La reaction a ete rapide et enthousiaste\. Trois semaines apres l'ouverture des souscriptions, six cooperatives avaient ete creees; elles comptent 470 membres et un capital total de quelque 500\.000 francs CFA\. Le nombre de membres depasse maintenant 1\.600 et l'epargne s'eleve aujourd'hui a quelque 3 millions de francs CFA\. 12\. En octobre 1976, les sept caisses populaires ant elu un Comite direc- teur charge d'etablir une politique de pret pour les projets d'amelioration communautaire au titre de la deuxieme phase de leurs activites\. Parallelement, une serie d'enquetes socio-economiques ant ete effectuees dans les quartiers, pour classer les priorites d'investissement\. Plusieurs projets prioritaires identifies par !'etude socio-economique ant ete entrepris par les caisses po- pulaires\. La plainte la plus frequente a ete le coat eleve de l~eau achetee aux vendeurs itinerants; elle a entra1ne l'achat de sept charrettes d'eau Âpouvant etre louees ou achetees par un membre de chacun des\. sept quartiers\. Les caisses populaires ant entrepris la construction d'un marche qui comptera 100 etals et sera exploite par le Comite directeur durant dix ans; apres quai la municipalite en prendra la responsabilite\. D'autres projets sont actuelle- ment a !'etude\. 13\. L'investissement dans des projets communautaires marque une nouvelle phase dans 1 'evolution des caisses populaires et fournit 1 1 occasion d' evaluer leur developpement a ce jour\. Cette evaluation est entreprise dans ie cadre de 1a preparation et visera a renforcer le reseau de Cissin avant de l'etendre a d'autres zones urbaines\. Activites de developpement communautaire 14\. La mobilisation de 1' epargne privee des habitants a faible revenu de Cissin reste le principal objectif des caisses populaires; toutefois, elles est aussi devenue un important moyen de stimulation de !'interet communautaire et de la conscience publique\. Le fait que la structure des caisses populaires  ANNEXE 2 Page 6 repose sur la hierarchie sociale existante a ete un element crucial de !'aug- mentation du nombre de leurs adherents et de la mise en place d'un regime d'epargne reguliere\. Pour les habitants, les reunions hebdomadaires ant fourni !'occasion de participer a des discussions publiques et cree un moyen de faire conna!tre les besoins et objectifs communautaires en matiere de developpement au gouvernement\. Les caisses populaires font done partie du processus d'amelio- ration et leur developpement sera soutenu et accentue dans le cadre du projet de developpement urbain\. 15\. Le projet pilate de developpement communautaire fera !'experience de l'inter~t suscite par les caisses populaires dans les collectivites\. Cet element (130\.000 dollars) financera de petites operations d'education, de sante publique et d'activites communautaires concernant les femmes, offrant aux pou- voirs publics des occasions supplementaires d'explorer la notion de responsabi- lite communautaire pour ameliorer les conditions de vie des populations\. Le Bureau du projet dirigera !'identification et la conception de ces activites durant !'execution du projet, par des entretiens avec les organismes publics interesses, les caisses populaires et autres organisations communautaires\. Cet element est modeste pour permettre une souplesse d'experimentation dans la con- ception et !'execution du projet; neanmoins, il doit repondre a plusieurs cri- teres : 1) Les activites doivent ~tre effectuees dans les secteurs mention- nes plus haut; 2) Elles doivent ~tre peu coQteuses et ~tre effectuees avec la participation des habitants; 3) Elles devraient demontrer qu'il existe d'autres solutions pra- tiques que les techniques traditionnelles fixes de services sanitaires et educationnels; et 4) Elles devraient ~tre partiellement financees par les quartiers en cause\. Ces criteres seront mis au point de fa~on plus detaillee durant !'execution du projet et !'experience sera suivie pendant la duree du projet\.  ANNEXE 3 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN PROJET DE DEVELOPPEMENT INDUSTRIEL ET DE FINANCES Projet d'artisanat et de petites entreprises Introduction 1\. Le Departement des projets d'urbanisme et de la Division du develop- pement industrial et des finances du Bureau regiona1 Afrique de !'Ouest ant commence, en decembre 1975, a preparer un projet integre d'urbanisme et de petites entreprises en Haute-Volta\. Par la suite, il a ete decide de preparer deux projets distincts mais se renfor~ant mutuellement, destines a atre finan- ces simultanement\. Les objectifs du projet d'artisanat et de petites entrepri- ses sont les suivants : a) stimuler l'investissement \.dans les petites entreprises, parti- culierement celles qui sont\.situees dans les quartiers qui doi- vent atre ameliores et qui ant une influence sur ces derniers; b) renforcer la Banque nationale de developpement de Haute-Volta (BND), comme intermediaire financier, particulierement pour les petites et moyennes entreprises; c) mettre au point un programme d'assistance tec!:Jnique destine aux petits entrepreneurs et aux artisans\. 2\. Pour atteindre ces objectifs, le projet comptera principalement sur trois institutions : i) l'Office de la promotion de l'entreprise voltaique (OPEV); ii) le BND; et iii) Le Centre national de perfectionnement des artisans ruraux (CNPAR) et son service d'assistance mobile, le Service d'assistance, conseil et soutien (SACS) (Organigramme 1)\. Le coOt total du projet s'eleve a 4 millions de dollars\. 3\. Le coOt de chaque element du projet est le suivant  ANNEXE 3 Page 2 Millions de dollars Total BND Credit Petites et moyennes entreprises 2,50 Formation et conseil de gestion 0,20 2, 70 2,70 OPEV Sui vi Personnel local 0,06 Vehicules et divers 0,02 0,08 Centre de gestion : Personnel expatrie 0,15 Homologues et etudiants 0,07 Divers 0,02 0,24 semina ires 0,16 0,48 0,48 CNPAR Credit en nature : Artisans 0,40 Formation et suivi Personnel expatrie 0,26 Personnel local 0,04 Formation 0,03 Materiaux 0,07 Divers 0,02 0,82 0,82 4,00  ANNEXE 3 Page 3 Dispositions institutionnelles 4\. La BND est une\. banque polyvalente de developpement qui a ete creee en 1962; elle suit le mod~le typique de la Caisse centrale de cooperation economique (CCCE), c'est-~-dire qu'outre les operations normales d'une SFD, elle accorde des pr~ts pour l'achat de biens de consommation durables, le logement et !'agriculture\. Les ressources destinees aux operations de la BND proviennent traditionnellement de la CCCE, de la Banque centrale et de depOts a court terme de 1' Etat\. Recemment, et partiellement par suite de modifica- tions apportees aux Statuts de la Banque centrale, le BND a cherche d'autres\. bailleurs de fonds (USAID, Banque africaine de developpement, KfW, DEG) qui ant souscrit a son capital social et lui ant accorde des pr8ts\. 5\. La BND beneficiera d'une ligne de credit, pour accorder des pr~ts aux petites et moyennes entreprises du secteur moderne, ce qui renforcera la tendance a l'elargissement des sources de fonds de la BND et son aptitude a fournir des credits aux entrepreneurs voltaiques\. Pour ce projet, taus les pr~ts aux entreprises voltaiques ayant un actif inferieur a 25 millions de francs CFA (100\.000 dollars) seront consideres comme des pr~ts a la petite industrie et taus les pr~ts accordes ~ des entreprises ayant un actif superieur ~ ce montant seront consideres comme des pr~ts a la moyenne industrie\. Un plafond sera etabli pour les pr~ts secondaires accordes aux entreprises dont l'actif est inferieur ~ 100 millions de francs CFA (400\.000 dollars), ce qui permettra a l'OPEV de promouvoir et ~ la BND de financer uncertain nombre de moyennes entreprises et d'eviter d'epuiser rapidement les fonds provenant du credit de !'IDA sur un ou deux investissements importants\. La BND recevra en outre des fonds (200\.000 dollars) pour les conseils techniques internes sur les procedures bancaires\.et la formation du personnel\. 6\. L'OPEV, organisme public independent place sous la tutelle du Minis- tere de l'industrie, a ete cree en 1971 et constitue le noyau des efforts visant a stimuler les entreprises voltaiques\. Il a regu un soutien financier exterieur important, notamment une assistance frangaise, allemande, americaine et le concours de l'ONUDI\. le mandat initial de l'OPEV, consistant ~assurer la formation des Voltaiques aux activites commerciales a ete maintenant elargi pour comprendre des cours de formation aux affaires, de preparation des projets, de suivi des entreprises et autre assistance technique\. les activites recentes comprennent un Fonds de participation destine aux petites entreprises et !'installation d'une zone nouvelle industrielle\. 7\. Le pro jet de developpement; industr iel et de finances integrera ses activites aux operations en cours de l'OPEV, les etendra pour atteindre une nouvelle client~le et renforcera le soutien accords ala BND par l'OPEV en ce qui concerne la promotion, la preparation et le suivi des projets\. Pour sou- tenir les efforts deployes ~ l'heure actuelle par l'OPEV dans ce dernier  ANNEXE 3 Page 4 do~aine, le projet accroitra sa mobilite en lui fournissant des vehicules et des techniciens voltaiques\. De plus, il jettera les bases d'un centre de formation gestionnaire a l'OPEV, congu pour assurer la formation d'un petit nombre de diplames des ecoles secondaires voltaiques\. Ces diplames consti- tueront un 11en dans le cadre de leur programme de travail et d'etudes entre les specialistes expatries de l'OPEV deja en place et les entrepreneurs qui auront besoin d'assitance\. Cet arrangement a pour objet d 1 elargir !'aptitude de l'OPEV a suivre les entrepreneurs et en m~me temps d'int~resser les nouveaux entrepreneurs aux problemes de gestion 11 reels 11 • Le programme de formation de , l'OPEV sera elargi pour comprendre approximativement huit seminaires portant sur les divers aspects des affaires, etales sur une periode de trois ans\. Ils seront propos~s aux entrepreneurs, aux comptables des caisses populaires et au personnel de la BND et de l'OPEV\. 8\. Les projets industriels de la BND et de l'OPEV ant typiquement port~ sur des entreprises ayant des coats d 1 investissement de 8\.000 a 10\.000 dollars par emploi\. Le projet a pour objet d •aider les deux institutions a cooperer pour r~duire le coOt de la cr~ation d'emploi en Haute-Volta\. Leurs directions sont dispos~es a poursuivre cet objectif, qui sera rendu officiel par une de- claration d'intention formul~e par chacune d'elle\. a savoir qu'elle cherchera a cr~er des emplois a un coOt moyen de 5\.000 dollars (non compris le montant de 400\.000 dollars destin~ aux artisans par l'intermediaire du SACS, le coOt de creation de chaque emploi etant tres inferieur dans ce secteur)\. 9\. Le CNPAR, cree en 1969 avec l'aide du BIT et du PNUD, est un organisme public qui assure la formation des artisans ruraux aux metiers de forgeron, de foreur de puits, de r~parateur de mobylettes, a la fabrication de briques et a la magonnerie\. Le BIT, ala suite de la r~ussite du CNPAR, a reduit le nombre de specialistes expatries affectes au centre et en 1976, a mis fin a son sou- tien budg~taire\. Le SACS, qui a ~te cree gr~ce a un don de la Suisse, super- vise les artisans au terme de leur formation, ainsi que d'autres qui n'ont pas regu la formation du CNPAR\. Il est ~quipe pour les approvisionner eri matieres pemieres et outils, et leur prodiguer des conseils\. En outre, i l pr~tera son con~ours pour la commercialisation de la production artisanale\. L'ARCOMA, autre activit~ parrainee par le CNPAR et qui ne fait pas partie du projet, fa- brique et commercialise les outils agricoles locaux\. 10\. Le CNPAR et le SACS continuent de faire un excellent travail de for- mation et de suivi, tout en aidant les artisans analphabetes\. Le projet de financement du developpement industriel (FID) soutiendra les activit~s en cours du CNPAR et les elargira pour assurer la formation et le suivi d'un plus grand nombre d'artisans du secteur informel\. Outre les programmes de formation du CNPAR, des services d~centralis~s de formation, ger~s par des Voltaiques, seront crees dans des quartiers qui seront modernis~s dans le cadre du projet de developpement urbain\. La formation commencers par les metiers du b~timent, puis S ~largira pour repondre a d'autres besoins en matiere de formation a la 1 demande locale\.  ANNEXE 3 Page 5 11\. Le SACS fournira aux artisans du credit, pour la plupart en nature et il continuers de prendre contact avec eux regulierement, leur livrant des matieres premieres et des outils et les aidant a commercialiser leur produc- tion\. Le credit qui leur sera accorde couvrira les fonds de roulement neces- saires et financera les besoins d'investissement, notamment l'achat d'outils et de materiel (30 %), le coOt desÂmatieres premieres (50%) et dans certains cas le coOt de la construction (20 %)\. (Les pr~ts seront accordes aux artisans pour la construction de petits ouvrages peu elabores et plus frequemment a des groupes d'artisans pour la construction d'ateliers)\. Les matieres premieres et les outils seront achetes en gros par le SACS, qui utilisera les remboursements des artisans pour creer une caisse permanente\. Le coOt d'etablissement de services decentralises de formation et de competences en matiere de suivi s'elevera a 420\.000 dollars; un montant supplementaire de 400\.000 dollars sera affecte au programme de credit du SACS\. 12\. En se fondant sur 1' experience anter ieure du SACS, on estime qu' u'n montant de 400\.000 dollars de credits devrait suffire pour atteindre 1\.000 artisans et entreprises artisanales durant la periode d'execution de trois ans (la moyenne des pr~ts sera de 400 dollars)\. Jusqu'a present, les artisans et entreprises artisanales ont rembourse le SACS de fa~;;on satisfaisante\. Les pr~ts octroyes assortis d'un interet de 7 % ont des echeances allant jus- qu'a cinq ans, y compris un differe d'amortissement de 18 mois\. Il n'est pas prevu d'accorder des pr~ts superieurs a 150\.000 francs CFA pour les artisans ou a 500\.000 francs CFA pour les groupes d'artisans\. Les pr~ts octroyes pour l'achat de matieres premieres\.et d'outils (prets pour fonds de roulement) auront des echeances relativement courtes (de 3 a 36 mois), et ceux qui seront accordes pour la construction auront des echeances plus longues (jus- qu'a 10 ans)\. Pour maintenir une certaine souplesse, le SACS continuers de modular les conditions du pr~t selon l'emprunteur, sous reserve de !'appro- bation de l'IDA\. La BND acheminera les fonds de l'IDA au SACS, qui supporters le risque du credit\. A mesure queÂles artisans rembourseront le SACS, ce dernier retiendra les fonds pour ouvrir une caisse permanente destinee a accorder aux artisans du credit en nature\. La coordination des activites de l'OPEV/BND/CNPAR et le Projet de developpement urbain 13\. La coordination des activites de la BND, de l'OPEV et du CNPAR sera tres importante pour !'execution du projet\. Les trois institutions doivent ~tre en mesure d'accorder de fa~;;on integree une assistance technique et financiere aux entreprises et aux artisans locaux\. Le projet de financement du developpement industrial represente le premier effort important dans cette direction\. Pour renforcer cet objectif, un comite de travail comprenant des representants des trois institutions sera cree et se reunira regulierement pour etudier l'etat d'avancement du projet\.  ANNEXE 3 Page 6 14\. Pour faciliter la coordination avec le projet de developpement urbain, un representant du comite de travail assistera aux reunions du Comite interministeriel qui sera cree dans le cadre du projet de developpement urbain\. Il sera charge de rendre compte au comite de travail de l'etat d'avancement du projet de developpement urbain et d'identifier les probl~mes au questions aux- quels devra repondre directement 1 'une quelconque des institutions interessees\.  Â~ • Sl • ANNEXE 3 p;;g;-7 IIA\.tr:rE•VOLTA Diagra\.mme l PROJET DE DEVELOPPEMEN'l' ~Rl!AIN I IDA J ; \. \. \. \. \. \. • \. \. \. \. • Assistance • : \. ' technique Credit • Ai<ie aux x1111icf\.psl1tes \. I I Invastissement Credit en  Fot:mat1on \. 'I I I I 4 'infrastructure nat:ure \. ' I I I \. I I I I I \. I I ' I I I I I GROlll'E CIBLE DAIIS LE POPULATION 1lRliAINE I Sou\.s-traitmce\.; Elqlmsion des affairea 1 1 PETITES ltlmU!l'RISES ARtiSANS ----- Pecitea entrepr1sea et artisans\. ÂÂÂÂ---------- Projet urbain llAP-IDF July 15,1977  ANNEXE 4 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN ORGANISATION ET GESTION DES INSTITUTIONS PARTICIPANT A L'EXECUTION DU PROJET 1\. Plusieurs institutions chargees de preparer et d'executer les divers elements participent simultanement au projet\. Ces institutions comprennent: un comite interministeriel de coordination, le Ministere des travaux publics, des Âtransports et de l'urbanisme, les municipalites de Ouagadougou et Bobo- Dioulasso, la prefecture de Gaoua, !'Office national des eaux (ONE), le Fonds national de l'assainissement et de l'entretien (FONASEN), un service de la Di- rection de l'hydraulique, qui travailleront en collaboration avec les institu- tions participant au projet du DIF, a savoir, la Banque nationale de develop- pement (BND), !'Office de la promotion de l'entreprise voltaique (OPEV) et le Centre Centre national pour le perfectionnement des artisans ruraux (CNPAR)\. L'organisation et la gestion de chacune de ces institutions sont examinees dans la presente annexe\. On trouvera a l'Annexe 2 des renseignements sur les caisses populaires\. Le partage des responsabilites entre les diverses insti- tutions participant au projet s'etablit de la fa~on indiquee au tableau ci- dessous\.  ANNEXE 4 Page 2 A\. Le Comite interministeriel de coordination 2\. Afin que 1 'execution des differents tHements du projet soit bien coordonnee, le gouvernement a propose de creer un Comite interministeriel de coordination qui sera preside par le Ministre des travaux publics, des trans- ports et de 1 'urbanisme\. Ce comite sera charge de suivre la preparation et !'execution des divers elements, d'examiner le calendrier des travaux, et d'identifier et de resoudre les problemes qui pourraient se poser au cours de !'execution\. Le Comite approuvera egalement les rapports trimestriels qui doivent etre presentee a la Banque par le Bureau du projet et s'entretiendra, le cas echeant, avec les missions de supervision\. Le Comite sera compose de membres permanents et de membres invites, le statut d'un membre dependant du rOle que joue dans le projet !'institution qu'il represente\. Les membres permanents seront: le Ministre des travaux publics, des transports et de l'urbanisme, qui assurera la presidence du Comite, le Ministre des finances ou son representant, qui sera le vice-president, le directeur general de l'interieur, le prefet de Ouagadougou, le sous prefet de Bobo-Dioulasso, ) \. le directeur de l'urbanisme, le directeur general de !'Office national des eaux, le directeur du bureau municipal de 1 'habitat de Ouagadougou, le directeur du bureau municipal de 1 'habitat de Bobo-Diou lasso\. le directeur du Patrimoine fancier le directeur general du FONASEN le directeur general du BND Les membres invites seront : le directeur de l'OPEV, le directeur du CNPAR le prefet de Gaoua\. ( le directeur de l'equipe d'evaluation  ANNEXE 4 Page 3 TABLEAU I COMITE INTERMINISTERIEL DE COORDINATION President Ministre des travaux publics, des transports et de l'urbanisme Vice-President Ministre des finances ou son representant Ministere des travaux Ministers de l'interieur Ministers du developpement publics rural Direction de Direction de l'hydraulique 1 1 urbanisme Nunicipalites\.Y Office national des eaux  Bureau municipal de 1' habitat - Supervision du projet - Notification aux - Preparation du projet \.d'execution interesses d'execution - Preparation du dossier - Choix\. des menages - Preparation et evaluation d'appel d'offres et des - Attribution des des documents d'appel contrats parcelles d'offres Supervision de !'execu- - Etablissement du ca- - Documents et contrats tion des travaux de dastre des parcelles - Supervision des travaux construction - Perception des rede- de construction Supervision du programme vances - Perception des redevan- de prets a la Permis de construction ces d'eau construction Permis urbains \. d'habiter - Relations communautaires - Assistance technique au Services des routes bureau municipal de et des b~timents !'habitat  Identification et prepa- - Aide aux municipalites ration d'un deuxieme - Enlevement des ordures pro jet menage res - Administration des pro- - Formation du personnel jets communautaires et des municipalites des caisses populaires - Remise en etat des ecoles et des cliniques Direction des travaux publics - Entretien des caniveaux de - Location du materiel drainage necessaire aux travaux - Reorganisation des de construction ateliers Service\.de !'hygiene - Pulverisation d'insecticides Perception municipale - Amelioration des methodes de perception des impOts 1/ Ce schema vaut pour les municipalites de Ouagadougou et de Bobo-Dioulasso\.  ANNEXE 4 Page 4 Ces derniers seront invites aux reunions du Comite chaque fois que figureront a l'ordre du jour des questions touchant a leur participation au projet\. B\. Le Ministere des travaux publics des transports et de l'urbanisme 3\. Le Ministere des travaux publics, des transports et de l'urbanisme sera l'organisme responsable deÂl'ensemble de la preparation et de l'execution du present projet\. Le Bureau du projet, qui sera decrit plus bas, fera partie de la direction de l'urbanisme et de l'architecture, comme cela avait ete le cas dans le cadre du projet de Cissin finance par le PNUD\. Le bureau benefi- ciera de l'aide de la Direction des travaux publics qui fournira le materiel necessaire a la construction des routes et au drainage, travaux qui seront executes en regie\. La coordination sera assuree par le directeur du cabinet du ministere\.  4\. La Direction de l'urbanisme et de l'architecture est une petite di- rection dotee uniquement de quelques cadres\. La direction, situee dans les b~timents du ministere\. a Ouagadougou, est tres centralisee (voir Tableau II); elle est\.representee par un petit bureau a Bobo-Dioulasso\. Cebureau local est essentiellement responsable de l'entretien et de la remise en etat des edifices publics\. A Ouagadougou, les activites des cadres de la direction consistent a : a) poursuivre le projet Cissin finance par le PNUD, b) amenager le terrain destine aux menages installes auparavant pres du marigot du Moro Naba, et \. c) examiner et approuver les demandes d'amenagement du terrain et de construc- tion de grands blltiments presentees par les secteurs public et prive\. En ce qui concerne cette derniere activite, la direction travaille en collaboration etroite avec l'Office national des eaux, la Direction de l'hydraulique, ~les municipalites, la Compagnie nationa1e d' electricite et la Direction du Petri- moine fancier\. Il est prevu, dans le cadre des deux premieres operations, de poursuivre l'experience commencee a Cissin et de la renouveler dans un autre contexte\. Malgre la cadence rapide de renouvellement du personnel voltaique engage depuis le debut du projet Cissin en 1973, il s'est cependant produit un transfert important des connaissances et des techniques utilisees dans le cadre du projet de Cissin\. Ces connaissances et ces techniques seront appliquees a une plus grande echelle dans leprojet propose par un personnel d'encadrement qui comprend maintenant plusieurs urbanistes, architectes, geographes et \. dessinateurs, dont deux sont des expatries, l'un de nationalite suisse, direc- teur du Deuxieme projet Cissin finance par le PNUD et l'autre de nationalite fran~aise, urbaniste emvoye par le Ministere fran~ais de la cooperation\. Le projet prevoit aussi une assistance technique supplementaire pour renforcer la direction (voir Annexe 8)\. 5\. Le bureau du projet de la direction aura pour tache: a) de superviser le projet d'execution; b) de preparer les dossiers d'appel d'offres et les contrats; c) de superviser l'execution des travaux de genie civil, y compris la construction des equipements collectifs;  ANNEXE 4 Page 5 d) de superviser le programme de prets a la construction; e) de superviser la mise en place et le fonctionnement des bureaux municipaux de !'habitat; et f) d'identifier et de prdparer un deuxi~me projet\. Les liens qui l'unissent aux autres institutions participantes sont donnes au Tableau 1\. C\. Administration municipale 6\. En Haute-Volta, !'administratio n municipale est placde sous la tu- telle du Minist~re de l'intdrieur\. La loi regissant !'administratio n munici- pals est calquee sur la lei fran~aise de 1884 et prevoit la creation de commu- nes administrees par un maire et un conseil municipal elus\. Les municipalitds ant pouvoir d'imposer et de percevoir des impots et d'utiliser les fonds af- fectds au budget municipal\. Cependant, toutes les ddcisions financieres doi- vent recevoir l'aval du Minist~re de l'interieur\. Ce syst~me municipal, que l'on retrouve dans toutes les anciennes colonies fran~aises, n'a pas dtd sen- siblement modifid depuis !'accession de la Haute-Volta a l'inddpendance en 1960\. Le montant limite des recettes locales, l'incapacitd a percevoir les impots existents et le manque de personnes qualifides ant contribue a l'drosion de !'administratio n municipale\. Ces facteurs, ainsi que la venue au pouvoir de militaires en 1966, ant conduit a un contrOle de !'administratio n municipale par le gouvernement central\. Le maire dlu a dtd remplace par un prefet-maire, nomme par le Prdsident et responsable de toutes les activitds qui dtaient au- paravant du ressort des municipalites\. Le prdfet-maire est ~galement prdsident d'une deldgation speciale, composde de notables et de dignitaires locaux, qui a remplacd le conseil municipal elu\. Cette ddldgation, comme !'ancien conseil municipal, est divisde en commissions dont le rOle est de superviser les pro- jets exdcutes par les services techniques des municipalitds\. Au cours des deux dernieres annees, le gouvernement a proced~ au remplacement du prdfet de Ouagadougou et du sous-prdfet de Bobo-Dioulasso afin de donner une nouvelle impulsion a !'administratio n municipale gr~ce a une gestion plus dynamique et plus efficace des affaires publiques\. Le prdsent projet va lui aussi dans le sens d'un renforcement de !'administratio n municipale\. 7\. Les budgets municipaux n'ont pas dte analyses en ddtail mais il a quand meme ete possible d'obtenir certains renseignements qui seront exposes bri~vement dans la prdsente section\. On constate dans !'ensemble un manque prdoccupant de recettes publiques au niveau local en Haute-Volta, imputable aux faibles revenus dont disposent en general les contribuables, a une elasti- citd insuffisante des recettes, ala faiblesse des taux d'imposition et aux methodes inaddquates appliquees actuellement dans le cadre de l'dvaluation et de la perception des impOts\. Ce manque de ressources dont souffre la Haute- Volta est illustre par les chiffres figurant dans les tableaux suivants au sont indiques, d'une part, le total des recettes per~ues au cours des derni~­ res anndes par les municipalitds de Ouagadougou et de Bobo-Dioulasso et, d'autre part, la structure du dernier budget de la municipalite de Ouagadougou\.  ANNEXE 4 Page 6 TABLEAU 1: TOTAL DES RECETTES FISCALES PAR ANNEE (Millions de francs CFA) Bobo-Dioulasso\. Ouagadougou 1971 161,6 n\.d\. 1972 156,3 n\.d\. 1973 155,9 n\.d\. 1974 198,4 323,4 1975 199,4 493,6 1976 219,4 379,8 1977 n\.d\. 347,5 TABLEAU 2: MUNICIPALITE DE OUAGADOUGOU RECETTES FISCALES PROJETEES POUR 1977 (Par principales sources de recettes) Millions de FCFA Patentes et imp6ts sur les entreprises 77 ,o ImpOts fanciers /1  21,0 Imp6ts sur 1e revenu 12,0 ImpOts sur les ordures menageres /2 4,0 ImpOts sur les routes /3 - 1,0 Taxe de marche /4 - 27,0 Taxe sur les spectacles 13 ,o Taxe sur 1es automobiles 26,{) Taxe sur les bicyclettes 11,0 Taxe de stationnement 6,0 Imp6ts sur le transfert des biens fanciers /5 15,0 Recettes hospitalieres 4,0 Autres taxes 70,5 Total des creances payees 60,0 Total des recettes fiscales 347,5 Exemples de taux d'impo~ition /1 3 9~ de la valeur estimee des biens fonds\. 72 Entre 500 et 3\.000 francs CFA selon le quartier\. 73 100 francs CFA par contribuable\. 74 250 francs CFA par eta!\. 75 300 francs CFA si le quartier est loti depuis mains de cinq ans, 100 francs CFA au-dela\.  ANNEXE 4 Page 7 TABLEAU 3: PROJECTIONS DES DEPENSES POUR 1977 Mont ant Pourcentage par rapport au total 1\. Personnel et administration 166,1 48 2\. Remboursement des prets (service de la dette) 66,2 19 3\. Enlevement des ordures menageres 45,0 13 4\. Services - depenses d'exploitation 57,8 17 5\. Investissements 12,4 3 Total 347,5 100 8\. Il ressort des tableaux precedents que les recettes fiscales de la ville de Ouagadougou, qui compte 220\.000 habitants, ne devraient etre que de 347,5 millions de francs CFA en 1977 (1,4 million de dollars), soit !'equiva- lent de 6,50 dollars par habitant\. Les recettes fiscales de Bobo-Dioulasso, ville de 150\.000 habitants, ont atteint 219,4 millions de francs CFA (0,90 million de dollars) en 1976, soit 6 dollars par habitant\. Ces deux villes ont des sources principales de revenu comparables et sont caracterisees par un grand nombre d'impbts d'un rendement tres faible\. C'est ainsi que les imp8ts fanciers, qui representant generalement une part importante des recettes fis- cales des municipalites dans le monde entier, ne constituent que 6 % des re- cettes fiscales per~ues par Ouagadougou et Bobo-Dioulasso\. 9o La perception des imp8ts existents est un problema important: le total des arrieres dO a la ville de Ouagadougou a la fin de ~976 etait presque egal aux recettes fiscales projetees pour 1977\. Cet etat de fait preoccupe beaucoup les autorites locales; il s'agit la d'un problema complique et qui, semble-t-il, ne pourra ~tre resolu que si l'on se decide a apporter des mo- difications importantes aux methodes d'evaluation et de perception en vigueur\. 10\. Il est clair que le regime fiscal actuel doit ~tre sensiblement mo- difie\. C'est ainsi qu'en ce qui concerne l'impbt fancier, il conviendrait de reevaluer les differentes zones et de les classer en differentes categories au fur et a mesure que seront realises les amenagements prevus, de modifier periodiquement les taux d' imposition qui sont actuellement tres bas et de tra- cer et mettre a jour des cartes ou serait indiquee la valeur des terres afin que l'on puisse disposer de renseignements sur la valeur des terres\. Plusieurs sources font etat d'une sous-evaluation systematique de ces derniers pour des raisons fiscales\.  ANNEXE 4 Page 8 11\. Compte 'tenu de la necessite de trouver des ressources suffisantes pour financer les activites de la municipalite - ce a quoi on devrait pouvoir arriver en ameliorant la perception des impOts et/ou en trouvant de nouvelles sources de recettes- il est prevu dansÂleÂprojet, au titre de !'assistance technique, de faire beneficier Ouagadougou et Bobo-Dioulasso des services d'un expert specialiste de !'administration et des finances municipales dent le rOle sera d 1 aider a mettre en oeuvre les ameliorations qu 'il aura proposees\. Bureaux municipaux de !'habitat 12\. Les bureaux municipaux de !'habitat seront crees au sein du Bureau domanial de chaque municipalite\. Un petit nombre de parcelles ayant ete ame- nagees par le passe, le Bureau s'est contents jusqu'a present de conserver les dossiers des candidats, de tenir a jour un regist're d'attribution des ti- tres de proprietes des terres de la municipalite et d'examiner les demandes de permis de bdtir\. Ces bureaux n'etaient done ni plus ni moins que des "centres de triage"\. Dans le cadre du projet de Cissin finance par la PNUD, un bureau municipal de !'habitat avait ete cree qui etait charge de toutes les operations depuis le stade de la demande jusqu'au moment de !'attribution, mais ce bureau cessait \.pratiquement\.de fonctionner une fois termine l'examen de !'ensemble des dossiers\. Le fait que ce Bureau n'etait pas un organisme municipal est sans doute une autre cause de sa fermeture; il avait en effet ete cree pour le projet Cissin finance par le PNUD et n'etait done pas reconnu par les pouvoirs publics comme un organisme municipal\. 13\. Il a ete prevu que le bureau municipal de !'habitat qui sera cree dans le cadre du projet urbain et comportera un element d'assistance techni- que, assumera des responsabilites de plus en plus importantes au niveau de la direction des operations d'attribution et de 'transfert de terres qui seront entreprises dans le cadre du projet\. Un directeur voltaique sera place a la tete de chaque bureau qui comprendra trois sections: comptabilite, services techniques\.et developpement communautaire\. a) Comptabilite: Cette section sera dirigee par un comptable voltaique et supervisee par le comptable du projet, ala direction de l'urba- nisme\. Elle sera chargee de mettre au point a !'intention du bureau municipal de !'habitat, les methodes de recouvrement et d 'enregistre- ment des apports initiaux des redevances parcellaires et d' etablir le budget global du projet urbain\. Cette section aura aussi pour fonc- tion d'instituer un systeme de comptabilite qui permettra a !'inte- resse de conna!tre immediatement l'etat de son compte\. Des bureaux de perception seront organises dans chaque centre communautaire; cer- tains des agents seront en peste fixe, d'autres se deplaceront de porte a porte\.  ANNEXE 4 Page 9 b) Service technique: Cette section, composee d'un personnel voltaique, continuers d'etre chargee d'identifie r et d'enregistr er les titres de propriete fonciere, de rassembler les dossiers et de dresser les listes des candidats, de donner suite aux reclamation s et aux deman- des d'indemnisa tion a soumettre a la Commission du Maire, de prepa- rer les contrats pour signature et d'examiner toutes les demandes de permis urbains d'habiter\. c) Section du developpement communautaire: Cette section, qui est a creer, sera supervisee par un expatrie expert en developpement commu- nautaire qui aidera le Directeur du Bureau ~ definir les relations avec les beneficiair es et leurs activites dans le cadre du projet\. La Section de !'aide communautaire sera chargee de definir et d'exe- cuter les activites suivantes: 1) publicite du projet: consultatio n des habitants des quartiers a renover, a propos notamment des objectifs du projet, et de la participati on et des responsabi lites des residents; 2) fixation des criteres de selection; 3) definition des procedures d'attributio n; 4) etude des dossiers des candidats a une parcelle a soumettre au Comite de selection; 5) notificatio n aux beneficiair es; et 6) aide aux residents pour la signature des contrats\. Cette section travaillera en liaison avec !'expert des caisses popu- laires au bureau du projet de la Direction de l'urbanisme , en vue de coordonner et de faciliter les contacts dans les collectivit es designees\. 14\. On trouvera dans le tableau suivant les chiffres corresponda nt a la progression des effectifs du personnel du Bureau municipal de 1 'habitat de Ouagadougou au cours des annees a venir :  ANNEXE 4 Page 10 Tableau 4: PERSONNEL NECESSAIRE A L'EXAMEN DES DEMANDES ET AU RECOUVREMENT DES REDEVANCES MENSUELLES 1978 1979 1980 1981 (6 mois) Demandes re~ues au Bureau 1\.440 2\.500, 2\.500 1\.000 Recouvrements 1\.000 3\.500 6\.000 \. 7\.000 Personnel Directeur 1 1 1 1 Cab§gorie I 6 8 8 8 (employes de bureau et enqueteurs) Categorie II 2 4 4 4 (Controleurs-Aides- comptables) Categorie III 2 4 4 4 (Agents responsables du recouvrement des redevances) Categorie IV 1 1 1 1 (Comptables) Assistant technique 1 1 1 Secretaires 2 4 4 4 Chauffeurs 2 2 2 2 Plantons 2 2 2 2 TOTAL 19 27 27 26 15\. On estime que 160 dossiers seront prepares chaque mois dans leÂsureau municipal de !'habitat par quatre employes de bureau et que deux employes sup- plementaires fourniront les renseignements generaux necessaires aux enquetes, interviendront pour les questions sortant de l'ordinaire et joueront le role de soutien\.  ANNEXE 4 Page 11 16\. En ce qui concerne le recouvrement des charges, on a suppose que chaque agent s'accupera it d'au mains 240 parcelles chaque mois, soit douze pour chaque jour ouvrable, pendant la premiere annee et demie et de 360 par- ,, celles par mois vers la moitie de 1979\. Le personnel sera embauche en fonc- tion du rythme d'attributio n des parcelles et de recouvrement des chargeso 17\. On trouvera dans le tableau suivant les chiffres corresponde nt au~ categories de personnes employees dans le bureau municipal de !'habitat de Bobo-Dioulasso: 1979 1980 1981 Demandes et recouvrements 1\. 750 1\. 750 700 Directeur 1 1 1 Categorie I 8 8 8 Categorie II 2 2 2 Categorie III 2 3 3 Categorie IV 1 1 1 Assistant technique 1 1 1 Secret aires 3 3 3 Chauffeurs 1 l 1 Plantons 1 1 1 TOTAL 20 21 21 18\. Les chiffres donnas ci-dessus constituent les estimations quantita- t;i,\.ves lea plus precises que la mission a pu etablir dans les circanstanc es ac- tuelles, mais ne tiennent pas compte Âde la difficulte que represente une ope- ration de cette envergure, ni de la qualite du travail qui sera effectiveme nt realise; c'est la un facteur primordial etant donne que c'est la premiere fois qu'une telle operation est entreprise dans la municipali te\. Ces estima- tions sent tout a fait raisonnable s et tiennent compte de la taille du bureau municipal de !'habitat de Ouagadougou qui devra ~tre cree en vue de !'execu- tion d'un projet portant sur 7\.000 parcelles dans la capitale\. Pour qu'un projet de cette importance puisse atre mene a bien~ il faut que sait recrute un personnel qualifie et un directeur voltaique qui fasse preuve d'autorite et de diligence; -les autorites locales doivent aussi pouvoir compter sur une as- sistance technique suffisante (une personne qui travaillera it a temps complet dans le Bureau avec l'aide du comptable et du socio-econo miste de la Direction de l'urbanisme )\. En outre, il faut compter six mois supplement aires pour !'attributio n des parcelles\.  ANNEXE 4 Page 12 D\. Office national des eaux - Adduction d'eau 19\. La responsabilite de !'adduction Âd'eau et du drainage est partagee entre la Direction de l'hydraulique et de l'equipement rural (HER), qui, d'une part, prepare les plans de taus\. les nouveaux ouvrages d'adduction d'eau et d'assainissement et s'occupe de taus les travaux de construction y afferents et, d'autre part, exploits de petits reseaux ruraux, et !'Office national des eaux (ONE)l/ qui exploits les reseaux d'adduction d'eau des sept plus grandes villes\. L'ONE, qui est maintenant devenu une entreprise publique ~ part en- tiers, contrele depuis 1970, date de sa creation, les reseaux d'adduction \. d'eau exploites auparavant par la Compagnie nationale d'electricite (VOLTELEC)\. L'Office est bien gere, bien organise, dispose d'un personnel adequat et enre- gistre des benefices adequats depuis sa creation\. Tout le personnel employe ~ plein temps est voltaique, y compris un president Âet le directeur general\. actif Il compte trois divisions techniques; l'une est affectee ~ Ouagadougou, la deuxieme ~ Bobo-Dioulasso et la troisieme aux cinq reseaux de moindre impor- tance\. En outre, !'Office comprend une petite section d'etude et de docu- mentation ainsi qu'un petit laboratoire d'etude de l'eau\. L'ONE confie la plupart du temps les travaux de reparation et d'entretien ~ des entrepreneurs exterieurs, ce qui lui permet de limiter son personnel\. 20\. Contrairement ~ la VOLTELEC dont le compte d'exploitation des ins- tallations d'adduction d'eau etait fortement deficitaire, l'ONE realise des be- nefices (6-11 ~~ du chiffre d'affaires annuel) depuis qu'il a ete cree en 1970\. Un tel changement est attribuable ~ une augmentation des tarifs de l'eau in- tervenue peu de temps avant le changement institutionnel, ~ une baisse des frais de gestion (de 20 t 33 %) et enfin ~ l'arrivee d'une direction plus dy- namique qui s'est preoccupee uniquement de !'adduction d'ea4, domaine qui etait auparavant considers comme secondaire par rapport~ l'electricite\. 21\. On trouvera ~ l'Annexe 7 des details sur les tarifs actuels en vi- gueur depuis le mois de juin 1977 ainsi que les repercussions financieres du projet sur la situation de l'ONE\. Comme il est precise au paragraphs 5\.19 et ~ l'Annexe 7, il n'a pas ete procede, dans le cadre du present projet, ~ une analyse detaillee de la situation financiere globale de l'ONE ni ~ une etude de justification des tarifs en vigueur\. I1 semble que, compte tenu Âdes bans resultats d'exploitation constates, la situation financiere de l'ONE soit sa- tisfaisante mais cette impression devra etre confirmee ulterieurement par une verification des comptes\. 1/ Societe nationale des eaux (SNE) jusqu'en 1976\.  ANNEXE 4 Page 13 22\. Les investissem ents realises en faveur de !'adduction d'eau en Haute- Volta ant ete principalem ent finances par des bailleurs de fonds strangers et en particulier par le Fonds europeen de developpement (FED)\. Cependant, les contributio ns danoises et allemandes sont devenues recemment aussi importantes que l'aide accordee par le FED\. Le KfW, le Danemark et le FED ant consacre la plupart de leurs ressources a !'ameliorat ion de la capacite de production et aux reseaux de distributio n des villes desservies par l'ONE, tandis que les programmes de constructio n de puits continuent a ~tre finances par le FAC et des institution s humanitaire s\. 23\. Le gouvernement cherche actuellemen t a obtenir une aide en vue de !'execution d'un vaste programme d'adduction d'eau qui prevoit !'utilisatio n de l'eau de la Volta Noire pour satisfaire, a partir de 1981, les besoins non seulement de Ouagadougou mais aussi des petites communautes situees a proximi- te de la capitale, y compris une usine textile importante situee a Koudougou\. Ce fleuve semblerait en effet la solution d'avenir la mieux indiquee, mais il ressort des premieres etudes d'ingenieri e que ce programme, qui est actuelle- ment !'objet de nouvelles etudes, serait extr~mement couteux\. Entre-temps , le gouvernement a adopte une nouvelle serie de tarifs, en fixant des tarifs qui varient d'une saison a !'autre, le gouvernement a voulu essayer de limiter la demande globale d'eau a Ouagadougou pendant les derniers mois de la saison seche, ce qui permettra peut-~tre de reporter a plus tard les investissem ents envisages en vue d'augmenter la capacite de production\.  ANNEXE 5 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN NORMES TECHNIQUES ET COUTS ESTIMATIFS DETAILLES A\. Normes techniques Taille des parcelles 1\. Dans les villas de Haute-Volta, les parcelles sont traditionnelleinent amenagees salon un m@me schema: les bAtiments d'habitation sont construits autour d 'une cour d 'environ 150 m2\. La cour est un espace multifonctionnel utilise a la fois pour les activites familiales (cuisine et lessive) ainsi que pour des activites liees a !'alimentation (elevage de quelques animaux et cul- ture de legumes)\. La plupart du temps chaque parcelle dispose d'un puits\. Dans les quartiers qui doi vent ~tre amen ages, la superf icie des parcelles est actuellement de 500 m2 en moyenne\. Le projet prevoit trois types de de parcelles: 240 m2 12 m x 20 m 300 m2 15 m x 20 m 360 m 2 15 m x 24 m Si ces parcelles peuvent ~tre considerees comma grandes, il n'en est pas mains vrai que le projet contribuera a reduire considerablement la superficie moyenne des parcelles et prevoit que celles dont la taille est limitee 1:1eront vendues a des prix avantageux\. Dans les quartiers amenages, les anciens resi- dents auront droit a des parcelles de 360 m2 alors que les nouveaux residents seront\.repartis egalement entre les trois types de parcelles indiquees ci-des- sus, la superficie moyenne etant de 300 m2\. Cette m@me repartition sera egalement la regle dans les trames d'accueil, au les parcelles mesureront aussi 300 m2 en moyenne\. 2\. La seule restriction applicable en matiere de construction dans le perimetre des parcellesÂconcerne les fosses septiques, qui doivent @tre cons- truites selon des techniques appropriees et a une certaine distance des puits et de la limite de chaque parcelle\.  Normes d'infrastructure  3\. Le projet c:onstitue la premiere etape d'un programme d 'amenagement progressif des zones interessees et les normes d'infrastructure retenues ant ete choisies en fonction des moyens financiers des beneficiaires du projet\. Les installations initiales pourront ~tre peu a peu ameliorees dans la mesure  ANNEXE 5 Page 2 au les revenus le permettront \. Les consultants qui ant realise !'etude de factibilite proposaient deux solutions\. Nous avons retenu la plus modeste du fait que, en particulier , les investissem ents necessaires a la mise en place du reseau de drainage sent beaucoup mains importants que dans !'autre solution envisagee et qu'il sera toujours possible par la suite d'ameliorer les instal- lations initi\.ales\. Routes interieures , pistes cyclables et voies pietonniere s 4\. Un reseau de voies de circulation sera amen age, aussi bien dans les \. quartiers restructure s que dans les trames d'accueil; la voierie comprendra des voies pietonniere s et des pistes cyclables et egalement des routes que pourront emprunter les camions d'enlevemen t des ordures\. Le nouveau reseau de rues ne sera pas conf$u seulement dans le souci de satisfaire les besoins en matiere de transports; il sera egalement partie integrante des reseaux d'adduction d'eau et de drainage\. Aucune parcelle ne sera a plus de 100/120 m d'une voie de circulation \. Les normes techniques retenues sent les suivantes: Emprises Routes sec:ondaires 15 m Routes tertiaire€! 10 m Les routes (emprises) occuperont environ 15% de l'espace dans chaque quar- tier\. 5\. Il ne sera pas necessaire en general de proceder a des travaux de remblai au de reempierrer les routes sauf dans le cas des routes primaires\. Les travaux routiers se limiteront principalem ent au nivellement et au com- pactage du sal\. Si des travaux de reempierrag e s'averaient necessaires , on pourrait se procurer les materiaux adequats en creusant des fosses sur le bas- c6te de la route\. Le materiel employe pour les travaux de constructio n des routes sera limite a des niveleuses automotrice s, des camions-cit ernes pour transporter l'eau et des rouleaux compresseu rs\. Drainage de l'eau de ruisselleme nt 6\. L'urbanisat ion des zones choisies ainsi que !'augmentat ion de la densite de la population dans lesdites zones reduisent la capacite d'absorp- tion du sol et rendent !'installat ion d'un reseau de drainage d'autant plus necessaire\. On a retenu la solution qui prevoit un amenagement progressif du reseau de drainage en trois phases\. Le projet ne porte que sur la mise en oeuvre de la premiere phase qui comporte les elements suivants:  ANNEXE 5 Page 3  a) Rues principales\. Construction de caniveaux trapezoidaux en terre, qui seront mac;ronnes aux endroits necessaires (environ 20 ~o de la longueur totale)\. 11 faudra installer des conduites souterraines aux intersections des routes\.  Le reseau de drainage a ete conc;ru en fonction d'un orage tous les cinq ans\. Les coefficients d'ecoulement varient de 0,60 a 0,30 selon la pente, l'etat du sol et du sous-sol\. b) Rues secondaires\. Construction de caniveaux triangulaires a l'aide d'une niveleuse automotrice\. Il n'est pas necessaire d'installer des conduites a !'intersection des routes\. c) Voies pietonnieres et pistes cyclables\. La construction de ces voies et pistes sera normalement laissee au soin des attributa'ires\. Cependant, le cas echeant, ces voies et pistes auront un profil en travers en forme de V et serviront alors de collecteurs d'eau de pluies, le reprofilage etant effectue a 1 'aide de niveleuses automotrices\. Drainage des zones hors-site : Le'marigot de Zogona 7\. Les travaux de drainage qui seront effectues dans les zones hors site comprennent le recalibrage du marigot de Zogona sur quatre km et le betonnage des rives du marigot sur deux km\. En outre, il est prevu de renforcer trois ponts qui enjambent ce bras de riviere et de construire un pont supplementaire\. Les ouvrages seront amenages au prof it des habitants des 500 ha urbanises du bassin versant de Zogona qui a une superficie de 1\.400 ha\. L'avant-projet re- latif a ces travaux a ete termine et, grAce aux donnÂees disponibles relatives a d'autres ouvrages de drainage importants de Ouagadougou, il a ete possible, dans le cas du recalibrage du marigot de reduire sensiblemenÂt  les normes tech- niques par rapport a celles retenues anterieurement\. Le coefficient d'ecoule- ment envisage est de 0,35 pour 'les zones urbanisees\. Le canal a ete conc;ru sur la base d'une crue par an\. Adduction d'eau 8\. Le pro jet prevoit d' alimenter en eau les di verses zones du pro jet au moyen de bornes-fontaines\. Il ne sera necessaire de proceder a des investis- sements hors sites que pour les quartiers de Sonsuribugu et Tanghin-Sambin qui ne pourront etre alimentes que si la conduite mattresse est renforcee; ces investissements seront finances dans le cadre du present projet\. Le re- seau de distribution secondaire sera construit le long du reseau routier res- \. tructure\. Les bornes-fontaines seront installees tous les 400 m a raison d'une borne pour 1\.500 personnes, ce qui constitue une amelioration sensible par rapport a la situation actuelle bien que ces normes restent basses\. Tech- niquement parlant, il sera possible d'alimenter par branchement direct 15 a 20 % des parcelles situees le long des conduites\. Les chiffres retenus pour la consommation sont de 60 litres par habitant et par jour pour la population branchee directement au reseau public et entre 20 et 25 litres pour la popula- tion s 'alimentant aux bornes-fontaines\. Les conduites sont en plastique (chlorure de polyvinyle) et ont un diametre variant de 42 x 50 a 144 x 160\.  ANNEXE 5 Page 4 Eguipements collectifs 9\. Les equipements collectifs de chaque quartier seront construits progressive ment, en fonction du rythme de peuplement de chaque zone\. La constructio n de marches, de centres communautaires ainsi que la renovation des ecoles et des cliniques situees dans les villes incluses dans le projet seront finances dans le cadre du present projet de developpement urbain\. Ouagadougou Bobo-Dioulasso • Marche (100 etals) 4 2 Centres communautaires (40 m2) 16 5 Renovation des ecoles 40 25 Renovation des dispensaire s 10 7 10\. Les marches comprendront des constructio ns simples partielleme nt couvertes, construites sur le sol d'origine qui sera bitume par la suite\. Ces constructio ns seront equipees d 'une borne-fonta ine, de lieux d 'aisance publics et d'installat ions pour le depOt des ordures\. Les centres communautaires seront construits avec des materiaux bon marche n'exigeant que tres peu d'en- tretien: murs en briques de terre stabilisees recouverts d'un enduit de platre, aeration transversal e, partes et fen~tres en bois, sol en beton au en terre, toiture en aluminium reposant sur une charpente en bois\. L'electri- cite sera si possible installee\. Des plans types doivent etre prepares\. La renovation des eccles et des dispensaire s se bornera a des travaux de transfor- mation peu importants (nettoyage, peinture, reparation des partes et des fene- tres, installatio n de l'eau courante et de lieux d'aisance et si possible de l'electrici te)\. Bien qu'il ne soit pas prevu de construire dans les zones du projet de nouvelles installatio ns, telles que des ecoles et des dispensaire s, certains espaces ont neanmoins ete reserves en vue de la constructio n ulterieure d'equipemen ts publics\. On trouvera ci-dessous la grille des reserves d'espace que les consultants SCET ont proposee pour les centres principal et secondaire sur la base d 'une superf icie moyenne de 5 m2 par habitant: '  ANNEXE 5 Page 5 Centre Centre principal secondaire Population 24\.000 3\.200 Ecole primaire 6\.000 m2 Terrain de sport 4\.000 m2 Centre polyvalent 800 m2 Protection maternelle et infantile 6\.000 m2 Centre social 4\.000 m2 Centre administratif 2\.000 m2 Centre professionnel 6\.000 m2 Centre culture! 2\.000 m2 Marches/commerces 4\.000 m2 1\.200 m2 Espace vert 6\.000 m2 Reserve d'espace/personne 1,25 m2 3,75 m2 Les chiffres donnes dans le tableau ci-dessus seront ajustes une fois etablis les plans de masse pour chacune des zones du projet\. 11\. On trouvera dans les tableaux qui suivent des donnees relatives a !'utilisation des terres, au nombre de parcelles eta la population installee dans chaque quartier; les chiffres figurant dans ces tableaux ant ete calcu- les en fonction de la superficie que devraient occuper les routes et les es- paces publics\.  ANNEXE\.5 Page 6 Tableau 1: Utilisation des terres Equipements Residences collectifs Circulation Total ha 0/ /0 ha 01 /0 ha 0/ /0 ha Quartiers amenages Zogona 70,0 70,0 15,0 15,0 15,0 15,0 100 Cissin 140,0 70,0 28,0 14,0 32,0 16,0 200 Sonsuribugu 92,4 70,0 18,5 14,0 21,1 16,0 132 Trames d'accueil Bobo-Dioula sso 33,8 67,6 8,7 17,4 7,5 15,0 50 336,2 70,2 75,6 482 B\. Description des guartiers a amenager dans le cadre du projet Tanghin-Sambin 12\. \. Situe au nord de Ouagadougou, a 2km du centre, Tanghin-Sambin s'etend sur une superficie de 163 ha sur la rive nord des trois barrages qui fournis- sent a la capitale une partie de l'eau potable dont elle a besoin\. Ce nouveau quartier compte 16\.000 habitants et a une densite de l'ordre de 100 habitants a !'hectare\. Le quartier est relie ala ville par deux digues qui traversent les barrages; il est situe le long de la route qui lange les trois barrages au nord\. Il sera desservi plus tard par un boulevard circulaire qui fera le tour de la ville\. Le quartier compte deja une ecole primaire et un dispensaire qui seront remis en etat dans le cadre du projet\. 13\. Le projet prevoit la constructio n d'une conduite de 200 em sur 1\.250 m de long qui permettra de raccorder le quartier au reseau d'adduction d'eau existant et !'installat ion de onze bornes-font aines\.  ANNEX 5 pag;-r Tableau 2: NOMBRE DE PARCELLES PAR OUARUER ET PAR DENSITE\. Superficie occupee par- Superficie Superficie Nombre lea routes et nettes de occupee par des Nombre lea espaces \. zones resi- Parcelles les pa~:celles Superficie nouvelles total de Densite Dl!lisite SupediCie I publica  dentielles existantes exis~tes restante pareelles parcelles ~ ~ ha 300 m2 Di\.2 300 mZ Zogona 100 30,0 70,0 2\.333 700\.000 2\.333 23,3 33,3 Ciss:i\.n 200 60,0 140,0 4\.000 1\.200\.000' 200\.000 667 4\.667 23,3 3=i!,3 Sonsu~:ibugu 132 39\.6 92,4 1\.200 360\.000 564\.000 1\.880 \. 3\.080 23,3 33,3 Bobo-Dioulasso Trames dÂ' accueil 50 16,2 33,8 1\.126 1\.126 22,5 33,3  ANNEXE 5 Page 8 HamdallayeI 14\. Situe a !'ouest de Ouagadougou, a 1,5 km du centre et de la zone industriell e de !'ouest, Hamdallaye est le plus ancien quartier non loti de la ville\. Il compte 13\.500 habitants repartis sur une superficie de 150 ha (densite de l'ordre de 90 personnes/h a)\. Hamdallaye est dote d'un reseau de rues bien developpe\.I l n'existe aucun equipement collectif mais le quartier profite des eccles, des dispensaire s et des marches des deux quartiers voisins\. Le projet prevoit d'etendre vers ce quartier ie reseau de distributio n d'eau qui est en cours d'installat ion dans des quartiers voisins gr~ce a un pret danois\. Les branchements seront effectues a partir des conduites existantes dent le diametre est de 200 et 300\. En outre, neuf bornes-font aines seront installees dans le cadre du projet\. Cis sin 15\. Situee au sud de Ouagadougou, a 2km du centre, la zone de Cissin Nord (210 ha) est reliee au centre de la ville par la route Po/Leo et compte environ 11\.000 habitants (densite: environ 52 habitants/h ectare)\. Cissin est un nou- veau quartier non loti\. Une grande partie de ses habitants sent encore des agriculteur s et les parcelles sent separees par des champs cultives\. 16\. Le projet prevoit le raccordemen t du quartier au reseau d'adduction d'eau existant - un ch~teau d'eau a deja ete construit- !'installat ion d'en- viron 14 bornes-fon taines, la refection et la modificatio n du trace des rues actuelles et de petits travaux de drainage\. Le projet comprend egalement la constructio n d'un marche, et de 8 centres communautaires\. Zogona 17\. Situe au nord-est de Ouagadougou, le quartier de Zogona est relie au centre de la ville par le Boulevard Charles de Gaulle, compte environ 20\.000 habitants\. C'est l'un des plus vieux quartiers non !otis de la ville; qui s'etend maintenant sur 250 ha\. 18\. Le projet prevoit le raccordemen t du reseau actuel d'adduction d'eau a un reseau de distributio n plus important, !'installat ion de bornes-font aines, la refection et la modificatio n du trace des rues existantes 'et !'installat ion d'ouvrages de drainage afin d'evacuer les eaux de ruisselleme nt vers le marlgot de Zogona\. Le projet comprend egalement la constructio n de deux marches, et de quatre centres communautaires\. Tampouy 19\. Situe au nord-ouest de la ville, en bordure de la route qui mene a Yatenga, Tampouy est l'un des nouveaux quartiers de Ouagadougou\. Il compte environ 7\.000 habitants clairsemes sur une vaste superficie La bordure nord  ANNEXE 5 Page 9 de \.cette zone est consacree aux cultures et au pAturage\. Le sud de Tampouy est situe le long des barrages; il est tres fertile\. Les pay- sans y pratiquent la culture maraichere sur de petites exploitations qu'ils irriguent avec de l'eau prdvenant des barrages situes a proximite\. 20\. Le projet prevoit le raccordement du quartier au reseau mentianne ci-dessus et !'installation de bornes-fontaines publiques le long des prin- cipales arteres\. Sonsuribugu 21\. Situe a !'ouest de Bobo-Dioulasso, a 2km du centre, Sonsuribugu (132 ha) est entoure par l'aeropart, une zone lotie (Accartville) et, au nord, par des zones non urbanisees\. Ce quartier compte environ 5\.000 habitants (densite: 45 habitants/ha); il camporte des zones semi-rurales au l'on prati- que des activites agricoles\. Cependant, ce quartier est relie au marcheÂcen- tral, a la zone industrielle et aux ateliers ferroviaires, qui offrent de nom- breuses possibilites d'emploi\. Les equipements collectifs se limitent a une ecole primaire situee a proximite d'Accartville qui compte des installations scolaires, un dispensaire et un marche dant beneficient Sonsuribugu\. 22\. Le projet prevoit la construction d' un collecteur principal d' eau de \. pluie d'une longueur d'environ 3 km, qui servira a evacuer l'eau de pluie des ateliers de la RAN et de la brasserie\. En autre, huit nouvelles bornes-fon- taines seront installees en plus des trois barnes existantes\. Ces nouvelles barnes seront raccordees aux conduites existantes, d'un diametre de 250, si- tuees a proximite de l'aeropart et d'Accartville\. La trame d'accueil sera raccordee aux conduites existantes d'un diametre de 200, au Âmoyen de conduites d' un diametre de 99 x llO\. Quatre bornes-font\.aines serant installees\. Deux marches et cinq centres communautaires seront construits\.  ANNEXE 5' Page 10 23\. On trouvera au tableau suivant les chiffres estimatifs correspondent a chaque quartier\. Tableau 3: Grandeurs estimatives Zogona Sonsuribugu Cissin Hectares 100 182 200 Routes d'acces: Secondaires (km) 500 Tertiaires (km) 3\.500 Routes situees dans les zones du projet: Principales (km 3\.450 6\.560 6\.900 Secondaires (km 5\.550 10\.035 11\.100 Adduction d'eau: Reseau principal (m) 2\.525 6\.565 5\.050 Bornes-fontaines 617 12 13/14 Drainage: Zones hors site (m) 4\.000 3\.000 Zones du projet (m) Equipements collectifs: Marches 2 2 2 Centres communautaires 4 5 5 c\. Coat estimatif detaille 24\. Les tableaux figurant dans les pages suivantes donnent des renseigne- ments supplementaires sur les coats estimatifs detailles des elements travaux d'amenagement et trames d'accueil et de !'ensemble du projet\.  ANNEXE 5 Page 11 Tableau 4: COUTS DETAILLES PAR QUARTIER (Millions de FCFA) Cis sin Zogona Bobo-Dioulasso Bobo-Dioulasso Amenagement Amenagement Amenagement Trames d'accueil 200 ha 100 \.ha 132 ha 1\. INFRASTRUCTURE DES ZONES DU PROJET Topographie 23,9 11,3 16,3 6,2 Routes 30,7 16,7 22,5 8,3 Drainage 53,2 50,2 46,8 17,7 Adduction d'eau 28,9 10,8 14,0 ~ TOTAL 136,7 89,0 99,6 38,2 Provision pour depassement des luantites 27,0 19,6 21,4 8,1 Provision pour hausse des priih 28,8 20,8 22,3 8,0 Ingenierie 26,0 18,9 20,2 7,2 Ingenierie-depassement des quantites 2,6 1,9 2,0 0,7 Ingenierie-hausse des prix 2,8 2,1 2,2 ___Q_& TOTAL GENERAL 223,9 152,3 167,7 63,~\. ,, l/ Pour tous les elements du cout, la provision pour hausse des prix a ete calculee au prorata de chaque quartier\. l - I \.j j j j  ANNEXE 5 ~ ~: PROJET DE DEVELOPPEMENT tmliAIN EN HAUTE-VOLTA COUT DU PROJET EN PRIX DE JUIN 1977 (en millions de Frana CFA) 1977 1978 1979 1980 TOTAL Coftts en Colits CoUts en Cotits cotits en cOGts coltts en Coiits Couts en Couts monnaie en monnaie en - monnaie en monnaie en monnaie en \\. h9p6ts nat1onale ~ 1£\.1;!1 ImpOts ~ ~ Total Imp~ts ~ ~ Total Imeata ~~ !£!!\.!\. Imp3ts nationsle~ !\.2!ll L A\."!ENAGEMENT QUARTIERS Ânon-loti§ Cisoin (200 ha) 18,1 49,9 26\.8 68,3 6,8 18\.5 26,6 58,4 136,7 Zogons (100 ba) w \.lli2\. w~ \.!§\.aQ\. \.2ll,\.l \. 89~0 Total Ouagadougou \.!Q\.1\. 11218 ll\.d g\.Q\. ~ 2§\.§\. 225,7 Sonauribugu (132 ha) ~\.!±2\.& ~\.!±2\.& 1\.W\. 44,2 Total Bobo-Dioulasso ~ 9,4 22,4 18,1 49\.9 61\.3 162,6 22,3 49,2 41,3 112,ft 63,8 140,8 120,7 325,3" II, TRAMES D 'ACCUEIL Bobo-Dioulasso (50 ha) lo4 2,9 7,6 14,0 n,o 30,6 7,0 17,4 38,2 Gaoua !\.!\. \.bi \.2\.! 1,1 2,5 2,5 6,1 1,4 3,3 2,9 7,6 5,6 14,0 11,0 30,6 8,1 19,9 16,3 44,3 III\. INFRASTRUCTURE HORS-SITE Zogona - Urainage 59,5 133,0 272,0 59,5 133,0 79,5 272,0 - Routes _!\.!\. -1\.1 \.-2\.1 \.h! _\.hl\. _\.Li\. __2\.,1 Total Zosona 60,6 136,7 82,0 279,3 60,6 136,7 () Sonsu:ribugu - Adduction d 'ea\.u 1,2 1,7 2,7 5,6 1,2 1,7 2,7 - Routes et drainage \.1\.d ~ !L\.l 'rotal Sonsuribugu 10,4 23,1 20,2 60,6 136 '7 82,0 279,3 1,2 1,7 2,7 5,6 9,2 21,4 17,5 48,1 71,0 159,8 102,2 333,0 IV, ADDUCTION D'EAU Hamdallaye 2,6 3,4 5,6 11,6 2,0 3,2 6,7 5,4 '8,8 18,3 Tempouy 3,5 4,7 7,6 15,8 2,7 4,5 9,2 7,4 12,1 25,0 Tamghin-Sambin \.i\.l hl \.i\.l Ll ~ l\.ll\. 2\.&\. !\.Q\.& !!\.& 1!!\.& ~ ~ 5,5 6,8 14,0 9,4 20,4 42,0 5,7 7,5 13,5 26,7 18,2 23,8 39,7 81,7 !ll!A\.1\.!\.!\.L\.l\.U\.U: 74,2 165,7 109,4 349,3 44,1 87,3 217,8 42,8 92,1 83,3 217,2 160,1 344,3 278,9 784,3 V, MATERIAUX DE CONSTRUCTION c~------ 11,1 24,8 35,9 41,2 7,4 16,5 23,9 37,1 82,5 119,6 zogoma 1M\. \.1\.! 1M\.~ ll\.l 1L!!\. ~ 'rotal Ouagadougou 11,1 24,8 35,9 26,5 58,6 75,1 15,2 33,9 49,1 52,8 117,3 170,1 Sonsuribugu 13,6 30,2 43,8 13,5 30,2 43,7 27,1 87,5 Trames d 1 accuei1 \.u \.!!\.§\. \.!lh1 \.2\.! ll\.l \.!lh1 1!\.d 36\.6 Total Bobo-Dioulasso 19,1 42,9 62,0 38,4 85,7 124,1 11,1 24,8 35,9 45,8 101,4 147,2 34,3 76,8 111111 91,2 203 ,o" 294,2 VI, PRETS A LA CONSTRUCTION : Ouagadougou -Marches 0,8 0,5 1,3 2,6 0,8 0,5 1,3 2,6 1,6 1,0 2,6 5,6 - Centres conmninautaires 0,5 1,0 019 2,4 0,5 1,0 0,9 2,4 1,0 2,0 1,8 4,8 - Fonds de d~veloppement communautaire 1,9 3,0 4,9 9,8 1,9 3,0 4~9 9,8 3,8 6,0 9,8 '19,6 - Reno~ation deoles, di,pensaires~ 3,2 1,1 7,8 12,1 3,2 1,1 7,8 12,1 6,4 2,2 15,6 24,2 - Hygiene publique et desinfection 2,3 1,7 2,9 6,9 0,8 1,7 1,2 3,7 0,8 1,7 3,9\. 5,1 5,3 14,3 Bobo \.Dioulasso - Marches 0,4 0,3 0,7 1,4 0,4 0,3 o, 1 1~4 0,8 0,6 1,4 2,8 - Centres eomm\.unautairea 0,2 0,5 0,7 1,4 0,2 0,5 0,7 1,4 0,4 1,0 1,4 2,8 \. Ponds de d&veloppement eommunautai:re  1,4 1,7 3,0 6,1 \. \. ~,4 1,7 3,0 6,1 2,8 3,4 6,0 12,2 \. Renovation ecole a~ dispensaires 2,1 0,8 5,2 8111 2,1 0,8 S,% 811 4,2 1,6 "10,4 16,2 \. Hygi~ne publique et disinfection u Ll ~ \.L2\. Q\.& Ll h1 !\.1 Q\.& Ll h2\. 2\.1 \.1\.1 !\.Y\.' 9,9 5,3 18,8 34,0 12,1 12,3 26,9 51,3 6,8 10,4 13,9 31,1 28,8 28,0 59,6 116,4 VII, AIDE AUX IIUNICIPALITES Ouagadougou - Mnovatto<t tltfp1,t et garage 1,3 3,1 3,1 7,5 1,3 3,1 3,1 7,5 \. Outils et materiel 10,6 27,1 37,7 10,6 27,1 37,7 - Camions ordures et pi~ces rechange 1,1 36,1 37,2 1,1 36,1 37 ,2\. \. Frais prmuier 'tabl1aaem\.ent po,,\. services 2,7 1,2 5,0 8,9 1,3 5,0 9,1 5,5 2,5 10,0 18,0 \. Vehicules et materiel pour Bureau municipal de 1 1 habitat \. 2,6 6,8 9,4 2,6 6,8 9,4 • Frais premier etab~iasement pour Bureau municipal de l'habitat 1,1 5,5 0,4 7,0 1,6 7,6 0,6 9,8 2,7 13,1 1,0 16,8 "" Aasis tance technique 1,2 5,3 6,5 \. 9,2 39,8 49,0 7,4 31,8 39,2 2,5 10,6 13,1 20,3 87,5\. 107,8 Bobo•Dioulasso - Outils et materl\.el 7,8 21,0 28,8 7,8 21,0 28,8 • VehicUles et materiel pour :Bureau municipal de l''babitat 5,7 7,8 2,1 5,7 1 \.a - Frais premier etablisaement pour Bureau municiPal de 1 'habitat 1,1 0,6 7,5 1,7 7,6 9,9 0,6 2,8 1,2 17,4 "' Assistance technique hl ll\.! ll\.! hl ll\.! \.?\.2\.! 12\.i 2!iaQ 1,2 5,3 6,5 \. 29\.,3 24,5 168,9 222,7 5,5 69,8 104,8 1,7 15,6 35,1 52,4 36,5 70,8 279,1 386,4 VIII\. ASSISTANCE Tl!CHI!lQUE Bureau du :erolet - Ing~nieur /Directeur 1,2 5,3 6,5 3,7 15,9 19,6 - Compt:nb1e 3,7 15,9 19,6 3,7 15,9 19,6 12,3 53,0 65,3 1,2 5,3 6',5 3,7 15,9 19,6 3,7 15,9 19,6 3,7 15,9 19,6 12,3 53 ,o 65,3 - Socio•economist 1,2 5,3 6,5 3,7 15,9 19,6 2,5 10,6 13,1 7,4 31,8 39,2 developpement eommunautaire 1,2 5,3 6,5 3,7 15,9 19,6 3,7 15,9 19,6 2,5 10,6 13,1 1f,l 47,7 58,8 et preparation deux!~ projet 1,8 8,0 • Vehicules 9,8 3,7 15,9 19,6 3,7 15,9 19,6 9,2 39,8 49,0 0,9 2,4 3,3 0,9 2,4 3,3 - Mat~riel et fournitures 0,1 0,9 1,0 0,8 2,0 \. Personnel local 2,8 0,8 2,0\. 2,8 0,4 1,0 1,4 2,1 5,9 8,0 6,7 6,7 6,7 6, 7 6,7 20,1 - Autres depenaes d'exploitation Q\.1 1\.!1\. !!\.Q !!\.1 !!\.Q Q\.1 1\.!1\. !!\.Q hl ~ 1,0 5,0 24,5 1,3 24,3 76,1 101,7 1,3 78,7 105,0 0,9 21,3 61,8 84,0 4,5 75,6 241,1 321,2 IX\., PREPARATION PROJET Fonda decaisaea en 1976 3,0 0,7 23,8 27,5 3,0 0,7 23,8 27,5 X\. PROJET D'EXEcUTIOll Pr6paration ,terrain 1,9 7,0" Pro jet d I execution 11,4 20,3 1,6 5,2 8,0 14,8 3,5 12,2 19,4 35,1 5,0 10,0 15,0 14,0 28,0 42,0 Supervision 19,0 38,0 57,0 \.!1\.2 \.L\.!l\. \.J!\.l !i\.l !!\.§\. li\.l \.!i\.l ~ !!!\.2\. 1,9 12,0 21,4 1,6 20,1 43,4 65,1 1,9 14,7 16,6 1,9 14,7 16,6 3,5 35,9 94,2 133,6 XI\. OONTROLE(EVALUAT!ON Charge de reeherche:s (voltaique) EniJ\.ueteur (voltaique)  ' 0,3 1,2 1,5 0,7 2,4 3,1 1,0 3,6 CoUts d 1 exploitation 0,5 1,9 2,4 1,1 3,8 4,9 1,6 5,7 h2\. \.!ia2\. \.Y\. L\.a\. !2\.& !Z\.1\. 2\.! 2,7 3,1 4,9 10,7 9,3 6,2 19,6 3S,l 9,3 24,5 45,8 COOT TOTl!,L PROJET SANS I!!PREVUS (en priK de juin 1977) 340,6 564,1 1\.204,2 2\.109,4 P~SIONS POUR 'lMPREVUS 1/ assement dea quantitJs: 25% pour travaux conatruction- 10% pour e'tudes techniques 36,3 70,8 69,0 176,1 \.2\.! _\.!& \.2\.!!\. 13,4 TOTAL PROVISIO,NS DEPASSEMllNT QllANTlTES 36,7 74,4 78,4 189,5 §!!VISION POUR HAUSSE DES PRIX 60,6 106,2 190,5 357,3 'roTA!\. PROVISioNS \.!!1d 180,6 268,9 546,8 :\.:u\.2\. 745,2 1,473\.1 2,656,2 !/ 101 pour travaux de drainage hore•atte c1Dns quartier de Zogona\.  Tablea u 6: HAUTE VOLTA ANNEX 5 PROJET DE DEVELOPPEMENT URBAI N Page 13 CALEN DRIER D'EXE CUTIO N DU PROJET -~-- ÂÂ-- \. Â-- -- -- - '-' - - 1979 1980 \. 1977 2nd 1978 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th 3rd 4th 1st ------- ------- \. AMENAG EMENT DES QUARTE RS - ""'\. Ill Photo aerienne -~ Notificati on aux chefs traditionn als ~-""' \. II II Leves topograph\.iques ~ II II r~AIII 1111 Enquete socio~c:onomique ~ ~Ill 1111 -- Plan de quartier Approbat ion du plan ' ~ II 1\. CNUR1J ' 2\. CNU2\./ ~ !:ill! II 3\. Notificati on-au plblic ~ Ill 4\. Conseil des Ministres • ~ II Projet d'exectui on Preparation dossiers appel d 'offres -- ~ "' ~~ I IIIII \.,\., IIIII -- Approbat ion Rectificat ions ~ \. \. \. ~ II - Ill Impression :'4 ,\. II II ,\.,\. _ AppelÂd'o ffres Evaluatio n des offres Approbat ion des marches ~ ~ 1111 -~ ~ \. II \. Signature des marches PHASE DE CONSTR UCTION Trace des parcelles ~\.:< ~~\.- \.,\.,\.,\. IIIII IIIII IIIII ~,\.,\. ::-<n IIIII Drainage ~ \.,\. io'\.14FI\. I I I I I I I I I I Routes \. Oor\.,\. Eau Centres communa utaires - ~ ~\. ~ \. \. \.rj'\.l\.:l IIIII IIIII IIIII IIIII ,\. \.f-"'" ~\.AI'\.: I II I I I I I I I Entrepots IIIII Marches Refection ec:oles et d ispensaires z ""''\.:< ~Ill IIIII REGROU PMENT DES PARCEL LES ~ \. !'\.,\.,\. IIIII IIIII IIIII Attributio n des parcelles Apports initiaux Recouvre ment redevances mensuelles \. \. r:r\. \.,\. ~ r:r:~-- IIIII IIIII IIIII ~Ill IIIII IIIII T z 1~1\. r,JIII I I I I I I I I I I Pre_ts a Ia c:on~ructio!"l - --- a: rn rn ::J rn w \.1) Commission Nationale de I'Urbanism e Restreint w ::J w ::J w ::J Â- ::J 'JJ Conseil National de I'Urbanism e 5:2 \. \.J \.J \.J c\. c\. c\. > rn rn rn w z w w w 0 0 - Cissin (Ouagadougou) 0 w z z z r,14F\.14FI~- Zogona (Ouagadougou) w a: 0 Âo rn 0 rn ~ 1111111 111- Sonsuribugo (Bobo-Oioulasso) 1- z :t ~ <t rn w rn rn World Bank - 18929  ANNEXE 6 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN CHARGES MENSUELLES ET POPULATION-CIBLE 1\. Les charges qu'il est envisage de faire payer aux beneficiair es sont fondees sur des notions d'efficacite et d'equite et tiennent compte de la pos- sibilite d'executer dans d'autres regions des projets du m~me genre et des moyens financiers des populations -cibles\. Il convient tout d'abord de noter qu'au cours de la preparation du projet il avait ete envisage d'appliquer des normes techniques differentes et qui auraient entra!ne des coOts de drainage plus eleves; elles ont ete abandonnees au cours de la preparation du projet au profit d'un programme d'amenagements progressifs a coOts initiaux plus faibles, ceci pour mettre les amelioratio ns proposees a la portee du plus grand nombre d'habitants possible\. De m~me, une majoration des prix des parcelles, si elle permet d'aboutir a une allocation plus efficace et d'avoir une plus grande repercussio n, ecarterait les menages disposant des revenus les plus faibles\. Et s'il etait demande aux beneficiaire s du projet d'assumer les coOts engages dans les zones hors site, le procede serait inequitable puisque les residents actuels, qui ont des revenus plus eleves, n'ont pas a payer des charges affe- rentes a !'infrastruc ture hors-site\. Par contre, la reduction des charges re- latives aux parcelles compromett rait ~erieusement l'objectif du projet ayant trait au renouvellem ent de cette experience dans d'autres regions et risquerait d'avoir sur !'allocatio n des parcelles des effets nefastes, notamment en favo- risant les investissem ents dans !'infrastruc ture urbaine aux depens du secteur rural\. Les charges qu'il est propose d'imposer aux beneficiair es, decrites dans la presente Annexe, ont done ete etablies compte tenu de tous ces elements\. 2\. Lea beneficiair es des elements du projet portant sur les travaux d'amenagement et les trames d'accueil s'acquittero nt de paiements au titre des redevances parcellaire s afferentes aux depenses,su ivantes: a) coOt d'amenagement des parcelles, y compris les provisions pour imprevus, l'ingenieri e, la supervision des travaux et lea coOts de reinstallati on des personnes deplacees; b) frais d'acquisitio n des terrains, selon le regime fancier anterieur; les autochtones payant 10 francs CFA le m2 et tous les autres residents, 100 francs CFA le m2; c) frais de gestion, d'un montant de 100 francs CFA par mois; d) une provision pour defaut de paiement, representan t 20 % des charges mensuelles totales; et e) les pr~ts a la construction dans le cas de menages participant a ce programme facultatif\.  ANNEXE 6 Page 2 CoQts et charges afferents a l'amenagement des parcelles 3\. Les coOts unitaires d'amenagement des zones non loties et d'instal- lation des trames d 'accueil ont ate calcules en di vis ant le coOt total des amenagements dans les zones du projet!/ par la superficie residentielle nette, ce qui donne le coOt par m2\. (Voir tableau ci-dessous)\. Cette methode a ete choisie parce qu'elle permet de repartir les coOts selon la taille des parcelles\. Par exemple, pour le quartier de Cissin, les coOts sont fondes sur les elements suivants Superficie totale: 200 ha CoOt total: 216 millions de francs CFA (y compris l'ingenierie) Superficie residen- tielle nette: 140 ha, ou 1\.400\.000 m2 CoOt unitaire par m2 154,29 francs CFA FCFA CoOt par parcelle:2/ 240 m2 34\.174 300m2 42\.717 360 m2 51\.260 A !'exclusion des residents autochtones qui payeront 15\.000 francs CFA (61 dol- lars), cheque beneficiaire devra verser un acompte de 15\.000 francs CFA, repre- sentant environ 20 % du total des coOts d'amenagement\. Le remboursement du solde des coOts 'de cheque parcelle s'effectuera en dix ans et sera assorti d'un taux d'inter@t de 8,5 %\. Le remboursement anticipe sera autorise\. La difference entre le coOt total des parcelles occupees par les autochtones et la redevance de 15\.000 francs CFA payee par ces derniers sera incluse dans le coOt d'amenagement des parcelles attribuees aux autres beneficiaires en proportion de la taille des parcelles\. Le taux d'inter~t est celui normale- ment applique aux pr@ts relatifs au logement consentis par les pays membres 1/ Une partie des coOts de' drainage des terrains hors site a ete ajoutee au total pour la zone de Zogona, comme indique dans le Tableau 5\. 1/ Non compris les terrains mais y compris tous les coOts d'amenagement\.  ANNEXE 6 Page 3 de l'Union monetaire ouest africaine (UMOA) et la Banque centrale des Etats d'Afrique de !'Ouest (BCEAO)\. Selon les\.estimations de la BCEAO le taux d'in- flation probable serait de 10% en 1977, mais il diminuerait ensuite pour pia- fanner a 7\.% pendant la periode de remboursement\. L'economie voltaique etant une economie ouverte, on peut presumer que son taux d'inflation suivra de tres pres le taux d'inflation mondial prevu\. frais d'acquisition des terrains 4\. Les frais officiels afferents a !'acquisition des terrains situes dans les zones placees sous l'autorite judiciaire des municipalites varient suivant le regime fancier prealablement en vigueur sur les terrains concernes\. Les personnes desirant acquerir les terrains occupes par elles dans le cadre du droit coutumier et dent elles acquittaient le droit de propriete en versant des paiements aux chefs traditionnels 7 doivent verser un montant de 10 francs CFA par m2; les autres doivent verser 100 francs CFA par m2\. De sorte que, dans le cadre du projet, les charges versees pour !'acquisition des terrains seront de deux sortes : les residents actuels des zones destinees a ~tre amana- gees verseront 10 francs CfA par m2 pour leur parcelle de 360 m2 - soit 3\.600 francs CfA - tandis que les populations nouvellement installees dans ces zones ainsi que sur les parcelles oa sont prevues les trames d'accueil verse- rant 100 francs CfA par m2 : le total de leur versement dependra de la taille de la parcelle qui leur sera allouee\. frais de gestion 5\. Chaque menage installs dans les zones du projet devra verser une commission de gestion qui sera comprise dans les charges afferentes a la par- celle et financera un tiers au total des frais assumes par le Bureau municipal de !'habitat de leur ville\. Cette charge, par mois et par parcelle, s'elevera a 100 francs CfA\. Provision pour defaut de paiement 6\. Etant donne que le systeme des echeances mensuelles represente une innovation et en raison des difficultes actuelles qu'ont les municipalites a assurer la perception des impOts, les charges mensuelles comportent une pro- vision pour defaut de paiement \.de 20 % du total mensuel\. Les recettes en pro- venant seront versees a un fonds special qui sera destine a financer les de- fauts de paiement et les arrieres\. Pr~ts a la construction et !'amelioration des logements 7\. Pour aider les menages a construire les nouveaux logements eta ame- liorer les structures existantes, des pr~ts seront accordes aux participants qui devront les rembourser en dix ans avec un interet de 8,5 %\. Les residents  Tableau 1: PROJET DE DEVELOPPEH£N'f URBAIN EN liAUTE-VOLTA COUT TOTAL ET COUTS UNITAIR£S D'AHENAGEIIENT DES ZONES OU PROJET, (Hi Ilion FCFA) ProÂttaton pour deipaa:Jement dea No;nbre Etudes q•JantitOs Pro vi at on pouc Allocation Co~t coUr de base de Coilu de l 1 in~~ technlque\.a tnfraa\. Ingen, hansse des erix co:1ts de in frau\. unlt\.tre £1lr tatlle !ltrcelle f\.!!\.fal~ Dornase ~ Dratnase ~ dftfinl thea __m_ \.J\.9\.L \.l!!\.!!!!\. !!!A!'l !2!!1 !!\.!ru!!ill\.!!,l!n\. hf!!!\.!!!L !2!!!1 ~ 240m! 300m t ~ INFRASTRUCTUN\.E DES ZONES DU 'PROJET Am~n\.ose~Dent des J:onea 92n loti~! OuaeadoU\.,gou -Cleatn 200 he 4\.667 23,9 ]0,7 53,2 107,8 26,0 27,0 2,6 :18,8 2~8 195,0 21,0 216,0 IS4,29 37\.030 46,287 55,544 -Z\.osona\. 100 ho 2,333 11\.3 16,7 50,2 78,2 18,9 19,6 t;g 20,8 2,1 141,5 12\.2 16,9 no,6 243 '71 87,736 73\.113 58,490 Bobo-Diuulaaao !;\.I -Sonauribugu m:w\. ll2 ha 3,080 16,3 22,5 46,8 -l!L\.§\. 271,6 1!h1 65,1 ll\.! 68,0 !\.!!\. 6,5 1W\. 71,9 \.Ll 7,1 153,7 490,2 \.i\.l\. 37,4 -- 16,9 !!!\.! 544,5 170,82 180\.05 61,520 51,267 41,014 64\.818 54,015 43\.212 Trame a d 'accuei 1 4/ Bobo--Dtoulaeao 50 h&- 1,126 6,2 8,3 17,7 32,2 7,2 8,1 0,7 B,O 0,8 57,0 57,0 168,64 60\.710 50\.592 40,474 Gaoua \.!\.!\. !\.i l\.l \.!!\.! Li \.!!\.!\. ~ !ll\.!A1 38,3 8,6 9,6 0,9 9,5 0,9 67,8 Add•\.u:tiun d'eau ('ll:ones du: projet) Cintn 28,9 6,9 7,2 0,7 7,6 0,7 52,0 Zogone 10,8 2,7 2,7 0,3 l,O 0,3 19,8 Sonsuri bugu 14,0 3,4 3,5 o,J 3,8 0,4 U,4 Tramett d'acct~eil 6,0 1,4 1,5 0,1 1,5 o,1 10\.6 \. Hatnda1 &ay\., 18,3 4,5 4,6 0,5 4,9 0,5 33,3 \. Tcmpnuy 21 25\.0 6,2 6,3 0,6 6,9 0,7 45,7 \. T\.onghln-Sambln- ~ \.!\.! \.M !!\.! J\.9\.,l !\.!!\. _§Ll !ll\.!A1 141,4 34,4 35,4 3,4 38\.0 3,7 256,3 lnfraot:rucrure hora at te Zngona \. Dntnage 272,0 10,7 27,2 1,1 26\.6 1,3 338,9 \. Routes 7,3 1,8 1,9 0,2 1,9 0,2 13,3 Soneuclbugu \. Adtluction d 1 e4u 5,6 1,3 1,4 0,1 1,5 0,1 10,0 \. Routes et dratnage ~ !\.Ll !!\.!!\. Ll\. ll\.a! LL \.!!!\.! !ll\.!A1 333,0 25,5 42,5 2,6 42,9 2,9 449,4 coi}r TOTAL DU PROJET m\.1\. \.ill\.§\. ill\.1 !!&! 162,3 !i\.§\. 1,263,7 t/ Col?t total aau~nage:ment dtvtse par superftc!e ceutdenttelle net:te\. 2/ Y ca;nprh trall'th\.lX hora olte, • l/ J\.ea coUta itant etab1h en fonctlon dea C!:tudes tachntquea preumlnstres, un wonca:1t de 1f!4 seule;gen\.t a ete prevu poar lea depaesen";H'Ita des q<~nntite&, "' 2 ~/ J\.ea co~ts d'a\.nenaaement et de mlBe en plaee dea tra11es d'accuett, de Bobo~Dtoulanso ont et6 calcules ensemble\. lh corr-espondent e un cout ~nitalre untforme de 170,29 ft"onca CFA/m • Les c~uu de base en fonction de la tat He dea parcellea oont les auiva:tta! 40\.870 francs CPA pour une parcelle df1c240 m2 • 51\.037 funcs Ci'A poor une parcelle de 430 m et 61\.304 france CFA pcnu une parcelle de 360 ;n •  ANNEXE 6 •Page 5 act~els des quartiers non !otis pourront emprunter jusqu'a 30\.000 francs CFA et les occupants des nouvelles parcelles , qui construir ont de nouveaux loge- ments, pourront emprunter jusqu'a 65\.000 francs CFA, ce qui represent e le prix d'achat de deux tonnes de ciment et de 18 feuilles de tole ondulee permettan t de construir e la toiture d'un logement d'une piece\. Les menages deplaces a la suite des travaux d'amenagement recevront 65\.000 francs CFA dent 30\.000 francs CFA a titre de pr@t et 35\.000 francs CFA a titre de don en de- dommagement des frais de reinstall ation\. Les remboursements seront per~us par les bureaux municipaux de !'habitat en m@me temps que les redevance s affe~ rentes a l'amenagement des parcelles \. Les remboursements mensuels s'etablis - sent comme suit : Tableau 2 Remboursements au titre des prets a la construct ion et a !'amelior ation des loqements (taus les quartiers ) Residents actuels/! Nouveaux residents Montant du pret 30\.000 65\.000 Remboursement mensuel 381 826 Provision pour defaut de paiement (20 %) 76 165 REMBOURSEMENT MENSUEL TOTAI/2 457 991 Total des charges mensuelle s 8\. Le Tableau 3 indique la structure des charges mensuelle s totales pour Ouagadougou et Bobo-Dioulasso\. A Ouagadougou, les charges proposees ne sent pas les m@mes pour taus les sites, en raison des coats plus eleves de drainage a Zogona; a Bobo-Dioulasso, les coats d'amenagement et d'installa tion /1 Les menages deplaces auront droit a 65\.000 francs CFA, mais ne rembourse- ront que 30\.000 francs CFA, le reliquat etant considere comme dedommage- ment des frais de reinstall ation\. Ces frais sent considere s comme faisant partie des coats d' amenagement des quartiers et sent repartis sur toutes les parcelles \. /2 Sur la base d'une periode de remboursement de 10 ans et d'un taux d'inte- r@t de B, 5 ~o •  ANNEXE 6 Page 6 Tableau 3 Charges mensuelle s et proportio ns du revenu des menages/1 /2 (245 francs CFA = 1 dollar) Charges afferente s a l'amenagement des parcelles /3 Residents actuels 240m2 300m2 360m2 Cissin 860 (8 %) 1\.103 (10 %) 1\.345 (12 %) Zogona 1\.231 (11 %) 1\.566 (14 %) 1\.902 (17 %) Bobo-Dioulasso 894 (8 %) 1\.045 (10 %) 1\.396 (13 %) Prats a la construct ion et a !'amelior ation des logements 457 (4 %) Consommation mensue11e d'eau 336 (3 ~6) Taxes municipal es mensuelle s 150 (1 %) Nouveaux residents 240m2 300m2 360m2 Cissin 860 (5 %) 1\.103 (7 %) 1\.345 (8 %) Zogona 1\.231 (7 %) 1\.566 (9 ~~) 1\.902 (11 ~~) Bobo-Dioulasso 894 (5 %) 1\.045 (6 ~&) 1\.396 (8 %) Prats a la construct ion 991 (6 %) eta !'amelior ation des logements Consommation mensuelle d'eau - 336 (3 %) Taxes municipal es mensuelle s ~ 150 (1 %) Le revenu mensuel des menages des residents actuels en 1979 s'etablit en moyenne comme suit : Cissin FCFA 11\.000 (US $ 44) Zogona FCFA 13\.000 (US $ 53) Sonsu~ibu gu FCFA 11\.000 (US $ 44) Le revenu mensuel des menages des nouveaux residents de tous les quar- tiers en 1979 est en moyenne de : FCFA 16\.500 (US $ 68) /2 Les chiffres entre parenthes es represent ant les pourcenta ges du revenu mensuel des menages\. /3 Les elements et les modalites de ces charges figurent aux par 2\. et 3 de l'Annexe 6\.  ANNEXE<6 Page 7 Tableau 4 Amenagement de Cissin Calcul des charges afferentes a !'amelioration des parcelles 240m2 300m2 360m2 Coat unitaire de !'infrastructur e /1 37\.030' 46\.287 55\.544 Coat du terrain /2 24\.000 30\.000 36\.000 Total 61\.030 76\.287 91\.544 Indemnites residents autochtones /3 2\.570 3\.213 3\.856 Coat total de la parcelle 63\.600 79 \. 500 95\.400 Apport initial 15\.000 15\.000 15\.000 Reliquat 48\.600 64\.500 80\.400 Charges mensuelles /4 617 819 1\.021 frais de gestion 100 100 100 Total 717 919 1\.121 Provision pour defaut de paiement (20 9\.J) 143 184 224 Total charges mensuelles par parcelle 860 1\.103 1\.345 Le coOt unitaire de !'infrastructur e est calcule en fonction des coats d'amenagement du quartier y compris l'ingenierie et les frais de reinstal- lation des personnes deplacees ainsi que les provisions pour depassement des quantites et pour hausse des prix\. Les residents actuels, proprietaires en vertu du droit ~outumier paieront 10 francs CFA le m2; les autres residents actuels et les nouveaux paie- ront 100 francs CFA le m2\. Les residents actuels, proprietaires en vertu du droit coutumier feront un seul versement de 15\.000 francs CFA\. La difference entre le coat total des parcelles occupees par ces residents et la redevance de 15\.000 francs CFA payee par eux a ete incluse dans le coat des parcelles attribuees aux autres residents en proportion de la taille des parcelles\. Sur la base d'une periode de remboursement de 10 ans a 8,5 % d'inter@t\.  ANNEXE 6 Page 8 Tableau 5 Amenagement de Zogona Calcul des charges afferentes a l'amelioration des parcelles 240m2 300m2 360m2 Cout unitaire de l'infrastructur e /1 58\.490 73\.113 87\.736 Cout du terrain /2 24\.000 30\.000 36\.000 Total 82\.490 103\.113 123\.736 Indemnites residents autochtones /3 5\.424 6\.720 8\.136 Cout total de la parcelle 87\.914 109\.833 131\.872 Apport initial 15\.000 15\.000 15\.000 Reliquat 72\.914 94\.833 116\.872 Charges mensuelles /4 926 1\.205 1\.485 Frais de gestion 100 100 100 Total 1\.026 1\.305 1\.585 Provision pour defaut de paiement (20 %) 205 261 317 Total charges mensuelles par parce lle 1\.231 1\.566 1\.902 /1 Le cout unitaire de l'infrastructur e est calcule sur la base des coOts d'amenagement des quartiers y compris l'ingenierie, les frais de reinstal- lation des personnes deplacees et les provisions pour depassement des quan- tites et pour hausse des prix\. Dans ce cas une partie des couts de drainage hors site y est aussi incluse\. /2 Les residents actuels, proprietaires en vertu du droit 'coutumier paieront 10 francs CFA le m2; les autres residents actuels et les nouveaux paie- ront 100 francs CFA le m2\. /3 Les residents actuels, proprietaires en vertu du droit coutumier feront un seul versement de 15\.000 francs CFA\. La difference entre le coOt total des parcelles occupees par ces residents et la redevance de 15\.000 francs CFA payee par eux a ate incluse dans le coOt des parcelles attribuees aux autres residents en proportion de la taille des parcelles\. /4 Sur la base d'une periode de remboursement de 10 ans a 8,5 % d'inter~t\.  ANNEXE 6 Page 9 Tableau 6 Quartiers de Bobo Dioulasso Calcul des charges afferentes a !'amelioration des parcelles 240m2 300m2 360m2 Cout unitaire de !'infrastructure /1 40\.870 51\.087 61\.304 Cout du terrain /2 24\.000 30\.000 36\.000 Total 64\.870 81\.087 97\.304 Indemnites aux residents autochtones /3 919 1\.149 1\.379 Cout total de la parcelle 65\.789 82\.236 98\.683 Apport initial 15\.000 15\.000 15\.000 Reliquat 50\.789 67\.236 83\.683 Charges mensuelles /4 645 854 1\.063 Frais de gestion 100 100 100 Total 745 854 1\.163 Provision pour defaut de paiement (20 %) 149 191" 233 Total charges mensuelles par parcelle 894 1\.045 1\.396 /1 Le coOt unitaire de !'infrastructure est calcule sur la base des coOts d'amenagement des quartiers y compris l'ingenierie, les frais de reinstal- lation des personnes deplacees ainsi que les provisions pour depassement des quantites et pour hausse des prix\. Les residents actuels, proprietaires en vertu du droit coutumier paieront 10 francs CFA le m2; les autres residents actuels et les nouveaux paie- ront 100 francs CFA le m2\. Les residents actuels, proprietaires en vertu du droit coutumier feront un seul versement de 15\.000 francs CFA\. La difference entre le coOt total des parcelles occupees par ces residents et la redevance de 15\.000 francs CFA payee par eux a ete incluse dans le cout des parcelles attribuees aux autres residents en proportion de la taille des parcelles\. Sur la base d'une periode de remboursement de 10 ansa 8,5 % d'inter~t\.  ANNEXE 6 Page 10 des\. trames d'accueil ne varient pas beaucoup d'un site a !'autre de sorte qu'il a ete possible de proposer un tarif uniforme pour !'ensemble de la ville, ce qui simplifie les procedures de recouvrement\. Le Tableau 3\. indique les charges a appliquer dans l'une et !'autre ville\. Les Tableaux 4 a 6 inclus indiquent les calculs qui ant ete effectues pour chaque site\. Revenu des menages dans la population cible 9\. La mesure dans laquelle les menages seront a m~me d'assumer les de- penses d'infrastructure et d'amelior'ation des logements depend de la fraction du revenu mensuel disponible des menages que ces derniers peuvent depenser pour leur logement\. Les tarifs proposes ant ete etablis en fonction de !'expe- rience acquise dans d'autres villes d'Afrique et compte tenu des disparites existent entre les niveaux de revenus dans les differentes villes, de fa~on que le total des depenses liees au logement represente de 15 a 25 % du revenu des me- nages, suivant le niveau de ces revenus et en fonction de l'inter8t manifeste par les families en ce qui concerne l'achat de materiaux pour la construction au !'amelioration de leur logement\. 10\. Pour eviter que les nouvelles depenses resultant du projet ne scient incompatibles avec d'autres charges inevitables, telles que les frais de con- sommation d'eau et les impots municipaux, ces dernieres ant ete incluses dans !'analyse des moyens dont pouvaient disposer les menages pour y faire face\. Le coOt de la consommation d'eau est fonde sur les besoins d'une fa- mille de huit pe\.rsonnes consommant en moyenne 20 litres d' eau par jour et par personne\. Les impots municipaux representant a) la taxe annuelle versee par chaque habitant pour les routes, b) l'impot pour le ramassage des ordures mena- \. geres et c) les impOts fanciers\. Le Tableau 3 indique ces depenses et la part du revenu mensuel moyen des menages (projections) a laquelleoelles correspondent\. 11\. Pour estimer les niveaux moyens des revenusÂdes menages, il a ete fait appel a plusieurs sources: a) les enqu~tes par sondage effectuees a !'occasion du projet d'amenagement de Cissin realise par le PNUD en 1974-76, b) une etude de petite envergure, mais tres approfondie, portent sur les depenses de menages des zones non loties dans la zone de Cissin en 1975 et c) les chiffres estimatifs locaux provenant des donnees relatives a l'emploi et aux salaires\. A l'aide de ces divers renseignements, il\.a ete estime que le revenu mensuel moyen des menages dans les quartiers non lotis de Ouagadougou s'elevait a 10\.000 francs CfA en 19761/ et, en raison de !'inflation et de la crois~ance reelle des revenus atteindrait approximativement 11\.000 francs\. CfA en 1979\.1/ , date moyenne a partir de laquelle les charges mensuelles commenceront a etre per~ues\. Comme l'indique le Tableau 3, les residents actuels verse- raient des charges allant de 860 francs CfA a 1\.902 francs CfA, soit environ 8 a 17 % de leur revenu mensuel moyen\. A cela viendraient eventuellement s'ajouter des charges au titre des pr~ts que les residents peuvent obtenir pour la construction des logements et qui sont estimees a 486 francs par mois\. 1/ Legerement plus eleve a Zogona\.  ANNEXE 6 Page 11 Taus les menages de ces villes ant les moyens financiers d'assumer les charges afferentes a !'infrastructure, ala consommation d'eau et aux taxes, et 90% d'entre eux sont probablement a m~me d'assumer les coOts supplementaires des materiaux de construction\. 12\. La population-cible qui, selon les projections, occuperait les nou- velles parcelles dans les zones d'amenagement ainsi que dans les zones ou se- ront etablies les trames d'accueil, ~isposerait de revenu legerement plus eleva que les menages installes dans les quartiers non !otis\. En 1979, ce revenu pour une famille de huit personnes s'eleverait en moyenne a 16\.500 francs CFA\. Cependant, les revenus dont disposeront les populations devant ~tre installees sur les nouvelles parcelles varieront considerablement en fonction de la taille de la parcelle, de son coOt et de son emplacement\. Malgre ces disparites, les projections relatives aux charges afferentes a !'infrastructure, aux mate- riaux de construction, a l'eau et aux impOts, ne depasseraient pas 22% des revenus mensuels moyens projetes~ de sorte que la grande majorite des menages vivant dans les deux villes auraient les moyens de vivre dans lea quartiers re- amenages et les trames d'accueil\. M8me les families les plus pauvres, c'est- a-dire celles\.qui disposent d'un revenu inferieur a 10\.000 francs CFA par mois, seraient a meme d'assumer les frais que representeront les nouvelles parcelles, et seraient meme, pour la plupart, en mesure de contracter des prets pour les materiaux de construction necessaires pour ameliorer leur logement\.  ANNEXE 7 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN RECOUVREMENT DES COUTS ET MARGES BRUTES D'AUTOFINANCEMENT 1\. Comme indique sous forme de tableau (paragraphe 5\.12), les charges mensuelles afferentes aux parcelles representant le principal element\. de recou- vrement des coOts du projet\. l'imputation et la composition de ces charges ainsi que les remboursements mensuels des pr~ts consentis a la construction d'habitations sont indiques dans l'Annexe 6\. La presente section s'attache a decrire les marges brutes d'autofinancement associees au projet\. ; 2\. Les Bureaux municipaux de 1'habitat de Ouagadougou et de Bobo- Diou1asso percevront le montant des acomptes ve~ses, des charges afferentes aux parce1les et des remboursements des pr~ts consentis a la construction d'habitations\. Aux fins d'analyse de la marge br~te d'autofinancement, les hypotheses suivantes en matiere d'attribution de parcelles et de paiements initiaux ont ete etablies pour les divers quartiers\. Acomptes 1978 1979 1980 1981 Droit de Droit de \.Droit de Droit de Date du jouissance jouissance jouissance jouissance premier tradi- tradi- tradi- tradi- paiement tionne1 Divers tionne1 Divers tionnel Divers tionnel Divers Cissin avril 150 850 150 1\.850 100 1\.567 1978 Zogona janvier 70 330 70 930 93 1\.840 ( 1979 Sonsuribugu janvier 60 1\.480 60 1\.480 1979 Trames juillet d'accueil 1979 250 250 626  ANNEXE 7 Page 2 Pr@ts pour !'amelioration et pour la construction d'habitations 1978 1979 1980 1981 Nouvelles Existantes Nouvelles Existantes Nouvelles Existantes Nouvelles Existante Cissin 1,000 334 1\.666 333 1\.334 1\.933 Zogona 400 1\.000 Sonsuribugu 940 600 940 600 Trames 250 250 626 d'accueil 3\. Le flux des fonds provenant de ces diverses sources et destines aux Bureaux municipaux de !'habitat sont indiques dans les comptes d'exploitation suivants sous la rubrique recettes : Comme l'indiquent les tableaux, des excedents considerables s'accumuleront pendant les premieres annees, du fait que non seulement les acomptes mais egalement les paiements mensuels seront verses alors que le service de la dette n'aura pas encore commence\. Par contre, quand les paiements mensuels viendront a terme, aux environs de 1988, il resters encore cinq annees de paiements au titre du service de la dette, ce qui entratnera des deficits pour 1989 et 1994\.  Tableau 11 HUNlCIPALIT@ DE OUAGADOUGOU - CO!IPT!! D'EXP!\.OITATION POUR p;; PUR!!AU HUNICIPAL DE L'HAJ!ITAT\. Recettea Â~tea !/ u \.•o 36,0 40,0 29,0 Redevanees menaue ls \.!L! 2!\.1 117\.7 162\.2, 162,9\. 162,9 162,9 162,9 162,9 162,9 150,4 100,2 !2:\.! Recettes Totales 27,5 98,7 157,7 181,9 162,9 162,9 162,9 162,9 162,9 162,9 150,4 100,2 45,2 Jrepensea ! Fonctionnemant du Bureau 12,8 13,8 14,9 16,0 17,3 18,6 20,1 21,7 23,4 25,2 27,2 Provieion pour 1mpayet 2,5 12,5 23,5 32,6 32,6 32,6 32,6 32,6 32,6 32,6 30,1 20,0 9,0 Service de 1s dette:\.:!1 Infrastructure sur site Inter~ts , 20,2 19,0 r7,7 16,4 14,9 13,4 11,8 10,1 8,3 6,4 4,4 2,3 Remboursement du principal !L\.2\. !W\. Z,Li ll\.l !h! 1W\. 1!!\.1 1!!\.9\. llA 1!\.1 ll\.l lL! Total parUe1 40,1 40,1 40,1 40,1 40,1 40,1 40,1 40,1 40,1 40,1 40,1 40,1 Pri:ta 4 la construction Ind~reto 10,4 9,8 9,1 8,4 6,9 6,1 5,2 4,3 3,3 2,3 Remboursement du principal !!W\. \.llW!\. !W\. !bl \.!U!\. li\.i ll\.1 !§\.!!\. !Li !!!\.i Total parUel 20,7 20,7 20,7 20,7 20,7 20,7 20,7 20,7 20,7 20,7 20,7 20,7 Total des Obltgattons au tt tre du Service de la dette 60,8 60,8 60>8 60,8 60,8 60,8 60,8 60,8 60,8 60,8 60,8 60,8 Dlipenaes Totalea 2,5 2,5 36,3 46,4 47,5 109,4 110,7 112,0 113,5 115,1 116,8 118,6 120,6 60,8 60,8 60,8 60,8 Excedent\. (Deftci t) pour 1' annee 25,0 86,2 121,4 135,5 115,4 53,3 52,2 50,9 49,4 47,8 33,6 (18,4) (75,4) (60,8) (60,8) (60,8) (60,8) !/ Y compris les redevances mensuelles et 1& remboureement des pr'l!:ts i la ,construct ton\. 2/ Net de 1'atde temporatre de l'etet de 17,2 et 9\.1! mtlltons de FCFA resp~c~iveinent en 1978 et 1979, !I Conditions du service de la dette: 6% d 1 1nteret sur 17 ans avec un diffe\.re d'amort1saement de 5 ana pendant lequel sucun inter:t n•eat versl\. Â;,  Tebleau 2; HIINICIPALITE DE 8080-D!OULASSO - COIII'TE D'EXPLOITATION POUR U BUREAU MUNICIPAL DE L'IIABITAT (Hll Uon FCFA) 1978 !ill !\.Wl !2ll \.!2!!1\. !ill \.llii !\.ill \.!\.2!!! 1987 \.!ill ill\.2 !22!!\. 1991 !ill !lli !\.ill\. Recettes ~tee~ 1/ 26,8 26,9 9,4 Redevances mensuels- - ll\.! \.!!\.J! \.1hl \.2Ll\. \.2Ll\. \.2Ll\. 24! \.2Ll\. 24! 24! 12\.1 ll\.l - - - - Recettes Totales 64,2 107,9 106,1 96,7 96,7 96,7 96,7 96,7 96,7 96,7 59,3 15,1 ntpenses 11 10,7 11,5 12,4 13,4 14,4 15,6 16,,8 18,1 19,5 21,0 Fonc:t ionnement du Bureau Provision pour impa\.yl!s 7,5 16,2 19,3 19,3 19,3 19,3 19,3 19,3 19,3 19,3 11,9 3,1 Service de la dette :11 Infrastructure sur site 12,6 11,9 11,1 10,3 9,4 8,4 7,4 6,4 5,2 4,0 2\. 7 1,4 lnteteu Rembouraement du princi!j)al -- -- -- -- -- ll\.i \.!1\.d ll\.&\. 25;1 !W\. 25 2 !i\.! 25,2 \.!hl 25,1 !1\.1 24,6 \.!!!\.& 25,2 !\.2\.2\. 25,1 ll\.! 25,1 ll\.i 25,1 ll\.l 25,1 Total parttel 1,5 16,2 30,8 30,8 25,1 25,1 Prho ~ lo construction 2,3 1,2 10,4 9,8 9,1 8,5 7\. 7 6,9 6,1 5,2 4,3 _3,3 IntEreta ~ Remboursement du Principal - -- -- -- -- !2\.1 20,7 !!!\.2\. 20,7 \.!!\.& 20,7 lW\. 20,8 !l\.Q\. 20~7 \.ll\.! 20,7 li\.! 20,7 ll\.1 20,7 ~ 20,7 ~ 20,7 20,7 !\.2\.i 20,7 Total esrttel le Dette 45,8 45,8 45,8 46,0 45,9 45,8 45,3 45,9 45,8 45,8 45,8 45 \.a Total des ObUsattons au tt tre du Service de 7,5 16,2 30,0 ]0~8 31,7 78,5 79,5 80~ 1 82,1 83,3 77,2 69,4 45,9 45,8 45,8 45,8 Dipenses Totales Excident !Deflc1<l pour 1 l anne'e 56;7 91,7 76,1 65,9 65,0 18,2 17,2 16,0 14Â,6 13,4 (17 ~9) (53, 7) (45,9) (45,8) (45 ,8) (45,8) 1/ Y compr~s lee redevsnce• mensuellea li!t le rembouraement des pr~ta ~ la construction\. 2/ Net de 1 1 a1de temporaire de 1 1 itat de 8,4, 7,5 et 9 3 9 mtlUontt de FCFAg reapectlvement en 1978 0 1979 et 1980\. Conditions du aervlce de ls dette~ 6'1 d 1 tntet4t sur 17 ana evec un d!ffe'IL'e d'amortiosement de 5 ana pendent ieque1 eucun tnt€r&t n est versB\. 1 !I~ ll \., "  ANNEXE 7 Page 5 4\. Compte tenu des excedents (au deficits) enregistres par les Bureaux municipaux de l'habitat, ainsi que de toutes les autres sources et utilisa- tions de fonds au titre du projet, les marges brutes d'autofinancement suivan- tes ont ete etablies pour Ouagadougou et Bobo-Dioulasso, elles indiquent l'im- pact du projet sur la situation financiere de chaque municipalite • \.  ~: Mli'NICU'ALITE D£ o_~UGOU \. SOURCES t1' UTIL!SA\.l'ION DES FONDS\. (en millier FCFA) ~~~~~~~~~~~~~~~~~ SOURCES DE F'ONDS t\. Bu~:::d:~l\.~!!i:~e::) l~~::!i:Ieactoo!1 25,0 86,2 121 1 4 135,5 115,4 53,\.5 S:Z\.,2 50,9 49,4 47;8 33,6 (18,4) (75-,4) (60,8) (60~8} (60,3) (60,S} Moina: augmaar:atiCC (bat \. a) doe \TIDI'ltacc;:e it\. recevotr (2,5) (10,0) (11\.0) (9,1) 2,5 10,0 11,0 9,1 II\. Exeident w deftstt PrGu!Subventttn:as da 1 '!tl£ n\.n \. du buresu de l 1 babteul/ 76,2 110,4 126 1 4 11\.5,4 SJ,S 52 1 2 A\. tnfrucruecure !ten site i\. Esuipt!l!:letlt:l - marehl• colleet:Ua \. ceuen• eo!!:IISWUlUtainu:t- \. re&ta• en leet dee dbpeuaina et 6c:o1ea \. sane& pubU\.que\. deetcfac:tioc c\. ~;:=;::;i:~&::;•::::a=: :!: !:nse• 8 1 1 4 10,% ~oW\.::f~~= er: 9tec:es de recttanse 36,6 : ::!!!:\. d-cnge \. c:oUt de du service d'en11!vtn:~W~t 4a~ ordures 40,% 10,1 10,1 co vehtcules ~t ute'riel du buro&l\.\ de t'babiu\.c\. 10,2 ,\. eoUt: de dtDrorrage du bunau de 1 'h•bieat 7\.0 9,8 \. acdstar:u:e tRtu:ai\.que 61\.0 43\.6 l6,S 1,2 1,2 1,4 1,4 1,4 1,7 1,7 1,7 %,1 2,1 2,1 2,5 2,5 III\. Recer:tes pr:ov4maru:: des l!llllj]bes tv, ReCGCteG ftsealea l\.aedea ant!deuremnct dfe"eteea a 1' enle'lll!l'll\.ent: detll ordutas 4-5,0 48,2 55,1 59,0 63,1 67,5 72,3 11 ,l 82,7 aa,s 97,1 106,5 116,1 V, Int:er~t prcvenant: de 1 1 exceChtnt: du bureau de l'habit\.C (F01'ld!ll d& di!Vdopp•tit de 1 1babttac> ii\.S\. Li 1L! ll\.! \.U,\.l \.l\.'W!\. 'MTAL SOllii\.CES 300,8 216,7 194\.7 191,1 140,7 145,7 150,6 156,1 1\.!it,5 81\.1 tJTILISATION DES FONDS Iufraseruct:ure hors aite 30,2 !gui\.pemants eolleeetf\.s - ma't'~:hCs 3,8 3,7 \. eencres ea:au\.nauc:ai\.re• 3,5 3,4 \. remtu en '~ot deo 4bta:el'lHirEs ot \.colE& 17,5 11,5 - Uttti pub11que:\. deetnfeceion 10,3 5,1 5,2 Prosr;UJ$e d 1 ueht\.anc:o :aunidpals \. npal'4tion dea d&pou et des ptape tO,\.l - cutUs et st0rie1 36,6 \. eamiotta de votrt• er: pOc:ea do 't'e:change 40,2 \. v~h1011aa er: lDtidel du bunau de 1 'babit•1: ta\.:z - cadt: d:G dctftattese du bureau d• 1'bobitsf! 7\.0 9,9 - \.uta:Uuo\.cc technique 61,0 43,6 \. urvice d 1 enlivea:umt dal ordv'l:'e• u,a 34,0 3&t4 3&,9 41~7 44~6 41,7 st\.t 54,6 58,4 u,_, 66,9 71\.,6 - colit: de: d\.m\.rrese du aof'ric:e d • ea:1~VI!IIHtl't de• ordurctJ 10,1 \0 11 1 Exploitadcn et ~tttrecien !infnuaruetuu) 17,S 17,5 17,5 17,5 l7,S 17,5 17,5 17,5 17,5 11,5 11 Â' Rembour!I~!Utt:: part tel du drainese hon st tn du Zcgona Service do 14:1 de:tt& Ini~::rr;esure hOn dtn l,S 1,1 0,2 Rembcur&I!'I:I:Umt du pdnc\.tpat \.!\.! l\.l \.!\.:\. Totol paretel 3,6 3,6 1,6 3,6 3,6 3,6 3,6 3,6 3,6 Inst\.allaeton cO':llltiUTUlut:oire: Ine4ri:t 0,8 o,a o,a 0,6 0,6 0,5 0,4 o,J 0,1 RGI:bOUr&een!nt du pr:t\.ru::tpal !!\.:\. !!\.?\. !!\.?\. L\.L Ll- \.w\. u \.l\.i \.L! "Total partie l 1,7 1,7 1,7 1,7 1,7 1,7 1,7 1,7 1,7 1,7 1,7 ?rounme d\. uatscance muntcf\.pale tntarit: fttt:Moureemaat: du l)tiu\.eipl ••• \.w\. J,J !\.! 2,9 ~ 2,5 \.Ld 2,0 !\.! 1,l !\.J\. 1,1 L\.!\. O,l \.w\. Total nrthl 9,8 9,8 9,8 9,8 9,8 9,8 9,8 9,8 total du gbUntions des nntce• de 14 dette 15,1 15,1 15,1 ~~ ,l lS,l 15,1 15,1 U't'ttiSATIO'!S TOTAU:S EXCEtltNT COE'PIC!T) 16,9 (4(),0) (2S,4l <JS,Jl os,&l o•\.n g:c!tU!:Nt fDE'P'IC:tTf cmmt! l/ Concernnc e:xc1u•i'I1CS!lent: l•• act::tvtclfc ftrJ:IIUICi\.rea affirntes au proj•t~ a&acma• hypoch~•s D1 ol ;te"' 9atte en c:• qui\. conc:crne t \. pt:oj&t9 1J venir\. I! U!a \.foode pro-~t~~nscc: deft ne\.Kl•ats enregbr:rfts par 1e Bureau :mntct9a1 de t'ht:bitat P•Maftt taa ctnq pnmi\.!l:ros ann\.eo d'exptcil:acion iernnt: dllpaa:\. dans un compte d•ftpugne porta,t insir«t e:c seront ntirO'D pow: fi\.fttl:t'lc\.at" leo d8ftcttll tltlt'&Siarnia p:ar 1e B~oeu unmidpel da l'habi\.t:at da 1989 \ 1994 U lit se~c• de la dlliCte \.  ANNEX£ 7 Page 1 Tableau 4! HtiNICIPAI\.tTE DE \.SOBD-OtOULASSO • SOURCES ET U1'IL1SATlCN D£S FONDS\. (on mlttter F'CFA) ~~~~~~~~~~~00~~~~~ SOURCES DES F'QHDS I\. ~:c:::n;u(~:i~~:; /'\,!~=~~~~atlonjj ~ 56,7 91,7 76,1 6$,0 18,2 17,2 16,0 14,6 1),4 (17,9) 7,5 (53,7) 8,7 (45,9) ),1 (45,8) (45,8) (45,8,\. \.t!s2l\.o\.l: auglflll:'ll'1tat!cn (b,e! ne) des 11t0ntants a M~Cavol r (7,5) (8,7) (),I) (10,4) (45,0) (42,8) (45,8) (45,8) (45,8) ~ede~t ou 46fl c~ t nft't du bureou do l 'habi ut!' 49,2 83,0 73,0 18,2 t7,2 14,6 1),4 It\. PrQt'\.t/Subventions de: l 1 Etat A: Infrl!lstruct:ure hers stte 87,2 3\. Ssu!p\.nts coi Teet! h \. ~Mrches 2,1 :z\.c \. ee11tres eOII'I'IlUn•u~•lroa , 2\.1 2\.0 \. rami se ol'\ Otat dos dl !l9«fnn1 ru et\. eccles 11,8 11,7 - santei pubJJque\. 41slnfoctlon 10,) 5,1 5,2 c4 ~r:;w e~l::lr~:~cg elclpalg 29,8 - vChlc:ules ;ac m~:tertol du bul'tlllt\.l deJ I 1 twbftlt 8,4 - ~X~'Ut de d0m\.rr•~ du buren do l 1 h11biUt 7,5 9,9 \. auisunce technfquo Jl,O 44, I 33,0 o,6 0,6 0,6 0,7 0,7 0,1 0,8 0,8 0,8 0,9 0,9 0,9 1,0 1,0 IU\. IV\. \.!\.Ll \.!!\.1\. \.!!\.1\. \.!l\.i ll\.l\. _\.w\. \.1\.!l\. \.Y\. \. TOTAl\. SOYR\.CES 83,0 l%1,8 )I ,2 29,3\. 28,1 26,9 ),0 (31,4) (32,6) ()7 ,9) (40,2) (42,6) UTTL!SATION DES F'tiNDS Infnsu•uc\.turo hors '' ta 87,2 Esrulerunt!!l1t collttetlf<t "'ma~hOt 2:,_1 2,0 - c\.antres ccwrm\.aneutai rGt 2,1 %,0 "' remise «11 itet des dlsP$1ltalrcut et e"c:ol•! 11,8 11,7 \. unt& pub I !qqe~ dhlnfec:tfon 10\.3 $,1 $,\.2\. Prpgrel'W"'It d 1 snluam:e I'I'I'I\.II'JieJP"le - outils et 1'1\llterf&l 29,8 : ==~{c~!":e!!,~:~:r!:\~c!:r:u 1 ~~a~;::t tat 8,4 )3,0 44,1 7\.5 9\.9 33,0 \. \.css! st•nca teckniquo Exploitation et ent:retlen (lnfranrusturol 10,9 10,9 10,9 10,9 10,9 10,9 10,9 10,9 S!!!lrvi ce de ht datte: !nfrauruwtun!l hon: site 2,2 0,6 tMGr&t Rombourscment du Âprincipal 5,2 \.w\. 4,9 \.i\.i 4,6 4,2 \.u \.w\. \.w\. 3,9 J,5 \.§\.1 3, I \.u 2,6 \.L! \.u l ,7 \.A\.l 'Â' \.u \.w\. Total partial Int:t1JII4!;fon scinrnanautaire lntSI"it o,s 0,5 0,4 O,) 0,2 0,1 0,1 Rambouncmont du prfnc:JjMI \.Jl\.i \.Jl\.i \.ll\.§\. !W\. u JU \.s\.i Tonl gtf'tfel 1,0 1,0 1,0 1,0 1,0 I ,0 I ,0 l,O 1,0 1,0 l,o 1,0 Prool"!e 4 1 uslstal1ee muttiC:IMie Int&rit 1,) 1,2 1,1 1,0 0,9 0,8 0,7 0,6 0,5 Ket!!Oourtt21Hlnt du prf ~tel p•l \.w\. \.!\.§\. u 1\.1 \.w\. ~ L\.l\. u w Total aerttel 2,8 2\.8 2\.8 2,\.8 2,8 2,8 2,S 2,8 1,8 2\.8 2,8 2,8 Tgut des oblrgatfons de• hrvtcea de 1a dette 14~2 14,2 T4,2 14,2 14,2 14,2 14\.2 14~2 14\.2 14,2 14,2 UTIU§ATIQN l'OTAL£i £XCED£Nf {DEFICIT) 49,2 85,0 68,0 6),8 50,8 6,1 5\.3 4,2 J,O 1,8 (22,1) (57\.5) (57\.7) (6),0) (65,J) (67,7) €XC£DENT (DEfiCIT) CU~tE 49,2 134,2 202,2 266,0 ll6,8 );12,9 328,2 332,'+ 3)5,4 337,2 31$,1 257,6 199,9 136,9 71\.6 ),3 ll Concornant \.-cluslvomeAt: les ectfvite"s ftntiJ'teit!res affoi-l!lnte'l •v projat; •ucune hypath~te n 1 \.:t dt4 falte en a qu\.l <o:crtcarne les ptcjet:s ~ venlr\. ?\./ Let fonds prowN~nt 4ft ucOdentJ enrc9hcres ;tQr 1• euro\.u municipal da Phabitat pondGIH les ¢fttq prCflil~rn 1nn8os d'Cllploltatfon 'Serom: de'posOs d\.tns un compte ct'llipargne portMt intBret at tcrant rettro"s !JOUr ftn~~ncar Jos d0ftcftl cnrog:istr\.!s 9•r le Elur\.u municipal de Phablt•t da 1989 ',1 199'4 et Te servrc\.e de la dotto\.  ANNEXE 7 Page 8 Les\. tableaux ci-dessus contiennent des elements pour lesquels des explication s supplementa ires s'imposent\. Origine des fonds a) La taxe mensuelle de 250 francs CFA par eta! actuellemen t prelevee pour la concession des etals de marches a servi de base pour le cal- cui des recettes initiales provenant de cette taxe a Ouagadougou comme a Bobo-Dioula sso\. Cependant, une majoration de l'ordre de 50 francs CFA devrait intervenir taus les trois ans pour couvrir !'augmentat ion des frais d'entretien \. b) La rubrique "recettes provenant de la taxe locale pour ramassag~ des ordures menageres" vise le montant que la municipalit e de Ouagadougou verse a l'heure actuelle a une entreprise privee de ramassage des or- dures menageres\. Ce montant a ete majora chaque annee de fa~on a cou- vrir ala fois le service de la dette concernant l'achat des camions de ramassage et les depenses renouvelabl es; pour ces dernieres, un taux d'inflation de 7 ro a ete prevu; c) Le taux d 'interet applique au dep6t des excedents annuels et aux excedents des annees precedentes a ete de 4 ro\. Utilisation des fonds a) Les depenses d'exploitati on et d'entretien prevues representan t 5 % des coOts d'investisse ment; b) Les conditions prevues pour le service de la dett~sont les suivan- tes : taux d'interet de 6 %, echeance de remboursement de dix sept ans avec un differs d'amortissem ent de cinq ans et exoneration des interets intercalaire s\. Excedents (deficits) a) Les deficits enregistres par les Bureaux mumc~paux de 1 'habitat seront entierement finances par les excedents enregistres les annees precedentes (voir paragraphe 5 ci-dessous) \. Fonds de developpement de !'habitat 5\. Les fonds excedentair es enregistres par les Bureaux mun~c~paux de !'habitat de 1978 a 1982 seront deposes dans des comptes d'epargne portant in- teret et qui auront pour nom Fonds de developpement de !'habitat\. Lars des negociation s des assurances ant ete obtenues pour que a) chaque municipalit e etablisse un Fonds de developpement de !'habitat et depose chaque annee les excedents (au preleve les deficits) au compte des pertes et profits des Bu- reaux de !'habitat et b) les fonds soient utilises pour couvrir leurs frais administrat ifs, les defauts de paiement jusqu'a concurrence de 20 % de ces derniers, le service de la dette relatif aux prets contractes pour des inves- tissements "sur le site"\.  ANNEXE 7 Page 9 Adduction d'eau 6\. Comme indique au paragraphe 5\.18, les investissements relatifs a l'adduction d'eau seront recouvres gr~ce aux paiements verses par les usagers de 1 1 eau a l'ONE, l'Office national de l'eau\. A dater de juin 1977, des tarifs differentiels ant ete appliques aux,usagers en fonction de la saison et du vo- lume de consommation : - Consommation/Categorie Saison Prix 1\. Jusqu 1 a 50 m3 par mois toute l'annee 70 FCFA/m3 2\. Plus de 50 m3 Âpar mois - saison "normale" janv\./fev\. 70 FCFA/m3 JU1n /dec\. - saison "seche" mars /mai jusqu 1 a 0,50 m3 par mois 70 FCFA/m3 51-100 m3 par mois 110 FCFA/m3 plus de 100 m3 par mois 153 FCFA/m3 Aux fins d'analyse, le tarif applique est le m~me pendant toute l'annee (70 francs CFA par m3) parce que les menages beneficiant du projet ne con- somment pas plus de 50 m3 par mois\. Aux bornes-fontaines, le tarif est de 100 francs CFA le m3 et la difference est encaissee par les agents habilites par 1 'ONE\. 7\. Selon les previsions, la consommation d'eau devrait augmenter consi- derablement dans lea zones du projet a la suite de la marge considerable entre le prix demande a l'heure actuelle par les vendeurs d'eau et celui que devront payer les consommateurs pour s'approvisionner aux bornes-fontaines situees a 250 m au plus des parcelles\. Selon des estimations prudentes, la consommation des populations vivant dans les quartiers reamenages et dans les trames d'ac- cueil (88\.000 personnes) augmenterait de 10,75 litres par personne et par jour (moyenne ponderee des saisons seches et pluvieuses); la population des trois quartiers de Ouagadougou devant ~te desservis exclusivement par un reseau de distribution sommaire (environ 20\.000 personnes) augmenterait sa consommation d'une moyenne ponderee de 8,75 litres par personne et par jour\. 8\. L'augmentation annuelle totale des ventes d'eau, selon les renseigne- ments ci-dessus, serait de 410\.663 m3, equivalant a 28,8 millions de francs CFA\. Comme l'indique le tableau de marges d'autofinancement ci-dessous, ce montant suffit a financer 96 % du service de la dette afferent aux investissements d'adduction d'eau dans la zone du projet et a l'exterieur de cette derniere (dans !'hypothese d'une echeance de 20 ans avec un differe d'amortissement de trois ans et d' un taux d 1 inter@t de 6 ~o) et Ja majeure partie des coOts d 1 en- tretien renouvelables associes a ces investissements\.  Tableau \.5: PROJET DE DEVELOPPEHENT URBAIN EN HAUTE-VOLTA ORIGINE ET EMPLOI DES PONDS AD TITRE DO PROJET -oNE!/ (en milllons de francs CFA) 1978-1980 illl \.!2!£ \.!2!!1 1984 \.!2!l\. \.!\.2M l2!ll \.!2!! !ill\. \.ill\.!!\. !ill \.!\.lli !ill\. llli 1m \.ill! \.!\.2\.21\. Orisine des fonds Pr~ du Gouvernement de Âb Haute-Volta 266,1 R~cetteeprovenant des ventee aupp1ementdrell~/ 28,8 28,8 ~ M\.! 28,8 28,8 28,8 28,8 211,8 28,8 M\.! ~ 28,8 28,8 28,8 M\.! 28,8 !\.!!!!!:\. 266,3 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 28,8 Eme1oi des fonda Infrastructure dana le zone du pro jet!/ 256,3 Infrastructure hore 6itdf 10,0 Freis d'entretien renouvel~bles!/ 4,5 4,5 4,5 4,5 4,5 4,5 4,5 4,5 4,5 4,5 4,\.5 4,\.5 4,5 4,5 4,5 4,5 4;5 Service de Ia dette5/ Int,r!hs 16,0 15,4 14,8 14,2 ll,5 12,8 12,0 11,2 10,4 9,5 8,5 1,5 6,4 5,3 4,1 2,8 1,4 Remboursement du principal --- \.Li !!!\.&\. \.!!!\.! U,2 11,9 12,6 11,4 14,2 15,0 lh2 ~ 17,9 19,0 20,1 21,3 22,6 24,0 Total eartie1 --- 25,4 25,4 25,4 ll\.i 25,4 29,9 25,4 ll\.i 29,9 25,4 29,9 25,4 29,9 25,4 29,9 1M\. 29,9 25,4 29,9 25,4 29,9 25,4 29,9 25,4 29,9 25,4- 25,4 29,9 29,9 !\.!!!!!:\. 266,3 29,9 29,9 29,9 29,9 29,9 Exc~dent ~d~flcit)!tl (1,1) (1,1) (1,1) (1,1) (1,1) (1 ,1} (1,1) (1,1} (1 ,1) (1,1) (1,1) (1,1} (1,1) (1,1) (1,1) (1,1) (1,1) ll Office nation~l des eaux, anc!ennement 1a Societe natlonale des eaux, j ' , ~j Dana !'hypothese de ventee aupp1ementalrea de 8,75 l par habitant et par jour dana lea trois zones du projet a1lmenteea uniquemeot par des reseaux sommaires de distribution d'eau et de 10,75 l par ~sbitant et par jour dane 1es zones em6neg~ee et lee trames d'accueil, , 3/ Comprend lea frais d 1 tngimlerie de mime que lea provisions pour hauase dea prix et depassemeni: des quantites\. 4/ A financer grace a l'element exploitation et entretien du prix de vente normal\. , It Conditions du service de la dette: inter~t de 6% sur 20 ana avec un dtff~re d'amortissement de 3 sns au coura duquel les inter~ts ne sont pas verses \. ----------------------  ANNEXE 7 Page 11 Comme l'indique le paragraphe 5\.18, il n'a ete procede a aucune evaluation de la mesure dans laquelle les tarifs actuels de l'eau sont suffisants pour cou- vrir les depenses d'exploitation, assurer le service de la totalite de la dette, fournir une rentabilite raisonnable des investissements et contribuer a !'ex- pansion\. Flux de tresorerie global du gouvernment central \. \. 9\. Le flux de tresorerie\.du gouvernement central, etabli en fonction des marges d'autofinancement indiquees ci-dessus et du plan de financement du pro- jet (paragraphe 5\.05),reflete !'ensemble des flux relatifs aux fonds associes au projet\. Les credits budgetaires requis du gouvernement central s'eleve- raient a 647,2 millions de francs CFA (2,64 millions de dollars) taxes compri- ses\. Etant donne que les depenses fiscales seront ulterieurement contrebalan- cees par les recettes fiscales, la contribution nette du gouvernement au finan- cement du projet est de l'ordre de 209,3 millions de francs CFA (0,85 million de dollars)\. Pour s'assurer que des fonds de roulement suffisants seront mis a la disposition des organismes du prajet, il a ete canvenu lars des negacia- tians que le gauvernement ouvrirait un compte special dans lequel un mantant d'une cantrevaleur de 400\.000 dollars serait deposee par !'IDA au titre de de- caissement, cette somme devant ~tre reconstituee au rec;u des demandes de de- caissements justifiees\.  ANNEXE 7 Page 12 Tableau 6: ~ROJET DE DEVELOPPEMENT URBAIN EN HAUTE-VOLTA CASH FLOWS DU PROJET (GOUVERNEMENT CENTRAL) (en millions de francs CFA) 1976 ill2 1978 1979 1980 1981 1982 ORIGINE DES FONDS 11 3,0 3~2 23192 206,5 203,3 Affectati on budgetair e de l'Etat Decaissem ent de l'IDA 24,5 75,7 702,0 643,2 55196 12,2 Remboursements des prets - Municipa lite de Ouagadougou 75,9 75,9 Municipa lite de Bobo-Diou lasso 60,0 60,0 ONE 25,4 25,4 TOTAL 27,5 78,7 933,2 849,7 754,9 173,5 161,3 :::n-1PLOI DES FONDg1/ Ameliorat ion des quartiers spontanes 403,9 246,2 239,3 Trames d'accueil 9\.,9 13,4 65,1 Reseaux de distribut ion d'eau 19,0 62,8 42,5 Prets a la construct ion de logements 38,8 170,7 137,7 Installati ons collectiv es 43,6 72,0 46,5 Assistanc e aux municipa lites 6,8 230,8 129,2 53,4 12,2 Assistanc e technique 31,5 109,9 121,8 104,2 Preparati on du projet (1976) 27,5 Conceptio n finale et projet d'executi on 40,4 77,3 21,2 22,7 Controle/ Evaluatio n 12,4 43,5 TOTAL 27,5 78,7 933,2 849,7 754,9 12,2 Excedent (Deficit) 161,3 161,3 Excedent (deficit} cumulatif 161,3 322,6 1/ Y compris les taxes qui se monteraie nt a 437,9 millions de francs CFA\. 2/ Le service de la dette envers l'IDA commence rait en 1987\.  ANNEXE 7 Page 13 Tableau 7: PROJET DE DEVELOPPEMENT URBAIN EN HAUTE-VOLTA CALENDRIER DES DECAISSEMENTS ESTIMATIFsl/ Decaissements pendant la Decaissements cumulatifs Exercice et trimestre periode du trimestre a la fin du trimestre (en milliers de do~lars) (en milliers de dollars) Exercice 1978 31 mars 1978 640 (PPF) 640 30 juin 1978 810 1,450 Exercice 1979 30 septembre 1978 950 2,400 31 decembre 1978 900 3,300 31 mars 1979 730 4,030 30 juin 1979 720 4,750 Exercice 1980 30 septembre 1979 560 5,310 31 decembre 1979 630 5,940 31 mars 1980 600 6,540 30 juin 1980 600 7,140 Exercice 1981 30 septembre 1980 560 7,740 31 decembre 1980 410 8,150 31 mars 1981 50 8,200 ll Dans 1 'hjpothese -otl-ie credit entrerai t en vigueur au cours du premier trimestre de 1978\.  ANNEXE 8 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN ASSISTANCE TECHNIQUE 1\. L' element "assistance technique" comporte deux valets principaux : aide au niveau national pour la conception et !'execution de ce projet et la preparation d'un deuxieme projet, et aide au niveau municipal pour !'ameliora- tion de la gestion et de l'entretien des services urbains, et la creation d'un Bureau municipal de l'habitat\. Ces deux elements ont ete congus compte tenu de l'effectif du personnel et de ses competences et il est prevu que !'execu- tion du projet sera etalee sur toute la periode du projet afin, chaque fois que cela est possible, de transferer progressivement les responsabilites aux ressortissants voltaiques\. Dans le cas particulier des municipalites, la formation aux techniques d'entretien des services urbains devra etre terminee pendant la troisieme annee d'execution du projet\. La repartition de !'assis- tance technique sera la suivante : Ministere des travaux publics de l'urbanisme et des transports 168 hommes/mois Municipalites de Ouagadougou et de Bobo-Dioulasso : 108 hommes/mois Les coOts moyens, imp6ts non compris, ont ete estimes a 8\.000 dollars par mois, comprenant les honoraires des consultants et les frais generaux (6\.500 dol- lars) et les indemnites locales (1\.500 dollars)\. A\. Au niveau national 2\. L'assistance technique au niveau national, qui est directement fonc- tion de la conception et de !'execution du projet, permettra d'acquerir !'ex- perience necessaire a la preparation de programmes analogues dans d'autres zones urbaines\. Un Bureau du projet-sera cree a cette intention au sein de la Direction de l'urbanisme qui sera responsable au premier chef de la conception, de !'execution et du contr6le de ce projet\. Ce Bureau du projet sera compose du personnel suivant double d'homologues voltaiques Ingenieur municipal/Directeur adjoint du projet 3\. Cet ingenieur sera affects a plein temps au Bureau du projet et par- ticipera ala conception et au projet d'execution de !'infrastructure, a l'echelonnement dans le temps des travaux de construction et a !'evaluation des offres; il sera aussi charge de superviser les contrats et de certifier la  ANNEXE 8 Page 2 bonne execution des travaux, comme il est prevu aux termes du credit\. 11 de- vra ~tre titulaire d'un diploma d'ingenieur civil et avoir acquis un minimum de cinq annees d'experience en matiere de travaux municipaux, de techniques sanitaires et d'amenagement des terrains\. 11 devra avoir passe une partie de sa carriere professionnelle dans des villes de pays en developpement et parler couramment le fran~ais\. Son contrat aura une duree de trois ans\. 1ngenieur urbaniste 4\. L'ingenieur urbaniste, travaillant avec les Voltaiques ala Direc- tion de l'urbanisme, participera ala preparation des plans directeurs des terrains ou s'executera le projet\. Il devra, se referant au Projet de Cissin, veiller a ce que les normes et les specifications qui seront appliquees scient peu coOteuses et fonctionnelles et a ce que le deplacement des families soit limite au minimum; il procedera, le cas echeant, aux modifications necessaires\. 11 preparera des plans au il sera tenu compte des espaces a prevoir et des spe- cifications afin de reduire au minimum les changements apres acceptation et ap- probation des soumissions et pendant la construction\. 11 devra ~tre titulaire d'un diplome d'ingenieur urbaniste, parler couramment le fran~ais et avoir ac- quis un minimum de deux annees d'experience dans les pays en developpement\. Son contrat aura une duree d'environ un an\. Comptable 5\. Il sera prevu le recrutement d'un comptable a plein temps qui aidera le Bureau du projet a organiser un systeme comptable: il s'agira d'enregistrer et de controler les depenses engagees au titre des divers elements du projet et de les repartir selon les sources\. Le comptable fixera les procedures a appliquer pour le paiement des factures des entrepreneurs et pour la verifica- tion des comptes du projet selon des methodes que l'IDA aura juge satisfaisan- tes\. Il aidera aussi les comptables des Bureaux municipaux de !'habitat de Ouagadougou et de Bobo-Dioulasso a fixer les procedures de recouvrement des acomptes et des charges mensuelles aupres des beneficiaires Âdu projet et a mettre au point un systeme comptable d'enregistrement et de contr6le du releve des paiements individuels ainsi qu'un grand livre des recettes et depenses au titre des activites du Bureau municipal de !'habitat\. Le comptable devra par- ler couramment le fran~ais et avoir acquis !'experience des comptabilites de l'Etat au des organisations du secteur public\. Ân sera affecte ala Direc- tion de l'urbanisme pour une periode de trois ans et quatre mois\. Socio-Economiste 6\. Ce fonctionnaire aidera a concevoir et a executer toutes les enqu~tes physiques et socio-economiques dans les quartiers renoves\. Il supervisera aussi le centrale exerce, participera a la conception des enquetes visant a verifier les parametres du projet et a !'execution, !'analyse et la preparation  ANNEXE 8 Page 3 rapports a soumettre a 1'1DA\. Si le socio-economiste est officiellement at- tache au Bureau du projet au niveau national, il devra aussi rester en liaison etroite avec le fonctionnaire du developpement communautaire du Bureau munici- pal de l'habitat dans les deux villes de Ouagadougou et de Bobo-Dioulasso\. 11 devra conseiller et aider ce Bureau pour la definition des criteres de selec- tion des families et d'allocation des logements; i l aura aussi pour fonction de programmer toutes les activites auxquelles participant les beneficiaires du projet, par exemple : la publicite, !'enregistrement des parcelles, l'examen des demandes, la notification aux candidats a un logement~ la signature des contrats, les versements d'acomptes et le paiement des charges mensuelles\. 11 devra posseder un diplOme de sociologie et de !'experience dans le domaine de l'economie urbaine\. 11 devra parler couramment le fran~ais\. 11 sera af- fects a la Direction de l'urbanisme pour une periode de deux ans\. L'expert devra former un homologue\. Expert en matiere de Caisse populaire 7\. Cet expert devra avoir acquis !'experience de la creation d'un sys- tems cooperatif d'epargne et de credit, analogue a celui du Projet finance par le PNUD et aux autres caisses populaires de la Haute-Volta\. 11 organisers et executera un programme visant a renforcer la caisse populaire du quartier de Cissin et a etendre ce systeme au quartier de Zogona et eventuellemeflt a la ville de Bobo-Dioulasso~ Cet expert devra rester en liaison etroite avec l'OPEV en m@me temps qu'avec le Projet de financement du developpement in- dustrial (FDI)\. 11 sera assigns a ce paste pour trois ans\. B\. Les municipalites 8\. La composante Aide aux municipalites comporte deux elements a) renforcement des services de gestion et entretien des services urbains, et b) creation d'un Bureau municipal de !'habitat\. Departements technigues 9\. L'assistance technique a fournir aux municipalites de Ouagadougou et de Bobo-Dioulasso a pour objet d'ameliorer, d'une maniere generale, !'organi- sation et les services techniques de ces municipalites, d'installer l'outil- lage et les equipements necessaires, de reorganiser les ateliers et de former des mecaniciens, des contremattres et des employes de bureau\. Comme la si- tuation financiers de chaque municipalite est mauvaise et que sa capacite d'absorption est limitee~ le programme s'executera par etapes et traitera au depart plus particulierement des operations d'entretien des quartiers renoves\. De ce fait, les sections d'assainissement et d'hygiene du Departement des  ANNEXE 8 Page 4 Routes et B~timents en beneficieront directement, qu'il s'agisse des opera- tions de ramassage des ordures menageres et de l'entretien des camions (nou- veaux venus dans le cas de Ouagadougou), de !'utilisation et de l'entretien des caniveaux de drainage, de la lutte contre le paludisme et de la renovation des ecoles et des dispensaires\. Ces ameliorations se feront gr~ce a l'achat d'equipements, a l'aide de specialistes charges de !'utilisation et l'entre- tien du materiel, a la rationalisation des operations courantes et a une meil- leure preparation du personnel municipal\. 10\. L'assistance technique a fournir est la suivante Expert en matiere de gestion et d'organisation 11\. Cet expert devra posseder un diplOma de specialiste de la gestion et de !'organisation et deux ans d'experience dans !'administration publique : organisation generale, gestion et comptabilite\. La duree de son contrat est de douze mois, et il travaillera la moitie du temps a Ouagadougou et l'autre moitie a Bobo-Dioulasso\. 12\. Il aura notamment pour fonction de : a) mettre au point un organigramme a !'intention des municipalites et preparer une definition d'emploi pour chaque paste; b) proposer des modifications aux pratiques actuelles d'evaluation et de recouvrement des taxes municipales et trouver de nouvelles sources de recettes municipales adaptees aux besoins des municipalites; c) aider a !'execution des ~odifications proposees; d) reorganiser et aider les departements techniques, notamment le ra- massage des ordures menageres; et e) initier le personnel municipal aux methodes de gestion\. Deux chefs mecaniciens 13\. Ces mecaniciens devront posseder au mains cinq ans d'experience dans les techniques suivantes: moteurs diesel et moteurs a essence, systemes elec- triques et hydrauliques des voitures et des usines\. Ils devront ~tre capables d'effectuer des reparations sur le terrain et d'organiser et diriger des ate- liers\. Ils seront affectes pour une duree de deux ans, l'un a Ouagadougou et l'autre a Bobo-Dioulasso\. Ils devront parler couramment le fran~ais et savoir former des homologues\.  ANNEXE 8 Page 5 14\. Ils auront notamment pour fonctions de : a) mettre au point !'organisati on et !'administr ation des ateliers et installer les equipements et l'outillage ; b) former des chefs d'equipe et des ouvriers et elaborer des principes permanents de formation; c) reparer et entretenir le pare de vehicules de la municipalit e avec !'aide du garage municipal; d) renover les batiments municipaux et les panneaux de signalisatio n des routes avec !'aide des ateliers de forgerons et de serruriers; e) renover le materiel Âscolaire avec 1' aide de 1' a\.telier de charpenter ie; conseiller le Chef du Departement technique sur la preparation du budget et le choix du materiel nouveau; et g) former des mecaniciens \. Bureau municipal de !'habitat 15\. Un Bureau municipal de !'habitat sera cree dans cheque municipalit e afin de renseigner et d'orienter le~ beneficiair es eventuels du projet\. Il sera administre par un directeur voltaique\. Le Bureau municipal de !'habitat sera dote pendant deux ans de deux experts du developpement communautaire (l'un sera affecte a Ouagadougou, !'autre a Bobo-Dioula sso)\. Ils serviront de liaison entre les quartiers a renover et les municipalit es\. Au bureau m~me, ils aideront le directeur voltaique de cheque bureau dans les activites sui- vantes : publicite, enregistrem ent des demandes, preparation des dossiers, no- tification des decisions et aide au relogement des personnes deplacees\. Ils assureront aussi la liaison avec !'expert des caisses populaires au Bureau du projet, pour toutes les activites des caisses populaires\.  ANNEXE 9 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN EVALUATION ECONOMIQUE A\. Amelioration et amenagement des trames d'accuei1 1\. L'amenagement de plusieurs quartiers spontanes a Ouagadougou et a Bobo-Dioulasso permettra d'ameliorer considerablement les conditions de vie d'environ 88\.000 citadins a faible revenu\. La legalisation du droit d'occupa- tion des terres, la mise en place d'une infrastructure de base et !'octroi d'un credit pour renover ou construire des logements devraient permettre d'ame- Iiorer directement les conditions d'hygiene de Ia population, partant sa pro- ductivite,1/ et de stimuler l'investissement dans la construction de Iogements mieux con~us, ce qui ne peut manquer d'ameliorer leur environnement materiel et social\. Lars de !'evaluation du projet, le manque de donnees chiffrees a emp@che de calculer l~s differences en matiere de productivite et de sante entre les zones amenagees et celles qui ne le sont pas\. Comme il est explique par la suite, !'augmentation de Ia valeur des biens fanciers a la suite des amenagements, qui constitue la mesure la plus facile des avantages decoulant du projet, a ete utilises pour calculer les taux de rentabilite economique des elements du projet portant sur l'amelioration et sur l'amenagement des trames d 'accueil\. Avantages du projet 2\. L'evaluation des avantages a ete basee sur I'hypoth~se suivante : les ecarts de valeur des biens fanciers observes ,entre Ies zones amenagees et les zones non Iotis peuvent indiquer la valeur economique des ameliorations de !'infrastructure et de l'investissement en matiere de logement\. Cette ma- niere de calculer les avantages risque d'aboutir a une sous-estimation de la La relation existent entre d'une part un systeme d'adduction d'eau sOr et efficace et d'autres ameliorations faites a l'environnement et d'au- tre part une amelioration des conditions d 'hygHme et de Ia productivite des populations est un element complexe et difficile a chiffrer\. Cepen- dant, de nombreux avantages touchant a ces questions laissent a penser que la relation entre ces ameliorations et la reduction de 1' impact et des consequences des maladies liees a l'eau polluee est importante\. Des etudes sur ce sujet ant ete faites dans les ouvrages suivants : Village Water Supply - Economics and Policy iri\.the Developing World, de Robert J\. Saunders et Jeremy J\. Warford, editeur John Hopkins University Press, 1976; et Drawers of Water Domestic Water Use in East Africa, de Gilbert F\. White, editeur University of Chicago Press, 1972\.  ANNEXE 9 Page 2 valeur reelle du projet car le consentement des particuliers a contribuer fi- nancierement aux coOts ne reflete pas toujours completement la valeur du pro- jet aux yeux des particuliers et de la societe\.1/ Cette divergence provient du fait que les particuliers ne per~oivent pas taus les avantages dont ils be- neficient grace au projet (par exemple, !'amelioration des conditions d'hy- giene et de la productivite) et/ou les avantages dont d'autres beneficieront (avantages externes tels que de meilleures conditions dans les zones avoisi- nantes)\. En consequence, les taux de rentabilite fondes sur les augmentations de la valeur des biens fanciers peuvent ne presenter qu'une estimation par- tielle de l'avantage economique du projet\. 3\. Des renseignements ont ete obtenus de differentes sources en ce qui concerne la valeur des terrains dans les zones du projet non ameliorees et dans celles qui ant ete amenagees et qui presentent des caracteristiques d'em- placement similaires; c'est ainsi que l'on a recueilli des donnees fournies par des consultants en ce qui concerne les modifications apportees a la valeur du terrain dans la zone du projet PNUD, dans le quartier de Cissin a Ouagadougou et par le personnel bienÂinforme du bureau du cadastre et de la Direction de l'urbanisme a Ouagadougou ainsi qu'aupres des autorites municipales de Bobo- Dioulasso\. 11 n'a pas ete possible d'etablir un profil des terrains en fonc- tion de leur valeur ni des releves chiffres des variations des prix de vente selon !'emplacement ou meme d'obtenir des renseignements precis sur les taux d'augmentation de la valeur des biens fanciers\. Cependant, les estimations fournies par les sources susmentionnees etaient suffisamment uniformes pour etre utilisees dans !'analyse economique pour le calcul des avantages\. 4\. Dans la zone des trames d 'accueil du Projet PNUD, dans le quartier de Cissin a Ouagadougou, la valeur de biens fanciers est passee d'environ 30 francs CFA le m2 a environ 1\.000 francs CFA le Âm2 de 1973 ~ 1977\. Une telle augmentation (plus de 33 fois) en l'espace de quatre ans s'explique par les ameliorations realisees, qui sont pourtant beaucoup plus modestes que celles prevues dans le cadre du present projet\. En particulier, le projet PNUD ne comprenait pas de travaux d'adduction d'eau et les normes relatives aux routes et au drainage etaient inferieures a celles envisagees dans le present projet\. En consequence, si l'envergure du projet etait comparable, le taux d'augmenta- tion de la valeur des terrains prevu a la suite de la realisation du present projet, dans le quartier de Cissin et dans des zones ayant des caracteris- tiques geographiques similaires, depasserait tres probablement celui qui a ete enregistre lors de !'experience 1973 a 1977 susmentionnee\. Cependant, la reproduction a grande echelle du projet pilate du quartier de Cissin qui sera Ceci s'applique en particulier a une situation ou le projet entratne une diminution de la valeur des biens fanciers qui fait suite a une augmenta- tion importante de l'offre de parcelles assainies (voir par\. 4)\.  ANNEXE 9 Page 3 entreprise dans le cadre de ce projet permettra d'ajouter un grand nombre de parce'lles assainies a celles qui existent deja dans les villes du projet; en fait, c'est un tiers de la demande totale a Ouagadougou et une fraction simi- laire a Bobo-Dioulasso qui sera ainsi satisfaite\. Ce projet entra!nera done probablement une tendance a la baisse des prix des terrains assainis, d'ou une diminution a terme du taux d'augmentation de la valeur des biens fanciers\. Aussi, cette donnee a-t-elle ete prise en consideration dans !'evaluation des avantages decoulant du projetÂ\. 5\. En plus des informations disponibles sur le quartier de Cissin, le personnel du bureau du cadastre, de la Direction de l'urbanisme et les auto \. rites municipales de Bobo-Dioulasso ont egalement fourni des renseignements sur la valeur des terrains dans d'autres zones amenagees de Ouagadougou et de Bobo-Dioulasso, parfois situees pres des quartiers spontanes du projet\. D'apres toutes ces sources, et les dispositions du par\. 4 ci-dessus, les va- leurs estimatives suivantes des terrains (ajustees d'un coefficient d'infla- tion) ont ete utilisees pour le calcul des avantages : VALEUR DES TERRAINS (FCFA/m2) AUX PRIX EN VIGUEUR EN JUIN 1977 SANS LE PROJET AVEC LE PROJET OUAGADOUGOU Amenagement du quartier de Cissin 35 900 Amenagement du quartier de Zogona 65 1500 8080-DIOULASSO Amenagement du quartier de Sonsuribugu 25 750 Trames d'accueil 25 900 6\. Les chiffres Âsusmentionnes ont ete appliques a la superficie resi- dentielle nette devant @tre amenagee dans chaque site afin d'obtenir une es- timation des avantages nets du projet par site (c'est-a-dire la difference existant entre des situations sans et avec le projet)\. On a suppose que les avantages provenaient d'une seule augmentation de la valeur des biens fanciers intervenant l'annee suivant l'achevement des ameliorations apportees a !'en- semble du site\. CoOts du projet 7\. Les flux de coOts du projet, nets d'impots et de taxes, calcules aux prix en vigueur en 1977, sont les suivants aux fins de !'analyse economi- que  ANNEXE 9 Page 4 a) Terrain : La valeur marchande, sans le projet, du terrain'dans les zones du projet, qui devrait refleter les coOts d'opportunite, a ete utilisee\. La totalite des coOts initiaux du terrain a ete sous- traite a la fin de la periode du projet\. b) Depenses d'investissement : Cette categorie comprend toutes les de- penses d'infrastructure sur les lieux du projet, une partie des de- penses relatives a !'infrastructure "hors-site", le cas echeant, des provisions pour depassement des quantites, les frais relatifs au projet d'execution et a la supervision des travaux de construction de m~me que le coOt de !'assistance technique fournie ala Direction du projet du Ministere des travaux publics des transports et de l'urbanisme (a !'exclusion de l'aide accordee pour la preparation d'un deuxieme projet)\. La totalite des frais d'amenagement "hers- site" a ete incluse dans le cas de Zogona, les deux tiers pour Sonsuribugu, et un tiers pour !'amelioration et l'amenagement des trames d'accueil\. Le dernier tiers devait s'appliquer a des zones avoisinantes\. Les frais d'ingenierie, de supervision et d'assis- tance technique ant ete repartis au prorata entre les divers sites\. c) Frais d'exploitation et d'entretien : Les frais d'exploitation et d'entretien renouvelables representaient d'apres les calculs un pourcentage fixe des depenses d'infrastructure\. Une moyenne ponde- ree de 5 % a ete utilise en fonction d'un taux de 6 % pour les rou- tes et les travaux de drainag~ et de 2% pour !'adduction d'eau\. Dans cette categorie, on a egalement inclus la fraction des frais administratifs annuels des bureaux municipaux de !'habitat de Ouagadougou et de Bobo-Dioulasso correspondent a chaque site\. d) Construction et ameliorations de logements : Le coOt des materiaux de construction et le coOt estime de la main-d'oeuvre pour les tra- vaux de construction et !'amelioration de logements ont ete utilises\. Cette categorie comprend les frais de reinstallation des habitants deplaces qui feront !'objet d'une subvention de 35\.000 francs CFA\. Seuls les premiers investissements qui devraient ~tre realises pen- dant et immediatement apres !'execution du projet ont ete pris en compte\. Pour simplifier, on n'a pas tenu compte de l'investissement prive supplementaire realise au-dela d'un delai d'un an apres !'exe- cution du projet\. 8\. D' apres les flux d 'avant ages et de coOts decrits ci-dessus, et pre- sentes dans les tableaux ci-joints, les taux de rentabilite interne ci-apres ant ete obtenus pour !'amelioration et l'amenagement des trames d'accueil dans les deux villes faisant partie du projet :  ANNEXE 9 Page 5 OUAGADOUGOU BOBO-DIOULASSO Amenagement du quartier Amenagement du quartier de Cissin 40% de Sonsuribugu Amenagement du quartier Trames d'accueil 37 ~6 de Zogona 24 % 9\. L'analyse de sensibilite a indique que ces taux de rentabilite n'etaient p~s tellement sensibles a une augmentation de 20 % des depenses d'investissement mais quelque peu plus sensibles a une reduction de 20% des avantages; cependant, il est peu vraisemblable que les valeurs des biens fan- ciers soient inferieures a celles presentees dans le par\. 5 ci-dessus\. Les taux de rentabilite eleves qui sont enregistres prouvent !'importance de la demande par rapport a une offre extr@mement limitee de terres assainies a bas prix d'ou une tres forte volonte de la part des particuliers de contribuer fi- nancierement au projet ce qui (voir par\. 2 ci-dessus) pourrait entratner une sous-estimation de la valeur economique totale du projet\. B\. Adduction d'eau 10\. Avec !'amelioration et l'amenagement des trames d'accueil, le pro- jet permettra egalement de construire des reseaux de distribution d'eau dans trois quartiers spontanes de Ouagadougou - a Hamdallaye, Tampouy et Tanghin- Sambin - qui ne seront pas completement amenages dans le cadre du present pro- jet\. Il a ete precede a une analyse economique separee de cet element en fonction des avantages de la rente du consommateur dont profitent les quelque 20\.000 personnes vivant dans ces trois quartiers\. Cette analyse n'est qu'in- dicative puisque les prix de l'eau ne refletent pas necessairement les coOts marginaux a long terme niles avantages resultant de !'amelioration des condi- tions d'hygiene\. 11\. Dans cette analyse, les avantages quantifies s'expriment par les economies de coOt realisees par les consommateurs et s'expliquent par une im- portante difference de prix entre l'eau vendue par les marchands d'eau (leurs fournisseurs actuels) et l'eau achetee directement ala borne-fontaine (dans la situation "avec le projet")\. Actuellement, les habitants de ces zones achetent pendant la majeure partie de l'annee !'equivalent de 7 a 10 litres d'eau par personne et par jour et consomment un volume supplementaire prove- nant de puits prives peu profonds et generalement pollues\. Pendant la saison  seche, de mars a mai, lorsque les puits sont a sec, Us achetent generalement jusqu'a 15 - 20 litres d'eau par personne et par jour aux marchands\. Les prix pratiques par ces derniers (quelque 575 francs CFA par m3) sont sept foi~ plus eleves que les prix pratiques aux bornes-fontaines (100 francs CFA par m ) qui sont generalement gerees par des particuliers a qui !'Office national des eaux (ONE) a delivre un permis\.  ANNEXE 9 Page 6 12\. Dans la mesure ou le projet permettra d'installer un plus grand nom- bre de bornes-fontaine s, la population comptera beaucoup mains sur les mar- chands d'eau, ce qui lui permettra de realiser d'importantes economies\. Aux fins de cette analyse, on a estime que 25 % de la popuiation continueraient a acheter l'eau chez les marchands pour des raisons pratiques\. Pour 75% de la population (quelque 20\.000 personnes), les economies realisees sur la consom- mation actuelle, estimee a 10,75 litres par habitant et par jour (moyenne pon- ders entre la saison seche et le\. reste de 1' annee) ant \.ete ajoutees aux eco~ nomies realisees sur les 8,75 litres par habitant et par jour supplementaires (consommation resultant de la reduc\.tion des prix) pour calculer la totalite des avantages\. 11 convient de noter que cette fa~on de calculer est prudente puisque !'augmentation de la population n'a pas ete prise en compte bien que cette omission soit compensee par !'hypothese d'une courbe de demande non li- neaire au lieu de la courbe lineaire qui a ete utilisee pour les calculs\. 13\. Les coOts utilises dans cette analyse comprennent les depenses d'in- vestissement, les provisions pour depassement de quantite, les coOts de super- vision de la construction et du projet d'execution, les frais d'exploitation et d'entretien (2 % par an), taus exprimes en fonction des prix en vigueur en 1977 nets d'impOts et de taxes\. 14\. Le taux de rentabilite interne obtenu en fonction des avantages et des coOts decrits ci-dessus et presents dans le tableau ci-joint est de 37 %\. Une analyse de sensibilite a demontre que ni une augmentation des depenses d'investissemen t de 20 ro ni une diminution des avantages de 20% n'entratnaient un taux de rentabilite inferieur a 31 ro\. L'utilisation d'un prix virtue! pour l'eau, refletant les coOts marginaux et la courbe de demande a long terme, de m~me que les avantages en matiere de sante qui n'apparatssent pas dans les es- timations de la volonte de la population de contribuer au financement redui- raient les avantages d'environ 20 %, ce qui se traduirait par un taux de ren- tabilite de 38 ro\. C\. Taux de rentabilite total 15\. Un taux de rentabilite total couvrant approximativement 75 % de la totalite des coOts du projet a ete calcule; i l atteindrait 34 %\. Une analyse de sensibilite, fondee sur !'hypothese d'une augmentation des coOts et d'une diminution des avantages de l'ordre de 20 ro, a donne un taux de rentabilite qui n'est pas inferieur a 21 %\.  ,, Tableau 1: PROJET DE DEVELOPPEMENT URBAIN EN HAUTE•VOLTA - ANALYSE ECONOMIOUE AMENAGEMENT DU QUARTIER DE CISSIN - FLUX DES COUTS ET DES AVANTAGES (en millions de francs CFA) Frais Amelioration et Depenses d'exploitationl/ construction de Total des Terrain!/ d'investissement- 21 et d'entretien 41 logements particuliers- Couts Avantages 1977 22,2 22,2 1978 12,0 104,7 13,0 44,6 174,3 1979 22,9 107,1 15,0 74,2 219,2 1980 14,8 49,4 17,7 29,7 111,6 1981 18,4 18,4 1~228\.3 1982 - 1990 18,4 18,4 1991 - 1999 5,4 5,4 2000 -49,7 5,4 -44,3 2 !/ Le valeur du terrain (cout d'opportunite) dans la zone du Projet a ete estimee a 35 francs CFA le m sans !'execution du Projet\. £/ Les depenses d'investissement comprennent toutes, les depenses d'infrastructure~ y compris les,provisions pour depassement des quantites de meme qu'une fractionproportionnelle des frais engages au titre du projet d'execution et de !'assistance technique (a !'exception de !'assistance technique relative au deuxieme projet)\. Les frais d'exploitation et d'entretien sont calcules d'apres une moyenne ponderee de 4% des depenses d'investissement (5% pour les investissements relatifs aux ~outes et au drainage ~t 2% pourceuxrelatifs a !'adduction d'eau)\. Le flux inclut egalement une fractionproportionnelledes frais de gestion renouvelables du bureau municipal de !'habitat de Ouagadougou\. !!_/ Une subvention de reinstallation fournie aux habitants deplaces sous forme de materiaux de construction est incluse de meme que la main-d'ouvre requise pour !'amelioration ou la construction de logements\.  Tableau 2: PROJET DE DEVELOPPEMENT URBAIN EN HAUTE~VOLTA- ANALYSE ECONOMIQUE AMENAGEMENT DU QUARTIER DE ZOGONA - FLUX DES COUTS ET DES AVANTAGES (en millions de francs CFA) Frais Amelioration et Depenses d'exploitation- 31 construction de 1/ 2 Total des Terrain- d'investissement-1 et d 9 entretien logements particuliers-41 Avantages Couts 1977 5,9 5,9 1978 273p3 6~0 279,3 1979 9,1 72'j9 15,6 97~6 1980 11,2 69,0 17,4 31,3 128,9 1981 25,1 19~2 31,3 75t6 1,001\. 6 1982 - 1990 19,2 19,2 1991 - 1999 13,2 13,2 2000 -45,4 13f2 -32~2 2 1\./ Le valeur du terrain (coOt d'opportunite) dans la zone du Projet a ete estimee a 65 francs CFA le m sans !'execution du Projet\. !:_I Les depenses d'investissement comprennent toutes les depenses d 1 infrastructure, y compris les provisions pour depassement des quantites de meme qu'une fraction proportionnelle des frais engages au titre du projet d'execution et de !'assistance technique (a !'exception de !'assistance technique relative au deuxieme projet)\. Les frais d'exploitation et d'entretien sont calcules d'apres une moyenne ponderee de 4% des depenses d'investissement (5% pour les investissements relatifs aux routes et au drainage et 2% pour ceux relatifs a !'adduction d'eau)\. Le flux inclut egalement une fraction proportionnelle des frais de gestion renouvelables du bureau municipal de !'habitat de Ouagadougou\. Une subvention de reinstallation fournie aux habitants deplaces sous forme de materiaux de construction est incluse de meme que la main-d'ouvre requise pour !'amelioration ou la construction de logements\.  Tableau 3: PROJET DE DEVELOPPEMENT URBAIN EN HAUTE~VOLTA - ANALYSE ECONOMIQUE\. AMENAGEMENT DU QUARTIER DE SONSURIBUGU - FLUX DES COUTS ET DES AVANTAGES\.  (en millions de francs CFA)  Frais AmiHioration et 3 Total des Depenses d'exploitation-1 construction de 4 Terrain!/ 2 d'investissement-/ et de entretien logements particuliers-' Couts Avant ages 1977 15,8 15,8 1978 40,8 11,5 52,3 1979 11,7 79,3 11,5 102,5 1980 11,7 88,3 13,6 54,3 167,9 1981 16,2 54,3 70,5 727,0 1982 \. 1990 16,2 16,2 1991 - 1999 4,7 4,7 2000 -23,4 4,7 -18,7 2 !/ Le valeur du terrain (coOt d'opportunite) dans la zone du Projet a ete estimee a 25 francs CFA le m sans !'execution du Projet\. !I Les depenses d'investissement comprennent toutes les depenses d'infrastructure,y compris lea provisions pour depassement des quantites de m@me qu'une fraction proportionnelle des frais engages au titre du projet d'execution et de l'assistance\.~echnique (a !'exception de !'assistance technique relative au deuxieme projet)\. 11 Les frais d'exploitation et d'entretien sont calcules d'apres une moyenne ponderee de 4% des depenses d'investissement (5% pour les investissements relatifs aux routes et au drainage et 2% pour ceux relatifs a !'adduction d'eau)\. Le flux inclut egaleme~t une fraction proportionnelle des frais de gestion renouvelables du bureau municipal de !'habitat de Bobo-Dioulasso\. !/ Une subvention de reinstallation fournie aux habitants deplaces sous forme de materiaux de construction est incluse de m@me que la main-d'ouvre requise pour !'amelioration ou 1a construction de logements\. 1\.01\.0  Tableau 4: PROJET DE DEVELOPPEMENT URBAIN EN HAUTE•VOLTA - ANALYSE ECONOMIQUE\. TRAMES D1 ACCUEIL DE BOBO-DIOULASSO - FLUX DES COUTS ET DES AVANTAGES (en millions de francs CFA) Frais Amelioration et ,Depenses d'exploitation construction de Total des TerraiJ:/ d 1 investissement- 21 31 et d'entretien- 41 logements particuliers-- Couts Avantages 1977 6,7 6,7 1978 17,0 4,2 21,2 1979 1,9 20,5 4,2 26,6 1980 1,9 55,9 4,6 22,6 85,0 1981 4,7 6,5 22,7 33,9 295,7 1982 - 1990 6,5 6,5 1991 - 1999 2,3 2,3 2000 -8~5 2,3 -6,2 2 y Le valeur du terrain (cofit d 1 opportunite) dans la zone du Projet a et~ estimee a 25 francs CFA le m sans !'execution du Projet\. 2/ Les depenses d 1 investissement comprennent toutes les depenses d 1 infrastructure, y compris les provisions pour depassement des quantites de m~me qu'une fraction proportionnelle des frais engages au titre de projet d'execution et de !'assistance technique (a !'exception de !'assistance technique relative au deuxieme projet)\. Les frais d 1 exploitation et d'entretien sont calcules d 1 apres une moyenne ponderee de 4% des depenses d'investissement (5% pour les investissements relatifs aux routes et au drainage et 2% pour c~ux relatifs a !'adduction d 1 eau)\. Le flux inclut egalement une fraction proportionnelle des frais de gestion renouvelables du bureau municipal de 1 'habitat de Bobo-Dioulasso\. '  Une subvention de reinstallation fournie aux habitants deplaces sous farme de materiaux de construction est incluse de m~me que la main-d'ouvre requise pour l 9 amelioration ou la construction de logements\.  ANNEXE 9 Page 11 Tableau 5: PROJET DE DEVELOPPEMENT URBAIN EN HAUTE\.;\.VOLTA - ANALYSE ECONOMIQUE ADDUCTION D'EAU - FLUX DES COUTS ET DES AVANTAGES (en millions de FCFA) Depenses l/ Frais d'exploitation d'investissements- et d'entretien-21 Avantages 3/ 1978 17,1 1979 52,0 0,3 1980 33,6 1,1 1981 - 2000 1,6 53,2 1/ Comprennent 1es frais techniques et les provisions pour depassement des quantites\. 2/ Devant representer 2%-des depenses d'investissement\. 3/ Les avantages sent ca1cules d'apres !'estimation des economies d'un montant de 475 francs CFA 1e m3 realisees par 20,302 personnes sur leur consommation actuelle de 10,75 litres par personne et par jour ainsi que les economies qui se rapporteraient a une augmentation anticipee de la consommation de 8,75 1itres par personne et par jour\.  ANNEXE 10 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN CONTROLE ET EVALUATION 1\. Les operations de contr6le et d'evaluation du present projet seront confiees a un bureau de recherche voltaique independent qui confiera a un chercheur voltaique, specialiste des affaires sociales, et responsable prin- cipal de la recherche, la realisation d'enquetes et d'etudes de cas en 1979 et 1980\. Ce chercheur sera aide par une equipe d'enqueteurs, et se verra octroyer un budget d'exploitation, et les fonds necessaires au traitement des donnees\. Ces etudes feront partie d'une analyse verticale basee sur une enquete de base menee dans les quartiers qui seront ameliores et elles seront executees par le Bup::au du projet au sein du Departement de 1 'urbanisme\. Cette enquete a ete testae en fevrier 1977 et executee de mars a juin 1977 dans le quartier de Cissin a Ouagadougou\. 2\. En raison de la penurie de personnel voltaique qualifie, les opera- tions de contr6le et d'evaluation seront con~ues de fa~on simple et on evi- tera de rassembler un grand nombre de donnees pour lesquelles les installa- tions de traitement sont inexistantes ou trap coQteuses\. Des enquetes par sondage seront executees a) avant le debut des amenagements, b) a la fin de la premiere annee qui suivra les ameliorations de !'infrastructure, et c) ala fin du projet c'est-a-dire en 1981\. Cette approche permettra d'etablir des comparaisons avec les evaluations precedentes\. D'autres echantillons de tra- mes d'accueil seront etudies pendant la phase de construction pour identifier les facteurs determinant le taux et l'ampleur i) de l'investissement dans les logements et ii) des modifications socio-economiques connexes\. 3\. Afin d'ameliorer le contenu economique de cette analyse, une assis- tance technique sera accordee a l'equipe de contr6le par le Centre de !'habi- tation, de la construction et de la planification des Nations Unies\. 4\. Le principal responsable charge de la recherche fera occasionnelle- ment partie du Comite interministeriel de coordination et aura en consequence la possibilite de presenter les conclusions d'etudes menees sur le terrain, ce qui permettra de fournir des informations en retour aux directeurs de projet\.  ANNEXE 11 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN SUPERVISION 1\. Etant donne que les institutions participant a 1 'execution de ce projet disposent d'un personnel qualifie restreint, et en raison de la com~ plexite du projet, celui-ci exigera de la part de !'IDA une supervision etroite \. tout au long de son execution\. Selon les estimations~ les tAches de supervi- sion du projet necessiteront 150 semaines de travail (sur le terrain et au \. siege) reparties sur les trois annees\. Le tableau ci-apres presente l'effec- tif affects aux missions du projet pendant cette periode en semaines de tra- vail\. Toutes les missions dureraient deux semaines, sauf exception, en raison du nombre de villes (3) a visiter et de la difficulte des deplacements pour se rendre de l'une a !'autre~ Exercice et trimestre de la Bangue 1978 1979 1980 I II III IV I II ------ ---- II III III I ---- Charge du projet 2 2 2 2 2 2 2 2 2 2 20 Urbaniste du pro jet 2 2 2 2 2 2 2 2 2 2 20 Ingenieur du pro jet 1 2 2 2 2 2 2 2 2 2 19 TOTAL (par mission) 5 6 6 6 6 6\. 6 6 6 6 (par exercice) 23 18 18 59 \.- '  ANNEXE 12 Page 1 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN AIDE AUX MUNICIPALITES Introduction 1\. L'element du projet portant sur l'aide aux municipalites comprend deux parties : a) un programme d'achat de materiel, formation et assistance technique pour la gestion municipale et les operations d'entretien et b) l'aide au Bureau municipal de !'habitat\. La presente annexe porte exclusivement sur les services techniques\. Les Bureaux municipaux de !'habitat sont decrits dans l'Annexe 4\. Donnees generales 2\. En Haute-Volta, l'entretien des investissements afferents aux servi- ces urbains incombe aux municipalites\. Ces dernieres n'ont pas eu jusqu'ici les moyens d'assurer de fa9on adequate l'entretien des equipements et des ins- tallations deja en place\. Dans le passe, les municipalites, disposant de res- sources financieres maigres, ant offert un minimum de services\. Quelques in- vestissements sont bien effectues a !'occasion d'une augmentation de credits budgetaires~ mais ils se deteriorent ensuite en !'absence de procedures perma• nentes de financement et d'entretien appropriees\. C'est ainsi qu'a Ouagadougou, par exemple, les ecoles et les dispensaires n'ont jamais ete entretenus ni re- pares\. La lutte contre la malaria a cesse depuis quatre ans et le reseau de canaux de drainage est bloque par les depOts que l'on a laisse s'accumuler, ce qui cause des inondations periodiques, avec les risque que cela entratne pour la sante des populations\.  3\. La situation financiere peu satisfaisante dans laquelle se trouvent lee deux municipalites constitue un obstacle majeur a !'application d'un vaste programme d'investissemen ts\. C'est pourquoi le projet prevoit une assistance qui permettra aux municipalites d'etendre progressivement leurs aptitudes a offrir et entretenir des services a long terme, tout en renforcant, a court terme, les activites prioritaires d'entretien et de gestion financiere\. Les programmes sont fondes sur une analyse des besoins de chaque municipalite et presentent done des caracteristique s differentes •\. Pris ensemble, les elements du projet visent a ameliorer !'hygiene et assainir l'environnement de fa90n a encourager et soutenir les initiatives des populations dans ces mt§mes domaines\. Le coOt total de l'aide aux municipalites s'eleve a 1,039 million de dollars\. Cet element prevoit des fonds pour l'achat d'outillage et de materiel destines aux activites d'entretien (472\.500 dollars) et, notamment, en matiere d'assai- nissement de l'environnement et d'hygiene, !'assistance technique pour la for- mation d'un personnel d'entretien, la reorganisation des services municipaux et !'amelioration de la gestion financiere (489\.000 dollars), ainsi que les depen- ses de lancement de certaines activites municipales (78\.000 dollars)\.  ANNEXE 12 Page 2 Le projet 4\. Le projet comporte les elements suivants : a) 54 hommes-mois d'assistance technique pour chaque municipalite en vue de proc~der a : i) la reorganisation\.des Departements de la vo1r1e et des b~timents de chaque municipalite\. Cette reorganisation comporte !'attri- bution de responsabilites aux services d'hygiene et d'assainis- sement au sein de departements et la designation de cadres moyens pour !'execution d'activites specifiques\. ii) la formation, au sein des Departements de la voirie et des b~­ timents, d'ouvriers municipaux charges de l'entretien\. Ce pro- gramme de formation sur\.le tas pendant deux ans est conc;u de maniere a ameliorer les connaissances techniques du personnel municipal au moyen de methodes nouvelles et d'un materiel dont on ne disposait pas jusqu'ici\. La formation portera essentiel- lement sur la reparation et 1 'entretien des vehicules, la ma- niere d'utiliser l'outillage et les procedures d'entretien re- gulier des canaux de drainage municipaux, des bfttiments publics et autres installations\. iii) !'amelioration du recouvrement des imp6ts et de la gestion fi- nanciere\. Dans chaque municipalite, un expert passera six mois a examiner lea methodes de recouvrement des imp6ts, notamment !'evaluation et les taux d'imposition, ainsi que les pratiques financieres, particulierement l'etablissement du budget, et re- commandera de meilleures methodes et une reforme de la politi- que, si necessaire\. iv) l'agrandissement des bureaux munlClpauX de !'habitat gr~ce ala mise au point de nouvelles procedures d'etablissement du cadas- tre, !'attribution des parcelles et la mise au point d'un sys- tems de recouvrement mensuel des semmes dues par les partici- pants aux programmes municipaux de renovation des terrains et d'installation des trames d'accueil\. b) l'achat du materiel suivant : i) 11 camions pour le ramassage des ordures, qui seront achetes pour la municipalite de Ouagadougou pour permettre a cette der- niere d'assurer le ramassage des ordures de fac;on plus efficace et mains coOteuse qu'a l'heure actuelle\. C'est en effet une entreprise privee qui en est chargee et le coOt de !'operation represents 13 % du budget municipal pour un service qui dessert  ANNEXE 12 Page 3 mains de 30 % de la ville\. L'achat de 11 camions et les depen- ses annuelles renouvelables aff~rentes, y compris l'amortisse- ment, representeront pour la municipalite une economie par rap- port a !'arrangement actuel et qui plus est taus les quartiers seront desservis; ii) les outils necessaires aux Departements de la voirie et des bA- timents de cheque municipalite\. Il s 'agit des outils necessai- res pour la reparation des vehicules, les travaux de menuiserie, la serrurerie et la construction, qui seront utilises par le personnel au cours des programmes de formation sur le tas; iii) les vehicules etÂle materiel destine aux bureaux municipaux de !'habitat, y compris une voiture par bureau, du mobilier, des classeurs, des machines a ecrire et a calculer; c) La renovation et l'agrandissemen t du garage municipal pour assurer l'entretien des vehicules a Ouagadougou\. A l'heure actuelle, ces vehicules sont exposes aux intemperies et il n'existe aucun endroit au puissant s'effectuer les grosses reparations et les travaux d'entretien importants\. d) Les depenses de premier etablissement concernant : i) le ramassage des ordures a Ouagadougou pendant deux ans, afin d'assurer une mise en train efficace des activites municipales de ramassage des ordures, lesquelles seront par la suite finan- cees gr~ce aux recettes de la municipalite, notamment un im- pet pour le ramassage des ordures; ii) les bureaux municipaux de !'habitat des deux villes, pendant deux ans, afin d'assurer le demarrage des activites de la muni- cipalite en matiere de logement, lesquelles seront auto-financees apres que le projet aura fonctionne pendant deux ans\. Execution du projet 5\. La reorganisation prevue des services mun1c1paux constituera une con- dition prealable a leur fonctionnement adequat (Diagramme 1)\. L'organisation definitive et la definition des responsabilites et fonctions des services se- ront etablies par un expert en gestion en consultation avec les services con- cernes et devront ~tre approuvees par le maire\. Specifiquement, cet expert aidera les municipalites a : reintroduire le ramassage des ordures menageres dans les activites de la municipalite; creer au sein du Departement de la voi- rie une section ayant pour fonction d'etablir des programmes; reorganiser les services administratifs et mettre au point des mesures a court terme en vue d'ameliorer le recouvrement des imp6ts\. Chaque proposition de reorganisation  ANNEXE 12 Page 4 sera !'objet d'un seminaire de formation qui aura pour but de fournir aux em- ployes des renseignements et des directives et de les familiariser avec les nouvelles procedures envisagees\. En outre, un chef mecanicien sera affects a !'atelier d'entretien et de reparation des services d'assainissement et d'hy- giene de chaque municipalite en vue de reorganiser ces services et de former le personnel\. Formation 6\. La majorite du personnel requis fait actuellement partie des effec- tifs de la municipalite et possede des aptitudes de base de sorte que les ac- tivites de formation porteront particulierement sur !'amelioration et le ren- forcement des connaissances plutot que sur !'acquisition de nouvelles et il s'agira principalement de formation sur le tas\. 7\. La formation aura lieu dans les ateliers de reparation de vehicules, de charpenterie et de travail des metaux des Departements des routes et b~ti­ ments\. Les Diagrammes 2 et 3 indiquent les grandes !ignes de cet effort de formation\. Les programmes definitifs seront mis au point par les chefs mecani- ciens une fois que ces derniers seront sur le terrain et tiendront compte des aptitudes effectives des employes dans le contexte voltaique\. Les connaisances pratiques constitueront la base de chaque programme de formation; dans les cas oiJ des notions plus complexes sent requises, il sera fait appel a des methodes d'enseignement n'exigeant du personnel ni lecture_ ni redaction\. Activites des municipalites 8\. Le projet sera realise en trois phases: phase preliminaire, phase operationnelle et phase d'elimination progressive de l'assist~nce technique (voir Diagramme 4)\. Voici un calendrier provisoire des activites proposees : a) Phase preliminaire i) Premier trimestre de 1978\. Un chef mecanicien effectuera une mission de courte duree afin de passer les commandes de nou- veau materiel, outillage et pieces detachees necessaires pour reparer le materiel existant\. 11 en profitera d'autre part pour selectionner dans les sections techniques le personnel devant participer aux programmes\.de formation et a la repara- tion des bAtiments municipaux et des ateliers\. ii) Mars-avril 1978\. Recrutement des assistants techniques expa- tries\. b)\. Phase operationnelle i)  Mai 1978\. Arrivee des assistants techniques et preparation du programme de reorganisation et formation\.:  ANNEXE 12 Page 5 format ion d 'un mois destin ee a un Volta_ique~ pour le paste de surve illant munic ipal; planif icatio n des travau x de repara tion de l'equip ement et du mater iel et mise en train de la format ion sur le tas dans les atelie rs de repara tion; etude de !'orga nisati on et de la struct ure de la munic ipa- lite de Ouagadougou; repara tion des eccles et dispen saires , y compr is la cons- e- tructi on et/ou la repara tion des lieux d'aisa nce et branch ment d'eau; programmation et mise en train des operat ions--d e nettoy age et de repara tion du reseau de draina ge\. ii) Juin 1978\. Mise au point et programmation d'une proced ure de ramassage des ordure s par les munic ipalite s\. iii) Juille t 1978\. Debut des operat ions de ramassage des ordure s menageres par les servic es du Departement de la voirie de la munic ipalite de Ouagadougou : ouvert ure et nettoy age des canaux de draina ge; propo sition s en vue de la reorga nisatio n des servic es muni- cipaux a Ouagadougou; stages d'etud es pratiq ues porten t sur !'orga nisati on destin es au person nel voltai que; propo sition s en vue de 1 'ameli oratio n de la taxati on et de la percep tion des impots a Ouagadougou\. iv) Janvie r 1979\. Arrive e de l'expe rt en gestio n a Bobo-D ioulass o; munic i- expans ion et execut ion d'une reorga nisatio n des servic es paux selon le modele de Ouagadougou\. c) Elimin ation progre ssive de !'assi stanc e techni que i) Janvie r 1980\. Organ isation de stages d'etud es pratiq ues en vue de renfor cer et de perfec tionne r les aptitu des nouvel lement acquis es : nomin ation des surve illants voltai ques a la t~te des sectio ns techni ques; - mise au point d'un programme des activi tes future s des munic ipalite s\.  ANNEXE 12 Page 6 iiL, Avril 1980\. Depart des assistant s technique s\. Evaluatio n de l'element assistanc e aux municipa lites 8\. Pendant la phase operation nelle, un certain nombre de parametre s devront etre examines, a savoir : execution du projet selon le calendrie r d'activite s; eValuatio n deS StageS de formation a1 I etranger deS SUrVeil- \. lants votaiques ; performance du personnel de contre~partie voltaique ; evaluatio n quantitat ive et qualitativ e des travaux realises dans les ateliers de reparation et d'entretie n pendant la periode de formation ; examen des effets qu'ont, dans l'ensembl e de la ville, les me- sures d'assainis sement du milieu et d'hygiene , notamment effi- cacite de la lutte centre la malaria et attitudes et reactions de la populatio n\. 9\. Avant l'elimina tion progressi ve de l'assistan ce technique , il sera precede a une evaluatio n finale du projet en fonction de ses objectifs initiaux et en vue de mettre au point une deuxieme phase operation nelle\. A cet effet, un certain nombre de parametre s devront etre evalues : l'aptitud e financier s et technique des municipa lites a assurer l'entretie n des services existents et des services prevus dans le cadre du projet; la performan ce du personnel voltaique ; les travaux accomplis par la section de programmation en ce qui concerne les activites des municipa lites dans l'avenir; les aptitudes et la capacite locales en matiere de planifica - tion, organisat ion et execution \. Il devra done etre precede a une evaluatio n du projet deux ans apres le de- part des assistant s techni~ues, ce qui permettra aux autorites voltaique s de se faire une idee exacte de l'efficac ite des municipa lites en tant qu'organe s d'executio n de la politique nationale de developpement urbain et fournira les elements necessair es a l'executio n d'operatio ns de meme genre,- dans l'avenir\.  \. • l Cti!E f VOUUE ~U SEn VICE f l DiUIMI:NT S Â---- --------------~----------~~---, CHEf DES \. SERViCES CHEF DES ATELIERS SERRURERIE PERSONN EL hunES ET PROGRAMMES :• ,• BATIMEN U LEvie n ~sSAIN\.ISSfMENT VOIR IE Â\. CI'JERNE \.  ANNEXE 12 Page 8 Tableau 2 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN MODELE DE STAGE D'ETUDES PRATIQUES DESTINE AUX MECANICIENS AUTOMOBILES (MOTEURS DIESEL ET A ESSENCE) MATIERES MOYENS PEDAGOGIQUES 1\. Caracteri stiques technique s et operation nelles du materiel Demonstratj\.on 2\. Utilisatio n de l'outillag e Formation sur le tas II 3\. Moteur - pieces detachees et fonctionnement II 4\. Entretien preventif 5\. Pannes et accidents ; reparatio ns II sur place 6\. Utilisatio n des catalogue s de pieces II detachees et des manuels d'instruc tion 7\. Organisat ion des magasins (materiel , outils, pieces detachees ) Visite aux magasins 8\. Caracteri stiques et utilisatio n des divers types d'huiles et graisses Etude de cas specifiqu es 9\. Procedure s appliquee s dans les ateliers Problemes pratiques 10\. Preventio n des accidents et hygiene dans les ateliers Etude de cas specifiqu es  ANNEXE 12 Page 9 Tableau 3 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN MODELE DE STAGE D'ETUDES PRATIQUES PORTANT SUR L'ORGANISATION DESTINE AU PERSONNEL DE DIRECTION ET D'ENCADREMENT MATIERES MOYENS PEDAGOGIQUES 1\. Structure et organisation Demonstration - organigrammes - t~ches - aptitudes et respons~bilites 2\. Organisatio n des ateliers Etude de cas - organisatio n interne \. - t~ches et responsabil ites - organisation des fournitures dans les magasins 3\. Planificatio n et coordination des Etude de cas activites - calendrier des activites - projections des besoins et des taches en matiere d'entretien 4\. Comptabilit e de base Problemes pratiques - tenue des livres et des comptes - fournitures - actifs et passifs 5\. T~ches et responsabil ites en matiere de gestion - droits et responsabil ites des employes - obligations et responsabil ites des chefs de section - relations humaines  ,\. HAliTE-VOLTA PROJET DB DBVBLOPPEMENT URBAIN CALENDRIEil\. DES ACTIVITES HllliiCIPALES 1978 1979 1980 Activitl!s 1 2 3 4 5 6 7 8 9 10 ll 12 1 2 3 4 5 6 7 8 9 10 ll 12 1 2 3 4 Phaae oreliminaire ' Commandes portant sur lea materiaux et 1'equ1pement Ouaga neufs, lee Fiecea detacHies pour 1a reparation du materiel deja en service, Bobo identification des Voltaloues nour la formation Un mota de f'\rmatton a Ouaga -~--- --~\. l'etranger pour un surveillant voltataue\. Bobo Arrivl!e d'un chef Ouaga i micanicien et debut des oni!rations\. Bobo Acceptation de l'expert Ouaga en geation et debut des ~ onerationa Bobo Livralaon du materiel; Ouaga reorganisation et \. reatructuration des garages et des blltiments\. Bobo Reintegration dana lea Ouaga aervlcea IDUoicipaux du ramaaaage des ordures Bobo ml!naoreres\. Depart des expatril!a Ouaaa et nomination de ----- - Voltdques Bobo  ANNEXE 13 HAUTE-VOLTA PROJET DE DEVELOPPEMENT URBAIN " PROGRAMME DE PRET DESTINE A LA CONSTRUCTION 1\. Afin d'aider 1es proprietaires de parce11es du projet a construire de nouveaux logements et a ameliorer les habitations existantes, le projet prevoit a cet effet un programme de pr@t a options\. Ces pr@ts seront consen- tis en argent liquide; ils se monteront a 65\.000 francs CFA (265 dollars) pour les families occupant de nouvelles parcelles et a 30\.000 francs CFA (122 dol- lars) pour celles qui apporteront des ameliorations a des logements existents\. Les habitants deplaces recevront une subvention de 35\.000 francs CFA (143 dol- lars) pour leur reinstallation et pourront s'ils le desirent recevoir un pr@t supplementaire de 30\.000 francs CFA\. Taus les prets porteront interet a 8,5 % et seront remboursables en 10 ans\. 2\. Les Bureaux municipaux de !'habitat et la Banque nationale de deve- loppement (BND) sous la supervision de laÂDirection du projet creee au sein de la Direction de l'urbanisme, s'occuperont des procedures relatives a !'obten- tion de ces pdtso Lars des negociations les modalites suivantes ont ete con venues a) Les bureaux mun~c~paux de !'habitat elaboreront des formulaires et des dossiers relatifs aux demandes de pr@t\. b) Les interesses rempliront individuellement les formulaires necessai- res sous la supervision du personnel,\. des Bureaux municipaux de 1 'ha- bitat\. c) Des copies de ces formulaires seront examinees par la Direction du projet\. d) Apres approbation d'un certain nombre de dossiers (ce nombre devant etre determine), la Direction du projet demanders au Tresor du Mi- nistere des finances de retirer du compte special du projet le mon- tant des credits approuves et de le deposer a la BND\. e) La Direction du projet et les Bureaux municipaux de !'habitat enver- ront conjointement un mandat a la BND autorisant le decaissement de montants specifiques a des particuliers identifies\. f) Le remboursement de ces pr@ts s'effectuera a la date du recouvre- ment des charges afferentes aux parcelles par le Bureau municipal de !'habitat interesse\.  PHASES DE LA CONSTRUCTION HABITAT TRADITIONNEL 24m ,\./ ~-----------------~---~-------------~~ / ,\. /,\. \. / ,\. ~/\.,\.,\. / \. ~ ,\.,\. \. 15m ,\. ,\. \. ,\. ,\. ,\. ,\. '------------------------------------/ Banque Mondiale - 17303  PLAN TYPE D'UNE PARCELLE HABITAT TRADITIONNEL COIN DESANIMAUX POULAILLER PUITS ENTREE © CHEMINEE ZONE COUVERTE ZONE COUVERTE POUR LA CUISINE Banque Mondiale - 17304  REPUBLIQUE DE LA HAUTE VOlTA PROJET DE DEVELOPPEMENT URBAIN Situation des Projets de I' IDA ROIJTCS PRINCIPALES R~VETUES RtJUrES PR INCJI'ALES GRAVI~ CH£Mlrw£ f£R ---- liMITES D£S 00 D - •- CENTRES 1\DMINISTRATIFS D~S ORO FRONTIERES INTERNATIONALES j:::::,\. COURS D"EAU 0 102030<10506070 KILOMETRES M A L BENIN G HA N A • ~\\\\\\\ P!lOJET 0£ DEVEL04'PEMENT URBAIN PI10JET Ole DEVEL\.lJ'PQEHfCE t: OlE>TIIOl\.TA - - - lllCJISIEMEPROoErRWnER • I'RI>a'AIJX I'ROlrn> !7 IR!UGA'IlCH _ D£UXIEMi' PROJET 0~ FONDS DE OEVE I\.OI'PEMENT RURAL ___\. PROJET o• ~UllAGE, ZONE DE RANCHS COL LECTIFS,SAMOROGOOAN ~=~~~~iO::i' DEVELOI't'EMENT DE t • ELE\IAG ~ ////////; ~:;:,~~~~~~: fftO\.JET D£ DEV£LOPP£MENT AGRtCOLE, BOUGOURlBA n\. tc\.,\.*""'••JIIIIII'••u *"P'Jr('1fllonfWJJtor~61*  BIRD 13630 JUIN 1977 HAUTE VOLTA PROJET DE DEVELOPPEMENT URBAIN OUAGADOUGOU '81 OUARTIERS SPONTANES ENTI EREMENT RESTR UCT URE PROLONGEMENT DU RESEAU D' ADDU CTION D' EAU\.SEULEMENT ZONES INDUSTRIELLES PARCS CIMETIERES Â~ RIVIERES OU COURS D' EAU CHEMIN DE FER :::::\.-RUES t::::l::!:l ZONES RESIDENTIELLES PROJET PILOTE DU PNUD 0 1000 2000 METRES 0 3000 6000 PIEDS CAMP MILITAIRE ZONE HAUTE VOLTA • MILITAIRE flit AFRIQUE Â~ PrjpÂ¥8t1 ,\., /es SIHVices de /11 B11nque M ondialtJ, /11 priJsente csrte est uniqut~ment d•stinH • f\.ciliter le lecture du repport euquttl elltJ ttst jointe\. Les tennes qui y sont utilisjs et /es frontiiJnlr qui y figurrmt n 'impliquent\. de Ill pert de 111 B11nque Mondie/e et dtJ le!l filillltJI\. eucun jugement qu• nt au st•tut ;uridique d'un ttHritoire quelconque, ef nfl lignifient null~~ment que ces institutions rtJconnt~isstJnt ou IICCeptent Cfl$ frontiiNes\.  BIRD 1 JUIN 1977 HAUTE VOLTA NI}NitA / \. , ''- PROJET DE DEVELOPPEMENT URBAIN BOBO- DIOULASSO !!!}}I!!!!!!]!!: QUART IE RS SPONT ANES ',~ \.: I \ - I ,-;t)C~;: ENTIEREMENT RESTRUCTURE 1111111 ZONE DES TRAMES D' ACCUEIL !??@ ZONE INDUSTRIELLE PARCS CIMETIERES RIVIERE CHEMIN DE FER EB RUES ZONES RESIDENTIELLES 0 1000 2000 METRES 0 3000 6000 PIEDS • Preparee par les services de Ia Banque Mondiale, Is presents carte est uniquement destinee ll faciliter Ia lecture du rapport suquel elle est iointe\. 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APPROVAL

P109785

Page 1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No\. : AB4239 Project Name Central African Republic Education Sector Support Project Region Africa Sector Education Project ID P109785 Borrower(s) Central African Republic Implementing Agency Ministry of Education Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD Date PID Prepared September 30, 2008 Estimated Date of Appraisal Authorization October 22, 2008 Estimated Date of Board Approval n/a I\. Key development issues and rationale for Bank involvement In 2002, in collaboration with development partners, the World Bank launched the Education for All –Fast Track Initiative (FTI), a global partnership to help low-income countries meet the education-related Millennium Development Goal (MDG) that all children complete a full cycle of primary education by 2015\. Through the FTI compact, developing countries commit to designing and implementing sound education plans while donor partners commit to aligning and harmonizing support for these plans\. Funding is channeled through existing bilateral and multilateral channels as well as through the FTI Catalytic Fund (CF), which supports countries with insufficient resources in the implementation of their sector plans\. The World Bank has a significant role and stake in the partnership given that it hosts the FTI Secretariat and serves as Trustee and Supervising Entity for FTI’s two trust funds, the CF and the Education Program Development Fund (EPDF)\. The Central African Republic (CAR) endured a long period of civil unrest during which time the education system suffered from a reduction in the number of teachers, the destruction of infrastructure and equipment, and the absence of investments\. Consequently, CAR currently has some of the worst education statistics in the region (see section 7)\. As the overall situation in CAR is slowly improving, a number of positive developments also occurred in the education sector\. For instance, more than 800 apprentice teachers, funded through the Bank-funded multi-sectoral HIV/AIDS, Health, and Education Emergency Support Project (PSES), are operating in mostly underserved and post-conflict areas since the beginning of this year\. The PSES will also deliver text books and furniture to a large number of primary schools\. The adoption of the national education strategy ( Strategie Nationale de Secteur de l’Education 2008-2020 ) by the council of ministers in February 2008 constituted a major step forward on the policy front\. The strategy, which aims to reach universal primary education by 2020, was developed with support of the Bank\. Independent consultants on behalf of the local Page 2 education sector development partners evaluated the strategy and deemed it consistent, credible and aligned with the country’s medium term expenditure framework\. The strategy lacks funding, however, as the government’s financial resources remain severely constrained\. In addition, CAR’s continuing fragile security situation and the overall devastation of infrastructure imply that both domestic and external funds are largely directed toward sectors other than education\. Resources from the EFA FTI Catalytic Fund (CF), focused explicitly at progressing toward universal primary education, would make a significant and essential contribution to the implementation of the first phase (2009-2011) of CAR’s education strategy\. II\. Proposed objective(s) The Development Objective of the project is to improve the qualitative and quantitative outcomes of the primary education system in CAR\. CF grant will support the implementation of the first phase of the national education sector strategy with the longer-term objective to reach universal primary education by 2020\. In particular, CF funds will be used to (i) improve access to education through school construction and rehabilitation and the provision of equipment; (ii) enhance the quality of education through teacher training; and the provision of text books; and (iii) improve the management and efficiency of the education system through, among others, reforms of the teacher payment system and capacity building activities\. III\. Preliminary Description 1\. Access (school construction, rehabilitation, and furniture) With the objective to reduce the pupil : classroom ratio from 111 to 70 at the end of the three- year project period, this component will build (718) and rehabilitate (567) classrooms\. In addition, housing for 120 school directors and 214 latrines will be constructed\. Also furniture for 32,125 pupils and 1,291 teachers will be provided\. The component will target all areas of CAR, with particular emphasis on the more accessible parts of the country during the first year of the project\. School construction and rehabilitation will be conducted through an arrangement with sub-contractors ( maîtrise d’ouvrage délégée )\. 2\. Quality (teacher training and textbooks) A) To increase the number of trained teachers , this component will (i) Train community teachers to meet minimum qualification criteria\. Taking into account training capacity in the country, the first batch of 600 teachers will complete their training, which includes a year of apprenticeship, in 2012; (ii) Prepare future “contract teachers”, who will receive two years training, including one year of apprenticeship\. Each year, 750 teacher candidates will embark on this training\. (iii) Construct and rehabilitate pre-service and in-service teacher institutes\. B) To reduce the pupil: textbook ratio to 2:1 by the end of the project period, this component will provide 231,000 French and 231,000 mathematics textbooks, as well as 6,000 teacher manuals for both subjects\. The textbooks will be purchased off-the-shelf and will be similar to those that are already used in CAR\. Delivery to schools which are relatively easy accessible will be carried out by a private contractor, while the (regional) Inspectorates will Page 3 take responsibility for distribution to schools that are difficult to reach, via local NGOs and transporters\. 3\. Management and efficiency A) Contract teachers : over the project period, a total of 3,315 teachers will be contracted and employed in primary schools across the country\. The contract teachers are expected to remain in their respective regions for a period of five years\. B) Payment of teacher salaries and apprentice remuneration : private sector actors, in particular petrol stations and mobile phone companies, will be involved in the distribution of payments to teaching staff\. Teaching staff in the 20% of the country that are currently not covered by these actors will receive their payments through the Catholic Church distribution network (currently being uses by the PSES)\. The coverage of private sector actors to provide payment to teachers is expected to gradually increase as the EU-supported “development poles program” is implemented\. C) Capacity building of the central administration : the central administration (including deconcentrated agencies) will benefit from training, the rehabilitation of buildings and the provision of equipment\. [Additional information on this sub-component will be provided during appraisal\.] IV\. Safeguard Policies that might apply Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment ( OP / BP 4\.01) Due to the unknown locations of classroom construction at this stage, an Environmental and Social Management Framework (ESMF) will be carried out with the objectives among others to establish clear procedures and methodologies for environmental and social planning, review, approval and implementation of the activities to be financed under the project, specify appropriate roles and responsibilities and outline the necessary reporting procedures, for managing and monitoring environmental and social concerns related to the activities\. [x] [ ] Natural Habitats ( OP / BP 4\.04) [ ] [x] Pest Management ( OP 4\.09 ) [ ] [x] Physical Cultural Resources (OP/BP 4\.11) [ ] [x] Involuntary Resettlement (OP/BP 4\.12) The project will build new classrooms and school director lodgings\. This new building could cause land conflicts\. The project will avoid to the extent possible any involuntary resettlement\. Screening will be systematically used for every new construction to decide if a RAP is necessary\. [x] [ ] Indigenous Peoples ( OP/BP 4\.10) The project will target vulnerable groups and the team suspects the presence of IP in the project areas (nationwide project)\. Due to the fact that this presence cannot be determined until the [x] [ ] Page 4 program is in place, the Indigenous Peoples Planning Framework will be used\. Forests ( OP / BP 4\.36) [ ] [x] Safety of Dams ( OP / BP 4\.37) [ ] [x] Projects in Disputed Areas ( OP / BP 7\.60) * [ ] [x] Projects on International Waterways ( OP / BP 7\.50) [ ] [x] Piloting the Use of Borrower Systems to Address Environmental and Social Issues in Bank-Supported Projects (OP/BP 4\.00) [ ] [x] V\. Tentative financing Source: ($m\.) Borrower/Recipient IBRD EFA-FTI Catalytic Fund $45 Total $45 VI\. Contact point Contact: Michel J\. Welmond, TTL Title: Lead Education Specialist Tel: 202-473-0900 Fax: 202-473-8107 Email: mwelmond@worldbank\.org Location: AFTH3 * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 5

APPROVAL

P176407

 The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 07-Jun-2021 | Report No: PIDISDSA32251 April 26, 2021 Page 1 of 8  The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Kenya P176407 Second Additional P173820 Financing for Kenya COVID-19 Health Emergency Response Project Parent Project Name Region Estimated Appraisal Date Estimated Board Date KENYA COVID-19 HEALTH AFRICA EAST 14-Jun-2021 29-Jun-2021 EMERGENCY RESPONSE PROJECT Practice Area (Lead) Financing Instrument Borrower(s) Implementing Agency Health, Nutrition & Population Investment Project Republic of Kenya Ministry of Health Financing Proposed Development Objective(s) Parent To prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness\. Components Medical supplies and equipment Response, capacity building and training Quarintine, isolation and treatement centres Medical waste disposal Community discussion and information outreach Availability of safe blood and blood products Project implementation and monitoring Gender Based Violence Response PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 130\.00 Total Financing 130\.00 of which IBRD/IDA 130\.00 Financing Gap 0\.00 Apr 25, 2021 Page 2 of 8  The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 130\.00 IDA Credit 130\.00 Environmental and Social Risk Classification Substantial Other Decision (as needed) B\. Introduction and Context Country Context 1\. Prior to the COVID-19 shock, Kenya was making significant progress towards meeting its ambitious development goals, building on successes such as achieving a 90% clean energy mix and the highest Human Capital Index score in continental sub-Saharan Africa\. The economy was sustaining growth of above 5% a year, poverty was declining, and important reforms (such as removing agricultural market distortions) were underway, guided by the government’s “Big Fourâ€? agenda and with the support of the previous DPO series\. However, the pandemic caused growth to stall in 2020, and has pushed an estimated 2 million Kenyans into poverty, despite swift actions by the authorities to contain the virus and protect vulnerable households and firms\. Furthermore, Kenya entered into the crisis with its public finances already stretched and the government has been forced to delay fiscal consolidation plans\. This has increased the risk of debt distress and makes it urgent to make spending more transparent and efficient, address fiscal risks emanating from poorly-performing public entities, and return to a debt-stabilizing fiscal path as soon as economic conditions allow\. The economy has shown resilience and staged a significant recovery in recent months, but the outlook remains highly uncertain and contingent on the future course of the pandemic\. The government has signaled its determination to achieve a resilient recovery from the shock, and to chart a course towards green, resilient and inclusive development (GRID), including by maintaining the reform momentum that has been achieved in recent years to address long-standing policy and institutional weaknesses\. The economy is expected to stage a partial recovery in the near-term\. Real GDP growth is projected to be 4\.5% in 2021 and 4\.7% in 2022\. T 2\. The economic impacts of COPVID 19 have been significant\. The economy entered into recession in 2020 for the first time since 2008, with output contracting by an estimated 0\.3 %\. As the crisis struck, the government moved swiftly to cushion households and firms and preserve macroeconomic stability, by expanding labor programs and social protection, providing temporary tax relief, and adopting accommodative monetary policy\. Inflation remained moderate, and a 10% nominal currency depreciation vs\. the US dollar helped to absorb the shock and reduce pressure on reserves\. The economy has rebounded significantly in recent months, albeit with large differences across sectors, with agricultural output growth being robust, but tourism remaining moribund\. The partial recovery which began in the 2nd half of 2020 is expected to continue, lifting real GDP by a projected 4\.5 % in 2021\. Apr 25, 2021 Page 3 of 8  The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) 3\. The pandemic is expected to have increased poverty by 4 percentage points (or an additional 1\.9 million poor) through serious impacts on livelihoods due to sharp decreases in incomes and employment \. The new poor are more often urban-based, with higher levels of education and are usually working in the service – rather than the agricultural – sector\. With the lifting of mobility restrictions in late 2020, though, the labor market started to show promising signs of recovery\. After the sharp doubling of unemployment to 10\.4 % in the second quarter of 2020, it has recovered to 7\.2 % in the third quarter, as measured by the KNBS Quarterly Labor Force Survey\. However, livelihoods are still under strain with food insecurity remaining prevalent in Kenya’s population\. Even though school closures were lifted in early 2021, the impacts from the prolonged closure in 2020 is likely to have long-term impacts as most students were not able to stay in contact with their teacher to continue learning\. Learning inequality is also likely to increase, as rural as well as children from poor households had even more limited access to remote learning\. Sectoral and Institutional Context 4\. Kenya is currently experiencing a third wave of COVID-19\. Since the first case was reported on March 13, 2020, the outbreak has spread to all of Kenya’s 47 counties\. As of June 4, 2021, a total of 171,942 cases and 3,240 deaths have been reported\. Estimates published in September 2020 suggest that the first peak of COVID-19 pandemic happened in July 2020\. The second peak happened in October to November 2020; the incidence of new cases remained relatively low from December 2020 until February 2021\. The infections picked up again in March 2021, with the rise mirroring the pattern observed in the second wave\. The current surge is severely straining Kenya’s health system given: (i) Kenya had previously eased many of its non-pharmaceutical interventions including resuming in-person education activities and increasing the numbers permitted to congregate; (ii) the COVID-19 variant B\.1\.351/501Y\.V2, which has greater transmissibility, and other variants of concern have been detected in the country since mid-December 2020 , although the actual numbers of cases from these variant is unknown as genomic surveillance capacity remains low; and (iii) neighboring countries are experiencing surges in confirmed cases and deaths\. 5\. Kenya launched COVID-19 vaccination on March 5, 2021\. Kenya received a first shipment of 1\.02 million doses of the AstraZeneca vaccine from COVAX on March 2, 2021, and an additional 100,000 doses as a donation from the Government of India\. The vaccination exercise, which initially recorded a low uptake among the prioritized groups (health workers, teachers, uniformed forces, and other front-line workers), has now picked and expanded to cover individuals aged 58+\. By June 4, 2021, a total of 974,000 people had been vaccinated\. Key challenges facing the vaccination exercise include: (i) limited sensitization of the population on the benefits of vaccination, in the context of widespread controversies on related side effects; (ii) limited awareness on who is eligible for the vaccine; (iii) weak logistics and distribution at national, regional and county level, which have led to stock-outs at vaccination sites when vaccines are available at the national level; and (iv) data not being captured on a timely basis\. These challenges are expected to increase in Phase 2, where a larger share of the population is targeted\. The proposed Second AF will contribute towards addressing these challenges and expand vaccination coverage in Kenya by financing the purchase of additional doses of the vaccine and providing support towards deployment to the end users\. C\. Proposed Development Objective(s) Original PDO Apr 25, 2021 Page 4 of 8  The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) To prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness\. Current PDO To prevent, detect and respond to the threat posed by COVID-19 and strengthen national systems for public health preparedness\. Key Results 6\. The Project’s progress towards achievement of the PDO and overall implementation progress was rated Satisfactory in the last Implementation Status and Results Report of December 18, 2020 and the project continues to make good progress\. As of April 21, 2021, disbursements for the parent project amount to US$32\.73 million (28\.51%)\. By June 30, 2021, expenditures amounting to about US$60\.0 million are estimated to be disbursed\. 7\. The Project Management Team (PMT) has been effectively coordinating project planning and procurement\. So far, the Project has supported procurement and distribution of laboratory test kits and reagents worth US$10\.5 million, 100 ventilators, installation of hand washing stations in 368 health facilities, procurement of 17 polymerase chain reaction machines to expand testing capacity in 13 laboratories, and contracting of 575 health workers to meet increased demand in case management and testing, oxygen piping, procurement of bulk liquid oxygen and related accessories for 80 COVID-19 treatment health facilities\. The Project has also purchased 16 vehicles to support rapid response in high risk counties and continues to provide operational support to rapid response teams at county and national level\. In addition, several activities are in the pipeline\. Key among these include: (i) renovation and equipping infectious disease and high dependency units at the Kenyatta University Teaching Research and Referral and Mama Lucy Hospitals; (ii) renovating, equipping and procuring essential supplies for the six regional and 28 satellite Kenya National Blood Transfusion Service (KNBTS) centers; and (iii) strengthening waste management capacity in 17 COVID-19 treatment facilities\. D\. Project Description 8\. The changes proposed for the Second Additional Financing (AF) entail expanding the scope of activities in the parent project (CHERP) and adjusting its overall design\. As the proposed activities to be funded under the proposed AF for CHERP are aligned with the original PDO, the PDO would remain unchanged, with the new activities incorporated into existing components\. The proposed Second AF will cover both the procurement and deployment of vaccines and systems strengthening activities required for effective distribution to address gaps identified in the VIRAT/VRAF assessments\. Additionally, the proposed Second AF will deploy Policy and Human Resources Development funds to support the operationalization of the Kenya Centers for Disease Control\. 9\. The content of the components, the Results Framework and the institutional/implementation arrangements of the parent project are adjusted to reflect the expanded scope and new activities proposed under the AF\. The existing implementation arrangements would remain the same, and the closing date would remain March 31, 2025\. 10\. Component 1\. Medical Supplies and Equipment: This component aims to improve the availability of supplies and equipment needed to respond to COVID-19 and other public health emergencies\. Specifically, the AF will support: (i) procurement of vaccines to fully vaccinate 6\.01 million people and accompanying injectable Apr 25, 2021 Page 5 of 8  The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) devices; (ii) expanding cold chain capacity (including climate friendly cold chain equipment) at the RVS, establishment of 25 county vaccine stores, strengthening capacity of 36 sub-county stores and strengthening the cold chain storage capacity in 1,177 health facilities\. The investment in cold chain equipment will complement funding from the COVAX facility that is focused exclusively on the national and regional level vaccine stores; (iii) deployment costs including distribution and logistics costs for the vaccine roll-out, including last mile delivery and logistics at the county level, investment in vaccine safety surveillance activities, including operational support for AEFI field investigations\. 11\. Component 2\. Response, Capacity Building and Training: This component aims to strengthen response and build capacity of key stakeholders including health professionals, and community health workers\. Support under the AF will include building capacity of health workers in vaccine planning and deployment\. This will include training of healthcare workers and other personnel responsible for the delivery, storage, handling, transportation, tracking and safety of vaccines\. Support will focus mainly on Phase 2, where expansion of coverage will necessitate training of healthcare workers in all immunizing facilities, including potential refresher training and new training that may be required in case of changes in vaccine delivery instructions or introductions of a variety of vaccine types\. 12\. Component 4\. Medical Waste Disposal: This component aims to ensure safe treatment and disposal of waste\. The parent project is supporting installation of waste treatment equipment in designated COVID-19 treatment facilities and laboratories, medical waste management supplies and consumables, capacity building of health workers on medical waste management, and environmental impact assessments and audits\. This proposed AF will: (i) enhance the waste management capacity through training healthcare workers on how to handle COVID-19 vaccine waste, printing and distribution of standard operating procedures and information materials on waste management; (ii) procurement of vaccine safety boxes and healthcare waste disposal bags; (iii) strengthening the integration of the NVIP and the environmental health departments at county and sub- county level to ensure COVID-19 vaccine waste is stored and managed appropriately; and (iv) contracting a licensed waste management company to transport and dispose COVID-19 vaccine waste as per the Environmental Management and Coordination ACT (Waste Management Regulations, 2006)\. 13\. Component 5\. Community Discussions and Information Outreach: This component will support activities set out in Kenya’s COVID-19 Vaccine Advocacy Communication and Social Mobilization (ACSM) strategy\. Specific areas of support will include: (i) advocacy activities at national, county and community level; (ii) development of Information, Education and Communication materials; (iii) capacity building on ACSM actions of key national and country level stakeholders; (iv) communication through mass and social media; (v) social mobilization and community engagement; and (vi) crisis management and response to address emerging issues\. 14\. Component 7\. Project Implementation and Monitoring: This component finances costs associated with project coordination and monitoring and evaluation (M&E) activities\. This proposed AF will support (i) project management operational costs related to COVID-19 vaccine deployment; (ii) post vaccine introduction and impact evaluations; (iii) increased scope and frequency of ongoing Knowledge Attitudes and Practices surveys to cover vaccine deployment; and (iv) fiduciary activities such as contracting an Independent Integrated Fiduciary Review Agent (IIFRA)\. \. Apr 25, 2021 Page 6 of 8  The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) Legal Operational Policies Triggered? No Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 Summary of Assessment of Environmental and Social Risks and Impacts \. E\. Implementation Institutional and Implementation Arrangements 15\. The Ministry of Health (MoH) will be the implementing agency for all activities in the proposed Second AF\. While the Kenya Medical Supplies Authority (KEMSA) plays a major role in procurement of medical supplies and equipment under the parent project, all procurement under this AF will be conducted by the MoH, who will contract UN agencies where relevant\. The PMT for the parent project will be enhanced to include representation from the NVIP, with expertise in vaccine logistics, procurement, and deployment\. The PMT is responsible for M&E, supervision and fiduciary activities including preparation and consolidation of annual workplans and a consolidated activity and financial report for the project\. The MoH will also continue receiving technical support from other development partners including the WHO and UNICEF on vaccine procurement and deployment, risk communication among others\. The National COVID-19 VDV taskforce will provide overall technical leadership for vaccine deployment planning and implementation\. \. CONTACT POINT World Bank Jane Chuma Senior Economist, Health Toni Lee Kuguru Health Specialist Borrower/Client/Recipient Apr 25, 2021 Page 7 of 8  The World Bank Second Additional Financing for Kenya COVID-19 Health Emergency Response Project (P176407) Republic of Kenya Julius Muia Principal Secretary pstreasury@gmail\.com Implementing Agencies Ministry of Health Susan Mochache Principal Secretary pshealthke@gmail\.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Jane Chuma Task Team Leader(s): Toni Lee Kuguru Approved By Practice Manager/Manager: Country Director: Camille Anne Nuamah 07-Jun-2021 Apr 25, 2021 Page 8 of 8

APPROVAL

P149752

PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Public Disclosure Copy Report No\.: PIDC18096 Project Name Health System Efficiency and Quality Improvement Project (P149752) Region EUROPE AND CENTRAL ASIA Country Montenegro Sector(s) Health (100%) Theme(s) Health system performance (90%), Other human development (10%) Lending Instrument Investment Project Financing Project ID P149752 Borrower(s) Republic of Montenegro Implementing Agency Ministry of Health Environmental B-Partial Assessment Category Date PID Prepared/ 02-Jun-2015 Updated Date PID Approved/ 19-Jun-2015 Disclosed Estimated Date of 21-Sep-2015 Appraisal Completion Estimated Date of 08-Dec-2015 Public Disclosure Copy Board Approval Concept Review Track II - The review did authorize the preparation to continue Decision I\. Introduction and Context Country Context Montenegro is an upper middle income economy with a total population of 621,400 and a Gross National Income (GNI) per capita of US$7,260 in 2013\. The country started accession negotiations with the European Union (EU) in June 2012 and is striving to accede to the EU by 2020\. After experiencing a double-dip recession due to the 2008 global financial and the 2012 Eurozone debt crisis, the Government has implemented a strong fiscal adjustment since 2010 entailing a freeze in public sector wages, staff rationalization, pension indexation freeze, expenditure restraints in the capital budget, which, supported by strengthened tax collection efforts, have helped the Government to reduce the fiscal deficit to below 3 percent of GDP in 2013 Poverty rates before the crisis had fallen more than 6 percentage points, from 11\.2 in 2005 to 4\.9 percent in 2008\. However, the global crisis and growth deterioration led to significant increase in poverty rate to 8\.6 percent in 2014, consequently counterpoising the earlier poverty reduction gains\. The Gini increased from 24\.3 in 2010 to 28\.6 in 2013, indicating rise in inequality\. The incidence of Page 1 of 8  poverty is in general about 10 percentage points higher in rural areas than in urban areas, but recently increase in poverty was recorded in urban areas resulting from troubling industries\. Sectoral and Institutional Context Public Disclosure Copy Montenegrin health indicators have improved faster in the past decade than those of the most recent EU members (2004 - 2007), effectively closing the 5–10 percent gap in life expectancy and mortality that existed in the years 2000s\. Life expectancy has increased 2\.4 years between 2000 and 2013 (from 74\.1 to 76\.5)\. In the same period, infant mortality decreased by more than half, from 11\.1 to 4\.4 per 1,000 live births (which marked Montenegro as a country with the lowest level of infant mortality among South Eastern European –SEE – countries)\. Standardized mortality rate (all causes) was reduced from 953 to 846 per 100,000 inhabitants\. Total health spending accounts for about 7\.6 percent of GDP, of which 60 percent comes from the public sector\. This is in line with the level of public spending of comparable countries in the region\. In addition, over 95 percent of the population is covered by social health insurance coverage - the highest in the Western Balkans\. Despite some efforts at cost control, the system continues to accumulate debts\. Total debt of the Health Insurance Fund (HIF) and health care institutions at the end of 2013 was Euro 34\.0 million (nearly 1 percent of GDP), a 36 percent increase from 2012\. Expenditures for drugs, treatment abroad, and sick leave compensation are the main drivers of increased debts\. Since 2010, the health budget has been disbursed by the Ministry of Finance (MoF), which has reduced the HIF’s role as an active purchaser of health services\. There is clear potential to introduce program planning and create a more advanced and flexible financing system to enhance efficiency and accountability in health care on all levels of decision making and management\. Many health services in Montenegro continue to deliver inefficiently\. Hospitals continue to provide services that can be provided in the outpatient setting more cost – effectively\. On the other hand, underdeveloped capacity to perform tertiary level of surgical treatment results in poorer treatment outcomes, increase in treatment abroad and higher patient dissatisfaction (HIF Surveys 2010, 2014)\. At the same time, primary care is not acting as an effective gate keeper, and its role in prevention needs to be strengthened\. Public Disclosure Copy The needs that the health system of Montenegro must address have changed as a consequence of the demographic and epidemiological transition in the country\. The disease burden, earlier dominated by maternal and child health and communicable diseases, has now shifted to being dominated by chronic and non-communicable diseases (NCDs)\. In 2009, chronic NCDs accounted for 70 percent of causes of deaths in Montenegro\. In 2012, cardiovascular diseases accounted for 51 percent of deaths (46% men, 54% women) while malignant diseases accounted for 20 percent of deaths (57% men, 43% women)\. The two combined are responsible for three of every four deaths\. According to the Primary Health Care Information System, prevalence of cardiovascular diseases in the adult population of Montenegro was 30% in 2014, with predominantly primary hypertension (64%: 25% men, 38% women), while prevalence of diabetes in the total population was 4\.5% with equal gender distribution\. Increasing the focus on prevention and better managing of NCDs would require placing more emphasis on primary care, and rewarding primary care physicians accordingly\. The Ministry of Health (MoH) is considering the introduction of revised performance-based payments at a larger scale\. The adjusted formula for provider payment in primary health care would, however, require changes in order to shift its focus from individual providers to institutions, and further towards prevention\. Hospitals have traditionally been paid based on historical, line-item budgets\. Strict budget rules and slow, centralized governance over material and human resources limit hospitals’ productive use of assets and obstruct effective service provision, resulting in inadequate management and planning, Page 2 of 8  and inefficient use of resources\. Transition to activity-based financing for acute inpatient care using the Australian Diagnosis-Related Groups (DRGs) system has been initiated under the previous project\. However, further efforts are needed to adapt the DRG system and build reporting and Public Disclosure Copy information systems and management capacity to implement DRGs for acute care at scale\. Pharmaceutical spending is an area with high potential for efficiency gains\. Public expenditure on pharmaceuticals in Montenegro increased by 60 percent between 2009 (Euro 25 million) and 2014 (Euro 40 million)\. This reflects inefficiencies driven by several factors: (i) lack of governance and resources to control the drug market and enforce the laws resulting in constantly increasing total costs of both multi-source and single-source drugs; (ii) delays in licensing of pharmaceuticals which limit competition on drug market; (iii) delays in tender procedures which result in shortages of pharmaceuticals in hospitals and out-patient sectors\. Finally, (iv) there is no reference laboratory to perform analysis and detection of counterfeit drugs whereas global estimates for counterfeit drugs are as high as 10%\. The changes in demographics and epidemiological profile of the population call for a health system that is focused on prevention, management of non-communicable diseases and integrated care\. The MoH has recognized the importance of improvement and standardization of quality of health care\. Quality improvement, including development of clinical guidelines to cover greater number of conditions, as well as development of pharmacotherapeutic protocols, clinical pathways and institutionalization of accreditation and licensing are envisaged and strongly supported by the MoH\. Relationship to CAS The proposed Project is closely aligned with the Country Partnership Strategy (CPS) for Montenegro 2011-14 (Report No\. 57149-ME), discussed by the Executive Board of Directors on December 28, 2010, which was extended to FY15\. The CPS seeks both to help the country recover from the 2009 recession and advance longer term goals\. One of the two priorities of the CPS aims at supporting EU accession through strengthening institutions and competitiveness, and specifically targets the strengthening of the health system\. The World Bank remains the main source of support for policy and system reform in the Public Disclosure Copy Montenegro health sector\. The proposed Project builds on the World Bank’s involvement in the first Montenegro Health Improvement Project (P082223, LN39180, 2003 – 2009) which laid the foundation for most of the activities proposed in the current Project, including supporting the first phase health system reforms, increasing capacity for policy, planning and regulation, stabilizing health financing, and improving quality of health service\. These reforms would be extended and consolidated under the proposed Project\. The proposed Project would also contribute to the World Bank’s Twin Goals by improving quality health care services, especially for the poorest segment of the population, and the health insurance system that supports a standard package of health service benefits and increase financial protection against catastrophic diseases\. II\. Proposed Development Objective(s) Proposed Development Objective(s) (From PCN) The proposed Project Development Objective (PDO) is to support activities to increase efficiency of health expenditures and improve quality of care for priority NCDs Key Results (From PCN) The PDO indicators under consideration are as follows: a) Percentage of adults over 40 registered with a primary care physician, who have been screened for high blood pressure in the previous year; b) Number of healthcare institutions with quality indicators measured and ranked; Page 3 of 8  c) Share (%) of acute care inpatient payments for secondary hospitals based on DRGs in X period; d) Percentage decrease in total cost of X (to be decided) most frequently dispensed Public Disclosure Copy prescription outpatient medicines; e) Percentage decrease in the total combined cost of sick leave benefits, medical treatment abroad, and travel benefits in X period III\. Preliminary Description Concept Description The proposed Project would include the following four components: Component 1: Strengthening Capacity for Improved Health System Management (Total cost: US $TBC; Loan financing: US$ 9\.250 million) This component seeks to build capacity to improve health system management by strengthening performance monitoring and active purchasing, improving pharmaceutical sector management and supporting complementary investments in information systems\. It would include: (i) results-based financing for results achieved wherein Project funds are disbursed against the verified achievement of DLIs; and (ii) traditional investment project financing of technical assistance, training and goods\. Strengthening health sector management Activities in this thematic area would support the transition from line-item budgets to program budgeting for health services, including greater flexibility for managers to reallocate funds within programs and build capacity for active purchasing and improved health sector management and oversight\. To strengthen information systems, activities would (i) ensure the continuation of support to eHealth development in Montenegro; and (ii) ensure IT support to achieve Project objectives, including for the transition to program budgets, to implement pay for performance and to improve integration of PHC, hospitals, HIF and Drugs agency (CALIMS) information systems to optimize Public Disclosure Copy pharmaceutical spending\. The potential DLIs under consideration would target improved monitoring and management of health expenditures through active purchasing and implementing program budgeting\. The institutional arrangements for the purchasing function are currently under discussion and are expected to be finalized during Project preparation\. The major investment activities to be financed would include: (i) Training and technical assistance (TA) on program budgeting for officials of the MoH, HIF and MoF; (ii) TA to support regulatory reforms, improved monitoring and accountability systems for financing of sick leave benefits, medical treatment abroad, and travel benefits and to better control costs; (iii) TA to build capacity and improve accountability for better management of health care institutions and (iv) Investments in Information Technology (IT) equipment and software as needed as well as complementary training and TA\. Improving pharmaceutical sector management Activities under this thematic area would aim at improving the availability of pharmaceuticals, rationalizing the use of medicines and keeping pharmaceutical spending under control\. It would include: (i) activities to improve pharmaceutical market regulation by enforcing existing rules and standards and supporting implementation of new regulations, and (ii) support to improve pharmaceutical procurement and distribution systems\. Page 4 of 8  Pharmaceutical sector management activities would be entirely financed using DLIs mechanisms\. The potential DLIs under consideration would target reductions in pharmaceuticals expenditures, improving availability and rational use of drugs, and increasing value-for-money from public Public Disclosure Copy spending on pharmaceuticals\. Component 2: Improving efficiency in health institutions (Total cost: US$TBC; Loan financing: US $37\.050 million) This component seeks to improve efficiency in health institutions by supporting the design and implementation of pay-for-performance in primary care and activity-based payments at hospitals, and investing in improvements in surgical and diagnostic capacities in the public sector, with a view to rationalizing expenditures on treatments abroad\. It would include: (i) results-based financing for health financing reform results wherein Project funds are disbursed against the verified achievement of DLIs; and (ii) traditional investment project financing of technical assistance, training and goods\. Designing and implementing pay-for-performance Activities in this area would support the design and implementation of primary care provider payments reforms and continue the transition to Diagnosis Related Group (DRG) payments in hospitals to improve the efficiency and quality of service delivery\. Pay-for-performance at primary care would aim to strengthen incentives to expand coverage and improve the quality of prevention and Non Communicable Disease (NCD) management services\. The design of revised primary care payments would be finalized during Project preparation, but key design elements may include: (i) pay-for-performance at the facility level linked to the delivery of specific preventive/ NCD management services; (ii) increased share of performance-linked payments in health workers’ payments; and (iii) non-monetary incentives that can complement performance payments\. Project activities would support phased implementation at both primary care and hospital levels to minimize possible disruptions to service delivery\. The major investment activities in this area would finance TA and training for the MoH, HIF and Public Disclosure Copy health institutions to build capacity for payment reforms, for the necessary modifications of legislation needed for effective implementation of efficient payment systems and to develop management tools for the revised payment system\. The potential DLIs under consideration would target the implementation of changes to primary care and hospital payment systems\. Increasing Surgical and Diagnostic Capacities Activities in this thematic area seek to: (i) increase efficiency of specialized (tertiary level) treatment and would support refurbishment towards modernization and increased capacity of surgery block within the Clinical Center in Podgorica and (ii) increase capacity for day surgeries\. In doing so the Project aims to facilitate the provision of timely and cost-efficient treatment in Montenegro and reduce expenditures on treatments abroad\. It would include traditional investment project financing of technical assistance, civil works, training and goods\. Component 3: Improving Quality of Health Care (Total cost: US$2\.5 million; Loan financing: US $2\.5 million) This component would focus on improving quality of health care\. It would include traditional investment financing for TA, training and goods\. Investment activities would focus on improving standards of quality and efficiency of health care by strengthening institutional capacity for: (i) monitoring of health parameters (National Health Page 5 of 8  Survey); (ii) further developing pharmacotherapeutic protocols, clinical practice guidelines and clinical pathways; (iii) strengthening and institutionalization of Continuous Medical Education (CME) and (iv) facilitating institutionalization of accreditation of health care institutions by the Public Disclosure Copy introduction and monitoring of appropriate indicators\. Investment activities under this component would also focus on systemic control, improving standards and quality of quality on drugs available on the market of Montenegro by provision of spectroscopes for the Montenegro Drug Agency (CAL IMS) which would serve as a regional center for detection of counterfeit drugs under the SEE Health Network\. Component 4: Project Implementation (Total costs: US$1\.2 million; Loan financing: US$1\.2 million) This component would support the operational costs of implementing the proposed Project, including project coordination and supervision, monitoring and evaluation (M&E), fiduciary management (financial and procurement), audits of Project’s accounts and technical audits for verification of DLIs\. Monitoring the implementation of the proposed reforms, including potential unintended consequences, would be a key function that is supported under this component\. The final institutional arrangements will be determined over the course of the preparation process\. At this stage, however, it is envisaged that a Project Coordination Unit (PCU), headed by an externally- recruited Project Coordinator, would be established within the MoH to support day-to-day project management and implementation and liaise with the existing Technical Service Unit team (TSU) of the MoF, which would be responsible for providing fiduciary support for the proposed Project as it does for all other Bank-financed operations\. Financing Instrument and Approach\. The proposed operation would use an Investment Project Financing (IPF) instrument\. It would follow: (a) a Results-based Financing approach supporting programs and the achievement of specific results (disbursement-linked indicators) under Component 1 and Component 2; and (b) a Public Disclosure Copy traditional investment approach for civil works, goods, technical assistance and training under all four components\. Disbursement-linked indicators would disburse against pre-defined Eligible Expenditure Program (EEP), which consists of salaries\. The EEP is in compliance with OP 10\.00 for IPF instrument that would be co-financed by the operation\. A financing percentage would be agreed upon and would form the upper limit for the amount to be disbursed against the EEP expenditure, in opposite to a percentage of a transaction or contract as in traditional investment financing\. Disbursements would be made against achievement of results through Disbursement-linked Indicators (DLIs) that should be challenging but realistic and support the achievement of the PDO\. The potential eight DLIs identified at the PCN stage, and included in Annex 3, are indicative, and would be confirmed during preparation in discussion with the MoH, MoF, and HIF\. In order to comply with the agreed percentage to be financed, the MoH would present, prior to the disbursements take place, a list of the selected recurrent expenditures\. In addition, compliance with agreed DLIs, vetted by an independent verification agency, would have to be presented in order for disbursements to take place\. A DLI protocol table will provide a full explanation of the indicators, methods of measurement, periodicity and verification process and will be prepared for the PAD along with disbursement arrangements\. For all components, traditional input-based financing and disbursements would also be used\. The use of a Programs-for-Results instrument (PforR) was considered, however, an IPF instrument Page 6 of 8  is deemed appropriate given the status of country system, overall project design and objectives entailing investment and results based priorities in parallel, while focusing on structural budgeting and payment reforms, pharmaceutical policy reforms, enhanced quality and performance of care and Public Disclosure Copy more rational spending in regards to treatment abroad, travel, and sick leave\. Weak implementation and monitoring capacity in the sector, and the fiduciary and safeguards weaknesses of the country systems were also taken into account\. The proposed operation would however strengthen technical and fiduciary (including safeguards) capacity of key stakeholders (MoH and HIF) in managing the health sector towards reaching the required capacity for a PforR in the future\. IV\. Safeguard Policies that might apply Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment OP/BP 4\.01 ✖ Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ V\. Financing (in USD Million) Total Project Cost: 50\.00 Total Bank Financing: 50\.00 Public Disclosure Copy Financing Gap: 0\.00 Financing Source Amount Borrower 0\.00 International Bank for Reconstruction and Development 50\.00 Total 50\.00 VI\. Contact point World Bank Contact: Ana Holt Title: Health Specialist Tel: 5265+3714 Email: aholt@worldbank\.org Borrower/Client/Recipient Name: Republic of Montenegro Contact: Title: Tel: Email: Page 7 of 8  Implementing Agencies Name: Ministry of Health Contact: Mensud Grbovic Public Disclosure Copy Title: Assistant Minister of Health Tel: 38278113127 Email: mensud\.grbovic@mzd\.gov\.me VII\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Public Disclosure Copy Page 8 of 8

APPROVAL

P008951

Doemnt of The World Bank FOR OFFIaAL USE ONLY Report No\. 13614 PROJECT COMPLETION REPORT TURKEY AGRICULTURAL EXTENSION AND APPLIED RESEARCH PROJECT (LOAN 2405-TU) OCTOBER 14, 1994 Agriculture and Environment Operations Division Country Department I Europe and Central Asia Regional Office This document bas a restricted distribution and may be used bv recipients only in the performance of their ofricial duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EOUIVALENTS Currency Unit = Turkish Lira (TL) US$ 1\.00 (at Appraisal, 1984) = 270 TL US$ 1\.00 (at Closing, 1993) = 12,980 Th WEIGHTS AND MEASURES 1 kilogram (kg) = 2\.20 pounds 1 metric ton = 1,000 kilograms 1 hectare (ha) = 10,000 square meter 1 decare (da) = 0\.1 ha 1 meter (m) = 1\.09 yards ABBREVIATIONS APK = Research, Planning and Coordination Council AEARP II = Second Agricultural Extension and Applied Research Project DAI = Department of Agricultural Inputs DE = Department of Extension DEC = Department of Evaluation and Coordination DES = Department of Economics and Statistics DR = Department of Research DP = Department of Publications DTCC = Department of Technical Cooperation and Coordination DVC = Department of Village Construction ESG = Extension Support Group FTE = Farmers' Training and Extension GDAA = General Directorate of Agricultural Affairs GDAR = General Directorate of Agricultural Research GDOF = General Directorate of Forestry GDOS = General Directorate of Organization and Support Services GDPA = General Directorate of Personnel Affairs GDPI = General Directorate of Project and Implementation GDPP = General Directorate of Protection and Control GDRS = General Directorate of Rural Service MAFRA = Ministry of Agriculture, Forestry, and Rural Affairs MARA = Ministry of Agriculture and Rural Affairs M&E = Monitoring and Evaluation MOPWR = Ministry of Public Works and Resettlement OED =Operations Evaluation Department PAU =Project Administration Unit PDA = Provincial Directorate of Agriculture SAR = Southeastern Anatolia Region SDC = Swiss Development Cooperation SMS = Subject Matter Specialist TZ = Field Extension Service of GDAA T&V = Training and Visit System TZDK = Agricultural Supply Office VGT = Village Group Technician VGTC = Village Group Training Center WTR = Western Transitional Region YAYCEP = Agricultural TV School ZB = Agricultural Bank FISCAL YEAR Government of Turkey = January 1 to December 31 World Bank = July 1 to June 30  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D\.C\. 20433 U\.S\.A\. Office of Director-General Operations Evaluation October 14, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Turkey - Agricultural Extension and Applied Research Project (Ln\. 2405-TU) Attached is the Project Completion Report on Turkey Agricultural Extension and Applied Research Project (Ln\. 2405-TU) prepared by the Europe and Central Asia Regional Office\. Part II was provided by the Borrower, and, inter alia, expresses satisfaction with the Bank's cooperation during project implementation\. The project attempted to enhance the adoption of new technology by expanding the T&V extension system (previously used in a number of Bank-supported development projects) to cover about 40 percent of Turkey's cultivated area and farming population, as well as by testing and developing various forms of mass media; applied research was also to be supported at six major institutes in the project area\. The project provided, albeit with major delays, useful equipment for project agencies, enhanced transport facilities (eventually 64 percent of target), external training of staff, a reduced amount (29 percent) of civil works and some improvement in the very poor linkage between research and extension\. However, the project had a number of serious implementation problems, including major institutional changes at the beginning of the project which led to responsibility and coordination issues which were not satisfactorily resolved; administrative problems and severe budgetary constraints severely delayed awarding of civil works contracts (with no civil works being undertaken at the research facilities); and in-service training was deficient for both the technical specialists and village technicians\. Most surveyed farmers (84 percent) indicated increases in wheat yield over the previous ten years, while increases in other important crops were much rarer\. No significant differences, however, were observed in the rate of change in wheat yields nor in the reduction in fallow area (the two most important agricultural changes in the 1980s in Turkey) between project and non-project provinces\. The report concludes that, considering the diverse agriculture and rapidly changing demographics in the project area, it was unwise to impose such a uniform extension methodology\. Despite the reported problems, the Region considers that there were sufficient benefits to rate the project as marginally satisfactory with modest institutional development impact and uncertain sustainability\. The PCR is satisfactory in supplying useful information and analysis, and is based on extensive field survey; however, its presentation could have been improved, the implementation and outcome of the mass media component should have been further elaborated, and at least the evidence for the critical project/non-project area responses attached as an annex\. An audit is planned, possibly in conjunction with the Extension and Research Project II, at which time the outcome rating will be reevaluated\. Robert Picciotto by H\. Eberhard K6pp Attachment This document has a restricted distribution and may be used by recipients only In the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   FOR OFFICIAL USE ONLY PROJECT COMIPLETION REPORT TURKEY AGRICULTURAL EXTENSION AND APPLIED RESEARCH PROJECT (Loan 2405-TU) Table or Contents Page No\. Preface \. \.i Evaluation Summary \. \.i Part I\. PROJECT REVIEW FROM THE BANK PERSPECTIVE \. 1 1\. Project Identity \. 1 2\. Background \. 1 Sector Development Objectives and Strategy \. 1 3\. Project Objectives and Description \. 2 Project Objectives \. 2 Project Description \. 3 4\. Project Design and Organization \. 3 Design \. 3 Organization \. 4 5\. Project Implementation \. 4 General \. 4 Agricultural Extension \. 4 Applied Research \. 7 Monitoring and Evaluation \. 8 Training \. 8 6\. Project Results and Impact \. 10 Achievements in Production \. 10 Improved Research-Extension Linkage \. 10 Improved in Extension Service \. 10 Institutional Support \. 10 7\. Project Sustainability \. 11 8\. Bank Performance \. 12 9\. IFAD Performance \. 12 10\. Borrower Performance \. 13 11\. Project Relationships \. 13 12\. Consulting Services \. 13 13\. Project Documentation and Data \. 13 14\. Lessons Learned \. 14 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Part II\. PROJECT REVIEW FROM BORROWER'S PERSPECTIVE \. \. 15 1\. Introduction \. 15 2\. Performance of the World Bank \. \. \. 15 3\. Performance of the Ministry of Agriculture and Rural Affairs \. 16 4\. Lessons Learned \. 19 Part III\. STATISTICAL INFORMATION \. 20 Tables 1 Related Bank Loans \. 20 2 Project Timetable \. 21 3 Cumulative Estimated and Actual Loan Disbursement \. 22 4 Project Implementation \. 23 5 Project Costs \. 24 6 Project Financing \. 25 7 Project Results \. 26 8 Status of Convenants \. 27 9 Staff Inputs \. 29 10 Staff Input and Mission Data \. 30  PREFACE This is the Project Completion Report (PCR) for the Agricultural Extension and Applied Research Project in Turkey, for which Loan 2405-TU, in the amount of US$ 72 million (equivalent), was approved on April 17, 1984\. The project was co-financed by IFAD Loan 143- TU in the amount of US$ 10 million, which was approved on May 16, 1984\. The last disbursement from the IBRD Loan was on April 25, 1994, nearly four years behind the original schedule\. US$ 61\.9 million was disbursed and US$ 10\.2 million of the IBRD Loan was canceled\. The IFAD Loan disbursed US$ 6\.6 million and the closing date was extended to June 30, 1994\. This PCR was prepared jointly by the Agriculture and Environment Division, Country Department I, Europe and Central Asia Region (Preface, Evaluation Summary, Parts I and III) and the Borrower (Part II)\. This PCR was initiated in April 1993 and is based, inter alia, on extensive field work and analysis by the senior author, on the Staff Appraisal Report; the Loan Agreement; supervision reports; correspondence among the Bank, IFAD, and the Borrower; internal Bank Memoranda; and information gathered by the Resident Mission\. The field work, carried out in 1993, covers 18 provinces, with questionnaire responses from 330 field-level extension staff and 130 subject matter specialists, 26 research scientists and 288 farmers\. Results are summarized in nine background papers available in the Bank's regional files, viz\., Project Implementation; Village Group Technician Survey; Subject Matter Specialist Survey; Researcher Survey; Farm Survey; Impact Evaluating Study; Management, Reorganization and Implementation; Project Implementation in Southeastern Anatolia; and Changes in Wheat Yields and Area Under Major Summer Crops\.   iii EVALUATION SUMMARY Objectives The main objective of the project was to enhance the adoption of new agricultural technology at the farm level\. This in turn was to raise farm incomes and generally increase the growth of agricultural GDP\. Project objectives would be realized by strengthening the General Directorate of Agricultural Affairs (GDAA), of the Ministry of Agriculture, Forestry and Rural Affairs, realigning research to ensure more appropriate technology, enhancing communication media support for extension, provision of training facilities, establishment of a monitoring and evaluation system, and the provision of consultant support\. Implementation Ministry commitment to project objectives and design was uneven and varied throughout the life of the project\. A reorganization of the Ministry in 1984/85, three months after project effectiveness, essentially delayed most implementation activities for two years\. Perhaps more important was that the reorganization scattered implementation units to several General Directorates, with the Department of Extension separated from the main implementing agency\. A subsequent Ministry reorganization in 1991 did not correct this\. Timely and sufficient provision of counterpart funds was always a problem - even when the Bank increased disbursement percentages to 80% in 1991-93\. Budget restrictions further aggravated implementation delays, particularly with respect to procurement and civil works\. Only 29% of the originally-planned buildings were constructed\. Implementation of the training component was also problematic -- in part due to delays in implementing the training arrangements and partly because of the lengthy procedures for candidate selection/processing\. Results Of the farmers surveyed for the PCR, 75% attributed yield increases to new genetic material, 70% to better use of fertilizer, and 52% to better use of chemicals\. For these same farmers, after "friends and relatives", the local extension worker was the most frequently- mentioned (sixty percent) source of new agricultural information\. Sixty-six percent of these farmers also reported that they felt extension services had improved in the project area\. Eighty-four percent of the surveyed farmers reported increases in wheat yields over the last ten years; considerably fewer for barley, sugar beet, cotton, and milk (17%, 7%, 6%, and 6%, respectively)\. The area under horticultural crops, particularly in Balikesir, Bursa, and Manisa, increased sharply\. There appears to be at least a casual association between increases in production and extension effort\. However, given the number of influences that impact on farmer land use and enterprize options, such as prices, improvements in transportation, better varieties, access to fertilizer, etc\., the degree of causality can not be determined with precision\. OED, in a recent review of extension services, states that extension's most important  iv contribution is in speeding up the rate of change\. From that perspective, considering the rate of change in wheat yields and the rate in the reduction of fallow area (the two most important agricultural changes in Turkey in the 1980s), no significant difference was observed in the rate of increase in wheat yields or in the rate of fallow reduction between provinces covered by the project and non-project provinces, (the latter under the Agricultural Extension II project)\. Sustainability With the demographic changes going on in rural areas and the budgetary limitations that continue to face the Government, the sustainability of the project as designed, i\.e\., the concentration on villages and use of large numbers of front-line staff, will be difficult\. Authorities have been unable to ensure that professionals who received training under the project remain in the project area\. There already has been a significant dissipation of trained professionals, in part through uncoordinated reassignments\. With respect to agricultural research, the biggest sustainability problem relates to the aging and retirement of scientists and the nearly decade-old Ministry moratorium on new recruitment\. Findings and Lessons Learned Given the variations in location, need for timeliness in agricultural operations, and markets, as well as the heterogeneity of agriculture and farm people, blanket prescriptions for a centralized extension service can not be expected to work very well\. For services such as extension, accountability and responsibility linkages between users and providers of the service must be in place\. Tight management and supervision systems of government staff, using government norms, is not enough to ensure relevant and responsive service\. Had the implementing agencies been more involved in the preparation of the project, there more likely would have been a greater degree of "ground truth" with respect to what was necessary and sustainable under Turkish conditions\. Besides developing an enhanced sense of project ownership, this also would have developed an early familiarization, understanding, and commitment to the project objectives by the staff of the implementing agencies\. Because the project required considerable, complex inter- and intra-institutional coordination, a strong coordinating body should have been established as a precondition to the project\. More attention should have been given to ensuring correct phasing of activities and to having a trained staff in place with responsibility and authority\. In that context, at preparation the Bank estimated that above-average supervision coefficients would be needed\. However, no additional supervision resources were made available\. Indeed, in four of the project years actual supervision coefficients were below average\. In addition, of the fifteen supervision missions, only six had an extension specialist as a member of the mission\. It seems clear that higher than average levels of supervision are required for this type of project under these kind of circumstances\. It is also clear that supervision missions need to be staffed consistently with appropriate professional capabilities\.  PROJECT COMPLETION REPORT TURKEY AGRICULTURAL EXTENSION AND APPLIED RESEARCH PROJECT (LOAN 2405-TU) PART I\. PROJECT REVIEW FROM THE BANK PERSPECTIVE 1\. Project Identitv Project Name: Agricultural Extension and Applied Research IBRD Loan No\.: 2405-TU IFAD Loan No\.: 143-TU RVP Unit: EC 1 Country: Turkey Sector: Agriculture Sub-sector: Extension/Applied Research 2\. Background 2\.01\. In June 1980 the Government requested Bank assistance to finance a nationwid extension improvement project\. The Bank instead suggested a phased approach based on agro-ecological zones\. The Government accepted this recommendation in 1982 and initiated project preparation in GDAA, a directorate of MAFRA\. This was followed by project preparation assistance from the FAO/World Bank Cooperative Program (CP) in August/September of 1982\. Subsequently, the International Fund for Agricultural Development (IFAD) expressed interest in co-financing the project\. Following a formal Bank preparation mission in March/April 1983, and a pre- appraisal mission in May/June 1983, the project was appraised by the Bank in March 1984, and became effective on September 5, 1984\. In 1992, SDC participated with IFAD in co-financing the project and, based on the understanding between SDC and IFAD, a grant of US$6 million was made available to the Borrower\. Sector Development Objectives and Strategv 2\.02\. While the relative importance of the agriculture sector in Turkey's economy is declining, the sector generated about 16% of total GDP and averaged about 21% of export earnings in recent years (1985-88)\. It continues to generate substantial employment, meet most domestic food requirements, supply industrial raw materials, and generate considerable foreign exchange\. Through the 1970s, Turkey's agricultural policies were inward-looking, stressing food self- sufficiency through subsidized inputs and producer prices\. Agricultural growth was relatively rapid in the early 1970s, averaging 4\.7% annually from 1972-75\. Sectoral growth rates slowed to 1\.5% per year in the late 1970s, largely due to a sharp reduction in incentives, ineffective investment policies, weak technical services, and inadequate marketing and credit systems\.  2 Starting in 1980, with Bank assistance, the Government began strengthening agricultural support services\. Input trade and distribution were liberalized, regulatory restrictions were reduced, and the private sector played an increasing role in marketing and processing\. Nevertheless, throughout the 1980s there was a continuing policy bias against the sector as compared to industry\. 2\.03\. One of the main agricultural sector development interventions of the Government has been support for the modernization of production techniques to raise productivity, yield and farmer income\. Agricultural lending by the Bank to the Government aimed to increase production, exports and rural employment, and to support reforms necessary to the sector\. Therefore, extension components were included in some early Bank-assisted infrastructure and farm development projects in Turkey\. 2\.04\. Under Stage II of the Seyhan Irrigation Project the T&V system of extension first was introduced prior to its inclusion in Bank-supported projects in other countries\. It failed to win the clear support of Government; the T&V activities were not implemented by the regular extension system\. 2\.05\. In the early 1980s, GDAA had the largest field staff of any state agency providing extension services to farmers\. Responsibilities covered virtually every aspect of crop and livestock agriculture\. GDAA's field organization was represented in all provinces and counties, and on a pilot basis in some villages\. However, most of the staff were also extensively involved in administrative, regulatory and record-keeping duties besides extension\. GDAA's agricultural research institutes were involved with occasional cooperation on specific projects\. Such activities were not regularly programmed, and communication between research workers and extension agents remained largely dependent on individual initiative\. This situation limited the usefulness of some of the investigations undertaken by the research institutions; extension workers were often unaware of existing research results\. Inadequacy of the technical and specialist expertise available to support the extension work of the county staff, limited availability of transportation, infrequent use of audio-visual materials and mass media, and insufficient M&E also limited the effectiveness of GDAA's extension operations\. 3\. Project Objectives and Description Project Objectives 3\.01\. The project's main objectives were to stimulate use of improved crop and livestock production methods to augment the production of basic food and export crops, raise farm incomes, and boost agricultural GDP\. This would be accomplished through investments to: a) strengthen GDAA extension service b) realign research to make available appropriate technology for extension c) provide communication media support for extension d) provide training facilities for upgrading the technical competence of research and  3 extension personnel e) provide facilities for monitoring and evaluating extension f) provide consultant support in selected fields\. Project Description 3\.02\. The project's objectives were to be achieved through four components over a six-year period: a) Agricultural Extension: Employing additional village-level extension agents to provide technical advice to farmers; establishing county- and province-based SMSs to provide training to extension agents; training SMSs in monthly workshops; assignment of staff exclusively to administrative matters in provincial extension offices; create an information center to establish a library, produce audio-visual aids and disseminate information through mass communication\. b) Applied Research: Strengthening the capacity of six research institutes serving the project area to carry out research; monthly training workshops for SMSs; constructing facilities at the research institutes and housing and facilities for training of extension agents; equipping the research institutes; coordination of research work; definition of research priorities; and dissemination of technical information\. c) Monitoring and Evaluation: Establishing a management information service responsible for internal monitoring and evaluation; strengthening of the external M&E unit within GDAA\. d) Training: In-service training; overseas training of selected central and provincial staff involved in extension, M&E, and research activities\. 3\.03\. Total project costs were estimated at US$ 205\.7 million (equivalent)\. The World Bank and IFAD would contribute about 40% of total requirements by providing, respectively, US$ 72\.2 million and US$ 10 million in loans\. The remaining US$ 123\.7 million equivalent (or 60% of total costs) was to be met locally by the Government\. In August 1992, under the Memorandum of Understanding with the Government of Switzerland, represented by SDC and IFAD, SDC made arrangements for the partial co-financing of Part A (Agricultural Extension) of the Project and provided a grant of US$ 6 million\. 4\. Project Design and Organization 4\.01\. Design\. The project was to address major problems facing agricultural extension, such as insufficient technical and specialist expertise, lack of systematic linkages with research, heavy bureaucratic workloads of extension staff, fragmented research and a lack of coherent research priorities\.  4 4\.02\. Project design reflected the socio-economic realities in Turkey during the late 1970s/early 1980s and heavy reliance on state intervention\. It concentrated on state-financed extension, detracting attention from altemative, possibly more cost-efficient approaches\. Signals of rapid demographic, market, economic, and structural developments that began to emerge in rural Turkey in the early 1980s were not foreseen sufficiently\. 4\.03\. The design had high recurrent cost implications\. At the time of project approval, the Government's budgetary position was sound\. Inflation subsequently became a major issue, and the Government was increasingly hard-pressed to provide planned-for budgetary support\. Organization 4\.04\. The project had a complex organizational arrangement and covered a large, diverse geographical area\. Overall responsibility for implementation was given to GDAA, under which the bulk of extension services and research institutes already operated\. In the original design, GDAA would implement the project through its six departments (Extension, Research, Training, Technical Cooperation and Coordination, Economics and Statistics, Externally Financed Projects)\. However, the Ministry went through a major reorganization in 1984/85 which hindered project organization\. 5\. Project Implementation 5\.01\. General: MAFRA's reorganization prevented expeditious start-up of project components\. Much delay was caused by the wait for by-laws defining responsibilities of the new General Directorates and for appointments of the senior administrators at the central, regional, and provincial levels\. It took almost two years for the project to become operational\. Subsequently, implementation suffered from: i) lack of overall technical authority for project implementation; ii) lack of clear task boundaries among related agencies; iii) low levels of "ownership" (particularly at managerial levels); iv) staff turnover at central and field levels, v) lack of direct control by the General and Provincial Directorates over their staff; vi) limited counterpart funds due to shortfalls in state budget allocations; and vii) lack of control of the General and Provincial Directorates over their yearly budgets\. 5\.02\. The two-year lag in project start-up put the project time-table behind, a delay which was not subsequently made up\. Severe procurement delays, in part stemming from limited counterpart funds and the Government's "saving instructions," also curtailed implementation\. Although the project was originally scheduled to be completed by December 31, 1990, it was extended four times: first to June 30, 1991, then to June 30, 1992, then to June 30, 1993, and finally to October 31, 1993\. The last disbursement from the loan was on April 25, 1994\. 5\.03\. Agricultural Extension: Although in April 1985 (seven months after effectiveness date) all 67 new PDAs were appointed and started to organize staff and determine responsibilities, the new organization was not fully operative until late 1986\.  5 5\.04\. After the reorganization, control of extension was diffused among sixteen (later eighteen) PDAs and three General Directorates in Ankara (with the latter reduced to largely advisory and monitoring roles)\. Two General Directorates, GDAPD and GDOS, were considered the major agencies for project implementation\. GDPD had responsibility for implementation, but found it difficult to get higher management to solve the implementation problems encountered\. It also lacked authority over other general directorates or PDAs\. GDOS, to which DE was transferred, played only a limited and sometimes unclear role in implementation, although it was to have technical control of the project\. Lack of clearly defined task boundaries between GDPD and GDOS resulted in vague ownership over much of the project life\. 5\.05\. Central review and follow-up to correct field-level deficiencies was not always effective\. A GDPD-based monitoring group to visit provinces and assess implementation was not activated, mainly due to budgetary problems\. In 1990 the Bank recommended establishing a full-time ESG in GDOS\. It was established, functioned poorly due to limited commitment from GDOS, and abolished in 1993\. GDPD appointed a team of four to coordinate project activities at the central level, but only in the last year of the project\. Because each Provincial Director is responsible directly to the Minister of MARA through the Undersecretary and monitoring bodies remained ineffective, supervision and support to the field level activities reamined weak throughout the life of the project\. 5\.06\. Project appraisal called, on average, for nine VGTs to live in a central village within each area of operation\. Although criteria for site selection of the VGT Centers were defined clearly, they sometimes were circumvented by local interests\. VGTC construction started with MOPWR and was shifted to GDRS in mid-1985 due to coordination and quality control problems\. It was concluded originally that conventional housing would have a longer life and lower maintenance cost than prefabricated housing\. Later, based on GDPD's 1991 proposal, two-story prefabricated houses were built\. Severe delays affected the schedule of every type of construction\. Major reasons for construction delays were: i) shortage of funds due to high inflation; ii) lengthy delays in MAFRA for the authorization to start; iii) time-consuming tender preparations caused by limited experience in Bank procedures; iv) limited capacity of provincial GDRS staff to tender, supervise, and inspect construction; and v) limited capacity of the small contracting firms employed to manage construction\. 5\.07\. The civil works component suffered from lack of adequate quality control\. The Staff Appraisal Report envisaged construction contracts packaged by county, but because of the scattered nature of specific construction jobs, they were contracted as single units\. This resulted in awards to small, inexperienced and underfinanced contractors which made supervision difficult\. Through the project life, quality of construction was a problem due to the limited capacity of Provincial MOPWR and GDRS staff and to the lack of a full time PAU Architect/Engineer to supervise construction\. 5\.08\. Overall only 29% of the anticipated buildings units were constructed under the project\.  6 5\.09\. During the project VGTs were assigned to village centers for undefined periods\. With this uncertainty, some VGTs sought ways to go back to towns as soon as they could\. In some areas there was frequent turnover\. Unsuccessful VGTs who stayed in the villages reflected their unhappiness in poor performance\. If MARA had clearly defined lengths of stays in villages (e\.g\., four years), the problems of vacant VGTCs and turnover might have been lessened\. 5\.10\. Delay in procurement of transport equipment was a major problem\. Transportation is more crucial for key lower level staff, i\.e\., VGTs, because of their need for direct contact with farmers\. VGTs without motorcycles visited farmers by using public transport, hitching rides, or walking, which wasted time and affected morale\. The VGT survey indicated that, to visit farmers' fields/orchards/barns in central villages, 54% of VGTs used motorcycles, 36% drove their private cars, 14% used farmers' vehicles, and 48% walked\. Thirty-six percent of the VGTs reported using public transportation to other villages in their areas\. Project motorcycles were purchased early in 1991, but by 1993, 575 of them were still not available due to import duties not budgeted by MARA\. 5\.11\. The level of expertise of the SMSs was another problem\. Most of the VGTs (71%) received in-service training\. The systematic technical training of the VGTs by SMSs was to have been an important feature of the project\. Fortnightly training organized by County Group SMSs began in the initial years of the project\. In the absence of certain specialists, the County Groups were backed up by provincial SMSs\. Although SMSs were important supports to the VGTs, shortage of qualified SMSs remained a problem\. Assignment to an SMS position provided neither prestige nor financial advantage for PDA staff\. In the circumstances, being an SMS was not attractive for the underemployed staff\. 5\.12\. Lack of academic specialization and technical background also limited the assignments\. The SMS survey indicated that the limited available pool of those holding bachelors' degrees did not match the current assignment area for 41 % of surveyed SMSs\. The arrangement of Provincial and County Group SMS teams also was problematic\. The double layer of SMS teams had blurred the line of command between the FTE Director and the County Group SMS team\. 5\.13\. Supervision at all levels in the system was limited, in part due to a shortage of vehicles until the end of 1989\. Major reasons for vehicle procurement delays were: i) the Government's "saving instructions" for state procurement; ii) lack of experienced staff; iii) delays in decision- making at MARA\. Even after provision of the vehicles supervision remained insufficient due to limits on vehicle use and operational budget allocations\. At the provincial level, vehicles usually were allocated by the Section of Administrative and Financial Affairs based on demand coming from six technical sections, not just extension\. The FTE section had to compete with other PDA staff for project vehicles and they did not obtain them as frequently as they deemed necessary\. The same problem existed at the county level\. 5\.14\. Performance in extension management varied greatly among provinces\. Differences were in commitment to the project, management ability, and initiative shown by the PDA and FTE\. Provincial variation also stemmed from the frequent high degree of turnover, particularly at  7 managerial levels\. Among sixteen project provinces, only four had the same PDA through all nine years -- in others, changes occurred up to four times\. Because T&V is a management system, establishing a high-quality, viable extension system depends heavily on management by an effective PDA\. After the 1984/85 reorganization, neither GDPD nor GDOS had control over the field staff -- only rarely were poorly-performing PDA Directors replaced\. 5\.15\. The new extension modalities were considered part of a limited, Bank-supported project, not part of a general extension system\. Both IBRD and MARA concentrated more on the hardware side of the project than the software side; communication aspects were left in the background\. At the provincial level T&V was looked upon as a special project that provided inputs (vehicles, buildings, training, etc\.) for the PDA, not a management system or an educational activity\. Although orientation courses were conducted by MARA for central and provincial staff, the desired level of understanding and ownership of the new concepts was not fully achieved\. 5\.16\. The planned Central SMS team that would approach extension based on regional land-use systems was not established; neither was a technical strategy for different agro-ecological zones\. PDAs did not know well enough what technical factors most limited productivity gains for different categories of farmers, viz\., which farmers needed assistance most\. Lacking problem analyses, county and provincial staff were unable to set precise and explicit objectives\. There was also little farmer participation in problem analyses, increasing the risk that advice given to farmers would be irrelevant\. 5\.17\. DP, supported with equipment, technical assistance and staff training, produced good quality audio-visual and mass media aids for the project in its earlier years\. Its focus was diverted from the project later and dialog with project implementation agencies got weaker\. Since mid-1992 DP has been busy with YAYCEP, a cost-effective effort, but not directly related to the project\. 5\.18\. Applied Research: The applied research activities were limited by institutional changes and procurement delays\. The 1984/85 ministerial reorganization fragmented the research, disrupted ongoing research programs and discouraged researchers\. The 1991 reorganization did not adequately correct this situation\. However, the research institutes started monthly training programs for SMSs shortly after project effectiveness, as envisaged during appraisal\. Through the life of the project these were conducted with varying degrees of success\. 5\.19\. The research component also suffered from excessive procurement delays in civil works\. None of the Loan funds for research civil works (research complex in Haymana/Ankara for the Field Crops Research Center, additional research facilities, dormitories and housing) were utilized\. Since the available land for construction was limited by unexpected land allocation problems in Haymana, the plan was modified to enable further development of the Eskisehir Transitional Zone Research Institute\. The tender process for this was started in 1988 but only completed in 1993\. During that period, the decision to initiate construction was delayed several times due to changes at the ministerial level\. One tender was cancelled even though the bid  8 evaluation was complete\. The third tender was approved, but by the end of the project completion date no disbursement had been made\. 5\.20\. Procurement of research equipment was seriously delayed\. Audio-visual equipment was purchased earlier than other goods, with a June 1988 contract award date, July 1990 customs clearance date, and November 1990 distribution\. Contracts for field equipment were awarded in March 1992, cleared customs in September and were distributed in October 1992, eight months before project completion\. The laboratory equipment tender began processing late in 1989 and continued until 1993\. Though bid evaluation was completed at the end of January 1993, contracts were signed 18 months later\. When the contract was approved, time left for payments was limited, so the Bank extended the Loan Closing date for three months\. The contracts were signed and the equipment shipped, but at the date of PCR preparation the equipment has not been made available to the research institutes\. 5\.21\. The project envisaged a team of four extension coordinators to be stationed permanently in research institutes and to act as field trial coordinators and links with the extension effort\. Due to an unclear chain of command, this arrangement was sustained only at Eskisehir\. 5\.22\. Notwithstanding several difficulties, the research institutes produced a number of valuable recommendations\. Multi-disciplinary research yielded, e\.g\., more sustainable rotation systems, soil tillage techniques, environment-friendly pesticide and fertilizer applications, and more efficient uses of water\. On the other hand, research in livestock remained largely unproductive\. This limited message formulation in extension\. Survey data indicated that fewer extension efforts were focused on livestock production (11\.6%) than on crop production (77\.5%)\. 5\.23\. Monitoring and Evaluation: Monitoring focused largely on inputs and outputs and paid insufficient attention to the project's impact and achievement of long-term objectives\. An internal monitoring and evaluation system was established in 1986\. Reporting forms for VGT, county and provincial staff were designed, and training of M&E staff at the provincial level took place\. Data on extension went regularly from the VGTs through the system to the central level, where quarterly reports on problems and progress were produced\. However, the data were less than fully used for management purposes\. 5\.24\. Since M&E traditionally was seen as an instrument of control, there was lack of clarity at the provincial level as to the responsibilities divided between the Sections of Projects/Statistics and Farmer Training and Extension\. M&E was given to Projects/Statistics on the assumption that another unit would be biased\. This approach actually lowered the quality of the data provided and prevented FTE from assessing its own activity\. 5\.25\. Training: The project provided initial orientation programs for staff at all levels\. Starting in 1984, eight different orientation seminars were organized for various implementation levels and counterpart agencies\. There appears to have been too little emphasis on the point that the project was a comprehensive management system\. Training also was needed in communication skills and management to improve communication between central level and provinces\. This was not done\.  9 5\.26\. Training provisions also included in-service and refresher courses and fortnightly training sessions for VGTs (and monthly for SMSs)\. In the project provinces, fortnightly training for VGTs became routine, though 61 % of VGTs surveyed rated its quality as insufficient\. 5\.27\. Training of staff in "training and extension techniques" were organized by GDOS (assisted by consultants) for SMSs, and by trained SMSs for VGTs in the provinces, in initial years of the project (1987-88)\. Given the turnover, these were not enough either to upgrade staff skills of the staff or to maintain the achieved level\. 5\.28\. Many SMSs performed below expectations because of insufficient training in technical requirements and unfamiliarity with farming and cropping systems of their posted area\. During the project years (except for a few attempts) no agency was given clear responsibility to upgrade SMSs' technical knowledge beyond the monthly workshops\. 5\.29\. Training provisions included financing for an extensive program of overseas training: 174 MSc and 510 short-term, including study tours and short-term courses\. The MSc program was implemented from 1986-92 and 91 staff members received degrees from foreign universities\. This program required foreign language proficiency possessed by few staff members, a factor which delayed its start\. GDPD organized language courses in various regions\. After reaching the required TOEFL score the majority of the candidates started their overseas training in 1987 and 1990 (48% and 31%, respectively)\. Areas of training were: crop breeding (27%), agricultural extension (26%), crop agronomy (15%), plant protection (13%), agricultural economics (11 %), information/media (2 %), livestock production (2 %), food technology (2 %), apiculture (1%), and mechanization (1%)\. The majority received training in the U\.K\. (59%) or U\.S\.A\. (40%)\. Average length of training varied from 7 to 32 months -- 83% of trainees spent 15-27 months in their respective universities\. 5\.30\. Short-term courses started in 1987\. During the project 252 person-months were spent by 380 staff members in 26 subjects\. Major areas were crop breeding (16%), monitoring and evaluation (15%), crop agronomy (12%), plant protection (8%), and horticulture (6%)\. No courses were made available in communication or management skills\. 5\.31\. Study tours involved 155 person-months for 204 staff, starting in 1987\. The majority of tours was organized in 1990-91, six years after project effectiveness; 77% of participants went abroad\. Nine percent of the participants were PDA Directors or Deputy Directors, 5% were FTE Directors, 6% were VGTs, and 80% were SMSs\. The tours were for ten days (76%) or two weeks (24%)\. The main recipient countries were the Netherlands (32%), the U\.K\. (23%), France (9%), and Italy (9%)\. 5\.32\. Overseas training programs suffered from lengthy delays -- in part due to slowness of putting training arrangements into place\. Lengthy procedures in candidate selection and processing in MARA added further delay, as did frequent changes in procedures and staff turnover at decision-making levels\. These programs attracted some MARA staff with no relationship to the project\.  10 5\.33\. The training activities were a significant strength of the project and were effective in imparting knowledge\. But problems were encountered in retaining trained staff through the project\. Overseas training provided valuable opportunities for staff, but subsequently they often moved to positions outside the project\. The magnitude of the problem was not quantified although clearly recognized as a substantial issue\. 6\. Project Results and Impact 6\.01\. Achievements in Production: The majority (84%) of the farmers surveyed for the PCR reported yield increases in the last decade\. Yield gains most frequently reported were in wheat (38%), barley (17\.1%), sugar beet (7\.2%), cotton (6\.3%), and milk (5\.9%)\. Seventy-five percent attributed yield increases to new genetic material (high-yield crop varieties developed by research institutes and imported pure or cross bred cattle)\. Seventy percent attributed increases to improved fertilizer application, 52% to improved chemical application, 24% to new equipment, and 18% to various agronomic techniques (improved soil tillage, seeding methods, and irrigation)\. A number of these research innovations were attributable in part to project activities\. There is also some suggestion, although the underlying statistics raise some questions, that the number of beneficiaries covered under the project may have been greater than anticipated in the SAR\. 6\.02\. ImDroved Research-Extension Linkage: The project regularized linkages between: i) researchers and SMSs; and ii) SMSs and VGTs\. Extension and research staff indicated that articulation between research and extension staff increased, but not sufficiently\. Only 15% of SMSs rated the previous extension-research linkage "good\." Most believed extension-research linkage improved with the project; the ratings were 52% "good," 40% "fair," and 8% "poor\." Existing linkage also was evaluated: 35% of researchers found it strengthened, and 59% found it somewhat strengthened, while 6% indicated no difference\. 6\.03\. Improvement in Extension Service: In the farm survey, 66% of the farmers reported that extension services available to them had improved in the last decade\. As sources of technical information useful in their operations, 62% reported friends/relatives, 60% the extension worker, 9\.7% TV, and 5\.2% other agencies (mostly private companies)\. The majority (85%) reported that they were in contact with their extension worker\. 6\.04\. Institutional Support: The project strengthened PDAs, although with substantial delays, by provision of VGTCs, PDA and county offices, vehicles, motorcycles, audio-visual and field equipment, and improvement of technical and, to a lesser extent, language skills through training\. The project also strengthened research institutes, through improvement of research and language skills and long- and short-term training\. It contributed to DP through provision of printing, photography, film and video units, and improvement of skills through training\. The project strengthened GDPD through the established M&E unit and computer network, although the intended use of the available information was not always made clear\.  11 6\.05\. Of planned totals, research institutes received 100% of field equipment, 100% of laboratory equipment, 3\.5% of audio-visual equipment, and 4% of vehicles (28% of large trucks)\. PDAs received 91% of audio-visual equipment and 68% of vehicles (61% of large trucks)\. The Publication Department received 5 % of the audio-visual equipment\. The central ministry got \.4 % of the audio-visual equipment and 1 % of the vehicles\. The rest of the vehicles and trucks were allocated to other research institutes and production stations (14% of vehicles were sent to PDAs outside the project area)\. 6\.06\. Beneficiaries of the training program were distributed as follows: research institutes received 63% of the MSc training opportunities, 68% of the short-term course graduates, and 3% of the study tours; PDAs received 21% of the MSc awards, 14% of the short-term graduates, and 73% of the study tours; the central ministry received 16% of the MSc awards, 11 % of short-term graduates, and 24 % of the study tours; the Publication Department received 2% of the short-term graduates and production stations 5 % of the short-term graduates\. 6\.07\. Actual civil works construction fell substantially short of appraisal targets\. No construction was carried out for the research institutes or Publication Department\. For PDAs, the achievements as percent of planned were 67% for Provincial Directorate offices, 45 % for County Offices, 18% for County staff apartments, and 42% of the VGTCs\. 7\. Project Sustainability 7\.01\. The project provided office and housing facilities and transportation at the village level\. This was envisaged for four diverse agro-ecological regions\. With growing urbanization and improved transportation, the question arises as to the appropriateness of constructing some of the training facilities at village level\. Where extension professionals and training facilities should actually be located should be reviewed\. 7\.02\. Offices and housing constructed were not of expected quality\. Even before the end of the project, maintenance expenditure was a growing demand on limited funds, adding to the issue of financial sustainability\. 7\.03\. The project intended to establish a relatively costly, labor-intensive extension method, requiring adequate operational funds at all levels\. One key to sustainability will be the continuity of sufficient budget allocations from the Government\. Given financial constraints and competing demands on its budget, the Government is likely to find it difficult to carry this financial burden for all regions or all categories of farmer\. To ease the financial burden on Government, efforts should be made to seek cost-efficient alternative approaches, as well as shift some of the burden to farmer beneficiaries\. 7\.04\. Problems were encountered in retaining trained staff through the project\. These problems are likely to continue as long as field-level support and staff motivation remain insufficient\. 7\.05\. Research institute capabilities are declining due to aging of staff and lack of recruitment for nearly a decade\. As long as the MARA moratorium on new staff recruitment remains, sustainability of applied research and MARA effectiveness of research-extension linkages are in jeopardy\.  12 8\. Bank Performance 8\.01\. The Bank's decision to complement the Government's commitment to increase productivity and agricultural incomes through enhancement of extension and research capabilities was appropriate\. However, the Bank's recommendation of uniform design for the four agro- ecological regions was wrong\. Insufficient vision was exercised on the implications for the project of the diverse agricultural and rapidly-changing demographic conditions\. Insufficient attention was given to the need to have demand-driven, beneficiary-accountable, extension services in which users also assumed some responsibility for supporting extension\. 8\.02\. The momentum the Bank displayed during preparation was not maintained through implementation\. It was envisaged that above-average supervision coefficients would be needed due to the complexity and large geographical coverage of the project\. In fact, no additional supervision resources were made available and allocations were below average in 1986, 1987, 1988, and 1990\. The "software side" of the project was not thoroughly supervised\. Of fifteen supervision missions, only six had an extension specialist and only one had a communication specialist\. 8\.03\. When the Government reorganized MARA, the Bank failed to adequately recognize the need to accommodate the new organizational realities\. One result was that significant coordination problems hampered project implementation throughout the life of the project\. 8\.04\. Through periodic supervision missions, the Bank was informed of shortcomings in project implementation\. Resolution of key problems, was left to the fulfillment of Government but frequently inadequate action was taken on solutions suggested by the Bank or consultants\. Frequent changes in Task Managers within the Bank further aggravated this problem\. 8\.05\. Two major findings of the Bank's mid-term review in 1987 were organizational weaknesses in project implementation and construction delays\. These problems remained when project extensions were discussed in 1990, 1991, and 1993\. In negotiations on project extension, the Bank stressed construction delays, with too little attention paid to organizational weaknesses\. 8\.06\. The Bank strongly supported the project during the Gulf Crisis by deciding (pursuant to a policy designed to assist borrowers affected by the Crisis) in 1991 to increase temporarily its share of funding of project costs\. In 1992, on the request of the Turkish Treasury, the Bank agreed to extend the increase in disbursement percentages through 1993\. 9\. IFAD Performnance\. 9\.01\. IFAD, which also administered the Swiss Grant, helped ensure the utilization of available financing from IFAD and the Swiss Grant in an effective and timely manner\. The contribution of the Swiss Government through a grant toward local costs (originally to be met from Turkish Government sources) helped meet critical financing needs for the project\. The opening of a Special Account for the Swiss Grant was delayed and reduced in effectiveness due to the complex accounting system of the Turkish Government\. Representatives from IFAD, which helped finance project activities in Southeastern Anatolia, participated in only about a quarter of the supervision missions\.  13 10\. Borrower Performnance 10\.01\. In MARA, commitment to the objectives and design of the project was uneven through the implementation period\. Strong initial ownership of the project was diluted with ministerial reorganization and different priorities of new decision-makers in MARA\. 10\.02\. After the 1984/85 reorganization of MARA the implementing units were spread to several general directorates\. Separation of DE from the main implementing agency had a negative effect on implementation\. MARA did not adequately adapt the project to organizational changes to ensure timely implementation\. The 1991 reorganization did not correct the problem\. 10\.03\. MARA did not respond fully to an issue that was raised by almost every mission for the nine years of the project -- to provide adequate full-time staff for project management\. 10\.04\. Counterpart budgetary funds were neither sufficient nor prompt enough for smooth and timely implementation\. Even when the Bank increased the disbursement percentages to 80% in 1991-93, the full complement of needed local resources was not provided\. 10\.05\. MARA support of the VGTs, many of which faced serious logistical and technical support issues, was frequently inadequate\. Few incentives were provided for those who were the "critical cutting edge" of the Government's extension effort in the villages\. 11\. Project Relationships 11\.01\. The relationship between the Bank and the Borrower was satisfactory, with both sides working to seek solutions to implementation problems\. 12\. Consulting Services 12\.01\. There were considerable delays in recruitment of consultants: 27% were recruited by the end of 1985 and 73% in early or mid-1986\. Further time was needed to visit the provinces and familiarize themselves with field conditions\. Some failed to do so at all and contributed very little to the project\. Others spent a good deal of productive time in the field situation\. Although they might have been employed better in a course-planning role and\.in training of trainers, the contribution of some consultants as trainers was invaluable, given the limited technical background of some extension staff\. 12\.02\. Reports prepared by the consultants were too often poorly utilized\. Some were not translated; some were not thoroughly circulated and used with full effect by MARA and too often remained "on the shelf"\. The training contractor, because of slowness in planning and implementing overseas training programs, contributed to lengthy delays in training activities\. 13\. Project Documentation and Data 13\.01\. The original and amended Loan Agreements were understood well by all parties concerned\. The Staff Appraisal Report and the Project Implementation File were useful tools to project management\. The operational files of MARA were satisfactory for preparation of the  14 PCR\. In spite of significant changes affecting the project and the responsibility diffused among various units, the filing of the relevant information was adequate\. The Audit Reports prepared by the Borrower usually were delayed and sometimes lacked annexes or audit statements for the Special Account\. The Resident Mission did not routinely receive all project documentation and was therefore handicapped in its oversight and supporting role\. 14\. Lessons Learned 14\.01\. The project provided several important lessons: i) In designing projects, diversity of circumstances among beneficiaries must be considered; blanket prescriptions do not work\. ii) Implementing agencies must be involved more in project preparation\. This will provide for more realism and facilitate timely implementation\. iii) For diversified time- and agro-ecologically-specific services such as extension, strong and timely accountability and responsibility linkages to users must be in place\. Supervision related to "government norms" is not enough to ensure relevant and responsive extension services to farmers\. iv) Staff need to be thoroughly familiarized in advance with project objectives and the proposed system and convinced of its advantages over the system in place\. v) Correct phasing and synchronizing of project activities are essential to success\. vi) When project implementation involves complementary input from several units, a strong coordinating body must be established and maintained\. vii) Coordinating committee members must be selected on the basis of the specific contribution each can make, not simply as members of a concerned agency\. viii) In complex projects the Bank's supervision coefficients have to be above-average\. ix) A viable M&E system must provide timely, useful information and must be seen as a tool to improve performance, rather than as a means of control\.  15 PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE 1\. Introduction: 1\.01\. The agricultural sector has a great responsibility in the country since the national economy is based mainly on agriculture and agro-industry\. In order to meet the food needs of the population which increases average 2 % per year according to the last census, to provide the necessary foreign currency for the importation of the raw material and the goods of the other sectors need and to create employment possibility to the increasing manpower are expected from agriculture\. In order to be able to meet these expectations, it is necessary to utilize the existing arable land that reached to the limit, in the most economic and efficient way\. 1\.02\. It is essential to develop extension and research services to enhance agricultural development, to strengthen research extension linkage as well as to increase the use of inputs such as chemicals, seed and seedlings fertilizers, which are the basic elements of the agricultural development to augment the contribution of the agricultural sector to the economy of the country\. In the previous years transfer of the new technologies to farmers could not be realized at a desired level due to weak research-extension linkage\. 1\.03\. For this reason, to transfer the technological saving of the research institutions to farmers with the shortest way, First Agricultural Extension and Applied Research Project has been prepared as a knowledge flow system\. 2\. Performance of the World Bank: 2\.01\. The value increase of US Dollar was unpredictable during project preparation and the implementation\. 1 US$ was equal to TL 270 in the project preparation period and it increased up to TL 12980 in June, 1993 which was the closing date of the project\. This increase of dollar could not be estimated at any stage of the project\. 2\.02\. During the project implementation, relations with the World Bank was the Ministry and the Bank worked in close cooperation\. The Bank missions visited the project areas together with the ministry staff to supervise implementation twice a year and did their best to solve the problems met until from the initiation of the project to the opening of the World Bank office in Ankara\. 2\.03\. With the opening of the Resident Mission, the relationship between the Bank and the Ministry was more frequent and easier\. This, provided a comfort in terms of communication and reaching a mutual conclusion for application in a short time\. The positive approach of the Bank Missions during the supervision particularly in the last two years made useful contribution to the project implementation\.  16 2\.04\. Various equipment and vehicles were imported to meet the infrastructure needs of the project\. According to the Loan Agreement the Ministry of Agriculture and Rural Affairs would pay tax, stamp and fees due to the importation\. However, these payments reached to the internal source level due to the increase in dollar, especially during the last years\. 2\.05\. It was envisaged to form a "Central Project Management Unit" which would be responsible for the implementation of the Bank Projects\. However, when the administrative body and the existing facilities of the Ministry are taken into account, it could not be possible to establish such unit and appoint additional staff there\. 2\.06\. To lay pre-conditions by the World Bank during implementation had a negative impact on project implementation\. For example, the construction of a given number of VGTC's in a given period has been delayed\. 3\. Performance of the Ministry of Agriculture and Rural Affairs: 3\.01\. With the initiation of the project implementation most of the services envisaged had been realized during the project period\. Central Coordination Committee, Central Executive Committee, Regional Coordination Committees have been established and continued their activities and met regularly during the project time and the project institutions were directed through these committees\. All the procurement envisaged in the framework of the project had bought\. Most of the overseas training and the civil works were realized\. (See Annex - I)\. 3\.02\. Nine international consultants were employed on various topics for a total 127 man/month period\. Printed material and the videos related to the project had been prepared and distributed to the institutions\. During the project period monitoring and evaluation activities have been carried out and the problems met and the efficiency of the project have been followed in every stage end for every component of the project\. 3\.03\. Following the initiation of the project in late 1984, a major reorganization changed central and provincial body of the Ministry in 1985\. Since the project was designed for the General Directorate of Agricultural Affairs, the reorganization caused difficulties in implementation\. As a result of reorganization, the Department of Extension was transferred to a different General Directorate and the linkage with the project was weakened\. 3\.04\. Although a strong cooperation and linkage were needed to implement the project, the fragmentation caused by the reorganization made it very difficult\. Problems arisen particularly in the areas of personnel planning, budgeting, research and extension management\. 3\.05\. Human resources were a crucial factor in the project\. However, the needed personnel could not be provided in terms of both quality and quantity as it was foreseen in the project\. Even if the regulation of the Ministry on appointment and transfer applies seriously, the personnel need of the project can meet partially\. However, the lack of personnel in the same provinces reached a critical stage\.  17 3\.06\. The personnel matters are handled by the General Directorate of Personnel (GDP)\. The political interference in the assignment and transfer of provincial staff caused important problems in the provinces\. The General Directorate of Personnel does not ask the views of the central units which are responsible for the implementation\. In this respect the personnel planning could not be realized according to the needs and the targets of the project\. 3\.07\. The project aimed to give training to the project staff both at in-service and academic level\. Some of the trained staff have appointed to the places out of the project area\. 3\.08\. Master degree program envisaged in the project had been delayed because the foreign language level of the candidates could not meet the requirements of the universities abroad\. Most of the candidates started to take foreign language course from the beginning level and the six months course was not enough to improve their foreign language level\. They needed further foreign language training\. Especially, when the foreign language courses of the candidates needed to take abroad, the evaluation of the period for master studies could not be realized accordingly\. 3\.09\. Another problem concerning training was the high ratio of the beneficiaries who were not involved in the project activities\. This situation demoralized the project staff\. In connection with this, more problems emerged in the implementation of the project\. 3\.10\. Foreign exchange use depends on the internal budget allocations\. First, the funds needed for the project activities period for master studies could not be realized accordingly\. 3\. 11\. Another problem concerning training was the high ratio of the beneficiaries who were not involved in the project activities\. This situation demoralized the project staff\. In connection with this, more problems emerged in the implementation of the project\. 3\.12\. Foreign exchange use depends on the internal budget allocations\. First, the funds needed for the project activities are provided from the internal budget than the same amount is requested from the corresponding categories of the Loan\. Each year, during the preparation of the annual budget the allocations used to be escalated based on the currency changes\. However, since 1989 annual budget allocations for the project continuously decreased\. 3\.13\. Since the intemal budgetary funds were insufficient, planned investments were not realized\. This, resulted in low disbursements rates and payment of commitment fees\. The delays due to limited funds were particularly significant in the civil works component\. The VGTC construction program could not be realized because of high costs resulted from high inflation\. Tax, duty and fees for the important goods were not paid due to insufficiency of funds, later with the storage costs and penalties the amount reached to 80% of the costs of goods\.  18 3\.14\. The project activities had been severely affected due to insufficient local counterpart funds provided by the Undersecretariat of Treasury and Foreign Trade and the State Planning Organization\. Besides, to meet the expenses such as fees and duties in importation and to be able to underline the construction work, an emphasis was placed on category 700 (for construction) and category 800 (for tax and fees)\. This application caused a limited allocation for the other services\. FUNDS PLANNING OF TYUAP II (Million TL) First Second Third Fourth Fifth Sixth Seventh Year Year Year Year Year Year Year 1985 1986 1987 1988 1989 1990 1991 Amount of the 11\.194 22\.182 32\.767 28\.508 20\.763 34\.053 - internal purposed with the project Amount of the 8\.60 8\.150 12\.300 16\.00 34\.800 33\.153 23\.500 internal source allocated in the application _ _ _ _== Funds allocated for 1992: 37\.073 Funds allocated for 1993: 64\.158 1 US$: TL 585 in 1985, TL 767 in 1986, TL 1033 in 1987, TL 1399 in 1988, TL 1800 in 1989, TL 2956 in 1990, TL 2604 in 1991, TL 4082 in 1992, TL 6820 in 1993 (according to SPO data)\. 3\.15\. During project years 641 VGTC's were constructed and together with the 235 VGTC's constructed before the project, the number of VGTC's reached to 876\. The World Bank stipulated the construction of a minimum of 200 VGTC's to extend the project\. Later, as a result of series of discussions flexibility was provided\. Due to insufficient budget allocation and incomplete procedures for transferring required amounts into the budget of General Directorates of Rural Services (GDRS), problems arisen in the implementation of 1992 civil works program\. 3\.16\. Construction of 331 VGTC was planned in 1992 program to use IIAD and IBRD Loans\. It has been planned to meet 20% of the construction costs from the internal budget and 80% from IBRD pass limited budget possibilities\. The construction tender document had prepared by reaching an agreement with the World Bank and forwarded to the GDRS in the attachment of 1992 construction program\.  19 3\.17\. However, the GDRS had been stated that the amount of the tender to be hold would be as much as the funds amount in the intemal source\. The reasons are shown below; - difficulty and delay transferring the allocation in the GDRS's investment budget of 1992 to supplementary budget, - delay in the transfer 80% of the amount to be met from the credit to their budget, - difficulty in the payments of contractors, - delay in the tender according to the World Bank methods due to some processes such as permission of the Court of Account and the Finance\. The construction program had been revised according to the amount of the intemal source and the tender had been hold, but the tender was cancelled by the Ministry\. 3\.18\. The construction project and the tender documents for the construction of Eskisehir Research Complex were prepared by a consulting firm and the tender was opened\. It has been envisaged to fund 75 % of the costs by IBRD and 25% by the government but, the tender amounting TL 48 billion was cancelled by the Ministry\. Later, an agreement was reached with the World Bank to hold the tender again\. The necessary changes have been done and the tender was hold again\. The necessary changes have been done and the tender was opened again\. However, the formalities were not completed to fund the construction under the project\. Therefore, the Loan was not utilized for this purpose\. An agreement was reached with the Bank to fund the complex under the Loan 3177-TU\. 3\.19\. Procurement of goods was done through international bidding under the project\. According to the Loan Agreement, the payment concerning tax, duties and fees would be paid by the Turkish Government\. Customs clearance of the goods was delayed because of the lengthy procedures\. Besides, the payments to be made reached high levels\. 3\.20\. For this reason, it would be useful to exempt tax, duties importation fees from the prices in respect of carrying out the services rapidly\. TUGEM which is the responsible agency for the application of the project, attempted several times to solve this matter but failed\. 4\. Lessons Learned 4\.01\. Some progress was recorded in research-extension linkage\. It was determined that during the implementation period, not only managers, all technical staff contacted each other, discussed the issues at different platforms and searched solutions\. In previous years, the research-extension linkage was very poor, even in the same province there was almost no contact between research and extension staff\. Today the activities in Aegean and the Marmara region have been continued at more advanced level than envisaged during appraisal particularly in terms of research-extension linkage\. Not only the institutions which were involved in the project also the universities in the region, other provinces and research institutions work in close cooperation\.  20 Table 1 PART m: STATISTICAL INFORMATION Related Bank Loans Project Loan/Credit Amount Status No (US$M) Seyhan Irrigation I Loan 63-TU 25\.2 Completed Seyhan Irrigation I Credit 38-TU 20\.0 Completed Seyhan Irrigation III Credit 143-TU 12\.0 Completed Seyhan Irrigation II Loan 587-TU 12\.0 Completed Fresh Fruit & Vegetable Export Loan 762-TU 10\.0 Completed Fresh Fruit & Vegetable Export Credit 257-TU 15\.0 Completed Irrigation Rehabilitation Completion Credit 281-TU 18\.0 Completed Ceyhan Aslantas Multipurpose Credit 883-TU 44\.0 Completed Ceyhan Aslantas Multipurpose Credit-360-TU 30\.0 Completed Corum-Cankiri Rural Development Loan 1130-TU 75\.0 Completed Second Fruit and Vegetables Loan 1967-TU 40\.0 Completed Erzurum Rural Development Loan 2094-TU 40\.0 Completed Second Extension and Applied Research Loan 3177-TU 63\.0 On-going Agricultural Research Loan 3472-TU 55\.0 On-going Eastern Anatolia Watershed Rehabilitation Loan 3567-TU 77\.0 On-going  21 Table 2 Project Timetable Activity Date Planned Revised Date Actual Date Identification June 1980 Preparation (Interim) Sep 1982 Preparation (Final) Mar/Apr, 1983 Pre-Appraisal May/Jun, 1983 Appraisal June 6, 1984 Negotiations Feb 21, 1984 Board Approval Apr 17, 1984 Loan Signature Apr 25, 1984 Loan Effectiveness Jul 25, 1984 Sep 5, 1984 Project Completion Dec 31, 1990 Jun 30, 1991 Jun 30, 1992 Jun 30, 1993 Jun 30, 1993 Loan Closing Mar 31, 1990 Oct 31, 1993  22 Table 3 Cumulative Estimated and Actual Loan Disbursements As of Dec 31, 1994 IBRD IFAD4 TOTAL Appraisal Estimate (US$ Million)2 72\.00 10\.00 82\.00 Actual Disbursements (USS million)3 61\.90 6\.60 68\.50 Actual as % of Appraisal Estimate 85\.97 66 83\.53 Date of Final Disbursement April 25, 1994 - 61\.98 2/ Per SAR and Loan Agreements\. I/ Per WB disbursement records\. 4/ IFAD Loan Closing Date was extended to June 30, 1994/  23 Table 4\.Project Implementation Table 4 Indicator Appraisal Actual or | Actual as % of Estimate PCR Estimate SAR Estimate Civil Works (m2) 327 022 93 541 29 Research 25 596 _ _ Extension 301 426 93 541 31 Vehicles (unit) 2 661 1 705 64 Equipment (no of items) Field (for research) 57 78 137 Laboratory (for research) 96 139 145 Documentation/information equipment (for research 112 122 109 and extention) Animal/Plant material (no 2775 700 25 of items) Training Msc (numbers) 174 91 52 Shortterm (personmonths) 510 407 80 Consulting services 110 127 115 (personmionths)  Table 5A Project Costs and Financing A\. Project Costs (US$M equivalent) Appraisal Estimate Actual Component Local Cost Forex Cost Total Local Cost Forex Cost Total Extension in service 85\.5 42\.0 127\.5 76\.9 39\.1 116\.0 Ext\. Information cent 2\.0 2\.4 4\.4 0\.3 0\.8 1\.1 Applied research 9\.1 10\.8 19\.9 14\.6 16\.1 30\.7 Pro\. Management m&e 0\.8 0\.3 1\.1 2\.0 0\.8 2\.8 Training 0\.4 11\.3 11\.7 0\.0 9\.3 9\.3 Technical assistance 0\.2 1\.5 1\.7 0\.6 2\.2 2\.8 Physical contingen\. 5\.7 1\.4 7\.1 Price contingen\. 20\.0 12\.3 32\.3 Sub-total 123\.7 82\.0 205\.7 Project end fee 0\.0 0\.2 0\.2 0\.0 0\.2 0\.2 Grand total 123\.7 82\.2 205\.9 94\.4 68\.5 162\.9  Table 5B B\. Project Financing (US$ equivalent) Planned Revised Actual 1BRD SRD IfAD TOTAL IBRO IFAD TOTAL IBRO IFAD TOTAL 1\. (a) Civil works and furn\. for extension offices in Southeastern Anatolia 2 200 000 2,200,000 3 110 000 3 110 000 805 305 805 305 (b) Construction of information center and new research buildings/facilities/ext\. buildings housing 11 700 000 - 11 700 000 11 112 000 5 703 202 - 5 703 202 2\. Vehicles 11 440 000 1 560 000 13 000 000 11 535 000 1 560 000 11 581 214 1 569 920 3\. Equipment and Books 4 900 000 - 4 900 000 13 954 000 - 12 770 780 - 4\. Overseas Training 10 120 000 1 380 000 11 500 000 7 575 000 1 380 000 8 173 493 1 114 353 S\. Consultant Services 1 470 000 - 1 470 000 2 119 000 - 2 233 563 - 6\. Incremental Operating Costs 17 820 000 2 430 000 20 250 000 21 321 500 2 360 000 21 321 079 2 857 504 7\. Initial deposit to Special Account for categories la, lb, 6 4 400 0001 600 000 5 000 000 4 400 000 600 000 2 998 990 255 470 8\. Fee 180 o50 180 050 180 050 \. 180 050 - 9\. Unallocated 10 169 950 1 830 000 11 999 950 3 450 990 000 \. TOTAL 72 200 000 10 000 000 82 200 000 72 200 000 10 000 000 61 966 379 6 602 552 Source: SAR, World Bank disbursement records, Government records  26 Table 6A Project Results A\. Direct Benefits AppraisaL Estimate PCR Estimate/Actual Total Number of Beneficiariesl 253,000 353,000 Incremental Enptoyment (Jobs 1,500 N/A Wheat YieLds' (kg/ha) 2,010 2,191 1 The undreliable nature of the underLying statistics raise questions about the comparability of these figures\. 2 Are\.yieLds 1982/84 and 1990/91  27 Table 7 Page 1 of 2 Status of Conai ts i _____________________ Subject Status 1\.Section 3\.02\. (b) Open & maintain at T\.C\. Merkez Bankasi a Bank Special CompLied and a Furd Special Account in accordance with Schedules 6 & 7 2\.Section 4\.01 (a) Carry out project with due diligence and efficiency Partially complied, difficulties mainly to l ____________________ budgetary constraints 3\.Section 4\.01 (b) EstabLish and maintain PartiaLLy complied, CCC exists (i) a CentraL Coordination committee, a Central but not effective 4 RC exist Executive Committee, four RegionaL Committees and but not effective additionaL Project Acdninistration Unit staff recruited lii) recruit and assign additional staff 4\.Section 4\.02 GDAA to enter and maintain protocoLs with CompLied (1) the agr\. facuLties at the Universities of Ankara, Izmir, and Adana to assist in training of Provincial Extension staff (2) TURDOK, FRT and TRT to assist with EIC 5\.Section 4\.03 (a) employ an organization for the administration of Complied the overseas training program; (b) employ consuLtants satisfactory to the Bank 6\.Section 4\.04 Issue revised job descriptions for all Provincial Complied, but late Extension staff in the project area by September 30, 1984 7\.Section 4\.05 (a) Insure imported goods against hazards incident Complied 8\.Section 4\.05 (b) Use Bank and Fund Loans excLusiveLy for project PartiaLly complied, vehicle purposes allocation not always exclusively for project use\. 9\.Section 4\.06 (a) Furnish the Bank promptLy with pLans, specifications, PartiaLLy complied, Late, for reports, contract documents and construction and vehicles, equipment and civil procurement schedules for the project works: procurement deLays 10\.Section 4\.06 (b) GDAA shall (i) record and monitor project progress (costs and Partially complied benefits) (ii) enable Bank/Fund representatives to visit the CompLied project (iii) prepare for each semester progress and Complied evaluation reports (iv) furnish at regular intervals information PartiaLly complied, costs and concerning the project, its cost, benefits, benefits missing expenditures financed by the Bank/Fund loans (v) furnish prior to the end of the 2nd year of Not available project execution terms of reference for mid-term review (vi) carry out mid-term review during third year but Partially complied, 1988; not later than March 31, 1987 delays in start-up 11\.Section 4\.06 (c) Prepare a Project Completion Report not later than Open six months after the closing date  28 12\.Section 4\.07 Acquire rights in respect of Land for carrying out Complied project 13\.Section 4\.08 (a) Furnish a draft Annual Work Program not later than PartiaLLy compLied, Late, September 15 of each year for the foLlowing year mechanicaL exercise Revise said draft AnnuaL Work Program and inform Partially complied, unforeseen 14\.Section 4\.08 (b) Bank/Fund of budgetary allocations budget shortfalls impeded implementation of plans 15\.Section 4\.09 (a) Establish and maintain ministerial working groups to Not complied, due to deveLop inter alia the reorganization and ministerial reorganization consolidation of the extension and research services 16\.Section 4\.09 (b) Discuss the findings and recommendations of said Not complied, due to ministerial working not later than June 30, 1986 ministerial reorganization 17\.Section 5\.02 (a) Maintain separate accounts and records by Complied participating institutions to reflect operations, resources and expenditures to be submitted within two months after the end of each semester 18\.Section 5\.02 (b) (i) Maintain separate accounts reflecting aLl CompLied expenditures on accounts (ii) Retain untiL one year after closing date aLl Open records (iii) Enable Bank/Fund representative to examine such Complied records 19\.Section 5\.02 (c) ti) Have the separate accounts mentioned under Complied, sometimes late 5\.02 (a) audited each fiscal year by independent auditors (ii) Furnish a certified copy of the audit in English Complied, sometimes Late not later than 9 months after the end of each fiscal year incLuding a separate opinion in respect of the expenditures and records mentioned under 5\.02 (b) 20\.Section 5\.03 (a) Maintain and renew buildings, equipment and machinery Partially complied, building maintenance poor budget problems 21\.Section 5\.03 (b) Maintain in the project area for at Least ten years Open following compLetion of the project the extension and research systems introduced under the project and provide the necessary funds, facilities and services for that purpose 22\.Section 5\.04 Take all measures necessary to ensure availability to Partially complied, farmers in the project area of a) credit facilities availability of seeds and and b) agricultural inputs credit 23\.Section 7\.01 Conditions of Loan effectiveness: (a) Fund loan agreement authorized or ratified and Complied the Fund has appointed the Bank as Cooperating Institution (b) Bank/Fund Special Accounts opened CompLied, but not functioning (c) Administrative entities under 4\.01 (b) have been Complied established (d) Protocols referred under 4\.02 signed Complied (e) Ministerial working groups 94\.09) established Not complied 24\.Section 7\.02 Additional matters to be included in the opinion to Cooplied but not functioning be furnished to the Bank (a) estabLishment of the Central Coordination Committee, the Central Executive Coffnittee, the 4 regionaL committees and the Project Administration Unit (4\.01(b)) as administrative entities (b) protocols (4\.02) signed, delivered and ratified ource: Loan Agreements, supervision Reports and GL)PU  29 Table 8A Use of Bank Resources: A\. Staff Inputs (staff weeks) PREP\. & APPR\. NEGOT\. SPN PCR TOTAL PREAPPR\. FY82 2\.7 2\.7 FY83 51\.3 23\.6 74\.9 FY84 47\.6 7\.1 1\.5 56\.2 FY85 10\.3 10\.3 FY86 28\.0 28\.0 FY87 24\.9 24\.9 FY88 35\.2 35\.2 FY89 23\.8 23\.8 FY90 17\.9 17\.9 FY91 14\.6 14\.6 FY92 8\.3 8\.3 FY93 10\.2 10\.2 FY94 5\.0 5\.0 TOTAL 54\.0 71\.2 7\.1 174\.7 5\.0 312\.0  Table 8B Use of Bank Resources B\. Staff Input and Mission Data Stage of Sent by Month/Year No\. of Period in Specialization Performance Types of Project Cycle Persons Field Represented Rating Problems (week) || Identification FAOCP Aug 9-Sep 5, 82 2 4 E/EX * Preparation WB Dec 18-22, 82 1 1 E * Preparation WB Cons\. Jan 15-27, 83 1 2 EX * Preparation WB Mar 1-22, 83 4 3 E/AE/EX/L * Mar 31-Apr 8, 83 Preparation WB May 23-Jun 5, 83 8 3 A/E/AE/EX/ * Appraisal 1/ WE Jun 6-21, 83 8 3 L/AR/C * Supervision WB Sep 17-29, 84 2 2 A/AR * Supervision FAO Feb 19-22, 84 1 5 C * Supervision WB Apr 14-27, 85 1 2 A 2 2/4 Supervision WB Oct 20-Nov 2, 85 1 2 A 2 4 Supervision WB Jun 15-Jul 7, 86 3 3 A/P 2 7 O Supervision WB Jun 1-Jul 9, 87 2/ 10 5\.5 A/L/AR/H/E/EX 3 2/3 Supervision WB Jun 6-29, 88 3 3 A/EX/AR 3 2/3/8 Supervision WB Feb 27-Mar 3, 89 1 1 A * Supervision WB May 29-Jun 21, 89 6 3\.5 P/EX/E 2 2/4 Supervision WB Jun 11-29, 90 5 3 AE/P/EX/A/F 4/5 Supervision WB Apr 1-11, 91 2 2 A/P * Supervision WB Jun 4-21, 91 2 2 P/EX * Supervision WB Jan 27-Feb 14, 92 4 3 E/A/ZX 2 2/3/5/6 Supervision WE Nov 5-16, 92 3 2 E/A/AE 2 3/4/5 Supervision WE Apr 26-May 6, 93 2 2 A/A 2 2/3/4 1/ Preappraisal-cum-appraisal, 2/ mid-term review mission * 590 not prepared or not in files Tyve of vroblems: 2\. project management performance, 3\. availability of funds, 4\. procurement progress, 5\. training, 6\. TA progress, 7\. disbursement, 8\. development impact A\. Agriculturalist, AR\. Architect, E\. Agricultural Economist, E\. Economist, C\. Communications Specialist, F\. Forestry, Specialist, H\. Human Resources Specialist, L\. Livestock Specialist, EX\. Ext\. Specialist

APPROVAL

P143819

 INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No\.: Date ISDS Prepared/Updated: 29-May-2013 I\. BASIC INFORMATION 1\. Basic Project Data Country: Republic of Yemen Project ID: P143819 Project Name: Household Budget Survey Task Team Leader: Umar Serajuddin Estimated Appraisal Date: February 28, 2013 Estimated Board Date (date June 25, 2013 of first GFR Approval): Managing Unit: MNSPR Lending Instrument: Multi-Donor Trust Fund for Yemen Sector: General Public Administration Themes: Poverty strategy, analysis and monitoring Economic Management Social protection and risk management Financing (in USD Million) Financing Source Amount Borrower 1\.1 International Bank for Reconstruction and Development/Multi-Donor Trust Fund for 2\.6 Yemen KfW 0\.4 World Bank Trust Fund for Statistical Capacity Building 0\.2 Total 4\.3 Environmental Category: C - Not Required Is this a Repeater project? No 2\. Project Objectives The Project Development Objective is to fill the knowledge gap in Yemen on social and economic indicators and poverty by developing and implementing the next round of the Household Budget Survey (HBS)\. This will be achieved through supporting the Central Statistical Organization (CSO) of Yemen in survey design, sampling, enumeration, and data entry and processing\. 3\. Project Description The purpose of the task is to support the Central Statistical Organization (CSO) in Yemen in successfully carrying out the different components of the HBS (which receives financing from a Multi Donor Trust Fund managed by the World Bank)\. The CSO would need to (i) to revise and finalize the household and community questionnaires (in Arabic and in English); (ii) pilot test the questionnaires; (iii) hire and train the field supervisors and enumerators; (iv) undertake a listing operation (census of households in selected enumeration areas); (vi) plan, implement and supervise the field work; (vii) develop the data entry program for the survey and arrange for data cleaning and entry; and (viii) produce datasets and final documentation including a statistical abstract of the data\. The survey will carry out structured face-to-face interviews\. A main focus of the survey is on expenditures (consumption) and incomes of households\. The survey will also collect information on many dimensions of well-being, sources of livelihood, access to services, participation in the labor market, gender issues\. As such, it is an integrated household survey with multiple purposes and uses\. The new HBS questionnaire will be adapted to integrate comments received from various stakeholders, including government agencies, donors and NGOs\. The questionnaire will have sections on: (i) household roster and dwelling conditions; (ii) health and education; (iii) economic activities; (iv) migration and remittances; (v) consumption and expenditures; (vi) income; (vii) durable goods and loans; (viii) social assistance; (ix) gender; (x) subjective questions on wellbeing\. A separate community questionnaire will collect community level information\. Several key innovations on survey implementation have already been decided upon to improve survey quality and reliability, and to account for the prevailing security related uncertainties\. - The CSO has agreed to integrate computer-based quality controls to field work\. Data entry specialists will accompany survey enumerators in the field, enter the data daily, and apply consistency controls on a household–by-household basis so that errors and inconsistencies are solved by means of eventual re-visits to the households\. The quality-assured databases will be transferred to survey headquarters bi-weekly (or more often)\. This will have a significant impact on the quality of data because errors and inconsistencies will be corrected while the interviewers are still in the field\. The fast transfer of data also gives the survey managers the ability to effectively monitor field operations\. - The CSO is optimistic of accessing all parts of Yemen as its survey enumerators are local\. However, given the prevailing and unpredictable security situation in Yemen, the CSO will have to adopt a survey implementation approach which allows for temporary and localized disruptions\. The CSO will coordinate closely with international survey and sampling experts who have experience in dealing with such replacements in fragile contexts\. - The CSO will simplify the administration of the consumption module (by shortening the data collection period from four weeks to two weeks), which will make the survey easier to administer and is expected to improve the quality of consumption data, which is central to creating poverty statistics\. 4\. Project location and salient physical characteristics relevant to the safeguard analysis (if known) Not applicable 5\. Environmental and Social Safeguards Specialists on the Team - not applicable 6\.Safeguard Policies Triggerred? Explanation (Optional) Environmental Assessment OP/BP 4\.01 No The proposed Project is rated Category C for environmental purposes\. Natural Habitats OP/BP 4\.04 No Forests OP/BP 4\.36 No Pest Management OP 4\.09 No Physical Cultural Resources OP/BP 4\.11 No Indigenous Peoples OP/BP 4\.10 No Involuntary Resettlement OP/BP 4\.12 No The Project does not involve any physical structure or construction, there is no restriction or acquisition of land planned in the Project’s activities\. No new buildings are to be constructed\. Therefore, the project is rated C and will not trigger the OP 4\.12 Safety of Dams OP/BP 4\.37 No Projects on International Waterways OP/BP 7\.50 No Projects in Disputed Areas OP/BP 7\.60 No II\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The Project will assist the CSO to carry out surveys, including provision of technical assistance in survey design and implementation\. As such, there are no safeguard issues associated with the Project\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Not applicable 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. Not applicable 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. Not applicable 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. Not applicable B\. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Was the document disclosed prior to appraisal? NA Date of receipt by the Bank NA Date of "in-country" disclosure NA Date of submission to InfoShop NA For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: The Project is Category C - Disclosure to Infoshop only\. C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes [ ] No [ X ] NA ] The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Yes [ ] No [ ] NA [ X ] Have relevant documents been disclosed in-country in a public place in a form and Yes [ ] No [ ] NA [ X ] language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared Yes [ ] No [ ] NA [X ] for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Yes [ ] No [ ] NA [X ] Does the Monitoring and Evaluation system of the project include the monitoring of Yes [ ] No [ ] NA [ X ] safeguard impacts and measures related to safeguard policies?  Have satisfactory implementation arrangements been agreed with the borrower and the Yes [ ] No [ ] NA [ X ] same been adequately reflected in the project legal documents? III\. APPROVALS Task Team Leader: Name: Umar Serajuddin Approved By: Regional Safeguards Coordinator: Name: Not applicable – Project is Transferred to Date: Not applicable Task Team Sector Manager: Name: Bernard Funck Date: June 14, 2013

APPROVAL

P003764

Report No\. 1534b-IND FILE C Indonesia Appraisal of a Second Population Project Annexes 1, 2, 3, 4 and 13 May 31, 1977 Population Projects Department FOR OFFICIAL USE ONLY U Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENT US$1 = Rupiahs (Rp) 415 Rp 1 = US$0\.002 Rp 1,000,000 = US$2,410 Government of Indonesia Fiscal Year: April 1 to March 31 ABBREVIATIONS ABRI = Armed Forces of the Republic of Indonesia ANM = Auxiliary Nurse Midwife BAPPENAS = National Development and Planning Agency GOI = Government of Indonesia IPPA = Indonesia Planned Parenthood Association IPPF = International Planned Parenthood Federation TUD = Intra Uterine Device KAP = Knowledge, Attitude and Practice LEKNAS = Indonesian Institute of Sciences MCH/FP = Maternal and Child Health/Family Planning MOH = Ministry of Health NFPCB = National Family Planning Coordinating Board PKK = Community Health Nurse PTC = Provincial Training Centre STC = Sub-provincial Training Centre TFR = Total Fertility Rate UNESCO = United Nations Education, Scientific and Cultural Organization UNFPA = United Nations Fund for Population Activities UNICEF = United Nations Children's Fund USAID = United States Agency for International Development VCDC = Village Contraceptive Distribution Centre WHO = World Health Organization GLOSSARY BUPATI - Chief Executive of the Kabupaten or Regency CAMAT - Executive Head of the Kecamatan or Sub-district DUKUN = Indigeneous Midwife INPRES - Presidential Instruction KABUPATEN - Administrative Sub-division of a Province KECAMATAN - Administrative Sub-district LURAH - Village Headman PENMAS - Community Education Program PUSKESMAS - Kecamatan Health Centre  FOR OFFICIAL USE ONLY INDONESIA II: BASIC DATA Total Area \. \. 1,904,345 km Total Population - latest Census (1971) \. 119\.2 million - latest Estimate (December 1976) \. \. 134\.8 million Density per km (1971) - Indonesia \. \. \. 63 - Java and Madura \. 565 Rate of Natural Increase (1976) \. 2\.2% Birth Rate (1976) \. 40 Death Rate (1976) \. 18 Life Expectancy at Birth (1973) \. 47\.5 years Urban Population as Percent of Total Population (1971) \. 17 1dul\.t \.,iteracy Rate in Percent (1971) - Males \. \. 72 - Females \. 50 - Total Adult Population \. 61 Primary School Enrollment in Percent (1971) - Males \. 62 - Females \. 58 - Total Population (aged 7-12) \. 60 Age Structure in Percent (1976) - 0 - 14 years \. \. 44 - 15 - 64 years \. \. 54 - 65 and over \. \. 2 Women aged 15-44 (1976) \. 29 million Population per Physician (1972) \.21,000 Population per Nurse (1972)\. 6,000 Population per Auxiliary Nursing Personnel (midwife) (1972) 25,000 Population per Hospital Bed (1972) \.1,500 New Acceptors Recruited by the National Family Planning Program - 9\.0 million Cumulative through March 1977 Current Family Planning Users (March 1977) - Java and Bali \. 3\.5 million - 10 Provinces in Other Islands \.3 million Current Family Planning Users as Percentage of Married Women aged 15-44 (March 1977) - Java and Bali\. 24\.1% - 10 Provinces in Other Islands 6\.2% GNP at Market Prices (1973) \. \. US$15\.9 billion This document has a restricted distribution and may be used by recipients only it the performance of their official duties\. Its contents may not otherwise be disclosed without Wwrd Dank autho>rization\.   INDONESIA APPRAISAL, OF A SECOND POPULATION PROJECT Table of Contents Page No\. SUMMARY AND CONCLUSIONS i - iii I\. INTRODUCTION \. II\. RECENT DEMOGRAPHIC TRENDS \. III\. FAMILY PLANNING PROGRAM AliD SERVICES \. 3 IV\. JOINT IDA/UNFPA-ASSISTED PROJECT\. \. \. \. 7 V\. NFPCB's MEDIUM-TERM PLANS \. 10 VI\. THE PROJECT \. 12 A\. Objectives and Components \. \. 12 B\. Mobile Family Planning Services \. \. 13 C\. Family Planning Training \. \. \. 14 D\. Family Planning and Population Centres \. 17 E\. Population Education \. \. 17 F\. Research \. 18 VII\. PROJECT COST, FINANCING, DISBURSEMENT AND IMPLEMENTATION \. 22 A\. Cost \. \. 22 B\. Proposed Financing \. \. \. 24 C\. Disbursement and Accounts \. 24 D\. Procurement \. \. 26 E\. Implementation \. \. \. 27 VIII\. PROJECT JUSTIFICATION \. 27 IX\. RECOMMENDATIONS \. 29 This report is based on the findings of a mission in October 1976 to Indonesia, composed of Messrs\. H\. M\. Jones, D\. B\. Mills, A\. Shaw, C\. Chandrasekaran, and Dr\. K\. V\. Ranganathan of the Bank, and Dr\. F\. Bayan, consultant to the Bank\. The report was prepared bv MIr\. Jones from the contributions of mission members\.  Table of Contents (Continued) Annexes *1\. Demographic Background *2\. The National Family Planning Program *3\. The Joint IDA/UNFPA-Assisted Project *4\. NFPCB Medium-Term Plans 5\. MIobile Family Planning Services 6\. Family Planning Training 7\. Family Planning and Population Centres 8\. Population Education 9\. Community Incentive Scheme 10\. Oral Contraceptive Raw Materials Feasibility Study 11\. Project Cost Estimates 12\. Estimated Disbursement Schedule *13\. Schedule of Civil Works Map IBRD 12696: Indonesia: Administration and Population * Available on request from the Population Projects Department\.  ANNEX I Page 1 INDONESIA II: DEMOGRAPHIC BACKGROUND A\. Population Characteristics Population Size and Distribution 1\. Indonesia is the fifth most populous country in the world\. The population count recorded by the most recent Census taken on Septimber 24, 1971 was 119\.2 million\. With a total land area 2f 1\.9 million km the density of population on that date was 63 persons per km , rather more moderate and lower than that of Asia (78) or India (172)\. However, 64% of the Indonesians lived in Java, including Madura, which accounts for less than 7% of the land area and had a density of 565 persons per km in 1971, almost twice that of the densely-populated countries in Northwest Europe, such as the Netherlands (326) or Belgium (318), and higher than in Bangladesh (510)\. 1/ The 22 provinces of Indonesia, excluding Java and Madura, have a much lower density with large differences among them\. Bali had a density close to Java'5 in 1971, while Kalimantan and West Irian had only 9 and 2 persons per km respectively (Table 1)\. Sex and Age Composition 2\. Females were slightly in excess of males, the 1971 Census having recorded 972 males per 1,000 females in the whole of Indonesia\. There was a greater preponderance of females in Java and Madura (957 males to 1,000 females), while in the rest of Indonesia the sexes were more evenly balanced (998 males per 1,000 females)\. Indonesia's population is marked by a high proportion in the younger age groups (Table 2)\. In 1971, 44\.0% were in the age group 0-14 years, 53\.5% in the age group 15-64 years and 2\.5% in the age group 65 years and over\. Such an age distribution is indicative of a high level of childbearing and a relatively low to moderate expectation of life at birth over the previous decades\. Urban-Rural Distribution 3\. Seventeen per cent of the population in the country was recorded in the 1971 Census as living in the urban areas (Table 3)\. In Java, includ- ing Madura, 18\.0% of the population was classified as urban\. In the other islands, Kalimantan was slightly more urban than Java and Madura (20\.4%)\. The urban populations in Sumatra and Sulawesi were 17\.1% and 16\.1%, respec- tively\. The provinces of Bali, West and East Nusatenggara, Maluku and West 1/ Figures for the Netherlands and Belgium refer to 1972\. See United Nations Demographic Year Book 1972, New York 1973\.  ANNEX 1 Page 2 Irian were the least urbanized\. A high density of population in Java and Madura, coupled with a relatively low degree of urbanization, results in heavy population pressure on cultivable land\. Selected Characteristics 4\. Some selected population characteristics are shown in Table 4\. Increasing urbanization and improvement in literacy rates are discernable\. School enrollment ratios given in Table 5 show that universal education can be expected in the near future\. B\. Population Dynamics 5\. Population growth in Indonesia is determined primarily by births and deaths occurring within the country, as international migration plays an insignificant part\. Indonesia's population growth rate during 1961-71 was 2\.1% per year, an increase of 0\.6% over that recorded during 1931-61\. International Migration 6\. During 1964-70, there was a net emigration from Indonesia of the order of 86,000 persons (immigrants: 693,000, emigrants: 779,000) which formed less than 0\.01% of the enumerated population in 1971\. 1/ Despite the encouragement of private or foreign investment in recent years, immigra- tion is generally restricted\. The 1971 Census enumerated only 140,000 per- sons born abroad (sex ratio 1,488) and 162,400 (sex ratio 1,657) who reported their last place of residence to be abroad\. Likewise, there is little pros- pect of a sizeable emigration of Indonesians in the years ahead, and it can- not provide a safety valve for the growing population pressure in Java\. Vital Rates 7\. Indonesia does not have a national system for the recording of births and deaths occurring in the country and it is, therefore, not possi- ble to obtain, as in the case of most developed countries, information on levels or trends in birth and death rates from routine official records\. 2/ 1/ Lembaga Demografi, Demographic Fact Book of Indonesia, Jakarta 1973, p\. 133\. 2/ A "Sample Vital Registration Project" was undertaken as part of the joint IDA/UNFPA-assisted project to study the feasibility of introducing a routine vital statistics registration system in selected sample areas\. On the basis of the experience gained in this project, a decision has been taken to extend the system to the entire East Java Province\.  ANNEX 1 Page 3 Mortality 8\. Fair indications of mortality levels are obtained by using the survival ratio of children given by the 1971 Census, and the data provided by the Fertility Mortality Survey, 1973\. 1/ Based on this information, infant mortality in the latter part of the 1960s was about 144 per 1,000 in rural Indonesia and 115 per 1,000 in urban Indonesia with an overall level of around 140 per 1,000 for the country as a whole\. In addition to the urban rural differences, regional differences in mortality could be detected\. Mortality rates appeared rather similar in the urban areas of Central Java, East Java and Sumatra (infant mortality rate of 110 per 1,000)\. In urban West Java and Sulawesi mortality rates appeared to be higher with an infant mortality rate of 126 per 1,000\. In rural areas the ranking of the regions by infant mortality rates, from the highest to the lowest was West Java, Sulawesi, Sumatra, Central Java, and Bali with East Java showing the lowest mortality\. The infant mortality rates varied from 167 per 1,000 in West Java to 120 per 1,000 in East Java\. 2/ 9\. Substantial and continuous declines in childhood mortality can be observed in all regions of Indonesia since 1945\. The rates for 1965-67 are only about 50% of those applying 20 years earlier in 1945-49\. This 50% decline in 20 years is consistent with the 25% decline in the 10 years between 1961 and 1971 estimated by McNicoll and Mamas\. 3/ The decline in rural areas has been only slightly less than in urban areas\. The trend in childhood mortality is presented in Table 6\. These substantial declines in mortality, without a substantial change in fertility up to 1970 as will be shown later, have been contributing to the problems of rapid population growth\. With the need and possibility for a considerable lowering in mortal- ity rates, there is further scope for an increase in the rate of population growth unless fertility declines\. Given the broad relationship between mor- tality rates for different age groups, the expectations of life at birth 1/ The Fertility Mortality Survey was a large one-round sample survey, covering the topics of marriage, marriage dissolution, fertility, mor- tality and knowledge, attitude and contraceptive practice (KAP) in Java, Sumatra, Sulawesi and Bali, which together contain 86% of Indonesia's total population\. Jakarta, which constitutes a special region equiva- lent in status to a province, was not included in the sample (or in the above estimate of 86%)\. 2/ Peter F\. McDonald, Mohammad Yasin and Gavin Jones\. Levels and Trends in Fertility and Childhood Mortality in Indonesia, Indonesian Fertility Mortality Survey, 1973; Monograph #1, Lembaga Demografi, Fakultas Ekonori, University Indonesia (preliminary draft, unpublished)\. 3/ Geoffrey McNicoll and Si Cide Made Mamas, "The Demographic Situation in Indonesia", Papers of the East-West Population Institute, December 1973, p\.14\.  ANNEX 1 Page 4 around 1971 can be placcI at around 47 years for the whole of Indonesia\. Differences between males and females, and between Java and the other islands are shown in Table 4; females had an expectation of life three years less than in Java\. Fertility 10\. Both the 1973 Fertility and Mortality Survey, and the 1971 Census provided data on cumulative fertility, namely the number of children born to ever-married women who had completed their reproductive span\. The figures obtained from both sources fob the different regions are shown in Table 7 for ever-married wome' aged 40-44 an(d 45-49 years\. In spite of deficiencies both the Census and survey data indicate that for women nearing the end of their childbearing period the number of children born is high in Sumatra, followed by Sulawesi, West Java, Bali, Central Java and lowest of all, East Java\. This general pattern holds in both urban and rural areas\. 1/ 11\. The regional differentials in the number of children born are quite pronounced\. For example, for women aged 40-44 living in urban areas, parity is fully 2\.4 childrel, higher in Sumatra than it is in East Java, and for rural areas, the Sumatra East Java differential is 1\.9 children\. Even within Java, the differentials are large for women aged 40-44, almost 1\.5 children higher irl West than in East Java\. 12\. According to the data cited in Table 7, there is little difference between urban and rural areas in completed fertility\. The differences in parity between regic s, along with a lack of differential between urban and rur,il areas, is suggestive of ethnic characteristics producing fertility dif- ferences as opposed to the effect of "modernization" on fertility\. 13\. The lev s of fertility as given in Table 7 when combined with mortality levels as given in Table 6 show that East Java and Central Java are the two provinces where "comparatively" low levels of fertility and mor- tality ar( prevalent\. In general, Indonesia's demographic pattern, at least before the 1970s l ls one of high fertility and somewhat declining mortality leading to an increase in the population growth rate\. 14\. Hlas there b n a decline in fertility during the decade 1960-70? Cable 8 presents data on total fertility (equivalent to the average number of children during the course of reproductive life to all women) during 1959-63, 1964-68, 1969-70 and 1971-72 as given by age-specific birth rates for these periods obtained frout the Fertility Mortality Survey\. These figures l/ Both sets of data suffer from inaccuracies\. It is usual to find errors due to "recall lapse" especially among older women and this is shown by a smaller figure, in some instances, for women aged 45-49 years as com- pared to that for women aged 40-44 years\. Census figures are known to have 5X to 10X women with parity not stated, resulting in a lowering of the estimate for the number of children born\. The survey figures on the other hand were slightly over-estimated due to a tendency to neglect to obtain information from divorced and widowed women whose parity level would tend to be below average\.  ANNEX 1 Page 5 suggest a diminution in fertility during 1971-72\. However, careful analysis of the data has led to the following summary statement: "The measured fertility decline in 1971-72 remains somewhat of a mystery\. The explanation would appear to be a compound of age mis-statement, under-registra- tion of young children and in the case of Bali and East Java at least, some actual decline in fertility\. The last factor can account for only a small part of the measured decline; the main explanation would appear to be in age mis-statement and under registra- tion\." 1/ Levels and Trends of Age-Specific Fertility Rates 2/ 15\. Age-specific fertility rates which provide the number of births per 1,000 women in a specified age-group during a 12-month period assist in appreciating the contribution to total fertility made at various ages in the reproductive span\. These contributions are determined by cultural factors such as age at marriage and also give an insight to the deliberate control of fertility\. The pattern of fertility in Indonesia as a whole can be described as an "early marriage, high fertility" pattern\. Fertility rates are high even at extreme ages of childbearing such as 15-19 and 35-39 years\. It is common for women's childbearing to be spread over a 20-year span or longer, whereas in the western Europe a 10-year span or shorter is much more typical\. 16\. Within regions there are considerable variations\. In particular, fertility at the older ages (35 and above) accounts for a higher proportion of fertility in those regions where fertility is highest\. This general pattern holds very clearly in urban areas\. In rural areas there is greater uniformity between regions in pattern of fertility, although childbearing at older ages is least pronounced in the two lower fertility regions, Central and East Java\. Sulawesi and Bali emerge as the two regions where childbearing continues into older age groups, closely followed by Sumatra\. But even Central and East Java exhibit a much older pattern of childbearing than countries with low levels of fertility, such as Taiwan or Japan or France\. Fertility at ages below 20 varies considerably and in each region is much higher in rural than in urban areas\. The Javanese pattern of early marriage causes fertility rates for the ages 15-19 to be higher in East Java than they are in Sumatra, despite much lower levels of fertility\. The net result of high fertility at the extreme ages of the childbearing span is that these ages account for around 30% to 35% of the sum of the age-specific fertility rates in Indonesia, compared with only 10% to 20% in most Western countries and as low as 6% in Japan\. 1/ Peter F\. McDonald, et\. al\., op\. cit\. 2/ The discussion is based on the findings given in Peter F\. MIcDonald's "Indonesian Fertility and Mortality Survey", op\. cit\.  ANNEX I Page 6 17\. Over the decade of the 1960s, or more specifically between 1959-63 and 1969-70, some rather consistent trends in fertility rates emerge\. In almost all regions fertility rates at ages 15-19 showed a fall\. This is clearly related to the rising age at marriage which occurred universally during the 1960s, though more pronounced in urban than in rural areas\. Fer- tility rates at the main childbearing ages (20-34) mostly rose during the decade, whereas at the older ages (35-44) they fell fairly consistently in urban areas\. The trend at these ages in rural areas was mixed\. These trends--a decline in fertility at the youngest and oldest childbearing ages, more pronounced in urban than in rural areas--are fairly typical of countries entering the early stages of a transition to lower fertility rates\. They can be optimistically interpreted as presaging a further decline in fertility as time goes on\. The age-specific fertility rates during 1965-70 as estimated for Java and Madura and other islands from the data obtained in the Fertility Mortality Survey, and augmented by information from other sources, and cor- rected for certain inaccuracies in basic data are given in Table 9\. 18\. Interest centers on the trend in fertility after 1970, when the NFPCB took shape and the national family planning program in Java and Bali went into operation\. Unfortunately precise figures are not yet available\. Based on the number of persons who had accepted family planning methods through the program and on the continuity of use of these methods, it has been estimated that the birth rate declined by about six points between 1970 and 1975\. The decline was more marked in East Java and Bali (Table 10)\. Under the aegis of the Central Bureau of Statistics an inter-censal survey in three stages has been completed and the data are being processed\. Very preliminary findings from the survey tend to confirm the evidence of a de- cline in fertility but the final results will not be available until the end of 1977\. C\. Population Projections 19\. Population projections have been made by the Indonesian Institute of Sciences (LEKNAS) under different alternate assumptions about fertility, transmigration and rural to urban migration for the 10 planning regions into which Indonesia has been divided by the National Development and Planning Agency (BAPPENAS)\. 1/ The assumptions are based on policy goals adopted by the Government but do not imply that the Government would or should adhere to these goals\. In fact, the projections are intended to help policy-makers to evaluate these goals or alternatives and to estimate the magnitude of programs needed to achieve them\. 1/ Alden Speare Jr\. (July 1976) Summary Report Projections of Population and Labor Force for Regions of Indonesia 1970-2005, Vol\. I; National Institute of Sciences (LEKNAS)\. See also accompanying Vols\. II and III\. Vol\. II: Population Projections for Indonesia 1970-2005 (accord- ing to BAPPENAS Regions)\. Vol\. III: Population Projections for Java 1970-2005 (according to BAPPENAS Regions)\.  ANNEX 1 Page 7 20\. The alternative assumptions made are: a\. Fertility Assumptions Low fertility - Total fertility in each region is assumed to decline linerally to a level consistent with a 50% decline in crude birth rate from the 1966-70 level\. This decline is assumed to be achieved by the 1996-2000 period in Java and Bali and by the 2001-05 period outside Java and Bali\. High fertility - Total fertility is assumed to decline linerally at one half the rate of decline of the low fertility assumption in re- gions comprising Java and Bali\. No de- cline in regions making up the other islands is assumed\. b\. Migration Assumptions Low migration - Inter-regional migration is assumed to continue at the same rates estimated for 1966-71 from the 1971 Census with a small upward adjustment for the re- ported increase in transmigration from 1966-71 to 1971-75\. High migration - The rates assumed for the low migration assumption have been increased so that the total transmigration for 1976-80 is 250,000 persons per year, which was the target of the second national five-year plan\. The rates of migration calculated for 1976-80 are applied to the following periods which implies that transmigra- tion will continue to increase in pro- portion to the total population of Indonesia\. c\. Urbanization Assumptions Low assumption - The difference in urban and rural growth rates in each region will remain the same as that observed between the 1961 and 1971 Censuses\.  ANNEX 1 Page 8 High assumption - The difference in urban and rural growth rates will increase to 2\.75% per year (UN medium assumption) in regions where the rate of urbaniza- tion between 1961 and 1971 was low and to 3\.75% (UN high assumption) in regions of medium to high urbanization in 1961-71\. On the average this re- sults in an increase in urban growth by about 1\.5% per year over the low urbanization assumption\. All projections were made from the populations reported in the 1971 Census (Series B)\. The initial age distributions were obtained from the 1971 Pop- ulation Census (Series E) adjusted for age misreporting\. In respect of mortality, female life expectancy is expected to increase by 2\.5 years for every 5 years projected, from 47\.5 years in 1971-75 to 62\.5 years in 2001-05\. The male life expectancy is expected to increase from 45 years in 1971-76 to 59 years by 2001-05\. West Model Life Tables of Coale and Demeny were used in projecting mortality rates\. All projections were made using the component cohort approach and are given as of December 31 of the year under reference\. 21\. The insights gained from an analysis of the projections are as follows: a\. Fertility Decline: fertility assumptions have the greatest effect on total population\. If the goal of the national family planning program of reducing the crude birth rate by 50% by 2000 is achieved, the total population will be around 209 million\. If the goal is only partly achieved on Java and Bali and there is no change in fertility outside Java and Bali (high fertility assumption), the total population will be around 258 million\. The difference between the low and high fertility assumptions is about 49 million people (Table 11)\. The projections under the high fertility assumption show the imperative need to extend the national family planning program outside Java and Bali if the size of the Indonesian population is to be controlled\. Of the 49 million difference in popula- tion size likely to be attained under the "low" and "high" assumptions of fertility, 23 million will occur inside Java and Bali and 26 million outside Java and Bali\. The popula- tion outside Java and Bali will increase by 115% under the 'low fertility' assumption and by 180% under the 'high fertility' assumption\.  ANNEX 1 Page 9 The age distribution of the population around the year 2000 will be affected by the speed with which fertility declines\. Under the 'low fertility' assumption, 32\.6% will be under 14 years of age, while on the 'high fertility' assumption 42\.8% will be under this age (Tables 12 and 13)\. The expected birth and death rates for Indonesia under the two fertility assumptions are shown in Table 14\. Whilst under the 'low fertility' assumption Indonesia's population will grow at the rate of 1\.4% per annum around the year 2000, the rate of growth at that time would be 2\.6% per annum under the 'high fertility' assumption\. Since the latter assumes a decline in fertility in Java and Bali at one-half the rate of the 'low fertility' assumption, it is evident that with levels of fertility remaining constant at prevailing levels, the already fast rate of population growth will be further accelerated\. b\. Transmigration: the effect of transmigration is best seen on the rural population of Java and Bali\. Under assumptions of "high" transmigration the rural population of Java and Bali will be about 8 million less around the year 2000 as compared with the number that will be expected under assumption of the "low" transmigration\. c\. Urbanization: a higher pace of urbanization will increase the urban population of Java and Bali by 10 million and will reduce the rural population of Java and Bali by the same amount, around the year 2000\. Outside Java and Bali the difference will be of the order of 8 million\. The expected 'urban' and 'rural' popu- lations in Java and Bali and outside Java and Bali under the various assumptions around the year 2000 are given in Table 15\.  ANNEX 1 Page 10 Table 1 INDONESIA II: POPULATION--1930, 1961, 1971, AVERAGE ANNUAL GROWTH RATE 1961-71 AND POPULATION DENSITY BY REGION AND PROVINCE (OOOs) Region Census Census Census/I Growth Rate Density 1930 1961 1971 1961-71 (persons/km) M(%) 1971 Jakarta 811 2,907 4,576 4\.6 7,944 West Java 10,586 17,615 21,633 2\.1 440 Central Java 13,706 18,407 21,877 1\.7 634 East Java 15,056 21,823 25,527 1\.6 539 Yogyakarta 1,559 2,241 2,490 1\.1 793 Sub-Total 41,718 62,993 76,103 1\.9 565 Soith Sumatra 1,378 2,773 3,444 2\.2 33 Lampung 361 1,668 2,777 5\.2 82 Bengkulu 323 406 519 2\.5 25 Jambi 245 744 1,006 Riau 493 1,235 1,642 3\.1 16 West Sumatra 1,910 2,319 2,793 1\.9 42 North Sumatra 2,541 4,965 6,623 2\.9 94 Aceh 1,003 1,629 2,009 2\.1 34 Sub-Total 8\.255 15,739 20,813 2\.8 38 West Kalimantan 802 1,581 2,020 2\.5 13 Central Kalimantan 203 497 700 3\.5 4 South Kalimantan 835 1,473 1,699 1\.4 49 East Kalimantan 329 551 734 2\.9 4 Sub-Total 2,169 4,102 5,153 2\.3 9 North Sulawesi 748 1,351 1,718 2\.8 71 Central Sulawesi 390 652 914 2\.8 10 South Sulawesi 2,657 4,517 5,189 1\.4 63 Soath-East Sulawesi 436 559 714 2\.5 22 Sub-Total 4,232 7,079 8,535 1\.9 37 Bali 1,101 1,783 2,120 1\.8 377 West Nusatenggara 1,016 1,808 2,202 2\.0 101 East Nusatenggara 1,343 1,967 2,295 1\.6 47 Sub-Total 3,461 5,558 6,617 1\.8 87 Maluku 579 790 \.,089 2\.5 13 West Irian 179 758 923 2\.0 2 TOTAL 60,593 97,019 119,233 /1 Includes 67,725 homeless persons, 772,654 rural West Irian and 24,270 erroneous entries\. Source: 1971 Population Census, Central Bureau of Statistics\.  ANNEX 1 Page 11 Table 2 INDONESIA II: POPULATION BY AGE GROUP AND SEX, 1961 AND 1971 (OOOs) Age Group 1961__ 1971__ Male Female Total Male Female Total 0 - 4 9,152 9,276 18,428 9,606 9,493 19,099 5 - 9 7,571 7,524 15,095 9,525 9,237 18,762 10 - 14 4,763 4,417 9,180 7,353 6,826 14,179 15 - 19 3,567 3,635 7,202 5,588 5,738 11,326 20 - 24 3,529 4,354 7,883 3,602 4,429 8,031 25 - 29 3,630 4,543 8,173 3,978 4,947 8,925 30 - 34 3,555 3,779 7,334 3,690 4,214 7,904 35 - 39 3,140 2,914 6,054 3,948 4,031 7,979 40 - 44 2,457 2,310 4,767 3,064 3,038 6,102 45 - 49 1,923 1,869 3,792 2,427 2,223 4,650 50 - 54 1,487 1,477 2,964 1,903 1,961 3,864 55 - 59 1,052 1,040 2,092 1,126 1,100 2,226 60 - 64 820 812 1,632 1,082 1,256 2,338 65 and over 1,029 1,079 2,108 1,440 1,529 2,969 TOTAL 47,675 49,029 96 704 58 332o 60 0221 118 3543 _ _ _ __ __ __ /1 Based on 1% sample of complete return\. /2 Excludes rural West Irian (772,654), homeless persons (67,725) and in- correctly counted (24,270)\. /3 1971 Census total from complete tabulations including estimate for West Irian, homeless persons and incorrectly counted, and age not stated (15,059), are in thousands: Male: 59,103; Female: 60,129; Total: 119,232\. Source: Central Bureau of Statistics\.  ANNEX 1 Page 12 Table 3 INDONESIA II: POPULATION BY PROVINCE AND RURAL AND URBAN AREAS, 1971 (OOOs) Region Urban Rural Total- Jakarta 4,546 - 4,546 West Java 2,683 18,938 21,621 Central Java 2,345 19,520 21,865 East Java 3,694 21,814 25,508 Yogyakarta 406 2,082 2,488 Sub-Total 13,674 62,354 76,028 South Sumatra 928 2,510 3,438 Lampung 273 2,503 2,776 Bengkulu 61 458 519 Jambi 293 713 1,006 Riau 218 1,423 1,641 West Sumatra 479 2,313 2,792 North Sumatra 1,136 5,485 6,621 Aceh 169 1,839 2,008 Sub-Total 3,557 17,244 20,801 West Kalimantan 223 1,797 2,020 Central Kalimantan 87 615 702 South Kalimantan 453 1,246 1,699 East Kalimantan 286 445 731 Sub-Total 1,049 4,103 5,152 North Sulawesi 335 1,383 1,718 Central Sulawesi 52 862 914 South Sulawasi 941 4,239 5,180 South-East Sulawasi 45 669 714 Sub-Total 1,373 7,153 8,526 Bali 203 1,912 2,120 West NAsatenggara 179 2,025 2,204 East Nusatengga-a 129 2,166 2,295 Sub-Total 516 6,103 6,69 Maluk! 145 945 1,090 West Irian 151 773 924 TOTAL 20 465 98,675 119,140 /l Excludes 67,725 ho-neless persons and 24,270 persons incorrectly included\. > irce: Indonesia 1971 Ce;:sus, Population tables for all Indonesia\.  ANNEX 1 Page 13 Table 4 INDONESIA II: SELECTED POPULATION DATA Selected Population Data Java Other Islands Indonesia 1961 1971 1961 1971 1961 1971 Census Count (millions) /1 63\.0 76\.1 34\.0 43\.1 97\.0 119\.2 1971 Adjusted for undercount- and mid-year 78\.0 44\.2 122\.2 Intercensal Growth Rate (%) 1931-61; 1961-71 1\.8 1\.9 2\.8 2\.4 1\.5 2\.1 Estimated Vital Rates, 1960-71 Birth Rate (per 1000) 40 46 42 Death Rate (per 1000) 21 22 21 Total Fertility Rate (children per woman)/2 5\.5 6\.8 5\.9 Life Expectancy at Birth (years), 1961-71 Males 46 44 45 Females 49 47 48 Persons 48 45 47 Mean Age at Marriage (Years) Males 23 24 24 Females 19 20 19 Marital Status Females 10 years and over (%) Single 25 33 28 Married 56 53 55 Widowed 15 11 13 Divorced 4 3 4 Age Distribution (%) Males 0 - 14 45 47 45 15 - 64 53 51 52 65 + 2 3 3 Females 0 - 14 42 45 43 15 - 64 56 53 55 65 + 3 3 3 Percentage Urban 15\.6 18\.0 13\.4 15\.7 14\.8 17\.2 Literacy Rate/- Population 10 Years and Over (%) Males 59 71 61 74 60 72 Females 33 48 37 56 34 50 Persons 46 59 49 65 47 61 /1 The net undercount is estimated to be 2\.5% in rural areas and 4\.07\. in urban areas,or 2\.76% in the total population\. /2 The total fertility rate is defined as the average number of children born to women who finish their fertile period\. /3 Ability to read and write in either Latin or non-Latin characters was considered adequate - to classify a person as literate\.  ANNEX 1 Page 14 Table 5 INDONESIA II: SCHOOL ENROLLMENT RATIOS FOR POPULATION AGED FIVE YEARS AND ABOVEL/ Age Urban Rural Total Males Females Males Females Males Females Indonesia 5 - 9 43\.6 43\.9 33\.5 32\.7 35\.0 34\.4 10 - 14 79\.1 71\.8 62\.3 54\.3 65\.2 57\.5 15 - 19 50\.4 34\.4 24\.1 12\.4 29\.7 17\.0 20 - 24 22\.6 9\.8 5\.7 1\.2 9\.7 2\.9 25 + 2\.8 0\.7 0\.4 0\.1 0\.7 0\.2 All Ages 29\.7 23\.6 19\.4 14\.9 22\.5 16\.4 Java 5 - 9 43\.4 43\.6 33\.2 32\.6 34\.8 34\.3 10 - 14 79\.1 71\.0 60\.0 52\.3 63\.4 55\.9 15 - 19 49\.5 32\.9 22\.5 11\.0 28\.4 15\.9 20 - 24 22\.5 9\.8 6\.2 1\.2 10\.4 3\.3 25 + 2\.8 0\.7 0\.3 0\.2 0\.8 0\.2 All Ages 28\.9 22\.7 18\.5 14\.3 20\.4 15\.8 Other Islands 5 - 9 44\.1 44\.5 34\.0 32\.9 36\.0 34\.6 10 - 14 79\.1 73\.4 66\.3 57\.7 68\.0 60\.4 15 - 19 51\.8 37\.2 26\.8 14\.6 32\.0 18\.9 20 - 24 22\.9 10\.1 4\.9 1\.2 8\.7 2\.6 25 + 2\.6 0\.6 0\.4 0\.1 0\.7 0\.2 All Ages 31\.1 25\.8 20\.8 15\.9 22\.5 17\.4 /1 1971 Census\.  ANNEX I Page 15 Table 6 INDONESIA IT: PROPORTION OF CHILDREN DYING BEFORE AGE FIVE FROM 1000 LIVE BIRTHS BIRTH YEAR COHORT, 1945-67 FERTILITY MORTALITY SURVEY Region Child Birth Year 1945-49 1950-54 1955-59 1960-64 1965-67 Urban West Java 269 216 180 161 136 Central Java 253 171 161 126 117 East Java 228 168 137 120 108 Sumatra 263 154 137 131 117 Sulawesi 212 184 178 138 152 Rural West Java 282 271 245 217 188 Central Java 301 218 178 164 157 East Java 261 231 192 143 117 Sumatra 383 251 192 180 175 Sulawesi 263 244 236 208 177 Bali 245 239 212 194 185 Source: Peter F\. McDonald, et\. al\., op\. cit\.  ANNEX 1 Page 16 Table 7 INDONESIA II: NUMBER OF CHILDREN BORN TO EVER-MARRIED WOMEN AGED 40-44 AND 45-49 YEARS IN DIFFERENT REGIONS Age of Mother Region 40-44 Years 45-49 Years Fertility 1971 Census Fertility 1971 Census Mortality Mortality Survey, 1973 Survey,1973 Urban West Java 5\.7 5\.4 5\.2 5\.0 Central Java 4\.7 4\.4 4\.9 4\.2 East Java 4\.0 4\.0 4\.1 3\.9 Sumatra 6\.4 6\.2 6\.6 6\.3 Sulawesi 5\.8 5\.6 5\.9 5\.6 Rural West Java 5\.6 5\.4 5\.5 5\.3 Central Java 4\.7 4\.9 4\.2 4\.8 East Java 4\.4 4\.0 4\.0 3\.9 Sumatra 6\.3 5\.9 6\.1 5\.8 Sulawesi 6\.2 5\.6 6\.3 5\.6 Bali/L 5\.9 5\.0 6\.0 4\.9 /1 Data for Bali are for the island as a whole, including both urban and rural areas\. The population of Denpasar, the largest town in Bali, is only about 70,000 and the proportion of Balinese population living in urban areas only 9\.8%\. Source: Fertility Mortality Survey, 1973\.  ANNEX 1 Page 17 Table 8 INDONESIA II: RECORDED TOTAL FERTILITY RATES BY REGIONj , 1959-72 Region 1959-63 1964-68 1969-70 1971-72 Urban West Java 6\.59 6\.75 7\.12 5\.88 Central Java 5\.67 5\.29 5\.31 4\.77 East Java 4\.66 4\.58 4\.49 4\.16 Sumatra 7\.19 6\.91 6\.65 5\.81 Sulawesi 6\.32 6\.15 6\.10 4\.90 Rural West Java 6\.23 6\.85 7\.05 5\.69 Central Java 5\.50 5\.60 5\.79 4\.40 East Java 5\.24 5\.32 5\.42 4\.14 Sumatra 7\.48 7\.54 7\.62 6\.15 Sulawesi 6\.71 6\.97 6\.99 5\.87 Bali 5\.98 6\.20 6\.09 4\.13 /1 1973 Survey\. Source: Peter F\. McDonald, et\. al\., op\. cit\.  ANNEX 1 Page 18 Table 9 INDONESIA II: AGE SPECIFIC FERTILITY RATES, FERTILITY MORTALITY SURVEY, 1965-70 Age Groups Java-Madura Other Islands Indonesia Fertility Mortality Fertility Mortality Fertility Mortality Survey Survey Survey /1 All Areas /2 All Areas /3 All Areas 15 - 19 167 165 147 147 161 158 20 - 24 278 277 318 315 290 290 25 - 29 253 254 324 325 273 277 30 - 34 203 203 269 269 220 224 35 - 39 130 129 191 185 147 146 40 - 44 68 67 100 96 76 75 45 - 49 10 10 14 18 11 12 Total Fertility Rate 5\.55 5\.53 6\.82 6\.77 5\.89 5\.91 /1 Excludes Jakarta\. /2 Excludes Kalimantan, East and West Nusatenggara, Maluku and West Irian\. /3 Excludes Jakarta, Kalimantan, East and West Nusatenggara, Maluku and West Irian\. Source: Peter F\. McDonald, et\. al\., o\.cit\.  ANNEX 1 Page 19 Table 10 INDONESIA II: ESTIMATED CRUDE BIRTH AND TOTAL FERTILITY RATE FOR 1965-70 (PREPROGRAM) AND 1975, BY PROVINCE Province Crude Birth Rate Total Fertility Rate 1965-70 1975 1965-70 1975 Jakarta 36\.9 33\.3 5\.6 5\.1 West Java 48\.2 44\.3 6\.8 6\.3 Central Java and Yogyakarta 37\.6 33\.9 5\.6 5\.0 East Java 36\.7 29\.6 5\.1 4\.1 Bali 44\.7 32\.6 5\.9 4\.3 Java and Bali 44\.0 38\.3 5\.8 5\.1 Source: NFPCB, Jakarta, unpublished work\.  ANNEX 1 Page 20 Table 11 INDONESIA II: POPULATION PROJECTIONS UNDER LOW AND HIGH FERTILITY ASSUMPTIONS 1970-2000/ (in millions) Year Java and Bali Other Islands Indonesia Low High Low High Low High Fertility Fertility Fertility Fertility Fertility Fertility 1970 77\.2 77\.2 40\.1 40\.1 117\.3 117\.3 1975 85\.4 85\.8 46\.5 46\.5 131\.9 132\.3 1980 93\.7 95\.6 53\.6 54\.6 147\.3 150\.2 1985 102\.2 106\.6 61\.3 64\.7 163\.5 171\.3 1990 110\.3 118\.7 69\.6 77\.4 179\.9 196\.1 1995 117\.6 132\.0 77\.9 92\.8 195\.5 224\.8 2000 123\.3 146\.3 86\.1 112\.1 209\.4 258\.4 /1 The figures relate to December 31 of the year indicated and were derived on the basis of "low migration", "low urbanization" assumptions\. Java and Bali comprise all of BAPPENAS Regions IV and V except for Lampung which is a part of Region IV but has been omitted here because its inclusion would have obscured the effects of transmigration\. Source: Alden Speare Jr\., Sumnary Report Projections of Population and Labor Force for Regions of Indonesia 1970-2005, Vols\. I, II and III, July 1976\.  ANNEX I Page 21 Table 12 INDONESIA II: POPUIATION PROJ CTIONS BY AGE GROUPS 1970-2000) Age Group 1970 1975 1980 1985 1990 1995 2000 Males 0 - 4 9,708 10,924 11,525 12,049 12,271 12,060 11,280 5 - 9 8,424 9,057 10,292 10,946 11,531 11,826 11,694 10 - 14 7,204 8,249 8,890 10,122 10,787 11,386 11,696 15 - 19 5,978 7,048 8,091 8,736 9,968 10,643 11,252 20 - 24 4,182 5,794 6,855 7,891 8,543 9,772 10,456 25 - 29 3,925 4,026 5,600 6,647 7,678 8,337 9,565 30 - 34 4,091 3,758 3,875 5,414 6,449 7,476 8,145 35 - 39 3,494 3,889 3,592 3,723 5,224 6,247 7,268 40 - 44 2,886 3,290 3,683 3,420 3,560 5,023 6,035 45 - 49 2,368 2,679 3,073 3,459 3,232 3,385 4,797 50 - 54 1,905 2,154 2,454 2,833 3,211 3,016 3,178 55 - 59 1,424 1,680 1,913 2,199 2,557 2,914 2,757 60 - 64 1,086 1,200 1,425 1,642 1,901 2,228 2,559 65 - 69 705 850 949 1,142 1,328 1,555 1,841 70 - 74 455 497 607 691 840 988 1,169 75 + 322 390 451 547 650 797 971 Total 58,152 65,485 73,275 81,461 89,730 97,653 104,663 Females 0 - 4 9,606 10,695 11,246 11,730 11,920 11,698 10,925 5- 9 8,277 3,976 10,081 10,694 11,243 11,513 11,373 10 - 14 7,090 8,088 8,797 9,906 10,538 11,102 11,393 15 - 19 6,062 6,849 7,924 8,642 9,754 10,395 10,978 20 - 24 4,452 5,881 6,667 7,738 8,461 9,576 10,236 25 - 29 3,939 4,299 5,695 6,477 7,543 8,275 9,396 30 - 34 4,126 3,780 4,142 5,513 6,292 7,355 8,097 35 - 39 3,374 3,943 3,626 3,992 5,333 6,114 7,172 40 - 44 2,920 3,284 3,764 3,479 3,844 5,159 5,940 45 - 49 2,453 2,758 3,116 3,588 3,329 3,694 4,982 50 - 54 2,046 2,286 2,580 2,932 3,393 3,163 3,524 55 - 59 1,620 1,859 2,092 2,376 2,717 3,162 2,964 60 - 64 1,287 1,417 1,639 1,860 2,128 2,452 2,872 65 - 69 889 1,055 1,177 1,376 1,576 1,822 2,118 70 - 74 587 665 804 904 1,011 1,240 1,479 75 + 454 554 659 802 952 1,148 1,370 Total 59,182 66,386 74,009 82,009 90,095 97,868 104,788 TOTAL (Male 117,334 131,871 147,284 163,470 179,825 195,521 209,451 and Female) /1 Low Fertility Assumption\. Source: Alden Speare Jr\., op\. cit\.  ANNEX 1 Page 22 Table 13 INDONESIA II: POPULATION PROJECTIONS BY AGE GROUP 1970-2000,q (OOOs) Age Group 1970 1975 1980 1985 1990 1995 2000 Males O - 4 9,703 11,197 12,781 14,680 16,766 19,121 21,908 5 - 9 8,424 9,021 10,551 12,140 14,051 16,151 18,540 10 - 14 7,204 8,250 8,854 10,376 11,963 13,873 15,979 15 - 19 5,978 7,055 8,087 8,697 10,216 11,799 13,704 20 - 24 4,182 5,802 6,859 7,886 8,501 10,008 11,591 25 - 29 3,725 4,027 5,607 6,648 7,671 8,294 9,796 30 - 34 4,091 3,755 3,877 5,420 6,453 7,472 8,103 35 - 39 3,494 3,887 3,592 3,727 5,233 6,254 7,264 40 - 44 2,886 3,289 3,682 3,422 3,566 5,035 6,040 45 - 49 2,368 2,678 3,073 3,460 3,232 3,390 4,808 50 - 54 1,905 2,153 2,473 2,832 3,211 3,016 3,185 55 - 59 1,424 1,679 1,911 2,198 2,557 2,916 2,758 60 - 64 1,086 1,197 1,424 1,640 1,900 2,223 2,557 65 - 69 705 849 950 1,142 1,327 1,555 1,841 70 - 74 455 496 587 688 839 993 1,169 75+ 322 390 448 548 649 796 965 Total 58,152 65,727 74,755 85,505 98,135 112,896 130,208 Females 0 - 4 9,606 10,955 12,475 14,291 16,290 18,551 21,216 5 - 9 8,277 8,933 10,336 11,866 13,700 15,730 18,030 10 - 14 7,090 8,089 8,759 10,149 11,690 13,528 15,566 15 - 19 6,062 6,857 7,921 8,597 9,998 11,531 13,374 20 - 24 4,452 5,889 6,670 7,732 8,416 9,812 11,349 25 - 29 3,939 4,300 5,702 6,485 7,538 8,232 9,626 30 - 34 4,126 3,778 4,145 5,517 6,296 7,348 8,056 35 - 39 3,374 3,941 3,627 3,996 5,342 6,120 7,169 40 - 44 2,920 3,283 3,763 3,478 3,846 5,167 5,952 45 - 49 2,453 2,758 3,115 3,587 3,328 3,698 4,980 50 - 54 2,046 2,286 2,581 2,931 3,391 3,162 3,526 55 - 59 1,620 1,859 2,091 2,377 2,716 3,160 2,962 60 - 64 1,287 1,416 1,639 1,868 2,129 2,451 2,869 65 - 69 889 1,055 1,176 1,376 1,576 1,823 2,118 70 - 74 587 665 799 905 1,069 1,239 1,455 75 + 454 554 658 803 951 1,144 1,371 Total 59,182 66,618 75,457 85,958 98,277 112,696 129,614 TOT AJI\. (Male and Female) 117,334 132,345 150,212 171,463 196,412 225,592 259,822 /1 High Fertility Assumption\. Source: Alden Speare Jr\., op\.cit\.  ANNEX 1 Page 23 Table 14 INDONESIA II: BIRTH RATE, DEATH RATE AND GROWTH RATE 1970-75 TO 1996-2000 (OOOs) Year Birth Rate Death Rate Growth Rate Low Fertility - 1970-75 42\.2 18\.9 2\.3 1976-80 38\.8 16\.8 2\.2 1981-85 35\.7 14\.9 2\.1 1986-93 32\.3 13\.2 1\.9 1991-95 28\.5 11\.7 1\.7 1996-2000 24\.3 10\.5 1\.4 High FertilityL' 1970-75 43\.2 19\.0 2\.4 1976-80 42\.2 17\.2 2\.5 1981-85 41\.2 15\.5 2\.6 1986-90 39\.8 13\.8 2\.6 1991-95 38\.3 12\.3 2\.6 1996-2000 36\.9 10\.9 2\.6 /1 Assumptions--Low migration and low urbanization\. Source: Alden Speare Jr\., on\.cit\.  ANNEX 1 Page 24 Table 15 INDONESIA II: ALTERNATIVE PROJECTIONS OF URBAN AND RURAL POPULATIONS FOR YEAR 2000 /1 Region Population end Population in the year 2000 by Projection- Year 1970 (1) (2) (3) (4) (5) (6) Assumption Fertility - Low High Low High Low High Transmigration - Low Low High High Low High Urbanization - Low Low Low Low High High Java and Bali Urban 13\.6 30\.3 35\.3 30\.3 35\.3 43\.6 50\.1 Rural 63\.5 93\.0 111\.0 85\.0 102\.1 80\.3 86\.8 Total 77\.1 123\.3 146\.3 115\.3 137\.4 123\.9 136\.9 Outside Java and Bali Urban 6\.7 19\.9 25\.9 22\.0 28\.5 28\.0 40\.1 Rural 33\.4 66\.2 86\.2 72\.7 94\.1 58\.1 82\.5 Total 40\.1 86\.1 112\.1 94\.7 122\.6 86\.1 122\.6 Total Population Urban 20\.4 50\.2 61\.2 52\.3 63\.7 71\.5 90\.0 Rural 95\.9 159\.2 197\.2 157\.8 196\.2 138\.4 169\.5 Total 117\.3 209\.4 258\.4 210\.1 259\.9 209\.9 259\.5 /1 Projection in millions\. Soarce: Alden Speare Jr\., op\. cit\.  ANNEX 2 Page 1 INDONESIA II: THE NATIONAL FAMILY PLANNING PROGRAM A\. Background 1\. Family planning in Indonesia was pioneered by a private organiza- tion, the Indonesian Planned Parenthood Association (IPPA) which began operat- ing in 1957\. President Suharto signed the Declaration of World Leaders on Population in 1967\. Recognizing the need to stem population growth in the country, the Government of Indonesia (GOI) set up a semi-governmental insti- tute in 1968 to coordinate family planning activities which were being carried out by various private and official agencies\. At the same time, the GOI invited a joint UN/WHO/IBRD mission to help it to develop a comprehensive program\. As the next step, the GOI replaced the institute in 1970, by the fully governmental National Family Planning Coordinating Board (NFPCB) to plan, coordinate, supervise and evaluate a national family planning program, at first restricted to Java (including Madura) and Bali\. B\. Organization 2\. The President is personally responsible for the progress of the program; this devolves upon the Provincial Governors insofar as the province is concerned and upon the Bupatis with regard to their kabupatens which are the next administrative division\. Advising the President on policy matters is a ministerial council composed of all the concerned ministers, with the State Minister of People's Welfare as the Chairman and the Chairman of the NFPCB as its secretary\. The NFPCB is a non-departmental body with a Chair- man, three deputy chairmen, a Secretariat for administrative and financial support, and nine bureaus representing the various staff functions required to fulfill its responsibilities (Chart 1)\. The Chairman reports directly to the President and the State Minister of People's Welfare, acting on behalf of the President, exercises certain powers on day-to-day matters\. Actual implementation of program activities is vested in the concerned operational Ministeries of the Government such as Health, Information, Education, In- terior, and the Armed Forces and voluntary organizations such as the IPPA, Muhammadiyah and the Indonesian Council of Churches\. A program consultative committee composed of the heads of the implementing units advises the Chair- man on policy formulation and operational strategy\. 3\. The NFPCB has an office in each of the provinces in which the program functions--six in Java and Bali and 10 in the other islands\. Each office is headed by a Chairman and has a secretary, three division chiefs (planning, supervision and research and evaluation) and several project leaders taking responsibility for one or more operational aspects of the program\. Inasmuch as provincial governors are responsible to the President for the progress of the developmental programs within the province, provin- cial chairmen are required to obtain his directives on operational matters\.  ANNEX 2 Page 2 Provincial chairmen are also responsible to the Chairman of the Central NFPCB for all administrative, financial and technical matters\. 4\. At the kabupaten level, which is really the operational base of the program, the NFPCB has a chairman, a field work supervisor and an administrative staff\. The kabupaten chairman is responsible to the Chairman of NFPCB but is directed by Bupatis in operational matters\. Working with the medical officer of the kabupaten (DOKABU) and kabupaten officials of other implementing units, he coordinates program activities within his juris- diction and exercises supervisory powers\. 5\. At the kecamatan level, the Camat from the Ministry of the Interior, the PUSKESMAS (public health centre) physician from the Ministry of Health (MOH) and the group leader of the non-medical fieldworkers of the NFPCB, assisted by other officials, organize educational, informational and service activities\. At the village-level, the Lurah from the Ministry of Interior, the non-medical fieldworker from the NFPCB and the midwife from the MOH, assisted by the voluntary village-level family planning worker (PPKBD) are responsible for recruiting acceptors and sustaining their practice of con- traception\. C\. Program Development 6\. Program development is an elaborate process and involves several levels of administration\. The National Working Meeting meets once a year, is presided over by the Chairman of the NFPCB and is attended by all senior and middle level officials of the central and provincial NFPCB and of the family planning cells of the implementing units; representatives of BAPPENAS, the Ministry of Finance and other concerned ministries also participate\. Review- ing past experiences and anticipating future needs, this body recommends programs and policies to the Chairman of the NFPCB\. After further discussions of the National Working Meeting's recommendations with the appropriate author- ities, the Chairman enunciates national policy and indicates the kind of programs required to implement the policy\. This information is then relayed to the provincial NFPCB Chairman for evolving specific program activities; the provincial chairman in turn sends it to the several kabupaten NFPCB to review needs and work out operational details\. The recommendations of these operational level units are consolidated and coordinated by the provin- cial NFPCB and after obtaining the Governor's approval are presented to the central NFPCB as the provincial program\. The Central NFPCB after reviewing the provincial programs, formulates the national program which it discusses with representatives of the central level implementing units, BAPPENAS and the Ministry of Finance\. When this group endorses the program it becomes the basis both for the budget and for program operations\.  ANNEX 2 Page 3 D\. Program Funding 7\. The Indonesian family planning program has progressed from the stage where contraceptive information and services were provided primarily through foreign donor assistance (96\.5% of the total family planning budget in 1968-69) to one where the GOI has assumed primary responsibility for providing these services and has committed itself to underwriting a large percentage of program costs (49% of the family planning budget in 1975-76, not including MOH personnel salaries) (Table 1)\. The family planning budget per capita has steadily increased from US$\.028 in 1968-69 to US$\.297 in 1975-76\. On the other hand, the cost of recruiting a new acceptor has declined to a level of US$10 to US$15 per acceptor\. E\. Service Delivery 8\. Until recently, the bulk of the family planning services was being provided by a network of clinics operated by the MOH, the Armed Forces (ABRI) Health Services, and other Government and private agencies\. As of March 1977, there were in Java and Bali 2,719 registered family planning clinics located in PUSKESMAS, sub-clinics and satellite clinics, of which 2,261 be- longed to the MOH, 199 to the ABRI, 51 to other governmental agencies and 208 to private organizations\. In addition, there were 1,443 mobile teams which carried services to those who did not have an easy access to clinics\. Most of the PUSKESMAS in Java and Bali now have a physician in charge and/or other supporting staff and the sub-clinics are manned by midwives and/or a PKK (primary health nurse)\. The mobile team consists of a midwife/PKK, a non-medical family planning fieldworker and a local volunteer\. The latter two prepare the community for the midwife's visit; the midwife pro- vides the services\. 9\. In the 10 other provinces to which the program was extended in 1974, as of March 1977, there were 901 family planning clinics of which 637 belonged to the MOH, 108 to the ABRI, 47 to other Government departments and 109 to voluntary organizations\. There were 194 mobile teams in operation\. In the mobile team, there is an auxiliary health worker known as a motivator, instead of the fieldworker as in Java and Bali\. 10\. Involved in the field operations in the country are 2,145 doctors, 3,416 midwives, 2,967 assistant midwives, 2,097 recording personnel, 1,557 information workers, 6,574 fieldworkers, 1,295 group leaders, 202 supervisors, 6 field work coordinators and 21 assistant coordinators, 274 motivators and others\. 11\. Some institutional contraceptive methods (vasectomy and tubal liga- tion) are available in specially designated hospitals\. Availability is con- tingent upon the existence of a demand for such methods and the socio-cultural  ANNEX 2 Page 4 conditions which permit them\. Field trials on the commercial distribution of condoms through the vendors of herbal medicine (Jamu Jago) and other small drug retail outlets have been carried out\. Distribution by mail upon request has also been tried\. Results of both studies are encouraging\. Commercial distribution may soon become a national scheme\. Community-Based Distribution Scheme 12\. The national family planning program has launched an all out effort to make the resupply of such contraceptives as the oral contraceptive and the condom as easy and as convenient for the user as possible\. This is the Community-Based Distribution Scheme\. For this purpose, a variety of village contraceptive distribution centres (VCDCs) have been established through most of Java and Bali\. These are staffed by various categories of individuals, including paid acceptors, members of the Village Social Institute who come under the authority of the Ministry of Interior, and members of the village headman's staff\. In Bali, contraceptive resupply, among other family plan- ning activities, has been integrated into the traditional Balinese banjar or hamlet administrative system\. All told, there are approximately, 28,000 VCDCs in Java, and over 3,000 in Bali\. Compared with the number of clinic supply points, the VCDCs outnumber clinics 9 to 1\. The proportions of all oral contraceptive resupplies distributed through the VCDCs are 36% in West Java, 45% in Central Java, 81% in East Java and 31% in Bali\. Contraceptive Supplies 13\. The Bureau of Logistics of the Central NFPCB is responsible for procuring contraceptives and maintaining a steady supply line\. The Bureau dispatches the contraceptives to the provincial offices where a reserve of 25% of the supplies is always maintained; the rest is distributed to the kabupaten\. Maintaining a small reserve, the kabupaten NFPCB supplies the PUSKESMAS which, in turn, supplies the PPKBD with a month's stock\. Staff members are available at each administrative level to handle the distribution and supply\. Except for the 27\.5 mm Lippes loop, all other sizes of this type of IUD are manufactured in Indonesia\. Oral contraceptives have been and will continue to be supplied by USAID until December 1977\. Thereafter, the demand will be r\.met by local production--tableting in the initial stages followed by complete production eventually\. F\. Information, Education and Communications Community Education 14\. Education of the community in Java and Bali is carried out pri- marily by non-medical family planning fieldworkers\. At the national level, the Special Bureau of Fieldworkers plans the overall program and directs  ANNEX 2 Page 5 and supervises it\. A coordinator at the provincial level, backed up by assistant coordinators does the detailed planning of the provincial program and provides guidance for its implementation and supervises performance\. A supervisor at the kabupaten is in overall charge of operations and works through a group leader and fieldworkers who are attached to the PUSKESMAS\. On an average there are four fieldworkers for every PUSKESMAS which works out to a ratio of one fieldworker to about 14,000 population and one group leader for every four or five fieldworkers\. With the coming in of the Community- Based Distribution Scheme the fieldworkers assist and supervise the educa- tional activities of the VCDC \. In addition to this direct input of the NFPCB, family planning is included in the health education programs of the MOH in the clinic and the community\. Information officers of the Ministries of Religious Affairs and of Information, who are largely face-to-face communi- cation practitioners working at the kecamatan level, also participate in the community education program\. 15\. Face-to-face communications in 10 provinces of the other islands include campaigns directed at special groups in the community, involvement of community leaders, orientation of community leaders and youth groups and special teams to carry out informational/educational activities at the kecamatan and village levels\. Paramedical staff of the PUSKESMAS educate the community regarding family planning as part of their health education activities\. The NFPCB plan to intensify this educational program by attach- ing four volunteer motivators to each PUSKESMAS\. The PUSKESMAS staff will then have a role similar to that of the group leader in Java and Bali and will operate through the four volunteers at the intermediate stage and the VCDC and traditional midwives (dukuns) at the village level\. The plan will also provide support to the paramedical staff through the appointment of a coordinator at the provincial level and a supervisor at the kabupaten level\. Volunteer motivators at PUSKESMAS level are already being recruited and trained\. Public Information 16\. When the NFPCB was established in 1970, there was hardly any activity in family planning in the Ministry of Information or its associated agencies, such as the Radio Republik Indonesia or the Television Republik Indonesia\. The first step taken by the Bureau of Information and Motivation of the Central NFPCB was to conduct a series of orientation courses, seminars and workshops for officials of the Ministry of Information and its associated agencies, as well as for officials of the Ministries of Social Welfare and of Religious Affairs, journalists, practitioners of indigeneous media, ullemas (religious leaders), community leaders, and the leaders of women's and youth groups\. The NFPCB provided the funds, technical advice and in some cases teachers and the organization concerned conducted the sessions\. This approach has resulted in the formation of organized groups such as the Family Planning Writers Association, Zero Population Group of the students, and others with population and family planning as the binding force; it has also helped to introduce family planning into the activities of existing organized groups such as KOWANI (women's organization) and HMI (Muslim Students Association)\.  ANNEX 2 Page 6 These national -ganizations have branches all over the country\. They conduct orientation couMr,-cs with financial, material and technical assistance from the NFPCB and thus help in stimulating and sustaining community interest in population matters\. 17\. The Ministry of Information has also developed a family planning unit; this was reorganized recently and now consists of a Chairman and six others including the news directors of the State radio and television net- works and those in charge of public relations and regional publicity\. The NFPCB provides this unit with its assessment of the information needs of the program, technical information, guidance and funds\. At the provincial level, the Ministry of Information maintains a provincial information office called the KANWIL consisting of a chairman, and four divisions--public speaking, mobile units, press and general--each with one or more professional staff; with other supporting and administrative personnel the total staff strength is between 50 and 60\. There is a project leader for information and motiva- tion in each provincial NFPCB office in Java and Bali\. This officer coor- dinates public information activities in the provinces through an information and motivation team comprising representatives of the implementing units\. The Governor's role is pivotal; since he is responsible for the progress of the program in his province, he personally directs the agencies to participate in the public information program and thus sets the pace for the Bupatis and others to do likewise within their areas\. 18\. At present, the information, education and communication program in the 10 other provinces is the direct charge of the Chairman of the provincial NFPCB\. A coordinating team with the provincial information officer as the Chairman and representatives of the implementing units as members has been appointed by the Governor to assist the Chairman of the provincial NFPCB and actually carry out an information service\. 19\. At the kabupaten level in Java and Bali--the operational base--the Ministry of Information has an information office with about three to five information officers and a total staff strength of between 25 and 30\. It operates a PUSPENMAS (public information centre)\. Areas of concentration are the same as at the provincial level and a multi-media approach is used including posters, leaflets, exhibitions, traditional media, bulletins and films\. A mobile information unit (provided under the joint IDA/UNFPA- assisted project) is located in each kabupaten with a driver, an operator and a speaker\. As there is no special functionary for information at the kabupaten NFPCB office, the Chairman himself coordinates public information activities in the area\. 20\. The kecamatan information worker is largely a face-to-face communi- cations functionary\. As of July 1976, there were 1,577 kecamatan information workers in the six provinces of Java and Bali, of whom 52\.8% sent in reports\. Collectively, they organized 26,848 meetings: mixed group (43%), men's group (16%), women's groups (34%) and youth groups (7%); of these 73% were mass meetings, 13% group discussions, and 0\.73% were sessions using indigeneous  ANNEX 2 Page 7 media\. Media or audiovisual aids were used on 944 occasions; films accounteu for 38% of these occasions, slides 7%, flipcharts 48%, filmstrips 0\.6%, and cassettes 6\.25%\. Total attendance reported was 3,214,070\. Subjects covered included the population problem, religion and family planning, family planning and family welfare, as well as information on contraceptive methods\. Radio and Television 21\. There are 46 Radio Republik Indonesia stations in the country, of which 18 are in Java and Bali\. In addition, there are 700 governmental and non-governmental commercial radio stations owned by regional governments, universities, the Armed Forces and the nrivate sector\. There are six television stations, three in Java, two in Sumatra and one in South Sulawesi; the recently launched domestic satellite will enable the establishment of a station in each province during the third five-year plan\. There is a great deal of coverage of family planning in the radio programs of both Radio Republik Indonesia and commercial stations\. Initially, the NFPCB provided funds to both types of stations for family planning broadcasts\. Now both Radio and Television Republik Indonesia include funds for this purpose in their own budgets, in addition to NFPCB funding\. Printed Material 22\. Initially, because of the lack of an infrastructure to stimulate and coordinate production of printing material, the Bureau of Information and Motivation of the Central NFPCB formerly prepared prototypes, pretested them, commissioned their production and arranged for their distribution\. Now, except for magazines, bulletins and press reviews, all printed mate- rials are produced in the provinces\. From 1970 to date, the Central NFPCB has produced 8 booklets on the population problem, 16 on the social, economic and cultural aspects of family planning, 5 on medical and health aspects, 7 on religion and family planning, 1 on law and family planning, and 15 on political and organizational aspects\. During this period 5\.7 million copies of 27 leaflets and over a million copies of 20 posters were produced\. Two sets of flipcharts were produced in 1972 and 1973, 2,000 copies of each set\. The Central NFPCB publishes a monthly magazine\. The annual print order has increased from 90,000 in 1970-71 to 300,000 in 1976-77\. Special calendars were issued from 1971-72 to 1974-75 with a print order of 10,000 each year\. Films 23\. In all, 24 films have been produced--18 by the Central NFPCB, four by the IPPA and two by the NFPCB of West Java\. Together they account for 624 minutes of running time\. There are 1,191 copies of the 24 titles\. Both local and international funds have been used to produce these films\. Eight sets of slides have been prepared\. A thousand copies of four cassettes with family planning songs have also been produced\. Training and Communications 24\. Some of the communications personnel involved in the program have been trained in established training programs at the University of Chicago  ANNEX 2 Page 8 and the East-West Communication Institute, and in India, Japan and the Philippines\. Others have gone on study tours of Asian countries and yet others on conducted tours to program sites within the country\. Recently, study tours financed under the joint IDA/UNFPA-assisted project were under- taken by seven batches of three staff each\. These persons were drawn from the central and provincial NFPCB offices; the Ministries of Information, Health, Interior, Education, Manpower and Religious Affairs, and the Armed Forces, as well as the IPPA, Muhammadiyah and the Indonesian Council of Churches\. The main objective of the tours was to study the communications program for family planning of the countries visited with special reference to organization, programming and research\. Countries visited included the Arab Republic of Egypt, Hong Kong, India, Iran, the Republic of Korea, Hfalavsia, the Philippines, Singapore, and Thailand\. G\. Training 25\. The IPPA established the National Training Centre in Jakarta in 1968 and in the following year provincial training centres (PTCs) in the six provinces of Java and Bali\. In 1971 a new building was constructed for the National Training and Research Centre (NTRC)\. The PTCs, however, were housed in rented premises\. Training staff was part time, drawn from the MOH and from universities and other teaching institutions\. These institu- tions not only trained volunteers, staff and field personnel of the IPPA but also doctors, nurses, social workers and others from the MOH and other Government agencies\. '26\. With the establishment of the national family planning program in 1970, training needs soared enormously\. A Bureau of Education and Train- ing was set up in the Central NFPCB and project leaders for training appointed to the provincial NFPCB offices\. Actual training was carried out by the TPPA training centres and the provincial training centres of the MOH, the U7FPCB meeting the training costs\. With financial assistance from the joint IDA/UNFPA-assisted project, seven sub-provincial training centres (STCs) in West, Central and East Java were established primarily to train the large number of fieldworkers and group leaders required in the national program\. Four of these were managed by the MOH and the other three by the IPPA\. The joint project provided support for the construction of 10 STCs in these three provinces and one PTC in each of the six provinces in Java and Bali\. 27\. During the period 1969-70 to 1973-74, a total of 40,452 persons were trained\. These included: 1,480 physicians; 4,905 paramedical and auxiliary personnel; 3,880 clinic-based and 259 kabupaten-based reporting and recording personnel; 8,590 fieldworkers for initial training and 1,214 in refresher courses; 1,533 group leaders for initial training and 147 in re- fresher courses; 76 fieldworkers' supervisors; 23 fieldworkers' coordinators and assistant coordinators; 282 administrators--61 from the central level, 62 provincial, 119 kabupaten, and 40 logistics personnel; 33 information  ANNEX 2 Page 9 officers; 5,583 information workers; 129 mobile information unit technicians; 161 social workers; 20 research and evaluation personnel; 37 trainers; 10,695 dukuns; and 1,405 others\. In addition, several workshops and seminars were conducted for curriculum development and for special subject areas\. 28\. Training was included as a component in the joint IDA/UNFPA-assisted project\. The training component included: construction and equipment of buildings for six PTCs and 10 STCs; defraying a portion of the operational costs; and instituting a staff development program\. Except for the PTC in East Java, the construction and equipment of all the buildings has been com- pleted\. 29\. At the same time, the NFPCB was concerned that the two parallel sets of training institutions under the management of two different imple- menting units, each set with its own orientations and emphases, was result- ing in variations in concepts, methods and standards\. Careful examination of the problem led to the conclusion that qualitative improvement would require a greater degree of uniformity in standards--work-programs, personnel and facilities--and more and sustained technical guidance from a well-staffed, multi-disciplinary central institution to peripheral ones which could be ensured only by developing a cohesive and well-knit training system under a single management\. Since the training of family planning personnel is interdisciplinary in nature, and hence cuts across the specialties of the several implementing units, the NFPCB decided to create a national training system and keep it under its own administrative control\. 30\. Ultimately the national training system will include: the NFPCB's Bureau of Education and Training which is to be expanded during 1977-78; six PTCs and 10 STCs in Java and Bali--the successors to the erstwhile IPPA institutions; and 10 new PTCs to replace the existing ad hoc training facili- ties of the IPPA in the 10 provinces of the other islands\. The NFPCB placed the new PTCs--housed in the new buildings constructed with joint project assistance--under the administrative control of the respective provincial chairmen from October 1, 1976\. The NFPCB will endeavor to retain as many of the IPPA trainers as possible\. Remaining positions will be filled by secondment on a fixed-term basis from universities, teacher training col- leges, other technical institutions, and concerned Government departments or by open recruitment\. All faculty members--whether NFPCB staff or sec- onded from other agencies--will be assigned full-time to the training cen- tres\. It is expected that the full complement of staff will be in position by July 1, 1977\. 31\. The NFPCB has evolved a staff development program in two phases-- a short-term one to improve current training programs and a long-term one to prepare for eventualities\. The need for such a program is emphasized by the anticipation of a staff turnover as a result of the change in management; this would necessitate the training of a number of new trainers and it was considered more pragmatic as well as more economical to use a new curriculum  ANNEX 2 Page 10 for this pur-ose, rather than expose the trainers to the old curriculum and call them back for retraining\. 32\. The short-term staff development program envisaged sending about a dozen trainers to the University of Connecticut for the 13-week course on training of trainers, and about 20 trainers to the National Institute of Family Planning in India for exposure to an adapted version of their train- ing course for Indian trainers to be followed by placement in a regional family planning training centre and state and local program headquarters for practical training experience, the whole program lasting for about six months\. On their return home the two groups of trainers would meet in a workshop situation, review the existing curriculum for trainers and revise it in the light of their experience in two very different situations\. The expectation was that such a process, without foisting any one ideology on Indonesia, would encourage the national training program to develop in the light of its own needs and interests enriched by experience elsewhere\. 33\. Five trainers financed by USAID have participated in the University of Connecticut training course\. Sixteen trainers spent 5-1/2 months in India and stopped in Thailand and Singapore on the way back home; funds from the joint project were used for this purpose\. In addition to these two major groups, other trainers have visited several other countries and studied their programs\. 34\. The long-term aspect of the staff development program consists of sending suitable trainers for full academic courses at a master's degree or diploma level in universities abroad in disciplines or professions relevant to family planning\. Financed by the joint project four trainers are scheduled to go to the Philippines and the United States of America during 1977-78 for specialization in management, communications, education and sociology\. These funds will permit sending another five or six persons in the following year\. The rest of the scheme will depend upon availability of funds--national or international\. 35\. The NFPCB has used funds from various sources to strengthen the competence of other staff members as well as those of the implementing units in all aspects of the program\. Staff members have gone to other coun- tries for regular academic courses in universities and institutions of higher learning, established specific- purpose courses, study tours, international and regional seminars and workshops and observation tours\. H\. Service Statistics System 36\. In July 1970, a comprehensive and standardized data system was designed by the NFPCB for the national family planning program\. The service statistics portion of the system incorporated the field-proven  ANNEX 2 Page 11 aspects of various African and Asian family planning service statistics systems\. Following field testing, which resulted in minor changes, the system was adopted in 1971\. The NFPCB provides a feedback report to the field within 30 days of data receipt\. As an average of 92% of the family planning clinics submit their reports on time, i\.e\., within 10-12 days after the end of the reporting month, the speed with which the monthly statistics are compiled and reported back to the field in Indonesia is unique for a national family planning program of comparable size\. In 1971, NFPCB also implemented a monthly contraceptive stock inventory and utilization program\. Both systems continue to be in operation with minor changes necessitated from time to time to cope with changes in the program\. In addition to the routine statistics, data for specific studies such as continuation rates, side-effects, etc\., are obtained through ad hoc surveys\. I\. Program Results New Acceptors 1/ 37\. Since its inception in 1969-70 through the end of 1976-77 2/ the national family planning program recruited 8,442,054 new acceptors in Java and Bali\. The number of new acceptors recruited annually is shown in Table 2, together with the annual targets, and acceptors as a proportion of married women age 15-44\. 38\. In terms of the methods selected by new acceptors in Java and Bali, (Table 3) oral contraceptive has increased considerably in importance from around 28% of all methods selected in 1969-70 to 68\.5% in 1974-75 since when there has been a slight decline\. The IUD, on the other hand, declined in relative importance, from a high of 55% in 1969-70 to a low of 11% in 1974-75 but subsequently rose to over 18% in 1976-77\. New acceptors of the condom have fluctuated from about 18% in the first year of the national pro- gram to 5% in 1971-72 back up to 19% in 1974-75 and 1975-76 and down again to about 13% in 1976-77\. Other methods, including injectables and steriliza- tion, make up a relatively small proportion of total acceptances, generally in the neighborhood of 1% or more each year\. 39\. In the 10 provinces of the other islands, where the program has been in operation since 1974, the number of new acceptors increased from 117,966 in 1974-75 (24 per 1,000 MWRA 3/) to 233,345 in 1976-77 (62 per 1/ An acceptor is defined as a woman who accepts contraception for the first time or who reaccepts after the termination of a pregnancy\. 2/ The program year coincides with the Indonesian fiscal year, i\.e\., April 1-March 31\. 3/ MWRA: Married woman in the reproductive age group (i\.e\., 15-44 years)\.  ANNEX 2 Page 12 1,000 MWRA)\. The pattern of acceptance does not differ markedly from that of Java and Bali\. Acceptor Characteristics 40\. In terms of new acceptor characteristics, the family planning program on Java and Bali has been recruiting progressively younger and less well-educated women whose husbands are likely to be farmers or fisher- men and who have fewer living children\. Table 4 summarizes the changes that have occurred in new acceptors over the life of the program\. On Java and Bali the "typical" acceptor is a 27-year old woman with less than a primary school education, with 2\.54 living children and whose husband is a farmer, fisherman, a laborer or was unemployed\. The "typical" acceptor in the 10 provinces of the other islands is a 29-year old woman with a primary school or better education, with 3\.88 living children, whose hus- band is a Government official or a tradesman\. Continuation Rates 41\. Data for the calculation of up-to-date continuation rates are presently being collected and analysed\. Listed in Table 5 are a selection of 12-month first method continuation rates as derived from a number of dif- ferent surveys\. First method continuation rates for IUD acceptors, especially in the case of Bali and East Java, run consistently higher than comparative figures for other national family planning programs in the region\. Oral con- traceptive continuation rates, on the other hand, are more in line with those found in other programs\. Current Users 42\. There has been a continual increase in the estimated number of current program users\. As shown in Table 6, current users of all contra- ceptive methods in Java and Bali in 1972-73 were approximately 738,000 or nearly 8% of all MWRA\. By March 1977, there were an estimated 3,486,323 current users, or 24\.1% of MWRA\. In the 10 provinces of the other islands, there were an estimated 322,567 current users as of March 1977, which repre- sented 6\.2% of MWRA\. Program Impact on Fertility 43\. Although data on the direct measurement of fertility change in Indonesia are not yet available, several estimates of fertility change for Java and Bali have been made\. In a 1975 study, it was estimated that the total fertility rate (TFR) on Bali had decreased from 5\.9% to 4\.3% between 1970 and 1975 (a 27% reduction)\. East Java followed with a 19% decline, from a TFR of 5\.1% to approximately 4\.1%\. The decline estimated for Central Java was in the neighborhood of 11%, with the TFR dropping from 5\.6% to 5\.0%\. West Java registered the smallest reduction, with a TFR of 6\.3% in 1975 compared to a TFR 6\.8% in 1970 (a 7% reduction)\.  ANNEX 2 Page 13 44\. Initial indications from a 1974-75 sample vital registration project in selected sub-districts of the country suggest that fertility has perhaps declined further\. What is of particular interest is the apparently strong relationship between the number of current users in the sub-district and crude birth rate for those areas, as seen in Table 7\. J\. Evaluation and Research 45\. Research activities undertaken through the auspices of the NFPCB have been grouped under four broad categories: information and motivation, management, training and medical\. Some 130 research projects have been undertaken since the inception of the program\. Under the first category are included a wide variety of knowledge, attitude and practice (KAP) studies of particular areas of the country and various minority groups; studies concern- ing acceptor characteristics; the use of various media, including the mass media, traditional media and the folk arts, and informal channels for the communication of family planning information; the use of paramedical personnel for motivation and service delivery\. Other studies have examined the source and effect of rumors on contraceptive acceptance and use, the status of women in customary law, and the value of children\. Under management studies, sev- eral manpower evaluations have been conducted on fieldworkers, the feasibility and advantage of paid incentives for fieldworkers, verification of service statistics data, and evaluations of the organization and management of the family planning program at various levels\. Under training, studies include routine evaluation of specific training programs for particular categories of individuals in addition to studies of the training provided fieldworkers\. Medically-oriented studies consist of evaluations of mobile clinics and mobile service units, contraceptive continuation rates (including a major on-going quarterly acceptor survey for Java and Bali), evaluations of sterilization pilot projects, condom mailing schemes, and the integration of family plan- ning and maternal and child health activities\.  ANNEX 2 Page 14 Table 1 INDONESIA II: POPULATION AND FAMILY PLANNING PROGRAM FINANCIAL RESOURCES, GOVERNMENT OF INDONESIA AND FOREIGN DONOR, 1968-69 TO 1975-76 (US$ OOOs) 1968-69 1969-70 1970-71 1971-72 1972-73 1973-74 1974-75 1975-76 Government of 75 300 1,323 2,300 5,134 5,885 8,400 12,500 Indonesia 3\.5% 18\.9% 28\.5% 44\.1% 52\.7% 40\.8% 39\.9% 49\.0% Foreign 2,051 1,288 3,319 2,913 4,600 8,552 12,636 13,000 Donor 96\.5% 81\.1% 71\.5% 55\.9% 47\.3% 59\.2% 60\.1% 51\.0% Total Per \.028 \.021 \.060 \.076 \.120 \.177 \.263 \.297 Capita Java and Bali Total Per 80\.90 29\.90 25\.61 10\.04 9\.02 11\.02 14\.26 15\.40 Acceptor Java and Bali Source: USAID estimates\.  ANNEX 2 Page -5 Table 2 INDONESIA II: ANNUAL NEW ACCEPTOR TARGETS AND PROGRAM ACCOMPLISHMENTS JAVA AND BALI, 1969-70 TO 1976-77 (OOOs) 1969-70 1970-71 1971-72 1972-73 1973-74 1974-75 1975-76 1976-77 Target 100 125 550 1,000 1,250 1,400 1,645 1,756 Accomplishment 53 181 519 1,079 1,369 1,475 1,786 1,979 % of Target 53 145 94 108 110 105 109 113 New Acceptors 5 15 40 81 101 103 126 137 per 1000 Married Women Age 15-44 Source: National Family Planning Coordinating Board\.  ANNEX 2 Page 16 Table 3 INDONESIA II: TRENDS IN METHODS SELECTED BY NEW ACCEPTORS JAVA AND BALI, 1969-70 TO 1976-77 Year Contraceptive Methods (%) Oral IUD Condom Others 1969-70 27\.5 54\.7 17\.9 1970-71 44\.1 42\.2 13\.7 1971-72 54\.2 40\.9 4\.9 - 1972-73 56\.3 35\.2 8\.0 \.5 1973-74 62\.7 21\.4 15\.0 \.9 1974-75 68\.5 11\.3 19\.2 \.9 1975-76 67\.5 12\.5 19\.0 1\.0 1976-77 66\.8 18\.4 12\.9 2\.1 / Percentages may not add to 100 due to rounding\. Source: National Family Planning Coordinating Board\.  ANNEX 2 Page 17 Table 4 INDONESIA II: TRENDS IN PROGRAM ACCEPTOR CHARACTERISTICS JAVA AND BALI, 1971-72 TO 1975-76 Characteristics 1971-72 1972-73 1973-74 1974-75 1975-76 Age at Acceptance 15-29 53 54 58 62 67 30-44 47 46 42 38 33 Parity 3 or Less 50 56 63 67 More than 3 - 50 44 37 33 Education Less than Primary 85 90 91 93 93 Primary or Higher 15 10 9 7 7 Husband's occupation Farmer/Fisherman 52 63 67 71 71 Other 48 37 33 29 29 Source: National Family Planning Coordinating Board\.  ANNEX 2 Page 18 Table 5 INDONESIA II: SELECTED TWELVE-MONTH FIRST METHOD CONTINUATInN RATES\. JAVA AND BALI 7% Continuation of Area Survey Date Contraceptive Methods Oral IUD Mojokerto, East Java 1974 Acceptors before January 1974 59 85 Special Drive Acceptors 48 81 East Java 1974 Regular Acceptors 79 94 Special Drive Acceptors 77 91 Bali 1975 Regular Acceptors 56 94 Special Drive Acceptors 44 89 Central Java 1973 - 87 1976 63 - West Java 1972 - 87 1976 63 - Jakarta 1973 69 83 Source: National Family Planning Coordinating Board\.  ANNEX 2 Page 19 Table 6 INDONESIA II: TRENDS IN CURRENT USERS BY METHODS, JAVA AND BALI 1972-73 TO 1976-77 (OOOs) Methods 1972-73 1973-74 1974-75 1975-76 1976-77 Oral Contraceptives 288 609 1,102 1,859 2,070 IUD 436 762 891 972 1,223 Other 13 37 112 167 193 TOTAL 737 ,408 2,_105 2_998 32486 Current Users as a 7\.8 12\.5 17\.3 21\.2 24\.1 Percentage of MINRAL /1 MWRA: Married Women in the Reproductive Age Group (i\.e\., 15-44 years) Source: National Family Planning Coordinating Board\.  ANNEX 2 Page 20 Table 7 INDONESIA II: FAMILY PLANNING USE AND ESTIMATED FERTILITY LEVELS AND CHANGES-BY SELECTED AREAS Area MWRA Using Increase in Family Planning\.-l Rate/2 Rate!3 Population Jakarta 11\.6 37 11 2\.6 Cirebon, W\. Java 28\.5 33 11 2\.2 Sukabumi, W\. Java 7\.7 47 18 2\.9 Pekalongan, C\. Java 11\.0 34 24 1\.0 Malang, E\. Java 26\.4 24 11 1\.3 Klungkung, Bali 22\.5 26 12 1\.4 W\. Lombok, Lombok 1\.5 36 13 2\.3 C\. Tapanuli, N\. Sumatra 1\.4 48 16 3\.2 Banjar, S\. Kalimantan 3\.6 39 24 1\.5 Bone, S\. Sulawesi 1\.7 43 11 3\.2 /1 MWRA: Married Women in the Reproductive Age Group (i\.e\., 15-44 years)\. /2 Kabupaten Data, National Family Planning Coordinating Board, August 1975\. /3_ Vital Registration Project Data 1974-75 by Sub-district Level (kecamatan)\. Source: National Family Planning Coordinating Board\.  Chart 1 ORGANIZATION CHART IN ACCORDANCE WITH THE PRESIDENTIAL DECREE NO 33/1972 PRESIDENT STATE MINISTER FOR PEOPLE'S WELFARE COUNCIL \. CONSULTING L\.N4-------------------------------COMMITTEE IMPLEMENTING | CHAIRMAN \. \. UNITSjNFC |rN \.P CB r - SERTRA r------ -----r----- GOVERNOR DEPUTY I DEPUTY 11 DEPUTY 11 I~~~~ I II \. BUREAU OF * BUREAU OP BUREAU OP * BUREAU OP \. BUREAU OF * BUREAU OF REPORT\., PLANNING _ I \. LOGISTICS MEDICAL SERVICE E EDUCATION & \. ESEAR VAL- * NO & DDCUMENTA- TRAINING *~~ UATION TION BUREAU F i BURAU OF UREAU DF SPECIAL PROJECTS B _ SUREAUISIDN OFHINFORMATION& B NMOTIVATION PROVINCIAL CHAIRMAN IMPLEMENTING PROVINCIAL UNITS N FP C B -T~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ j F R \.TS E F VA E L I REGENT REGIONAL CHAIRMAN v X : IMPLEMENTING REMARKS REGIONAL | | UNITS -------------- LINE OF OPERATIONAL STRATEGIES N , _ _ _ _ LINE OF COORDINATION E F R T , _ \. \. \. LINE OF STAFF CLERICAL STAFF _- - LINE OF TECHNIQUE \. LINE OF TECHNICAL ADMINISTRATION & FINANCE LINE OF RESPONSIBILITY W-rld B-1, 16882  ANNEX 3 Page 1 INDONESIA II: THE JOINT IDA/UNFPA-ASSISTED PROJECT Introduction 1\. In 1969, a UN-WHO-IBRD mission visited Indonesia at the Govern- ment's request to make recommendations on the establishment of a national family planning program\. On the basis of its report a five-year operational plan covering Java and Bali was prepared\. Subsequently the GOI asked the Bank for assistance and in May 1972 legal agreements covering a first population project were signed\. This project was prepared on the basis of GOI requests and with the assistance of the UN and specialized agencies including WHO, UNICEF, UNESCO, UNFPA and the Bank Group\. Project costs were estimated at US$33 million to be disbursed over a five-year period\. The joint project was funded by an IDA Credit of US$13\.2 million, a UNFPA Grant of US$13\.2 million and a GOI contribution of US$6\.6 million\. The project became effective in November 1972\. At the UNFPA's request, IDA acts as the executing agency\. 2\. The objective of this joint IDA/UNFPA-assisted project is to sup- port the development of the GOI's national family planning program\. Its components covered a wide range of family planning activities including: a\. the construction and equipment of 10 paramedical training schools; b\. the construction and equipment of about 320 MCH/FP centres in East Java, Bali and Jakarta; C\. the construction and equipment of six provincial and 10 sub-provincial family planning training centres; d\. salary support for some 7,000 non-medical field- workers; e\. support for research and evaluation acitivities cover- ing technical assistance, fellowships, research stu- dies, seminars and a demonstration field postpartum program; f\. the construction and equipment of one central and six provincial NFPCB administrative centres; g\. the provision of transport for staff involved in MCH/FP services and motivation activities; h\. support for an extension of the hospital postpartum program;  ANNEX 3 Page 2 i\. the provision of 115 mobile information units, tech- nical assistance, fellowships and studies for infor- mation and communication activities; j\. support for a population education program; and k\. technical assistance and fellowship support for program management and project implementation\. Implementation 3\. In order to implement the project, the NFPCB established a project implementation unit (PIU) which included staff for construction, accounting, procurement and project management\. This was considered necessary because of the NFPCB's inadequate management experience, particularly in civil works\. In the course of time, as the NFPCB's management capability has improved, the functions of the PIU have been absorbed by the appropriate NFPCB bureaus, with the exception of the construction unit\. The latter is now being absorbed by the NFPCB secretariat in preparation for the proposed second project\. Foreign management consultants were contracted to assist the PIU in project implementation, and technical assistance was also provided for family planning program management, training, information, research, vehicle maintenance and operations, and population education\. 4\. The joint project was the first attempt at donor coordination in a Bank-assisted population project\. Not only was the UNFPA involved as a funding partner, but other agencies coordinated the provision of technical assistance and services\. WHO supported the project on the basis of its over- all assistance agreement with the GOI\. UNESCO, UNICEF and the Population Council, a privately-funded agency based in New York, negotiated and signed specific technical asistance agreements with the GOI\. On the one hand, co- ordination undoubtedly affected the pace of implementation because of the time taken to sign agreements after the resolution of difficulties caused primarily by the need to recognize differing agency operating procedures and GOI assistance requirements\. On the other hand, the joint project helped the GOI to coordinate assistance from several sources for a variety of acti- vities, avoid overlap and assist the GOI in channelling this assistance to key program development areas\. Construction 5\. The construction program got off to a slow start in part due to the inexperience of the NFPCB with a program of this size\. Failure to brief the local architects adquately on user requirements was also in part respon- sible\. Retention of foreign management consultants was of little help in overcoming these problems\. Increasing familiarity of NFPCB staff with Indo- nesian construction requirements and the establishment of effective tendering  ANNEX 3 Page 3 procedures and documentation with the support of Bank supervision missions has eventually produced a unit of the NFPCB capable of managing a construc- tion program of this size and nature\. To date, 45 MCH/FP centres have been built in the Mojokerto Regency of East Java for the demonstration field postpartum program, five provincial training centres (PTCs) and 10 sub- provincial training centres (STCs)\. The central NFPCB headquarters and 50 MCH/FP centres in East Java are under construction\. Tenders will be let in June for the remaining PTC in Surabaya, six provincial offices, and nine paramedical training schools\. The GOI has proposed that the civil works program be limited to the construction of paramedical training schools, leaving one nurse-midwifery school and 223 MCH/FP centres in East Java, Bali and Jakarta to be dropped from the project\. The reasons are that the GOI, through the INPRES program, has built or rehabilitated a total of 3,675 centres in the period 1974-77 (45% in Java and Bali) which has eliminated the need for additional centres to be constructed from project funds\. The nurse- midwife school is no longer needed following a change in the paramedical staffing pattern subsequent to the start of the project\. And on policy grounds, the national program is moving towards a service system based to a lesser extent on static service outlets than at the conception of the project\. The Bank and the UNFPA have formally agreed with these proposals\. Transport 6\. With the assistance of UNICEF, the joint project procured 158 four- wheel drive vehicles, 213 minibuses, 3,180 motorcycles and 4,570 bicycles\. They are all in use in the field and provide program staff with much needed mobility\. In addition, 115 mobile information units were procured and are in use in each kabupaten in Java and Bali\. With the assistance of a foreign expert, the NFPCB has established systems and procedures covering the main- tenance and operation of its vehicles, including those provided by other donors and those procured from local resources\. Further details of the transport provided by the joint project are given in Annex 5\. Training 7\. Two of the joint projects' components are directly concerned with training, providing facilities and equipment for training paramedical staff and family planning workers\. One of the project's objectives was to assist the process of restructure the 28 classes of paramedical staff which the MOH employed into two or three categories, all of which would be important in providing family planning services\. As a result of discussions and sem- inars, the concept of an auxiliary nurse-midwife as considered in the project appraisal report was developed into that of a community health nurse (PKK)\. The MOH plans to train 31,500 PKKs by 1980, 50% of whom would be nurses retained from existing categories in a one-year course\. An essential part of the development of the PKK course was the retraining of 34 nurses as PKKs at Sidoardjo in East Java in 1974\. They received field training in Mojokerto Regency and have been posted to the demostration field postpartum  ANNEX 3 Page 4 program\. An evaluation of their performance is contributing to the develop- ment of the PKK training curriculum\. The nurse-midwife category has been replaced by that of a graduate supervisory midwife and the proposed training school for this category is no longer required\. Tendering of the construc- tion of the nine PKK training schools is scheduled for early June 1977, and completion of construction is scheduled for April 1978\. 8\. The joint project's assistance for the development of family plan- ning training is discussed in paragraphs 6\.09 and 6\.10 of this report and in Annex 6\. One of the more important training activities conducted by the IPPA with NFPCB financial assistance was the training of fieldworkers, the salaries of whom were provided from joint project funds\. Over 8,000 field- workers and the necessary supervisory staff have been trained\. The current number of fieldworkers is about 5,500 which gives a level of about 1:14,000 people in Java and Bali\. The project aimed at a level of 1:10,000 but this was lowered because of steep salary increases since 1971, problems of re- taining temporary staff such as fieldworkers, and the development of the village-based contraceptive distribution system which provides new and wider peripheral motivation and service activities\. Problems of implementing this assistance were caused by the dual budget system\. The GOI share of salaries was channelled through the development budget whilst project assistance was channelled through a supplementary budget\. Problems in monitoring the two sources were eventually overcome and project assistance in this respect has been phased out to the point where the GOI is now entirely responsible for fieldworkers' salaries\. Information 9\. In addition to the mobile information units, the joint project has provided two foreign advisors\. One, who assisted the NFPCB's Bureau of Infor- mation, has completed his assignment\. A second advisor, recruited to assist the Ministry of Information's family planning unit, was recruited in November 1976, for one year\. His appointment coincides with the reorganization of this unit and more effective radio, television and mass media support for family planning activities should result\. Problems of providing adequate audiovisual materials for the mobile information units have been partly overcome by the provision of an adequate number of copies of existing family planning films\. With the assistance of UNESCO, the production of a new film and other audio- visual materials is nearing completion and should resolve these problems\. The project has also supported study teams, drawn from the staff of the NFPCB and its implementing units to observe the information programs of major national family planning programs\. Population Education 10\. The joint project's support for population education is described in Annex 8\.  ANNEX 3 Page 5 Hospital Postpartum Program 11\. The joint project provided support for an extension of the hospital postpartum program to 86 hospitals\. WHO provided the services of a technical advisor, and the project provided salary support, essential hospital and office equipment, informational and educational materials, in-service train- ing programs, vehicles and funds for the evaluation of activities\. The strength of the hospital postpartum program does not lie in its ability to add substantial numbers of new acceptors to the progam but in the provision of contraceptive services immediately after delivery or abortion, particu- larly surgical methods such as sterilization\. The program recruits about 25% of all delivery and abortion cases as "direct" acceptors, i\.e\., those who accept before or within three months of their discharge\. This figure compares well with international experience\. Of the methods chosen, about 10% selected tubectomy, 39% oral contraceptives and 28% the IUD, the remain- der selecting conventional contraceptives\. Research 12\. The research component of the joint IDA/UNFPA-assisted project was designed to strengthen the research/evaluation capability of the NFPCB, provide support for local contract research, and develop a demonstration field postpartum program\. The Population Council was made the executing agency; it has coordinated technical assistance support for the NFPCB, the Population Studies Centre of the Institute for Social and Economic Research (LEKNAS), and the demonstration field postpartum program in Mojokerto\. The project also provided for fellowships, data processing equipment, vehicles and salary supplements\. 13\. It is in the field of family planning evaluation and research that aid from other agencies, notably USAID and the Ford Foundation, has comple- mented the first project activities most directly\. Progress made in this component particularly must be judged against the perspective of overall de- velopment which has occurred in this field\. About 10 studies have been sup- ported from joint project funds covering both service and motivational aspects of family planning activities\. Of these, the more important include a survey to evaluate the effectiveness of the special drive for new acceptors in East Java, a sample vital registration project which is contracted to the Central Bureau of Statistics, and a quarterly acceptor survey, which provides feed- back on contraceptive use-effectiveness in the provinces in which the program operates\. 14\. The project is supporting the development of the LEKNAS Population Studies Centre by funding overseas training fellowships, technical assistance for both research and teaching duties, and specific studies including the preparation of population projections for development planning purposes, in- cluding the preparation of the NFPCB's medium-term strategy\. Two research papers have been produced on the status of women and work is proceeding on a study of population distribution policies\.  ANNEX 3 Page 6 15\. The demonstration field postpartum program in Mojokerto had the objectives of assuring improved maternal child care and more effective family planning\. The joint project provided for the construction of 45 MCH/FP cen- tres, additional staff, technical assistance, vehicles, equipment and sup- port for studies\. Thirty-four communty health nurses have been trained and added to the Regency MCH/FP staff, the centres have been constructed and the necessary vehicles and equipment procured\. Baseline surveys, including a con- traceptive continuation rate survey, KAP studies, and a village ecological survey (probing into factors such as distance, which affect the provision of family planning services) have been regulated\. In mid-1976, the NFPCB and the Ministry of Health modified the program's objectives to emphasize the integration of family planning into MCH care and to improve health services within the framework of the national family planning program\. As a result, operational plans are being revised, responsibility for evaluation has been delegated to the Institute for Public Health in Surabaya, and technical assistance in health/family planning systems analysis is being provided\. Thus far, the demonstration has provided useful basic program data and the opportunity to examine the effectiveness of PKK training\. 16\. The development of an effective family planining research program is difficult to manage because of its diversification\. With donor support, the NFPCB has managed a contract research program which has focussed on providing important operational data and information on fertility and contraceptive use trends; the available results have been successfully used for program feedback and the development of the NFPCB's medium-term strategy\. An adequate institu- tional research capability will be evident after the completion of the fellow- ship program and collaboration with foreign advisors\. Disbursements 17\. At April 30, 1977, US$13\.2 million (50%) of the combined Credit and Grant had been disbursed\.  ANNEX 4 Page 1 INDONESIA II: NFPCB MEDIUM-TERM PLANS Program Strategy and Rationale 1\. The Indonesian family planning program has evolved through several critical and overlapping stages\. Prior to 1969-70, limited family planning information and services were administered essentially through a privately- funded and single purpose program\. Once the Government became publicly in- volved in administering the program, services were first provided through health channels and in particular through maternal and child health (MCH) services\. In spite of the extremely encouraging response to the expanded public program which was built up with National Family Planning Coordinating Board (NFPCB) as the coordinating agency and with several Ministries (Health, Information, Education and Interior), the Armed Forces(ABRI) Health Services and voluntary agencies (such as Muhammadiyah and the Indonesian Council of Churches) cooperating, it was felt that for ultimate success family planning had to be viewed in a wider context\. The second five-year plan, promulgated in 1974, articulated family planning as a general development issue and linked national population strategy to national development priorities and activities\. 2\. The NFPCB has recognized that ultimate success de- pended on: a\. a shift in responsibility for the program to the field level, i\.e\., the degree to which fertility control and the small family norm are accepted by the community it- self and the degree to which the community bears the ultimate responsibility for motivating, recruiting and maintaining family planning acceptors and supporting and reinforcing the small family norm; and b\. the undertaking of the responsibility for the family planning program by the entire Government, i\.e\., the degree to which the Government has initiated the process whereby family planning and the goals of the national population policy are integrated into the national de- velopment programs of other ministries\. 3\. The redirection of the program towards the field is not new\. One of the early efforts to achieve this consisted of special drives in East Java and Bali where the local population and community structures of entire villages were mobilized for short but intensive campaigns to recruit new acceptors\. Although the special drives were initiated by the Government at provincial level, their immediate success demonstrated the type of contribu- tion which communities themselves could make to a more widespread acceptance of family planning\. Similarly, the community contraceptive distribution schemes and the village acceptor groups emerged as much because of\.the *spontaneous involvement and participation of the communities in the family planning program as because of direct Government intervention\.  ANNEX 4 Page 2 4\. Ilarnessing local forces consists of a step-by-step procedure of identifying and training key individuals--formal and informal leaders-- such as the village chief, his staff, local religious leaders and the school teacher, who have the capacity to organize and positively influence others\. The Government does not consider the transfer of responsibility to the field possible without a simultaneous improvement of the life of the individual and the community\. It has begun to initiate and implement programs designed to overcome obstacles to family planning acceptance imposed by such features as high rates of infant and childhood mortality, widespread illiteracy and unemployment\. For this reason family planning is working in close conjunction with the national development program for the rural areas to create a respon- sibility for disseminating, maintaining, and cultivating the small family norm in the community\. Program Objectives 5\. The long-term aim of the family planning program is to reduce fer- tility by 50% by the year 2000\. On a linear decline, using a base total fer- tility rate (TFR) around 5\.8 in 1970, the TFR should reach a level of about 4\.5 by 1983-84 which is the end of the third five-year plan\. This would roughly correspond to a 10-point decline in the birth rate by 1983-84 from the level round 44 per 1,000 in 1970\. In setting this target, the following factors have been taken into account: a\. Geographical Coverage: As of this year, the national family planning program provides direct information and services in 16 provinces of the country\. The pro- gram in West, Central and East Java, in Bali and in Jakarta and Yogyakarta has been in operation since the inception of the family planning effort\. In 1974-75 the national program activities were expanded to 10 provinces in the other islands\. During the third five-year plan activities will be initiated in the remaining provinces of the country\. b\. Current Users of Contraception (Prevalence): The short- term goal of fertility decline has been set in terms of prevalence rates to be attained by 1983-84\. These are 35% for Java and Bali, 25% for the 10 other provinces to which the program was extended in 1974-75 and 15% for the remaining provinces which will be brought into the program in the third five-year plan\. The re- sponse of the public to the family planning program has varied between provinces\. Within Java and Bali the acceptor rate has differed markedly with the result that by March 1977, prevalence rates have also correspondingly differed, with Bali and East Java recording prevalence rates of 35\.4% and 33\.7% respectively of currently married women aged 15-44, while the other four provinces had  ANNEX 4 Page 3 prevalence rates varying from 15% to 20%\. In working out the targets of acceptors, these differentials in response between provinces have been taken into account\. Within Java and Bali, the goal of 42% prevalence rate has been set for Bali and East Java while the goals for the other provinces are less than 35, the average for the entire area\. In the 10 provinces of the other islands included in the program, provinces, such as North Sulawesi, which have done comparatively well are expected to reach higher prevalence rates than others\. It is premature to adjudge differences in response likely to arise in the remaining provinces and all these provinces have been considered as a group to reach the target of 15% prevalence by 1983-84\. c\. Contraceptive Mix: An important aspect in relating goals of prevalence rates to the number of acceptors to be recruited into the program is the acceptor choice of the different types of contraceptives\. A method such as the IUD has a greater continuation rate than the oral contraceptive and it is to be expected that with a lesser number accepting the IUD the same prevalence rate as that reached with a larger number of oral con- traceptive acceptors can be obtained\. The contracep- tive mix as displayed by acceptors is not only impor- tant in terms of prevalence rates but also in terms of effective protection given by different contracep- tives as reckoned by avoidance of accidental preg- nancies\. Oral contraceptives, for instance, give rise to less accidental pregnancies as compared with the TUD\. The net effect of acceptance of a contraceptive on fertility is affected by continuance rate as well as its effectiveness; contraceptive mix is, therefore, also important in determining fertility decline\. Two sets of contraceptive mix have been assumed for Java and Bali in working out acceptor targets, and are given in Table 1\. Both assume a reversal of the trend towards a lower acceptance of the IUD\. Mix A sets an increase in the acceptance rate of IUDs to 20% by 1983-84 while Mix B aims at a more ambitious goal of 30% by that time\. The NFPCB has used Mix B as its target\. Oral contraceptives are expected to make up 50% of the accep- tors in both mixes, the rest being made up of "other" contraceptives\. In the provinces of the other islands, the program strategy will aim at obtaining Mix B\. d\. Number of New Acceptors Required: Having estimated the prevalence rates and contraceptive mixes required  ANNEX 4 Page 4 to achieve the desired reduction in the birth rate, the NFPCB has set targets of the number of new accep- tors which must be recruited\. As indicated in Tables 2, 3, 4 and 5, these differ from province to province in accordance with population size, length of program, and results achieved thus far\. In Java and Bali, in the next seven years covered by the program, (1977-78 to 1983-84) if contraceptive Mix A which indicates greater use of oral contraceptives is followed, 16\.1 million acceptors will need to be recruited\. If Mix B (the NFPCB target mix) is achieved, 15\.15 million new acceptors are needed to meet the target\. Using Mix B, 4\.45 million new acceptors are needed in the 10 prov- inces of the other islands, and 0\.7 million in the remaining provinces\. Program Needs 6\. To meet the program's objectives in Java and Bali, program expansion will concentrate on the provision of information and services to areas not completely or adequately covered yet\. These will be provided through a number of channels, including mobile service units and paramedical units as well as the existing social structures and institutions of the community\. The latter will include village-based contraceptive supply depots, acceptor groups, community leaders and social organizations which will become the final and crucial supply link to rural inhabitants\. Because of the nature of the geography and population dispersion of the other islands, and because of the experience gained by the programs of Java and Bali in involving local institutions, greater reliance will be placed on mobile services as compared with static clinics\. The NFPCB does not plan to utilize family planning fieldworkers in the other islands in the way they have been used on Java and Bali\. Instead village volunteers, village leaders and community organizations will be trained to assume the roles and functions which fieldworkers have filled elsewhere\. At present, the NFPCB facilities in the other islands are inadequate because they have to share already overcrowded offices with other Government agencies\. To accommodate the expanding activities of the NFPCB in these areas, there is a need to increase the number of program staff and new office facilities will be required\. 7\. Expansion of program activities will be sought through greater interaction with the ministries of the national Government whose programs, particularly in the realm of development, reach down to the community level\. Although the mechanism of involvement of other ministries in the family planning program has already been set into motion, the NFPCB will provide considerable assistance, primarily through population training programs and seminars for the staff of these ministries\. Similarly, plans have already been made for training various key persons in the community such as community leaders, religious leaders, teachers, local Government officials, voluntary organizations, labor leaders and intellectuals who heretofore have not been formally included in the information and educational component of the program\.  ANNEX 4 Page 5 Acceptor Maintenance 8\. The program will also need to lengthen effective contraceptive use\. One means of achieving this is to encourage new acceptors to adopt more effective methods\. During the seven-year period 1969-70 to 1975-76 there has been a steady erosion of IUD acceptances in Java and Bali, from a high 54\.7% of new acceptors in 1969-70 to a low 11\.3% in 1974-75\. In 1975-76 the percentage increased to 18\.4% and the NFPCB hopes to maintain this reversal of the trend away from the IUD and has set the objectives of a method mix for oral contraceptives, IUD and condoms of 50:30:20 (Mix B) by 1983-84\. One obvious approach to achieve this is simply the intensification of campaigns to encourage acceptance of more effective methods\. In the November 1975 special drive in East Java, particular emphasis was placed on increasing the proportion of IUD acceptances\. The result was that IUD acceptances made up 25% of the total of new acceptances during the intensive campaign compared to an average of 10% in the regular program\. Aside from encouraging adoption of the IUD, the national program is investigating the feasibility of expanding institutional methods such as sterilization\. Although such services are now available in only a few hospitals on Java and Bali, interest is growing, particularly on Bali\. The role of injectables is likely to increase substantially in the next few years\. A small pilot project in Yogyakarta demonstrated the potential popularity of this method\. 9\. Contraceptive use can also be maintained by the removal of identi- fied obstacles such as rumours on side effects, real or imagined, which dis- courage continued contraceptive use\. There already exists a substantial international literature on medically validated side effects which may be encountered by users of various contraceptives\. The NFPCB has conducted research with the support of joint project funds and will embark on a major informational and educational campaign to dispel those rumours which have no scientific basis\. The campaign will be designed to inform acceptors and community leaders about common and mostly minor side effects which often accompany initial and continued contraceptive use\. Trained community leaders can provide local counseling\. Also, through the Government's expansion of community health centres and the provision of mobile service units, increased professional back-up support is expected to be made readily accessible to those few individuals who do experience major difficulties with contraceptive use\. Greater emphasis will be made at the community level to create a com- munity awareness of the obstacles to contraceptive use and to encourage the community as a whole to support sustained contraceptive use\. 10\. Another of the major obstacles to the continued use of contracep- tives, especially those which must be renewed periodically, is a break, even a temporary one, in the chain of contraceptive supplies\. Here again, the Village Community Distribution Centre (VCDC) and the village acceptor groups will play a major part in ensuring that contraceptive supplies are available when and where they are needed\. The mobile service units, too, will contribute significantly to this effort\.  ANNEX 4 Page 6 11\. At the national level, a decision has been taken by the Government to make Indonesia as nearly self-sufficient in its contraceptive needs as possible\. With the likely phasing out of supplies through foreign assistance and grants, the Government is moving towards local production\. The Govern- ment launched a domestic IUD production program in 1974, which today supplies 100% of the national need\. A local oral contraceptive manufacturing capabil- ity is also planned; production is expected to begin in December 1977 and should provide all requirements by the end of the third five-year plan\. Program Support Activities 12\. In order to meet its medium-term objectives and respond to program needs, the NFPCB has identified principal program support activities which require strengthening\. These are: a\. Population Education: The Ministry of Education and Culture instituted the National Population Education Pro- ject to run in close collaboration with NFPCB\. The project, supported by joint project funds, has been operating for three years\. The earlier phase of the project had the limited objective of probing into the integration of pop- ulation education into the school curricula and out-of- school program\. The feasibility of such integration has been established\. With this in mind and with the decision to gradually introduce from 1976 over a three-year period the new curricula at all the stages of school education, acccompanied by a massive program of upgrading all teachers, the GOI decided to integrate population education in the national education system\. The program of the first phase of the National Population Education Project which was to end in 1978 was changed accordingly\. By the end of the second phase, 1979-80, population education will be assim- ilated in the educational system of the country covering all the primary, lower secondary and higher secondary schools of all types (general, vocational, technical, etc\.)\. It will become an integral part of the pre-service and in-service training of teachers at all levels\. Its management would become the responsibility of the existing educational administrative machinery of the Ministry of Education and Culture at different levels\. Thus, by 1980, population education would become an integral part of the activities of the Ministry of Education and Culture\. Though as a start, attention has been focused on integrating popula- tion education in formal and non-formal education, through the Ministry of Education and Culture, the plan is to incor- porate it in the activities of other ministries in due course\.  ANNEX 4 Page 7 b\. Tar!Ti4gR: The term, here is broadly defined to include both formal training of field-level personnel, community leaders and the like, as well as more informal training of other groups, such as personnel of national ministries and other agencies whose greater involvement in the pro- gram is desired\. It will be primarily through such train- ing that a common awareness and appreciation of the goals and objectives of the national family planning program are created and the basis for unified support to the program will be provided\. Training has been provided so far by a National Training and Research Centre (NTRC), six provincial training centres (PTCs) and four sub-provincial training centres (STCs) of the Indonesian Planned Parenthood Associa- tion (IPPA)\. Family planning training has also been pro- vided for medical and paramedical staff at four provincial and four sub-provincial public health training centres of the MOH\. The IPPA also operates 10 regional training facilities in the other islands\. Under the joint IDA/UNFPA- assisted project, six PTCs and 10 provincial STCs are being constructed to provide satisfactory facilities\. Training is now recognized as a development function which meets the needs of and strengthens the entire range of program opera- tions\. It is against this background that the NFPCB, in consultation with the concerned implementing units, is developing a single national training system, under its own administrative control which will be responsible for all family planning training activities\. In pursuance of these objectives, the NFPCB's Bureau of Education and Training will be expanded and developed and will replace the NTRC run by the IPPA\. At present, training facilities in the provinces of the other islands are ad hoc institu- tions, utilizing public buildings for training courses and staffed by part-time teachers brought in from various organizations\. The NFPCB will establish a full-time PTC in each of the 10 provinces in the course of the next two years; new buildings will be required to house these training centres\. In terms of staffing and facilities, the NFPCB intends to develop these training centres on the same lines as those in Java and Bali\. Their function will be to train all categories of personnel required for the province\. c\. Management Improvement: Improvement of the internal management of the program will be achieved through an improvement and strengthening of the coordinating func- tion both within the NFPCB itself, and between the  ANNEX 4 Page 8 NFPCB and the implementing units\. Improvement is con- tingent upon a careful and clear statement of the activ- ities, which each must undertake so that the function of each at the central, provincial and district levels are fully understood and implemented\. Since the major thrust of the program is to achieve the total involve- ment of the community and its institutions in the pop- ulation program, the management operation style at the community level will reflect traditional modes of oper- ation and will differ markedly from those existing at higher levels\. At the national level, the dialogue between population specialists and members of the legal profession will be continued and expanded with a view toward clarifying the legal aspects of the family plan- ning program, reconciling any discrepancies between reality and existing statutes, and investigating a variety of legislative approaches to encouraging the acceptance of family planning and the small family norm\. A variety of innovative approaches to encourage the greater participation, involvement and enthusiasm of communities in promoting family planning and the small family norm will be designed and executed\. These will include a number of incentive schemes which reward family planning achievements at the community level\.  ANNEX 4 Page 9 Table 1 INDONESIA II: MIXES OF CONTRACEPTIVES USED IN SETTING TARGETS OF ACCEPTORS Contraceptive Methods Year MIX A (%) MIX B (%'\. Oral IUD Condom Total Oral IUD Condom Total 1976-77 63 17 20 100 63 17 20 100 1977-78 60 17 23 100 60 20 20 100 1978-79 58 17 25 100 55 25 20 100 1979-80 56 18 26 100 54 26 20 100' 1980-81 54 18 28 100 53 27 20 100 1981-82 54 18 28 100 52 28 20 100 1982-83 52 19 29 100 51 29 20 100 1983-84 50 20 30 100 50 30 20 100 Source: National Family Planning Coordinating Board\.  ANNEX 4 Page 10 Table 2 INDONESIA II: ACCEPTOR TARGETS FROM 1976-77 TO 1983-84 AND EXPECTED FERTILITY RATES FOR JAVA AND BALI MIX A/1 Year Number of Acceptors (OOs) MWRAL2 Total Prevalence Birth Contraceptive Methods (0OOs) Fertility (a) RateL4 Oral IUD Condom Total Rate/3 1976-77 1,134 306 360 1,800 14\.302 4\.70 22\.4 35\.8 1977-78 1,200 340 460 2,000 14,602 4\.57 25\.1 34\.8 1978-79 1,218 357 525 2,100 14,909 4\.46 27\.5 34\.0 1979-80 1,232 396 572 2,200 15,316 4\.33 29\.3 33\.3 1980-81 1,242 414 644 2,300 15\.643 4\.33 30\.9 32\.7 1981-82 1,296 432 672 2,400 15, 980 4\.22 32\.4 32\.2 1932-83 1,300 475 725 2,500 16,324 4\.16 33\.9 31\.6 1983-84 1,300 520 780 2,600 16,675 4\.09 35\.2 31\.1 /1 Basis of estimation is woman-years of protection necessary for an essentially linear decline in total fertility rate (TFR)\. First-year continuation rates used are 92%, 62% and 21% respectively for Oral, IUD, and Condom\. Effective protection after allowing for accidental pregnancies and overlap of use with postpartum amenorrhea assumed to be 83% of woman-years of protection\. /2 MWRA: Married Women in the Reproductive Age Group (i\.e\., 15-44 years)\. /3 Total Fertility Rate - Base 5\.78 /4 Birth Rate - Base 44\.0\. Source: National Family Planning Coordinating Board\.  ANNEX 4 Page 11 Table 3 INDONESIA II: ACCEPTOR TARGETS FROM 1976-77 TO 1983-84 AND EXPECTED FERTILITY RATES FOR JAVA AND BALI MIX BL1 Year Number of Acceptors (000s) MWRA L2 Total Prevalence Birth Contraceptive Methods (000s) Eertili-ty (%) RateL4 Oral IUD Condom Total Rate R 1976-77 1,134 306 360 1,800 14,302 4\.70 22\.4 35\.8 1977-78 1,140 380 380 1,900 14,602 4\.58 25\.0 34\.9 1978-79 1,100 500 400 2,000 14,909 4\.47 27\.3 34\.0 1979-80 1,134 546 420 2,100 15,316 4\.37 29\.4 33\.3 1980-81 1,153 587 435 2,175 15,643 4\.26 31\.7 32\.4 1981-82 1,170 630 450 2,250 15,980 4\.16 33\.8 31\.7 1982-83 1\.186 674 465 2,325 16,324 4\.06 35\.9 30\.9 1983-84 1,200 720 480 2,400 16,675 3\.96 37\.9 30\.2 /1 Basis of estimation is woman-years of protection necessary for an essentially, linear decline in total fertility rate (TFR)\. First-year continuation rates used are 92%, 62% and 21% respectively for Oral, IUD, and Condom\. Effec- tive protection after allowing for accidental pregnancies and overlap of use with postpartum amenorrhea assumed to be 83% of woman-years of protection\. /2 MWRA: Married Women in the Reproductive Age Group (i\.e\., 15-44 years)\. /3 Total Fertility Rate - Base 5\.78 /4 Birth Rate - Base 44\.0\. Source: National Family Planning Coordinating Board\.  ANNEX 4 Page 12 Table 4 INDONESIA II: ACCEPTOR TARGETS FROM 1976-77 TO 1983-84 AND EXPECTED RATES FOR TEN OTHER PROVINCES MIX B5L Year Number of Acceptors (000s) MWRA/2 Total Prevalence Birth Contraceptive Methods (OOOs) Fertility (%) Rate/4 Oral IUD Condom Total Rate/3 1976-77 139 37 44 220 5,149 5\.76 4\.8 44\.2 1977-78 145 41 56 242 5,291 5\.68 6\.3 43\.6 1978-79 244 72 106 422 5,439 5\.57 8\.5 42\.7 1979-80 290 93 135 518 5,594 5\.43 11\.4 41\.6 1980-81 346 115 180 641 5,752 5\.28 14\.4 40\.5 1981-82 405 135 210 750 5,914 5\.13 17\.5 39\.3 1982-83 454 166 253 873 6,080 4\.98 20\.5 38\.2 1983-84 502 201 300 1,003 6,250 4\.83 23\.5 37\.0 /1 Basis of estimation is woman-years of protection\. First year continuation rate used was 60%\. Effective protection after allowing for accidental pregnancies and overlap of use with postpartum amenorrhea assumed to be 83% of woman-years of protection\. /2 MWRA: Married Women in the Reproductive Age Group (i\.e\., 15-44 years)\. /3 Total Fertility Rate - Base 6\.0\. /4 Birth Rate - Base 46\.0\. Source: National Family Planning Coordinating Board\.  ANNEX 4 Page 13 Table 5 INDONESIA II: ACCEPTOR TARGETS FROM 1979-80 TO 1983-84 AND EXPECTED RATES MIX BL/' Year Number of Acceptors (000s) MWRAL2 Total Prevalence Birth Contraceptive Methods (000s) Fertility (%) Rate 4 Oral IUD Condom Total Rate /3 1979-80 44 21 17 82 1,841 5\.9 2\.00 45\.2 1980-81 48 25 18 91 1,889 5\.8 4\.98 44\.1 1981-82 72 39 28 139 1,943 5\.6 7\.46 43\.2 1982-83 90 51 35 176 1,992 5\.5 10\.49 42\.0 1983-84 108 65 42 215 2,051 5\.3 13\.46 40\.9 /1 Basis of estimation is woman-years of protection\. First year continuation rate used was 60%\. Effective protection after allowing for accidental pregnancies and overlap of use with postpartum amenorrhea assumed to be 837/ of woman-years of protection\. /2 MWRA: Married Women in the Reproductive Age Group (i\.e\., 15-44 years)\. /3 Total Fertility Rate - Base 6\.0\. /4 Birth Rate - Base 46\.0\. Source: National Family Planning Coordinating Board\.  ANNEX 13 Page 1 Table 1 INDONESIA II: SCHEDULE OF CIVIL WORKS Province Town Facility size m2 Jakarta Jakarta NFPCB's Bureau of Education and Training 2,250 Aceh Banda Aceh Provincial Training Center Type I (PTCI) 1,500 NFPBC Provincial Offices Type 1 (PO1) 650 North Sumatra Medan PTC1 1,500 PO1 650 West Sumatra Padang PTC1 1,500 PO1 650 South Sumatra Palembang PTC1 1,500 PO1 650 Lampung Tanjung Karang Provincial Training Center Type 2 (PTC2) 1,200 NFPCB Provincial Offices Type 2 (P02) 600 West Kalimantan Pontianak PTC1 1,500 PO1 650 South Kalimantan Banjarmasin PTC1 1,500 PO1 650 North Sulawesi Menado PTC2 1,200 P02 60o South Sulawesi Ujung Pandang PTC1 1,500 PO1 650 West Nusatenggara Mataram PTC2 1,200 P02 600 Source: National Family Planning Coordinating Board\.  ANNEX 13 Page 2 Table 2 (A) INDONESIA II: NFPCB's BUREAU OF EDUCATION AND TRAINING SCHEDULE OF ACCOMMODATION Space Personnel Visitors Capacity Area h2) I\. OFFICE Bureau Chief 1 5 6 24 Secretary to Bureau Chief 2 3 5 15 Sub-Director 2 x1 2 x 2 2 x3 40 Secretary to Sub-Director 2 3 5 15 8ecretary 1 4 5 20 Secretariat 7 3 10 40 Training Division 7 3 10 40 Trainer 5 5 10 40 Field Services 3 - 3 20 Documentation Services - - - - _ Documentalist & IBM Typist 4 - 4 24 Camera Processor, Operator and Layout Artist, Plate Maker 3 - 3 60 Offset Press Operator 2 _ 2 25 Prototype Development - Photographer and Dark Room 2 _ 2 25 Technician Artist 3 - 3 15 Script Writers 3 _ 3 15 Exhibit Mechanics 1 1 18 Video Technician 1 1 18 Small Studio - - 30 Recording Technician 1 1 18 Projectionist 1 - 1 18 Research Division 5 2 7 35 Division of Curriculum Development 3 3 6 30 Supervision Division 3 3 6 30 TOTAL 615  ANNEX 13 Page 3 Table 2 (A) (contd\.) Space Personnel Visitors Capacity Area (m2) II\. TRAINING Auditorium 150 - 150 Classrooms 2x30 2 x30 2 x 30 100 Discussion Rooms 2 x 15 - 2 x 15 60 Operation Room 32 _ 32 60 Library 5 15 20 70 Reception - - - 12 452 III\. HOSTEL Bedroom Accommodation 50 50 275 Dining Room 80 + 20 - 80 + 20 125 Kitchen _ 50 Laundry - - 23 Worship Room 15 15 15 Storage - - - 20 Bathroom and Toilet - - - 85 Mechanical - - - 20 Hostel Warden Quarters - - - 50 Sitting Room - - - 40 703 TOTAL I + II + III 1)770 m2 Circulation, walling, etc\. 480 m2 TOTAL GROSS AREA 2,250 m2 SUMMARY I\. OFFICE 615 II\. TRAINING 452 III\. HOSTEL 703 CIRCULATION, Etc\. 480 TOTAL 2,250 m2  ANNEX 13 Page 4 Table 2 (B) INDONESIA II: PROVINCIAL TRAINING CENTRE TYPE I SCHEDULE OF ACCOMMODATION Space Personnel Visitors Capacity Are I\. SCHOOL BUILDING Director's Room 1 4 5 20 Secretariat Room 6 6 12 42 Trainer's/Teacher's Room 6 6 12 42 Library 3 15 18 60 AVA Room 1 2 3 10 Mimeograph Room 1 2 3 10 Storage - - - 10 Classrooms 2 x30 2 x10 2 x40 120 Discussion Room 2 x 15 - 2 x 15 50 Operation Room 4o - 40 50 4114 II\. HOSTEL ACCOMMODATION Bedroom Accommodation 50 - 50 280 Dining Room 50 30 80 100 Kitchen 4 - 4 60 Sitting Room - - - 4 Worship Room 15 - 15 15 Laundry 2 - 15 Director Quarters -70 Hostel Warden Quarters 50 Bathroom and Toilets (10 units) - 80 Servants Room, Bathroom and Toilet 2 - 2 15 Storage - - 15 740 TOTAL I + II 1,9154 m2 Circulation, walling, etc\. 346 m2 TOTAL GROSS AREA 1,500 m2 i4OTES: PTC, Type I (1O00 m2) - The two classrooms should be separated from each other by a movable screen in order to facilitate using them for opening/closing ceremonies\. Student bedroom: maximum 3 - 4 persons each bedroom\.  ANNEX 13 Page 5 Table 2 (C) INDONESIA II: PROVINCIAL TRAINING CENTRE,TYPE II SCHEDULE OF ACCOMMODATION Area Space Personnel Visitors Capacity (m2) I\. SCHOOL BUILDING Director's Room 1 4 5 20 Secretariat Room 6 6 12 42 Trainer's/Teacher's Room 6 6 12 42 Library 3 15 18 60 AVA Room 1 2 3 10 Mimeograph Room 1 2 3 10 Storage - - - 10 Class Rooms 30 20 50 70 Discussion Room 2 x 15 - 2 x 15 50 Operation Room 35 _ 35 50 364 II\. HOSTEL ACCOMMODATION Bedroom Accommodation 30 - 30 180 Dining Room 30 20 35 80 Kitchen 3 - 3 40 Sitting Room - - _ 35 Worship Room 15 - 15 15 Laundry 2 - - 15 Director Quarters - 70 Hostel Warden Quarters - - 50 Servant's Room, Bathroom and Toilet 2 2 15 Bathroom and Toilets - - 48 Storage - 15 563 TOTAL I + II 927 m2 Circulation, walling, etc\. 273 m2 TOTAL GROSS AREA 1200 m2 NOTES: PTC,Type II (1,200 m2) - classroom and conference room should be separated from each other by a movable screen (sec\. 2\.1\.)\. Students bedroom: maximum 3-4 persons each bedroom\.  ANNEX 13 Page 6 Table 2 (D) INDONESIA II: PROVINCIAL OFFICE, EYPE I SCHEDULE OF ACCOMMODATION Space Personnel Visitors Capacity ArAa Director 1 5 20 Secretary, Division Chief\. Project Officer 8 15 24 84 Sub-Division Chiefs, Treasurers I4 28 42 126 Staff, Typists 19 0 19 76 Central Data, Library Mimeograph _- - 70 Storage - - 60 Conference Room - - 72 Toilet __- 12 Sub-total 42 520 m2 Circulation, walling, etc\. 130 m2 TOTAL GROSS AREA 650 m2 Table 2 (E) INDONESIA II: PROVINCIAL OFFICE,TYPE II SCIHEDULE OF ACCOMMODATION Space Person el Xii\. tors Capacity (m2) Director 1 2 5 20 Secretary, Division Chief, Project Officer K 24 84 Sub-Division Chief, Treasurer 4< 42 126 Staff, Typists 19 76 Central Data, Library, Mimeograph - - 60 Storage - - 40 Conference Room - - 60 Toilet - - 12 Sub-total 42 478 m2 Circulation, walling, etc\. 122 m2 TOTAL GROSS AREA 600 m2  Table 3 INDONFSIA II: CIVIL WORKS IMPLEMENTATION SCHEDULE Province- Facility Location 1977 1978 1979 1 2 3 4 5 6 7 8 9 ID U 12 1 2 3 4 5 6 7 8 9 D R 121 1 2 3 4 5 6 7 8 9D0 U r 123456789131112123456789II311121234567891311 Jakarta Bureau(2,250m2) Jakarta iIi | Aceh PTC I (1,5OOm2) Banda Aceh PO I ( 650m2) Lampung PTC II (1,200m2) Tanjung Karang PO II ( 600Dm2) S\. Kalimantan PTC I (1,500m2) Banjarmasin PO I ( 65Dm2)__ N\. Sulawesi PTC II (1,20Om2) Menado PD II ( 60Dm2) W\. Nusatenggara PTC 11 (1,200m2) Mataram C L1 I Po II ( 600m2) S\. Sumatra PTC I (1,500m2) Palembang PO I ( 65Dm2) W\. Sumatra PTC I (1,500m 2) Padang PO I ( 65Dm2) N\. Sumatra PTC I (1,500m2) Medan PO I ( 65Dm2) W\. Kalimantan PTC I (1,50Dm2) Pontianak PO I ( 65Dm2) 'Oa S\. Sulawesi PTC I (1,500m2) Ujung Pandang _ PO I ( 65Dm2) Furniture i!I!I'}fLL1ILI -1 /1 In order of construction priority\. LEGEND: g Preliminary Designs Bureau - NFPCB Bureau of Education and Training PTC I - Provincial Training Centre Type I flhJiffl7flIfl Production Drawings and Documentation PTC II = Provincial Training Centre Type II PO I NFPCB Provincial Office Type I Bidding and Evaluation PO II = NFPCB Provincial Offiee Type TT Construction Post Contract Work Source: National Family Planning Coordinating Board\.   110- TIS\. iio- IS\.'~~~~~~~~~~~~~~~~~~~~~~~~~3 ip EC' ANAR - THAILAND SORE N DON ESI I nN2AceE > /PHILIPPINIES ADMINISTRATION AND POPULATION \. (2 1 ?'< > Ya South China Seo BR UNEI A_xYFj4 - - IN-ATRIDUL ROURIEAU \ \.< 5 t Ri6;1EIIF I r ' ' '' '' ' ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~F) -IqI \.1 ,FU 12 21' ~~K\. 1PLI-ND-9-POEAE\.U\.SR p -ETLEOEUDE O \ tS 8@ 9' SrEniuxPlnGnqL 4 -- 0 e tHALMAHERA f G a C / f b c O c e a n E'~~~~~~~P2\. 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APPROVAL

P082056

Documentof The World Bank FOROFFICIALUSEONLY ReportNo: 30402 - PY PROJECTAPPRAISAL DOCUMENT ON A PROPOSEDLOAN INTHEAMOUNTOFUS$22\.0MILLION TO THE REPUBLIC OF PARAGUAY FOR THE MOTHER AND CHILD BASIC HEALTHINSURANCE PROJECT September21,2005 HumanDevelopmentSector ManagementUnit Argentina, Chile, ParaguayandUruguayCountryManagement Unit Latin America and the CaribbeanRegionalOffice This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World  CURRENCY EQUIVALENTS (ExchangeRate Effective September 20,2005) CurrencyUnit = ParaguayanGuarani (PYG) 6,124\.82\.00 PYG = USD 1 0,00016327USD = 1PYG FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS HIVIAIDS HumanImmunodeficiency VirusIAcquired Immune Deficiency Syndrome APL Adaptable ProgramLoan BCP Paraguay Central Bank (Banco Central del Paraguay) CAS Country Assistance Strategy CEPEP Center for Population Studies-Paraguay CFAA Country Financial Accountability Assessment DGAF General Financing Administration Directorate (Direccidn General de Administracidn Financiera) DR RegionalHealthDirectorate(DireccidnRegional de Salud) DWAs Direct Withdrawal Applications ENDSSR National Demographic, Sexual and Reproductive Health Survey (Encuesta Nacional de Demografia y Salud Sexual y Reproductiva) ENS National Health Survey (EncuestaNacional de Salud) EPS EssentialPackageof Services (PaqueteEsencial de Sewicios) FMAR Financial Management Assessment Report FOE EssentialObstetric Functions (FuncionesObstktricas Esenciales) FY Fiscal Year GNP Gross National Product IDB Inter-American DevelopmentBank IBRD International Bank for Reconstruction and Development (World Bank) ICB InternationalCompetitive Bidding IEC Information, Education and Communication IESCIE IntegratedEnvironmental, Social, Cultural and IndigenousEvaluation ITU Insurance Technical Unit IPS Social Security Institute (Instituto de Previsidn Social) INDI National IndigenousInstitute IMCI IntegratedManagement of Childhood Illness MCBI Maternal and Child Basic Health Insurance M C H Mother and ChildCare MDGs MillenniumDevelopment Goals MH Ministryof Finance (Ministerio de Hacienda) MSPBS Ministry of Public Health and Social Welfare (Ministerio de Salud PEiblica y Bienestar Social) NCB National Competitive Bidding NGO Non-Governmental Organization OECD Organization for Economic Cooperation and Development OM OperationalManual PAHO Pan-American Health Organization PAU InternationalProjects Administration Unit PHRD Policy and Human Resources Development Fund financed by the Government of Japan  FOROFFICIALUSEONLY PSM Proyecto de Salud Matemo Infantil RHS ReproductiveHealth Survey SA Special Account SIAF Central Integrated Administration System (Sistema Zntegrado de Administracidn) SEAM Ministry of Environment (Secretariadel Ambiente) SENASA Directorateof EnvironmentalHealth inMSPBS (Direccidn de SaludAmbientul) SOEs Statement of Expenditures STD Sexually Transmitted Diseases TA Technical Assistance TOR Terms of Reference UNDP UnitedNations Development Programme UNFPA United Nations PopulationFund UNICEF UnitedNations Children's Fund uoc Operational Contracting Unit USAID United States Agency for InternationalDevelopment Vice President: PamelaCox Country Director Axel van Trotsenburg Sector Director Evangeline Javier Sector Manager Keith Hansen Country Sector Leader Jesko Hentschel Co-Task TeamLeaderslTask Managers: MontserratMeiro-Lorenzo and Femando Lavadenz This document has a restricteddistribution and may be used by recipients only in the performance of their official duties\. I t s contents may not be otherwise disclosed without World Bank authorization\.   PARAGUAY MOTHERAND CHILD BASICHEALTHINSURANCEPROJECT CONTENTS PAGE A\. STRATEGIC CONTEXT AND RATIONALE\. 3 1\. Country and sector issues\. 3 2\. Rationalefor Bank involvement\. 5 3\. Higher levelobjectives to which the Project contributes \. 6 B\. PROJECT DESCRIPTION\. 7 1\. Lending instrument\. 7 2\. Project development objective and key indicators \. 7 3\. Project components\. 9 4\. Lessons learned and reflected inthe Project design \. 12 C\.5 IMPLEMENTATION\. \. Alternatives considered and reasons for rejection\. 13 13 1\. Partnership arrangements\. Not applicable \. 13 2\. Institutional and implementation arrangements\. 13 3\. Monitoring and evaluation of outcomeshesults \. 18 4\. Sustainability\. 18 5\. Critical risks and possible controversialaspects \. 19 6\. Loadcredit conditions andcovenants \. 21 D\. APPRAISAL SUMMARY\. 21 1\. Economic and financial analyses\. 21 2\. Technical \. 22 3\. Fiduciary\. 22 4\. Indigenous and Social\. 22 5\. Environment \. 24 6\. Safeguard policies\. 24 Annex 1:Country and Sector or ProgramBackground\. 25 7\. Policy Exceptions and Readiness\. 24 Annex 2: Major Related Projects Financedby the Bank and/or other Agencies\. 30 Annex 3: Results Framework and Monitoring\. 33 Annex 4: DetailedProject Description\. 37 Annex 5: Project Costs \. 41 Annex 6: Implementation Arrangements\. 42 Annex 8: Procurement Arrangements \. 54 Annex 9: Economic and Financial Analysis\. 59 Annex 10: Safeguard Policy Issues \. 70 Annex 11:ProjectPreparation and Supervision\. 78 Annex 12: Documents inProject File\. 79 Annex 13: Letter from Government of Paraguay in Support of Mother and ChildBasic Health Insurance Project\. 80 Annex 14: Statement of Loans and Credits \. 83 Annex 15: Paraguay at a Glance\. 84 Map IBRD33464   PARAGUAY MOTHERAND CHILD BASIC HEALTHINSURANCEPROJECT PROJECTAPPRAISAL DOCUMENT LATINAMERICA AND THE CARIBBEAN LCSHH Date: September 20,2005 Co-Team Leaders: Montserrat Meiro-Lorenzo and FernandoLavadenz Country Director: Axel van Trotsenburg Sectors: Health (100%) Sector Managermirector: Evangeline Javier Themes: Health system performance (P) Project ID: PO82056 Environmental screening category: B Lending Instrument: Specific Investment Loan Safeguard screening category: Limited impact For Loans/Credits/Others: Total Bank financing (US$m\.): 22\.0 million RECONSTRUCTIONAND DEVELOPMENT Total: 21\.73 3\.27 25\.00 Borrower: Republic of Paraguay Responsible Agency: Ministry of Public Health and Social Welfare (MSPBS) Does the Project depart from the CAS incontent or other significant respects? [ ]Yes [XINO Does the Project require any exceptions from Bank policies? Ref\. PAD D\.7 [ ]Yes [XINO Have these been approved by Bank management? ]Yes [ IN0 I s approval for any policy exception sought fromthe Board? [ ]Yes [XINO Does the Project include any critical risksrated "substantial" or "high"? Ref\. PAD C\.5 [XIYes [ ] N o Does the Project meet the Regional criteria for readiness for implementation?Ref\. [XIYes [ ] N o  Project development objective Ref\. PAD B\.2, TechnicalAnnex 3 The overall Project development objective i s to contribute to the reduction of Paraguay's maternal and infant mortality by increasing the use of selected life-saving services included in the Mother and Child Basic Health Insurance Program (MCBI) by women of child-bearing age and children under age six in Project Areas\. To achieve this objective, the Project would help to: (i) and implement the MCBI create Program; (ii) improve quality and efficiency of the health service network in the Project Areas; (iii) increase the Ministry of Public Health and Social Welfare's (MSPBS) management capacity and transform the operational culture of the health care system to a system that rewards providers for increasing health care coverage and increasing productivity; and (iv) increase the population's participation inthe social monitoring of basic and first referral-health services inthe Project Areas\. Project description Ref\. PAD B\.3\.a, TechnicalAnnex 4 The proposed Project has five components as listedbelow: (a) Extendthe delivery of the Essential Packageof Services (EPS) to women of child-bearing age and children under age six (target population) inthe 10poorest departments of the country (Project Areas) under the Mother and Child Basic Health Insurance Program(MCBI); (b) Establishthe Mother and ChildBasic HealthInsuranceProgram(MCBI) and strengthen the Ministry of Public Health and SocialWelfare's (MSPBS) capacity to lead and implement the MCBI; (c) Introduce social management of M C B Ito ensure the target population, particularly those that have been historically marginalized, has adequateknowledge and motivation to seek the EPS and facilitate enrollment of the target populationinthe program; (d) Enhance the monitoringandevaluationcapacity of the MSPBSparticularly with respect to the MCBI, includingfinancingconcurrent audits; and (e) Support technical assistance, materials, and operational costs required for Project management\. Which safeguardpolicies are triggered, if any? Ref\. PAD D\.6, TechnicalAnnex I O EnvironmentalAssessment, Indigenous Peoples, Cultural Property Significant, non-standard conditions, if any, for: None Board presentation: None Loadcredit effectiveness: (i)AdoptionofProjectOperationalManualsatisfactorytotheBank; Covenants applicable to Project implementation: Retroactivefinancing:The Bank would finance expenditures incurred after July 1,2005 up to US$2\.2 million (10% of the total Loan amount)\. Disbursement Conditions: No disbursements would be made for the Capitation Payment category, until the following conditions are met: i\. EstablishmentoftheMCBIaccount; ii\. Contractingofthetechnicalandfinancialconcurrentauditors; iii\. ApprovalbytheBankoftheMCBIOperationalGuidelines; iv\. Specific disbursements from the Capitation Payments category to an individual department would be conditional on the signingof the first "Annual Management Agreement" for that department; v\. The implementation of the MCBIAccount specific financial management system; and vi\. Prices inthe Nomenclador (list of identified services) are set\. 2  A\. STRATEGIC CONTEXTAND RATIONALE 1\. Country and sector issues Inthe late 1990s,Paraguayentered aneconomic crisis fromwhich itis barely starting to recover\. Per capita income fell by 15 percent to US$l,lOO1in 2003\. According to official statistics, from 1995 to 2002, poverty rose from 30 to 46 percent and in 2003-04, it was estimated at about 41\.4 percenta2The situation i s worse inrural areas with about two-thirds of the population below the poverty line, which i s particularly worrisome since about half of the country's population lives inrural areas\. Partof the decline inpercapita income is due to the economic crisis inthe region, butpoverty also increased becauseof the country's political instability, poor economic performance and the inefficiency and lack of transparency of the public sector\. Moreover, pre-existing inequalities increased during the crisis and require proactive pro-poor public policies\. The crisis deepenedalready existing structuralproblems inthe health sector and aggravated health service disparities between the rich and poor, rural and urban populations, and among departments\. Since the election of a new Government in August 2003, both the political and economic situations have shown signs of stabilization\. The economy grew in2003 and 2004 at 2\.6 and 2\.9 percent, respectively, reflecting favorable external conditions (stabilization inArgentina and highsoybean prices), and increased confidence in the policies of the current Administration\. Projections for 2005 are for growth to be around 3 percent, with fiscal accounts in overall equilibrium and with single-digit inflation, but subject to continued confidence by the private sector\. Nevertheless, real growth prospects in the mediumterm are barely sufficient to keep up with Paraguay's population increase\. Health Status: According to official data, Paraguay has one of the highest maternal mortality rates inthe region (182 registered deaths per 100,000 live births, 2002)3, and a stagnant Infant Mortality Rate (IMR)\. Results of the most recent national survey suggest an IMR of 29 per 1,000 live births4for the 1999-2004 period\. Paraguay has made the slowest progress inreducing infant mortality inthe last 50 years inthe region\. Furthermore, with a total fertility rate of about 2\.9 children per woman,5 Paraguayhas the second highest population growth rate in the region, and will double its population by 2015\. The burden of disease and mortality fall disproportionately on the poor and vulnerable, especially rural and indigenous women and children\. Without substantial effort, trends in health indicators would persist, making it unlikely for the country to achieve the health Millennium Development Goals (MDGs) by 2015\. The country's epidemiological profile, several studies, and empirical evidence, all suggest that the causes of death amongpoor women and children in Paraguay-such as hemorrhages, abortions, and neonatalcauses-result from insufficient utilization of healthcare facilities and inadequate health-seeking practices\. Therefore, in order to reduce maternal and child mortality in Paraguay, it will be necessary to increase the quality and use of basic and first-referral health services by the poor\. According to a recent World Bank report6, the main bottleneck to health service delivery in Paraguay today i s not the availability of infrastructure (capacity utilization of healthfacilities is, on average, only about 50 percent), but rather supply bottlenecks (linked to the availability of serviceshputs) and demand factors (such as low utilization among the poor)\. 1Calculated according to World Bank Atlas method\. Direccidn General de Estadistica, Encuestas y Censos\.Estadisticas recientes de Pobreza en Paraguay (2004)\. Official Ministry of Health data are believed to underreport the Infant Mortality Rate (IMR) by as much as 30 percent\. Current unofficial data has been calculated by PAHO\. National Demographic, Sexual and Reproductive Health Survey, 2004\. Ibid\. User Fees and the Quality of Public Health Care inParaguay\. World Bank (2005), forthcoming\. 3  On the service supply side, ineffective healthcare andthe low and delayed use of healthfacilities by the poor result from the following key sector issues: (i) insufficient, inefficient and inequitable allocation of public funds and inputs; (ii) poor service quality; (iii) managerial capacity; and, (iv) weak low perceived quality of care (e\.g\. mistreatment, lack of drugs)\. Experience in Paraguay with reforms in other sectors suggests that efforts to address similar sector issues also need to deal with accountability, transparency,trust, and governance-the lack of which would hamper any effort of change\. Demand issues are also hampering the use of services by the poor\. Studies and service data indicate that economic, cultural, and geographic barriers keep poor patients away from public health services\. Moreover, although mistrust of and dissatisfaction with public service providers rank high among the poor, there are no patient-led efforts to improve such services\. This indicates that poor people do not see demanding better services as a possibility or a right\. Further, preventive practices and healthy lifestyles are also at times not valued sufficiently or simply not known\. Studies inthe region suggest that the lack of actionable knowledge about personal and community hygiene, nutrition, family planning, and sources of infection, among others, is not the only cause of unhealthy lifestyles\. Rather, the perceived higher personal costs and lower personal benefits of adopting new lifestyle practices have as much, and even more, impact on individual and community behavior\. Inthe short term, as a result of the crisis in the late 1990s combined with longer-term trends in health indicators, the main challenge for public policy in health i s to ensure access of the poor and excluded to basic health services\. Simultaneously, there i s a needto introduce much-needed structural and system changes to improve the efficiency, effectiveness andtransparency of the health system\. The Government's health sector strategy i s responding to the sector priorities through its National Health Plan\.7 The central tenet of this plan i s to reduce maternal and child mortality by improving access to quality health services and expanding the coverage of basic health care to those who cannot afford to pay for it, through targeted increases inpublic sector spending inthe health sector\. The key strategy to achieve this goal i s to initiate the implementation of the Mother and Child Basic Insurance Program (MCBI), which would progressively increase the availability and effectiveness of public subsidies to improve the health status of the poor\. All women of reproductive age and children under six years of age in the participating geographical areas (10 out of 17 departments and 10 out of 18 health regions) would be eligible for the program\. Rather than a contributory health insurance, the M C B I i s a publicly-subsidized package of basic health services selected to address the main causes of maternal and child mortality inParaguay\. Both the package of services and the operation of the MCBIwere designed to reduce the barriers to the use of basic health services by the poor and indigenous people, particularly in rural areas\. Other key reforms in the National Health Plan include the progressive development and implementation of the National Health Law 1032/96\.The 1032/96Law included: (i) the implementation of a National Health Fund as a general executive directorate in charge of the sector's financing policy, andimplementing and managing the NationalHealth Insurance (the creation of the MCBIis the first step in that direction); (ii) creation of the Health Superintendence (Superintendencia de Sulud) by the the National Executive Directorate; and (iii) the establishment of Local and Regional Health Councilsg to increase socialparticipationinthe oversight of health service delivery\. * HealthPolicy, Ministry of Healthand SocialWelfare, September2003\. The Superintendenciade Salud is a semiautonomousbody with the role inter alia to control and enforce the quality standards for health service provision, established by the MSPBS, among the public and private health care roviders\. `The RegionalandLocal HealthCouncilsare socialparticipationbodiesregulatedthroughLaw 1032/96\.These councils include representativesfromlocal Governments, civil society groups andthe localhealthauthorities\. 4  The Government is committed to major changes inthe health sector, as stated inParaguay's draft Poverty Reduction Strategy (2004)\. The Government is seeking to increase investments inhealthpolicies that enhance equity and increase access to health services for the poor\. Between 2003 and 2004, the Ministry of Public Health and SocialWelfare's (Ministerio de Salud Pliblica y Bienestar Social, MSPBS) health budget was increasedby about 5 percent innominal terms\. The Government approached the Bank for financing the implementation of the MCBIProgramand for technical assistance to design a financing mechanism for the Program that would: (i) increase transparency in resource allocation; (ii) establish an efficiency enhancing incentive framework for departments and service providers by linking the availability of resources to their output performance; and (iii) take advantage and support implementation of existing legislation and administrative framework to establish such framework\. The MSPBS has organized a qualified and highly motivated team to design and help manage the MCBI, including the preparation of this Project and the implementation of several other aspects of the sector strategy\. The mainfocus of the proposed Project i s to support the launch of the MCBIin 10departments of the country (selected because they have the highest maternal and infant mortality rates, unmet basic needs and highpoverty levels --see Annex 4)\. The Project would support actions that are essential to the successful implementation of the MCBI such as: (i) strengthening the Ministry of Public Health and Social Welfare (Ministerio de Salud Pdblica y Bienestar Social, MSPBS) and health service providers" to implement the MCBI; (ii) designing and implementing a communication and social monitoring strategy for the implementation of the MCBI; and (iii)supporting the Government's efforts to establish a comprehensive monitoring and evaluation strategy for the MCBI\. The MCBI would help the MSPBS to reorient its approach from financing inputs to rewarding performance, and make public subsidies in the health sector significantly more progressive and effective\. Estimates show that with full implementation, the MCBI could reduce infant and maternal mortality by about 30 percent in the 10 poorest departments in Paraguay, and, as a result, achieve about 13 percent reduction of the overall infant and maternalmortality over the next five years\. 2\. Rationalefor Bank involvement Over the past decade, the Bank involvement inParaguay has been limited since social unrest and implementation difficulties increased the portfolio risk rating\. However, since the new Administration took office inAugust 2003, Bank assistance has resumed and several new operations have been approved bythe Board, including aFinancial Sector Technical Assistance Project (Loan No\.72870) and a Technical Assistance Loan (Loan No\.72860) for the Modernization of the Ministry of Finance\. Inthe health sector, the only Bank loan in the last decade was the recently-closed Maternal Health and Child Development Project - (PSM)\." This Project financed improvements in the basic infrastructure and equipment needed to provide maternal and child services in the six poorest departments in the country and trained health personnel of those departments in obstetric emergencies and integrated childhood diseases\. However, available outcome information and improvements incoverage targets fell short of expectations\. Through this experience, the Bank has developed important knowledge of the dynamics and constraints governing the process of health sector reform in Paraguay\. Lessons learned from the difficulties encountered in the PSM are included in the design of the proposed Project\. Specifically, those lessons indicate that to support changes in the health sector, a purely supply-oriented approach is insufficient, and hence the design of the proposed Project i s more demand-oriented\. loProviders would include public, andpotentially private, health facilities that would be certified, according to criteria establishedby the InsuranceTechnical Unit (ITU), to offer the basic packageof services under the MCBI\. l1The early stages of implementation of this Project were challenging and disbursementswere low, which resulted inanoverall "unsatisfactory" ratingat closing\. Yet, after the Projectwas restructuredin2001, itmadeimportant improvements to the functioning andcapacity of the health care system\. 5  The Bank i s currently financing a number of innovative approaches to maternal and child health inthe region, withimportant lessonsfor the proposedoperation inParaguay\. The Bankhasbeenactive in the region in assisting Governments to formulate "insurance and quasi-insurance models" with performance-based financing for publicly-financed health care provision, and thus can draw on a variety of experiencesfrom implementationof such insurance schemes inother countries\. The proposed operation would benefit from the link the Bank can establish between the proposed Project and other Bank-financed operations in other sectors+specially the economic sector\. In particular, there are strong links with the budget process changes advanced under the recently approved Technical Assistance Loan for the Modernization of the Ministry of Finance Project (P087036, Ln\. 72860), which aims to fundamentally reform the budget, the planning process, and the monitoring system of the Ministry of Finance\. Accordingly, the MSPBS has been selected as a pilot institution to introduce a results-based budgeting system\. The proposed Project would support this process by introducing results- based allocation of funds, and by strengthening the management capacity of the MSPBS's General Financing and Administration and Directorate (DGAF)\. Finally, the proposed implementation of Information, Education and Communication (IEC) strategies in rural areas aimed at modifying the Knowledge, Attitudes, and Practices of the communities related to improve the access to, and utilization of healthfacilities, are linked to Bank-financed operations inthe ruraland agricultural sectors\. Traditionally, there has been relatively loose donor coordination inthe health sector inParaguay, but the MSPBS, with active support from the Bank, is fostering a much stronger collaboration, especially with respect to the implementation of the MCBIProgram\. The MSPBS and the Bank team are working in close coordination with a team from the Inter-American Development Bank (IDB) as an IDB-financed Health Sector Credit i s restructured in order to support and complement the Government's health sector program and the proposed Project\. The United Nations Children's Fund (UNICEF) and the United Nations Population Fund (UNFPA) have supported Project preparation with technical assistance in the areas of health services for the indigenous population and reproductive health, and have expressed their support for the Government's overall program\. The Pan American Health Organization (PAHO) is also supporting the Government's program\. Finally, the Bank has closely coordinated with the U\.S\. Agency for InternationalDevelopment (USAID) on their work indecentralization and social pharmacies, and with other bilateral agencies, which play a smaller role inthe sector\. 3\. Higher levelobjectives to which the Project contributes The proposed Project i s consistent with the Country Assistance Strategy (CAS) and the Borrower's National Poverty Reduction Strategy Pape/' and Health Sector Strategy general objectives of reducing poverty and increasing the well being of the population\. The Paraguay CAS (November 2003, Report No\. 27341-PA) i s built on four pillars addressing: (i) and financial sector stabilization; (ii) fiscal improved governance and transparency in public administration; (iii) enhanced and sustained growth, in particular in rural areas where poverty is most concentrated; and (iv) social inclusion-improved coverage and efficiency of basic social services to help meet the Millennium Development Goals (MDGs)\. The proposed Project directly supports pillars ii,iii and iv\. The proposed Project would contribute to the higher level objective of poverty reduction and human development\. The MCBI Programhas a strong poverty focus\. First, the program would initiate its implementationinthe poorest areas of the country\. Second, the program targets women and children, the most vulnerable groups of the poor population\. Finally, the selected departments are eminently rural and l2 Estrategia Nacional de Lucha Contra laPobreza, la Desigualdady la Exclusi6nSocial, Presidencia de la Rep~blica,Gabinete Social, Secretaria de Acci6n Social\. Julio 2004\. 6  are home to over 70 percent of the country's indigenous population (both are traditionally excluded groups)\. The MCBIProgramwould include special outreach activities targeting these two groups\. B\. PROJECTDESCRIPTION 1\. Lendinginstrument The proposed Project would be a Specific Investment Loan (SIL)\. This Project would focus only on the initial stages of the implementation of the Government's health sector program by financing the launch and then the scaling-up of the MCBI Program\. Focusing on this initial stage recognizes the historical high risks of lending operations in Paraguay and ensures that the Bank financing would be directed to the most poverty afflicted departments as a matter of priority\. 2\. Project development objective and key indicators The overall Project development objective i s to contribute to the reduction of Paraguay's maternal and infant mortality by increasing the use of selected life-saving services included in the MCBI by women of child-bearing age and children under age six inProject Areas\. To achieve this objective, the Project would help to: (i) create and implement the M C B IProgram; (ii) improve quality and efficiency of the health service network in the Project Areas; (iii) increase the MSPBS's management capacity and transform the operational culture of the health care system to a system that rewards providers for increasing health care coverage and increasing productivity; and (iv) increase the population's participationinthe social monitoring of basic and first-referral health services inthe Project Areas\. It is expected that the implementation of these actions would contribute to the reduction of the country's overall infant and maternal mortality\. The country-wide infant mortality baseline i s 29 per 1,000 live births13, yet an end-of-project quantitative target i s difficult to establish since data is representative only at the national level, not at the level of the Project intervention areas\. For maternal mortality, the Government i s currently carrying out a study (financed with PHRD funds) that would establish the baseline data\. Therefore, the only outcome indicator that would be reliable at the levelof the Project Areas i s maternal mortality\. The following key performance indicators would be used for the Project Areas: (a) percentage reduction inMaternalMortality Rate; (b) percentageof institutionaldeliveries (attended inhealth facilities by trainedpersonnel); (c) percentage of infant deaths that are audited; (d)percentage of maternal deaths that are audited; (e) percentage of public health providers meeting annual certification standards to provide the MCBIpackage; (f) percentage of population that knows the role and actions of, and trusts the Local Health Councils (measured by the ~onfidence'~index); and (g) percentage of population satisfied with the MCBIservices (measuredby the 10yalty'~index)\. These key performance indicators and others listed in Annex 3 would be measured through the administrative health information system and evaluations that would compare results in Project Areas to those inthe rest of the country, before and after the intervention\. The baseline data for indicator (i) would l3National Demographic, Sexual and Reproductive Health Survey, 2004\. l4Confidence inthe LocalHealth Councils would be measuredby studying the trust they place in these institutions comparedto other institutions such as Government, president,church etc\. l5 Loyalty refers to the satisfaction of a health service user with the services received expressed as hisher willingness to returnto the health facility\. 7  be provided by the maternal maternity study currently under way prior to Project implementation\. The Project would finance an evaluation of maternal mortality rates during the last year of Project implementation (with the same methodology used to establish the baseline values)\. The baseline data for indicator (ii) i s provided by the 2004 National Demographic, Sexual and Reproductive Health Survey, and would be measured through the same methodology at the end of the Project\. Indicators (iii) and (iv) are measured through administrative data collection\. For indicator (v), the baseline would be established as part of the diagnostic procedures prior to initiating the interventions in an area\. Finally, baseline data for indicators (vi) and (vii) have been collected through a survey supported by the PHRD Grant as part of Project preparation\. Beyond the performance indicators outlined above, the Project would also support the measurement of infant mortality at the national level to monitor the country's progress towards the overall sector goal and the MDGs\. Changes in infant mortality at the national level would be measured through the NationalReproductive Health Survey (RHS) performed every five to six years\. Given the size of the target population, the RHS would be used to determine changes inthe mortality rate in the regions with Project-supported departments duringthe five years of Project implementation, but it cannot be used as a baseline for impact evaluation\. The last RHS (baseline) was carried out in 2004 and the Project would finance the next RHS in2009\. The M C B I Program would be implemented in phases to reduce the risks and complexity of executing these types of changes\. The MCBI would be launched in three departments (San Pedro, Concepci6n y Caaguazd)16, and as the various implementation hurdles are overcome and the program i s refined, it would be progressively extended, during a second phase, to seven additional departments (Amambay, Canindeyd, Alto Parani, Pte\. Hayes, Boquerbn, Caazapi, and Itapua) or others as the Government and the Bank might agree inthe future, thus covering over half of the country (10 out of 17 departments)\. These seven departments could enter the MCBIwhen they are ready for implementation as evidenced by signed Annual Management Agreements demonstrating political commitment and implementation capacity\. Participation in the MCBI would occur through voluntary enrollment of mothers and their children\. Enrollment would be promoted through enrollment campaigns and in situ, when beneficiaries contact service providers\. The annual coverage goals (percentage of the target population reached through the MCBI), would be determined when a department enters the programand updated on an annual basis\. l6These three departments were selected since they have the most adequatemanagerial and infrastructure capacity to offer the EssentialPackage of Services (EPS)\. 8  3\. Project components The proposed Project would have five components with a total cost of US$25\.0 million over a five and a half year period (IBRD US$22\.0 million including US$1\.5 million of unallocated and the Front-End Fee, and US$3\.0 million in counterpart funds)\. The proposed loan would partially cover the cost of providing an agreed Essential Package of Services (EPS)" in the context of the MCBIProgram\. The loan would also cover costs to ensure that the MCBI can be launched and implemented, including activities to strengthen: (i)stewardship, and management of MCBI services; (ii) transparency and accountability; (iii)community voice in the quality, and social adequacy of the health services, and (iv) basic investments inwaste management and communication equipment for certain healthfacilities\. Component 1: Extend the Delivery of the Essential Package of Services (EPS) to the Target Population in the Project Areas Under the Mother and Child Basic Health Insurance (MCBI) Program(IBRD US$10\.2 million) The objective of this component i s to extend effective access to an EssentialPackage of Services (EPS) to women of child-bearing age and children under age six, in the 10 poorest departments in the country\. Specifically, the Project would launch the implementation of the MCBI Program in three departments and then expand to another seven departments\. This component would finance the delivery of the EPS to the target population through two subcomponents: (a) Subcomponent l\.A\. would finance (subsidize) on a declining basis the equivalent of an insurance premium per beneficiary to pay for the services included in the EPS;18 and (b) Subcomponent 1\.B\. would finance the logistics and inputs necessary to deliver the EPS to isolatedbeneficiaries thoughmobile teams\. Subcomponent LA\. Capitation Payments (IBRD US$8\.3 million): This subcomponent would finance the establishment of the MCBIFund, the vehicle for financing the delivery of the EPS by health care providers, and the costs of providing the EPS to the target population\. This component would be implementedby the Insurance Technical Unit (ITU), within the MSPBS General Directorate of Planning, and under the direct supervision of the Vice Minister of Health\. This unit would act as a purchasing agency for the EPS, monitoring the Annual Management Agreements between the MSPBS and the national and regional healthauthorities and ordering fee-for-service transfers to the service providers\. The average per-capita costs for providing the EPS to the target population (women of reproductive age and children under age six) was estimated through an in-depth study that considered variable costs (drugs and medical supplies) of the EPS\. The costs of the benefit were developed by analyzing actual prices prevailing in the market for medical goods, technology improvements and efficiency standards, and expected economies of scale\. These costs were estimated on a per-capita average based on the beneficiary population in the 2002 census update\. The present estimated average cost of the EPS i s about US$5\.60 (per-capitdyear)\. The Bank`s no-objection would be required to introduce changes to this per-capitaaverage, the composition of the EPS, or the population to be covered\. However, all these parameters would be reviewed regularly by the Government and the Bank\. To receive loan proceeds, other than resources for technical assistance for capacity building, the 10MCBIProgrameligible departments are requiredto become MCBIProgramparticipating departments through: (i) signing the Annual Management Agreements between the national and regional health l7The EPS has been formulated inaccordance with the generally recognizedcriteria o f cost-effectiveness and evidence-based medicine inthe following areas of intervention: i)maternal care; ii)sexual and reproductive health; iii)childhealth(underfive), stressingneonatalcare;andiv)healthpromotion,andhealtheducationontheseissues\. ''Toavoid confusion with traditional insurance schemes since the M C B I is not a contributory insurance, the premium is called "Capitation Payment for the MCBI\." 9  authorities (MSPBS) and the Regional Councils, in their social monitoring role; and (ii)signing of Service Performance Agreements between the Regional Health Directorate (DR)" and the health service providers\. The MSPBS would make resources available to participatingdepartments based on enrollment rosters\. Subcomponent l\.B\. Extension of Coverage to Remote Populations (IBRD US$1\.9 million): Subcomponent l\.A\. should create the incentivefor providers to deliver the EPS to the enrolled population upon demand\. However, there i s a small percentageof the population living inremote, isolatedareas that faces constraints both to enroll and to demand services\. Subcomponent 1\.B\. i s designed to reach out to this population in participating departments through special mobile teams that would simultaneously deliver the EPS, enroll the population and provide health education services aimed at overcoming potential cultural barriers\. Subcomponent 1\.B\. would finance ad-hoc teams in the MSPBS participating departments, and also the contracting-out of those teams by the MCBIFundas necessary\. Component 2: Establish the MCBI and Strengthen the MSPBS's Capacity to Lead and Implement the MCBI(IBRD US$6\.5 million) This component would finance most of the activities needed to establish the MCBI Program, including strengthening the MSPBS's regulatory, health service purchasing and MCBI Technical capacity, and the capacity of public health service providers to deliver the EPS services up to a level essential to implement the MCBI\. This component i s relatively large compared to Component 1since it would finance a substantial amount of start-up costs and initial investments to create institutional capacity\. Most of these activities would be significantly reduced as the Project advances and the Ministry's capacity increases\. There are two subcomponents: Subcomponent 2\.A\. Strengthen the MSPBS's Capacity to Launch, Regulate, Manage and Monitor the MCBI (IBRD US$1\.9 million)\. This subcomponent would finance technical assistance, IECefforts, office equipment, training services and selectedrecurrent costs to: Establish the Insurance Technical Unit (ITU)inthe MSPBS (US$O\. 1million); Develop the MSPBS's service purchasing capacity and develop all managerial and administrative systems for overseeing the implementation of the MCBI and the delivery of the EPS by authorized2' health service providers\. Specific activities would include inter alia: (a) design, implement, and monitor Service Performance Agreements; (b) reengineer and improve selected administrative procedures to improve transparency, efficiency and effectiveness of the administrative support systems needed to implement the M C B I successfully, including financial management and procurement, logistics, social communication, and monitoring and evaluation at the central and department level as needed; (c) design and implement a human resources management system to certify, contract, train, and motivate health personnel with the skills and new operational culture needed to implement the MCBI, including an internal communications campaign; (US$0\.5 million); Increase the MSPBS's staff capacity to develop their service purchasing, managerial and administrative capacity to manage the MCBIProgram(US$0\.7 million); Design and implement the MCBIinformation system (US$0\.2million); and Enhance the capacity of the Health Superintendence (Superintendencia de Salud) to certify health services\. (US$0\.4 million)\. l9The DRs are decentralizedpurchasingentities and the headof the serviceproviders' network at the departmental level\. 2oAuthorized providers would be certified by the Health Superintendence to deliver the EPS in the participating departments\. 10  Subcomponent 2\.B\. Strengthen the Public Service Network Capacity and Service Quality, to Launch and Implement the MCBI, and Deliver the EPS (IBRD US$4\.6 million)\. This subcomponent would finance the following actions: Create start-up/monitoring and training teams, to improve the health services technical, managerial, and service quality of the Regional Health Directorates2' (DRs) and health facilities up to health center level inProject Areas\. Duringthe life of the Project, the start-up/monitoring, and training "in situ" teams, originally consistingof top national professionals, would be replaced by regionalMSPBS staff, thus becomingRegional Health supervision teams (US$3\.0 million)\. Carry out remedial actions suggestedby the start-up/monitoring teams regarding human resource capacity through: a) temporary compensated personnel rotation and internships in well functioning health services; b) benchmarking among health providers; and c) financing formal education according to the needs identified by the start-up/monitoring teams, through the already established distance learning capacity in the General Direction of Health Programs (US$0\.6 million)\. Install basic waste management and communication equipment for the health facilities that would deliver the EPS package\. Investment would not include levelfour facilities, such as National and SpecializedHospitals (US$l\.O million)\. Component3: Introduce Social Management of the MCBI (IBRD US$2\.4 million) This component would ensure that the target populations, particularly those that have been historically marginalized, have adequate knowledge and motivation to request the EPS, and it would facilitate the enrollment of beneficiaries in the MCBI Program\. This component would mobilize the support of decision makers and opinion groups outside the Ministry to support the MCBIand the changes it would introduce\. Communities would also be empowered to monitor the delivery of the EPS and the MCBI\. Finally, individuals and communities would be targeted for the introduction of good practices regarding reproductive and child health behavior at the household and community levels in the Project Areas\. This component i s also relatively large since it includes a substantial amount of initial investment to ensure that the population and local authorities understand the insurance scheme and their rights and duties and have information to monitor the functioning of the MCBI\. Specifically, the component would finance the following: Enrollment and IEC campaigns for beneficiaries and dissemination of detailed information about the program among major stakeholder groups, providing opportunities for feedback and dialogue\. Beneficiary communities would be provided with practical information on beneficiaries' rights to services, and the EPS includedinthe MCBI(US$0\.6 million)\. Community outreach to foster social participation in the oversight of MCBI services, providing technical assistanceto: (a) Local and RegionalHealth Councils to establish social monitoring and auditing mechanisms of the MCBI (e\.g\. Local Councils would act as enrollment promoters); (b) health facilities for the enrollment and training of health workers; and (c) Local Councils that request support to establish social pharmacies; (US$1\.5 million)\. Studies to monitor and evaluate the results of the activities financed (US$0\.3 million)\. Component 4: Enhance the Monitoring and Evaluation of the MSPBS, Regarding the MCBI and Finance Concurrent Audits (IBRD US$l\.O million) This component would finance the monitoring and evaluation activities of the Project, including the National Demographic, and Sexual and Reproductive Health Survey during the final year of 21MSPBSrepresentationsinthe Departments 11  implementation, the maternal mortality survey following the RAMOS" method, and the external technical and financial concurrent audits\. Component 5: Project Management (IBRD US$0\.4 million) This component would finance technical assistance, materials and operational costs required for the functioning of the ITU, and NationalHealth Fund(MCBI Fund) if required, and the Project financial audit\. 4\. Lessonslearned and reflectedinthe Project design Most of the lessons learned from previous Bank-financed projects in Paraguay relate to the country's structural administrative problems and limited implementation capacity (due to turnover of staff, the budget allocation process, and the difficulties surrounding the approval of projects and amendments inCongress) which are being gradually addressedon a portfolio-wide basis\. Specific lessons learned from the recently-completed PSM and Secondary Education Projects have been addressedin the proposed Project's preparation, component design and implementation arrangements and are detailed below: Design: (i) Establish a baseline before Project launch to facilitate the process of monitoring and evaluation and help ensure transparency and accountability\. Annex 3 outlines a limited number of key indicators and their baseline values as well as targets to be achieved during Project implementation; and (ii) outforecastsoftheProject'sfiscalimplicationsandmonitoringofsustainabilityplansearlyin Carry preparation, repeat annually, and revise with all stakeholders, particularly the Ministry of Finance, to improve sustainability\. During Project preparation, the Government carried out a fiscal impact analysis which i s includedas Annex 9 inthis document\. Implementation: (i) the groundwork for viable sector reform in Paraguay by targeting Prepare key Ministry staff early in implementation to increase their capacity to function as a team, support ownership of the changes proposed, and lead the change; (ii) Build ownership and accountability in ministries and communities, through participatory Project design, monitoring, and evaluation, in order to improve Project implementation and minimize the impact of frequent staff turnover; (iii) Carefully identify the disbursement categories that require counterpart funds so as to minimize the impact of the current cash flow management system in Paraguay; (iv) Minimize transaction costs for most small activities, particularly for training and supervision, by contracting-out the full process rather than doing it in-house following the cumbersome internal procedures; (v) Institute a Proiect Management Unit at this stage of development of the institutional and administrative capacity of the ITUand seek to integrate the unit as much as possible in the MSPBS, yet ensure that the unit performs only a limited number of specific and professionalized functions that the normal administration cannot readily perform; and (vi) Ensure intensive Bank supervision\. All the above lessons have been taken into account during Project preparation through a participatory design process, the limitation of counterpart funds to only one disbursement category, the contracting-out of training activities, and the complete integration of Project management into the MSPBS\. 22Ramos i s a low cost technical methodology utilized to measure maternal mortality inareas with inadequate data collection capacity\. 12  5\. Alternatives consideredand reasonsfor rejection The main strategic decision was to target mothers and children versus focusing on the general poor population\. Given the epidemiological profile of Paraguay and the causes of avoidable deaths of different population groups, the Government and the Bank decided that a focus on the root causes of maternal and child mortality was justified, since the program would address the main burden of disease among the poor\. The recently-completed PSM Project also demonstrated that even for this target group, a campaign approach that focused on a select set of critical services aimed at a specific set of acute and frequent heath risks was more effective than offering a broad set of care options for a wide variety of risks\. Other design alternatives considered include: (i) different geographical scope; (ii) a different lending instruments; and (iii) different intervention mixes\. After defining and applying an MDG exclusion index, the proposed Project would finance the introduction of the insurance in 10 (out of 17) most excluded departments\. The Project is structured so that it allows flexibility, permitting program implementation and management capacity to be built progressively within departments before adding the specific responsibilities of managing the MCBI\. While the Government has announced that it will seek to introduce the MCBIon a national basis, the proposed Project would focus on a gradual scaling-up of the insurance, given the novelty of the reformand the available institutional capacity inParaguay\. Closely linked to the decision of limited geographic scope i s the choice of the lending instrument\. A SIL was considered more appropriate than an Adjustable ProgramLending instrument given the scope and scale of the reform being undertaken\. The Government has indicated that it would, if this initial implementation of M C B I proves successful, seek additional external and domestic funds to pursue the expansion of the insurance to the entire country\. Regarding the mix of interventions to be financed, the Project would focus on reducing the same set of health risks as the previous PSM Project, but would approach them from both the demand and supply sides\. Experience suggests that providing infrastructure and the service offering alone has only limited impact in increasing service use, while exclusively demand-motivating programs (such as cash transfers to families, information campaigns and advocacy) do not necessarily increase the efficiency and quality of care\. The proposed Project would focus on changing attitudes and behaviors, both among the populationand the health staff, rather than exclusively on service improvement and infrastructure\. Given these strategic choices, Project design decisions have been motivated by : (i) lessons learned from the design and implementation of maternal and child care interventions in the region and worldwide; (ii) experience with non-contributory health insurance systems in the region; (iii) experience with reforms in public health systems such as provider payment reforms, provider contracting and "purchaser-provider split"; and (iv) experience with successful public sector reforms in the region, particularly with the use of change management techniques (such as for customs inPer6 and Ecuador), all adaptedto Paraguay's political and regulatoryframework\. C\. IMPLEMENTATION 1\. Partnershiparrangements\. Not applicable 2\. Institutional and implementation arrangements The Project would be implemented by the Ministry of Health and Social Welfare (MSPBS), through the Maternal-Child Basic Health Insurance (MCBI) Technical Unit (ITU)\. For Component 1, this Technical Unit would make resources available to the Regional Directorates (DRs) on a capitation 13  basis according to actual eligible population enrollment\. Inturn, the Regional Directorates, supported by the ITU,would pay providers on the basis of fee-for-service through the MCBIFund(to be created)\. The M C B I Fund would be regulated by its own Operational Guidelines (MCBI Operational Guidelines)\. Components 2, 3, 4 and 5, would be managed and implemented by the MSPBS through its different organizational units\. Technically, activities of these components would also be under the management (butnotnecessarily hierarchicalcontrol) of the ITU\. Institutional Roles in Project Governance The following agencies would also be involved inProject implementation: Insurance Technical Unit (ITU)\. Technical management of the MCBI would be the responsibility of the Insurance Technical Unit (ITU)within the MSPBS's Planning Direction (DGP)\. The ITU would carry out all the health service purchase functions\. Thus, the ITUwould be responsible for supporting the Regional Directorates in the purchase of the EPS for the target population and for working with and through the different National and Regions$ MSPBS' Directorates, and the National Insurance Fund (MCBI Fund) in the implementation of the MCBI Program and the Project\. The ITU would be responsible for ensuring that all technical, financial and administrative aspects of the Project implemented by the different directorates meet agreed quality and timeliness standards\. The ITUwould be the point of contact with the Bank for Project implementation (technical supervision, disbursements, compliance with loan conditions, etc) and it would also provide technical advice to the MSPBS\. The ITUwould be staffed with a director (appointed by the Minister of MSPBS and satisfactory to the Bank), would draw on existing expertise in the MSPBS for most other technical issues, and supplement its capacity with short term consultants on highly technical matters such as the health service purchasing function, monitoring and evaluation, outreach and communications\. The ITUwould be supported by the International Projects Administration Unit (PAU), a DGAF unit specialized in financial management and procurement procedures for all multilateral projects integrated within the Ministry structure\. A Project Operational Manual would specify operating objectives, inter-institutional relationships and procedures covering financial reporting, procurement, reporting and auditing (financial and concurrent) governing the Project\. At the Mid-Term Review, the Government and the Bank would evaluate thepertinence of vesting the ITU with a higher degree of autonomy under the National Health Fund legalframework\.24 General Direction of Finance and Administration of the MSPBS (DGAF)\. The Ministry's DGAFwould administer the Loanproceedsthrough two unitsdescribed below\. 1\. InternationalProjects AdministrationUnit (PAU)\. Fiduciary and administrativematters related to the Project in general, except for resources for the MCBI Fund (Component l\.A\.), would be handled by the PAU within the MSPBS's DGAF\. Staff in the DGAF have been assigned, and would be trained to be responsible for procurement and financial management in accordance with Bank guidelines\. This unit would support the ITU by providing it with necessary financial information, procurement services (components 2-5) and reporting, which conformto the Bank's requirements\. 2\. MCBI Fund\. This unit would be constituted under the DGAF as a sub administration and financing unit, thus having more flexibility and a simpler financial management\. Criteria and procedures for managing the fund were agreed as follows: (i) an enhanced fiduciary framework to ensure appropriate use of funds; (ii) a reporting scheme to inform all stakeholders of the transactions made and enhance accountability of the system; (iii) a technical, and financial concurrent audits to 23Unlike other Government agencies, the representation of the MSPBS at the departmental level is called the Regional HealthDirection, not theDepartmentalHealthDirection\. 24Law 1032/96 established a legal framework for a National Health System that includes a National Health Fund\. However, this Law has beenonly partially regulated and hence not fully implemented\. 14  ensure quality of services and accuracy of the billing of the service providers; and (iv) social participation in the accountability framework through the involvement of the Regional and Local Health Councils as consultative bodies\. All the features described above would be reflected in a specific Operational Guidelines with all the detailed operational procedures, billing system, financial reporting scheme, MCBI Fund administrative procedures, concurrent audits terms of reference, and social participation framework, and would be a condition of disbursement for the Capitation Payments disbursement category (Component 1\.A\.)\. The fund would maintain records and provide financial reports on the sources and use of funds to the MSPBS\. Regionaland Local Health Councils? For the MCBI, the Regional and Local Health Councils would monitor the operation of the MCBI in the respective health service independently\. The Councils would receive and/or request the statement of accounts and the aggregate information on services provided by the health facility under their oversight, and interface with, and transmit information to the ITUandthe DRsthroughthe start-up/supervision teams\. RegionalHealthDirectorates(DR)\.For the MCBI, the DRs would be a signatory on the Annual Management Agreements and would sign and supervise Performance Service Agreements with health providers\. The DRs would be responsible for identifying the departments' needs inorder to implement the MCBI and obtain the financial, technical and administrative support through the ITU\. The DRs would also be responsible for the enrollment of the population and for sending the enrollment rosters to the ITU (the disbursement supporting documentation)\. Health Service Providers\. These service providers would be certified, according to criteria established by the ITU, to offer the basic package of services under the MCBI\. Certification of service providers would be carried out by the Health Superintendence\. Most service providers would be public; however, the Ministry would be able to contract private providers, if needed, that would be submitted to the same certification procedures\. Related to the MCBI, these service providers would be responsible for maintaining proactive contact with beneficiaries, particularly the poor, providing quality services, maintaining records and submittingbills for their services to the DRs\. Health Superintendence\. The Health Superintendence was created by Law 1032/96 and regulated by the Supreme Decree 20553/98 to certify public and private health service providers inthree areas: clinical audit, financial audit, and health services regulation\. For the MCBI, the Health Superintendence would assume a critical role in the certification of public service providers, and therefore, it would receive support from the Project, in order to strengthen its current capacity so that it can expand its ongoing certification activities to all the facilities inthe Project Areas\. ImplementationInstruments Key implementation arrangements would include: The EssentialPackage of Services (EPS)\. The interventions included inthe EPS are listed inthe MCBINomencZador,26which has been agreed between Government and the Bank\. The average cost of delivering the EPS would be about US$5\.60 per potential beneficiary (women of child bearing age and children under age six) per year\. The EPS cost reflects variable costs to complement the fiscal resources already allocated to the health services within the Ministry budget\. 25The Regional and Local Health Councils were established under 1032/96Health System Law, and regulated under Decree 19996/98\.They are led by a representative of the Departmental or Municipal authorities, and include representatives from the MSPBS and civil society\. 26The list of health services identified\. 15  Annual Management Agreements and Service Performance Agreements\. The Project would be implemented under Annual Management Agreements between the national and regional health authorities, and the Regional Councils, in their social monitoring role\. The Project's Operational Manual would include prototypes of Annual Management Agreements between the different institutions covering inter alia, capitation payments allocations, annual service targets, work programs, training, and investments resource requirements\. The manual would also include a model Service Performance Agreement between the MSPBS/DR and service providers and non-governmental Organizations (NGOs) for the provision of services to dispersed populations, and other collective services\. These agreements would be controlled by the ITU and subject to concurrent audits undertaken by an independent firm acceptable to the Bank\. Scaling-up Based on Evaluation\. In order to allow progressive capacity buildingto manage the MCBI, the Project would initiate in three departments selected from among the poorest 10 because they have the most managerial and infrastructure capacity to offer the EPS\. Reviews of progress would be conducted duringthe early years of implementationto refine the operational and financial procedures, and the operations manuals\. During this period, the seven remaining departments covered by the MCBI Project would, with the pro-active help of national technical assistance through start-up groups, increase their management skills, and train their technical staff to prepare them to meet the standards of the MSPBS for providing the EPS\. The ITU, in agreement with the Bank, would apply the following indicators for each department to decide when the additional seven departments can join the MCBI: (i) a satisfactory assessment of enrollment capacity; (ii) a satisfactory assessment of recording and billing capacity; and (iii) initial certification of the health facilities in each department to be able to provide the EPS (by the Health Superintendence)\. Implementation Capacity Development\. The MSPBS's capacity to overseethe implementation of the MCBI was strengthened through the PSM Project and preparation of this proposed Project\. The MSPBS's fiduciary capacity was also strengthened since execution i s now subject to central administration controls and budgeting through the Integrated Fiscal Administration System (SIAF)\. The loan would finance a few incremental specialized consultants for project implementation\. Financial Management and Procurement Assessments were carried out during preparation and the weaknesses identified by these assessments, plus the weaknesses already identified under the PSM Project, would be addressed with the technical assistance to be provided during implementation (see findings of these assessmentsinAnnexes 7 and 8)\. The MSPBS has sufficient technical capacity on maternal and child health issues to support the ITU\.The healthservice purchasing function, (identifying the healthservice needs, which, how many and what quality services to purchase, and define the conditions of service provision), i s new to the MSPBS and would be developed under this Project\. Moreover, the DRs would receive support to contribute to the implementation of the MCBI, particularly during the first two years\. To facilitate this, the Project would finance start-up groups that would regularly visit the health facilities\. Flow of Funds and Reporting\. Loanproceeds would be disbursed to a Special Account (SA) in the Central Bank, under the Project's name\. Those resources would be transferred to an operational account in local currency, managed by the MSPBS in the "Banco Nacional de Fomento"\. The disbursement mechanismi s the replenishment of the SA trough the justification of expenditures\. For the , which\. For the Capitation Payment category, payments would be supported by the M C B I quarterly audited financial statements containing the summary of enrollment at the department level\. The PAU would be responsible for maintaining the Project accounts and ensuring annual audits by qualified auditors following terms of reference acceptable to the Bank (details inAnnex 7)\.Procedures utilized by 16  the DGAF, where the PAU i s housed, were assessedduringpreparation and found to be satisfactory\. All the Departmentalenrolled lists will be pooled, and conserved at the ITUlevel\. The MCBIFundwill periodically provide system balances and would be subject to the concurrent financial audit\. An Operational Guidelines governing the administration of the MCBIFund(MCBIFund Operational Guidelines) would have to be approved by the Bank before it receives any loan resources\. The MSPBS would finance the administrationof the MCBIFundwith its own resources, out of capitation payments\. The ITU,through its supervision teams, and the concurrent audits, would regularly verify the number and quality of the services delivered as internal control of the program\. The DRs would be responsible for consolidating the bills issued by the MSPS, for the health services provided, and would provide said bills to the ITUwith copy to the MCBI Fund\. The MCBI Fund staff at the regional level would be responsible to verify and consolidate the procurement processes carried-out by the health services with MCBI Fundproceeds\. They would also pay the providers of inputs to health facilities and send the purchase information to the central MCBI Fund for justification of expenses, accounting registration and budget reconciliation, and to request new disbursements\. Capitation Payments\.About 80 intervention services included inthe EPS are listed inthe MCBI Nomen~lado?~, and have been agreed between the MSPBS and the Bank\. The Nomenclador would be mandatory for all participating departments\. As in other projects of similar nature, the per capita transfer to finance the services included in the Nomenclador would be included as a separate disbursement category called "Capitation Payments of the MCBIServices\." The Bank would disburse funds for the Capitation Payment (conceptually the equivalent to insurance premium) to the Special Account (SA), specifically to finance the average cost of the EPS per enrollee for the departments participating inthe program, on the basis of actual enrollment of mothers and children in the participating departments\. Annually, each participating department and the MSPBS, through the ITU, would agree on the estimated number of women and children that the respective department plans to enroll\. The maximum amount would be the number of eligible women and children reported in the 2002 census and updated with population growth estimates\. This estimation would be included in the Annual Management Agreement to be signed by the MSPBS and the Regional Directorates, and would determine a "budget signal" for the maximum amount of capitation payment the corresponding department would have at its disposal to pay providers for the provision of the EPS to enrolled mothers and children on a fee-for-service basis that year\. The actual funds available to the department (up to the limit of the budget signal) would depend on the actual enrollment of the population\. The Departmental M C B I would receive the bills for the services provided by respective health facilities and would certify them, and credit the respective amounts to the different health facilities, on the basis of fee-for-services\. This means that, although funds would be available to the Regions based on capitation per enrolled beneficiary, the actual use of those funds would be based exclusively on fee-for-service payments for bills sent by providers after services have been rendered\. Even if Regions have enrolled a number of beneficiaries, the funds would not effectively be credited to the health providers until they provide bills of services rendered\. Bank financing for Subcomponent 1\.A\. (Capitation Payments) would be disbursed periodically against the list of enrolled mothers and children presented by the DRs to the ITUand certified by the ITU as verified\. As the enrollment process would most likely take time and there is a need to launchthe MCBI as soon as possible (to reach the population and to encourage enrollment), each participating department would have a 12-month grace period after joining the program during which resources would be made available for that department to pay providers on a fee-for-service basis, exclusively on the basis of estimations of eligible populations based on the 2002 census, rather than actual enrollment\. After that, all "Nomenclador" is the name utilizedfor the selected guaranteed health services aggregated inonly one conjoint package\. 17  resources made available to the Regions, and "budget signals" would be done exclusively on the basis of actual and estimated enrollment respectively\. Accordingly, that first year grace period, Bank financing for the respective entering department would be made available against the 2002 census estimation of eligible mothers and children presentedby the ITU,updated by population growth rates\. The Annual Management Agreements between the Ministry and the DRs would also include agreements on resources or in-kind transfers for the other Project components as necessary\. Any variation in the capitation price (set at US$5\.60 per year), the composition of the EPS's Nomenclador and/or its prices would need no-objection from the Bank\. Annual reviews of the capitation price, the Nomenclador and its prices, the census reliability, and coverage figures would be carried out and agreements reached between the Bank and Borrower as necessary\. 3\. Monitoring and evaluation of outcomesh-esults Monitoring Results\. Indicators of program results would monitor levels of services used and the effectiveness of the services provided\. These indicators are outlined in Annex 3\. Information would be generated by the ITU, on the basis of bills, and the administrative and epidemiological data, for the services provided, andevaluated against outcomes as agreedinthe Annual Performance Agreements\. The ITUwouldconduct periodic independent audits ofthe data, which would include surveys ofbeneficiaries' satisfaction with the servicesreceivedand confidence inthe LocalHealth Councils\. Currently, most of the hospitals and clinics have functioning medical record systems, which can generate basic data on beneficiary numbers and services rendered\. The MSPBS compiles this data and additional assistance would be provided to improve data analysis and use it to monitor Project results\. Similarly, the MSPBS currently develops statistics on health care trends, and the loan would finance the upgradingand modifying of existing systems to accommodate the MCBIneeds\. Evaluation\. The loan would finance performance evaluations of the MCBI\. Results of these evaluations would be compared against the baseline data that has been collected and against the baseline data that would be collected early in Project implementation\. A mid-term evaluation of preliminary results and the factors that affected those outcomes would also be carried out inorder to refine operational processes\.A full evaluation would be conducted duringthe last year of implementation, and supported by the results of the National Demographic, Sexual and ReproductiveHealth Survey which i s expected to be available at that time\. The terms of reference for these evaluations would be agreed between Government and the Bank\. Project indicators would track implementation and effectiveness of services provided in the selected departments\. The MSPBS generates health outcomes data and prepares quarterly reports in the context of the Control de Gestidn, an existing institutional structure\. These data would provide regular information for monitoring of health outcomes\. During the Project, data on user satisfaction, waiting times, purchase of inputs, and other factors would be collected through different sources\. A household survey would be contracted as part of the final evaluation\. 4\. Sustainability The Borrower i s committed to implementing these major changes in the health sector as evidenced by an increase inthe budget of the MSPBS during2004-05 and its leadership inthe preparation of the proposed Project\. The MSPBS's budget i s expected to continue to increase as some of its present expenditures are redirected to the MCBIProgram\. As part of preparation, the Borrower carried out social and fiscal impact studies to assess the social and fiscal sustainability of the Project\. In summary, the Project would invest heavily in social mobilization activities in order to create social support and demand for those services, which i s expected 18  to increase social sustainability\. The proposed Project i s designed to launch the MCBI Program progressively, by working closely with the Ministry o f Finance inthe allocation of resources and also by investing heavily in creating a demand for the program and awareness among different interest groups and stakeholders\. In addition, the Borrower has also attended to environmental, social and cultural sustainability, by carrying out an integrated evaluation to assess the Project's sustainability inthese areas (see Annex 10)\. Regarding the financial sustainability, the impact of the MCBI on the overall Government - as well as health sector - budget i s relatively modest\. However, the impact of the Program in the overall, and specifically in the non-salary, MSPBS budget will be more substantial when Government progressively expands the insurance scheme to the entire country (see Annex 9)\. By 2020, it i s estimated that this expansion would represent roughly 9 percent o f overall central administration health expenditures and 25 percent of non-salary health expenditures\. Part o f the fiscal impact would be offset by the substantial expected gains in efficiency due to the Project implementation\. Progressive redistribution o f resources within the Ministry towards mother-and child services would occur, which would be in line with the overall strategy outlined by Government and referred to above\. 5\. Critical risksand possiblecontroversial aspects Risks RiskMitigationMeasure RiskRating with Mitigation To Project developmentobjective Reversal of Sector Strategy\. Any such changes, if they occurred, would have to be S Changes inministerial authorities carefully evaluated, butexperience shows that projects could endanger progressof designedthrough highly participatory methods (as this activities or force a change in one has been), are more resilient to political changes\. philosophy Activities supportingorganizational change within the MSPBS are probably most at riskinthis respect\. Political instabilityand/or social The proposedProject includesboth cultural S unrest couldjeopardize transformation andcommunity participation and implementation, as happenedin mobilizationto mitigate the impact of political and the early stages of the PSM social instability\. This would parallelmitigating Project (Ey95)\. measures usedinthe educationsector where capacity building (through organizational transformation) at the central level and community mobilization have contributed to, somewhat, shielding the sector from the turmoil of the late 1990s\. To comDonentresults Weak institutionalcapacity of the The operation would focus on capacity building, H DRs as comparedto the enhancing good governanceandproviding substantial demandingtechnical requirements for the implementationof the MCBI, which under similar designs, havechallenged Governments inother countries in the region\. Resistance by the MSPBS The proposedProject would include abuilt-in S personneltoproposed changes\. communications strategy to address possible resistance\.Early inProject implementation, Government would carry-out an organizational and leadershipdiagnosis, identifying key potentially more skeptical stakeholdersand groups within the MSPBS, as well as early adopters for change\. The diagnostic would also include aproposal to introduce and manage 19  institutional change\. Luck of economicprogress could The Bank is working with the Governmentof S endanger the sustainability of Paraguay invarious ways to support the improvement some actions, particularly the of economic policy making, includingits ongoing financing by the Borrower of part macro-economicdialogue (including the preparationof of the capitation payments\. core diagnostic AAA) as well as through the recently approvedMinistry of Excellence Project (providing technical assistancefor the Ministry of Finance and Economy)\. Ij jUuciary risksmaterialize, this Fiduciaryrisksarecountry-wide andimpactonthe S could undermine implementation entireportfolio; this project does not have a higher and public support for the MCBI fiduciary riskthan other Bank financed projects\. But Program\. various measureshavebeentaken during project preparationto mitigate the fiduciary risks\. Procurementwould be centralized inthe DGAFPAU which is being reinforced, and the staff would have receiveintensive trained\. The Bank has agreed with Goverrnmenton the following additional measures in the designto minimize such risk: (i) accounting The systemof the project i s linkedto the overall Governmentaccounting system and the PIU will be able to generatequality financial reports; (ii) Continuousexternal auditors' engagement under specific Terms of Referenceare going to be carried out; (iii)the Project Operational Manualwould contain aclear statement of the roles andresponsibilities as the basis for enhancingaccountability\. Finally, (iv) the MSPBS has implemented an online procurementportal that is making its procurement public and thus more transparent\. Fiscal sustainability\. Pre- Apart fromcarrying out an initialfiscal analysis and M evaluation of the fiscal impact of annualreviews, the proposedProject would include the program shows that, by Project activities to disseminateProject results, andfoster closing, the marginal expenditures public and political support from the Ministryof of the insurancescheme would Financeandthe Legislative bodies for the MCBI representapproximately 5 percent Program\. Moreover, the Project would proposea of total health expendituresand planning horizon longer than the loan's duration for about 14percent of non-salary the Governmentto cover all the incremental expenses\. expenditures\. Project activities also include awarenessraising campaigns, which the Government plansto use in order to signal the importance of the insurance scheme and its focus on the poor and marginalized populations\. Cumbersomeadministrative Risk mitigationincludes: process reengineering, S procedures that could affect clustering training activities under one contactto avoid Project execution, weak social high transactioncosts of administering small controls that could affect expected payments;out-sourcing of administration of capitation outcomesof the Social Monitoring payments; outreach activities for social participation of the Project, andpoor and the establishment of start-up/monitoring groups\. commitment level of DRsthat could affect the performance of the Service Performance Agreements\. Overall RiskRating S Based on the risks identified above, an intensive supervision effort by the Bank team, including close support from the Country Management Unit, would be required\. 20  6\. Loadcreditconditions and covenants Effectiveness Conditions: Adoption of Project Operational Manual satisfactory to the Bank Retroactive financing\. The Bank would finance expenditures incurred after July 1, 2005 up to US$2\.2 million (10percent of the total Loan amount)\. Disbursement Conditions: No disbursements would be made for the Capitation Payments category, until the following conditions are met: i\.ApprovalbytheBankoftheMCBIOperationalGuidelines; ii\.EstablishmentoftheMCBIaccount; iii\.Contractingofthetechnicalandfinancialconcurrentauditors; iv\. Prices inthe Nomenclador are set\. v\. Specific disbursements fromthe CapitationPayments category to an individualdepartment would be conditional on the signingof the first "Annual Management Agreement" for that department; D\. APPRAISAL SUMMARY 1\. Economic and financial analyses Economic Analysis\. The EPS was designed by the MSPBS based on the national reproductive health policy, and the list of services identified (Nomendador) includes about 80 cost-effective interventions that target the main causes of maternal and infant mortality (unwanted pregnancies, hemorrhage and infections linked to unsafe deliveries and complications from unsafe abortions, perinatal causes, diarrhea and acute respiratory diseases as well as inadequate prenatal care)\. The program also includes cost-effective interventions for promotion and prevention\. An economic evaluation, carried out following accepted international standards for estimating the current value of averted maternal and child deaths, considering the impact of use of the EPS, has shown a substantial net present value of US$6\.6 million and a rate of return of about 9 percent\. Moreover, interventions are considered to be cost effective consideringthe importance of neonatal mortality as a determinant of infant mortality inParaguay\. The estimated cost of the EPS for the 10 departments covered by the Project would be, on an annual average, about US$5\.60 per beneficiary\. The Government would progressively increase the proportion of local counterpart funds for the EPS (beginning inthe first year of implementation) to avoid a steep transition in budget allocation from external to treasury funds and ensure financial sustainability of the program once the Project closes\. The minimumlocal counterpart funds to be provided to the EPS would be US$3\.0 million\. Fiscal Impact Analysis\. With appropriate community outreach, it i s expected that about 85 percent of the target population would be served by the third year of implementation of the M C B I in a given department\. Based on these assumptions, at the closing of the loan (in 2010), the M C B I costs are estimated to represent about 5 percent of the National MSPBS health budget, which would translate into about 13 percent of the discretionary budget of the Ministry\. If the Government were to expand the MCBI to the entire country, the estimated weight within the MSPBS health budget would increase to about 9\.2 percent in 2020 (and 25\.1 percent of the discretionary budget)\. These resources would represent a significant shift within the overall public health expenditures towards primary priority programs, and would require a commitment of the Government (specially the Ministry of Finance) to sustain the financing of the MCBI\. During appraisal, Ministry of Finance staff was closely involved in analyzing and appraising the fiscal implications of the MCBI Program\. The Ministry of Finance and the MSPBS 21  signed ajoint policy letter indicatingthe Government's commitment to provide adequatefinancing for the MCBI Program\. Given current economic and populationgrowth projections, the projected fiscal increases are considered to be sustainable inthe long term (20 years)\. Incremental costs of program administration are likely to be negligible\. 2\. Technical The program includes two key technical features: (i)clearly defined package of essential health a services (EPS); and (ii)sustainable health financing arrangements that would establish the correct incentive framework for health providers\. The EPS has been assessed from a medical and population healthperspective and corresponds to best internationalpractice\. The performance-based financing design reflects the lessons learned from other programs in the region that have introduced innovations in contracting and provider-payment mechanisms\. These mechanisms are at the core of the expected changes inthe health system provider incentive framework for efficient provision of services to the poor, and would pave the way for the implementation of a more comprehensive National Health Insurance in the future, as per the NationalHealth System Law objectives\. 3\. Fiduciary The Financial Management Assessment found that the proposed arrangements for MCBI Project satisfy the Banks minimumrequirements and can produce the requisite financial management reporting\. An ActionPlan agreedwith the Bank for proposed arrangementsof the FMsystemhas beenfulfilled, and the MSPBS has sufficient resources and skills for the necessary follow-up of the action plan\. Four additional financial management elements were included inthe program design: (i) integration of Project administration into the MSPBS's general administration, subject to central administration controls; (ii) concentration of Project financial management responsibilities inthe PAU; (iii) concurrent audits external of the MCBIFund, and iv) expanded scope for Project Financial Audit\. A Procurement Capacity Assessment was carried out during preparation\. This assessment identified several weaknesses in the procurement and administrative functions, particularly in terms of differences between the Bank guidelines and local procedures, multiple internal reviews of documentation, weaknesses in preparation of technical specifications and terms of reference, and the limited experience of the staff with the Bank procurement guidelines\. An Action Plan, which includes very strong support for building the capacity of the PAU and the DGAF, was agreed and i s being implemented with funds from the PHRDGrant\. 4\. Indigenous and Social Paraguay i s a multi-ethnic country, but with characteristics that differ in many ways from other such countries\. Specifically, although the indigenous population i s officially about 1\.7 percent of the total population, another 59 percent speaks only Guarani, but they are not considered indigenous; however, they have maintained several traditional customs and knowledge\. Indigenous people and those that speak exclusively Guarani are the most vulnerable sectors of Paraguay's society\. About 91 percent of the indigenous population lives in non-urban areas, and it i s divided into five linguistic families with 20 ethnic groups\. Over 76 percent of the indigenous people speak exclusively their own language, and over 80 percent are illiterate\. Of the total indigenous population of 87,0002*,about 50,000 live in the Project Areas\. The cultural, geographic and financial barriers to adequate health support for the indigenous populations and the exclusive Guaranispeakers are similar\. These groups share similar language barriers, Data from 2002 census\. 22  and cultural and poverty aspects\. The average indigenous fecundity rate i s 6\.5 children per women and 5\.1 children per women among rural poor (Guarani-only speakers) versus the nationalrate of 2\.9 children per women\. Most of the data available for maternal-infant health i s for the total population; but it i s known that the indicators are worse for the rural poor and the indigenous population\. The country's improvements in overall female health in the last decade have not trickled down to the rural and indigenous populations, and child mortality rates appear to have increased slightly since 1994\. During 1995-2002, rural extreme poverty increased by 57 percent, while general poverty rose from about 30 to 46 percent\. According to the 2002 census, about 67 percent of the rural, and 72 percent of indigenous communities lack health posts\. Most of the extreme poor do not have access to public health facilities or health insurance, and 12 percent of the poor are in female-headed households\. Around 5 percent of their total expenses, based on a family of seven, relate to health; 70 percent is for medications\. Anthropological studies show the main causes for the poor access to health services by the indigenous and rural poor population are: geographic isolation, poor communication, and cultural discrepancies between the population and the service providers and planners\. In addition, 92 percent of the indigenous population and 39 percent of extreme poor, practice traditional medicine\. The Government prepared an Integrated Environmental, Social, Cultural, and Indigenous Evaluation (IESCIE) to provide guidance for developing solutions to the social and environmental issues identified in the proposed MCBI Project\. The major socio-environmental issues identified are related to the cultural discrepancies between the targeted populations and the health providers, and the lack of adequate management of medical waste\. Project components specifically address the identified issues and an Indigenous Peoples Implementation Plan has been prepared and disseminated\. Annex 10 details the Project's actions and activities to ensurethe effective inclusionof the indigenous and the extreme poor, or excluded populations\. The Government i s committed to ensuring that the indigenous population and the extreme poor benefit from the Project by developing and extending adequate mother-infant health services, education and promotion to both groups\. To that end, and in compliance with OD 4\.20, the Project has identified, and would implement, mechanisms for participation of the targeted populations-mothers-to-be and their community support base-in order to: (i)guarantee both adequate cultural integration and adequacy of the intended health benefits, (ii) introduce the re-validation of positive health related indigenous customs and traditions, (iii) accommodate the cultural variation among the various indigenous groups, and (iv) develop culturally conscious and effective healthproviders to assist the above groups\. The Project includes monitoring indicators to identify whether the rural and indigenous populations are benefiting from the Project, and to provide feedback for annual Project reviews\. Since conditions vary for the different geographic locations and ethnicities of the target populations, the IESCIE would be updated duringProject implementation\. Project preparation has been very participatory\. The MSPBS and the Bank organized meetings and seminars with donors, staff at different administrative and service levels, local authorities and civil society representatives on the Project concept and design\. A number of workshops with the MSPBS's staff, civil society, local authorities and indigenous leaders have been organized to review Project arrangementsand discuss how to make them more transparent\. It is possible that physical, natural, architectural, religious, historic or other cultural resources of significant or potentially significant value to the neighboring indigenous communities and population, as well as to other local, regional or international community groups may be encountered in several localities where the Project would be implemented\. The Project would include measuresto identify, report and preserve any resources eventually encountered duringproject implementation, including: (i) bidding documents and contracts with clear clauses about cultural safeguards, (ii) with specifications of contracts 23  contacts (Project and Governmental authorities) for adequateaction and guidelines for procedures; (iii) administrative and emergency plans andmanuals, incorporatingcultural guidelines, and (iv) assurance that any activity initiatedor supported by the Project that may include eventual rehabilitation, removal and/or relocationof existing services andbuildings,abides by the above cultural safeguards\. 5\. Environment The Project has been classified as a B category for environmental screening purposes\. The major environmental issues identified by the IESCIE evaluation are the lack of adequate management of biomedical waste, and of other solid and liquid waste in the health facilities\. The Government, with assistancefrom the Pan-American Health Organization(PAHO), i s revising waste management protocols, including the related institutionaland legislative framework\. The revision includes bio-medical waste, and i s expected to provide a practical and safe management system that could be supported by the various levels of existing health administration and facilities\. The current legislation determines that: (i) the collection of biomedical waste must be carried out separately from other waste, and according to established technical conditions, and (ii) the location of sanitary landfills i s subject to environmental impact evaluation\. To enforce the existing legislation, the responsible institutions, especially the Ministry of the Environment and the Direction of Environmental Health inMSPBS, performperiodic monitoring, control and supervision of the health units\. The General Attorney (Ministerio Pziblico-Fiscalia) and the Controller's Office (Contraloria General del Estado)apply sanctions for breakingthe laws\. At appraisal, it was decided that the Project civil works would not include rehabilitation and be limited to the adaptations needed in the health facilities to improve health-related environmental conditions related to biohazardous and general waste disposal for health facilities in the Project Areas, and indicators measuring improvements (see Annex 10)\. 6\. Safeguard policies SafeguardPoliciesTriggered by the Project Yes N o EnvironmentalAssessment (OP/BP/GP 4\.01) [XI [I Natural Habitats (OPBP 4\.04) [ I [XI Pest Management (OP4\.09) [ I [XI Cultural Property (OPN 11\.03, being revisedas OP 4\.11) [XI [ I Involuntary Resettlement (OPBP 4\.12) [I [XI IndigenousPeoples (OD 4\.20, being revisedas OP 4\.10) [XI [ I Forests (OPBP 4\.36) [ I [XI Safety of Dams (OPBP 4\.37) [ I [XI Projects inDisputedAreas (OPBP/GP 7\.60)* [ I [XI Projects on InternationalWaterways (OPBP/GP 7\.50) [ I [XI The safeguard screening category i s S2\. The safeguard evaluationstudies were made available inthe country on March 15,2005 and inthe Info Shop on March24,2005\. 7\. Policy Exceptions and Readiness There are no policy exceptions required\. 'BysupportingtheproposedProject,theBankdoesnotintendtoprejudicethefinaldeterminationof theparties'claimsonthe disputed areas 24  Annex 1: Country and Sector or ProgramBackground 1\. Health Status Even before the recent economic crisis, Paraguay's health system did not ensure its population's good health or protect them from the costs of sickness\. Maternal mortality i s among the highest in the region, with 182 per 100,000 live births reported in 2002 and with an estimated underreporting of 30 percent\. The 2004 National Demographic, and Sexual and Reproductive Health Survey (ENDSSR) indicates an infant mortality rate of 29 per 1,000 live births (this i s the data that would be used as a baseline)\. This latest figure represents a non-statisticallv significant increase in the infant mortality rate from 1990-95\. Thus, infant mortality has not changed in the country since the mid-l990s, while it has been improving in the region\. Similar stagnant rates have been observed in maternal mortality\. The total fertility rate i s calculated at about 2\.9 children per woman, the second highest population growth rate in the region\. Many of these children are born to adolescent mothers (one-third of women under age 18 have at least one child)\. These alarming figures mask substantial inequalities as the burden of disease and mortality falls disproportionately on the poor and vulnerable, especially women and children\. Inaddition, several other health indicators have been stagnant inthe last five to ten years\. If current trends in health indicators persist, the country will not achieve the health MDGs, unless there is major effort to reverse these trends\. Most infant and maternal mortality in Paraguay could be avoided through adequate prevention, diagnosis and treatment\. Service reports indicate that about three-quarters of maternal mortality cases are due to toxemia, hemorrhage, complications of abortion2' and sepsis\. Some estimates put mortality for complicated abortions at 50 percent of all maternal deaths\. A highproportion of infant deaths occurs in the perinatalperiod, and are often due to poor delivery and neonatal practices inthe home and low quality of health facility-based deliveries\. Finally, teenage pregnancies are strongly associated with low birth weight and higher infant mortality\. This situation suggests that most cases of maternal and infant death could have been prevented if the patients had access to basic primary care and first level referral when needed\. Overall, about 75 percent of health services contacts are attributable to seven causes: respiratory infections, intestinal parasites, diarrhea, anemia, hypertension, pregnancy complications, and abortions\. This general morbidity pattern suggests that most illnesses could be preventedand treated with relatively simple and cost-effective interventions, further underscoring the need to prioritize and strengthen primary healthcare\. The trend in self-reported morbidity also seems to be moving upward from 1999-2001\. According to the 2001Household Survey (Encuesta Zntegruda de Hogares), 37 percent of the population reported being sick or having an accident inthe 90 days preceding the interview\. Self-reported morbidity was higher inrural than urban areas (35\.5 percent urban and 40\.5 percent rural) and higher than the rates observed in the 1999 Household Survey (32 percent of the urban residents and 37 percent of rural residents)\. Moreover, there are significant differences in the illness perception rate among population groups defined by household size, occupation or education of the householdhead, gender, age or region\. The poor reported that they were more likely to be sick than the rest of the population\. Inequity of access to health services compounds the impact of these infectious and perinatal and reproductive health care diseases\. Equity issues relate to gender, age, ethnic group, income and area of residence\.Transportationcosts are a significant deterrent to the poor accessing healthcare inremote areas 29 Abortion and its complications are substantially underreported (abortion is illegal) and many of the other diagnoses cover up botched abortions\. 25  and the largest equity discrepancies relate to area of residence\. Access to public and private inpatient facilities varies considerably by income group, with the wealthier making greater use of both, particularly for the expensive services, and inthe urban areas\. 2\. HealthExpenditure The country annually spends about US$110 per capita in health, which amounts to about 8\.7 percent of the GDP\. This level of expenditure i s quite high by regional standards and close to OECD levels\. About 40 percent of the expenditure (2\.6 percent of GDP, and falling) comes from the public sector, of which 18 percent i s financed through general taxation and is administered by the MSPBS, and the other 20 percent from salary contributions to the Social Security Institute (Znstituto de Previsih Social, IPS)\. Several other entities cover about 2 percent of the sector's financing\. The remaining 60 percent of total health expenditure comes from household direct contributions (private insurance + out-of-pocket)\. Of the out-of-pocket expenditure, about 70 percent is spent on pharmaceuticals, either through cost sharing at public facilities or in the private sector\. Inrecent years, public resources for the sector have been decreasing in real terms\. Nominally, total national health spending has increased during 1996 to 2001\. MSPBS nominal spending increased by 9\.1 percent, below that of out-of-pocket spending which increased by 11percent, and IPS spending which increased by 12 percent\. Inreal terms, the picture i s very different\. The total growth of health spending i s only 2\.9 percent inthe last six years with negative growth (-0\.8 percent) for Government and private insurance financing\. Total real per-capita spending has been reduced from US$lSO in 1996 to US$111 in 2001\. In dollar terms, the Ministry's spending fell by 6percent since 1996 to a low US$14 per capita in 2001, and increased to about US$16 in 2004\. Thus today, Paraguay i s one of the countries with lower public sector spending inhealth, only after MCxico and Ecuador, and it i s also about a quarter of a percentage point of GDP below its expected value for countries of similar income\. At current expenditure levels, if all the MSPBS resources were used exclusively to provide public and merit goods, and basic services for the poor, they would barely suffice\. The Government's stated commitment to primary health care i s not well reflected in resource allocation in the public health sector\. There has been a progressive increase in the percentage of the MSPBS's budget allocated to specialized facilities (representing 34 percent of the Ministry's budget in 2001), as compared to primary and primary reference facilities (representing 19 percent of the Ministry's budget), which should be providing 90 percent of the services and treating the main disease burden\. Public goods, preventive programs and epidemiological surveillance accounted for about 10 percent of the 2001 budget, but a large share of this i s spent on administration at the central level\. Moreover, historically the MSPBS has poor budget execution (as low as 60 percent)\. Therefore, the greatest fraction of the MSPBS's spending covers only labor costs (particularly for higher complexity hospitals and administrative tasks), independent of the quantity and quality of the services provided\. In conclusion, Paraguay needs to increase the resources for health in the public sector, but those resources should be redirected as a subsidy to the poorest populationof the country, reducingthe out-of-pocket expenditure of those inmore need\. 3\. Sector Issues The main factors hampering the effective delivery of health services are: insufficient and inequitable distribution of resources, poor staff skills and health care delivery management including a lack of performance incentives, ineffective governance and accountability, and passivity of the poor population to mistreatment on the part of health staff\. Capacity and Management\. The MSPBS has developed a strategy for health sector reform, linked to health objectives, such as the MDGs, and several well-formulated plans to implement the 26  strategy\. The key component of this strategy i s the Maternal and Child Health Insurance\. However, the capacity to implement the vision and strategiesi s somewhat weak\. The capacity of the MSPBS to deliver services i s constrained by the low level of resources, resulting in poor productivity and inadequate management, particularly in human resources\. Moreover, the unpredictability of the flow of funds contributes to some degree of inefficiency inthe use of funds and some important functions are under-staffed\. The motivation of staff and incentives to work are weak\. The MSPBS collects extensive information, but there are more than 12different databases inthe Ministry that are not linked\. Also, the shortage of physical facilities for disperse and isolated rural populations contributes to constraining service delivery\. The key characteristics of Paraguay's health sector are as follows: i\. InsufficientGovernmentinvestmentinhealthissues(MSPBSspentUS$16percapitain2004)\. ii\.Segmentationbysocio-economic groupandwagecontribution-based insurance(limitedto 19 percent of population)\. iii\.Heavyandincreasingrelianceonout-of-pocketpayments(55percentin2001)\. iv\. Financing of inputsrather than outputs, performance, or production of services\. On the service supply side, ineffective health care and the low and untimely use of health facilities by the poor result from the following sector issues: (i) insufficient, inefficient and inequitable allocation of public funds; (ii) weak managerial capacity; (iii) service quality; and, (iv) low poor perceived quality of care (e\.g\. mistreatment, lack of drugs)\. Experience with reforms in other sectors suggests that efforts to address similar sector issues need to deal with accountability, transparency,trust and governance, which if lacking would impede any effort to change\. Demand issues are also hampering the use of services by the poor\. Although mistrust of and dissatisfaction with public service providers rank highamong the poor, there are no patient-led efforts to improve such services, which indicates that the poor do not perceive the demand for services as a possibility or a right\. Moreover, preventive practices and healthy living styles do not seem to be valued or known\. Studies in the region suggest that the lack of knowledge i s not the only cause of unhealthy lifestyles\. Rather, the perceived lower benefits of adopting new practices have as much, and even more, impact on individual and community behavior\. 4\. Health Sector's PrioritiesandPrograms The Government is proposing to develop a publicly-financed basic health insurance (MCBI) that would address key sector priorities in a comprehensive manner\. Although the approach i s somewhat ambitious, the Borrower has decided to pursue it because of the need to tackle the issues inan aggressive and comprehensive way\. To reduce risks and complexity, the program would be phased over a period of 15-20 years\. The first phase (the proposed Project would be the cornerstone), focuses on providing social protection and increasing the access to a basic package of health services for mothers and children inthe poorest departments inthe country\. Afterwards the Programwould be expanded to the whole territory\. By offering a definedpackage of guaranteedbasic health services (EPS) supported with payment systems that reward health services providers' performance, the MCBI aims to alter fundamentally the health services delivery mechanism\. The introduction of the MCBI, with a focus on the poorest departments, i s at the core of the proposed changes\. The MCBI would help the MSPBS to reorient its approach from financing inputsto rewarding performance, and make public subsidies inthe health sector significantly more progressive and effective\. Estimates show that with full implementation, the MCBI 27  could reduce infant mortality by about 30 percent in the 10 poorest departments in Paraguay, and, as a result, achieve about 13 percent reductionof overall infant mortality over the next five years\. Policy priorities: The National Health Plan 2003-2007 (NHP) seeks equitable access to quality health care for all people, aiming to bring the poor and marginalized groups into the mainstream of development\. The NHP stresses strategic cross-cutting approaches to: (a) increase access to basic health care by the poor, especially mothers and children; (b) increase public subsidies to the poor through the MCBI; (c) change the incentive framework to improve effectiveness and efficiency in the financing and management of health services; (d) promote community participation and social monitoring of health services at the local levels; (e) accelerate the decentralization process; and (f) explore the possibility to contract-out service delivery for dispersed populations\. The NHP proposes a redirection of public spending towards EPS and away from tertiary care and lower priority services\. To confront these challenges the Government's innovative health strategy combines traditional skill building, system development, incentive realignment and communication activities, with innovative methodologiesfor community empowerment,and interventions to transform the MSPBS's organizational culture\. Several of these proposed new approaches have been successfully implemented in Paraguay's education sector (see Lessons Learned)\. Ultimately, the strategy seeks to reduce maternal and child mortality\. These objectives would be achieved by increasing the effective access to basic services by the poor and redirecting public resources towards quasi-public health goods\. The key strategic lines include the following: 0 Provide social protection from health expenditures for the poor through the MCBI\. 0 Modify the mechanisms and criteria for the allocation of the MSPBS's public resources and introduce payment mechanisms for services to provide incentives for better production and improved quality of basic health services\. 0 Improve the management and increase the quality and number of health personnel delivering the EPS inruralareas and among dispersed populations\. 0 Decentralize some health services' functions to local Governments, and increase community participation\. The core approach to provide financial protection to the poor from health expenses i s the decision to guarantee the delivery of a minimum package of cost-effective health interventions, recognized as effective inreducing maternal and infant mortality\. 5\. Delivering the Essential Package of Services(EPS) The EPS was designed by the MSPBS, based on the national reproductive health policy, and the list of services identified (Nomenclador) includes about 80 cost-effective interventions, that target the main causes of maternal and infant mortality (unwanted pregnancies, hemorrhage and infections linked to unsafe deliveries and complications from unsafe abortions, perinatal causes, diarrhea and acute respiratory diseases as well as inadequate prenatal care)\. These interventions were defined on the basis of evidence-based medicine, cost-effectiveness, the principal causes of mother and child morbi-mortality, and oriented towards services most frequently used and neededby poor women and children\. The affordability of proposed interventions was also considered\. The EPS includes cost-effective interventions for primary health care promotion and prevention, and reproductive health after deliveries\. The inclusion of outreach activities designed for rural, dispersed and indigenous populations, and the adaptation of service delivery to the special needs of indigenous mothers and children i s a specific feature of the EPS\. 28  The EPS, as operationalized in the Nomenclador, would be mandatory for all participating departments\. The EPS identifies five health priority areas: (i)safe motherhood and family planning; (ii) child health (including micronutrients); (iii) outpatient care for Mother and Child Health diseases; basic (iv) sexually transmitted diseases (STD) counseling, treatment and prevention and Acquired Immune Deficiency Syndrome (AIDS) diagnosis, counseling and prevention; and (v) health promotion for maternaland child healthcare\. These areas were further elaborated into 12 interventions and about 80 specific services, all described in the Nomenclador, including: i)family planning; ii)safer motherhood and peri-natal care; iii) community-based integrated management of childhood illness (CB-IMCI); iv) immunization (including Hepatitis B and tetanus); v) STD and AIDS prevention; vi) essential obstetric functions and its referral system between the network of health facilities; vii) HIV/AIDS and sexually transmitted disease counseling and treatment (not including HIV treatment); viii) prevention of micronutrient deficiency disorders in women and children (Vitamin A, and iron); ix) prevention and control of neonatal and maternal malnutrition; x) basic outpatient services; xi) health promotion for the 75 services for women between 12to 45 years old, children up to six years old, and inSTDs and AIDS for the target populations; and, xii) transportation of pregnant women, and potential mobile clinics to provide EPS to the dispersed population\. The EPS prioritizes these healthinterventions for public financing\. Services included in the EPS have treatment protocols developed by the MSPBS with PAHO technical support, describing the medical and administrative processes and the attention algorithms for each of the selected interventions\. The protocols would also serve to organize the health services delivering the EPS, and as a benchmark to measure the quality of services\. The Government has calculated the investment needs to be covered through the proposed Project on the basis of the gaps between the estimated needs to deliver the EPS and the current status of the health services\. It has also identified the need to reallocate personnel\. Any modifications and updates of the EPS would require the Bank's agreement\. 29  Annex 2: Major Related Projects Financed by the Bank and/or other Agencies Inthe last five years, Paraguay's healthsector hasreceived the support of the World Bank, the Inter-American Development Bank (IDB), several United Nations agencies, and a few bilateral agencies, including the U\.S\. Agency for International Development (USAID)\. The Bank and the IDB financed strengthening the health network and supporting some sector reforms respectively\. The other agencies have been offering mainly technical assistance to the sector through non-reimbursable cooperation and implementing specific projects at a local level\. The Bank-financed Maternal Health and Child Development Project (PSM) (Ln\. 4086-87, closed in June 2004) aimed to improve the health status of the underserved Paraguayan population, particularly women and children in six out of the country's 17 department^\.^' To achieve this objective, the Project was designed to: (i) increase the coverage, quality and efficiency of basic maternal and child health services in six underserved departments in Northeastern Paraguay;31(ii) increase the population's knowledge about adequate health practices; (iii) pilot-test a strategy to enhance early child development in Asunci6n; and (iv) strengthen management capability in support of an eventual decentralization of public health services inProject Areas\. The Project activities included: (i) the construction and equipment of two new district hospitals; (ii) rehabilitationandequipment of obstetric andpediatric servicesinfive regionalanddistrict the hospitals; (iii) the rehabilitation and equipping of 42 health centers and heath posts; (iv) the construction and equipping of the national cold chain for immunization composed of a national and three regional depots, and mobile fridges; (v) equipment and personnel training for five decentralized blood banks; (vi) purchase of pharmaceuticals for basic mother and child conditions; (vii) launching, training and supervision of the maternal deaths surveillance system; (viii) training of health staff on obstetric emergency care, and integrated management of childhood illnesses (IMCI); (ix) recurrent costs for immunization campaigns; (x) training and recurrent costs for community-based behavior-change campaigns on prenatal care, blood donation and immunization, and (xi) studies on diagnostic and proposal of a national blood bank network, the effectiveness, efficiency and quality of health services regarding the eight Essential Obstetric and one Neonatal functions, the implementation of the IMCI strategy, and the knowledge, attitudes and practices of the population on prenatal care, blood donation, and immunization, before and after the communication campaigns\. Although the PSM had very difficult implementation until 2001, during the last years of implementation, the Project increased the effectiveness, efficiency and quality of the 8FOE&lN health services in the Project Areas; improved the detection and recording of maternal mortality, contributed to the improvement of vaccination coverage, increased the implementation of the IMCI strategy particularly among auxiliary nurses that see 80 percent of the children; and launched a movement for blood donation\. However, there were no changes in child or mother mortality rates and specified coverage rates of the target population were not achieved\. Therefore, the Project was classified as unsatisfactory regarding its Development Objective\. Since 1995, the IDB has financed the Mother and Child Primary Health Care Reform Project, with a total cost of US$46\.6 million (of which 84 percent i s financed by the IDB and the rest i s the Governmental counterpart), covering five department^\.^' Due to its low disbursement levels, after the 30The country's 17 Departments areAlto Paraguay, Presidente Hayes, Boquerdn, Concepcidn,San Pedro, Itaplia, Caazapa,Amambay, Alto Parank, Canindeyli, Caaguazli,Paraguari, Guaira, Neembucli, Cordillera, Misiones, and Central\. There is alsoAsuncidn as the capital, which has its own identity and constitutes a Sanitary Region if not a Department\. 31Alto Paraguay,Alto Parank, Amambay, Canindeyli, Concepcidny San Pedro\. 32Cordillera, Guairb, Caaguazli,Paraguari and Central 30  original five-year disbursement period, the loan was extended for two years\. Currently, the Government has requested an additional two-year extension and a restructuring of the loan along the lines of the Bank- financed PSM Project\. The proposed restructuring has been developed in close coordination with the Bank and it seeks to complement the efforts of the proposed MCBI Project\. The main objective of the restructured Project i s to reduce maternal and infant morbid-mortality through strengthening the primary health service network\. The restructured Project activities include: (i) rehabilitation and equipping finance of mother and child care services around the country; (ii) supply drugs for a set of basic mother and child health illnesses; (iii) set up a distribution system for said drugs; and (iv) training on mother and child issues for health staff at different levels\. The Pan-American Health Organization (PAHO) has focused its support in three axes: (i) family planning, and maternal and perinatal mortality; (ii)prevention and control of transmissible diseases, and (iii) social protection in health\. Under the Family Planning Project33,PAHO carried out a qualitative diagnosis on the demand for and the offer of family planning, and obstetric and perinatal mortality prevention services\. The Project on Prevention and Control of Transmissible Diseases in Children34focuses on strengthening the national IMCIprogram in four health regions35through training and technical assistance\. Under the aegis of the Social Protection in Health agenda, PAHO developed, together with the local authorities, a mother and child health insurance pilot in the health district of Caazapi\. The insurance was to be financed with resources from the MSPBS, the Department, Caazapi' s Municipality and family's contributions\. So far the insurance i s free for families, andhas not been fully implemented\. Moreover, PAHO provides technical assistance to strengthen the institutional capacity for interventions among high-priority groups (mainly mothers and children)\. The technical cooperation is focused on the development of projects, intervention strategies, and development of methodologies for strategy implementation, and supervision and evaluation bothinhealth services and inthe community\. The United NationsPopulationFund(UNFPA) has provided technical assistance inpartnership with other agencies, such as USAID, to develop the National Reproductive Health Plan 2001-2004, and the NationalReproductiveand Sexual Health Plan 2003-2008 Policy Document\. The United Nations Children's Fund's (UNICEF) work in mother and child health revolves around selected public policy issues, and community empowerment and social services\. Public policy activities focus on the definition of standards and indicators for early childhood development, immunization, prevention of developmental issues, and support for the elaboration of Paraguay's National Child Integrated Health Plan\. Regarding the provision of social services, UNICEF has given priority to implementing projects at a departmental the provision of medical supplies, and technical assistance for access to water and sewerage: construction of latrines, wells and water gathering systems\. UNICEF has also supported population census exercises, training of health promoters to extend the IMC137community-based strategy, and the adaptation and implementation of the Integrated Nutritional Strategy for Children and Indigenous Girls38under five years of age, through training the population on hygiene, nutrition, and feeding guides\. The overall objective of the United States Agency for International Development (USAID) assistance i s to expand access to quality reproductive health services\. USAID activities focus on the 33 Supportedby WHO and the REPROLATINA (regional network of NGOs insexual andreproductive health)\. 34 Supportedby the CanadianInternational Development Agency\. 35 Ztapua, Caazapd, Boquerdn andAsuncidn\. 36 Mariscal Estigarribia, Boquerdn, Caaguazliand Concepcidn\. 37 IntegratedManagementof Childhood Illness\. 38 Nivaclt and Guarani-flandtva, indigenous communities inMariscal Estigarribia, Boquerdn\. 31  provision of health services from both public and private sources in order to increase the quality and availability of reproductive health care inan efficient, cost-effective manner\. A demonstration model of a maternal health system i s being implemented in order to ensure that essential obstetric care i s provided to women during pregnancy and childbirth\. Working with local Governments, USAID has helped to create financially self-sustaining "Social Pharmacies" that provide low-income families with affordable access to basic medical supplies\. Under USAID'scooperation, the Ministry of Health evaluated the Reproductive Health National Plan 2001-2004 and for the first time, implemented a participatory process in designing the new policy, the National Reproductive and Sexual Health Plan 2003-2008\. While implementing activities through NGOs, USAID has concomitantly strengthened local Government decentralization and built the capacity of local NGOs\. Finally, it piloted a micro-insurance pilot in Ztupuu, from which the MCBIProject has drawn many lessons andtools\. 32  Annex 3: ResultsFramework and Monitoring ResultsFramework 1\. Project Indicators The National MCBZ Program seeks to reduce maternal and infant (particularly neonatal) mortality in Paraguay in accordance with the MDG targets\. Given the unreliable status of the country's vital statistics, and since improvements in the capacity to measure maternal and child mortality would be supported duringProject implementation, the Project does not include a specific quantitative target for the two indicators mentioned above\. Nevertheless, the Project would finance nationwide surveys in the last year of the Project to assess trends inthese two areas\. The specific Project indicators are: OUTCOME INDICATORS USEOF INFORMATION Determine effectivenessof MCBI ~ I Paraguay's % reduction inMaternalMortality maternal and infant (RAMOS method) Programand degree of expansion to other departments\. Component 1: % of institutional deliveries (attended in Monitor effectivenessof NationalMother and ChildBasic health facilities by trained personnel) in interventions inthree and then InsuranceProgram (MCBI) is Project Areas\. seven departmentsand the rest createdand implemented inthe % of infant (el) deaths that are audited of the country\. Project Areas\. % of maternaldeaths that are audited\. Monitor if insuranceis 0 Disbursementsof MCBIresources and reaching vulnerable consumption of "credits" by EPS populations; fraud control\. Drovidersincreasingannuah\. Component2: Monitor: Quality of the health servicenetwork % of public healthproviders meeting servicequality by Insurance intheProject Areas is improved\. annualcertification standardsto provide Technical Unit\. the MCBIpackageof services\. 0 start-uplsupervision group The MSPBS's managementcapacity % of the population satisfied with the methodology for capacity is increasedandthe operational MCBIhealth services\. building\. culture of the health system has 0 HealthSuperintendence changedto a systemthat rewards capacity to certify services\. providers for increasinghealth care depth of organizational change coverageand increasingproductivity Component 3: Monitor: Population's participation inthe % of population that knows the role and effectivenessof empowerment social monitoringof basic and first actions of, and trusts HealthCouncils\. strategy\. referral health servicesinthe Project % of the population satisfied with the effectivenessof health Areas has increased\. MCBIcertified services\. promotionstrategy\. Component4: % of mandatory epidemiological and Monitor: Improvementof the monitoring and serviceproductionreports receivedby quality for strategic decisions evaluation capacity of the MSPBS the ITUon time by the InsuranceTechnical and carry-out concurrent audits Unit\. 33  2\. Arrangementsfor ResultsMonitoring\. Since surveys would not be carried out annually, progress on the Project activities would be monitored through a reference line basedon the existing administrative data, taking as base year the one F previous to Loan effectiveness\. Output Indicators % Institutional ITU ~ Births months lata % of infantdeaths 0% 20% 30% 40% 50% 60% 6months 4dministrative ITU audited lata % of matemaldeaths 70% 75% 80% 85% 90% 95% 6months 4dministrative ITU audited lata % of public 0% 5% 10% 15% 20% 25% 6months kdministrative Superintendence providersmeeting iata & ITU certification standards % of populationthat 5% knows +15% +20% Every 2 Survey Directionof Social knowsthe role and role Promotion actions of, andtrusts & ITU HealthCouncils % of population Exit Direction of Social satisfiedwith the at 6 m\. of interviewsand Promotion MCBIcertified implement\. studies & ITU services\. ResultsIndicators by Component ComponentOne : Administrative % institutional births data DRs V\.S\.expectedbirths ITU by department\. % users thatbought Measured +lo% Sentinel site inputs for an EPS at 6 m\. of data Sentinel site serviceinsentinel implement\. ITU sites\. I% pregnantwomen Administrative ITU testedfor VRDL39 data (%I I I ComponentTwo RespectiveRegional I 1 +lo% % infant deaths 0% 20% 30% Administrative healthDirectorates audited/department data &ITU % healthcentersthat Measured +lo% +lo% +lo% +lo% 6months follow reporting at 6 m\. of Administrative im lement data 15% 20% 25% Direction of Social % births with birth 6 months Sentinel site Promotion plan(Plande Parto) data & ITU inselectedsentinel ~ Concurrent ITU % of administrative at 6 m\. of audit data problems identified implement intransactions 39 VRDLis ascreeningtestfor syphillis\. 34  3\. Impact Evaluation The Project would also carry out an impact evaluation of the MCBI to: (i) the impact of isolate the insurance from the effect of other background factors and show the extent to which the insurance has affected health outcomes; (ii)offer useful information on how this type of insurance, which other countries including Argentina, Bolivia, and Peru are implementing, can affect health outcomes, and (iii) encourage a focus on results and measurementof impact inthis and other projects since it i s currently rare to carry out an impact evaluation of any projects inParaguay\. Paraguay's Center for Population Studies (CEPEP) recently completed the 2004 National Demographic, Reproductive and Sexual Health Survey (ENDSSR) that will serve as a source of baseline data for the evaluation\. The Project would finance a final survey in 2009 with similar methodology\. The Project would support technical assistanceand hiringof consultants to carry out the evaluation\. The evaluation would use multivariate regressions for 2004 and for 2009 with departmental dummies and with controls for background factors (age, income, education, employment, languages spoken, civil status, urban residency, income, family size, etc\.) that could influence the health outcomes of interest as independent variables\. One healthoutcome (see below) would be the dependent variable for each regression, with a separate regression for each health outcome\. The regressions could also include non-endogenous Governmental indicators (e\.g\. estimated local per-capita health spending and others)\. The evaluation would measure impact as the difference betweenthe coefficient inProject departments in 2009 and in 2004\. If possible, the 2009 survey would keep the same primary sampling units (Le\., clusters) that the 2004 survey used, thereby producing a panel of communities\. To help understand why the Project created observed impacts, the evaluation would also describe and analyze changes in health services use\. This description and analysis will seek to understand whether observed impacts are due to changes in quality of care or to changes in quantity of services provided; and whether the insurance effectively reached isolatedor vulnerable populations\. The ENDSSR survey collects data on the following output indicators, all of which the evaluation may use: skilled birth attendance, births inmedical institutions, prenatal checkups, use of contraceptives, cesarean sections, underweight birth, and others\. The survey has insufficient observations to establish significant impact on matemalmortality, and may not include enough observations to establish significant impact on infant mortality\. 4\. Data Sources The MSPBS's administrative data presents an imperfect picture of the reality inParaguay\. Since administrative data may not represent some public and many informal and private services, there i s a divergence between administrative data and population-based estimates\. For the primary health outcome indicator, infant mortality, the baseline was established using independent population-based estimates from a household survey (2004)\. The Project would fund another such survey in2009\. The Project would also finance the collection of annual data from selected sentinel sites on whether the users would recommend the provider to others (loyalty index), on whether they had to purchase inputs (drugs, supplies, etc\.) inorder to receive services, and on whether they had a birthplan (PEande Parto)\. 5\. StrengtheningGovernment's Capacityfor Monitoring and Evaluation The Project would support three components to improve monitoring and evaluation work in Paraguay overall\. First, the Project would strengthen the existing MSPBS Control de Gestidn group, which includes national health administrators and local functionaries from each department\. For the last 15 years, this group has met quarterly to review extensive data on health services and outcomes\. Recently, it began to compare these indicators to targets established by administrators\. The Project would 35  support this group as it focuses on health outcomes data rather than on input or service data\. The Project would also seek to involve local health councils (Consejos de Salud) and other units of the Government outside the MSPBS on reviewing and analyzing data\. Additionally, the Project would support quarterly online publishing of health outcomes data and targets at a regional level\. The Project would finance technical assistance to advance and institutionalize those reforms\. The ultimate goal of this support i s to generate public, accurate, and frequent data on health outcomes for use in the MSPBS and for public discussion\. Second, the Project would develop an Insurance Technical Unit (ITU)under the Vice-minister of Health\. The ITU would obtain quarterly data from the Control de Gestidn and, as necessary, more frequent data from other sources\.This unit would emphasize streamliningdata collection processeswithin the Govemment rather than generating new data collection mechanisms\. With oversight from the Vice- minister and Directors, this group would use these data to research, develop and implement specific proposals for reallocation of resources and revision of the MCBI implementation\. The Project would finance technical assistanceto develop and institutionalize this unit\. Third, the Project would use a comprehensive approach to monitoring the above-mentioned indicators\. The Project would train community health workers to obtain specific data on user satisfaction, waiting time, purchasing of inputs and other factors\. The Project would also support work among the MSPBS, the General Directorate of Censuses and Statistics, and other Government units to compare population and administrative data in order to improve the accuracy of administrative data\. The Project would finance technical assistanceand acquisition of neededmaterials for these activities\. 36  Annex 4: Detailed Project Description The total cost of the Project is estimated at US$25\.0 million (US$22\.0 million IBRDfinancing, including an estimated US$1\.5 million of unallocated and the Front-End Fee and US$3\.0 million in counterpart funds)\. The implementation period i s expected to be about five years\. Specifically, the Project would finance the followingcomponents and activities: Component 1: Extend the Delivery of the Essential Package of Services (EPS) to the Target Population in the Project Areas Under the Mother and Child Basic Insurance Program (MCBI) (IBRD US$10\.2 million) The objective of this component i s to extend effective access to an Essential Package of Services (EPS) to women of child-bearing age and children under age six, in the ten poorest departments in the country\. This component would achieve this objective by financing the delivery of the EPS to the target population, through two mechanisms: (a) Subcomponent 1\.A\. would finance (subsidize) on a declining basis the equivalent of an insurance premiumper beneficiary to pay for the services includedinthe EPS;40 and (b) Subcomponent l\.B\. would finance the logistics and inputsnecessaryto deliver the EPS to isolated beneficiaries though mobile teams\. Subcomponent l\.A\. Capitation Payments (IBRD US$8\.3 million): This subcomponent would finance the establishment of the MCBIFund, the vehicle for financing the delivery of the EPS by health care providers, and the costs of providing the EPS to the target population\. This component would be implementedby the Insurance Technical Unit (ITU), within the MSPBS General Directorate of Planning, and under the direct supervision of the Vice Minister of Health\. This unit would act as a purchasing agency for the EPS, monitoring the Annual Management Agreements between the MSPBS and the Regional Counsels, and ordering fee-for service transfers to the service providers\. The average per-capita costs for providing the EPS to the target population (women of reproductive age and children under age six) was estimated by the MSPBS through an in-depth study that considered variable costs (drugs and medical supplies) of the EPS\. The costs of the benefit were developed by analyzing actual prices prevailing in the market for medical goods, technology improvements and efficiency standards, and expected economies of scale\. These costs were estimated on a per-capita average based on the beneficiary population in the 2002 census update\. The present estimated average cost of the EPS i s about US$5\.60 (per-capitdyear)\. The Bank's no-objection would be required to introduce changes to this per-capita average, the composition of the EPS, or the population to be covered\. However, all those parameters would be reviewed regularly by the Government and the Bank\. Subcomponent l\.B\. Extension of Coverage to Remote Populations (IBRD US$1\.9 million): Subcomponent 1\.A\.should create the incentive for providers to deliver the EPS to the enrolled population upon demand\. However, there i s a small percentage of the population living inremote, isolated areas that faces constraints both to enroll and to demand services\. Subcomponent 1\.B\. is designed to reach out to this population in participating departments through special mobile teams that would simultaneously deliver the EPS, enroll the population and provide health education services aimed at overcoming potential cultural barriers\. Subcomponent 1\.B\. would finance ad-hoc teams in the MSPBS participating departments, and also the contracting-out of those teams by the MCBIFundas necessary\. 40To avoid confusion with traditional insuranceschemes, sincethe MCBIis not acontributory insurance, the premium i s called "Capitation Payment for the MCBI"\. 37  Component2: Establishthe MCBIand Strengthenthe MSPBS's Capacity to LeadandImplement the MCBI(IBRD US$6\.5 million) The objective of this component i s to finance most of the activities within the MSPBS neededto establish, regulate, manage and monitor the MCBI Program\. It would also finance improvements in the technical and managerial capacity of public health service providers up to a level essential to deliver the EPS\. This component is relatively large as compared to Component 1since it would finance a substantial amount of start-up costs and initial investments to create institutional capacity\. Most of those activities would be significantly reduced as the Project advances and the MSPBS's capacity increases\. This component has two subcomponents: Subcomponent 2\.A\. Strengthen the MSPBS's Capacity to Launch, Regulate, Manage and Monitor the MCBI (IBRD US$1\.9 million):This subcomponent would help the MSPBS to develop its health service purchasing capacity at the national and departmental levels to enter into performance agreements for the service provision of the EPS, and support and monitor the delivery of the EPS in the Project Areas\. The Insurance Technical Unit (ITU) would be created within the Planning Directorate of the MSPBS to manage the MCBI\. The role of the ITUwould be to purchase health services-to identify which, how many, and of what quality services to purchase and agree the conditions of service provision\. This unit would also analyze the relevant informationfromthe MCBImonitoring systems and counsel the relevant authorities regarding the health service purchasing functions\. To ensure acceptance among staff and institutionalization of these systems and tools, the Ministry would use organizational transformation methodologies, including internal communications activities, to improve the possibility that the institutional changes brought about by the implementation of the MCBI are embraced by the MSPBS's staff and to increase the ownership of these changes\. The loan would finance technical assistance, IEC efforts, office equipment, training services and selectedrecurrent costs to: 0 Establish the Insurance Technical Unit (ITU)inthe MSPBS (US$O\.l million); 0 Develop the MSPBS's service purchasing capacity and develop all managerial and administrative systems for overseeing the implementation of the MCBI and the delivery of the ESP by authorized41 health service providers\. Specific activities would include inter alia: (a) design, implement, and monitor Annual Performance Agreements; (b) reengineer and improve selected administrative procedures to improve transparency, efficiency and effectiveness of the administrative support systems needed to implement the MCBI successfully, including financial management and procurement, logistics, social communication, and monitoring and evaluation at the central and department level as needed; (c) design and implement a human resources management system to certify, contract, train, and motivate health personnel with the skills and new operational culture needed to implement the MCBI, including an internal communications campaign; (US$0\.5 million); 0 Increase the MSPBS's staff capacity to develop their service purchasing, managerial and administrative capacity to manage the M C B IProgram(US$0\.7 million); 0 Design and implement the MCBIinformation system (US$0\.2 million), and 0 Enhance the capacity of the Health Superintendence4' (Superintendencia de Salud) to certify health services (US$0\.4 million)\. ~ 41 Authorized providers would be certified by the Health Superintendence to deliver the EPS in the participating departments\. 42 The HealthSuperintendence was created by Law 1032196and regulatedby the Supreme decree 205531981 Its role is, among others, to certify the public and private health service providers\. It has three areas, clinical audit, financial audit, and health services regulation\.  Subcomponent 2\.B\. Strengthen the Public Service Network Capacity and Service Quality, to Launch and Implement the MCBI, and Deliver the EPS ( US$4\.6 million of Bank Loan): This subcomponent would finance start-up/monitoring teams to improve the health services technical, managerial, and service quality of the Regional directorate^^^ (DRs), and health facilities up to health center level in Project Areas\. During the life of the Project, the start- up/monitoring teams, originally consisting of top national professionals, would be replaced by regional MSPBS staff, thus becoming Regional Health supervision teams\. Specifically, these teams would: a) facilitate the diagnosis of managerial, technical, personnel, investment and logistical (communication, transport, buildingand equipment maintenance) needs of each health facility; b) design, together with the DR and the facility staff, action plans to solve the identified issues; c) support the DR and the health services with their annual negotiation of performance agreements; d) provide on-the-job training through regular visits to health facilities; and e) monitor the fulfillment of the annual agreement\. To avoid conflict of interest, start-up groups would be periodically rotated among departments\. (US$3\.0 million); 0 This subcomponent would support the remedial actions suggested by the start-up/monitoring team, regarding human resource capacity by financing: a) temporary compensated personnel rotation and internships in well functioning health services; b) benchmarking among health providers; and c) financing formal education according to the needs identified by the start- up/monitoring teams, through the already established distance learning capacity in the General Direction of Health Programs (US$0\.6 million); 0 Installation of basic waste management and communication equipment for the health facilities that would deliver the EPS package\. Investment would exclude level four facilities (US$l\.O million)\. Component3: Introducing Social Management of the MCBI (IBRD US$2\.4 million) This component would ensure that the target populations, particularly those that have been historically marginalized, have adequate knowledge and motivation to request the ESP, and it would facilitate the enrollment of beneficiaries in the MCBI Program\. This component would mobilize the support of decision makers and opinion groups outside the Ministry to support the MCBIandthe changes it would introduce\. Communities would also be empowered to monitor the delivery the EPS and the MCBI\. Finally, individuals and communities would be targeted for the introduction of good practices regarding reproductive and child health behavior at the household and community levels in the Project Areas\. This component i s also relatively large since it includes a substantial amount of initialinvestment to ensure that the population and local authorities understand the insurance scheme and their rights and duties and have information to monitor the functioning of the MCBI\. Specifically, the component would finance consultant services and technical assistance (TA), incremental MSPBS operating costs, event organization, training of social promotion staff from the MSPBS, and communication services, whenever possible, through NGOsand local groups and organizations, to support the following: 0 Enrollment and IEC campaigns for beneficiaries and dissemination of detailed information about the program among major stakeholder groups, providing opportunities for feedback and dialogue\. Beneficiary communities would be provided with practical information on beneficiaries' rights to services, and the EPS includedinthe MCBI(US$0\.6 million); 0 Community outreach to foster social participation in the oversight of MCBI services, providing technical assistance to: (a) Local andRegional Health Councils to establish social monitoring and auditing mechanisms of the MCBI (e\.g\. Local Councils would act as enrollment promoters); (b) health facilities for the enrollment and training of health workers; and (c) Local Councils that request support to establish social pharmacies; (US$1\.5 million); 43MSPBSrepresentations at the Departments 39  Studies to monitor and evaluate the results of the activities financed (US0\.3 million)\. Component 4: Enhance the Monitoring and Evaluation of the MSPBS, Regarding the MCBI and Finance Concurrent Audits (IBRD US$1\.0 million) The satisfactory implementation of the MCBI Program would imply significant changes in the MSPBS's staff incentive structure, and the population's participation in the health services leading towards increased transparency and results accountability\. To measure whether the expected changes are occurring and take the pertinent actions, the MSPBS's ability to monitor, evaluate and audit performance would be strengthened\. The Project would finance information technology (IT) design services, software and equipment, and training for staff in the ITU and the DRs to: (a) upgrade the monitoring of health provider performance; and (b) aggregate and report information used for gauging Project performance, and to make transfers to departments\. This component would also support the strengthening of the MSPBS to make informed strategic decisions based on recent and accurate data\. The Project would provide technical assistance to transform the meetings between the key General Directors and the Regional Health Directors (Control de Gestidn) into problem solving exercises for the MCBI Program\. During these meetings, quarterly service and management data are discussed\. The ITUwould use this and other regular data to propose and implement operational and strategic changes to increase the effectiveness of the insurance\. In addition to being a renewed basis for health policy and programming, the monitoring system i s also expected to generate tracer information that would be accounted for inmanaging financial flows inthe Project\. The ITU staff would monitor results and enrollments on a monthly basis and two independent technical and financial audits (concurrent audits) would be carried-out\. The technical audit would be conducted by a fm with qualifications in health system administration, insurance, and information technology\. It would provide an independent opinion on: 0 The veracity of the "billing" sent by participating departments to the ITU justifying the "capitation payments;" 0 The reliability of "billing" based on service production by the different health facilities; The compliance of the departments and the MSPBS with the Annual Performance Agreements; 0 The compliance of the DRs and the service providers with the norms on the provision of the ESP including: (a) quality and number of services provided; (b) payments done only for services included and agreed inthe "Nomenclador" at approved prices; and (c) respecting an overall limit on payments to providers on a capitation basis; 0 The effectiveness of the ITU and the DRs on the management and results of the transfer of capitationpayments to departments\. The financial concurrent audit of the MCBIFundwould be carried out by an independent audit firm acceptable to the Bank\. Lastly, this component would finance end-of-Project evaluation activities, including the National Demographic, Sexual and ReproductiveHealth Survey planned for 2009-2010\. Component 5: Project Management\. (IBRD US$0\.4 million) The component would finance technical assistance, materials and operational costs required for the functioning of the ITU, and National Health Fund (MCBI Fund) if required, and the Project financial audit\. 40  Annex 5: Project Costs Local Foreign Total us us Project Cost By Component and/or Activity $million $million US $million 1\.-Financingthe MCBI 12\.4 0\.6 13\.0 2\.- Strengthening the MSPBS' andthe Public Health Providers' Capacity to Lead and Implementthe M C B I 4\.9 1\.6 6\.5 3\.- Communicationand Social Management to Implementthe MCBI 2\.4 2\.4 4\.- Project and ProgramMonitoring, Evaluation and Concurrent Audits 0\.11 0\.85 0\.96 5\.- Project Management 0\.4 0\.4 6\.- Total Baseline Cost 20\.21 3\.05 23\.26 7\.- Physical Contingencies 1\.58 1\.58 8\.- Price Contingencies n- Total Project Costs' 21\.79 3\.05 24\.84 Interest duringconstruction 0 Front-endFee 0\.16 0\.16 Total FinancingRequired 21-79 3\.27 25\.0 'Identifiable taxes and duties are US$1\.2 million, and the total Project cost, net of taxes, i s US$23\.93 million\. Therefore, the share of Project cost net of taxes i s 95 %\. 41  Annex 6: ImplementationArrangements Project implementation arrangements consist of two broad categories related to: (i) implementation of the Project itself; and (ii) implementation of Project and program monitoring and evaluation functions (see Annex 3)\. 1\. Project Implementation The Project would be implemented by the MSPBS through the MCBI Insurance Technical Unit (ITU), with assistance from other general and departmental directorates\. Resources from the Government of Paraguay Treasury and the Bank loan, and potentially other sources to finance the provision of the EPS through the MCBI (about 44 percent of total Project financing), would be channeled through the MCBI Fund\. There would be external audits and internal control processes covering disbursement and accounting recording of the MCBIFundand social control of the performance of the ESPproviders\. Agencies Roles and Responsibilities: The principal agencies and arrangements covering implementation include the following: The Ministry of Public Health and Social Welfare (MSPBS) would have the overall responsibility for Project implementation, meetingthe Project objectives, and for affecting a change inthe operational culture of the health system\. To receive loan proceeds, other than resources for technical assistance for capacity building, the ten MCBI Program eligible departments are required to become MCBI Program participating departments through: (i) the Annual Management Agreements signing between the national and regional health authorities, and the Regional Councils, in their role of social monitoring; and (ii) signing of Service Performance Agreements between the Regional HealthDirectorate (DR) and the health service providers\. The MSPBS would make resources available to participating departments based on enrollment rosters\. Annual Management Agreements would define the rules for the parties regarding the administration, financing, monitoring, auditing and other specific requirements with which the MSPBS and the participating departments would have to comply, including, inter alia: (i) the norms to enroll patients; (ii) the norms for the billing of fee-for-service payments from providers to the respective DR; (iii) the list of key services to serve as tracers of service production at the departmental level (trazadoras) and their corresponding targets; (iv) agreed prices for the services included in the Nomenclador; (v) agreed work programs (including outreach, staff development and investment levels); and, (vi) agreed budget allocation\. Drafts of model agreements would be included in the Project OperationalManual\. Znsurance Technical Unit (ZTU)\. Technical management of the MCBI would be the responsibility of the Insurance Technical Unit (ITU) within the MSPBS's Planning Direction(DGP)\.The ITUwould carry out all the health service purchase functions\. Thus, the ITUwould be responsible for supportingthe DRs inthe purchase of the EPS for the target population and for working with and through the different National and Regional4 MSPBS' Directorates, and the National Insurance Fund (MCBI Fund) in the implementation of the MCBI Program and the Project\. The ITU would be responsible for ensuring that all technical, financial and administrative aspects of the Project implemented by the different directorates meet agreed quality and timeliness standards\. The ITUwould be the point of contact with the Bank for Project implementation (technical supervision, disbursements, compliance with loan conditions, etc\.) and it would also provide technical advice to the MSPBS\. The ITUwould be staffed with a director (appointed by the Minister of MSPBS and satisfactory to the Bank), would draw on existing expertise in the MSPBS for most other technical issues, and supplement its capacity with short term consultants on highly technical matters such as the health service purchasing function, monitoring and 44Unlike other Government agencies, the representation of the MSPBS at the departmental level is called the Regional HealthDirection, not the Departmental Health Direction\. 42  evaluation, outreach and communications\. The ITU would be supported by the International Projects Administration Unit (PAU), a DGAF unit specialized in financial management and procurement procedures for all multilateral projects integrated within the Ministry structure\. A Project Operational Manual would specify operating objectives, inter-institutional relationships and procedures covering financial reporting, procurement, reporting and auditing (financial and concurrent) governing the Project\. At the Mid-Term Review, the Government and the Bank would evaluate thepertinence of vesting the ITU with a higher degree of autonomy under the National Health Fund legalframe~ork\.~' General Direction of Finance and Administration of the MSPBS (DGAF)\. The Ministry's DGAFwould administer the Loanproceedstrough two unitsdescribedbelow\. (a) Znternational Projects Administration Unit (PAU)\. Fiduciary and administrative matters related to the Project in general, except for resources for the MCBIFund (Component l\.A\.), would be handled by the PAU within the MSPBS's DGAF\. Staff in the DGAF have been assigned, and would be trained to be responsible for procurement and financial management in accordance with Bank guidelines\. This unit would support the ITU by providing it with necessary financial information, procurement services (Components 2-5) and reporting, which conformto the Bank`s requirements\. (b) MCBZ Fund\. This unit would be constituted under the DGAF as a sub administration and financing unit, thus having more flexibility and a simpler financial management\. Criteria and procedures for managingthe fund were agreedas follows: (i) an enhancedfiduciary framework to ensure appropriate use of funds; (ii)a reporting scheme to inform all stakeholders of the transactions made and enhance accountability of the system; (iii) a technical concurrent audit to ensure quality of services and accuracy of the billing of the service providers; and (iv) social participation in the accountability framework through the involvement of the Regional and Local Health Councils as consultative bodies\. All the features described above would be reflected in a specific Operations Manual with all the detailed operational procedures, billing system, financial reporting scheme, MCBI Fund administrative procedures, concurrent audits terms of reference, and social participation framework, would be a condition of disbursement for the Capitation Payments disbursement category (Component 1\.A\.)\.The fund would maintain records and provide financial reports on the sources and use of funds to the MSPBS\. However those records would be under the custody of the PAU\. Regional and Local Health Councils\. The Regional and Local Health Councils are social participation bodies that are regulated through the 1032/96 Law\. The councils include representatives from local Governments, civil society groups and the local health authorities\. For the MCBI, the Regional and Local Health Councils would initially be third party social monitoring agents of the operation of the MCBI\. The councils would review the statement of accounts and the aggregate information on services provided by the health facility under their oversight and interface with and report to the ITUand the DRs through the start-uphupervision teams\. Health Regional Directorates (DR): The DR are decentralized purchasing entities and incharge of the service providers' network at the departmental level\. For the MCBI, the DRs would be a signatory on the Annual Management Agreements (see below) and they would sign and supervise Service Performance Agreements with health providers\. The DRs would be responsible for identifying the departments' needs inorder to implement the MCBIand obtain the financial, technical and administrative support through the ITU\. The DRs would also be responsible for the enrollment of the population and for sending the enrollment rosters to the ITU(the disbursement supporting documentation)\. 45Law 1032/96 establisheda legal framework for a National Health System that includes a National Health Fund\. However, this Law has beenonly partially regulated and hencenot fully implemented\. 43  Health Service Providers: These service providers would be certified, according to criteria established by the ITU, to offer the basic package of services under the MCBI\. Certification of service providers would be carried out by the Health Superintendence\. Most service providers would be public, however the Ministry would be able to contract private providers if needed that would be submitted to the same certification procedures\. Related to the MCBI, these service providers would be responsible for maintaining proactive contact with beneficiaries, particularly the poor, providing quality services, maintaining records and submittingbills for their services to the DRs\. Health Superintendence: The Health Superintendence was created by Law 1032196 and regulated by the Supreme Decree 20553/98 to certify public and private health service providers in three areas: clinical audit, financial audit, and health services regulation\. For the MCBI, the Health Superintendence would assume a critical role in the certification of public service providers, and therefore, it would receive support from the Project, in order to strengthen its current capacity so that it can expand its ongoing certification activities to all the facilities inthe Project Areas\. 2\. Responsibilities for Project Components In addition to ensuring that all components are implemented, the ITU would be directly responsible for implementing complementary activities needed to deliver the EPS and implement the MCBI (Components 1 and 2)\. The ITU would also strengthen the stewardship role of the MSPBS (Component 2); supervise the implementation of the social information program and the dissemination and communications by the MSPBS's National Direction of Social Communication, including relevant community outreach programs to increase enrollment in the program (Component 3); and carry out the overall monitoring, evaluation, management and administrationof the Project (Component 4)\. 3\. Procedures and Relationships The processes and procedures governing Project implementation would be detailed in the Project's Operational Manual\. The manual would cover: (i) the basic relationship between the Government and the World Bank in the areas of financial management and procurement (detailed below and inAnnexes 7 and 8); and, (ii) the norms and procedures guiding the responsibilities of the staff of the ITU,the relationship among the ITUand their departmental counterparts, including models of Annual Performance Agreements and Service Performance Agreements\. Models of Annual Performance Agreements to be included in the Operational Manual would be structured as follows: Between the MSPBS-Regional Health Councils\. The MSPBS at the national level would establish Annual Management Agreements with the DRs, and the Regional Health Councils (in their social monitoring role) under which each department would be part of the MCBI Program\. Under these agreements, departments and the MSPBS would agree on all pertinent program norms regarding, inter alia: overall capitation payments, coverage, target population, auditing procedures; beneficiary and service provision validation procedures, reporting procedures, supervision, financial management, procurement, communication and dissemination, reimbursement rules, incremental resources requirements, investment amounts, capacity building programs, the expected level of program coverage and the resulting budget for the year, the specific quarterly production goals for the health interventions; the work program covering services to be delivered, promotional and community outreach activities and other program-related activities; and the annual program budget (including the cost of services, incremental investments, training, staffing)\. The MSPBS would: establish the norms and requirements of the MCBI Program; agree to the care standard of the EPS and the results to be achieved by the department; provide technical assistance 44  and financial resources according to the department's demonstrated needs to provide the EPS; and provide financial resources (through the premium payment) for the implementation of MCBI Program according to coverage levels agreements (premium) and technical assistance, consulting services and goods that arejustified to buildprovincial implementationcapacity\. Between MSPBUDR and Authorized Providers: Parties would establish one-year Service Performance Agreements that would remain inforce subject to good perfonnance and the maintenance of accreditation on the part of the provider\. The agreements would detail: (i) services to be provided conforming to the ESP through the "Nomenclador", and the price of component services that would be paid for these services; (ii) quality standards and quality control measures; (iii) practices for building and maintaining enrollment of beneficiaries (if the particular provider performs this activity); and (iv) modalities for supervision of activities by the DR, reporting and payment, and results to be accomplished\. 45  Annex 7: FinancialManagement and DisbursementArrangements 1\. Introduction The Financial Management Assessment was carried out in accordance with the guidelines issued by the Financial Management (FM) Board on June 30, 2001 and revised on October 1, 2003\. The objective of the assessment was to determine whether the proposed financial management arrangements are adequate, and: (i) have assurance that the funds would be used only for the intended purposes in an efficient and economical way; (ii) ensure the preparation of accurate, reliable and timely periodic financial reports; and, iii)safeguard the entities' assets\. This PAD reflects the assessment of the agreed proposed financial management arrangements\. The proposed FMarrangementssatisfy the minimumfinancial management requirements, and the Borrower has sufficient capacity and resourcesto implement them\. The Project would be implemented by the MSBPS and instead of having a dedicated project implementation unit separate from the Ministry, the Project would be implemented through the relevant technical areas\. The financial management function would be carried out by the General Administration and Financing Directorate (DGAF) through a dedicated staff group that would act as the International Projects Administrative Unit(PAU)\. All uses of funds would be processed by the PAU, and supported by external third party documentary evidence and the related goods and services procured in line with Bank guidelines\. The PAU would be responsible for Project financial management (includingtransfers of funds to the MCBI Fund for Annual Management Agreements with the participating departments), making payments to suppliers, obtaining loan disbursements, and accounting and financial reporting\. The assets to be procured during the Project would be incorporated directly into the MSPBS and recorded inits asset registry\. The DGAFhas assignedthe PAUas responsible for this function\. The provision of funds supporting the Maternal Child Basic Insurance Program (MCBI) would be channeled through a specific financial management arrangement, the MCBI Fund\. The MCBI Fund would be created to allocate the MCBIcapitation payments to the ten departments\. Inthe departments, the health service providers would receive the MCBI resources on a fee-for-service basis\. Extensive consultation with the MSBPS and Ministry of Finance has been carried out to refine the operational characteristics of the MCBIFundoperation\. The mechanism for the MCBIFundincludes establishing the M C B IFundas a dedicated account to receive the capitation transfers, and pay the fee for services\. Both the capitation and the use of funds would be recorded in the Government's budgetary system under the modality of Rendicidn de Cuentas\. The MCBI fund administration costs would be paid by the MSPBS, and not by a percentage of the capitation transfers\. Project implementation would be guided by an Operational Manual\. The MCBI Fundwould be implementedunder a separate OperationalGuidelines called the MCBIFundOperational Guidelines\. Uses of loan funds would include: (i) payments to suppliers for all components outside of the MCBICapitation Payments category; and (ii) Capitation Payments transfers from the MCBIFundto the participatingdepartments\. The transfer of resources from the loan to the M C B I Fund, on an average per-capita basis, i s conceptually equivalent to a contribution to the costs of the premiumfor a traditional health insurance 46  scheme covering incremental costs\. However, to avoid confusion, since the MCBI i s a publicly-financed program, rather than a contributory healthinsurance, it would be called capitation rather than premium\. The Bank would disburse funds for the Capitation Payment (conceptually the equivalent to insurance premiums), to the Special Account, specifically to finance the marginal cost of the EPS per enrollee for the departments participating inthe program, on the basis of actual enrollment of mothers and children in the participating departments\. Annually, each participating department and the MSPBS through the ITU, would agree on the estimated number of women and children that the respective department plans to enroll\. The maximum amount would be the number of eligible women and children reported in the 2002 census and updated with population growth estimates\. This estimation would be included in the Annual Management Agreement to be signed by the MSPBS and the Regional Directorates, and would determine a "budget signal" for the maximumamount of capitation payment the corresponding department would have at its disposal to pay providers for the provision of the EPS to enrolled mothers and children on a fee-for-service basis that year\. The actual funds available to the department (up to the limit of the budget signal) would depend on the actual enrollment of the population\. The Regions would credit funds to providers exclusively on the basis of fee-for-services\. This means that, although funds would be available to the Regions based on capitation per enrolled beneficiary, the actual use of those funds would be based exclusively on fee-for-service payments for standardized bills, issued by the MSPBS for the program, sent by health providers after services have been rendered\. Even if DRs have enrolled a number of beneficiaries, the funds would not be creditedto the health providers untilthey provide bills of services rendered\. Bank financing for Subcomponent 1\.A\. (Capitation Payments) would be disbursed against the list of enrolled mothers and children presented by the DRs to the ITUand certified by the ITUas verified\. As the enrollment process would most likely take time and there i s a need to launch the M C B I as soon as possible (to reach the population and to encourageenrollment), each participating department would have a 12-month grace period after joining the program during which resources would be made available for that department to pay providers on a fee-for-service basis, exclusively on the basis of estimations of eligible populations based on the 2002 census, rather than actual enrollment\. After that, all resources made available to DRs and "budget signals" would be done exclusively on the basis of actual, and estimated, enrollment respectively\. Accordingly, that first year grace period, Bank financing for the respective entering department would be made available against the 2002 census estimation of eligible mothers and children presented by the ITU,updated by population growth rates\. The Annual Management Agreements between the Ministry and the Regions will also include agreements on resources or in-kind transfers regarding other Project components as necessary\. Any variation in the capitation price (set at US$5\.60 per year), the composition of the EPS, Nomenclador andor its prices would need no-objection from the Bank\. Annual reviews of the capitation price, the Nomenclador and its prices, the census reliability, and coverage figures would be carried out and agreements reached between the Bank and Borrower as necessary\. The MCBI Fund would periodically provide system balances for participating providers, and would be subject to a concurrent financial audit\. Operational Guidelines will be governing the administration of the MCBIFund, and have to be approved by the Bank, before said Fundcan receive any loan resources\. The MSPBS would finance the administration of the MCBI Fund with its own resources provided out of capitation funds\. The ITU, through its supervision teams and the Health Superintendence, would regularly verify the number and quality of the services delivered as internal control of the program, which will be complementary to the external technical concurrent audit\. The DRs would be responsible for consolidating the service bills of their providers, and providing the information to the MCBIFund\. 47  2\. MCBIProgramFiduciary Framework Appropriate use of Capitation Payments would be ensured through periodic reporting by an external concurrent financial audit acceptableto the Bank that would monitor the MCBIfund transactions and financial statements\. This audit would be conducted in addition to the Project annual audit\. To minimize the country's fiduciary risk, the option of considering only international audit f m s for the MCBIFundconcurrent financial audit is beingexplored\. The MCBI Fund would issue quarterly audited financial statements which would include: financial balances, and source and uses by region, uses of funds by type of health service by region and complementary financial information on the financial position of the health facilities\. The accounting of the MCBI Fund would be maintained on a cash basis of accounting following international accounting standards\. The MCBIFundfinancial statementsformat would be part of its Operational Guidelines\. The contracting of the concurrent financial auditor will be a condition of disbursement for the expenditure category "Capitation Payments for the MCBIProgram"\. The terms of reference of the concurrent audit would require the auditor to provide : (i) an opinion on the MCBIFundfinancial statements; (ii) opinion on the "billing" sent by the MCBIFund an justifying the calculation of the per capita payment; (iii) opinion on the management of the MCBI an funds and supporting documentation for the payment to the MCBI service providers maintained at the MCBI Fund level; and (iv) conclusions and recommendations for modifying processes used for maintaining valid information and coverage\. Opinions, conclusions and recommendations would be provided every three months\. The MCBI Fund Operations Manual, the Terms of Reference for the MCBI financial administrator, the Annual Management Agreements with the departments, and the terms of reference for the concurrent financial and technical audits would be all subject to Bank review and approval and would be conditions for disbursements for the capitation category\. 3\. Country Issues The Paraguay Country Financial Accountability Assessment (CFAA), March 2004, and the Country Assistance Strategy (CAS), November 2003, describe the problems of governance and institutional weaknesses in Paraguay\. The CAS states that Paraguay i s renowned for corruption and contraband\. Perceptions of corruption have increased during the past decade and Transparency International consistently ranks Paraguay among the ten most corrupt nations\. Corruption i s not the only institutional weakness in Paraguay\. The basic management systems of Government are also weak or non-existent\. Within the central administration, the personnel management system i s in an embryonic stage and i s only now pullingtogether a master roster of all civil servants\. A much larger task i s to embark on the professionalization of the civil service, including competitive entrance exams, career streaming and training\." The CFAA states the following as the most important weaknesses and shortcomings that threaten financial accountability inParaguay: 0 Weak-control environment\. 0 Numerous and serious exceptions inthe application of the financial administration law and regulations\. 0 Weak internal audit and control, especially inrevenue collection agencies\. 48  The disproportionate share of time and resourcesthat the Auditor General devotes to ad hoc review requests\. 0 Congressional introduction of budget increaseswithout provision for corresponding financing Trade liabilities incurredby execution agencies, but unrecordedif they exceed the authorized cash program\. 0 Many exceptions to generally acceptedaccounting standardsandfinancial statementsnot prepared incompliance with the Government's own regulations\. The CFAA concludes that both inherent and control risks are high and states that the advances made in the modernization of Paraguay's public financial management system could not compensate for the effects of a deficient control environment\. The Bank`s country portfolio review of October 2003 also identified the main issues affecting portfolio implementation, including: (i) high staff turnover inthe project implementation units; (ii) of lack timely and adequate availability of counterpart funds; (iii) cumbersome procedures for the flow of funds to the projects; (iv) delays ineffectiveness and project start-up; and (v) limited disbursement capacity and limited knowledge of Bankprocedures\. Actions to address these issues have been agreed at the portfolio level and are under implementation, and these issues have been taken into account in the design of this proposed Project\. To address the limited knowledge of Bank procedures, as part of Project preparation, specific training on FM operational policies and procedures was provided to DGAFadministrative staff\. 4\. RiskAnalysis Fiduciary risks are country-wide and impact on the entire portfolio; this project does not have a higher fiduciary risk than other Bank financed projects\. But various measures have been taken during project preparationto mitigate the fiduciary risks\. Procurement would be centralized inthe DGAFPAU which is being reinforced, and the staff would have receive intensive trained\. The Bank has agreed with Government on the following additional measures inthe design to minimize such risk: (i) The accounting system of the project i s linked to the overall Government accounting system and the PIU will be able to generate quality financial reports; (ii) Continuous external auditors' engagement under specific Terms of Reference are going to be carried out; (iii) the Project Operational Manual would contain a clear statement of the roles and responsibilities as the basis for enhancing accountability\. Finally, (iv) the MSPBS has implemented an online procurement portal that i s making its procurement public and thus more transparent\. Nevertheless, fiduciary risks are substantial\. A detailed risk assessment is provided in the FinancialManagement Assessment Report (FMAR,inProject files)\. The overall riskassigned i s high\. 5\. Strengthsand Weaknesses Strengths: The MSBPS has been involved from the very beginning and the degree of commitment and ownership i s very high\. Weaknesses: Country issues and the execution of project indifferent departments with weak inherent control environments may make it difficult for follow-up and fraud control\. This control risk i s mitigated by the requirement of specific concurrent audits\. 49  Weaknesses Resolution Weak control environment - Project transactions would be recordedinthe Government accounting system and subject to Government controls (budgetary, internal audit) andexternal auditors (avoiding exceptions to the central control framework)\. - Special Account reconciliationcertified by auditors for capitationpayments category\. - Continuous external auditors' engagement under specific - Terms of Reference\. Project execution subject to the application of the financial administrationlaw and regulations\. Departmental execution ' Concentration of FMinthe PAUand the MCBIFund Lack of knowledge of Bank ' Specific training provided to the MSPBS's administrative procedures staff\. 6\. Project Financial Statement Audit Arrangements The Project would contract an annual project financial statement audit under Terms of Reference preparedinaccordance with the Bank Guidelines to be performed by an independent auditor acceptableto the Bank\. The audit would cover all fundingand expenditures reportedinProject financial statements\. In addition to the standard Project financial audit, two other audits would carried out\. First a financial concurrent audit of the MCBI Fund would be carried out to ensure proper use of funds and adequate reporting, and a technical concurrent audit would be carried out to ensure adequate provision and billing of health services to the MCBIProgram\. The concurrent financial audit of the MCBI Fund, performed under Terms of Reference acceptable to the Bank, would provide quarterly audited reports on the MCBIFund's financial statements and consist of opinions on financial statements, internal control frameworks, capital inflows and health providers supporting documentation\. 7\. Flow of Funds The Government would open one Special Account (SA) managed by the PAU\.Funds would flow from the Loan account to the SA\. From the SA, funds for the capitation payments category, would be transferred to the MCBIFundaccount in a Bank (generally the Bunco de Fomento) to be available for the departments as established in their respective Annual Management Agreement\. For the other categories, funds would be withdrawn from the SA to pay for eligible expenses\. The proposed flow of funds is detailed inthe following graphic: 50  MCBIProject Flow ofFunds Direct payments (managedby PAW 8\. DisbursementArrangements r Loanproceeds would be disbursed against the following expenditure categories: _ _ _ _ _ _ _ _ ~ ~~ Expenditure Category Amount financed inUS$ Bank's FinancingPercentage* 1\.Works 68,000 100% ~~ 2\. Goods 4,036,000 100% 3\. Consulting Services and audits 1,789,000 100% 4\. Training 3,970,000 100% 5\. Capitation Paymentfor MCBIProgram 80% the first two years up to a maximumof $2,000,000 8,288,000 60% thereafter 6\. OperatingCosts* 2,100,000 100% 7\. Unallocated 1,529,000 100% 8\. Front EndFee 220,000 100% Total Project Costs 22,000,000 885% 51  Funds from the SA for the capitationpayments category would be transferred inGuaranis to the MCBIFundinan amount equalto that statedinthe Annual Management Agreements (one for eachof the ten eligible regions), and would correspond to the forecasted needs for three months\. Periodically, at least annually, the health services rendered and the premium transfers received would be analyzed and the forecast would be re-estimated by the ITUand the Bank\. Fromthe Bank`s point of view, any outstanding balances inthe MCBIFundwould be considered for the next period calculation\. Given the special nature of this disbursement category, the documentation to justify expenses would be a copy of the Annual Management Agreements (including any amendments made during the year) and the statement of accounts of the MCBIFundindicating that resources have been disbursed to the regional branches with an audit opinion on the quarterly report along with a summary of the enrollment list of beneficiaries\. Other Categories: Funds for the other categories would be transferred as expenditures are incurred, and only for the amount of those expenses, to a second tier account in Guaranis in the Banco NacionaE de Fomento (BNF) under the Government's budgetary system control\. The bank accounts in local currency are also known as "operative accounts" and are a common feature among Bank-financed projects in the region because they facilitate fund management and payment control\. Replenishment of this account would be done based on the traditional Statements of Expenditures (SOEs) and also Direct Withdrawal Applications (DWAs)\. In the latter case, disbursements would be made on the basis of full documentation for all expenditures made under contracts requiring prior review by the Bank, and contracts whose value would be raised above the prior review limits as a result of amendments\. All consolidated SOEs documentation would be maintainedby the PAUfor post-review and audit purposes for up to one year after the final withdrawal from the loan\. The Project would request access to the Bank`s Client Connection webpage to access the 1903Formand to perform the reconciliation process periodically between their bank account and the resourcesreceivedfrom the different sources\. The total Authorized Allocation for the SA i s established at 10 percent of the loan\. At first, the SA Authorized Allocation would be US$1\.0 million, until the MCBI Fund i s ready to receive disbursements\. 9\. AccountingandReporting The PAU within the DGAF would be responsible for keeping accounting records for Project activities at the MSPBS level\. Accrual accounting for both accounts would be used following international accounting standards\. Transactions would be recordedprimarily in the Government system SIC0 and complemented by a dedicated system, supervised by the Bank, to allow adequate reporting and SA and SOEs control\. Project financial statements would disclose funds transferred to the MCBIFund consolidated at the departmental level\. The PAU would issue annual financial statements and quarterly Financial Monitoring Reports (FMRs)\.The proposed format for the FMRs was considered acceptable for the Bank, and will be part of the Operational Manual, including: 0 source and uses of funds, for each quarter and cumulative (uses by category), 0 uses of funds by component and, 0 physicalprogress report for each quarter by Project component\. 52  10\. Staffing The proposed organizational arrangement of the PAUis considered satisfactory and FMtraining has been already provided to the DGAFstaff\. The Government would implement the MCBIFundand would staff it with adequatepersonnel\. 11\. Action Plan Financial management arrangementsare reflectedinthe following action plan: Action ResponsibleEntity EstimatedCompletionDate PAUstaffing and organization satisfactoryto MSBPS Before disbursements the Bank\. Operational Guidelines for the Capitation payments,including interlalia: TORSof the ITUpersonnel; criteria for Capitation payments; indicators; draft-model of the Annual ManagementAgreement, and the MSBPS Before disbursementsof capitation Health services Provider Agreement; criteria payments for enroll population inthe eligible departments; criteria for convert Departments fromEligible to Participants; proceduresfor deletion children after than 5 years old; criteria for selectionand authorization of health Contracting concurrentFinancial auditor for MSBPS Beforedisbursementson capitation the capitation payment acceptableto the Bank payments Project OperationalManualacceptableto the MSBPS Beforeeffectiveness Bank that includes inter alia: Chart of Accounts and FMRsformats\. 12\. SupervisionPlan ~ Timing Mechanism Objective Visit GeneralSupervision: Integrating supervisionmissions - Review FMsystem\. every four months\. at leastone time each semester\. - SuperviseSpecial Account Others separately\. Reconciliation\. Use of funds\. - Follow up onExternal Auditors recommendations/raised issues\. - Review staffing\. - supervisedepartmentarrangements Quarterly The FMRs submittedto the II Field visit to confirm findings and - Review FMR information Review Bank\. consistency\. Raiseissuesdisclosed inFMR\. Audit Once a Year The Audit Reports submitted to Review Audit Report\. the Bank Raiseissuesdisclosed inAudit Report Quarterly The Audit Reports submitted to Review Audit Report\. Audit the Bank Raiseissues disclosed inAudit Report Review 53  Annex 8: Procurement Arrangements A\. General Procurement for the proposed Project would be carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement\. The various items under different expenditure categories are described in general below\. For each contract to be financed by the loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and timeframe are agreedbetween the Borrower and the Bank inthe Procurement Plan\. The Procurement Plan would be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity\. The procurement procedures and Standard BiddingDocuments (SBD) to be usedfor each procurement method, as well as model contracts for goods and consultants procured, should be included inthe Project OperationalManual (OM)\. Procurement of Works: Civil Works procured under this Project would mainly be for minor construction to install medical, communication and waste management equipment\. All civil works contracts estimated to cost over US$3\.0 million equivalent would be procured using International Competitive Bidding(ICB) procedures\. Civil works contracts estimated to cost less than US$3\.0 million equivalent may be procured using National Competitive Bidding (NCB) procedures\. The procurement under NCB would be done using National SBD documents agreed with and satisfactory to the Bank\. Works estimated to cost less than US$250,000 equivalent, may be procured on the basis of at least three quotations from qualified contractors\. There i s not expected to be any ICB procurement of works, and probably no NCB\. Procurement of Goods and Non-Consulting Services: Goods procured under this Project would include: (i) medical, communication and waste management equipment and instruments; (ii) vehicles; (iii) communications and office equipment; (iv) printing materials; (v) advertisement for dissemination campaigns; and (vi) pharmaceuticals and medical materials would be purchased only on exceptional basis with the Bank's approval\. All goods estimated to cost over US$250,000 shall be procured using International Competitive Bidding (ICB)\. Goods estimated to cost less than US$250,000 may be procuredin accordance with NCB procedures, usingNational SBD acceptable to the Bank\. Contracts for goods which cannot be grouped into larger bid packages and estimated to cost less than US$50,000 per contract may be procured using shopping (NationaUIntemational) procedures inaccordance with Articles 3\.5 and 3\.6 of the Guidelines and based on a model request for quotations satisfactory to the Bank\. All vehicles totaling about US$SOO,OOO would be procured through the United Nations Inter-Agency Procurement Office (IAPSO)\. All procurement notices shall be advertised in the website of "Direccidn General de Contratacidn Pziblica" (DGCP) or inat least one localnewspaper of national circulation\. ICB procurement notices and contract award information shall be advertised inthe UN Development Business online (UNDB online) and inthe Development Gateway's dgMarket\. DGCP shall also be used to publish information on awarded contracts in accordance with provisions of paragraphs 2\.60 of the Procurement Guidelines and as mandated by locallegislation\. Selection of Consultants: Consultants services through Firms to be financed by the loan would include technical assistance to different areas of the MSPBS, trainers (could be firms or individuals), project monitoring, information technology system design and audits\. Short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants inaccordance with the provisions of paragraph 2\.7 of the Consultant Guidelines\. Some of the training services could be provided by local universities, public training institutions and NGOs\. All contracts for firms would be procured using the Quality-and-Cost-Based Selection (QCBS) method\. Consulting services for financial auditing services with an estimated contract amount less than 54  US$lOO,OOO and other services (that because of their routine nature and small size), could be procured using Least-Cost Selection (LCS) method and/or Consultant's Qualifications (CQ) method\. The Single- source Selection (SSS) procedure may be used only in exceptional cases, with prior agreement of the Bank, in accordance with provisions of paragraphs 3\.10 of the Consultant Guidelines, for assignments when only one fir"G0 i s qualified or has experience of exceptional worth, and it has been confirmed by a request of expressions of interest\. Consultants' services to organize workshops would be selected usingLCS\. The DGCPand/or a nationalnewspaper shall also be usedto advertise a request of expression of interest for consulting firms or individuals, and to publish information on awarded contracts in accordance with provisions of paragraphs 2\.28 of the Consultants Guidelines and as mandated by local legislation\. Contracts expected to cost more than US$200,000 shall be advertised inthe UNDB online and indgMarket\. IndividualConsultants to be contracted would be relatedto specific technical assistance incertain areas, project management if needed, trainers for the MSPBS staff and for health care providers\. The consulting services mentioned above would be provided by individual consultants selected by comparison of qualifications of at least three candidates and hired in accordance with the provisions of Section V of the Consultant Guidelines\. Individual consultants for services with an expected duration of six months or more would be selected as a result of a request of expressions of interest advertised in a national newspaper and/or in the website of the "Direccidn General de Contratacidn Pziblica" (DGCP), and contracts would be signed for the expected duration of the assignment, subject to annual reviews for performance or for non-completion of the work with the Bank's prior agreement\. The Bank would not agree to the replacement of individual consultants terminated for other than the above-mentioned reasons\. Training, workshops and study tours, do not involve procurement processes\. This includes expenditures for cost of tuition, venue, food, and traveling for the MSPBS staff and per diem, and would be procured according to normal business principles\. A detailed Annual Training Plan of activities, including cost estimate, would be submitted each year to the Bank for prior review\. The procedures shouldbe described inthe OM\. Operating Costs would be financed related to Project implementation activities, including supervision field visits, vehicle rental, fuel and maintenance, sundry items, office utilities, internet services and Project-related meeting travel expenses (excluding Government officials' salaries) would be procured according to normal business principles\. The plan agreed with the Borrower i s to finance initially US$lO,OOO per month inthe first year, which would be updated every year to reflect actual costs\. Others: Procedures regardingthe capitation payments to the MCBIProgramto fund the per capita cost of providing the agreedinsurance coverage to the target population would not follow procurement rules\. B\. Assessment of the agency's capacity to implement procurement SUMMARY An assessment of the capacity of the Ministry of Public Health and Social Welfare (MSPBS) to implement procurement actions for the Mother and Child Basic Health Insurance Project was carried out inJune 2004\. When the assessment was carriedout, there was not a procurement organizationalstructure within the International Projects Administration Unit (PAU) yet\. However, the assessment reviewed the proposed organizational structure for implementing the Project and the interaction between the Project's staff responsible for procurement and the MSPBS's General Financing Administration Directorate (DGAF) where the Procurement Department (Departamento de Licitaciones, DL) is located\. The DL is responsible, under national procedures, for preparing the bidding documents and following the process until the contract is awarded\. The Operational Contracting Unit (Unidad Operutiva de Contrataciones, UOC) i s responsible for monitoring the Annual Procurement Plan and publishingall contract information 55  and is the link with the Ministry of Finance (MOF)\. The current DL staffing level i s insufficient to manage the workload identified in the Project due to lack of experience with World Bank guidelines and procedures\. To meet the demands of the proposed Project, the DL will need to dedicate two additional procurement officers to work in coordination with the other officer that should be located in the PAU\. The procurement flow of documents would start in the PAU\. The PAU's technical staff would prepare technical specifications and/or terms of reference and draft the related biddingdocument and then transfer it to the DL\. The DLwould initiate andfollow the biddingprocessuntilthe contract i s awarded\. The procurement assessment reviewed the Project components and operational costs\. These components would include the procurement of goods and non-consulting services, consulting services, and training\. The procurement risks identified inthe assessment are below: 0 Several differences between the Bank Guidelines and local procedures, which could lead to delays incontract implementation; 0 Multiple stages for review and approval of documents, including the procedure to authorize the per-diemrelated to training; 0 Weaknesses inthe internal auditing system; 0 Weaknessesinthe preparation of technical specifications and Terms of Reference (TOR); 0 Weakness incontract management,procurement information and procurement filing systems; and 0 Needfor qualified staff to manage Project procurement\. An Action Plan was agreed with the Borrower, delineating the corrective measures to be taken before Project implementation starts, which include: 0 Reinforcement of the DGAF with two procurement staff (one procurement specialist with experience with multilateral banks and one procurement assistant with experience in procurement); 0 Preparation of a comprehensive Project OM, acceptable to the Bank and adopted prior to Project implementation, which includes both organizational and operational functions, with a specific chapter on procurement that details all the procedures, channels of responsibilities and flow of documentation with a maximum timeframe for the different internal office approvals\. The manual should include a description of the functions for the PAU's procurement staff and for the ContractingUnit under the DGAFadministrative staff; 0 Hiringof a qualified procurement consultant, with World Bank experience, to: (i) the organize procurement unit; (ii) provide training to all staff involved inthe preparation, review, and process of bidding documents; (iii) verify that the contract managementhnformation system i s well established and operational, (iv) improve or organize the filing system; (v) review the different stages that a document should follow to secure approval and establish a flow chart with the maximum timeframe for each stage to be incorporated in the OM and (vi) ensure that the use of the local procedures and approvals does not cause delays and if needed, identify the measures to address internal delays\. The measures shouldbe also included inthe OM\. 0 Review by the Bank o f (i) Annual Procurement Plan and quarterly updates and; (ii) the the Annual plan for training and key field visits; Drafting of national standard bidding documents for (NCB) for goods and request for proposals for consultant's services\. These documents may be included inthe OM; 0 Implementation of a procurement information system acceptable to the Bank before disbursements\. 0 Preparation of a plan for improving the procurement filing system or establishing a new filing systemfor the Project\. 56  The limited Bank procurement experience of the PAU's staff and the MSPBS's administrative staff is considered a high risk; however, with the above-mentioned measures in place, the overall risk for procurement would be lowered to Average\. Table A: Thresh1 ds for Procurement Methods and Prior Re iew (US$) 1\. CATEGORY Contract Value Procurement Contracts Subject (thresholds US$) Method to Prior Review Works >3,000,000 ICB All >250,000 NCB Firsttwo c 250,000 Three Quotations Firsttwo Goods and Non- >250,000 ICB All ConsultingServices >50,000 NCB Firsttwo c 50,000 Shopping Firsttwo Consultants' services > 100,000 QCBS All (firms) >50,000 LCSor CQ Firsttwo Consultants' services c 50,000 & sole See SectionV of All (TOR,contract, (individuals) source Guidelines cv> ~25,000 See SectionV of All TORSevery Guidelines quarter according to the Plan C\. Procurement Plan At appraisal, the Borrower developed a Procurement Plan for Project implementation that provides the basis for the procurement methods\. This plan was approved by the Bank on June 24,2005 and i s available in the Project files\. The plan will also be available on the MSPBS procurement webpage and on the Bank`s external website\. The Procurement Plan would be updated in agreement with the Bank annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity\. D\. Frequencyof Procurement Supervision Inaddition to the prior review supervision to be carried out by the Bank, the Procurement Assessment recommends supervision missions every six months to carry out post review of procurement actions\. E\. Detailsof the ProcurementArrangementsInvolvingInternational Competition 57  1\. Goods, Works, andNonConsulting Services (a) L i s t of contract packages to be procured following ICB and direct contracting: - -1 2 3 4 6 7 8 9 Re Contract Estimated Procurement Domestic Review Expected Comments f\. (Description) cost Method Preference by Bank Bid- No (yes/no) (Prior / Post) Opening - 1 Hospital waste US$1\.0 ICB disposal million equipment 2 Communication 500,000 ICB Yes Prior November equipment 2007 3 Vehicles 800,000 IAPSO No Prior September 2006 - There i s not expected to be any ICB procurement of works\. ICB contracts for goods estimated to cost above US$250,000 per contract and all direct contracting would be subject to prior review by the Bank\. 2\. Consulting Services (a) List of consulting assignments with short-list of international firms\. I I 1 2 3 4 5 6 7 Descriptionof Estimated 1 Selection I Review 1 Expected I Comments I Ref'No* Assignment cost Method by Bank Proposals (Prior / Submission Post) Date 1 Technical 400,000 QCBS Prior January2006 Concurrentaudit (b) Consultant services estimated to cost above US$lOO,OOO per contract and single source selection of consultants (firms) for assignments estimated to cost above US$50,000 would be subject to prior review by the Bank\. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2\.7 of the Consultant Guidelines\. 58  Annex 9: Economic and Financial Analysis 1\. FiscalImpactAnalysis This section contains the fiscal impact analysis of the National Maternal and Child Health Insurance Program (MCBI)\. The analysis was carried out for the two phases of program implementation\. The first phase i s the 2006-2010 period when the proposed Bank-financed Project would provide technical and financial assistance to cover ten departments\. The second phase i s the expansion of the MCBIProgramto the entire country at the end of the Bank-financedProject, and thus the incorporation of the target population in the remaining departments\. The information used inthis analysis i s from sources of the Government of Paraguay and particularly, the Ministry of Public Health and Social Welfare (MSPBS)\. Sources of Information and Data\. In order to estimate the Project's fiscal impact, certain variables critical to the program must be previously determined, in particular, a projection of the target population by health region for the period 2006-2020 and the expected number of beneficiaries to be reached (enrollment rate)\. With this information, the financial flow of the proposed Project can be estimated to determine the Project's fiscal impact and the program's sustainability\. Beneficiary Population of Paraguay's MCBZ\.The beneficiary population i s children under five years old and women in reproductive age (15-49 years old) from ten department^\.^^ The information source to estimate the target population for the Project's first year (2006) was a projection of the population by age group according to the 2002 census update\. Table 1 presents the basis information (2003) for the two age groups mentioned and the projection of such population groups based on the average annual variation rate between each census for each department\. According to this projection, the target population in2006 would be 1,091,871people\. MCBZ's Affiliates\. The second step was to estimate the number of beneficiaries that would join the program by year and department\. Table 2 shows a projection for each of the ten departments selected, considering an enrollment rate of 30 percent for the first year and an expected annual enrollment increase of 30 percent, until reaching a maximum coverage of 85 percent in the Project's fifth year\. Also, only three departments (San Pedro, Concepci6n and Caaguaz6) would join during the first year of implementation, four during the second year and, finally, the remaining four during the third year\. The Project's fiscal impact was estimated using such phasedimplementation hypothesis\. Financial Flow of the CapitationPayments\. Once the target population and the guidelines of beneficiary affiliation to the MCBI Program were identified, the next step was to estimate the financial flow of subsidy payments to finance the EPS provided to the program's beneficiaries\. This financial flow i s presented inTable 3, assuming an annual cost of the EPS amount to US$5\.60 (per capitdyear)\. Table 3 shows the financial flow during the life of the Project (2006-2010) for the ten departments selected\. According to this estimate, in 2010, Subcomponent 1A of the Project would represent an approximate expenditure of US$4\.6 million\. According to the assumptions, this would be financed in the final year of the Project by 60 percent of loanfinancing and 40 percent of counterpart financing\. Inthe year thereafter, it is assumed that the fiscal costs of the Capitation Payments would be absorbed by national resources\. By 2015, assuming the affiliation of the seven remaining departments, EPS financing entails an expenditure of approximately US$12\.5 million\. In 2020, under the full program implementation hypothesis and achieving total coverage of the target population, the subsidy needed to cover the CGP represents around US$17\.9 million annually\. 46 The sanitary regions selected for MCBI's first two phases are: Concepci6n, San Pedro, Caazapi, Itap6a, Alto Parani, Amambay, Canindeyk Pte\. Hayes, Boquerdnand Caaguazli\. 59  Cost of Other Project Components\. Inorder to estimate the Project's total impact, expenses for other Project components were also estimated, amounting to US$12\.1 million\. Fiscal Impact\.: The FiscalImpact Analysis of the MCBIProgramwas carried out on the basis of projections of the public expenditures inhealthfrom Paraguay's central administration over the medium termwith, and without the MCBI\. The projections include the Project period (2006-2010) and the period of expansion to the entire country after the Project (2011-2020)\. As a base case assumption, the budgetary projections assumeda constant expenditure inhealthas a percentage of the GDP\. The medium termmacroeconomic framework was modeledon the basis of current year data and the Country Assistance strategy projections\. Table 4 shows actual health expenditures for the country's central administration from 2000 to 2004, and health expenditure projections for 2005-2020 both with and without the Project\. Impact estimates take into consideration the three financial sources of the MSPBS's budget and its level of expenditure inMother and Childprograms\. Importantly, the impact evaluation takes into account a lower `own resources' financing source (from user costs) inthe withproject simulation than the without project case because the EPS includes several services and medications that are currently under a cost recovery scheme and would be provided for free\. The fiscal impact was determined by comparing the increase inpublic expenditure for healthwith the Project with: i)the total Central Administration public expenditure (GPT-AC); ii)the GDP; iii)the total Public Expenditure inhealth (GPS-AC); iv) the Discretionary budget of the MSPBS (GPSF); and v) the level of MSPBS's spending on mother and child care programs (GSMI)\. The results of the analysis suggest that the proposed Project presentsa moderate fiscal impact\. Specifically: i\. Publichealthexpenditures(centraladministration) asapercentageofGDP(around1\.4percent) do not increase as a result of the Project investment\. Likewise, the impact of the Project on the Government's spending i s marginal\. ii\. TheimpactoftheProjectontheexpendituresoftheMSPBSismoderaterepresentingabudget increase of only 5\.3 percent at the Project's closing (year 2010)\. iii\.The increaseinpublic healthexpenditures (due to the project) as a shareof discretionary spending of the MSPBS (non-salary budget) would amount to 13\.9 percent in2010\. iv\. Project implementation would substantially increase (19 percent increase) the levelof spending in Mother and Child programs compared to the without theproject case\. Regarding the sustainability of the MCBIProgramwhen it reaches national coverage, the estimated fiscal impact i s as follows: i\. PublichealthexpendituresasapercentageofGDPwouldincreasemarginallyduetotheProject (to 1\.5 % of GDP) and the share of overall public expenditures going to the health sector would also increase(9\.0 percent withthe project compared to 8\.2 percent without the project)\. ii\. TheimpactoftheProjectexpendituresontheexpendituresoftheMSPBSwouldamountto7\.5 percent in 2015 and to 9\.2 percent in2020\. iii\. Theincreaseinpublichealthexpenditures asashareofdiscretionaryspendingoftheMSPBS (non-salary budget) would amount to 19\.9 percent in2015 and to 25\.1 percent in2020\. iv\. The additional spending on Mother and Child programs due to the project would amount to 8\.1 percent of overall central administration public health spending in2015 and 9\.8 percent in2020\. 60  Conclusionsand Identified Risks: The fiscal impact analysis has shown that the expenses incurred by the Government through the Project would represent a relatively moderate increase in overall public health spending\. We estimate that, in its first year of execution, the Project outlays would amount to 2\.1percent of the MSPBS budget, increasing to 5\.3 percent by the last year of Project implementation\. The extension of the MCBIProgramto the entire national territory, as the Borrower intends to do, would roughly double the impact of the insurance on the overall health budget, leading - by 2020 - the insurance program to claim 9\.2 percent of overall available health resources\. This would require internal reallocations within the MSPBS towards more effective services in general and in particular towards the MCBIProgram\. Such reallocations will occur from the first year of Project implementation which would allow external financing (for capitation payments) to decrease from the first year of disbursements from this category\. 61  1   I   z 1 3 Y) 3 1 - a a - a a U a  2\. Economic Benefit Analysis This section examines the potential impact of Paraguay's Maternal and Child Health Insurance Program (MCBI) in the ten departments selected for the Project\. The methodology used to estimate the Project's potential impact includes the following steps: i\. Identificationofcausesofmaternalandinfantmortalityinthedepartmentsselected,andestimate of proportion of preventable deaths with public intervention on the basis of general estimates and estimates of the MSPBS; ii\. Assumptionsontheeffectivenessofmaternalandchildhealthinsurance;impactondisabilityand morbidity rates; iii\. EstimateofProjectimpact:numberofmaternalandinfantdeathsprevented,numberofliveswith disability prevented, and number of healthy children (improvement inthe morbidity rates); iv\. Identification and quantification of the Project's economic benefits\. Assumptions on the effectiveness of maternal and child provincial health insurance\. Table 6 summarizes the MCBI affiliation projections in the ten departments selected for the first five years of program implementation (column 1)\. It also shows the population covered according to the affiliation tendency described (column 2)\. The third, fourth and fifth columns reflect the program's effectiveness hypotheses for the three age groups defined\. The Project's effectiveness rate indicates the percentage of deaths that could be prevented through the Project divided by the proportion of reducible deaths with adequatepublic intervention\. 4 555 54% 60% 70% 60% 5 737 70% 70% 70% 70% Impact on death and disability estimates: This section presents an estimate of the number of maternal and infant deaths prevented with the intervention discussed in this analysis\. It includes estimates of the program's impact on disability and morbidity rates\. Table 6 displays the results expected with the Project in terms of the three benefit categories identified: i)death prevention; ii)disability prevention; iii)improvement inmorbidity rates\. In summary, it is estimated that the Project would prevent 1,851 deaths (maternal and infant population) during its first five years\. Table 7 displays the trajectory of the average maternal and infant mortality rate in the Project's ten departments and its impact on the country's maternal and infant mortality rate\. 67  Infantmortality rate 10Sanitary Regions 23\.3 22\.2 20\.7 18\.4 15\.7 Maternal mortality rate 10 Sanitary Regions 259\.8 242\.9 220\.7 187\.2 146\.2 Maternal mortality rate Country Total 182\.1 179\.8 174\.0 166\.5 155\.0 Identificationof the economic benefits of the Project It i s very difficult, ifnot impossible, to apply a monetary value to the life of a person since there are many things that cannot be valued in economic terms\. However, economists have made efforts to measure the economic benefits of the deaths avoided by means of an intervention\. The economic analysis of this Project takes this approach, with all the caveats that this may imply, and takes only the income of a person whose death i s avoided becauseof the Project, as the baseline for the analysis\. This section identifies the benefits of the Project on the basis of the economic value o f i)deaths prevented by the Project; ii)disability avoided due to Project investments; and iii)reduction of morbidity among children\. The criteria adopted ineachone of the above mentionedcategories are as follows: 0 Economic benefit due to preventeddeaths: This benefit was calculated on the basis of the expected life income flow of those who did not die due to the Project's intervention, estimated at the level of the average Gross National Income (approximately US$1,100 year), discounted at a annual rate of 8 percent, and with a working life spanning between the ages of 17to 65 years\. 0 Economic benefit due to prevented disability: Calculated as 25 percent of the discounted expected income flow of the people expected to avoid disability due to the Project\. The argument i s that the income of a person with a disability is, on average, 75 percent of that of a completely able person\. Therefore, the calculation of the Project benefit for avoided disability i s equal to the income differential between a person with and without a disability\. A general estimation suggests that for each death prevented, there are three prevented disabilities\. Economic benefit due to reduced morbidity: The identification of improvements in the indices of morbidity by an interventioni s an enormous challenge, particularly when, as inthe case of Paraguay, there i s not a good epidemiological information system\. The present analysis assumes that a reduction in morbidity can be translated to improved education outcomes, and tries to show the additional income that could be generated in the future as healthier children have better education outcomes\. The analysis assumes that children in the program would have, on average, two more years of schooling than the average worker (who has ten years of schooling)\. This represents a lifelong income increase of about 20 percent with respect to what they would have received without the program\. 68  Analysis of the Project's CashFlow The indicators used to evaluate the Project results are the Net PresentValue (WV) of the benefits and the Internal Rate of Return (IRR) of the Project\. The NPV measuresthe monetary benefits of the Project over its costs for the period under analysis (2006-2010), both discounted at an 8 percent interest rate\. The IRR measures the rate of discount that would cause the NPV of the Project to become zero (this methodology assumes that the utilities of each year can be reinvested at that same rate throughout the life of the Project)\. Table 8 (below) shows that the NPV of the Project calculated at a discount rate of 8 percent i s about US$6\.6 million and the IRR is approximately 9 percent\. Therefore, considering the above- mentioned assumptions, the Project has substantial economic benefits, even using this rather limited conceptualization of measuring the Project's impact\. 69  Annex 10: Safeguard Policy Issues IntegratedEnvironmental-Social-Cultural-IndigenousEvaluation\. I\. Introduction The population of Paraguay i s 5\.6 million, with a population growth rate that reached 2\.2 percent during 1992-2002\. In the 2002 Census, 44 percent of the population lives in rural areas\. Of the rural population, 49 percent live under the poverty line and 25 percent live inextreme poverty\.47The majority of the rural poor inhabit isolated and/or remote locations and environments\. Paraguay i s a multi-ethnic country, but with characteristics that differ in many ways from other such countries\. The indigenous population i s officially estimated at less than two percent of the country's population; nonetheless, over 59 percent of the total population speaks only Guarani, and maintains several traditional indigenous customs and knowledge\. Over 82 percent of the rural population speaks primarily Guarani; 6 percent of the total rural population speaks primarily Spanish\. The indigenous population and the rural Guarani-only speakers are the most vulnerable population groups in Paraguay\. The majority of the Guarani speaking population i s classified as poor or extremely poor\. This Annex presentsthe mainissues identified inthe Integrated Environmental-Social-Cultural-IndigenousEvaluation (IESCIE) that affect maternal-infant morbidity and mortality rates for the extreme poor and the indigenous populations\. 11\. Socio-environmental Conditions A\. The extreme poor Poverty increased 16 percent from 1995 to 2002 and rural extreme poverty increased by 57 percent\. The majority of the extreme poor do not have access to health facilities or lack public health insurance and 12percent are infemale-headed households\. About five percent of the total expensesof the extreme poor, based on a family of seven, relate to health, of which 70 percent i s for medications\. No information exists regarding the intra-household distribution and impact of maternal-infant health expenses\. For the extreme poor, necessary outlays for purchasing medication or health services will crowd out other necessary expenditures, such as for family nutrition\. Health indicators for the last decade have shown an improvement in female health, albeit less so for rural and indigenous women: all suggest that the causes of death among poor women and children in Paraguay-such as hemorrhages, abortions, and neonatal causes-result from insufficient utilization of health care facilities and inadequate health- seeking practices\.48 Public Health facilities network\. It is mainly publicly funded under the MSPBS\. The network includes 650 health post and dispensaries (first aid), 127 health centers, 62 hospitals and a small number of mobile health units\. The majority of the network serves the rural areas\. Yet, about 67 percent of the rural communities lack health posts\. Maternal-infant health i s provided by public health facilities (often through, multi-and bilateral financiers), and by an unrecorded number of small projects runby religious, 47 2002 Census\. 48 The data available for maternal-infanthealth i s for the total population; the indicators are worse for the extreme poor and the indigenous population\. 70  indigenous-related and other NGOS\. Most of those involved in maternal-infant health focus on specific support, rather than on integrated healthsupport\.49 The responsibility for health support for the extreme poor and indigenous groups i s under the MSPBS's National Directorate of Human Resources, and the Directorate for Vulnerable Groups\. However, the staffing, technical capacity and budget of these departments are limited\. This has a negative impact on healthaccess of the indigenous population\. Health services utilizationand demand\. The poorest populations have inadequate access to the public health sector network\. The main factors responsible for this lack of access are insufficient allocation of public funds, lack of quality assistance and services from the health staff, as well as inadequate health management\. On the patient side, there are cultural, geographic and economic barriers, lack of community or family participation and/or interest in health services, and disregard for preventive health practices and healthy habits\. Inaddition, the burden of poverty itself appears to affect the extreme poor and the indigenous groups' initiatives and eventual trust in new approaches to improve their access to health services or to better health\. The cultural, geographic and financial barriers to health support for the non-indigenous rural extreme poor and the indigenous populations in Paraguay are similar\. The literacy rate of the non- indigenous extreme poor i s higher than that of the indigenous population\. The indigenous groups inhabit more inhospitable environments while the extreme poor either lack land and natural resources or have marginal agricultural lands and implements\. Both groups encounter similar problems due to environmental degradation, including water contamination due to inadequate sanitation and hygiene, decreasing use of traditional medicine and available food base due to biodiversity loss, and increasingly inhospitablemicro-climatic conditions due to changes innatural vegetation\. B\. The Indigenous Population Ethnicity\. The National Indigenous Census of 2002 shows about 1\.7 percent of the population is indigenous; over 91 percent live in rural or other non-urban areas and 95 percent live in indigenous communities\. The annual population growth rate i s over 30 percent higher than the national rate\. The indigenous population i s divided into five linguistic families with 20 ethnic groups" and over 76 percent speak their native language\. These groups are distributed in about 500 villages or indigenous communities; roughly 50 percent live in 181 larger communities in the east-the Chaco Occidental, and the others are ineasternParaguay (Regibn Oriental)\. Maternal, and Child Health\. The 2002 Census shows the average indigenous fecundity rate at 6\.5 children per mother and the rate varies from 3\.4 to 8\.9 depending on the ethnic group\. Infant mortality (0-2 years old) i s over twice the average rural rate\. Maternal death is largely related to complications due to late andor poor quality health assistance and abortions\. Mortality rates are approximations, due to inherent difficulties in collecting data, including the lack of official disease and mortality recording 49 Anecdotalinformation indicates the support givenby the Mennonites and the Pastoral de 10s Niiios i s basedon integrated healthplans, while other groups focus on specific assistanceor support\. The largest linguistic family i s the Tupi-Guarani, with four ethnic groups (PaiTavy terh, MbyhGuarani, Avh Guaraniy Ache Guayakf)inthe RegionOriental\.Inthe Chaco there are 4 linguistic families, the Zamuco, with two ethnic groups (Ayoreoor Moro, andChamacocoor Oshor),the Maskoy with five ethnic groups (Lengua, AngaitC, SanapanB, GuanhandToba-Maskoy), the Mataco-Mataguayo, with three ethnicgroups (Choroti or Manjui, NivaclC or Chulupi, and MakB), and Guaicud~with one ethnicgroup (Toba-Qomor Qom Liic)\. 71  mechanisms in the communities, and cultural hesitation vis-&-vis open discussions about the causes of death\. Health Services\. The indigenous population i s the least served by health services\. The 2002 Census shows only 28 percent of the indigenous communities have a health post or health center\. Health services are also provided by mobile health units, and increasingly by trained local indigenous health promoters\. About 48 percent of the indigenous communities have health promoters, and 36 percent have doctors\. There i s public debate about the desirability of a separate health policy for the indigenous population\. Most indigenous leaders support a separate policy and services, adapted to their cultural background and needs\. The inadequate access to services in the health facilities has resulted in the indigenous population increasingly relying on the National Indigenous Institute (INDI) for health support\.51 Cultural links\. The cultural discrepancies among indigenous groups and the service providers and planners appear to be the main reason for low demand for services\. The indigenous groups have their own concepts of health and well-being, death, poverty and quality of life, as well as of the need for, and the outcome of health assistance and services\. These views are conceptualized by the various groups according to inherently diverse beliefs that condition their recognition of poor health and/or diseases, and their acceptance of health assistance and services, including the providers, support, and treatments\. Training of community members to support health for, or in the communities, has had mixed results due to perceived negative changes incommunity dynamics\. Indigenous health knowledge\. The 2002 Census showed that 92 percent of indigenous communities practice traditional medicine, stressing the strength of the traditional body and soul 'healers' (shaman) and the importance of women, midwives, and medicinal plants and potions in the matemal- infant health cycle\. The situation i s similar for the majority of the non-indigenous extreme poor\. Use of health facilities is considered only after failure of traditional or home treatment\. Traditional mysticism plays a strong role in pregnancy and birth, and in the acceptance of abortion; there are several pregnancy and birth-related traditions and customs, which generally involve the shaman, other women, and midwives\. There are also several practices regarding the first bom child, from the cutting of the umbilical cord to hidher initiation inthe communities\. Anthropological information i s available on several of these traditions and customs\. With few exceptions, this information has not been processed to support culturally-adaptedhealth assistance\. There i s little identification on aspects that could either support or allow the incorporation of health-based corrections to related negative traditions and customs; on the conditions within which the shaman and midwives provide matemal-infant services; on whether, when and why they refer patients to health facilities, or about the destination of delivery byproducts\. Inadequate hygiene related to traditions and customs, or to the areas where labor i s carried out, as well as dangerous practices and inadequate waste disposal may affect labor safety and matemal-infant health\. Traditional medicines, and indigenous knowledge\. Most of the indigenous population utilizes plants traditionally or empirically known to cure or prevent some of the local diseases\. The Guarani in particular are known for their extensive knowledge of medicinal plants\. It appears that the use of plants for medicinal purposes i s widespread, also by health staff at all levels; however there i s little official recording or dissemination of such use beyond the communities\. About 61 percent of the rural population 51 According to the MSPBS, indigenous health i s part of its mandate, while INDI's mandate i s related to indigenous land issues\. INDInonethelesshasbeenactive inhealthsupport\. 72  practices self-medication, and 19 percent rely on Shamans\. Teas are part of daily life, and used traditionally for pregnancy and care of newborns\.52 Environment-relatedepidemiology\. Ecological factors, particularly environmental degradation, play a role in the high vulnerability of the non-indigenous extreme poor and the indigenous populations\. These factors include soil degradation, and contamination of surface water and groundwater due to agriculture and to inadequate sanitation, which contribute to decrease wild or cultivated subsistence crops, and affect crop-related income, nutrition and health, which in tum, may affect a mother's nutrition or health during pregnancy, reflected in low birthweight and inadequate breast-feeding\. No information i s available regardingpesticidetoxicity at the maternal-infant level\. Experience in other countries shows this toxicity may be a factor inbirth-relatedmatemaldeath due to anemia and hemorrhaging\. Inadequate sanitation can lead to health problems that affect pre- and post-labor maternal-infant health, such as diarrhea and parasites, which are prevalent health problems for the target populations\. Household water can be contaminated due to inadequate hygiene, reinforcing the effects of inadequate sanitation\. The current loss of biodiversity affects mostly the rural landless and the indigenous populations, which are dependent on the natural environment for daily survival and for continuation of their traditions\. Several food and medicinalplants are indanger of extinction\. Health perception and education\. The notion of morbidity is well developed at the community level, but at times, traditional health beliefs conflict with more modem health delivery systems\. Also, the decisions about whether and when a pregnant woman should seek health services are affected by other concerns, such as care for other children, the cost, and the time spent away from home\. The content and material used by the health facilities for health education and campaigns are often overwhelming due to technical details, solutions beyond the knowledge or means of the targeted population, or culturally unacceptable, and based on written information that i s beyond the reach of targeted groups or individuals-eventhough often accompanied by drawings\. Use of health services\. The current low demand for health services of the indigenous population stems in part from a mismatch between the culture surrounding modem health service delivery and the cultural values of this population group\. The modern health services delivery culture lacks sensitivity for beliefs, traditions and customs, other needs, and capacity\. For example, several communities do not accept male doctors talking directly to women patients, yet efforts have been made to improve the quality of the services and the demand\. Measures include providing the relevant facilities with female doctors and male doctors relying on the patients' husbands to relate or translate the woman's complaints or descriptions\. These cultural issues also include the lack of acceptance of several architectural or sanitation features or system\. Yet, some doctors and nurses have successfully incorporated symbols, actions or activities related to ethnic or community traditions and customs\. Other issues affecting the demand for services include geographic isolation due to lack of adequate roads or climate, inadequate support and care for the family during consultation and treatments, and finances\. Transportation i s available through several arrangements, however rough roads and a difficult climate often prevent timely arrival\. Arrangements for family, friends or neighbors' support during a woman's pregnancy and labor is common, and facilities often have dormitories for patient's families\. Yet, using such support comes at a cost to patients and their families (transport costs, loss of income-producing time for adults accompanying the patients)\. 52 Other countries, such as Bolivia, have successfully approached the subject by adding teas to the list of medicines to be providedby insurancepackagesto indigenous populations\. 73  Hierarchy and jurisdiction\. Further, the sense of hierarchy within the indigenous communities seems to influence decisions regarding health support since many indigenous families prefer to consult with only those doctors that are equivalent in status to that of the Shaman\. Some families also have the perception that high costhigh technology means better services, leading to increased use of hospitals rather than closer health facilities\. Patients often seek services from other healthcare providers, including religious groups, the legal and illegal private sector (nurses and doctors in the informal sector), and providers across nationalborders\. 111\. Cultural Safeguards Cultural Resources\. The multiplicity of ethnic groups and the complexity of the related environments and ecology, indicate a country richincultural resources\.These resources range from arich verbal culture filled with traditions ranging from social support and environmental management to the extensive use and management of natural resources (particularly the Guaraniknowledge and use of the local flora for medicinal purposes)\. Several small projects and other national and international initiatives are in the process of identifying, recording and organizing this information\. Nonetheless, the existing information on the cultural resources of the various ethnic groups in the Project Areas, such as the location of cultural, religious and otherwise social and traditional sites, such as cemeteries, other religious and historic areas, or buildings, i s scarce\. There i s also little information or recordings of the verbal transfer of traditions and customs between the previous and current generations, or about sites that are currently important to the ethnic groups\. IV\. Environmental Safeguards Waste management\. The disposal and treatment of biomedical and non-biomedical waste is inadequate inmost health facilities\. The public health facilities are responsible for the majority of the bio- waste generated\. Paraguay has several institutions and agencies, at the national, departmental and local levels, that are responsible for the regulation, implementation, management, supervision, monitoring and control of waste in the health units\. The main responsibility for biomedical waste i s shared by the health facilities and municipalities, under the Directorate of Environmental Health (Direccidn de Sulud Ambiental-SENASA in MSPBS)\. SENASA is also responsible for water pollution control, including contaminationby biomedical and other dangerous waste\. The Ministry of the Environment (Secretaria del Ambiente-SEAM) and SENASA perform periodic monitoring, control and supervision of the health units to enforce the existing legislation\. The Attomey General and the General Controller's offices apply sanctions for infractions\. The Government, with assistance from PAHO, i s revising waste management issues, including the related institutional and legislative framework\. The review includes biomedical waste issues, and i s expected to provide guidelines for a practical and safe management system that could be supported by the various levels of existing health administration and facilities\. The current legislation requires that: (i) the collection of biomedical waste be carried out separately from other waste, and according to established technical conditions, and (ii) the location of sanitary landfills i s subject to an environmental impact evaluation\. The legislation is poorly enforceddue to inadequate capacity and equipment\. Biomedical waste\. The biomedical waste is estimated at 30-85 Kg/day for 50 percent use\. The amount of biomedical waste generated in the Project Areas i s about one-third of the country's total\. The management of biomedical waste i s deficient, especially in the hospitals, the largest generators\. The classification of biomedical waste i s generally well understood in all health facilities\. Yet, daily 74  management of the waste i s deficient, from its disposal by the various health professionals and personnel while working, to the collection, disposal and treatment within and outside the health facilities\. Monitoringand control i s basicallynon-existent and waste classificationi s generally disregarded\. Sanitary conditions\. The hospitals have restrooms for the staff, patients and visitors, and latrines for the patients' families and visitors\. The hygienic and sanitary conditions of the latrines are often poor, and wastewater i s inadequately managed\. These conditions are ideal to transmit feces- and water-related diseases, such as parasitic infections, as well as contaminationof users and visitors\. Diarrhea, inherent to parasite infection, can decrease food absorption by up to 40 percent, and may contribute to increase anemia inpregnant women and babies, and leadto child malnutrition and undernourishment\. V\. Conclusions,and Recommendations A\. Social-Indigenous Safeguards The evaluation indicates an increasing interest by the indigenous groups, several sectors of the civil society, and local authorities in improving the health conditions of the extreme poor and the indigenous populations\. The under-use of the health services by the poor i s largely due to: (i) reliance on traditional-practitioners and community midwives; (ii) perceptions relatedto cultural and ethnic bias; (iii) inadequate information and education campaigns; (iv) practical perceptions of quality and cost; and (v) insufficient knowledge about service availability\. The social and ethnic composition of the villages plays a strong role both in the use of the health services, and the disposition toward community participation\. The practice of giving birth at home or in the communities may take time to change, since the most prevalent reasons appear to be cultural or related to convenience and family support, rather than economic\. This indicates the need to improve the conditions for birth within the communities by strengthening the major actors, as well as improving the understanding of the importance to seek assistanceinthe healthfacilities promptly inthe event of problempregnancies or labor and delivery\. Disease perception i s crucial to improve maternal-infant health in the indigenous communities\. Understanding priorities as defined by the beneficiaries-the individuals within the communities-and working within their own cultural system may prove to be more effective to introduce changes in habits and beliefs if based on drawings or stories that reflect the community beliefs and reality\. At the level of the community and the health facilities, developing and implementing an integrated sanitary- environmental education and IEC with support for preventive health by improving sanitary and hygiene conditions, may help reduce maternal-infant morbidity and mortality\. The IESCIE highlightsthree major aspects of health support for the poor and indigenous groups in Paraguay: (i) need to clarify and respect the community role both as receivers and providers of the health services and health service support, (ii) the importance of supporting cultural sensitivity and stressing preventive health, and (iii) the importance of clearly defining and supporting the role of the communities, as well as of the public sector inthe monitoring and control of the quality of health services\. The studies, surveys and fieldwork prepared for the PSMProject and the proposed Project indicate that in order to establish effective use of maternal-infant related health services, it i s crucial to: (i) the improve quality of the contact between staff and patients, and the quality of the services; and (ii) simplify the training content and material used by promoters and volunteers, communities, women and/or mothers, and community leaders\. The Project would finance activities to ensure implementation of the safeguards, including inter alia: (i)developing culturally-appropriate health services for health professionals and staff, and related 75  training, (ii) developing and disseminating sanitary-health educatiodcommunication material for the health staff, (iii)developing and disseminating sanitary-health education in the communities, (iv) identifying, incorporating and disseminating appropriate Project-related indigenous customs and traditions, (v) complementing the IESCIE with a focus on maternal-infant health in the various Project Areas to develop and implement indigenous maternal-infant health plans; and (vi) supporting technical assistance for the MSPBS's appropriate directorates, to implement, monitor and control implementation of the safeguards\. B\. CulturalSafeguards It i s possible that physical, natural, architectural, religious, historic or other cultural resources of significant or potentially significant value to the neighboring indigenous communities and population, as well as to other local, regional or internationalcommunity groups may be encountered in several localities where the Project would be implemented\. The Project would include measures to identify, report and preserve any resources eventually encountered during project implementation, including: (i) bidding documents and contracts with clear clauses about cultural safeguards, (ii) contracts with specifications of contacts (Project and Governmental authorities) for adequate action and guidelines for procedures; (iii) administrative and emergency plans and manuals, incorporating cultural guidelines; and (iv) assurance that any activity initiated or supported by the Project that may include eventual rehabilitation, removal and/or relocation of existing services and buildings, abidesby the above cultural safeguards, C\. EnvironmentalSafeguards The success of the Project would result in an increase in the generation of bio-medical waste related to maternal-infant medical services in the various types of health units\. To avoid subsequent environmental impacts, and to correct existing problems, the Project would identify and establish environmentally sustainable waste management systems for the health facilities\. The GovernmentPAHO review of biomedical waste i s expected to provide a long-term solution to waste, including biomedical waste management\. The IESCIE evaluation indicates that decentralizingwaste treatment by developing in situ treatment would avoid transportation costs, and risks to health and the environment\. Untila long-term treatment solutionis implemented, an interimplan specifyinginterimtreatment methods for each type of biomedical waste would be prepared by SENASA for the hospitals, health centers, posts and dispensaries, as well as for selected indigenous communities\. The plan would be prepared in the first phase of the Project, and would be tested in selected areas\. It would include inter alia: (i) sensitization, training and a manual for all health staff about biomedical waste and safety, and waste management; (ii) training of managers and operators; (iii) biomedical and other waste in-situ treatment; and (iv) monitoring and control\. SENASA would implement, monitor and control the interim plan; based on the results, SENASA would prepare a long-term plan, and define the steps to be implemented inthe secondphase of the Project\. To improve sanitary and environmental conditions in the health facilities, the Project would finance: (i) development of the above-mentioned interimplan; (ii) technical assistance and equipment for SEAM and SENASA for the relatedimplementation, monitoring and control; (iii) equipment and training to establish adequate management of biomedical waste in the health facilities; (iv) low cost systems to establish management of non-medical waste in the health facilities @e\., wastewater and other waste disposal, latrines and septic tanks), and related training; (v) demonstration low cost systems (wastewater, latrines and septic tanks) in selected communities for community sanitation, and related education, and 76  (vi) developing and implementing sanitary-health education and management for the personnel in the healthfacilities\. ExpectedOutputs The outputs of the above recommendations would include: (i) staff trained in socio-cultural health sensitivity and inmaternal-infanthealthrelated environmentalmanagement; (ii) improved regional health staff supervision and control; (iii)community-based validation of pertinent traditional knowledge and treatment, and a sustainable community infonnation/monitoring and control system, and the re-validation of several aspects of indigenous knowledge; (iv) material for dissemination of maternal-infantpreventive health/environmental health concepts and training; and (v) improved waste management in the health facilities\. 77  Annex 11:Project Preparation and Supervision Planned Actual PCNreview 05/17/2004 05/17/2004 InitialPID to PIC 0511212004 07/22/2004 InitialISDS to PIC 0511212004 07/22/2004 Appraisal 04/07/2005 03/14/2005 Negotiations 0512112005 06121/2005 BoardIRVP approval 10/13/2005 Planneddateof effectiveness 04/3012006 Planneddateof mid-termreview 01130/2009 Plannedclosing date 1013112011 Key institutions responsiblefor preparationof the Project: Ministry of Public Healthand SocialWelfare (Paraguay) and the Ministry of Finance (Paraguay)\. Bank staff and consultantswho worked onthe Project included: Montserrat Meiro-Lorenzo Co-Task Manager Fernando Lavadenz Co-Task Manager LuisOrlando Perez Senior Public Health Specialist Antonio Leonard0 Blasco Financial Management Specialist Jesko Hentschel Country Sector Leader Cristian Baeza Sector Manager (A) Mario Bravo Communications Specialist Karla Chaman Communications Specialist Maria Lucy Giraldo Senior Procurement Specialist Graciela Sanchez Civil Society Specialist Natalia Moncada ProgramAssistant MarthaP\. Vargas Team Assistant Luz Meza-Bartrina Senior Counsel Morag Van Praag Senior Finance Officer Reynaldo Pastor Senior Counsel Ferenc Molnar Chief Counsel Edgardo Mosqueira Public Sector Management Specialist Marcel0 DanielBarg (Consultant) Public Sector Management Magda Lara Resende (Consultant) Integrated Safeguards Shampa Sinha (Consultant) Bankfunds expended to date onProject preparation: 1\. Bank resources: US$343,088\.14 2\. Total: US$343,088\.14 EstimatedApproval and Supervision costs: 1\. Remainingcosts to approval: US$6,000\.00 2\. Estimatedannual supervision cost: us$loo,ooo\.oo 78  Annex 12: DocumentsinProject File 1\. Draft Operational Manualfor the PCUand ImplementingAgencies 2\. Procurement Plan 3\. FinancialTerms Sheet 4\. Project Appraisal Report for the PY Maternal Healthand ChildDevelopment 5\. Minutes of the Concept Review Meeting (July 8,2004) 6\. Minutes of the QER Meeting (January 24,2005) 7\. Memo from IsabelBraga, Acting QAT Coordinator of Environment and Social Comments (May 17,2004) 8\. Minutes of the DecisionMeeting (March 9, 2005) 9\. ISDS-Concept & Appraisal Stage 10\. PID-Concept & Appraisal Stage 11\. Country Assistance Strategy of the WorldBankGroup for the Republic of Paraguay 12\. Draft of FinancialDesign for the Project 13\. NationalHealthLaw 1032/96 14\. National Sexual and Reproductive Health Survey (2004) 15\. ICRfor the ParaguayMaternal Health and ChildDevelopment 79  Annex 13: Letter from Government of Paraguay inSupport of Mother and ChildBasic HealthInsurance Project Asuncion, 4 of July of 2005 Mr\.Wolfowitz, President: We are hereby pleased to report on our health policies and commitments assumed by our National Government to ensure the effective implementation of the Programa Nacional de Aseguramiento Matemo-Znfantil (National Mother and Child Basic Health Insurance Program), a key tool to achieve the Millenium Development Goals pledged by our country\. Inaddition, we kindly request your institution's financial and technical support for the implementation of these policies through a specific project initially targeted to those districts inour country where the maternal and child mortality ratio i s above the national average\. Duringthe last decade, the Paraguayan State has strongly invested in the modernization of the national public network of primary health care services, progressively relocating medical personnel in areas with few health care services\. Such an effort has rendered mildly positive results, not yet reflected in an improved health condition of the poorest or in a reduced maternal mortality ratio\. For illustration purposes, let us mention that Paraguay has one of the highest maternal death rates inthe region, estimated at 182-200 /100,000 live births, and an infant mortality rate of 29 per 1,000 live births\. The national fertility rate of 2\.9 children per woman masks the situation of poor or indigenous women whose fertility rate amounts to 5\.1 and 6\.5 children per woman, respectively\. At present there is aneedto supplement health care provisionpolicies with actions oriented to promoting demand particularly among the poor or excluded\. The country has adopted a new approach, i\.e\. to subsidize demand, which entails a fundamental change in the way the health care sector i s financed\. The economic crisis affecting our country has weakened the purchasing power of most inhabitants who now turn to the State for protection and to meet some of their basic needs\. Inthis context, the Ministerio de Salud Pu`blica y Bienestar Social (Ministry of Public Health and Social Welfare) and the Ministerio de Hacienda (Ministry of Finance) have worked together to elaborate a proposal that should meet the requirements of equity, cost-effectiveness, transparency, sectoral decentralization, local and community participation, and fiscal responsibility\. Onthe basis of studies on exclusion, equity, access to and demand of healthcare services and of a careful evaluation of international and, particularly, Latin American experiences, the Paraguayan Government has decided to implement a National Mother-Child Health Care Program (PNAMI, by its Spanish acronym)\. This Program will guarantee the country's population its constitutional rights to essential health services, which the poorest sectors cannot access nowadays for different reasons\. This decision i s backed by the experience gathered from similar health care provision processes in the region which are proving successful in reducing maternal and child death and disease rates, especially among the most vulnerable\. 80  The implementation of this public health care provision system for fertile women and under-five children would consist in subsidizing an essential set (around 80) of health care services that would be rendered free of charge to those demanding them\. In the first stage, these services would be provided in existing public facilities inpreviously specified districts\. All services on the list have been selected with rigorous scientific criteria and on the grounds of their potential impact to reduce maternal and child disease and death rates if those most inneed had full and unrestricted access to them\. This Programhas been designed to be progressively executed in different phases, startingin at least two districts, extendinglater to eight to reach a total of 10,thus covering a target population of about 1million women and children\. This will enable us to evaluate and monitor the impact of the Programon health care services and on any local initiative available (social pharmacies or other) in order to introduce any adjustment, if necessary\. It i s important to underscore that the Consejos Regionales y Locales de Salud (Regional and Local Health Councils) will participate in the Program's implementation, monitoring, and evaluationprocesses\. The Program provides for an articulation with the local and subnational governments and the strengthening of the Local and Regional Health Councils' role through management agreements, whereby the parties concerned commit to taking actions and attaining results, linking them with appropriate resource allocations\. This i s a vital requisite for the implementation of this Program and represents an initiative ensuring the concrete execution of a result-oriented budget as well as the participation by the community in managing health services\. Moreover, the Government will conduct a study to examine the impact of gratuitous or paidhealth services uponbothour population and service quality\. Given the fact that studies have identified a pressing need to improve medical care quality, the Ministerio de Salud P6blica y Bienestar Social (Ministry of Public Health and Social Welfare) has decided to carry out a policy aimed at the "certification and accreditation of health care institutions"\. The purpose of this policy, under the purview of the Superintendencia de Salud (Health Superintendency) in compliance with our current legal system, will be to improve the quality of and increase the regulations on existing health care services in the selected districts, through an innovating and continuous certification system\. In addition, a continuous quality improvement strategy based on the permanent training of technical teams inhealthestablishments will be implementedby the so-called "start-up teams"\. These teams, made up of professionals specialized in the services listed in the "package", will support health care services by regularly visiting themuntilthe required standards for certification and accreditationare met\. To address the issue of those who do not, or cannot have access to health care services for reasons of distance or geographical dispersion, a policy of coverage extension through "mobile health teams" will be adopted so as to make health care services available to more people\. The Government i s planning to upgrade basic equipment and infrastructureby resortingto several internationalfinancing institutions\. We would like to ratify Paraguay's commitment to gradually and increasingly assuming the financing of all the services guaranteedby the State\. Alternative financing mechanisms for this sector are under study so as to ensure the sustainability of the Program and its social protection policy, to foster an increase in the access to health care services to protect the poorest sectors, and to build a better and more efficient healthcare system\. With regard to the use of financial resources, we would like to express the interest of our two Ministries in constantly seeking options that will strengthen the health regions and hospitals' capacity for financial resource management under the legal framework in force, as well as mechanisms to reinforce their 81  capacity for accountability, thus helping the Ministries' task of overseeing the use of such financial resources\. As to the expected results from the implementation of this Program, the Government will monitor the following indicators, among others, that should be improved after implementing the National Mother and ChildBasic HealthInsurance Program: a\. Maternal mortality ratio\. Estimatedin 182-200 /100,000 live births\. b\. Institutional delivery rateestimated at 70%\. c\. Audited infant death rate (at present no medical audits of infant deaths are carried out)\. d\. Auditedmaternaldeathrate, estimated at 75% of mothers' deaths\. e\. Rate of public health providers certified to participate in the PNAMI\. Program to be developed by the Project\. f\. Percentage of the population acquainted with the Local Health Councils' role and activities, currently estimated in5\.1%\. g\. Percentageof the populationsatisfied with healthcare services, 51%\. We are confident of the Bank's favorable disposition to provide us with its fundamental support to implement the above-mentioned policies and actions\. Yours sincerely, TeresaLeonMendaro, Minister ErnstF\.BergenS\., Minister Minister of Health and Public Welfare Minister of Finance (translatedfromthe originalversioninSpanish) 82  Annex 14: Statementof LoansandCredits Operations Portfolio (IE3RD\.TD-kaid Gnuits) c:loScd Projertx 4 1 "JmA '\. Total Dhbiused(Active) 14\.13 of wlricli lias bemramid 23,\.;5 Total Disbiused (Closed) ftS\.81 of whichhas bee11 repaid 6679\.3 Total Disbursed(ActiiJe Closed) + SOL94 o fwluchbasbeeti rtvnid 691\.A9 Total Untliabursecl(Active) i?\.O? Total Uiiclisbirsed(Closed) 0\.00 Total Uiidisbursed(-4ctive +c'losf 77\.07 DilYerencc BeWecn Last PSR EqectcdaiidAchval Supeivirio IIRating jlltilAmoinit hU S $ Mill Disbwsemeiits Project N m c n o E IBR II)GRA C'ruictl UiuuSb D 4 NT oliq\. FllnRr~,,l P0399S3 PS4th R1RA\.LEv44mSUPPLY ,G sah s s 1998 10 14082 14082 5 019652-3 PO80961 PSFuiancialSector T\.A\.Project s s 2005 5\.' 5\.: P08-036 PYh4odenlizationMilisby ofFhiaiice S S 2005 7\.5 7\.5 0\.5 P00'~18 PYNTLRESXICfhrr I s s 1994 i o 5\.9S14 5 9S14 -5\.9814IZS P039991 PI'PRUCi\.FIN\.XNCX4L SECTOR XDJLI S S 7005 15 15 15 PO09265 PYPilot C:oiimiiulilyDevelop~~iait Project S S 2002 9 6,6555 i \. 9 M 4 5\.90115233 P1)'3526 PY-EnUt!\.4~i)N~O~IPROJEt::TS S ill04 21 f\.L\.153 10\.303 0ve1all Result 1'1 77\.072 51,?68 16\.9021179 P W W Y statementofIFC's HeldandDisbursedPortGolio Held Disbursed FYApprovd company Loan Equity Quasi Partic Loan Equity Quasi Partic Approvals PendingCon"tit\.!nent Loan Equity Quasi Partic 2005 MillicomParagua 15 0 0 0 TotalPendingCommitment: 15 0 0 0 83  Annex 15: Paraguay at a Glance and SOCIAL Lifeexpectancy Accessto improvedwater source MIC RATIOS an 993 20 Trade Investment Indebtedness STRUCTURE of the ECONOMY 1983 1993 2002 2003 p:\.L?f-3 Agriculture 25\.7 24\.5 22\.0 21\.0 Industry 23\.6 25\.8 28\.4 27\.1 Manufacturing 14\.8 16\.0 14\.5 13\.9 Services 50\.7 49\.7 49\.6 51\.9 Privateconsumption 71\.4 81\.3 83\.9 81\.0 Generalgovernmentconsumption 7\.3 6\.7 7\.8 8\.4 Importsof goodsand services 13\.4 47\.9 41\.9 43\.2 -GQI -GQP 1983-33 1993-03 2002 2003 I Growth of erparts and imports [ X I &w&w mdsvmw Agriculture 3\.9 1\.8 2\.2 2\.5 10 Industry 4\.6 2\.5 2\.5 2\.5 0 Manufacturing -1\.1 0\.9 2\.5 2\.5 -10 Services 3\.1 -0\.1 -7\.8 1\.6 -20 Privateconsumption 3\.9 1\.8 -2\.5 1\.2 -30 Generalgovernmentconsumption 9\.0 1\.3 -19\.3 16\.4 Gross domesticinvestment 4\.9 -3\.5 -7\.3 3\.9 I Importsof goodsand services 15\.8 -7\.1 -15\.0 6\.3 ---Exports -Imports Note:2003 data are preliminary estimates Thistable was producedfromthe DevelopmentEconomicscentraldatabase\. * The diamondsshow four key indicatorsinthe country[inbold]comparedwith itsincome-groupaverage\.If data are missing,the diamondwill beincomplete\. 84  1993 2002 I 4 $ 1 16 4 140 15 Q w' **L* 80 03 02 $3 2 9 3 3 O Q 04 P dcltator --w-CPI 2002 1\.374 2\.780 r,a1a 1\.502 817 i%93 2002 Current account batance to GDP C\.xB 56 -18 3% $9 5% 62 3 3 1ao \.87 \.% )t 3 1993 2062 1It2 186 21 $1 f It 2 4 21 39 t66 "7 72 56 5 22 0 0 rt 451 40 0 9 30 B 14 9 43 17 21 -35 -3 t3 II $ \.I4   MAPSECTION

APPROVAL

P007350

Document of The World Bank FOR OFFICIAL USE ONLY FILE Report No\. 5080 PROJECT COMPLETION REPORT HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) May 14, 1984 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only In the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  I  FOR OFFICIAL USE ONLY HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT TABLE OF CONTENTS Page No\. PREFACE \. \. i BASIC DATA SHEET \. \. MISSION DATA \. \. HIGHLIGHTS \.i\. HIGLIGTS\. i I\. INTRODUCTION \. \. 1 II\. PROJECT PREPARATION, APPRAISAL AND NEGOTIATIONS \. 1 III\. PROJECT EXECUTION \. \. 2 IV\. COST ESTIMATES AND DISBURSEMENTS \. 10 V\. ECONOMIC EVALUATION \. \. \. 12 VI\. PERFORMANCE OF THE BORROWER \. \. 13 VII\. ROLE OF THE BANK \. \. 14 VIII\. CONCLUSIONS \. 15 TABLES 1\. Costs of Civil Works per Km (US$) \. 17 2\. Comparison Between the Appraisal and Final Cost \. 18 ANNEX Borrower Comments \. \. \. 19 MAP IBRD 14823R (PCR) This document has a restricted distribution and may be used by recipients only in the performance of | their official duties\. Its contents may not otherwise be disclosed without World Bank authorization   HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT PREFACE The following is a Project Completion Report on the Honduras Seventh Highway Project for which loans in the amount of US$35\.0 million (US$7\.0 million on Third Window Terms and US$28\.0 million on Standard Terms) were approved by the Executive Directors on November 23, 1976\. The loans are about 96% disbursed\. About US$0\.7 million are not committed and would be cancelled\. The Loan closed on December 31, 1983\. This Completion Report was prepared by the Bank's Latin America and the Caribbean Regional Office and is based on information obtained from the Minutes of the Board Meeting, LAC Information Center, Appraisal Report No\. 12353a-HO, staff supervision reports, consultants' final reports and reports from the Project Unit in the Secretariat of Communications, Public Works and Transport (SECOPT)\. In accordance with the revised procedures for project performance audit reporting, this Completion Report was read by the Operations Evaluation Department but was not audited by OED staff\. The draft Completion Report was sent to the Borrower, Comments received are presented as an annex and have been incorporated in the text of the report\.   - ii - HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT BASIC DATA SHEET Key Project Data Appraisal Item Estimates Actual Total Project Cost (US$ million) 51\.2 51\.3 1/ Loan Amount (US$ million) 35\.0 35\.0 Disbursed (04-10-84) 35\.0 33\.4 Estimated Economic Rates of Return (%): Talanga-Juticalpa Road 16 21 Juticalpa-Catacamas Road 11 12 Date Physical Components Completed 6-81 12-83 Financial Performance - Fair Institutional Performance Fair Proportion of Time Overrun (%) 56 Other Project Data Original Item Plan Actual First Mention in Files or Timetables 06-02-75 Appraisal - 07-76 Negotiations 09-08-76 10-20-76 Board Approval 10-26-76 11-23-76 Loan Agreement - 12-16-76 Effectiveness 03-16-77 05-20-77 Closing Date 12-31-81 12-31-83 Borrower Republic of Honduras Executing Agency Secretariat for Communications, Public Works and Transportation (SECOPT) Fiscal Year of the Borrower January 1 - December 31 Follow-on Project Name Eighth Highway Project Loan Number 1901-HO Amount (US$ million) 28\.0 Loan Agreement 09-29-80 1/ As explained throughout this report, some project components have been deleted while others have been added\. A meaningful comparison of final costs with appraisal estimates can be done only for individual components of the project\.   - iii - HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT MISSION DATA 1/ Month/ No\. of No\. of Staff/ Date of Type Year Weeks Persons Weeks Report Preparation 05-75 1 2 2 06-02-75 Preparation 08-75 1 2 2 09-03-75 Preparation 10-75 1 1 1 10-28-75 Preparation 01-76 1 2 2 02-06-76 Appraisal 02-76 2 4 8 07-27-76 Post-Appraisal 09-76 1 1 1 09-29-76 Supervision 01-77 1 1 1 01-21-77 Limited Supervision 2/ 03-77 0\.5 1 0\.5 04-20-77 Supervision 07-77 1 3 3 08-05-77 Supervision 02-78 1 2 2 03-06-78 Supervision 05-78 1 2 2 06-05-78 Supervision 01-79 1 4 4 03-01-79 Limited Supervision 3/ 03-79 1 1 1 06-01-79 Supervision 06-79 2 3 6 07-16-79 Technical Assistance 4/ 06-79 2 1 2 08-08-79 Supervision 09-79 2 3 6 11-08-79 Limited Supervision 5/ 10-79 1 1 1 11-12-79 Supervision 08-80 1 1 1 09-24-80 Supervision 02-81 2 1 2 03-10-81 Supervision 05-81 1\.5 3 4\.5 06-09-81 Supervision 03-82 2 3 6 04-13-82 Supervision 08-82 0\.5 1 0\.5 09-01-82 Supervision 03-83 1 2 2 05-05-83 TOTAL SUPERVISION EFFORT FY1977 FY1978 FY1979 FY1980 FY1981 FY1982 FY1983 (cont\.) Staff Weeks 3\.4 21\.4 12\.8 8\.1 17\.2 9\.3 15\.0 1/ Most of these missions included work for the Sixth and Eighth Highway Projects\. 2/ To supervise the preparation of the Highway Master Plan\. 3/ To supervise the labor-intensive Feeder Road Construction component\. 4/ A Bank-appointed consultant visited Honduras to assist SECOPT in carrying out its commitment regarding personnel incentives\. 5/ To supervise the training component of the technical assistance to the Directorate General for Roads and Airports Maintenance (DGMCA)\.   - iv - HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT HIGHLIGHTS The Seventh Highway Project was successful in achieving its main objective of reconstructing the Talanga-Juticalpa-Catacamas road\. This was done at a cost 13% below appraisal estimates, in spite of the additional costs brought about by the upgrading of the standards of the Juticalpa-Catacamas section (para 3\.05) and the need to carry out substantial repair works on the project road (para 3\.07)\. The ex-post economic evaluation yielded estimated rates of return for the Talanga-Juticalpa and the Juticalpa-Catacamas road sections of 21% and 12% respectively, confirming the probable viability of the project (para 5\.03)\. During the execution of the civil works, the Borrower initiated changes in the design standards of the Juticalpa-Catacamas road and in the alignment of the Talanga-Guaimaca road without prior Bank consultation\. In the first case, the Bank found the changes justified and accepted their inclusion in the project (para 3\.05)\. However, in the case of the new alignment for the Talanga-Guaimaca road, which necessitated a new bridge 54m long, the Bank did not fully accept the Government's arguments for the change and did not agree to finance the new bridge from the proceeds of the Loan (para 3\.03)\. Two civil works contractors presented claims to the Borrower, for diverse reasons (paras 3\.03 and 3\.05)\. Loan funds freed because of the lower-than-expected cost of civil works and the deletion from the project of the Telica Dam Study (para 3\.15) were reallocated to the construction of three access roads connecting the main road to the towns of Campamento, Juticalpa and Catacamas (para 3\.08); to the construction of a 6\.05 km road between Catacamas and the Escuela Nacional de Agricultura (para 3\.09); to the purchase of additional equipment and spare parts for the country's highway maintenance program (para 3\.15); and to the Labor-Intensive Road Construction Program (para 3\.16)\. The following discussion summarizes the main aspects of the Technical Assistance elements included in the project: (a) Transport Planning\. A Highway Master Plan was developed under the project (paras 3\.11 and 3\.12)\. (b) Technical Assistance to the Directorate General for Roads (DGC)\. This technical assistance focused on the organization and equipment of laboratories\. Its training element was hampered by the slow progress in laboratory construction and shortage of supplies\. Two practical courses were offered and,   in addition, four laboratory technicians attended specialized courses in Mexico (paras 3\.13, 3\.17 and 3\.18)\. (c) Technical Assistance for the Directorate General for Road and Airport Maintenance (DGMCA)\. The consultants helped to introduce a system for road maintenance and equipment management in a Pilot District\. However, implementation of the system at the national level was postponed and is being carried out under the follow-on Eighth Highway Project (paras 3\.19, 3\.20 and 3\.21)\. (d) Technical Assistance to the Construction Industry\. Consultants carried out a study identifying the mDst serious bottlenecks faced by the industry\. However, since the study is still being reviewed, the technical assistance that should have emanated from it has not been carried out\. The lessons to be learned from the project, identified in this Report, refer to: (a) the need to examine cost estimates in future projects in Honduras more carefully; (b) the need for future Bank supervision to increase emphasis following through on the institution-building aspects of the projects, after securing prior Government commitment; (c) the difficulties inherent in establishing an efficient road maintenance system in countries greatly lacking in staff and facilities; and (d) the need for continuation of the Bank's efforts to identify and implement appropriate technologies in labor-abundant countries\.   HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT I\. INTRODUCTION 1\.01 Honduras, with an area of 115,200 km2, is the second largest of the five Central American countries\. The generally rough topography, character- ized by several mountain ranges, makes the development of the road infra- structure difficult and expensive\. Significant road development in Honduras started only in the mid-1960s, and, during the last decade, major efforts were made to extend and improve the network\. Roads now interconnect major population centers; however, parts of the country, especially the east and northeast, have poor access and low road density\. The present network consists of about 8,545 km, of which 1,716 are paved\. Its backbone is the north-south road which, starting at the San Lorenzo Port on the Pacific Ocean, passes through Tegucigalpa and San Pedro Sula, reaching Puerto Cortes on the Caribbean Sea (Map IBRD 14823R (PCR))\. 1\.02 Over the past 25 years, the Bank has been involved continuously with highway development in Honduras\. Since 1955, eight highway projects have been approved, with loans and credits amounting to US$88 million equivalent\. With the reconstruction of the Talanga-Juticalpa-Catacamas road, financed under the subject project, the primary road network has been largely completed\. The emphasis of investment in the road subsector has now shifted toward the expansion and improvement of the secondary and feeder roads and the maintenance of the system\. This policy, supported by the Highway Master Plan (December 1977) prepared under the Seventh Highway Project (para 3\.11), provided the basis for the formulation of the ongoing Eighth Highway Project (Loan 1901-HO), under which about 350 km of feeder roads located in selected, agriculturally productive valleys are being constructed and about 115 km of existing secondary roads are being improved\. 1\.03 This project completion report is based on information obtained from the Minutes of the Board Meeting, the LAC Information Center, Appraisal Report No\. 12353a-HO, staff supervision reports, consultants' final reports and reports from the Project Unit in the Secretariat of Communications, Public Works and Transport (SECOPT)\. II\. PROJECT PREPARATION, APPRAISAL AND NEGOTIATIONS 2\.01 The civil works components of the project constitute the second tranche of the reconstruction of the Tegucigalpa-Talanga-Juticalpa-Catacamas highway corridor; reconstruction of the first tranche (Tegucigalpa-Talanga) was financed under the Sixth Highway Project (Loan 896-HO) and completed in February 1977\. The feasibility study for the Tegucigalpa-Talanga-Juticalpa road was prepared by U\.K\. consultants, with financing provided by the Central  American Bank for Economic Integration (CABEI) and the U\.K\. Government\. The study was completed in 1971 and updated by the Sectoral Planning Office of SECOPT in late 1975\. Detailed engineering was prepared by the same consultants and completed in 1973\. For the Juticalpa-Catacamas section, the feasibility study and detailed engineering were prepared in 1974-75 by US consultants, with financing provided under Loan 896-HO\. 2\.02 The project was appraised in February 1976\. The issues paper, circulated on April 7, 1976, dealt mainly with the question of the investment necessary for the development of the area of influence of the project road\. In particular, the paper discussed the possibility of excluding from the project the reconstruction of the Juticalpa-Catacamas road to release funds for a comprehensive study of the Guayape Valley development and for the construction of the feeder roads program that would emanate from such study\. The Decision Memorandum, issued on April 30, 1976, stated that it would not be advisable to postpone reconstruction of the Juticalpa-Catacamas road in order to have funds for feeder roads since the logical first step in improving the Guayape Valley roads was to reconstruct the Juticalpa-Catacamas road\. Thus, reconstruction of the road was retained in the project, although loan funds were also allocated for a study of the development of the Guayape Valley\. Loan negotiations took place in October 1976; the loans, amounting to US$35\.0 million (US$7 million on Third Window Terms and US$28 million on Standard Terms), were approved by the Executive Directors on November 23, 1976 and became effective on May 20, 1977\. 2\.03 The components of the project and their estimated costs as given in the Appraisal Report, are shown in the tabulation on the next page\. III\. PROJECT EXECUTION Civil Works 3\.01 Invitations for prequalification of contractors were issued in August, 1976, following Bank guidelines on procurement\. Nineteen firms (one local, 18 foreign) were prequalified and, on December 23, 1976, SECOPT issued the invitations to submit bids for one or more of the four sections into which the project road had been subdivided\. Contracts were awarded as follows: (a) Section II 1/, Talanga-Guaimaca (33\.1 km), to a French-Honduran joint venture; (b) Sections III and IV, Guaimaca-Rio Guayape (33\.9 km) and Rio Guayape-Juticalpa (47\.0 km), to a US contractor; and (c) Section V, Jutlcalpa-Catacamas (38\.3 km) to an Italian firm\. 1/ Section I was the Tegucigalpa-Talanga road financed under the Sixth Highway Project\.  -3- Foreign US$ Millions Exchange Local Foreign Total Component (%) a) Road Reconstruction, including Right-of-Way 10\.1 21\.0 31\.1 68 b) Supervision of Construction (522 man/months) 1\.2 1\.3 2\.5 50 c) Study of an Integrated Development Program for the Guayape Valley (33 man/months) 0\.1 0\.5 0\.6 80 d) Preparation of a Highway Master Plan (56 man/months) 0\.1 0\.3 0\.4 80 e) Procurement of: - Maintenance, Workshop and Laboratory Equipment 0\.3 2\.2 2\.5 90 - Spare Parts - 0\.3 0\.3 100 f) Technical Assistance to SECOPT (65 man/months) 0\.1 0\.3 0\.4 80 g) Technical Assistance to the Local Construction Industry (20 man/months) - 0\.1 0\.1 80 2/ Total Base Costs 11\.9 260 7\. 68 h) Contingencies: Physical (about 10% of Item (a)) 1\.0 2\.1 3\.1 Price Adjustment (about 27% of base costs) - For Civil Works 3\.0 6\.3 9\.3 - For Equipment Purchases - 0\.3 0\.3 - For Consulting Services 0\.3 0\.3 0\.6 Total 16\.2 35\.0 51\.2 68 3\.02 Although the Italian firm was the lowest bidder for Section II, the contract, with the Bank's concurrence, was awarded to the French-Honduran joint venture to give an opportunity to new companies to establish themselves in the country\. The basic value of contracts awarded for civil works was about US$28\.0 million, 10% below the appraisal estimate of US$31\.0 million (excluding contingencies)\. 3\.03 The reconstruction of the Talanga-Guaimaca Road (Section II) began in September 1977 and thereafter proceeded ahead of schedule\. In February 1978, a Bank mission found that, over a 10-km road section, works were 2/ Local costs amounting to about US$20,000 not shown because of rounding of figures\.  - 4 - proceeding on a revised alignment that was about 3 km longer than the original design, necessitating the construction of a new bridge 54 m long\. The change was initiated without prior consultation with the Bank\. Although the new alignment provided somewhat better geometrics, the Bank did not fully accept the Governments's arguments for the change and did not agree to the financing of the cost of the new bridge from the proceeds of the Loan\. The design and construction of the bridge were therefore financed from the Government's own resources\. The Talanga-Guaimaca road section was successfully completed in May 1979 at a total cost of US$6\.1 million--about US$184,000 per km--and the quality of works was considered good\. Immediately after the completion of works, the French partner of the joint venture submitted claims totaling about US$1\.1 million as compensation for costs incurred because of the shortage of fuel in the country during the construction period and the execution of works not covered by the contract; the supervision consultants had not approved these extra works, which were not part of the design\. The Directorate General for Roads (DGC) did not accept these claims\. Following this refusal, the French partner of the civil venture inititated arbitration procedures through the International Chamber of Commerce in Paris\. Although the Government reiterated its refusal of the claims to the appointed arbitrator, the case still has not been resolved\.3/ 3\.04 Works on the Guaimaca-Rio Guayape road (Section III) were satisfactorily completed in September 1979 at a total cost of US$8\.7 million, or about US$250,000 per km\. After the completion of works on Section III, the US contractor encountered financial difficulties, causing delays in the implementation of works on the Rio Guayape-Juticalpa road (Section IV)\. The firm stopped work in March 1981, and the contractor's insurer assumed the responsibility for carrying out the contracted works through subcontractors\. This road section was expected to be completed by early 1983, but, because of a shortage of bitumen coupled with some financial and organizational problems of the subcontractors, it was completed in December, 1983\. The Government invoked the penalty clause for late completion\. Total cost of the Rio-Guayape-Juticalpa road was US$13\.8 million, or US$241,000 per km\.3/ 3\.05 Construction of Section V (Juticalpa-Catacamas) by the Italian firm was carried out on schedule and completed by the end of 1980 at a total cost of US$8\.4 million, or about US$221,000 per km\. In early 1978, a Bank mission found that SECOPT had upgraded the design standards to make them homogeneous with those for the Talanga-Juticalpa section\. The changes in standards, introduced without prior consultation with the Bank, were based on a sub- stantial increase in traffic volumes with respect to appraisal estimates\. The Bank, based on what SECOPT submitted, post-facto, accepted the changes, and the Loan Agreement was amended accordingly\. After completion of works in 1982, the contractor submitted claims to the Government for about US$2\.0 mil- lion, alleging increased costs because of the execution of works not covered by the contract and higher-than-expected labor costs\. Part of these claims was accepted by the Government but not made effective because the contractor didnot submit required evidence\. 3\.06 The supervision of the civil works was carried out by a joint venture of Honduran, Nicaraguan and Costa Rican firms\. During the early 3/ See the Borrower's comment on this paragraph (Annex I)\.  - 5 - stages of project implementation, its performance was hampered by inadequate coordination between the Project Unit, the DGC and the supervisory group, leading to an excessive turnover of personnel within this group\. These shortcomings resulted in decisions being taken without a clear definition of who was responsible for monitoring compliance with Bank procedures\. As a result, Bank approval was not solicited by the Government regarding changes in civil works (paras 3\.03 and 3\.05)\. During 1979, SECOPT undertook the improvement of supervision and of the Project Unit including a substantial change in staff, and the clear definition of the functions and responsibilities of each of the above-mentioned groups\. These actions improved the consultants' performance, which was generally adequate\. The estimated total cost of supervision (US$3\.3 million) was 32% above the appraisal estimate and represents 10% of the cost of the civil works\. The cost overrun was caused by delays in the completion of the civil works, which necessitated a two and a half years extension of the consultants' services\. 3\.07 Exceptionally heavy rains during August and September of 1979 caused serious damage and landslides on all sections of the Tegucigalpa- Catacamas road\. Some repairs were carried out by contract on a cost-plus fee nasis by the US contractor for Sections III and IV\. However, based on further assessment of the condition of the road, the Bank and SECOPT concluded that, in order to prevent possible serious deterioration, additional repair and maintenance works along the Tegucigalpa-Catacamas road should be included in the project\. Initially, SECOPT proposed, and the Bank agreed, to award the contract for the repairs to the US contractor, but, in view of the firms's financial problems, the contract for an amount of US$1\.36 million was awarded to a local contractor following local competitive bidding procedures acceptable to the Bank\. Works were completed by November 1983\. A local firm was retained for the supervision of the repair works at a total cost of US$187,000\. This amount represents 14% of the civil works, which is adequate\. In general, there is a minimum supervision effort that is required regardless of the size of the civil works\. Therefore, for small projects, the cost of supervision represents a higher proportion of the cost of civil works\. 3\.08 Because of the lower-than-expected costs of civil works (para 3\.02), loan funds became available for other uses\. Early in 1980, SECOPT proposed, and the Bank agreed, to use uncommitted loan funds for the construction of three access roads connecting the main road and the towns of Campamento (2\.17 km), Juticalpa (3\.17 km) and Catacamas (1\.29 km)\. The Bank initially asked SECOPT to request proposals from the US and the Italian contractors responsible for Sections IV and V respectively for carrying out these works; however, since the Italian firm had barely enough equipment to complete its section of the main road, the contracts were signed with the US firm\. Construction of the access roads to Campamento and Juticalpa stopped in March 1981 because of the financial difficulties of the contractor, when works were about 30% complete\. At that time, construction of the access road to Catacamas had not yet started\. The contractor's insurance company also took over these projects, which were completed by the end of June 1983, at an estimated total cost of US$1\.4 million (about US$210,000 per km)\.  - 6 - 3\.09 In December 1980, SECOPT proposed the construction a 6\.05-km road between Catacamas and ENA (Escuela Nacional de Agricultura)\. The Bank, after reviewing the feasibility study report, approved the inclusion of this road in the project\. Following local bidding procedures acceptable to the Bank, a contract was signed in October 1982\. Works were completed satisfactorily in November, 1983 at a total cost of US$1\.06 million (about US$175,000 per km)\. A local firm was retained for the supervision of this element of the project\. Total cost of supervision was US$159,000, or 15% of the civil works\. 3\.10 Table 1 summarizes information regarding the cost per km of the different roads included in the project\. Appraisal estimates of the cost per km of the Talanga-Juticalpa road were excessive\. Although the substantial repairs that had to be carried out after the heavy rains of 1979 (para 3\.07) were naturally not envisaged at the time of appraisal, final costs are still below appraisal estimates\. The repair costs have been mostly concentrated on the Guaimaca-Juticalpa section, raising its cost substantially above the cost per km of the Talanga-Guaimaca section\. Transport Planning 3\.11 The Bank, under the technical assistance component of Loan 896-HO, financed a transport planning study which was carried out by US consultants\. The study, completed in late 1976, laid the groundwork and provided the basic data needed to prepare a Highway Master Plan under the project\. The same consultants were retained to develop the Plan, which was satisfactorily completed at the end of 1977\. Under the Plan, covering in detail the 1978-1982 period, priority was given to small scale improvements of the trunk network, with special attention to deferred maintenance and to the construction of secondary and low standard feeder roads to serve agricultural areas\. The priorities identified under the plan served as the basis for defining the Eighth Highway Project\. 3\.12 Loan funds were also used to extend the consultants' services initiated under the Sixth Highway Project in the area of training staff of two offices within SECOPT (the General Directorate for Transport and the Sectoral Planning Office)\. The consultants' report emphasized that qualified staff, as well as a sustained planning effort, would be required by SECOPT for the successful implementation of the Plan\. In view of this consideration, and also recognizing institutional weaknesses within SECOPT, the Bank agreed to the use of about US$100,000 of loan funds to hire an experienced Honduran transport economist for a three-year period\. Despite these efforts, improvements in planning capabilities were not adequately incorporated within SECOPT's institutional structure\. Most of the difficulties can be attributed to lack of qualified staff\.4/ The total cost of the transport planning element of the project, including the hiring of the local economist, was about US$522,000, as compared with the appraisal estimate of US$475,000\. 4/ The Borrower attributes the difficulties to the provision of technical assitance to separate departments within SECOPT, instead of focusing on a coordinated planning unit\.  Purchase of Maintenance, Workshop and Laboratory Equipment 3\.13 The loan included funds for the purchase of the most urgently needed maintenance, workshop and laboratory equipment through international competitive bidding\. By early 1980, the procurement of maintenance equipment and spare parts, as originally envisaged, had been completed\. However, the exclusion from the project of the Telica Dam Study (para 3\.15) freed loan funds which, at the Government's request, were reallocated to the purchase of additional maintenance equipment and spare parts\. Deliveries are expected to be completed in 1984; the total cost of this component is US$3\.3 million\. 3\.14 For the purchase of workshop and laboratory equipment, Section 4 (b) of the Loan Agreement states that no disbursement would be made until SECOPT had provided facilities, satisfactory to the Bank, for the installa- tion of the equipment\. To this effect, the Borrower undertook to build a laboratory and a workshop in San Pedro Sula and to improve the existing laboratory in Tegucigalpa\. The works proceeded extremely slowly because of managerial problems, shortage of funds and inadequate design of the San Pedro Sula workshop, which required substantial revisions to make it functional\. The necessary installations became operational between mid-1982 and early 1983\. The Bank, aware of the time-consuming process of equipment procurement in Honduras, agreed that the invitation to bid for the equipment might take place before the buildings were completed, reconfirming, at the same time, the above-mentioned condition for disbursement\. Procurement of workshop equipment has been completed at a total cost of about US$569,000, while procurement of laboratory equipment was completed by December 1983 at a cost of about US$293,000\. Telica Dam Study 3\.15 The original Loan Agreement included funds for a study of the inte- grated development program of the Guayape Valley\. In mid-1978, the Bank was informed that the Canadian International Development Association (CIDA) had made a formal proposal for carrying out the study\. The proposal was accepted, and the US$500,000 allocated for that purpose became available for other uses\. In July 1979, SECOPT proposed, and the Bank agreed, to use US$100,000 of those funds for the engineering studies of the Catacamas-Culmi road\. By the end of 1979, after lengthy debates, the Bank agreed with the Ministry of Natural Resources (MNR) on the use of the remaining funds for a study of the Telica Dam site in the Guayape region with the purpose of investigating its potential for irrigation, domestic water supply, flood control and hydropower development\. The Loan Agreement was modified accordingly\. A Bank Agricultural Division, in charge of this component, agreed, in mid-1980, to MNR's selection of a French-Honduran consulting firm for carrying out the study\. The consultants' proposal included a foreign exchange requirement of US$720,000, which was made available under Category 5 (a) of the revised allocation of proceeds of the Loan\. However, since the study was never started, the Bank informed the Borrower, in November 1982, that, since it was clear that the study could not be completed before the loan's closing date, the Bank would no longer consider its financing under  - 8 - the Project\. The Bank recommended, and the Borrower agreed to, a realloca- tion of the loan proceeds to finance much needed equipment and spare parts for its highway maintenance program\. Labor Intensive Road Construction Program 3\.16 In February 1976, the Bank agreed to a Government proposal to promote the development of labor-intensive technology for low volume feeder road construction and maintenance\. To support the launching of the labor- based construction program, a two-year, US$400,000 technical assistance scheme was established, financed in equal parts by the Government of Honduras and by the Bank's research program for appropriate construction technol- ogies\. The scheme was initiated in March 1976 with the arrival in Tegucigalpa of the German consultants who, working with Honduran public sector engineers and economists in a newly created "Feeder Roads Unit," provided assistance to develop the organization and methods of road selection, construction, supervision and administration, suitable to labor- intensive techniques\. The program soon gained substantial local acceptance, and about 150 km of roads were built between 1976 and 1978\. In January 1978, the Ministry transformed the Feeder Roads Unit into a "Department of Labor-Intensive Construction" within DGV\. Since the contract for consultant services was to expire in September 1978, the Government, in May 1978, proposed to the Bank the extension of the program for an additional two-year period with financing for extension of the consultant services and acquisition of equipment, using the surplus funds that resulted from highway construction cost savings due to both lower-than-expected base costs and lower incidence of cost escalation\. The Bank agreed, and the second part of the program was included in the project in September 1978\. The Loan Agreement was changed accordingly, and the proceeds of the loan were revised to allocate US$1\.0 million to the program\. A Final Report issued by the consultants points out that the work performed under the 1976-1980 Labor-Intensive Road Construction Program resulted in the construction or improvement of over 330 km of all-weather rural access roads to the Honduran network\. The program, now also covering the maintenance of rural roads, is proceeding well, funded by its own resources as well as by several bi-lateral and multi-lateral agencies\. Technical Assistance to the Directorate General for Roads (DGC) 3\.17 In November 1980, a German firm was selected to carry out this technical assistance which included, inter-alia, a study of DGC's Human Resources and Institutional Improvements, especially the organization and equipment of laboratories\. The training aspects of the technical assistance were scheduled to take place after the laboratory buildings were completed and the new equipment installed\. However, because of slow progress on the laboratory constructions and shortages of training supplies, the training program, conducted in May and June of 1980, suffered from inadequate facilities, equipment and textbooks\.5/ Two practical courses on Soils and Materials Mechanics were offered to Taboratory engineers and assistants\. The consultants' final report of August 1980 contains recommendations regarding training of laboratory personnel in the aspects of organization, planning and 5/ The Borrower attributes the problem to delays in contracting consultants and supply shortages\.  -7- Purchase of Maintenance, Workshop and Laboratory Equipment 3\.13 The loan included funds for the purchase of the most urgently needed maintenance, workshop and laboratory equipment through international competitive bidding\. By early 1980, the procurement of maintenance equipment and spare parts, as originally envisaged, had been completed\. However, the exclusion from the project of the Telica Dam Study (para 3\.15) freed loan funds which, at the Government's request, were reallocated to the purchase of additional maintenance equipment and spare parts\. Deliveries are expected to be completed in 1984; the total cost of this component is US$3\.3 million\. 3\.14 For the purchase of workshop and laboratory equipment, Section 4 (b) of the Loan Agreement states that no disbursement would be made until SECOPT had provided facilities, satisfactory to the Bank, for the installa- tion of the equipment\. To this effect, the Borrower undertook to build a laboratory and a workshop in San Pedro Sula and to improve the existing laboratory in Tegucigalpa\. The works proceeded extremely slowly because of managerial problems, shortage of funds and inadequate design of the San Pedro Sula workshop, which required substantial revisions to make it functional\. The necessary installations became operational between mid-1982 and early 1983\. The Bank, aware of the time-consuming process of equipment procurement in Honduras, agreed that the invitation to bid for the equipment might take place before the buildings were completed, reconfirming, at the same time, the above-mentioned condition for disbursement\. Procurement of workshop equipment has been completed at a total cost of about US$569,000, while procurement of laboratory equipment was completed by December 1983 at a cost of about US$293,000\. Telica Dam Study 3\.15 The original Loan Agreement included funds for a study of the inte- grated development program of the Guayape Valley\. In mid-1978, the Bank was informed that the Canadian International Development Association (CIDA) had made a formal proposal for carrying out the study\. The proposal was accepted, and the US$500,000 allocated for that purpose became available for other uses\. In July 1979, SECOPT proposed, and the Bank agreed, to use US$100,000 of those funds for the engineering studies of the Catacamas-Culmi road\. By the end of 1979, after lengthy debates, the Bank agreed with the Ministry of Natural Resources (MNR) on the use of the remaining funds for a study of the Telica Dam site in the Guayape region with the purpose of investigating its potential for irrigation, domestic water supply, flood control and hydropower development\. The Loan Agreement was modified accordingly\. A Bank Agricultural Division, in charge of this component, agreed, in mid-1980, to MNR's selection of a French-Honduran consulting firm for carrying out the study\. The consultants' proposal included a foreign exchange requirement of US$720,000, which was made available under Category 5 (a) of the revised allocation of proceeds of the Loan\. However, since the study was never started, the Bank informed the Borrower, in November 1982, that, since it was clear that the study could not be completed before the loan's closing date, the Bank would no longer consider its financing under  the Project\. The Bank recommended, and the Borrower agreed to, a realloca- tion of the loan proceeds to finance-much needed equipment and spare parts for its highway maintenance program\. Labor Intensive Road Construction Program 3\.16 In February 1976, the Bank agreed to a Government proposal to promote the development of labor-intensive technology for low volume feeder road construction and maintenance\. To support the launching of the labor- based construction program, a two-year, US$400,000 technical assistance scheme was established, financed in equal parts by the Government of Honduras and by the Bank's research program for appropriate construction technol- ogies\. The scheme was initiated in March 1976 with the arrival in Tegucigalpa of the German consultants who, working with Honduran public sector engineers and economists in a newly created "Feeder Roads Unit," provided assistance to develop the organization and methods of road selection, construction, supervision and administration, suitable to labor- intensive techniques\. The program soon gained substantial local acceptance, and about 150 km of roads were built between 1976 and 1978\. In January 1978, the Ministry transformed the Feeder Roads Unit into a "Department of Labor-Intensive Construction" within DGV\. Since the contract for consultant services was to expire in September 1978, the Government, in May 1978, proposed to the Bank the extension of the program for an additional two-year period with financing for extension of the consultant services and acquisition of equipment, using the surplus funds that resulted from highway construction cost savings due to both lower-than-expected base costs and lower incidence of cost escalation\. The Bank agreed, and the second part of the program was included in the project in September 1978\. The Loan Agreement was changed accordingly, and the proceeds of the loan were revised to allocate US$1\.0 million to the program\. A Final Report issued by the consultants points out that the work performed under the 1976-1980 Labor-Intensive Road Construction Program resulted in the construction or improvement of over 330 km of all-weather rural access roads to the Honduran network\. The program, now also covering the maintenance of rural roads, is proceeding well, funded by its own resources as well as by several bi-lateral and multi-lateral agencies\. Technical Assistance to the Directorate General for Roads (DGC) 3\.17 In November 1980, a German firm was selected to carry out this technical assistance which included, inter-alia, a study of DGC's Human Resources and Institutional Improvements, especially the organization and equipment of laboratories\. The training aspects of the technical assistance were scheduled to take place after the laboratory buildings were completed and the new equipment installed\. However, because of slow progress on the laboratory constructions and shortages of training supplies, the training program, conducted in May and June of 1980, suffered from inadequate facilities, equipment and textbooks\.5/ Two practical courses on Soils and Materials Mechanics were offered to Taboratory engineers and assistants\. The consultants' final report of August 1980 contains recommendations regarding training of laboratory personnel in the aspects of organization, planning and 5/ The Borrower attributes the problem to delays in contracting consultants and supply shortages\.  - 7 - Purchase of Maintenance, Workshop and Laboratory Equipment 3\.13 The loan included funds for the purchase of the most urgently needed maintenance, workshop and laboratory equipment through international competitive bidding\. By early 1980, the procurement of maintenance equipment and spare parts, as originally envisaged, had been completed\. However, the exclusion from the project of the Telica Dam Study (para 3\.15) freed loan funds which, at the Government's request, were reallocated to the purchase of additional maintenance equipment and spare parts\. Deliveries are expected to be completed in 1984; the total cost of this component is US$3\.3 million\. 3\.14 For the purchase of workshop and laboratory equipment, Section 4 (b) of the Loan Agreement states that no disbursement would be made until SECOPT had provided facilities, satisfactory to the Bank, for the installa- tion of the equipment\. To this effect, the Borrower undertook to build a laboratory and a workshop in San Pedro Sula and to improve the existing laboratory in Tegucigalpa\. The works proceeded extremely slowly because of managerial problems, shortage of funds and inadequate design of the San Pedro Sula workshop, which required substantial revisions to make it functional\. The necessary installations became operational between mid-1982 and early 1983\. The Bank, aware of the time-consuming process of equipment procurement in Honduras, agreed that the invitation to bid for the equipment might take place before the buildings were completed, reconfirming, at the same time, the above-mentioned condition for disbursement\. Procurement of workshop equipment has been completed at a total cost of about US$569,000, while procurement of laboratory equipment was completed by December 1983 at a cost of about US$293,000\. Telica Dam Study 3\.15 The original Loan Agreement included funds for a study of the inte- grated development program of the Guayape Valley\. In mid-1978, the Bank was informed that the Canadian International Development Association (CIDA) had made a formal proposal for carrying out the study\. The proposal was accepted, and the US$500,000 allocated for that purpose became available for other uses\. In July 1979, SECOPT proposed, and the Bank agreed, to use US$100,000 of those funds for the engineering studies of the Catacamas-Culmi road\. By the end of 1979, after lengthy debates, the Bank agreed with the Ministry of Natural Resources (MNR) on the use of the remaining funds for a study of the Telica Dam site in the Guayape region with the purpose of investigating its potential for irrigation, domestic water supply, flood control and hydropower development\. The Loan Agreement was modified accordingly\. A Bank Agricultural Division, in charge of this component, agreed, in mid-1980, to MNR's selection of a French-Honduran consulting firm for carrying out the study\. The consultants' proposal included a foreign exchange requirement of US$720,000, which was made available under Category 5 (a) of the revised allocation of proceeds of the Loan\. However, since the study was never started, the Bank informed the Borrower, in November 1982, that, since it was clear that the study could not be completed before the loan's closing date, the Bank would no longer consider its financing under  - 8 - the Project\. The Bank recommended, and the Borrower agreed to, a realloca- tion of the loan proceeds to finance much needed equipment and spare parts for its highway maintenance program\. Labor Intensive Road Construction Program 3\.16 In February 1976, the Bank agreed to a Government proposal to promote the development of labor-intensive technology for low volume feeder road construction and maintenance\. To support the launching of the labor- based construction program, a two-year, US$400,000 technical assistance scheme was established, financed in equal parts by the Government of Honduras and by the Bank's research program for appropriate construction technol- ogies\. The scheme was initiated in March 1976 with the arrival in Tegucigalpa of the German consultants who, working with Honduran public sector engineers and economists in a newly created "Feeder Roads Unit," provided assistance to develop the organization and methods of road selection, construction, supervision and administration, suitable to labor- intensive techniques\. The program soon gained substantial local acceptance, and about 150 km of roads were built between 1976 and 1978\. In January 1978, the Ministry transformed the Feeder Roads Unit into a "Department of Labor-Intensive Construction" within DGV\. Since the contract for consultant services was to expire in September 1978, the Government, in May 1978, proposed to the Bank the extension of the program for an additional two-year period with financing for extension of the consultant services and acquisition of equipment, using the surplus funds that resulted from highway construction cost savings due to both lower-than-expected base costs and lower incidence of cost escalation\. The Bank agreed, and the second part of the program was included in the project in September 1978\. The Loan Agreement was changed accordingly, and the proceeds of the loan were revised to allocate US$1\.0 million to the program\. A Final Report issued by the consultants points out that the work performed under the 1976-1980 Labor-Intensive Road Construction Program resulted in the construction or improvement of over 330 km of all-weather rural access roads to the Honduran network\. The program, now also covering the maintenance of rural roads, is proceeding well, funded by its own resources as well as by several bi-lateral and multi-lateral agencies\. Technical Assistance to the Directorate General for Roads (DGC) 3\.17 In November 1980, a German firm was selected to carry out this technical assistance which included, inter-alia, a study of DGC's Human Resources and Institutional Improvements, especially the organization and equipment of laboratories\. The training aspects of the technical assistance were scheduled to take place after the laboratory buildings were completed and the new equipment installed\. However, because of slow progress on the laboratory constructions and shortages of training supplies, the training program, conducted in May and June of 1980, suffered from inadequate facilities, equipment and textbooks\.5/ Two practical courses on Soils and Materials Mechanics were offered to Taboratory engineers and assistants\. The consultants' final report of August 1980 contains recommendations regarding training of laboratory personnel in the aspects of organization, planning and 5/ The Borrower attributes the problem to delays in contracting consultants and supply shortages\.  control of road construction which SECOPT is endeavoring to carry out\. To this effect, an experienced local engineer has been appointed as Chief of the Geotechnical Department and is currently implementing the consultants' recommendations\. The cost of this component was US$116,000\. 3\.18 Also, under the training program, SECOPT reached an agreement with the Mexican Secretariat of Public Works (SAHOP) to send four laboratory technicians to Mexico, with transportation and cost-of-living expenses paid from loan proceeds\. The trainees attended a special six-month (April/ September 1981) course at a total cost of about US$17,000\. Technical Assistance for the Directorate General for Road and Airport Maintenance (DGMCA) 3\.19 This technical assistance was carried out by the consultants (US) between May 1978 and November 1980\. Its main objective was to design and introduce a system for road maintenance and equipment management for at least one year in a Pilot District before extending the system at the national level\. Periodic meetings and lectures chaired by the consultants were carried out to implement and test new management procedures\. In addition, 18 members of the DGMCA, comprising engineers, administrators and executives, made one- week training trips to the United States to observe the implementation of road maintenance and equipment management systems in several districts of the states of Maryland and New Mexico\. 3\.20 The first program was completed satisfactorily but, when the system was considered suitable for implementation at the national level, the consultants were asked by SECOPT to postpone its introduction to other districts and to concentrate on studies required for the preparation of the Eighth Highway Project\. This postponement resulted in the extension of the contract by four months\. Furthermore, because of the delay in the preparation of the contract for the continuation of the consultants' services under the Eighth Project, SECOPT requested a new three-month extension, which was agreed by the Bank, to ensure the continuity of this technical assistance\. 3\.21 A final report, presented by the consultants in June 1981, lists the objectives partially achieved under the Seventh Highway Project and expected to be consolidated under the ongoing Eighth Highway Project\. Among them: (a) the implementation of a new system for maintenance and equip- ment administration comprising the programing, execution, control and evaluation of the work performed; (b) the simplification of data collection and field reports; (c) the study of a new costing system; (d) the centralization of data to be used as a management tool; and  - l1O - (e) the reduction of the delays experienced in the procurement of spare parts with the creation of an office of the Proveeduria de la Republica (Central Procurement Office) attached to DGMCA\. 3\.22 The final cost of the technical assistance to DGMCA was about US$694,000, which, added to the cost of the technical assistance to DGC and to the scholarship program (paras 3\.17 and 3\.18), represents a total cost of about US$827,000, 74% above the appraisal estimate of US$475,000\. This substantial increase in cost is mostly due to the extension of the scope and duration of the work by the US consultants (paras 3\.19 and 3\.20)\. Technical Assistance to the Construction Industry 3\.23 In compliance with Section 3\.04 of the Loan Agreement, the Borrower, in November 1977, signed an agreement with the Honduran Chamber of Construction Industry for assisting in the carrying out of an aid program to the local construction industry\. German consultants were selected to provide this technical assistance, and the contract was signed in August 1979\. A consultants' report identified the most serious physical and financial bottlenecks faced by the industry and made specific recommendations leading to increasing the predictability of future work and the availability of timely credit supply\. However, the technical assistance to the construction industry that should have emanated from the consultants' study was not carried out\. The report is presently being reviewed by the Honduran Chamber of Construction Industry and SECOPT\. Their recommendations will be discussed with the Honduran Government in the near future since Loan 1901-HO estab- lishes the obligation of the Borrower to act on the report's recommenda- tions\. The total cost of this project component was US$226,000, 64% above the appraisal estimate of US$138,000\. IV\. COST ESTIMATES AND DISBURSEMENTS 4\.01 A comparison between appraisal and final cost estimates (including contingencies) is shown in Table 2\. The final cost of the original project items which remained in the project is currently estimated at about US$44\.0 million, including normal contingency allowances, some US$7\.2 million (14%) less than the appraisal estimate\. The remaining funds were used for new project elements (Labor Intensive Road Construction Program, access roads, etc\.) or for increasing the scope of the original ones\. Bank participation remained at 68% of the total project cost, as estimated during the appraisal\. 4\.02 Disbursements lagged considerably behind appraisal estimates during the first year-and-a-half of project implementation, as shown in the following tabulation\. A four-month delay in starting the construction of the Talanga-Juticalpa road, indecision on the use of the Guayape Study funds, delays caused by a contractor's financial problems, and additional procure- ment of maintenance equipment and civil works also contributed to the dis- bursement delays\. The acceleration of disbursements in 1979 reflects the on-schedule completion of most of the project's original civil works, by far the largest element of the project\.  - 11 - Disbursements (US$ millions) Appraisal Actual as % of FY Estimates Actual Appraisal 1977 50 - 0 1978 7\.00 40 6 1979 18\.50 16\.84 91 1980 29\.00 23\.35 81 1981 34\.00 27\.70 82 1982 35\.00 29\.70 85 1983 - 33\.40 6/ _ 4\.03 The allocation of loan proceeds has been revised four times, as shown below, to provide for the Labor Intensive Program and other project revisions\. (US$'000) Revisions Categories Original First Second Third Fourth 9/78 1/81 2/82 1/83 A\. Civil Works 21,000 21,000 25,500 26,350 26,350 B\. Equipment for Maintenance Workshop and Laboratories 2,500 2,500 3,050 3,020 4,175 C\. Consultant Services (i) Design and supervision of Part A and B of the Project 1,300 1,300 1,500 1,875 1,875 (ii) Transport Planning (Part D) 300 300 440 540 444 (iii) Technical Assistance to DEC and DGMCA (Part E) 300 300 805 725 725 (iv) Technical Assistance to construction industry (Part E) 100 100 250 220 220 (v) Guayape Study (Part G) 500 500 820 820 96 (vi) Labor-Intensive Program (Part H) - 1,000 1,000 1,115 1,115 (vii) Unallocated 9,000 8,000 1\.635 335 - Total 35,000 35,000 35,000 35,000 35,000 6/ As of April 10, 1984 about US$1\.3 million of Loan 1341-HO and US$0\.3 million of Loan 1342-T-HO were still undisbursed\. Current estimates of the final cost of the project suggest that about US$0\.7 million are not committed and would be cancelled\.  - 12 - 4\.04 The original Closing Date, December 31, 1981, was extended twice first to June 30, 1983 and finally to December 31, 1983\. V\. ECONOMIC EVALUATION 5\.01 The upgrading of the gravel Talanga-Catacamas road was justified at appraisal on the basis of quantifiable benefits accruing to road users mainly from reduced vehicle operating costs which would result from improvements in road design and surface characteristics and from a 13\.2-km shortening of the Talanga-Juticalpa Section\. 5\.02 The economic reevaluation of the project road was based on a methodology similar to the one used at appraisal\. However, certain assumptions have been modified, as follows: (a) Savings in Maintenance Costs The appraisal estimated that the difference in maintenance expenditures for the "with" and "without" project cases would result in a net additional economic cost for the project\. However, given the present level of traffic (about 700 vehicles per day), an assumption of net savings from reduced maintenance costs seems more realistic\. Since the results of the economic analysis were not sensitive to different assumptions about maintenance costs, they were ignored in the economic reevaluation\. (b) Projected Traffic Growth Projected traffic growth at the time of the appraisal was heavily based on the possible development of the forest industry in the Olancho region, which was expected to be limited by a rapid rate of exhaustion of resources\. Therefore, the appraisal projected a conservative average annual traffic growth rate of 5% for the first ten years of the lifetime of the project and 4% thereafter, although the historical traffic growth rate in the years preceding the appraisal had been about 8% p\.a\. Traffic counts carried out by SECOPT in March 1983 show that actual traffic levels in the Talanga-Juticalpa and the Juticalpa-Catacamas road section are 13% and 7%, respec- tively, above those expected at appraisal for that year\. This higher-than-expected traffic is explained by the development taking place in the several valleys in the area of influence of the project road\. Therefore, in spite of the modest growth of the forest industry, the economic reevaluation has been based on a projected annual traffic growth of 6% for the first 10 years of the project and 5% thereafter\.  - 13 - 5\.03 The ex-post economic evaluation yielded estimated economic rates of return (ERR) of 21% for the Talanga-Juticalpa road and 12% for the Juticalpa- Catacamas road, versus the 16% and 11% respectively estimated at appraisal\. The substantial difference in the ex-ante and ex-post ERR for the Talanga- Juticalpa road is due to an actual and projected traffic growth above that estimated at appraisal and to a final cost of construction 16% below the appraisal estimate 7/\. In the case of the Juticalpa-Catacamas road, the extra benefits brought about by the higher traffic growth were mostly offset by a real cost of construction 23% above that envisaged at the time of appraisal\. This cost increase was due to the adoption of a higher design standard than that agreed at appraisal (para 3\.05)\. VI\. PERFORMANCE OF THE BORROWER 6\.01 The performance of the Borrower, except for the changes in road designs initiated without previous consultation with the Bank, can be considered as generally satisfactory\. Regarding the contractors' claims, the Borrower is reviewing their different elements and is prepared to satisfy those claims found justified\. Following are the major covenants and the Borrower's efforts to comply\. 6\.02 "Section 3\.08 (a)\. Except as the Bank shall otherwise agree, the Borrower shall: not later than June 30, 1977, submit to the bank a detailed plan setting forth the action to be taken by the Borrower, including, without limitation, the provision of adequate incentives, in order to recruit and retain the services of qualified personnel for DGC and DGMCA\." The covenant was partially fulfilled\. After several postponements of the deadline to submit the above mentioned plan, the Bank sent, in July 1979, a consultant to assist SECOPT in this matter (the cost of these services did not come from loan proceeds)\. As an interim solution to the implementation of the Plan's recommenda- tions, the Government strengthened SECOPT's capabilities by con- tracting advisors at salaries higher than the civil service scale\. 6\.03 Section 4\.03 (a)\. The Borrower shall: (i) cause all national roads of the Borrower to be adequately maintained and cause all necessary repairs thereof to be made, all in accordance with sound engineering practices; (ii) cause all maintenance equipment of the Borrower to be adequately maintained and cause all necessary repairs and renewals thereof to be made, all in accordance with sound engineering practice; (iii) cause existing repair workshops to be adequately maintained, particularly by improving, not later than December 31, 1977 and in manner satisfactory to the Bank, the equipment repair and laboratory facilities at Tegucigalpa and San Pedro Sula 7/ The comparison between actual and appraisal estimated costs (including contingencies) was made in constant 1982 prices\.  - 14 - (including disposal of obsolete equipment presently stockpiled therein); and (iv) provide, promptly as needed, the funds, facilities, services and other resources required for the foregoing\." The Borrower partially complied with the preceding covenant\. Compliance with item (i) is expected to improve after the equipment financed under the Seventh and Eighth Highway Projects is in operation\. The continuation under the Eighth Highway Project of the technical assistance in this area is also expected to strengthen the capabilities of DGMCA and improve maintenance operations\. Compliance with item (ii) is also expected under the Eighth Highway Project\. Regarding item (iii), the San Pedro Sula laboratory, the Tegucigalpa workshop, the San Pedro Sula workshop and the Tegucigalpa laboratory are operational\. Some equipment remains to be delivered by the supplier to the San Pedro Sula laboratory\. The delay in complying with item (iii) was mainly the result of temporary lack of compliance with item (iv)\. 6\.04 "Section 4\.03 (b) (i)\. The Borrower shall take all necessary action to: not later than June 30, 1977 or such date as shall be acceptable to the Bank, cause the dimensions and weights of the vehicles using the national roads of the Borrower to be kept within the limits provided by the laws and regulations of the Borrower\." SECOPT complied well in advance with the preceding covenant\. Enforcement of maximum weights and dimensions of vehicles started on January 6, 1977, and the program is being continued success- fully\. Currently there are 13 weighing stations in operation\. VII\. ROLE OF THE BANK 7\.01 The Bank was significantly involved in project identification and preparation by inclusion of feasibility studies under the preceding Sixth Highway Project and by participation in review of subsequent designs and studies which were financed by others\. The scope and size of this, the Seventh Highway Project, were within SECOPT's administrative capabilities\. The original implementation schedule was reasonable, but additional works and procurement of equipment described in preceding chapters delayed completion beyond the originally envisaged date\. 7\.02 The Bank, during project implementation, showed the necessary flexibility to reassign funds released by the lower-than-expected civil works costs and by the deletion from the project of the Guayape Valley Study\. At the same time, in the case of the changes in road design standards and alignments initiated by the Borrower without prior consultation, the Bank's response was adequately firm\. The Bank accepted those changes that were justified, as well as part of the already started realignment for which substantial costs had already been incurred\. However, it refused to finance a new bridge, leaving to the Borrower the responsibility of bearing most of the cost of the Government's decision\.  - 15 - VIII\. CONCLUSIONS 8\.01 The Seventh Highway Project was successful in achieving its main objective of completing the second tranche of the Tegucigalpa-Catacamas highway, with an estimated rate of return above that expected at appraisal\. In addition, the well chosen technical assistance elements resulted in some improvements in the area of road maintenance and transport planning which are expected to continue under the Eighth Highway Project\. However, because of the Borrower's financial and staffing constraints, planning efforts, namely the updating of the Highway Master Plan completed under the project, were not pursued\. The Government was committed, under the Eighth Highway Project, to update the Plan, using its own resources\. Because of financial constraints, the Government requested that surplus funds from the Seventh Highway Project be reallocated to finance the updating of the Plan\. The Bank did not agree to this request, but waived the Borrower's obligation to update the Plan under the Eighth Highway Project\. In the case of the implementation of a maintenance system at national level, results continue to be below expecta- tions, with budgetary constraints and delays in equipment and spare parts procurement contributing to the slow pace of achievement in this area\. 8\.02 There are several lessons to be learned from this project: (a) One particular lesson can be learned from the fact that appraisals of the last three Highway Projects in Honduras substantially overestimated the cost of civil works\. This pattern suggests that, in the future, the Bank should examine cost estimates in Honduras more carefully in order to improve the planning process of resource allocations\. (b) In addition, future Bank project supervision should give more emphasis to the institution-building aspects of its technical assistance components\. The Seventh Highway Project had, as the main objective of its transport planning element, the prepara- tion of a Highway Master Plan\. However, the plan, by itself, becomes a temporary tool if the planning agency does not develop the necessary capabilities to monitor and update it in a continuous and systematic way\. Although the project marginally provided for such needs, supervision efforts focused on the civil works component and did not pay early attention to the detrimental effects that the lack of coordination of the project executing units of the different lending agencies were having on the technical assistance for planning\. (c) Another lesson to be learned from this project refers to the difficulties inherent in establishing an efficient road maintenance system in countries greatly lacking in staff and facilities\. The Bank should be less optimistic in this area,  - 16 - realizing that the development of such a system is a slow and tortuous process that can be achieved only over a longer term\. In addition, the Bank should consider the possibility, in future projects, of reducing the emphasis on the implementation of over-sophisticated management information systems\. The focus, as a first step, should be on developing, from the in-place system, high standard field work together with simple forms for reporting inputs so that physical targets and costs can be readily controlled and that realistic planning and budgeting can be carried out\. The introduction of such improvements should be preceded by some measure of success in training the necessary local staff\. (d) A final lesson can be derived from the implementation of the Labor-Intensive Program for road construction in Honduras\. The success of the program, coupled with the substantial institution-building that accompanied it, indicates that the Bank should continue with its efforts to identify and implement appropriate technologies in labor-abundant countries\.  - 17 - TABLE 1 HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT Costs of Civil Works per km (US$) Appraisal Original Final Road Section Estimate 1/ Contract Costs Talanga-Guaimaca (33 km) ) 187,100 194,006 2/ Guaimaca-Rio Guayape (34 km) ) 303,800 ) 266,619 2/-3/ ) ) 263,205 6/ Rio Guayape-Juticalpa (48 km) ) ) 241,400 3/ Juticalpa-Catacamas (38 km) 198,700 222,340 4/ 233,003 2/-4/ Access Roads - 219,000 210,000 5/ Catacamas - ENA - 167,600 175,000 1/ Including physical and price contingencies 2/ Including repair works contracted with a local firm (para 3\.07) 3/ Including the supplementary contract signed with the US contractor to carry out additional works on these road sections (para 3\.07) 4/ Design standards were raised to make this road homogeneous with the Talanga-Juticalpa Road (para 3\.05) 5/ Includes the cost of installing main water pipes and access connections to houses 6/ US$195,488/km was the original contract value excluding the additional works later contracted (para 3\.07)  - 18 - TABLE 2 HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT Comparison Between the Appraisal and Final Cost Estimates Total Cost Estimates Increase/ Appraisal 1/ Final Decreases (US$ million) A\. Civil Works (a) Talanga-Catacamas Road 42\.54 37\.00 -13 (b) Tegucigalpa-Catacamas repair works - 1\.36 - (c) ENA road 1\.06 - (d) Access roads - 1\.40 - B\. Maintenance Equipment 2\.82 3\.30 +17 C\. Workshop Equipment \.56 \.57 + 2 D\. Laboratory Equipment \.14 \.29 +107 E\. Consultant Services (a) Construction supervision 3\.30 3\.65 +11 (b) Transport planning \.48 \.52 + 8 (c) Technical assistances to DGV and \.48 \.83 +73 DGMAC (d) Technical assistance to the construction industry \.14 \.23 +64 (e) Guayape Valley Int\.Dev\.Project \.75 - - (f) Catamacas-Culmi engineering study - \.12 (g) Labor-Intensive Program - \.92 Total 51\.21 51\.25 1/ Including contingencies  - 19 - Annex Page 1 of 5 HONDURAS SEVENTH HIGHWAY PROJECT (LOAN 1341-HO/1342-T-HO) PROJECT COMPLETION REPORT Translation Incoming telex to the World Bank from SECOPT April 10, 1984 Mr\. Shiv S\. Kapur, Director, OED Dear Sir: As requested we are intorming you of our agreement with the contents of the Project Completion Report (for Loans 1341/1342-HO); we attach below certain suggestions which we feel are appropriate, though we leave it to your judgement as to whether to include them or not\. Page iii: eliminate note 2, "Estimated date\." Page v: - paragraph 2, line 7: change length from 55 m to 54 m\. - paragraph 3: it is not the case that two contractors sued 1/; only the Dumez Company sued the Government, while the Cogefar Company umade a claim to the DGC\. - paragraph 4, line 6: change the length of the road built between Catacamas and the Escuela Nacional de Agricultura from 6\.6 km to 6\.05 km\. - Comment: no reference is made to the project to correct the other deficiencies of the Tegucigalpa-Catacamas highway\. Page vi, paragraph 2, line 1: replace "Direccion General de Carreteras" by "Direccion General de Caminos\." Page 1, Introduction, paragraph 1\.01, line 11: replace 1,610 by "1,716 are paved\." Paragraph 2\.02\. - Line 10: it would improve the report to say "reconstruction of the Juticalpa-Catacamas road\." - Line 13: it would be better to say "the decision to reconstruct the road was retained\." 1/T\.N\. The report does not use the word "sued," but the distinction intended in this comment makes little sense unless translated in this way\. In any event, the writer's comment applies only to the Spanish version\.  - 20 - Annex Page 2 of 5 Paragraph 3\.01\. It is suggested that the, paragraph be written as follows: "Invitations for prequalifioation of contractors were issued in August 1976 in accordance with the World Bank guidelines on procurement included in the Loan Agreement\. Nineteen construction firms were prequalified among which were one Honduran company seso4\.ated with a foreign company\. On December 20, 1976 the Secretariat in a written communication informed the prequalified firms (regarding) their participation in one or more of the four sections into which the project had been subdivided\. On December 23, the invitation to bid was published in the largest daily Honduran newspapers\. Contracts were awarded as follows: (a) Section II, Talanga-Guaimaca (33\.1 km) to a French-Honduran company; (b) Sections III and IV, Guaimaca-Rio Guayape (33\.9 km) and Rio Guayape-Juticalpa (47 km) to a U\.S\. contractor; and (c) Section V, Juticalpa-Catacamas (38\.32 km) to an Italian firm\." Paragraph 3\.03\. - Line 2: replace October by September\. - Line 7: change 55 m to 54 m\. Page 5, paragraph 3\.03\. It is suggested that the (remainder of the) paragraph read as follows: "\.French partner in the joint venture presented claims for a total of about US$1\.1 million as oompensation for additional costs incurred in executing the work, which according to the contractor should have been recognized by the Government in addition to the unit prices established in the contract\. SECOPT having consulted the DGC and the consultants did not accept these claims; following this refusal\. in Paris\. The position of the Honduran Government was to refuse arbitration on the basis that the claim was presented by only one of the partners in the joint venture\." Paragraph 3\.04, line 8: change text to: \. using subcontractors\. It was expected that the remaining work would be completed by early 1983 but because of the financial problems of the insurer and the organizational problems of the subcontractors the work was only completed in December 1983\. The Government invoked the penalty clause for late completion\.  - 21 - Annex Page 3 of 5 The total cost of the Rio Guayape-Juticalpa section and access roads (para\. 3\.08) was US$13\.08 million, or US$241,000 per km\." Paragraph 3\.05, line 12\. Change text to: "\. works in 1982, the contractor subnitted clai,na to the DGC for approximately US$2 million, alleging increased costs resulting from execution of works\. Part of these claims was accepted by DGC but was not settled before the due date because the contractor did not present the necessary supporting documents\." Paragraph 3\.06\. It is suggested that the start of paragraph be changed as follows: "The supervision of the civil works was carried out b} a -onsortium of Central American firms consisting of one company each irom Honduras, Nicaragua and Costa Rica\. During the early stages of project implementation, its performance was hampered by inadequate coordination between the Project Unit, the DGC and the supervisory group, leading to an excessive turnover of personnel within this group\. These shortcomings\." Ibid\., page 6, line 2\. Change text to "\.undertook the improvement of supervision and of the Project Unit, including a substantial change\." - Line 7\. Change text to: "\.(US$3\.3 million) was 32% above the - Line 10\. Change text to: "\. a two and a half year extension of the consultants' services, which represented an increase of 63% in the original period of services\." Paragraph 3\.07 - Line 2\. Change to: "\. caused serious damage and destruction on various sections of the Tegucigalpa-Catacamas road\." - Line 8\. Change text to: \. repairs and maintenance on the said road\." - Line 15\. Change text to: \. the works were concluded in November 1983\." - Lines 15 to 17\. Change text to: "\. a local firm was retained for the supervision of the repair works at a final cost of US$182,000\." Paragraph 3\.08\. - Line 6\. Change text to: "\. towns of Campamento (2\.17 km), Juticalpa (3\.17 km) and Catacamas (1\.29 ki)\."  - 22 - Annex Page 4 of 5 - Line 17\. Change text to: "\.these projects which were completed in December 1983 at a final cost of US$1\.4 million (about US$210,000 per km)\." Paragraph 3\.09\. - Line 6\. Change text to: "\.the work was completed satisfactorily in November 1983, the final length of the project being 6\.05 km at a total cost of US$1\.06 million (US$175,000 per km)\." - Line 10\. Change text to: "\. the total cost of supervision was US$159,000, or 15% of the civil works\." Paragraph 3\.12\. - Line 3\. Change text to: "\.training staff of the two departments within SECOPT (the General Directorate for Transport and the General Directorate of Sectoral Planning)\." Ibid\., page 8, line 2\. It is suggested that the paragraphs be divided at this point and the text changed to: "Part of the difficulties in the transport planning component of the project can be attributed to the use of separate consulting services instead of focusing on a coordinated planning unit\. The total cost of the planning element, including the hiring of a local economist, was US$522,000 as compared with the appraisal estimate of US$475,000\. Paragraph 3\.14, last line\. Change to: "\.cost of US$293,000\." Paragraph 3\.16, line 18\. Change to: "\.withing DGV given that the final contract\." Ibid\., page 9, line 1\. Change to: "\.the consultant services and acquisition of equipment for this program, using the surplus funds that resulted from highway construction cost savings due to lower-than-expected base costs and the effects of a reduction in cost increases\. The Bank\." Paragraph 3\.17\. - Line 8\. Change to: "\.equipment installed\. Owing to delays in the contracting of consultants and the supply shortages, the training program - Line 17\. Change to: "\. to this effect the DGC has appointed a civil engineer with adequate experience as head of the Geotechnics Department, who is currently implementing the consultants' recommendations\. The cost of \."  - 23 - Annex Page 5 of 5 Page 12, paragraph 4\.02, last line\. Change to: "\.(which constitutes) the largest element of the project, namely 74%\." Page 17, paragraph 8\.01, line 13\. Change "excendentarlo" to *excedente\."2/ Page 18, paragraph (b), line 15\. Change "Proyecto" to "proyectos \. "3/ Page 18, paragraph (c), line 13\. (The recommendation is merely to make a small change in the order of works in Spanish, which does not affect the English version, namely "high standard field work\.") Page 19\. Change lengths of road sections in accordance with the changes in paragraph 3\.01 of the report\. Regards, Edwin Roberto Leiva Director General 2/ In English both words mean "surplus\." 3/ In the English version "project" cannot be made plural but in the Spanish text the change should be made if more than one project is involved\.   IBRD 14823R(PCK 8S- RR* B 55' 87\. 8 55\. JUNE 10i3 B E L I Z E TAREAReSA SOA=NA A j\._\.r\. g X ~~~~~~~~~~~~ ~ ~~C a r h b eo a/AA ISAN Sea oS\.C 1eI - U ILAISLAIL ISALD j / ~~~~~GUI F OF HONDURAS lf- -f lS+,^A L > 1\<TH 5 IAA,>_,a, \sAGAI< _ 7 #,4> j MAIN HstGLHayWrqAssYs<N U X~~~~~~~~~~~~~~~~~~~~HES DE a, obeen ciA AAS ANISAN _eR GULF Of WOA'OL/AAS~~~~~~~~~~~~~~~~~~~~~~~~~LFT Su,~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I SAG ~ ~ J RACS arRE 5 i( ~ - \ S Njf;N0 ~ ~ J/ O-O iiylEn ud od SIXTH HIGHWAY PROJECT ILoan 9SpoHDI E L S A L V A LSO R S < I I TMROaTm A osRE o ron 'A LA VEGA ALEE IA LDA EL MU E 00-GINA IL UNION ESEBN Ro OONGONG OF T HIGHWAYPOJNECT\ SIlOEa- CNCPIO THS APISRAEDONlOD 483RMA RD /EL PARAISO OORTE~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~25 5 5 0 PRIOSOPTASPRATONNTOR N PaJc L//C Ocea7n P07/SOfA El 9KLOW MTERS 3 \.PAN A 83 I\ D V E T S RU BA

APPROVAL

P155689

PROJECT INFORMATION DOCUMENT (PID) IDENTIFICATION/CONCEPT STAGE Report No\.: PIDC25330 Public Disclosure Copy Project Name Integrated Single Window Office for Social Assistance and Employment Services Region EUROPE AND CENTRAL ASIA Country Uzbekistan Sector(s) Public administration- Other social services (70%), General public administration sector (30%) Theme(s) Social Safety Nets/Social Assistance & Social Care Services (30%), Social Protection and Labor Policy & Systems (40%), e- Government (30%) Lending Instrument Lending Instrument Project ID P155689 Borrower Name Ministry of Economy Implementing Agency Ministry of Labor and Social Protection of Population Environment Category C - Not Required Date PID Prepared 28-May-2015 Estimated Date of Approval 22-Jun-2015 Initiation Note Review The review did authorize the preparation to continue Decision Public Disclosure Copy I\. Introduction and Context Country Context Uzbekistan is a lower middle-income, resource rich, doubly-landlocked country, strategically located in the heart of Central Asia\. Its population of about 28\.2 million (mid-2010), about half of whom live in urban areas, accounts for about forty percent of CentralAsia‘s total\. It is the world‘s sixth largest cotton producer and fourth largest raw cotton exporter\. As the only country bordering five other Central Asian states including Afghanistan, Uzbekistan‘s economic and social development is important not only for its own young and rapidly growing population, but also for the management of the region‘s energy, water, and trade as well as for its political stability and security\. It has enjoyed robust gross domestic product (GDP) growth since the mid-2000s— averaging 8 percent annually according to official data―due mainly to: (i) favorable terms of trade for country‘s key export commodities—copper, gold, and natural gas; (ii) the government‘s macro- economic management, including its government led-2008 stimulus; and (iii) limited exposure to international financial markets, which shielded it from contagion effects of financial crisis\. Poverty has declined in recent years, due to rapid economic growth, government investments, and increased remittances from abroad\. According to official data, poverty declined from 27\.5 percent of the population in 2001 to 19\.5 percent in 2010\. However, despite acceleration in poverty reduction since 2005 elasticity of poverty reduction to GDP growth remains low especially in the rural areas\. The Government's vision is for Uzbekistan to become an industrialized, high middle- Page 1 of 6  income country by mid-century\. Among the critical elements for such a transformation are creating jobs for the rapidly growing population of young educated people and improving governance, including access to services and information on government policies and their outcomes\. Public Disclosure Copy Sectoral and Institutional Context The recent assessments conducted independently by the Word Bank, UNICEF, and national think- tanks indicate that administration of the social protection programs in Uzbekistan requires substantive investments in order to meet the needs of emerging middle income country and to ensure that its systems of public benefit delivery meet high standards of efficiency, transparency, security, accountability and quality service to the population\. In Uzbekistan, design and implementation of policies in social protection and labor are part of the mandate of the Ministry of Labor and Social Protection (MLSP)\. The Ministry operates a range of social programs to support the neediest\. Administratively, it shares that responsibility with the local community organizations (Mahalyas)\. The role of the latter is to identify and enroll the families that require assistance, while the Ministry provides for centralized management benefit payments and supervision\. Additionally, the same ministry manages programs in labor and employment\. The fact that the same ministry manges both assistance and employment programs provides a strong advantage as those could be closely coordinated through an efficient administration, including one- stop-shop and unified referral system\. The Government is taking a gradual approach by focusing on reform of administration bottom-up\. As the first stage, the Ministry is seeking to develop and pilot a concept of integrated single window office (ISWO) operation (as a new MLSP office) with streamlined functions and referral mechanisms, effective data consolidation and information management, and robust monitoring provisions\. At the second stage (outside this grant), the Government is seeking to consolidate management of the social protection system on a centralized facility of the Registry of social Public Disclosure Copy beneficiaries\. The Ministry of Labor and Social Protection (MLSP) has, therefore, requested the Bank to provide assistance to (i) developing the reform roadmap, (ii) the pilot of the ISWO concept, and (iii) the work on preparations for the national MIS/Registry design and implementation\. The first step is supported by a related TA (P153562)\. The second step is the focus of activities under this grant\. It will then feed into preparations of the forthcoming operation, as the third step\. Indeed, the current systems and processes at the local level are cumbersome, not transparent, and not user friendly\. The proposed changes in the operation of the front offices will establish a set of common standards in service delivery, unifying application and eligibility verification process and establishing a common referral system (for both assistance and employment programs)\. This will result in lesser burden for the applicants, including reduced travel and paperwork requirements, faster benefit decisions, more accurate decisions, more efficient grievance mechanisms, and better overall awareness about a full spectrum of government services available from the regional offices of the Ministry\. Furthermore, at the moment, provision of social assistance and employment facilitation services are not related\. The proposed pilot will develop and test mechanisms of referral between different programs to reduce dependency on assistance and promote awareness about employment opportunities\. In doing so, the grant will contribute to better harmonization of policies in labor and Page 2 of 6  safety nets\. Finally, it will help identify and better understand various bottlenecks in the current system that limit feasibility of better policy choices\. Public Disclosure Copy Relationship to CAS/CPS/CPF The Country Partnership Strategy for 2012-2015 emphasizes importance of improving the social protection system, especially the targeting of assistance to the most vulnerable groups: "Result Area 4: Improving access to, and outcomes of social services This result area will support the government's objective to reduce regional and rural-urban inequities through promoting social inclusion and human capital development\. To this end, the Bank would initially address the following government requests through recently approved lending (under the previous CAS) and studies: (a) improving the quality, and equitable access to early childhood education and basic education services; (b) providing more accessible quality and sustainable health services, especially in the rural areas, (c) continuing to improve the coverage and sustainability of potable water supply and sanitation services, and (d) improving the social protection system, especially the targeting of assistance to the most vulnerable groups\." Additionally, as the new CPF is in the process of development, the team will closely coordinate with that work to ensure consistency with the broader vision of reforms\. II\. Project Development Objective(s) Proposed Development Objective(s) The PDO is to increase coordination among SPL programs and functions , to strengthen capacity of MLSP in delivering services to the vulnerable and needy groups of the population and implementing complex reforms, to establish a solid foundation for implementation of a national social Registry\. Key Results 1\. Assessment of the current systems and recommendations on the streamlined operation of SPL programs produced\. Public Disclosure Copy 2\. Concept of the Integrated Single Window Office (ISWO) of the Ministry of Labor and Social Protection (MLSP) for provision of social assistance and employment services to population is developed, piloted in 2 locations, and evaluated\. 3\. A roadmap and detailed blueprint for implementation and rollout of a national reform of administration of the social assistance and employment programs prepared, including high level design of the Management Information System (MIS) and a Registry of beneficiaries, on the basis of the analysis and optimization of the local service provisions, piloting of the ISWO concept, best international practices, and future reform plans in Uzbekistan\. 4\. A training program for the staff in new procedures developed, including 100% staff from 2 designated MLSP regional pilot offices trained in the new business processes and client oriented service delivery\. 5\. Management and fiduciary capacity to support implementation of a complex national reform established within MLSP\. III\. Preliminary Description Concept Description The project will focus on improving social service delivery by increasing the efficiency of the processes behind it, especially at the level of district operation, and by strengthening the capacity of MLSP's staff\. It will support development of a detailed blueprint for the implementation of the Integrated Single Window Office (ISWO) for provision of social assistance and employment Page 3 of 6  services\. The ISWO concept then will be piloted in up to two regional offices and evaluated, allowing MLSP to further improve the blueprint based on the learnings from the pilot\. In addition, an assessment of HR development needs for MLSP and local governments will be conducted to Public Disclosure Copy inform customized trainings that the project will provide to strengthen the capacity of MLSP regional level staff to deliver the new mode of services\. Mahalyas will be among the direct beneficiaries of the project in what the MLSP modernized offices will offer as improved services\. Furthermore, it is planned to automate the operational interface between the MLSP and Mahalyas, as part of the design and implementation of a new MIS system\. The activities under the project will be broken down into the following three components: Component 1: Design, pilot, and evaluate the ISWO concept, develop a reform roadmap ($350,000) - RE This component will focus on developing and piloting (on the basis of up to 2 regional offices) a concept of Integrated Single Window Office (ISWO) for the service provision to the population by the MLSP, with needs assessment and design of a business process and a software to automate the processes of identification, enrollment, decision, grievances, and monitoring of social assistance and labor programs\. Specific activities will include: 1\. Assessment of current business processes of service provision at all levels, from local self- government to the national level, with implications specifically for operation of the regional offices\. 2\. Development of proposals for optimization of roles, functions, and business processes (including options for strengthened payment procedures and integration with the MOF Treasury systems); development of standards in the social assistance and employment services provision to eligible groups of population\. 3\. Inventory of the existing software applications and databases supporting operation of the regional offices and developed by the MLSP at different times and for different purposes\. 4\. Assessment of capacity of the existing software application packages to meet the needs of various social and employment programs, with the view of operational consolidation\. 5\. Recommendations for integration of the existing software packages and corresponding databases Public Disclosure Copy under a framework of the ISWO, with the step by step guidance on implementation of the future centralized system of Registry of social beneficiaries 6\. Design and implementation of a software application to operate at the regional level as a building block for the future consolidated MIS\. The new software will support the full array of services provided by the regional MLSP offices\. 7\. Analysis and design of specialized software applications supporting operation of Mahalyas\. Provision of tablet computers to facilitate the work of MLSP inspectors working with Mahalyas\. 8\. High level design of the future Management Information System (MIS) and the Registry of beneficiaries\. 9\. Develop procedures for monitoring of the pilot processes and evaluation of the results\. 10\. Preparations for the pilot, including design of the operational documents (the Operations Manual, public awareness materials, guidelines for monitoring and verification) 11\. Pilot the new ISWO concept and organize activities related to pilot evaluation\. 12\. Finalize operational procedures and standards; produce a final package of materials as a Roadmap for implementation of the national rollout\. 13\. Draft a safeguards framework and a manual to support capacity building for the future rollout activities to be implemented as part of the operation that will follow implementation of this grant\. In addition to national and international consulting services, this component will finance limited procurement of computer hardware and office equipment, including tablet computers, as well as Page 4 of 6  development of specialized software applications and a database, provision of necessary connectivity and power supply as may be needed, minor office upgrade costs, and operating expenses\. The office upgrades may include any renovations - such as electricity, plumbing, cosmetic Public Disclosure Copy upgrades (walls restoration and painting, windows and doors repairs, etc) - that do not involve demolitions or changing structural integrity of the buildings otherwise, and that do not trigger safeguards polices, as per further consultations with the safeguards team on the basis of the renovations plan to be produced by the Ministry\. Component 2: Strengthen capacity to improve service delivery ($50,000) - RE This component will focus on important activities complementary to the Component 1: 1\. Assess the HR development needs for MLSP and local governments\. 2\. Design customized training programs for the staff at the different levels of the pilot implementation: a\. At the level of the district offices, training for MLSP officers in client management, case management, specifics of various programs, uses of the new software application, and the computer literacy b\. At the local government level, training on new mode of services provided by MLSP, including case management, etc\. c\. At MLSP level, training on the principles of effective management, planning, and budgeting for the social assistance and employment programs 3\. Delivery of the workshops in the pilot areas 4\. Define training needs and curriculum for the future stages of the reform, as preparations to the planned IDA operation The above activities will be complemented by a campaign of raising awareness among the staff about benefits of the anticipated changes and sensitizing them to the new operational mode\. This is to ensure a broad buy-in of the reforms by the staff of the regional offices\. Public Disclosure Copy This component will finance national and international consultancies, as well as training and workshop activities, including associated operating costs\. Component 3: Project management ($50,000) - RE This component will finance establishment and operation of a PIU within MLSP, including the management and fiduciary team of national consultants (composed of, as to be further determined, financial management, procurement, office management, project monitoring specialists), and the costs of audit, minor office upgrade costs (see defitnition above) and operating expenses, as well as various short term national and international consultancies\. Component 4: Bank supervision and implementation support component ($100,000) - BE This component will finance staff and consultants time, travel, and operating expenses for implementation support as well as design and implementation of a study tour program and activities related to pilot evaluation\. Given important cross-sectoral policy linkages and operational synergies, we will closely coordinate within the SPL team as well as with the social development (GP SURR) team\. IV\. Safeguard Policies that Might Apply Page 5 of 6  Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment OP/BP 4\.01 ✖ Public Disclosure Copy Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ V\. Financing (in USD Million) Total Project Cost: 0\.55 Total Bank Financing: 0 Financing Gap: 0 Financing Source Amount Rapid Social Response Program 0\.55 VI\. Contact point World Bank Contact: Oleksiy A\. Sluchynskyy Title: Senior Economist Tel: 473-4687 Email: osluchynskyy@worldbank\.org Borrower/Client/Recipient Public Disclosure Copy Name: Ministry of Economy Contact: Galina Saidova Title: Minister Tel: 99871-232-63-20 Email: info@mineconomy\.uz Implementing Agencies Name: Ministry of Labor and Social Protection of Population Contact: Alexander Navotnyi Title: Head of Division Tel: 99871239-4121 Email: nmintrud@rambler\.ru VII\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Page 6 of 6

APPROVAL

P002894

R E S T R I C T E D FILE COPY Report No\. P-245 This report was prepared for use within the Bank\. It may not be published nor may it be quoted as representing the Bank's views\. The Bank accepts no responsibility for the accuracy or completeness of the contents of the report\. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE UGANDA PROTECTORATE March 21, 1961  REPORT AND RECOMMENDATIONS OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE UGANDA PROTECTORATE 1\. I submit the following report and recommendations on a proposed loan of 88\.4 million to the Uganda Protectorate for an expansion of elec- tric power facilities of the Uganda Electricity Board\. PART I - HISTORICAL 2\. The Bank was approached in July 1958 by the United Kingdom Govern- ment and the Government of Uganda for its assistance to the Uganda Elec- tricity Board in financing an extension of its transmission and distribu- tion systems, based on the existing Owen Falls hydroelectric power station, and for construction of small generating units to serve some outlying areas\. 3\. Preliminary discussions were held in the course of 1959 in Entebbe and London with representatives of the Uganda Government and of the Uganda Electricity Board about the project and, in particular, on the Uganda Electricity Board's financial position and prospects\. The Board has been in a difficult financial position\. A mission from the Bank visited Uganda in April, 1960 to examine the economy and the proposed project\. The mis- sion's findings confirmed the need to put the Board's finances on a sounder basis and the resulting negotiations for a loan, which took place in Washington in January and February, 1961, were largely directed to that end\. 4\. So far, the Bank has made no loans exclusively to Uganda\. A Bank loan of '24 million equivalent was made in 1955 to the East Africa High Commission for the development of railways and harbors in Kenya, Uganda and Tanganyika\. This loan was guaranteed by the United Kingdom and by the three territories concerned\. As of February 28, 1961, after repayments and sales without the Bankts guarantee, about '8\.7 million equivalent was held by the Bank\. 5\. The Bank has already made the following loans with the guarantee of the United Kingdom: Amount as of February 28, 1961 Year Borrower Purpose (expressed in $ million) 1952 Colony of Southern Rhodesia Power 28\.0 1953 Territory of Northern Rhodesia Railways 1\.O 1955 East Africa High Com- mission Railways & Harbors 24\.0 1956 Federal Power Board (Federation of Rhodesia and Nyasaland) Power 80\.0  -2- 1958 Nigeria Railways 28\.0 1958 Federation of Rhodesia and Nyasaland Railways 19\.0 1960 Federation of Rhodesia and Nyasaland African Agriculture 5\.6 1960 Kenya African Agriculture and Roads 5\.6 Total 20h\.2 Of which has been repaid 13\.0 Total now outstanding 191\.2 Amount sold 64\.9 Of which has been repaid 12\.7 52\.2 Net amount held by the Bank 139\.0 The total loans outstanding include `,l5\.6 million not disbursed as of February 28, 1961\. PART II - DESCRIPTION OF THE PROPOSED LOAN 6\. The main characteristics of the proposed loan would be as follows: Borrower: Uganda Protectorate\. Guarantor: United Kingdom\. Amount: The equivalent in various currencies of M8A1 million\. Amortization: In 35 semi-annual installments, beginning on June 1, 1961 and ending June 1, 1981\. Interest rate: 5 3/A%, including 1% commission\. ComLmitment charge: 3/4 of 1%\. Purpose: Extension of the Uganda Electricity Board's existing transmission and dis- tribution systems and construction of small generating stations to serve out- lying areas\. PART III - LEGAL INSTRUMENTS AND AUTHORITY 7\. Attached are drafts of the Loan Agreement between the Uganda Pro- tectorate and the Bank (No\.l), the Project Agreement between the Bank and the Uganda Electricity Board (No\.2) and the Guarantee Agreement between the United Kingdom and the Bank (No\.3)\.  -3- 8\. Under the draft Loan Agreement the Uganda Protectorate undertakes to relend the proceeds of the proposed loan to the Uganda Electricity Board on terms and conditions satisfactory to the Bank (Sectiorn 5\.01(a))\. The draft Loan Agreement follows the usual form of the Dank's loan agree- ments for lending for electric power undertakings and contains covellants as to limitations on the Board's incurring of new debt (Section 5\.04) and as to its rates (Section 5\.05)\. The covenant on rates will be amplified in a side letter (No\. L)\. Section 5\.03 (the negative pledge clause) of the draft Loan Agreement has been modified to avoid constitutional prob- lems arising from its applicat on to political subdivisions and their agencies\. If the Governrment of Ugarnda, for constitutional reasons, is unable to make the negative pledge effective with respect to these polit- ical subdivisions and their agencies, it will grant to the Bark an equiv- alent lien satisfactory to the Bank\. The draft Loan Agreement requires, as a condition of effectiveness, that action be taken, satisfactory to the Bank, to establish a sound financial position for the Board (Section 7\.02(b))\. The action contemolated will be specified in a side letter (No\. 5)\. An amerndment, satisfactory to the Bank, of the Uganda Electric- ity Board Ordina:c_ce will also be a condition of effectiveness (Section 7\.02(e))\. The draft Project Agreement reneats relevant covenants of the draft Loan Agreement as direct obligations of the Board to the Bank\. 9\. The draft Guarantee Agreement is in form similar to the Bank's preirous guarantee agreements with the United Kingdom\. It is -roposed that an understanding between the Bank and the United Kingdom as to the interpretation of Section 2\.02 of the draft Guarantee Agreement in the circumstances of this loan be in the form of the draft attached (No\. 6)\. 10\. The report of the Committee provided for in Article III, Section h(iii) of the Articles of Agreement is attached (No\. 7)\. PART IV - THE PROJECT 11\. An appraisal of the nroposed project is given in the attached technical report No\. TO 253-b (No\. 8)\. 12\. The Uganda Electricity Board is a statutory corporation establish- ed in 1948 with the sole right to generate, distribute, and licence gener- ation or transmission of electric power in Uganda\. It is well managed, has competent officers and a sound organization\. 13\. The Board's current development nrogram, covering the period 1959 through 1963, is designed mainly to extend its service area and thus to build up the load on the Owen Falls station by improving and expanding the existing transmission and distribution systems\. It involves a total expenditure of about 16\.1 million equivalent\. The project which it is proposed the Bank help to finance requires a total expenditure of about 4lL! million equivalent\. About 95% of this would be for expansion and improvement of transmission and distribution systems to a number of town- ships and to the copper mining center at Kilembe\. Some orovision is also made for small generating stations to serve outlying areas which could not be economically supplied from the main generating station\.  1i\. Roughly 60% or $8\.4 million equivalent of the proposed expenditure under the project would be for imported goods and services\. The Bank would disburse funds at a rate of 60% of the total expenditure on the project\. 15\. A detailed review of the Board's financial position and prospects was made during the negotiations and a financial plan has been evolved to improve gradually the Board's difficult financial position, arising partly from the "bunching" of maturities of its long-term debt\. 16\. To ease the financial burden, the Government has agreed that the Board's redemption obligations should be rescheduled so as to fall more evenly over the period 1967-1981\. Steps are being taken to this end\. (See paragraph 42 of Technical Report)\. The Board's future borrowing will be subject to limits as set by an interest coverage covenant in the pro- posed Loan Agreement\. 17\. The Board's tariffs for a bulk supply to Kenya and for its sales of power to certain large industrial consumers are set under long-term contracts wihich cannot be altered unilaterally\. The Board plans to raise its standard tariffs by 18% before July 1, 1961 to help meet its heavy cash requirements\. This should increase total revenue by about 13%\. Under a rate covenant in the proposed Loan Agreement, the Board will be required to adjust its rates from time to time to produce revenues sufficient to earn a reasonable return on net investment after meeting operating ex- penses and to cover all cash obligations including debt service\. 18\. It is expected that by 1963, when the proposed project is com- pleted, there will have been a growth in sales leading to a steady im- provement in the Board's earnings\. By 1967, the Board should achieve a return of about 7-1/2% on its net investment, and the return should be much higher in subsequent years\. This should enable the Board to make some provision from internal sources for its further growth\. Moreover the Board should no longer need short-term Government advances and Government funds should be released for investment in other productive sectors of the economy\. 19\. The works under the proposed project have been,and will be, exe- cuted partly by the Board's own organisation and partly by contractors selected on the basis of competitive bidding\. Direct purchases by the Board will be made through local importers or from abroad; the larger and more specialized items of equipment are more likely to be purchased abroad\. A tender system is used for all purchasing; both domestic and foreign suppliers may tender\. There are no preferential tariffs in Uganda\. PART V - ECON0CIC BACKGROUND Uganda 20\. A report No\. EA 113-b on the economy of Uganda is attached (No\. 9)\.  -5- 21\. Uganda's economy is based on agriculture, predominantly of the subsistence type\. African peasant farmers on small plots grow food crops for their own consumption and cotton and coffee (mainly Robusta) for market- ing\. These two crops account for about L0% of Ugandats domestic cash income and more than 80% of its export earnings\. Land titles cannot be granted to non-Africans, and, except in sugar and tea growing, plantation farming is virtually non-existent\. Since 1956, copper is mined in Western Uganda; present production is about 12,000 tons of blister a year\. 22\. High export prices for Uganda's main exports made possible a rapid economic growth in the first post-war decade\. Since 1955, prices have fal- len and, despite larger output, growth in the gross domestic product has only roughly matched the growth of population\. Per capita gross domestic product now amounts to only about $64 equivalent\. 23\. Since there is unused land and a suitable climate, the physical potential for expanding production of major export crops and for increas- ing the production of minor exports, such as tea and livestock products, is good\. Difficulty in marketing is likely to be the major limiting factor\. 2h\. Government revenues have fallen substantially due to their denendence on export taxes\. Contrasted with a surplus of about $10 million eqiuivalent in 1951, the Government's overall budget in 1959/60 had a deficit estimated at about S;O million equivalent\. Some part of the reserve balances accumu- lated in the earlier years are still available to help cover this year's deficit, but after this year the balances will probably be exhausted\. The Uganda Treasury is now seeking ways to balance its current accounts by 1965\. Until that date, the United Kingdom Government has agreed to assist Uganda in meeting its deficits on current account, if necessary\. 25\. Private investment in industrial and agricultural ventures has been small\. But the Uganda Development Corporation, the Government's main instrument for economic development, has been active in promoting both in- dustrial and agricultural investment, including direct investments in textiles, cement, metal processing, hotels and large-scale tea-growing\. The infrastructure on the whole is well-developed\. In recent years public investment has been heavy in fields such as health and education where the need is great but benefits tend to be long-term\. 26\. With good management and reasonable stability in commodity prices, Uganda can expect in the next five or six years a modest rate of growth in its gross domestic product\. To accelerate its development, it will need an inflow of foreign capital, including official loans and grants\. Uganda's own external public debt, all in sterling, is low: it amounts to about $56 million equivalent, incurred almost entirely for relending to the Uganda Electricity Board\. Servicing of the debt represents about 2\.5% of Uganda's annual external earnings and about 7% of the Government's total revenue\. 27\. Uganda shares with neighboring Kenya and Tanganyika a common East African mar'-et, the same currency and joint institutions\. At present  -0- these territories are moving towards political independence from the United Kingdom; independence may indeed be achieved within a few years, but it is likely that even when this happens close economic ties among them will continue\. 28\. Uganda is passing throur'h a difficult transition from Protectorate status to full independence\. For the future economic development of the territory it is important that the transition be orderly\. Unlike the two other British East African territories, Uganda has no substantial European settler population\. There has, however, been interracial tension between the 75,000 Asian settlers and the Africans\. Among the Africans, too, there are some strong tribal or regional antagonisms, such as the separa- tist movement in Buganda, the richest province, which now constitutes a major obstacle to early independence\. There has been a declaration by the Buganda legislature that Buganda should secede by the end of 1960\. This was rejected by the United Kingdom on constitutional grounds\. But the situation has not since deteriorated\. A commission which has recently been appointed to recomnend a future political structure for Uganda may succeed in devising an acceptable solution\. A constitutional conference is due to convene in London, before the end of this year, to consider the future pace of progress towards self-government and eventual full independ- ence\. Even assuming that the Buganda dispute will be settled soon, there are uncertainties and risks in the future; the guarantee of the United Kingdom of the proposed Bank loan is, however, an additional assurance\. United Kingdom 29\. The present economic situation in the United Kingdom is reviewed in the report No\. EA-117a, dated February 20, 1961, which has been dis- tributed to the Executive Directors\. 30\. In guaranteeing the proposed loan, the United Kingdom accepts an additional contingent liability\. The total amount of Bank loans made so far to dependent territories w\.ith the [Jnited Kingdom's guarantee, now amounting to ''191 million, is relatively small\. The annual service pay- ments on the United Kingdom's external public debt, including the guaran- teed debt, amount to about 2% of the United Kingdom's gross annual re- ceipts from current external transactions\. PART VI - COMPLIANCE WITH ARTICLES OF AGREEiENT 31\. I am satisfied that the proposed loan will comply with the re- quirements of the Articles of Agreement of the Bank\. PART VII - RECONIIENDATIONS 32\. I recommend that the Bank at this time make a loan to the Pro- tectorate of Uganda in an amount in various currencies equivalent to $8\.4 million for a total term of about 20 years, with interest (including  -7- commission) at 5-3/4% per annum and on such other terms as are specified in the attached draft Loan, Project and Guarantee Agreements, and that the Executive Directors adopt a resolution to that effect in the form attached (No\. 10)\. Eugene R\. Black President Attachments Washington D\.C\. March 21, 1961

APPROVAL

P170868

 The World Bank Serbia Railway Sector Modernization (P170868) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 15-Nov-2019 | Report No: PIDC27813 Oct 02, 2019 Page 1 of 11  The World Bank Serbia Railway Sector Modernization (P170868) BASIC INFORMATION A\. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Serbia P170868 Serbia Railway Sector Modernization (P170868) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) EUROPE AND CENTRAL ASIA Jul 05, 2020 Sep 18, 2020 Transport Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance Ministry of Construction, Infrastructure, and Transport, Serbia Railways Infrastructure Proposed Development Objective(s) To improve the efficiency, market share, and safety of the rail network\. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 400\.00 Total Financing 400\.00 of which IBRD/IDA 400\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 400\.00 Environmental and Social Risk Classification Concept Review Decision Substantial Track II-The review did authorize the preparation to continue Oct 02, 2019 Page 2 of 11  The World Bank Serbia Railway Sector Modernization (P170868) Other Decision (as needed) B\. Introduction and Context Country Context The Republic of Serbia is located in the central part of the Balkan Peninsula, on an increasingly important route linking Europe and Asia\. Serbia’s international road, railway, and inland waterway networks are connected to the broader Western and Central European corridors, as well as to intercontinental routes linking Central and South-eastern Europe with the Middle East, Asia and Africa\. Serbia’s geographic position opens up significant opportunities to deepen regional trade and economic integration\. The country borders Bulgaria to the east, Romania to the northeast, Hungary to the north, Croatia and Bosnia and Herzegovina to the west, Montenegro to the southwest and Albania and Macedonia to the south, with a total border length of 2,114 kilometers\. Serbia is an upper middle-income country, and with a gross domestic product (GDP) of US$ 50\.5 billion, is one of the main economies in the Western Balkans\. After an average annual growth of 5\.9 percent during the decade before the 2008 global financial crisis, average real GDP growth approached zero as the economy experienced three recessions in 2009, 2012 and 2014, as well as several floods and droughts during 2012-2014\. Over the last four years, Serbia’s economy has resumed growth, and poverty is estimated to have declined slightly from 23\.8 percent in 2014 to 22\.4 percent in 2017\. Positive economic performance in Serbia over recent years is mainly the result of a fiscal stability program, supported by the World Bank and the International Monetary Fund (IMF), and a regulatory and institutional modernization process to meet European Union (EU) accession requirements\. The service sector has been the main driver of growth, as it contributed 2\.3 percentage points to total GDP growth in 2018\. The main engines of growth in the service sector are trade, transport, and tourism\. The information technology (IT) sector is increasingly important, with its exports exceeding EUR 1 billion as of 2018\. Agriculture also did well in 2018, recovering from 2017 by growing 15\.6 percent\. Economic activity in 2019 is projected to grow by only 3\.5 percent because external developments are less favorable, and the one-off effects from higher consumption and recovery of agriculture are exhausted\. Medium-term projections are based on the assumptions that consumption will keep growing at about 3-4 percent annually and that investment will have annual growth of 5-6 percent in real terms\. This would bring the share of investment in GDP to about 23 percent\. Serbia remains exposed to external risks, including spillovers and renewed episodes of global market volatility\. High levels of public sector employment, inefficient human resource management, and weaknesses in public financial management contribute to Serbia’s fiscal challenges\. State-owned enterprises (SOEs) dominate many sectors of the economy, drawing substantial fiscal subsidies and diverting resources from more productive uses\. Serbia has potential to transform itself into a highly dynamic, modern economy on a par with those in Western Europe\. Its principal economic development opportunities and challenges lie in four areas: (i) deepening financial sector Oct 02, 2019 Page 3 of 11  The World Bank Serbia Railway Sector Modernization (P170868) development; (ii) enhancing the skills of its labor force; (iii) strengthening competition in product markets; and (iv) making government more effective\.1 Sectoral and Institutional Context Improved transport connectivity will be crucial to enable Serbia to shift towards a greater export orientation, which is the primary path to its economic and social development\. Modernized transport infrastructure, together with further structural reforms in the transport sector, will be among the key elements for making Serbia more competitive, stimulating investment, and completing Serbia’s transition to a market economy\.2 Serbia’s rail system, covering 2,474 km, is a major asset with the potential to play a strategic role in the nation’s development\. At present, Serbia’s main trading partners are the Western Balkans, Germany, and Russia\. Serbia’s key exports—automobiles and auto components, electrical motors and wire, and agricultural products—as well as its main imports—pharmaceuticals, vehicle parts (for assembly), and crude and refined petroleum—lend themselves to transport by rail as the mode of choice\. Railways are more cost-efficient than road transport for products that are in bulk, heavy, and moved over relatively long distances\. For such goods, rail transport also is more energy- and emissions- efficient per ton and saves on road maintenance\. With a modern rail system, Serbia can capitalize on its favorable location as a hub for main east-west and north-south corridors to capture both regional and longer-distance trade opportunities\. The reforms undertaken by the GoS have helped to introduce an EU-compliant legal framework to enable clarity of institutional roles and drive performance improvements\. In 2015, the GoS Railway Reform Steering Committee was established, and Serbian Railways was unbundled into three operating companies (passenger, freight, and infrastructure) plus a transitional company\. The Steering Committee adopted a Railway Reform Plan (2016-2020), informed by a 2014 World Bank Railway Policy Note and an EU-funded consultancy report\. Underlying the Reform Plan’s actions is the need to change the business culture in the sector to enable and empower the new railway companies to operate commercially\. Restructuring of commercial debt was completed, with debt allocated to the cargo and passenger operating companies and debt restructuring plans either agreed with, or under consideration by the creditors\. Since 2016, labor productivity has increased by more than 15 percent\. Total subsidies to the sector were reduced by 33 percent between 2015 to 2018, from RSD 16\.7 million to RSD 11\.25 million\. The two main railway operators completed several successful rounds of disposal of surplus assets, generating a total of EUR 6\.0 million in savings (Cargo EUR 4\.33 million and Voz EUR 1\.68 million)\. Following the unbundling of Serbia Railways into separate companies, the key stakeholders in the railway sector in Serbia are now the following: The Ministry of Construction, Transport and Infrastructure (MCTI) is responsible for policy direction and funding of railways\. The Railways Directorate (RD) is the market regulator and oversees the safety and interoperability of rail transport\. Serbian Railways Infrastructure (IZS) is an SOE for infrastructure management, responsible for construction, maintenance, and operation of the railway network, supporting itself mainly through fees\. Serbia Voz is an SOE responsible for organization and delivery of rail passenger transport services\. Serbia Cargo is an SOE responsible for organization and delivery of rail freight services\. Serbian Railways AD is a temporary organization with the remit of generating revenue from various non-core railway assets and settling the court cases involving the 1 World Bank, Serbia’s Growth Challenge, 2019\. http://pubdocs\.worldbank\.org/en/965791561402546104/Serbia-CEM- NGA-Concept-Note-public-Eng\.pdf 2 World Bank Group, Country Partnership Framework for Serbia for the period FY16-20, Report No\. 94687-YF\. Oct 02, 2019 Page 4 of 11  The World Bank Serbia Railway Sector Modernization (P170868) former vertically integrated railway company\. Finally, there are nine active private rail cargo operators certified by the Railways Directorate (one other operator is certified but not currently active)\.3 Infrastructure modernization is essential to address various cross-cutting performance issues\. Decades of low and non-strategic investments, outdated management structures and practices, and neglect of maintenance have led to serious deterioration of the network infrastructure, obsolescence of the rolling stock, and low service quality\. As one example, an average of 39 percent of scheduled passenger and 37 percent of scheduled freight trains were cancelled during the period 2016-2018\. The current design state of the railway lines enables operation of rolling stock from 12 t/axle to 22\.5 t/axle, with the latter maximum load capacity possible on only 1,886 km, which is an obstacle to growth of rail freight traffic\. Services are greatly hampered by the current severe regime of continuous speed restrictions across the network\. The average speed is low at 38 km/h, and the network has many slow and dangerous spots\. As recently as 2017, railways in Serbia had a derailment rate of 9\.14 derailments per million train kilometers, compared to 1\.5 in Bulgaria and 0\.1 in Croatia\. Favorable results are starting to emerge for freight rail transport, but much more needs to be done\. Recent reforms have resulted in attracting back some of the freight traffic lost between 2004 and 2014 (Table 1)\. However, much of the freight that could move by railways still goes by road\.4 The railway freight market share in Serbia is below five percent, which is very low compared to most European countries (Figure 1)\.5 Serbia’s rail freight intermodal market is undeveloped but has the potential to add an important traffic base to the railway system\. In general, other European railways have been able to achieve substantial growth of intermodal traffic, even while their overall freight market share remained constant\. Total rail freight (million ton-kilometers) in the EU grew by only 1 percent from 2005 to 2015, but intermodal rail freight grew by 28 percent during the same period\.6 Improving rail infrastructure and modernizing rail cargo operations would introduce a service that is being sought by producers in the region\.7 The picture for passenger rail services is mixed and poses considerable challenges\. Serbia Voz has improved its financial accounting practices and has entered into a Public Service Obligation (PSO) contract whereby the subsidy that it receives is conditioned on certain performance indicators\. This helps to ensure that only valuable passenger rail services are maintained\. Still, passengers per km declined by over 60 percent between 2005 and 2017, and the volume of passenger services was lower in 2018\. Technology will be an important element going forward, as new infrastructure will need to be compatible with emerging intelligent railway systems\. Railway automation is the architecture that links railway components together for a standardized and efficient flow of traffic\. The railway sector in Serbia is well positioned to start a formal initiative for technology deployment in support of significant transportation, safety, and environmental benefits\. Such an 3 Most rail cargo operators provide specialized services (e\.g\., chemical or mining) focused on particular traffic segments\. Many of these operators were established by previous rail customers that sought to obtain higher quality service or lower transport rates\. 4 For example, Serbia currently exports about 2\.7 million tons of corn and 0\.5 million tons of wheat to Romania\. However, railway operational statistics from MCTI do not show significant rail freight movements of these two commodities, and it is unlikely that they are moving on inland waterways (Danube and Sava rivers)\. 5 International Union of Railways (UIC) Report on Combined Transport in Europe 2016 6 Ibid\. 7 Study of intermodal transport users’ needs in the Danube Region , June 2018 Oct 02, 2019 Page 5 of 11  The World Bank Serbia Railway Sector Modernization (P170868) initiative can be supported by key local drivers such as the country’s strong IT sector and the presence of a clear technology framework driven by EU standards\. Railway safety is a serious challenge in Serbia\. As mentioned above, Serbia’s derailment rate is far above peer countries\. In 2017, the level crossing accident rate in Serbia was 5 per million train-km, compared with only 1\.14 in Bulgaria, 0\.5 in Croatia, and 0\.09 in Germany (Figure 2)\. If this problem is not addressed now, it is likely that more accidents and fatalities will happen once trains speeds increase\. Implementation of Safety Management Systems (SMS) coupled with cost-effective technologies have the potential to bring the safety in Serbian rail sector to a level comparable to regional standards\. To consolidate its railway reform work and develop a sustainable base for the future, the GoS has requested the World Bank’s support for continuation of institutional, physical, and operational modernization of the sector in an integrated fashion\. The key elements of the GoS’s approach are (i) strengthening sector regulation while giving companies clear and manageable contractual arrangements; (ii) improving infrastructure; (iii) giving railway sector companies incentives to maximize their own corporate efficiencies and achieve their commercial objectives; (iv) enhancing reliability and safety of railway services through utilization of modern technology, up to date safety systems, energy efficiency measures, and resilience considerations; and (v) increasing rail modal share by addressing last mile connectivity, urban integration, multimodal logistic centers, and concepts of integrated territorial development\. Figure 3 schematically illustrates the route being followed by the Serbian rail sector on its journey to its ultimate goal, a safe, sustainable, commercially efficient, and effective railway system\. Relationship to CPF The MPA is closely aligned with the World Bank Group (WBG)’s twin goals of reducing poverty and promoting shared prosperity and with the Country Partnership Frameworks (CPF) for the period ending 2021, as well as the priorities outlined in the Systematic Country Diagnostics (SCD)\. The program will contribute towards enhancing quality of infrastructure for improved in-country and regional integration and accelerated economic growth, boosting employment and improving the business environment in the region\. Connectivity is a critical driver of competitiveness and a key piece in support of export-oriented development\. The program will enable improved access to new economic opportunities\. Improved infrastructure quality and integrated territorial development should contribute toward modal shift to railways, provision of more affordable transport service, and reduction of greenhouse gas (GHG) emission\. Most importantly, railways are key for full integration with the EU and this program will support this priority\. Infrastructure is one of the six priority areas identified in the CPF for fiscal years (FY) 2016 - 2020\. Better regional connectivity through infrastructure development is essential to boost investment and growth in Serbia\. The WBG has been heavily engaged in infrastructure development, through the reform of the railway sector, investment support to highway and national road construction, and improvements in road and rail sector management systems\. The CPF notes that improved efficiency in spending and operation of SOEs, better quality maintenance of infrastructure, and improved prioritization of public investments need to be pursued\. Furthermore, the CPF notes that engagement in infrastructure development will be continued in close coordination and cooperation with other international bodies (i\.e\., IFIs and the EU)\. This MPA is closely linked to three CPF objectives\. The Multiphase Programmatic Approach (MPA) instrument selected for this operation will support the improvement of the rail infrastructure and continued corporatization and financial consolidations of the three railway companies\. Improvement of the important railway links and improved safety on the Oct 02, 2019 Page 6 of 11  The World Bank Serbia Railway Sector Modernization (P170868) network is directly aligned to the CPF objective 2d “enhancement of infrastructure networks\.â€? Railways is perhaps the transport sector that has lagged behind the most and is now prime for investment, as reforms have improved financial and operational indicators\. Improved performance will also likely support a more sustainable public expenditure management (CPF Objective 1a) and improve operation of railway SOEs (CPF Objective 1d)\. Building on past reforms and rebuilding the most important railway lines in Serbia will allow Serbia Voz and Serbia Cargo, along with other potential operators, to start regaining some of the traffic lost to road service providers\. This will in turn increase revenues and reduce the need for public budget support\. C\. Proposed Development Objective(s) To improve the efficiency, market share, and safety of the rail network\. Key Results (From PCN) The MPA key results identified at the concept review stage are the following; The MPA’s key results Key output indicators: ï‚ Kilometers of track rehabilitated ï‚ Number of beneficiaries at the passenger level, disaggregated by gender ï‚ Proper legislative framework and data system for the Railways Directorate (sector regulator)\. ï‚ Human Resources strategy to enhance strategic staffing and Gender balance in the companies\. ï‚ Safety management system action plan\. Outcomes: ï‚ Increased modal share of rail transport in Serbia, as measured by percent of ton-km and pass-km in the rail mode ï‚ Improved safety on Serbia's railway network, as measured by derailment rates, accident rates, fatality rates ï‚ Increased intermodality, as measured by freight containers and passengers connecting to or from rail with a different mode of transport Intermediate Outcomes: ï‚ Increased technical efficiency of the railway infrastructure in Serbia, as measured by average network speed\. ï‚ Improved financial sustainability of Serbia Voz and Serbia Cargo, as measured by improved operating ratios; reduced subsidies/traffic unit\. ï‚ Improved capital investment efficiency of IZS, as measured by numbers of km rehabilitated and built per year\. ï‚ Improved maintenance of the rail infrastructure, as measured by share of track network operating at design speeds (design speed km/total network km)\. ï‚ Improved gender balance in male-dominated roles of Serbia Voz, as measured by percent increase in number of women employed in roles such as management, engineers, mechanics and drivers\. D\. Concept Description Oct 02, 2019 Page 7 of 11  The World Bank Serbia Railway Sector Modernization (P170868) The proposed operation will be a simultaneous Multiphase Programmatic Approach (MPA) with three Phases implemented over ten years to support GoS in deepening railway reforms and modernizing the railway sector\. The MPA will have the following development objectives: ï‚ Proposed Phase Development Objective (Phase 1)\. To improve quality and sustainability of existing network assets; governance and institutional improvements ï‚ Proposed Phase Development Objective (Phase 2)\. To integrate intercity and urban rail services with other modes (freight and passenger); operational safety ï‚ Proposed Phase Development Objective (Phase 3)\. To consolidate gains from previous two phases to promote multimodality in freight and passenger rail services, synchrony of railways with urban development, and universal accessibility (i\.e\., gender, disability access, and minorities)\. Phase 1 of the Program is a US$125 million IBRD loan, focusing on the rehabilitation and renewal of the existing railway infrastructure and technical assistance to key institutions in the sector\. The latter will support improved sector governance, institutional strengthening, and key modernization elements of the sector\. Phase 2 would prioritize investments in the integration of intercity and urban rail services (freight and passenger) with other modes and continue to improve operational safety\. This is expected to be the largest phase by investment amount\. In Phase 2, the MPA would utilize the knowledge originated in Phase 1 on ownership structure, further corporatization, and commercialization of the sector\. In addition, it would scale up and finish implementation of the SMS to improve safety performance and establish a safety culture\. These efforts would be coupled with scaled-up infrastructure investments coherent with the main objective of the phase\. Phase 2 may also begin the utilization of intelligent transportation systems (ITS) and pilot integration of rail and bus services\. These measures would not only benefit wider local communities but also provide climate co-benefits\. Phase 3 would consolidate the performance of the sector by promoting multimodality (in freight and passenger services), synchrony of railways with urban development, and universal accessibility\. Interventions would promote the re-insertion of Serbia Voz in the urban transport landscape and regional intercity markets through improved ticketing, multimodality, and transit-oriented development (TOD) strategies\. For Serbia Cargo, Phase 3 would support interventions to optimize the railway system for moving more intermodal freight\. At this stage, the MPA also would support activities for both SOEs to move towards universal access to ensure services enhance accessibility of opportunities for all segments of the population\. Phase 3 would utilize two main knowledge products generated during Phase 1, the investment plan on intelligent railway systems (subcomponent 3\.1) and knowledge on integrated territorial development (subcomponent 3\.3)\. Private investments opportunities will be considered in close coordination with IFC\. Intermodal terminals, transit oriented development (TOD), and cargo oriented developments (COD) normally have clear opportunities for the private sector to participate\. Oct 02, 2019 Page 8 of 11  The World Bank Serbia Railway Sector Modernization (P170868) The sequencing of activities across the three phases is shown in Table 4\. Sequencing of Activities Across Phases of Proposed MPA Components Phase 1 Phase 2 Phase 3 Component 1: ï‚ Rehabilitation of selected local ï‚ Renewal of a main intercity route ï‚ Intermodal terminals (freight and Infrastructure and regional routes (Pancevo – Vrsac or a segment passenger) Investments and ï‚ Upgrading of railway crossings in a regional corridors); will ï‚ Other infrastructure to promote Asset ï‚ Monitoring station include catenary, track, and transit- and cargo-oriented Management ï‚ Rollout of asset management signaling development around Belgrade, system – phase 1 (integration ï‚ Pilot integration of bus and urban Nis, and Novi Sad of asset register and rail services accounting system) ï‚ Rollout of asset management ï‚ Preparatory studies for phase 2 system for other components investments beyond rail tracks – phase 2 ï‚ Preparatory studies for phase 3 investments Component 2: ï‚ TA to strengthen RD as ï‚ TA for Implementation of SC and ï‚ Capacity building for the Institutional regulator SV ownership recommendations companies to better manage Strengthening ï‚ TA for railway company (if decision is to privatize, focus intermodal and urban services and Project ownership structure will be on privatization ï‚ TA to determine private Management ï‚ TA to strengthen existing legal, approaches in EU context; if to investment opportunities in both regulatory and enforcement maintain as SOE, focus will be on freight and passenger terminals framework of contracts and change management and SOE and facilities and for companies obligations between MCTI and best practices) to handle private sector companies ï‚ Human capital: further partnerships ï‚ TA for developing human implementation of HR and skills ï‚ Project management and capital for market-oriented development in accordance with capacity building service delivery SMS, asset management, and ï‚ Project management and commercialization efforts capacity building ï‚ Adoption by the three companies of commercial, customer- responsive practices ï‚ Project management and capacity building Component ï‚ Intelligent railway systems – ï‚ Implementation of foundation ï‚ Implementation of ITS 3: Railway planning and design phase systems for intelligent railway applications -- traffic planners, Modernization ï‚ Safety Management Systems communication network; Phase 3 scheduling, wagon reservation Enablers (SMS) – planning and design design etc\. phase ï‚ SMS – implementation of risk- ï‚ SMS – phase 3 implementation ï‚ TA to assess options for freight based hazard ï‚ Implementation of integrated and passenger integration with management program ticketing and other systems for urban transport, transit-oriented Belgrade-Zagreb intercity link development options, land use planning, etc\. ï‚ Business process support systems for Serbia Cargo Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No Summary of Screening of Environmental and Social Risks and Impacts \. Oct 02, 2019 Page 9 of 11  The World Bank Serbia Railway Sector Modernization (P170868) Note To view the Environmental and Social Risks and Impacts, please refer to the Concept Stage ESRS Document\. \. CONTACT POINT World Bank Victor A Aragones, Svetlana Vukanovic Senior Transport Economist Borrower/Client/Recipient Ministry of Finance Implementing Agencies Ministry of Construction, Infrastructure, and Transport MiÅ¡ela Nikolic Adviser to the Deputy Prime Minister miselan@privreda\.gov\.rs Serbia Railways Infrastructure Milan Segan Manager for Regional Cooperation milan\.segan@srbrail\.rs FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects Oct 02, 2019 Page 10 of 11  The World Bank Serbia Railway Sector Modernization (P170868) APPROVAL Task Team Leader(s): Victor A Aragones, Svetlana Vukanovic Approved By APPROVALTBL Environmental and Social Standards Advisor: Practice Manager/Manager: Country Director: Oct 02, 2019 Page 11 of 11

APPROVAL

P146795

PROJECT INFORMATION DOCUMENT (PID) ADDITIONAL FINANCING Report No\.: PIDA3386 Project Name Additional Financing to Cameroon Health Sector Support Project (P146795) Parent Project Name Cameroon Health Sector Support Investment (SWAP) (P104525) Region AFRICA Country Cameroon Sector(s) Central government administration (20%), Sub-national government administration (10%), Health (70%) Theme(s) Health system performance (25%), Population and reproductive health (25%), Child health (25%), Tuberculosis (13%), HIV/AIDS (12%) Lending Instrument Investment Project Financing Project ID P146795 Parent Project ID P104525 Borrower(s) Ministry of Public Health Implementing Agency Ministry of Public Health Environmental Category B-Partial Assessment Date PID Prepared/Updated 22-Apr-2014 Date PID Approved/Disclosed 22-Apr-2014 Estimated Date of Appraisal 20-Mar-2014 Completion Estimated Date of Board 21-May-2014 Approval Decision I\. Project Context Country Context In 2012, Cameroon was ranked 150th out of 187 countries on the Human Development Index\. With an index of 0\.495, slightly better than in 2011 (0\.492), the country was situated slightly above the average of countries with low human development (0\.456) and countries in Sub-Saharan Africa (0\.475)\. The gross school enrolment rate stands at 60\.4 percent, with an overall education index of 0\.520\. The education sector accounts for 3\.7 percent of GDP\. The health index (life expectancy) is situated at 0\.499, with health expenditures amounting to 1\.3 percent of GDP\. Cameroon’s poverty rate barely changed between 2000 and 2007\. The third household survey released by Cameroon’s National Institute of Statistics (NIS) estimates that nearly 40 percent of the population was living below the poverty line in 2007, for a total of nearly 7\.1 million poor Cameroonians\. The incidence of poverty stood at 40\.2 percent in 2001\. Large geographical poverty Page 1 of 4  rate disparities were found in 2007, as was already the case in 1996 and 2001\. Poverty is predominant in rural areas and in the northern regions of the country\. Existing data also highlight strong socioeconomic disparities and show that over time poverty has decreased in urban areas while continuing to increase in rural areas\. The latest household survey in 2007 finds that 55 percent of rural families are poor, as opposed to 12 percent in urban areas\. Approximately 87 percent of the poor live in rural areas\. In the oil sector, the upward trend in production has continued, expanding to 17\.4 million barrels in the first three quarters of 2013, compared to 17 million barrels over the same period last year\. However, this expansion is slower than that projected earlier this year because of delayed activities in new oil fields\. Total oil production for 2013 is estimated at 24\.3 million barrels, compared to the 27 million barrels projected in April\. Oil GDP represented 8 percent of total GDP in Cameroon in 2011\. The economy grew at about 3\.6 percent over the last two years (2012 and 2013)\. Sectoral and institutional Context Cameroon is not on track to achieve the MDGs\. For example, in order to achieve MDG 4 (Reduce Child Mortality), the mortality rate for children under five would have to fall to 45 deaths per 1,000 live births by 2015\. In Cameroon, one woman dies every two hours from complications of pregnancy or childbirth, and one in 127 pregnancies is fatal\. Cameroon has the 18th-highest maternal mortality rate in the world, ranked just between the Republic of Congo and Angola\. Achievement of the goal to reduce the maternal mortality rate (MDG 5), which would have to fall from 690 deaths per 100,000 live births to 170 deaths per 100,000 live births by 2015, remains unlikely\. While the incidence of underweight children would also have to decrease by nearly half, from 17 percent to 9 percent, by 2015, the situation has actually worsened over the past five years\. Disparities between the rural (disparities in the North and Far North regions are shrinking) and urban areas are significant for all health indicators, with mortality levels higher among lower socioeconomic groups\. All mortality indicators are lower in rich households than in poor households\. Only 80 in 1,000 children born in rich households die before the age of five\. However, the under-five mortality rate is more than twice as high in poor households\. The age of the mother is also a determining factor\. One in six children born to mothers under 20 years of age dies before the age of five, while one in eight children of mothers aged 20 to 29 years dies during childbirth\. The three northern regions of Cameroon face particular challenges such as highest chronic poverty headcounts and substantial barriers to facility-based services (limited staffing in facilities, long distance to facilities, rough terrain and cultural factors)\. The human resources for health challenges in these regions are substantial and different from the rest of the country\. Not only is the health worker density less in the north, but managerial and clinical capacity for service delivery are weaker, in part augmented by difficulties in retaining qualified workers in remote parts of the north\. II\. Proposed Development Objectives A\. Current Project Development Objectives – Parent To increase utilization and improve the quality of health services with a particular focus on child and maternal health and communicable diseases\. B\. Proposed Project Development Objectives – Additional Financing (AF) Page 2 of 4 III\. Project Description Component Name District Service Delivery Comments (optional) In the 26 districts currently covered by the Project and the eight additional departments where PBF will be scaled-up, this component will provide PBF payments: (i) to health facilities in the targeted regions conditional on the quantity and quality of services delivered via in-clinic activities and/or via health-outreach activities, and (ii) to community health workers for providing selected basic health services as well as ensuring community organization to support positive health behavior\. Contracted health facilities will use PBF payments to (i) increase the quality and the quantity of (a) health services provided at the facility level and (b) health services provided at the community level to women and children (in collaboration with community health workers) through outreach ca Component Name Institutional Strengthening Comments (optional) The component supports institutional strengthening at national, regional, and district levels, particularly focusing on PBF contract design and management and establishing a unified health management and geographic information system to generate up to date, reliable, financial and programmatic data\. The Component also supports project management and implementation\. IV\. Financing (in USD Million) Total Project Cost: 20\.00 Total Bank Financing: 20\.00 Financing Gap: 0\.00 For Loans/Credits/Others Amount BORROWER/RECIPIENT 0\.00 International Development Association (IDA) 20\.00 Total 20\.00 V\. Implementation The project will be implemented by the Ministry of Public health in the North-West, South-West, East, Littoral, Adamaoua, North and Far North regions\. VI\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 ✖ Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Page 3 of 4  Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ Comments (optional) VII\. Contact point World Bank Contact: Gaston Sorgho Title: Lead Public Health Specialist Tel: Email: gsorgho@worldbank\.org Borrower/Client/Recipient Name: Ministry of Public Health Contact: Title: Tel: 237-22-22-35-25 Email: Implementing Agencies Name: Ministry of Public Health Contact: Title: Tel: (237) 222-5758 Email: mauricefe@yahoo\.fr, cnls@camnet\.cm VIII\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Page 4 of 4

APPROVAL

P006597

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 3103 PROJECT PERFORMANCE AUDIT REPORT CHILE--TECHNICAL ASSISTANCE PROJECT (LOAN 978-CH) August 22, 1980 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT CHILE-TECHNICAL ASSISTANCE PROJECT (LOAN 978-CH) TABLE OF CONTENTS Page No\. Preface \. i Basic Data Sheet \. \.Li PROJECT PERFORMANCE AUDIT MEMORANDUM (HIGHLIGHTS) \. 1 Attachment A: Comments Received from the Borrower 3\. 3 ATTACHMENT B: PROJECT COMPLETION REPORT \. \. 12 I\. Summary and Conclusions \. \. \. 12 II\. Project Identification, Preparation and Appraisal \. 14 III\. Project Implementation -\. \.16 IV\. Government Performance and Institution Building under the Project - \. \. 19 V\. Bank Performance \. \. \. 21 Annex 1: Studies Financed under the Loan o\. 22 Table 1: Sectoral Distribution of Pre-Investment Studies \. 28 Table 2: Disbursements o \. \. \. \. \. 29 Table 3: Pre-Investment Studies Financed under the Loan \. 30 COUNTRY EXCHANGE RATES Year Averages 1971 US$1 = Eo 13\.47 1972 US$1 = Eo 21\.87 1973 US$1 = Eo 405\.18 1974 US$1 = Eo 836\.65 1975 (January-September) US$1 = Eo 4,750\.00 1975 (October-December) US$1 = Ps 8\.30 /a 1976 US$1 = Ps 13\.05 1977 US$1 = Ps 21\.54 1978 US$1 = Ps 31\.67 Since July 1979 US$1 = Ps 39\.00 /a In October 1975 the Peso replaced the Escudo as Chile's currency unit at the rate of Ps 1 = Eo 1,000\. This document has a restricted distribution and may be used by recipients only in the performance of their oficial duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  - 1 - PROJECT PERFORMANCE AUDIT REPORT CHILE--TECHNICAL ASSISTANCE PROJECT (LOAN 978-CH) PREFACE This report presents the results of a performance audit of a tech- nical assistance project for which Loan 978-CH was approved to the Republic of Chile in February 1974\. The loan, in an amount of US$5\.25 million, was closed, fully disbursed, in June 1979, after the closing date had been ex- tended three times\. The report consists of Highlights prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the Latin America and the Caribbean Regional Office\. Following its abbre- viated procedure, OED has reviewed the PCR in the light of the respective President-s Report, loan documents and minutes of the Board discussions\. On the basis of this limited review, OED finds no reason to disagree with the analysis and the conclusions of the PCR\. Comments received from the borrower have been taken into account in preparing this report and are reproduced as Attachment A\.  - ii - PROJECT PERFORMANCE AUDIT REPORT CHILE--TECHNICAL ASSISTANCE PROJECT (LOAN 978-CH) BASIC DATA SHEET Amounts (in US$M) As of 6/30/80 Original Disbursed Cancelled Repaid Outstanding Loan 978-CH 5\.25 5\.25 - \.42 4\.83 CUMULATIVE LOAN DISBURSEMENT FY74 FY75 FY76 FY77 FY78 FY79 (i) Planned 3\.10 5\.25 5\.25 5\.25 5\.25 5\.25 (ii) Actual - 0\.70 2\.10 3\.40 4\.50 5\.25 (iii) (ii) as % of (1) 0 13 40 65 86 100 PROJECT DATA Original Loan Date Actual or Re-estimated Board Approval 12/18/73 /a 2/05/74 Loan Agreement - 4/22/74 Effectiveness 7/23/74 7/23/74 Loan Closing 6/30/75 6/30/79 Physical Completion 6/30/75 9/30/79 Total Project Cost (US$ M) 10\.536 13\.137 MISSION DATA No\. of No\. of Month, Year Weeks Persons Manweeks Appraisal July 1973 2 5 10 Appraisal August 1973 1-1/2 1 1\.5 Subtotal 11\.5 Supervision I May 1974 1 2 2 Supervision II August 1974 1-1/2 2 3 Supervision III September 1974 2 1 2 Supervision IV October 1974 1 2 2 Supervision V February 1975 1-1/2 2 3 Supervision VI February 1975 1 1 1 Supervision VII April 1975 2 3 6 Supervision VIII June 1975 4 2 8 Supervision IX July 1975 1-1/2 2 3 Supervision X September 1975 1 2 2 Supervision XI October 1975 3 2 6 Supervision XII October 1975 1/2 1 0\.5 Supervision XIII January 1976 1-1/2 2 3 Supervision XIV March 1976 2 1 2 Supervision XV May 1976 1 2 2 Supervision XVI August 1976 1 1 1 Supervision XVII December 1976 1 1 1 Supervision XVIII January 1977 2 1 2 Supervision XIX April 1977 2 1 2 Supervision XX October 1977 1-1/2 2 3 Supervision XXI October 1977 1 1 1 Supervision XXII January 1978 1/2 1 0\.5 Supervision XXIII May 1978 2 1 2 Supervision XXIV October 1978 1 1 1 Supervision XXV October 1978 3 1 3 Supervision XXVI April 1979 1 2 2 Supervision XXVII July 1979 1 4 4 Subtotal 68\.0 TOTAL 79\.5 /a Documents were distributed to the Executive Directors on 9/7/73, but the date for consideration was to be fixed subsequently\.  PROJECT PERFORMANCE AUDIT 1EMORANDUM (HIGHLIGHTS) CHILE--TECHNICAL ASSISTANCE PROJECT (LOAN 978-CH) Loan 978-CH, in an amount of US$5\.25 million, was approved in February 1974 to the Government of Chile to help finance a technical as- sistance project\. The loan was processed in the context of considerable uncertainties as regards the economic and political future of the country and particular difficulties in the relations between the Bank and Chile\. The proceeds of the loan were intended to be allocated to the financing of high priority investment studies, consulting and advisory services, and training for the staff of agencies responsible for project planning or implementation\. Given the Government's desire to build rapidly a pipeline of development projects for future investment, it was expected that disbursements would be completed within little more than a year\. Although the loan agreement provided for considerable flexibility in the use of funds, a tentative sectoral distribution of the pre-investment studies to be financed under the loan was suggested at appraisal, reflecting the public investment priorities of the Government in office at the time, Sectors expected to be covered under the project were: (i) mining, metal- lurgy and manufacturing; (ii) nutrition and fisheries; (iii) transportation; and (iv) water-supply planning\. Following the change of Governmemt in September 1973, the new Government embarked on a program of economic policy reforms, which entailed a substantial reassessment of the role to be assumed by the State in managing the economy\. Throughout the period of the loan (1974 to 1978), however, considerable uncertainties remained concerning public investment priorities\. In actual fact, it took four years longer to disburse the loan than the optimistic appraisal forecast of little more than a year (para\. 14 of the PCR)\. In line with the austerity program it undertook to implement, the new Government strictly tightened its control of financial allocations to studies of public investment projects\. Moreover, reflecting its policy to encourage private investment in productive sectors, studies related to the mining, metallurgical and manufacturing sectors, which were expected to account for 30% of the loan, were gradually phased out of the program\. In effect, continually shifting Government priorities during the 1974-1978 period regarding public investment priorities were responsible for causing major delays in selecting studies and protracted discussions in the process of contracting consultants\. Thirteen studies were financed under the loan, five of which have, so far, contributed substantially to actual investment decisions, while six of the remaining eight studies are expected to lead to actual investment - 2 - decisions later (para\. 15 of the PCR)\. Reflecting changes in public invest- ment priorities, their actual sectoral distribution differed radically from the estimated one, with Bank funds allocated to mining, manufacturing, nutri- tion and fisheries dropping from 80% to 3%, whereas other fields, such as water-resource planning for hydroelectric energy and irrigation, and nitrate salt mining and processing received the majority of Bank funds in line with the country's evolving priorities\. These studies, however, have had only a marginal impact on the performance of public services for lack of emphasis on the training of Government officials (para\. 18 of the PCR)\. Progress in introducing new techniques in project evaluation along the lines suggested by the Planning Ministry (ODEPLAN) has also been very slow (paras\. 17 and 18 of the PCR)\. At the new Government's request, the Corporacion de Fomento de la Produccion (CORFO), the most important development agency in Chile acting as holding company for the great majority of public productive assets, was designated as executing agency for the project in lieu of the Investment Financing Division of the Central Bank originally selected\. However, the Government's emphasis on disengaging the public sector from productive activities caused CORFO to lose progressively its earlier importance\. Its effectiveness became handicapped for lack of continuity in its management as well as working level personnel, and the resulting frustration of its staff was largely responsible for its inefficient handling of administra- tion procedures and consequent poor implementation of the project (para\. 13 of the PCR)\. In hindsight, given the uncertainties which have surrounded the future scope of State investment in industry (and CORFO's specializa- tion in this particular sector), the wisdom of designating CORFO as executing agency for the loan is subject to question\. However, the PCR expresses the view that, given the prevailing economic and political environment, it is doubtful whether any other Government agency would have been able to provide the answers needed for swift project implementation (para\. 16 of the PCR)\. Other points of interest are: - the coordination between loan approval and an agreement between Chile and the IMF regarding the provision of a standby credit (para\. 10 of the PCR); - the Bank's extensive supervision effort to cushion the weakened and demoralized state of the executing agency (paras\. 22 and 23 of the PCR); and - the lack of institutional continuity between studies pertaining to the same sector (water resources and irrigation ) and its adverse effect on the contracting and implementation of the studies in question (para\. 19 of the PCR)\. 3- Attachment A Comments Received from the Borrower Translation from Spanish Corporaci6n de Fomento de la Producci6n Chile (CORFO) Office of the Deputy Manager, Financing Our Ref: FLP/mgs\. No\. 83 Santiago, June 30, 1980 SUBJECT: Transmission of originals of comments on annex 1 of first draft of final report, Loan 978-CH Mr\. Shiv S\. Kapur Director Operations Evaluation The World Bank Washington, D\.C\. Dear Mr\. Kapur: In reply to your letter of April 25, 1980, requesting comments on the first draft of the final report for Loan No\. 978-CH for US$5\.5 million of technical assistance, we sent you the telexes of June 20 and 25; only the LAN comments remained outstanding, as they had not been received by CORFO\. We attach to this letter the following annexes showing the comments received\. We believe this completes the information requested\. Annex 1 Aysen hydroelectric development; Aysen electroindustrial study; Mixed salts study; Sarao industrial project\. (CORFO: Development Department, Deputy Manager for Operations)\. Annex 2 Maipo River regional development (Directorate-General of Water Resources, Ministry of Public Works) Annex 3 Rationalization of coal production (ENACAR) Annex 4 Cabo Negro and Quintero installations (ENAP) - 4 Annex 5 Pudahuel maintenance (LAN)\. We remain at your disposal for any further information\. CORPORACION DE FOMENTO DE LA PRODUCCION /s/ Fernando Lorea P\. Deputy Manager, Financing Encl: As stated -5- ANNEX 1 CORFO EHF/nma OFFICE OF THE DEPUTY MANAGER, OPERATIONS Santiago, June 19, 1980 Ref: IBRD report To: Juan Galvez, Deputy Manager, Financing From: Deputy Manager, Operations As requested, we would comment as follows: 1\. Aysen hydroelectric project: no comments\. 2\. Aysen electroindustrial study: no comments\. 3\. Cordillera del Sarao industrial project: no comments on the contents of the report\. It should be added that CORFO is currently working on a study to determine the industrial possibilities of the Cordillera del Sarao region\. The cost of the study is US$135,000\. The contract was awarded to Ingenieria de Bosques Ltda\., one of the Phase 1 consultants\. 4\. Mixed salts study: no comments on the contents\. It should be added that the studies have led to a number of discussions with foreign investors interested in potassium projects\. These discussions centered on plants of the order of 500,000 tons per annum of potassium chloride, 150,000 tons per annum of potassium sulfate and 50,000 tons per annum of boric acid\. As regards potassium nitrate, plants between 100,000 and 135,000 tons per annum were studied and the results were made available to SQM, which will have to decide as regards the investment\. Sincerely, /s/ Jose Antonio Darrigrandi L\. -6- ANNEX 2 MINISTRY OF PUBLIC WORKS DIRECTORATE-GENERAL OF WATER RESOURCES MEM 0 RANDUM 1\. The study on the planning and use of water resources in the Maipo River bed was undertaken by the Directorate-General of Water Resources, a unit of the Ministry of Public Works\. The loan finally amounted to US$332,500, as indicated in the draft report\. 2\. In general, we agree with the text of the draft final report, although we feel that the following points should be included: - Detailed studies were prepared covering various subjects (sani- tation, agriculture, hydroelectricity, etc\.) involved in the overall development of the Maipo River basin and these detailed studies were then used to prepare an economic appraisal at the pre-feasibility level to determine what alternative works would best meet the needs of the basin\. - The various aspects of study were carried out by the Directorate- General of Water Resources and the Water Planning Engineering Advisory Office (IPLA), with the advisory services during the final appraisal stage at the prefeasibility level for the short, medium and long term of the U\.S\. firm of Engineering Science, Inc\. - The total cost of the investment recommended is US$203 million, which covers the complete alternative in the overall study, including execution of the Pirque Dam\. It is expressed in 1974 prices, which means that this figure may now be in excess of US$320 million; this alternative should therefore be analyzed in greater depth\. - 7 - - Since the physical feasibility studies of the alternatives proposed as the basis of the overall study, namely the Pirque Dam or the Cachapoal- Maipo Canal, could lead to changes in the values of the economic indicators would obtained in the study, we/agree that the first alternative should be to analyze the above-mentioned solution at the feasibility stage, based on the Pirque Dam, since it would be better to study the use of the resources of a basin to the point where they are exhausted before attempting to transfer them from some other source\. - The overall problem of developing the resources of the Maipo River valley and planning their use is currently receiving the attention of the authorities and the National Irrigation Commission and to the extent that it proves possible it is intended to move ahead with solutions\. Santiago, June 1980 -8- ANNEX 3 ENACAR, OFICIO NO GF 434/80, de 04\.06\.20 RATIONALIZATION OF COAL PRODUCTION Executed by Empresa Nacional del Carb6n (ENACAR) Recommend improvements in basic work methods currently employed in coal mining and processing, particularly in the Lota and Schwager mines (Bio-Bio Region), washing plants, and the methane and coke production units\. This study was contracted to SOFREMINES and Montan Consulting on February 28, 1974 in the amount of US$ 210,000 which the Bank fully financed\. The recomended working plant represents 4m investment of about US$ 20 million and the methane drainage instalation of about US$ 2 million\. However, Corporacion de Fomento de la Producci6n has decided not to prove de investments, mainly because they were based on siqnificant production increase of ENACAR'S mines that did not correspond with the company's financial standing, with the real posibilities of production and also as a result of the course give to the economic policy\. 811 02 0237 - 9 - ANNEX 4 EMPRESA NACIONAL DEL PETROLEO, Oficio NO 2752, de 09\.06\.80 PRESTAMO BIRF N- 978-CH Borrador Informe Final Cabo Negro and Quintero Port and Wharf Design and Subsea Pipelying\. Executed by Empresa Nacional del Petro'leo (ENAP) To design specialized port facilities in Cabo Negro and Quintero and l$\. a pipeline on the Straits sea bed for handling gas as part of a large project for the production, transport and marketing of natural gas from Magellan Straits region\. Contracted January 22, 1976 to Frederic R\. Harris and R\. Flores Ingenieros Ltda\. and Snam Progetti in the same year in the total amount of US$ 597,400\. Inboth contracts the foreign currency expenses were financed by the Bank\. The study recommended construction of a port installation at Cabo Negro at a cost of US$ 8\.4 million, and pipe facilities re- quired for transporting gas across the Magellan Straits at a cost of US$ 14\.9 million\. The rate of return on recommended investments is 20% to 23% for various components\. Financing required for the port facility is 80% in foreign exchange and 20% in local costs\. These studies are part of the basic engineering of the LNG Project that is now being implemented by a new corporation, "Gas de Chile S\.A\. ", formed in late 1978 and including as shareholders ENAP, Compafiia de Petr6leos de Chile S\.A\. (COPEC), ARCO Chile of Atlantic Richfield and Air Products and Chemicals, Inc\. "Sociedad Gas de Chile S\. A\. " will direct funds for each component as required under the Cabo Negro LNG Project, which has an estimated daily production of 7 million cubic meters of gas\. Civil works construction is expected to begin as soon as financing and marketing arrangements are completed\. - 10 - ANNEX 5 LAN-CHILE MEM 0 RANDUM On April 18, 1975, LAN-CHILE hired a consortium of consultants, composed of the firms of Sverdrup and Parcel and Associates, CADE-IDEPE, AFIC and Fernando Martinez S\., to study the projected maintenance base at Pudahuel International Airport\. Under this project it is planned to centralize the maintenance, administration, instruction, services and recreation facilities of LAN-CHILE in a single base\. The first construction stage involved an investment of US$12\.5 million, while the cost of the study amounted to Us$850,000\. Of this figure, US$240,ooo would be covered under IBRD Loan 978-CH\. The study was divided into three phases: Phase I Master Plan Phase II Draft design of the buildings to be constructed in Stage 1 Phase III Final design: development of construction plans By June 1976, Phases 1 and 2 were completed, while Phase 3 was post- poned until resources for the construction of the works had been obtained\. a In November 1977, the study was continued, limiting Phase 2 to/reduced investment program of US$6\.5 million\. Phase 3 was again postponed, however, due to a reorganization in LAN-CHILE\. Finally, the project was restarted in June 1979, and Phase 2 was again cut back to an investment of US$3\.8 million for the first construction stage\. Phase 3, the current development stage, started in February 1980\. The total investment in the study, after completion of Phase 3, is estimated at US$730,000\. - 11 - The projected rate of return is in excess of 18% per annum\. The amount of the foreign component for the construction stage has not yet been determined\. The works should begin during the last quarter of 1980, and be comleted by mid-1982\. /s/ Julio Ibanez Vasquez Architect Los Cerrillos, June 25, 1980  - 12 - Attachment B PROJECT COMPLETION REPORT I\. SUMMARY AND CONCLUSIONS 1\. In early 1973 the Bank faced the dilemma of how to assist Chile in its development efforts at a time when the Government suspended debt service payments, pursued economic policies that led to the loss of its creditworthi- ness, nationalized the assets of major foreign companies without adequate compensation, and allowed ongoing Bank projects to come practically to a halt, which drastically reduced disbursements creating a net negative transfer of Bank resources to Chile\. Because of these difficulties, as well as a judgement that the Government could not efficiently implement new development projects, the Bank had decided by late 1971 not to make new loans to Chile\. After considerable negotiations, however, a commitment was received from the Government for repaying its debt service arrears to the Bank\. The Bank also appraised and negotiated a $5\.25 million technical assistance loan in July 1973 to finance the required foreign exchange for preparing high priority development projects in industry, metallurgy, mining, transportation, and nutrition\. 2\. The loan's documentation was distributed to the Board September 7, 1973, but a Board date was not fixed because of the strong concern of several member countries with Chile's creditworthiness\. Four days later the Allende Government was deposed by the military\. The new Government reaffirmed the project's priority, agreed to go ahead with it, but the difficulties in regard to fixing a firm Board presentation date continued, and the loan was only approved in February 1974, after the IMF had extended a stand-by credit in January\. 3\. The new Government immediately embarked on a program of fundamental economic policy reforms which was designed to lead to a basic restructuring of the economy\. However, a sharp drop in copper prices beginning in 1974 and the ensuing 1975 recession and foreign exchange crisis required stern emergency measures\. In 1975 the Government introduced an austerity program to cope with the crisis, without, however, interrupting implementation of the economic reforms\. As a result, public investment dropped drastically, the priorities of the economy shifted continually, and government decision making concerning projects slowed down\. At the same time, the designated project executing agency, CORFO, experienced the most traumatic period in four decades of its existence, losing its top management, its quasi-ministerial rank, and being held in contempt by the new managers of the economy for its share of responsibility for the inefficiency and anarchy of the country's public sector enterprises up-to 1973\. 4\. Under these adverse circumstances and in the absence of clearly defined priorities, in 1974 CORFO was to revise completely the project's studies that were agreed with the previous Government, and to start up a large-scale procurement of consultant services that required multi- sectoral coordination and familiarity with Bank procedures\. However, as explained in the following chapters, CORFO was weak in multi-sectoral coordi- nation, and its new inexperienced staff had little familiarity with Bank - 13 - procurement procedures\. Between 1974 and 1976 the project's nutrition and metallurgy component was dropped, mining greatly reduced, and the infrastruc- ture, water resources/irrigation, energy and nitrate components were built up in response to new requirements of the economy\. 5\. As expected the above initial difficulties delayed project start-up and disbursements, and it took four years longer to disburse the loan than the optimistic appraisal estimate of little over a year\. Nevertheless, if the project's usefulness for public investment decisions is considered, it has already been a success\. Five of the thirteen pre-investment studies prepared under the loan have already contributed substantially to investment decision making, and the full success of the project would materialize within a few years, when investment decisions are expected to be made based on six other studies also financed under the loan\. 6\. In the atmosphere of prolonged economic and institutional crisis between 1974 and 1976, Government performance and institution building under the project left a lot to be desired\. Converging factors such as the funda- mental policy and structural reforms, the 1975 recession and severe foreign exchange shortage, as well as the ensuing austerity program affected all state-owned enterprises, including CORFO\. The overwhelming task of all public agencies was to survive the consequences of the resulting drastic cut-backs in investment programs, withdrawal of Government subsidies and large-scale reductions in personnel\. Obviously, progress in strengthening the institutions was slow, and introduction of new techniques in project evaluation based on economic and financial criteria -- concepts that were not generally used by previous administrations in Chile -- was difficult\. An investment budgeting reform introduced in 1975 was strictly enforced by the Planning Ministry, ODEPLAN, which affected selection of public investment projects, and provided strong incentives for improved project preparation\. The Bank loan complemented this process well, and it was quite useful in providing badly needed on-the-job training\. It also ensured that the high priority projects prepared under pre-investment studies with loan financing were up to the standards of external financing agencies\. 7\. Considering the enormously complicated circumstances in 1973, the Bank's performance was remarkable in processing this new type project within less than five months\. On the other hand, five months were lost between distribution of the loan documents to the Board and the project's approval, mainly because of the crisis left behind by the Allende Government, and the doubts it provoked among several Bank member countries concerning Chile's ability to recover and to restore its creditworthiness\. In supervising the project the Bank again responded well to the critical situation facing the country in 1974 through 1976 by sending frequent missions there which kept the operation going, and helped produce the studies which -- notwithstanding the delays and uncertainties -- were in the end relevant to investment decision making in the public sector\. - 14 - II\. PROJECT IDENTIFICATION, PREPARATION AND APPRAISAL 8\. In 1973 Chile's already deteriorating economy continued downhill\. After more than two years in office, the Allende administration was faced with several major problems: first, was hyperinflation, since the cost of living which had risen by under 30 percent in 1971 was rising at ten times that rate by 1973; second, was a drop in real output, which led to drops in real incomes as well as wages; thirdly, was a severe foreign exchange shortage which had led to arrears in public debt service payments, including payments to the World Bank beginning in early 1973\. Finally, as regards the implementation of ongoing Bank operations, major problems also developed, including a drastic slowdown in disbursements\. As a result, the Bank found itself in a very difficult position toward Chile\. On the one hand, there were strong reasons not to lend to the country until substantive progress would have been made in several of the above problem areas, but on the other hand, the Bank had to confront increasing pressures for lending created by a growing net negative transfer to Chile -- which was only a logical consequence of lagging disbursements and a three year hiatus in new Bank lending\. 9\. Under these adverse circumstances the Bank had to search hard to find some ways to assist the country\. After intensive contacts with the Chilean Government, in June 1973 the Bank suggested to develop a Technical Assistance project, which could satisfy the urgent need for well prepared development projects that would be suitable for external financing and obtained an agreement for resumption of debt service payments\. Even though the UNDP country program had continued in Chile, sound projects were scarce because that program focussed mainly on manpower training and institution building\. In July 1973, the Bank sent a combined Appraisal/Negotiating mission to complete preparation of a technical assistance loan that could be presented for Board action without delay\. The mission returned from Chile with a draft President's Report, negotiated lending conditions, and the design of a $5\.25 million loan that was to finance quickly disbursing foreign exchange needed for pre-investment studies in industry, metallurgy, mining, transportation and nutrition\. A $100,000 retroactive financing was also recommended to allow for advance contracting\. Following Bank practice in this new type of operation in Indonesia and Bangladesh, the loan agreement was to provide considerable flexibility in the use of loan funds, but because discussions with the Chilean authorities had advanced substantially durtag appraisal, a tentative outline showing distribution of pre-investment studies by sector, including their cost, was included in the President's Report\. The proposed loan was to be made to the Republic of Chile, and at the suggestion of the Government, the Investment Financing Division of the Central Bank, a centralized unit created to control all public sector investments, was designated as the coordinating agency\. The project documenta- tion was distributed to the Board on September 7, 1973 with the date for Board action to be determined at a later time -- mainly because of strong objections from some Bank member countries in regard to lending to a country - 15 - that was simply not creditworthy\. Without shortcutting the complex prepara- tion work requiring multisectoral expertise, the Bank was able to appraise and substantially negotiate the loan within four months after the first discussions with the Chilean Government\. 10\. Only four days after the loan's documentation was distributed to the Board, on September 11, 1973, the Allende Government was deposed by a military coup\. While the new Government agreed with the project's top priority, they requested, and the Bank agreed, to make the loan to CORFO with a Government guarantee\. Under the new arrangements, CORFO -- the Borrower -- was also to be responsible for coordination among the various participating public enterprises\. However, the difficulties in regard to fixing a firm Board presentation date continued after September 1973, and the loan was approved only on February 4, 1974, about five months after the documents were distributed to the Board\. In that interim period several Bank member countries questioned Chile's creditworthiness and the adequacy of its economic policies to deal with the economic crisis, while some others voiced objections which were clearly politically motivated\. A short-term Government program served as a basis for an IMF stand-by credit in January 1974, and paved the way for the February presentation of the Bank loan\. - 16 - III\. PROJECT IMPLEMENTATION 11\. The tentative sectoral breakdown of the pre-investment studies agreed during appraisal in mid-1973 (Table 1) was no longer suitable for Chile's conditions in July 1974, when the loan became effective\. First, the new Government began introduction of fundamental economic policy reforms opening up the economy, and signaling a total reversal of earlier policies; second, the Government began a determined effort to reduce the hyperinflation of the economy; and third, a drastic downturn in copper prices beginning in 1974, 1/ precipitated by 1975 the worst depression in Chile's economy since the 1930s\. Under the ensuing austerity program more than routine decisions were required to allocate funds for studies of ambitious public investment projects\. Moreover, Chile's 1976 withdrawal from the Andean Pact had a major effect on public investment decisions, which only exacerbated the selection process for pre-investment studies\. In view of this, major adjustments were needed in the program as outlined in the President's Report, and with the Bank's concurrence the following changes were made over the period 1974-76: (a) The nutrition component was dropped to avoid duplications as USAID's lending program was heavily concentrated in that area and also because state ownership of a $1\.5 million fishing vessel for research purposes was not considered desirable by CORFO under the new Government; (b) Because new Government policy was to encourage private invest- ment in the productive sectors of the economy, the mining, metallurgical and copper manufacturing studies were gradually phased out of the program\. Some were transferred to the private sector, some others were dropped altogether, and two key studies were eventually financed under the Bank's copper sector project (Ln\.1200-CH) in 1976\. Only one study was retained under the project in 1975 for the extractive metallurgy of oxidized Chilean copper deposits, including engineering and the procure- ment and installation of a pilot plant; even this was dropped later, however, and its foreign exchange cost was reimbursed by CODELCO to CORFO in the full amount of $180,000 representing earlier Bank disbursements for the study; (c) The last phase of a study of transport facilities (berths and underwater pipeline) for LNG in the Magellan Straits area was substituted for the Valdivia highway studies\. ENAP, the state-owned petroleum company, was in charge of the design and feasibility studies of the infrastructure facilities; 1/ Chile's relative economic loss from adverse terms of trade changes in 1975 was the greatest of any Bank Group borrower\. - 17 - (d) Because of the heavy emphasis on agriculture after 1973 -- a sector in which the country is believed to have a comparative advantage -- the project's scope was expanded to include the Convento Viejo and the Aconcagua basin agriculture/irrigation and regional development studies, in addition to the original water resource study of Greater Santiago; and (e) Since the post-1973 economic reforms attributed far greater importance to non-traditional industrial exports than policies of the previous administration, three major industrial studies were included for financing\. 12\. A comparison between the sectoral breakdown of the studies as proposed in 1973, and as completed in 1979, is shown in Table 1\. What this reflects is the shifting emphasis in public investment policies in the period: instead of devoting 58 percent of loan funds to metallurgy and nutrition, as proposed in 1973, about 72 percent went to water resources/agriculture, nitrate and other salts, and industrial development\. 13\. Besides the above mentioned cumbersome adjustments in project content, CORFO -- the project executing agency -- was another cause of slow project implementation\. CORFO had been the most important development agency in Chile for the past three decades, and as a holding company of the great majority of productive public assets, CORFO enjoyed a quasi-ministerial rank in previous governments\. It had become the Bank's first borrower outside Europe in 1948, performing credibly under several Bank operations thereafter, the most recent of which was a vocational education project approved in early 1970\. CORFO was particularly experienced in the industrial sector\. Hence, it had initially shown great interest in the project, and attempted to apportion as much of the loan funds for industrial studies as possible\. However, at the same time CORFO was beginning to lose its earlier importance\. To a great extent, it was identified in the eyes of the new economic policymakers as one of the main causes of the widespread inefficiency and anarchy of public sector enterprises in Chile\. Conse- quently, after the new Government took over, CORFO's top managers were fired, its role in the economy was drastically reduced, working level personnel changes continued to be frequent; in short, there was no continuity within the agency and its future was uncertain\. In spite of these adverse circumstances, CORFO had its own view of what should be the industrial sector's priorities, but its staff was obviously much less interested in the other sectors that were also to be studied under the loan\. The fact that those studies directly under CORFO's management were contracted sooner and Bank disbursements for the same moved faster than the studies that were handled by the agencies outside CORFO, only proves the point\. In addition, its ability to coordinate among the various sectoral agencies and ministries was eroded by the continually shifting government priorities in the 1974-76 period\. It is not surprising that in these circumstances CORFO's overall performance left a lot to be desired\. The slow administra- tive procedures of a frustrated bureaucracy more often than not contributed to the protracted discussions concerning consultant's terms of reference, - 18 - their selection, and the delays in contracting the studies\. Also, the new, inexperienced personnel of CORFO and the other participating agencies lacked familiarity with Bank procedures, which slowed down the commissioning of studies\. The various requirements for clearance from the Ministry of Economy only aggravated these delays\. 14\. Major difficulties in the project's initial phase can be summed up as a need for substantial readjustment in the sectoral breakdown of the studies, and the weakened and demoralized state of the executing agency\. Given an environment of uncertainties and a lack of clearly defined priorities, it was only to be expected that project execution would take much longer than originally envisaged\. At the time of negotiations it was expected -- in hindsight, with undue optimism -- that disbursements would take little more than a year and the project would be completed by mid-1975\. Yet, only 13 percent of the loan had been disbursed, and six of 13 studies were under contract by that time\. Revised disbursements projections prepared in October 1974 after the first full Bank supervision mission continued to be optimistic estimating that the project could be completed by April 1976 (Table 2)\. CORFO was only able to tentatively allocate the full loan amount by the end of 1975, but further changes in the list of studies continued until 1977, when the final commitment for studies emerged as shown in Table 3\. In summary, project implementation took four years longer than originally envisaged, with actual disbursements -- shown in Table 2 -- ending only in early 1979\. 15\. Yet, if the project's relevance to public investment decisions is considered, it has already been a success\. Five pre-investment studies completed under the loan have already contributed substantially to invest- ment decision making\. Some of these projects are in the implementation phase, while some others have advanced only beyond the investment decision stage: The Bank's sixth power project (Ln 1351-CH) is now in execution by ENDESA; the infrastructure component of ENAP's LNG project in the Magellan Straits region is part of an overall investment scheme for which the Sociedad Gas de Chile was formed in late 1978, and financing arrangements are already underway; the Convento Viejo irrigation project enjoys a high govern- ment priority, and is expected to be submitted for financing to the Bank or the IDB before the end of 1979; the state-owned chemical corporation, SOQUIMICH, is currently promoting abroad major investment possibilities that exist in the Salar de Atacama region to increase the production of potash and other salts, and to help reduce unusually high production costs through plant modernization; furthermore, LAN Chile decided in 1978 to expand their installations at Pudahuel Airport providing a new cargo terminal and mainte- nance facility\. By contrast, the Aisen industrial study and the forestry projects have as yet not served in any investment decision, mainly because of the Government's policy not to expand the public sector in these areas\. Although CORFO has made attempts to attract private foreign capital to invest in equity in forestry, and the pulp and paper industry, concrete commitments have not been received to date, and implementation of high return projects in this sector may be delayed indefinitely\. An Annex to this report contains more details on all project studies\. A final judgement on the project, however, will materialize only after a few more years, after investment decisions are made based on the findings of some of the remaining studies financed under the loan\. - 19 - IV\. GOVERNMENT PERFORMANCE AND INSTITUTION BUILDING UNDER THE PROJECT 16\. The previously mentioned basic economic reforms, the 1975 recession and the ensuing Government austerity program put a squeeze on all public enterprises, including CORFO\. Investment budgets were cut back drastically as was personnel, and to promote economic efficiency full cost pricing was applied to public services\. Consequently, state subsidies were beginning to be withdrawn -- in some cases gradually, in some others immediately, depend- ing on the financial strength of the enterprise\. The continued encouragement by the Government for productive investments by the private sector, and delays in several major public investment decisions only added to the considerable uncertainties under which the public agencies had to operate during 1974-78\. CORFO and its structure have been the subject of several studies since 1974, but its reorganization, drawn up in a draft law in early 1979, has yet to be approved by the Government\. In hindsight, the wisdom of designating CORFO as the borrower for this loan in 1974 can, therefore, be questioned\. One might ask why another institution was not considered such as, for instance, the National Planning Office, ODEPLAN\. It was common knowledge that ODEPLAN was a traditionally weak Government agency, and with its limited trained staff, it was fully engaged in 1974 in carrying out the wide ranging policy reforms in the areas of planning and investment budgeting\. Other ministries in the main stream of economic management such as Finance or Economy were of course fully occupied with the formulation of the reforms, the management of the 1975 crisis, and the austerity program\. In short, none of them had any additional capacity for executing and coordinating a complex project\. In any case, whichever entity was chosen would have had an extremely difficult task in selecting the studies and coordinating their execution, especially in the 1974-76 period when far-reaching economic reforms were introduced, the economy underwent almost unprecedented austerity in an effort to reduce inflation and adjust to extremely low copper prices, and key economic advisers and managers were frequently replaced\. By and large these managers represented the same economic philosophy, but lacked clarity as to what the new public investment priorities should be\. Therefore, it is doubtful whether any other government agency would have been able to provide the answers needed for swift project implementation\. 17\. The Government recognized, however, that the drastic changes in the agencies and CORFO were not at all conducive to project preparation in general, and much less so to the introduction of new techniques which estab- lish project viability on the basis of economic and financial returns, a concept not generally used in a strict sense by previous administrations in Chile\. Therefore, ODEPLAN instituted in 1975 a system of economic justification for all public investment projects, which requires ministries and state-owned enterprises to submit the results of evaluation of those projects they wish to include in their investment budget\. The evaluation must be based on feasibility studies if the capital investment exceeds $2 million\. These studies are reviewed annually through an iterative process, first in working committees, and then at the ministerial level, followed by the President's signing of the budget into law on December 1\. - 20 - 18\. While considerable progress was made since 1975 in tightening the annual budgeting process, results have been less than spectacular in improving the quality cf project preparation\. Inadequate emphasis on the training of government officials in the use of new project evaluation techniques and the persisting depressed levels of public investments -- unfortunately continuing to date -- were mainly responsible for slow improvements in this area\. Although with a somewhat limited impact, the Bank loan was useful in providing on-the-job training within some ministries and agencies during the 1974-1978 period, and in ensuring that the quality of study recommendations was up to the standards of external financing sources\. Unfortunately, these studies did not provide sufficient leverage for institution building, since the public agencies were more concerned with fundamental policy reforms and their consequences on financial efficiency than with investment decisions that were recommended in the Bank-financed studies but would not be made as a matter of urgency\. 19\. The three water resources and irrigation studies took especially long to complete\. Considerable time was lost in their identification and contracting because of a shifting emphasis in the agricultural sector's institutions\. Each study was contracted under a different agency\. The first was the Directorate General for Water of the Ministry of Public Works, the second the Ministry of Agriculture, and the last one the National Irriga- tion Commission, an interministerial agency\. Instead of building on the experience of the previous study, each agency had to start anew beginning with the terms of reference, selection and contracting of consultants, not to mention the important logistical support these studies required on account of the heavy field work -- surveys, soil tests, etc\. - 21 - V\. BANK PERFORMANCE 20\. The Bank prepared and appraised the project within less than five months\. First reference to the project in the files dates from March 1973, yet the appraisal and negotiations were completed by the end of July 1973\. Even though technical assistance loans and their processing are not as structured and time consuming as standard Bank lending operations, this pace in project preparation was remarkable, which reflects the mutual interest of the Government and the Bank, and a sense of urgency shared by both\. The achievement is particularly noteworthy considering that this was the Bank's third technical assistance project, after two similar opera- tions in Bangladesh and Indonesia\. 21\. As mentioned previously, difficulties with respect to fixing a firm Board presentation date for the loan continued after the Allende Government was deposed in late 1973\. Obviously, the question may be asked why was that opportunity not used to adapt the original sectoral breakdown of the studies to current requirements, thus eliminating one of the major obstacles that delayed project implementation in 1974 and 1975\. First, the Bank did not know whether it would take as much as five months before the project could be presented for Board action because of the concern of several Bank member countries about Chile's creditworthiness and the adequacy of the economic policy reforms to deal with the economic crisis\. Second, even if an attempt had been made, it would have been impossible to arrive at a final list of studies in the last three months of 1973, since many economic policymakers were not then clear as to what should be the new public investment priorities\. In other words, the Bank -- in all prob- ability -- would have been forced in 1975 and 1976 to undo the attempted changes in order to adjust to the evolving and continually shifting priorities of the economy\. 22\. The Bank's extensive supervision effort was supported by no less than 33 supervision missions, which were badly needed under the circumstances prevailing during project execution, particularly in 1974 through 1976\. In 1974 and 1975, fifteen missions went to Chile to help CORFO and the participating agencies initiate project implementation\. There was only one specific area where more Bank effort might have been useful, namely to involve Ministry of Economy and Ministry of Finance officials at the working level to a greater extent in establishing priorities for the selection of pre-investment studies\. 23\. Supervision within the Bank was under guidance of the LAC Regional Projects Department\. The Programs Division responsible for Chile coordinated the supervision work under the Assistant Director of the Projects Department, providing itself substantive inputs for the review of selection of studies and consultants' terms of reference\. Some 21 project-specific missioas went to Chile to monitor the consultants' work on the various pre-investment studies, and to comment on the quality and presentation of final study recommendations\. As a result, follow-up investment projects benefitted considerably in the power, water resources/irrigation, nitrate industry, mining, and transportation fields\. In addition, to help speed up disburse- ments, the Bank's Controllers Department also sent a short mission to Chile in 1975\. - 22 - ANNEX 1 Page 1 STUDIES FINANCED UNDER THE LOAN Aisen Hydroelectric Development Project - Baker and Pascua Rivers Executed by Corporacion de Fomento de la Produccion (CORFO) Technical and economic pre-feasibility study of the hydroelec- tric development potential in the Aisen region of the Baker and Pascua Rivers was contracted in December 1974 to ENDESA\. The total contract amount was close to US$400,000, with Bank financing of US$247,000\. The study confirmed the existence of 2,600 MW power potential capable of generating 18,000 GWh per year at estimated costs of 6\.8 to 8\.3 mills/KWh\. Total required capital investments would amount to US$1\.35 billion in 1976 costs\. A comprehensive least cost investment program for national power supply would be needed before an investment decision could be made, although early indications are that on account of the high transmission costs other hydro sites, closer to the country's consumption centers and already fully engineered by ENDESA should be considered first\. Electro-Industrial Study of Aisen - Phase I Executed by Corporacion de Fomento de la Produccion (CORFO) To recommend alternative technologies for various industries that are best suited to resource endowment of the Aisen region taking into account the eventual availability of cheap hydroelectric energy, the existence of raw materials in the region as well as in the rest of the country, the required labor and capital inputs, and the infrastructure and transport require- ments\. Also, to determine rate of return on proposed investments\. Contracted to the Bureau Central de'Etudes pour les Equipements d'Outre Mar (BCEOM) on September 16, 1975, the study cost is US$137,282\.16 equivalent to FF652,940, totally financed by IBRD\. The study identified industries that could be installed in the Aisen region and benefit from cheap electricity\. However, because total investments required are about US$1\.1 billion, without taking into account infrastructure costs, and because of limited public investment outlays under the austerity program of the Chilean Government, no action has been taken to date on any of the recommendations\. Investments in Chile have been channelled over the last few years towards projects with low capital requirements and short implementation period, in contrast to the require- ments of the Aisen project\. In retrospect, given the severe scarcity of foreign exchange and high unemployment in Chile, such an obviously capital - intensive proposal could have been deferred with little loss\. Nevertheless, the study has been of some usefulness in identifying the energy and the overall development potential of the region over the medium to long term\. - 23 - ANNEX 1 Page 2 Sarao Industrial Project - Phase I Forestry Inventory Executed by Corporacion de Fomento de la Produccion (CORFO) To determine the industrial use of forestry resources that exist in the coastal zone of Osorno and Llanquihue\. The Phase I study was aimed at producing a detailed forestry inventory, a soils study, and other general information needed for a Forest Management Plan\. If Phase I results were favorable, the consultant was to recommend on the scope of an industrial feasibility study as Phase II\. The study was contracted December 31, 1975 to Ingenieros Consultores Asociados (ICA), Rust Engineering Co\., and Ingenieria de Bosques\. The Total contract amount was US$350,000\. The Bank financed US$193,400\. Phase I was successfully completed and CORFO has contracted with its own funds a US$135,000 Phase II study to Ingenieria Bosques to determine the industrial potential of the region for the production of sawnwood and pulp and paper as a follow-up to the Phase I inventories\. Advisory Services for Ten-Year Power Investment Plan Executed by Empresa Nacional de Electricidad S\.A\. (ENDESA) To prepare for a ten-year investment plan the (a) comprehensive demand projections; and (b) priority ranking of the specific projects\. This study was contracted June 1974 by Vaughan Sear (consultant)\. The contract amount was US$12,000, totally financed by the Bank\. This study assisted in the preparation of the Bank's sixth power project for which a US$35 million loan (Ln 1351-CH) was approved in late 1976\. There were delays in loan effectiveness because government policy measures had been withheld to allow ENDESA to earn adequate rates of return, but after renegotiated financial projections, and substantial tariff increases the loan became effective in 1978, and the project is being implemented at this time\. Nacimiento Plant Expansion - INFORSA Executed by Industrias Forestales S\.A\. (INFORSA) To recommend on the proposed expansion of the plant's productive capacity (currently 80,000 tons per year), and to determine optimal tech- nology for lumber and pulp processing\. This study was contracted in September 1974 to H\.A\. Simons (International) in the amount of US$265,000, which the Bank financed in full\. - 24 - ANNEX 1 Page 3 The recommended expansion would require investments on the order of about US$124 million with a first phase minimum program of US$6\.75 million\. Investment decision has been postponed\. The rate of return on recommended investments is 14\.1%\. Rio Maipo Regional Development Executed by General Directorate of Water Resources, Ministry of Public Works\. Evaluate and integrate existing studies, as well as to compile new data for recommending a planned use of available water resources for short, medium and long term, particularly as regards drinking water, irrigation, power generation, recreation, etc\. Contracted September 20, 1974 to Engineering Science, Inc\. in the amount of US$332,500, which the Bank financed in full\. The recommended package of investments amounts to US$203 million (1975 dollars), including construction of the Pirquet dam\. In the recommended scheme, priority has been given to water supply, in order to meet medium- and long-term demand in the central region, including the Santiago metropolitan area, first fully developing the area of influence of the dam\. The rate of return on recommended investments varies between 25% and 42% for the different components\. The source and terms of financing are under evaluation\. The Comision Nacional de Riego is studying the future stages of the Region's development\. Rationalization of Coal Production Executed by Empresa Nacional de Carbon (ENACAR) Recommend improvements in basic work methods currently employed in coal mining and processing, particularly in the Lota and Schwager mines (Bio-Bio Region), washing plants, and the methane and coke production units\. This study was contracted to SOFREMINES and Montan Consulting on February 28, 1974 in the amount of US$210,000, which the Bank fully financed\. The recomended washing plant represents an investment of about US$20 million and the methane drainage installation of about US$2 million\. However, the Corporacion de Fomento de la Produccion (CORFO) has decided not to go ahead with the investments, because ENACAR's financial situation did not justify the significant production increases recommended by the study\. Convento Viejo Feasibility Study Initiated by Ministry of Agriculture Planning Office (ODEPA) and then executed by National Irrigation Commission\. - 25 - ANNEX 1 Page 4 With a view to identifying the agricultural potential of the Convento Viejo region, and evaluating the feasibility of irrigation over an area that represents about 10% of all irrigated land in Chile\. Main objectives should be employment generation and production for exports\. Contracted on September 30, 1976 to a joint venture between Ingenieros Consultores Asociados (ICA) Chile and TAHAL, Israel, in the amount of US$1,045,000\. The final contract cost amounted to US$1,600,000 of which the Bank financed US$600,000\. The study recommended improvement in existing irrigation facilities over 100,000 ha, and incorporating 60,000 ha dry land under irrigation at a total cost of US$127 million\. Three phases were recommended to carry out irrigation, civil works, and to implement adequate land tenure arrangements, and to provide credit and technical assistance\. The rate of return on recommended investments is 22\.5% over a 40 year evaluation period\. The financing required is under study by the National Irrigation Commission and Ministry of Economy for a first phase project\. The Bank has been approached informally, and is considering the project in its pipeline for FY81\. Cabo Negro and Quintero Port and Wharf Design and Subsea Pipeline Executed by Empresa Nacional de Petroleo (ENAP) To design specialized port facilities in Cabo Negro and Quintero and a pipeline in the sea bed of the Magellan Straits as part of a large project for the production, transport and marketing of natural gas from the Magellan Straits region\. Contracted January 22, 1976 to Frederic R\. Harris and R\. Flores Ingenieros Ltda\. and Snam Progetti in the same year in the total amount of US$597,400\. In both contracts the foreign currency expenses were financed by the Bank\. The study recommended construction of a port installation at Cabo Negro at a cost of US$8\.4 million, and pipe facilities required for transporting gas across the Magellan Straits at a cost of US$14\.9 million\. The rate of return on recommended investments is 20% to 23% for various components\. Financing required for the port facility is 80% in foreign exchange and 20% in local costs\. These studies are part of the basic engi- neering of the LNG project that is now being implemented by a new corporation, the Sociedad Gas de Chile S\.A\., formed in late 1978 and including as share- holders ENAP, Compania de Petroleos de Chile S\.A\. (COPEC), ARCO-Chile of Atlantic Richfield and Air Products and Chemicals, Inc\. Sociedad Gas de Chile S\.A\. will direct funds for each component as required under the Cabo Negro LNG project, which has an estimated daily production of 7 million cubic meters of gas\. Civil works construction is expected to begin as soon as financing and marketing arrangements are completed\. - 26 - ANNEX 1 Page 5 Huachipato Plant Development Executed by Compania de Acero del Pacifico (CAP) Given the existing plant and an expansion target of one million tons output per year, procedures were recommended for optimization of production\. The consultant Nippon KoKan KK contracted this study on March 29, 1977 in the amount of US$300,000 equivalent, which the Bank has financed in full\. Mixed Salts Study Executed by Corporacion de Fomento de la Produccion (CORFO) The study's scope is to recommend procedures for optimizing recovery of non-metallic minerals including (1) technical/economic feasibility study to increase production of potassium salts and boric acid in Salar de Atacama; (2) rehabilitation of refineries of nitrous products, increase and diversify production; and (3) study installation of a new nitrous refinery\. Contracted to Saline Processors, Inc\. as follows: Phase I Phase II Phase III Contract Date 1/2/75 2/17/77 4/14/78 Contract Amount US$715,000 US$300,000 US$480,000 The final cost is US$1,495,000, totally financed by the Bank\. The recommended investment program includes: (i) production of 150,000 t/yr\. potassium chloride and 100,000 t/yr\. potassium sulfate and alternatively 500,000 t/yr; (ii) production of 10,000 t/yr\. of boric acid; and (iii) potassium nitrate refinery w/ 100,000 t/yr\. capacity\. CORFO, with assistance from SOQUIMICH, is attempting to attract private equity for the required investments\. As an alternative the Salar de Atacama projects (A and B) extraction of salts from the clay deposits are also being studied\. Pudahuel Maintenance Facilities Executed by LAN-Chile (National Airlines) Prepare feasibility and design of facilities required for the concentration of LAN maintenance operations at Pudahuel airport, including, in follow-up phases, concentration of administration, training and recreation facilities, etc\. This study was contracted in two phases on April 18, 1975 and March 15, 1978 to Sverdrup and Parcel and Associates, Arce-Flores Ingenieros Consultores, CADE Ingenieria de Proyectos and Fdo\. Martinez in the amount of US$850,000 of which US$240,000 was financed by the Bank\. A master plan was produced under the Phase I and preliminary design under Phase II\. - 27 - ANNEX 1 Page 6 As a first phase, the maintenance facility would include construction and installation of hangars, workshops, storage facilities and office and service areas, and cost a total of US$12\.5 million, with a foreign exchange component of US$7\.5 million\. The rate of return on the investments is 18\.6%\. However, LAN-Chile has revised the first stage to limit investments to US$3\.8 million for which consultants retained in early 1980 are now completing detailed engineering designs\. Construction should begin in late 1980 and be completed in 1982\. The source and terms of financing are currently under study\. Aconcagua Basin Development Study Executed by National Irrigation Commission Recommend irrigation and other investments needed for agricultural development in the Aconcagua, Putaendo, La Ligua and Petorca Valleys\. This study was contracted December 16, 1977 by Comunidad de Ingenieros Consultores (CICA), Chile, Hunting Technical Services, and Binnie and Partners, UK, in the amount of US$2,459,382 of which US$640,600 was financed by the Bank\. It is expected that the consultant's work would be completed shortly and final report as well as recommendations would be available some time in late 1979\. Follow-up investment decisions by the Government could be expected only after they went ahead with the Convento Viejo project\. - 28 - Table 1 CHILE TECHNICAL ASSISTANCE PROJECT (Ln\. 978-CH) COMPLETION REPORT Sectoral Distribution of Pre-Investment Studies (Thousands of US$ equivalent) Actual/ Original (%) Completed (%) Mining 1,200 22 180 3 Metallurgy and Manufacturing oo 8 - - Nutrition, Fisheries 2,608 50 3 - Transportation/Infrastructure 432 8 837 16 Water Resources/Irrigation, Agriculture/Regional Development 610 12 1,522 29 Energy - - 470 9 Industrial Development (general, timber, - - 896 17 pulp, steel) Nitrate- Salts - - 1,342 26 5,250 100 5,250 100 - 29 - Table 2 CHILE TECHNICAL ASSISTANCE PROJECT (Ln\. 978-CH) COMPLETION REPORT Disbursements 1/ 2/ BY END OF BANK APPRAISAL- 1974 2/ FISCAL YEAR ESTIMATE ESTIMATE ACTUAL 1974 3\.10 - - 1975 2\.25 3\.30 0\.70 1976 1\.95 1\.4o 1977 1\.30 1978 1\.10 1979 (March Ist) 0\.75 TOTAL LOAN 5\.25 5\.25 5\.25 1/ As shown in President's Report of 9/6/73\. 2/ Estimates taken from first full supervision report dated 10/1/74\. - 30 - Table 3 CHILE TECHNICAL ASSISTANCE PROJECT (Ln\. 978-CH) COMPLETION REPORT Pre-Investment Studies Financed under the Loan 1/ LOCAL TOTAL STUDIES UNDER CORK0 BANK DISBURSEMENTS- COUNTERPART1 COST L/ Hydroelectric Study - Aisen 247\.5 151\.2 398\.7 Mixed Salts (Phases I - III) 1,351\.0 1,612\.1 2,963\.1 Industrial Development - Aisen 137\.3 - 137\.3 Sarao Industrial Project 193\.4 156\.6 350\.0 STUDIES UNDER OTHER AGENCIES ENDESA 12\.0 9\.0 21\.0 INFORSA 265\.0 50\.0 315\.0 Gen\. Directorate Water Management (Maipo Valley Study) 332\.5 3,050\.0 3,382\.5 Catholic University (Nutrition)** 3\.4 - 3\.4 ENACAR 210\.0 30\.9 240\.9 CODELCO** 180\.2 - 180\.2 LAN-CHILE 240\.0 610\.0 850\.0 Agricultural Ministry (Convento Viejo) 567\.0 478\.0 1,045\.0 ENAP 597\.4 97\.8 695\.2 CAP \. 300\.0 150\.0 450\.0 National Irrigation Commission (Aconcagua Valley) 613\.3 1,846\.1 2,459\.4 TOTAL 5,250\.0 7,886\.7 13,136\.7 In thousands of US$\. ** Studies for which the Bank had disbursed a total of $183,600 before they were dropped from the project at Government request\. Subsequently, the participating agencies reimbursed $183,600 to CORFO; of this amount, CORFO paid $144,000 to cover foreign exchange needs of the mixed salts project in excess of the Bank's disbursements shown in the above table; another $27,300 covered a part of $40,000 additional foreign exchange requirement of the Aconcagua Valley project\.

APPROVAL

P171150

 The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 23-Dec-2020 | Report No: PIDA29512 Nov 08, 2020 Page 1 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Bosnia and Herzegovina P171150 Bosnia & Herzegovina Health Systems Improvement Project Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) EUROPE AND CENTRAL ASIA 10-Dec-2020 25-Mar-2021 Health, Nutrition & Population Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Ministry of Finance, Ministry of Health and Federation of Bosnia and Social Welfare, Republika Herzegovina, Ministry of Srpska, Ministry of Health, Finance, Republika Srpska, Federation of Bosnia and Ministry of Finance and Herzegovina Treasury Proposed Development Objective(s) The Project Development Objective is to contribute to improvement in the quality of care and in the financial sustainability of BiH’s health care systems\. Components Increasing health system performance in Republika Srpska Increasing health systems performance in the Federation of Bosnia and Herzegovina Project management and monitoring Front-End Fee (financed from loan) PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 75\.00 Total Financing 75\.00 of which IBRD/IDA 75\.00 Financing Gap 0\.00 Nov 08, 2020 Page 2 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 75\.00 Environmental and Social Risk Classification Low Decision The review did authorize the team to appraise and negotiate B\. Introduction and Context Country Context 1\. Bosnia and Herzegovina (BiH) is an upper-middle income country with a per capita gross national income of US$6,150\.1 The country has been at peace for the past 25 years and, despite a complex political setup, has been able to achieve significant results\. Much of the infrastructure destroyed in the war (1992-1995) has been rebuilt, and institutions have been established to govern the country at all levels of authority\. The country is governed as two independent political entities: the Federation of Bosnia and Herzegovina and Republika Srpska\. The Federation has 10 autonomous cantons and 79 municipalities and cities; Republika Srpska has 7 geographic (non-autonomous) regions and 63 municipalities and cities\. The constitutional architecture also includes the autonomous BrÄ?ko District\. Multiple reform efforts have improved economic links between the Federation of Bosnia and Herzegovina and Republika Srpska, and some progress has been made in creating a better environment for private sector development and job creation\. Still, much more needs to be done if BiH is to achieve sustainable prosperity for its citizens and fulfill its aspiration to join the European Union (EU)\. 2\. The public sector is expensive, inefficient, and suffers from limited skills and lack of accountability \.2 Fragmented institutions and governance have weakened systems of accountability, human resource management, and public financial management in the public sector, and slowed investment in efficiency- enhancing digital technologies\. This has led to runaway spending, significant waste, and hollowed out the public sector’s skill base and capacity to deliver necessary services\. BiH’s public sector comprises over 30% of all workers and in 2019 the public wage bill amounted to 10\.8% of GDP\.3 Yet the public sector is also extremely inefficient and the expected return on the governments’ large investments is low\. Despite BiH’s high expenditure on public services relative to most EU and other countries in Europe and Central Asia (ECA), the quality of public services compares very unfavorably to comparators\. Most countries in ECA achieve higher satisfaction levels with lower spending\. 1 The World Bank Spring Survey, May 2020 2 Unless otherwise noted, data and analyses from World Bank (2020)\. BiH Systematic Country Diagnostic Update\. 3 BiH 2021-2023 Global Framework of Fiscal Balance and Policies Nov 08, 2020 Page 3 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) 3\. Weak public sector institutions and financial management have contributed to the accumulation of significant budget overruns and arrears,4 which threaten fiscal sustainability and elevate fiscal risks\. Although overall government debt has decreased (from 43\.6% of GDP in 2015 to 31\.0% in 2019), significant fiscal risks arise from unmeasured off-budget liabilities and arrears and large liabilities of health care facilities and state-owned enterprises\. The arrears in Republika Srpska are mainly in the healthcare sector— approximately 1\.5% of BiH GDP—whereas arrears in the Federation of Bosnia and Herzegovina, mostly in cantons, are approximately 2\.5% of BiH GDP, mainly in unpaid pension and healthcare contributions in state- owned enterprises\. In some social sectors arrears threaten the sustainability and quality of service delivery\. Delays in payments to suppliers and employees halt equipment deliveries and daily work of service providers, while repayments of past arrears squeeze needed new investments\. Other effects of arrears accumulation include reduced government revenues from under-collection of tax and social security contributions, higher prices as suppliers factor in the cost of arrears, and barriers to restructuring and privatization of affected state-owned enterprises\. Without strong corrective action, arrears threaten the viability of large segments of BiH’s public sector\. 4\. BiH’s economy is now confronted by the possibility of a deep recession as the coronavirus (COVID-19) pandemic constrains economic activity\. In 2019, growth of real gross domestic product (GDP) slowed from 3\.6% in 2018 to an estimated 2\.8% because of a less supportive external environment and political uncertainty\. Slower growth in the Euro zone, the largest BiH export market, and regional trade disputes contributed to a decline in exports, as did a slump in industrial production, resulting in part from temporary output disruptions at large exporting firms\. Delayed formation of the government following the 2018 election also slowed policy-making and impaired confidence in the economy\. Consumption growth contributed 2\.6% to economic growth in 2019, investment added 0\.4%, but net exports subtracted 0\.2%\. More recent data for the first half of 2020 indicate a sharp slowdown of economic activity as a result of the current pandemic; the outlook is subject to significant uncertainty\. The World Bank (WB) estimates that BiH’s economy will contract by 3\.2% in 2020, subject to further revisions due to the unprecedented and rapidly evolving situation\. 5\. COVID-19 poses the most serious social and economic challenge to the country since the 2008-09 global financial crisis\. The COVID-19 outbreak is testing health and public health systems, while measures to contain its spread are resulting in an economic slowdown and threaten the economic security of many of its citizens, particularly those with low-incomes\. COVID-19 also risks accelerating BiH’s pace of outward migration, already the highest in the region\. A third of those who renounced BiH nationality in 2018 were between 18 and 35 years old, with peaks for both the low and highly educated, indicating a high rate of loss of the country’s current and future human capital\. While the toll the pandemic ultimately takes on the country will not be clear for some time, a strong, coordinated institutional response is critical to both containing the spread of COVID-19 and working to limit its social and economic effects\. 6\. An emergency COVID-19 loan was recently approved to help BiH prevent, detect and respond to COVID– 19\.5 The EUR 33\.1 million (US$ 36\.2 million equivalent) loan finances a range of interventions to strengthen public health services and to safeguard lives and livelihoods overall\. It offers financial and technical assistance (TA) to increase isolation capacities in hospitals, obtain new intensive care beds with ventilators, 4 “Arrearsâ€? refers to overdue unpaid liabilities, owed to suppliers and other contractors\. 5 P173809: Bosnia and Herzegovina Emergency COVID-19 Project; effective September 1st, 2020\. Nov 08, 2020 Page 4 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) establish new designated laboratories and procure other medical equipment and material\. Furthermore, some 48,000 people most affected by the pandemic crisis are receiving social assistance\. The country did well to control the pandemic in the first half of 2020 (promptly imposing restrictions on entry into and movement within the country, for example)\. Loosening of the lock-down and increased travel over summer, however, have produced a second surge of the infection, with record breaking numbers of new cases now occurring\. 7\. A health-focused Development Policy Financing (DPF) operation is also under preparation, expected to be submitted to the WB Board in June 2021\. The financial assistance provided through the DPF is intended to support the immediate clearance of health systems’ stock of arrears\. Prior actions and policy triggers that will create the conditions for successful implementation of this IPF are the focus of the DPF, comprising the adoption of laws and related policies on financial consolidation of health systems in each entity, alongside complementary laws on health insurance, the health care workforce and health care records\. 8\. The complex political structure and weak mechanisms of BiH for inter-government cooperation pose a challenge to effective policy reform and implementation\. The state-level and Federation parliaments meet sporadically\. Delays in forming the BiH Council of Ministers following the 2018 elections as well as, in the Federation, uncertainty over the formation of a new government (alongside challenges around agreeing on electoral legislation for the Federation's House of People’s) presented barriers to the smooth implementation of reforms\. Collaboration between cantonal, entity and state level institutions remains problematic\. The persisting absence of an agreed coalition government in the Federation following the 2018 elections further complicates the picture\. Nevertheless, agreement on the Council of Ministers at the BiH level in early 2020 has led to renewed commitment to health sector reform\. Furthermore, despite the country’s complex constitutional arrangements, a clearly defined reform agenda exists, underpinned by a broad national consensus on the country’s critical challenges and priorities and adopted by the Council of Ministers of BiH, Government of Republika Srpska, and Government of the Federation of Bosnia and Herzegovina\. This document, the 2019-2022 Socio-Economic Reform Program also benefits from the sustained support of key development partners\. 9\. The 2019-2022 Socio-Economic Reform Program represents a rare window of opportunity for structural reforms in BiH and provides the basis for WB assistance\. The Program lists four priorities, one being “comprehensive reform and improved quality of the health care systemâ€?\. The document lists nine commitments jointly made by the entities, including “urgent steps to halt the growth of health sector arrears and achieve financial stabilityâ€? and “provide for well-managed and good quality accessible public health care for all citizensâ€?\. It also describes specific challenges facing the health sector, including the need to improve its fiscal sustainability and identify additional funding sources, to improve service delivery as well as health sector governance and accountability\. The WB is identified as BiH’s main development partner in this area\. In addition, the Republika Srpska Economic Reform Program also highlights the financial unsustainability of the health sector and envisages specific reforms to increase sector performance and governance, with WB support\. Further pressure for health sector reform comes from the conditionalities placed around macro- financial assistance from the EU following the COVID-19 pandemic\. These include required actions to strengthen the health sector and take advantage of a better coordinated procurement process of pharmaceuticals and medical equipment, especially for high-cost and high-volume medications\. Together, these documents provide a strong mandate for reform\. Nov 08, 2020 Page 5 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) Sectoral and Institutional Context 10\. By basic measures, health outcomes in BiH are in line with Western Balkan countries but lag substantially behind EU states\.6 In 2018, average life expectancy at birth (77 years) was on par or better than other EU accession states in the region but lower than Croatia’s (78) and Slovenia’s (81)\. Similar trends hold for age standardized death rates (0-64 years of age) for malignant neoplasms, diseases of the circulatory system, ischemic heart disease and cerebrovascular disease\. BiH’s infant mortality rate (5\.1 per 1000 live births) is the highest in Western Balkans and above the EU average (3\.3 per 1000 live births)\. 11\. The main public health challenge in BiH is reducing non-communicable diseases (NCDs), namely heart disease, stroke, cancer, diabetes and chronic respiratory disease\. NCDs are estimated to account for 80% of the country’s annual deaths and dominate the overall burden of disease and disability, as do the risk factors that contribute to them, such as high blood pressure, tobacco use and unhealthy nutrition\.7 Total cancer incidence per 100,000 population has been growing (increase of 69% in Federation of Bosnia and Herzegovina and 25% in Republika Srpska, during 2013-2017), and cancer mortality has been on the increase as well\.8 12\. Resources to meet BiH’s health care needs are modest\. In 2017, BiH spent almost 9% of GDP on health,9 a high figure for a middle-income country\. The equivalent per capita figure, however, is low at just US$ 460 per person per year\. The number of hospital beds and health care workers, summarized in Table 1, is also modest compared to other Western Balkan countries\. To meet the population’s health care needs, BiH’s limited health care resources must be used as efficiently as possible\. There is extensive evidence, however, that this is not the case\. Table 1: Overview of Health Systems in BiH The Federation of Bosnia and Republika Srpska Herzegovina MoH 1 federal 1 MOHSW 10 cantonal HIFs 1 Federation fund10 1 HIF 10 cantonal funds Public Health Institutes (PHI) 1 federal PH institute 1 PH institute 10 cantonal PH institutes Quality and Accreditation Agency 1 agency 1 agency Hospitals 18 10 Special hospitals 3 11 3 12 Special institutes 6 13 6 World Development Indicators, 2019\. 7 World Health Organization Regional Office for Europe\. Tackling noncommunicable diseases in BiH\. Copenhagen, 2018 8 Health Statistics Annual, FBiH and Statistical Yearbook, RS Institute of Statistics\. 9 National Health Accounts, from the Agency for Statistics of Bosnia and Herzegovina, www\.bhas\.gov\.ba 10 Fond Solidarnosti Zavod Zdravstvenog Osiguranja i Reosiguranja Federacije Bosne i Hercegovine, the Solidarity Fund for Health Insurance and Reinsurance of the Federation of Bosnia and Herzegovina, www\.zzofbih\.ba 11 Jagomir Psychiatric Hospital, Sarajevo; Tuzla Heart Centre; the Hospital for Pulmonary Diseases and Tuberculosis, Travnik\. 12 Sokolac Psychiatric Hospital; Modrica Hospital for Chronic Psychiatry; Kozarska Dubica Special Hospital for Orthopedic Medicine and Rehabilitation\. 13 Public Health, Stomatology; Forensic Medicine; Transfusion Medicine; Orthopedic Medicine and Rehabilitation; and, Forensic Nov 08, 2020 Page 6 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) Acute beds per 100,000 population 3\.3 2\.4 Primary care facilities 79 55 Physicians per 1,000 population 2\.24 2\.25 Nurses, midwives and technicians per 5\.61 4\.12 1,000 population Health systems challenges 13\. Reflecting BiH’s complex political constitution, health care insurance and health care services are highly fragmented\. Although responsibilities for health sector functions are relatively clearly defined in the law, they are divided between a large number of jurisdictions and institutional actors\.14 In both entities, service provision is the responsibility of primary care centers, hospitals (secondary care), and clinics (tertiary care)\. Ownership, policy, oversight, financing, certification and supervision mandates are divided across several levels of government\. In both entities, primary care centers are established and owned by municipalities (in the Federation of Bosnia and Herzegovina a handful are instead owned by cantons)\. Ownership of hospitals and clinics in Republika Srpska is centralized in the entity Ministry of Health and Social Welfare (MoHSW), while in the Federation of Bosnia and Herzegovina it is decentralized to cantonal MoHs\. In some cases, such as with three university clinical centers, ownership is shared between cantons and the Federation\. Box 1: The legal framework underpinning health systems governance in BiH BiH’s health sector is governed by a complex and fragmented legal framework\. Responsibility for many functions is constitutionally devolved to entity and cantonal governments, resulting in 12 relatively autonomous health systems covering State, RS and FBIH entities, each of the ten Federation cantons, and autonomous Brcko District\. Ownership, financing, certification, accreditation and supervision of public and private health care institutions are regulated by three separate Laws on Health Care, covering the two entities and Brcko district\. Additional specialized laws at the entity level supplement the Laws on Health Care on some aspects, such as functioning of medical chambers in the Republika Srpska and accreditation of health care institutions and patients’ rights in the Federation of Bosnia and Herzegovina\. In both entities, public health care institutions are governed by separate relevant entity and cantonal- level laws and by-laws on financial management and human resource management in the public sector\. Public procurement is regulated by a single BiH Procurement Law\. Separate entity-level Laws on Health Insurance govern the functioning and financing of health insurance systems and exercise of health insurance rights\. Entities have their own Laws on Pharmacies, although a single BiH Law on Pharmaceuticals and Medical Devices governs BiH’s single pharmaceutical market\. 14\. Quality of care and dissatisfaction with BiH’s health care systems are a concern\. A recent WB poll on social media15 found that almost 8 out of 10 people are quite dissatisfied, or very dissatisfied, with the health care Psychiatry\. 14 Discussion excludes autonomous Brcko District since it is not covered by the present project\. 15 Conducted by the WB Country Office in Sarajevo in February 2019 Nov 08, 2020 Page 7 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) systems in BiH\. People frequently stated that the health care systems have never been worse, signaling an urgent need for reform\. Common reasons for dissatisfaction were perceived poor service quality, with staff being rude or lacking technical knowledge; respondents also cited concerns about money being wasted\. Adding to this finding, the most recent multi-country comparison of population satisfaction with health care systems16 found that only 48% of the population in BiH were satisfied with the healthcare system, the lowest in the Western Balkans\. These sentiments are backed up by objective data on quality and outcomes of care\. In Republika Srpska, for example, fatality rates after a heart attack are 10% or higher in a number of hospitals, substantially worse than the Organisation of Economic Co-operation and Development (OECD) average of around 6\.9%\.17 Agencies for quality monitoring and improvement are also well-established in both entities\. These agencies have also developed systems for benchmarking of family medicine teams based on key health outcomes, such as management of hypertension\. This information, however, is not yet made public or used for payment\. 15\. Another critical weakness across BiH’s health systems concerns overdue unpaid liabilities (“arrearsâ€?) to creditors\. Arrears pose an immediate threat to the sustainability of the health care sector\. In Republika Srpska, before the emergence of the COVID-19 pandemic, the health sector had accumulated approximately EUR 505 million in liabilities18 to suppliers, salaries, the health insurance fund (HIF) and the tax authorities over the past twelve years (around EUR 40 million/year on average)\. In February 2020, the Ministry of Finance (MoF) indicated that, in dealing with arrears in the health sector, its intention is to first deal with the arrears to the tax authorities, for social security contributions, and to banks\. At this time, the amount needed for clearance of the arrears was estimated by to be EUR 340 million\. In the Federation of Bosnia and Herzegovina, the proposed Law on Restructuring and Financial Consolidation of Public Health Institutions indicates that health sector liabilities at the end of 2016 had reached BAM 269 million (EUR 138 million), of which BAM 175 million (EUR 90 million) were more than 90 days’ overdue for payment (that is, in arrears), with an accumulated operating loss across health care providers of BAM 167 million (EUR 85 million)\. The law states that health sector losses are likely to grow\. Health care facilities in the Federation have made some progress since then in reducing arrears to the tax authorities\. To start clearing health sector arrears, however, the ministries of finance in each entity need to be confident that arrears will not simply reaccumulate\. Box 2: Prior and on-going WB analytics informing project design Health Care Arrears in Bosnia and Herzegovina (P161510; completed May 2018) mapped the extent and immediate causes of arrears in BiH’s health systems\. It found that, in both entities, arrears were most often generated by hospitals (as opposed to primary care facilities or health insurance funds) and were largely owed to other public agencies (tax and social security authorities) and suppliers\. It concluded that the financial imbalances leading to these arrears were predominantly due to poor expenditure controls (rather than insufficient revenue), which were, in turn due to high input prices (particularly for drugs and medical devices), a growing 16 European Bank for Reconstruction and Development’s Life in Transition Survey, available from https://litsonline-ebrd\.com 17 OECD health statistics, available from https://data\.oecd\.org/health\.htm 18 Data received from Ministry of Health and Social Welfare; data on liabilities does not reliably distinguish between unpaid liabilities and overdue unpaid liabilities (“arrearsâ€?)\. Nevertheless, the term “arrearsâ€? is used throughout this document given its widespread use, and for ease and consistency\. Nov 08, 2020 Page 8 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) wage bill (including unusually high numbers of non-clinical employees) and a surplus of activity in hospitals that could be delivered more cost-effectively in primary care\. The Bosnia and Herzegovina Functional Review of Health Systems (P161510; completed November 2020) assessed performance of BiH’s health systems more broadly and explored deeper causes of good or bad performance at facility- and system-level, both clinical and financial\. It found that the legislative and policy frameworks governing BiH’s health systems were out of date, preventing, more efficient use of the health care network and health care workforce\. It also assessed controls, incentives and performance frameworks for clinical and financial performance as weak and noted that accountability to citizens for health systems performance was under-developed\. Ongoing WB analytic work on BiH’s health systems will support project implementation and continuous refinement of project activities\. It includes: • a formal mapping of health systems stakeholders, analyzing their influence over and incentives for/against key reforms, using the Net-Map tool; • a survey of health care facility lead-clinicians and managers, analyzing their performance incentives and performance monitoring frameworks, using the World Management Survey adapted to the BiH context; • a quantitative study of workforce numbers, distribution and productivity, with options for optimization, using techniques applied by WB in other health systems; • a study of bottlenecks preventing more effective management of non-communicable diseases by primary care, in partnership with the Primary Health Care Performance Initiative (https://improvingphc\.org/); and, • a study of the current and potential role of private health care providers to in the management of non-communicable diseases, in partnership with Access Accelerated Trust Fund (https://accessaccelerated\.org/)\. Technical assistance will also be offered to guide possible reforms on expanding health systems’ revenue base, including new or increased taxes on environmental pollution, tobacco products, sugary drinks); delinking health care insurance from employment status; switching to general tax revenue for the health insurance fund; and, revising categories of persons exempt from contributing to health care insurance and/or degree of exemption\. Key constraints underlying unsatisfactory health care quality and poor financial sustainability 16\. The root causes driving disappointing quality of care and poor financial sustainability are fundamentally intertwined\. Health care providers and policy makers in BiH, rightly, do not view quality and sustainability as separate objectives that should be pursued independently\. Instead, these goals are understood to be two equally important, and mutually reinforcing, dimensions of system performance\. The explanatory factors underlying unsatisfactory quality of care and weak financial sustainability are also, to a large extent, the same\. The analytics (Box 2) point to five key constraints that need to be addressed in both entities: (a) Weak preventive and primary care\. There is scope to strengthen preventive and primary care, thereby reducing unnecessary use of hospitals; Nov 08, 2020 Page 9 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) (b) Inefficiencies in hospital care\. (Unavoidable) in-patient hospital care is not provided in ways that optimize value for money; (c) Lack of effective financial controls\. Irrespective of efficiency, there is a lack of effective financial controls to prevent over-spending in hospitals; (d) Weak incentives, accountability and training\. Performance frameworks that would enable managers and clinicians to improve quality of care and financial balance are not well developed; (e) Under-funded health care systems\. BiH’s health care systems are, most likely, under-funded for the level of service that they aim to provide\. 17\. Service design and delivery is compromised by inefficiencies in the allocation of activity across the network of preventive, primary and secondary care services - constraint (a)\. Institutional fragmentation jeopardizes the quality of care in both entities by undermining network coordination\. Primary care workload (as measured by consultation rate) increased in both entities between 2013 and 2018, but it remains unclear to what extent general practitioners and family medicine specialists truly act as gatekeepers to hospitals and resolve primary health care needs appropriately\. Too much complex, chronic care is still managed, at high cost, in hospital settings, rather than proactively, at lower cost, in primary health care settings\. In the Federation of Bosnia and Herzegovina, around 27% of all doctor consultations result in referrals (compared to 16% in Croatia in 2014); no data on referrals is available for Republika Srpska\. As a result, in-patient care in hospital settings still consumes almost half of total expenditures, compared to an OECD average of 30%, indicating scope to allocate funds to more cost-effective primary care settings\. In Republika Srpska, there are high and increasing levels of admissions for conditions that could be treated outside of hospitals (including diabetes, hypertension, pneumonia, chronic obstructive pulmonary disease and asthma); no information on disease-specific admission rate is available for the Federation\. Hospitals in East Sarajevo, Trebinje and Foca particularly stand out in this respect, indicating the need to strengthen primary care and/or revisit clinical guidelines in these areas\. 18\. The lack of network coordination is both a result of and impacted by poor planning and data management\. Providers across and even within political jurisdictions do not undertake joint strategic planning activities to assess and plan for projected demand and to develop clinical pathways for integrated care\. The lack of a unified patient database and records system prevents effective referrals across all levels of facilities and across municipal-cantonal-entity jurisdictions, to more evenly share the patient burden\. Both entities have made progress in establishing electronic patient records, but implementation is uneven, and data is not freely shared across facilities\. 19\. Service design and delivery is also compromised by inefficiencies within hospitals and the lack of payment systems to incentivize high quality care - constraint (b)\. Productivity challenges at the hospital level are caused by both managerial as well as structural inefficiencies\. There are a number of structural and systemic inefficiencies\. The number of beds in BiH’s health systems is broadly in line with international comparators\. Nevertheless, key indicators, such as the number of beds per doctor and bed occupancy rates, vary widely among comparable hospitals indicating scope for rationalization in some facilities\. In Republika Srpska, the number of beds per doctor varies from 2 in Nevesinje to 3\.7 in Bijeljina\. Bed occupancy rates are also low compared to western European standards, varying from 51% in Zvornik to 82% in Clinical Center Banja Luka\. Similar variation exists across hospitals in the Federation of Bosnia and Herzegovina, where average bed occupancy is less than 60%, signaling substantial capacity for more efficient use of the hospital estate\. Measures of hospital productivity, such as the number of discharges per staff member, vary two-fold (from Nov 08, 2020 Page 10 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) 7\.9 discharges per clinician in Canton 10 to 18\.1 discharges per clinician in Srednjo-bosanski canton)\. In both entities, payment structures do not adequately incentivize performance of quality\. There are no stimuli for following clinical pathways, guidelines or for the provision of preventative care\. Similarly, the contracting system does not optimize efficiency: in the Federation of Bosnia and Herzegovina, the diagnosis-related group (DRG) payment system is barely used, and in Republika Srpska the system does not currently benefit from a process for systematic tariff revision, so reimbursement is not well calibrated with actual costs and incentives for high-quality care\. In addition, in both entities there is scope to concentrate complex or high- cost services into fewer specialist centres\. The current allocation of activity, where almost all hospitals provide almost all services, compromises quality and raises costs\. 20\. The lack of effective controls to prevent hospitals from over-spending further exacerbates the accumulation of arrears - constraint (c)\. Inefficiencies also emerge out of skewed incentive regimes\. In both entities, health facility managers who accumulate operating deficits and arrears are not penalized, and managers who take steps to improve efficiency and reduce arrears are not rewarded\. There are gaps in the legal framework – notably the Health Insurance Law places most responsibility for arrears on the HIF – but other accountability measures are not being enforced\. For example, many hospitals are not submitting annual performance reports, despite a requirement to do so, many facilities are not paying employers’ share of social security contributions, and there are no consequences or follow up for negative audit findings of health facilities\. In addition, it has been reported that capital investment decisions – both infrastructure and investments in diagnostic equipment – are sometimes made without fully considering current cost implications or the challenges of the duplicated health service network\. 21\. This lack of incentive and weak accountability also impacts quality and financial management - constraint (d)\. In both entities, the institutional framework and capacities for monitoring health sector efficiency and quality are not adequately defined and supported\. Although agencies for quality monitoring and improvement are well-established in both Republika Srpska and the Federation of Bosnia and Herzegovina, their impact on day-to-day clinical work or strategic thinking remains limited\. Accreditation currently focusses on the achievement of minimum standards, rather than more ambitious goals of continuous quality improvement\. Both agencies have also developed systems for benchmarking of primary care teams and hospitals on key health outcomes (such as management of hypertension)\. These indicators are not, however, publicly disclosed or used for payment\. Additionally, health insurers’ contract and payment arrangements with health care providers do not optimize incentives for quality or efficiency\. Managerial inefficiencies at the hospital level are often caused by weaknesses in leadership, in turn due to the hospitals’ autonomy regarding the recruitment and appointment of employees at all levels (board members, managers and regular clinical and non-clinical staff), causing politicization and non-accountability amongst staff\. Systems to appoint and train qualified managers also need to be strengthened to provide a supply of managers who can balance the financial and quality related needs of the sector\. The combination of weak governance, political patronage and limited citizen engagement means that health systems are not held to account for providing good care\. In addition, patients have little choice over where they can get care, so they cannot ‘vote with their feet’\. 22\. Incentives for budget prudence are weak\. Incentives for providers to stay within their budgets are low due to weak reporting, oversight, and expenditure controls, as well as structural misalignments in accountability for expenditures\. Weak expenditure reporting dilutes accountability and incentives for budget prudence\. In both entities primary care centers are not integrated into the treasury system, which reduces the Nov 08, 2020 Page 11 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) transparency and oversight over their expenditures\. Lack of effective oversight and expenditure controls permit providers to overspend their budget allocations and run into arrears\. Legally, HIFs and ministries of finance have weak capacity to monitor and control expenditures\. For example, gaps in legal frameworks permit facility managers to recruit additional staff (beyond filling vacancies) without the approval and control by ministries of finance or other relevant control bodies, even if there is no funding available, which generates arrears in salary and other payments\. Misalignment in budget accountabilities, partly rooted in incomplete legislation, contributes to overspending and arears\. The health insurance laws in each entity place most responsibility for arrears on the HIFs: HIFs are by law obligated to pay hospitals and clinics for services that are uncapped and deemed necessary\. Decisions over spending and classification of services by payment categories, however, rest with the facilities\. This setup disproportionally distributes the risk of budget overruns to the HIF and does not incentivize managers to stay within their annual allocations\. The ongoing integration of primary care centers into the treasury system in Republika Srpska is expected to strengthen owners’ accountability for financial performance\. 23\. Effective service delivery, FM and systems governance are constrained by the wider macroeconomic environment - constraint (e)\. BiH’s limited health care resources must be used as efficiently as possible\. Some recent reforms, however, have weakened the health systems’ financial position: in Republika Srpska, for example, the rate of mandatory employee contributions to the health insurance fund was reduced in 2013, from 12\.5% to 12% for the employed (compared to 15% in 2001) and from 2% to 1% for the retired (compared with 3\.75% in 2009)\. As a result, the HIF estimates a total revenue loss of 81 million BAM between 2013 and 2016\. Crucially, these decisions to reduce the funding envelope were not aligned with expenditure decisions\. Central decisions to increase wages and a lack of planning around capital investments and the lack of an evidence-based approach to the benefits package, have further contributed to arrears\. For example, in Republika Srpska, centrally mandated salary increases for staff, particularly in 2008 (86%), created an additional annual burden of 80 million BAM for facilities, but without an increase in financial allocations\. The HIF took out loans to cover the gap, but the 67 health facilities were responsible for repayments\. In the Federation of Bosnia and Herzegovina, the proposed Law on Restructuring and Financial Consolidation of Public Health Institutions notes that fiscal policy has not kept up with trends in health care needs and services\. Commitments to increase excise duties on tax and alcohol, with the resulting revenue being directed to the health sector, and to increase government subsidies for older peoples’ use of health care services remain unfulfilled, meaning that the sector is at risk of being under-funded relative to need\. Governments’ response 24\. The governments in each entity have adopted, or are in the process of adopting, plans and legislative frameworks to improve health systems performance, and have requested WB financial and TA to support implementation\. In Republika Srpska, two health sector Action Plans have been formally adopted: one addresses health sector financial sustainability (prioritizing, amongst other things, transfer of health care providers to central and local governments’ “treasury systemâ€?, the budget planning, execution and monitoring system supervised by the MoF); the other aims to improve the quality of care for NCDs (prioritizing, amongst other things, expansion of preventive care and strengthening of primary care)\. In addition, the legislative framework underpinning the health care system is being revised through the preparation of four new laws on (a) health care services (addressing strengthened primary care, the creation of service networks, a more prominent role for clinical guidelines, a strengthened role and more secure funding for the Agency for Certification, Accreditation and Health Care Quality Improvement (ASKVA), and Nov 08, 2020 Page 12 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) telemedicine amongst other things); (b) health care insurance (addressing categories of insured persons, the range of health care benefits, and revision of contract and payment arrangements with health care providers to incentivize quality and efficiency amongst other things); (c) health care workers (addressing professional roles and spheres of activity, training and continuous professional education amongst other things); and, (d) health care information systems (addressing creation of an integrated health information system and harmonized records across health care providers, a shareable electronic health record and entity-level patient register amongst other things)\. 25\. In the Federation of Bosnia and Herzegovina, laws that transfer the largest teaching hospitals to the Federation’s treasury system (and that allow smaller hospitals to be transferred to cantonal tr easury systems) are being prepared, as well as creation of a new financial regulator for the health sector\. Complementary laws that aim to increase the revenue available for the health sector through expansion of social security contributions are also being drafted\. It is widely recognized, however, that implementation of these reforms will be difficult (Republika Srpska has been trying to transfer health care providers to the treasury system for several years)\. Accordingly, both entities have requested assistance from the WB to support implementation of the necessary reforms\. This will include both financial assistance (to clear current arrears and allow transfer of health care providers to the treasury system, as well as invest in activities to improve health care quality and efficiency) and TA (to improve FM, as well as health care quality and efficiency)\. 26\. A comprehensive and coordinated package of assistance will be needed to support health systems reform in both entities\. Given the depth, complexity and persistence of the problems to be solved, a sophisticated sequence of technical and financial inputs is needed to tackle the twin problems of unsatisfactory health care quality and unsustainable health systems arrears, as described below\. ➢ Immediate: assistance to clear the stock of existing arrears ➢ Immediate to short- and medium-term: assistance to arrest the flow of new arrears, by improving the performance of health systems (‘spending more effectively’; constraints (a), (b) and (d)) and by improving FM (‘stopping overspending’; constraints (c) and (d)); and, ➢ Longer term: assistance to ensure sustainable health systems financing in the long term; constraint (e)\. 27\. This project will support activities in the second step (assistance to arrest the flow of new arrears)\. As mentioned earlier, a health-focused DPF operation is also under preparation - this will help address the first step (assistance to clear the stock of arrears)\. Both governments have indicated that they do not wish to use project resources on training, consultancies, communications and outreach activities\. As such, necessary TA of this kind will be supported through a health sector focused trust fund (TF), as shown in Annex 5\. The interaction between this project, the DPF, and TA supported through associated TFs is described in Section IV A, Technical Analysis\. Care has been taken to avoid gaps or overlapping of activities and financial resources across the projects\. A schematic overview of the intended instruments and a roadmap for ensuring the long- term financial sustainability of BiH’s health systems is provided in Table 2\. Nov 08, 2020 Page 13 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) Table 2: A Roadmap for Ensuring the Long-Term Financial Sustainability of BiH’s Health Systems Step on the roadmap Instruments ✓ planned DPF series (through budget support) 1\. Assistance to clear the stock of existing arrears ✓ other sources of budget support, including the International Monetary Fund (IMF) Rapid Financing Instrument19 2\. Assistance to arrest the flow of new arrears i\. Spending more effectively (addressing ✓ planned DPF series (through prior actions) constraints (a) and (b), supported by action to ✓ this project (through investments and address constraint (d)) performance-based conditions) ✓ analytics, training and communications ii\. Stopping over-spending (addressing constraint provided through linked TF (c), supported by action to address constraint (d)) 3\. Assistance to ensure sustainable health systems Future DPF, Investment Project Financing (IPF) financing in the long-term and TF focused on: (addressing constraint (e)) ✓ deepening quality and efficiency reforms started in Step 2 ✓ addressing likely structural shortfall in health systems revenue\. Stakeholder engagement 28\. The WB has consulted a wide range of stakeholders to identify appropriate objectives and activities for the project, including health care providers\. A stakeholder analysis was conducted in both the Federation of Bosnia and Herzegovina and Republika Srpska and based on this, Working Groups were established in both entities, comprising representatives from the ministries of health and of finance, the health insurance funds, health care providers and professional associations\. In our initial meetings, the Working Groups, were asked to participate in the identification of priority investments for the project as well as SMART20 indicators to monitor progress/achievement of the PDO\. The WB has also developed close and effective collaboration with development partners (including UN agencies and several national development agencies and/or embassies) through a standing committee that discusses health sector issues, thus developing a single, coherent voice on priorities for reform\. 19 A Rapid Financing Instrument (equivalent to US$361 million; EUR 333 million) was approved by the IMF in April 2020\. This is also intended to support spending on health and social assistance (particularly in the context of the COVID-19 pandemic), while preserving debt sustainability\. 20 SMART: specific, measurable, achievable, relevant, time-bound\. Nov 08, 2020 Page 14 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) 29\. Maintaining and extending this level of stakeholder engagement during project implementation is a priority\. This will be achieved through the standing committee, and with politicians as and when appropriate\. Groups representing patient or carers are virtually non-existent in BiH\. New platforms are being developed, however, to facilitate engagement with citizens and health care users and build a consensus for reform, as described in Box 3\. Box 3: Enhancing citizen engagement in BiH’s health systems The Strengthening Transparency and Accountability of Health Systems in Bosnia and Herzegovina trust fund (P175779), supported by the United Kingdom, will deliver a tailored package of technical assistance to improve health systems’ transparency and accountability\. Two sets of activities will be implemented to support mutually reinforcing objectives: i) establishing effective and resilient citizen engagement mechanisms and ii) developing policy options for strengthened fiscal and procurement practices, thereby addressing both ‘demand-side’ and ‘supply-side’ accountability\. Activities will lay essential groundwork for a deeper engagement on areas of transparency, accountability and community engagement\. The project will deliver essential preparatory materials (such as a citizen engagement framework and related content for the project’s Operations Manual for citizen engagement) as well as pilot studies (integrity of procurement and transparency and accountability in areas such as financial or workforce management) whose recommendations can be implemented through a longer-term multi-donor TF\. The project will also support launch of a citizen-facing online platform to facilitate and integrate health systems citizen engagement, design and pilot a digital citizen engagement community scorecard, and train pilot cohorts of community- level focal points in each entity\. Accountability will be strengthened through increased public awareness, engagement and support for health sector reforms on the demand side, and through increased transparency and responsiveness of health care providers and authorities on the supply side\. The WB will leverage its network to transfer knowledge and start building capacities of local counterparts\. Specific activities will enable building skills and competence of women and vulnerable groups in engaging with public authorities on local aspects of health systems reform\. These preparatory activities, through June 2021, will be maintained and built upon through the duration of the project\. C\. Proposed Development Objective(s) Development Objective(s) (From PAD) The Project Development Objective (PDO) is to contribute to improvement in the quality of care and in the financial sustainability of BiH’s health care systems\. Key Results Nov 08, 2020 Page 15 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) 30\. PDO indicators\. Progress towards and achievement of the PDO will be monitored through the following indicators: 1) The percentage of health care providers demonstrating quality gains through a defined set of indicators21 that are publicly disclosed; 2) The percentage reduction in the rate of hospital admissions where the only recorded diagnosis is arterial hypertension, or where the principal diagnosis is uncomplicated arterial hypertension;22 and, 3) The percentage of health care providers and health insurance funds achieving a debt ratio of 0\.5 or less at the end of the financial year\.23 The proposed indicators directly relate to the PDO, addressing the quality of clinical care (indicators 1 and 2) as experienced directly by the key beneficiaries of the project, that is, patients and their carers, as well as financial sustainability (indicator 3)\. Indicator 2, as a measure of efficiency, captures both quality and financial sustainability\. The proposed indicators also directly relate to the constraints underlying unsatisfactory quality and sustainability (paragraph 16), with indicator 1 addressing constraints (a), (b) and (d); indicator 2 addressing constraints (a) and (d); and indicator 3 addressing constraints (b), (c) and (d)\. The PDO indicators will be monitored separately for each entity; in addition, Indicator 2 will be disaggregated by gender\. 31\. Intermediate indicators\. Intermediate steps towards achievement of the PDO will be monitored through indicators that track critical steps in strengthening the governance of BiH’s health systems, alongside key project activities or outputs that, together, can contribute to improved quality of care and financial sustainability\. Intermediate indicators, monitored separately for each entity and, where relevant, disaggregated by gender, will be: Quality of care: • Number of health care providers that have established an annual, representative, patient satisfaction survey that is publicly disclosed; • Percentage of citizens/users reporting that they have been engaged in providing facility-level feedback and in planning service design and delivery; • Number of clinicians and managers trained in quality monitoring and improvement techniques; and, • Number of studies conducted to allow concentration of specialist care into fewer providers; and, 21 Indicators will be drawn from those already defined, collected and analyzed by the health care quality agencies AKAZ and ASKVA\. The set will be defined through a consultative process involving ministries of health, health insurance funds and health care providers\. 22 Arterial hypertension is chosen because it is, in a high-performing health system, almost always treatable in primary care and almost never a valid reason for hospital admission\. In addition, data from Republika Srpska show year-on-year increases in hospital admissions for hypertension (equivalent data for the Federation of Bosnia and Herzegovina are not available)\. 23 Debt ratio = total debt / total assets\. This ratio captures both long term financial stability (by including assets), as well as progress in reducing arrears (a subset of liabilities), and therefore reflects well what is meant by ‘financial sustainability’ in this project and in the PDO\. The ratio can be easily calculated from routinely collected administrative data in each healt h care provider / health insurance fund and is well-established internationally as a measure of financial health (with 0\.4 to 0\.6 being typically acceptable figures)\. Nov 08, 2020 Page 16 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) • Number of hospitals publishing waiting times for selected secondary care services\. Financial sustainability: • Number of health care providers or health insurance funds submitting financial reports, including overdue unpaid liabilities, to the appropriate authorities on time; • Number of studies of patient pathways conducted to determine true cost and adjust reimbursement tariff; • Share of total purchase value of medical goods (drugs, equipment, supplies and consumables) executed through centralized procurement; and, • Transfers from the general government budget to the health insurance funds, and from the health insurance funds to health care providers, to maintain coverage of the health care needs of: war veterans, refugees, the unemployed, social welfare recipients and other groups unable to, or exempt from, direct contributions themselves\.24 D\. Project Description 32\. The project will have three components: (1) Increasing health system performance in Republika Srpska; (2) Increasing health systems performance in the Federation of Bosnia and Herzegovina; and (3) Project management and monitoring\. There will be one technical component per entity to facilitate implementation, each adjusted to reflect the needs and priorities of that entity’s health system(s)\. These technical components will finance investments to improve the efficiency and quality of care (addressing constraints (a) and (b)); and the management capacity and financial sustainability of health care providers (addressing constraints (c) and (d))\. Collaboration across entities in project implementation and monitoring will be encouraged wherever feasible\. Critical complementary activities, including training, consultancies, communications and outreach activities, will be funded through a linked TF that has been specifically created to support the project\. 33\. In addition, in Republika Srpska performance-based conditions (PBC) will be used to incentivize reforms that can prevent the further accumulation of arrears\. These PBC will strengthen sector governance through institutional and policy changes that address the constraints underlying unsatisfactory quality and financial sustainability set out earlier, thereby creating the foundations for longer-term and more challenging reforms\. The federal Ministry of Health of the Federation of Bosnia and Herzegovina has stated that they do not want PBC as part of their investment project\. Instead, support to the Federation for similar institutional and policy changes will be achieved through targeted technical assistance and TF activities\. 24 To be measured in Republika Srpska only, as the Eligible Expenditure Program for Performance-Based Conditions (described later, under Sub-component 1\.3)\. Nov 08, 2020 Page 17 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) Component 1: Increasing health system performance in Republika Srpska (US$ 50 million) Sub-component 1\.1\. Improving the efficiency and quality of care (US$ 13 million) 34\. This sub-component will address constraints (a) and (b) by investing in goods, equipment and minor works to optimize the service network, including strengthening preventive care and health system preparedness; increasing primary care and day-care where appropriate; studying patient pathways to determine the true cost of care for four prevalent conditions and based on this, repricing selected services within the DRG system; expanding centralized procurement for high-cost drugs, medical devices and supplies; and, enhancing citizen engagement to gather users’ feedback on health care and health insurance\. Specifically, this sub-component may include activities and investments described below\. 35\. Support MoHSW and the Public Health Institute to strengthen preventive care and health system preparedness, through activities and investments that: (a) Develop capacity for disease surveillance, on-time data analysis and decision-making by enhancing systems and protocols for data reporting, analysis and dissemination, including linking primary care providers to public health surveillance systems; and, (b) Support epidemiological investigation by expanding the number of public health workers trained to undertake disease detection and contact tracing; 36\. Support primary care providers and the MoHSW to strengthen primary care and reduce unnecessary use of hospitals, through activities and investments that: (a) Update clinical guidelines and care pathways to strengthen preventative care and shift management of complex, chronic conditions such as hypertension from hospitals to primary care, thereby avoiding unnecessary hospitalization; (b) Expand the provision of outpatient and ambulatory services for less-invasive diagnostics and procedures, such as hernia repair and cataract surgery; and, (c) Optimize the numbers and distribution of the health care workforce (both clinical and administrative) to improve productivity\. 37\. Support hospitals, the MoHSW and the health insurance fund to ensure efficient provision of in-patient hospital care, when unavoidable, through activities and investments that: (a) Reprice selected services within the DRG system, so that reimbursement from the HIF to health care providers represents true cost and to incentivize the use of ambulatory and outpatient care where appropriate;25 (b) Build capacity in, and expand the use of, health technology assessment in the HIF, to ensure that only cost-effective services are included in the benefits package; and (c) Build capacity in and expand the use of centralized procurement and managed-entry agreements for high cost drugs and devices\. 38\. Support health care providers to improve the quality of care and patient satisfaction, through activities and investments that: 25The project will not directly contribute to redundancies, but eventual job loss may result from rationalization and increased efficiency of health care insurance and health care services\. Nov 08, 2020 Page 18 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) (a) Develop systems and structures for the regular collection and reporting of health care quality, safety and patient satisfaction at facility level; (b) Where possible, merge and concentrate specialist services and diagnostics into fewer hospitals/ clinics/laboratories; (c) Introduce performance-based payments for clinical and managerial teams to reward high-quality care, as defined by ASKVA, professional and patient groups; and Sub-component 1\.2\. Strengthening management and financial sustainability of health care institutions (US$ 7 million) 39\. This sub-component will support activities and investments to improve the financial stability of health care providers and HIFs, thereby addressing constraints (c) and (d)\. Complementing the activities and investments in sub-component 1\.1, this sub-component will focus on investments that build providers’ capacity and strengthens their incentives to avoid budget overruns and arrears\. Specifically, this sub- component may include activities and investments to: (a) Establish a publicly accessible database of arrears by health care provider; (b) Purchase hardware and software to allow health care providers and the health insurance fund to implement the treasury financial information system, and thereby improve their reporting on arrears, liabilities and financial risk; (c) Revise contracting and accounting methods to comply with treasury system requirements; and, (d) Develop robust management information and communication technology such as integrated hospital dashboards to provide information on resources, activities, and key performance indicators (including feedback from service users)\. Sub-component 1\.3\. Promoting linked institutional and policy reforms through performance-based conditions (US$ 30 million) 40\. This is a result-based sub-component that introduces incentives for institutional and policy adjustments which address the constraints underlying unsatisfactory quality of care and financial sustainability set out earlier, thereby supporting achievement of the results chain\. The sub-component provides incentives that reward the government and other relevant health system authorities for making changes in the legislative and regulatory framework (that are not part of the planned DPF), as well as for day-to-day management of health care providers, that will enhance transparency and accountability for improved clinical and financial performance - constraints (a) to (d)\. The PBC will be designed to target regulatory and institutional bottlenecks to improving health sector performance, including fragmented and limited accountability for results, and thereby synergize with the investment component\. Financing for this component will be provided based on five PBC, each with around three sequential targets that trigger disbursement\. 41\. The PBC, disbursement-linked targets, disbursement schedule and verification protocols have been developed in close consultation with the MoHSW\. Disbursements will be ‘scaleable’, meaning that early or partial fulfilment of the targets can trigger disbursement; advances may also be disbursed (subject to the PBC being fully achieved within the project duration)\. A robust verification mechanism (using an independent agency) will be agreed and set out in the Project Operations Manual\. The agreed PBC are: Nov 08, 2020 Page 19 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) PBC 1\. Reduction in the number of hospital admissions where the only recorded diagnosis is arterial hypertension, or where the principal diagnosis is uncomplicated arterial hypertension (addressing constraint (a)) PBC 2\. Introduction of updated hospital reimbursement methods for four prevalent conditions, based on evidence-based care pathways (addressing constraint (b)) PBC 3\. Incremental migration of health care providers’ budget planning, execution and monitoring to the treasury system (addressing constraint (c)) PBC 4\. Expansion in the share of high-cost medical goods (drugs, equipment, supplies and consumables) executed through centralized procurement, as measured by value (addressing constraints (c) and (d)); and, PBC 5\. Expansion in the number of health care providers using patient satisfaction measures and service- user engagement in business planning, including publicly disclosed patient satisfaction rates (addressing constraint (d)) 42\. Eligible expenditures will comprise the MoHSW’s contributions to the HIF to finance the insurance premiums of the poor and exempted, in accordance with the Article 10 of the Law on Health Insurance in Republika Srpska\. These contributions are substantial26 and regular item on the MoHSW’s budget since they purchase healthcare insurance coverage through HIF, which then contracts health services from healthcare institutions for specific groups, such as the retired, vulnerable, children, unemployed and other similar categories (which are all defined in the Law)\. These expenditures are, therefore, productive and necessary\. The obligation to make these contributions is set under the Law and the MoHSW (and its predecessors and successors) is obliged to budget such funds every year\. The amounts may vary but the budget item always exists in the RS budget\. Although these contributions could be considered as recurrent expenditure, achievement of the PBCs will change the nature of such expenditure, by making health care insurance and health care services more efficient\. Eligible expenditures in this sub-component in combination with the specified PBCs, therefore, directly contribute to achievement of the PDO\. They also offer a means to monitor continuity and equity of access to the health care systems as efficiency reforms are undertaken\. Component 2: Increasing health systems performance in the Federation of Bosnia and Herzegovina (US$20 million) 43\. All cantons were asked in August 2019 to express interest in participating in the project and to identify potential activities\. Six cantons expressed interest in collaboration;27 of these, Sarajevo Canton (KS), Herzegovina-Neretva Canton (HNZ/K) and Tuzla Canton (KT) proposed activities that were best aligned with the reform priorities identified\. Engagement, therefore, will be taken forward in these three ‘spearhead’ cantons – an approach endorsed by the Federation Minister of Health (additional details are provided in the “Project Contextâ€? section)\. It is intended that other cantons will participate in this IPF at a later stage, once results from the ‘spearhead’ cantons emerge, and if their plans for health sector reform align with the project's activities and objectives\. In the meantime, they will be supported by trust fund activities (Annex 5)\. 26 57\.5m BAM (34\.7m USD, 34\.7m EUR) annually, according to the most recent figures\. This is around 10% of the HIF annual revenue\. 27 Canton 10, Herzegovina-Neretva Canton, Posavina Canton, Sarajevo Canton, Tuzla Canton, West Herzegovina Canton\. Nov 08, 2020 Page 20 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) Sub-component 2\.1\. Improving the efficiency and quality of care (US$ 13 million) 44\. This sub-component will address constraints (a) and (b) by investing in goods, equipment and minor works to support the Federal MoH to work with cantons to optimize the service network, including strengthening preventive care and health system preparedness; increasing primary care and day-care where appropriate; studying patient pathways to determine the true cost of care for four prevalent conditions to build upon the incipient DRG systems already developed in the Federation (for example by HNZ/K) and extending them to all health care providers for more patient groups; expanding centralized procurement for high-cost drugs, medical devices and supplies; and, enhancing citizen engagement to gather users’ feedback on health care and health insurance\. The Federation of Bosnia and Herzegovina MoH also wishes to invest in harmonized information technology hardware and software across the 10 cantons’ health systems\. These activities align with proposed activities in Republika Srpska as well as with the health sector project in the Federation’s Public Investment Program (remaining from the 2017 project preparation that was cancelled)\. Specifically, this sub-component may include activities and investments described below\. 45\. Support federal and cantonal ministries of health and public health institutes to strengthen preventive care and health systems preparedness through investments that: (a) Develop disease surveillance (both NCDs and infectious disease) modules of health systems’ current information systems and linking primary care providers to them; and, (b) Provide on-time data and information for public health decision-making and response activities, by enhancing systems and protocols for data reporting, analysis and dissemination\. 46\. Support professional organizations, federal and cantonal ministries of health to optimize health care networks, through investments that: (a) Develop electronic health records in primary care and secondary care and develop an integrated information system that shares clinical and administrative information across primary care centers, hospitals, public health institutes and the Agency for Accreditation and Health Care Quality in Federation of Bosnia and Herzegovina (AKAZ); and, (b) Optimize the tasks, numbers and distribution of the health care workforce (both clinical and administrative) across primary care and secondary care facilities\.28 47\. Support hospitals to deliver efficient in-patient care, when unavoidable, through investments that: (a) Develop an open-source DRG system that can be regularly updated and used for monitoring activity, ensuring accurate reimbursement rates and eventually used for pay-for-performance; (b) Expand the outpatient and ambulatory care for selected, appropriate services that are currently provided as in-patient services; (c) Expand the use of centralized procurement and managed-entry agreements for high cost drugs and devices, especially at the level of the Federation; and, (d) Where possible, merge and concentrate specialist services and diagnostics into fewer hospitals/clinics/laboratories\. 28The project will not directly contribute to redundancies, but eventual job loss may result from rationalization and increased efficiency of health care insurance and health care services\. Nov 08, 2020 Page 21 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) 48\. Support AKAZ, health care providers and federal and cantonal health insurance funds to improve the safety and quality of care, including patient satisfaction, through investments that: (a) Support the adoption of safety standards and quality accreditation in all health care providers; (b) Strengthen programs for monitoring and improving the safety and quality of care (including surveillance for adverse events) to enhance performance and accountability; (c) Introduce performance-based payments for clinical and managerial teams to reward high-quality care as defined by the AKAZ, professional and patient groups; and, (d) Strengthen the units in each health care provider responsible for quality monitoring and improvement, enhancing their capacity for analysis of quality indicators\. Sub-component 2\.2\. Strengthening management and financial sustainability of health care institutions (US$ 7 million) This sub-component will support activities and investments to improve the financial stability of health care providers and HIFs, thereby addressing constraints (c) and (d)\. Complementing the activities and investments in sub-component 2\.1, this sub-component will focus on investments that build providers’ capacity and strengthens their incentives to avoid budget overruns and arrears\. Specifically, this sub-component may include activities and investments to: (a) Develop hardware and software to allow health care providers and HIFs to improve budget planning, execution and monitoring, including their reporting on arrears, liabilities and financial risk; (b) Develop integrated hospital dashboards to provide information on resources, activities, and key performance indicators (including feedback from service users)\. (c) Develop or support Performance Innovation Units in health care facilities, federal and cantonal HIFs and MoHs to strengthen internal needs analysis, reform planning, piloting and evaluation of reforms; and, (d) Establish a publicly accessible database of arrears by health care facility\. Component 3: Project management and monitoring (US$ 4\.82 million; of which Republika Srpska US$ 3\.44 million, Federation of Bosnia and Herzegovina US$ 1\.38 million)29 49\. This component will support project implementation in each entity, providing overall administration of the project (including procurement and FM, including fiduciary assessments), as well as regular monitoring and evaluation (including beneficiary surveys), reporting of implementation, communication and beneficiary feedback activities\. Continued outreach to stakeholders to explain the rationale for reforms and build consensus for their implementation will be emphasized\. Where appropriate, activities to overcome intergovernmental fragmentation and to support collaboration between the two entities will be delivered through this component, such as aligning efforts to design and implement community scorecards and health service user surveys as part of project monitoring\. 29Financing in this component is distributed between Republika Srpska and the Federation of Bosnia and Herzegovina in proportion to Components 1 and 2\. In particular, verification of the achievement of PBC (sub-component 1\.3) requires a greater budget for project management and monitoring in Republika Srpska\. Nov 08, 2020 Page 22 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) 50\. Existing government structures and capacities will be used as much as possible\. If necessary, these will be strengthened by the appointment and/or recruitment of additional staff/consultants responsible for overall administration, the Environmental and Social Framework (ESF), communication and outreach, procurement, and FM\. Local administrative structures and relevant specialized institutions at the local level will support the Project Implementation Units (PIUs) in project monitoring\. Project Beneficiaries 51\. Direct beneficiaries of the project will be the MoH of the Federation of Bosnia and Herzegovina, MoHSW of Republika Srpska, HIFs and health care facilities, including clinical and management staff\. Efforts to improve quality and efficiency of health care through monitoring, improved internal management procedures and use of citizen feedback to strengthen accountability will benefit health facilities at all levels (public health institutes, hospitals and primary care facilities) and ultimately the users of BiH’s health care systems, that is, the general public\. 52\. Patients and their carers, particularly the elderly and people with chronic conditions, will benefit from better performing health systems\. The project will promote better quality and more responsive health services for both women and men, as well as for infants, children, working age adults and senior citizens\. Special attention will be given to monitor service coverage of, and use of health care services by, underserved populations, including those groups that are not registered by the HIFs (such as the Roma community)\. The final indicator also addresses key beneficiaries, by focusing on citizen feedback as an accountability mechanism to improve health system performance\. \. \. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No Summary of Assessment of Environmental and Social Risks and Impacts \. 53\. The project, at this stage, does not include any activities that could have a physical footprint or have direct or indirect lasting environmental impacts or risks\. The main aim is to improve financial management of the sector, focusing mostly on arrears\. Furthermore, the project would improve quality assurance and monitoring of the services in the sector and overall improved governance in the publicly funded health care sector\. By increasing citizen interface with health care facilities, the project aims to use public pressure to improve accountability and quality of health care services\. There is a possibility that the hospital improvement and reform plans would include activities that could have temporary environmental impacts (in cases of some reconstruction to offer new medical services for example) and these would be addressed if they occur, through the use of a Small Scale Reconstruction Works Checklist ESMP\. 54\. Provided that potential repurposing would take place within the existing footprints of health care facilities, it is unlikely that impacts on private land/assets would occur\. The Project Operational Manual would need Nov 08, 2020 Page 23 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) to specify that, if any works are proposed under the improvement plans, they are subject to an environmental review and will be conducted in line with the World Bank Environmental and Social Standards, and also the Environment Health and Safety Guidelines, both general and the Guidelines for the Health Care Facilities\. 55\. The project does not anticipate direct impacts on any other vulnerable groups as access to healthcare services is not within the scope of the project\. The project will continue with wide and frequent stakeholder engagement to facilitate public receptiveness to potential changes in medical services\. Given the low risk nature of the operation, the lack of lasting direct or indirect environmental and social impacts, and the integration of citizen engagement mechanisms in key project activities, the project’s environmental and social risks are considered to be low\. E\. Implementation Institutional and Implementation Arrangements 56\. Given the complex governance within BiH, institutional and implementation arrangements have been designed to be as practical and reliable as possible\. Accordingly, institutional and implementation arrangements build upon existing structures and systems in each entity, to the extent possible\. In Republika Srpska, the MoHSW has a Planning, Analysis, Financing and Project Implementation Department (PAFPID) that has experience with the implementation of WB projects, in both the health and social assistance sectors\. In the Federation of Bosnia and Herzegovina, the MoH has successfully implemented WB projects in the past\. Key individuals from earlier PIUs remain employees within the government and have been recently reconvened to establish a PIU for the Bosnia and Herzegovina Emergency COVID-19 Project (P173809)\. 57\. In Republika Srpska, project implementation will be carried out by the PAFPID in the MoHSW, led by the Assistant Minister for Planning, Analysis, Financing and Project Implementation and will rely on existing government structures\. In addition to PAFPID, MoHSW (and other government departments, if need be) will provide all other necessary staff to assist with procurement, the ESF, monitoring and evaluation, and communication\. The PAFPID will support relevant technical units in the MoHSW, and directly implement and coordinate certain technical activities, including procurement, communication and monitoring activities\. It will establish partnerships with ASKVA, the HIF and other agencies as needed (such as the Institute for Public Health)\. Some activities, such as training, may be outsourced to third parties through contractual agreements acceptable to the WB\. The PAFPID will also be responsible for preparing a consolidated annual workplan, annual budget and a consolidated activity and financial report for the project\. It will gather and, together with other stakeholders, analyze all relevant monitoring data and report these to the Minister for Health and Social Welfare, and to the WB\. A Project Operations Manual (POM) clearly describing the roles, responsibilities, and processes will be developed by the MoHSW\. 58\. In the Federation, implementation of the project will be carried out by the Federation Ministry of Health (FMoH) and existing government structures\. A PIU will be created in FMoH for overall project coordination and implementation\. The PIU will comprise a Project Coordinator, FM Specialist, and Procurement Specialist\. In addition to the PIU, the FMoH (and other government departments, as needed) will provide all other necessary staff on procurement, FM, the ESF, monitoring and evaluation, and communication\. The PIU will Nov 08, 2020 Page 24 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) establish partnerships with the Agency for Accreditation and Health Care Quality in Federation of Bosnia and Herzegovina (Agencija za kvalitet i akreditaciju u zdravstvu u Federaciji BiH, AKAZ), HIFs and other agencies as needed (such as the Institute for Public Health) to support project implementation and monitoring\. The PIU will also establish project support groups at the cantonal level (including cantonal MoH and public health institutes)\. Some other activities, such as training, may be outsourced to third parties through contractual agreements acceptable to the WB\. The PIU will submit an implementation status report to the Project Steering Committee (to comprise relevant ministries and stakeholders) and to the WB\. A POM clearly describing the roles, responsibilities, and processes will be developed by the FMoH\. Results Monitoring and Evaluation Arrangements 59\. In Republika Srpska, through the PAFPID, the MoHSW will be responsible for monitoring and evaluation activities, including: (a) collecting and consolidating all data related to indicators from the relevant public authorities; (b) evaluating results; (c) providing the relevant performance information to the Minister for Health and Social Welfare; and (d) reporting results to the WB on a quarterly basis\. Each MoHSW division engaged in project activities, and PAFPID will perform their project-related functions in accordance with the methodology prescribed in the POM\. Each such MoHSW division will appoint a focal point to be responsible for timely provision of project monitoring data\. 60\. In the Federation, the PIU in the Ministry of Health will be responsible for collecting, analyzing and reporting project monitoring data\. The PIU will submit quarterly reports elaborating on physical and financial progress and reporting on agreed results indicators to the Project Steering Committee, as well as the WB\. \. CONTACT POINT World Bank Ian Forde Senior Health Specialist Carlos Marcelo Bortman Lead Health Specialist Simon Carl O'Meally Senior Public Sector Specialist Borrower/Client/Recipient Ministry of Finance, Federation of Bosnia and Herzegovina Samir Bakic Assistant Minister samir\.bakic@fmf\.gov\.ba Nov 08, 2020 Page 25 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) Ministry of Finance, Republika Srpska Bojana Vasiljevic Assistant Minister B\.Vasiljevic@mf\.vladars\.net Gordana Prastalo Head of External Borrrowing G\.Prastalo@mf\.vladars\.net Ministry of Finance and Treasury Betja Ramovic-Kamberovic Head of Dept for Financial Arrangements with International O BRamovic@mft\.gov\.ba Implementing Agencies Ministry of Health and Social Welfare, Republika Srpska Sinisa Janjetovic Assistant Minister S\.Janjetovic@mzsz\.vladars\.net Ministry of Health, Federation of Bosnia and Herzegovina Snjezana Bodnaruk Assistant Minister Snjezana\.Bodnaruk@fmz\.gov\.ba Marina Bera Assistant Minister Marina\.Bera@fmz\.gov\.ba FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects Nov 08, 2020 Page 26 of 27  The World Bank Bosnia & Herzegovina Health Systems Improvement Project (P171150) APPROVAL Ian Forde Task Team Leader(s): Carlos Marcelo Bortman Simon Carl O'Meally Approved By Practice Manager/Manager: Country Director: Johannes Widmann 12-Jan-2021 Nov 08, 2020 Page 27 of 27

APPROVAL

P093882

项 目 ä¿¡ 息 文 件 评估阶段 报告编åï¼šAB2706 项目名称 山东烟气脱硫项目 所属地区 东亚与太平洋地区 所属行业 电力（100％） é¡¹ç›®å P093882 借款人 中国政府 执行机构 山东省环保局 环境类别 B 项目信息文件编制日期 2007 å¹´ 4 月 9 日 授权评估日期 2007 å¹´ 4 月 28 日 执董会审批日期 2007 å¹´ 8 月 16 日 1、国别与行业背景 1980 年以来，中国 GDP 年均增长率达到 9％，持续增长速度位列全球首位。为支撑 如此高的经济增长速度，中国的初级商业能源消费从 1980 年的 6 亿吨标准煤增至 2005 å¹´ 的约 22\.2 亿吨标准煤，增幅超过两倍。所有预测结果均显示，今后几十年内，中国经济 将继续以相对较高的速度增长。同æ ï¼Œå³ä¾¿èŠ‚能力度持续加大，能源消费也将继续快速增 长。 中国不断增加的能源需求基本上由国内煤炭满足。煤炭消费从 1980 的 10\.8 亿吨增加 到 2005 年的 21 亿吨。2005 年煤炭消费的 50％以上用于发电。2005 年，中国发电能力和 发电量分别达到 510 GW 和 2475 TWh 。其中，煤炭发电能力和发电量分别占 75 ％和 80％。即便国家实施了积极的燃料多æ åŒ–政策，发展核电、水电和其它可再生能源，但煤 炭在今后一段时间内仍将是主要的能源来源，今后新增发电能力的至少 50 ％将依托煤 炭。预计到 2020 年，发电能力将增至 1100 GW 以上，其中 700 GW 将依托煤炭。 发电系统的迅速增加及其对煤炭的倚重成为中国严重空气污染的一大推动因素。二氧 化硫是煤炭燃烧排放的主要污染物，可导致各种环境问题，包括酸雨、城市二氧化硫污 染、本地以 PM2\.5 颗粒为主的污染以及大气能力度下降，从而有可能对人体健åºã€å»ºç­‘ 物、文化遗产和农作物生产造成严重影响。据国家环保局发布的报告， 2005 年二氧化硫 排放总量为 2550 万吨，其中 90％源自煤炭燃烧。据测算，大城市空气污染每年可导致 17\.8 万人早逝，34\.6 万人因呼吸道疾病住院治疗，其主要致因为二氧化硫。中国 696 座城 市中，半数以上出现了酸雨。中国约三分之一地区，主要为人口密集和å¥ä¸šåŒ–程度较高的 南方地区，å²å—到酸雨影响。测算显示，仅树木和农作物种植面积减少造成的直接经济损 失就超过了 125 亿美元。 山东省煤炭消费居全中国第二位（2004 年为 1\.59 亿吨），二氧化硫排放量居全国首 位。煤炭消费占该省初级能源消费总量的 82％，高于全国 67％的平均水平。此外，山东 低硫煤炭资源有限，因此在煤炭业目前受供应制约背景下，尽管该省愿意支付高额溢ä»ï¼Œ 也无法从其它渠道èŽå¾—足够低硫煤炭。 火电厂发电能力占山东省总发电能力 37\.6 GW 的 99\.7％，其煤炭消费量占该省所有 行业煤炭消费总量的 51\.6％，因而也是二氧化硫的主要排放源。2005 年，山东省二氧化 硫排放总量为 203 万吨，其中电力和供热行业排放 117 万吨，占 52\.4％。 中国政府部门完全清除应对环境问题的必要性，其近期出台的战略和政策要求在实现 经济可持续发展的同时保护环境。为此，有关部门正采取措施，增加清洁能源供应，提高 能源使用效率。同时，政府部门也在采取有力措施实现其能源来源的多æ åŒ–。这些措施包 括加快发展核电规划、燃气开发与普及宏伟蓝图以及水电和可再生能源大力开发计划。 但是，人们普遍认为中国实际上并不å…备替代能源，因此无法在中短期内实质性改变 其倚重煤炭这一主要能源来源的状况。缓解煤炭消费造成的环境影响是中国清洁空气政策 的一项重点内容。中国政府制定了与国际标准相当的环境空气质量标准。修订后的火电厂 大气污染物排放标准相当严格，要求新建火电厂将二氧化硫排放水平控制在 400 mg/Nm3 以下。此外，中国政府划定了“两控区”，即酸雨控制区和二氧化硫污染控制区，覆盖 109 万平方公里和 61 个大城市。“两控区”范围内的省份要执行二氧化硫排放标准。最 近，经全国人民代表大会批准通过的“十一五”规划制定了到 2010 年全国二氧化硫排放 在 2005 年基础上减少 10％的目标。为实现这一目标，国家环保局与七个排放大省（包括 山东）和六大电力集团签订了二氧化硫总量控制目标责任书。与此同时，中国政府实施了 经济激励措施，支持并鼓励电厂脱硫。配有二氧化硫排放控制设施的电厂èŽå‡†å°†æ¯åº¦ç”µé”€ 售电ä»æé«˜ 1\.5 分，同时每吨二氧化硫排放收费也提高到 630 元。如果这些政策能够得到 充分落实，安装二氧化硫排放控制设施产生的财务效益就有可能充分补偿财务成本。 山东省根据中央政府二氧化硫排放控制政策和目标制定了全省二氧化硫排放控制目标 和贯彻计划。该计划要求到 2010 年使二氧化硫排放总量在 2005 年基础上减少 20％，电 力行业减排 27\.9％。但是，实现这些目标是山东面临的一大挑战。为了实现这些目标，山 东省需制定实施细则和计划，调动足够资金，升级环境监测设施和信息系统，加强环境治 理和机构能力以确保目标得到执行，试点实行排放许可证和排放权交易方案。 实施中央政府环境控制政策是一项å¨å¤§å¥ç¨‹ï¼Œéœ€è¦è°ƒåŠ¨ç§è¥å’Œå…¬å…±éƒ¨é—¨èµ„金。按照中 国电力行业改革安排，五大国有电力集团将用自有资金或商业融资实施二氧化硫排放控制 项目。然而，电力和供热行业有相当部分省级和地方企业的锅炉单位容量小于 1100 T/H，它们既得不到商业融资，也不å…备足够的内部资金，因此无法为二氧化硫排放控制 项目筹集资金。中方å²è¦æ±‚世行和其它多边金融机构支持这部分电力行业。 2、 项目目标 本项目的发展目标是减少供热和电力行业二氧化硫排放，增强监管部门监督执行其二 氧化硫减排方案的能力。 3、 世行参与项目的理由 实施中央政府环境控制政策是一项å¨å¤§å¥ç¨‹ï¼Œéœ€è¦è°ƒåŠ¨ç§è¥å’Œå…¬å…±éƒ¨é—¨èµ„金。按照中 国电力行业改革安排，五大国有电力集团将用自有资金或商业融资实施二氧化硫排放控制 项目。然而，电力和供热行业有相当部分省级和地方企业的锅炉单位容量小于 1100 T/H，它们既得不到商业融资，也不å…备足够的内部资金，因此无法为二氧化硫排放控制 项目筹集资金。中方å²è¦æ±‚世行和其它多边金融机构支持这部分电力行业。 多年来，世行积极支持中国实现其环境可持续发展目标。最新对华《国别伙伴战略》 （经世行执董会 2006 å¹´ 5 月 23 日批准）重点支持中国建设“以人为本”和谐社会，统筹 经济发展与效益分配和生态问题。该战略的一项主要内容是应对资源稀缺和环境挑战，尤 其通过减少大气污染加以应对。本拟议项目将通过资助二氧化硫排放控制设施和增强环境 制度的有效性直接推动这些目标的实现。 世行的参与将在最低成本规划和实施方面引入国际经验和最佳做法，帮助地方在环境 监测和环境执法方面建立制度能力。没有切实有效的制度，将缺乏执法和公平环境——一 些电厂执行环境法规，另一些则不执行。因此，世行参与对确保中国政府二氧化硫排放控 制战略的可持续性至关重要。 4、 项目描述 （a）技术援助子项目：加强山东省二氧化硫排放控制和减排相关技术和制度能力， å…体内容包括：（1）排放监测和执法能力建设与增强，包括安装在线监测设备和信息系 统；（2）技术与管理培训；（3）相关法规、程序和政策的制定。 （b）投资子项目：资助运营中、在建或计划新建的六家火力发电厂安装烟气脱硫设 施。现将每家燃煤供热和火力发电厂介绍如下： 黄台火力发电厂位于济南市，现有七台锅炉和八台发电机组，总装机能力为 1005 MW 。该厂向山东电网供电，向济南市内小区供热。其 660MW 机组å²è¿›è¡ŒçƒŸæ°”脱硫改 造。两台 330MW 新机组正在筹建之中，目的在于关闭其余 345MW 机组和分布于全市的 80 多台纯供热锅炉。 本分项目将资助为两台 300MW 机组安装石灰/石灰石湿法洗涤系统。烟气脱硫系统 主要由吸收装置和供应系统、二氧化硫吸收系统、烟气系统、石膏处理系统、供水系统、 电力系统以及控制系统组成，将建于电厂锅炉房后身。每台锅炉将配有单独一台压力风 机、一座吸收塔和一台热交换器。两台锅炉将共用石灰生产、石膏脱水和供氧设施。 二氧化硫吸收系统是烟气脱硫设施的核心部分，由吸收器、除雾器、循环泵、氧化风 机等构成。烟气中的二氧化硫与石灰中的碳酸钙反应，经强制氧化后成在吸收塔底部形成 石膏晶体。控制系统持续监测脱硫系统进出口处的烟气、二氧化硫和氧气含量。  莱芜火力发电厂èèŽ±èŠœå¸‚ 9 公里，现有 3 台 125MW 火力发电机组。该电厂隶属山东 鲁能集团。目前，3 台现有机组正在进行烟气脱硫改造，另外两台 300MW 新机组正在筹 建之中。根据计划，该厂将向莱芜市供热，以满足该市不断增长的需求，同时将向山东电 网供电。 本分项目将资助为两台 300MW 新机组安装石灰/石灰石湿法洗涤系统。 烟台八角火力发电厂位于烟台市经济开发区，由两台筹建中的 300MW 火力发电新机 组构成。该电厂隶属山东鲁能集团，计划向经济开发区的居民和å¥å•†ä¸šç”¨æˆä¾›çƒ­ï¼Œå‘山东 电网供电。本分项目将资助为两台 300MW 新机组安装石灰/石灰石湿法洗涤系统。烟气 脱硫系统配置与黄台电厂烟气脱硫系统类似。 鲁北火力发电厂位于宾åžå¸‚无棣县，有两台 300MW 供热和发电机组。该电厂隶属山 东鲁能集团，目前正在建设之中。首台 300MW 机组计划于 2007 å¹´ 11 月投产发电，第二 台机组计划于 2005 年投产发电。本分项目将资助对两台 300MW 机组进行石灰/石灰石湿 法洗涤系统改造。烟气脱硫系统配置与黄台电厂烟气脱硫系统类似。 正和集团分项目，由正和集团出资实施。该集团现有两家供热和发电厂，向广饶县经 济开发区和城市地区供热和蒸汽。目前，该厂共有 5 台锅炉（3 台 35TPH 锅炉、2 台 75 TPH 锅炉）。目前，该厂计划在厂区内新建两台 130TPH 锅炉，以补充该县现有 113 台小 型锅炉，满足不断增长的用热需求。本分项目内容将包括对 5 台现有锅炉进行石灰/石灰 石湿法洗涤系统安装改造，为 2 台新锅炉安装石灰石湿法洗涤系统。 新汶集团分项目。本分项目由新汶矿业集团资助。该集团现拥有并运营热电厂，后者 现有 4 台锅炉（3 台 75TPH 锅炉、1 台 130TPH 锅炉）。目前，集团正计划在新址建设 2 台 480TPH 锅炉。新热电厂将用低质煤作原料，向新汶矿业集团供热、供电。本分项目将 改造 1 台 130 t/h 锅炉和配有半干法烟气脱硫装置的 3 台 75 t/h 锅炉，为新热电厂 2 台 480 TPH 锅炉安装石灰/石灰石湿法洗涤系统。 在线监测设备将与二氧化硫排放控制设施同时安装。 本项目拟利用专门投资è´æ¬¾ã€‚è´æ¬¾å°†é€šè¿‡è´¢æ”¿éƒ¨è½¬è´ç»™å±±ä¸œçœï¼Œå†ç”±åŽè€…根据符合 要求的担保向各分项目公司发放。 5、 项目融资 来源： （单位：百万美元） 借款人 0 国际复兴开发银行 70 借款国地方资金 23\.46 次借款人 16\.50 合计 109\.96 6、 项目实施 项目筹备和实施机构安排将分为三级： ï‚ çœçº§é¡¹ç›®é¢†å¯¼å°ç»„å²ç»„建完毕。该小组由主管环保å¥ä½œçš„副省长兼任组长，成员为 各相关省级部门（如发改委、财政和环保等部门），将负责提供总体指导和协调。 ï‚ é¡¹ç›®ç®¡ç†åŠžå…¬å®¤å²æ­£å¼ç»„建。为组建项目办，山东省财政厅、省发改委和省环保局 于 2006 å¹´ 3 月 20 日联合发文。项目办设于省环保局，由环保局副局长任主任，四 名副主任也å²ä»»å‘½ï¼Œå…¶æ—¥å¸¸å¥ä½œç”±çœçŽ¯ä¿å±€éƒ¨åˆ†å¥ä½œäººå‘˜å¼€å±•ã€‚项目办将是世行的 主要联络单位，同时将为项目筹备和实施å¥ä½œæä¾›å¿…要协调。技术援助子项目将主 要由省环保局实施，国际和国内专家提供协助。 ï‚ åˆ†é¡¹ç›®å‡ºèµ„æ–¹çŽ°å²åˆ†åˆ«åˆ¶å®šå…¶é¡¹ç›®ç­¹å¤‡å’Œå®žæ–½æ–¹é¢çš„机构安排，涉及与本项目相关 的所有方面，包括但不仅限于技术、å¥ç¨‹ã€çŽ¯å¢ƒã€ç¤¾ä¼šã€è´¢åŠ¡å’Œé‡‡è´­ç­‰æ–¹é¢ã€‚ 7、 可持续性 山东省各级政府对二氧化硫减排和排放控制的全面重视表明，本项目及其成果将很有 可能å…备可持续性。å…体讲： ï‚ çŽ°è¡ŒçŽ¯å¢ƒæ³•è§„è¦æ±‚æ‰€æœ‰æ–°å»ºç”µåŽ‚è£…é…äºŒæ°§åŒ–ç¡«æŽ’æ”¾æŽ§åˆ¶è®¾æ–½ï¼Œè€Œä¸”ä¸­å›½æ”¿åºœæ˜Žç¡®æ‰¿ 诺将确保这些法规得到贯彻。这些法规也要求大部分现有电厂（包括本项目支持的 电厂）进行二氧化硫排放控制设施改造。本项目的成功实施将提高今后项目实施成 功的可能性和成本效益。 ï‚ å±±ä¸œçœæ”¿åºœå²ä¸Žä¸­å¤®æ”¿åºœï¼ˆå›½å®¶çŽ¯ä¿å±€ï¼‰ç­¾è®¢äºŒæ°§åŒ–硫总量控制目标责任书，对二 氧化硫排放控制作出了承诺。 ï‚ æœ¬é¡¹ç›®çš„æŠ€æœ¯æ´åŠ©å­é¡¹ç›®æ—¨åœ¨å¢žå¼ºå±±ä¸œçœçŽ¯ä¿å±€é«˜æ•ˆå’Œæœ‰æ•ˆç›‘æµ‹çŽ¯å¢ƒæ³•è§„æ‰§è¡Œæƒ…å†µ 的能力。机构能力建设将促进二氧化硫排放控制å¥ç¨‹çš„长期可持续性。 ï‚ æ­¤å¤–ï¼Œæœ¬é¡¹ç›®å°†æ”¯æŒå¯¹äºŒæ°§åŒ–ç¡«æŽ’æ”¾æŽ§åˆ¶é¡¹ç›®å¯æŒç»­æ€§æœ‰ç€å…³é”®ä½œç”¨çš„å…¶å®ƒç›¸å…³æœº 构的能力加强å¥ä½œã€‚例如，地方环保部门或独立机构将负责维护烟气排放连续监测 系统（CEMS），并负责确保数据向环境监测中心传送前的质量。本项目将向这些 机构提供培训，以确保它们有能力履行其职能。同时，培训也将面向电厂操作人 员、二氧化硫排放控制设施制造企业、å¥ç¨‹å…¬å¸ä»¥åŠå‚与二氧化硫排放控制项目的 其它机构。 ï‚ æœ€åŽï¼Œæœ¬é¡¹ç›®å°†æ”¯æŒå¼€å‘é«˜è´¨é‡äºŒæ°§åŒ–ç¡«æŽ’æ”¾æŽ§åˆ¶è®¾å¤‡ã€‚å›½é™…ç«žäº‰è¡Œæ‹›æ ‡å’Œæœ€ä½Žèµ„ 质要求将保证本项目资助的二氧化硫排放控制设备å…备高质量，这是确保中国二氧 化硫排放控制å¥ä½œé•¿æœŸå¯æŒç»­æ€§çš„一个重要因素。虽然中国国内市场上有很多供应 商，但其经验有限，产品质量不一定能得到保证。 8、 以往国别或行业项目的经验教训 要长期成功实施二氧化硫减排规划，需å…备以下条件：（1）可执行的环境法规和标 准制定到位；（2）å…备足够的法规贯彻执行能力；（3）制定适当政策和方案，鼓励并 促进二氧化硫排放控制设施投资或惩罚违规行为。在规划实施早期，可能有必要采取行 政手段，但也应采取市场手段，以确保其长期可持续性。这些经验教训å²è¢«çº³å…¥æœ¬é¡¹ç›® 设计，因此应有助于项目实施å¥ä½œã€‚ 在项目层面，从以往世行在华能源项目汲取的以下经验教训å²è¢«çº³å…¥æœ¬é¡¹ç›®è®¾è®¡ï¼š ï‚ æ‰€æœ‰ç›¸å…³éƒ¨é—¨çš„å…±è¯†å’Œé‡è§†æ˜¯é¡¹ç›®å–å¾—æˆåŠŸçš„å…³é”®ã€‚ ï‚ å°½æ—©å……åˆ†è¿›è¡Œé‡‡è´­è§„åˆ’å¯¹è¿…é€Ÿæœ‰æ•ˆå®žæ–½é¡¹ç›®è‡³å…³é‡è¦ã€‚ç”±äºŽé‡è¦è®¾å¤‡é‡‡è´­å»¶ 误，一些能源项目的实施å¥ä½œä¸¥é‡æ»žåŽã€‚诸如烟气脱硫系统等尖端设备的采购 过程很复杂，持续时间也很长，因此应在项目筹备阶段尽早启动，以便合同授 予å¥ä½œä¸Žè´æ¬¾ç”Ÿæ•ˆä¿æŒåŒæ­¥ã€‚此外，大部分采购延误是由于中标商及其分包商 资质存在问题而引èµçš„。导致安装å¥ä½œæ»žåŽçš„另一个难题与各采购包之间的衔 接有关。因此，采购分包å¥ä½œåº”尽可能减少采购包数量。 ï‚ å……åˆ†çš„ç§»æ°‘è§„åˆ’ã€åå•†å’Œç›‘æµ‹å¯¹é¡ºåˆ©å®žæ–½é¡¹ç›®è‡³å…³é‡è¦ã€‚è¿‘æœŸå®žæ–½çš„éƒ¨åˆ†ä¸–è¡Œ 项目由于移民规划和协商å¥ä½œä¸å……分遇到了诸多困难。本项目有限的移民å¥ä½œ 正在汲取这些经验教训。 ï‚ ä¸ºé¿å…å¤§é‡ä¸–è¡Œè´æ¬¾èµ„金取消，尽可能减少对次借款人的负面财务影响，项目 成本概算应切合实际。采用传统成本概算方法å²å¯¼è‡´ä¸–行早期在华资助项目的 成本概算过高。为确保项目成本尽可能接近市场ä»æ ¼ï¼Œå›½å†…设计院和项目实施 机构开展了细致的成本概算å¥ä½œã€‚ 9、 安全保障政策（包括公众协商） 本项目将适用两项安全保障政策：OP4\.01 环境评ä»å’Œ OP4\.12 非自愿移民。 对安全保障事项的初步评估表明，项目筹备期间要对这些事项予以关注，新建和改造 电厂都是如此。 六个拟议分项目分布于山东各地。其中，两个分项目仅涉及现有发电机组的烟气脱硫 改造，五个分项目涉及现有和新建发电机组烟气脱硫系统安装，四个分项目因新发电机组 建于现有电厂所属地区而不涉及征地和移民å¥ä½œï¼Œä¸‰ä¸ªåˆ†é¡¹ç›®æ¶‰åŠå¼‚地新建发电机组，因 此将要开展征地和农æˆæ¬è¿å¥ä½œã€‚  预计本项目将产生正面和负面环境影响。现有和新建发电机组安装烟气脱硫系统可减 少项目区和山东全省大气二氧化硫、氮氧化物和颗粒物总含量，但烟气脱硫系统运行会增 大电厂噪声，产生需要妥善管理的副产品石膏。施å¥æœŸå‡ºçŽ°çš„噪声和灰尘等常见现象可以 轻易得到控制。 本项目对征地和环境造成的有限影响将通过编制并实施经广泛征求意见而制定的完善 移民行动计划和环境管理计划加以缓解。 10、 项目档案文件 10\.1 采购计划 a\. 黄台火力发电厂 b\. 新汶矿业集团有限公司 c\. 鲁北发电有限公司 d\. 山东正和集团股份有限公司 e\. 烟台八角发电厂 f\. 莱芜火力发电厂 10\.2 采购能力评ä»æŠ¥å‘Š 10\.3 èžèµ„ç®¡ç†è¯„ä» 10\.4 经济与财务分析 《山东电厂烟气脱硫项目经济与财务分析》 10\.5 环境管理计划 g\. 《黄台火力发电厂环境管理计划》 h\. 《新汶矿业集团有限公司环境管理计划》 i\. 《鲁北发电有限公司环境管理计划》 j\. 《山东正和集团股份有限公司环境管理计划》 k\. 《烟台八角发电厂环境管理计划》 l\. 《莱芜火力发电厂环境管理计划》 10\.6 移民行动计划 m\. 《烟台八角发电厂移民行动计划》 n\. 《新泰市劣质煤综合利用坑口电厂移民行动计划》 o\. 《莱芜火力发电厂移民行动计划》 10\.7 可研报告 p\. 《黄台火力发电厂可行性研究报告》 q\. 《新汶矿业集团有限公司可行性研究报告》  r\. 《鲁北发电有限公司可行性研究报告》 s\. 《山东正和集团股份有限公司可行性研究报告》 t\. 《烟台八角发电厂可行性研究报告》 u\. 《莱芜火力发电厂可行性研究报告》 11、 联系人 赵建平 职衔：高级能源专家 电话：+86-(0)10 5861-7731 传真：+86-(0)10 5861-7800 电邮：Jzhao@worldbank\.org 12、了解更多情况，è¯åž‚询： 世界银行信息处 地址：美国华盛顿特区西北区 H 大街 1818 å é‚®ç¼–ï¼š20433 电话：(202) 458-4500 传真：(202) 522-1500 电邮：pic@worldbank\.org 网址：http://www\.worldbank\.org/infoshop

APPROVAL

P086411

Document of The World Bank Report No: ICR00003433 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-41380, IDA-44290, IDA-49060) ON A CREDIT IN THE AMOUNT OF SDR 69\.1 MILLION ($100 MILLION EQUIVALENT) CREDIT IN THE AMOUNT OF SDR 59\.6 MILLION ($98\.1 MILLION EQUIVALENT) CREDIT IN THE AMOUNT OF SDR 63\.6 MILLION ($100 MILLION EQUIVALENT) TO THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR A ROAD SECTOR ASSISTANCE PROJECT June 22, 2016 Transport and ICT Global Practice Sustainable Development South Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective as of February 21, 2016) Currency Unit = Sri Lanka Rupee LKR 1\.00 = $0\.00712824 $1\.00 = LKR 140\.2871 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS $ All dollars are in United States dollars unless otherwise indicated ADB Asian Development Bank AF Additional Financing AM Aide-memoire CAS Country Assistance Strategy CPS Country Partnership Strategy DO Development Objective EIRR Economic internal rate of return EMP Environmental Management Plan ERR Economic rate of return FM Financial management GoSL Government of Sri Lanka HDM Highway Development and Management Model ICR Implementation Completion Report IRI International roughness index ISR Implementation Status Report JICA Japan International Cooperation Agency MoF Ministry of Finance MoH Ministry of Highways MoT Ministry of Transport M&E Monitoring and evaluation MTR Midterm Review NPV Net present value NRMP National Road Master Plan NWSDB National Water and Sewage Development Board PAD Project Appraisal Document PDO Project Development Objective PMU Project Management Unit RAMS Road Assets Management System RDA Road Development Authority RMTF Road Maintenance Trust Fund RSAP Road Sector Assistance Project TAC Technical Advisory Committee VoC Vehicle operating cost  SRI LANKA ROAD SECTOR ASSISTANCE PROJECT CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 8 3\. Assessment of Outcomes \. 17 4\. Assessment of Risk to Development Outcome\. 26 5\. Assessment of Bank and Borrower Performance \. 27 6\. Lessons Learned \. 30 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 31 Annex 1\. Project Costs and Financing \. 33 Annex 2\. Outputs by Component \. 35 Annex 3\. Economic and Financial Analysis \. 37 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 42 Annex 5\. Beneficiary Survey Results \. 44 Annex 6\. Stakeholder Workshop Report and Results\. 45 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 49 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 62 Annex 9\. List of Supporting Documents \. 63 Annex 10\. QAG Report ………………………………………………………………\.64 Annex 11\. MAP ………………………………………………………………………\.74 Regional Vice President: Annette Dixon Country Director: Francoise Clottes Senior Global Practice Director: Pierre Guislain Practice Manager: Karla Gonzalez Carvajal Task Team Leader: Amali Rajapaksa ICR Team Leader: Radia Benamghar  DATA SHEET SRI LANKA ROAD SECTOR ASSISTANCE PROJECT A\. Basic Information SL - Road Sector Country: Sri Lanka Project Name: Assistance Project IDA-41380 Project ID: P086411 Credit Number(s): IDA-44290 IDA-49060 ICR Date: 06/22/2016 ICR Type: Core ICR Democratic Socialist Lending Instrument: Specific Investment Loan Borrower: Republic of Sri Lanka Original Total XDR 69\.10 million Disbursed Amount: XDR 180\.16 million Commitment: Revised Amount: XDR 180\.16 million Cancelled amount XDR 12\.14 million Environmental Category: B Implementing Agencies: Ministry of Ports and Highways through Road Development Authority Ministry of Provincial Council and Local Government Ministry of Finance and Planning Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 12/18/2003 Effectiveness 03/16/2006 03/16/2006 06/23/2008 06/23/2008 03/15/2011 03/15/2011 Appraisal: 09/26/2005 Restructuring(s): 04/08/2013 04/08/2013 09/23/2014 09/23/2014 06/30/2015 06/30/2015 Approval: 12/15/2005 Midterm Review: 01/12/2009 03/02/2009 Closing: 09/30/2011 06/30/2015 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: High Bank Performance: Moderately Satisfactory -i- Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project at Quality at Entry No 2 (Likely to achieve DOs) any time (Yes/No): (QEA): Problem Project at any time Quality of Supervision No None (Yes/No): (QSA): DO rating before Satisfactory – – Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 6 6 Rural and Inter-Urban Roads and Highways 90 90 Subnational government administration 4 4 Theme Code (as % of total Bank financing) Administrative and civil service reform 17 17 Environmental policies and institutions 16 16 Infrastructure services for private sector development 33 33 Other social development 17 17 Rural services and infrastructure 17 17 E\. Bank Staff Positions At ICR At Approval Vice President: Annette Dixon Praful C\. Patel Country Director: Francoise Clottes Peter C\. Harrold Practice Manager/Manager: Karla Gonzalez Carvajal Guang Zhe Chen Project Team Leader: Amali Rajapaksa Isabel Chatterton - ii - ICR Team Leader: Radia Benamghar ICR Primary Author: Radia Benamghar Mirtha Pokorny Tabjeel Ashraf F\. Results Framework Analysis Project Development Objectives (from Legal Agreement) The objective of the Project is to lower transportation costs through sustainable delivery of an efficient national road system\. Revised Project Development Objectives (as approved by original approving authority) The PDO remained unchanged throughout the life of the Project\. Note on Indicators: For the purposes of a split evaluation, indicators below refer to either RSAP-1 (original project and first Additional Financing), or RSAP-2 (second Additional Financing)\. Questions regarding validity of some of the baseline data for RSAP-1 arose during implementation\. This issue is discussed in sections 1\.3, 2\.3 and 3\.2\. (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Lower transportation costs through sustainable delivery of an efficient national road system RSAP–1 Reduction in average network vehicle operating costs for average vehicle of Indicator 1 (a) 3\.8% by 2010 Value (quantitative or LKR 23\.9 per km LKR 22\.9 per km LKR 14\.97 per km qualitative) Date achieved 11/16/2005 09/30/2011 09/30/2011 Target achieved by more than 100%\. Comments RSAP-1: The final value well surpassed the 3\.8% target (by several hundred percent); (including % however, an exact determination of the extent of the overachievement for this indicator achievement) cannot be precisely quantified, due to uncertainties related to baselines, mentioned above\. (See section 1\.3, 2\.3 and 3\.2 for further discussion\.) Indicator 1 (b) RSAP-2 Reduction in average network vehicle operating costs for average vehicle Value (quantitative or LKR 14\.6/km LKR 10\.5/km LKR 13\.88/km qualitative) Date achieved 03/15/2011 03/15/2011 06/30/2015 Comments Original target 128% achieved; revised target not achieved\. While the VoC was (including % reduced by 4\.9% (exceeding the original 3\.8% RSAP-1 target), target was revised under achievement) RSAP-2, increasing the percentage reduction to 28% (LKR 13\.88/km)\. The lower - iii -  achievement may have been partially affected by post-conflict country priorities, discussed in section 3\.2\. RSAP-1 Reduction in average network roughness from 9\.5 in the International Indicator 2 (a) Roughness Index (IRI) in 2005 to 8\.39 IRI in 2010 Value (quantitative or 9\.5 8\.39 6\.45 qualitative) Date achieved 11/16/2005 09/30/2011 09/30/2011 Target achieved by more than 100%\. As with Indicator 1 (a) the target was exceeded Comments (272%); however, there are uncertainties regarding baseline\. (See sections 1\.3, 2\.3 and (including % 3\.2\.) achievement) RSAP-1I Reduction in average network roughness from 9\.5 on the International Indicator 2 (b) Roughness Index (IRI) Value (quantitative or 6\.2 5\.9 5\.9 qualitative) Date achieved 03/15/2011 09/30/2014 06/30/2015 Comments 100% Achieved\. (including % achievement) RSAP-1 Reduction in percentage of the network in poor and bad condition from 52% Indicator 3 (a) in 2005 to 35% in 2010 Value (quantitative or 52% 35% 40% qualitative) (%) Date achieved 11/16/2005 09/30/2011 09/30/2011 Comments Partially achieved (70%) (including % achievement) Indicator 3 (b) RSAP-1I Reduction in percentage of the network in poor and bad condition to 35% Value (quantitative or 38 35 – 35 qualitative) (%) Date achieved 11/16/2005 09/30/2011 – 06/30/2015 Comments 100% Achieved\. Although there had been considerable progress, the target had not (including % been fully achieved under RSAP-1 so target was not changed\. achievement) RSAP-1 Increase in annual maintenance expenditure from $13 million to $46\.3 million Indicator 4 (a) in 2010 Value (quantitative or 13 million 46\.3 million – 44 million qualitative) ($) Date achieved 11/16/2005 09/30/2011 – 09/30/2011 95% Achieved\. The Borrower reported maintenance expenditures had been Comments substantially higher than the target ($56 million vs $46\.3 million)\. The task team noted (including % the $44 million figure excludes funding for periodic maintenance in 2010 that has been achievement) channeled outside of the RMTF, and when these funds are added, the target is - iv -  substantially exceeded\. However as the higher figures do not appear in relevant ISRs or the Project Paper for the 2nd AF, the lower figure is reflected here\. See related comment for 4 (b) below\. Indicator 4 (b) RSAP-2 Progressive increase in annual road maintenance expenditure Value (quantitative or LKR 4\.2 billion/year LKR 6\.6 billion/year – LKR 5 billion qualitative) Date achieved 03/15/2011 12/31/2014 – 06/30/2015 Not achieved\. This indicator is a continuation of indicator 4 (a) under RSAP-1\. The term “progressive” was added (in the Project Paper) to capture annual improvements Comments over the life of the Project\. Unit of measurement changed from $ to LKR\. (including % As above, Borrower reported as achieved and task team noted maintenance expenditures achievement) had been substantially higher, and that the intent was to increase annual maintenance, while this indicator measured the amount channeled through the RMTF\. RSAP-2 Improved level of satisfaction of road users (for 3 roads: A002, A003, and Indicator 5 A006) (Percentage) A002 40\.38% A002 62\.16% Value A003 36\.22% A003 74\.14% (quantitative or – Combined: 38\.3% Combined: 68\.1% qualitative) A006: 81\.2% Date achieved 03/15/2011 – 06/30/2015 Achieved\. While user satisfaction surveys for both A002 and A003 were carried out Comments using standard methodology, including baselines, A006 was assessed using a recall post (including % survey which did not include a baseline\. Satisfaction improved substantially, however, achievement) no target was established\. (b) Intermediate Outcome Indicator(s) Component 1: Maintenance and Rehabilitation of National Roads Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Indicator 1(a) RSAP-1 About 620 km of national roads resurfaced Value (quantitative 0 620 – 617 or qualitative) Date achieved 11/16/2005 09/30/2011 – 09/30/2011 Comments (incl\. % 99\.5% Achieved\. All activities carried out as planned\. achievement) Indicator 1(b) RSAP-2 134 km of national roads resurfaced Value 43 (Orig\. section) (quantitative 0 134 A2 17 km 78 or qualitative) A3 17\.7 km Date achieved 03/15/2011 09/30/2014 09/30/2014 06/30/2015 -v-  100% Achieved (of revised target) New indicator for 134 km of national roads under RSAP-1I\. It later became evident that widening the full 134 km from 2 to 4 lanes would Comments entail substantial land acquisition issues which could not be resolved during the life of (including % the Project\. Therefore, 134 km section was divided into 2 phases: phase 1 retained 43 achievement) kilometers of the original section; phase 2 replaced the remainder with road sections A2, 17 km and A3, 17\.7 km\. 43 + 35 = 78 km\. Indicator 2a RSAP-1 Reduction in IRI for project roads from 7\.8 to 2\.9 (for 620km) Value (quantitative 7\.8 2\.9 – 2\.8 or qualitative) Date achieved 11/16/2005 09/30/2011 – 09/30/2011 Comments (including % 103% Achieved\. achievement) Indicator 2b RSAP-1I Reduction in IRI for project roads Value 6 2\.8 2\.33 (quantitative 4\.3 (A002) 2\.4 1\.9 or qualitative) 3\.1 (A003) 2\.4 2 Date achieved 03/15/2011 09/30/2014 09/30/2014 06/30/2015 More than 100% achieved\. Comments This indicator refers to the road section resurfaced that was split into two phases (See (including % indicator 1 (b) above\.) The original target for phase 1 remained\. New targets of 2\.4 IRI achievement) were set for the two new sections\. Road sections A6, A002 and A003 were achieved by 115%, 127%, and 151%, respectively\. RSAP-1 50% of relevant staff in the Planning and Maintenance Division of the RDA Indicator 3 trained in road asset management Value (quantitative or 0 50 – 67 qualitative) (%) Date achieved 11/16/2005 09/30/2011 – 09/30/2011 Comments (including % 134% Achieved\. achievement) Indicator 4 RSAP-2 Reduced travel time on project national roads in minutes Value 66 42 40 (quantitative 13\.8 for (A002); 12\.5 11\.31 or qualitative) 26\.5 for (A003) 23\.9 23\.58 Date achieved 03/15/2011 09/30/2014 09/30/2014 06/30/2015 Comments More than 100% achieved\. (including % This indicator was added for the reasons mentioned above in indicator 2b\. Road achievement) sections A6, A002 and A003 were achieved by 108%, 191%, and 112%, respectively\. Indicator 5 RSAP-2 About 60 km of national roads on which periodic maintenance was carried out\. Value (quantitative or 0 60 – 64\.50 qualitative) Date achieved 03/15/2011 09/30/2014 – 06/30/2015 - vi - Comments (including % 107% Achieved\. achievement) Component 2: Maintenance and Rehabilitation of Rural Roads Pilot Indicator 6 Rural roads improved (635 km) - RSAP-1 Value (quantitative or 0 635 km 157 km 167 km qualitative) Date achieved 11/16/2006 09/30/2011 09/30/2014 09/30/2015 Achieved 106% of revised target RSAP-1 and RSAP-1I\. Comments The initial target length of 635 km for improvement of rural roads was based on (including % assumption that only minor maintenance would be required\. However, upon achievement) formulation of a new Rural Road Strategy Study, and after extensive stakeholder consultation, it was decided to carry out more extensive improvements, thus necessitating a reduction to 157 km, which was achieved after restructuring in 2013\. Indicator 7 RSAP-1 Reduced travel time on project rural roads by 10% Value 10% reduction (quantitative or 0% – 60% (overall average) qualitative) (%) Date achieved 11/16/2005 09/30/2011 – 09/30/2011 Target exceeded substantially\. While detailed travel-time baselines could not be Comments prepared for the PAD, large scale monitoring and assessments were carried out\. In (including % many cases, even 60% improvement does not capture the full level of improvement as achievement) many of the roads had been non-motorable\. Component 3: Institutional Strengthening and Policy Support Indicator 8 Annual road maintenance program is approved by the RMTF Value Approved (quantitative or Not approved Approved annually qualitative) Date achieved 03/15/2011 06/30/2015 06/30/2015 Comments 100% achieved (including % This is an RSAP-1I indicator\. achievement) G\. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No\. DO IP Archived ($, millions) 1 06/21/2006 Satisfactory Satisfactory 4\.39 2 12/12/2006 Satisfactory Satisfactory 13\.61 3 06/22/2007 Satisfactory Satisfactory 24\.59 4 12/20/2007 Satisfactory Satisfactory 32\.67 5 06/30/2008 Satisfactory Satisfactory 64\.85 6 10/01/2008 Satisfactory Satisfactory 74\.21 - vii -  7 04/30/2009 Satisfactory Satisfactory 80\.79 8 08/06/2009 Satisfactory Satisfactory 87\.21 9 02/07/2010 Satisfactory Satisfactory 156\.78 10 12/16/2010 Satisfactory Satisfactory 159\.52 11 02/16/2011 Satisfactory Satisfactory 159\.52 12 08/20/2011 Satisfactory Satisfactory 164\.08 13 04/14/2012 Satisfactory Moderately Satisfactory 181\.01 14 10/16/2012 Satisfactory Moderately Satisfactory 186\.79 15 05/15/2013 Satisfactory Moderately Satisfactory 221\.64 16 12/01/2013 Satisfactory Satisfactory 234\.07 17 02/07/2014 Satisfactory Satisfactory 240\.26 18 03/24/2014 Satisfactory Satisfactory 240\.26 19 05/05/2014 Satisfactory Satisfactory 244\.63 20 12/23/2014 Satisfactory Moderately Satisfactory 269\.46 21 06/22/2015 Satisfactory Satisfactory 279\.95 H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring and Approved PDO Date(s) Restructuring Key Changes Made Change DO IP in $ millions Additional Financing of $98\.1 million to help finance the costs associated with the cost overrun of civil works 06/23/2008 -- S S 64\.85 under the national roads component of the Project due to unprecedented rise in world fuel prices in 2007/08\. A second Additional Financing of $100 million to scale-up the activities through additional road sections in two phases for the rehabilitation of 134km in 2 phases: Phase 1\. Rehabilitation of 43km of roads from Kanthale to Trincomalee on the A6\. Phase 2\. Rehabilitation of 91 km of 04/12/2011 -- S S 162\.73 roads Ambepussa to Dambulla on the A6\. The operation also included (a) financing of periodic maintenance through the Bank assisted RMTF, (b)TA of RMTF, (c) capacity building of RDA; and (d) the piloting of a safety corridor\. In addition, the original project was extended by three years from September 30, 2011 to September 30, 2014\. A Restructuring to address the 04/08/2013 -- S MS 209\.06 following changes: Phase 2 related to rehabilitation of 91 km of roads - viii -  Ambepussa to Dambulla on the A6 was replaced by priority urban sections in the western province\. It included rehabilitation and upgrading of approximately 34\.7 km of ‘A’ class urban roads\. It also included design review and supervision of these sections\. In addition reallocation of categories\. The proposed restructuring was for extension of closing date by 6 months from September 30, 2014 to March 31, 2015\. In addition, reallocation of financing proceeds from category 1 09/23/2014 -- S MS 262 (supporting parts A, B3, and B4 of the Project) to category 2 (supporting Part B1 of the Project) an amount of $1\.4 million to finance the periodic maintenance contracts through RMTF\. The proposed restructuring was for partial cancellation of the Project proceeds in the amount of SDR 8\.5 06/30/2015 -- S S 279\.95 million (approximately US$12 million)\. In addition, the Project was extended by three months from March 31, 2015 to June 30, 2015\. - ix - I\. Disbursement Profile -x- 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal Country Context 1\. At the time of appraisal of the Road Sector Assistance Project (RSAP) (Credit 4138-CE, ‘the parent Project’) the Government of Sri Lanka (GoSL) expected the economy to grow at annual rates of 6 to 8 percent during the next five years\. Infrastructure was considered paramount to achieving these expected growth targets\. The GoSL planned to increase the level of public expenditure to reach 8 percent of gross domestic product, a substantial increase from the 5 percent in 2004\. To that end, a broad agenda was laid out for the road sector, including connecting poor regions and production centers to domestic and international markets, building a national highway system and an integrated road network, enhancing road safety, and promoting private sector participation in the sector\. Sector Issues 2\. Road infrastructure in 2004 was inadequate to support economic growth\. Uncontrolled roadside development, years of neglect, and poorly maintained roads had resulted in low traffic speeds and poor levels of services, discouraging long-distance traffic and hindering the spread of economic activities and development away from the Colombo metropolitan area\. Given Sri Lanka’s road density of 1\.5 km per km2, there was an urgent need to address the issues of asset preservation\. 3\. The focus on the road sector was taking place at a time when there was substantial progress, albeit slow, on the peace front\. There were considerable improvements in the lives of the people in the north and east, and the entire country was benefitting from the cease-fire of 2002\. Roads were being reopened, suspended rail services were resumed, and considerable reconstruction had occurred\. In this scenario, the GoSL and the Asian Development Bank (ADB) agreed on a medium-term sector reform framework as part of ADB’s Road Sector Development Project that was under implementation\. The World Bank, Japan Bank for International Cooperation (JICA), and ADB agreed in November 2004 to coordinate their activities in the sector to support a medium-term reform program that was based on three pillars: (a) strengthening the Road Development Authority (RDA), a statutory institution assigned to the Ministry of Highways (MoH) and responsible for implementing the development strategy for the sector, as well as strengthening the provincial road agencies; 1 (b) establishing a mechanism for providing 1 The Ministry of Transport (MoT) has overall responsibility for policies concerning land transport services, including bus transport and railways\. The National Transport Commission, a regulatory body under the MoT is responsible for policy formulation and subsidy disbursement\. The MoH has overall responsibility for policies and programs concerning the national road network\. The RDA under the MoH is responsible for planning and managing the national roads\. Provincial roads are the responsibility of Provincial Councils and local roads under the responsibility of local authorities\. -1- sustainable funding for financing road maintenance; and (c) developing the domestic private sector in the road industry\. Rationale for Bank Involvement 4\. The Bank had remained disengaged from the transport sector in Sri Lanka for almost a decade\. However, there was an increased demand for the Bank to support infrastructure development and the IDA Credit, the subject of this report, was seen as the appropriate vehicle for reentering the transport sector at a time when GoSL was showing signs of abandoning its previous reluctance to commit to sector reform\. The emerging sector reforms included the closure of a state-owned construction company that was causing serious distortions in the market, and the decision to implement a Road Maintenance Trust Fund (RMTF) as an interim mechanism for financing road maintenance\. GoSL expected that, eventually, dedicated fuel taxes would fund the RMTF\. Furthermore, under the right circumstances, the Project would help to put in place the necessary legal and regulatory framework for a ‘second generation’ road fund, that is, with a governance structure that included major stakeholders\. 5\. Within this framework, the Bank agreed to take the leadership to address the issue of sustainable road maintenance financing; JICA agreed to take leadership of the issue of private sector development in the road construction industry; and ADB agreed to continue to lead the dialogue on institutional strengthening and capacity building\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators 6\. The Project Development Objective (PDO) in the Project Appraisal Document (PAD) differs slightly from the one in the Credit Agreement\. In both documents, the PDO is stated as: The objective of the Project is to lower transportation costs through sustainable delivery of an efficient national road system\. In the PAD, this statement is followed by the phrase that serves the needs of road users and the Sri Lankan public at large\. The latter phrase is not included in the PDO in the Credit Agreement\. The difference is not material within the context of the project and results framework; therefore, the Credit Agreement PDO is treated as operative for the purpose of this Implementation Completion and Results Report (ICRR)\. 7\. The achievement of the PDO was to be monitored and evaluated using the following indicators (as described in the PAD): PDO Indicators ï‚ Reduction in the average network VoC for standard commercial vehicles of 3\.8 percent by 2010; ï‚ Reduction in the average network roughness from 9\.50 in the international roughness index (IRI) in 2005 to 8\.39 IRI in 2010; ï‚ Reduction in percentage of the network in poor and bad condition from 52 percent in 2005 to 35 percent in 2010; ï‚ Increase in annual maintenance expenditure from projected US$13 million in 2005 to US$46\.3 million in 2010\. -2- Intermediate Indicators ï‚ About 620 km of national roads resurfaced; ï‚ Reduced IRI for project roads from 7\.8 to 2\.9; ï‚ 50 percent of relevant staff in Planning and Maintenance Divisions of the RDA to be trained in road asset management; ï‚ About 635 km of rural roads improved; ï‚ 10 percent reduction in travel time; ï‚ An increase in annual maintenance expenditure from projected $13 million in 2005 to $30 million in 2010; allocation based on Road Assets Management System (RAMS); regular consultation with road users; publication of the RMTF Annual Reports in public domain\. 1\.3 Revised PDO (as Approved by Original Approving Authority) and Key Indicators, and Reasons/Justification 8\. The PDO remained unchanged throughout the life of the Project but the outcome and intermediate indicators were revised to reflect new activities supported by a $100 million Second Additional Financing in 2011\. Changes affecting the indicators included the rehabilitation of additional road sections in two phases for 134 km in the East-West corridor, and the financing of road maintenance through the Road Maintenance Trust Fund (RMTF)\. (See Section 1\.6\., Revised Components\.) 9\. A subsequent restructuring was approved in 2013 to drop one of the National road sections from the Second AF, replacing it with two urban road sections\. The replacement was in response to GoSL’ s request to widen the National road section from two to four lanes due to increased traffic; however, the widening would have entailed land acquisition adding a significant amount of time to the contract period, exceeding the timeline envisaged under the Project\. 10\. The new activities undertaken for RSAP-1I also provided an opportunity to utilize and incorporate improved road data that was being collected through enhanced monitoring of the road network\. Inadequate data had, in some cases, resulted in indicators with deficient baselines\. It was not until several years into the project that more reliable data became available\. 11\. Table 1 below summarizes the changes in the indicators and targets that occurred over the life of the project, including the original credit, the additional financings, and the restructuring in 2013\. -3-  Table 1\. Indicator and Target Changes during the Project Original targets to be Type of Target revisions made at the achieved by 2011 as set out in Restructuring in 2013 change second AF the PAD made Reduction in the average network Reduction in the average network Target value VoCs for standard commercial VoCs for standard commercial vehicles from 23\.9 (baseline) to vehicles to LKR 10\.5 per km – 22\.9 Reduction in the average network Reduction in the average network Target value roughness from 9\.50 in the IRI to roughness from 6\.2 to 5\.9 in the – 8\.39 IRI IRI Reduction in percentage of the Target value Reduction in percentage of the network in poor and bad condition network in poor and bad condition from 38 to 35 percent (not – from 52 percent in 2005 to 35 technically a revision, but PAD percent target had not been fully achieved so it was continued for RSAP2) Target value Increase in annual maintenance Progressive increase in annual expenditure from projected $13 maintenance expenditure from – million in 2005 to $46\.3 million in LKR 4\.2 billion ($45\.1 m equiv\.) in 2010 2011 to LKR 6\.6 billion in 2014 New Improved level of satisfaction of – – Indicator for road-users (new indicator) RSAP-1I Type of Intermediate Indicators- PAD Second AF - 2011 Restructuring Paper - 2013 change made About 620 km of national project roads resurfaced About 134 km of national roads to New be resurfaced in two phases\. Indicator for – (Revised in 2013 restructuring – RSAP-1I see cell one down to the right) 134 km revised to 78 km of national Target value – – roads to be resurfaced\. Phase 2 split into 2 roads (A002 & A003) Reduced IRI for 620 km national project roads from 7\.8 to 2\.9 (same – – km as cell above) Reduced IRI for 134 km project New roads from 6\.0 to 2\.8 (same km as – Indicator for cell above) RSAP-1I Split into separate roads (reduced km) Target value necessitated having individual IRI – – targets: from 4\.3 to 2\.4 for A002 road and from 3\.1 to 2\.4 for A003 Reduced travel time for 134 km New – project roads from 2\.3 to 1\.8 (same – Indicator for km as cell above) RSAP-1I Split (reduced km) required new travel Target value – – times: from 13\.8 to 12\.5 for A002 -4-  Original targets to be Type of Target revisions made at the achieved by 2011 as set out in Restructuring in 2013 change second AF the PAD made road and from 26\.5 to 23\.9 for A003 About 60 km of national roads on New – which periodic maintenance has – Indicator for been carried out\. RSAP-1I New Annual road maintenance program – – Indicator for is approved by Board of Trustees\. RSAP-1I 50% of relevant staff trained in – – road asset management 157 km of rural roads improved (This Target value\. About 635 km of rural roads – was changed based on the new Rural improved Road Strategy Study) Reduced Travel Time (rural roads) – – (Same km for indicator above) Routine and periodic maintenance – – funding increased to $46\.3 million 1\.4 Main Beneficiaries 12\. The primary beneficiaries of the Project are the road users and road-related transport services\. More specifically, road users and road transport services directly benefit from improvement in key linkages, with decreased transport costs and travel times, which improve connectivity and road safety for its users, and promote economic growth in the region\. In the socioeconomic context, the improvement of local roads directly influences the daily social life of the population who live in rural areas\. As a result, rural populations have better access to public amenities such as schools, health care, business centers, and markets\. In addition, the execution of rural roads generated new jobs and stimulated the local economy through the indirect purchasing of local goods and services\. The rural development improved safety for working women\. Furthermore, the highways safety component of the project helped to decrease road accidents and fatalities and contribute to lower accident-related road costs to the economy\. 1\.5 Original Components 13\. The parent Project (RSAP-1) consisted of the following three components (see Table 2 for costs)\. ï‚ Component 1: Maintenance and Rehabilitation of National Roads\. Consisted of the following: (a) civil works along national roads, comprising resurfacing and improvement of about 620 km of Class A and B roads; (b) technical assistance for the selection, design and construction supervision of these works; (c) training and institutional strengthening; and (d) incremental operating costs\. ï‚ Component 2: Maintenance and Rehabilitation of a Rural Roads Pilot\. Consisted of the following: (a) rehabilitation and maintenance of about 635 km of rural roads, and strengthening of the rural road management and maintenance systems in three project Provincial Councils and nine project Pradeshiya Sabhas; (b) feasibility, design, and construction supervision consultant services; (c) training and institutional strengthening; -5-  and (d) incremental operating costs\. This was a pilot project to help the GoSL for future rural road improvement programs\. ï‚ Component 3: Institutional Strengthening and Policy Support\. This component comprised technical assistance to improve sector policies for road maintenance financing\. 1\.6 Revised Components 14\. The original components were revised and updated at the time of the second AF for $100 million and the 2013 Restructuring\. The components below include the new activities funded under the AF\. Component 1: Rehabilitation of Priority National Roads in the East-West Corridor Providing Connectivity to the Eastern and Northern Provinces\. This component consisted of resurfacing and improving about 134 km of class A roads which was part of the government’s strategy to provide connectivity to the Northern and Eastern Provinces\. It was designed to be implemented in two phases\. While phase 1 was completed as planned, Phase 2 was modified under a 2013 restructuring, due to the government’s request that the road sections be widened from two to four lanes, because of increased traffic\. The proposed widening, however, required significant land acquisition which could not be completed within the timeline envisaged under the Project\. Therefore, priority urban sections in the western province were selected for upgrading in Phase 2\. Component 2: Institutional Strengthening and Improvements in Asset Management Practices\. This component provided funding for periodic maintenance, technical assistance and strengthening of the systems within the RMTF and RDA relating to road maintenance, institutional strengthening of the RDA, and addressing issues identified through the capacity assessment relating to road safety\. 15\. The component allocations under each key phase of the project – the parent project, the first and second additional financings, and the restructuring in 2013 – are shown in Table 2\. -6-  Table 2\. Revised Project Costs by Components ($ millions) Components 2005 2008 Original + First Additional Finance (Original Project) (1st AF) Component 1 - Maintenance and Rehabilitation 82\.64 66\.64 of National Roads Component 2 - Maintenance and Rehabilitation 11\.04 of Rural Roads Pilot Component 3 - Institutional Strengthening and 0\.66 Policy Support Unallocated (physical and price 31\.46 5\.67 contingencies/First AF) Includes VAT Sub-Total 100\.00 98\.10 **Total Project Costs (original +First AF) 198\.10 Components with Second Additional 2011 2013 Finance and Restructuring 2013 (2nd AF) Restructuring Component 1 - Maintenance and Rehabilitation 85\.50 81\.00 of national Roads Component 2 - - Institutional Strengthening and 14\.50 19\.00 Asset management practices Sub-Total 100\.00 Reallocation **Total Project Costs 100\.00 TOTAL (Original + First AF + Second AF + 298\.00 RP) 1\.7 Other Significant Changes 16\. First Additional Financing 2008\. The First AF under RSAP-1 (for $98 million equivalent) was approved on September 16, 2008 to cover financing gaps due to: (a) the unprecedented oil price increase in the world market that had led to the escalation of prices in oil-based materials; and (b) the use of higher standards for national highways to improve safety environment as stipulated in the National Road Master Plan (NRMP) adopted in December 2007\. (See Factors outside the control of the Government, pages 9-10, for additional detail\.) 17\. Second Additional Financing 2011\. As mentioned above, the purpose of the AF was to scale up the parent project and enhance its impact through the rehabilitation of national roads, providing funding for periodic road maintenance, technical assistance to the RMTF and RDA, and address safety issues identified in a capacity assessment\. The Government was keen to achieve quick results in order to: (a) capitalize on the benefits of the cessation of the conflict and its impact on the development of the previously conflict affected areas, and (b) maximize the usage of the already established implementation mechanisms and institutional arrangements in order to scale-up activities within the agreed extended timeframe\. 18\. Restructuring 2013\. In addition to the changes already mentioned, the length of rural roads targeted for improvement was reduced from 635 km to 157 km in Component 2 of the parent project\. Subsequent to the formulation of the Rural Roads Strategy Study financed under the Project, and after extensive stakeholder consultations carried out during project preparation, it was decided that a full upgrade of the rural roads should be carried out, rather than proceeding with a relatively low cost but temporary maintenance regimen, i\.e\., pothole filling, patching, etc\. The -7- decision was made to provide a more comprehensive upgrade, which required a reduction in the number of kilometers of road\. 19\. Restructuring 2014 was a six-month project extension to allow sufficient time to complete the rehabilitation on sections of A002 and A003\. 20\. Restructuring 2015 included a partial cancellation of $12 million equivalent at the request of the Borrower due to underuse of price and physical contingencies and savings resulting from sliding fuel prices, and lastly, the depreciation of the Sri Lanka Rupee\. The restructuring also included a final project extension of three months to accommodate the completion of unfinished works\. 21\. Establishing and functioning of the RMTF\. The Ministry of Finance (MoF) was responsible for the implementation of all activities related to the set-up and adequate financing for a trust fund related to sustainable road maintenance finance\. However, the RMTF under the MoF was not fully operationalized because of administrative difficulties and lack of capacity\. This resulted in re-establishment of the RMTF under the Ministry of Ports and Highways to take the agenda forward through the Second AF\. 22\. RMTF and road maintenance funding\. The funding for road maintenance was channeled to the RDA through the RMTF under an annual budgetary allocation\. Although it was originally envisaged that taxes from the sale of petrol and diesel would be made available to the RMTF, the funding for road maintenance was provided as a budgetary allocation\. The annual funds collected from the sale of fuel were only $8 million to $10 million—far less than the maintenance needs\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 23\. Soundness of the background analysis and design\. The project responded to the government’s transport priorities where civil conflict had been prolonged for many years and had contributed to the poor condition of the road network\. Immediate rehabilitation was required to augment the condition of the road network\. The project design was highly relevant to Sri Lanka’s needs and in line with the priorities of the Country Assistance Strategy (CAS)\. The FY2003–06 CAS aimed to improve social and economic inclusion of the poor and facilitate broad-based economic growth\. Both the government and the Bank strategies placed high priority on developing road infrastructure and recognized its contribution to the development of the private sector and the desired increase in revenues to achieve high levels of public investment\. The lessons learned from earlier operations included: (a) providing adequate post-project maintenance; (b) the importance of environmental and social management; (c) improving rural roads management; (d) providing targeted training and capacity building for local governments; (e) the need for the Project’s design to include the first steps toward developing an appropriate sector policy framework, (f) empowering and strengthening the local authorities to discharge responsibilities, and (g) providing targeted and practical training programs built into the rural roads pilot component\. -8- 24\. Paticipatory process\. The project was prepared in a participatory manner with the involvement of key stakeholers, including government ministries, designated government implementation agencies, local and provincial government units, development partners and local communities, and road users\. 25\. Risk and mitigation measures\. A range of risks were identified during project preparation and appropriate mitigation measures were considered\. The main risks were related to: (a) the consolidation of the peace process and political stability to oversee meaningful sector and economic reforms; (b) exogenous shocks to the economy impairing aggressive revenue raising strategy; (c) vested interests supporting the status quo; (d) weak national construction capacity to undertake the works; and (e) institutional capacity for the day-to-day implementation of the Project\. These risks were mitigated by the already proven strong commitment of the government and the resources committed by the ADB and the Bank to facilitate the process of implementing reforms\. Finally, the risk of a weak national construction capacity to undertake works under the Project was addressed by suitable packaging of contracts to accommodate both National Competitive Bidding and International Competitive Bidding\. One risk that was not forseen at appraisal, yet materialized during implementation was the effect of the rapid surge of the construction activity in the country, which contributed to the shortage of human and material resources and the resulting increase in construction costs\. The issue of counterpart funding was well foreseen during preparation and eventually, remained under monitoring\. 26\. A Quality at Entry (QAG) assessment was carried out by the Quality Assurance Group on November 7, 2008 and the project was rated Satisfactory (likely to achieve its development objectives)\. In particular, the report comments, “The DOs expressed exactly what they neeeded, and they are still highly relevant\.” The report also remarks, “The project design adequately evidences that measures were taken to promote positive social impacts…With regard to poverty, project covers the poorest segments of the country including provinces close to the conflict areas and proposes labor intensive interventions…Stakeholder consultations were organized in a manner that ensured gender equality\.”2 2\.2 Implementation 27\. The project implementation period could be broadly divided into two phases: (a) RSAP-1 (parent project and First AF)—for a period of six years (December 2005– September 2011) (b) RSAP-1I (additional components through the Second AF and two Restructurings) for an additional period of four years (March 2011–June 2015), for an overall project period of about 10 years\. 28\. Project implementation, including compliance with both the original Project and its two AFs, was generally rated satisfactory in all of the Implementation Status Reports (ISRs) and 2 The report from the Quality Assurance Group is in annex 9 \. -9- slipped into moderately satisfactory for about 18 months (April 2012, May 2013, and December 2014)\. Project implementing agencies had amassed considerable experience through implementation over the 10-year period and developed an adequate technical capacity in procurement, contract management, social and environment related aspects\. There were some events that occurred during the Project’s life that delayed implementation\. These are outlined below\. Factors outside the control of the Government 29\. The increase in construction costs in Sri Lanka necessitated an AF of $98 million, i\.e\. 59\.2 percent of the Project cost\. This cost overrun was due to two reasons: ï‚ A worldwide escalation of oil and commodity prices resulted in an increase in construction costs in Sri Lanka following the Project start-up\. The analysis undertaken during project implementation showed that all key cost drivers under Components 1 and 2 suffered major increases between 2005 and 2009: Bitumen (433 percent), fuel (241 percent) among other factors\. Works on the national roads under the parent project experienced cost overruns averaging 86\.5 percent, and ranging from 51\.4 percent to 132\.4 percent\. ï‚ The use of higher standards for national highways to improve the safety environment as stipulated in the National Road Master Plan (NRMP) adopted in December 2007\. Under the Project, this new policy of the Ministry of Highways and Road Development necessitated widening of roads to 6\.2 meter national standards with a 0\.65 meter hard shoulder on the inside of the numerous bends\. As a result of the change in width of carriageway, all culverts had to be extended and other related matters addressed\. Factors generally subject to Government control ï‚ Unrealistic estimates\. Bid prices were 6\.8 percent above estimated prices at a time in which a construction boom brought about by reconstruction works after the end of the civil war, and rebuilding after the tsunami of December 2004 resulted in shortages of resources that affected the cost and pace of implementation\. ï‚ Limited availability of bitumen during the first two years of project implementation due to the high demand created by construction works in the country\. The state monopoly supplier, Ceylon Petroleum Corporation, was not able to increase supply to match the new demand\. Eventually, after a concerted effort by international donors, the GoSL approved, starting in January 2008, importing bitumen for interested contractors through Maga Naguma, a subsidiary of RDA\. ï‚ Unrealistic estimation of contract periods for works and designs\. The original periods had been understated and the contracts neither fully appreciated nor reflected the work involved in difficult terrains\. They also did not reflect the additional work due to variations in time needed to obtain environmental clearances, which later required additional time for expansion of the scope of work\. - 10 -  ï‚ Delay in obtaining Environmental Protection Licenses and/or Explosive Permits, processes that in many cases took more than 10 months\. ï‚ Lack of coordination with utilities agencies\. Civil works were slowed because of difficulties in getting sufficient crews mobilized to work simultaneously on several contracts, particularly for utilities relocation\. Despite monthly coordination meetings being chaired by RDA’s management, the utility companies performed slower than expected\. This was particularly true of the National Water and Supply and Drainage Board (NWSDB)\. For works on the Second AF, coordination improved substantially through a different allocation of responsibilities\. In particular, RDA procured the water pipes and their laying was part of the civil work contracts\. This allowed for the water and road works to be completed on these corridors simultaneously avoiding wastage due to uncoordinated activities that the country has been suffering for a long time\. ï‚ Frequent turnover of the PMU staff\. The PMU staff turnover which resulted in losing institutional capacity and memory was a major challenge to project implementation\. Four different project directors headed the PMU during the course of the Project\. ï‚ No appropriate approval delegation, ownership, and accountability from the MoF with regard to operationalizing the RMTF, which necessitated the reestablishment of the RMTF within the Ministry of Port and Highways\. ï‚ Cost overruns on the national roads parent project could range from 51\.4 percent to 132\.4 percent, and time overruns from 7\.6 percent to 180\.7 percent\. Cost overruns in the civil works under the Second Additional Financing were substantially lower\. The cost improvements were achieved through better distribution of responsibilities between RDA and consultants for the different stages of implementation\. For the original Project, design and supervision of works were entrusted to consultants\. The lack of involvement of RDA’s provincial staff had, in some cases, led to variation orders being received several years after commencement of contracts\. ï‚ With respect to supervision, the parent Project was affected by multiple problems\. These ranged from changes in staffing of the consulting firm, to the difficulties in dealing with multiple projects spread over a large area\. These problems were also compounded by (some) poorly qualified consultants both with respect to design as well as supervision\. ï‚ During a workshop for the preparation of this ICR that took place in Colombo in June 2015, there was a consensus among the main stakeholders that the pressure to quickly start projects contributed to less than optimal designs\. Time overruns were also substantially contained although contractors claimed that the time estimated to complete projects was too optimistic\. 30\. The Midterm Review (MTR) was carried out in March 2009 with 41 percent of funds disbursed (of RSAP-1)\. Both the PDO and IP were rated satisfactory\. The MTR highlighted overall project progress, including lessons learned from the challenges discussed above\. The MTR discussed some revisions to the Results Monitoring Framework and some changes were suggested, notably that the number of km of rural roads targeted for spot improvements would likely need to - 11 - be reduced from 635 to 157, and changing the road condition target\. Although these changes were noted in the aide memoire, there was no formal restructuring of the results framework until the AF two years later\. Part of the reason for this seems to have been government uncertainties during a period of rapid change, i\.e\., identifying and agreeing on the number and location of roads to be rehabilitated and a change in the government’s view post-MTR regarding changing the road condition targets because of budget considerations\. That said, adjustments could have been made sooner in a restructuring\. The relevant observations and findings from the MTR were used to corroborate the ICR’s team’s observations and analysis with respect to implementation challenges and progress\. 31\. The Rural Roads Pilot\. The objective of the Rural Roads pilot was to develop a sustainable system that could be scaled up in future programs\. The emphasis was on the preparation of a Rural Roads Strategy/Manual, development of a rural roads improvement program, providing maintenance on the targeted roads, and the creation of a rural roads database\. While the number of kilometers was reduced in order to provide greater rehabilitation to a smaller network of roads, the works, as well as the strategy, database and other activities, were successfully completed and the pilot has been expanded to other provinces, an important step toward a sustainable system\. 32\. The Roads Maintenance Trust Fund (RMTF) was established in order to improve transparency in the allocation of resources and disbursement of funds, as well as to carry out efficient monitoring of the maintenance programs\. The intention was to ensure a sustainable well- maintained road network in the long term by maximizing the use of resources applied to the rehabilitation of the network\. 33\. The Roads Maintenance component focused on supporting GoSL to set up an interim mechanism for road financing in the form of a trust fund under the Trust Ordinance for earmarked road maintenance funds\. At the time, it was to support the writing of the draft bill, and its presentation to Parliament, and necessary legislation to establish a dedicated Road Maintenance Fund\. The Fund would be financed by fuel taxes and managed as a statutory body by an independent board and funding\. The RMTF was set up, as agreed, at the beginning of the Project under the MoF, and the GoSL appointed a Board of Trustees and a Technical Advisory Committee (TAC)\. A separate budget line allocated funds to the RMTF and these funds were transferred to RDA after the approval of its annual maintenance plan\. 34\. The Fund, however, only attained a meaningful role as an overseer of maintenance practices after the approval of the Second AF, late in 2011\. Lack of strong commitment of the main stakeholders in fully launching the Fund combined by frequent changes in the Board of Trustees and TAC contributed to the delays\. 35\. During the preparation of the Second AF it was decided to return momentum to the Fund through the inclusion of a road maintenance component to be cofinanced by the Bank and RMTF\. The Credit Agreement included a disbursement condition for adequate staffing of the Fund that, after problems finding suitable candidates, was accomplished by transferring some RDA staff\. As a result, the role of the Fund in approving the annual road maintenance plans was carried out with an increased technical capability\. In addition the Fund started to play an active role in overseeing works and ensuring the adequate use of the approved allocations\. - 12 - 36\. The Road Asset Management System (RAMS) has been successfully implemented\. The implementation phase witnessed not only the enhanced capacity of the RDA and PMU for implementation but also improvement in the construction industry overall\. The institutionalization of RAMS has resulted in sustained maintenance grants through the RMTF with more emphasis given to collecting scientific data\. Though much improvement is needed for the analyses of such data, the presence of RAMS will lead to the sustainable functioning of a maintenance system for the highways in Sri Lanka\. Awareness of environmental and social safeguards during construction activities has increased among the practitioners in the road sector\. The public participatory process in these activities through stakeholder consultations, and the approval process of yearly maintenance plans, may open opportunities for enhanced quality, transparency, and accountability\. 37\. Road traffic safety pilot\. Concerned by the fact that the substantial road improvements taking place in Sri Lanka were allowing increased speeds and potentially detrimental effects on traffic accidents, the Second AF included a pilot safety corridor to address these concerns\. Twenty-seven km of the A002 was selected as the road safety demonstration corridor due to its existing high-level of road accidents\. A committee was formed from multiple organizations that had not cooperated previously, and a considerable amount of time and effort was used to mobilize them and the communities\. Organizations included, among others, RDA, the Traffic Police, Ministry of Health, four local authorities on the corridor, the University of Moratuwa, and the National Council for Road Safety (NCRS)\. The committee was tasked to scope and implement the demonstration corridor\. Traffic Police coordinated public awareness measures and enforcement, working closely with the public to mitigate initial reluctance\. In addition to awareness programs, interventions included placing of pedestrian crossings, especially in view of schools and bus stands, street lighting, provision of safety barriers, raised foot walks, availability of ambulance and fire facilities and training of staff for emergency care, provision of an emergency number to access these facilities, safety awareness for schools, three wheelers and private buses, enforcement of speeds, etc\. Table 3\. Changes in Accident Patterns Along A002 Pilot Safety Corridor 2015-2016 Category 2015 2016 Fatal 10 5 Grievous 40 5 Minor Injured 101 22 Total 151 30 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Use 38\. M&E design\. The project M&E systems were planned using the Results Framework designed at appraisal\. The PDO outcome and intermediate results indicators were adequate from a technical standpoint to measure improvements in road conditions (IRI), reduction in VoCs, sustainability, and efficiency\. The indicators were, in principle, appropriate to measure the PDO to reduce transportation costs through sustainable delivery of an efficient national road system\. - 13 - 39\. However, three out of the five PDO indicators encompassed the whole network, in particular, VoC, IRI and the percentage of roads in poor and bad condition\. While the PDO and associated outcome indicators were to reduce the transport costs through sustainable delivery of an efficient national road system for the whole network (12,000 km), the Project works were responsible directly for only 755 km, which is about 6 percent\. To address the greater network, the project incorporated a number of institutional strengthening activities; however, the results framework falters in showing direct causal links between the project’s institutional activities and the national targets\. These weaknesses raise attribution issues\. 40\. The PDO could have been more focused by separating the sub-objectives more distinctly, i\.e\., lowering the transportation costs for the targeted project roads, and supporting sustainable delivery of an efficient national road system\. In fact, the project indicators that measure the reduction of transport costs for the targeted roads in the project are precise and easily measurable, and closely related to the road improvements and related activities\. It is the references to the national roads that weaken the framework\. A relatively simple change in the language of the PDO and the three PDO indicators could have gone a long way towards strengthening the evaluative framework, i\.e\., substituting “targeted roads, or corridors” for “national network”\. Many projects with similar components do just this: frame the objective to “reduce the transports costs along the targeted corridor,” instead of “reduce transport costs for the whole national network”\. 41\. The establishment of baselines and target values for RSAP-1 was also marred by flawed data\. According to one aide-memoire,3 the baseline value of the network IRI for RSAP-1 was fixed at 9\.5 based on 226 km out of 9,913 km of road network in the year 2004\. Yet even the methodology used in assessing the 226 kilometers was not clear\. This resulted in indeterminate baselines the VoC and IRI of the parent project\. The Bank recognized the flaws and at various points took steps to improve the framework, but reliable data – even four or five years into the project – was not always available\. It was only by the time of the Second AF in 2011, when annual national road surveys had been instituted, that the Bank team was able to agree with the government on significant changes to the results framework and establish clear and reliable baselines and targets\. (The PDO target values for the VoC and IRI were revised because the Project had already achieved a much lower value than the target value in 2009\.) 42\. M&E Implementation and Use\. RDA and the Ministry of Provincial Councils and Local Governments (MPCLG) were responsible for collecting, analyzing, and reporting project performance indicators\. The Bank had access to the data necessary to analyze performance and other monitoring issues\. The Bank used this information, to the extent possible, to carry out the project’s restructuring and prepare the AFs\. The Results Framework matrix was adjusted accordingly, particularly at the Second AF\. 43\. An independent M&E report in 2009 found that monitoring alone was not sufficient and more focus needed to be placed on analysis and evaluation to improve strategic decision making\. Improvements were made, albeit gradually\. 3 Annexure 2 of aide-memoire of June 2008\. - 14 - 44\. Progress towards achievement of the final targets was monitored through regular project progress reports by RDA and the Bank’s implementation Status and Results Report (ISR)\. Progress under the institutional development component and compliance with related covenants, were reported in semi-annual progress reports prepared by RDA, while regular supervision missions and comprehensive aide-memoires monitored progress and results achieved\. An MIS system was used by RDA to provide monthly progress reports to sector stakeholders, including the Bank, on physical and financial, as well as technical progress for all road sections and contracts\. HDM-4 was used to monitor selected project indicators\. The project was able to train an adequate number of persons on RAMS and RDA is well equipped with the latest survey equipment, including laser road profilometers and falling-weight deflectometers\. Survey teams now collect data annually\. 2\.4 Safeguard and Fiduciary Compliance Environment Safeguards 45\. The project triggered Bank safeguards policies Environmental Assessment (OP/BP 4\.01) and Natural Habitats (OP/BP 4\.04), and was classified as an environmental category B project\. An Environmental Management Plan (EMP) was prepared by the RDA\. Overall, the EMP was satisfactorily implemented by contractors and monitored under the supervision of the RDA\. During implementation, this was confirmed with no major impacts or safeguard compliance issues arising\. The successful adoption and implementation of the Bank’s environmental guidelines on the initially reluctant local and international construction firms is one of the important achievements of the Project\. Sri Lankan law requires environmental assessments and actions for road constructions, but not for rehabilitations\. However, the Project helped introduce and include environmental clauses as part of the contract documents of these rehabilitation works\. By the end of the Project, many of the local contractors were adopting the same preventive and remedial environmental protection measures on other projects with no such requirements\. Social Safeguards 46\. Social safeguards management of the Project showed gradual progress throughout the Project implementation period\. In keeping with the Bank’s safeguard policies, the RDA prepared an Environmental and Social Management Framework for the overall project\. 47\. The project triggered OP 4\.12 (Involuntary Resettlement) to mitigate impacts to the properties and structures along the roads\. However, no physical or economic displacement of persons or resettlement impacts were experienced by the Project and most of the lands used for expansion of the roads were within the domain of the RDA or obtained through voluntary land donations from project beneficiaries\. 48\. Most of the adverse social impacts were due to construction-induced issues related to expansion of the width of roads, affecting property owners residing along the roads, and drainage lines that obstructed planned improvements\. Social Impact Assessments and site-specific Resettlement Actions Plans were prepared to identify the potential, adverse social impacts and mitigation measures were implemented to reduce them\. A key highlight of the Project was the systematic implementation of a grievance redress mechanism according to the Policy Framework\. Also, for the first time in a road project in Sri Lanka, an independent third-party monitoring system - 15 - was introduced to engage project-affected persons to provide feedback and systematic monitoring of project implementation\. In addition to the above measures, the Project undertook a series of awareness creation programs on HIV/AIDS in compliance with the Bank’s policy\. Overall, implementation of social safeguards was Satisfactory throughout the Project period\. Procurement 49\. Procurement of goods, works, technical assistance, and non-consulting services was carried out in accordance with the Bank’s procurement guidelines\. All contracts, with minor exceptions, were signed and completed before project closing\. At appraisal, the procurement capacity of the implementation agency was assessed and a Procurement Plan was prepared\. The procurement activities were managed by the related project implementation agencies\. Procurement under the Project was rated Satisfactory throughout most of the Project implementation period, with very few exceptions, where it received a Moderately Satisfactory rating due to procurement and contract delays\. However, it was noted in two aide-memoires (December 2010 and April 2015) and interviews that procurement and contract management were at times affected by a lack of proper monitoring and supervision by the implementing agency which, in turn, affected fiduciary compliance\. The project experienced substantial time and cost overruns largely due to unrealistic estimates, and poor performance in works that showed premature pavement failures on three packages under the national roads component of the parent Project\. At the end of completion of the original Project in December 2010, about $10 million was financed by the government’s own funds due to additional works that were carried out without the Bank’s agreement, and which were found to be ineligible due to unacceptable variations in price indices for the calculation of price adjustments and the use of unacceptable market rates\. Financial Management 50\. The performance of the implementing agencies in financial management (FM) has been satisfactory in a majority of the implementation support review missions\. On two occasions, during November 2011 and December 2013, the overall FM rating was downgraded to Moderately Satisfactory\. The reasons for the downgrade was primarily due to one or more of the following: inadequate FM staffing, issues in submission of interim unaudited financial reports, inadequate internal audits, delayed external audit, and inadequate counterpart funds flow on a timely basis\. However, other than on these two occasions, basic arrangements handled at the PMU, Project Consultancy Unit, and RMTF level, including budgeting, financial reporting, external auditing arrangements, accounting, FM staffing, funds flow, and internal controls, did not have major issues and hence, the overall implementation was managed satisfactorily\. It should be noted, however, that during the last few years of implementation, the Project’s internal audit failed to perform at its optimum level due to internal audit staffing constraints that were prevailing at the ministerial level\. This was identified as a systemic issue that could affect any project going forward\. It is envisaged that this area could be given special focus and perhaps training might be provided to enhance the capacity to perform internal audits\. 2\.5 Post-completion Operation/Next Phase 51\. The project roads from the parent project and Phase 1 of Component 1 of the Second AF have now been in operation for some years\. Despite cracks detected in pavements of three road - 16 - sections (parent project) and surface irregularities in pavements of a Phase 1 section, maintenance is under way on these roads\. The projects of Phase 2 of Component 1 of the Second AF have been taken over and post-project activities such as issuance of Taking over Certificates and Defect Liability periods have been completed\. 52\. An annual maintenance plan is being developed by the RDA and approved by the RMTF for periodic maintenance and routine maintenance of roads\. The funding is channeled through the RMTF using budgetary grants\. During 2005 to 2013, the budgetary allocation to road maintenance through the RMTF increased from $13 million to $63 million\. However, more sustainable avenues for funding need to be explored and an output and performance-based contracts system may be implemented for rehabilitation and maintenance of projects for longer duration\. The project has been transformational in its attempts to address the backlog of maintenance due to years of neglect\. In addition, this project helped both the Bank and the RDA undertake several institutional changes and reforms, such as financing the piloting of several initiatives to address adverse issues within the sector, including development of the contract management capacity within the RDA\. 53\. Based on the experience of the RSAP, the Bank is considering another project for long- term development of the capacity of the RDA as well as the maturity of the construction industry with renewed focus on good governance\. Given the country’s history of inadequate maintenance of existing assets and the Bank’s strong support for maintenance reflected through its entire support to the road sector in Sri Lanka, an asset management approach is being proposed through design-build-maintain-operate-transfer methodology\. 4 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation Rating of Relevance of Objectives: High 54\. The project objectives at appraisal were highly relevant to Sri Lanka’s needs and in line with the priorities of the CAS for FY2003–06 that aimed to improve social and economic inclusion of the poor and facilitate broad-based economic growth\. Both the government and Bank strategies highly prioritized the development of road infrastructure and recognized its contribution to the development of the private sector and the desired increase in revenues to achieve higher levels of public investment\. Improvement of the road network to maintainable conditions was considered a necessary condition to sustain the expected surge in economic growth\. 55\. It cannot be overemphasized that civil conflicts had severely impacted the country for a number of years and had contributed to the poor condition of the road network\. Its rehabilitation was essential to the country’s recovery process\. 4 A new project with many of these features was approved on May 9, 2016\. - 17 - 56\. The project objectives were and continue to be highly relevant and fully aligned with the current FY2013–16 CPS, which identified three areas for the World Bank Group’s engagement to assist Sri Lanka in addressing its long-term strategic and structural development challenges and middle-income country agenda\. The CPS’ areas of focus are linked to the three central goals of the government's Mahinda Chintana vision, namely: (a) facilitating sustained private and public investment; (b) supporting structural shifts in the economy; and (c) improving living standards and social inclusion\. The Bank supports Sri Lanka’s transport sector with the objective of improving the quality and sustainability of roads\. 57\. The project was linked to the third central goal of the government’s Mahinda Chintana vision and the third pillar of the CPS\. The third goal was to ensure access to basic, related services and provide improved quality of services, and the Project was fully aligned with this objective\. The project supported the government’s efforts to improve connectivity and enhance competitiveness through lowering of transportation costs and providing better and all-weather accessibility to related services for 80 percent of Sri Lanka’s population that live in rural areas\. The improved level of services resulted in enhanced highway safety, reduced travel time, and lower transportation costs, which resulted in more social inclusion and improved living standards\. Rating of Relevance of Design: Modest 58\. The project design had a balanced mix of civil works and institutional strengthening components which were closely aligned with the government’s reform priorities\. The lending instrument was Specific Investment Lending (SIL) and was found to be the appropriate instrument for the Bank to re-engage in the Transport sector after being absent for decades\. The Project’s design recognized the need to lower transportation costs and the sustainable delivery of a road system, which is an appropriate description of the objectives\. 59\. However, as mentioned previously, the M&E framework did not have an adequate mechanism to attribute the impact of these activities directly to the project which raises attributional questions\. Given the scope of the project and its components, the formulation of the PDO was overly ambitious\. In addition, the establishment of some baselines and target values were shown to be problematic because of weaknesses in the data which was not fully resolved until the second additional financing\. 60\. While the above weaknesses should not be understated, and are the direct cause for the Modest rating for Relevance of Design, it should not be lost that the project design had some highly relevant and innovative features that have had, and continue to have, a transformative influence on road maintenance, contracting, safety, and financing in Sri Lanka\. 3\.2 Achievement of Project Development Objectives Rating: Substantial (RSAP-1) and Substantial (RSAP-2) 61\. The project was initially scheduled to close on September 30, 2011, although two additional financings and several restructurings extended the closing date to June 30, 2015\. In addition to the closing date changes, there were significant changes to the results framework\. With this in view, the ICR used a split evaluation as outlined in the ICR Guidelines\. As the primary demarcation over the life of the project was the second AF, which was a scale-up, and which - 18 - introduced new activities and significant changes in the results framework, the project has been evaluated based on this milestone\. The two phases comprise RSAP-1, which includes the parent project up through the first AF; and RSAP-2, which includes the project from the second AF through its closing\. 62\. The PDO was to reduce the transport costs through sustainable delivery of an efficient national road system comprising a network of 12,000 km\. While most of the civil works were limited to about 6% of the network roads, the project counterbalanced the limited civil works with a broad range of institutional activities that included capacity building and financial support to the Road Maintenance Trust Fund\. Support funded improved network maintenance, promoted greater transparency in the allocation of resources and disbursement of funds, and carried out efficient monitoring of the maintenance programs\. Between 2005 and 2013, the allocation for road maintenance channeled through the RMTF increased from $13 million to $63 million\. 63\. Support was also provided for the establishment of a Road Asset Management System, which was a key component of the second additional financing aimed at building capacity and strengthening systems within the RMTF and RDA relating to road maintenance, and geared to better maintaining and prioritizing the country network of national roads\. Funding was provided for periodic maintenance, training of staff, developing the right tools and developing a strategy for moving from a post-conflict system of historically poor road maintenance to a modernized and competitive working national system\. 64\. The Project PDO and some of the associated outcome indicators were not ideally formulated to align with the project scope\. As mentioned in the M&E section, this weakens certain causal links\. At the same time, discounting achievements because of poor formulation risks discounting substantial outcomes\. First Objective - Lowering Transport Costs 65\. Lowering transportation costs has been monitored and evaluated through outcome indicators via reducing average network VoCs, average network roughness, share of network roads in poor and bad condition, and maintenance expenditure for project roads\. Taking into account that each indicator is split by the multiple implementation periods, the project achieved, and in many cases exceeded, the targets of the large majority of these indicators\. Reduction in VoC and Roughness 66\. Reduction in VoC was fully achieved for RSAP-1\. The target was a 3\.8 percent decrease; the actual decrease was closer to 35 percent\. As mentioned above, however, the result should be interpreted with caution as the VoC was overestimated at the appraisal stage of RSAP-1\. For RSAP-2, reduction in VoC was not fully achieved\. Although the decrease achieved about a 5 percent reduction (improving upon RSAP-1’s target), the target had been reset in the 2nd AF from 3\.8 percent to 28 percent\. In contrast, the roughness (IRI) of the Project roads was decreased substantially and the target was fully achieved\. This duel result suggests that despite significant improvements in road quality there was only a modest reduction in VoC\. This could be due to increased traffic on the roads due to the road improvements, or increased speeds of vehicles on the roads, resulting in higher fuel consumption (or both)\. The Borrower has suggested, although it - 19 - awaits confirmation, that subsequent to the cessation of the conflict in 2009, the amount of funding to the road sector increased substantially, but was disproportionately targeted to rebuild the network in areas that had suffered severely from the conflict\. However, the road network in the conflict affected areas does not carry as much traffic as the road network in the urban areas, and thus, fewer users would result in a smaller impact on the network’s VoC\. 67\. The achievement of the first objective was also linked to project outputs measured by intermediate indicators, namely, to lowering transportation costs through resurfacing of national roads, improving rural roads, increasing of periodic maintenance, and increasing annual maintenance expenditure, which were almost all achieved, and in several cases, exceeded\. Second Objective – Sustainable delivery of an efficient national road system Increase in Annual Maintenance Expenditure 68\. The achievement of this second objective was linked to project outputs that were implemented successfully, including: capacity building, the establishment of the RMTF, the rural roads maintenance pilot that included the development of a rural roads maintenance strategy, country rural roads investment plan and database; safety capacity assessment; and a 5 percent reduction in traffic accidents in the selected demonstration corridor as a result of measures supported by the Project\. 69\. The expenditures of $0\.66 million and $19 million for institutional strengthening in (RSAP-1 and RSAP-2, respectively) resulted in building capacity for data collection and analyses, design of enhanced decision support systems, better internal organizational management, and additional support for maintenance financing for periodic maintenance work\. 70\. As noted under the first objective, though with different emphasis, the project supported the establishment of RAMS and the RMTF, two of the highlights of the project which have had a transformative impact\. RMTF was set up to ensure the sustainable and transparent allocation of resources and funds, but also carries out efficient monitoring of road maintenance, while RAMS aids RDA in building capacity to optimize the selection of roads for maintenance and align its processes toward minimizing costs\. A related notable achievement has been the strengthening of the capacity of local governments to prioritize road expenditures and select appropriate technical interventions for rural road maintenance\. The Project substantially achieved the intermediate indicators that assess this objective\. 71\. The outcome indicator related to sustainability was to monitor the funding levels for yearly maintenance for periodic and routine maintenance works\. The original target for RSAP-1 was substantially achieved; $44 million (up from $10 million) against the target value of $46\.3 million\. The target for RSAP-1I was not achieved, LKR 5 billion against the target of LKR 6\.6 billion\. The indicator, however, does not take into account that GoSL has increasingly channeled funds for periodic maintenance through other projects not reflected under the budget item for RMTF\. In addition, GoSL channels funding for improvements which include periodic maintenance expenditure which cannot be easily separated as a result of streamlining budgetary processes, and recently moving to a multi-year budgetary system\. - 20 - 72\. In sum, although the results framework had inherent weaknesses, the project accomplished most of its major objectives: resurfacing, rehabilitating or maintaining over 800 km of roads, developing budgetary systems that are generating institutional changes and new approaches to road maintenance and financing; innovating in programs for road safety; and piloting new methods and strategies for rural roads maintenance\. Taken together, the cumulative impact of these activities, together with the achievement of most of the project targets, suggests the project had a major impact on the improvements to the national network\. Quoting from the Borrower’s ICR: “The culture change that RSAP catalyzed that ranged from the improved practice of safeguards and an effective grievance redress system to better efficiency in all aspects of project design and implementation will be key to the sustainability of its outcomes\. The setting up of the RMTF and maintenance systems, the building of capacity within the RDA, including the capacity to manage contracts, and the development of the private contracting industry, are all key factors that influence sustainability\.” The efficacy of the project is rated Substantial\. Table 4\. Assessment of Efficacy Pre- and Post- Restructuring Table 1\. Assessment Targets Actual Values Percent Achieved of Efficacy Pre- and Post- Restructuring PDO Indicator Aggregate Rating of Efficacy: Original Efficacy – Substantial ; Revised Efficacy - Substantial Specific Objective 1: Main objective - Lower Transport Costs through sustainable delivery of an efficient national road system Rating (against revised target): Substantial RSAP-1 Original: Actual value: 14\.97 Original: Achieved (i) Reduction in average LKR 22\.9 per The value achieved in 2006/08 was 15\.37/km network VoC by 3\.8%, km and the mission considered VoC to be very low and after examination of the estimation, it was found that the methodology was unknown (AM-June 2008 (ii) Reduction in IRI in Original: 8\.39 Actual value: 6\.45 Original: Achieved average network Similar as above, the survey data collected in 2004 was being used\. It was found that only 226 km out of 9913 km of national highways were surveyed for IRI in the year 2004 or before\. Therefore the source of the information of the baseline year 2004 of IRI 9\.5 could not be known\. (iii) Reduction in Original:35% Actual value: 44% Achieved: 70% percentage of the network in poor and bad condition (iv) Increase in annual Original: Actual value: 44 Achieved 95% maintenance expenditure $46\.3 million - 21 - RSAP-1I (i) Reduction in average Original: Actual value: 13\.88 Original target of 3\.8% achieved; revised network VoC LKR 10\.5 target of 28% not achieved (ii) Reduction in IRI in Original: 5\.9 Actual value: 5\.9 Achieved average network (iii) Reduction in Original: Actual value: 35% Achieved percentage of the network 35% in poor and bad condition (iv) Progressive increase Original: $66 Actual value: $50 Not achieved in annual road million million maintenance (v) Improved level of Original:38\.3 Actual value: 68\.15 Achieved satisfaction of road users 0 Intermediate outcomes RSAP-1 Original: 620 Actual value: Achieved (i) # of KM of National 617km roads resurfaced (ii) reduction in IRI for Original: 2\.9 Actual value: 2\.8 Achieved project roads (620km) (iii) Reduced travel time Original: 42 Revised (split) Achieved on project roads (620km) (iv) # of km of Rural Original: 635 Actual value: Original: Revised from spot improvement to Roads improved Revised: 157 167km rehabilitation due to rural strategy\. Revised: Achieved (v) Reduced travel time Original: 4% Actual value: 60% Achieved on project rural roads by 10% (vi) Relevant staff to be Original: Actual value: 67% Achieved trained in road asset 50% management RSAP-1I Original: 134 Actual value: Revised: Achieved (i) # of KM of National Revised: 78 78 roads resurfaced (ii) reduction in IRI for Original:2\.8 Actual value: 2\.33 Original: Achieved project roads Revised: 2\.4 Revised value: 2 Revised: Achieved (iii) Reduced travel time Original: 42 Actual value: 40 Achieved on project roads Revised: 12\.5 Actual value: 11\.31 Achieved Revised: 23\.9 Actual value: 23\.58 Achieved (iv) Periodic maintenance Original: Actual value: 64\.50 Achieved 60km - 22 - 3\.3 Efficiency Rating: Modest (RSAP-1) and Substantial (RSAP-2) 73\. The national roads sections rehabilitated under the parent project were selected on the basis of development priorities and economic viability and assessed during appraisal using the Highway Development and Management Model (HDM-4) software\. The net present value (NPV) of the investments in the 15 original road sections was estimated at $103 million and the economic internal rate of return (EIRR) at 31 percent\. Sensitivity analysis showed that changes in costs and benefit scenarios would have limited impact on the results\. The analysis of the ICR is conducted for 12 road sections\. After project completion, the NPV is estimated to be $225 million and the economic internal rate of return (EIRR) is 29 percent\. This difference in the NPV values (between the PAD and ICR) is driven by a difference in the assumptions of the PAD and ICR—the analysis in the PAD is conducted for an 11-year time horizon while the analysis of the ICR is conducted for a 20-year time horizon\. If we limit the time horizon of the ICR analysis to 11 years then the resulting NPV is $23\.6 million and EIRR is 17 percent\. This reduction in EIRR and NPV is consistent with the increase in construction costs between the initial economic analysis and the revised analysis\. With cost overruns ranging from 51\.4 percent to 132\.4 percent, the efficiency of this phase of project, that is, RSAP-1, is rated as Modest\. 74\. In the roads financed under the Second AF, the economic analysis was carried out for both sections using HDM-4 by the RDA\. Here we compare the results for the ICR to those in the Restructuring Paper\. The estimates of NPV and the EIRR for the K-T section, A002, and A003 increased after project completion\. For the KT section, the NPV and EIRR at the time of restructuring was $24 million and 21 percent, respectively—the NPV is $8 million higher and the EIRR is 3 percentage points higher after project completion\. For A002, the NPV and EIRR at the time of restructuring was $101 million and 29 percent, respectively—the NPV is $28 million higher and the EIRR is 10 percentage points higher after project completion\. For A003, the NPV and EIRR at the time of restructuring was $132 million and 47 percent, respectively—the NPV is $14 million higher and the EIRR is 4 percentage points higher after project completion5\. With cost overruns ranging from negative to 20\.8 percent, the efficiency of this phase of project RSAP- 2 is rated as Substantial\. 75\. Table 5 summarizes the main results, comparing the EIRRs before and after the Project\. All EIRRs after project completion remain above the 12 percent threshold\. For both RSAP-1 and RSAP-1I the benefits from travel time savings are higher than the benefits from vehicle operating cost savings\. 5 The analysis at both the appraisal and ICR stage is conducted using HDM4 which is calibrated for Sri Lanka, it is based on the same time horizon and accounts for the same benefits (VoC and VoT)\. - 23 -  Table 5\. Results of Economic Analysis-Before and After the Project EIRR at NPV at appraisal EIRR at ICR NPV at ICR Length Appraisal ($, millions) (%) ($, millions) (%) 620 km(using different time 31 103 29 225 horizon) 620 km (using same time 31 103 17 24 horizon) Before Restructuring 134 km 51 522 Dropped and replaced with A002, A003 (A006) After Restructuring K-T Section 21 24 24 32 A002 29 101 39 129 A003 47 132 51 146 76\. Final results were heavily dependent on the soundness of input data and quality of analyses\. This remained a matter of concern during project life\. The Bank mission highlighted the issue of quality of data and more need of analyses to apprehend the scenarios better\.6 Therefore, the ICR team has taken cost overruns into account as well for assessment of efficiency\. The project's overall efficiency was rated as Modest (rounding down the efficiencies of two phases of the project because the parent project is given more weightage due to more cost)\. 3\.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory 77\. The ICR considers the overall outcome of the Project as Moderately Satisfactory\. The rating is based on the relevance of objectives, relevance of design, achievement of PDOs, and efficiency, and using the weighted system, before and after the Second AF, which was a major change in scope of work\. The related indicator values during project life were rounded off to the nearest whole number\. The assessment is given in Table 6\. 6 AM of mission in December 2013\. The mission discussed the shortcomings in development of asset management system in the RDA, highlighting data management issues\. - 24 -  Table 6\. Assessment of Overall Project Outcome Against Original Against Revised Outcome Outcome Indicators Indicators before after 2nd 2nd Restructuring Restructuring Overall Comments Relevance to 1 Substantial Substantial – – objectives and design Achievement of 2 Substantial Substantial – – project outcome 3 Efficiency Modest Substantial – – Moderately 4 Overall rating Satisfactory – – Satisfactory 5 Rating value 4 5 – – Weight (% disbursed 6 before/after 2nd 57 43 – – Restructuring) 7 Weighted value 2\.28 2\.15 4\.43 Rounded to 4, which arrives at Moderately 8 Final rating – – Moderately Satisfactory Satisfactory 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 78\. The project is expected to have had an indirect positive impact on poverty and social development—improving transport conditions fuels the economy, creating jobs, and access to markets\. Improved transport conditions facilitate better connected communities, foster access to social facilities, and reinforce social nets\. Poverty impact and social development were higher- level objectives of the Project success and have not been specifically assessed\. (b) Institutional Change/Strengthening 79\. The project collaboration has had important benefits in driving the institutional reform agenda for road asset management\. The Project financed several courses to improve the capacity of the RDA and the construction industry in areas of construction capacity, maintenance, asset valuation, preservation, highway safety, environment and social safeguards, FM, and procurement management\. 80\. The project made significant contributions to institutional strengthening of Sri Lanka’s transport sector\. In particular the Project: ï‚ Provided technical assistance for the strengthening of procurement, planning, and contract management\. ï‚ Improved the capacity to resolve social and environmental safeguards issues by training RDA and other implementing agencies, ï‚ Provided capacity building in the functionality of the RMTF, - 25 -  ï‚ Strengthened RDA to design and supervise consultants’ and contractors’ work including laboratory tests, etc\., ï‚ Strengthened RDA to work with other inter agencies such as utilities, water body, police etc, and ï‚ Supplied technical Assistance in Asset Management, HIMS, PMS, HDM-4, inventory, selection, prioritization, database for rural roads\. (c) Other Unintended Outcomes and Impacts (positive or negative) 81\. There were no noticeable or irreversible negative impacts of this project\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 82\. The ICR team carried out a workshop with stakeholders during the mission of June 8-12, in order to obtain their impressions and lessons learned\. The workshop was attended by a large audience from the various government agencies, PMU, contractors, consultants, and beneficiaries who provided valuable input for the ICR\. This workshop sought to capture the lessons learned to improve the design of future transport projects in Sri Lanka\. The findings of this workshop were rich and are presented in annex 6\. 4\. Assessment of Risk to Development Outcome Rating: High 83\. The joint strategy by the GoSL to rehabilitate the national road network along with the rural road project was supported through a collaborative effort of the Bank, ADB, and JICA that agreed on funding the maintenance backlog which affected the road network\. Sustainability of the road network largely depends on adequate maintenance; thus, the focus of the Project on supporting the RDA in developing capacity in assets management and reducing the backlog in maintenance was critically important\. Proper maintenance of the road assets remains one of the priorities in the transport sector\. 84\. The risk to the development outcome is High\. It is clear that through persistent efforts and consistent programs, GoSL has managed to improve the road network during the past 10 years\. It has continued gradual progress in strengthening road management at the national and rural levels, brought increased transparency to the allocation of resources through the use of the RMTF, and is working to put in place the right institutions and policies to secure continued inroads in traffic safety\. However, there is a significant risk to relaxing the level of funding for road maintenance as maintenance budgets for roads infrastructure may be crowded out by large investments in new construction and for works stated in this section\. 85\. Political will to invest in the maintenance of roads is critical\. In this case, it was witnessed that with the change of regime, the interim government reduced the budgetary allocation for road maintenance from LKR 6\.6 billion to LKR 5 billion\. - 26 - 86\. From a broader perspective, the financing of the sector continues to raise doubts in its capacity to meet the actual needs of the road network with regard to rehabilitation and maintenance\. Although the increases in road maintenance budget allocations made it possible to partially catch up with the road maintenance backlog, the current budget is insufficient to mitigate road deterioration in the coming years\.7 This means that any additional resources allocated to the road rehabilitation and maintenance will reduce the extent of the expected deterioration rather than contribute to absolute improvements on the road network\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 87\. The Bank's performance during the preparatory period was Moderately Satisfactory\. Overall, the Project was well prepared and reflected the government’s priorities at the time of the appraisal\. The project design included: (a) the incorporation of most lessons learned; (b) the pragmatic approach for dealing with unknowns in the rural roads sector; (c) identification of most of risks early in the Project; and (d) strong attention to safeguards\. 88\. The Bank's performance, with regard to the strategic relevance and approach and paying adequate attention to fiduciary and safeguards arrangements was satisfactory\. The Bank team was comprised of experienced professionals who worked with the GoSL and development partners on project preparation\. The project was also designed based on the GoSL’s development strategy and in the framework of the CAS and donor transport strategy\. In this respect, there was a strong Bank effort to coordinate its interventions in the transport sector with ongoing efforts from other international financial organizations, particularly ADB and JICA\. 89\. The project was designed taking into account the insurgency in Sri Lanka and its impacts, which exacerbated the lack of available vital data at entry, the nonexistent or limited capacity of the implementing agency in RAMS practices, the relative inexperience of the local private construction industry, and the need to address the country’s huge backlog of road maintenance through a systematic and programmatic approach\. The urgency of the crisis made moving quickly a high priority, thus limiting the amount of time for preparation\. The team handled most of these challenges well\. However, as explained in previous sections, the PDO and associated indicators were overly ambitious and disproportionate to the Project scope, particularly for a post conflict affected state\. The Results Framework was inadequately designed, and in addition there were 7 Final Book; Directions and Destinations by World Bank Group Sri Lanka\. Page 6; “road maintenance has been chronically under-funded across the different types of roads\. The total funding requirement for periodic and routine maintenance of roads from 2007 to 2013 was approximately LKR 81 billion, but only LKR 38 billion was made available during the period\.” - 27 - some causal disconnects between inputs, outputs and outcomes which made it difficult to assess the contribution and achievement of the Project activities as stated in the PAD\. 90\. Keeping this in mind, the quality at entry is rated as Moderately Satisfactory, although QAG’s rating was satisfactory\. (Annex 9)\. (b) Quality of Supervision Rating: Moderately Satisfactory 91\. The Bank provided constant and appropriate implementation support to the borrower and took proactive action on issues that arose during implementation\. Clear examples of this have been the prompt attention to process two AF operations, explained previously in this ICR\. The operation took into account the priorities of the borrower and the need to ‘fine tune’ the design of the project, incorporating a focus on road traffic safety issues and tailoring the design and supervision of civil works to the specific needs of Sri Lanka\. The timely processing of the 2nd AF was pivotal in nature to ensure continuity of the Bank's engagement in the country with already well performing implementation arrangements\. The Bank also provided special training on the use of HDM-4, procurement, contract management, social and environment management to RDA\. 92\. The Bank team carried out at least two implementation support missions per year\. The field-based Task Team Leader and other team members worked directly with the client and ensured timely responses\. Continuity in the team was maintained from preparation through completion\. Implementation support extended beyond operational missions\. The task team possessed the appropriate skills mix with the technical, institutional, fiduciary, and safeguards knowledge\. The Task Team had the experience to work effectively with the client, review documentation and provide advice on the quality of works\. The team recommended new approaches in the implementation of institutional support components which was appreciated by the client\. This resulted in an excellent integration of procurement supervision activities with the overall supervision effort, and for the consistency, clarity, and comprehensiveness of documentation of safeguards supervision\. 93\. In addition, the Bank helped to introduce and include environmental clauses as part of the contract documents of rehabilitation works\. Because of this project, many of the local contractors adopted the same preventive and remedial environmental protection measures on other non-Bank financed projects that previously had had no such requirements\. Therefore, the Project was instrumental in elevating the awareness of using high standards of safeguards practiced by several contractors\. 94\. The Bank Team, however, needed to have updated the M&E Results Framework more vigorously and on a more timely basis\. As the weakness of the data became apparent in the early years of the project, efforts should have been made to prioritize data collection and analysis\. If it became clear that data was not going to become available, then baselines and targets (and perhaps, objectives) should have been reassessed\. While the results framework was revised during the second AF, this was five years into the project\. In addition, at no time during project implementation – including the second AF, or the restructuring in 2013 – was the issue of attribution ever considered\. If addressed earlier, indicators/objectives affecting attribution could - 28 - have been revised, creating stronger links to the PDO, and bringing a more robust coherence to the results framework\. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 95\. The Bank team put substantial effort in project preparation and implementation support, which led to the Project (mostly) achieving its development goals\. The implementation support was provided amidst the escalating conflict where in certain parts of the project period the particular roads could not be accessed due to terrorist activities\. The Bank, albeit with some shortcomings in design and supervision, achieved implementation of a project with complex civil works, challenging safeguards features, and the need to manage a large multidisciplinary team, all that in a pre and post conflict state for decade\. 96\. Therefore, considering the ratings for the Bank's performance at entry and quality of supervision Bank performance is rated Moderately Satisfactory\. 5\.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 97\. The GoSL remained fully supportive of the efforts for smooth implementation of the civil works component of the Project, the expansion to the whole country of the strategy for rural roads maintenance, and the successful implementation of a pilot traffic safety effort\. The GoSL was instrumental in reshaping the road maintenance regime in the country; its commitment made it possible to achieve a majority of the performance indicators\. 98\. Shortages in counterpart funds were evidenced at different points of project implementation; however, the government was able to provide the funds at a later stage\. Actions toward fully launching the RMTF dragged on during the first three years of the Project but with continuous engagement of the Bank's Task Team and approval of the Second AF, the fund became operational, and the GoSL was able to establish the RMTF\. Maintenance allocations during the life of the Project were mostly in line with the agreed amounts, and the output indicator related to maintenance expenditure was mostly achieved\. 99\. The Government's performance is rated Moderately Satisfactory due to delays in the release of counterpart funds and delay of a fully functioning RMTF, which impeded the implementation of the maintenance component\. - 29 - (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 100\. The project was implemented by a dedicated PMU\. Despite initial problems with staffing due to internal regulations affecting outside recruitment and a rather high rotation of staff because of the then ongoing construction boom and high demand for skilled professionals, the PMU was helpful in carrying out the implementation of the Project related activities\. The PMU had adequate reporting systems, submitting bi-annual progress reports to the Bank that contained updated information on project financing, procurement, physical progress of works, safeguards, and key implementation issues\. 101\. However, the implementing agency failed to provide key technical performance data (roughness, condition, and traffic survey report) which was reflected through ISRs and AMs\. The provision of this data on a yearly basis was a covenant\. 102\. The main weakness of the PMU and the RDA related to contract management and close control with respect to growing variations which were found to be ineligible\. For instance, physical variations on the 12 civil work contracts ranged from 7% to 88%\. The cost increase by the end of the project was 34% more than the original contracts cost and 11% over the variations at MTR which stood at LKRs\. 3\.9 billion\. The implementing agency showed a lack of proactivity in the use of remedial actions to address the issue of underperforming supervision consultants\. The project faced cost and time overruns throughout project life\. Many quality-related issues were highlighted and were attributed to non-satisfactory performance of the supervisory consultant, poor designs, and engineering practices\. Premature failures in pavements in three road sections were witnessed\. 103\. The PMU and RDA could have avoided many of these issues through better monitoring and supervision and proper contract management\. Overall, the implementing agencies performance is Moderately Satisfactory\. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 104\. Based on the above considerations, the Borrower’s performance is rated Moderately Satisfactory\. 6\. Lessons Learned 105\. The long-term and continued Bank’s engagement and coordination ef forts in the country’s road subsector provides a robust platform for well performing projects\. The Bank’s continued presence in the transport sector helped to strengthen and enhance supervision effectiveness and deepen understanding issues in Sri Lanka’s road subsector\. The Bank has been active in the subsector since 2004 with consistent objectives\. This continued presence has allowed for the strengthening of the transport sector across the board through the introduction of innovative road stabilization programs and sound periodic and routine road maintenance policies\. - 30 - 106\. Extensive turnover of the key RDA project team weakens the institutional memory\. Continued RDA key staff is pivotal for a project's success\. Continuity of the same project team and task team leader of the Bank from the preparation to completion helped achieve most of its PDOs\. The high turnover of many project team members of the RDA (four project directors were changed during the Project) resulted in many problems related to cost and schedule overruns and quality of civil works\. 107\. A dedicated project management consultant will help both the Bank and the Borrower to have more effective control on project implementation\. The RSAP project suffered major cost overruns and issues with quality and risk management\. These issues are related to project management implementation\. In the case of the RDA, the authority was assisted by supervisory consultants and individual consultants but close investigation of their terms of reference indicated that these consultants were subject to area specialists (engineering, finance, etc\.) and they were given additional segmental project management activities\. In the era of project management role delineation, the engagement of a dedicated project management consultant on big projects will help the Borrower in their project management effort\. 108\. Adopting sustainable funding sources for the RMTF is key for its optimum functioning\. Though setting-up institutional arrangement for the creation of a road fund seems simple, implementation of associated Policy and Legislative Frameworks throughout the sector becomes difficult\. Nevertheless, autonomous arrangement of the RMTF and road funds provide an opportunity for progress on management, accountability, transparency, and increased awareness on the need to address long-neglected maintenance\. Whereas the concept of highway maintenance and development financing through marginal social costing is very popular and remained the essence of this project, another revenue stream from road user fees might have added to the much- needed additional source of funding\. 109\. Formulating a proper M&E system (with improved and adequate Results Framework) is instrumental for the evaluation of project\. The choice of the PDO indicators should take into account the type of data that can be collected during implementation\. The Bank should ask the Borrower to provide reliable data with the frequency stated in covenants\. The baseline and target values should be based on reliable data, should be realistic, and should be based on sound engineering\. 110\. Importance of RAMS practices is key\. One of the achievements of this project was to highlight the importance of a comprehensive system for maintaining the road network through RAMS practices\. RAMS not only helped in reducing the transportation costs and increasing public perception about the importance of maintenance but was also instrumental in supporting the national economy through better and sustainable connectivity and mobility\. Further enhancements in the current RAMS will help the transportation sector manifold in the country\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies - 31 - 111\. The Borrower’s ICR, as well as their comments on this document are included in Annex 7\. Any corrections and/or other changes that have been suggested have been incorporated where appropriate and where evidence was available to substantiate recommended changes\. (b) Cofinanciers\. Not applicable\. (c) Other partners and stakeholders\. Not applicable - 32 -  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in $, millions equivalent) Appraisal Revised Actual/Fi Percentage Percentage Estimate Estimate nal Components of of Revised (Original) ($, ($, Appraisal Estimate ($, millions) millions) millions) Component 1 of Parent Project: Maintenance and Rehabilitation of National 112\.51 179\.15 239\.00 78\.06 49\.23 Roads Component 2 of Parent Project: 10\.04 10\.04 13\.07 6\.97 2\.76 Maintenance and Rehabilitation of Rural Roads Component 3 of Parent Project: 0\.60 0\.60 0\.66 0\.42 0\.16 Institutional Strengthening and Policy Support Second AF: 81\.00 63\.06 Rehabilitation of Priority National Roads and – 0\.00 27\.48 19\.00 12\.07 Maintenance Finance Total Baseline Cost 123\.14 363\.87 327\.86 85\.44 79\.64 Unallocated (physical and price contingencies) 20\.98 74\.08 0 14\.56 20\.36 Total Project Costs 144\.12 363\.97 327\.86 – – (b) Financing Actual/Latest Appraisal Estimate ($, Percentage of Percentage of Source of Funds Estimate ($, millions) Appraisal Actual/ Latest millions) Borrower 44\.12 54\.63 12\.89 17\.64 IDA 298\.00 255\.00 87\.08 82\.36 Total 342\.22 309\.63 – – (c) Project Cost by RSAP-1 and RSAP-1I 2005 2008 Components 2010/11 Appraisal Estimate Annex 1 of PP RSAP-1 Actual/Final (Original) Revised Estimate (Original + First AF) ($, millions) ($, millions) ($, millions) Maintenance and Rehabilitation of National 112\.51 179\.15 239\.00 Roads Maintenance and Rehabilitation of Rural 10\.04 10\.04 13\.07 Roads Institutional Strengthening 0\.60 0\.60 0\.66 and Policy Support Total Baseline Cost 123\.14 189\.79 252\.73 - 33 - Unallocated (physical and 74\.08 20\.98 0\.00 price contingencies) Also includes VAT **Total Project Costs 144\.12 263\.87 252\.73 2011 2013 2015 Components Appraisal Estimate Annex 1 of PP Actual/Final RSAP-1I (Second AF) (Original) Revised Estimate ($, millions) ($, millions) ($, millions) Rehabilitation of Priority 85\.50 81\.00 63\.06 National Highways Maintenance Finance and 14\.50 19\.00 12\.07 Institutional Strengthening **Total Project Costs 100\.00 100\.00 75\.13 ** Total (Original +First 244\.12 363\.87 327\.86 AF+Second AF) (d) Financing per Credit and Share Appraisal Estimate *Actual Latest Source of Funds ($, millions) ($, millions) CR 4138 Borrower 44\.12 54\.63 IDA 100\.00 96\.40 CR 4429 Borrower 0\.00 0\.00 IDA 98\.10 83\.60 CR 4906 Borrower 0 0 IDA 100\.00 75\.00 Total Borrower 44\.12 54\.63 IDA 298\.10 255\.00 Grand Total 342\.22 309\.63 Note: *Current value for client connection\. - 34 - Annex 2\. Outputs by Component Status at Output Indicators Actual Achievement % Closing 1st Revised 2nd Original Baseline Target Revised Target Second AF Target Component 1\. Maintenance and Rehabilitation of National Roads RSAP-1 (Parent Project and First AF) National roads resurfacing and 0 620 – – 617 Successfully achieved target for national roads improvement (km) Reduction in IRI for project roads 7\.8 2\.9 – – 2\.8 Successfully achieved RSAP-1I (Second AF) National roads resurfacing and Successfully achieved revised target for national 0 134 – 78 78 improvement (km) roads Reduction in IRI for project roads A6 6\.0 2\.8 2\.33 A2 4\.3 – 2\.4 1\.9 Successfully achieved A3 3\.1 2\.4 2\.0 A6 66 42 40 Reduction of travel time A2 13\.8 – 12\.5 11\.31 Successfully achieved A3 26\.5 23\.9 23\.58 Component 2\. Maintenance and Rehabilitation of Rural Roads RSAP-1 (Parent Project and First AF) Rural Roads resurfacing and Achieved\. Formally revised target was reduced 0 635 – 157 162\.3 improvement (km) and restricted in 2013\. Reduction of travel time (%) 10 – – 60 Successfully achieved Component 3\. Institutional Strengthening and Policy Support RSAP-1 (Parent Project and First AF) Establishment of and fully operational bodies such as the – – – – – Successfully achieved RMTF, Board Trustee, TAC, and Trust Fund Secretariat 50% of relevant staff in the Successfully achieved Planning and Maintenance of RDA trained in road asset management Training on Asset management, HDM-4, 0 50% – – 67% Maintenance Manual, Contract management, Social and Environment Management, PPP’s in highways - 35 - Rural road Maintenance Successfully prepared and delivered and used\. Strategy/Manual Rural Road Database established Successfully established and used for the whole country\. Out of 342 Local Authorities to be covered, the road databases and investment land for226 Las have already been prepared RSAP-1I (Second AF) Annual road maintenance program New Approved – – Approved Successfully achieved approved by the RMTF About 60 km of national roads on which periodic maintenance has New 60 – – 64\.50 Successfully achieved been carried out Rural road Strategy/Manual Note: A2 =; A3 =; TAC =; - 36 - Annex 3\. Economic and Financial Analysis Introduction 1\. Economic analysis is performed to assess whether the economic benefits of the Project are higher than its economic cost and whether these benefits are similar to those estimated at the appraisal stage\. We accomplish this by first assessing whether the economic internal rate of return (EIRR)8 is greater than 12% and then comparing it to the EIRR estimated at the appraisal stage\. Framework Assumptions: 2\. The following general assumptions are made when performing the economic analysis: ï‚ The analysis is performed for a period of 20 years—the analysis period starts from the construction commencement year since traffic is allowed to use the road during construction\. ï‚ Project discount rate is assumed to be 12%\. ï‚ For the conversion rate it is assumed that USD 1 is equivalent to LKR 140\.2871 ï‚ The vehicle classification used in the analysis consists of 10 vehicle\. The ten vehicle types considered are medium goods vehicle (MGV), Van (VAN), medium bus (MBU), light goods vehicle (LGV), motorcycle or scooter (MCL), three wheeler (TWL), car (CAR), large bus (LBU), 3 axle truck (HG3), and articulated truck (ART)\. ï‚ To convert financial costs into economic costs a conversion factor of 0\.97 is used (based on the 2014 Central Bank data)\. With vs\. Without Project Scenario: 3\. The without project case assumes that the current maintenance regime that allows for a gradual deterioration of the road continues\. The with-project case entails the actual rehabilitation of the roads and subsequent improvement in road maintenance\. It is assumed that there is minimal routine maintenance in both scenarios with a slight improvement in the project case to reflect current government intentions to sustain the conditions of the newly rehabilitated roads\. Periodic maintenance works items is assumed to vary with the surface type of the road while routine maintenance works will not\. Costs and Benefits: 4\. The economic benefits of improved road infrastructure is assumed to stem from two sources: (1) time savings benefits (VoT) and (2) reduction in VoC\. For the analysis, traffic volume and growth data for each road was extracted from the relevant Feasibility Study Reports\. 8 EIRR is the discount rate that equates the discounted stream of benefits and costs\. - 37 - 5\. Project costs account for both improvements (road widening) and maintenance (routine and periodic)\. To account for improvements the whole package is considered as a single section and the cost per km varies for each package\. Maintenance (routine and periodic) costs are recurring and apply in both ‘with’ and ‘without’ project with some difference in the work items\. These work items depend on the general maintenance policy adopted by the RDA in their normal maintenance works\. A key difference in the modeling of the periodic and routine maintenance is that the former is allowed to vary with the surface type of the road while the latter is not\. The total capital costs in financial terms for project were Rs\. 30,059 Million or $214\.3 Million\. The breakdown of the cost by contract is presented in table 3\.1\. Table 3\.1: Contract Package Details Contract Final Contract Date of Actual Date of Road Length No\. Amount (Rs) commencement Completion WB/RSAP/C Rehabilitation and Improvement on 35\.08 km 932,713,752\.94 1-Mar-2006 27-Nov-2009 P/01 Ingiriya-Ratnapura Rd WB/RSAP/C Rehabilitation and Improvement on 75\.30 km 2,683,861,789\.60 15-Mar-2006 8-Dec-2009 P/02 Nittambuwa-Kandy Road WB/RSAP/C Rehabilitation and Improvement on 22\.14 km 980,242,714\.82 6-Sep-2006 10-Jul-2009 P/03 Bandarawela-Haliela Road WB/RSAP/C Rehabilitation and Improvement on 20\.200 km 829,534,965\.36 6-Sep-2006 29-Jun-2009 P/04 Bandarawela-Haliela Road Rehabilitation and Improvement on WB/RSAP/C Galle - Deniyaya Road & Deniya 80\.09 km 1,918,216,256\.91 6-Nov-2006 5-Jan-2010 P/05 Akuressa Rehabilitation and Improvement on WB/RSAP/C Dengama - Mulatiyana Road and 22\.98 km 948,393,818\.31 21-Mar-2006 6-Jan-2009 P/06 Hakmana - Talahaduwa Road WB/RSAP/C Rehabilitation and Improvement on 24\.61 km 971,282,211\.38 6-Nov-2006 11-Aug-2009 P/08 Medawachchiya-Punewa Road WB/RSAP/C Rehabilitation and Improvement 69\.28 km 1,573,584,156\.66 6-Nov-2006 19-Nov-2009 P/09 onWellawaya-Siyambalanduwa Rehabilitation and Improvement on WB/RSAP/C Siyambalanduwa-Ampara-Karathiv 77\.83 km 1,763,152,639\.85 6-Nov-2006 26-Mar-2010 P/10 Road Rehabilitation and Improvement on WB/RSAP/C Maradankadawala-Jayanthipura 59\.90 km 1,897,490,215\.49 5-Jan-2007 30-Jun-2009 P/11 Road WB/RSAP/C Rehabilitation and Improvement on 68\.66 km 2,286,806,255\.81 24-Aug-2007 14-Aug-2009 P/12 Jayanthipura - Trikondimadu Road WB/RSAP/C Rehabilitation and Improvement on 61\.37 km 1,768,861,093\.87 8-Mar-2007 30-Jun-2009 P/13 Padeniya - Puttlam Road Rehabilitation and Improvements on Ambepussa-Kurunegala- WB/RSAP- Trincomalee Road (A06)from 10\.2 km 916,085,524\.85 11-Jul-2011 18-Oct-2012 1I /KT/01 157+000 km to 167+280 km & Kantale to Perathuweli (B196) Road Rehabilitation and Improvements on WB/RSAP- Ambepussa-Kurunegala- 10\.72 km 867,898,141\.30 11-Jul-2011 18-Oct-2012 1I/KT/ 02 Trincomalee Road (A06) from 167+280Km to 178+000Km Rehabilitation and Improvements on WB/RSAP- Ambepussa-Kurunegala- 12\.0 km 740,367,191\.80 11-Jul-2011 10-Oct-2012 1I/KT/ 03 Trincomalee Road (A06) from 178+000 Km to 190+000Km Rehabilitation and Improvements on WB/RSAP- Ambepussa-Kurunegala- 9\.3 km 986,889,478\.40 11-Jul-2011 10-Oct-2012 1I/KT/ 04 Trincomalee Road (A06) from 190+000Km to199+300Km Rehabilitation and Improvements on WB/RSAP- Colombo – Galle - Hambanthota 1I/WK/ICB Road (A02) from Maliban Junction to 5\.28 km 1,872,510,000\.00 7-Jul-2013 31-Aug-2014 01 - Lot 01 Cross Junction (from 13+275 km to 18+480 Km) and AB011 Road from - 38 -  Cross Junction to Panadura Bridge (from 0+000Km to 0+080Km) Rehabilitation and Improvements on Colombo – Galle - Hambanthota Road (A02) from Panadura Bridge to WB/RSAP- Nalluruwa Junction (From 25+240 1I/WK/ICB 11\.76 km 2,786,250,000\.00 7-Jul-2013 30-Apr-2015 km to 30+300 km) and AB011 Road 01 - Lot 02 from Cross Junction to Panadura Bridge (from 0+080Km to 6+780Km) Rehabilitation and Improvements on WB/RSAP- Peliyagoda – Puttlam Road (A03) 1I/WK/ICB 8\.4 km 1,701,840,000\.00 7-Jul-2013 31-Jan-2015 from Peliyagoda to Mahabage (from 01 - Lot 03 0+600 km to 9+000 Km) the Rehabilitation and Improvements WB/RSAP- on Peliyagoda – Puttlam Road (A03) 1I/WK/ICB 9\.3 km 1,633,850,000\.00 7-Jul-2013 31-Jan-2015 from Mahabage to Ja-ela (from 01 - Lot 04 9+000 km to 18+310 Km) Analysis 6\. Since the various phases of the Project started at different points in time, the economic analysis for each phases is conducted for different time horizons—the economic analysis for RSAP-1 is conducted from 2006 to 2025, the economic analysis for RSAP-1I phase I (sections A2 and A3) is conducted from 2012 to 2031, and the economic analysis for RSAP-1I phase II (section A6) was conducted from 2011-2030\. Therefore, we report NPV and EIRR for these three phases separately\. 7\. Cost benefit analysis indicates that the Project achieved a favorable economic internal rate of return (EIRR)—See table 3\.2\. ï‚ The EIRR for RSAP-1 is 29% and the NPV is $225 million; ï‚ The EIRR for RSAP-1I phase I is 44% and the NPV is $275 million; and ï‚ The EIRR for RSAP-1I phase II is 24% and the NPV is $32 million\. 8\. This indicates that the realized benefits of the Project were sufficient to make it a successful for RSAP-1 and the two phases of RSAP-1I\. Table 2 presents the breakdown of the NPV by road sections\. As expected, the NPV of benefits is positive for all road sections and the EIRRs for each road section varies from 16% to 51%\. All EIRRs are well above the 12% threshold\. - 39 -  Table 3\.2: HDM-4 Analysis Summary NPV (in Million) Road Section EIRR Rupees USD RSAP-1: CP01-A008: Ingiriya – Ratnapura 28% 1,631 12 CP02-A001: Nittambuwa–Kandy CP 51% 9,318 66 CP03-A016: Haliela -Bandarawela CP 38% 3,074 22 CP04-B044: Bandarawela –Welimada 21% 633 5 CP05-A017: Galle – Deniyaya –Madampe 26% 2,672 19 CP06-B098: Denagama –Mulatiyana 23% 798 6 CP08-A014: Medawachchiya -NCP Boundary 17% 389 3 CP09-A004: Wellawaya –Siyambalanduwa 33% 3,830 27 CP10-A025: Siyambalanduwa–Ampara 22% 1,558 11 CP11-A011: Maradankadawala–Jayanthipura 16% 581 4 CP12-A011: Jayanthipura –Tirukkondainmadu 21% 1,788 13 CP13-A010: Padeniya- Puttalam 31% 5,241 37 Sub-Total: 29% 31,513 225 RSAP-1I -Phase I (sections A2, A3): CP01-A002: Maliban Junction - Walana Junction 39% 18,128 129 CP02-A003: Nawaloka Junction – Seeduwa 51% 20,465 146 Sub-Total: 44% 38,593 275 RSAP-1I-Phase II (section A6): CP05-A006: 157+000 km to 167+280 km 24% 1,546 11 CP06-A006: 167+280km to 178+000km 21% 773 6 CP07-A006: 178+000 km to 190+000km 21% 628 4 CP08-A006: 190+000km to199+300km 28% 1,530 11 Sub-Total 24% 4,477 32 Comparison to PAD 9\. We compare the various phases of the Project before and after project completion (see table 3\.3)\. For the 620 km road section, we compare the economic analysis in the PAD to the economic analysis in the ICR\. For the KT Section, A002, and A003, we compare the economic analysis of the restructuring paper to the economic analysis of the ICR\. - 40 -  Table 3\.3\. Results of Economic Analysis-Before and After the Project EIRR at NPV at appraisal EIRR at ICR NPV at ICR Length Appraisal ($, millions) (%) ($, millions) (%) 620 km (using different time 31 103 29 225 horizon) 620 km (using same time 31 103 17 24 horizon) Before Restructuring 134 km 51 522 Dropped and replaced with A002, A003 (A006) After Restructuring K-T Section 21 24 24 32 A002 29 101 39 129 A003 47 132 51 146 10\. The results of this comparison are presented in table 3\.6\. For the 620km section, the NPV at the time of appraisal was $103 million and the EIRR was 31 percent\. In comparison the NPV after project completion (at ICR) is $225 million and the EIRR is 29 percent\. This difference in the NPV values is driven by a difference in the assumptions of the PAD and ICR—the analysis in the PAD is conducted for an eleven year time horizon while the analysis of the ICR is conducted for a twenty year time horizon\. If we limit the time horizon of the ICR analysis to eleven years then the resulting NPV is $23\.6 million and EIRR is 17 percent9\. 11\. The estimates of NPV and the EIRR for the K-T section, A002, and A003 increased after project completion\. For the KT section, the NPV and EIRR at the time of restructuring was $24 million and 21 percent, respectively—the NPV is $8 million higher and the EIRR is 3 percentage points higher after project completion\. For A002, the NPV and EIRR at the time of restructuring was $101 million and 29 percent, respectively—the NPV is $28 million higher and the EIRR is 10 percentage points higher after project completion\. For A003, the NPV and EIRR at the time of restructuring was $132 million and 47 percent, respectively—the NPV is $14 million higher and the EIRR is 4 percentage points higher after project completion\. For both RSAP-1 and RSAP-1I the benefits from travel time savings are higher than the benefits from vehicle operating cost savings\. 9 Ideally, the analysis in the PAD and ICR should be performed over the same time horizon\. - 41 - `Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team Members Responsibility/ Names Title Unit Specialty Lending Isabel Chatterton Financial Specialist SASEI Team Leader Amali Rajapaksa Senior Infrastructure Specialist GTIDR Co-Team Lead Rajesh Bahadur Singh Dongol Program Assistant GFMDR Team Support Deepal Fernando Senior Procurement Specialist GGODR Procurement Surendra Govinda Joshi Consultant GTIDR Tran\. Spec\. Sumith Pilapitiya Lead Environmental Specialist GENDR Environment Swaminathan A K Consultant GTIDR Tran\. Spec\. Simon Thomas Lead Transport Economist SASDT - HIS Economist Supervision/ICR Amali Rajapaksa Senior Infrastructure Specialist GTIDR Team Leader Ishtiaque Ahmed Transport Specialist SASDT - HIS Transport Zia Al Jalaly Senior Social Development Specialist OPSOR Social Dev\. Farahnaz Azoor Program Assistant GFAAR Team Support Darshani De Silva Environmental Specialist GENDR Environment Rajesh Bahadur Singh Dongol Program Assistant GFMDR Team Support Deepal Fernando Senior Procurement Specialist GGODR Procurement Susanne Holste Lead Social Development Specialist GSURR Social Dev\. Sashikala Krishani Jeyaraj Program Assistant SACSL Team Support Ashok Kumar Senior Highway Engineer GTIDR Transport Sumith Pilapitiya Lead Environmental Specialist GENDR Environment Zafar Iqbal Raja Senior Highway Engineer GTIDR Transport Amali Rajapaksa Senior Infrastructure Specialist GTIDR Team Leader Eashwary Ramachandran Operations Analyst GENDR Operations Rajesh Rohatgi Senior Transport Specialist GTIDR Transport Sunethra Chandrika Samarakoon Procurement Specialist GGODR Procurement Jiwanka B\. Wickramasinghe Senior FM Specialist GGODR Financial Mgt\. Bernadeen Enoka Wijegunawardene FM Specialist GGODR Financial Mgt\. Samantha Prasada Wijesundera Water and Sanitation Specialist GWADR Wat\. & San\. Haider Raza Senior Procurement Specialist GGODR Procurement Comfort Onyeje Olatunji Program Assistant GTIDR Team Support - 42 - (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle $, thousands (including Travel No\. of staff weeks and Consultant costs) Lending FY04 19\.71 49\.18 FY05 42\.02 141\.9 FY06 47\.82 176\.3 FY07 0\.87 4\.8 FY08 0\.0 0\.0 Total 110\.42 372\.18 Supervision/ICR FY04 – 0\.00 FY05 – 0\.00 FY06 17\.41 65\.38 FY07 42\.45 101\.00 FY08 29\.64 91\.01 FY09 51\.88 110\.31 FY10 48\.21 128\.99 FY11 33\.99 113\.24 FY12 60\.75 174\.16 FY13 83\.53 173\.55 FY14 31\.98 64\.66 FY15 27\.05 115\.82 FY16 14\.24 60\.71 Total 441\.13 1198\.83 - 43 - Annex 5\. Beneficiary Survey Results - 44 - Annex 6\. Stakeholder Workshop Report and Results 1\. A Bank mission visited Sri Lanka during June 8 –12, 2015 to gather information for the preparation of the ICR\. The mission team comprised Radia Benamghar (Transport Specialist/ICR Team Leader), Mirtha Pokorny (ICR Author), Amali Rajapaksa (Senior Infrastructure Specialist/Project Team Leader), Darshani de Silva (Environmental Specialist), Haider Raza (Senior Procurement Specialist), Razaak Ghani (Senior Social Development Specialist), Susrutha Goonasekera (Social Development Specialist), Enoka Wijegunawardene (FM Specialist), Comfort Olatunji (Program Assistant), and Sriyakanthi Sujeeva Roshinie Pieris (Team Assistant)\. 2\. The mission’s objective was to collect information and inputs that will help in drafting the ICR\. As part of this mission, the ICR team (a) exchanged views with the implementing agency about the drafting of the completion report; (b) carried out site visits of two roads, A002 and A003; (c) conducted interviews with the relevant government agencies and stakeholders, including the MOH, Ministry of Investment Promotion, RDA, PMU, contractors, communities, and so on; and (d) delivered an ICR workshop along with working group session to draw the lessons learned from the Project\. 3\. The workshop was attended by a large audience from the various government agencies, PMU, contractors, consultants, and beneficiaries who expressed ideas and provided valuable input for the ICR\. The following topics were discussed during the workshop: Design, Construction, and Supervision of Civil Works (Group 1) Design and Quality of Supervision of Civil Works (a) Problems in the design and supervision stage ï‚ Lack of proper investigations due to insufficient time allocations (pavement design and changes during construction) ï‚ Poor attention to hydrology and drainage matters and related construction issues, lead away drains, and so on (acquisition) ï‚ Design issues with vertical alignment with hydrology and access to adjoining land properties ï‚ Acquisition issues during construction, public complaints, and general intervention (b) How to address the problems ï‚ Identify proper evaluation of the design components ï‚ Coordination between design team and stakeholders (c) How to ensure that design and design review are compatible - 45 -  ï‚ Design a checklist for design and design reviews and strictly follow the same 4\. Supervision of work ï‚ Problems in controlling quantity and quality of the construction work ï‚ Continue receiving inputs (availability) from the design team throughout the Project duration (responsibility concerns) ï‚ Adequate staff allocation and time allocation and review of the experience of staff in the relevant field 5\. Construction industry ï‚ Developments in the local construction industry through project implementation such as the following: o Need for tremendous improvements for staff training and transfer of knowledge to be continued (the discussion centered on whether this has been done adequately) o Improvements to labs and laboratory equipment and continuous review of the standards of the same o Contract administration capacity should be improved Road Maintenance (Group 2) (a) RMTF ï‚ Yes It makes a system to identify in priority maintenance program *HDM and it created the situation to government to collect funds from fuel CESS and so on\. Because of this the quality of the road was improved\. ï‚ Yes ï‚ Continue Funding - Bank/Donors 50–50% 40–60% 30–70% 20–80% - 46 -  (b) Asset management ï‚ All decisions with regard to roads are based on engineering and technical information and for that purpose asset management is important ï‚ Updated correct/reliable data for management to take decisions ï‚ This systems allows to take intervention decisions based on economic value and value for money ï‚ Funding for data collection to be established (c) Rural roads ï‚ Appropriate data-based system has to be developed for road information for them to take decisions on interventions ï‚ Make allocations through RMTF (with the increased capacity of RMTF) Road Safety (Group 3) ï‚ Road safety corridor was selected based on accident data statistics ï‚ Police was very weak in coordination during construction ï‚ Utility shifting agencies were weak in shifting utilities on time ï‚ Utility agencies are not able to provide existing underground utility details ï‚ Pilot to be improved (junction mirrors can be provided) ï‚ Contract period should be selected carefully ï‚ Both side fencing can be implemented ï‚ Roadside parking should be restricted by providing identified parking area Environmental and social safeguards (Group 4) 1\. GoSL/bank policies ï‚ LAQ ï‚ NEA ï‚ L/Government 2\. NEA - 47 -  ï‚ LAA ï‚ NIRP (2001) ï‚ Environmental and Social Safeguards Manual 3\. LAD—v/Land Donation ï‚ GRM ï‚ E&S Committee at Project Level ï‚ GRC – D\.S\. Level 4\. Voluntary land donation should be avoided - 48 - Annex 7: Part 1 -- Borrower's ICR 1\. Introduction 1\. In 2004, the GoSL sought the World Bank’s re-engagement in the road sector after a lapse of over a decade, to help address the critical state of the country's road network due to a huge backlog of road maintenance at all levels – national, provincial and rural\. Contributing to (and exacerbating) the disrepair and deterioration of roads was the increasing traffic congestion in the national roads, which compelled the government to increase road capacity – a costly process requiring land acquisition – at the expense of the maintenance of all classes of roads\. In addition, Sri Lanka’s violent civil conflict, experienced since the early 1980s, took a heavy toll on the government’s treasury\. Sri Lanka needed considerable investment to bring its road system to a level of performance consistent with its DOs\. 2\. The GoSL’s development strategy highlighted the urgent need to develop its roads and increase connectivity and interaction between the provinces for both social integration and economic development\. This coincided with the World Bank’s assistance strategy that supported investment in roads as an essential infrastructure development area for pro-poor growth linked to shared prosperity\. Both strategies emphasized the importance of developing private industry for road construction and maintenance\. By disbanding the state-owned Road Construction Development Company (RCDC) in 2003, the GoSL demonstrated that it was serious about revitalizing the road sector by enabling the participation of the private construction industry\. The RDA’s reliance on the RCDC for most road works funded by the government had inhibited the growth of Sri Lanka’s domestic road construction capacity\. 3\. Thus, the GoSL was committed to institutional and policy reforms to meet the needs and targets of the road sector\. In November 2004, the Bank, JICA, and the ADB decided to coordinate their activities in the road sector within the context of the Reform Framework\. The GoSL began addressing Sri Lanka’s road rehabilitation needs for the first time through the RSAP\. The project was designed to focus on the “maintenance of existing assets”\. The maintenance focus was supported by the rehabilitation of national roads, establishing a sustainable arrangement for continuous maintenance as well as carrying out the preparatory work necessary for the rehabilitation of rural roads\. This was supported initially through an International Development Association (IDA) credit of $100 million\. The roads rehabilitated in this original phase provided the much-needed connectivity to all of the provinces, including the north and the east\. Additional funding of $98 million in 2008 and subsequently another $100 million in 2011 was channelled to improve the road conditions in the urban sections in the high traffic areas of the western province\. The project assisted Sri Lanka to increase the percentage of national roads in good and fair condition from 48 percent to 65 percent\. 4\. With regard to rural roads, although ADB is providing support for rural infrastructure including rural roads in the southern, north central, north western, and central provinces, this and overall donor assistance to this sector, had been modest compared to the needs\. For this reason, the Project prepared the necessary framework and built the required capacity for the rural road sector to absorb funding for their rehabilitation needs by establishing a rural road strategy, preparing a comprehensive database and providing training to the Pradeshiya Sabhas (provincial authorities) in related areas, including the prioritization and selection of investments\. 2\. Assessment of Project Objectives, Design, Implementation Experience and Outcomes Project Objective: RSAP’s DO was to lower transportation costs through the sustainable delivery of an efficient national road system that serves the needs of road users and the Sri Lankan public at large\. 5\. Project Design: The project’s design had to take into account the country’s huge backlog of road maintenance – a situation compounded by not just financial constraints but also inadequate institutional capacity in the road sector – and the urgent need to improve connectivity between provinces by rehabilitating the priority - 49 - corridors of the national network\. The RMTF was established to ensure a sustainable mechanism for continuous funding for the maintenance of road assets and to prevent the recurrence of the deterioration of the road network\. 6\. To achieve the increased workload from road rehabilitation, the private contracting industry needed to be co-opted and provided work\. To support this, the RCDC was closed down and hands-on support provided to improve the capacity of contractors in a well-coordinated effort by the three main road sector donors\. Moreover, as the rehabilitation of the rural roads was also a priority concern and the capacity to achieve it insufficient, the Project laid the framework for developing institutional capabilities for road infrastructure rehabilitation and maintenance within Sri Lanka’s decentralized governance system 7\. RSAP did not simply focus on the rehabilitation of roads\. It emphasized the improvement of development effectiveness by identifying and catalysing the changes the sector needs to make to achieve the required efficiencies in the longer term\. RSAP supported RDA to establish a fully-fledged asset management system to inventorize, prioritize, monitor and manage its network with a view to increasing the organisation’s ability to provide road users with a level of service that they would demand\. Concerning Rural Roads, the Project began its process of addressing maintenance needs of rural roads by incorporating a small pilot component\. 8\. RSAP’s national roads component covered maintenance, rehabilitation and minor upgrading in eight provinces10\. It resurfaced and improved 685\.475km of Class A and B roads; provided technical assistance for the selection, design and construction supervision of the civil works; building capacity within the RDA; and enabled the development of the local construction industry\. The rural roads component rehabilitated 162\.23km of rural roads in nine local government areas, whose selection was based on the recently completed poverty map of Sri Lanka; built capacity within local authorities and of local contractors for road rehabilitation and maintenance; and created a comprehensive rural roads database for the entire country that would support more rational planning and prioritising in the development of rural roads, which represents nearly 75 percent of the country’s total road network\. The institutional strengthening and policy support component cut across the first two components, providing technical support for institutional changes and the adoption of more efficient mechanisms and systems for improved road maintenance\. RSAP was equally a capacity building project as it was one of infrastructure development\. 9\. Implementation experience: At the outset, a pressing challenge was to complete the procurements for the RSAP road packages within a strict timeline due to the urgency of achieving the Project’s objectives\. Delays in the implementation of RSAP would have caused serious bottlenecks and holdups in the GoSL’s socio- economic recovery and development process\. The mobilization of consultants and the invitation and evaluation of bids had to be done in quick succession\. The Bank conducted training sessions for government officials on how to select consultants following the Bank procedures\. Training was also carried out to introduce the RSAP perspective to contractors\. The Bank was also responsive to the GoSL’ s request to use the standard bidding document of the Institute of Construction Training and Development (ICTAD), as the contractors were familiar with it\. This helped move the procurement process\. 10\. Due to the relatively small number of contracts previously offered to the private sector, the local construction industry had limited opportunities to develop\. This lack of experience in turn resulted in most companies being unqualified to meet the World Bank’s requirements for bidding\. As a solution to this impasse, RSAP encouraged a joint venture facility that enabled companies to join forces and combine capacities\. This would become one of the momentous strategies to be adopted by the Project\. Another strategy adopted to support the local construction industry was the division of the Kantale - Trincomalee highway into four equal segments 10 However, the Northern Province could not be included as it was not accessible for a project of this nature due to the conflict\. - 50 - to enable smaller companies to bid for the contracts\. Local contractors recognize RSAP as the Project that was key to the development of the local construction industry\. 11\. The National Road Sector Master Plan, which was finalized in 2007, required the widening of roads from 5\.5m to 6\.2m\. This called for changes in design after the award of the civil works contracts – causing delays in implementation as well as the escalation of costs and sometimes questioning the capacity of the contractors to undertake the increased workload\. The project experienced variations, which were 31 percent of the original awarded price\. The design changes made to accommodate the widening of the road as well as designs of culverts and drains not being identified up-front have contributed to this issue\. This situation arose due to the appropriate design requirements regarding culverts and drains not being identified at the design stage\. 12\. The Grievance Redress System that the Project put in place made it possible for the public to resolve their problems quickly, transparently and out of court\. The public also had the benefit of a specially allocated hotline to access project management with concerns and complaints\. If people do not agree with the solution offered, a grievance redress committee (GRC) is formed so that they could make their case\. If there was no agreement, people could take legal action\. RSAP received over 4000 complaints; all but two were resolved on site\. More than 60 percent of the public complaints or requests were related to house access, 25 percent to road access, and 10 percent to retaining and parapet walls\. People often referred to the Bank’s safeguard policies to protect their interests\. 13\. RSAP also took practical measures to improve coordination on road development between national agencies\. For example, the RDA and the NWSDB have frequently been accused of lack of coordination in project planning, where the NWSDB would dig up the roads to lay water pipelines as soon as a road was rehabilitated\. The road works planned in the urban road sections within RSAP, with the laying of water pipelines in coordination with NWSDB, has started a new working relationship that would avoid such waste of resources\. 14\. A vital initiative supported by RSAP was the RMTF, set up to ensure the sustainable and transparent allocation of resources and funds as well as to carry out efficient monitoring of maintenance\. The financing of maintenance works by the World Bank was intended to help the RDA to build capacity to optimize the selection of roads for maintenance and align its processes toward minimizing costs\. An innovative concept that the RSAP- 1ntroduced as a pilot initiative on the Kantale - Trincomalee road was Third Party Monitoring, which is essentially a system of benefits monitoring from the perspective of users and stakeholders\. This would be a means of gaining their views regarding the road construction so that they could influence the design and implementation of the Project\. The long-term objective was to make benefit monitoring by project beneficiaries an integral part of road sector monitoring processes\. 15\. A five-pillar approach formulated by the UN on road safety was adopted to design a 17km demonstration road safety corridor from Ratmalana to Nalluruwa – a stretch of road with a high level of road accidents\. A committee comprising representatives from the MOH, the RDA, the Traffic Police, the Ministry of Health, the four local authorities on the corridor (Dehiwala/Mt\. Lavinia, Moratuwa, Panadura and Kalutara), the University of Moratuwa, the MOT and the National Council for Road Safety (NCRS) designed and implemented the demonstration corridor that strengthened some of the pillars identified, such as improving infrastructure that is safe, improving road user behavior, and commencing a dialogue toward strengthening post-crash care services\. The launch of the new safety corridor saw the parallel launch of an awareness campaign using multimedia including street drama and animated road signs to promote good pedestrian practice\. 16\. The Project gave rise to a new form of social responsibility among contractors\. In all construction packages of the national roads components and in some in the rural roads component, contractors funded and carried out several activities, addressing the needs of communities\. These included repairs to access roads, construction and renovation of buildings and providing for the needs of service providers such as police stations, schools and health clinics\. These actions of contractors helped create goodwill between the contractors and the community and this, in turn, had a positive impact on the relationship between the community and the Project, especially in managing conflicts and disputes\. - 51 - 17\. In the area of technology too, RSAP made some clear advances\. It was with this project that road construction in Sri Lanka was updated from the use of macadam and double bituminous surface treatment (DBST) to asphalt, which provides smoother surfaces as well as the ability to better withstand wear and tear\. Although the initial investment was higher, the considerable savings on maintenance costs meant that the switch to asphalt, based on sound economic analysis, proved beneficial\. Thus, the introduction of asphalt for the national roads resulted not only in improved quality but also in long-term financial benefits\. This required contractors to purchase asphalt plants, which RSAP facilitated with an advance payment\. By December 2014, the Central Environmental Authority had granted 140 Environmental Protection Licences for asphalt plants, of which RDA owns and operates ten\. 18\. The RSAP-1I roads pass through the most urbanized and congested areas in the country\. Finished road levels have reached their highest levels in relation to adjacent properties\. Overlay with milling will become increasingly necessary in future pavement strengthening projects\. Considering the Project requirement and future benefit to the RDA, a Milling Machine was procured under RSAP and used for the Project\. In low lying areas where reconstruction is necessary, high water table has limited excavation depth\. This precludes the possibility of increasing the pavement thickness by excavating below existing road level and was a problem when a thick overlay is required\. Alternatively, for the same pavement life and strength, pavement thickness reduced significantly by reinforcing with paving fabric (at AC level) and geo-grid (at DGAB level) and geotextile (at sub-base level)\. 19\. RSAP trained all project engineers on environmental safeguards, in a one-year process done in modules, in collaboration with the University of Peradeniya\. The Southern Transport Development Project – the construction of the southern expressway – was used as the case study to understand what went wrong, what went right; and the training process also helped the engineers to see the true value of an Environment Impact\. The RDA and the construction companies improved their proficiency to implement safeguards and manage safeguard issues while putting in place the systems and procedures that were needed to institutionalize these practices\. 20\. The RDA had over a period suffered from external consultants carrying out designs with the risk of that design requiring additional quantities, or technical errors being borne by the government\. RSAP encouraged the designs to be carried out through RDA's design units established with the re-engineering of the RDA\. This was the first opportunity that RDA had of implementing its own designs under an externally funded project\. A similar initiative was carried out for building supervision capacity, where a pilot project was implemented to supervise the Kantale - Trincomalee section by a unit within the RDA\. RDA is also increasingly carrying out feasibility studies and economic analysis of its own projects\. The RSAP helped improve capacity in construction management, planning, project formulation, construction design, acquisitions, construction supervision, and maintenance\. 21\. Project Outcomes: PDOs has two components they are the lowering transportation cost and sustainable delivery of an efficient National Road system\. Lowering transportation cost has been achieved through: Outcome indicators on the National Road Networks via reduction in VoC, reduction in average network roughness, reduction in network poor and bad condition roads, number of kilometres rehabilitated and intermediated indicators on the National Road Networks was achieved via: reducing Travel Time, Annual Road Maintenance Program and User Satisfaction Survey\. 22\. The road sections for upgrading and rehabilitations were selected based on the NRMP (2007 – 2017) and the VoC calculation proposed under “target” has been based on the NRMP\. The majority of the candidate roads identified for upgrading in the NRMP were in the western province that carry a high volume of traffic\. The level of traffic has a high impact on the VoC\. However since the cessation of the conflict, to address socio economic issues, more funds were channeled in to the eastern and Northern provinces that were starved of any investment over a long period of time due to the conflict and accessibility issues\. These investments were not featured in the NRMP due to these areas not being accessible at the time of preparing the NRMP\. - 52 -  Table 7\.1\. Results Framework and Monitoring Indicators Outcom Achieve ment of Target Values 2006 2007 2008 2009 2010 2011 2012 2013 2014 e Outcome Indicators Documents Reference Achieved Achieved Achieved Achieved Achieved Achieved Achieved Achieved Achieved Baseline Target Target Target Target Target Target Target Target Target 23\.9 2005 0\.0 0\.60 1\.50 2\.70 3\.80 (LKR per 15\.37 14\.91 14\.83 14\.32 14\.21 (PAD) 0% % % % % km) Reduction in Not 2011 VoC 14\.6 Achieved (Projec (LKR per 13\.6 14\.21 12\.5 14\.13 11\.5 14\.03 10\.5 13\.88 t km) Paper) 2005 9\.5 Reduction in 9\.5 6\.8 9\.31 6\.7 9\.02 6\.5 8\.66 6 8\.39 6\.2 (PAD) 3 average 2011 network IRI Achieved (Projec from 9\.5 IRI to 6\.2 6\.1 6\.2 6\.1 6\.1 6 5\.9 5\.9 5\.9 t 8\.4 IRI Paper) Reduction in 2005 48 52 48 48 47 43 44 38 38 35 40 network in poor (PAD) and bad 2011 Achieved condition from (Projec 38 37 40 36 35 36 34 35 33 52% to 35% t (in percentage) Paper) Component 1: To be About 620km of – undertak – – 150 – 300 – 450 – 620 620 – Achieved National roads en YR 1 resurfaced Reduction in network IRI for – 7\.8 8\.6 6\.93 7\.9 – 4\.5 – 2\.8 4\.03 2\.9 2\.8 – Achieved RSAP roads from 7\.8 TO 2\.9 50% of relevant staff in the Planning and Maintenance – 0% 0% – 10% – 30% – 40% – 50% 67% – Achieved Divisions of RDA trained in road assets management To be Component 2: – undertak – – 50 – 250 – 450 50\.03 635 101\.38 – 162 – About 635km of en YR 1 Achieved Rural Roads improved Restructured Reduced Travel Time for Rural – 0 0 – 0 – 3 – 3 – 4 60 – Achieved Roads (%) Component 3: Routine and Periodic maintenance funding 30 Achieve – 13 28\.24 34\.8 30\.82 38\.3 28\.65 42\.2 26\.53 46\.3 56\.54 45\.22 70\.55 43\.10 46\.72 46\.48 39\.89 50\.55 28\.53 increased to \.0 d $46\.3 million (constant 2005 prices) (in $, millions) - 53 - km of roads 80\.15 Achieve – – – – – – – – – – – – 0 – 41 – 80 – – rehabilitated 5 d P h Reductio a Achieve n in – 6 2\.8 2\.33 – – – – s d Network e Roughnes 1 s IRI for A Achieve project – 4\.3 – – – – 2\.4 1\.9 2 d Roads A Achieve – 3\.1 – – – – 2\.4 2 3 d – P h a Achieve Reduced – 66 42 40 – – – – s d Travel e Time on 1 project A Achieve roads – 13\.8 – – – – 12\.5 11\.3 2 d A Achieve – 26\.5 – – – – 23\.9 23\.5 3 d P h a Improved – – – – – – – – – – – – – – – – – – – 80\.89 – s level of e satisfacti 1 on of A road – – – – – – – – – – – – – – – – – – – 2 users Achieve No 38\.3 68\.15 A d – collecte – – – – – – – – – – – – – – – – 3 d Intermediate Result (Component 2): Road Maintenance Trust Fund in Operation and road Maintenance 3-year program implemented About 60km of National roads on which Achieve periodic – 0 0 – 20 – 45 – 60 64\.5 d maintenance has been – carried out Annual road Maintenance New Appr Appr Appr Appr program is – – – – – – Baseline oved oved oved oved approved by RMTF Parent Project Component 2 Number of km Achieve Rural Roads – – – – – – – – – 157 162 d improved - 54 -  23\. Over the period from 2007–2012 alone, the GoSL has in effect achieved 109 percent of the NRMP\. Even though a considerable length of roads in the northern, eastern, and southern provinces, which carry a very low traffic volume were rehabilitated, this was not adequate to compensate for the loss of VoC from the high traffic volume of western province roads\. This has resulted in falling short of the VoC targets forecasted\. 24\. The Maintenance funds disbursed lag behind the target value when considering the reported figures which are only for the periodic and routine maintenance of roads and bridges, and hence reflect as not achieving the target\. 25\. However there were maintenance works carried out for the widening and improvement of roads, which were carried out with funds from outside the RMTF, such as from the GoSL, ADB, JICA and other Donors\. These cost were not taken into the reported routine and periodic maintenance expenditure\. Table 2 (below) clearly shows that with the cumulative expenditure for both maintenance of roads and bridges and for road widening results in achievement of the target for maintenance expenditure\. Table 7\.2\. Maintenance Expenditure 2006 2007 2008 2009 2010 2011 2012 2013 2014 Achieved Achieved Achieved Achieved Achieved Achieved Achieved Achieved Achieved Target Target Target Target Target Target Target Target Target Maintenance of 30\. 26\. 46\.7 28\.5 Roads and Bridges - 28\.24 28\.65 56\.54 70\.55 39\.89 82 53 2 3 $, million (Table 1) 38\. 42\. 46\. 45\. 43\. 46\.4 50\. 30\.00 34\.8 Widening and 3 2 3 22 10 8 55 41\. 47\. 130\. 171\.2 110\. Improvement of 28\.88 55\.87 78\.51 134\.7 41 84 68 5 48 Roads ($, million) 72\. 74\. 135\.0 205\.2 177\. 211\.1 139\. Total ($, million) 57\.12 84\.52 23 37 5 5 4 4 01 26\. Although initially 635 km of rural roads were identified, subsequent restructuring of the Project saw this reduced to 157 km, with 162 km of roads being rehabilitated, and hence the target was achieved\. 27\. The second component which is the sustainable delivery of an efficient National Road System was achieved via the establishment of RMTF and channelling of funds into road rehabilitation and maintenance, closure of RCDC and establishing capacity of contractors, establishing efficient cooperation amongst utility providers to prevent damage to the investment toward the latter part of the Project, and ensuring that all utility relocation costs are financed through the Project, and achieving environment and social sustainability through changing the culture of RDA and contractors to comply and follow environmental safeguards, as well as effective implementation of Grievance Redress Committee and third party monitoring\. 28\. In addition to the rehabilitation of 162 km of rural roads and the building of local capacity in the sector, RSAP’s rural roads pilot project produced a rural roads database and along with it a rural roads development strategy\. The data generated includes information such as road condition, vulnerability of roads to flooding, number of families with direct access, percentage of Samurdhi (government welfare) recipients living along the roads, and the main use of the roads, for example, whether used mainly for industrial or agricultural transport\. The pilot project provided a good indication of the benefits arising from simple, but well-structured road interventions that enhanced both mobility and access to services and markets\. - 55 - 29\. In the Rural Roads Pilot Project, the following key results11 were observed: The percentage of families with immediate access to an “All Weather Road” rose from 48\.3 percent to 70\.9 percent\. Agricultural sales points increased by 160 percent and service providers of different sorts – ranging from communications centres to repair workshops – increased by 143 percent\. In the survey areas, 14 percent of students moved from their poorly resourced schools and gained admission to schools located in towns – with better facilities and better quality teachers\. Moreover, school attendance of both students and teachers showed a definite improvement\. Student attendance increased by an average of 45 percent - ranging from 40 percent to 60 percent with seasonal fluctuations\. A competitive market environment emerged, with small enterprises diversifying their range of products and increasing annual turnover\. However, some small businesses who found it difficult to adjust to the changing environment, became nonviable and closed down\. Improved roads also created a competitive environment for marketing agriculture produce, with local producers better able to negotiate for favorable prices\. Improved labour mobility and employment opportunities for people saw household incomes taking an upward turn\. Road development encouraged new settlements – leading to increased land values\. Due to the reduction of Transport Cost, Traffic volume of trishaws, vans/cars, busses, and lorries have increased significantly\. 30\. New systems and practices: RSAP recognized that environmental and social risk management requires appropriate planning, implementation and monitoring, even for small works\. The GoSL regulations stipulate an Environmental Impact Assessment for the construction of new roads, but this does not apply for the rehabilitation of roads, which does not generally call for land acquisitions\. However, the Bank requires that its environmental safeguard policies be put in place to ensure long-term sustainability, even when government regulations didn't call for them\. 3\. Factors Affecting Implementation 31\. The implementation of RSAP was somewhat constrained due to the country’s security situation\. The project had to contend with a failed ceasefire and renewed hostility soon after it commenced work\. However, with the cessation of violence in 2009, implementation took place at a steadier pace\. A summary of the other factors affecting implementation are given below\. 32\. Delays in approvals: Road contractors had to deal with delays caused by the time taken by both the Central Environment Authority and the Geological Survey and Mines Bureau (GSMB) to issue approvals and licenses\. 33\. Estimation of Contract periods: The original contract periods had been understated and the contracts neither fully appreciated nor reflected the work involved in difficult terrains, nor the additional work due to variations not fully reflecting the time for delays in environmental clearances, which later required additional time for expansion of the scope of work\. 34\. Sufficient time for completion of designs: Some of the shortcomings of the designs arose as a result of the short time periods allowed for the designs due to the urgency of the Project\. 35\. Involvement of Provincial Staff: Effective engagement and interest of the provincial staff did not take place at the design stage\. 36\. Spread of roads in the Project and staff of the supervision consultant: As the RSAP was the first project for rehabilitation, the priority roads across the entire nation were included and the geographical spread made it more difficult to supervise all of these sections as the RDA themselves were not accustomed to 11 Rural Accessibility Survey - Rural Roads Pilot Component, Ministry of Local Government and Provincial Councils\. 2012 - 56 - supervision at such a scale\. This was made especially difficult because there were multiple donors involved in the rehabilitation of national roads\. 37\. Unavailability of bitumen: The project has suffered from shortages in the availability of bitumen due to the high demand created by the road-works\. The monopoly supplier, the Ceylon Petroleum Corporation, in the past was not able to match demand with supply\. 38\. The isolation of the PMU: The PMU was earlier isolated due to limited participation from other units of the RDA – a situation somewhat aggravated by the differences in the incentives structure that applied to PMUs within the government systems\. The earlier interventions of the Project suffered teething problems as a result of this separation\. 39\. These areas of concern and bottlenecks were addressed as the Project progressed and resulted in improvements in the design of subsequent project phases/credits\. 4\. Transition Arrangements for Sustainability of Project Achievements 40\. The “culture change” that RSAP catalyzed that ranged from the improved practice of safeguards and an effective grievance redress system to better efficiency in all aspects of project design and implementation will be key to the sustainability of its outcomes\. The setting up of the RMTF and maintenance systems, the building of capacity within the RDA, including the capacity to manage contracts, and the development of the private contracting industry, are key factors that influence sustainability\. A Road User Satisfaction Survey carried out toward the end of the Project confirmed that the general public perceived the RDA’s role current and changing role positively\. 41\. The RDA has for decades been compelled to carry out ad hoc maintenance based on the availability of finance, putting the already rehabilitated network at risk\. The newly energized RMTF will provide a sustainable flow of funding for the rehabilitation of roads\. Moreover, the RDA’s transitioning from a project implementation agency to an asset management agency, where the planning, the interventions and managing the country’s road assets is done over a longer time horizon, will make a significant difference both in cost-effectiveness and sustainability\. It will also allow the private contractors to attend to required interventions on a timely basis, using a Design-Build-Maintain-Operate and Transfer Model\. Due to the sharing of risk between the RDA and the contracting entity, some of the issues previously encountered by RDA can be mitigated\. 42\. The construction contracts currently in implementation in Sri Lanka are based on payment being made on the amount of materials used; there is little incentive for contractors to save costs\. As a result, the quantity variations and resulting contract payments are high\. The government is therefore unable to have certainty in expenditure and need to secure funds beyond the budgeted amount\. Moreover, if something goes wrong with the design, that risk must also be borne by the government\. The Bank is assisting the RDA to adopt a contract format that is more beneficial for the country as a whole, which will provide the government price certainty, and share risks between the government and the contractor\. This will also encourage innovation by providing incentives to the contractor to save costs, ensuring value for money\. 43\. A road-specific EMP was developed for each segment of road rehabilitation\. The EMP identified issues based on various activities that will happen within the contract – and came up with mitigation measures\. The contractors could then decide which final solution they wanted to employ and bid for the cost of the work involved\. The World Bank’s strategy of building capacity in the compliance of safeguards changed the mind-set of the road agency as well as of the contractors\. Today, many contractors are adopting these environmental and safety standards, as normal procedure, even outside RSAP\. - 57 - 5\. Risks for Sustainability 44\. One of the continuing risks for sustainability is that there is still no independent source of finance for road rehabilitation and maintenance\. The government still depends on a budget allocation\. Another crucial need is a revision of the National Roads Master Plan so that it reflects the current context better – incorporating more updated information on crucial aspects like increasing road congestion\. The Plan would also need to outline a strategy and an investment plan, clearly outlining its view of what needs to happen and where the funding is coming from\. RMTF was established in 2006 with the intention of improving adequacy, reliability, and consistency of maintenance financing for all types of roads\. However these objective yet not been reflected in annual maintenance allocations\. The government facilitates finance for RMTF through domestic sources\. Since 2012, the World Bank co-financed (50 percent share) for identified twelve road projects through RMTF\. The contribution of each party was equal to $10 million and these project roads were rehabilitated during 2012 to 2015\. 6\. Lessons Learned 45\. RSAP was of course not an entirely smooth journey\. The challenges experienced have been carefully documented so that the lessons learned and recommendations made can be taken into account in future projects\. During the long period of implementation of RSAP much of the learning has already been taken into account and changes reflected in the recent investments\. 46\. The lessons learned include the following: the need for appropriate guidelines to enable the speedy issue of licenses; the importance of identifying all of the parameters at the beginning of project implementation to prevent recourse to avoidable design variations that are time and cost intensive; the need to stipulate cross sections at shorter intervals when preparing detailed engineering designs; the importance of looking at the benefits of using ‘Design-Build’ and ‘Fixed-Price Lump Sum’ contracts to prevent avoidable physical variations during project implementation; the importance of not comprising on the time allocated for the designs; the need to effectively engage provincial staff at the design stage to prevent some of the variation orders that resulted from provincial requirements reaching the Project several years after its commencement; the need to carry out community consultations not only before the implementation of the contracts but also during implementation, as people are more likely to become engaged when construction has begun\. 47\. Involvement of Communities: Consultations were carried out at the inception of the Project to fully understand the requirements of communities and to incorporate these needs within the Project at the design stage\. Experience has however shown that communities effectively engage in such discussions predominantly during implementation\. 48\. Co-ordination between involved Agencies: where hitherto there had been a lack of co-ordination and co-operation between Utility providers, the RSAP fostered a culture of dialogue between concerned Agencies, so that the road rehabilitation could be undertaken with minimum disruption 49\. Some of the key lessons learned which was reflected in this project are: Cost overruns – these have occurred in most of the road contracts due to various reasons\. Delays in the contract completion – this occurred due to poor resource planning, poor construction methodologies and so on\. Lack of attention to maintenance in rural roads\. Bank’s Performance 50\. The GoSL saw the Bank's role as going beyond that of a donor to one of an advisor and facilitator\. The systems the Bank helped put in place for project implementation and monitoring will have a long-term impact on the efficiency of Sri Lanka's road sector\. Improving capacity within the RDA, the agency responsible for steering the Project, was a process that began from the preparatory stages, reaching several significant milestones as the Project progressed\. - 58 - 51\. At the beginning of the Project, a pressing challenge was to complete the procurements for the RSAP road packages within a strict timeline\. The mobilization of consultants, the invitation of bids, and the evaluation of bids had to be done in quick succession\. The Bank collaborated with the RSAP to ensure that contracts were awarded in a timely manner\. When it comes to donor-funded projects the criticism that the GoSL often gets is that the start-up time is very long\. The GoSL’s previous experience is received, which is a considerable waste of time\. But in this particular project, an advance payment was received from the intended loan to begin the design work\. Later, it was absorbed into the main loan\. This saved a lot of time\. With RSAP we were able to design various subprojects as we went along, ensuring the smooth implementation of the Project\. 52\. The local office responded to urgent project requirements quickly without having to always wait for advice or the go ahead from Washington\. The Bank also consistently responded to issues within the industry in a manner that was sensitive to the situation in the country, without adopting a bureaucratic one-size-fits-all approach, while at the same time ensuring that the solutions were appropriate and had implications for sustainability\. The Bank’s close partnership with Sri Lanka’s other main donors in the road sector – ADB and JICA – with whom they had regular consultations also at the field level, helped avoid duplication of work and ensured that there was no conflict\. 8\. Conclusions 53\. The main achievement of RSAP-1s that it has enabled the road sector in Sri Lanka to develop its all- round capacity for progress and sustainability\. The World Bank’s close collaboration with the RDA generated innovative and practical solutions to address a range of challenges\. Crucially, most of these approaches, based on clearly defined principles, are being incorporated and institutionalized to enable the sector's long-term development\. The extent of RSAP’s achievements can be attributed largely to the World Bank’s long-term strategic partnership with the GoSL in the country’s continuing efforts to modernize and streamline its road sector\. Annex 7: Part 2 -- Borrower Comments on Final Implementation Completion and Results (ICR) Report 54\. This has reference to the letter signed by DKR Swarna, Addl\. Director General (Projects) For Director General Road Development Authority dated 20 April 2016 on above subject\. Our comments on the finding of the report are given below\. 55\. Page iii - Indicator 1(b) - We also agree that use of Network level VoC as PDO indicator is not suitable as the project interventions are very limited to reflect at network level as indicated in the report\. And also without having the baseline data at approval level calculation of achievement is not reasonable 56\. Indicator 4 (a) and 4(b) - Road Maintenance Expenditure: Annual maintenance allocation for national roads are provided in the Annual budget Estimate as a maintenance item under the name of "Maintenance of Roads & Bridges (Road Maintenance Fund)"\. But there other items in the budget estimate which will be used for maintenance activities such as periodic maintenance which has not been reflected in the value as it is difficult to separate out from other activities at head office level\. As such total expenditure on maintenance of National roads is more than the allocation indicated in the item\. It is to be noted here that the original maintenance allocation in the year 2010 was Rs\. 4200 mn (US $ 37\.1) as per Budget Estimate and actual expenditure under the maintenance item in the year 2010 was Rs6,342\.0 (US $56\.0mn) (at the rate of 1 US $=Rs\.113 at 2010)\. 57\. Page 11- Para 32 - Factors generally subject to Government control • Unrealistic Estimates: The Estimates were prepared by International consultant using available data and the prices at the time of preparation of project\. Due to the rapid increase of construction activity all price went up due to the reasons indicated in the report\. As such it is out of control of government\. As such it is better not to consider this as a government control item\. However the bid price increase to a level of 6\.8% is normal\. - 59 -  • Inadequate initial Engineering design: The design of the Original contract package was carried out by international consultant with the traffic and safety assessment by their experts\. It is to be noted here that RDA use the "Geometric Design Standards of Roads developed in 1998" for all RDA design\. It require minimum of 6\.2 m for two lane road\. However these design done by international consultant has not gone through the standards\. This has to be avoided in future projects\. • Unavailability of bitumen: There was a shortage of bitumen time to time due to high demand\. If contractors were programmed their works it could have been reduce the impact due this situation\. RDA wanted to import bitumen through Maganeguma to control the quality of the bitumen supply\. • Time overrun: All the packages of parent project was design by international consultant and also supervised by international consultant\. As such the consultant should held responsible for the wrong design\. Even if the time allocated for the design is short the consultant should deploy adequate staff for realistic design\. This should be reflected in future design activities\. 58\. Page 12 • Culverts and drains were not properly identified: Design of Parent project roads were done by international consultant\. After realization of this situation it was corrected by carrying out the design in- house by RDA for roads under the RSAP-1I • Delay in obtaining Environmental protection/ Explosive permits: Due to the situation of the country at that time issue of permit to use of explosive had to go through several screening process\. However it can be a delay of the contractor also not following correct procedure\. • Lack of coordination with utility agencies: The name of NWSDB should be corrected as "National Water Supply and Drainage Board"\. • Frequent turnover of the PMU staff: All changes of Project Directors were done at the latter part of the project\. But there were not much issues such as cost overrun in that period\. 59\. Page 13 - Bullet 12 - ( Para 2) - This is entirely the mismanagement of international consulting firm who carried out the supervision work and they should have control of getting qualified staff not the individual local consultant\. If local consultant is not performing team leader of the international consultant could change the consultant\. 60\. Page 16 para 44 - There was a delay in HDM 4 data evaluation due to the migration of old data to new system which has been upgraded through the project\. 61\. Page 19 para 54 - This is good as a pilot project to identify issues of implementation of DBMOT method\. It is required to have very good data bases as well as the good understanding of behavior of road especially pavement with the situation of the road in terms of traffic and other parameters\. As per the standard practices of selecting payment methods for road works, Lump Sum type contracts are suitable only for the Projects, where uncertainties for change of scope during implementation is minimal\. With the lack of knowledge of the behavior of road, the bidder will tends to price high to cover up the risk\. Therefore, suitability & cost effectiveness of this method will be known only with the receiving of bids\. 62\. Page 22 Para 64 - Reduction in VoC - It has been indicated here that with the significant reduction of IRI of project roads, only modest reduction of VoC was achieved\. It has to be noted here that assuming of increase of speed to have high fuel consumption is not reasonable as these roads are operating at low level speeds\. With the improvement of the roads there can be increase of traffic volume on these roads due to attraction\. This will keep the speed at same range before the intervention or reduce the speed below the project level resulting of modest reduction of VoC\. 63\. Page 23 Para 69 - By 2015 GoSL had spent LKR 370 billion to be corrected as "By 2015 GoSL had spent LKR 187\.64 billion on National roads" 64\. Page 26- Para 75 - Economic analysis period of using 11 years is not reasonable\. As indicated in the para it should be same and more appropriately it should be 20 years\. - 60 - 65\. Page 34 - Para 104 - In this section it is stated that the supervision consultant's performance is non- satisfactory, produced poor designs and followed poor engineering practices and it affected performance of all 12 civil works contracts\. It is the clear evidence of poor management of the project by lead consulting firm, but not due to poor performance of few individual local consultants, as highlighted in this report\. 66\. Page 35 - Para 109 - A dedicated project management consultant - It is to be noted here that project management is responsibility of Team Leaders and Resident Engineers of the supervising consultancy firm\. It is necessary to consider their experience in selecting of these staff in future projects\. 67\. Page 35 - Para 110 - Quality of engineering design, construction supervision should ensure defect free- work - This is very good lesson learned from the project\. Add to this most of the issues were due to the poor performance of the international consultant selected for the project in all phases of the project implementation\. It is better to revisit the selection process of these consultant\. It is proposed to adopt following process in future project implementation a\. All the designs procedures, adopted by the Consulting firms shall be reviewed by RDA specialized divisions\. This requirement should be made mandatory and the PMU should submit them to RDA for review\. If the present capacity of those divisions are not sufficient to take action to mobilize more resources b\. The consulting firms, engaged in RDA projects, should follow only RDA design manuals or any other standards, approved by RDA\. All the designs manuals shall be updated, if required\. c\. Prepare Contract Administration manual and update already available manuals and make it mandatory for using them by the Consulting firms and PMUs\. d\. Standardized Contract documents and make mandatory for using them by all PMUs\. e\. Formulate Technical Audit Division for updating standardized documents and Manuals, using experience of past and ongoing projects to avoid/minimize problems and to improve performance\. f\. Ministry or RDA to form separate section under Director (Quality Assurance) to carry out random quality control testing in all project\. 68\. Page 35 - Para 111 -Adopting sustainable funding sources for the RMTF - RMTF is a good mechanism for the sustainable maintenance of road network and transparency in maintenance fund usage\. Management of road sector agencies need to provide high level of commitment for the functioning of RMTF\. - 61 - Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders 62 Annex 9\. List of Supporting Documents 1\. The World Bank (2005) Project Appraisal Document on a Proposed Grant in the Amount of US$100 million equivalent to the Democratic Socialist Republic of Sri Lanka for a Road Sector Assistance Project\. 2\. The World Bank (2008) Project Paper on a Proposed First Additional Financing Credit in the Amount of US$98\.1 million equivalent to the Democratic Socialist Republic of Sri Lanka for a Road Sector Assistance Project\. 3\. The World Bank (2011) Project Paper on a Proposed Second Additional Financing Credit in the Amount of US$100 million equivalent to the Democratic Socialist Republic of Sri Lanka for a Road Sector Assistance Project\. 4\. Restructuring Papers, 2008, 2011, 2013, 2014, 2015\. 5\. QAG Report Quality at Entry, 2008 6\. Evaluation of Implementation of Environmental and Social Management Framework of the Road Sector Assistance Project\., 2012 7\. Rural Accessibility Survey – Rural Road Pilot Component, 2012 8\. Road User Satisfaction Survey 9\. Aide Memoires for Project Supervision missions 2005-2015\. 10\. Project Implementation Status Report, Project Files 2005-2015 63 Annex 10\. QAG Report QUALITY ASSESSMENT OF LENDING PORTFOLIO (QALP-1) Summary Assessment Sheet PROJECT Sri Lanka - Road COUNTRY Sri Lanka Sector Assistance REGION SAR SECTOR Transport TASK TEAM LEADER Amali Rajapaksa SECTOR MANAGER Michel Audige COUNTRY DIRECTOR Naoko Ishii LN/CR AMOUNT ($MIL) 100 LN/CR NUMBER 41380 TTL (Please indicate if HQ Headquarters PROJECT ID P086411 or Field-based) DATE APPROVED 12/15/2005 DATE EFFECTIVE 03/16/2006 MTR DATE (Planned) 01/12/2009 MTR DATE (Actual) Not Assigned REVISED CLOSING ORIGINAL CLOSING DATE 09/30/2011 09/30/2011 DATE PREVIOUS QAG FRAGILE STATE (Yes/No) No None ASSESSMENT(s) Roads & highways (90%) SECTORAL COVERAGE Central govt\. admin (6%) Sub-natl\. govt\. admin (4%) SPVN BUDGET $000 (incl\. TF): FY06 FY07 FY08 ACTUAL: 65\.4 100\.6 91 DO/IP RATING: FY07 FY08 DO S DO S ISR: IP S IP S EA CATEGORY Partial Assessment ASSESSMENT DATE 10/10/2008 LIKELIHOOD OF ACHIEVING DOs: 2 Guidance: 1= Highly Likely; 2 = Likely; 3 = Moderately Likely; 4 = Moderately Unlikely; 5 = Unlikely; 6 = Highly Unlikely\. 64  Amali Rajapaksa; Isabel Chatterton; Sumith Pilapitiya; Darshani De Silva; Sunethra Chandrika Samarakoon; Jiwanka B\. Wickramasinghe; Samantha PERSON(s) INTERVIEWED Prasada Wijesundera; Deepal Fernando; Zia Al Jalaly; Zafar Iqbal Raja; Ishtiaque Ahmed; Ashok Kumar MODERATOR Peter Ludwig OBSERVER(S) PANEL MEMBER(S) Robin C\. Carruthers; Jacques Bure; Arie Chupak SPECIALIZED REVIEWERS: 1\. Social Santhadevi Meenakshy 2\. Environment John Buursink 3\. Procurement Jorge Claro QUALITY ASSESSMENT OF LENDING PORTFOLIO (QALP-1) COUNTRY: Sri Lanka PROJECT TITLE: Sri Lanka - Road Sector Assistance QALP-1 Assessment: Likelihood of Achieving Development Objectives List of DOs: Ratings: PDO The objective of the Project is to lower transportation costs through sustainable delivery of an efficient national road system that serves the needs of road users and the Sri Lankan public at large\. DO1 DO2 DO3 DO4 DO5 2 Other (if Applicable) Likelihood of Achieving DOs Comments: The chosen indicators will not show whether an efficient national road network has been delivered on a sustainable basis, and even if it has, whether this is likely to contribute to economic (implicit in the phrase “needs of road users”) and social development (implicit in the phrase “Sri Lankan public at large”)\. But if the civil works are implemented together with those of the other funding agencies in the sector, the indicator values will be achieved\. Overall Comments A\. Quality of Design 1\. The original physical component of the Project (improvement to national roads) was designed to meet a specific government request\. A rather different physical component (a pilot exercise in upgrading rural roads) was later added to meet a request from the next government\. Adding the additional component was a justifiable risk, given the less acceptable alternatives, and in the event, has turned out well\. The institutional component relied on a component in a parallel project being implemented by the ADB\. This was a marginally acceptable risk, given that ADB had assumed the role of lead agency in the sector, but has not turned out so well\. 2\. The DOs are closely related to the first and third project components, and the outcome indicators were crafted to meet some subtle differences in how the objectives might be achieved\. 65 It was a justifiable simplification to use Vehicle Operating Costs (VoC) and not truck tariffs as the indicator of transportation costs, given the circumstances of Sri Lanka and the difficulties that would have been encountered in trying to estimate tariffs\. But in future road development projects in Sri Lanka, as elsewhere, more attention should be paid to the structure of the trucking industry and the reasonableness of the implicit assumption in the DO that reductions in VoC will be passed on to users\. It would not be essential to go to the next stage (as suggested at the interview) and link changes in truck tariffs to increased economic and social activity, as such impacts take time to become apparent whereas the lower tariffs should be observable more quickly\. 3\. The method of selecting sections of road to be improved in the national roads component included a thoughtful balance of technical and social considerations, as well as taking account of the roads being improved under the parallel ADB roads project\. More attention should have been given to the design standards used, as they were subsequently found to need improving to achieve an acceptable level of road safety\. The design concept for the rural roads component, of including pilot projects for different types of rural road improvement, was a justifiable compromise between rejecting the new government request to include a rural roads component in the Project and fully accepting such a component as an equally significant component as that for national roads\. 4\. The institutional component aimed at the creation of a road fund for road maintenance, a Board of Trustees to manage the fund, and a Technical Advisory Committee to provide technical support\. This was an ambitious agenda, particularly taking account that the existing road agency that would have to be restructured was also implementing the civil works component of the Project and similar projects of other financing agencies\. Under these circumstances the use of a PIU (or multiple PIUs) was more justifiable than would otherwise have been the case, since this insulated management of the civil works from much of the institutional disruption\. B\. Quality of Implementation 5\. Given the continued civil unrest in Sri Lanka, the Government’s attention to the Project has been strong\. When it became clear that the increases in unit costs for civil works could result in some of them not being completed, the Government took appropriate action to request additional Bank funding\. However, some of the additional funding was to meet a change in design standards between contracting the civil works and completing them\. While having a plausible justification in meeting higher safety standards, more consideration could have been given to completing the existing contracts under the original design standards, since they could not have been so unsafe as to be unacceptable\. The response to rapidly escalating bitumen costs was to allow the contractors to import bitumen as an exception to the Government policy of having it provided by a state monopolist\. Unfortunately this response was too little and too late, as the set up logistics costs for individual contractors to importing relatively small quantities of bitumen has not resulted in significant cost reductions, and this could have been foreseen\. A quicker, more innovative and comprehensive response was needed\. 6\. There have been delays in contracting the consultant that has the task of designing the new road maintenance funding system, a delay that is compatible with the current Government’s reluctance to pursue institutional changes\. Whatever the reason, the slow progress jeopardizes the chances of achieving the DO objective of delivery of an efficient national road system\. 66 7\. The Government has been responsive in purchasing new equipment that will facilitate more measurements of the IRI (the values of which constitute one of the outcome indicators) and has been diligent in trying to understand how the previous government arrived at the baseline values\. They have also been making estimates of vehicle operating costs (another outcome indicator)\. C\. Quality of Bank Supervision 8\. The Bank (both the task team and management) has been responsive in addressing the rapid escalation of contract costs and the Government’s proposed solution for dealing with the cost overruns\. While there is little evidence of collusion between contractors in seeking price variations based on unit cost increases, more thorough investigations could have been made, together with other road funding agencies, to verify that this has not happened\. Experience from other countries indicates that when unit costs increase rapidly, some contractors take advantage of the situation to increase their invoices even more\. The Bank has been diligent in maintaining frequent contact with other agencies active in the road sector, particularly the ADB as the lead agency\. These contacts have not been as productive as they might have been, for example in devising a scheme to reduce the impact of increases in bitumen costs, or reappraising the implementation of the design change to on-going contracts\. The Bank has given much attention to the interests of residents close to the roads being improved and to efforts to minimize construction impacts on them\. However, in agreeing to change the design standard of rural roads from gravel surface to a more expensive but less environmentally intrusive paved surface, perhaps more attention should have been given to the neighbors and users of roads that cannot now be improved as more funding has been given to on-going projects\. The decision to adopt this more expensive design concept will have large scale implications for the whole rural roads program\. D\. Panel Recommendations 9\. There is a high probability that the civil works components of the Project will be completed more or less on time, but well over the original budget but probably within the modified budget (taking account of the additional Bank funding and that the worst of the unit cost escalations might now be past)\. So in the second half of the implementation period more attention can be given to the third project component, Institutional Strengthening and Policy Advice, that addresses the part of the DO related to the delivery of an efficient national road system\. This system will require a secure funding for new roads as well as road maintenance and a national road agency that has effective incentives and access to human and financial resources to address them\. The performance of the ADB in progressing this agenda has not met the expectations indicated in the PAD and implicit in the DO of the Project\. The World Bank will have to take a more proactive role if this agenda is to be met\. 10\. One way that this could be done is through the rural roads program where the role of the World Bank is stronger than it is for national roads\. Given that the new CAS puts a strong emphasis on rural roads and their development role, the pilot projects included in the on-going project could provide a wealth of useful information and support for policy initiatives related to broader issues of funding for roads and the institutional arrangements for building and maintaining them\. This relates particularly to design standards and the trade-offs between constructing fewer but better roads or more but less costly roads that are perhaps more difficult to maintain\. 67 11\. The strategy of designing road maintenance funds based on models used in other countries might no longer be sustainable\. While road maintenance needs could often be met from a surcharge on transport fuels of the order of U$0\.05 to U$0\.09 per liter, with the increase in costs of road maintenance it is probable that this level of surcharge would have to at least double, and increase even more if the global economic downturn results in a slower rate of growth of traffic (road maintenance needs are largely fixed and only decrease slowly in relation to decreases in traffic)\. There is conflicting evidence as to whether it is the absolute level of the surcharge (an increase of about U$0\.05 per liter) that limits the feasibility of an increase, or its share of the total cost of fuel (if the surcharge doubles while the cost of fuel increases three fold or more, the impact of the surcharge might be less than expected)\. The impacts of the changing global economic context will need to figure prominently in the assessment of an appropriate road maintenance funding mechanism\. 12\. The Technical Audit has an important role in the supervision of this project\. Emphasis should be given in future Aide Memoires to the findings of the audits\. 13\. The review has noted some apparent inconsistencies in the physical and financial progress of the Project: physical progress is estimated at about 50%, disbursements also estimated at 50%, but contractual costs including escalation factors have been about 50% higher than indicated in the original contracts\. These three facts cannot all pertain at the same time\. Preparation for the Mid- term review provides a good opportunity for the percentage progress figures to be shown consistent with the cost escalation estimates\. E\. Any Systemic Lessons 14\. The DOs and the indicators used to measure them do not give any indication as to whether economic or social development will result from the Project\. The projected values of at least two of the indicators (VoC and IRI values) will be achieved if the Project civil works are implemented, and so are not in themselves indicators as to whether any development will result from the Project\. Great care needs to be taken in defining DOs that are not so ambitious that even if they are achieved, such achievement cannot reasonably be attributed to the Project, while at the same time not making them so trivial that so long as the civil works are completed, the indicators will show that the DOs have been achieved\. 15\. Institutional changes invariably take much longer than expected, so some provision for a slower implementation (a “Plan B”) should be made\. This could be an addition to the “Measures taken to mitigate risks\.” It would indicate what measures should be taken should any of the risks be realized; it is not enough just to show what has been done to reduce them\. 68  Rejoinder from the Region QUALITY ASSESSMENT OF LENDING PORTFOLIO (QALP-1) Guidance Questionnaire Summary Assessment Sheet Assessment Rating 1 = Highly Satisfactory/Likely 2 = Satisfactory/Likely 3 = Moderately Satisfactory/Likely 4 = Moderately Unsatisfactory/Unlikely 5 = Unsatisfactory/Unlikely 6 = Highly Unsatisfactory/Unlikely NA = Not Applicable QALP-1 Assessment Quality of Design 2 Quality of Implementation 2 Quality of Bank Supervision 2 Focus on Development Effectiveness 3 Fiduciary/Safeguard Aspects 2 Supervision Inputs and Processes 2 Candor and Realism of ISRs 2 QALP-1 ASSESSMENT: Likelihood of Achieving DOs 2 Likelihood of achieving DOs is rated on the same six-point scale as other ratings\. In arriving at a final judgment on outcomes, panelists should exercise their judgment and take into account quality of design, implementation and Bank supervision, as well as country conditions and known risks\. QUALITY ASSESSMENT OF LENDING PORTFOLIO (QALP-1) Guidance Questionnaire Context Section A\. Quality of Design 2 (i) Strategic relevance and appropriateness of DOs? Comments: The project design did more or less what the 2 Government wanted\. The DOs expressed exactly what they needed, and they are still highly relevant\. 69 (ii) Appropriateness of project design, complexity, and approach, given the country’s past track record and absorptive capacity? 2 Comments: The original fears that the pilot rural road projects might detract from the focus on the national roads component were not realized\. (iii) Adequate attention to technical, financial and economic aspects? Comments: The selection of road sections to be upgraded made sensible use of the Highway Development Model 4(HDM4), as did the overall evaluation\. However, the technical design 3 should have looked more at the safety implications of using a relatively narrow road width of 5m, since it was later found desirable to change it to 6\.2m\. (iv) Quality of the Results Framework to achieve the DOs, including realism of causal links between the Project’s inputs, activities, outputs, and intended outcomes? 2 Comments: Given the development objectives, the outcome indicators and causal links are adequate\. (v) Quality of arrangements for monitoring and evaluation (including clarity and precision of the 2 performance indicators to assess progress and outcomes and availability of baseline data)? 16\. Comments: The Roads Development Authority (RDA) is measuring in regular intervals the IRI, VoC and the conditions of the network\. However they have gotten the initial baseline values wrong for the IRI, through overuse of extrapolation\. The task team is taking adequate precautions to ensure that the subsequent measurements are more reliable\. (vi) Adequacy of measures incorporated in project design to address policy constraints? Comments: RDA was being redesigned, therefore selection of PIU for project implementation was justifiable\. The ADB is taking the lead on RDA restructuring and Road Fund\. While at the time it was correct not to question the leadership of ADB as the Bank 2 was absent from the road sector for 10 years, the subsequent failure to achieve the expected changes indicates a more proactive response from the World Bank will be needed to achieve the DOs\. (vii) Level of Borrower ownership, commitment? Comments: The Borrower has demonstrated strong ownership throughout project execution, 2 exemplified by the requests to include rural road pilot studies and for additional funding when it was necessary\. (viii) Extent of integration and quality of arrangements for governance and anti-corruption in project design? Comments: The use of third party technical audits is an excellent means to keep the implementing 2 agency, contractors and consultants on their toes with respect to the quality of civil works executed\. Also see comments under FM (xi) and procurement (xii) below, which are both rated satisfactory\. (ix) Extent of integration and quality of social development aspects in project design? 2 17\. Comments: Development objective of the Project provides opportunity to address vulnerability due to poverty, isolation, and gender\. 70 18\. The project design adequately evidences that measures were taken to promote positive social impacts result from the Project implementation\. As part of project preparation, social impact assessments have been completed and social framework was generated though the Project does not trigger OP 4\.12\. The framework proposes continued consultations with the stakeholders during every stage of the Project to ensure social safeguard compliance is maintained throughout the Project cycle, and provides the principles and the methodology for evolving a grievance redress mechanism\. It goes to state that a Grievance Redress Committee (GRC) will be established with critical roles for civil society and concerned stakeholder\. 19\. With regard to poverty, project covers the poorest segments of the country including provinces close to conflict areas and proposes labor intensive interventions where appropriate\. 20\. Stakeholder consultations were organized in a manner that ensured gender equity\. The social impact assessment report proposes ways to integrate gender dimension within the earth works\. The project design would have benefitted by establishing criteria for gender focus in: (i) earth works; (ii) proposed stakeholder dialogue during implementation; and (iii) institution of safety measures in congested areas such as wide sidewalks and proper lighting of sidewalks to enable safe mobility of poor female road users\. (x) Extent of integration and quality of environmental aspects in project design? Comments: Environmental aspects of this “Category B - Partial Assessment” project have been fully integrated into project design\. Sufficient attention was given to the financial and human 2 resources required to monitor and supervise the multiple environmental issues of national and rural roads during project implementation\. Environmental management is well integrated into project design and implementation\. (xi) Extent of integration and quality of FM aspects in project design? Comments: Adequate actions to ensure the Project’s FM arrangements to properly record and control project’s financial activities were in place before Loan effectiveness\. Adequate attention 2 was also given to mitigate the potential risk of fraud and corruption\. Thus, required FM arrangements were in place at an early stage of project implementation\. (xii) Extent of integration and quality of procurement aspects in project design? 2 21\. Comments: Governance and anti-corruption: As reported in other Sri Lanka projects evaluated, the country does not appear to have a high incidence of corruption although the CPAR did warn about institutional weaknesses, the absence of appropriate procurement controls including the absence of a formal system for performing procurement audits, and a weak capacity to implement the procurement laws and regulations, rating the risk of fraud and corruption as Medium\. The same year of the release of the CPAR, Transparency International ranked Sri Lanka as No 67 in a survey of 145 countries, which coincides with the medium classification of the CPAR\. 22\. The overall procurement risk in this particular project is also classified as Medium although the CPAR is not mentioned\. The procurement arrangements in the PAD are very good and consistent with a project of this nature, with stringent controls, ex-ante review of procurement actions and very frequent procurement review missions that include field visits, on-site inspections and post-reviews of procurement actions\. In addition, like most major road projects, it has the usual independent consulting engineering supervision\. 71 23\. Procurement aspects: The procurement aspects at project design were very well laid out, properly organized and straightforward\. In fact there was substantial procurement readiness at project inception with an 18 month procurement plan agreed upon from the start\. (xiii) Quality of institutional framework for the Project? Comments: Using several PIUs to avoid problems with RDA, which was in the restructuring 2 process was a necessary precaution to ensure implementation of the physical components of the Project\. (xiv) Quality of risk assessment and management? 4 24\. Comments: While risks were described in the PAD, there were no mitigation measures mentioned\. While perhaps not obligatory at the time, it would have been a desirable addition\. 1\. Quality of Implementation 2 QUALITY ASSESSMENT OF LENDING PORTFOLIO (QALP-1) Table 1\. Risk Flags and DO/IP Status COUNTRY: Sri Lanka REGION: SAR PROJECT ID: P086411 PROJECT TITLE: Sri Lanka - Road Sector Assistance DO/IP/Risk Factor FY07 FY08 ISR Panel ISR Panel DO/GO S S S S IP S S S S Project Components Maintenance and Rehabilitation of S S S S National Roads Maintenance and Rehabilitation of Rural S S S MS Roads Sustainable Maintenance Financing S S S S Arrangements Discretionary Flags Counterpart Funds No No No No Financial Management No No No No Legal Covenants No No No No Monitoring and Evaluation No No No No Project Management No No No No Procurement No No No No Safeguards No No No No Sub-Total 0 0 0 0 1/ Exogenous Flags Disbursements Delays No No No No 72 Effectiveness Delays No No No No Country Environment No No No No Country Record Yes Yes Yes Yes Long-Term Risk Flag No No No No Sub-Total 1 1 1 1 Total Flags 1 1 1 1 Golden Flag No No No No 2/ Overall Risk Status Low-Risk Low-Risk Low-Risk Low-Risk 25\. Comments 1/ Exogenous flags are system generated flags and have the same ratings for both ISR and Panel\. 2/ APP (DO) - DO rated below the line\. APP (IP) - IP rated below the line\. APP (DO/IP) - Both DO and IP rated below the line\. Potential - Non-problem projects with 3 or more flags and without a golden flag\. 2-flag - Non-problem projects with only 2 flags and without a golden flag\. Low risk - Non-problem projects with 0 or 1 flag and without a golden flag\. 73 Annex 11\. Map 74

APPROVAL

P003734

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 9254 PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480-IND) DECEMBER 28, 1990 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their ofricial dc ies\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS Currency unit - Indonesian Rupiah US$1\.00 - Rp 415 from 1973 through 1978 - Rp 625 from 1979 Rp 970 on March 30, 1983 - Rp 1798 on May 20, 1990 WEIGHTS AND MEASURES Metric System 1 ton (t) - I metric ton - 1,000 kg = 2,200 pounds 1 kilogram (kg) - 1,000 grams = 2\.2 pounds 1 hectare (ha) = 10,000 square meters = 2\.5 acres 1 GT - 100 cubic feet of ships' internal capacity ABBREVIATIONS BRI - Bank Rakyat Indonesia DGC - Director General of Cooperatives DGF - Directorate General of Fisheries FAO - Food and Agriculture Organization GOI - Government of Indonesia GT - Gross ton MOF - Ministry of Finance NES - Nucleus Estates OED - Operations Evaluation Department PCR - Project Completion Report PPM - Perum Perikanan Maluku (a state fisheries enterprise) RSI - Resident Staff Indonesia SAR\. - Staff Appraisal Report  VOR OmCIAL uE ONLY THE WORLD SANK Washington, D\.C\. 20433 U\.S\.A\. 0kiOWUW Ivuuul Me w ow"tarCA& December 28, 1990 ENMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Republic of Indonesia FiPheries Credit Prolect (Credit 480-IND) Attached, for information, is a copy of a report entitled "Project Performance Audit Report on Republic of Indonesia - Fisheries Credit Project (Credit 480-IND)" prepared by the Operations Evaluation Department\. Attachment This document has a restricted distribution and may be used by recipients only in the pefformance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480-IND) TABLE OP CONTENTS Page, No\. Proface \. \. \. \. 1\. \. Basic Data Sheet \. \. l* iii Evaluation Summary \. \. \. \. v PROJECT PERFORMANCE AUDIT T\. BACKGROUND \. I Context\. 1 Project Objectives\. \. 1 Design\. 2 Finance Plan\. 3 Organization \. \. 3 Pre-implementation Processing\. 3 II\. IMPLEMENTATION EXPERIENCE 4 Start-up \. 4 Skip-jack Tuna Sub-project \. \.5 Fishpond Sub-project\. 5 Trawler Sub-project \. 6 Management \. 6 Supervision \. \. 7 Ill\. PROJECT OUTCOME \. o\. \. \. \. \. 8 Closing Date and Project Cost\. 8 Performance at Completion and Longer Term Impact \. IV\. FINDINGS AND LESSONS \. \. \. 12 General \.12 A\. Inadequacies in Project Design \.12 B\. Organization of Fisheries Credit 14 C\. Management and Training \. 15 D\. Capital Structure of State Enterprises 16 E\. Economic Reassessment \.16 Table 1 - Summary of Fisheries Statistics for Selected Years Table 2 - Performance of PPM Skipjack Fishing Vessels, 1978/89 Table 3 - Brackish Water Fish Farming Credit Prograimes Financial Swmnary as at April 1990 Map - IBRD No\. 2853R1 - Project Location This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  - i - PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480-IND) PREFACE This is a Project Performance Audit Report (PPAR) on the Fisheries Credit Project, which involved an IDA credit amounting to US$6\.5 million (M) to the Government of Indonesia (GOI) for the development of skipjack tuna fishing at Ambon in the Moluccas, and intensification of fish farming in four provinces, namely, East, Central d West Java, and South Sulawesi\. The IDA credit was approved in June 1974 and became effective in January 1975\. The closing date of June 30, 1979 was extended to December 31, 1981\. This PPAR is based on the Project Completion Report (PCR)\.j/ the Staff Appraisal and the President's Reports, the loan documents, the transcript of the Executive Directors' meeting at which the project was considered, on a study of project files and discussions with Bank staff\. In addition, an OED mission visited Indonesia in May 1990 to discuss the outcome and impact of the project and the effectivenese of the Bank's assistance with GOI staff and others\. Their interest, kind cooperation and active assistance in the preparation of this report is gratefully acknowledged\. The PCR, which was prepared by the East Asia and Pacific Regional Office following a country visit in August 1982, provides a comprehensive analysis of the project experience and its status shortly after the Credit -was closed\. A number of lessons which were apparent by then are also highlighted in the PCR\. The audit memorandum further elaborates on some of the PCR conclusions and on issues arising from the subsequent outcome and impact of the project, because of their importance for other Bank supported fisheries projects\. In particular, inadequacies in the preparation and appraisal process are discussed, especially as regards credit arrangements for fish farmers and the choice of fishing vessel intended for operation by fishermen's cooperatives\. The draft PPAR was sent to the Borrower for comments but none were received\. 1/ Project Completion Report, Indonesia Fisheries Credit Project (Credit 480- IND), Report No\. 4468, dated May 3, 1983\.  - iii - PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480711M1) BASIC DATA SHEET KEY PROJECT DATA Appraisal Actual or Actual as Z estimate estimated actual of appraisal estimate Project costs (US$ million) 12\.9 18\.5 143 Credit amount (US$ million) 6\.5 6\.5 100 Date Board approval 06/04/74 Date Signing 06114/74 Date Effectiveness 10/18/74 01/08/75 Date physical components completed 06/30/79 09/30/81 Proportion then completed (2) 70 100 Closing date 06/30/79 12/31/81 Economic rate of return (Z) 22-39 n\.a\. n\.a\. Financial rate of return (X) 20-38 n\.a\. n\.a\. Institutional performance Adequate Fair Technical performance Adequate Fair Number of direct beneficiaries 9,000 3,000 33 CUMULATIVE DISBURSEMENTS FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 Appraisal estimate (US$ M) 0\.5 2\.9 5\.2 6\.2 6\.5 - - - A8tual (US$ M) 0\.1 0\.6 3\.3 4\.2 4\.8 5\.1 5\.8 6\.5 Actual as & of estimate 20 21 63 68 74 78 89 100 Date of final disbursement 03/82 STAFF INPUTS (staff weeks) PRE- TASK FY81 FY81 FY82 FY83 TOTAL Preappraisal 118\.4 118\.4 Appraisal 19\.0 19\.0 Negotiation 2\.2 2\.2 Stpervisicn 105\.7 11\.8 13\.0 5\.1 135\.6 Other 4\.5 6\.2 5\.8 16\.5 TOTAL 249\.8 11\.8 19\.2 10\.8 291\.6  - iv - MISSION DATA No\. of Specializations Performance Typea of Lfission Date Persons represented ratint Trend Problems (mo\./yr) La /b La id Identification/ Preparation 08/72 3 F(2) E Appraisal 06/73 6 F(2) E(2) FA(2) Supervision 1 08/75 3 F E FA 1 1 Supervision 2 03/76 2 F E 1 1 Supervision 3 06/76 2 F E 1 1 Supervision 4 04/77 3 F E FA 2 2 M,T Supervision 5 12/77 3 F E FA 2 1 M,T Supervision 6 07/78 3 F E FA 2 2 F\.M Supervision 7 09/79 3 F E FA 2 1 F\.P Supervision 8 12/79 2 E FA 2 2 M,T Supervision 9 08/80 2 F FA 2 3 M,T Supervision 10 05/81 2 F FA 2 2 M,0 Supervision 11 01/82 2 F FA 2 1 M,O OTHER PROJECT DATA Borrower Governmert of Indonesia Executing agency Perum Perikanan Maluku (PPM) Fiscal year April 1 - March 31 Name of currency (abbreviation): Rupiah (Rp) Currency exchange rate: Appraisal year average 1973 US$1\.00 - 415 Intervening years average 1973-81 US$1\.00 = 510 Completion year average 1981 US$1\.00 - 625 La F = Fishery expert; E = economist; FA - financial analyst\. lb 1 = problem-free or minor problems; 2 - moderate problems; and 3 - major problems\. /c 1 improving; 2 = stationary; and 3 = deteriorating\. /d F financial; M1 managerial; T = technical; P = political; and 0 - other\.  - v - PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480--IND) EVALUATION SUMMARY Introduction When this project Was identified, in the early 1970s and prior to the 1973 world fuel oil price crisis, Indonesia was engaging in a major fisheries expansion program aimed at making fuller use of the country's fish resources for both domestic consumption and for exports and increasing income and employment opportunities of subsistence fishermen and fish farmers\. Proiect Design & Obiectives The Project, as approved by the Board in 1974, was designed to increase fish production from the project area thereby increasing employment and earnings of fishermen and fish farmers, to strengthen fisheries estates' management and to enhance economic development in the project area, comprising East, Central and West Java, South Sulawesi and the Moluccas\. The SAR detailed three sub-projects and a technical assistance component to support project implementation\. These components were: (a) a skipjack tuna fishing complex in Ambon for the state enterprise Perum Perikanan Malukua (PPM), consisting of shore facilities for handling the catch (ice-making, freezing and cold storage), and for fishing vessel maintenance (jetty, slipways and workshops), together with provision of two 100 gross ton (GT) carrier vessels and ten 30 GT pole and line fishing boats\. Ten more of these vessels were provided for sale to local fishermen's cooperatives, whose catches were to be sold to PPM which would also be rosponsible for maintaining the Coop boats\. (b) milkfish and shrimp pond improvements over 15,000 hectares in Java and South Sulawesi, together with nine small ice plants; (c) the provision of 25 trawlers for fishing cooperatives in the Java area; (d) technical assistance comprising specialists in management, boat building and mechanical, electrical and civil engineering were provided for the skipjack sub-project and three pond-fisheries experts supported the fish & shrimp farming program; and  - vi - (e) loans for fishermen's cooperatives and other sub-borrowers such as fish-farmers, were to be axtended by the Bank Rakyat Indonesia (BRI), and the Director-General of Fisheries (DGF) was responsible for coordinating and supervising project implementation\. ImRlementation Experience An initial three month delay in effectiveness and slow procurement at the outset caused a two year delay in project implementation\. However, procurement did improve very greatly later on with assistance from GOI and Resident Mission (RSI) staff\. Supervision records show that moderate managerial problems were experienced through most of the years with less frequent instances of difficulties of a financial or technical nature\. Two project components, namely the 25 cooperative trawlers and 9 small ice plants were dropped during project implementation and the savings used to finance part of the cost overruns for the other vessels and consultants\. Total project costs were the equivalent of US$16\.9 M instead of US$12\.8 M as estimated at appraisal\. Results Credit 480-IND was fully disbursed by February 1982, shortly after the formal closing date of December 31, 1981\. Excluding the two sub-components which were dropped, as mentioned above, the project's other objectives were very largely achieved except for the poor financial control on operations, cost overruns and the rather small number of fish-farmers assisted (less than 3,000 compared with the SAR target of 9,000)\. As recorded in the PCR, marine fish catches and fish-pond yields, although about 40% below appraisal targets, were considered satisfactory and showed rapidly increasing production trends\. PPM's fleet of ten 30 GT pole & liners and two 100 GT catcher/carriers, plus the ten cooperatively owned 30 GT fishing vessels were fully operational, as were the shore facilities at Ambon\. PPM, having made losses from 1978 to 1980, recorded its first net profit in 1981\. Fish pond productivity, expressed as kg/ha/yr, was showing increases of up to 100% for milkfish and 500% for shrimp, from Credit 480 assisted ponds\. However, the level of sub-loan arrears and defaults remained disappointingly high at 44% and was improving only slowly, due to the lack of an appropriate system for fisheries debt recovery in BRI and to BRI's relative unfamiliarity with long-term fisheries lending prior to this project\. Sub-loans under the fish farming component benefitted 2,725 owner/operators of 8,900 ha of ponds and totalled Rp\. 1,616 million\. The appraisal target was 9,000 beneficiaries and 15,000 ha but it is clear that this target underestimated both the average size of fish farm and the amount needed per hectare to achieve the necessary improvements\. Economic rates of return were assessed at appraisal for nine separate components, with results ranging from 22% to 39%, but were recalculated at completion for only two, namely PPM (Ambon) and a 5 hectare fish pond\. At completion the ERR for PPM was 29% (SAR 34%) and 30% for the fish pond (SAR 24S)\. There was no weighted value quoted for ERR covering the project as a whole, either at appraisal or completion\. Results since completion suggest a very  - vii satisfactory outcome for the fish-farming sub-project, but a disappointing decline in perfotmance of the skipjack-tuna sub-project baced at Ambon\. Sustainabilitv As indicated in the PCR it did appear, at the completion stage, as if the prospects for sustainability were good and, as regards the fish farming component this has indeed proved to be the case\. Arrears including accrued interest, have been reduced to 9\.5% of the amount originally lent (44% at completion) ard are continuing to reduce slowly\. It is considered that the arrears could be virtually eliminated if BRI were willing to establish fisheries units to enable closer and more frequent contact with its borrowers at provincial and district levels\. Project achievements in aquaculture have been reinforced by two ADB funded brackish water aquaculture projects and by additional lending under the IDA funded Rural Credit Project (IDA Loan 827-IND)\. The fish-farming extension service, which was a weak element during much of this project, has since been reorganized, amalgamated with other Ministry of Agriculture farm extension services and strengthened\. Parmed fish production has greatly increased, especially from brackish water ponds which yielded more than 192,000 me\. in 1987 compared with 113\.000 mt in 1981\. The skipjack tuna fishing component based at Ambon has not fared so well during the 8-1/2 years since credit closing\. PPM's shorebase and fishing fleet are still operational, although the ice-plant and the ten pole & line boats are nearing the end of their working :ife and mey need replacing within the next three years\. Despite the subsequent acquisition of four long-liners PPM has never caught more than 60% of the appraisal target annual catch (the 12 year average, 1978/1989, is only 35%) and in consequence has recorded a net profit, after interest and depreciation, in only one y__r (1981) out of the past twelve\. As a state enterprise, PPM's continued survival is therefore dependent on GOI's willingness to sipport its losses although, as the PCR also notes, the losses were and continue to be partly due to GOI decisions concerning the extremely high ratio of debt to equity in PPM's capital structure and the level of depreciation charges, which were judged to be about 40% higher on average than was justified by the value of assets\. The position of the cooperative owned fleet is even worse in that, with one exception the boats are now all derelict and are said to be beyond any hope of renovation, having given at most only six years of working life\. The cooperatives concerned still owe the banks more than Rp 382 M, plus interest, in respect of vessel and fishing gear costs, and also owe a further Rp 54 M to PPM for repairs, fuel and ice supplied\. They have no other means or any hope of ever being able to repay such amounts and in their case, at least, it is clear that the project has had a decidedly negative impact\. Findings and Lessons Despite the apparently favorable status of the project at completion, there were two inherent weaknesses stemming from the preparatory stage which should have been more adequately dealt with prior to negotiations, namely BRI's  - viii - relative lack of experience of lending to the fisheries sector and an over- optimistic assessment of the capability of fishermen's 8ooperatives in the project area to manage and maintain relatively large and costly fishing vessels\. Considering that the fisheries credit program, including the fish farming component and sub-loans to cooperatives and others for skipjack catcher vessels and trawlers, was originally planned to utilize about 60Z of project funds and that BRI uas also to be responsible for all of the lending, it is remarkable that at no stage was any credit expertise included in a\., of the supervision missions, let alone anyone part0cularly knowledgeable about the problems of fisheries credit recovery\. Although, as the PCR points out, credit recovery should take place at the time of fish catch dalivery or of fishpond harvesting, and not routinely, at regular monthly or annual intervals, a mechanism and the staffing needed for this purpose shculd have been determined and agreed with BRI before lending commenced\. As it was, the high level of arrears was due more to BRI's unpreparedness and disinclination to establish specialist fish-farming credit units in the Provinces or to assign staff specifically to work in this field, rather than to any iaiherent unwillingness by fish farmers to repay their loans\. It is to be hoped that such arrangements will be included in any future credit plans\. The need for project design to be realistic as to implementation time schedules and the nature of components for inclusion in the project, was recognized in the PCR, along with the view that the provision for trawlers and for small ice-plant in fish-farming areas should have been excludAd at appraisal\. The same may be said about the fishing vessels selected for sale to cooperatives in the Ambon area, which proved to be too large and too costly for them to operate and maintain, particularly as they had to rely on the PPM slipway and workshops for vessel repairs and upkeep, a role which PPM found itself 1-creasingly unable to fulfill after the first two or three years, because it had to give priority to maintaining its own fleet\. A fishing vessel designed to meet the needs of an industrial scale, company type of operation is unlikely to prove suitable also for a much smaller scale enterprise\. Each should have a vessel designea around its own requirements\. It is essential that preparation and appraisal missions must view such matters much more critically in future\.  PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480-IND) I\. BACKGROUND Context 1\. Although Indonesia is known to have substantial marine resources, its fishing industry still has much potential for further development\. Prior to 1970 the industry was based on a large, mainly subsistence coastal fishery, using traditional boats and gear\. A small commercial fishery had developed but was dominated by joint ventures between mainly Japanese companies and ethnically- Chinese Indonesian businessmen\. Very few Indonesian fishermen had the capital or managerial ability neeted for successful commercial fishing\. Fisheries cooperatives were not well organized or very effective and so the Government of Indonesia (GOI) turned to the concept of state enterprises\. 2\. In 1970, there were eight state fisheries enterprises, each rather small and managing a few fishing boats or small shcea facilities\. None were particularly profitable but covered their operating costs and although operated commercially, they also had social goals such as, research, employment and price stabilization, etc\. IDA's First Fisheries Project (Credit 211-IND) in Indonesia became effective in October 1970, in the shape of a state fishing enterprise located at Aer Tembaga, North Sulawesi intended to promote skipjack tuna fishing for export\. 3\. Preparation for the Fisheries Credit Project (Credit 480-IND) commenced shortly thereafter, whilst the Aer Tembaga project was still in the process of implementation and concurrently with the establishment of Asian Development Bank (ADB) funded new enterprises in West Irian, Riau and Central Java ar(' a Japanese Government supported tuaLa long-line fishing project in Bali\. All of these enterprises have encountered severe managerial and financial problems, made worse by a rapid rise in fuel based operating costs since the 1973 oil price crisis and a collapse in skipjack and tuna world market values in 1982 which have never fully recovered\. In view of this relatively poor record, GOI has increasingly moved towards supporting the private fisheries sector, with particular emphasis on the nucleus estate approach ir which private enterprise and individual fishermen or cooperatives can associate on mutually beneficial terms\. GOI has also continued to support the state enterprises in the expectation that they could become the bases for future nucleus estates, as has already happened in two cases\. Proiect Obiectives 4\. In pursuance of the overall national aim of making fuller use of Indonesia's fish resources for domestic consumption and export and thereby  - 2 - increasing income and employment opportunities for subsistence fishermen and fish farmers, the main objectives of the Fisheries Credit Project were to expand production of skipjack tuna from the Ambon area for export and encourage greater investment in and increased production from brackish water fish farms in East, Central and West Java and South Sulawesi\. In the process and by means of appropriate technical assistance, the technical and managerial capacity of the Ambon state fishing enterprise Perum Perikanan Maluku (PPM) would be developed, the DGF's Fish Farming Extension Service would be strengthened and the expertise of the Bank Rakyat Indonesia (BRI) as regards the particular needs, problems and characteristics of the fishing industry, would also be enlarged and strengthened\. Design 5\. The design of the project differed from the earlier Aer Tembaga project (Credit 211-IND) in that about half of its funds were directed to the developent of brackish water fish farming and the balance to marine fisheries, whereas Credit 211 was concerned only with marine fisheries development\. Fish farming was then growing in importance as a source of income and employment in many coastal areas of Indonesia but was in need of development capital and better extension services\. 6\. Design of the facilities at Ambon incorporated some of the recommendations and lessons learned from the earlier project at Aer Tembaga, such as the jetty being extended into water of sufficient depth as to allow larger refrigerated cargo ships to berth alongside as well as the fishing fleet\. The Ambon cold storage system was also designed to minimize loading and unloading time, producing ccst savings and better quality fish\. Provision for the recruitment of experienced consultants to strengthen PPM's management and organizational structure was regarded as an important improvement in project design, given the acute managerial and technical problems that were being experienced at Aer Tembaga\. 7\. The project, as approved by the Board in 1974, comprised three sub- projects and a technical assistance component to support project implementation\. These were: (a) Skipjack Tuna Sub-proiect, involving the establishment of a tuna fishing complex in Ambon for the state fishing enterprise, consisting of 10 pole & line fishing boats to be used by PPM for skipjack fishing; fishing gear for catching live bait and skipjack tuna; two 100 GT carrier vessels to increase fishing efficiency; shore facilities for handling the catch (ice-making, freezing and cold storage) and for fleet operation and maintenance (jetty, slipway and workshops)\. A further 10 pole & line fishing vessels of similar size and design, were provided for sale on credit to local fishermen's cooperatives, on the assumption that their catches would be sold to PPM, and that PPM would be responsible for uaintaining the Cooperative boats and accounting for Cooperative loan repayments by deductions from catch sale values\. (b) Fish Pond Sub-project, consisting of improvements to about 15,000  ha of existing smallholder brackish water ponds in East, Central & West Java and in South Sulawesi; development of about 45 one to five ha demonstration ponds for use by a strengthened extension service; and establishment of nine 5-ton ice plants for the preservation of project milkfish and shrimp production enroute to market\. (c) Trawler Sub-nrolect, involving the procurement of 25 trewlers for sale on credit to fishing cooperatives in the Java area\. (d) Technical Assistance, for effective implementation of the project, comprising specialists in management, boat building, electrical, mechanical and civil engineering for the skipjack tuna sub-project and three pond-fisheries experts to support the brackish water fish and shrimp farming program\. A total of 17 man/years for up to seven experts was proposed\. Finance Plan 8\. At appraisal it was estimated that the project would cost a total of US$12\.9 M, of which the IDA credit amounted to US$6\.5 M\. Allocation of the total estimate, including the relevant amount for technical assistance, was approximately 42% to the skipjack tuna sub-project, 44% to the fish-pond sub- project and 14% to the trawler sub-project\. 9\. The estimated foreign exchange component totalled US$3\.8 M, or 30% of total costs, and it was therefore intended that the IDA credit would finance roughly 50% of total project cost, including about US$2\.7 M of local currency cost\. The credit was intended to supply about 58% of BRI support for the project, 53% of PPM's investment costs and 14% of GOI's contribution to project cost\. Organiz at ion 10\. Loans to the fishermen's cooperatives and other borrowers such as fish-farmers, were to be extended and administered by BRI\. Overall responsibility for coordinating and supervising project implementation was undertaken by the Director General of Fisheries\. 11\. There is no mention of any involvement by the Director General of Cooperatives\. Pre-implementation Processing 12\. GOI's request for a second IDA-financed fisheries project was reviewed and discussed by an FAO/Bank identification mission in August/September 1972\. In January 1973 FAO/Bank again visited Indonesia and prepared the project broadly along the lines of GOI's request\. The project was appraised by IDA in June 1973\. 13\. These missions noted local and international scientific assessments of the marine resources in Indonesian waters as being capable of yielding a 30-  fold increase in skipjack production and a 7-fold increase in overall total fish catch, compared to the 1972 landings of only 5,000 tons of skipjack and 839,000 tons of all kinds of fish\. Notwithstanding this potential for increased production, some inshore areas, such as the zone up to 5 miles offshore along the north coast of Java, were already overfished because about 97% of the 288,000 boats in the fishing fleet were not mechanized and were therefore unable to travel further afield\. Consequently, it was important to divert as much fishing effort as possible away from overexploited coastal waters to more distant but still underutilized fishing grounds\. 14\. Prior to project start-up th,re were about 184,000 ha of brackish water fish-ponds in Indonesia, dating back for several hundred years in some places, but mostly employing only a low level of milkfish culture technology and yielding about 330 kg/ha annually of mixed fish species, crabs and shrimp\. The missions noted that quite simple improvements to pond design producing better control of water conditions could, when combined with the use of small amounts of fertilizer, generate large increases in productivity of up to 500-600 kg of milkfish and 250 kg of shrimp per annum\. 15\. Issues included concern about the ability of state fishing enterprises such as PPM to manage such development projects, given the problems that were affecting the Aer Tembaga development; and the inadequate level of extension back-up for fish farming development, coupled with a general lack of facilities to demonstrate improved fish farming techniques\. There were also doubts about BRI's preparedness to engage in a substantial fisheries credit program given that BRI had no in-house fisheries expertise and that lending to the fisheries sector had until then constituted less than 2% of the bank's lending rortfolio and was experiencing arrears of about 40%\. 16\. Negotiations took place in April 1974 when, in addition to agreements on such matters as local funding and interest rates, agreement was also reached that BRI would engage a qualified fishery officer to liaise with DGF and PPM over the technical appraisal of sub-loan applications\. DGF agreed to construct 45 demonstration fish-ponds each staffed by one trained fish farming instructor, and to recruit a further 50 extension officers who would work with the three pond fisheries experts\. Conditions of effectiveness included that at least one pond fisheries expert and the management specialist for PPM be appointed and in position prior to the project being declared effective\. 17\. The credit was approved by the Board in June 1974\. II\. IMPLEMENTATION EXPERIENCE Start-up 18\. Project effectiveness was planned for October 18, 1974 but had to be deferred because of initial difficulties in recruiting the first aquaculturist and the management specialist Eor PPM\. The credit was eventually declared  - s - effective on January 8, 1975\. Thereafter the remaining technical assistance personnel and consultants were recruited expeditiously and the project made good progress at least until Year 4\. Skip-Jack Tuna Sub-prolect 19\. Soon after effectiveness, specifications and tender documents for the twenty skipjack pole & line fishing boats were prepared with the assistance of consultants and in consultation with RSI\. The boat construction contract was awarded to a state owned yard in Sumatra which delivered the first ten craft to PPM on schedule by October 1977\. Delivery of the remaining ten vessels was delayed from April 1978 until October/November 1979 because of disputes involving BRI, PPM, DGF and the Cooperative Department (DGC) concerning the selection of coops to receive the boats, their cost and manner of repayment\. 20\. Considerable delay occurred in procurement of the two carrier vessels, caused by changes in specification necessitating retendering and other bureaucratic problems, so that they did not finally enter service until just after the credit closing date and at greatly increased cost\. 21\. Construction of the shore facilities at Ambon commenced in early 1976 and was completed within two years, on schedule\. The work was carried out with little or no cause for complaint and at completion, the condition of these facilities was adjudged good to excellent and the operational equipment was working satisfactorily\. However, the cost of these shore facilities, at US$5\.9 M was double the appraisal estimate and the cost of the sub-project as a whole was US$11\.445 M compared to the appraisal estimate of US$5\.364 M\. Fishpond Sub-project 22\. Implementation of this component started in September 1975, and appeared to be going well when, as reported by the third supervision mission in June 1976, loans had been made to some 780 smallholders covering 2554 ha of brackish water ponds\. However, by the time of the 4th supervision in April 1977, the position had deteriorated quite badly\. BRI lending procedures, such as poor appraisal at branch level, coupled with inadequate extension follow-up, were giving cause for concern and escalating arrears\. Notwithstanding the support provided by the three experts, fish-farming extension workers appeared poorly motivated and in many cases were not regarded by more experienced pond owners as having any specialized knowledge to offer\. 23\. Because of the deteriorating quality of its fisheries portfolio and under IDA advice, BRI suspended disbursements in May 1977, and reappraised all fisheries sub-loans in accordance with guidelines provided by IDA\. This exercise resulted in the cancellation of a number of bad loans and a considerable improvement in subsequent lending operations\. At the same time DGF acted to improve the quality of its extension services in the project area, in terms of increased staffing and establishing pond demonstration & training units along the lines of undertakings made during negotiations\.  24\. As a consequence of the interruption, BRI did not complete its fishpond lending program until early 1980, well behind schedule, and totalling 2,725 owner/operators of 8,900 ha\. Provision for small ice-plants was dropped during 1978 because supplies of ice from other existing sources were sufficient and there was l:\.ttle or no interest by cooperatives or local businessmen in taking out loans for this purpose\. The savings were applied towards the escalating cost of technical assistance\. Total expenditure, including the costs of demonstration ponds and consultant services, was US$5\.427 M or 95Z of the appraisal estimate\. Trawler Sub-proilect 25\. The third supervision, in June 1976, noted reports of increasing numbers of private trawlers fishing illegally inside coastal water limits, especially in the Java Sea area, exacerbating the overfishing problem to the detriment of artisanal/subsistence fishermen\. It was therefore agreed with DGF to put the trawler component into abeyance\. 26\. Two years later, the sixth supervision in July 1978 agreed with DGF to drop the trawler component altogether, in favor of three additional carrier boats for the Ambon operation\. However, there is no indication that any orders were placed for these three vessels and in the end, the savings from Category 2 (trawlers) was used to offset some of the other cost overruns\. Management 27\. Administrative and technical weaknesses in the management of state enterprises, including PPM and fishermen's cooperatives, were recognized at appraisal and led to the inclusion of several technical assistance positions in the project to help PPM to develop its managerial capacity whilst implementing the project\. The project provided a technical adviser (described as a management specialist in the SAR and Credit Agreement), a master fishermen and a refrigeration engineer who performed well in assisting their counterparts, training other local staff, supervising construction of the shore base and advising on procurement, etc\. However, as none of them had any direct managerial function they were unable to be of much help in accelerating project implementation\. 28\. Record-keeping for management and project monitoring purposes did improve during the projp t, but were still unsatisfactory at completion and are only marginally better \. It was noted that although the performance of PPM's management team was ge\.1\. \.lly satisfactory, there were problems of commitment since most managers spent excessive time in Jakarta, where their families lived, rather than on the job\. In particular, the PCR stressed the need for a commercially oriented functional accounting system, the absence of which, throughout the project, resulted in increased operational costs and was the chief cause of reported accounting losses\. 29\. Management of the fish farAing co-Donent presented different problems in that the recruitment of three pond-f\. heries experts was intended to strengthen DGF's fish farming extension service, but had only marginal impact  - 7 - in that respect\. As regards BRI, the main worry was the lack of personnel especially at branch level, who had experience of fisheries credit management\. The employment of a fisheries graduate by BRI was helpful in improving liaison between the bank and DGF, but the officer concerned had only about two years post-graduate experience and was not therefore in a position to have much influence on the quality of sub-loan appraisal at the branches, or to direct the management of loan repayment on lines that accord with the way of life of fishermen and fish farmers\. 30\. There was a potentially very damaging disagreement at a critical stage during 1978, between PPM and DGF on the one hand and DGC and the Ambon fishermen's cooperatives on the other, concerning the choice of which cooperatives should receive boats and the manner of cost recovery\. Such key questions should have been resolved before the orders were placed to build the vessels, whereas failure to do so cost a year's delay in delivery and added significantly to their cost\. It was also a serious error by project management and by the preparation and appraisal missions that DGC's institutional and legal responsibility for cooperative affairs as not given enough consideration so as to ensure full participation by DGC from the outset in planning and implementing this part of the project\. 31\. Finally, from the record and from discussions held with some of the cooperative members concerned, it appears that they were not adequately consulted before decisions were taken on the type, size and cost of fishing vessel to be built\. Cooperative members stated that the vessels differed in respect to size, manner of construction, materials and cost, from what they expected\. They were particularly unhappy with the shallow draft, flat-bottomed design instead of a deeper V-shaped hull which they considered to be more sea-worthy\. The seventh supervision report (September 1979) noted that the first five boats were in service but that the cooperatives concerned were unhappy about their high purchase and operational cost and that this was leading to bad relations between the coops and PPM and disputes about fish prices, etc\. Effectively the coops were arguing that they were pressured into taking boats which they could not afford to operate, maintain and repay at prices dictated by PPM\. BRI was also clearly unhappy about the loan repayment prospects\. The eighth and subsequent supervision reports note steadily worsening repayment arrears, poorly maintained craft and suggestions that PPM should take over the boats together with the BRI loan commitments, although this idea was never followed through\. Supervision 32\. Although IDA's supervision procedure has no direct bearing on project management, it is frequently perceived by borrowers, however incorrectly, as contributing to the management process\. Such was certainly the case in this instance and IDA's supervision interventions helped to expedite procurement and to improve technical standards, often by providing the bridge for contact between GOI officials\. As noted in the PCR, supervision was not forceful enough in promoting improvements in PPM's accounting & financial management or in facilitating project cost recovery\. However, its request to BRI in 1977 to stop disbursements and to reappraise all the fish farming sub-loans, helped to reduce arrears and improve portfolio quality\. On the other hand, had BRI been better  - 8 - prepared perhaps by the inclusion of a fisheries credit specialist in the earlier missions, the problems might not have arisen\. 33\. There were a total of 11 supervision missions between August 1975 and January 1982, at roughly six monthly intervals\. Mission members totalled 27, each averaging 6 man-days per visit which should have been adequate\. Apart from the lack of fisheries credit expertise, mission composition was satisfactory with a fishery expert present on 10 missions, an economist on 8 and a financial analyst on 9\. Continaity was also reasonable especially during the latter half, but Mission No\. 7 in which 3 participants spent only 2 days each in country and No\. 8 in which two members were allowed only 1-1/2 dayr, each, hardly seems adequate time for proper understanding at a fairly crucial stage in the project cycle\. III\. PROJECT OUTCOME Closing Date & Proiect Cost 34\. The sixth supervision (July 1978) noting the delays, especially in procuring the 10 skipjack fishing boats for Ambon cooperatives and the 2 carrier vessels for PPM, coupled with DGF's request, recommended postponement of the closing date from June 30, 1979 by 18 months to December 31, 1980\. This was agreed and IDA subsequently granted a request for a further postponement to December 31, 1981 when the credit was formally closed\. 35\. Final disbursement was in February 1982 at which point the credit of US$6\.5 M was fully disbursed\. However, funds from Category 4 (unallocated) and from the balance of Category 2 (trawlers) were transferred to Categories 1 & 3 to finance part of the cost overruns for other vessels and consultants\. Total project costs were the equivalent of US$16\.9 M, an increase of 322 over the appraisal estimate of US$12\.8 M\. About 10% of the cost overrun is attributable to changes in project design, e\.g\. carrier vessel specification, and the remainder to project delays, higher equipment and material costs and to much higher consultant costs than originally estimated\. 36\. In fairness, these cost escalations were largely due to longer term knock-on effects of the oil price crisis from 1973 onwards, the consequences of which could not have been foreseen by the appraisal mission, even as late as June 1973\. However, it is also clear that more effective project and sub-project management would have minimized delays and thereby would also have reduced the cost overruns\. Performance at Completion and Longer Term Impact 37\. The PCR was based on the findings of a country visit in August 1982 and thus reviewed the project outcome and performance up to and including 1981/82\. The audit visit in May 1990 was perforce limited by time constraints to discussions in Jakarta and field studies of fish farming in East Java and the marine fishing component at Ambon\.  38\. As regards the Skipjack-Tuna Sub-project, the completion mission concluded that the operational status and productivity of PPM and the fishing cooperatives concerned was generally satisfactory and improving, although it was still about 40Z below appraisal estimates\. The shore facilities at Ambon were well maintained and fully operational and the combined fleet of twenty PPF and coop fishing vessels were apparently all serviceable\. The world market price for frozen skipjack had increased from US$520 per mt in 1978 to US$1045 per ton in 1981 and this had helped PPM to record its first annual net profit, after allowing for interest and depreciation charges\. 39\. Notwithstanding continuing managerial difficulties, unresolved disputes with cooperatives over prices and scarcity of live-bait for skipjack pole and line fishing, the recalculated ERR for the Ambon/skipjack sub-project is shown in the PCR as 29%, only 5% less than the appraisal estimate\. In the audit's view this figure is too high because it is based on an inaccurate and over-optimistic assessment of PPM's fleet efficiency and productivity\. The appraisal target for production per boat/year was 325 tons of skipjack, based on 1\.3 tons per day for 250 days at sea during each year\. The PCR, para\. 3\.02, incorrectly quotes the target as 1\.3 tons per fishing day and assesses actual catches as being only about 40% below appraisal targets\. It will be evident that there are fewer fishing days than total days at sea because the latter figure includes days spent steaming to and from the fishing grounds and catching bait, etc\., which take up about 35% of the time\. Consequently the equivalent target catch per fishing day would be about 2\.2 tons\. In reality, as can be seen from Table 2, during the 12 yearb from 1978 and 1989 total annual landings from PPM's fleet of 10 vessels never exceeded 1,360 tons or 42% of the target catch of 3,250 tons\. 40\. Equivalent production figures for the 10 cooperative boats are not available but from Supervision 8 onwards there are warnings about these craft being poorly utilized and badly maintained\. One has to assume therefore that they spent less time at sea and caught fewer fish even than the PPM fleet\. It was planned that PPM would maintain the cooperative fleet but after the first few years PPM had to give priority to its own boats, which is understandable, but resulted in cooperative vessels frequently having to wait, idle, for several weeks before they could be attended to\. It is greatly to be regretted that nine of the coop boats are now derelict and are reported to be beyond any hope of repair or renovation, having given no more than six years of working life\. The cooperatives concerned still owe more than Rp 382 M, plus interest, in respect of vessel and fishing gear costs and were also reported to owe a further Rp 54 M to PPM for repair work carried out in the past and for fuel and ice supplied\. There seems to be little or no possibility of their being able to repay these debts and the cooperative fishermen are, in effect, worse off now than before the project started\. 41\. The trend towards improved profitability noted in the PCR sadly proved to be short-lived\. In 1982 the average export price for skipjack slumped from US$1045 to US$653 per ton and continued to decline thereafter to US$612 in 1986\. Prices started to recover in 1987 but even by 1989 were still no more than  - 10 - US$898\. Given that costs of fuel, fishing gear and wages, etc\., have also increased over this period it is not surprising that PPM reverted to making net losses annually from 1982 to date\. 42\. On a more positive note, it is to the credit of PPM's staff and management that their shore base and fleet are still operational, although it is understood that the ice-plant and the ten skipjack boats are now nearing the end of their working life and will need replacement within the next few years\. Live bait availability is less of a problem because fishing is now based mainly on the use of aggregating rafts, known locally as rumpon, to attract the bait fish and tuna *\.4oals\. The fleet also now includes vessels equipped as long- liners, which use frozen bait to catch other tuna species, such as Yellowfin, which are more profitable than skipjack\. 43\. It is understood that there are hopes that PPM might form the basis for a fisheries nucleus estate development, an idea which seems well worth investigation\. PPM staff have developed considerable expertise over the years, in fishing, fish handling onshore, marketing and the upkeep of vessels and other equipment\. However, there will be need for a considerable injection of new capital to replace worn out boats, plant and machinery and the question of management capability will also have to be addressed\. 44\. The outcome of the Fish Farming Sub-project was viewed very favorably by the completion mission (PCR paras\. 3\.OS and 5\.02), despite the high rate of sub-loan arrears which was 44Z at completion\. Although progress was slow to start with, by the end there was a major improvement in aquacultural extension services supported by a series of demonstration ponds in most of the areas served by the project\. Pond owners who took advantage of these facilities were enabled to increase annual milkfish yields from 300 to around 1,000 kg/ha/yr and tiger shrimp yields from an average of 50 kg to as much as 300 kg/ha/yr\. Thit was achieved by means of higher stocking rates and reduced mortality losses made possible by better husbandry resulting from the provision of credit and extension advice\. 45\. During the project, BRI disbursed the equivalent of US$3\.5 M in sub- loans to 2,725 owners of about 9,000 ha of brackish-water ponds and in view of the favorable outcome, and despite the persisting high arrears, the recalculated ERR at completion was 28X, compared with the appraisal estimate of 24%\. The audit generally concurs with the PCR's assessment of the economics of this component, which has continued to have a beneficial impact during the eight years since project completion\. 46\. The improvement in fish-farming extension has been reinforced since 1982 by the amalgamation of fisheries extension into an overall agricultural extension program under the Directorate for Education, Training and Extension of the Ministry of Agriculture\. Experience gained during the project has also been of benefit to subsequent developments, auch as two ADB funded brackish aquaculture projects and the fish-farming component of the IDA funded Rural Credit Project (Loan 827-IND)\. As shown inter-alia in Table 1, brackish water pond fish production has increased over time, country wide, from 112,900 tons in 1981 to 192,000 tons in 1987, whilst the area of brackish ponds has also  - 11 - increased significantly, from 198,000 ha in 1981 to 263,000 ha in 1987\. Wider adoption of improved technology is evidenced by a growth in average productivity, from 560 kg/ha/yr in 1981 to 730 kg/ha/yr in 1987 and although figures are not available, the productivity growth in financial terms will be even more dramatic because it is known that many ponds have been converted from milk-fish production to the much more profitable tiger shrimp culture\. 47\. The high level of arrears which remained outstanding at project completion, has reduced steadily, albeit slowly sinze then to a stage where, as shown in Table 3, the outstanding principal plus accrued interest now amounts to only 9\.52 of the original sub-loan total\. it appears that this has happened with a minimum of pressure by BRI and that a more active program of regular contact with borrowers, such as was recommended by IDA supervision, would have virtually eliminated these arrears well before now\. The opportunity was taken during the audit visit in East Java, to meet three pond owners/operators whose loan accounts were still in arrears\. The following points emerged from the discussion: (a) in two of the three cases, inheritance problems following the deaths of the original borrowers hindered proper working of the ponds for several years and so led to the arrears; (b) two appeared unaware, prior to the interview, of the serious nature of their indebtedness, both owed about Rp 1 M yet both had earned at least Rp 8 M from their ponds during 1989 and should therefore be able to resume payments; (c) some ponds suffered from shortages of freshwater, with consequent high mortality and low productivity because of excessive salinity levels during the dry season\. Production levels vary from year to year, depending on stocking rates, salinity and predators, etc\., up to about 550 kg/ha for milkfish and 180-230 kg/ha for tiger shrimp\. Wherever possible, pond owners are stocking more shrimp and cutting back on milkfish; (d) two of the pond owners employed experienced workers on a share- cropping basis to operate their ponds\. The two owners had had discussions with local extension officers, but never in company with their workers who were said to be reluctant to adopt any new ideas\. The general view was that the extension service is much more active now than in the past\. 48\. As noted earlier, it is clear that BRI needs to establish closer and more regular contact with borrowers in order to encourage accelerated repayment of arrears and also to be informed about seasonal or other difficulties that may arise\. It is also clear that such action is highly relevant to the fish-farming sub-loan portfolio of IDA Loan 827, in relation to which it was observed that arrears currently stand at nearly 46% in East Java\. Finally, it appears that additional efforts are needed to ensure than extension messages reach not only the pond owners but also their share-cropping workers who are largely responsible for day-to-day pond management and upkeep\.  - 12 - IV\. FINDINGS AND LESSONS General 49\. The audit is in general agreement with the PCR comment that "\.The project's objectives were achieved except for the poor financial control on operations and the limited number of fish farmers assisted\." (PCR, Highlights, para\. i)\. Numerous problems were experienced en route, as detailed in the PCR but despite these difficulties tl'e overall outcome may be described as generally satisfactory, at least as far as the Fish Farming Sub-project is concerned\. With regard to the Skipjack Tuna Sub-project, although the PCR is correct in its statement concerning objectives having been attained, they have subsequently proved to be less sustainable\. This has been particularly so with the cooperative owned fishing vessels, most of which are now derelict\. 50\. The completion mission identified four main lessons arising from the project which are set out in para\. 5\.05 of the PCR\. Although in a different order, they are as follows: (a) project design should be more realistic as regards components (e\.g\. trawlers and ice boxes should have been omitted) and to the implementation schedule; (b) subloans should be recovered from cooperatives or fishermen whenever fish catches are delivered and not once yearly; (c) management and training are key factors for projezt success; management requirements and the use of experienced consultants in managerial positions, if need be, should be considered as priorities in future; (d) the capital structure (debt/equity) of project beneficiaries should be adequate to prevent deterioration of their financial standing\. Although the audit is in general agreement with these conclusions, it also considers that the analysis contained in the PCR did not penetrate sufficiently to identify other important issues\. These matters are therefore discussed below\. A\. Inadeguacies in Proiect Desizn 51\. The PCR concluded that project design was unrealistic as regards implementation time schedules and that in consequence there was a ten week delay in the project becoming effective and an eventual two and a half year time overrun before project completion\. Of these, the delay in effectiveness seems to be the most crucial, particularly because of its cause\. The Project Agreement was signed on June 14, 1974 and was scheduled to be made effective only four months later, on October 18, 1974\. However, amongst the conditions was a requirement that the consultant management specialist for PPM and one of the fish pond experts had to be recruited and in post before the credit could be declared effective\.  - 13 - 52\. Overseas recruitment is rotoriously difficalt and time consuming under any circumstances and to demand that two such key people be recruited and in post within only four months seems quite unreasonable and it was inevitable that there would be delays\. However the crucial point is that recruitment to such tight timings is bound to restrict choice to the possible detriment of the project\. In the audit's view it is much more important to select the right person for a key post, such as management specialist, even at the cost of a few months, than to insist that the post be filled by a given date\. It is therefore recommended that effectiveness conditions related to recruitment should be worded in a more constructive and less restrictive way in future\. 53\. The PCR concluded that project design was defective as regards some of its components, and in particular suggested that the two components which were eventually dropped, namely trawlers and small ice plant, should not have been included in the first place or should have been deleted during appraisal\. It was known from the outset, viz\. SAR para\. 2\.08, that inshore waters, especially in the Java Sea, were being heavily fished by all and sundry including the existing trawler fleet, even though the area was ostensibly reserved for the local artisanal/subsistence fishing communities\. Audit therefore agrees that the inclusion of additional trawlers was inappropriate and that a better approach would have been to induce some of the existing trawl fleet to divert to other underfished areas, such as the fishing grounds off South Kalimantan\. 54\. Cancellation of the provision for small ice plants in areas served by the Fish Farming Sub-project was agreed because it was found that there was adequate larger scale commercial ice-making capacity operating in the market and no demand emerged for the proposed smaller units\. The audit endorses the decision to cancel the ice-plant but was unable to judge whether or not the situation could have been foreseen during either preparation or appraisal\. It could have been a case of unrealistic planning, as suggested by the PCR, or equally well an instance where the project was overtaken by de,\.elcpments originating elsewhere\. 55\. The design and specification of fishing vessels selected for sale to fishing cooperatives in the Ambon area was another aspect in which project design proved inadequate and in the audit's view, led to the rapid deterioration and final breakdown of nine of the ten vessels after at most only six years service\. As late as November 1977, long after the orders for boat construction were placed, there were still disagreements (as reported by Supervisicn Mission No\. 5) over the selection of cooperatives to receive the vessels, and arguments persisted for several years thereafter about vessel costs and manner of construction, etc\. Cooperative members claimed that they were not consulted beforehand about vessel size and design and found themselves landed with boats which were too costly to buy, operate and maintain\. 56\. It seems clear that the cost advantages of building 20 boats to the same specification weighed more heavily with project planners than othnL considerations and that the cooperatives, in consequence found themselves having to accept vessels which were too large and too expensive for their limited means\. The craft were too large to be beached in the traditional way for routine hull  - 14 - maintenance by their owners, so they had no option but to rely on PPM to service the vessels on the project slipway\. This was fine until PPM found that with increasing age, their own vessels to which they had to give priority, were taking up most of the available slipway time, forcing the coop boats to wait for long periods before they could be attended to\. 57\. Thus, Supervision Missions Nos\. 8 and 9 reported that the cooperative fleet was being poorly utilized and badly maintained, that there were bad relations between PPM and the cooperatives and that loan repayments to BRI were falling badly into arrears\. Somehow this situation escaped the attention of the Completion Mission during August 1982, which regarded the cooperatives as operating profitably, (PCR, para\. 3\.02), but by 1985 only one of the coop boats remained in service and that has been operated by PPM on behalf of the cooperative concerned\. 58\. It is clear that project design was defective in not having consulted the fishermen concerned before decisions were taken as to which cooperatives should benefit and what kind of boat should be built\. As was well demonstrated in this case, it does not follow that a fishing vessel design suitable for use by a commercial company will also be appropriate to other circumstances\. Each group of user should have a vessel designed to meet their particular needs\. Design was also unrealistic in over-estimating the longer term ability of PPM to maintain a large fleet of cooperative vessels in addition to its own fleet\. It is therefore recommended in future that project design be based, inter alia, on the principle that intended beneficiary groups should have a major say in determining the nature of inputs from which they are expected to benefit but for which they will also have to pay\. It is also essential that preparation and appraisal missions, and especially the latter, must view these matters much more critically in future to ensure that timescales are realistic and that components are properly planned before appraisal, or if that is not possible, that the project contains adequate provision for the necessary planning and design work\. B\. Oreanization of Fisheries Credit 59\. According to the PCR, paras\. 2\.04, 3\.04 and 5\.05, the main lesson learnt was that credit recovery should take place at the time of catch delivery or pond marketing and not once yearly, so as to improve project financial control\. However, in the view of the audit, this was merely an end-product from the real lesson for future reference, which is that appraisal should not have allowed a fisheries credit program to proceed without including provision for the necessary remedial action, knowing that the agency concerned, BRI, lacked experience of fisheries credit management, lacked staff particularly at district level who had any real understanding of the fisheries sector for effective sub- loan appraisal and lacked any mechanism for collecting repayment installments at the fish landing beach or beside the fishpond\. 60\. Considering that the fisheries credit program, including the fish farming component and sub-loans to fishing cooperatives and others for skipjack catcher vessels and trawlers, was originally planned to utilize nearly 601 of total project provision and that BRI was to be responsible for managing all of the lending, it is remarkable that no specific credit expertise was included in  - 15 - any of the supervision missions\. There were also doubts from the outset (SAR, para\. 4\.16 and Annex 7, paras\. 8 and 9) about BRI's preparedness to ergage in a substantial fisheries credit program because of the above-mentioned shortcomings and because BRI's lending to the fisheries sector had until then comprised less than 2% of the bank's loan portfolio and was experiencing arrears of about 402\. There was a clear need for someone having particular experience of the problems of fisheries credit recovery and their causes and solutions, to advise BRI and help set up an appropriate mechanism and staffing for this purpose, concurrently with the start of lending\. Ideally such a post should have been included in the technical assistance component and in this regard the audit considers that GOI and IDA missed an opportunity to male a really worthwhile contribution to fisheries development in Indonesia\. 61\. Given the problems they have experienced, it is greatly to the credit of BRI staff that they have succeeded in reducing fish pond credit arrears to the present low level\. In the process some of the BRI staff will also have gained useful experience of some aspects af the fisheries sector, but by means of trial and error rather than by a planned and constructive approach\. C\. Management and Training 62\. One of the principal findings of the Completion Mission was that adequate management and training were key factors in project success and that the use of experienced consultants in managerial positions, if need be, should be considered as priorities in future projects (PCR, paras\. 1\.05 and 5\.05)\. Concern about the managerial capacity of PPM was also an issue during preparation and appraisal (SAR, para\. 4\.13 and Annex 8), to the extent that the recruitment of a management specialist to advise and assist PPM's top management team, was made a condition of effectiveness\. 63\. The original intention, arising from the acute managerial problems experienced during implementation of the Credit 211-IND, Aer Tembaga project, was that the provision of experienced consultants would strengthen PPM's management and organizational structure\. As shown in SAR para\. 3\.21 and Annex 10, it was proposed that the technical assistance team would comprise the Management Specialist/Team Leader, plus an electrical/mechanical engineer, a civil engineer and a naval architect/master boat-builder\. However, what eventuated was a three man team consisting of a technical adviser, a master fisherman and a refrigeration engineer\. The supervision record is not very clear as to how these changes came about but it is apparent that the original emphasis on strengthening the managerial function in PPM was changed to concentrate on reinforcing PPM's technical capacity\. 64\. As acknowledged earlier, in para\. 27, the project team worked well in their various technical fields but as none of them occupied a managerial position their impact on improving the management function was minimal\. Sadly therefore, this was one very important area in which the project failed to meet its objective because GOI and IDA allowed their attention to be diverted elsewhere\.  - 16 - 65\. The lesson in this case is that where inadequate management is identified as an issue during project preparation/appraisal, and it is agreed that its strengthening is to be an objective, then the means must be unequivocally specified, i\.e\. the personnel concet\.Led and their terms of reference, and no changes should be permitted that in any way detract from that principal objective\. D\. Capital Structure of State Enterprises 66\. The audit endorses the views expressed in para\. 3\.04 of the PCR concerning the need to rectify an imbalance in the capital structure of PPM by which too large a proportion of GOI's investment is in the form of loans rather than equity\. The consequent very heavy interest charges, coupled with depreciation charges which, as the PCR points out were about 40% higher than justified by the value of assets, have been major factors producing the annual net losses recorded by PPM in eleven of the past twelve years\. It is also noted that there has been no change in the situation since publication of the PCR in 1983\. 67\. It is appreciated that the position is complicated by GOI policy toward state enterprises in general, and therefore it is not a simple matter to adjust PPM's debt/equity ratio along the lines suggested in the PCR\. However, given that PPM will shortly be seeking additional capital to replace some of its fleet and shore equipment, and that consicaration may be given to cteating a fisheries nucleus enterprise based on PPM\. it is recommended that debt/equity ratio issue be reviewed at that time\. E\. Economic Reassessment 68\. According to Annexes 12 and 13 "f the SAR, financial and economic rates of return were calculated for each cf :he components, as tabula vd below\. However, there is no -eference in the SAR tV any weighted overall ERR assessment for the project as a wvhole and the referenc;- to such a figure in the PCR Basic Data Sheet is therefore erroneous\. The presentation of FRR/ERR figures in the PCR HIghlights, para\. (ii), as being represe:tative of anything more than the two components concerned, is also somewhat mJL'eading\. 69\. The Completion Mission selected the 5 ha fish-pond in South Sulawesi (Component No\. 8) and PPM (Component No\. 1) for re-evaluation, vide PCR para\. 5\.02, with the results shown in the table below, in parenthesis\. The other components were not re-evaluated and it was not posEible, therefore for the PCR to include an overall assessment of ERR for the project\.  - 17 - Com2onent (Annex 13) FRR X ERR 2 FRR ERR (1) PPM (includes shore plant and catcher fleet) 34 (26) 34 (29) (2) Cooperative tuna boats 20 22 (3) Beach seine 36 42 (4) 30 GT trawler 20 22 (5) Ice plant 30 31 (6) Java 1 ha fish pond 22 23 (7) Java 1 ha shrimp pond 38 39 (8) Sulawesi 5 ha fish pond 22 (28) 24 (30) (9) Sulawesi 5 ha shrimp pond 26 28 70\. Although the audit is not wholly convinced about the use of ERR as a method of measuring project outcome, it is considered that the PCR should have been more explicit as to the limited extent of its economic reassessment\. The audit mission also lacked time or adequate data for ERR recalculations, but on the basis of its overall review of project outcome, the position is likely to be: (1) PPM; at best little more than break-even after 12 years, with major new investment needs shortly, ERR likely to be less than 10%; (2) Coop boats; 901 derelict after less than 6 years service and large debts still owing; ERR has to be negative; (3) Beach seine net; for catching bait, small item of minor economic significance; (4) Trawlers; cancelled, ERR not applicable; (5) Iceplant; cancelled, ERR not applicable; (6/9) Fish Farming; now well established in all areas and continuing to improve, with good markets and high prices, overall ERR could be at least 302\.  - 19 - Table 1 PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480-IND) SUMMARY OF FISHERIES STATISTICS FOR SELECTED YEARS (A) FISH PRODUCTION (mt) 1981 1983 1 9 8 7 Total 1\.914\.505 2\.214\.481 2\.670\.413 Marine Fisheries 1,408,272 1,682\.019 2,017\.350 Inland (capture) 264\.983 265,562 276,291 Fish Farming (total) 241\.250 266\.900 376\.772 Brackish water ponds 112,916 134\.072 192,123 Freshwater ponds 78,224 79,681 95,353 Other (cages & paddy) 50,110 53,147 89,296 (B) FISHERMEN (No\.) Full time 579,336 602,477 679,714 Part time (major) 411,792 460,291 508,173 Part time (minor) 113\.521 163\.875 184\.543 Total 1\.104,649 1\.226\.643 1\.372\.430 (C) FISH FARMERS (No\.) Brackish water 111,269 121,023 145,235 Freshwater 610,476 713,632 1,057,281 Other 241\.687 254\.705 347\.839 Total 963\.432 1\.089\.360 1\.550\.355 (D) AREA UNDER CULTURE (ha) Brackish water ponds 198,210 220,365 263,162 Freshwater ponds 47,085 41,783 46,528 Other 96\.958 137\.434 99,681 Total area (gross) 342,253 371,054 409,371 Total area (net) (306,318) (326,885) (369,351) Note: 1987 is most recent published data\. Data provided by Directorate General for Fisheries\.  - 20 - Table 2 PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480-IND) PERFORMANCE OF PPM OWNED FLEET OF TEN X 30 GT SKIPJACK FISHING VESSELS /a Year Total Catch Actual as X Days at Sea Catch/boat/day (mt) of Appraisal _ (mt) Appraisal target 3250 - 2500 1\.3 1978 732 22\.5 1370 0\.5 1979 1069 32\.9 2535 0\.4 1980 994 30\.6 2276 0\.4 1981 /b 1205 37\.1 2440 0\.5 1982 915 28\.1 2158 0\.4 1983 1337 41\.1 2051 0\.6 1984 620 19\.1 n\.a\. n\.a\. 1985 993 30\.5 n\.a\. n\.a\. 1986 1359 41\.8 n\.a\. n\.a\. 1987 992 30\.5 n\.a\. n\.a\. 1988 509 15\.7 n\.a\. n\.a\. 1989 322 9\.9 n\.a\. n\.a\. Notes: /a There are no production data available for the 10 cooperative owned fishing vessels\. Lb The project was formally completed w\.e\.f\. 12/31/81\. Source: Perum Perikanan Maluku (PPM) reports\.  - 21 - Table 3 PROJECT PERFORMANCE AUDIT REPORT REPUBLIC OF INDONESIA FISHERIES CREDIT PROJECT (CREDIT 480-IND) BRACKISH-WATER FISH FARMING CREDIT PROGRAM FINANCIAL SUMMARY AS AT APRIL 1990 E\. Java C\. Java W\. Java S\. Sulawesi Total Beneficiaries 544 1,226 263 692 2,725 Pond Area (ha) 3,234 2,650 797 2,468 9,149 Total Lent (Rp\. million) 589\.5 342\.0 149\.0 535\.4 1616\.0 Recoveries (April) Principal (Rp '000) 670\.3 - - - 670\.3 Interest (Rp '000) 94\.0 - - - 94\.0 Total (Rp '000) 764\.3 - - - 764\.3 Arrears No\. of accounts 59 39 45 6 149 Principal (Rp '000) 60,967 10,994 15,021 955 87,936 Interest (Rp '000) 47\.350 11\.198 6\.806 352 65\.706 Total (Rp '000) 108,317 22,192 21,827 1\.307 153,672 Total arrears as Z of amount lent 18\.4% 6\.5% 14\.6% 0\.2Z 9\.52 Source: Bank Rakyat Indonesia, Jakarta\.  95' ,TH\ILAND IjO' 1115° <s 120' t 125' n~~~LrV, ' \. PHILIPPINES 1R251 |@_< P _, SocthCh oS f \,4 ( FISHERIES CREDIT PROJECT| \>8 - 7> >\ ( ~~~) )-\--- Fi'tSa , sh Po\.d P,o ect Areos\. t;tArERA X \~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~----; Terrtoriol Wo, Bonaries s RE M ,(\., Ier ti,,l Bo\.d,,e,J/ss ) =n , ' _ ~~~,=J:& -S:--:--------- -Bil\. 100_~~~~~~~~~~~~~~~i\. KA IMA IV rANoAour e O I r,0 200MATES60Rn7n o Sa d2 wd6br d~ z O 100 200 30a400 500 600 00 EoO 200 I,OO Wb\.cnr-DSrner46^^rx4rrrr0 rrd a<, 2!5KIOME2n 1lO c7o2Eols |IZf13' c 1 69J JPUAY19b

APPROVAL

P112963

Document o f The World Bank FOR OFFICIAL USEONLY Report No: 49266 BD - INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PAPER ONA PROPOSEDADDITIONAL FINANCING CREDIT INTHE AMOUNT OF SDR 83\.8 MILLION (US$130MILLIONEQUIVALENT) TO THE PEOPLE'SREPUBLIC OF BANGLADESH FOR THE RURAL ELECTRIFICATION AND RENEWABLE ENERGY DEVELOPMENT PROJECT July 6,2009 SustainableDevelopmentUnit SouthAsia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwisebe disclosedwithout World Bank authorization\.  BANGLADESH-GOVERNMENTFISCAL YEAR July I -June 30 CURRENCYEQUIVALENTS (ExchangeRateEffectiveas of June 30,2009) Currency Unit =BangladeshTaka (Tk) SDR 1=US$1\.55223 US$1 =Tk 68\.875 Weights and Measures Metric System ABBREVIATION AND ACRONYMS ADB Asian Development Bank IL IncandescentLamp BPDB BangladeshPower DevelopmentBoard I S 0 InternationalStandards Organization CAS CountryAssistance Strategy JICA Japan InternationalCooperationAgency CDM Clean Development Mechanism KfW Kreditanstaltfur Wiederaufbau CER Certified Emission Reductions KWH Kilowatt-hour CFL Compact FluorescentLamp MW Megawatt DESCO Dhaka Electric Supply Company NGO Non-GovernmentOrganization DPDC Dhaka Power DistributionCompany NSC National Steering Committee DSM Demand Side Management OHSAS OccupationalHealthand Safety Management Systems EIRR Economic InternalRateof Return PBS Palli Biddyut Samities (rural cooperatives) EMF EnvironmentManagementFramework PDO ProjectDevelopmentObjective ERPA EmissionReductionsPurchase PO ParticipatingOrganizations Agreement FIRR FinancialInternalRate of Return PRMP ProcurementRisk Mitigation Plan FM FinancialManagement PSU Project Support Unit GEF GlobalEnvironmentFacility RE RuralElectrification GHG Green-houseGases REB RuralElectrificationBoard GOB Governmentof Bangladesh RERED RuralElectrificationand Renewable Energy Development GPOBA GlobalPartnershipon Output-Based SHS Solar Home System Aid GTZ Gesellschaft fir Technische TA TechnicalAssistance Zusammenarbeit IDA InternationalDevelopmentAssociation VAT Value Added Tax IDCOL InfrastructureDevelopment Company WP Watt Peak Limited Vice President: IsabelM\.Guerrero Acting Country Director: Robert L\.Floyd Sector Director: John Henry Stein Sector Manager: Salman Zaheer Task Team Leader: RaihanElahi 11  FOR OFFICIAL USE ONLY Additional Financingfor RuralElectrification And RenewableEnergyDevelopmentProject TABLE OF CONTENTS -- --- YKUJLLI PAPERDATA SHEET 1 I INTRODUCTION 2 I1 BACKGROUNDAND RATIONALEFORADDITIONAL FINANCING 3 Sector Issues and Relevance to Additional Financing 3 Background on REREDproject 4 Rationalefor additionaljnancing 6 I11 PROPOSEDCHANGES 10 IV CONSISTENCYWITH COUNTRY ASSISTANCESTRATEGY (CAS) 11 V APPRAISAL OF PROJECT ACTIVITIES 12 Economic and Financial Analysis of the SHSProgram 12 Economic and Financial Analysis of the CFL Component 13 Operational Policy 8\.3 Compliance 14 Fiducialy 14 Procurement 15 Technical 15 Institutional 17 Safeguards 18 Governance andAnti-corruption 18 VI EXPECTEDOUTCOMES 20 VI1 BENEFITSAND RISKS 20 VI11 FINANCIAL TERMS AND CONDITIONSFOR THE ADDITIONAL FINANCING 21 ANNEXES ANNEX 1 FINANCIAL AND ECONOMICANALYSIS 22 ANNEX 2 OPERATIONSPOLICY 8\.30 COMPLIANCEREVIEW 27 ANNEX 3 FINANCIAL MANAGEMENT ASSESSMENT REVIEW 31 ANNEX 4 PROCUREMENTASSESSMENT 37 ANNEX 5 RESULTS FRAMEWORK AND MONITORTNG 41 This document has a restricted distribution and may be used by recipients only inthe performance o f their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. \. 111   - PROJECTPAPERDATASHEET Sector Manager: Salman Zaheer Environmental Category: B Borrower: Peoples Republic of Bangladesh Responsible agency: Infrastructure Development Company Ltd\. (IDCOL) and Rural Revised estimateddisbursements(Bank FY/US$m) FY FY 2010 I FY 2011 I FY 2012 I FY2013 I Annual 30\.0 I 35\.0 35\.0 30\.0 Cumulative I 30\.0 I 65\.0 100\.0 130\.0 Current closing date: December31, 2009 Revised project development objectives/outcomes[Ifapplicablej The development objective of the additional financing project remains same as the main project\. The Project's aim is to support Bangladesh'sefforts to raise levels of social development and economic growth by increasingaccess to electricity in rural areas\. Does the scaled-up or restructuredproject trigger any new safeguardpolicies? N o For Additional Financing [ 3 Loan [XI Credit [ ] Grant For Loans/Credits/Grants:- Total Bank financing (US$m\.): US$130 million Proposedterms: IDA StandardCredit 1  The Rural Electrification and RenewableEnergyDevelopmentProject AdditionalFinancing I\.Introduction This Project Paper seeks the approval o f the Executive Directors to provide an additional credit in an amount o f US$130 million to Bangladesh Rural Electrification and Renewable EnergyDevelopment Project, Credit No\. 3679-BD\. 1\. The proposed additional financing Credit would help finance the costs associated with: (i)scaling up the project's renewable energy components which are improving off- grid electricity supply in rural areas through the installation o f Solar Home Systems (SHSs) for affordable lighting, and also supporting electricity generation and supply from other renewable energy sources; (US$ 100 million); (ii)introducing energy efficient Compact Fluorescent Lamps (CFLs) as part o f a electricity demand side management program to help address the severe energy shortages inthe country, which i s particularly affecting the rural areas of Bangladesh(US$15 million); and (iii) rehabilitating additional electricity distribution networks in rural areas as part o f the System Loss Reduction component of the project (US$15 million)'\. The first component will be managed and implemented by the Infrastructure Development Company Limited (IDCOL) using eligible Participating Organizations (POs) while the second and third components will be managed and implemented by the Rural Electrification Board (REB)\. 2\. The proposal meets all three criteria of the Additional Financing Policy\. It proposes to scale up the renewable energy component by supporting installation o f more SHS and other renewable energy projects (e\.g\. generating electricity from biogas and biomass fuels, solar water pumps, etc\.); restructure the original project by adding a component on energy efficiency and demand side management to address the present electricity demand-supply gap in the rural areas through introducing energy efficient lighting; and meet an unanticipated financing gap o f the distribution line renovation component due to the sharp exchange rate fluctuations between SDR and US$over the past year\. 3\. Partnershiparrangements:Given the successful implementation track record o f the renewable energy component by IDCOL, several development partners became interested in supporting the program\. The GEF grant fund provided under the Bank financed project was used for training, awareness and communication campaign, and to subsidize initial SHS costs to consumers\. The grant fund successfully reduced various implementation barriers\. Followingthe same project design, KfW and GTZ of Germany started to support the project by providing grant funds for the technical assistance part o f the project and to further reduce SHS costs to consumers\. Recently, the Asian DevelopmentBank approved a credit o f US$33 million to install 100,000 SHS\. IDCOL 1 The scale-up inrehabilitation was conducted under the original project due to an increase in funds caused by currency fluctuations\. The additional financing is requiredto fill the financing gap created when the SDR value sharply decreased in FY09\. 2  signed an Emission Reduction Purchase Agreement (EWA) with the Bank for developing a Clean Development Mechanism (CDM) project, acting as the bundling agent for 14 Participating Organizations (PO) which borrow from IDCOL, to expand their SHS program\. Another large PO which borrows from IDCOL, Grameen Shakti, has also signed a separate ERPA with the Bank\. IDCOL's overall program has a target o f installing a total o f 1,000,000 SHS units by the year 2012, which will require installation o f 650,000 additional SHS units and cost about US$305 million\. This proposed Additional Financingwill support IDCOL inmeetingthis target\. 11\.Background and Rationale for Additional Financing Sector Issues and Relevance to Additional Financing 4\. Over the last decade, Bangladesh has experienced a net energy demand growth in the order o f 8% to 10% per annum\. Per capita electricity generation is among the lowest in the world, at about 165 kWh per year\. Peak electricity demand is around 5,200 MW and available generation capacity o f 3,600 to 4,300 MW i s insufficient to satisfy current demand2\. At the same time, the demand for electricity continues to grow at the rate o f over 500 MW a year due to population growth, increased industrialization, adaitional connections and rise inthe use o f modem, electrical appliances\. The generation capacity deficits results in frequent power failures during peak load hours (usually 6 to 11 pm in summer season), which hurts economic growth and industrial development and affects the quality of life3\. Frequent outages have also prompted industries, shops and households to install their own generators, pushing up the cost o f living\. This situation could also lead to indirect negative impacts, such as in 2009, when the Government had to temporarily close down several fertilizer plants to divert the natural gas they use to generate more electricity\. For a variety o f reasons, Bangladesh also failed to award new contracts to increase generation capacity although some agreements have recently been signed with development partners to finance several power plants to increase generation capacity by about 900 MW\. If demand i s not managed properly, load shedding will continue to increase until new power plants come into operation, which i s not expected soon\. 5\. The Government's Vision and Policy Statement (2002) on Power Sector Reforms has, inter alia, the following objectives to overcome the enormous challenges facing the power sector: bringthe entire country under electricity service by the year 2020 with improved reliability and quality o fthe electricity supply increase the sector's efficiency and makethe power sector financially viable make the sector commercial and increase private sector participation 'The higher loads are prevalent in the urbanareas, with the largest electricity load centers being Dhakaand Chittagong\.However, load shedding regime is implementedthroughoutthe country during the specific periodsof ower shortages, with rural customers being affected more disproportionately\. Estimatesindicate a reduction in gross domestic product by around $1 billion annually due to power shortages\. 3  use natural gas as a primary fuel for generation and explore the possibility for power export ensure a reasonable and affordable price for electricity 6\. The policies outlined above, ifimplementedwell, could very well underpina well managed, financial and economically viable power sector, ready to meet the rapidly growing energy needs o f the country\. However, implementation o f the above referenced policies and reforms have been much slower than expected due to weak sector institutions with limited managerial and technical capacity\. The Bank i s assisting the Government to overcome some o f these issues through various lending and TA activities\. Though Government i s to provide electricity to all by 2020, there has not been any significant addition to its electricity generation capacity after Meghnaghat-1 (450 MW) IPP was commissioned in 2002\. This shortcoming has particular relevance for the rural population since many rural areas are distant from the national electricity grid and, even where these are connected to the grid, the lack of sufficient generation capacity invariably leads disproportionate load sheddinginrural areas\. The original Rural Electrification and Renewable Energy Development (RERED) project had helpedbring electricity to remote areas away from the grid through several renewable energy options, i\.e\. Solar Home Systems (SHS)\. The proposed additional financing will augment those efforts and also make more electricity available by introducing energy saving Demand Side Management (DSM)measuresthrough large scaleprogrammatic deployment ofCFLs\. Background on REREDproject 7\. IDA financing for the Rural Electrification and Renewable Energy Development Project (RERED) was approved on June 25,2002 and became effective on December 31, 2002\. The project's development objective is to support Bangladesh's efforts to raise levels o f social and economic growth by increasing access to electricity in rural areas\. The project was designed to increase access o f rural people to electricity through conventional and renewableenergy options\. 8\. The Rural Electrification Board (REB), whose mandate is to support the rural electric cooperatives, known as Pally Bidyut Samities (PBSs), implemented the grid electrification component o f the project\. A total 70 PBSs are responsible for the entire rural area o f Bangladesh, out o f which 45 PBSs constructed new distribution lines to expand and intensify their existing networks and connect new consumers under this project\. These 45 PBSs also took over pockets o f the Bangladesh Power Development Board (BPDB) operated networks within their coverage area to renovate and integrate themwith the PBS network\. This reduced system losses significantly and also optimized the rural distribution network\. Under this project, REB has so far connected about 600,000 consumers, constructed about 8,500 km of new distribution lines and taken over about 12,000 kmo f distribution lines from BPDB, which are now beingrenovated\. 9\. To implement the renewable energy component, the project adopted a two- pronged approach to reach the remote areas o f Bangladesh, far away from the grid network\. REB was tasked with extending afee-for-service SHS program, whereby the systems would be installed and owned by REB and consumers would pay a monthly 4  fixed fee for using the systems\. The approach of the other SHS implementing agency, IDCOL, was to sell the systems to consumers using a micro-finance scheme through the POs (NGOs, micro-finance institutions, cooperatives, and private organizations) who have greater reach and acceptability at the community level as well as practical experience in providing micro-finance\. The POs extend micro-credits for consumers to buy the systems and, inturn, obtain re-financing from IDCOL for up to 80% of the loans extended to consumers\. 10\. The REB's fee-for-service approach was able to achieve about 75 percent of the project target for SHS installation in rural areas\. Against a target of providing 16,000 households with SHS, REB provided SHS to about 12,000 households\. As REB's primary function is to provide grid electricity, it found itself organizationally challenged to provide SHS services\. REB's institutional constraints and its inability to contract the manpower to support the SHS program was one of the main reasons behind meeting less than the target output\. 11\. The IDCOL SHS program, in contrast, has been highly successful\. Against the original project target of installing 50,000 systems, by May 2009 the POs had installed about 320,000 systems, a remarkable achievement within a period of 6 years\. On average, the POs are installing about 12,000 SHS per month\. The success of the IDCOL approachcan be attributed to: (i) SHS ownership by consumers resulting inproper care in systems usage; (ii) customer training imparted by the POs, enabling customers to carry out repairs and regular maintenance by themselves; (iii)credibility of the POs at the community level resulting in customer readiness to try the systems; and (iv) institutional set-up of the POs enabling them to reach remote customers in a cost-effective and efficient manner\. The implementation mechanism of the IDCOL approach has proved sustainable, with POs having an average loan collection efficiency of about 98% while fully servicing their debts owedto IDCOL on a timely basis\. 12\. As a result of successful implementation, mainly by IDCOL, the initial financing of US$18 million to provide about 50,000 households with SHS was expanded in stages, achieving disbursements of about US$52 million and electrification of about 320,000 households through SHS\. This component targets households far from the grid who are unlikely to get grid electricity in the foreseeable future\. As the installed generation capacity of the country has been unable to meet the entire electricity demand, IDA has supported the Government's requests to divert more funds to this renewable energy component, including now through the additional financing\. The project has also financed the piloting of the first biomass power plant in Bangladesh which is providing electricity through its mini-gridto about 300 consumers\. 13\. Having realized the importance of energy efficiency improvements and the need to utilize the large energy savings potential across various sectors, in 2008, Government of Bangladesh (GOB) drafted the Energy Conservation Act, which is expected to be endorsed by the Parliament inthe near future\. The Government had also introduced some electricity load managementmeasures in2008 (e\.g\., time of use pricing for industrial and large commercial consumers, closing of shopping malls at 8\.00 pm)\. More recently, 5  starting June 19, 2009 a new system o f Daylight Savings Time has been introduced and the Government estimates that 200-250 MW per day can be saved by having more daylight hours in the evening so that people can avoid using electric lights\. The Government has also decided to waive VAT and other duties on imported solar panels and CFLs to help reduceprices inthe market and encourage increased use\. 14\. Table 1 summarizes the key data o f the RERED project to date, including relevant project dates, credit amounts, and performance ratings\. Revised Closing Date: Credit Amount: SDR153 million 15\. While the project maintained its overall performance rating as "satisfactory" throughout its implementation period, the Financial Management and Procurement ratings were downgraded to "Moderately Satisfactory" in the December 2008 ImplementationStatus Report as REB could not submit its audit report on time and took a long time to resolve several representations on its Procurement Bid Evaluation Report\. REB has already taken corrective measures to improve its Financial Management and Procurement ratings\. It has also shared an action plan with IDA to ensure satisfactory financial and procurement management rating\. Based on these initiatives, project performance ratings of these two indicators have beenupgraded inthe recent (June 2009) Implementation Status Report\. All legal covenants of the project are incompliance\. Rationalefor additionaljnancing 16\. The primary rationale for additional financing i s for IDA to maintain its support for the Project which continues to be an important and effective contributor to enable the Government inmeeting its vision o f providing universal access to electricity by 2020\. 17\. Access to electricity in Bangladesh i s low, currently about 40%\. Even those with access to grid electricity do not get an uninterrupted supply as the country i s facing serious power shortages and load shedding inthe rural areas i s disproportionately severe (see Box A)\. Apart from some small power plants, no new reliable power generation capacity has been added to the grid since 2002\. GOB i s making efforts to increase electricity generation capacity and improve efficiency o f the supply system'\. Despite 6  these efforts, reliance on grid electricity alone will not allow GOB to realize its vision o f universal access to electricity by the year 2020\. Furthermore, the dispersed nature o f rural settlements and the numerous rivers that crisscross the country make grid electrification in many areas difficult and expensive\. Inthis context, off-grid electrification, based on renewable energy i s the only long-term option available for cost-effective electricity access for millions o f people inremote areas\. Box A: Load Sheddingin Urban and RuralAreas In March 2009, the average generation was about 3,600 MW\. The average demand in DESCO area (the utility servingthe northernDhaka areas) was 420 MW while the average demand in the rural areas served by PBSs was 2,200 MW\. During the month, the average supply to DESCO area was 3 12 MW (74% of DESCO demand) while PBSs received 1,281 MW (58% PBS electricity demand)\. 18\. While the grid-based supply component had been effective in the Project's early years, the off-grid electrification component has become more effective in recent times, in view of the mounting power generation shortages in the country, increasing availability and gradual decrease in costs o f modern renewable energy-based measures like SHSs\. Therefore, the bulk of the additional financing is proposed for the renewable energy based, off-grid component\. 19\. As mentioned before, the impact o f the power shortages have been particularly severe in the rural areas where electricity i s sometimes available only for a few hours a day\. While efforts are underway to increase generation capacity, it i s realizedthat it will take several years before additional capacity comes on stream, and electricity deficits may continue to grow as the Bangladesh economy grows further\. In order to address some o f the current and expected power shortages inthe future, which particularly affects rural areas more disproportionately, GOB has requested additional financing to initiate a program o f electricity demand-side management activities through the introduction of energy efficient compact fluorescent lamps (CFLs) on a large scale\. Limitedvariety of CFLs are available in Bangladesh but the consumer uptake, especially for household consumers, has been low due to high cost (Taka 250 to 300 per CFL) and poor quality o f these available products\. The project aims to deploy high quality CFLs, procured in bulk (andtherefore at a cheaper price) inthe densely populated electrified areas, both inurban and rural distribution utilities, and use mostly traditional incandescent lamps (ILs) which are five times inefficient\. The reduction in electricity demand in these areas due to the replacement o f I L s with CFLs, will make more electricity available to be distributed in the rural areas of Bangladesh\. The plan is to help increase the penetrationof CFLs to the entire country, within a relatively short time to maximize the benefits from DSM activities\. The CFL deployment program proposed under this project is the first step towards national coverage\. 7  20\. The borrower has requested the additional financing for the following three components: 21\. Component 1 Scale up the renewable energy component (US$lOO million)\. - Additional financing would be used to provide electricity to an additional 300,000 households through SHS and to finance other renewable energy projects in rural Bangladesh\. This will help IDCOL continue with the successful program and complement the funding from other donors\. Under this component renewable energy initiatives like solar home systems, biomass power plants, biogas power plants, solar water pump for irrigation, solar thermal plants, solar mini grids, etc will be supported\. About US$ 92 million for SHS and about US$ 5\.8 million for other renewable energy projects will be allocated as subloan to implement this component\. About US$ 2\.2 million has been allocated for goods, technical assistance to support training, inspection, monitoring & evaluation, feasibility studies, etc\. 22\. Component2 Introduce a new component on energy efficiency and demand - side management to mitigate supply shortages and improve the availability of electricity in the rural areas (US$15 million)\. A part o fthe additional financing will be used to purchase and install about 10 million high quality CFLs, to replace an equivalent number o f incandescent lamps inthe households of the most densely populated areas o f Bangladesh where the electricity demand i s high - both in urban and rural areas\. Residential consumers will be provided with a limited number o f CFLs, free o f cost, and in exchange for the ILs currently under use in their households\. As lighting coincides with the peak load hours and contributes over 20% of the demand as per a recent comprehensive survey in Bangladesh, this initiative i s expected to reduce peak power demand and reduce load shedding significantly, particularly in the rural areas\. Assuming that the CFLs o f equivalent light output (measured in lumens) will reduce electricity demand/consumption by 80% over that o f I L s (for instance, a lOOW incandescent may be replaced by a 20W CFL, and 40W incandescent may be replaced by a 8W CFL), deploying 10 million CFLs inareas o f highdemand i s expected to reduce the peak demand by about 360 MW\. Due to the "release" o f 360 MW grid based generation capacity, the reliability o f power supply i s expected to increase considerably, particularly inadversely affected rural areas\. 23\. Component 3 -Meet the financing gap of the REB component to renovate distribution lines taken over from BPDB (US%15million)\. Additional financing will be usedto fund the financing gap which has emerged while implementing this successful component\. As part o f a distribution rationalization program, REB took over rural electricity distribution networks from the national power utility (BPDB), renovated them to reduce losses, and improve services that resulted inpositive financial returns to REB\. The financing gap has arisen due to exchange rate fluctuations\. The original IDA Credit funding for the project was SDR153 million, which was equivalent to US$190 million in June 2002\. Due to exchange rate fluctuations, the total credit amount increased to about US$250 million in mid-2008\. Against a target of 9,400 km o f lines, REB has actually taken over 12,000 km o f lines from BPDB and IDA agreed to finance the renovation of these additional lines from the funds generated by SDR appreciation\. Unfortunately, 8  after all the contracts to finish this renovation had been awarded, the SDR started to depreciate sharply against the U S Dollar from early FY 2009; as o f June 2009, the credit amount i s equivalent to US$236 million\. Given this sharp reduction in available credit funds in US$ equivalent and as most of the contracts awarded are in US$, REB would need about US$15 million to meet the financing gap and complete the renovation of all the distribution lines taken over from BPDB\. 24\. A summarized indicative Cost Table for the additional financing project is provided below\. Note: Govt\. Government contribution isfor the REB Grid Electrification Component only\. GOBfund will be usedfor paying Tax, CD, VAT, staffcost, and other operating expenditure against this component\. Thesecosts can be easily identified and separated\. PO: Includes contribution from Partner Organizations against 20% of the loan extended to consumers for SHSand equity participation of Sponsorsfor other renewable energypilot projects\. Cons: Includes down payment requiredfrom consumers before receiving SHS\. GPOBA: Includes subsidy allocatedfor each household receiving SHS and subsidy to reduce capital cost on other renewable energy projects\. Other DPs: Includes commitment from Development Partners: Asian Development Bank, Islamic Development Bank GTZ, Kfw, JICA, etc\. Funding receivedfrom PO, Cons, GPOBA and other DPs will be parallelfinancing\. 25\. The bulk o f the additional financing will continue with the on-going activities of the parentproject\. Hence it will start to disburse immediately after the credit i s effective\. The renewable energy component o f IDCOL is expected to be completed within a period of three years\. The energy efficiency component i s expected to be completed by the end o f 2010\. REB's line rehabilitation component will be used to meet the financing gap for contracts that have already been awarded and would require retroactive financing\. Total expected amount required for retroactive financing i s expected to be about US$ 10 9  million paid after January 1, 2009\. This component i s expected to be disbursed within 3 to 4 months of effectiveness o f the additional financing credit\. 111\. ProposedChanges 26\. The primary activity o f the project underthe Additional Financing Credit remains essentially the same\. The project will follow the same implementation design to support installation o f SHS and other renewable energy projects\. The proposed changes to the project are: (i) SHSprogram expansion with the target o f installing additional 300,000 SHS during FY10-12\. Under the proposed additional financing credit, IDCOL will allow its POs to support SHS smaller than 30 Wp in addition to their current range o f products\. This will ensure rural households with relatively lower income to receive SHS under this project\. A funding application has been submittedto the Trust Fundfor Global Partnership on Output-Based Aid (GPOBA) to support this project and GPOBA Panel o f Experts has accepted the application for eligibility\. An additional US$7 million is expected from GPOBA to support the SHS component of the project\. Fund from GPOBA will be used as parallel financing to this project\. (ii) Support several renewable energy technologies\. Under the original credit IDCOL has successfully supported a pilot biomass base power plant o f 250kW\. Another biogas based power plant o f 50 kW i s under construction\. Based on the experience o f these plants and lessons learned, IDCOL plans to support more subprojects based on similar technologies\. IDCOL further plans to support other subprojects like i)solar water pumping for irrigation, ii)solar mini grid, iii)solar thermal plants, etc\. IDCOL has received proposals for a 400 kW biomass plant and a 20kW solar water pump for irrigation\. These and other sub-projects will be considered under the additional financing that will help achieve the Project Development Objective o f increasing access to electricity inthe rural areas of Bangladesh in a sustainable manner\. Funding from GPOBA to buy down the capital costs o f these pilot projects has been requested and about US$1 million is expected\. Fund from GPOBA will be used as parallel financing to this project\. (iii) Financing and installation of CFLs\. Given the severe electricity supply shortage prevailing in Bangladesh, GOB requested IDA to support in electricity demand side management\. Hence a new component has been included in this proposed additional financing credit to help alleviate the serious energy shortage in the country\. The GOB has requested $15 million of additional financing to deploy about 10 million CFLs amongst residential consumers o f high density load centers in Bangladesh\. The funds will be used to procure better quality CFLs, support a systematic distribution system, as well as conduct a comprehensive consumer awareness scheme, and monitoring and evaluation plan\. The first phase 10  can be launched relatively quickly, with CFL deployment starting in early 2010 and contributing to reduce load-shedding by the next peak season (summer 2010)\. The availability of additional electricity i s expected to particularly benefit the rural areas which have borne the major brunt o f the load shedding\. REB will be the key implementing agency responsible for overall management o f this component, including implementing consumer awareness and monitoring and evaluation plans at national level\. REB will be procuring the high quality CFLs in bulk, and distributing them in the service territory of their selected PBSs for installation in place of ILs within the households\. In addition, a portion of the CFLs will be distributed by other utilities (BPDB, DESCO, DPDC, etc\.) amongst the residential consumers intheir respective service territories, usingthe same broad approach being followed by REB\. Quick deployment o f a large number of CFLs may allow GOB to capture the benefits of carbon financing, by seeking payments for the resulting carbon emission reductions which will substantially offset the cost o f deploying the CFLs, in the long-term\. IDCOL will act as the coordinating entity (bundling agent) for the C D M transaction associated with the CFL project\. (iv) Implementation arrangement of the CFL component\. Though REB will act as the implementing agency to implementthe CFL component, GOB i s considering it as a national level component, which will help the country to reduce its electricity peak demand and help alleviate load shedding\. Dueto the complex nature o fthe CFL component which involves multiple stakeholders, a Project National Steering Committee (NSC), under the chairmanship o f Joint Secretary-Power Division, will be set up to oversee project activities\. The NSC and Power Division will be supported by a Project Support Unit (PSU) funded from an existing technical assistance grant (Sustainable Energy Development) from the GTZ\. The NSC will ensure coordination between the stakeholders to support implementation o f this component\. IV\. Consistency with Country Assistance Strategy (CAS) 27\. The REREDproject's objective i s to extend electricity access to a greater portion o f the population\. Increasing access to electricity i s an important component of poverty reduction and i s consistent with the Country Assistance Strategy o f Bangladesh\. The persistent shortage in electricity i s particularly affecting the rural population, which i s suffering a disproportionate share of the load shedding\. The CFL component will help mitigate this imbalance and contribute to poverty reduction and improve the quality o f life inthe rural areas\. 11  V\. Appraisalof ProjectActivities Economic and Financial Analysis of the SHSProgram 28\. The direct benefits accruing to households from the use o f SHS result from savings in kerosene consumption due to replacement o f kerosene lamps for lighting\. Prior to the deployment o f solar home systems, many households operated televisions on batteries which were typically o f low-quality and required frequent re-charging\. Switchingto SHS (of 40W and above) saves the households from this significant cost and inconvenience o f recharging batteries\. Among the costs o f owning an SHS, households make a down payment for the system (usually 10% o f the system price), pay the remaining amount in monthly installments, and bear the costs o f replacing the batteries and other accessories\. Taking these costs and benefits into account, the net benefits to households, calculated in terms o f financial rate o f return (FIRR) and economic rate o f return (EIRR), are summarized in the following table4\. The assumptions used in the calculations are summarized inAnnex 1\. Size of SHS FIRR EIRR WP) Without Carbon I With Carbon I Without Carbon I With Carbon Benefits Benefits Benefits Benefits 20 3\.1% 4\.0% -0\.6% 0\.4% 40 41\.1% 41\.9% 33\.0% 33\.7% 50 32\.8% 33\.7% 26\.9% 27\.8% 65 30\.4% 3 1\.2% 25\.1% 25\.9% 85 25\.5% 26\.5% 21\.4% 22\.4% 29\. The benefit o f using a 20 WP system derives mostly from replacement o f kerosene lamps, and does not add up to significant benefitto the consumers at the current prices o f kerosene\. These systems are used by poorer households, and continued subsidiesare needed to make these systems affordable\. The prices of bigger systems (85 WP) are proportionately higher than the medium range (40-50 WP), contributing to reduced rate o f returnfor the bigger systems\. 30\. Under the existing RERED project, more than 320,000 SHSs have been installed through the Participating Organizations (POs)\. O f the number o f systems installed so far, about half (45%) are o f 50 WP size, 20% o f 40 WP size, 20% are in the range o f 60- 6 5 W , and only 9% inthe 85 WP range\. Less than 2% o f the systems were in20-3OWP size\. The POs do their own due diligence on the affordability o f the households to pay for the systems\. The overall collection efficiency of the existing program i s 96%\. 31\. The economic and financial analysis took into account only the direct benefits of owning SHS\. There are other benefits of using SHS (improved quality of lighting contributing to improved productivity and better quality o f life, reduction in indoor 4 The FinancialRate of Return(FIRR) takes into account direct benefitsof usingthe system (cost savings from keroseneandbattery recharging)and directs costs of owningthe system\. The economicrate of return (EIRR)is calculatedbasedon the same benefitsandcosts butnet oftaxes and subsidies\. 12  pollution, longer study time for students, etc\.) that have not been quantified but nonethelessare makingpositive contributionto the lives of the rural households\. 32\. The SHS component o f the project is expected to receive carbon benefits\. Two EmissionReductions Purchase Agreements (ERPA) have been signedbetween C D M and (1) IDCOL, (2) Grameen Shakti\. C D M validation i s currently on-going\. The proposed additional financing will continue in the same way, allowing IDCOL to lower costs for consumers and enhance project returns\. Economic and Financial Analysis of the CFL Component 33\. The additional financing will fund the deployment o f 10 million CFLs in areas with the highest electricity demand\. Although the Government's goal is to replace all ILs nationwide with 30 million CFLs inthe long term, 10 million CFLs will be distributedin the first phase inhighpriority areas that have beenidentifiedthrough surveys carried out with the assistance o f GTZ\. The GTZ funded survey shows that o f the 12 million households having access to grid power each use 2 to 3 on an average, and on a weighted averagebasis 2\.3 incandescent lamps, of mostly 40W rating\. 34\. The cost of the proposed CFL deployment program will be the cost of procurement of the energy efficient and high quality CFLs and the cost o f distributing them to the households to replace inefficient incandescent lamps\. In addition, there will be costs associated with designing and implementingconsumer awareness programs and M&Eplans\.CFLs are more expensive thanILs\.However bulk procurement of CFLs will ensure the cheapest price\. The higher cost o f CFL i s offset by the fact that CFLs last about 5-6 times longer than incandescent lamps (10,000 hours compared to 1,000 hours typically) and consumes 80% less energy for the same light (lumens) output\. 35\. The Government intendsto distribute the first replacement CFL free (limit o f four per family) and therefore there will be no cost to the consumer other than the remaining value of incandescent lamp which they will bring to the office o f the electric utility\. The benefit to the consumer will be the reduction o f electricity consumption and hence the monthly electricity bill, which they accrue for the life o f the CFLs and also the avoidance of the replacement cost o f incandescent lamps which would have been there during this life o f the CFLs, had the consumer continued to use incandescent lamps\. 36\. Detail discussion on assumptions used to calculate the Economic and Financial rate o f return for this component is provided inAnnex 1; The summary result shows that 10 million CFLs will result in 312 G W y e a r in energy savings (at the bus bar) equivalent to US$ 11\.5 million per year\. Taking into the cost o f the program o f US$15 million, the FIRR and ERR of the program turns out to be 44% and 52% respectively\. Including the C D M benefits, the FIRR and EIRR o f the program will turn out to be 52% and 60% respectively\. 13  OperationalPolicy 8\.3 Compliance 37\. IDCOL performs a financial intermediary role, which requires them to comply with World Bank's OP 8\.30 eligibility criteria\. A full OP 8\.30 compliance review has been carried out and IDCOL was found to be in compliance\. Financial performance of IDCOL as found during the review i s provided below\. The detailed OP 8\.30 compliance review i s provided inAnnex 2\. (i) Capitalization:IDCOL has a soundcapital structure\. As ofJune 30,2008 its share capital i s BDT 400 million and its total equity i s BDT 548\.09 million, which i s approximately 41% and 56% respectively of the loans and advances outstanding\. (ii)Recovery Performance: The implementation of the IDCOL approach has proven to be sustainable without compromising the loan recovery rate\. The recovery rate is 96%, on average, at the PO-beneficiary level and 100% at the IDCOL-PO level\. (iii)Loan Loss Provisioning:IDCOL abides by the provisioning guidelines of the Bangladesh Central Bank\. This financial intermediary has beenprovisioning 1% for unclassified loans and 5% for the classified part of the portfolio\. (iv) Accounts Keeping: Accounting documents and financial statements of the Company have been audited by established audit firms over the last three fiscal/accounting years\. It appears that adequate numbers of disclosure have been made incompany annual reportsandthose were approvedby the auditors\. (v) Profitability: As per its audited financial statements, IDCOL has been earning profits, which are sufficient to support sustainability\. Fiduciary 38\. The financial management (FM) arrangements used inthe original project, which are satisfactory to IDA, will be used under the Additional Financing Credit with add-on arrangements corresponding to the expected changes in the financing arrangements in respect of SHSs and CFL distribution\. In implementing the CFL component, REB will use the PBSs, BPDB, DPDC, DESCO, etc\. by signing Participation Agreements with them\. IDCOL's Financial Management Organization and systems have been adequate to manage its operation and to undertake the project financial management\. The Financial Management organization of the REB is robust and its entity financial management systems are also acceptable, although the implementation of its computerized accounting system is moving slowly\. During implementation to date, IDCOL and REB financial management teams have acquired significant experience in IDA procedures and requirements\. A detailed Financial Management assessment of the implementing agencies under the project and a table showing amount of fund allocated to different disbursement categories is provided inAnnex 3\. 14  Procurement 39\. The only change in procurement arrangements i s in component 2 for the procurement o f about 10 million compact fluorescent lamps (CFLs) to replace incandescent lamps\. This component is estimated to cost about $15 million and REB will implementthis component\. It was decided by the Power Divisionthat all the CFLs will be procured through one or two procurement packages following International Competitive Bidding (ICB) procedures\. REB will procure the CFLs and will be responsible for the distribution, consumer awareness, M&E and other administrative activities related to ensuring distribution o f CFLs by other participating power distribution utilities (DESCO, DPDC, BPDB) and the use o f CFLs by end users\. Therefore, the project foresees some consulting and advisory services along with incremental operating costs\. REB will procure and distribute the CFLs to respective Power Distribution utilities\. REB will be supported by the Project National Steering Committee in both upstream and downstream activities of the CFL program and, in particular, the monitoring and evaluation activities required to claim carbon emission reduction benefits, the latter to be managed by IDCOL\. 40\. The procurement under the proposed additional financing would be carried out in accordance with the Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 revised October 2006 and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 revised October 2006, as well as the provisions stipulated in the Legal Agreement\. As mentioned in Annex 4, the project is considered a high risk operation from the procurement perspective\. This assessment was based on the prevailing conditions for public procurement in the country as well as the previous experience under this project\. A number of special measures are underway in the country, and as part o f the ongoing procurement reform, a second follow-on reform project under implementation i s expected to make the reform efforts sustainable\. Concurrently, a number o f measures including: a system o f handling complaints, disclosure o f information and the introduction o f a procurement risk mitigation plan (PRMP) with a set o f performance indicators will be specifically introduced during project implementation to minimize procurement risks\. Steps that have reduced project specific procurement risks are discussed in the "Governance and Anticorruption" Section below\. The detailed arrangements specific to this project are described inAnnex 4\. Technical 41\. ' The project uses well established renewable energy and energy efficient lighting technologies\. The solar home system component will continue to use internationally sourcedphotovoltaic panels and local batteries and electronics, all o f which are compliant with detailed specifications\. The additional financing for renewable energy mini-grids will explore all potential options, with proventechnologies tested elsewhere inthe world, with a specific focus on biomass gasification and biogas electrification\. Such plants are 15  currently under development and are well matched to the fuel resources found in rural Bangladesh\. 42\. The procurement o f CFLs under Component 2 will be guided by Efficient Lighting Initiative (ELI) set criteria\. Experience and lessons learned from deploying similar projects in other countries and supported by the Bank will, help finalize the bidding documents and CFL technical specifications\. The CFL will have specifications based on ELI as the benchmark, but adjusted for higher requirements required for Bangladesh (eg\., voltage tolerances, power factor, THD, etc), along with a 1 to 2 year warranty and branded with the Power Division logo on the body o f the CFL\. Power Division has formed a CFL Technical Specification Committee to ensure CFL specification complies with the technical requirementsfor Bangladesh\. 43\. Power Division will provide leadership and guidance to REB and other distribution utilities through the Project National Steering Committee\. They will coordinate the communication and awareness campaign activities at the National level to support effective replacement o f the ILs with CFLs\. The distribution utilities are considering a common mechanism for efficient deployment o f the lamps, where on selected days, consumers will bring specified number o f incandescent lamps in a predeterminedplace to exchange for the CFLs\. REB will use the project funds to procure the CFLs, finance the cost against communication and awareness campaign and meet the incremental operating cost to deploy the CFLs in exchange o f ILs\. REB i s preparing its Development Project Proposal based on the above project implementation design\. The Development Project Proposal will be finalized based on input received from all participating electricity distribution companies\. REB will share with IDA the draft final DevelopmentProject Proposal before submitting it to the Planning Commissionto ensure that it i s consistent with this Project Paper\. 44\. The technical risk of the SHS and other renewable energy program has been mitigated by the creation o f a technical advisory committee working incollaboration with the BangladeshUniversityof EngineeringTechnology and the Bangladesh Standards and Testing Institute\.' In the current phase, there have been some issues with the photovoltaic panels procured not meetingthe technical specifications\. In future, the task team may seek grant funding for additional testing capacity withinBangladesh\. GTZ has providedfimds to BangladeshStandards and Testing Instituteto procure an advancedCFL testing facility, which couldbe usedfor randomsample tests after the procurement, to ensure products indeedmeet the technicalcriteriaspecified under the procurement\. However, the REBprocurementunder the Component2 will include a standardprovisionfor third party independenttesting as per the technical specifications\. 16  Institutional 45, Infrastructure Development Company Ltd\. (IDCOL) has been successfully facilitating private sector participation in developing infrastructure projects in Bangladesh since its inception in 1997\. This i s a Government owned financial intermediary and governed by an independent Board o f Directors represented by representatives from the Government o f Bangladesh and the representatives from the Private Sector Stakeholders\. Being independent from the Civil Service Regulations, IDCOL had been able to offer market based incentive package to its staff and attract qualified professionals from the market\. This has helpedIDCOL to work at similar level o f efficiency compared to the private sector Financial Intermediaries\. To meet short term special needs to carry out a feasibility study or to supervise construction o f projects, IDCOL had appointed qualified consultants to manage the process\. 46\. Rural Electrification Board started its operation in 1977 with the mandate to electrify rural Bangladesh\. According to its enabling Ordinance, REB is to act as the Financier, Quasi Regulator, and Technical Assistance Provider o f the PBSs\. The Rural Electrification (RE) program was created based on the Rural Electric Cooperative Model o f USA and the first phase included development o f 13 PBSs\. For many years REB performed as a successful rural electrification model, arguably one o f the most effective models in the developing world\. However, over the years the Bangladesh electricity sector has gone through several changes presenting numerous challenges for the RE program\. The total number o f PBSs increased to 70; total number o f rural consumers increased,from several thousands to more than 7\.5 million; rural customers now account for the highest share o f electricity (about 40% o f total electricity consumption); etc\. Furthermore, with the creation o f Bangladesh Energy Regulatory Commission (BERC), some overlaps have been created between REB's role vis-a-vis the PBSs and BERC's role as a whole\. 47\. Given the above development in the REB and PBS system, REB has found it challenging to maintain its once high level o f operational and managerial performance\. With the increasing demand o f rural electrification, there had been instances where selection o f new lines had not fully followed REB's practice o f economic and area coverage principles\. This has shaken the consumer confidence on REB management\. The situation was further aggravated as rural consumers suffered more from load shedding to provide better electricity supply to the urban consumers despite rural consumers' better track record o f paying bills on time compared to the urban consumers\. The relationship betweenthe PBS management and the consumers worsened so much that the consumers carried out processions protestingagainst PBS management and physically attacked some PBS offices\. To resolve the issue, the government agreed to take actions to improve electricity services quality inrural areas and equitably load shed between urbanand rural consumers\. The CFL component included in the Additional Financing proposal is expected to assist in this regard by reducing electricity demand overall and therefore making more electricity available for the rural areas\. The Government has also recognized the need to improve REB's overall governance and effectiveness, and i s carrying out a study to assess the effectiveness o f REB's current organizational and 17  management structure\. Recommendations of this study will help the government to take corrective measures to restore effectiveness o f REB\. IDA is supporting GOB to finalize this study and would support inimplementingthe recommendations\. 48\. Power Division o f the Ministry o f Power Energy and Mineral Resources will play a pivotal role in guiding REB to implement the CFL component o f the project\. The Power Division will be supported by a Project Support Unit funded from an existing GTZ grant facility and will ensure overall coordination among different stakeholders taking part in implementing this component\. Safeguards 49\. The safeguard category of the project is B since there are no significant and/or irreversible adverse environmental and social issues in sub-projects financed under the project\. The major concerns under the Additional Financing Credit are improper discharge o f lead sulphate into the local environment and occupation health and safety issues during recycling o f used SHS batteries\. IDCOL will promote the adoption o f I S 0 14001-2004 (Environmental Management Standard) and OHSAS 18001:1999 (Occupational Health and Safety Management Systems) by battery manufacturers and will make it mandatory to have these certifications withintwo years o f implementationo f the Additional Financing Credit\. During implementation of the original RERED project, IDCOL developed a policy guideline for "Disposal o f Warranty Expired Batteries" and to ensure its effectiveness developed standard agreements to be entered into between Battery Manufacturers and POs to buy back warranty-expired batteries as per the guideline\. Similarly, the project will now facilitate developing a national guideline for collection and recycling o f used CFLs using good practices in the developed and other regional countries\. REB has updated its Environment Management Framework (EMF) o f the project by incorporating the above changes\. GovernanceandAnti-corruption 50\. Bangladesh has a challenging environment with regard to governance and anti- corruption issues\. There is significant risk o f corruption, particularly where large scale procurement is involved\. However, government has put efforts to improve procurement framework to better mitigate the retlatedrisks\. 5 1\. The parent RERED project has two implementingagencies - REB and IDCOL\. REB operates underthe civil service rules and IDCOL operates underthe Companies Act governed by an independentBoard o f Directors\. Duringthe implementation period o f the RERED project, there had been several newspaper articles indicating political interferences in REB's decision making process\. The news media questioned procurement award decisions made by REB management under GOB funded projects\. Given this news media perception, the RERED Task Team maintained very close supervision o f the RERED project\. Almost all procurement packages o f REB under the RERED project were prior reviewed by the Procurement Specialist o f the Task Team\. REB had to obtain no objection from IDA on its final bidding documents and bid 18  evaluation reports\. This reduced the risk o f political or other interference under the Bank financed procurement o f REB under the REREDproject\. 52\. Implementation o f the renewable energy component by IDCOL followed a financial intermediary model, where the consumers borrowed funds from POs and followed commercial practices to purchase their SHS and IDCOL refinanced POs 80% o f the their loans to households\. To ensure that POs are claiming refinancing for actual installation of SHS, IDCOL initially inspected 100% o f SHS installations physically before making any disbursements\. When IDCOL found any discrepancy between the claimed SHS and actual verification, which could be difference in size o f the SHS, model number o f the PV panel, etc\. IDCOL disallowed those claims and asked the POs to explain the reasons behindthe discrepancy\. To ensure a proper database o f all the SHS installed with name o f the households and their address, IDCOL developed a software database and required all POs to maintainthat database\. This helped IDCOL to monitor the program and ensure that no system has claimed refinancing or the subsidy twice\. As the program expanded, (POs are installing about 12,000 SHS per month) IDCOL reduced its physical inspectionratio to about 50%-60%\. However, IDCOL carried technical audit o f SHS performance based on random sampling of consumers from the database it maintains\. These stringent procedures have helped IDCOL to mitigate governance and corruption risks under the project\. IDCOL Board has now decided that this technical audit will now be carried out annually through an independentfirm\. 53\. Under the Additional Financing Credit IDCOL will continue to implement its renewable energy project under the same principles established in the parent project\. This implementation model has already been tested, under which about 320,000 SHS have been installed, and other development partners (ADB, IDB, GTZ, KfW, etc\.) have also reviewed this model independently and agreed to finance IDCOL under the same approach\. This provides good evidence that this model i s robust enough to protect the project from governance related issues and corruption risks\. 54\. The CFL component is new to the project and would require REB to procure CFLs following IDA Procurement Guidelines\. At most there could be two procurement packages\. IDA would require the implementing agency to follow ELI (Efficient Lighting Initiative) benchmarks as the minimum basis, particularly in terms o f quality parameters o f technical specifications, to procure these lamps and the Bid Document and the Bid Evaluation Report will be prior reviewed by IDA to mitigate governance and corruption risks\. 55\. The REB system loss reduction component financed by the Additional Financing Credit has limited exposure to governance and anti-corruption issues as all the procurement has already been carried out following IDA procurement guidelines and contracts have been awarded\. The Task Team will however ensure through its close supervision o f the project that the goods procured are actually used to renovate the lines taken over from BPDB and the system losses o f those lines comes down to less than 20% after the renovation i s complete\. 19  VI\. Expected Outcomes 56\. This project is expected to meet the development objective o f raising social development and economic growth by expanding access to electricity inrural areas\. Both the SHS and mini-grid components will expand access to electricity to rural households and businesses\. The success o f this program i s easily measuredby the number o f systems installed, which i s recorded by the POs\. The success o f the CFL program can also be measured by the number o f light bulbs replaced, against the target o f 10 million, and the subsequentreduction inoverall electricity demand\. This reduction indemand will reduce load shedding, which has hurt electricity availability in rural areas\. Detailed outcome indicators are provided inAnnex 5\. VII\. Benefits and Risks 57\. Rural electrification i s a critical infrastructure element needed for improvements in economic development, provision of social services, and enhancement of quality o f life\. Already the original RERED project has brought grid electricity to about 600,000 consumers and off-grid lighting to about 320,000 households, businesses and community centers\. While the magnitude o f these benefits i s expected to increase with the additional financing, there are some risks to consider as the program expands\. 58\. The greatest threats to the sustainability o fthe project are: 0 Market saturation: There may be a finite populationthat i s able to afford the SHSs under the current financing schemes\. 0 Maintenance and reliability: As more and more installed SHSs enter the battery replacement phase, and other parts begin to show wear, it is important to keep up with maintenance to retain consumer confidence inthe technology\. Component quality and cost: Price fluctuations or technical failures o f procured system parts could impact consumers' perceptions o f PV and its relative affordability and reliability\. 59\. Prior to the current REREDproject, a market report for Bangladesh estimated the SHS market at 500,000 households\. However, over this period the SHS market has developed and several entry barriers have been removed\. Now that IDCOL i s targeting 1,000,000 households, there is a risk that the market will saturate before reaching that goal\. The greatest scale-up constraint appears to be with affordability so POs will need to be creative about how to size and finance the systems to makethem affordable to poorer households\. There have already been some efforts inthis direction and POs have started to target households demanding smaller systems\. It i s up to the POs to make sure their product lines reflect consumer demand\. In addition, IDCOL plans to conduct a new market survey to help direct the project expansion\. 20  60\. Most of the growth in SHS installations in Bangladesh has occurred very rapidly and as the program matures there is likely to be a greater number of battery and component failures\. There is a risk that with further scale-up the technical problems will become more prominent and reduce customers' favorable impression of solar\. Steps have already been taken to mitigate this risk in the creation of a Technical Standards Committee (TSC)\. Through this project, IDCOL will be able to strengthen the TSC, its activities and its monitoring role\. VIII\. Financial Terms and Conditionsfor the Additional Financing \. \. 61\. The Additional Financing Credit would be an IDA Credit repayable in 40 years, including a grace period of 10 years\. GOB will then transfer the IDA credit to IDCOL and REB under the following terms\. a\. SHS and Renewable Energy Component: GOB will lend the proceeds to IDCOL under a subsidiary loan agreement at an interest rate of (3%) and a repayment period of (20) years including a (5) years grace period\. The foreign exchangerisk to be borneby the Recipient\. b\. CFL Component: GOB will transfer the proceeds to REB as a grant\. c\. Grid Electrification Component: GOB will lend the proceeds to REB under a subsidiary loan agreement with a repayment period of 25 years after an 8-year grace period, an interest rate of three-fourths of one percent (3/4 of 1%) per annumduring the grace period, capitalized; an interest rate oftwo percent (2%) per annumthereafter, and the foreign exchange risk to be borne by the Recipient\. 21  Annex 1 Bangladesh:RuralElectrificationand RenewableEnergy DevelopmentProject Requestfor Additional FinancingCredit (US130 millionequivalent) Financialand EconomicAnalysis The SHS Component Financial and Economic Analysis The Solar Home Systems (SHSs) range from 20 WP to 120 WP and are used by households for lighting, watching TV, and running small appliances like cell phone chargers\. The direct benefits accruing to households from the use o f SHS result from savings in the purchase o f kerosene due to replacement o f kerosene lamps\. Prior to the deployment o f SHSs, many households ran TVs on batteries which were typically of low- quality and required frequent re-charging\. Switchingto SHS (of 40 WP and above) saves the households from this significant cost and inconvenience of recharging batteries\. Among the costs o f owning an SHS, household makes down payment for the system (usually 10% o f the system price), pays the remaining amount in monthly installments, and carries out the replacement o f system batteries and other accessories (charge controllers and lamps) at the end o f their useful lives\. Under the existing RERED project, more than 320,000 SHSs were installed through the Participating Organizations (POs)\. O f the number o f systems installed so far, about half (45%) are o f 50 WP size, 20% o f 40 WP size, 20% are inthe range o f 60-65WP, and only 9% in the 85 WP range\. Less than 2% o f the systems were in 20-30WP size\. These small systems cannot run TVs and hence are not popular with rural households\. The price o f the most popular 50 WP system i s currently Tk 27,900 (about US$400) and the minimum 10% down payment turns out to be $40 for a 50WP system\. The POs have reported that\.the average monthly income o f households buying 30WP or above ranges from Tk 6,000-10,000 (US$90-150)\. The POs do their own due diligence on the affordability of the households to pay for the systems\. The overall collection efficiency of the existing program is 98%\. Taking the costs and benefits over the life o f an SHS (20 years), the net benefits o f the additional systems to be installed under the proposedadditional financing program were calculated interms o f financial rate of return (FIRR) and economic rate o f return(EIRR)\. The FIRR takes into account direct benefits of using the system (cost savings from kerosene and battery recharging) and direct costs o f owning the system (including the replacement cost o f batteries and other accessories)\. The EIRR i s calculated based on the same benefits and costs but net of taxes and subsidies\. As the existing project i s going through the process o f getting carbon benefits (the necessary CDMvalidation i s currently on-going), the analysis also looked at the financial/economic returns with and without carbon benefits\. 22  Results Summary As the following table shows, the net benefits calculated in terms o f FIRR and EIRR o f systems above 20 WP size are high\. The benefit o f using a 20 WP system derives mostly from replacement o f kerosene lamps, and does not add up to significant benefit to the consumers at the current prices o f kerosene (the economic return i s actually negative)\. The smaller systems are used by poorer households, and continued subsidies are needed to make these systems affordable\. The prices of bigger systems (85WP) are proportionately higher than the medium range (40-50 WP), contributing to reduced rate o f return for the bigger systems\. The project i s viable without the carbon benefits, while the carbon claims bring slightly higher benefits to households\. Assuming that the additional 300,000 SHSs under the proposed additional financing follows roughly the same distribution o f WP sizes as o f the existing project (2% o f 20 WP size, 21% o f 40 WP, 45% o f 50WP, 23% of 65WP, and 9% o f 85WP), the weighted average FIRR and EIRR o f the total program would be about 33% and 27% respectively (without carbon benefits)\. Adding the carbon benefits, the FIRR and EIRR o f the additional SHSs would be about 34% and 28% respectively\. SensitivityAnalysis The financial and economic benefits from using the higher size SHS (above 20WP) are robust\. The weighted average returns o f the program will still be above 15% even if prices o f kerosene dropped by half from the current level\. Ifall the additional SHSs were o f small sizes (50% o f 20WP and 50% o f 40WP), the weighted average FIRR and EIRR will be 22% and 16% respectively without carbon benefits\. If the savings from the avoided costs o f battery recharging were to reduce to half from the current level, the returns will still be above 15% for systems above 20WP\. Assumptions Used in the Analysis The following are the key assumptions used for quantifying the benefits and costs of owning SHS: The solar panels are assumedto have a life spano f 20 years andthe systemprices range from Tk 13,000 (US$190) to Tk 41,900 (US$612), dependingon the size o f the system\. 23  Battery costs are assumed to range from Tk 3,200 to Tk 11,400 depending on the size of the SHS and are assumed to be replaced by the household at its own cost after the end of its estimateduseful life o f 5 years\. The associated accessories, charge controllers and lamps, are estimated to have a life- span o f 3 years after which the household replaces them at its own cost\. Prices o f charge controllers are assumedto be Tk 600 each, and lamps at Tk 350 each\. Household pays 10% o fthe system price as down payment and the rest i s borrowed at 12% interest rate to be repaid in equal monthly installments in3 years\. 0 The battery recharging cost savings are assumedto be Tk 240 per month\. This cost is based on the price charged by a battery recharging station (Tk 1 per Amp) and the costs o f transportation to and from the recharging station\. The avoided cost of battery replacement (Tk 5,650 each) after 2 years of useful life was also added as a benefit to the household\. These cost savings were assumed for SHS o f 40 WP and above only\. Price o f Kerosene was assumed to be Tk 44/liter (equivalent to about US$ 2\.8/ US gallon)\. This i s the current selling price o f kerosene at the retail level\. The following kerosene consumption pattern for different systems is assumed\. The figures are taken from a sample survey o f 441 households done by Grameen Shakti in early 2009 as part of establishing a baseline for claiming carbon benefits\. The sample had only one 20 WP system with a consumption of 3\.94 literdmonth\. To be conservative, an amount o f 3\.5 literdmonth o f kerosene consumption savings was assumed for a 20 WP system\. I Table: SummaryResultsof Survey of Grameen Shakti(2009) Size of SHS I Kerosene Consumption per I Average # of I Average # of 1 (WP) Household per Month (Liters) Kupis used by Hurricanes used Household by Household 50 6\.15 2 2 65 8\.63 2 3 85 10\.94 3 4 0 The Grameen Shakti survey also established the average number of lamps (hurricanes) and small lamps (kupis) used by households (as shown in the table above)\. The price o f each hurricane was assumed to be Tk 120 and kupi Tk 20 each with estimated useful life of one year\. By owning an SHS, the household saves on thereplacement cost o fthese lamps\. 0 Emission factor for kerosene was assumed to be 2\.41 tCo2e/kl and the price for carbon benefit was assumed to be 10US$/tCo2e\. 0 For the purpose of calculating the economic rate o f return (ERR), all prices were assumed net o f tax and subsidy\. Tax rates assumed were: i)5\.5% for solar panels; ii) 25% for batteries; iii)8% for charge controllers; and iv) 12% for lamps\. Total tax on kerosene price was assumed to be Tk 12 per liter\. Subsidy in each system was estimated at Euro 30\. 24  A price contingency of 10% was included inthe financial return calculations\. Exchange rate was assumedto be Tk 68\.4/US$ and US$1\.32/Euro\. The EnergyEfficiency-CFL Component Financial and Economic Analysis The additional financing will fund the deployment of 10 million CFLs in areas with the highest electricity demand\. Although the Government's goal is to replace all incandescent lights (ILs) nationwide with 30 million CFLs in the long term, 10 million CFLs will be distributedinthe first phase inhigh priority areas that have been identified through surveys carried out with the assistance o f GTZ\. The GTZ funded survey shows that o f the 12 million households having access to grid power each use 2 to 3 on an average, and on a weighted average basis 2\.3 incandescent lamps, o f mostly 40W rating\. The cost ofthe proposed CFL deployment program will be the cost of procurement ofthe energy efficient and highqua1,ity CFLs and the cost of distributing them to the households to replace inefficient incandescent lamps\. Inaddition, there will be costs associated with designing and implementing consumer awareness programs and M&E plans\. CFLs are more expensive than ILs\. However bulk procurement o f CFLs will ensure the cheapest price\. The higher cost o f CFL i s offset by the fact that CFLs last about 5-6 times longer than incandescent lamps (10,000 hours compared to 1000hours typically) and consumes 80% less energy for the same light (lumens) output\. The Government intends to distribute the first replacement CFL free (limit o f four per family) and therefore there will be no cost to the consumer other than the remaining value o f incandescent lamp which they will bring to the office o f the electric utility\. The benefit to the consumer will be the reduction of electricity consumption and hence the monthly electricity bill, which they accrue for the life o f the CFLs and also the avoidance o f the replacement cost o f incandescent lamps which would have been there during this life o f the CFLs, had the consumer continued to use incandescent lamps\. The cost o f this Component to the Government will be the cost o f CFLs itself, CFL distribution costs (including transportation costs associated with taking CFLs from the head offices to zonal offices/distribution centers), cost o f implementing consumer awareness programs, and monitoring and evaluation plans\. The benefits o f the program for the Government will be the avoided cost o f installingpower generation capacity equal to the electricity saved by the CFLs compared to incandescent lamps and the O&M cost of runningthese electricity generation plants\. Inaddition, a further benefit of the introduction of CFLs is the reduction inGreenHouse Gas (GHG) reductions due to the reduced need for energy from the supply side that i s power stations\. These GHG emissions reductions can be claimed by the Government under the CDM, with the assistance of the World Bank\. The sale o f certified emissions 25  reduction (CERs) through CDM, in the global carbon market will bring additional revenues to the Government\. The following table summarizes some of the assumptions of the financial and economic analysis of the CFL component\. Wattage (average) of CFL (as a replacementof 60W incandescentlamp): 15 W Usage of lamps per day: 4 hours CFL Lifetime (as definedby ELIspecifications): 6,000 hours ProgramLeakageFactor (Losses due breakage, etc\.): 5% Cost of High Quality CFL (assuminghigh PF CFL): $1\.10 ProgramImplementationCost (Distribution, M&E) $1,500,000 Overall Consumer Awareness Program: $1,000,000 Recycling/destructionof I L s $500,000 Overall ProgramContingencies, Other Costs: $1,000,000 GHG EmissionsFactor: 700 kg/MWh Avoided GenerationCosts (IPP): 4\.5cKWh Priceof CERs inthe Carbon Market: $1O/tC02e Exchangerate Tk 68\.4/US$ Priceescalation: None The analysis here takes into the energy savings due to replacement o f ILs with CFLs\. This energy savings is quantified usingthe Bulk Supply tariff (for financial analysis) and inavoided generation costs (for economic analysis)\. The lifetime savings ofenergy from using CFL is the only benefit considered for the purpose o f this analysis\. The analysis does not take into account the avoided T&D losses, replacement costs o f ILs, consumer outage costs, and other positive cross-effects o f CFLs\. There will be increase in reliability o fthe supply inthe system due to the availability o f freed up capacity resulting inlower numberofpower cuts (load shedding) particular inrural areasresultingin avoidance and/or reduction o f consumer outage costs\. The cross-effects o f CFLs such as reductionin cooling (air conditioning) loads insidethe households due to lowered cooling needs because less heat (waste energy) will be dissipated by cooler CFLs compared to inefficient incandescent lamps\. Results Summary It is estimated that 10million CFLswill result in312G W y e a r inenergy savings (at the busbar) equivalent to US$ 11\.5 millionperyear\. Taking into the cost o fthe program of U S $ l 5 million, the FIRR and EIRR o f the program turns out to be 44% and 52% respectively\. Including the CDM benefits, the FIRR and EIRR of the program will turn out to be 52% and 60% respectively\. 26  Annex 2 Bangladesh: RuralElectrificationand RenewableEnergyDevelopmentProject (REREDP) Request for Additional FinancingCredit (US$130 millionequivalent) OperationsPolicy 8\.30 ComplianceReview I\. Introduction This is a review of the proposed additional financing Credit for Bangladesh: Rural Electrification and Renewable Energy Development Project (REREDP), to ascertain its compliance with World Bank OP 8\.30 requirements\. This review i s based on background documents, a detailed discussion with the Task Team Leader and team members, and review of documents submitted by Infrastructure Development Company Limited (IDCOL), the financial intermediary (FI) for the project\. 11\. The Project:FinancialSector Context and Objectives 1\. The original REREDP, scheduled to close in December 31, 2009, has been under implementation with the objective o f spreading affordable lighting in rural areas o f Bangladesh through installation o f Solar Home Systems (SHSs) and providing reliable electricity generated from other renewable energy sources\. This off-grid electricity component o f REREDP i s being implemented by IDCOL, which on-lends to selected partner organizations (POs) across the country\. The additional financing o f REREDP aims at scaling up the off-grid renewable energy component (US$98 million) keepingthe project objectives the same while introducing one new component: an energy efficient component for Compact Fluorescent Lamps (CFLs) as part o f demand side management to help alleviate energy shortages inthe country (US$15 million)\. 2\. Access to electricity improves the quality o f livelihood in rural areas and empowers the poor, as stated in the second pillar of CAS\. On the other hand, financing real sector investment in affordable power in environmentally friendly manner and promoting development o f participating FIs are real benefits derived from a financial intermediary loan (FIL), which i s consistent with the first pillar o f CAS\. As such, the Additional Financing Credit for the FIL i s very much consistent with the country's poverty reduction objectives\. 111\. PolicyFrameworkfor the FIL 1\. There i s no issue with respect to the macroeconomic environment or the interest rate regime\. Bangladesh has a record o f consistent and successful macroeconomic management resulting in a steady growth pattern, relatively moderate inflation, and a stable and market-based exchange rate\. 2\. Despite the ongoing global financial meltdown and the resultant macroeconomic imbalance in a number o f developed as well as developing economies, Bangladesh has, 21  so far, remained one of the least affected countries\. Relatively low integration with global financial markets i s probably one reason for this\. However, the country's economy is well integrated with the global markets through the export o f readymade garments and through remittances sent back by the expatriate workers\. There i s some indication that Bangladesh could be affected by the global recession in these two sectors in three to six months time\. The Government o fthe country i s preparingitself for such a shock, as much as possible, and a Government Task Force i s actively working on possible measures that , need to be taken\. It is expected, that with positive steps, the shocks will be absorbed and be managed to a reasonable degree\. 3\. One important aspect of\.the compliance review i s the likelihood o f Government intervention in the market through the project, which might distort the financial intermediation process in the country\. As in the ongoing REREDP, the implementation approach would remain the same for the Additional Financing Credit: i\.e\. IDCOL would provide financing to the POs (NGOs, micro-finance institutions, cooperatives, and private organizations) to sell the SHSs to consumers using a micro finance scheme\. The POs have greater access as well as acceptability at the community level\. The hands on expertise and experience in implementing micro-finance operations would also be a criterion\. The POs would extend micro-finance for consumers to buy the systems and would, in turn, get re-financing from IDCOL for up to 80% o f the micro-finance extended to consumers\. The POs operation would be at the market determined interest rate, as in other microfinance services they provide\. Currently the Posy interest rate varies between 12% -15% (nominal rate) with a repayment period o f 2-3 years\. The POs receive re-financing from IDCOL at 6% interest rate, with a 10-year repayment period, including a grace period o f 2 years\. The cost o f funds for the POs under the RERED project i s comparable with their other sources o f financing - such as PKSF (Pally Karma Shahayak Foundation), the apex institution financing micro-finance organizations in Bangladesh\. Thus, there would be no significant market distortions arising from implementation of the Additional Financing operation for REREDproject\. 4\. There is, however, some subsidy component in the lending process o f SHS to poor households\. A small subsidy o f US$50 per SHS per household (initially, it was US$90) on the selling price i s provided to buy down the capital cost o f SHS\. Grant funding i s also provided to overcome the initial market barrier by increasing awareness among the poor households, building up capacity o f the POs, and training households on how to operate the systems\. It is expected that the need for a subsidy would continue to decrease as the remaining market barriers are overcome, competition i s enhanced in the market, and the SHSs become affordable enough to reach even more remote areas and poorer households\. 28  IV\. Eligibilityof the FI 1\. ImplementationProgress As per the background documents, implementation progress of the renewable energy component implemented by IDCOL has been highly satisfactory\. Against an initial project target of 50,000 households, over 320,000 households have now been provided with SHS-based electricity access over the 6-year project implementation period\. Currently, 12,000 households are getting SHS installed per month\. The pace of growth suggests that there is demand for SHS at the household level and IDCOL can utilize the additional resourcesneededto satisfy the market demand\. 2\. FinancialPerformanceof IDCOL (vi)Capitalization: In terms of capitalization, IDCOL has a sound capital structure\. As of June 30, 2008 its share capital was BDT 400 million and total equity was BDT 548\.09 million, which is approximately 41% and 56% respectively of the loans and advances outstanding\. provenRecovery (vii) Performance:The implementationofthe IDCOL approachhas to be sustainable without compromising the loan recovery rate\. The recovery rate is 98%, on average, at PO-beneficiary level and 100% at IDCOL- PO level\. (viii) LoanLoss Provisioning:IDCOL abidesby the provisioning guidelines of BangladeshBank, the country's central bank\. The financial intermediary has been provisioning 1% for unclassified loans and 5% for the classified part of the portfolio\. (ix) Accounts Keeping: Accounting documents and financial statements o f the Company have been audited by established audit firms over the last three fiscal/accounting years\. It appears that adequate numbers of disclosure have been made incompany annualreports andthese were approvedby the auditors\. (x) Profitability: As per audited financial statements, IDCOL has been earning profits, which are enoughto support sustainability\. 3\. Exemptions As per Bangladesh Bank Circular, IDCOL i s exempted from compliance of sections 4(d), 6,9,14(1),14(1)(d),14(l)(e),14(l)(f), 16, 17, 18, 19, and 25(3) of the Financial Institutions Act 1993\. These exemptions provide Government guarantees and enhance IDCOL's capacity to sustain itself as a viable, non- banking, financial institution inBangladesh\. 29  4\. Under the original REREDP, IDCOL received OP 8\.30 clearance during project appraisal\. V\. Recommendations Considering the above points and based on other available information, it can be concluded that IDCOL, the financial intermediary, i s compliant to OP 8\.30 requirements\. However, it is recommended that adequate care and due diligence be carried out as regards the following aspects: (a) In order to be compliant with CAS pillars and outcomes, REREDP would remain focused on poor households' demand satisfaction and sufficient emphasis would be given to the newly-introduced component of demand side management to have a greater development impact\. (b) The project would definitely needto examine closely the impact of the global financial crisis on IDCOL, on the POs, on the rural households dependent on remittances, and on the project's financial management as awhole\. (c) The standards and criteria used for selecting POs by IDCOL should be maintained and, ifnecessary, may needto be revised to improve the quality of implementation\. (d) It is understoodthat the amount of subsidy component i s small and is required for increasing awareness among poor households in the rural areas\. IDCOL should take care in regard to the use of the subsidy component to ensure that benefits actually meet project criteria\. (e) For these kinds of projects, success in project management as well as in financial performance of the FIsPOs depends on close monitoring by the implementing agency\. Therefore, as the additional financing component gets going, a more rigorous monitoring system (through frequent field visits) put in place would only help inmaintaining the high standards set earlier\. 30  Annex 3 Bangladesh:RuralElectrificationand RenewableEnergy DevelopmentProject (REREDP) Requestfor Additional FinancingCredit (US%130million equivalent) FinancialManagementAssessment Review Financial Management 1\. Brief Project Description: The proposed additional financing would help finance the costs associatedwith: (i)scaleuptheproject's renewableenergycomponentsthrough US$ 94 million the installation of Solar Home Systems (SHSs) and Technical Assistance (ii)scaleuppilotprojectsforgeneratingelectricityfromfuels US$ 6 million likebiogas, biomass, solar thermal, and Technical Assistance, etc\. (iii)introduce energy efficient Compact Fluorescent Lamps U S $ 15 million (CFLs) as part of demand side management (iv)rehabilitate additional electricity distribution networks in US$15 million rural areas as part o f the System Loss Reduction'component o f the project The project under additional financing will be implemented by the two agencies -- Infrastructure Development Company Limited (IDCOL) a Financial Intermediary fully owned by the Government and Rural Electrification Board (REB) an autonomous body under the Power Division o fthe Ministry of Power Energy and Mineral Resources\. These agencies have been implementing the original project\. The first two parts will be managed and implementedby IDCOL, using eligible Participating Organizations (POs) and Project Sponsors\. The third and the fourth components will be managed and implemented by REB\. In implementing the third component - installation of CFLs in exchange o f incandescent lamps, REB will use the rural electric cooperatives known as Pally Bidyut Samities (PBSs), Bangladesh Power Development Board (BPDB), Dhaka Power Distribution Company (DPDC), Dhaka Electric Supply Company (DESCO), etc\. by signing participation Agreementswith them\. 2\. F M capacities : The financial management (FM) arrangements used in the original project, which are satisfactory to IDA, will be used under the additional Financing with add on arrangement corresponding to the expected changes in the financing arrangements in respect of SHS and distribution o f 10 million CFLs, in exchange o f incandescent lamps, to the electricity consumers\. IDCOL's Financial Management organization and systems have been adequate to manage its operationand to undertake the project financial management activities\. Financial Management  Organizations o f the REB i s a robust one and its entity financial management systems are also acceptable, although the implementation o f its computerized accounting system i s going a bit slow\. Both the agencies have been using their entity FM systems for financial management o f the project\. During implementation to date, RERED implementing agencies i\.e\., IDCOL and REB financial management team have acquired significant experience inIDA procedures and requirements\. 3\. Disbursements and Flow o f Funds: The additional financing will use transaction based disbursement currently used under the original project\. IDA funds will continue to be channeled through the existing special accounts (CONTASA) operated by IDCOL and REB under the original Credit\. For the new energy efficiency component, a separate Designated Account (CONTASA) has to be opened as this fund will be transferred to REB as grant\. Authorized Allocation for REB's special account is Tk 670 million which will remain unchanged, the Authorized Allocation for the new Designated Account o f REB could be Tk 100 million\. IDCOL requested to increase its Authorized Allocation from Tk 100 million to Tk 250 million given increase inpace o f implementation of their project\. Additional financing o f $100 million will be accessible to IDCOL through a Subsidiary Loan Agreement with MOF in order to refinance loans to be made to households for purchase o f SHS and to refinance loans for installing small generating plants from biogas and biomass\. Funds will flow from IDCOL to Participating Organizations (POs) and Project Sponsors through sub-loans under Sub-loanAgreements betweenIDCOL and the POs and Sponsors\. IDA will finance 100%inclusive of taxes in sub-loans and goods and services associated with management o f sub-loans\. The requested additional financing o f US$ 15 million for REB Grid component will flow to REB to meet the anticipated financing gap on the contracts already awarded\. This is the only activity under AF inwhich Governmentcounterpart funding i s involved infinancing taxes and duties\. For this activity, IDA will finance 100% o f works, goods and services net o ftaxes\. 4\. Disbursement on CFL: The disbursement under AF will continue under the same disbursement categories except for the new financing to compact fluorescent lamps (CFL)\. A new disbursement category will be opened to track disbursements on Goods, Services and Incremental Operating Costs ( to be defined inthe Financing Agreement) up to $15 million for procurement and installation o f about 10 million compact fluorescent lamps (CFL) in exchange o f incandescent lamps to households in the urban and rural habitats across the country\. REB will procure the CFLs and will distribute these through PBSs and the electricity distribution companies\. To avail the economy o f scale, the procurement will be done through two packages with IDA'Sprior review and funds will be disbursed through Special Commitment\. A new Designated Account will be used to fund services and incremental operating costs for this component\. IDA will finance 100%inclusive o f taxes and duties\. To meet the fiduciary assurance that the fund is used for the intended purpose, the actual distribution o f CFLs to the targeted consumers will be carried out according to the implementation arrangement outlined in the CFL project Development Project Proposal, satisfactory to IDA and approved by GOB\. Adequate and accredited documentation will be provided to authenticate implementation progress that would be reported through Project Physical Progress Report\. 32  5\. Disbursement Category: IDA financing under the credit through the various disbursement categories would be as follows\. Table 3\.1: DisbursementTable Category US$Million Yo of IDA Financing (1)Works REBGrid 1S O 100% exclusive of taxes (2) Goods (a) REB Grid 12\.00 100% exclusive of taxes (b) IDCOL 0\.20 100% inclusive of taxes (3) Services (a) REB Grid 1S O 100% exclusive of taxes (b) IDCOL 2\.00 100% inclusive of taxes (4) Goods, Services and IncrementalOperating 15\.00 100% inclusive Costs For REB CFL of taxes (5) Sub-loans IDCOL ,97\.80 100% inclusive of taxes Total Amount 130\.00 6\. Accounting: Since, IDCOL as a financial intermediary, will be borrowing from the Government, IDA funds on additional financing of SHSs, IDCOL's records and financial statements should reflect the amounts payable to the Government and receivable from the POs\. In ensuring accounting and financial control o f transactions under additional financing IDCOL agreed to enhance their current accounting system in consultation with IDA\. Any inadequacy in the accounting and reporting systems in IDCOL and non-availability o f reliable, timely and periodic information from the POs to monitor performance may increase the risk o f inefficient use or diversion o f funds\. IDCOL agreed that its evaluation o f POs will encompass an assessment o f their FM capacities as well\. IDCOL shall also strengthen its field monitoring o f loan recoveries at various unit offices o f the POs and their accounting controls\. IDCOL has agreed to maintain adequate FM systems in IDCOL and in the POs and this will be ensured through insertion of appropriateprovisions (stated below) in the Operating Guidelines of theproject and Participation Agreement signed between IDCOL and the POs: "POs shall: (i) maintain a financial management system including records and accounts, and prepare, all in accordance with accounting standards acceptable to the 33  Association, consistently applied, adequate to reflect distinctly the operations, resources and expenditures related to subloans granted under the Project\. have their records, accounts and financial statements (balance sheets, statements o f income and expenses and related statements distinctly identifying ) for each fiscal year audited, in accordance with auditing standards acceptable to the Association, consistently applied, by independent auditors listed under the List o f Auditors Grade-A o f Bangladesh Bank ; promptly furnish at the request o f the Association, as soon as available, but in any case not later than six months after the end o f each such year, (A) certified copies of the financial statements referred to in clause (i)f o this Section, for such year as so audited, and (B) an opinion on such statements and report o f such audit, by said auditors, o f such scope and in such detail as the Association shall have reasonably requested including a management letter indicating auditor's findings on state o f governance ,internal controls and management practices involved in POs' operations and measures recommendedby auditors to overcome weaknesses ;and furnishto the Association such other information concerning such records, accounts and financial statements, and the audit thereof, and concerning said auditors, as the Association may from time to time reasonably request furnish to the Association IDCOL's assessment of financial management capacities and practices o fthe selected POs\. 7\. Financial Reporting: The format, content and periodicity (within 45 days o f the completion o f quarters) of the Financial Monitoring Reports (FMR) under AF will continue to be the same as in the original Credit except for project finance and implementationreport on CFLs by REB for which contents and formats of reporting was agreed during negotiations\. Under the original Credit, FMRs have been received in a reasonably timely manner and with acceptable quality\. However, FMRs were produced from a standalone excel spread sheet rather than from the entity accounting system, exposing to risk o f inaccuracy and manipulations\. It has been agreed with both REB and IDCOL that henceforth FMRs would be produced from the entity accounting system and the accounting process and FMR presentation arrangements will be monitored during FM supervisions\. 8\. Internal Control: IDCOL through interim operational review meetings has initiated to address fiduciary and internal control weaknesses\. IDCOL has agreed to share the minutes o f the meetings with IDA at its request\. REB's audit findings reflected on lack o f reconciliation o f transfer of funds and resources from REB to PBSs and repayment by PBSs to REB\. REB undertakes to strengthen its internal control arrangement interms o f appropriate documentation, audit trail and regular reconciliation\. 9\. Audit: IDCOL has been submitting the external audit reports both for the entity and the project within the due dates\. However the entity audited financial statements were 34  not clearly reflecting the project transactions and the auditors did not always provide managements letters\. REB also submitted all due audit reports with some exceptions on timeliness for entity audit reports\. Absence of management letters was also prevalent in respect of REB audits\. To address the above issues, appropriate provisions will be inserted in the Article IV of the Project Agreements or recorded in the minutes of negotiations requiring REB and IDCOL to furnish management letters and to share the audit TORS with IDA\. REB audit reports were often qualified but REB has been progressively addressing the audit issues and has always been responsive to Bank's concerns on audit follow ups\. There are a number o f outstandingaudit objections on REB audits for which REB is preparing a dated Action Plan to resolve the audit issues\. The audit requirementunder the Additional Financingthat will be tracked throughthe Audit Report Compliance System (ARCS) will follow the provisionsof the original project as stated inthe following table: ImplementingAgencies Audit Auditors REB IProject FinancialStatements C&AG REB Entity PrivateAuditor IDCOL Project Financial Statements PrivateAuditor IDCOL Entity PrivateAuditor 10\. FMRisks:Fromthe fiduciary perspective,the overall FMrisk for the Additional Financing is assessed as Substantial\. This is composed of high inherent risk at country level and substantialto moderatecontrol risks at the project level\. The following matrix presents the risksassociated with this projectandtheir respectivemitigationmeasures\. Identified FMrisks Rating Mitigationmeasures Rating Post Mitigation Fund Flow S (i) Fundflow to REB and SubsidiaryLoadGrant Agreements IDCOL andto IDCOL's POs (draft) between GOB and IDCOL might be constrained due to and between GOB and REBto be delayed endorsed by MOF during (a) financingarrangements negotiations or signingof such betweenthe Governmentand agreement(s) will be effectiveness/ REB and IDCOL disbursementcondition\. (b) refinancingagreement IDCOL's on lendingterms to its betweenIDCOL and POs POswill be agreed during negotiations\. Internal Control S Internalcontrol arrangement IDCOL agreedthat its assessment and accountingcontrol of POswill encompass an environment ofthe POs are assessment oftheir FMcapacities unknown\.IDCOL's coverage as well\. of POs and its unit offices The ParticipationAgreement accounting and customer loan betweenIDCOL and POs will recovering systems for tracking containprovisionsrequiringthe the flow and use of fund yet to POs to maintainadequate FM 35  Identified FMrisks Rating Mitigation measures Rating Post Mitigation be streamlined\. systems\. Financial Reporting S M Timely, reliableand accurate FMR submissionshall continue at reportingunder AF may be quarter intervalson total expenses constraineddue to FMRs not of the project(Own, GOB producedfrom the entity contributionandIDA fund)\. Both accountingsystems and REBandIDCOL agreedthat financial statementsnot henceforth FMRswould be reflectingdistinctlythe project producedfrom the entity resources and expenditures accounting system\. The accounting processandFMR Contents and format ofa report presentationarrangements will be on implementationof CFL monitoredduringFM supervisions\. distributionsat the levelof end The format, contents of the users\. reportingon CFL distributionswill be agreed with REB before starting imdementationo fthis activitv - Audit S S The audit reports may not Audit reports of bothIDCOL and capture accountability and REBand also POs andPBSswill corruptionissuesadequately be supplementedby a management and audit reporton POs may letter\. not providethe assurancethat Audit TOR on Audit of IDCOL, sub-loans proceedswere used POs and entitiesborrowingfrom for the intendedpurpose\. IDCOL and REB and PBSs under REBto be sharedwith IDA\. Governanceand accountability While clearingthe Audit TORS, issues might not be captured in IDA will ensurethat auditors are absence of Management requiredto issuemanagement Letters\. letters on weaknesses on financial managementpractices andreport on governanceand internal control framework\. OverallProiZRisk R a t K S S 36  Annex 4 Bangladesh: RuralElectrificationand RenewableEnergyDevelopmentProject Request for AdditionalFinancingCredit (US130 millionequivalent) ProcurementAssessment GENERAL The additional financing proposed i s for US$ 130 million out o f which, for component 3 i s about US$ 15 million\. Out o f this US$ 15 million consulting services would be for about US$1\.5 million and works o f US$1\.5 million and goods worth o f US$ 12 million have already been procured and contracts awarded\. Portion o f this fund will have to retroactively financed to REB from the credit\. The only change in procurement arrangement is for the new Component (2): the procurement o f about 10 million CFLs at an estimated cost o f US$15 million to be deployed in households in areas with high electricity demand; REB will implement this component\. For component 3, REB has completed the procurement process and awarded the contracts under the existing RERED project\. Due to US$ appreciation there is a shortage o f US$15 million fund to meet contractual obligation under the existing credit\. The US$ 15 million being provided under the Additional Financing will meet this shortfall\. The procurement under the proposed additional financing would be carried out in accordance with the Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 revised October 2006 and "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 revised October '2006, as well as the provisions stipulated in the Legal Agreement\. Within the overall context o f Bank guidelines, the local procurement o f goods, works, and services (for which the shortlists are expected to be entirely comprised o f national consultants) will follow the Government's Public Procurement Act (PPA) 2006 (applicable to goods: < US$300,000 per contract, works: < US$300,000 per contract and consulting services- firms: < US$lOO,OOO per contract and individual consultant- < US$50,000 per contract)\. Incase of any conflicts between the Bank and GOB procedures, the Bank guidelineswill prevail\. In addition, the project implementation will need to be carried out in compliance with The Guidelines for Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants (dated October 15, 2006)\. 2\. PriorReview Thresholds: Goods and Works: The Bank will carry out prior reviews for the following contracts: (i)for goods- first contract usingNCB, andthereafter contracts estimated to cost US$ 300,000 equivalent or more, irrespective o f the procedures; and (ii)for works - first packagekontract using N C B, and thereafter contracts estimated to cost US$300,000 equivalent or more, irrespective o fthe procedures\. 37  Consultants Services: The Bank's prior review will be required for consultant's services contracts estimated to cost US$lOO,OOO equivalent or more for firms and US$50,000 equivalent or more for individuals\. All single-source contracts will be subject to prior agreement by the Bank\. All TORS o f the consultants are subject to the Bank's prior review\. 3\. Procurement Components and Responsibility: The project will have three components\. Component 1-will be implemented by IDCOL and has no procurement\. Components 2 and 3 will be implementedby REB\. 4\. Procurement Capacity and Risk Assessment: A procurement capacity assessment o f REB was carried out to evaluate the capability o f the implementing agency and o f the adequacy o f systems in place to administer Bank-financed procurement and to assess the risks that may negatively affect ability of the agency to carry out the procurement process\. REB i s the implementing agency o f the present RERED project and it has adequate knowledge o f Bank guidelines and procedures related to project implementation\. However, REB has weaknesses in terms o f internal controls, award delays, transparency, management o f the procurement process, and in handling complaints\. In order to safeguard against this and given the prevailing conditions for public procurement in the country, the project i s rated "high risk" from the procurement and contract administration viewpoint\. In order to minimize the risk, several measures including a procurement risk mitigation framework have beenintroduced\. 5\. Measures for Improving Governance in Procurement: Government has put efforts to improve procurement framework to better mitigate the related risks\. Several risk mitigation measures have been agreed with the Government toward improving governance in procurement and minimizing procurement risks under the project\. The three main pillars of the risk mitigation framework are: (i)system o f handling complaints; (ii)disclosure o f information; (iii)introducing a procurement risk mitigation plan (PRMP) with a set o f performance indicators as described in paragraph 8 below to monitor procurement performancethrough reports submittedto IDA on a quarterly basis\. 6\. System for HandlingComplaints:A credible system for handling complaints will be I put in place in REB\. The salient features of the system will be an oversight of a complaint database, a standard protocol with appropriate triggers for carrying out investigations, and actions taken against involved parties\. The system will be developed and managed by REB\. For ICB and international selection o f consultants the Bank's prescribed complaint redress mechanism will apply\. 7\. Disclosure of Information: All information relating to bidding and procurement above the specified thresholds, as per PPR will be published in CPTU's website in addition to REB's website\. Inaddition, the following additional steps will be followed as part o f procurement and implementation: (i) Alerting agencies' ofJiciafs/ sraffi In accordance with the PPA and the Bank guidelines, REB will issue an alert letter notifying staff about the 38  possible consequences o f corrupt procurement practices and similar behavior and the actions to be taken against the officials/staff found involved insuch practices\. Alert bidders: In pre-bid meetings, REB will alert all bidders on the consequences o f corrupt practices (fraud and corruption, collusion, coercion, etc\.) including the debarring o f contractors\. Multiple dropping: The multiple dropping of bids (bids submitted inmore than one location and opened in one location) will not be permissible for any procurement under Bank financed projects\. Timeliness of bid evaluation and contract award: In accordance with the PPA, REB will ensure the awarding o f contracts within the initial bid validity period, and closely monitor the timing\. The Bank may not finance contracts which are not awarded withinthe period of bid validity\. Action for corrupt practices (bidders and GOBstaffl: In cases where collusion has been established, REB will initiate actions, including the debarring o f contractors/suppliers and actions taken against responsible GOBstaff (ifapplicable), as appropriate inaccordance with PPA and Bank guidelines\. Filing and record-keeping: REB will preserve records and all documents regarding their public procurement, in accordance with the PPA provisions\. Publication of award of contract in websites: For ICB and large value consultancy contracts including direct contracting and sole source selection o f consultants, REB will publish contract award information in dgMarket/ UNDB online within two weeks o f contract award; this is in addition to CPTU's and agencies' websites\. Late payments and liquidated damages: REB will ensure the timely payment o f bills o f the suppliers/contractors/consultants and the imposition o f liquidated damages for delayed completion specified in the relevant contracts\. Oversight by Project Director(PD) : PD will provide the oversight function for procurement and provide the Bank quarterly reports identifying any procurement deficiencies including measurement o f procurement performance using the indicators mentioned below\. NCB conditions to be added: Bids should be submitted and opened in public in one location immediately after the deadline for submission\. 8\. Procurement Performance Indicators: REB will prepare reports on the following procurement performance indicators\. 39  SL Procurementsteps / subjects Indicators 1 Publicationof invitation for Percentageof invitations for bid publishedinthe CPTU website in accordancewith the PPA\. 2 Receipt and evaluationof bid Average number of bidders purchasedbidding documents\. Average number of bidders submitted bid\. Average number of days betweenreceivingbidsand completionof evaluation\. Percentageof contracts requiredextension ofbid validity\. 3 Contract awarding Average number of days taken between submissionof bid evaluationreport and the approvalofcontractfor differentfinancial delegationas per PPA\. Percentageof contract awards informationpublishedin CPTU's website as per PPA\. - 4 Deliverywithin the original Percentageof contracts completed within the original schedule deadline as stated in contract\. Percentageof contracts had liquidateddamaged imposed\. 5 Payments Average'numberof days taken for release payment\. Percentageof contracts where payments were not made I as per contract\. Percentageof contracts where interest for delayed paymentwas made\. 6 1ProcurementTraining 0Ratioof staff get procurement trainingand number of staffs planned for procurement training\. Compliance with the above arrangements will ensure that the procurement under this additional financing is likely to be effective and transparent and result in smooth implementation o f the project\. However, procurement process and implementation o f the contracts would be reviewed every six months by the Bank, and adjustments or corrections will be made, as appropriate\. 40  Annex 5 Bangladesh: Rural Electrificationand RenewableEnergy DevelopmentProject Request for Additional FinancingCredit (US$130 millionequivalent) Resultsframework and monitoring The primary objectives o f the RERED additional financing are to continue to expand access to electricity in rural areas not served by the grid and to reduce demandon the grid system through the introduction o f demand side management measures which will make more electricity available in the rural areas which suffer disproportionately from load shedding\. The first objective will be met through sales o f solar home systems and installation of renewable energy mini-grids\. The second will be met through the exchange o f incandescent light bulbs for compact fluorescent lamps (CFL)\. The third component o f the Project will help REB to complete renovation o f its distribution lines taken over from BPDB and reduce system loss in Project PBSs\. Under the main project, REB has renovated about 9,000 km of lines and has brought down the system loss of taken over pockets from more than 40% to less than 20%\. REB will continue to provide information o f its System Loss Reduction Program as carried out under the parent project\. SHS sales will be tracked monthly by the POs and compiled by IDCOL\. Sales are expected to continue to grow, or hold steady, for the three years o f the Additional Financing operation\. If there i s a trend o f reduced sales (seasonally adjusted), IDCOL will need to take action to identify and address the problem\. By monitoring this metric closely, IDCOL i s better positioned to respond to potential problems like market saturation and declining quality o f service\. While SHS sales show the success o f the business side o f the project, there should be a corresponding rise in socio-economic status o f the householdswhich purchase a system\. The quality of life impacts of the project i s being monitored through a socio-economic impact assessment to determine the extent of changes to the health, education, and income o f the households\. There i s no specific outcome indicator for socio-economic improvements from the additional financing since the assessment will cover primarily households that were connected under the first phase o f RERED\. However, it can be assumed that the impacts will be similar for SHS installations going forward\. The baseline survey for the socioeconomic impact monitoring was carried out in 2006 and now a panel survey i s ongoing\. After some delays, the study i s expected to complete in May 2010\. A successful result in the development o f renewable energy mini-grids is less easily defined\. IDCOL will accept proposals for new systems (several are already in the pipeline) based on the strengtho f design and technical, financial and economic viability\. Setting a target for the size or number of systems could create a technology bias and therefore better left to the discretion o f IDCOL\. 41  The energy efficiency component will be measured by the number of CFLs that are distributedin exchange for incandescent bulbs\. This program will be carried out by REB with the assistanceofthe PMUthat will be created\. The REB' project component to renovate distribution lines taken over from BPDBwould be measured by amount o f km of line renovation completed and number of consumers connections recorded\. REB will also provide monthly system loss data o f the Project areas\. 42  m d  P 0 0 0 m v) U 2 - 0 m 1 -5 -5 P0 0 0 1 v) 1 -r

APPROVAL

P001275

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 2533a-KE KENYA THE KENYA POWER COMPANY, LIMITED OLKARIA GEOTHERMAL POWER PROJECT STAFF APPRAISAL REPORT December 20, 1979 Energy and Water Supply Division Eastern Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  KENYA OLKARIA GEOTHERMAL POWER PROJECT CURRENCY EQUIVALENTS Currency Unit - Shilling (Sh) Kenya Cents 100 - KSh 1 Sh 20 - Kenyan Pound (KL) 1 1/ KE 1 - US$2\.67 US$1 - Sh 7\.5 Pound Sterling (1 stg\.)l - KSh 16 1/ The K1 is not now used in Kenya as a unit of currency but is used in accounting, economics and reporting as a convenient measure of value or unit of account\. ABBREVIATIONS AND ACRONYMS CDC Commonwealth Development Corporation CIDA Canadian International Development Agency EAP&L The East African Power and Lighting Company, Limited GENZL Geothermal Energy of New Zealand Government Government of Kenya GWh Gigawatt hour = 1,(00,00() Kilowatt hours KPC The Kenya Power Company Limited kV Kilovolt = 1,000 Volts kVa Kilovolt Ampere = 1,000 Volt Amperes KW Kilowatt = 1,000 Watts KWh Kilowatt hour = 1,000 Watts hours MWh Megawatt hour = 1,000 Kilowatt hours MVA Megavolt Ampere - 1,000 Kilovolt Amperes MW Megawatt = 1,000 Kilowatts O\.D\. Outside Diameter PSC Power Securities Corporation SIDA Swedish International Development Authority TRDA The Tana River Development Authority TRDC The Tana River Development Company Limited UEB The Uganda Electricity Board KPC's Financial Year - Calendar Year This report was prepared by C\.H\.A\. Killoran, J\. Shaukat, and G\.F\. Steinke, and is based on information obtained during a mission to Kenya in November, 1978\.  FOR OFFICIAL USE ONLY KENYA OLKARIA GEOTHERMAL POWER PROJECT Table of Contents Page No\. I\. THE ENERGY SECTOR \. I Local Energy Resources \. \. \. 1 Hydroelectric Resources \. \.1\. Geothermal Resources \. 1 Imported Energy \. \.1\. Relative Energy Pricing \. 3 II\. THE POWER SECTOR \. 4 General \. 4 The Power Supply Entities \. 4 Existing Facilities \. 4 Demand for Power and Energy \. 6 Long Term Development Plan \. 7 Future Development \. 7 Rural Electrification \. 8 Previous Bank Lending in the Power Sector \. 9 Bank Strategy in the Power Sector \. \. \. 10 Government Strategy in the Power Sector \. \. 11 II[\. THE PROJECT \. 11 Objectives \. 11 Background \. 11 The Project \. \. \. 12 Project Cost Estimates \. \. \. 13 Basis for Estimates \. \. \. 13 Financing \. \. 15 Status of Engineering and Construction Schedule \. 17 Procurement \. \. 17 Disbursements \. \. \. 19 Environmental Considerations \. \. \. 19 I\\. JUSTIFICATION OF THE PROJECT \. 19 The Power Market \. \. \. 19 Need for Additional Capacity \. \. \. 20 Comparison of Alternatives \. \. \. 20 Economic Rate of Return \. \. \. 21 Risk \. \. 22 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Table of Contents (Cont'd) Page No\. V\. THE BORROWER - THE KENYA POWER COMPANY, LIMITED \. 23 Structure of the Electricity Supply Industry \. \. 23 Organization and Management \. 24 Accounts and Audit \. 25 Training \. 26 Insurance \. 26 Project Monitoring System \. \. 26 VI\. FINANCIAL ASPECTS \. \. 27 Introduction \. 27 Past Operations and Present Financial Position \. 27 EAP&L's Tariffs \. 28 Proposed Financing Plan \. \. 29 Future Earnings \. 31 Debt Limitation \. 31 Security Arrangements \. \. 32 VII\. AGREEMENTS REACHED AND RECOMMENDATIONS \. 32  LIST OF ANNEXES ANNEX NO\. DESCRIPTION 2\.1 Existing Generating Plant 2\.2 Forecast of Production Capability and Demand for Average and Dry Water Years 2\.3 Forecast of Production Capability and Demand for an Average Water Year 2\.4 Forecast of Production Capability and Demand When Recorded Dry Year Recurs and 254 GWh Not Available from Uganda 3\.1 Description of Project 3\.2 Implementation Schedule 3\.3 Estimated Schedule of Disbursements (US$ millions) 4\.1 Diesel Alternative - Cost Estimate (mid-1979 prices) 4\.2 Least Cost Solution (including all costs since March 1978) 4\.3 Least Cost Solution (assuming all costs before September 1979 as "sunk costs") 4\.4 Kenya Power Company, Limited - Method and Assumptions Made to Determine the Rate of Return on Investment 5\.1 Kenya Power Company, Limited - History of the Power Companies 5\.2 Kenya Power Company, Limited - Project Monitoring System 6\.1 Kenya Power Company, Limited - Balance Sheet as of December 31, 1975-1984 6\.2 Kenya Power Company, Limited - Income Statement for the Years 1975-1984 6\.3 Kenya Power Company, Limited - Funds Statement for the Years 1979-1984 6\.4 Kenya Power Company, Limited - Tana River Development Company, Limited - East African Power and Lighting Company, Limited - Combined Balance Sheet as of December 31, 1975-1984 6\.5 Kenya Power Company, Limited - Tana River Development Company, Limited - East African Power and Lighting Company, Limited - Combined Income Statement for the Years 1975-1984 6\.6 Kenya Power Company, Limited - Tana River Development Company, Limited - East African Power and Lighting Company, Limited - Combined Funds Statements for the Years 1979-1984 6\.7 Kenya Power Company, Limited - Notes and Assumptions for Financial Statements 6\.8 Kenya Power Company, Limited - Electricity Tariff Structure 6\.9 Kenya Power Company, Limited - Loan Capital and Security Arrangements of EAP&L, KPC and TRDC Map IBRD 14278R   I\. THE ENERGY SECTOR Local Energy Resources 1\.01 The greatest potential source of energy in Kenya is in hydroelectric power and, although the potential for geothermal power has been recognized for some time, only now has the comparative cost become sufficiently attractive to warrant its development\. In spite of continued search, there has been no success in locating reserves of oil or gas in Kenya\. In rural areas parti- cularly, firewood and charcoal are used extensively for energy needs while bagasse is used as a source of fuel in the sugar industry\. There are no known coal reserves in Kenya although coal deposits have been found in neighboring Tanzania\. Hydroelectric Resources 1\.02 The hydro power potential of Kenya has been estimated to be about 6,000 MW (30,000 GWh per year), however, half of this lies in small rivers and is uneconomic to develop\. The remaining half is on the Tana River and of this only about 800 MW or 4,000 to 5,000 GWh per year is economically feasible of development (1,500,000 tons of oil equivalent per annum), about 300 MW of this potential is already developed (para\. 2\.05)\. With little natural storage, there is considerable variation in the seasonal flow of the Tana River\. This variation affects the output of the existing hydro plants accordingly, although there will be a significant improvement after the Upper Reservoir, now under construction, begins to impound water in 1981\. The National Power Development Plan, 1978-2000, funded by the Bank under Loan 1147-KE, (para\. 2\.10) was prepared by Merz and McLellan and Sir Alexander Gibb and Partners of the U\.K\., consultants to the East African Power and Lighting Company, Limited (EAP&L), and their 1978 Report lists the following potential sites on the Tana River in order of priority; Kiambere - 120 1MW, Mutonga - 70 MW, Grand Falls - 88 MW\. Geothermal Resources 1\.03 The most attractive geothermal potential is at Olkaria, in the Rift Valley near Lake Naivasha about 100 km from Nairobi\. Exploration began over 20 years ago, and investigations funded since then by UNDP and EAP&L indicate that the site should be capable of supporting power generation of 100 MW and possibly more than 200 MW\. Two other potential sites, at Lake Hannington and Eburu, have not been explored, but it is expected that with further search and investigation geothermal power could contribute significantly toward meeting Kenya's electric power needs\. Imported Energy 1\.04 The main source of primary energy in Kenya is imported oil and petroleum products, a secondary source being electrical energy from Uganda (para\. 2\.04)\. Over the period 1973-77, the consumption of imported liquid fuels as a percentage of total energy consumption was about 85%\. Except for minor amounts of speciality oils and greases, most of the imported crude oil  - 2 - is processed at the refinery at Mombasa\. Between 1973 and 1977, an average of about 2\.7 million tons per annum of crude oil were refined; of this total the amount used domestically was about 1\.5 million tons per annum, while the remainder was exported to neighboring countries\. During the period 1973-77, the value of net imports of crude oil and petroleum products averaged about 13% of the value of Kenya's imports\. The following table contains a summary of the growth in energy consumption in Kenya\. Tons of Oil Equivalent (Thousands) 1973 1977 Coal and coke imports 50 44 Oil consumption 1,360 1,606 Hydro generated electricity 1/ 98 167 Hydro imported electricity 72 65 Total Energy Consumption 1,580 1,882 I/ 1 GWh = 330 equivalent tons of petroleum (based on thermal steam plant heat rate of 3,300 Kcal/kWh)\. 1\.05 Kenya's dependence on imported oil and the potential effects it can have on the country's economic growth is clearly demonstrated by the oil crisis of 1973\. Over the period 1964-72, a growth rate of 6\.5% per annum was achieved in Kenya, but this dropped very sharply after 1973, and the average for the years 1973-75 was 3\.4%, one of the main causes being the international oil crisis and higher import prices which forced the Government to enact restrictive economic policies\. Secondly, Kenya's merchandise import bill doubled between 1972-74 (from US$632 million in 1972 to US$1,237\.3 million in 1974), despite the fact that import volumes were only 9% higher in the latter year\. The rise in the import bill again was due to higher import prices as well as the rising costs of energy supplies, particularly petroleum\. The dramatic rise in the petroleum prices is seen in that the average price of crude oil increased from K\.1 5\.8 per ton (1972) to Kb 23\.9 per ton (1974) and was Kb 39\.3 per ton in 1977\. Finally, before 1973, in monetary terms Kenya was virtually in balance in its imports and exports of petroleum products\. The receipts earned in Kenya from exports of petroleum products were almost sufficient to pay for the country's own petroleum needs\. However, the price of crude increased much faster than the price of refined petroleum products, and this has led to Kenya now having an adverse balance on its petroleum trade\. Compounding the problem has been the border closure between Kenya and Tanzania and the break-up of the East African Community which has meant a loss of markets and stagnation in shipments of refined petroleum\.  - 3 - 1\.06 Government has thus realized that as long as oil remains the major source of primary energy and substantial amounts of foreign exchange are expended in paying for crude oil imports, Kenya's economy is very vulnerable to sudden increases in petroleum prices\. Thus, the Government's strategy, as specified in the Development Plan 1979-83, is to rationalize the use of imported petroleum and to develop and utilize domestic power resources to obtain some alleviation of the country's dependence on imported oil\. Relative Energy Pricing 1\.07 The price of many essential commodities, including electricity and fuel, is regulated by the Government of Kenya\. The cost of electricity is the same to consumers in all parts of the country although certain isolated areas are supplied with expensive diesel-generated electricity\. Usually, prices of petroleum products vary regionally and, in general, reflect the cost of transportation\. For example, the wholesale price of regular gasoline less duties and taxes in Mombasa is KSh 1\.547 per liter\. Duty of KSh 0\.6, sales tax of KSh 0\.705 and transportation of KSh 0\.143 bring the wholesale price of gasoline in Nairobi to KSh 2\.995 and the retail price to KSh 3\.16 per liter\. There are no duties or sales tax on diesel fuel and fuel oil\. The wholesale price of diesel fuel in Mombasa is KSh 1\.347 and in Nairobi KSh 1\.49, and the wholesale price of fuel oil in Mombasa is KSh 0\.985 and in Nairobi KSh 1\.145\. 1\.08 The relative cost of energy in Kenya is illustrated in the following table: Price per Unit Cost per 6 in Nairobi Kilocalories x 10 Kilocalories/Unit (K shillings) Fuel oil 9\.7 x 106/ton 1,215 125 Gas oil 10\.2 x 106/ton 2,751 270 Kerosene 10\.3 x 106/ton 2,242 218 Firewood 3 x 10 /ton 400 133 Electricity 860/kWh 42 490 Considering also relative convenience in use of various types of energy, the above price structure appears to be reasonably well balanced\.  -4- II\. THE POWER SECTOR General 2\.01 The availability of power to consumers in Kenya is, in general, limited to the central and southwestern sections of the country and along the southeast coast (see IBRD map 14278R)\. There are several isolated diesel installations in the north and east, but people living in these areas do not have easy access to electricity\. Of the estimated 14\.4 million inhabitants in Kenya, 90% live in rural areas\. Only 6% 1/ of the total population has access to electricity, resulting in an average estimated per capita consumption of electrical energy in 1978 of about 90 kWh\. The Power Supply Entities 2\.02 Public electricity in Kenya is now being supplied by three compa- nies: The East African Power and Lighting Company, Limited (EAP&L), The Kenya Power Company, Limited (KPC) and The Tana River Development Company, Limited (TRDC)\. EAP&L coordinates all sources of power, purchases in bulk from the other two companies, staffs and manages them, and is the sole dis- tributor\. Background information and a description of the three companies is given in Chapter V\. In addition, the Tana River Development Authority (TRDA) is now constructing a dam to store water to augment the low river flows during the dry season for irrigation purposes and will make use of the head available for the production of hydroelectric power\. The output will be fed into the EAP&L power system (para\. 2\.11)\. Existing Facilities 2\.03 Most of the electricity sold by EAP&L is distributed through an interconnected system covering five major areas of Kenya: Nairobi, Mount Kenya, Coast, Rift and Western Districts - which are shown on the map IBRD 14278R\. Power is supplied to some of the large centers in outlying areas by isolated diesel stations\. There are numerous small privately operated generators, mostly isolated and some used for standby purposes\. No consider- ation has been given to the effect of these on the power supply system in Kenya\. The existing generating plant operated by the three companies (listed in detail in Annex 2\.1) together with those privately owned are shown in the following table: 1/ Percentages of population with access to electricity in other East African countries are as follows: Lesotho 3\.5%; Malawi 2%; Sudan 8%; Tanzania 7%; Zaire 2%\.  -5- Summary Table of Existing Generating Plant ------------------Public----------------- - Private- Interconnected System Isolated Stations Hydro 306 MW - 2\.6 MW Steam 98 MW - 22\.0 MW Diesel 32 MW 2\.2 MW 15\.0 MW Gas Turbine 30 MW - - Total 466 MW 2\.2 MW 39\.6 MW 2\.04 This generating plant is augmented by a 30-MW bulk supply from the Uganda Electricity Board (UEB) under a long-term agreement, extending to year 2005 (para\. 2\.14), giving a total installed capacity of 496 MW on the interconnected system\. However, the effective capability is reduced to 460 MW due to derating some of the older diesel and gas turbine plant because of their age\. The dates of plant retirements will depend to some extent on available river flows\. For the purposes of this report, it has been assumed that 21 MW of diesel plant, 2 MW of steam turbine plant, and 6 MW of hydro plant will have been retired by 1985\. In 1978 the gross output was 1529 GWh of which 1053 GWh was supplied from the hydroelectric generating stations\. 2\.05 The three largest hydroelectric power stations (Kindaruma - 44 MW, Gitaru - 145 MW, and Kamburu - 94 MW located on the Tana River some 70 miles to the east of Nairobi) are owned by TRDC, and the 98-MW Kipevu steam station located at Mombasa is owned by EAP&L\. Two smaller hydro- electric developments, Tana (10\.4 MW) and Wainjii (7\.4 MW), are owned by KPC\. The remaining four very small hydroelectric installations (3\.3 MW in total) together with eight diesel-electric stations, the Nairobi South and the gas turbine plant, are owned by EAP&L\. All of these generating stations are interconnected by means of 132-kV and 33-kV transmission and subtransmission lines\. This system is linked to Uganda by a 132-kV double-circuit transmis- sion line for the transfer of 30-MW bulk power\. One of the 132-kV transmis- sion lines between Kamburu and Nairobi is constructed for operation at 275 kV but will be operated at 220 kV some time after 1982 (para\. 2\.12)\. The distri- bution voltages are 11 kV and 415/240 kV\. EAP&L also operates four isolated diesel-electric power stations aggregating 2\.2 MW in the northern and eastern part of the country\. However, for the purposes of this report, they have been disregarded because of their isolation and size\. 2\.06 The supply of power is reasonably reliable\. The system frequency is controlled by UEB through the tie-line to Uganda, and following a load change, EAP&L adds or removes generating equipment from its system to keep the import of power just slightly below the contract limit of 30 MW\. This requirement has necessitated load shedding on occasion\. The losses in the system amount to about 10%, which appear to be reasonable\.  -6- Demand for Power and Energy 2\.07 In the preparation of the National Power Development Plan, 1978- 2000 (para\. 1\.02), the consultants very carefully examined the requirements of the consumers in each of the five districts: Nairobi, Mount Kenya, Coast, Rift and Western, and by consumer - Domestic, Off--Peak, Industrial, Commercial, Street Lighting and Small Consumer - for the period 1972 to 1976\. From these data, growth trends were established\. The rales of growth from 1972 to 1976 for the districts were as follows: Nairobi 6\.9%, Coast 9%, Western 10\.6%, Rift Valley 11\.3%, Mount Kenya 10\.7%, the weighted average of which is 8%\. The cyclical growth rate due to the changing demands of industrial development in Kenya, is shown by the 11\.2% increase in demand in 1977 over that of 1976, 8\.1% in 1978, and expected rates of 9\.1% in 1979, 9\.9% in 1980, 8\.5% in 1981, falling to 7\.0% in the mid-1980s (Annex 2\.2)\. The largest district, Nairobi, which accounts for about 60% of total sales, is growing at the lowest rate because it is the most developed and is expected to continue at this rate\. In the examination of the annual growth for Nairobi, it was noted that sales of off-peak power were significantly lower in 1976 than previous years\. This was evidently caused by the suspension of the 30-NW supply from UEB for about two months, and the necessity to turn off the heating of domestic hot water remotely by means of "ripple control"\. A suitable adjustment was made to the average results so as to take this suppressed demand into account\. The higher rate of growth in the Coast District reflects the Government's efforts to expand the industrial and commercial areas away from Nairobi, while domestic sales have increased more slowly\. The historical rate of growth is expected to continue except for a new load at the Ken Ren Fertilizer Plant which required an increase of 13\.5 MW and 95 GWh in 1979\. Suitable adjustments have been made to the load forecasts to allow for this large increment\. In the Western District, the rate of growth has varied one year to the next with an average of 9%\. One new load, the Pan African Paper Mill, would result in a large increase in one year, and the effect has been averaged out over several y(ears\. The Rift Valley and Mount Kenya Districts have also grown at variable rates\. There have been no significant adjustments to the actual growth rate for the forecast except that, if the Kenya Fibre Corporation builds a factory in the Mount Kenya District, the increase in sales would be Significantly higher than was assumed in the forecast\. 2\.08 Most of the demand for energy is from industry where much of the sales increase is expected to originate\. There are five consumers who average more than 1 GWh per month, the largest being the Bamburi F'ortland Cement Company at 7\.8 GWh per month and a demand of 18,000 kVA\. Twenty organizations consume more than 500,000 kWh while there are 103 who consume between 100,000 and 500,000 kWh per month\. 2\.09 The demand for power has been met by the existing generating plant, although in 1977 after making an allowance for units out of service for maintenance and repair, the firm capacity was only 5 MW above the peak demand\. This improved in 1978 with the commissioning of the Gitaru units, where the firm surplus capacity in the system became 128 MW above the peak demand\.  - 7 - The energy situation, however, is quite different\. In 1977 the firm continuous energy available (i\.e\. from the existing thermal plants, and from the hydro plants limited by the river flows available in the driest year) was 153 GWh below that required, and in 1978, even with the addition of the Gitaru units, the firm energy shortfall would have been 142 GWh\. During some periods, it has been necessary to disconnect certain areas from the system in order to reduce the demand to the capability of the available generating plant\. It is evident that Kenya requires the installation of additional firm generating facilities to meet the potential deficiency in energy\. The actual and forecast sales of electricity from 1976 to 1988 are shown in Annex 2\.2\. The forecasts for an average water year and a dry year are shown in chart form in Annex 2\.3 and 2\.4\. Long-term Development Plan 2\.10 During the preparation of the Gitaru Loan (1147-KE), it was foreseen that generation of geothermal power at Olkaria was becoming more attractive, and to investigate the possibility and to put it into a long-term perspective, funds were included for two separate studies\. As a result, in October 1977, Merz and McLellan of the United Kingdom (UK) and the Virkir Consulting Group, Limited of Iceland completed and submitted a report on Geothermal Development at Olkaria, in which it was concluded that active development of the Olkaria site was economically feasible and was the least cost solution to meet the growing power needs\. The report concluded that geothermal power would be required by 1981\. The results of this study were included in the National Power Development Plan, 1978-2000\. Several alternative scenarios to meet the expected load growth were considered, beginning with the Olkaria project and taking into account the potential for development of both hydro and thermal schemes\. Future Development 2\.11 The power installations at the TRDA dam (para\. 2\.02) will consist of two 20-MW units and storage of water is scheduled to begin in the spring of 1981\. These units cannot be considered as a source of firm power supply because, at the time of greatest need, i\.e\. during the dry season, the reser- voir will generally be drawn down to such an extent that the head on the plant will be insufficient for the generation of any appreciable amount of power\. Instead, they will serve as a source of less expensive energy to replace fuel- generated energy during the period when the head on the plant is suitable for power production\. Although operated by TRDA, the reservoir will nevertheless provide increased regulation of the Tana River flows, and the releases of water during the low flow periods will result in a significant increase in energy output of the downstream plants - Kamburu, Gitaru and Kindaruma\. 2\.12 With the diverse load centres and alternate sources of power, (hydro, steam turbine, diesel, gas turbine), it is now justified to construct a 220-kV transmission line from Mombasa to the Kamburu hydroelectric generating station to augment the transmission capabilities of the existing 132-kV line between the Mombasa and Juja Road sub-station in Nairobi\. Upon its completion, forecast for 1982, it will be possible to transmit additional amounts of low cost hydro power to the Coast Region, during periods of high river flow, and higher cost  -8- steam-generated power to Nairobi and the Western Regions, during low flow periods\. The Canadian International Development Agency (CIDA) has recently approved a loan for this important link\. 2\.13 The National Power Development Plan contains a forecast that the growth in demand will be such that a new power development would be required at Kiambere by 1984\. Funds for feasibility studies to determine whether a hydro, geothermal, or other conventional thermal projects should be undertaken are included as part of this project\. Additional thermal generating plant at Mombasa is expected to be required by 1987\. 2\.14 KPC has requested UEB to increase the power exported to Kenya, but UEB has been reluctant to provide more than the 30 MW now contracted\. With seemingly inadequate plant maintenance in Uganda and UEB's recent inability at times to supply even the 30 MW on a continuous basis, EAP&L does not now expect that an additional amount of power will be provided\. For some time, there has been a suggestion that a bulk transfer of power from the Kidatu project in Tanzania may be available for use in Kenya\. Although the provision of power from this source will not be possible in the immediate future, in the long-term, improved relations may make this transfer of power a possibility\. 2\.15 Therefore, Kenya's future needs will be met by further development of geothermal or hydro resources or by thermal stations using imported fossil fuels\. The development program recommended in the National Power Development Plan will be reviewed periodically, so as to ensure that the least cost solution to supplying energy needs is obtained\. Rural Electrification 2\.16 A Rural Electrification Fund has been established by the Government and is administered by the Electricity Development Committee, which is com- prised of representatives of the Ministries of Finance, Economic Planning, Power and Communications and EAP&L\. Rural electrification schemes are managed and operated by EAP&L, which receives revenue from the consumers and presents statements of revenue and cost to the committee\. EAP&L normally apportions 1% (about US$500,000 in 1978) of its gross sales revenue to the fund for the development of supplies in the rural areas\. In addition, funds provided from the interest differential between the soft terms of a Swedish International Development Agency (SIDA) credit to the Government for the Kamburu project and the Government's harder onlending terms to TRDC are used to finance the rural electrification program\. A Swedish team, comprising a planning engineer and two construction foremen, have been seconded to EAP&L to assist in the imple- mentation of the program\. 2\.17 It is envisaged that when the Swedish grant ends, the rural elect- rification program would continue with funds from CIDA, which has made a direct grant into the Rural Electrification Fund of about Canadian $2\.75 million to be disbursed over five years\. CIDA would also provide two or three staff members in a form of technical assistance\. Funds would also be provided for a study on the socio-economic benefits of rural electrification\. 2\.18 Plans for the future include an increase in the funds allocated for rural electrification from KL 1\.4 million in the Government's Third Five-Year  -9- Development Plan (1974-78) to Kb 4\.2 million in the Fourth Plan period (1979-83), so that rural electrification could benefit an additional 500,000 people, about 3% of the population\. Although staff constraints (para\. 2\.19) may limit the expenditure on rural electrification, the training component (para\. 5\.14) of this project has been included to alleviate this restraint\. 2\.19 EAP&L has spent about US$800,000 per annum on 22 schemes during the 1970-76 period\. The two major problems encountered with rural electrification programs in Kenya are the small demand of consumers and the unwillingness of contractors to undertake works in the rural areas\. Demand is low because the cost limits most rural households to the use of electricity for lighting and not for any other domestic or productive purposes\. The second problem is that the contractors, mainly concentrated in urban areas, are unwilling to undertake minor jobs in the rural areas, and EAP&L does not have sufficient construction staff to do this type of work\. The geography of the country adds to the problem in that there are few village concentrations, and the scattered households make the distribution costly\. The training of line construction workers would be included in the training program (para\. 5\.14)\. 2\.20 Although some of the rural electrification programs appear to be uneconomic, the Government has continued to encourage the expansion of the programs (para\. 2\.18) in the belief that improvement of the social, commercial and industrial activities in small communities will tend to reduce migration to the larger urban centers\. Although none of the schemes undertaken to date are financially viable, most are likely to become remunerative in time\. Meanwhile, the social and economic well-being of the rural community is gradually being improved\. Previous Bank Lending in the Power Sector 2\.21 The proposed loan would be the fourth Bank lending operation for power in Kenya\. The previous loans - US$23 million for the Kamburu Hydro- electric Project (Loan 745-KE of 1971) and US$63 million for the Gitaru Hydroelectric Project (Loan 1147-KE of 1975) - were made to TRDC and US$9 million for the Olkaria Geothermal Engineering Project (Loan S-12-KE of 1978) was made to KPC\. 2\.22 The Kamburu project was the second phase of the Seven Forks hydro- electric development on the Tana River (the first was a hydroelectric power station at Kindaruma)\. The project was designed to meet the demand for power in Nairobi and the coastal areas round Mombasa, where most of the industrial and commercial activities of Kenya are concentrated\. The project consisted of a rock fill dam on the Tana River, an underground power station containing three 30 MW units, and the associated transmission line facilities connecting the power station with Nairobi and the Kindaruma hydroelectric power station further downstream\. The project was completed in 1974 about five months behind schedule with a cost overrun of about 7%\. The delays were not unusual for a construction program of this nature, and the cost overrun was unavoid- able as it was largely due to currency fluctuations\. The Project Performance Audit Report No\. 1230, dated July 14, 1976, based on the Project Completion Report stated that the construction of the dam, powerhouse and transmission lines posed no unusual problems, and that the project was completed as planned  - 10 - with only minor start-up problems\. It was noted that EAP&L would have to rely on the technical expertise of expatriates for some years to come, and that an appropriate training program was available for all levels of personnel\. The sales and maximum demand forecasts were exceeded to such an extent that with a tariff increase in 1974, the rate of return for EAP&L, KPC, and TRDC was 21% as compared with the appraisal estimate of 16%\. 2\.23 The Gitaru project is the last phase of the Seven Forks Scheme completing the development of the hydro potential of the Upper Tana River\. It is situated between the Kamburu and Kindaruma power stations, and the three stations operate in cascade\. The project consisted basically of a powerhouse with two 72-MW units with provision for a third similar unit, a 30 meter high dam, 580 meter long, a 900 meter supply tunnel and 4,700-meter tailrace tunnel, switching station, and an 111 km transmission line to the Juja Road substation in Nairobi\. In addition, funds were provided for three studies: Geothermal Development at Olkaria (para\. 2\.10); the National Power Development Plan 1978-2000 (para\. 1\.02); and Management and Accounting Consul- tancy Study (para\. 5\.10)\. The project was completed five weeks ahead of schedule in June 1978, with cost savings of about US$3\.5 million under the Bank loan\. The cost savings are almost entirely attributable to unutilized physical contingencies, a reflection of the good preparation and implementa- tion that went into this project\. A Project Completion Report will be prepared for this project\. 2\.24 The Olkaria Geothermal Engineering Loan became effective on April 30, 1979 and the project is the first phase of the development of geothermal power in Kenya (para\. 1\.03)\. This project, located near Lake Naivasha, was for the preparatory works for the development of a power source and the drill- ing of steam production wells\. There is a certain element of risk associated with the development of geothermal resources relating to volume of steam output, and its characteristics of temperature and pressure variations over time\. The engineering loan was used to drill wells to prove that sufficient steam was available for operation of the first 15-MW unit, and is now being used to drill production wells for the second 15-MW unit\. This loan is a preliminary though essential phase of the Olkaria Geothermal Power Project\. Bank Strategy in the Power Sector 2\.25 The Bank's involvement in this project in Kenya will be the first development of geothermal power in Africa\. It is expected t:hat this is the start of a series of geothermal projects in Africa because the requirements for energy have taxed the resources of Governments during the past few years with the rapidly rising cost of oil, and the Rift Valley has shown great potential to supply much needed energy at an economically attractive cost\. The Bank is keeping abreast of geothermal activities by closely following the studies being made in other countries, particularly in Ethiopia, where UNDP has recently funded a large investigation program similar to that for the initial phases of the Olkaria project\. 2\.26 The Bank is also proposing to assist in meeting the projected short- age of energy in rural Kenya through a forestry project which would include fuelwood development on both private and Government land\. Although the search  - 11 - for domestic oil and gas reserves has been unsuccessful so far, Government intends to continue the exploration program, and assistance may be requested for further oil and gas exploration\. The Bank's continued lending in this sector would assist in funding Kenya's requirements for energy, for technical assistance, for the development of Kenyan personnel to fill middle and senior management positions now held by expatriate staff, and for studies on the justification and manner that existing resources may be developed to meet the needs of the country\. Without this assistance, growth in the industrial sector would stagnate, and retard the major objective of the Fourth Five-Year Development Plan, aimed at alleviation of poverty through the creation of income-earning opportunities and the provision of social services to meet the basic needs of the population\. Government Strategy in the Power Sector 2\.27 The Government continues to attach high priority to the development of the power sector in view of its importance for the overall economic devel- opment of Kenya\. Moreover, the need to formulate a comprehensive national energy development plan has become generally recognized by the Government since the 1973-74 energy crisis\. Thus, to meet the development objectives for the energy sector as defined in the Development Plan 1979-83 investment by the Government over the Plan period in generation expansion, transmission and distribution is estimated at US$226 million of which US$59 million has been allocated for the geothermal program\. The large allocation (about 21% of total capital expenditure in the power sector over the Plan period) reflects the Government's emphasis on geothermal development\. III\. THE PROJECT Objectives 3\.01 The primary objectives of the project are to assure the availability of a firm source of power and energy within the country to meet the growth in demand expected from 1981 to 1985 and, in line with the Government's intention, as stated in the Development Plan 1979-1983, to assist in reducing the country's heavy dependence on oil\. The power industry must provide a reasonably reliable source to meet the growing demand for electricity needed for economic growth and the social well-being of the Kenyan people\. The proposed project is the least costly means of adding to the existing plant to achieve this objective\. A further objective is to strengthen the power industry in Kenya, by the provi- sion of funds for the training of staff at all levels of the organization, and maintaining the power industry's financial viability through sound management and tariff policies\. Background 3\.02 The Olkaria geothermal field is located south of Lake Naivasha and is about 100 km northwest of Nairobi\. Initial exploration indicated that Olkaria (para\. 1\.03) had excellent potential for development\. Thus, in 1970 with UNDP assistance, extensive investigations and surveys were initiated in order to determine the feasibility of developing power from the available steam\. As a result of the studies, UiDP provided more funds to cover part  - 12 - of the costs of a further drilling program for six deep wells between 1973 and 1976\. Following this, the Bank financed additional feasibility studies for this geothermal project from proceeds of the Gitaru Hydroelectric Project (Loan 1147-KE) (para\. 2\.22)\. The studies were completed in October 1977 and indicated that the proposed project was feasible\. KPC thus reactivated drilling operations in March 1978 and sought Bank assistance for the power project\. An engineering loan (S-12-KE) for US$9 million provides foreign funds for part of the cost of the preparatory works estimated to total US$15\.5 million\. This loan became effective on April 30, 1979\. The need for the engineering loan arose because the volume of steam output, temperature and pressure variations from a well could vary considerably at different locations in the geothermal field\. Thus, the funds were used to drill production wells for the proposed generating station, and 80% of the steam requirements for the first unit were proven before the Bank proceeded with appraisal\. The Project 3\.03 The project consists of the construction of an electric generating station comprising two 15-MW units with associated auxiliaries and other necessary civil works, together with deep wells driven into a geothermal reservoir some 1,300 meters below grade level to provide a source of steam\. It is estimated that an annual output of about 95 GWh would be produced from each 15-MW unit\. The project has three distinct phases: preparatory works (Loan S-12-KE), the commissioning of Unit 1, and the commissioning of Unit 2\. In summary, the phases are as follows: (a) Preparatory Works The drilling of production wells for the steam supply (with the existing drilling equipment), the purchase of another drilling rig with its associated equipment and supplies, and the provision of drill operators and consultants\. (b) Unit I (i) The construction of a power house for one 15-MW unit, complete with all auxiliaries and ancillary electrical and mechanical equipment, a system to bring steam from the wells to the power house, a cooling tower and other works associated with the cooling water system, and roads and housing, (ii) The switchyard and 22 km of 132-kV transmission line to join the Kenya-Uganda transmission line at Naivasha; and (iii) Consulting engineering\. (c) Unit 2 (i) Drilling of additional production wells; (ii) The installation of a second 15-MW unit, its associated equipment, and civil works, and (iii) Consulting engineering\.  - 13 - (d) Training and Studies Training, and studies of further geothermal potential and the next power project\. 3\.04 A conventional power house would be constructed to contain the 15-MW steam turbine-driven generators together with all auxiliary equipment and controls\. Since the generating capability of each production well is expected to be about 2 MW or less, steam from a large number of wells would be gathered through surface piping and taken to the power house\. The power from the generators would be stepped up to 132 kV by a transformer in an adjacent switching station and carried to the load centers by a 22-km trans- mission line which would be connected to the 132-kV Kenya-Uganda transmission line\. Consultants acceptable to the Bank have been retained to carry out the necessary engineering design and supervision of construction (para\. 5\.09)\. The existing access roads would be improved, and housing would be provided for operation and maintenance personnel\. 3\.05 In addition, the project would include two studies to be carried out by consultants: (a) a complete review of all existing data on geothermal field at Olkaria to reassess the potential for further geothermal development and to provide guidance for the location of additional production wells at the site; and (b) a feasibility study of the Kiambere hydroelectric project (para\. 2\.13)\. A more detailed description of the project is contained in Annex 3\.1\. Project Cost Estimates 3\.06 The total project cost is estimated at US$84\.3 million equivalent; the net cost excluding duties and taxes is US$74\.7 million\. The project's foreign exchange component is estimated to be US$44\.3 million equivalent, about 53% of total project costs\. The estimated costs of the principal features of the project are shown in the table on the following page\. The total financing required, including interest during construction, is estimated to be US$89\.0 million\. Basis for Estimates 3\.07 Project cost estimates, as of mid-1979, are based on actual contract prices for the supply of equipment and the construction of the transmission line and civil works, and have been estimated for the drilling, training, engineering, and studies for further geothermal exploration and for the next project\. In general, price contingencies of 12% per annum were used for foreign expenditures, and 12% per annum for 1979 and 10% for 1980-83 for local expenditures\. Physical contingencies of 5% were used for the mechanical- electrical equipment and 7\.5% for the switching station contracts which have been awarded and where there is less likelihood of increased cost due to unknown factors, and 10% was used on the local component of the civil and transmission line contracts\. The major contract, mechanical-electrical equipment for Unit 1, has been awarded to Mitubishi on a firm price, i\.e\. zero price escalation, for work completed in Japan, and with 12% escalation to be applied for work in Kenya\. KPC has an option to purchase second unit, and price escalation of 12% has been included on the foreign funds to allow for expected price increases which may occur until the date on which the option is taken\.  - 14 - KENYA: OLKARIA GEOTHERMAL POWER PROJECT ESTD[MATED PROJECT COSTS -------KE Thousands -------- --------US$ Thousands------ Local Foreign Total Local Foreign Total Preparatory Work Drill Rig and Accessories 970 1,800 2,770 2,600 4,800 7,400 Equipment, Supplies and Other Works 900 790 1,690 2,400 2,110 4,510 Consultants and Drill Operators 410 680 1,090 1s100 1,810 2,910 Subtotal 2,280 3,270 5,550 6,100 8,720 14,820 Physical Contingencies 100 100 200 270 280 550 Price Contingencies 50 - 50 130 - 130 Total 2,430 3,370 5,800 6,500 9,000 15,500 Unit 1 Mechanical Electrical Equipment 2,460 3,350 5,810 6,570 8,950 15,520 Switching Station 380 910 1,290 1,010 2,430 3,440 Civil Works 1,190 360 1,550 3,180 960 4,140 Housing and Roads 680 120 800 1,820 320 2,140 Transmission Line 190 280 470 510 750 1,260 Engineering 150 400 550 400 1,100 1,500 53 Diu 5-,4zu 10,47U 13,4Y 14=,5 Z8,UUU Subtotal 290 60C890 76 1,70T 2,330 Physical Contingencies 290 600 890 760 1,570 2,330 Price Contingencies 550 420 970 1,470 l*o00 2,570 Total Unit No\. 1 5,890 6:44_ J22=3V 11L27 1R 32,900 Unit 2 Mechanical Electrical Equipment 2,000 2,370 4,370 5,340 6,330 11,670 Civil Works 770 230 1,000 2,050 620 2,670 Drilling 2,050 1,600 3,650 5,480 4,270 9,750 Engineering 100 300 400 270 770 1,040 Subtotal 920 5UU 9,420 13,1-40 11,990 25,130 Physical Contingencies 150 330 480 400 870 1,270 Price Contingencies 1\.260 1,440 2,700 0 3,840 7,200 Total Unit No\. 2 6,330 6,270 12,600 16,900 16,700 33,600 TraininA and Studies Training 110 130 240 290 350 640 Studies - Geothermal 70 100 170 190 270 460 Next Project 150 300 450 400 800 Total 330 --860 880 1420 2,300 TOTAL PROJECT COST 14,980 16,610 31,590 40,000 44,300 84,300 Interest during Construction 150 1,610 1,760 400 4,30 4,700 TOTAL FINANCING REQUIRED 15,130 18,220 33,350 40,400 48,600 89,000 NOTE: An amount of KE 3,600,000 (US$9\.6 million) is included in the local cost as duties and sales taxes\. December 1979  - 15 - 3\.08 Prior to the resumption of work at Olkaria in March 1978, about US$5\.6 million was expended on studies, civil works, exploratory drilling, the purchase of a drill rig, and the drilling of six wells\. These costs have not been included in the cost estimates for this project, and appear in KPC's accounts as work in progress\. Financing 3\.09 The proposed Bank loan of US$40 million would finance 54% of the estimated project cost (US$74\.7 million) and 90% of the estimated foreign component of project cost (US$44\.3 milion) in both cases excluding duties and taxes, and interest during construction\. Part of the loan would be used to refinance a portion of the existing Bank loan of US$9\.0 million (para\. 3\.02)\. A proposed loan from the Commonwealth Development Corporation (CDC) of US$20\.0 million equivalent, would provide financing for the remaining foreign component of estimated cost, and for some local costs\. The total external financing would amount to US$60\.0 million, about 75% of the project cost less duties and taxes\. This is in line with the level of external financing that the Bank normally uses in Kenya\. The Bank loan would be for 20 years with a 5-year grace period and would be made at an interest rate of 7\.95% to KPC\. The CDC loan to KPC would be for 15 years with a 3-year grace period, and with an interest rate of 8\.5%\. Local costs would be financed by a Development Surcharge 1/ on electric power sold by KPC and TRDC to EAP&L, and a government equity of Kb 3\.0 million (US$8\.0 million), and other short term borrowings\. 3\.10 In summary, the financing plan would be as follows: K--K millions ------ -----US$ millions ----- Local Foreign Total Local Foreign Total IBRD (Proposed Loan) - 15\.0 15\.0 - 40\.0 40\.0 CDC 4\.3 3\.2 7\.5 11\.4 8\.6 20\.0 Kenya Govt\. Equity 3\.0 - 3\.0 8\.0 - 8\.0 KPC - Development Surcharge and other short term borrowings 7\.8 - 7\.8 21\.0 - 21\.0 Total 15\.1 18\.2 33\.3 40\.4 48\.6 89\.0 3\.11 There is sufficient steam available for the first 15 MW unit from the 12 wells that have been completed (para\. 3\.14), but to date, the avail- ability of steam for the second 15-MW unit has not yet been proven\. Thus there would be a condition in the Bank loan, that funds for Unit 2 may not be committed until about 80% of the steam needed for both units (i\.e\. 24 MW) has been proven\. The source and proposed allocation of funds is follows: 1/ The definition of Development Surcharge is in para\. 6\.09\. It would be applied to power sold from 1980 to 1982 to cover part of the balance of the project's local cost of Kb 7\.8 million (US$21\.0 million)\.  - 16 - Proposed Source and Allocation of Funds (US$ millions) Foreign costs ----Local Costs----- Kenya IBRD CDC CDC Govt\. KPC Total Preparatory Works Drilling Rig 5\.0 - - 3\.0 - 8\.0 Drilling Operations 4\.0 - - 3\.5 - 7\.5 Subtotal 9\.0 - - 6\.5 - 15\.5 Unit 1 Mech\. Elec\. Contract 9\.4 - 2\.5 1\.5 3\.6 17\.0 Switching Station 3\.0 - - - 1\.2 4\.2 Civil Works - 1\.3 - - 3\.2 4\.5 Housing and Roads - 0\.5 1\.9 - - 2\.4 Transmission Line - 1\.2 0\.5 - - 1\.7 Engineering 1\.8 - 0\.6 - - 2\.4 Subtotal 14\.2 3\.0 5\.5 1\.5 8\.0 32\.2 Unit 2 Mech\. Elec\. Contract 8\.4 - 3\.1 - 3\.9 15\.4 Civil Works - 0\.8 2\.0 - 0\.8 3\.6 Drilling 5\.0 - - - 6\.0 11\.0 Engineering 1\.0 - 0\.3 - - 1\.3 Subtotal 14\.4 0\.8 5\.4 - 10\.7 31\.3 Training and Studies Training 0\.3 - - - 0\.3 0\.6 Studies 1\.1 - - - 0\.6 1\.7 Unallocated 1\.0 0\.5 0\.5 - 1\.0 3\.0 Subtotal 2\.4 0\.5 0\.5 - 1\.9 5\.3 TOTAL PROJECT COSTS 40\.0 4\.3 11\.4 8\.0 20\.6 84\.3 INTEREST DURING CONSTRUCTION 4\.3 - - 0\.4 4\.7 AMOUNT TO BE FINANCED 40\.0 8\.6 11\.4 8\.0 21\.0 89\.0 Duties and Sales taxes amounting to US$9\.6 million are included in the local costs\. The amounts and their proposed allocation to project investments have been approved in general by KPC and CDC\.  - 17 - Status of Engineering and Construction Schedule 3\.12 The construction schedule is based on full commercial operation of the first unit by July 1, 1981 and the second on April 1, 1983\. KPC is most anxious that this schedule be maintained because, if the output of the hydro plants is reduced by a dry year, there would be power shortages in the early months of each year beginning in 1980 (para\. 4\.03)\. Details of the construction schedule are given in Annex 3\.3\. 3\.13 The project is being designed by Merz and McLellan of the U\.K\. in association with Virkir of Iceland\. It is estimated that of the total of 105,000 man-hours which would be required by the consultants for the design and supervision of this project, approximately 37,000 man-hours would be expended in Kenya, and the remainder in the consultants' offices in England and Iceland\. An estimated amount of US$1,000,000 in foreign funds and US$100,000 in local funds would be disbursed from the preparatory work compo- nent by the end of 1979, to cover the estimated 15,000 man-hours of the consultants' time spent in Kenya and 40,000 man-hours in England and Iceland\. Geothermal Energy of New Zealand (GENZL) has been contracted to provide key staff for the operation and maintenance of the drilling equipment and to train local staff in its operation\. Since the drilling program was reactivated in early 1978, three of the six wells drilled in 1973-76 were successfully rehabilitated\. Subsequently, six more wells have been drilled, with the eighth and ninth producing only a limited quantity of steam\. 3\.14 The production wells, drilled to a depth of 900 to 1,300 meters, have required an average of two months for completion, including moving and setup times as well as delays due to failures of the existing equipment\. The existing drill was purchased for the 1973-76 program and has been out of service for maintenance frequently\. When the second drill (funded under Loan S-12-KE) is put into operation in the fall of 1980, the rate of completion of production wells should be more than doubled\. The output from the seven successful wells completed to date is estimated to be capable of generating about 16\.7 MW, and progress on the project indicates that the on-line date of July 1, 1981 for the first unit would be achieved\. It is also projected that sufficient steam will have been proven by October 1980 to enable KPC to order the necessary mechanical and electrical equipment, and to contract the assoc- iated civil works to enable the second 15-14W unit to be commissioned on April 1, 1983\. Funds have been included to cover the estimated costs of drilling production wells until December 1982\. These are estimated to provide a 40% surplus of steam because the production from some wells may diminish over time\. Any excess would be available for the generation of additional power at some future date\. KPC hopes that additional funds may be obtained so that the drilling of wells would continue beyond this date\. Procurement 3\.15 All of the funds to be provided in the engineering project loan (S-12-KE) will have been committed for the drill rig and accessories, drilling supplies and consultants, and about US$2\.5 million will have been disbursed by the end of 1979\. Implementation of this project has necessitated advance contracting, so that the shipping date of long delivery items would not delay the scheduled on-line date\. In the President's Report for Loan S-12-KE, it  - 18 - was estimated that about US$13\.5 million would be required for advance contract- ing\. Upon receipt of tenders, however, it was found that the cost had increased significantly\. It is now estimated that the value of the contracts which have been awarded, and which would be financed in part by funds from this loan, amount to about US$22\.0 million, of which US$14\.0 million would be from the loan and the remainder financed by others\. For the generating station, contracts have been awarded only for the construction and supply of equipment for Unit 1, and an option is held for the supply of the mechanical and electrical equipment for Unit 2\. The contract price for the second unit would be adjusted in accordance with labor and material indices for work completed in Japan, and in Kenya\. No additional work would be required in the switching station or for the transmission line for the commissioning of Unit 2\. Contracts have been awarded as follows: Drill Rig and Accessories National Supply Company U\.S\.A\. Drilling Equipment and Supplies Overseas Drilling Supplies Scotland Canadian Overseas Engineering Canada and Development Ltd\. Mechanical Electrical Equipment Mitsubishi Corporation Japan Switching Station British Brown Boveri England Civil Works Mowlem Construction Co\. Ltd\. Kenya Housing and Roads Mowlem Construction Co\. Ltd\. Kenya Transmission Line Clough Smith Ltd\. England Consultants Merz and McLellan England in association with Virkir Ltd\. Iceland Genzl New Zealand Study of Kiambere Project Engineering and Power Development Consultants England 3\.16 Retroactive financing is recommended to cover the estimated expendi- tures of about US$2 million needed for the initial costs of the contracts for the mechanical-electrical equipment, switching station engineering, and studies for the next power project\. Prosurement for work and material to be financed under the Bank loan has been or would be in accordance with Bank guidelines for international competitive bidding\. In bid comparison of equipment procured through international competitive bidding, domestic manu- facturers have been allowed a preferential margin of 15% or the existing customs duty, whichever is lower, over the c\.i\.f\. price of competing imports\. However, only the civil works and roads and housing contracts have been awarded locally due to the very specialized nature of the equipment and supplies involved\. Contracts of less than about US$100,000 (expected to total about US$3\.0 million) for miscellaneous drilling equipment and supplies would be awarded on the basis of the Bank's limited competitive bidding procedures\.  - 19 - Disbursements 3\.17 The proceeds of the loan would be disbursed over four years on the following basis: 100% of the foreign component of the cost of the drill rig, drilling operations, mechanical electrical contracts, switching station, engi- neering design and supervision, training, and studies for further geothermal production wells and for the next power project\. The remaining foreign costs would be disbursed from CDC funds\. KPC would not exercise the option held for the supply of mechanical and electrical equipment for Unit 2 until such time that a supply for the generation of 24 NW of electrical power (i\.e\. 80% of station capacity) is proven to be available (para 7\.01 (a))\. A dis- bursement schedule may be found in Annex 3\. Environmental Considerations 3\.18 There are no inhabitants in the immediate area of the proposed power station, the vegetation is sparse, and except for a few zebra, there is little wildlife\. Thus, the disposal of gases in the air, particularly the hydrogen sulphide, would cause little harm to man or animal life\. The equip- ment which may be affected by this gas would require air-tight seals so that they may operate effectively\. Special attention has been given to the problem of hydrogen sulphide in the design of the station so as to eliminate unven- tilated areas, and deep pits or trenches where the gas may accumulate\. Disposal of gases would normally be through a 50-foot high chimney which has been designed to provide adequate dispersion and dilution so as to conform with recommended allowable ground level concentrations\. Periodically, it would be necessary to blow off steam for pressure stabilization and well maintenance, but with suitable protection the noise would be within acceptable limits for the operators, who would normally be stationed in an air-conditioned control room\. Housing for the operating staff would be located some distance away so that objectionable gases would be diffused and seldom reach the area, and the noise level much reduced\. Waste water containing large quantities of salts would be piped to a nearby depression where the water would seep into the ground\. The underground flow in this area is away from Lake Naivasha, so there is no possibility of contaminating the lake\. However, if this effluent were to reappear on the surface, proper measures would be taken to dispose of it\. IV\. JUSTIFICATION OF THE PROJECT The Power Market 4\.01 Kenya's Fourth Development Plan, 1979-1983, indicates that the target for economic growth is 6\.3%, which is the average rate of growth of the economy since independence\. While the nation's output of goods and services between 1964 and 1967 averaged an annual increase of 5\.8%, the growth rate between 1972 and 1977 was only 4\.7%\. From 1972-1976, the average growth in demand for energy was 8\.0% (para\. 2\.07)\. Based on a review of the available data, including the anticipated rate of industrial development, the mission agreed that there was no reason to change the forecast as prepared by the consultants in their report on the National Power Development Plan dated May 1978 (para\. 2\.10)\. Therefore, these forecasts were used to determine the requirements for new energy sources, the economic and financial feasibility, and the financial projections\.  - 20 - Need for Additional Capacity 4\.02 The generation of electricity in the interconnected system is primarily by hydroelectric plants augmented by a large steam-generating plant in Mombasa, a gas turbine and diesel installations in Nairobi and other isolated diesel installations (para\. 2\.05)\. While it is possible to meet the maximum demand, the National Power Development Plan (para\. 2\.10) indicates that the firm energy capability of the existing generating plant was below the requirement in 1977 and 1978, and that the shortfall would continue to increase as the need grew larger in future years\. In assessing the capability of existing plant, the consultants took into account the need to have the installed capacity of generating plant in the system greater than the maximum demand, in order that units may be withdrawn from service for planned main- tenance and to have capacity available for unforeseen forced outages\. The time required for the planned maintenance was based on an average of a large number of installations, while the reliability data published by the Edison Electric Institute of USA was used to estimate the frequency of forced outages of the various types of generating equipment\. Both of these assumptions give an optimistic result for the frequency and duration for out-of-service condi- tions and, therefore, the possibility of shortfall in energy would appear to be somewhat greater than that forecast by the consultants\. 4\.03 Depending on the Tana River flows, there is a possibility of four years in thirty that there could be a deficiency in firm energy of about 100 GWh in 1980\. Therefore, the mission agrees that Kenya needs new generating facilities as soon as possible\. 4\.04 A tabulation of the forecast of demand and production capability is shown in Annex 2\.2, monthly for an average water year in Annex 2\.3 and in chart form for a dry year in Annex 2\.4\. Comparison of Alternatives 4\.05 The need for additional generating capacity (para\. 4\.03) requires the development of either geothermal, diesel or gas turbine installations or some combination which would satisfy the demand\. A conventional coal-fired steam plant would take too long to commission\. The next 'Logical hydro plant, Kiambere, has not been studied in detail and could not be brought into service soon enough to meet the expected shortfalls\. In 1978, gas turbine fuel costs were KIE 41,000/GWh and diesel fuel costs were KE 20,200/GWh for the existing equipment in Kenya, indicating that choice was limited and that only two possibilities, geothermal or diesel, should be considered\. The comparison was prepared on the following basis, using the estimated cost for the diesel alternative as shown in Annex 4\.1: (a) Interest during construction, escalation, and duties and taxes were not included; (b) The equivalent geothermal production in the case of the diesel alternative would be provided as follows: 80% from the  - 21 - Kipevu steam plant in Mombasa, and 20% from a diesel gener- ating plant located close to the demand so that transmission costs may be disregarded; (c) Cost of steam plant fuel at Kb 15,675/Gwh and diesel fuel at KL 24,750/Gwh in July 1979\. (d) Shadow prices were used for foreign exchange\. 1/ (e) Salvage value of drill rig and accessories assumed to be K1E 1\.5 million (US$4\.0 million) in 1984\. 4\.06 With interest rates up to 25%, the least cost solution was found to be the geothermal project, which is much higher than the opportunity cost of capital in Kenya, estimated to be 12%\. Sensitivity tests have been carried out to determine the effect of a 10% increase in estimated capital cost, compared with the diesel alternative with a 10% reduction in fuel costs, and the geothermal alternative remains the least cost solution at discount rates up to about 23% (Annex 4\.2)\. 4\.07 The costs used in the foregoing analysis include all capital costs expended since March 1978 when KPC decided to reactivate the project\. An alternative approach would be to consider all costs expended prior to Sep- tember 1979 as "sunk costs" and, therefore, not included in the calculations\. On this basis, the equalizing discount rate would be about 34%\. An increase in the capital cost of the project of 10% and a decrease in fuel costs of 10% lowers the equalizing discount rate to about 31% (Annex 4\.3)\. Economic Rate of Return 4\.08 The economic rate of return, relating the economic project capital and operating costs to the savings and revenues expected from it were cal- culated, taking into account the following assumptions\. During most of the year, the existing generating plant is capable of meeting the demand for energy, and for the next few years, energy from Olkaria would be needed to meet the requirements of the system only during the periods of low river flow\. The sale of energy from Olkaria is expected to begin with an estimated 50 Gwh in 1981 rising to 190 Gwh in 1984, but for computation of the benefits, it has been assumed that only 20% of this energy would produce an incremental revenue\. The revenue was determined by reducing the rated output of the project by the estimated losses in the transmission and distribution system, and multiplying the resulting kilowatt hour output by EAP&L's average sales price per Kwh\. During the remaining 80% of the time, instead of generating expensive energy in the steam plant and diesel stations, the energy from Olkaria would be used\. The annual reduction in system operating costs due to the fuel savings was determined by arbitrarily assuming that 80% of the 1/ Shadow foreign exchange rate KSh 10\.50 = US$1\.00 compared to current rate of KSh 7\.5 = US$1\.00\.  - 22 - Olkaria energy output would displace steam plant fuel and 20% would displace diesel fuel, using the KPC fuel costs for July 1979\. A new thermal plant is scheduled to be commissioned in 1987, and therefore, the station output was assumed to be 100% revenue-producing from that date onwards\. The economic rate of return is about 11%, using the 1979 tariff structure averaging KSh 0\.42 per kWh\. Shadow prices were used for foreign exchange\. Shadow prices were not applied to unskilled labor because their application would have little effect on the rate of return\. When the sensitivity of the rate of return was tested using the 1979 tariff, it was found that an increase in the capital cost of the project by 10% and a decrease in benefits of 10% reduces the economic rate of return to about 10%\. 4\.09 The method used to determine the rate of return on investment and the assumptions made are detailed in Annex 4\.4\. Risk 4\.10 There are two quite different degrees of risk associated with the physical development of this project\. The first is for the powerhouse, switching station and transmission line which would be moderate and no dif- ferent from other typical thermal generating projects\. There would be a greater unknown, however, for the production wells and associated controls and steam-gathering system\. 4\.11 The greatest unknown is the amount and characteristics of the steam which may be obtained from new wells drilled in the future, some of which may be failures\. Although the wells would be lined with steel pipe, some plugging of the wells may take place after a period of time because calcite and silica will precipitate where the hot water flashes into steam, retarding the flow\. The Olkaria site could be subject to earthquake shocks of an intensity from VIII to IX on the modified Mercalli scale, which means that there would be moderate to severe damage to buildings not specifically designed to withstand such forces\. Therefore, the buildings and equipment for the project would be designed to withstand the acceleration forces due to the expected earth tremors, without failure or distortion, in accordance to the Kenya Code of Practice for the Design and Construction of Buildings and other Structures in Relation to Earthquakes\. If a tremor were to occur, the flow of steam might actually be improved by additional shattering of the rock, but the flow could be cut off entirely if the well casing is sheared off or crushed\. This would only be likely if the well intersected an active geological fault\. The life of the materials and equipment in contact with the live steam would be shortened considerably due to the corrosive nature of the suspended water carried by the steam, particularly when units are shut down, and if air enters the piping system\. 4\.12 The risks foreseen in this project would be minimized by the employ- ment of GENZL and Virkir with extensive experience in similar geothermal work in New Zealand and Iceland, and Merz and McLellan who have had extensive experience in the design of conventional thermal power plants\. Three of the original six well have little flow, and two of the recently completed six wells have minimum output, although it is expected that with further work, the power potential from these two may be increased\. The remaining seven wells have  - 23 - been producing steam for an extended period and are estimated to be capable of producing 16\.7 MW\. Although the vast hot water reservoir (300 C) may be considered to provide an endless supply of steam, it is expected that the productive capability of each well will gradually decrease as the steam flow carries particulate matter into the crevices in the rock and dissolved salts are precipitated, obstructing the flow\. In order to reduce the risk expected from the corrosive nature of the steam, the potential suppliers of the equipment were invited to place various samples of steels with different chemical content in a testing chamber, where they have been exposed to flowing steam for periods extending over six months\. The results of these tests have been used for the selection of materials for various components of the project\. In some cases, it would be more economical to use mild steel and replace the item periodically as necessary, rather than use a costly material\. 4\.13 In addition, there are slight institutional risks relating to EAP&L and KPC's capability to properly administer this and other projects in the development program and their continued financial viability\. Several changes in management took place (para 5\.10) to ensure continued and improved operating functions\. A training component is included in this project (para 5\.14) to assist in the upgrading of present staff at all levels in the organization, and ensure that the expected growth of all three organizations would not be hindered by a shortage of qualified employees\. As to the financial viability, EAP&L's record of timely tariff revisions to maintain a sound financial position has been satisfactory\. The rate of return covenant proposed for this project (para 6\.08) would help to ensure that EAP&L and KPC continue to have a sound financial position in the future\. V\. THE BORROWER - THE KENYA POWER COMPANY, LIMITED Structure of the Electricity Supply Industry 5\.01 The East African Power and Lighting Company, Limited (EAP&L), which is the sole distributor of electricity in Kenya, was founded in 1922 by the amalgamation of two private companies which had supplied Nairobi and Mombasa since 1907 and 1909\. Both the Kenya Power Company, Limited (KPC) and the Tana River Development Company, Limited (TRDC) were established by EAP&L, the former in 1955 principally to finance the interconnection with Uganda and sell imported power to EAP&L, and the latter in 1964 to develop the potential of the Tana River\. At the time these companies were formed, the stock of EAP&L was privately owned by a large number of shareholders\. Almost all of the capital raised for KPC and TRDC was loan capital\. EAP&L shared the ownership of the nominal equity with a private financing company and the Government, which became the owner of one third of KPC's equity capital and one quarter of TRDC's\. In 1969 the Government decided to obtain control of EAP&L by purchasing the available shares on the London stock register, and became in July 1979, the majority shareholder in the company\. Subsequently, the Government acquired the total equity of KPC and TRDC in February 1971\. Since establishment, both companies have been managed and staffed by EAP&L under a management agreement\. A brief description of the history of the power companies is in Annex 5\.1\.  - 24 - 5\.02 Government has accepted that rationalization of the structure of the power industry could best be achieved by integrating all three companies, which already operate for all practical purposes as one company\. However, this cannot be achieved immediately; about US$3\.3 million of debenture stock in KPC is held by outside shareholders\. Government intends to retire these debentures when the merger of TRDC and KPC can proceed\. In the case of EAP&L, Government and its associated institutions, which together hold about 60% of the equity, are continuing to buy up shares on the Nairobi register as and when these become available\. The target for the merger of all three companies is difficult to forecast but the present arrangement, while complicated, is operating efficiently and it is not of significant importance if the merger cannot be achieved in the short term\. 5\.03 EAP&L purchases the entire output of KPC and TRDC at what is called the "ascertained cost" (Annex 6\.7 for definition) and is the only company with surplus revenue-earning capacity\. The funds required to enable the proposed borrower to cover its operating expenses, pay its debt service and meet the local currency costs of the project must therefore come from EAP&L, and appropriate arrangments are necessary to assure KPC's revenues\. These matters have been discussed with the Government and EAP&L during negotiations, and agreement has been obtained on the continuation of the "development surcharge" to meet the needs of KPC's development program (para\. 6\.09)\. 5\.04 It was confirmed during negotiations that a generating station license, which is required under the Electric Power Act, would be issued in respect of the project before December 31, 1980 (para\. 7\.Dlb)\. Organization and Management 5\.05 EAP&L is a well-managed utility and is operated in accordance with sound commercial principles\. The Chairman, a Kenyan, is a competent admin- istrator\. The Board of Directors consists of nine members including the Chairman and General Manager of the company and two government representa- tives; the remaining five members are leading Kenyan businessmen\. 5\.06 The staff of EAP&L at December 31, 1978, inclusive of staff attached to KPC and TRDC, numbered 3,525 which includes 56 expatriate staff\. There has been a significant reduction in expatriate staff as evidenced by the fact that in 1970 there were 189 expatriate professional staff, and 120 in 1974\. There were 845 employees in the generation department, 1,332 in the distribution department, with the remainder in various administrative positions in the organization\. The number of metered connections was 141,727 and there were about 40 consumers per employee\. This compares favorably with some of the other East African companies 1/ and is reasonable considering the number of installations (some 21 power stations spread over Kenya), the distances involved, the amount of construction work carried out by the company, and staff training needs\. 1/ Mauritius 74; Tanzania 22; Madagascar 38\.  -25 - 5\.07 Maintaining the establishment at full strength and, at the same time, avoiding a deterioration in the quality of staff are continuing problems\. Departing expatriate staff have generally been replaced with qualified local staff, but there are a number of vacancies which EAP&L is having difficulty in filling with suitable candidates either locally or from abroad\. For these reasons, the standard of management of the companies has remained about the same since the Gitaru project was appraised in 1974\. 5\.08 There is no quick solution to this problem, and the situation can only be relieved as the establishment becomes progressively more Kenyanized\. In the meantime, EAP&L will have to rely on expatriates for some years but to a decreasing extent as Kenyans are trained to replace them (para\. 5\.14)\. 5\.09 The present staff are competent to operate the companies, to carry out the project with the assistance of consultants, and to carry out other works covered by EAP&L's development program\. Assurances were obtained during negotiations that KPC will continue to employ consultants satisfactory to the Bank in carrying out the project\. In addition, KPC has appointed a resident project manager to be responsible for overall supervision and coordi- nation of the drilling and steam production aspects of the project (para\. 7\.01c)\. 5\.10 In January 1978, the Montreal Engineering Company, Limited sub- mitted a report entitled "Management and Accounting Consultancy Study" which contains comments and recommended changes to the structure of the organiza- tion, the accounting functions, and the management reporting systems of EAP&L\. In general, the report found that the company functions were reason- ably well organized but suggested that certain activities might be better handled if assigned to other departments\. The report has been studied by EAP&L during the past year, and the introduction of many of the recommenda- tions, including a restructuring of the company by the creation of six functional divisions to replace nine departments took place on July 1, 1979\. 5\.11 EAP&L has provided assurances that it will continue to operate in accordance with sound business, public utility, financial and insurance practices, and exchange information with the Bank\. A satisfactory management agreement between EAP&L and KPC is already in force, and a condition of effectiveness would be an extension of this agreement to include operation and management of the proposed project (para\. 7\.02(a))\. Accounts and Audit 5\.12 It was agreed for IBRD Loan 745-KE and Loan 1147-KE (for TRDC's Kamburu and Gitaru projects, respectively) that the financial statements of TRDC and KPC, individually and combined, would be prepared on depreciation accounting basis and that the financial statements of TRDC/KPC, as so prepared, would be combined with those of EAP&L\. It was also agreed that the annual accounts of TRDC, KPC and EAP&L, including the accounts on depreciation basis  - 26 - for TRDC and KPC, would be audited by independent auditors acceptable to the Bank and that copies of the certified financial statements and of the auditors' reports would be submitted to the Bank within six months of the end of the financial year\. Since TRDC and KPC now prepare their accounts on a deprecia- tion accounting basis, it has been agreed that EAP&L, TRDC and KPC would in future continue to submit their audited accounts to the Bank within six months of the end of the financial year, with combined accounts statements of KPC/TRDC and KPC/TRDC/EAP&L and that the combined accounts statemencs would not be required to be audited (para\. 7\.01 (e)\. The performance of the accountants, Gill and Johnson, who currently audit the accounts of the three companies, has been generally satisfactory and they are acceptable to the Bank\. Training 5\.13 EAP&L has several training programs designed to produce qualified staff to meet the company's normal growth and to compensate for the frequent loss of employees to other sectors of the economy because of salary differen- tials\. The cost of training in 1978 was KE 490,000 for 156 trainees\. Of these, there were 23 students at university and 9 graduate apprentices pri- marily in mechanical and electrical engineering\. The 127 trainees in the Technicians Training Program are sponsored by EAP&L at the polytechnical schools in Nairobi and Mombasa\. Candidates who do not meet the requirements for training as technicians are apprenticed as linemen, mechanical and elec- trical fitters, welders, etc\. Middle and senior managers attend management courses conducted by the Kenya Institute of Administration and the East African Management Institute\. 5\.14 KPC would use funds from the loan to enlarge the foregoing programs so as to provide the necessary skilled manpower that is needed at all levels within the utility\. Particular emphasis would be placed on the training of operators and maintenance personnel because KPC staff are unfamiliar with this type of project\. Special attention would also be given to training additional staff as linemen for the distribution department\. Agreement has been reached on the training of staff of EAP&L, and the extension of on-going training programs both in Kenya and abroad\. Insurance 5\.15 The three power companies maintain sufficient coverage against loss through fire, machinery breakdown, special perils (such as earthquakes) as well as against consequential loss, in addition to coverage for such things as their motor vehicle fleet, workmen's compensation, personal accidents, third party liability, etc\. Project Monitoring System 5\.16 EAP&L has agreed to the project monitoring system which is pre- sented in Annex 5\.2 and to the requirements of the Completion Report\.  - 27 - VI\. FINANCIAL ASPECTS Introduction 6\.01 The activities of the three companies comprising the public power supply in Kenya are closely connected through common management\. The finan- cial position of the borrower, KPC, should not therefore be evaluated in isolation but jointly with that of TRDC and EAP&L\. Financial statements of KPC and consolidated statements for all the three companies combined, covering the period 1975 through 1978 (actual) and 1979 through 1984 (estimated), are presented in Annexes 6\.1 to 6\.6\. Assumptions made in these statements are given in Annex 6\.7 together with explanatory notes\. 6\.02 The revenues of KPC and TRDC are determined on the basis of "ascer- tained cost" as defined in their respective bulk-supply agreements\. Ascer- tained cost (Annex 6\.7), described briefly, comprises operation and admin- istration costs, interest and redemption payments for debt, income and other taxes and an amount to meet abnormal expenses and a part of the development expenses\. The two bulk supply companies, while separate legal entities, should, for all practical purposes, be considered a single unit since they are both wholly owned by the Government, have similar nature of operations, and sell the entire energy purchased or generated by them to a single entity, EAP&L\. Past Operations and Present Financial Position 6\.03 As will be seen from Annex 6\.1, net assets (fixed assets, invest- ments and working capital) of KPC are estimated at about KL 14 million at the end of 1979\. Most of these assets were financed by borrowing, all of which debt is payable in sterling\. Net gain from the devaluation of UK pound from time to time since 1967 is reflected as a part of equity\. The debt equity ratio at the end of 1979 is expected to be 17/83\. By the end of 1983, after completion of the project, net assets are expected to be about KL 48 million and the debt equity ratio 46/54, which is satisfactory\. However, it is more significant to consider the financial position of KPC on a combined basis with the other two companies (para\. 6\.05)\. 6\.04 During the three years 1975 to 1977, the rate of return earned by EAP&L, 7\.3%, 2\.2% and 7\.3% respectively, was lower than for the bulk supply companies, which was 8\.3%, 7\.4% and 9\.2%, respectively\. This resulted from payment of the development surcharge to TRDC during these years which was more than the amount required to equalize the rate\. The financial covenants of the IBRD Loan 1147-KE required a minimum rate of return of 8\.5% on average net fixed assets revalued annually, including work in progress for EAP&L as well as KPC and TRDC combined\. These requirements are being modified for the proposed loan (paras\. 6\.06, 6\.09 and 6\.14)\.  - 28 - 6\.05 The combined balance sheet contained in Annex 6\.4 shows that, at the end of 1979, the total net assets of the three companies are expected to be KE 171 million and the debt equity ratio 35/65\. It is apparent, therefore, that on a combined basis, the three companies are conservatively capitalized\. 6\.06 The effect of currency rate fluctuations in the past has had no adverse effect on the foreign currency debt of the three companies, as the official rate of exchange of the Kenya shilling has remained quite stable\. The rate of return covenant (para\. 6\.09) for this loan repeats the provision for the annual revaluation of assets on a price index, agreed between EAP&L and the Bank, which takes into account the increases in the replacement cost of fixed assets (para\. 7\.01f)\. 6\.07 Annex 6\.4 indicates that the three companies havre adequate working capital and satisfactory cash positions\. There has been good control of debtors; accounts receivable amounted to only a little more than two months' billing at the end of 1978\. Net income of the three companies for the years 1975, 1976, 1977 and 1978 (Annex 6\.5), expressed in million KE, was 3\.1, 3\.1, 6\.0 and 9\.3 as against the estimates (prepared during the appraisal of the Gitaru Project in 1974) of 2\.4, 4\.2, 4\.4 and 6\.7 respectively, and shows a satisfactory position\. EAP&L's Tariffs 6\.08 On the basis of power tariff study completed by the Bank in 1977, a tariff structure, taking into consideration long-term marginal costs, was introduced throughout the country in January 1979\. This is estimated to bring in an average revenue of 42 Kenya cents or 6 US cents per kWh in 1979\. 1/ A fuel oil surcharge can be added to the tariff to allow EAP&L to recover from its consumers the bulk of any increase in the cost of fuel used in power generation\. The electricity tariff structure is described in Annex 6\.8\. EAP&L, while accepting the need for future tariff adjustments, indicated that it would not be able to meet in the future the minimum rate of return of 8\.5% required by the financial covenants of IBRD loan 1147-KE (para\. 6\.04)\. The Bank accepted this position and agreed to lower rates of return (para\. 6\.14) since working capital and cash positions are at acceptable levels (para\. 6\.07)\. EAP&L has, in the past, made timely adjustments to its tariffs in an effort to meet agreed rate of return requirements and is expected to make appropriate tariff increases in the future\. 1/ Electricity tariffs for some other East African countries converted at official exchange rates into US cents per kWh are: Botswana 3, Malawi 5, Mauritius 9, Sudan 10, Swaziland 3, Tanzania 6\.  - 29 - Proposed Financing Plan 6\.09 The financing plan includes a 10% increase in EAP&L's tariffs from July 1, 1980 and further annual increases by an average of 20%, 9%, 11% and 13% from January 1, 1981 through January 1, 1984 1/ respectively, continuation of the development surcharge payable by EAP&L to the bulk supply companies, issue of further KPC equity subscriptions of par value KL 1\.75 million to the Government of Kenya and a CDC loan, a part of which would be used to finance local currency expenditure\. To help finance TRDC's development projects, EAP&L has in the past paid annually to TRDC a development surcharge which was computed so that it provided the two bulk supply companies, TRDC and KPC, with a rate of return which was similar to that of EAP&L\. The development surcharge which was being paid to help finance the Gitaru project was discontinued after 1978 as that project was completed in mid-1978\. EAP&L has suggested that it should continue to pay the development surcharge to help finance the proposed project and that from 1980, the surcharge should be paid to KPC and that, to simplify calculation of its amount, it should be paid at a rate of 2 Kenya cents per Kwh of energy supplied to EAP&L by the two bulk supply companies\. However, as the requirement of funds would vary from year to year depending on the pattern of disbursements and other factors, EAP&L's suggestion was accepted subject to the further requirement that, should this amount not prove adequate to provide the local currency funds needed for the proposed project in any particular year, EAP&L would provide additional funds required up to an amount which would make the rate of return of the two bulk supply companies in respect of any year equal to 8\.5% of their average revalued net fixed assets in operation (para\. 7\.01g)\. Thus, the local currency costs of the project are proposed to be provided by continuation of the development sur- charge, an equity subscription by the Government of Ki 3 million and a local currency amount of K1 4\.3 million in the CDC loan\. The Government has paid to KPC K£ 1\.25 million as equity subscription in 1978 and has agreed to contribute additional equity subscriptions of KE 1\.25 million in 1979 and K1 0\.5 million in 1980 (para\. 7\.01h)\. 6\.10 A forecast of KPC's sources and application of funds for the period 1979 to 1984 is presented in Annex 6\.3\. The financing plan of KPC for the project construction period 1979-1982, along with that of the three companies combined, follows: 1/ Assuming an annual price escalation rate of 10%, the level of electricity tariffs in real terms would remain close to 1980 levels after the proposed tariff increases\.  - 30 - KPC/TRDC/EAP&L KPC Combined Financing Plan, 1979-1982 KE % KE US$ millions ---millions--- Requirements Construction (including Capitalized Interest) KPC - The Proposed Project 1/ 30\.74 100 30\.74 82\.08 35 - Other 0\.07 - 0\.07 0\.19 - TRDC - Gitaru and Kiambere - - 11\.84 31\.61 13 EAP&L- including 220 kV Line - - 46\.57 124\.34 52 Subtotal 30\.81 100 89\.22 238\.22 100 Increase in Working Capital -0\.18 - -4\.71 -12\.57 -5 Decrease - Deferred Taxes 3\.45 9\.21 4 Increase in Reserve and Equalization Fund (see Annex 6\.7, para\. 4) - - 0\.78 2\.08 1 Total Requirements 30\.63 100 88\.74 236\.94 100 Sources of Funds Net Cash Generation 12\.96 42 71\.97 192\.16 81 Less: Debt Service -4\.68 -15 -34\.50 -92\.11 -39 Dividends - - -4\.16 -11\.11 -4 Net Internal Cash Generation 8\.28 27 33\.31 88\.94 38 Increase in Share Capital 2/ 1\.75 6 1\.75 4\.67 2 Grants 1\.29 3\.45 1 Loans Project - Proposed IBRD 3/ 14\.66 48 14\.66 39\.14 16 - CDC 4/ 5\.94 19 5\.94 15\.86 7 Other Loans for EAP&L and TRDC Projects - - 31\.79 84\.88 36 Total Borrowings 20\.60 67 52\.39 139\.88 59 Total Sources of Funds 30\.63 100 88\.74 236\.94 100 1/ With preliminary expenditure in 1978 of KE 1\.06 million and expenditure in 1983 of KE 1\.3 million, and KE 0\.25 million in 1984 the total esti- mated cost of the project is KE 33\.35 million (US$89\.0 million)\. 2/ Equity subscription of KE 1\.25 million was paid in 1978 and, together with it, the total equity funds allocated are KE 3 million, payable to KPC by the Government\. 3/ With KE 0\.33 million (US$0\.87 million) to be relent to TRDC for investi- gations for Kiambere hydroelectric project, the totaL amount of the Bank loan is proposed to be US$40 million\. 4/ Additional drawdowns in 1983 and 1984 of KE 1\.28 million and KE 0\.27 million respectively\.  - 31 - 6\.11 It is appropriate to consider the financing plan on the basis of the combined sources and requirements of the three companies, eliminating inter-company transactions as though they were merged into one company\. The forecast of the combined requirements and sources of funds on this basis, of KPC, TRDC and EAP&L for the period 1979-1984, is presented in Annex 6\.6\. The summarized financing plan of the three companies, given in the table in the preceding paragraph, shows that of the total construction and working capital requirements of the three companies for 1979-1982, 38% would be financed by net internal cash generation after providing for debt service and dividends, 2% from increase in share capital, 1% from CIDA grants and the balance by borrowings: 16% by the proposed IBRD loan, 7% by a loan from CDC, 30% by other loans which are available to EAP&L and TRDC or are in the process of being negotiated; and 6% from an unidentified loan which would be required for the Kiambere Project\. Completion of cofinancing arrangements for the proposed project is a condition of effectiveness of the proposed loan (para\. 7\.02b)\. As indicated in Annex 6\.6, the internal cash generation covers the annual debt service requirements by an ample margin, ranging from an estimated 1\.7 times in 1979 to about 3\.5 times in 1984, which is adequate\. 6\.12 If additional funds are required to complete the project because of cost overruns, or due to outside loans and credits being insufficient, the Government has guaranteed that it will provide the additional financing requirement in accordance with arrangements satisfactory to the Bank (para\. 7\.Oli)\. Future Earnings 6\.13 Forecasts of revenues and expenses are attached for KPC (Annex 6\.2) and for the three companies combined (Annex 6\.5)\. The development surcharge has been calculated to provide KPC and TRDC with funds required by them for their capital development programs and EAP&L's tariffs adjusted to provide a minimum rate of return on average net fixed assets in operation of 7% in 1981 and 1982 and 8% in 1983 and 1984\. 6\.14 EAP&L has undertaken to ensure that the combined net operating income of the three companies, KPC, TRDC and EAP&L, will be not less than 6% of their combined average revalued net fixed assets in operation in 1980, 7% in 1981 and 1982 and 8% thereafter\. The Government has agreed that it will take or cause to be taken all actions necessary to permit EAP&L to obtain revenues sufficient to yield these rates of return (para\. 7\.01j)\. For this purpose, the depreciation amount used to determine operating income would be on revalued amount of fixed assets\. Debt Limitation 6\.15 Debt service coverage is relevant only in relation to the combined position of the three companies,particularly because of the rate of return requirement for KPC/TRDC and EAP&L (para\. 6\.14) and the debt service of the  - 32 - bulk supply companies, KPC/TRDC, being payable by EAP&L as a part of ascer- tained cost (Annex 6\.7)\. In line with the requirements of IBRD Loan 1147-KE for the Gitaru project of TRDC, no long-term debt may be incurred by EAP&L, TRDC, KPC (or any similar company which may be established in the future as a bulk licensee selling power to EAP&L) without prior Bank approval, unless cash earnings before provision for depreciation are at least 1\.5 times the maximum debt service for any succeeding fiscal year, on all debt including the debt to be incurred\. This test is made on the basis of combined revenue accounts and debt service after eliminating inter-company payments\. The debt service coverage of the three companies is expected to be well above 1\.5 and a similar covenant has been incorporated for the proposed IBRD loan (para\. 7\.01k)\. Security Arrangements 6\.16 Annex 6\.9 describes the security arrangements for the loan capital of EAP&L,KPC and TRDC\. The outstanding foreign debt of KPC is estimated to be about US$7\.8 million equivalent in 1977 of which about US$3\.3 million is secured by a floating charge or lien on all present and future assets\. It has been agreed with KPC that if any lien is created in the future on any of its assets as security for any debt, such lien would eqlually and ratably secure the proposed loan (para\. 7\.011)\. VII\. AGREEMENTS REACHED AND RECOMMENDATIONS Agreements Reached 7\.01 Agreement was reached by the Bank, the Government, EAP&L and KPC that: (a) Commitment of funds from the proposed loan for Unit 2 of the power generation plant, included in the project, would be made only after assurance is received that about 80% of the steam required for two units would be available (para\. 3\.16); (b) KPC would be issued a generating station license, in respect of the project, required under the Electric Power Act before December 31, 1980 (para\. 5\.04); (c) EAP&L would continue to employ consultants satisfactory to the Bank in carrying out the project\. KPC has appointed an engi- neering expert to be responsible for the supervision of the drilling and steam production aspects of the project (para\. 5\.09); (d) EAP&L would continue to operate in accordance with sound business, public utility, financial and insurance practices; and exchange information with the Bank (para\. 5\.11);  - 33 - (e) Auditors satisfactory to the Bank would be employed and copies of annual financial statements of KPC, TRDC and EAP&L with auditors' reports thereon, together with combined statements of KPC/TRDC and KPC/TRDC/EAP&L, would be submitted to the Bank (para\. 5\.12); (f) Fixed assets of the three companies would continue to be revalued for the purpose of determining rate of return (para\. 6\.06); (g) EAP&L would pay a development surcharge to KPC during the construction period of the proposed project to provide a part of KPC's requirements of local currency funds for the project (para\. 6\.09); (h) The Government would contribute an additional KE 1\.75 million for KPC's equity capital (para\. 6\.09); (i) The Government would provide additional funds, if required, to complete the proposed project (para\. 6\.12); (j) Minimum annual rate of return are to be earned by the three power companies on a combined basis as follows: 6% in 1980, 7% in 1981 and 1982 and 8% thereafter; and timely tariff adjustments are to be made to achieve this rate (para\. 6\.14); (k) Debt limitation covenant of Loan 1147-KE would be repeated (para\. 6\.15); and (1) Equal and ratable security for the proposed loan would be made if any lien were created in the future on KPC's assets (para\. 6\.16)\. 7\.02 The following are conditions of effectiveness of the loan: (a) Extension of the management agreement between EAP&L and KPC (para\. 5\.11); (b) Completion of cofinancing arrangements (para\. 6\.11)\. Recommendation 7\.03 With the above agreements, the project is suitable for a Bank loan of US$40 million equivalent for a term of twenty years including a grace period of five years\. December 20, 1979  - 34 ANNEX 2\.1 KENYA: OLKARIA GEOTHERMAL POWER PROJECT EXISTING GENERATING PLANT Set Rating Set Rating Station No\. kW Year Station No\. kW Year Interconnected System Interconnected System (contd\.) Gitaru 1 72,500 1978 Ruiru 1 1,500 1949 Hydro 2 72,500 1978 Diesel 2 1,500 1950 (TRDC) Kamburu 1 30,000 1974 Kisumu 2 200 1947 Hydro 2 30,000 1974 Diesel 3 200 1947 (TRDC) 3 30,000 1976 4 380 1949 5 380 1952 Kindaruma 1 22,000 1967 6 605 1955 Hydro 2 22,000 1967 (TRDC) 3 150 1967 Kericho 1 700 1960 Diesel 2 700 1960 Wanjii 1 2,700 1952 Hydro 2 2,700 1952 Eldoret 1 550 1952 (KPC) 3 1,000 1952 Diesel 2 550 1952 4 1,000 1952 3 400 1954 Tana 1 2,000 1933 Lanet 1 550 1952 Hydro 2 2,000 1933 Diesel 2 550 1952 (KPC) 3 2,400 1950 4 1,100 1955 4 4 ~~~~~~ ~~~~~5 750 1957 56 44'4488 I9533 6 750 1958 Ndula 1 1,000 1925 Hydro 2 1,000 1925 Mbaraki 1 900 1947 (EAP&L) Diesel 2 800 1950 3 800 1951 Mesco Hydro 1 380 1933 4 800 1951 (EAP&L) 5 800 1951 8OG 1951 Sagana Falls 1 500 1955 Hydro 2 500 1955 Malindi 1 800 1959 (EAP&L) 3 500 1962 Diesel 2 800 1959 3 800 1963 Selby Falls 1 180 1952 Hydro 2 180 1952 Total Inter\. System 463,600 (EAP&L) Isolated Stations Nairobi South 1 2,240 1956 Diesel 2 2,240 1956 Homa Bay 1 169 1967 Gas Turbine 3 13,500 1973 Diesel 2 169 1967 4 2,200 1955 3 169 1967 Diesel 6 1,050 1959 Kitale 1 150 1949 7 1,050 1959 Diesel 2 150 1949 8 1,050 1954 3 150 1949 9 1,050 1955 4 180 1954 10 2,188 1957 5 300 1962 11 2,188 1957 6 320 1958 12 2,188 1957 Lamu 1 105 1969 Kipevu Diesel 2 65 1969 Steam Turbine 2 5,000 1955 3 5,000 1961 Garissa 1 102 1972 4 12,500 1962 Diesel 2 102 1972 5 12,500 1965 3 70 1972 6 30,000 1971 7 33,000 1976 Total Isolated Stations 2,200 Gas Turbine 8 12,200 1970 Note: Diesel steam and gas turbine power stations are all owned by EAP&L\. December 1979  - 35 - ANNEX 2\.2 KENYA; OLKARIA GEOTHERMAL POWER PROJECT FORECAST OF PRODUCTION CAPABILITY AND DEMAND FOR AVERAGE AND DRY WATER YEARS …-----------GWh----------------- ----------Productive Capacity (GWh) …__________ Total Avg\. Generated Maximum Installed Effective Hydro Hydro UEB Year Total Units X Sent and Demand Capacity Capacity Avg\. Dry Non- with Dry Year Sold Increase Out Purchased (MW) (MW) (MW) Year Year Thermal Firm UJEB Year Actual 1976 1,082 8\.1 1,249 1,280 207 320 295 563 - 563 - 240 56 1977 1,203 11\.2 1,378 1,405 223 466 430 785 - 1 44 272 785 _ 1978 1,301 8\.1 1,468 1,529 256 466 430 1,053 - 259 217 1,053 - Forecast 1979 1,418 9\.0 1,643 1,670 269 466 430 1,100 690 750 254 2,104 1,440 1980 1,559 9\.9 1,802 1,829 289 466 430 1,210 690 750 254 2,214 1,440 1981 1,691 8\.5 1,958 1,989 316 481 445 1,230 690 800 254 2,284 1,490 1982 1,812 7\.2 2,101 2,130 338 520 485 1,460 1,120 850 254 2,564 1,970 1983 1,938 7\.0 2,249 2,273 362 535 500 1,590 1,120 915 254 2,759 2,035 1984 2,073 7\.0 2,409 2,439 389 535 500 1,620 1,120 950 254 2,824 2,070 1985 2,219 7\.0 2,577 2,607 417 535 500 1,620 1,120 950 254 2,824 2,070 1986 2,378 7\.2 2,765 2,795 451 655 620 2,400 1,640 950 254 3,604 2,590 1987 2,550 7\.2 2,967 2,997 481 715 680 2,400 1,640 1,350 254 4,004 2,990 1988 2,737 7\.3 3,185 3\.215 517 715 740 2,400 1,640 1,750 254 4,404 3,390 Assumptions 1981 - start of impounding of water in Upper Reservoir\. 1981 - 1 x 15 MW unit (geothermal)\. 1982 - 2 x 20 MW unit at Upper Reservoir (hydro)\. 1983 - 1 x 15 MW unit (geothermal)\. 1986 - 2 x 60 MW unit at Kiambere (hydro)\. 1987 - 1 x 60 MW unit at Mombasa (thermal)\. 1988 - 1 x 60 MW unit at Mombasa (thermal)\. December 1979  -36- ANNEX 2\. 3 KENYA OLKARIA GEOTHERMAL POWER PROJECT FORECAST OF PRODUCTION CAPABILITY_ AND DEMAND FOR AN AVERAGE WATER YEAR <E m o 4500 < B EW~~~~~~o 4000 E 3500 Bfl B~~~ GWH t ~~< OLKAFiIA OUTPUT 3000 X I UGANDA~~~~~~~~ ~Wol BULK SUPPLY1 December 1979  - ~~~~~~ ~37 - ANNEX 2 \.4 KENYA OLKARIA GEOTHERMAL POWER PROJECT FORECAST OF PRODUCTION CAPABILITY AND DEMAND WHEN RECORDED DRY YEAR RECURS AND 254 GWH NOT AVAI LABL E F ROM UGANDA --4000_ 350 0 x _ <E 3000SXGHl~ z) 200C _ g _0 ~ QKAOTU ,\. 0 979 1 80 92 198 WorldR Ian OUTPUT5 Decmbr 97  - 38 - ANNEX 3\.1 Page 1 of 3 KENYA OLKARIA GEOTHERMAL POWER PROJECT Description of Project 1\. This project, because of its extended nature, has three distinct phases: the first, preparatory works; the second, relating to Unit 1 and the third to Unit 2\. Commitment for Unit 2 would not be made until about 80% of the steam required for two units has been proven\. In summary, the phases are as follows: Preparatory Works (1) the provision of a new drill rig, equipment and supplies; (2) the drilling of production wells for steam supply; (3) consultants\. Unit No\. 1 (1) a gathering system to bring the steam from the wells to the powerhouse; (2) a powerhouse for one 15-MW unit; (3) installation of one 15-MW turbine generator and associated controls; (4) a switching station; (5) housing and access roads; (6) 26 km of 132-kV transmission line; (7) consulting engineering; Unit No\. 2 (1) drilling of production wells; (2) the second 15-MW turbine generator and its associated equipment and minor civil works; (3) consulting engineering\. Training and Studies (1) training of KPC management and staff; (2) studies of further geothermal potential and for the next power project\. Characteristics of the Geothermal Field 2\. 2Although the Olkaria geothermal field extends over an area exceed- ing 50 km , the area of 2the reservoir being considered for development at this time is some 12 km \. Under this region, circulating ground water is  - 39 - ANNEX 3\.1 Page 2 of 3 heated by the hot rock to a temperature of about 3000C and is almost wholly contained by a nearly impervious caprock about 700 meters below grade\. Some steam escapes through fissures and fractures in the rock and appears at the ground surface in scattered locations\. The volume of escaping steam is replaced by water from Lake Naivasha seeping down through porous sections of the bedrock\. At depth, the water is saline and contains fluoride, calcium, magnesium and sulphate salts\. The steam contains non-condensable gases, the most dominant being carbon dioxide, but hydrogen, hydrogen- sulphide and methane are also present\. Scaling of silica and calcite can be expected when the pressure is reduced and the water flashes into steam\. Long-term tests at the existing well-heads have been conducted to determine the appropriate operating pressures to minimize scaling\. Preparatory Works 3\. Between 1970 and 1976 approximately US$5\.6 million were expended in studies and in drilling six production wells and associated works\. These costs have not been included in the estimates for this project\. The cost of drilling additional production wells, a new drilling rig and associated equipment and materials sufficient to operate until the end of 1980 is included in the Engineering Loan S-12-KE\. Each production well is 22" in diameter at the top and reduces in several steps to 8-3/4" in diameter 900 to 1,300 meters below ground level\. As the well is drilled, a steel liner is concreted in place, beginning with an 18-1/2" O\.D\. casing at the top\. The lower end of the well contains a slotted 7" O\.D\. diameter casing which is not concreted, allowing the steam to flow into the casing\. Well-head Equipment and Steam Gathering System 4\. The equipment at the top of each well would consist mainly of a steam and water separator, an exhaust silencer, control valves, testing and measuring devices\. The steam would be conveyed to the powerhouse through a system of insulated pipelines, and designed to take advantage of the topography, and allow for expansion and contraction\. Powerhouse and Equipment 5\. The equipment for this station would require a rather simple steel structure with no major civil works\. Initially, only the structure for Unit 1 would be erected to house the turbine and generator, associated control equipment and a small workshop\. The 15-MW turbo-generator has been designed using materials specially selected to withstand the corrosive and erosive characteristics of the steam emitted from the production wells\. The site is about 7 km from Lake Naivasha, and therefore a system with a forced draft cooling tower would be the most economical solution to meet the cooling requirements\. Make-up water would not be required because the condensate would exceed the water lost in evaporation\.  - 40 - ANNEX 3\.1 Page 3 of 3 Electrical Installation 6\. Considerable cost savings in switching and transformers have been achieved by connecting the two 15-MW units to a single 36-MVA transformer, stepping up to 132 kV\. Suitable circuit breakers at Olkaria and the sub- station at Naivasha allow for convenient maintenance and adequate fault protection\. Transmission Line 7\. The 132-kV transmission line would be constructed from material salvaged from part of a 275-kV line which requires removal because of the flooding of the Upper Reservoir\. Several new galvanized steel towers and a quantity of new conductor, insulators and miscellaneous hardware would be required\. The shortest route for the transmission line from Olkaria to Naivasha, where it will join the Nairobi to Uganda transmission line, is through Hell's Gate Gorge, a distance of 20 km\. However, by a short diversion of about 2 km, the line would bypass this frequently visited tourist attraction and leave it in its natural state\. Training and Studies 8\. During the course of the work, a complete reevaluation of the geothermal field would be made, taking into account all of the additional information that has been gathered since drilling was resumed in March 1978\. The information has been continually assessed as work progresses but a more complete and in-depth review is now required\. Funds have been included to prepare a feasibility study of the Kiambere Project forecast in the National Power Development Plan to be required by 1984\. The project would be compared with further geothermal or conventional thermal genera- tion to determine the most desirable solution to the need for increased power generation\. Training would continue in the operation and maintenance of the drilling equipment\. Specific training in various trades and for technical and management personnel would be carried out in Nairobi, Mombasa and overseas as required\. Unit 2 9\. KPC has an option to purchase the second unit which could be exercised any time prior to February 1, 1981\. A decision would be required by the Bank in the fall of 1980 on the advisability of committing funds for the purchase of Unit 2 and its associated equipment\. This would be determined by the rate of success in drilling that had been achieved to date\.  41 - AMNEX 3\. 2 KENYA OLKARIA GEOTHERMAL POWER PROJECT Implementation Schedule 1978 1979 19960 1981 1982 1983 +J +1 I \.1MA|M|J IA I1J|A|S|O|N0 J|F|M|A|M| J |JASON JI F|M|A|M| J J|A| SON|D J|F | M |J|A| C J |F |M|A|M J | NI Well Drilling New Drill Rig * * V Mechanical Electrical Equipment Unit No 1 * V Mechanical Electrical Equipment Unit No\. 2 V Turbine Generator Unit No\.1 * V Turbine Generator Unit No\. 2 Switching Station * * V Civil Works Unit No\. 1 * * V Civil Works Unit No\. 2 Transmission Line * 0 V Roads and Housing * * V * Tender Documents issued * Receipt af Tenders V Contract Signature V in Service Date Construction or Erectaon wonrd Ba-k - 20971 December 1979  - 42 - ANNEX 3\.3 KENYA: OLKARIA GEOTHERMAL POWER PROJECT ESTIMATED SCHEDULE OF DISBURSEMENTS (US$ millions) IBRD Fiscal Year Quarterly Cumulative Disbursements and Quarter Ending Disbursement at End of Quarter 1980 June 30, 1980 7\.0 7\.0 1981 Sept\. 30, 1980 4\.0 11\.0 Dec\. 31, 1980 4\.0 15\.0 Mar\. 31, 1981 4\.0 19\.0 June 30, 1981 5\.0 24\.0 1982 Sept\. 30, 1981 1\.0 25\.0 Dec\. 31, 1981 1\.0 26\.0 Mar\. 31, 1982 2\.0 28\.0 June 30, 1982 3\.0 31\.0 1983 Sept\. 30, 1982 3\.0 34\.0 Dec\. 31, 1982 2\.0 36\.0 Mar\. 31, 1983 1\.0 37\.0 June 30, 1983 1\.0 38\.0 1984 Sept\. 30, 1983 1\.0 39\.0 Dec\. 31, 1983 1\.0 40\.0 December 1979  - 43 - ANNEX 4\.1 KENYA: OLKARIA GEOTHERMAL POWER PROJECT DIESEL ALTERNATIVE COST ESTIMATE (mid-1979 prices) KI THOUSANDS US$ THOUSANDS Phase I - 15 MW Installation Local Foreign Total Local Foreign Total Civil works 420 300 520 1,120 270 1,390 Generating equipment 424 3,000 3,224 606 8,010 8,610 Electrical equipment 127 127 - 340 340 Fuel Storage 139 139 - 370 370 Engineering 30 300 330 80 800 880 Subtotal 674 3,666 4,340 1,800 9,790 11,590 Physical Contingencies 66 334 400 180 930 1,110 Total 740 4,000 4,740 1,980 10,720 12,700 Phase II - 15 MW Installation Civil works 300 100 400 800 270 1,070 Generating equipment 240 3,200 3,440 640 8,540 9,180 Electrical equipment 135 135 - 360 360 Fuel Storage 148 148 - 390 390 Engineering 200 200 - 530 530 Subtotal 540 3,783 4,323 1,440 10,090 11,530 Physical Contingencies 60 377 437 160 1,010 1,270 Total 600 4,160 4,760 1,600 11,100 12,700 Assumptions: Capital costs based on price levels mid-1979 and shadow price rate of 1\.40 have been applied to the foreign exchange components\. Local labor has not been shadow priced\. December 1979  _ 44 - ANNEX 4\.2 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY LEAST COST SOLUTION (including all costs expended since March 1978) (KLThousands) Geothermal Program Diesel Program Operation Operation Diesel Capital and Total Capital and Fuel Steam Plant Total Year Cost Maintenance Cost Cost Maintenance Cost Fuel Cost C6st 1978 815 - 815 - - 1979 2,205 - 2,205 210 - - - 210 1980 13,220 - 13,220 1,950 - - - 1,950 1981 2,830 200 3,030 5,465 250 350 875 6,940 1982 7,220 200 7,420 4,410 350 700 1,645 7,105 1983 650 300 950 685 450 1,210 2,855 5,200 1984 -2,100 400 -1,700 - 450 1,385 3,300 5,135 1985-1996 - 400 4oo _ 450 1,385 3,300 5,135 1997-2006 - 400 400 _ - - 4,170 4,170 Equalizing Discount Rate: 26% Equalizing Sensitivity Analysis Discount Rate Change in Capital Cost + 10% 24% Change in Fuel Cost - 10% Assumptions: Capital costs based on price levels mid-1979 and shadow price rate of 1\.40 have been applied to the foreign exchange components\. Local labor has not been shadow priced\. Salvage value of KL 1\.5 million for drill rig credited to geothermal program in 1984\. Life of Project - 25 years; life of diesel alternative - 15 years\. Geothermal operating costs include the cost of drilling two new wells every three years\. Fuel Price Diesel fuel, 1979 Kl 24,750/Gwh Steam plant fuel, 1979 KI 15,675/Gwh December 1979  45 - ANNEX 4\.3 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY LEAST COST SOLUTION (assuming all costs expended before September 1979 as "sunk costs") (KL Thousands) Geothermal Program Diesel Program Operation Operation Diesel Capital and Total Capital and Fuel Steam Plant Total Year Cost Maintenance Cost Cost Maintenance Cost Fuel Cost Cost 1979 1,000 - 1,000 210 - - - 210 1980 13,220 - 13,220 1,950 - - - 1,950 1981 2,830 200 3,030 5,465 250 350 875 6,940 1982 7,220 200 7,420 4,410 350 700 1,645 7,105 1983 650 300 950 685 450 1,210 2,855 5,200 1984 -2,100 400 -1,700 - 450 1,385 3,300 10,335 1985-1996 - 400 400 - 450 1,385 3,300 5,135 1997-2006 - 400 400 - - \.4,170 4,170 Equalizing Discount Rate: 34% Equalizing Sensitivity Analysis Discount Rate Change in Capital Cost + 10% 28% Change in Fuel Cost - 10% AssumPtions: Capital costs based on price levels mid-1979 and shadow price rate of 1\.40 have been applied to the foreign exchange components\. Local labor has not been shadow priced\. Salvage value of KL 1\.5 million for drill rig credited to geothermal program in 1984\. Life of Project - 25 years; life of diesel alternative - 15 years\. Geothermal operating costs include the cost of drilling two new wells every three years\. Fuel Price Diesel fuel, 1979 KL 24,750/Gwh Steam plant fuel, 1979 KL 15,675/Gwh December 1979  - 46 - ANNEX 4\.4 Page 1 of 2 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY LIMITED Method and Assumptions Made to Determine the Rate of Return on Investment 1\. The rate of return on the investment is defined as the discount rate at which the present values of all project-related capital and operating costs, on one side, and the revenues attributable to the project, on the other, over the life of the project, are equal\. 2\. The capital costs of Olkaria (exclusive of costs incurred prior to 1978) are estimated at August 1979 constant prices\. The economic life of Olkaria was assumed to be 25 years\. 3\. Shadow prices were applied to foreign cost at a rate assumed to be 40% above the official exchange rate\. Local unskilled labor was not shadow priced because the small percentage work involved would not affect the result of the calculation to any significant extent\. The operating costs include the cost of drilling two new wells every three years\. 4\. The streams of costs and revenues are presented in the table on page two of this annex\. The rate of return on investment is 13% based on 1979 tariffs\. 5\. The rate of return on investment is sensitive to changes in costs and revenues\. A 10% increase in total costs together with a 10% decrease in benefits would reduce the rate of return to 10%\.  - 47 ANNEX 4\.4 Page 2 of 2 KENYA KENYA POWER COMPANY OLKARIA GEOTHERMAL POWER PROJECT Return on Investment (KE Thousands) Project Operation and Transmission Saving in Olkaria Incremental Estimated Capital Maintenance and Distri- Fuel Costs Total Output Sales from Revenues Year Costs Olkaria bution Costs Thermal plants Total tGwh) Olkaria (Gwh) Kt\.021/Gwh 1978 815 _ _ _ 815 _ _ _ 1979 2,205 - 2,205 - - - 1980 13,220 - 500 13,720 - - - 1981 2,830 200 1,000 -980 3,010 50 10 210 1982 7,720 200 1,000 -1,880 7,040 95 20 420 1983 650 300 1,000 -3,250 -1,300 165 33 690 1984 -2,600 400 - -3,750 -5,950 190 38 800 1985-1987 - 400 _ -3,750 -3,350 190 38 800 1988-2W" - 400 - - 400 190 190 4,000 Return on Investment: K£ \.021/Gwh 1979 13% Sensitivity Analysis Return on InVeat e tt Change in Capital Cost + 10% lOX Change in Benefits - 10% Assumptions Revenues: Average tariff 1979 - KE 0\.021/Kwh Expected Life of Project: 25 years Saving in fuel costs for thermal plants for 80% of year and revenue from sales for 20% of year until 1987 when next thermal plant is commissioned\. December 1979  - 48 - ANNEX 5\.1 Page 1 of 2 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY, LIMITED History of the Power Companies 1\. The Kenya Electric Supply Industry is presently comprised of three companies: (a) The East African Power & Lighting Company, Limited (EAP&L); (b) The Kenya Power Company, Limited (KPC); and (c) Tana River Development Company, Limited (TRDC)\. 2\. A fourth is the Tana River Development Association (TRDA) which will begin producing energy in 1981\. The East African Power & Lighting Company, Limited 3\. EAP&L, which is the sole distribution company, was incorporated in 1922 by the amalgamation of two undertakings which had supplied Nairobi and Mombasa since 1907 and 1909, respectively\. It is a local private company with authorized share capital of K1 10,000,000, of which KE 9,741,504 is issued\. In addition, loan capital amounting to Kf 5\.72 million was outstanding as at the end of 1978\. Although formerly operating throughout Kenya, Uganda and Tanzania, its activities have been confined to Kenya since 1964 due to purchase of the Uganda and Tanzania undertakings by the respective Governments\. The company is primarily concerned with the commercial distribution of electricity throughout Kenya\. At present it also generates the entire power requirements of the coast system covering Mombasa, Malindi and Kwale, provides the necessary thermal back-up for the main grid system, and operates generating stations in centers not connected to the grid\. It also coordinates all sources of power, and staffs and manages the other two companies (KPC and TRDC) and, beginning in 1981, will be responsible for the Upper Reservoir generating station\. 4\. In 1970 the Government acquired a controlling interest in EAP&L when it made a successful bid for all the shares on the London Register\. Since then the Government has been purchasing shares as they come in the East African market, and its total holding together with that of government- controlled agencies is now probably in the neighborhood of 60%\. The Kenya Power Company, Limited (KPC) 5\. In 1955 EAP&L was faced with the problem of financing the con- struction of a 132-kV transmission line to interconnect the power systems of Uganda and Kenya as well as other expansion requirements\. The company did not consider it practicable to raise the required finances through new equity issues because of conservative dividend policies due to political pressures and the need for increased self-financing\. There was also revived  - 49 - ANNEX 5\.1 Page 2 of 2 political pressure for nationalization\. The company concluded it was inevitable and desirable to increase public ownership and direct government participation in the power industry\. Accordingly, it was decided to form a new company, KPC, in 1955 with an issued nominal capital of KE 100 held equally by EAP&L, the Government and Power Securities Corporation, Limited (PSC)\. 1/ KPC's function was to construct the transmission line and to take over the ownership of the two hydroelectric stations belonging to EAP&L on the Tana River\. KPC financed its requirements through issuance of L Stg\. 7\.5 million of debenture stock, the payment of the debt service on which was guaranteed by EAP&L's undertaking to purchase KPC's entire production at "ascertained cost"\. 6\. In accordance with its policy of increasing its participation in the electricity supply industry, the Government acquired 100% of KPC's issued share capital by buying out EAP&L's and Power Securities Corporation, Limited in 1971\. Tana River Development Company, Limited (TRDC) 7\. A forecast of load growth after Kenya's achievement of independence in December 1963 indicated that it would be necessary to commission further major generating capacity by 1967-68, and a reappraisal of the Seven Forks Scheme (the harnessing of the hydro potential of the Upper Tana) established Kindaruma as the most economical first stage development\. TRDC was formed in 1964 to finance the Kindaruma hydroelectric development for much the same reasons as led to the formation of KPC\. The share capital of TRDC is a nominal KE 100 which was held equally by EAP&L, the Government, Power Securities Corporation, and Commonwealth Development Corporation (CDC) until February 1971, when the Kenya Government acquired the entire stock\. CDC supplied L Stg\. 3\.5 million of a total of about L Stg\. 6 million of loan capital which was arranged for the Kindaruma project\. Kamburu Stage 1, comprising the first two generating units, was comissioned in July 1974 and the third unit in 1976\. Gitaru, the last of the Seven Forks hydroelectric projects, was commissioned in 1978\. Like KPC, TRDC sells its entire output to EAP&L at ascertained cost\. Tana River Development Association 8\. A fourth company, Tana River Development Association, is presently building the Upper Reservoir on the Tana River primarily for irrigation purposes\. Advantage of the dam has been taken by EAP&L to complete arrange- ments with TRDA to include a powerhouse and related structures and equipment at the site\. EAP&L will pay a fixed charge of KE 1\.8 million per year to TRDA from the date the reservoir is first filled to the maximum operating level\. This charge will be adjusted in relation to the cost of fuel that this powerhouse displaces at the time of commissioning\. All costs in excess of KE 245,000 for operation and maintenance of the powerhouse and other direct power-producing facilities, not including the dam, will be paid by TRDA\. 1/ PSC is a UK finance house which arranged the financing of most of EAP&L's development in the past\. It is also the parent company of EAP&L's engineering consultants\.  - 50 - ANNEX 5\.2 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY, LIMITED Project Monitoring System There are several key factors which affect the operation of a utility and the ultimate success of the project\. These have been discussed with the Borrower, and it was determined that existing systems for gathering information and statistics are acceptable, and there is no need to add new requirements for additional monitoring purposes\. The project, however, would be monitored, and the main items to be monitored are described below: 1\. Critical Items for Project Implementation (a) Progress of construction relative to the schedule; (b) Rate of drilling new wells and associated steam characteristics; (c) Production capability of wells so as to determine when the option on the second unit could be exercised; (d) On-line date of Unit 1; and (e) On-line date of Unit 2\. 2\. Staff Training Training activities will be checked against targets which have been agreed upon\. 3\. Financial (a) Review of financial status of the combined companies before April 30, 1980; and (b) Comparison of appraisal financial forecast and actual performance\.  - 51 - KENYA: OLKARIA GEOTHERMAL POWER PROJECT ANNEX 6\.1 THE KENYA POWER COMPANY, LIMITED BALANCE SHEET AS OF DECEMBER 31, 1975-19a4 (Kt Thousands) ACTUAL_ ESTIMATED 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 ASSETS Pl ANT IN OPERAT1:ON 7626 7606 7594 7604 17625 19372 44136 47013 63985 68414 LESS: DEPRECIATION \.__3608 \.__\.3810 __\._01\._ 4 4\. \. _9\.482 1026 __1213 -_19llY __16306 --12024 NET FLANT 1/ 4018 3796 3580 3390 8143 8466 31998 32894 47679 49320 WORK IN FROGRESS 0 0 2010 3074 5193 19441 2673 12593 0 0 RESERVE & EQUALIZATION FUND INVEST^ENTS 380 361\. 390 146 146 146 146 146 146 146 CUIRRENT ASSETS - CASH AND BANKS 56 230 199 67 619 94 68 90 47 47 -ACCOUNTS REC 179 6 4 145 0 0 0 0 0 0 TNVIENTORIES 0 82 165 197 200 200 200 200 200 200 TOTAL 235 318 368 409 819 294 268 290 247 247 TOTAL\. 4633 4475 6348 7019 14301 28347 35085 45923 48072 49713 L\.I APElIL I TIES EQUTITY -CAP:ITAL 2/ 0 0 0 1250 2500 3000 3000 3000 3000 3000 -RETAINED EARNINGS 0 0 0 0 0 2500 6400 10500 10500 9585 -EXCHANGE EQUAL\. RES\. 465 722 500 416 416 416 416 416 416 416 -CAPITAL RESERVE 3/ 504 545 540 583 5B3 583 583 583 583 583 -OTHER RESERVES 4/ 1210 1381 1581 3220 3101 2956 2781 1752 637 0 -REVALUATION RESER - \.-- -_ - - -- - - \. \. \.O \. _5122 \.__ 5986 __6536 __\.8616 __10259 _13853 TOTAI 21\.79 2648 2621 5469 11772 15441 19716 24867 25890 27437 L\.ONG TERM DEBT 2368 1747 3011\. 1264 2339 12556 15019 20706 21832 21926 CUR'NT LIABILITIES -ACCOUNTS PAYABLE\. 86 68 tt 8 148 190 350 350 350 350 350 EAI- \. _ \.Q 12 _\.528 _ a 138 D\. _ - \. D _ _ TOTAL 86 80 716 286 190 350 350 350 350 350 TOTAL 4633 4475 6348 7019 14301 28347 35085 45923 48072 49713 DEBT/DIEBT & EQUITY 52 40 53 19 17 45 43 45 46 44 DEBT/EQUITY 1\. 1\. 0\.7 1\.1 0\.2 0\.2 0\.8 0\.8 0\.8 0\.8 0\.8 1/ See Annex 6\.7, para\. 14\. 2/ During the years 1975 to 1977, KPC had a nominal share capital of KblOm wbolly owned by the Government of Kenya\. 3/ Capital Reserve includes losses and gains on disposal of fixed assets and Reserve and Equalization Fund (Annex 6\.7, para\. 4)\. 4/ Other Reserves include the difference between debt redemption and accumulated depreciation\. December 1979  -52 - KENYA: OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY, LIMITED ANNEX 6,2 INCOME STATEMENT FOR THE YEARS 1975-1984 (KE Thousands) ACTUAL ESTIMATED 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 OPERATING REVENUES OFN & ADMIN 202 216 213 253 249 262 340 433 469 508 INTEREST 128 94 91 62 61 43 25 1180 1725 1770 DEBT AMORTIZATION 335 267 303 1740 313 331 348 163 154 176 R S E FUND 0 23 0 23 0 0 0 0 0 0 PURCHASED ENERGY 423 394 475 438 390 390 390 390 390 390 TAXES _ _ 0 …_ _Q815 __\.l2Y42 _\._l460 __ 0 _ TOTAL SALES REV 1088 994 1082 2516 1013 1841 2852 3626 2738 2844 0lEV SURCHARGE 2/ …_…_…_…Q __ ------ _ _ _____0_0 ___2500 -\.3200 _\.4100…Q ---- 0 a TOTAL ---1088 ----4 __Q1082 --_25l6 1013 \._4341 -\.6252 ---2226 _\.__23B ___2849 OPERATING EXPENSES OPN & ADMIN 202 216 213 253 249 262 340 433 469 508 PURCHASEI, ENERGY 423 394 475 438 390 390 390 390 390 390 EIEPRECIATION 3/ 200 201 204 200 432 476 523 1192 1269 1728 TAXES 4/ 0_____ _ -----_0 _ _0 _815 __ lZ42 ___1460 ___ 0 _ _0 TOTAL - _ ___825 --8-1 _822 ____821 _\.__l021 __1243 --\.3QQ2 _\._ 3425 _ _2128 ___2626 OPERATING INCOME 263 183 190 1625 --58 2398 3750 4251 610 218 OTHER INCOME NET _____28 _____33 _____23 -40 - - _ --Q - - NET INCOME BEF INT 291 216 213 1665 -58 2398 3750 4251 610 218 INT CHARGED OF, ____132 _102 … 26 ____\._82 _\.____61 93 -5 __18Q _l225 __1220 NET INCOME 5/ 154 107 117 1583 -119 2355 3725 3071\. --1115 -1552 1/ See Annex 6\.7, para\. 4\. 2/ See Annex 6\.7, para\. 5\. 2/ See Annex 6\.7, para\. 9\. 4/ See Annex 6\.7, para\. 10\. 5/ During the years 1979, 1983 and 1984 KPC shows net losses because the development surcharge in the latter two years is payable to TRDC and not to KPC and none at all is payable in 1979\. The losses in 1983 and 1984 represent the difference between the amounts of debt amortization and depreciation\. December 1979  53 - KENYA: OLKARIA GEOTHERMAL POWER PROJECT ANNEX 6\.3 THE KENYA POWER COMPANY, LIMITED FUNDS STATEMENT FOR THE YEARS 1979-1984 (Kt Thousands) 1972 to 1979 1980 1981 1982 1982 1983 1984 TOTAL INTERNAL SOURCES -NET INCOME BEF IN -58 2398 3750 4251 10341 610 21\.8 -DEPRECIATION 432 476 523 1192 2623 1269 1728 TOTAL 374 2874 4273 5443 12964 1879 1946 OPERATIONAL RE- QUIREMENT'S -WORKING CAPITAL -46 -160 0 0 -206 0 0 -DEBT SERVICE \.__\._502 Z\.122 __ _1512 _\._1636 __\._46B2 \.__182 --_\._1246 TOTAL _\._\.461 ____862 \.__1512 _\._l1636 I 744B1 \._\. 182 _\.__196 NET AVAILABLE FROM OPERATIONS -87 2007 2756 3807 8483 0 0 CONSTRUCTION REQUIREMENTS -ONGOING WORKS 13 15 18 20 66 23 25 -PROPOSED PROECT 1966 13565 5575 9615 30741 1300 245 \. \. \._\._ __ \. _\. \.__\.__\. _\. \._ \._ \._ TOTAL \. \.__1222 1358Q ___5523 \.__2635 _30807\.BQZ 22\. 20 BALANCE rO FINANCE 2086 1\.1573 2837 5828 22324 1323 270 FINANCED BY: BORROWINGS 1388 10548 2811\. 5850 20597 1280 270 -EQUITY 125Q 0_\.I 5 _\. \.Q_\. --- Z _ \.___ - TOTAL\. 2638 11048 2811 5850 22347 1280 270 SURPLUS'SDEFICIT) OF F:IUNDS 552 --525 26 22 23 -43 0 ACCU MULAT ED 619 94 68 90 9( 47 47 NEI' AVAILABLE F'RClM ff::1:1AT' I ON1,/ DEBT SERVICE COVERAGE 0\.7 2\.8 2\.8 3\.3 2\.8 1\.0 1\.0 December 1979  - 54 - KENYA: OLKARIA GEOTHERMAL POWER PROJECT THE KENYA POWER COMPANY, LIMITED ANNEX 6\.4 TANA RIVER DEVELOPMENT COMPANY, LIMITED THE EAST AFRICAN POWER AND LIGHTING COMPANY, LIMITED COMBINED BALANCE SHEET AS OF DECEMBER 31, 1975-1984 (Ki Thousands) _ ACTUAL ESTIMATED 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 ASSE rs PLANI IN OPERATION 58898 65742 67170 120725 212030 236434 278629 300426 373529 403592 LESS: DEPRECIATION __18164 __12642 __2Q582 _22498 __52252 __63475 \._243QZ _ 8ZQ33 \._01230 _118234 NET PLANT 11 40734 46095 46583 98227 159771 172959 204322 213393 272299 284858 WORK IN PROGRESS 13718 23110 35909 3908 7193 30902 32918 57058 20105 36065 RESERVE & EQUALIZATION FUND INVESTMENTS 652 747 896 395 877 977 1077 1177 1277 1377 CURRENT ASSETS -CASH AND BANKS 1711 2518 4642 9438 2220 1777 628 5289 15196 31221 -ACCOUNTS REC 2852 2817 4291 4734 4434 5243 6805 7922 9371 11344 -INVENTORIES \. \.30 __\.4231 ___42Z3 \.__ 4244 _\._5178 ___S5858 ___6412 __2008 ___2226 \._\.10624 TOTAL 7563 9566 13206 18916 11832 12878 13845 20219 34343 53189 TOTAL 62667 79518 96594 121446 179673 217716 252162 291847 328024 375489 LIABILITIES EQ4UITY -CARITAL 11506 13813 16000 17250 18500 19000 1900( 19000 19000 19000 -RETAINED EARNINGS 3706 3896 6470 9978 12403 17116 25188 34571 48647 66022 =E)tHANGE EQUAL\. RESERVE 1927 2383 2161 2077 2077 2077 2077 2077 2077 2077 -CAPITAL RESERVE 2074 2230 2076 2244 2344 2444 2544 2644 2744 2844 -OTHER RESERVES 6713 7887 10643 14717 14476 14654 15032 14273 13024 11510 -REVALUATION RESER _\._ _ __ QO \. _ _\.61835 _Z2812 __82Q54 \._12335 _116204 _133203 TOTAL\. 25926 30209 37350 46266 111635 133103 152895 174900 201696 235356 LONG TERM 'EBrT 25084 38112 46755 59351 59171 73139 85865 98549 103421 114414 CUR'NT LIABILITIES -ACCOUNTS PAYADLE 4751 7387 7208 :L0382 6987 8254 9392 12388 16077 17209 TAXATION 991 0 1671 1487 1370 2710 3500 5500 6320 8000 DIVIDENDS PAYABLE 418 569 510 5't0 5'i0 510 510 510 510 510 -OVERDRAFTS _3422 lQO41 _ 2Q0 D 0 Q _Q _ _ TOITAL 9657 8997 9639 12379 8867 11474 13402 18398 22907 25719 DEFERRED TAXES __20 2200 \. __28 _345E \. 0 - _ \.… 0 TOIAL\. 62667 79518 96594 121446 179673 217716 252162 291847 328024 375489 ==-- :: = == = == = = =:== = = =L\.= = = = = = == = \.:-:= = :\.-\. :\.= = _%= = == = = -= = = = = == := == == = == ======= DFE BT/DtEB'T & EQUITY 49 56 56 56 3' 35 36 36 34 33 DEBT/EQUITY 1\.0 1\.3 1\.3 1\.3 0\.5 0\.5 0\.6 0\.6 0\.5 0\.5 CURRENT RATIO 0\.8 1\.1 1\.4 1\.5 1\.3 1\.1 1\.0 1\.1 1\.5 2\.1 RL-CEI:VABLES/REV X 21 16 19 19 15 15 15 15 15 15 RECEI:VABLES-DAYS 76 58 68 68 54 54 I/ See Annex 6\.7, para\. 14\. December 1979  - 55 - KENYA; OLKARIA GEOTHERHAL POWEr PROJECT ANNEX 6\.5 THE KENYA POWER COMPANY, LIMITED TANt RIaEK DEVELOPMENT COMPANY, LIMITED THE EAST AFRICAN POWER AND LIGHTING COMPANY, LIMITED COMBINED INCOME STATEMENT FOR THE YEARS 1975-1984 (KE Thousands) ACTUAL ESTIMATED 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 SALES IN GWH - _-_\. _\. \. \. A UP 10 7000 KWH/M 291\.0 299\.0 336\.0 348\.0 378\.0 415\.0 444\.0 474\.0 505\.0 536\.0 B 7000-100000 KWH/ 250\.0 283\.0 200\.0 302\.0 329\.0 356\.0 391\.0 428\.0 480\.0 517\.0 C EXC 100000 KWH/M 312\.0 356\.0 543\.0 539\.0 585\.0 660\.0 726\.0 779\.0 820\.0 886\.0 D FEAK SUPPLIES 134\.0 130\.0 111\.0 105\.0 113\.0 114\.0 115\.0 116\.0 117\.0 118\.0 E PUBLIC LIGHTING 11\.0 11\.0 11\.0 11\.0 11\.0 11\.0 11\.0 11\.0 12\.0 12\.0 F STAFF \. \. \._Q _\.3\.3 0 ___3_0 _3\.0 _4\. Q _ \.4\.0 _ 4\.0 TOTAL 1001\.0 1082\.0 1204\.0 1308\.0 1419\.0 1559\.0 1691\.0 1812\.0 1938\.0 2073\.0 REVENUE/KWH SOLD A UF TO 7000 KWH/M 0\.019 0\.024 0\.027 0\.027 0,027 0\.027 0,027 0\.027 0\.027 0\.027 B 7000-100000 KWH/ 0\.011 0\.014 0\.019 0\.019 0\.024 0,024 0,024 0\.024 0\.024 0\.024 C EXC 100000 KWH/M 0\.011 0\.014 0\.015 0\.015 0\.017 0,017 0\.017 0\.017 0\.017 0\.017 D PEAK SUF'FLIES 0\.007 0\.009 0,011 0\.011 0,009 0\.009 0\.009 0\.009 0\.009 0\.009 E PUBLIC LIGHTING 0\.015 0\.018 0\.023 0\.023 0\.023 0\.023 0\.023 0\.023 0\.023 0\.023 F STAFF 0\.005 0\.009 0\.012 0\.012 0\.007 0\.007 0\.007 0\.007 0\.007 0\.007 AVERACE PRICE PER KWH 0\.014 0,016 0\.019 0\.019 0\.021 0\.021 0\.027 0\.020 0\.030 0\.033 OFERATING REVENUES A UF' TO 7000 KWH/M 5628 7096 9146 9549 10093 11080 11855 12656 13483 14311 B 7000-100000 KWH/ 2700 3856 3712 5617 8060 8722 9579 10486 11760 12666 C EXC 100000 KWH/M 3431 4858 8419 8354 10120 11418 12560 13477 14186 15328 El F'EAK SUPPLIES 1004 1214 11\.73 1113 1017 1026 1035 1044 1053 1062 E PUBLIC LIGHTING3 167 203 253 253 247 247 247 247 270 270 F STAFF 14 27 36 36 22 22 29 29 29 29 FUEL SURCHARGE \. __243 ____556 \. - - …Q …0 __0 0 TOTAL SALES REV 13687 17810 22851 24922 29559 32515 35305 37939 40781 43666 TARIFF INCREASE _ \. \. \. _ \.… \. _ \.2432 __lQ062 -14822 \.-\.21625 -31264 TOTAL _ 13682\. 1 21Q 22851 -24922 \.2255Y -34254 __45362 __52811 __62426 __25630 OFERATING EXF'ENSES OP + AEMIN\. 3764 4600 4625 5662 6447 7245 8263 9421 10675 12096 FUEL 2573 6847 4923 3385 5504 6896 9561 7316 6588 10345 PURCHASED ENERGY 423 394 475 438 390 390 738 5956 6256 6256 DEF'RECIATION 1/ 1669 1724 2072 2100 5312 5990 6706 7896 8539 10924 TAXES 2/ \. _\.260 _\.1820 \.4-1631 - 3822 __\._4212 \.-_6888 \.__\._2602 __10222 __13233 TOTAL \. 2382 \.13565 \.-\.13915 -13216 --_21545 \. \. \. 24233 __32156 \.38126 \.43050 -53354 OPERAlING INCOME 4298 4245 8936 11706 8014 10221 13211 14615 19426 22276 OTHER INCOME NET 34 _ _28 5 \.4 1222\._ \. \.a\.0 _ \._0 NET INCOME BEF INT 46B2 5030 71\.59 11784 8014 10221 13211 14615 19426 22276 INT CHARGEEi OF' \. \. 1608 \.188 I 1122 __ 2494 \.4621 \.451 3 __4266 \. 5124 ___5460 \._-\.5226 NET INCOME 3074 3142 '5,9B0 9290 3323 5708 8945 9441 13966 17000 RATE OF RETURN - NET OPERATING INCOME AS % OF AVERAGE FIXED ASSETS 3/ 7\. 5\.5 8\.6 8\.8 6\.4 6\.1 7\.0 7\.0 8\.0 8\.0 - STATUTORY 4/ 7\.0 4\.6 10\.0 10\.3 8\.6 8\.3 9\.7 9\.4 11\.6 12\.4 1/ See Annex 6\.7, para\. 9\. 2/ See Annex 6\.7, para\. 10\. 3/ See Annex 6\.7, para\. 12\. 4/ See Annex 6\.7, para\. 13\. December 1979  - 56 - ANNEX 6\.6 KENYA: OLKARIA GEOTHERMAL POWE R PROJECT THE KENYA POWER COMPANY, LIMITED TANA RIVER DEVELOPMENT COMPANY, LIMITED THE EAST AFRICAN POWER AND LIGHTING COMPANY, LIMITED COMBINED FUNDS STATEMENT FOR THE YEARS 1979-1984 (KU Thousands) 1979 to 1979 1980 1981 1982 1982 1983 1984 TOTAL INTERNAL SOURCEL3 -NET INCOME: bE;l F 'I:N 8014 10221 13211 14615 46061 19426 22276 -DEPRECIATION 5312 5990 6706 7896 25904 8539 10924 -INVESTMENTS \. _6Q_ - \.6 \. \. \.2 \._ 2 \.__141 ___64 \.153 _-165 TOTAL 13486 16385 20046 22652 72569 281 18E 33365 OPERATIONAL\. RE- QU IRE MENTfS -WORKING CAPITAL\. 3646 -1118 188 --3283 567 -292 9 --DEDT SERVICE 7879 8492 8874 9258 34503 9709 9650 -DIVIDENDS 1039 1039 1\.039 1039 4156 1039 1039 OTHER CHG \. \. TOT'AL\. 16014 \._ 8413 10101 \. 2Q14 4154 2 \.- 1Q 0456 10698 NET AVAILABLE FROM OPERATIONS \.-2526 7972 9945 :15638 231\.027 17662 22667 CONST R lJCTION R E Q U R REMEN T S -ONGOING WORNS 3378 3209 3321 3433 13341 3648 41 62 -PF'ROPOSED FROECT 1986 13565 j57L5\. 9615 30741 1300 245 --FUTURE PROJECT 500 6 1\.5 2130 5620 8865 9440 15760 ^20 lV 2300 8846 16583 8 5i47 36276 :1\.474 () L/r INVESTMENTS \. 6\.4 2\. \. \._222 \.22 \.2 \.1 \.413 \. \. \.53\. 265 TOTAL \.8\.B806 \.- \.2650Q 27838 \. \. 2456 \.-- 2060 \._16115 20432 BALANCE TO FINANCE :\.1\.334 1\.8l\.i37 17893 1:l\.8:1\.£3 '5958'2 -1547 -2\.2'3\. FINANCEU BY: - EQUITY 1250 500 0 0 1750 0 0 - BORROWINGS 2866 17272 16100 16157 52395 8360 13790 -GRA\.4TS ___Q __3 _ 644 322 ?288 0 0 TOTAL 4116 1fRnQ4 1A744 16479 55433 8360 13790 SURLU D EF ICIT:r OF l: NJN DI"72:L8 443 1:149 466:1\. 4149 9907 1\.6025 ACCUMULATE :I 2220 1777 628 29 52\.139 15196 3:1\.2'2 :2 DEBT SERVICE COVERAGE 1\.7 1\.9 2\.3 2\.4 2\.1 2\.9 3\.5 December 1979  - 57 - ANNEX 6\.7 Page 1 of 5 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY, LIMITED Notes and Assumptions for Financial Statements Sales and Revenues 1\. EAP&L energy sales and revenue projections for each customer category appear in Annex 6\.5\. Revenues from 1979 onwards are based on a 10% tariff increase effective July 1, 1980 and further annual average tariff increases of 20%, 9%, 11% and 13% effective January 1, 1981 to 1984 respectively\. 2\. A consumption tax of 1,/kWh is levied on all energy sales\. 3\. The revenues of KPC and TRDC are their respective ascertained costs, the amount payable by EAP&L for electricity purchased from both companies as described in para\. 4\. The ascertained costs of both companies include a development surcharge as described in para\. 5 below\. Ascertained Cost 4\. The bulk supply licenses of KPC and TRDC define ascertained cost (on the basis of which their revenues are determined) as the actual audited cost each year for the following items: (a) Operations and administration\. For KPC this also includes the cost of purchasing power from Uganda; (b) Interest and redemption payments for debt; (c) Income or other taxes\. TRDC's income is exempt from payment of income tax and KPC has had no taxable income because of large depreciation allowance deductible for tax purposes; and (d) Such other charges as the Government shall consider proper to be allowed\. Under this authority a development surcharge (described later in this annex) has been added up to 1978 as a part of ascertained cost of TRDC and is proposed for KPC from 1980\. In addition, ascertained cost includes small annual appropriations to a Reserve and Equalization Fund which, with the interest on the securities in which it is invested, is available for future capital expenditure or to cover deficiencies in income and to pay for abnormal expenses\.  - 58 - ANNEX 6\.7 Page 2 of 5 Development Surcharge 5\. Development surcharge, being paid by EAP&L to TRDC, was prin- cipally designed to provide the latter with a part of the funds required to pay the local currency costs of its Kamburu project (IBRD Loan 745-KE) and Gitaru project (IBRD Loan 1147-KE)\. The surcharge has been paid by EAP&L, since 1971, as part of the cost of electricity it purchases from TRDC and has been determined each year so that the rate of return on average net fixed assets in service of TRDC and KPC combined was similar to that earned by EAP&L\. The payment of surcharge has provided to TRDC funds for part of the local currency requirements of the Gitaru project\. The surcharge payment was intended to result each year in similar rates of return for TRDC/KPC combined and EAP&L, measured in terms of net operating income as a percentage of average net fixed assets in service for the years 1971-1974, and average net fixed assets including work in progress for the years 1975-1978\. The latter method provided larger amounts to TRDC during the construction period when the requirements of funds for t'he project were substantial\. This also reduced the income tax burden of the power sector during the construction period of the project by increasing TRDC's income which is exempt from income tax and by reducing EAP&L's taxable income\. Development surcharge payment by EAP&L to KPC has been provided from 1980 to 1982 to help provide local currency requirements of the geothermal project (para\. 6\.09)\. Fuel Cost and Purchased Energy 6\. The fuel cost per GWh of operating EAP&L's plants is assumed to increase 10% per year\. 7\. KPC's annual purchases from UEB are assumed to be constant at 254 GWh and KE 390,000 from 1979 onward under the existing long-term contract (to 2005)\. TRDC is assumed to purchase 192 GWh from TRDA's Upper Reservoir in 1982 and 217 GWh annually thereafter\. The estimated cost of this energy is based on the agreement for electricity purchase by EAP&L from TRDA\. Operating and Administration Expenses 8\. Increases in volume of operations are reflected in these expenses, 4% for EAP&L; for KPC, due to the addition of two geothermal units in 1981 and 1983 respectively, the expenses are expected to increase by KE 60,000 for each unit\. The sharp increase in TRDC's 1979 operating and administration costs reflects the first full year of operation of Gitaru as well as major non-recurring maintenance\. In addition, provision for price escalation of 10% per year has been made\. Depreciation 9\. Depreciation is charged as a percentage of the revalued fixed asset value at the beginning of each year: EAP&L 3\.7%, KPC 2\.7%, TRDC 2\.2%\. This is consistent with past experience\. The depreciatiorl for the years 1975 to 1977 is computed on cost of fixed assets; whereas for the period after 1977, it has been calculated on the revalued fixed assets\.  - 59 - ANNEX 6\.7 Page 3 of 5 Taxes 10\. TRDC's income is exempt from income tax\. Incomes of KPC and EAP&L are subject to tax; the present rate of tax is 45%\. KPC has not paid income taxes in the past because it has accumulated losses for tax purposes arising from higher depreciation allowance deductible for tax computation than the accounting depreciation\. Dividends 11\. Dividends on 4% and 7% preferred stock are KE 97,000 per year\. Dividends on common stock of EAP&L are assumed to continue at the 1978 level of 12% per year\. Rate of Return - Financial 12\. The rate of return for the years 1975 to 1979 has been calculated on the average revalued net fixed assets including work in progress, in accordance with the requirements of IBRD Loan 1147-KE\. The depreciation allowance used in calculating operating income for those years is on the basis of the cost of fixed assets, in keeping with past practice\. The rate of return for years starting from 1980 has been calculated on the average revalued net fixed assets in operation, in accordance with the method suggested for the proposed loan\. Depreciation allowance used for calcula- tion of operating income from 1980 onwards is on the basis of the revalued fixed assets\. Rate of Return - Statutory 13\. Under the Electric Power Act of Kenya (Section 47), a power company's tariffs would be subject to reduction to the extent of five-sixths of the amount by which operating income before income tax for any year exceeds 12-1/2% of the "capital expended on the undertaking" as of the end of the year\. This statutory assets base is shown as the total of fixed assets at cost, including work in progress and inventories at the end of each year\. Fixed Assets 14\. Fixed assets and depreciation for the years 1975 to 1978 are at cost as shown in audited accounts; however, these have been increased in 1979 to reflect their estimated replacement values and in 1980 and subsequent years by 10% and 6\.5%, respectively, to reflect estimated price escalations in those years\. Accounts Receivable 15\. EAP&L's accounts receivable are assumed to be 15% of total revenues in accordance with recent past experience\.  _ 60 - ANNEX 6\.7 Page 4 of 5 Inventories 16\. Considering past experience, EAP&L's inventories are assumed to be 6% of gross revalued plant in operation while those of KPC and TRDC are assumed to be constant\. Long-Term Debt 17\. A statement showing the composition of foreign exchange and local currency loans of KPC appears on the following page\.  - 61 - ANNEX 6\.7 vage 5o,9 5 KENYA: OLKARIA GEOTHERMAL POWER PROJECT THE KENYA POWER COMPANY, LIMITED DEBT STATEMENT FOR THE YEARS 1979-1984 (K1b Thousands) 1979 1980 1981 1982 1983 1984 5\.5 ' 75/85 -AMORTIZATION 313 331 348 272 0 a -BALANCE 951 620 272 0 0 0 -INTEREST 61 43 25 7 0 0 IBRID GE OTHERMA -BORROWINGS 1618 7143 1811 4409 0 0 -BALANCE 1618 8761 10572 14981 14981 14981 -INTEREST 64 410 764 1009 1183 1183 -COMMITMENT CHGE 50 73 40 17 0 0 -IDEC-% 100 100 100 20 0 0 -IDC 114 483 804 205 0 0 CDC -BORROWINGS 0 3500 1000 1441 1280 270 -AMORTIZATION 0 0 0 0 262 284 -BALANCE 0 3500 4500 5941 6959 6945 -INTEREST 0 149 340 444 548 591 -COMMITMENT CHGE 28 43 26 17 6 0 -ID'C-% 100 100 100 20 0 0 -IDC 28 192 366 92 0 0 IBRDL RELENT TO TRD, -BORROWINGS -'230 -950 0 0 0 -AMORTIZATION 0 0 0 -109 -108 -108 -BALANCE -230 -325 -325 -216 -108 0 -INTEREST -9 -22 26 -21 -13 -4 -ID'C-% 100 100 100 20 0 0 - I l:c -9 - 22 -26 -\.4 0 0 LOAN NAME:' DEBT SUMMARY -BEORROlWINGS 1388 10548 2811 5850 1280 270 REI::AYMENTS 313 331 34B 163 154 176 -BALANCE 2339 12556 15019 20706 '21832 21926 -COMMITMENT FEES 78 116 66 34 6 0 - INTERE'Tr 116 580 1103 1439 1719 1770 -INTEREST & CF 194 696 1169 1473 1725 1770 ---DEBT '-\.ERVICE 507 1027 1517 1636 1879 1946 -:ric 133 653 1144 293 0 0 TOTAL OPENI\.NG 1264 0 0 0 0 0 December 1979  - 62 - ANNEX 6\.8 Page 1 of 2 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY, LIMITED Electricity Tariff Structure 1\. EAP&L's new tariff structure was developed in consultation with the Bank\. It took effect on January 1, 1979 and comprises the following six categories: Method A: covers consumers whose monthly usage does not exceed 7,000 kWh\. Method B: is applicable to consumers with monthly usage ranging from 7,001 to 100,000 kWh\. Method C: covers consumers whose monthly usage exceeds 100,000 units\. Method D: Off-peak supplies\. Method E: Public Lighting\. Method F: Company staff\. 2\. In addition, there is provision for the introduction of a fuel oil cost adjustment with the approval of the Ministry of Power and Communi- cations\. This is a surcharge designed to allow EAP&L to recover part of any additional fuel costs from electricity consumers based on the difference between actual fuel cost and a "basic price"\. 3\. Details of the tariffs are presented in the attached table\.  - 63 - ANNEX 6\.8 Page 2 of 2 KENYA: OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY, LIMITED Projected Average Charge per kWh (Based Demand charge per Revenue per on monthly consumption Fixed charge per month KVA per month kWh inl979 Method A Monthly consumption 0 to 30 kWh : KSh 0\.22 1/ not exceeding 7,000 kWh Over 30 kWh : KSh 0\.50 KSh 15 KSh 0,534 Method B Monthly consumption ranging 415/240 V KSh 0\.27/kWh 415/240 V : XSh 60 415/240 V : Kgh 50 from 7,001 to 100,000 kWh llkv/33 kv : KSh 0\.25/kWh llkv/33kv ;Sh 360 llkv/33kv : KSh 45 KSh 0\.490' 66kv/132kv : KSh 0\.23/kwh 66kv/132kv: KSh 1,640 66kv/132ky : KSh 40 Method C Monthly consumption in Peak Hours (8 AM-10 PM excess of 100,000 kWh Mon-Fri) 415/240 v : KSh 0\.27 415/240 V : KSh 60 415/240 V : KSh 50 llkv/33kv : KSh 0\.25 llkv/33kv : KSh 360 llkv/33kv : KSh 45 KSh 0\.346 66kv/132kv : KSh 0\.23 66kv/132kv: KSh 1,640 66kv/132kv : KSh 40 Off-peak hours 415/240 V : KSh 0\.16/kwh llkv/33kv : KSh 0\.15/kWh 66kv/132kv : KSh 0\.14/kWh 1/ Method D Off-Peak Supplies KSh 0\.16/kWh KSh 32\.50 KSh 0\.180 M4ethod E Public Lighting K KSh 0\.45/kWh KSh 32\.50 per RSh 0,449 supply terminal Method F Company Staff KSh 0\.15/kWh KSh 0\.150 1/ If Method A is used in conjunction with Method D at the same supply terminals, the combined fixed charge will be KSh 35\. 2/ Supplies available for a minimum period of 11 hours per night for public lamps\. December 1979  _ 6i4 - ANNEX 6\.9 Page 1 of 2 KENYA OLKARIA GEOTHERMAL POWER PROJECT KENYA POWER COMPANY, LIMITED Loan Capital and Security Arrangements of EAP&L, KPC and TRDC 1\. This annex describes the loan capital of power companies of Kenya and the arrangements securing this loan capital\. The amounts stated represent the total amount of the loans contracted and not the amounts outstanding, which are given in Annex 6\.7\. Unless indicated otherwise, all references to t are references to E Sterling\. EAP&L 2\. EAP&L's loan capital comprises loans from Commonwealth Development Corporation (CDC) (L 350,000, E 2,944,000 and E 1,500,000), and from Glyn, Mills and Company syndicate (L 2,887,520, E 216,400, E 2,724,320 and _ 240,000)\. The CDC loan of E 350,000 was secured by (i) EAP&L's 8-1/2% Debentures 1971-85; and (ii) a Trust Deed dated November 1, 1968, which provided for a first legal charge on specified leasehold properties of EAP&L\. The E 2,944,000 CDC loan and the E 2,887,520 loan from the Glyn, Mills and Company syndicate were respectively secured by Debenture Stock 1975-91 and 1971-80 respectively, as well as a Trust Deed dated May 16, 1969\. This Trust Deed created mortgages and charges on certain of EAP&L's properties and assets and also stipulated that EAP&L was not to create any mortgage or charge ranking in priority to or pari passu with that mortgage or charge\. The E 1,500,000 CDC loan and Glyn syndicate loans of E 2,724,320 and E 240,000 were secured by Debenture Stock 1979-88, and 1978-80 respec- tively, as well as a supplemental Trust Deed dated August 29, 1974 which made these loans to rank pari passu with the loans secured by the Trust Deed dated May 16, 1969\. By the end of 1978 EAP&L had also taken up KE 64,800 at 8% on an unsecured basis from a KE 750,000 given by the British Government to the Government of Kenya and a further KE 362,100 on similar terms from a loan of KE 1 million made to the Government of Kenya by the Finnish Government\. KPC 3\. In 1955 KPC floated a E 7,500,000 loan by the issue of a E 7,500,000 5-1/2% Debenture Stock 1975/85\. E 3,500,000 of this loan was subscribed by CDC, and the balance was underwritten for public sale\. The Debenture Stock was secured by a Trust Deed dated June 27, 1956, which among other things, created a first legal charge and a floating charge in respect of KPC's property and assets and stipulated that KPC was not to create any further charges or incumbrances upon its undertakings and assets ranking in priority to or pari passu with the charges created under the Trust Deed except in special stated circumstances\. The Trust Deed also provided that any scheme for the reconstruction should require an extraordinary resolution of the stockholders which means in effect the consent of three-fourths of the  - 65 - ANNEX 6\.9 Page 2 of 2 stockholders\. KPC also took up in 1977 an unsecured 9% loan from EAP&L, in the amount of KE 1,316,879, repayable in 10 years commencing from the commissioning of the first geothermal plant as well as KE 62,390 of an 8\.5% unsecured loan from TRDC totalling KE 145,000 (balance taken up in 1978) and repayable from 1979 to the year 2000\. Both of these loans were repaid in 1978\. TRDC 4\. TRDC's loan capital in 1978 came from CDC, the Glyn, Mills and Company syndicate (now Williams & Glyn's Bank Ltd\.), EAP&L, IBRD, the Government of Kenya, from a SIDA credit to the Government of Kenya, and from the Standard Bank Limited and export suppliers credits\. A Trust Deed dated May 26, 1966 modified and extended by three Supplemental Trust Deeds dated December 5, 1968, December 16, 1971 and March 10, 1976, secures the following loans: (i) E 3,742,911 A Debenture Stock 1971-87, (ii) Shs 9,240,500 and Shs\. 5,380,000 B Debenture Stock 1971-87, (iii) Shs\. 6,040,000 C Debenture Stock 1971-87, (iv) Shs\. 81,300,000 E Debenture Stock 1975-96, (v) US$23,000,000 and US$63,000,000 IBRD loans (vi) E 2,000,000 Debenture Stock 1980-91 (vii) KE 2,000,000 loan from EAP&L (viii) KE 1,890,000 loan from the Government of Kenya\. The Trust Deed provided for the creation of a floating charge of TRDC's undertakings, property and assets and also required TRDC (i) not to (A) create without the Trustee's consent any mortage or charge ranking in priority to or pari passu with the floating charge of (B) create any specific mortgage or charge over any of its immovable property or other assets without prior written consent of the Trustee or have any subsidiary, except with the prior written consent of the Trustee\. The Trust Deed also provides for the creation and issue in specified circumstances of additional stock to rank pari passu in point of security with the original stock created under the Trust Deed\. These circumstances include the need to secure any loan TRDC would need to finance later stages of the Seven Forks Hydroelectric Project\. 5\. In addition, TRDC has issued promissory notes in the amounts of DM 22,553,000 and US$217,000 to cover part of the export suppliers credits while DM 32,459,000 financed by Kreditanstalt fuer Wiederaufbau is covered by a guarantee from the West German Government\. The loan from the Standard Bank Limited was unsecured and repaid in 1978\.  - 66 - KENYA OLKARIA GEOTHERMAL POWER PROJECT Related Documents and Data Available in Project File Sector Montreal Engineering Company, Limited\. Management and Accounting Consultancy Study, 1 volume, January 1978\. Merz and McLellan, Sir Alexander Gibb and Partners\. The National Power Development Plan, 1978-2000 (2 volumes, May 1978)\. Merz and McLellan, Sir Alexander Gibb and Partners\. Justification Report for the National Power Development Plan, 1978-2000 (3 volumes, May 1978)\. Project Merz and McLellan, Virkir Consulting Group, Limited\. Report on Geothermal Development at Olkaria (2 volumes, October 1977)\. Legal The Electric Power Act Electric Power Act - Distribution License No\. 42 Electric Power Act - Distribution License No\. 41 Electric Power Act - Variation of Bulk Supply License No\. 2 The Income Tax Act - Chapter 470 The Electric Supply Lines Ordinance - Chapter 315 The Electric Power Act - Bulk Supply License No\. 3 Agreement for Mutual Cooperation (dated November 20, 1957 between KPC and EAP&L) Selected Working Papers Tariff Study, Financial Statements and Projected Accounts for the three companies\.  IBRD 14278R ' 360 40 JULY1979 S U D A N KENYA / --- - OLKARIA GEOTHERMAL POWER PROJECT 44\.~~~~~~~~~~~~~~~~~~~~~~~~~~~\. o Marsabi t 4- K F N YA K Y \\./\ ,( g, < \\.X9, / O P P j rj 00 ILcK ti / ;bse in ! ffi I --~' i ano I r o R l F T / Ngcn )AK ' Aa do,L e R I' Kcam~,VA L L E Y JSOu~' - * Olkono GeoThermal Fie ruld a Desse w ni :C A 0Meru j W +_-X/ Maloo> ~~~~~~~~~~M O U N T K E N Y A-( * Stam PowKerico Naku us A) Qr H y PowomByios By G gi | NciIV~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I ' * <~~13 k> Vs Trasmisin lin /P j't*d h ,/ ohi de,,m p>ep\.e 5, 6 ' r amburu c \ st '\ < \ ~~~~~~~~~~~Ngr,ng N AIR IK> 0\ -- X 0 ~~~~~~~~~~N AI R O B I \ Me,akchost LaGlle \,~~~~~~~~~o~~s4 f (f Th - Momb,\.as T A N Z A N I A t 'oMonda IsK O rNkoric Gbeothermal Fietd s D ,r * D{iesel Power Stroti \ 't\ns( 3 5 Veon Power Stations \ I C,O * HFlydro Power Stations alrndi i O,#O0& ---132 RV, Transm,isisirn tine (Projected), rm, maphsterpe edbt, \ t 132 hV, Tronsmnission tir,e|ExistiiingJ rdwaShthZ Istah-f /peu ' : : >¢k@l,onusThe the Ma riciahn 66' RV, Transmisin and distribtulion lines rt,tX,^t,+ hsm ap' mtbJa\. 4 -R|*%\. 33 40 e D ostribu ton tines 0r th6e tes 4 60 20 0 20 40 4 ifWOM OD $6 Mt, 0 KX0\.,/ 40,

APPROVAL

P166420

   FOR OFFICIAL USE ONLY  Report No: PAD3245      INTERNATIONAL DEVELOPMENT ASSOCIATION    PROJECT APPRAISAL DOCUMENT  ON A  PROPOSED CREDIT    IN THE AMOUNT OF SDR 25\.5 MILLION  (US$35 MILLION EQUIVALENT)    TO THE    INDEPENDENT STATE OF PAPUA NEW GUINEA    FOR AN    URBAN YOUTH EMPLOYMENT PROJECT II    March 28, 2020                    Social, Urban, Rural And Resilience Global Practice  East Asia And Pacific Region                  document has a restricted distribution and may be used by recipients only in the performance of  This their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   CURRENCY EQUIVALENTS     (Exchange Rate Effective {January 31, 2020})    Currency Unit =    PGK  PGK3\.41 =  US$1  US$1\.37695 =  SDR 1      FISCAL YEAR  January 1 ‐ December 31                                  Regional Vice President: Victoria Kwakwa   Country Director: Michel Kerf  Regional Director: Benoit Bosquet  Practice Manager: Susan S\. Shen  Task Team Leader: Sonya Woo            ABBREVIATIONS AND ACRONYMS      AGO  Auditor General’s Office  ALMP  Active Labor Market Program  BLST  Basic Life Skills and Job Readiness Training  BoQ  Bill of Quantities  BSP  Bank South Pacific  CCP  Community Consultation Plan  CFP  Country Financing Parameters  CPF  Country Partnership Framework  CPS  Country Partnership Strategy  CV  Curriculum Vitae  DA  Designated Account  DFAT  Department of Foreign Affairs and Trade, Australia   DFCDR  Department for Community Development and Religion  DLIR  Department of Labor and Industrial Relations  DNPM  Department of National Planning and Monitoring  DOT  Department of Treasury  DPLGA  Department of Provincial and Local Level Government Affairs  DSP  Development Strategic Plan  ESMF  Environmental and Social Management Framework  ESMP  Environmental and Social Management Plan  ESW  Extended Skills Work  FM  Financial Management  FMM  GoPNG’s Financial Management Manual  FSV  (NCDC) Family and Sexual Violence Secretariat  FUS  Follow‐Up Survey  GBV  Gender Based Violence  GDP  Gross Domestic Product  GoPNG  Government of Papua New Guinea  IA  Implementing Agency  IDA  International Development Association  IFMIS  Integrated Financial Management Information System  IRI  Intermediate Results Indicator  IPP  Indigenous Peoples Plan  JICA  Japan International Cooperation Agency  LCA  Lae City Authority  M&E  Monitoring and Evaluation  MIS  Management Information System  MOU  Memorandum of Understanding  MTDP III  Medium Term Development Plan III 2018‐2022  MTR  Mid‐Term Review  NATTB  National Trade and Testing Board  NCD  National Capital District   NCDC  National Capital District Commission  NEET  Not in Education, Employment or Training  NTC  National Training Council  NYDA  National Youth Development Authority  OJT  On‐the‐Job Training  PAD  Project Appraisal Document  PCO  Program Coordination Office  PDO  Project Development Objective  PGK  Papua New Guinea Kina  PMU  Project Management Unit  PNG  Papua New Guinea  POM  Project Operations Manual  PPSD  Project Procurement Strategy for Development  PSC  Project Steering Committee  RFP  Request for Proposal  RPF  Resettlement Policy Framework  SDR  Special Drawing Rights  SPD  Standard Procurement Documents   STEP  Systematic Tracking of Exchanges in Procurement  TOC  Theory of Change  ToT  Training of Trainers  TVET  Technical and Vocational Education and Training  UNICEF  United Nations International Children's Emergency Fund  US$  United States Dollars  UW&S  Urban Works and Services  UYEP I  Urban Youth Development Project I  UYEP II  Urban Youth Development Project II  WB  World Bank    YJC  Youth Job Corps   The World Bank Urban Youth Employment Project II (P166420)   TABLE OF CONTENTS    DATASHEET \. 1  I\.  STRATEGIC CONTEXT \. 8  \. 8  A\. Country Context  B\. Sectoral and Institutional Context \.  9  C\. Relevance to Higher Level Objectives \.  14  II\.  PROJECT DESCRIPTION \. 15  A\. Project Development Objective \.  15  B\. Project Components \.  15  C\. Project Beneficiaries \.  23  D\. Results Chain \. 24  E\. Rationale for Bank Involvement and Role of Partners \.  25  F\. Lessons Learned and Reflected in the Project Design \.  26  III\.  IMPLEMENTATION ARRANGEMENTS \. 27  A\. Institutional and Implementation Arrangements \.  27  \.  29  B\. Results Monitoring and Evaluation Arrangements  C\. Sustainability \. 29  IV\.  PROJECT APPRAISAL SUMMARY \. 30  A\. Technical, Economic and Financial Analysis \.  30  \. 31  B\. Fiduciary  C\. Safeguards \. 32  V\.  KEY RISKS \. 33  \. 38  VI\.  RESULTS FRAMEWORK AND MONITORING  ANNEX 1: Implementation Arrangements and Support Plan \. 50  ANNEX 2: Economic Analysis \. 65  ANNEX 3: UYEP I Impact Evaluation and Results Working Paper Executive Summary \. 69          The World Bank Urban Youth Employment Project II (P166420)      DATASHEET    BASIC INFORMATION    BASIC INFO TABLE  Country(ies)  Project Name  Papua New Guinea  Urban Youth Employment Project II  Project ID  Financing Instrument  Environmental Assessment Category  Investment Project  P166420  B‐Partial Assessment  Financing    Financing & Implementation Modalities  [  ] Multiphase Programmatic Approach (MPA)  [  ] Contingent Emergency Response Component  (CERC)  [  ] Series of Projects (SOP)  [✓] Fragile State(s)  [  ] Disbursement‐linked Indicators (DLIs)  [  ] Small State(s)  [  ] Financial Intermediaries (FI)  [  ] Fragile within a non‐fragile Country  [  ] Project‐Based Guarantee  [  ] Conflict   [  ] Deferred Drawdown  [  ] Responding to Natural or Man‐made Disaster  [  ] Alternate Procurement Arrangements (APA)    Expected Approval Date  Expected Closing Date  22‐Apr‐2020  30‐Sep‐2025  Bank/IFC Collaboration     No    Proposed Development Objective(s)    The  development  objective  is  to  improve  the  capacity  of  participating  young  men  and  women  in  project  areas  to  engage in productive income generating activities\.    Components      Component Name   Cost (US$, millions)  Page 1 of 72  The World Bank Urban Youth Employment Project II (P166420)   Youth Job Corps     18\.30    Skills Training      8\.90    Referral Services and Monitoring and Evaluation      3\.20    Project Management      4\.60    Organizations    Borrower:    Independent State of Papua New Guinea   Implementing Agency:   National Capital District Commission    Lae City Authority     PROJECT FINANCING DATA (US$, Millions)   SUMMARY   ‐NewFin1 Total Project Cost  35\.00  Total Financing  35\.00  of which IBRD/IDA   35\.00  Financing Gap  0\.00      DETAILS   ‐NewFinEnh1 World Bank Group Financing       International Development Association (IDA)  35\.00            IDA Credit  35\.00      IDA Resources (in US$, Millions)  Credit Amount  Grant Amount  Guarantee Amount  Total Amount  Papua New Guinea    35\.00     0\.00     0\.00    35\.00  National PBA    35\.00     0\.00     0\.00    35\.00  Total    35\.00     0\.00     0\.00    35\.00        Expected Disbursements (in US$, Millions)    Page 2 of 72  The World Bank Urban Youth Employment Project II (P166420) WB Fiscal Year          2020  2021  2022  2023  2024  2025  2026  Annual           0\.00     4\.87     4\.94     6\.82     8\.87     8\.24     1\.27  Cumulative           0\.00     4\.87     9\.81    16\.62    25\.49    33\.73    35\.00        INSTITUTIONAL DATA    Practice Area (Lead)  Contributing Practice Areas  Education, Fragile, Conflict & Violence, Gender, Social  Social  Protection & Jobs    Climate Change and Disaster Screening  This operation has been screened for short and long‐term climate change and disaster risks    SYSTEMATIC OPERATIONS RISK‐RATING TOOL (SORT)    Risk Category  Rating    1\. Political and Governance   Substantial    2\. Macroeconomic   Substantial    3\. Sector Strategies and Policies   Moderate    4\. Technical Design of Project or Program   Moderate    5\. Institutional Capacity for Implementation and Sustainability   Substantial    6\. Fiduciary   High    7\. Environment and Social   Moderate    8\. Stakeholders   Substantial    9\. Other       10\. Overall   Substantial      Page 3 of 72  The World Bank Urban Youth Employment Project II (P166420) COMPLIANCE    Policy  Does the project depart from the CPF in content or in other significant respects?  [  ] Yes      [✓] No    Does the project require any waivers of Bank policies?   [  ] Yes      [✓] No     Safeguard Policies Triggered by the Project  Yes  No    Environmental Assessment OP/BP 4\.01  ✔     Performance Standards for Private Sector Activities OP/BP 4\.03    ✔   Natural Habitats OP/BP 4\.04    ✔   Forests OP/BP 4\.36    ✔   Pest Management OP 4\.09    ✔   Physical Cultural Resources OP/BP 4\.11    ✔   Indigenous Peoples OP/BP 4\.10  ✔     Involuntary Resettlement OP/BP 4\.12  ✔     Safety of Dams OP/BP 4\.37    ✔   Projects on International Waterways OP/BP 7\.50    ✔   Projects in Disputed Areas OP/BP 7\.60    ✔     Legal Covenants      Sections and Description  The Recipient shall maintain, or caused to be maintained, throughout the Project implementation period, a Project  Steering Committee, with terms of reference, composition and resources satisfactory to the Association, which  shall be co‐chaired by DPLGA and NYDA, and comprised of representatives from the Project Implementing Entities  and other representatives set forth in the Project Operations Manual\. (Section I\.A\.1 of Schedule 2 to the Financing  Agreement)\.         Sections and Description  NCDC shall maintain, throughout the Project implementation period, a Project Coordination Office within NCDC,  with terms of reference, composition and resources satisfactory to the Association, which shall be co‐located with  the NCDC Project Management Unit, led by a Project coordination manager and supported by adequate staff and  Page 4 of 72  The World Bank Urban Youth Employment Project II (P166420) personnel shared with the NCDC Project Management Unit, each with terms of reference, qualifications and  experience satisfactory to the Association\. (Sections I\.A\.1 and 2 of the Schedule to the NCDC Project Agreement)\.         Sections and Description  NCDC shall maintain, throughout the Project implementation period, a NCDC Project Management Unit within  NCDC, with terms of reference, composition and resources satisfactory to the Association, which shall be led by a  Project manager and supported by a senior Project accountant and a procurement officer, each with terms of  reference, qualifications and experience satisfactory to the Association\. (Sections I\.A\.3 and 4 of the Schedule to the  NCDC Project Agreement),         Sections and Description  LCA shall maintain, throughout the Project implementation period, an LCA Project Management Unit within LCA,  with terms of reference, composition and resources satisfactory to the Association, which shall be led by a Project  manager, with terms of reference, qualifications and experience satisfactory to the Association\. (Sections I\.A\.1 and  2 of the Schedule to LCA Project Agreement)\.         Sections and Description  By not later than thirty days from the Effective Date, the Recipient shall cause the Project Implementing Entities,  DPLGA and NYDA to, and the Project Implementing Entities shall, enter into a memorandum of understanding, in  form and substance satisfactory to theAssociation, setting forth the understanding on the cooperation,  implementation arrangements and roles and responsibilities of each party with respect to the implementation of  the Project\. (Section I\.A\.2 of Schedule 2 to the Financing Agreement; Section I\.A\.5 of the Schedule to the NCDC  Project Agreement; and Section I\.A\.3 of the Schedule to the LCA Project Agreement)\.         Sections and Description  To facilitate the carrying out of LCA’s Respective Part of the Project, the Recipient and/or LCA, as applicable, shall,  by not later than six months after the Effective Date, take the following actions: (a) the Recipient shall furnish to  the Association the document(s), in form and substance satisfactory to the Association, demonstrating that LCA is  authorized to undertake its roles and responsibilities under its Respective Part of the Project pursuant to the LCA  Act and/or other relevant legislation; (b) the Recipient shall cause LCA to enter into a Project Agreement, in form  and substance satisfactory to the Association; (c) the Recipient and LCA shall enter into a Subsidiary Agreement,  under terms and conditions approved by the Association; and (d) the Recipient shall take all measures required on  its part to cause LCA to, and LCA shall: (i) take the following actions to become operational: (A) appoint an  accountant or accounting firm to perform its financial and accounting functions, and ensure that such accountant  or accounting firm has commenced the work; (B) establish a bank account for its operations; (C) implement a  functional accounting system; and (D) secure adequate funding to support its operations; and (ii) thereafter  maintain such measures throughout the Project implementation period, all in a manner satisfactory to the  Association\. (Section I\.C of Schedule 2 to the Financing Agreement and Section I\.B of the Schedule to the LCA  Project Agreement)\.         Sections and Description  The Project Implementing Entity (NCDC) shall, by not later than one month after the Effective Date, update its  financial management and information system for managing Project accounting and reporting, in a manner  satisfactory to the Association\. (Section I\.B\.2 of the Schedule to NCDC Project Agreement)\.       Page 5 of 72  The World Bank Urban Youth Employment Project II (P166420)   Sections and Description  The Recipient shall cause the Project Implementing Entities to, and the Project Implementing Entities shall, by not  later than three months after the Effective Date, prepare and adopt the Project Operations Manual accepted by the  Association\. The Recipient and the Project Implementing Entities shall ensure that the Project, or its Respective Part  of the Project, as applicable, is carried out in accordance with the Project Operations Manual\. (Section I\.D of  Schedule 2 to the Financing Agreement; and Section I\.C of the Schedule to the Project Agreements)\.         Sections and Description  The Recipient shall cause the Project Implementing Entities to, and LCA shall, by not later than November 1 of each  year, prepare and furnish to NCDC for consolidation, information on the Annual Work Plan and Budget with respect  to its Respective Part of the Project, and NCDC shall, by not later than December 1 of each year, prepare and  furnish to the Association for its review and no‐objection, an Annual Work Plan and Budget for the Project\. The  Recipient and the Project Implementing Entities shall ensure that the Project or its Respective Part of the Project, as  applicable, is implemented in accordance with the Annual Work Plan and Budget accepted by the Association for  the respective fiscal year (Section I\.E of Schedule 2 to the Financing Agreement; and Section I\.D of the Schedule to  the Project Agreements)\.         Sections and Description  The Recipient shall carry out jointly with the Association and the Project Implementing Entities, not later than three  years after the Effective Date, or such other period as may be agreed with the Association, a Mid‐Term Review of  the Project\. (Section II\.2 of Schedule 2 to the Financing Agreement; and Section II\.B of the Schedule to the Project  Agreements)\.         Conditions    Type  Description  Disbursement  No withdrawal shall be made under Category (1) unless and until the Association is satisfied  that the Project Implementing Entities have adopted the Project Operations Manual, in form  and substance satisfactory to the Association\. (Section III\.B\.1(b) of Schedule 2 to the  Financing Agreement)\.    Type  Description  Disbursement  No withdrawal shall be made under Category (2) unless and until the Association is satisfied  that: (i) the Project Implementing Entities have adopted the Project Operations Manual, in  form and substance satisfactory to the Association; (ii) the Recipient has furnished to the  Association the document(s), in form and substance satisfactory to the Association,  demonstrating that LCA is authorized to undertake its roles and responsibilities under its  Respective Part of the Project pursuant to the LCA Act and/or other relevant legislation; (iii)  the LCA Project Agreement and the LCA Subsidiary Agreement have been entered into, and  the Association has received legal opinion(s) with respect to these agreements; and (iv) LCA  has furnished to the Association the evidence to demonstrate that all measures set forth in  Section I\.C\.1(d)(i)(A) to (D) of Schedule 2 to the Financing Agreement for LCA to become  operational have been completed, all in a manner satisfactory to the Association\. (Section  Page 6 of 72  The World Bank Urban Youth Employment Project II (P166420) III\.B\.1(c) of Schedule 2 to the Financing Agreement)\.    Type  Description  Disbursement  No withdrawal shall be made under Category (4) unless and until the Association is satisfied  that: (i) the Recipient has furnished to the Association the document(s), in form and  substance satisfactory to the Association, demonstrating that LCA is authorized to undertake  its roles and responsibilities under its Respective Part of the Project pursuant to the LCA Act  and/or other relevant legislation; (ii) the LCA Project Agreement and the LCA Subsidiary  Agreement have been entered into, and the Association has received legal opinion(s) with  respect to these agreements; and (iii) LCA has furnished to the Association the evidence to  demonstrate that all measures set forth in Section I\.C\.1(d)(i)(A) to (D) of Schedule 2 to the  Financing Agreement for LCA to become operational have been completed, all in a manner  satisfactory to the Association\. (Section III\.B\.1(d) of Schedule 2 to the Financing Agreement)\.                     Page 7 of 72  The World Bank Urban Youth Employment Project II (P166420) I\. STRATEGIC CONTEXT    A\. Country Context    1\. Papua  New  Guinea  (PNG)  is  the  largest  country  in  the  Pacific  sub‐region  with  a  population  of  just  under  nine  million\.  While  the  country  has  made  some  progress,  economic  growth  and  productivity  is  partly  constrained  by  a  low  skilled workforce\. PNG’s economy is dominated by the agricultural, forestry, and fishing sector, where most of the labor  force is engaged, and mining sector, which has provided significant growth over the past decade\. Despite reasonable Gross  Domestic Product (GDP) growth rates1, and the accumulation of natural resource wealth, which has allowed PNG to obtain  Middle Income Country status, private investment is low\. Since Independence, real GDP per capita has increased by only  0\.8 percent per year, which is low in comparison to other Middle Income Country resource exporters\. Employment in the  mining sector only accounts for about 1 percent of total employment; and employment in the private sector accounts for  less  than  20  percent\.2  Across  the  country,  the  number  of  jobs  in  the  formal  sector  has  fallen  by  10  percent  over  the  last  four years\.3 Two‐thirds of the formal sector jobs are in the private sector (heavily concentrated in the wholesale and retail  trade sector and construction), with the remaining in the public sector\.4 There are also large skill shortages in a variety of  trades,  such  as  carpentry,  hospitality,  retail  and  office  administration\.5  Most  people  rely  on  the  informal  economy  and  non‐resource (agricultural) sector for their livelihoods\.    2\. The  relatively  low  growth  performance  of  the  non‐resource  sector  has  limited  inclusivity  in  PNG’s  growth  performance\.    While  recognizing  significant  data  gaps,  PNG  has  considerable  levels  of  poverty  and  suffers  from  poor  development outcomes\.  The 2010 Household Income and Expenditure Survey reveals that 38 percent of the population  lived  below  the  internationally  recognized  extreme  poverty  line  of  US$1\.90  per  day\.6   PNG’s  Human  Development  Index  (HDI)  rank,  was  154  in  2015,  the  second  lowest  in  the  Pacific  region\.  The  country  is  also  vulnerable  to  natural  hazards\.7   These  include  floods,  droughts,  landslides  and  sea‐level  rise,  which  have  affected  the  agriculture  and  fisheries  sectors,  leading to lower economic growth and negatively impacting the most vulnerable populations\.      3\. In PNG, poverty is  overwhelmingly a  rural phenomenon, but  urban poverty is rising faster\.8 Almost 90 percent  of the poor in PNG live in rural areas and Papua New Guineans engaged in agricultural activities are much more likely to  be  poorer  than  the  rest\.  However,  in  urban  areas,  poverty  tends  to  be  concentrated  in  and  around  urban  settlements,  which are those areas with particularly limited access to public services and facilities\. The increase in poverty among urban  households reflects the rising urbanization rate coupled with limited gainful employment opportunities\.       1 The economy has more than tripled in size and real GDP growth has averaged 3\.4 percent per year since independence in 1975\.  2 World Bank, 2017, Systematic Country Diagnostic – PNG\.  3 BPNG 2018, UNFPA 2014\.  4 NSO 2013, Jones and McGavin 2015\.  5  Imbun,  Ben  (2015),  Supporting  Demand  Led  Vocational  Skills  Development  in  Papua  New  Guinea:  A  Labour  Market  Approach,  Study  prepared for Human Resources Development Programme Phase 2 (HRDP2), December 2015\.  6 NSO 2012, PNG Household Income and Expenditure Survey, 2009‐2010\.  7 The University of Notre Dame’s Global Adaptation Initiative ranks PNG 173 out of 181 countries for its vulnerability and readiness to the  challenges of climate change\.  8 World Bank, 2017, Systematic Country Diagnostic – PNG\. Urban poverty has experienced a larger increase (5 percentage points) than rural  poverty (3 percentage points) since 1996\.  Page 8 of 72  The World Bank Urban Youth Employment Project II (P166420) B\. Sectoral and Institutional Context    4\. Related  to  the  recent  lackluster  performance  of  the  economy  and  non‐resource  sector,  limited  economic  opportunities  for  youth,  gender  inequity,  and  gender  based  violence  (GBV)  are  key  impediments  to  reducing  poverty  and  boosting  shared  prosperity\.9   Youth  are  the  dominant  demographic  group  in  PNG,  and  a  growing  proportion  of  the  total population are urban youth\.10  It is estimated that 67 percent of the country’s population is below 35 years of age\.11   Available  evidence  suggests  youth  move  to  urban  locations  to  pursue  livelihood  opportunities,  although  schooling  and  other  social  factors  serve  as  important  “pull”  factors\.12   They  are  disproportionately  disadvantaged  by  poverty,  limited  economic opportunities, poor human capital development, increasing social pathologies, and risky behaviors\.      5\. Certain characteristics set urban youth apart from other groups\.  Urban youth are more likely to be: poor, living  in  settlements,  migrants  from  other  areas,  living  on  the  streets,  in‐conflict  with  the  law,  living  with  disability,13  HIV14  or  tuberculosis, serving as sex workers, and experiencing high levels of GBV\.15 These groups are among the most stigmatized,  facing difficulties in accessing state services and entering the labor market\. Crime and victimization rates in PNG are among  the  highest  in  the  world  with  Lae  and  the  National  Capital  District  (NCD)  at  the  top  end  with  66  and  33  homicides  per  100,000 population, respectively, reported in 2010\.16  The Development Strategic Plan (DSP) 2010‐2030 states that within  PNG,  “80  percent  of  crimes  are  committed  by  young  people  and  71  percent  of  prisoners  are  below  the  age  of  25  years\.”   High crime rates have affected the business and investment climate in PNG and the economic costs and longer‐term social  impacts  of  crime  and  violence  are  substantial  as  business  owners  and  employees  have  stressed  that  this  continues  to  effectively limit them from operating to their full potential\.17 High levels of crime and violence create fear that constrains  the  mobility  of  staff  and  clients,  erodes  trust,  and  reinforces  stigma  toward  certain  groups  perceived  to  be  dangerous,  especially youth\.     6\. About  one  in  four  urban  residents  are  estimated  to  be  not  in  Education,  Employment  or  Training  (NEET)  but  urban youth are more likely to be unemployed and lacking basic education, which are key determinants for transitioning  out  of  poverty\.18  Youth  are  first  and  foremost  preoccupied  with  getting  a  job,  whatever  their  status\.  However,  they  do  not meet the prequalification requirements for vocational or other training; and do not have access to the basic services  and  economic  opportunities  that  should  be  available  to  them  in  a  lower‐middle  income  country  such  as  PNG\.  Currently,  there  are  only  limited  places  available  at  technical  colleges  and  universities  (just  over  5,000  across  the  country19)\.  It  is  estimated  that  about  80,000  school  leavers  enter  the  labor  force  each  year,  but  only  10,000  jobs  are  created\.20  The  9 World Bank, 2017, Systematic Country Diagnostic – PNG\.  10 Jones, P\. and Kep, M\. 2012\. Understanding Urbanization in the PNG Context\.  11 Ivaschenko et al\., 2017, Can public works programs reduce youth crime? Evidence from PNG’s UYEP\.  12 Kanaparo, P\., J\. Ryel, B\. Imbun, and J\. Jacka, 2014\. Urban Youth Employment Study in Selected Urban Centres in PNG\.  13 WHO 2011, World Report on Disability\. While there is no available data, the WHO estimates about 15 percent of the population in PNG  has some form of disability and these groups tend to find themselves even more isolated in urban areas without family support\.  14 UNAIDS, 2016\. HIV prevalence data suggests that amongst the population, 0\.9 percent are HIV positive, and rates are higher for women  at 1\.1 percent\. Another group particularly at risk are sex workers with an estimated prevalence rate of 17\.8 percent\.    15 Evans, D\. 2018\. Draft Youth Scoping Study\.  16 Law and Justice Sector Secretariat Monitoring and Evaluation Unit (2010)\.  17 Lakhan, S and Willman, A (2014), The Socio‐economic Costs of Crime and Violence in Papua New Guinea, Recommendations for Policy and  Programs\. Private security represents a significant and growing expense: more than two‐thirds of businesses employ private security staff  and spend an average of 5 percent of their annual costs on this, compared to an average of 3\.2 percent for firms in East Asia overall\.  18 Evans, D\. 2018\. Draft Youth Scoping Study\.  19 Australian Council for Educational Research, 2014, Research into the Financing of Technical and Vocational Education and Training in the  Pacific, PNG Country Report\.  20 National Strategic Plan Taskforce, Government of Papua New Guinea (2011)\.  Page 9 of 72  The World Bank Urban Youth Employment Project II (P166420) situation  is  particularly  acute  in  cities,  as  youth  migrate  to  urban  centers  in  search  of  better  job  opportunities\.  Among  young  people  aged  15  to  24  years  in  Port  Moresby,  29  percent  were  estimated  to  live  on  less  than  US$3\.10  per  day  in  2009/2010, and 31 percent were unemployed\.21 This number is set to increase by more than 50 percent over the next 25  years\.22  Youth  are  generally  at  a  disadvantage  when  competing  for  jobs,  compared  to  older  and  more  experienced  workers\.  Due  to  shortcomings  of  the  school  system,  many  young  people  leave  school  without  basic  cognitive  and  social  skills\. Since they also lack work experience, their employability is low\.  Those that are employed, and in the informal sector,  are  usually  in  low  paying  jobs  and  lack  productivity\.   A  2014  survey  of  youth  reported  58  percent  have  dropped  out  of  school or tertiary education, with graduation rates for young men almost doubling that of young women at the secondary  level\.23  In 2012, 82 percent of students assessed were not attaining expected levels of literacy, while 64 percent were not  attaining  expected  levels  of  numeracy\.24   Particularly  in  technical  and  vocational  areas,  the  quality  of  training  is  below  what  the  PNG  economy  requires,  due  to  numerous  factors  including  poor  training  facilities  and  teacher  quality\.  Various  studies  have  drawn  attention  to  the  mismatch  between  training  provided  by  Technical  and  Vocational  Education  And  Training (TVET) institutions and employers’ needs in PNG\.25 It is likely that the formal economy would be able to absorb a  larger  number  of  graduates  if  they  had  the  “right  skills\.”26  Therefore,  despite  limitations  in  the  job  market,  reports  by  employers  suggest  there  is  opportunity  for  filling  and  creating  more  jobs,  and,  consistent  with  global  evidence,27  incorporating  a  combination  of  soft  and  practical  skills  training  in  all  stages  of  the  work  cycle  is  at  least  as  important  as  building technical skills\.28    7\. There are also gender disparities across all sectors, including a gender gap in access to paid work\. UNDP’s Gender  Inequality Index (GII) placed PNG at 141st place out of 156 countries in 2015\.29 Women in PNG suffer from gender inequity  in  terms  of  their:  (i)  access  to  endowments  such  as  education  and  health,  (ii)  access  to  economic  opportunities,  and  (iii)  voice  and  agency\.  According  to  the  most  recent  data  available,  only  27  percent  of  the  labor  force  were  women  in  2011\.  The formal economy workforce comprised 261,682 men and 99,050 women but women are three times more likely than  men to work in the informal sector\.30  More men were employed in construction, while the education industry employed  the  largest  number  of  women  (22  percent  of  women)\.31  There  are  very  few  females  in  jobs  and  training  for  the  construction,  vehicle,  electrical  and  metal‐working  trades\.  Two  colleges  which  specialize  mainly  in  these  trades:  Port  Moresby Technical College, which reported that females comprised 11 percent of its students; and Mt Hagen Tech, which  reported that the proportion was even lower at six percent\.32 In 2016, women in the formal sector reported their average  21 Ivaschenko et al\., 2017, Can public works programs reduce youth crime? Evidence from PNG’s UYEP\.  22 United Nations Population Fund (UNFPA) (2018), Data, available at: https://www\.unfpa\.org/data  23 Kanaparo, P\., J\. Ryel, B\. Imbun, and J\. Jacka, 2014\. Urban Youth Employment Study in Selected Urban Centres in PNG\.  24 SPC 2012, Pacific Islands Literacy and Numeracy Assessment\.  http://www\.forumsec\.org/resources/uploads/attachments/documents/2014FEdMM\.03_Attachment_PILNA_Rpt\.pdf  25  Parker,  J\.,  J\.  Arrowsmith,  D\.  Tippin,  M\.  Nemani,  with  L\.  Marai  (2012),  Situational  Analysis  of  Employment  Policies  in  Papua  New  Guinea\.  A Report Commissioned by the International Labour Office (ILO)\.  26  Department  of  Higher  Education,  Research,  Science  and  Technology  (DHERST)  (2015),  National  Higher  and  Technical  Education  Plan,  2015 ‐ 2024, Port Moresby: DHERST\.   27 Fox, L and Kaul, U, 2017, The evidence is in: How should youth employment programs in low income countries be designed?  28 Deloitte Touche Tomatsu and UNDP 2017, Fulfilling the Land of Opportunity: How to Grow Employment in PNG\.  29  At  the  core  of  violence  dynamics  is  gender  inequality\.  Dominant  gender  identities  (in  particular,  dominant  models  of  masculinity)  that  link together being a man with taking risks, using violence, and dominating women are risk factors for violence\. In addition, children both  girls and boys experiencing or witnessing violence during their childhood, often at home, have a higher probability to become perpetrators  or victims of violence when adults, suggesting that the patriarchal system that supports gender inequality and violence against women also  leads to the inter‐generational transmission of violence\.  30 NSO 2010\. 2009‐2010 Papua New Guinea HIES: Summary Tables\. International Labour Organisation (ILO) (2016), Women at Work –  Trends, Geneva: ILO\.  31 NSO 2013, Jones and McGavin 2015\.  32 https://dfat\.gov\.au/about‐us/publications/Documents/financing‐of‐tvet‐in‐png\.pdf  Page 10 of 72  The World Bank Urban Youth Employment Project II (P166420) monthly  pay  was  less  than  half  that  of  men’s  income\.33   Women  also  face  both  structural  and  circumstantial  barriers  in  accessing  and  controlling  finances,  which  limits  their  ability  to  grow  businesses  and  make  financial  decisions  that  affect  them and their families\.34 This is reflected in the fact that women have significantly lower levels of financial inclusion than  men  (holding  just  over  one‐third  of  bank  accounts)\.35  Gender  inequities  remain  pervasive,  partly  because  of  widespread  violence against women\. Women in PNG are also victims of some of the highest levels of GBV in the world\. Médecins Sans  Frontières  suggests  that  70  percent  of  women  in  PNG  experience  some  degree  of  physical  or  sexual  assault  in  their  lifetime\.36  In the same way that crime has affected the business climate, GBV is intruding into the workplace and exacting  a  heavy  toll  on  the  economy  as  economic  productivity  and  accumulation  of  human  capital  is  directly  impacted  due  to  related absenteeism and time taken to provide support for coworkers affected by GBV\.37     8\. There are policies and programs that provide a range of “just‐in‐time” support for young people but no impact  evaluations  have  been  carried  out  to  date,  making  it  difficult  to  assess  their  efficacy,  value  for  money  and  scalability\.  PNG’s  National  Youth  Policy  (NYP)  reaffirms  the  importance  of  youth  in  national  development  planning;  and  the  Vision  2050,  launched  in  2009,  aspires  to  improve  PNG’s  human  development  outcomes  and  prosperity  by  improving  human  capital  development,  gender,  youth  and  people  empowerment  as  one  of  seven  pillars\.  The  DSP  2010‐2030  provides  the  Government of Papua New Guinea (GoPNG)’s blueprint for achieving this, with a strong focus on employment, secondary  education for all, and halving the rate of youth crime\. Complementing these priorities, GoPNG’s focus continues to be on  promoting  nutrition  through  its  2016‐26  National  Nutrition  Policy  due  to  concerns  regarding  the  cognitive  impact  of  stunting  as  well  as  job  creation  and  economic  growth\.  The  Medium  Term  Development  Plan  III  2018‐202238  focuses  on  Youth and Employment under Priority Development Agenda 3 where it seeks to develop “a vibrant and productive youth  that  has  career  opportunities,  skills,  good  education,  moral  values  and  respect\.”  GoPNG  seeks  to  stimulate  economic  growth through the development of small to medium enterprises (SMEs) as well as investments in the agriculture, tourism,  and livestock industries\. There are also a range of youth and community programs currently in operation that range in size  and  scale\.  A  National  Youth  Employment  Framework,  prepared  by  the  National  Youth  Development  Authority  (NYDA),  was approved by GoPNG in March 2018\. The Department for Community Development and Religion (DFCDR), is supporting  various  initiatives  to  strengthen  the  family  unit  and  enhance  access  to  training  opportunities  through  non‐formal  education and the informal sector\.  Municipal authorities are coordinating and financing a range of training programs (e\.g\.,  TVET scholarships) safety campaigns (e\.g\., National Capital District Commission [NCDC]’s Seife Meri), GBV referral services  (NCDC’s  Gender  and  Family  and  Sexual  Violence  Action  Committee  [FSVAC]  Desks)  and  youth  networks\.  United  Nations  International  Children's  Emergency  Fund  (UNICEF)  and  UN  Women  are  involved  in  youth  policy  development  and  supporting programs focused on HIV/AIDS prevention, GBV, promoting child protection as well as education and livelihood  opportunities  for  women\.    Australia’s  Department  of  Foreign  Affairs  and  Trade  (DFAT)  is  financing  GBV  and  youth  programs focused on marginalized youth, including the Ginigoada Binis Development Foundation and City Mission\.    9\. Despite the number of sectoral interventions, there were other issues that also pointed to the need for a new  33 ADB 2017\. Pacific Economic Monitor\.  34 Structural barriers are those that arise from traditional and contemporary cultural and other socio‐economic characteristics, such as  the culture of male entitlement or weak law enforcement\. Circumstantial barriers are the factors arising from each woman’s personal  circumstances, including household dynamics, level of education, economic activities, and access to opportunities (Women’s World  Banking, 2013)\.  35 This is true even where financial services are available in urban communities (38 percent of urban women have some form of savings  account, versus 68 percent of urban men), and where women hold jobs in the formal sector (where women’s access to financial products  still lags that of men)\.    36 Médecins Sans Frontières (2016)\.  37 Darko, E\., W\. Smith and D\. Walker\. 2015\.  38 Securing Our Future through Inclusive Sustainable Economic Growth,” focuses on building PNG’s economic foundations through inclusive  growth\.  Page 11 of 72  The World Bank Urban Youth Employment Project II (P166420) and comprehensive approach due to the high numbers of youth finding the transition from school to work difficult with  little  or  no  support,  and  not  obtaining  the  necessary  basic  skills  and  work  experience  required  in  the  work  place  and  integrate  into  society\.  First,  a  growing  segment  of  youth  at‐risk  were  engaging  in  crime  and  in  civil  unrest;  but  public  programs  were  not  addressing  their  specific  needs\.  Second,  TVET  organizations  confirmed  that  most  youth  engaged  by  the  World  Bank’s  Urban  Youth  Employment  Project  I  (UYEP  I,  P114042)  would  not  prequalify  for  their  courses  as  a  high  school certificate was required\. In addition, they did not have the capacity to absorb large numbers and did not routinely  offer industry placement opportunities for students\.39 Employers also suggested that some TVET programs were outdated  and  were  not  aligned  with  industry  needs\.  The  main  job‐relevant  skills  lacking  in  youth  identified  by  employer  surveys  include:  (i)  low  numeracy  and  literacy  levels,  with  PNG  behind  global  benchmarks;  (ii)  poor  cognitive,  character,  and  behavioral skills that are desired in the workplace and society; and (iii) a shortage of a range of trade and job‐specific skills\.  Eighty  percent  of  businesses  surveyed  consider  skill  shortages  a  barrier  to  expanding  headcount  with  one  in  three  jobs  filled by unqualified persons\.40  Third, given the complex nature of youth unemployment, solutions were either too short  or too fragmented to make a difference\.     10\. In 2010, GoPNG asked IDA to prepare the UYEP I, a national workforce development and job readiness scheme  designed  to  provide  urban  youth  with  practical  training  and  work  experience  to  increase  their  employability\.41  UYEP  I  contained  three  key  components  of  a  comprehensive  Active  Labor  Market  Program  (ALMP):  (i)  soft  skills  and  vocational  training;  (ii)  job  matching  assistance  and  placement;  and  (iii)  wage  subsidies\.  The  project  played  a  critical  role  in  three  areas:  (i)  the  provision  of  training,  job  creation  and  employment  opportunities  for  out‐of‐school  and  out‐of‐work  youth  between the ages of 16 and 29 years; (ii) the provision of an income transfer to youth; and (iii) the provision of secondary  benefits, including small‐scale infrastructure aligned with  the local development  priorities of cities\.  The injection of  cash  into the economy and operation of a social safety net is significant in an environment where there is low economic growth  and where the cost of living is significantly higher than in rural areas\.42     11\. Demand for the project was strong with the project over‐subscribed even after eight years of implementation\.  The  project  screened  over  24,000  applicants;  engaged  about  18,500  youth  (compared  with  the  15,500  target);  and  was  successful at promoting social inclusion and gender\. Forty‐one percent of youth participants were women (exceeding the  target of 40 percent); and 12 percent are indigenous to NCD (Motu Koitabuan youth exceeding the target of 10 percent)\.  Of  the  other  major  ethnic  groups,  30  percent  of  participants  report  their  region  of  origin  as  Highlands,  25  percent  as  Southern; 9 percent as Momase; and 3 percent from the Islands\.43     12\. A Gender and Labor Study for the UYEP I44 confirmed that in most aspects of training, women showed a higher  39 Practical training was carried out through workshops\.  40 Deloitte Touche Tomatsu and UNDP 2017, Fulfilling the Land of Opportunity: How to Grow Employment in PNG\. 71 percent of employers  identified poor staff attitudes, productivity, and attendance as factors affecting their willingness to hire more staff\.  41 World Bank 2010\. Urban Youth Employment Project, Project Appraisal Document\. UYEP I has three components: (i) Youth Job Corps (YJC)  inclusive  of  Eligibility  Screening,  Basic  Life‐Skills  Training  (BLST)  and  public  works;  (ii)  Skills  Development  and  Employment  Scheme  (SDES)  inclusive  of  two  Pre‐Employment  Training  (PET)  schemes  (Office,  Customer  Service  and  Hospitality;  and  Industrial  Technical),  On‐the‐Job  (OJT) and Adult Literacy and Livelihoods Training; and (iii) Project Management\.   42 UYEP I surveys indicate that in addition to meeting immediate expenses, e\.g\., food and clothes, youth contribute to other family expenses\.   43 UYEP I Quarterly Progress Report end September 2018\. Some respondents did not report their origin\.  44 Voight‐Graf, C\. 2018\. Gender and Labor Market Study, Port Moresby, Papua New Guinea\. Other key challenges faced by females related  to household and family obligations, not finding a babysitter and pregnancy\. Most women were expected to tidy their houses before leaving  in the morning and therefore often arrived late\. For others, unsupportive husbands were a major obstacle\. Previous studies reported that  some  female  participants  had  to  deal  with  aggressive  resistance  from  husbands  towards  their  participation  in  UYEP  I\.  Focus  group  participants  also  talked  about  incidents  of  jealous  husbands  turning  up  at  worksites  and  forcing  women  to  withdraw\.  Interviews  for  this  study  suggest  that  there  are  considerable  costs  for  providing  childcare  for  mothers  in  terms  of  energy,  financial  expenses,  and  missing  Page 12 of 72  The World Bank Urban Youth Employment Project II (P166420) propensity to complete the training offered, which suggests that the project was successful at engaging young women  and  addressing  a  gender  gap  in  access  to  and  paid  employment\.  Apart  from  skills  development  and  work  experience,  receiving a certificate and reference from UYEP I were major factors facilitating the search for employment\. However, the  study also revealed that women encountered several challenges  with respect  to completing the  training, which resulted  in  them  dropping  out  of  the  project\.  Factors  disadvantaging  women  in  the  labor  market  include  their  vulnerability  to  becoming  victims  of  crime,  gender‐based  violence,  difficulty  accessing  safe  transport,  discrimination  in  workplaces,  cultural expectations, difficulties accessing market opportunities, financial exclusion, legal factors (such as inheritance and  ownership laws), and others\. To mitigate this, UYEP I ramped up its communications to reassure families about the training  and  work  women  were  being  offered,  it  sensitized  trainees,  contractors  and  project  personnel  through  gender  training,  and in areas where the subprojects were not located in proximity to communities, it arranged for contractors to provide  transport to ensure safe passage\. UYEP I also provided all participants with child and family care responsibilities additional  days to complete the training; and incorporated an electronic banking component to help promote their financial inclusion  and protect their income and savings\.45 Through its Gender Committee, the project developed a Sexual Harassment and  GBV Policy and Maternity Leave Statement in 2016,46 which defined the project’s related response and reporting protocols  in  accordance  with  the  NCDC’s  Family  and  Sexual  Violence  Action  Committee  (FSVAC)  Strategy  2016–2018,  and  the  PNG  National Strategy to Prevent and Respond to Gender‐Based Violence 2016‐2025\.    13\. Evidence  showed  strong  employment  and  social  impacts  for  UYEP  I  participants\.   A  2017  Impact  Evaluation  on  the project examined the effect of participation on anti‐social behavior compared to youth in parts of Port Moresby where  the program had not been offered\.47 This evaluation showed that UYEP I participants were up to 65 percent less likely to  engage in aggressive behavior, gratuitous property damage, and be out late at night compared to the ‘control’ group\. This  suggested that there were large public benefits from the UYEP I as these positive externalities benefited society, not just  the participants themselves\. In a 2017 Follow‐Up Survey (FUS) conducted on a sample of youth between six months and  two years after their participation in UYEP I , 41\.2 percent of the On‐the‐Job Training (OJT)48 trainees in this group reported  that  they  had  been  employed,  full‐time  or  part‐time,  in  the  six  months  prior  to  the  survey  compared  to  13\.6  percent  in  the control group\. The placements can be directly attributed to the project, as two‐thirds were offered jobs, by their OJT  employers\. Of the youth who had been through the Youth Job Corps (YJC)49, 21 percent reported being employed, full or  part  time,  in  the  previous  six  months\.  The  top  employing  occupation  was  for  clerical  and  administrative  workers\.  The  second  largest  employment  sector  was  for  works,  general  labor  and  maintenance  followed  by  hospitality,  catering  and  retail/customer services\. The results suggested that the project played an important role in facilitating entry into the labor  market for youth—against a backdrop  of persistent  bias from employers against engaging youth with limited education,  experience  and  skills\.  The  results  were  also  corroborated  by  a  2017  Employers’  Survey  of  OJT  employers\.  Employers  reported  that  97  percent  of  UYEP  I  youth  were  perceived  as  being  qualified  for  a  full‐time  job\.  Seventy  eight  percent  of  employers confirmed that youth had acquired technical skills during their OJT\. In terms of support for OJT from the Project  training and work experience days\.  45 According to the end March 2018 Quarterly Progress report, 41 percent of women had never had a bank account prior to the UYEP I\.  46  The  Policy  establishes  a  comprehensive  set  of  workplace  strategies  to  address  the  impact  of  GBV  in  the  workplace  and  guide  UYEP  I  responses  to  employees  and  trainees  whose  work  life  is  affected  by  GBV\.  The  Gender  Committee  is  responsible  for  implementing  and  monitoring the GBV Policy and UYEP I’s response protocol\. It also has responsibility for GBV focal points which provide support and referral\.  According  to  UYEP  I’s  Maternity  Leave  Statement  for  Youth  Trainees  of  April  2016,  women  trainees  will  be  entitled  to  unpaid  maternity  leave  in  line  with  the  Public  Services  General  Order\.  Women  will  not  lose  their  place  in  the  YJC,  PET  and  OJT  when  they  withdraw  due  to  pregnancy\. While the Statement is not yet being implemented, UYEP I currently deals with the issue of pregnant women by advising them  to start UYEP I later while their places are guaranteed\.   47 Ivaschenko, Oleksiy, et al (2017) “Can public works programs reduce youth crime? Evidence from Papua New Guinea’s Urban Youth  Employment Project”, IZA Journal of Development and Migration (2017) 7:9\.  48 OJT was provided to approximately 3,000 participants with a range of employers in NCD over a period of approximately three months\.  49 This involved 30 days of public works placements for approximately 8,500 youth who completed the program\.  Page 13 of 72  The World Bank Urban Youth Employment Project II (P166420) Management  Unit  (PMU),  89  percent  of  employers  found  that  the  support  services  provided  by  the  PMU  were  helpful\.  Their  main  reason  for  participating  in  UYEP  I  was  to  “contribute  to  the  community”  (with  62  percent  of  employers  reporting this)\. Of those not working after UYEP I, there was still evidence of increased job search (from 14 percent before  the  UYEP  I  to  18  percent  post‐UYEP  I)  and  greater  optimism  about  future  employment  prospects,  than  before  their  involvement in UYEP I\. The proportion of youth in informal work was also higher after their participation in YJC (from 30  percent to 49 percent) and OJT (from 39 percent to 44 percent)\. At the time of the 2017 FUS, 5 percent of YJC youth and  8 percent of OJT youth were in education, and 46 percent of YJC youth and 50 percent of OJT youth expressed an interest  in pursuing education or training opportunities in the next six months\.50    14\. Based  on  the  success  of  UYEP  I,  IDA  received  official  requests  from  GoPNG  in  August  2017  and  May  2018  to  deliver  a  follow‐on  project,  Urban  Youth  Employment  Project  II  (UYEP  II),  and  consolidate  and  expand  the  workforce  development scheme delivered under UYEP I\. In a context of high youth unemployment and slowing economic growth,51  risks associated with youth poverty and marginalization was perceived to have the potential to hamper the future growth  and development of the country\. Underscoring demand from the city authorities were growing concerns regarding both  poverty  and  associated  social  risks,  which  had  the  potential  to  fuel  civil  unrest  and  become  a  major  source  of  risk  and  fragility  for  the  Government  and  for  society\.  This  had  been  evident  with  periodic  and  highly  destabilizing  street  rioting  having taken place in Lae, Port Moresby and Mt Hagen over the last decade\. Robbery and assault were the most commonly  reported  crimes  with  youth  being  the  most  active  in  crime\.  Supporting  the  safety,  functioning  and  connectivity  of  key  cities was therefore perceived to be vital for the economy and wellbeing and livelihoods of urban residents as well as rural  regions and communities connected to  them by land  or sea\.52 It was agreed that the follow‐on operation would address  the following key priorities:53     a\. Strengthen GoPNG’s medium‐term public‐sector response to addressing the more immediate challenges and risk  factors  related  to  youth  poverty,  marginalization,  and  unemployment  (and  GBV)  until  longer‐term  investments  and growth begin to generate more visible impacts;   b\. Contribute to job creation by providing resourcing for the engagement of youth in a range of social and economic  development priorities;  c\. Serve as a model for other cities and rural areas to potentially replicate and customize their own models; and  d\. Facilitate critical research and development on youth to inform policy development\.    C\. Relevance to Higher Level Objectives    15\. The operation will contribute to the World Bank Group’s Country Partnership Framework (CPF) for PNG for FY19‐ 23,54  focusing  on  ensuring  more  effective  and  inclusive  service  delivery,  particularly  in  underserved  areas;  and  enabling  private sector development and inclusive growth in the non‐resource sector\. By assisting unemployed and out‐of‐school  youth to access improved training and job opportunities, with targeted monitoring of and support for female participation,  the project is expected to help achieve these objectives\.   50 More details can be found in Annex 3\.  51 The November 2019 budget for 2020 cut capital expenditure by defunding provincial and district services improvement programs\.  52 World Bank, 2017, Systematic Country Diagnostic – PNG\.  53  The  PDO  responds  directly  to  GoPNG’s  MTDP  III  2018‐2022\.  Specifically,  Key  Result  Area  (KRA  3),  Goal  3\.3  which  for  GoPNG  to  develop  “Resourceful  and  Productive  Youth\.”   It  also  responds  to  Goal  3\.5,  which  is  for  GoPNG  to  provide  “Equal  Opportunities  for  all  Citizens  to  Benefit  from  Development\.”  Both  goals  are  captured  in  the  project’s  indicators  measuring  direct  employment  outcomes  and  citizen  engagement\.  54 CPS FY 2019–2023\. Report 128471‐PG\.  Page 14 of 72  The World Bank Urban Youth Employment Project II (P166420) II\. PROJECT DESCRIPTION   A\. Project Development Objective    PDO Statement    The project development objective is to improve the capacity of participating young men and women in project areas  to engage in productive income generating activities\.    PDO Level Indicators    16\. The  performance  of  the  project  will  be  measured  by  a  set  of  indicators  contained  in  the  Results  Framework\.   Key  Project  Development  Objective  (PDO)  and  Intermediate  Results  indicators  (IRI)s  will  be  disaggregated  by  gender  by  the Project Implementing Entities\.55  Indicators tracking achievement of the PDO are:    a\. Number of direct project beneficiaries (i\.e\. project participants—numbers of youth engaged in training and work  experience opportunities, including the percentage of beneficiaries who are women, Motu‐Koitabu and Ahi); 56  b\. Percentage of graduates who report being employed 12 months after they complete their internships;57  c\. Percentage of youth who are assessed to have achieved satisfactory performance in the Urban Works and Services  component58; and  d\. Percentage of participants achieving minimum standards in vocation training assessments59\.    B\. Project Components    17\. The  project  (UYEP  II)  is  designed  as  an  Investment  Project  Financing  (IPF)  operation  and  is  financed  by  an  IDA  credit  of  SDR25\.5  million  (inclusive  of  taxes  or  US$35  million  equivalent)\.  It  is  planned  to  be  implemented  over  five  years from 2020 to 2025 in NCD and Lae\.60  The project will help NEET youth:    ï‚ Develop practical skills to get a job,  ï‚ Connect with certified training organizations and microenterprise providers (for those interested in self‐ employment),  ï‚ Find and complete internships, and  ï‚ Connect with relevant specialized community services, including counseling for GBV survivors through a referral  system connected to local service providers\.  55 The gender disaggregated IRIs will be captured in the Quarterly Progress Reports to be submitted to GoPNG and IDA\.  56 This core indicator is required for all IDA financed investment projects\.  A beneficiary is defined as people or groups who directly   derive benefits from an intervention\.  57  Defined  as  either  self‐employment  or  employment  in  the  informal  or  formal  sectors\.  Formal  employment,  part  or  full  time,  regular  ongoing employment (not temporary) during the past 6 months; and/or Self‐employment as part of an ongoing activity (i\.e\. not "one‐off"  assignment) over the past six months, for at least four weeks in total\.  58 See Results Framework for definition of “satisfactory” performance\.  59 Based on assessment tests administered at entry and during/end of vocational training\.  60 “Lae Area” means the area defined under the Recipient’s Lae City Authority Act 2015, No\. 11 of 2015, as the boundaries and jurisdiction  of  LCA,  unless  otherwise  specified  in  the  Project  Operations  Manual\.  “Greater  Lae”  typically  includes  the  six  Wards  of  Lae  Urban  and  17  Wards of the Lae Ahi\.  Page 15 of 72  The World Bank Urban Youth Employment Project II (P166420) 18\. GoPNG’s Department of Treasury (DOT) would be the Executing Agency for the project and Subsidiary Financing  (as  a  grant)  would  be  provided  to  the  City  Authorities,  namely,  the  National  Capital  District  Commission  (NCDC)  and  Lae  City Authority (LCA) as the implementing entities for NCD and Lae, respectively\.  The project locations were selected due  to  their  population  size  and  the  strategic  potential  they  offer,  linking  job  placements  to  the  local  economy\.61  During  the  first  year  of  project  implementation,  a  study  to  consider  the  applicability  of  a  simplified  UYEP  model  to  other  project  locations will be carried out\. Locations to be included in the study will be determined by the Project Steering Committee  (PSC)\. Subject to the findings of the study as well as project performance and additional financing, to be reviewed during  the  Mid‐Term  Review  (MTR),62  additional  locations  may  be  added  to  the  project  scope\.  The  project  will  include  four  components:  (1)  Youth  Job  Corps;  (2)  Skills  Training;  (3)  Referral  Services  and  M&E;  and  (4)  Project  Management\.  The  youth development process is shown schematically in Annex 1 (Diagram 4)\.    19\. COMPONENT 1: YOUTH JOB CORPS (US$18\.3 million) will raise the awareness of the project in targeted urban  areas among youth in their communities, mobilize eligible youth, provide them with Basic Life Skills and Job Readiness  Training (BLST) and place them in public works schemes\. The overall design includes key changes based on lessons from  the original UYEP I, including: (i) reinforcing the importance of soft skills by integrating the soft skills learned into public  work placements; (ii) allowing for more capital and skills‐based intensive works, the development of hard/technical skills  and  the  inclusion  of  young  women  and  youth  with  disabilities;  and  (iii)  adopting  a  merit‐based  approach  to  training,  whereby  all  selected  participants  are  required  to  complete  classroom‐based  and  practical  training  in  public  works  as  a  prerequisite for further skills training\.  As with UYEP I, the works and services will consist of waste management services,  maintenance activities and public infrastructure repair and improvement works, which are closely aligned with the urban  development planning priorities of the city authorities and their communities\.  Completion of both the ten‐day BLST and  30‐day public works activities will be a pre‐condition for further training\. There will be four subcomponents:    20\. Subcomponent 1a: Communications and Mobilization (US$0\.9 million) will support community awareness and  mobilization  campaigns,  communications  and  related  activities  to  identify  eligible  youth  and  inform  them  on  the  procedures and requirements for participation under the project\.  As for UYEP I, the campaign will inform youth of the  project  and  selection  criteria  to  mitigate  risks  of  complaints  from  youth  about  perceived  biases  in  the  application  and  screening process\.  The community mobilization process and Grievance Redress Mechanism (GRM) have been continually  reviewed  and  adjusted  throughout  UYEP  I\.  Activities  for  the  communications  and  media  program  will  be  set  out  in  a  Community Consultation Plan (CCP) developed by the project, which will include a nuanced engaged strategy targeted to  different groups who meet the selection criteria, such as young women, indigenous youth and disabled youth\. The project  will finance the development and dissemination of communication materials, consultations with local stakeholders in each  city  to  plan  for  the  screening  and  recruitment  of  youth  and  implementation  of  the  GRM\.  The  CCP  and  GRM  will  be  the  main instruments for the project’s community outreach and citizen engagement\.    61 Business Advantage PNG, 2013\. The nomination of these cities followed an announcement by the Prime Minister in 2013 that identified  four  locations  for  development  as  “special  zones,”  representing  each  of  PNG’s  four  geographic  regions:  NCD  as  the  commercial  and  administrative  center;  Lae  for  manufacturing  and  industry;  Mt  Hagen  for  agricultural  development  and  Kokopo  as  the  tourism  center\.  Reliable  data  is  problematic  in  PNG\.  However,  dated  Diagrams  for  Port  Moresby  indicate  youth  between  the  ages  of  15  and  29  years  accounted for 35\.1 percent in 2000 as compared to 28\.5 percent nationally\.  Although the official population was reported in 2011 by the  NSO (NSO, 2014) as 364,125, this figure is felt to be grossly underestimated\.  By some accounts the figure is 750,000 (Jones and Kep, 2012)  or even higher, at 900,000\.  Lae is the second largest city in PNG and comprises around 22 percent (approximately 150,000, comprising the  districts of Ahi and Lae) of the total population of the province (NSO, 2014)\.  Like NCD, Lae is ringed by settlements (over 50 percent of the  city’s  population  lives  in  settlements  (Jones  and  Kep,  2012)\.  At  the  2011  Census,  Mt  Hagen  was  home  to  some  30,000  residents  (NSO,  2014c:26)  but  more  recent  estimates  suggest  that  the  figure  is  somewhere  between  40,000  and  70,000  depending  on  the  boundaries  included, which would make it the third most populous city in PNG\.  62 The MTR will be completed between two‐and‐a‐half to three years after project effectiveness\.  Page 16 of 72  The World Bank Urban Youth Employment Project II (P166420) 21\. Subcomponent 1b: Basic Life‐Skills and Job Readiness Training (US$4\.3 million) will provide Basic Life Skills and  Job Readiness Training (BLST) to approximately 6,700 youth (5,360 in NCD and 1,340 in Lae) to increase their knowledge  and  preparedness  for  transitioning  into  the  work  place  both  in  the  formal  and  informal  economy\.  Drawing  on  UYEP  I,  which highlighted the importance of the soft skills training, the BLST will be modified and extended from five to ten days,  which  is  expected  to  allow  young  women  and  men  with  low  literacy  more  time  to  absorb  the  training  topics\.63  The  curriculum will cover: (i) basic literacy and numeracy, (ii) social diversity, gender equity, GBV awareness and prevention,64  (iii) personal health, hygiene, and nutrition (especially related to environmental sanitation and maternal‐child health), (iv)  work  place  health  and  safety,  (v)  basic  finance  and  budgeting‐business  skills,  (vi)  banking  and  savings,65  (vii)  work  place  behavior,  communication  and  relationships  with  co‐workers  and  supervisors  and  problem  solving,  and  (viii)  preparing  basic  work‐related  documents,  e\.g\.,  job  applications,  CVs,  etc\.   In  addition,  the  BLST  will  collect  socio‐economic  data  as  part of its registration process; setup bank accounts for beneficiaries; and orient youth to a set of referral services provided  by  the  project\.  The  BLST  involves  classroom‐based  training  using  adult  learning  methods  delivered  in  the  communities  where  youth  reside\.  Based  on  lessons  acquired  under  UYEP  I,  the  training’s  instructional  design  will  focus  on  special  learning needs of female and male trainees with low literacy, disability and be delivered by National Training Council (NTC)  certified  facilitators\.  Learning  achievements  will  be  measured  through  a  baseline  pre‐training  test,  in‐classroom  assessment  by  the  trainers,  and  a  post‐training  test\.   Trainers  will  receive  prior  training  on  the  curriculum  and  on  the  delivery  of  coaching  and  support  services\.  Course  accreditation,  which  was  recognized  by  UYEP  I  participants  as  being  important for future training and employment, will be provided by the NTC\.  Participants will be provided with lunch during  training\. If feasible, the training will be delivered in the Ward or settlement where youth reside and/or in a facility within  safe walking distance\.     22\. Subcomponent  1c:  Urban  Works  and  Services  (UW&S)  (US$13\.0  million)  will  generate  approximately  183,000  labor  days for 6,100  participants,66 enabling youth  to  develop  technical skills  and  apply the soft skills learned through  public works for 30 paid days after they complete the BLST\.67  Through the Urban Works and Services scheme, youth will  be engaged in short‐term public works and acquire work place, and marketable skills in one or more of the following: basic  road  maintenance,  the  construction  of  pedestrian  pathways  and  landscaping  (including  tree  planting,  both  of  which  will  improve  the  project’s  climate  change  mitigation  benefits),  drainage  cleaning  and  clearing,  mixing  and  laying  concrete,  concrete block making, laying of bricks and pavers, painting, fencing and other practical skills as well as health and safety  in  construction\.   It  is  expected  that  the  road  and  drainage  maintenance  activities  will  contribute  to  the  infrastructure’s  climate  resilience  due  to  an  anticipated  reduction  in  flooding,  and  climate  resilient  construction  practices\.  In  addition,  based on consultations during preparation, the menu of works and services will be expanded to improve inclusion of young  women  and  youth  with  disabilities\.  Tasks  such  as  painting,  clearing  of  debris,  weeding,  planting  and  paving  will  be  identified and can be performed by young women and youth68 with disabilities\. Examples of infrastructure and services to  63  Using  the  lessons  from  UYEP  I  one  and  feedback  from  employers,  the  training  will  allow  for  more  skills  practice  sessions  to  develop  communication skills and help participants to identify learning and employment pathways\.   64 In terms of GBV awareness and prevention, the BLST will rely on specialized service providers who would oversee developing the  content for these modules\.   65 The BLST curriculum will align with the financial education modules established by Centre for Excellence in Financial Inclusion (CEFI)  and promoted by all micro‐banks and institutions for inclusive finance and include it in the scope for training of trainers for BLST\.   66 This assumes some attrition\.  67 Under UYEP I, youth were engaged in 35 days of road and public works maintenance\.  Capable, good performing trainees were provided  an  extra  10  days  of  Extended  Skilled  Works  (ESW)\.   The  ESW  involved  semi‐skilled  works  such  as  constructing  concrete  footpaths,  block  pavements, and stone wall masonry\.  The ESW helped transfer trade skills through guidance and learning by doing\.  Under UYEP I, ESW was  popular  with  trainees,  and desirable  because  of the  increased skills  gained  and  social  desirability  of  the  work\.   Under  UYEP  II,  all  trainees  will have an opportunity to do ESW as part of the mix of public works undertaken\.  68 Under UYEP I, there was no significant difference in public works completion (48 percent females) and attrition rates between men and  women at two and four percent, respectively\.    Page 17 of 72  The World Bank Urban Youth Employment Project II (P166420) be  delivered  include:  pedestrian  pathways,  steps,  driveways  and  parking  lots,  recreational  and  market  shelters,  the  beautification  and  landscaping  of  public  areas,  maintenance  and  repair  of  roads  and  drainage,  schools  and  other  public  buildings, waste management and street lighting\.  Climate resilient design considerations (e\.g\., use of suitable construction  materials  and  standards  to  enhance  resilience)  will  be  incorporated\.  Women  would  be  encouraged  to  perform  other  infrastructure works to break gender stereotypes and give them skills not otherwise available to them\. Completion of both  the BLST and public works activities will be mandatory for further training\. The public works scheme will be closely aligned  with the local development priorities of the municipal authorities\.  Infrastructure improvements and maintenance needs  are  similar  both  in  NCD  and  Lae,  and  joint  planning  will  be  undertaken  with  City  Authorities  in  support  of  their  urban  development  plans\.    In  addition  to  supporting  their  core  functions  and  services,  the  investments  will  enable  them  to  achieve  more  than  they  could  otherwise  with  limited  financial  means\.    Households  in  target  neighborhoods  and  the  general  urban  population  not  regularly  served  under  the  City  Authorities  current  arrangements  will  benefit  from  the  infrastructure and services provided\.    23\. Subcomponent  1d:  Other  Technical  Assistance  Activities  (US$0\.15  million)\.  The  project,  through  NCDC,  will  finance  a  set  of  technical  assistance  activities,  such  as  studies  and  diagnostics,  that  will  inform  the  design  and  implementation of violence prevention and/or labor mobility pilot initiatives in subsequent years, drawing on global best  practices69  and  available  evidence\.70  A  concept  note  for  the  studies  and  diagnostic  work  will  be  developed  by  NCDC  in  collaboration  with  relevant  stakeholders\.  The  foundation  work  will  subsequently  inform  the  development  of  a  concept  note  for  the  implementation  of  a  multi‐year  pilot  that  is  designed  to  identify  and  test  innovative  approaches  to  youth  inclusion  and  their  development,  including  identifying  opportunities  for  example,  for  their  labor  mobility\.  International  best  practices  suggest  that  youth  development  strategies  are  most  effective  when  they  build  on  a  strong  participatory  approach and combine social and situational evidence‐informed interventions\.     24\. COMPONENT  2:  SKILLS  TRAINING  (US$8\.9  million)  will  provide  a  range  of  market‐oriented  training  programs  for approximately 5,700 youth to improve their general and technical skills needed in the work place\.71 Stakeholder and  youth consultations suggested that the UYEP I was successful in providing recognition to youth in society and giving them  the basic skills required in the job market, but youth expressed a desire for more opportunities for skills development and  qualifications to be competitive in the labor market\.72  The training and skills development activities will aim to build basic  69 Chioda, L (2017), Stop the Violence\.  70 See for example, Carbonari, F\., A\. Willman and R\. Sérgio de Lima\. 2017\. “Learning from Latin America: Policy Trends of Crime Decline in  10 Cities Across the Region”\. Background paper\. Ending Violence in Childhood Global Report 2017\. Know Violence in Childhood\. New Delhi,  India; See also: Abt, T\. 2017\. “Towards a Comprehensive Framework for Preventing Community Violence among Youth\.” Psychology, Health  and  Medicine  22(S1):  266–85\.  The  pilot  could  build  on  the  works  and  services  financed  by  the  project  whose  design  will  follow  Crime  Prevention  Through  Environmental  Design  (CPTED)  principles  to  enhance safety perception  and reduce  opportunity  for  crime  in  the  built  environment\.  The  CPTED  informed  urban  works  (situational  prevention)  could  be  combined  with  additional  evidence‐informed  social  interventions  (e\.g\.  cognitive  behavioral  therapy)  or  strengthened  existing  programs  and  services  (e\.g\.  mediation,  sports,  respectful  relationship,  and  parenting  programs),  to  increase  the  intensity  of  the  support  provided  to  the  youth  and  ensure  the  approach  sustainability\.  By  so  doing,  the  pilot  could  focus  on  mitigating  most  salient  risk  factors  for  violence  and  crime  at  the  individual  and  community  level,  including  youth  idleness,  conflict  resolution,  abuse  of  alcohol,  dating  violence,  poor  parental  discipline,  anger  management and a lack of citizen engagement\. It is expected that the combined interventions will have a cumulative effect geared towards  strengthening  youth  leadership,  gender  equality,  and  the  community  social  capital  that  will  in  turn  enhance  community’s  resilience  to  violence\.  The  approach  developed  in  the  pilot  communities  will  be  evaluated  after  at  least  12  months  of  implementation  and  inform  the  pilot’s scalability and sustainability\.   71  With  increased  coaching  and  counselling,  regular  feedback  and  communication  with  employers,  affirmative  action  on  gender  issues,  UYEP I was able to reduce the attrition rate in OJT from 38 percent to 18 percent\. The projection for UYEP II includes an attrition rate of 20  percent\. However, there is an assumption that the rates can be lowered through improved coaching, mentoring and counselling will help  reducing the attrition rate in the skills development schemes\.  72  There  is  a  strong  evidence  of  substantial  employment  gains  due  to  the  pre‐employment  training  and  the  work  placement  with  a  firm  Page 18 of 72  The World Bank Urban Youth Employment Project II (P166420) competency  and  provide  a  skill  development  pathway  for  employment  in  the  formal  and  informal  sectors\.   The  training  will  involve  creating  a  competency  framework  for  each  course,  and,  to  the  extent  possible,  putting  youth  on  a  pathway  for accreditation or certification/licensing\.  The project will coordinate with NTC and the National Trade and Testing Board  (NTTB)  to  develop  a  competency‐based  certification  that  will  be  issued  to  participants  on  course  completion  or  trade  testing\.    While  participants  can  self‐select  into  one  of  two  training  programs,  criteria  such  as  satisfactory  trainee  performance during BLST and Urban Works and Services and numeracy and literacy may be applied to guide the process  of selection to ensure suitability and competitiveness\.  There will be two subcomponents:    25\. Subcomponent  2a:  Internships  (US$6\.7  million)  will  provide  an  approximately  4,600  youth  the  opportunity  to  work  with  employers  on  a  three‐month  internship  in  entry  level  jobs\.73  Building  on  UYEP  I,  the  labor‐market  insertion  scheme  provides  youth  with  firm  training  and  on‐the‐job  experience  in  areas  that  have  shown  consistent  demand  supported by a training stipend and facilitation services\. Growing participation in UYEP I confirmed employer demand for  such  training  and  the  wage  subsidy,  and  consultations  with  employers  revealed  that  the  project  should  continue  to  emphasize the importance and monitoring of life and job skills progression during the internship\.  The project will establish  a scoring system for the internship using a score card to be completed by the employer at the beginning, and end of the  internship  period  together  with  regular  coaching  and  counselling  sessions  to  be  provided  by  the  project\.    The  value  proposition offered to employers is the three‐month wage subsidy in the form of a training stipend provided to participant  youth  in  addition  to  the  screening,  training  and  job  matching  services  provided  by  the  project\.  The  program  offers  employers  a  low‐risk  opportunity  to  observe  and  assess  trainees  for  potential  employment,  subject  to  vacancies\.  The  project  will  aim  to  match  youth  into  appropriate  jobs  based  on  expressed  demand,  levels  of  numeracy  and  literacy  with  additional  provisions  for  mentoring  and  coaching\.  The  project  will  maintain  attendance  and  performance  data  for  certification where possible\.74       26\. Subcomponent  2b:  Vocational  Training  (US$2\.2  million)  will  develop  entry‐level  competencies  for  approximately  1,100  youth75  in  selected  trades  relevant  to  both  the  formal  and  informal  sectors  by  providing  existing  short  courses  offered  by  accredited  training  providers  or  industry‐linked  training  providers  for  duration  of  three  months\.76  In addition to the minerals sector, GoPNG’s Medium Term Development Plan III 2018‐2022 (MTDP) identifies  tourism and agriculture as key areas for economic growth\. However, consultations with employers and other development  partners  confirm  that  the  tourism  and  construction  sectors  provide  the  most  immediate  potential  for  job  growth\.  Employer surveys,77 experience with the OJT under UYEP I and consultations with vocational training organizations suggest  that relevant trades considered suitable for trainees are: (i) hospitality, (ii) kitchen operations,78 (iii) office, customer care  and  basic  computing  skills,  (iv)  building  and  construction  and  (v)  machine  and  plant  operators\.79   Therefore,  based  on  a  (Sonya Woo and Darian Naidoo, 2018)\.   73 The internship (previously call on‐the‐job training) period was five months under UYEP I; the period has been reduced so more youth can  benefit from the limited number of places available\.  74  UYEP  I  implemented  a  literacy  and  livelihoods  scheme  in  2018  through  a  training  provider  and  terminated  due  lack  of  atonement  of  targeted results\.  Livelihoods programs with the existing providers in Lae is largely geared towards rural areas\.   75 The numbers are considerably lower as this is a new intervention that is yet to be tested\. The cost per beneficiary at $1,600 is also  marginally higher than for the Internship scheme ($1,100 per beneficiary)\.  76  The  assessment  of  vocational  training  providers  in  Lae  revealed  that  most  of  them  are  disconnected  from  the  industry;  do  not  have  adequate  facilities  with  modern  equipment  used  in  industry,  have  stopped  industry  placement  schemes  to  provide  on  the  job  training/internship, and do not have job placement mechanism for graduates\.   77 Deloitte Touche Tomatsu and UNDP 2017, Fulfilling the Land of Opportunity: How to Grow Employment in PNG\.  78 While UYEP I have already provided short courses on hospitality and office and business skills, the Vocational Education and labor market  linkage practices adopted by providers such as IEA‐TAFE and Limana suggest that the partnership agreement between training institutions  and local businesses provide a better chance for trainees to get a job compared to those joining a course without such placement linkages\.   79  Consultations  with  local  businesses,  training  institutions  and  other  stakeholder  suggest  that  the  Wholesale  and  Retail  Trade  and  Page 19 of 72  The World Bank Urban Youth Employment Project II (P166420) labor  market  analysis  carried  out  under  the  UYEP  I,80  the  project  will  finance  existing  short  courses  in  response  to  expressed  demand  by  employers  in  the  tourism/hospitality,  administration  and  construction  sectors\.  Training  service  providers  will  be  required  to  provide  accredited  trainers,  physical  facilities  equipped  with  learning  equipment  matching  with  the  industry  requirements  and  have  established  linkages  with  the  relevant  industry\.  The  building  and  construction  related training will also include climate resilient/energy efficient building techniques\. Provision for financial literacy and  basic  business  skills  during  the  training  will  be  relevant  for  youth  seeking  to  pursue  self‐employment  opportunities;  and  those  youth  will  be  further  assisted  through  the  referral  services  on  training  or  enterprise  development  desks\.  Such  courses will help youth to build basic competencies in relevant trades along with basic financial and business skills over a  three‐month  period\.  The  course  certification  will  follow  the  national  certification  system  and  target  training  or  trade  Certificate I and II for these purposes\. The project will work closely with the training provider to quality assure their training  policies  and  competency  assessments\.  Participants  will  be  provided  with  lunch  and  a  transport  stipend  together  with  regular  coaching  and  counselling  sessions\.  The  coaching  and  counselling  support  will  include  both  career  path  coaching  and address behavioral and personal issues\.     27\. COMPONENT  3:  REFERRAL  SERVICES  AND  MONITORING  AND  EVALUATION  (US$3\.2  million)  will  build  on  the  systems  and  processes  developed  under  UYEP  I,  aimed  at  screening  and  referring  youth  to  other  specialized  organizations  and  delivering  data  and  analysis  to  support  project  operations  and  inform  policy  development\.    This  component  will  also  include  a  set  of  services  that  respond  to  recommendations  arising  from  UYEP  I,  that  facilitate  pathways to employment, engagement in micro‐enterprises and training beyond the project, and utilize more specialized  counseling services, drawing upon the expertise of service providers in those fields\. There will be two subcomponents:    28\. Subcomponent  3a:  Referral  Services  (US$1\.8  million)  will  provide  a  set  of  job,  training  and  microenterprise  support  services  designed  to  screen  and  refer  eligible  youth  to  identify  and  access  potential  career  pathways  beyond  the project\. The subcomponent will comprise two streams: First, the provision of job search, microenterprise and training  referral  services  beyond  the  project;  and  second,  referral  to  specialized  GBV  services\.   Both  streams  will  be  integrated  with  the  mentoring  and  coaching  services  to  be  provided  through  all  components  of  the  project,  so  that  participants  receive consistent guidance towards appropriate pathways\. Coaching and mentoring will be strengthened by specialized  training  for  PMU  staff  and  the  adoption  of  a  structured  approach  to  delivery  of  these  services,  including  systematic  recording of information\. Participants will be offered a basic set of exit services consisting of a career advice session and  CV  preparation  advice  and  facilities\.  There  will  be  three  types  of  referral  services  in  the  first  stream:  (i)  Employment;  (ii)  Training;  and  (iii)  Micro‐Enterprise  services\.  They  will  be  implemented  in  partnership  with  other  institutions  such  as:  Employers,  Accredited  Training  Agencies  and  Financial  Services  (micro‐lending)  Institutions\.  The  services  will  aim  to  go  beyond  the  provision  of  general  information  and  refer  youth  to  known  opportunities  identified  through  a  network  of  partnerships, like the arrangements, resourcing and direct relationships pursued under the Internships (or “OJT” in UYEP  I)\. However, services will be limited to screening and referrals\.     ï‚ The  Employment  Referral  Desk  will  leverage  relationships  with  Internship  employers;  work  with  the  Hospitality  industries  have  greater  chance  of  providing  employment  in  NCD\.  However,  the  assessment  during  project  preparation  in  Lae  identified  Building  and  Construction  and  machine  operator  as  the  most  prospective  skills  to  maximize  the  chances  of  getting  employed\.  The  assessment  found  a  dis‐connect  between  the  Vocational  Training  Providers  and  Industry  that  has  led  to  Industry  actors  setting  up  certified  training  packages  and  apprenticeship  scheme  that  best  match  the  industry  requirements\.  UYEP  II  will  include  such  training  that  has  got  a  linkage  with  industry  with  better  employment  prospects\.  The  assessment  of  agriculture  sector  for  Lae  City  area  under  LCA  suggested that the current schemes are targeted for farmers in rural areas, e\.g\. the rice farming scheme promoted by Trukai Industries in  partnership with NARI targeting farmers outside LCA area\.  Similarly, the current arrangements for Poultry farming promoted by Tablebirds  under Mainland Holding targets farmer families in rural areas outside LCA, is not viable for LCA Wards due to its land requirements\.  80 Voight‐Graf, C 2017, PNG Gender and Labor Market Study\.  Page 20 of 72  The World Bank Urban Youth Employment Project II (P166420) Department  of  Labor  and  Industrial  Relations  (DLIR),  to  promote  UYEP  II  youth  for  inclusion  in  unskilled  and  semi‐skilled  labor  components  of  government  infrastructure  projects;  facilitate  the  exchange  of  information  (and potentially access) to the Australian seasonal labor migration program; and work to widen the network of  employers, especially in the planned growth areas of agriculture, tourism and construction\.  The potential for  developing  a  labor  placement  desk  under  NCDC  as  a  sustainable  long‐term  service,  will  be  explored  as  it  is  confirmed that local recruitment agencies have no commercial interest in the type of labor that can be provided  by UYEP II\. The secondment of NCDC staff to one or more positions will be explored\.     ï‚ The  Training  Referral  Desk  will  focus  on  opportunities  for  further  training  for  those  who  wish  to  strengthen  their  prospects  for  formal  employment,  for  example,  by  obtaining  trade  certification\.  There  will  be  efforts  to  develop productive relationships with these institutions to ensure that the project meets specific training pre‐ qualifications  for  certain  programs\.  E\.g\.,  Malanghan  Technical  High  School;  St  Joseph’s  Technical  School;  Hornibrook NGI and IEA TAFE\.    ï‚ Micro‐Enterprise  Development  Referral  Desk  will  focus  on  providing  support  for  youth  exploring  informal  employment  options\.  This  will  depend  on  relationships  with  micro‐lending  business  services  institutions  such  as: Pacific Financial Inclusion Program (PFIP) – UNCDF; Women’s Micro Bank; Centre for Excellence in Finance  Inclusion (CEFI); and the Market Development Facility funded by DFAT\. It will be necessary to expose youth to  these institutions at key points during the program so that youth understand their requirements and available  options\.  E\.g\.,  micro‐banks  may  require  borrowers  to  open  bank  accounts  with  them  and  establish  savings  as  prior conditions for lending, and methods of making provision for this will be explored, as well as coaching to  ensure  youth  understand  the  services  available,  the  benefits  and  risks  and  especially  responsibilities  of  borrowers\.    29\. In  the  second  stream,  and  in  response  to  issues  identified  by  women  in  the  UYEP  I  regarding  women’s  maternal  health and access to the labor market (see paragraph 12), the project will strengthen its approach to GBV, by leveraging  services of specialized external entities already operating in NCD and Lae\. Specific initiatives to be financed by the project  include: (i) GBV awareness training for all project staff, including BLST trainers and contractors and employers participating  in the Urban Works and Services and Internships schemes; and (ii) identifying and/or strengthening the project’s referral  process for GBV cases\. Under UYEP I, NCDC’s Gender Desk and FSV Secretariat provided support on intervention protocols,  case  management  and  referral  pathways  to  meet  the  anticipated  needs  in  the  project\.  Under  UYEP  II,  IDA  will  engage  a  GBV expert to undertake a qualitative assessment of the system (NCDC’s referral pathway and their partner GBV service  providers)  to  have  a  better  understanding  of  the  strengths  and  weaknesses  of  the  system  in  place\.  This  will  ensure  that  project staff understand the referral points, procedures and services as well as limitations in support that may require the  provision  of  additional  project  resources  to  strengthen\.  Where  available,  the  assessment  should  draw  on  existing  work  undertaken  by  other  partners  (e\.g\.,  IFC)\.  Services  in  Lae  are  not  as  well  established\.  There  is  not  the  equivalent  of  a  FSV  Secretariat  or  Gender  Desk  as  in  the  case  of  NCDC\.  There  are  a  few  service  providers  who  provide  services  but  there  is  also less coordination and clarity of referral pathways than in NCD\. The lack of well‐established services suggests that the  PMU in Lae will need to devote more resources (including the time of the Gender and Inclusion Advisor) to advocate for  a more organized government response to FSV case management and the development of LCA’s referral pathway\. Given  budget limitations, the scope of improvements to be financed by the project will be limited to service provision for project  participants only and will not involve building case management capacity within the project itself\. In addition, the project  will support the monitoring of GBV cases in accordance with the Sexual Harassment and GBV Policy and Maternity Leave  Statement  developed  under  the  UYEP  I  in  2016;  and  the  inclusion  of  a  Workers  Codes  of  Conduct  on  sexual  exploitation  and abuse and other forms of GBV that all contractors will have to comply with\.    Page 21 of 72  The World Bank Urban Youth Employment Project II (P166420) 30\. Subcomponent  3b:  Surveys,  Monitoring  and  Evaluation  (US$1\.4  million)  will  include  a  set  of  surveys  designed  to  evaluate  the  achievement  of  project  outcomes  and  impacts,  including  the  value  and  effects  of  individual  interventions\.  As  with  UYEP  I,  a  Management  Information  System  (MIS)  will  be  used  to  record  most  of  the  project’s  operational  information,  including  registration,  allocation  of  trainees  to  work‐sites,  attendance  and  performance  score  cards,  survey  data,  electronic  stipend  payments,  and  training  certificates\.   Responding  to  lessons  learned  in  the  UYEP  I,  the evaluation surveys will include carefully designed procedures to maintain statistically rigorous randomized control and  treatment  groups,  within  the  practical  constraints  of  project  operations\.  The  number  of  surveys  will  also  be  reduced  to  balance  data  collection  and  analysis  against  practical  constraints,  including  resources\.  Biometric  identification  based  on  fingerprint scanning or facial recognition will be implemented, where appropriate, to  ensure that  control and treatment  groups remain separated for the planned periods\.  The set of surveys comprise a Baseline when youth enter the project,  Follow‐Up Surveys (FUS) administered at the project’s mid‐line and end‐line, and a set of additional Community Perception  and Employer surveys\. Follow‐Up Surveys are planned to take place around 12 months and 24 months after participants  are  screened\.  Execution  of  the  FUS  will  preferably  be  done  by  a  professional  survey  firm  contracted  for  the  purpose,  working closely with  the  PMU\. A second option of  working with  an individual  consultant to guide the PMU’s own survey  team  has  also  been  identified,  in  case  a  well‐qualified  firm  cannot  be  procured  within  the  available  budget\.  Assessment  of participants performance at key stages, such as entry and  exit  of BLST, exit from Urban  Works and Services; exit from  internships or vocational training; and assessments obtained during coaching and mentoring sessions, designed to monitor  their development as they progress through the project, will be introduced\. The MIS will be enhanced as needed to record  and present this information and will be an increasingly important tool in the provision of targeted services to participants  as they progress through the project and later, for referrals to other opportunities and services\.    31\. Component  4:  PROJECT  MANAGEMENT  (US$4\.6  million)  will  finance  project  management  support,  including  safeguards  oversight,  communications  and  media,  short‐term  technical  assistance,  training,  grievance  management,  financial management, procurement, project management and support staff, goods, and incremental operating costs\.  The  key  elements  consist  of  two  Project  Management  Units  (PMU)s  attached  to  NCDC  and  LCA,  respectively,  as  the  Implementing  Entities,  coordinated  by  a  Project  Coordination  Office  (PCO)  co‐located  with  the  NCDC  PMU\.    Each  implementing  agency  will  host  a  PMU  led  by  a  Project  Manager\.   The  staffing  structures  and  contracting  within  the  two  PMUs will essentially be a mirror of each other, although the size of the LCA PMU will be smaller because of the smaller  number of throughput beneficiaries\.  Some joint activities will also be undertaken but led by the NCDC PMU on behalf of  both entities, such as the impact evaluation and specialist surveys although both teams need to be involved at some level\.  The PMUs will house the back‐office functions such as accounting, procurement, and administration essential to operate  the  project\.    The  major  activities  under  the  project  will  be  led  by  Team  Leaders,  each  with  supporting  technical  and  operational staff\.  There will be two subcomponents:    32\. Subcomponent 4a: Program Coordination Office (PCO) and PMU in NCD (US$2\.6 million) implemented by NCDC\.   Technical and operational assistance, capacity building activities and training will be provided to support NCDC on project  management,  implementation,  coordination,  communications  and  media\.  A  PCO  will  manage  inter‐agency  coordination  and  carry  out  certain  overarching  activities  including  national  communications,  coordinating  with  NYDA  on  project  implementation,  partnerships,  joint  PMU  training,  and  consolidated  accounting  and  reporting  to  the  Association,  DOT,  DNPM  and  PSC  (where  appropriate)\.   For  efficiency  and  operational  reasons,  the  PCO  will  be  co‐located  with  the  NCDC  PMU  in  office  space  provided  by  NCDC\.  The  NCDC  Project  Manager  and  PCO  Manager  will  formally  report  to  the  NCDC  City  Manager  but  will  also  be  functionally  accountable  to  the  PSC  Co‐Chairs  (Department  of  Provincial  and  Local  Government Affairs [DPLGA], the parent ministry for NCDC and LCA, and National Youth Development Authority [NYDA])  in terms of governance and reporting\.      Page 22 of 72  The World Bank Urban Youth Employment Project II (P166420) 33\. Subcomponent 4b: PMU in Lae City (US$2\.0 million) implemented by LCA\. Technical and operational assistance,  capacity  building  activities  and  training  will  be  provided  to  support  LCA  on  project  management,  implementation,  coordination, communications and media\. The LCA Project Manager will report to the LCA Chief Executive Officer but also  be functionally accountable to the PSC Co‐Chairs\.      C\. Project Beneficiaries    34\. UYEP II will cover NCD in Port Moresby and Lae in Morobe Province\. Additional locations may be considered for  inclusion in a second phase following the completion of the project’s scoping/feasibility study to be carried out in the  first  year  of  implementation  under  the  auspices  of  the  NYDA,  and  subject  to  financing  and  performance\.  With  the  experienced gained in setting up what is now a well‐tested ALMP in NCDC, the expansion to Lae would provide a critical  step in scaling up the program nationally; and lay  the foundation for similar programs to be implemented  in Mt Hagen,  Kokopo  and  elsewhere\.  However,  the  scale  up  will  be  targeted  and  managed  with  the  support  from  local  level  implementing  partners  to  ensure  the  sustainability  of  the  program\.  It  was  agreed  that  only  two  locations  would  be  included in the first phase of the scale up\. Both NCD and Lae were selected after an extensive consultation process with  key national, provincial, city and local level government authorities carried out between 2014‐2018\.81 NCD and Lae met  the project’s criteria of: (i) being the largest and second largest cities in PNG (in terms of its population and youth size);  (ii) having local economies and service providers that would ensure the project’s sustainability; (iii) having city authorities  in place which would provide local level oversight for project implementation; and (iv) providing suitable office space for  the project to operate out of\.     35\. The  continuation  of  the  program  through  a  dedicated  and  highly  experienced  project  coordination  team  in  NCDC will provide the necessary experience and hands‐on support required for the roll‐out of the project to Lae, and  potentially other urban and rural areas, where institutional and implementation capacity is considerably weaker\. Both  NCD and Lae include extensive peri‐urban areas outside the city center, characterized by larger lot sizes and lower density  development\.82  The rationale for providing a slightly higher proportion of funding for NCD (60 percent) compared with  Lae  (40  percent)  in  the  current  context  is  because  NCD  has  a  considerably  larger  youth  population  than  Lae,  and  the  budget  allocation  for  NCD  also  includes  the  PCO  and  other  shared  resources,  which  will  benefit  and  provide  support  to  LCA (and NYDA), including the secondment of staff as well as the implementation of the MIS (Management Information  System)  and  impact  evaluation\.  LCA  is  still  in  the  very  early  stages  of  setting  up  its  operations,  including  its  accounting  system and staff to perform the financial and accounting and procurement functions of the LCA\. For these reasons, it is  anticipated that will not be able to disburse the same level of funding as NCD\. However, a further re‐balancing of project  funding can be made during implementation, subject to performance capacity\.    36\. The  project  will  focus  on  training  and  employment  opportunities  for  about  6,700  youth  that  have  been  out‐of‐ school  and  out‐of‐work  (“unattached  youth”)  for  at  least  six  months;  have  resided  in  the  project  areas  for  at  least  24  months;  and  fall  between  the  ages  of  16  and  29  years\.83  UYEP  I  (total  of  $26  million)  engaged  18,500  youth  in  the  BLST  and  generated  815,000  labor  days\.  However,  UYEP  II  ($35  million)  is  only  targeting  6,700  youth  for  the  BLST;  ~183,000  81  Stakeholders  as  reported  above\.  In  addition,  additional  workshops  and  consultations  were  carried  out  with  the  following  government  departments: DOT, DNPM, DLIR, DPLGA and DFCDR from 2018‐2019\.  82 Due to the ad hoc nature of development, and steep topographic features in the area, NCD and Lae include large areas of undeveloped  land, most of which are cleared of vegetation\.  83 The National Employment Act (1994) stipulates that the minimum working age is 16 years\.  PNG’s National Youth Policy 2007‐17 defines  youth  between  the  ages  of  12  and  25  years  of  age\.   However,  during  implementation  of  UYEP  I,  the  age  limit  was  increased  to  35  years  based on demand, although that is now felt to be too old to be classified as youth\.  Page 23 of 72  The World Bank Urban Youth Employment Project II (P166420) labor days under the Urban Works and Services; and ~300,000 labor days through Internships\. The change in target group  size is due to a shift in focus from providing temporary income and employment for large numbers of youth, to ensuring  improved  socio‐economic  opportunities  and  employment  outcomes  for  youth\.  Under  UYEP  I,  only  25  percent  of  participants  were  placed  in  On‐the‐Job  Training\.  In  UYEP  II,  all  participants  will  be  given  a  longer  duration  of  training,  quality  of  training  will  be  improved  as  participants  are  provided  with  the  opportunity  for  formal  NTC  or  NATTB  certification, and the actual through‐put numbers at the end of the Internships is higher (4,600 compared to ~3,000 under  UYEP I with a further 1,100 to complete short‐TVET courses)\.    37\. The  project  will  aim  for  gender  parity  (at  least  50  percent  young  women)  and  the  social  inclusion  of  indigenous  Moitu‐Koitabu  and  Ahi  youth  with  targets  set  at  a  minimum  of  10  percent  for  NCD  and  15  percent  for  Lae\.  Additional  provisions  for  the  engagement  of  young  women  and  disabled  youth,  including  a  nuanced  communications  strategy,  expanded menu of public work activities, increased stipend rate to partly compensate for child care and referrals on GBV,  jobs,  training  and  microenterprise  services,  will  be  incorporated  in  the  project  design\.  The  project  will  monitor  in  the  Results  Framework  and  help  to  close  gender  gaps  by:  (i)  increasing  the  capacity  and  access  for  female  participants  to  training and paid work opportunities; (ii) affecting changes in attitudes/perceptions of women and gender equality in the  work  place;  and  (iii)  promoting  improved  employment  outcomes  for  young  women,  particularly  in  areas  such  as  civil  works and key trades that have traditionally not been filled by women\.84 In addition to cash benefits, youth participants  will  gain  value  from  the  training  received  and  learning  experiences  under  the  project\.   Many  will  achieve  direct,  long‐ term  employment  because  of  their  involvement  in  the  project\.    The  BLST  and  coaching  will  also  contribute  to  strengthening human and social capital, including an expected reduction in anti‐social and/or crime‐related behavior\.    38\. Secondary benefits will accrue to communities and households in the project areas, contractors, and employers  who take on urban youth through the project as well as key government institutions\.  The project will also create jobs  through the engagement of small contractors and national service providers; increase the level of cash flow in the local  economy through the stipend (wage) transfer; and provide basic infrastructure and services, that would not be delivered  otherwise to under‐served communities and settlement areas, if left to the City Authorities alone\. Benefits will accrue to  communities  residing  in  both  cities,  who  are  expected  to  benefit  from  improved  infrastructure  and  services,  and  increased perceptions of safety\. The project will enable the City Authorities to deliver part of their backlog of minor works  and  services  at  no  or  minimal  cost\.  To  ensure  national  oversight,  the  Ministry  for  Inter‐Governmental  Relations  and  National Youth Development Authority (NYDA)  will Co‐Chair the PSC\. Project funding will  be  allocated  to support  NYDA  activities  on  an  annual  basis  through  the  project’s  annual  work  planning  process and  the  Program  Coordination  Office  will provide support  to the NYDA  to meet its coordination commitments\. NYDA will also benefit through the PCO  being  established  under  the  project  with  functional  accountability  to  NYDA’s  Director  General\.    Although  primarily  to  coordinate between Implementing Entities, and lead some activities, this arrangement will help NYDA realize some of its  broader strategic objectives and ensure alignment with the NYDA’s with national priorities\. How this will be achieved will  be investigated through the proposed feasibility/scoping study (see paragraph 18)\.    D\. Results Chain    39\. The  project’s  Theory  of  Change  (TOC)  responds  to  the  following  problem  statement:  “Disadvantaged  youth  have  limited  skills,  education  and/or  employment  experience,  limited  sources  of  income  and  are  perceived  to  have  behavioral issues\. They therefore face economic and social exclusion\. Young women particularly encounter gender bias  in the workplace\.”  The expected outcomes reflect a shift in focus from providing income and temporary employment, to  84 See paragraph 12\.  Page 24 of 72  The World Bank Urban Youth Employment Project II (P166420) improved socio‐economic opportunities for vulnerable youth\.  The design pursues four main areas of change: (a) positively  affecting  the  capabilities,  attitudes  and  experience  of  participating  youth;  (b)  dispelling  existing  biases  and  any  negative  perceptions of these youth and their attributes by potential employers; (c) establishing linkages between institutions that  support  youth  as  they  progress  towards  formal  or  informal  employment,  including  vocational  training,  microfinance  institutions and employers; and (d) achieving gender equity in both the training and works placements\.  The project inputs  address  the  desired  areas  of  change:  the  BLST  and  UW&S  prepare  participants  for  employment  and  provide  them  an  opportunity to develop basic work place and life skills; Vocational Training provides the opportunity for certified training;  and Internships provide work placement opportunities for youth; and Referral Services link youth to institutions that assist  them  in  pursuing  informal  employment  as  well  as  youth  who  may  pursue  further  training  or  formal  employment\.  The  change  achieved  by  these  inputs  are  reflected  in  the  gender  targets  which  are  set  across  the  project,  intermediate  outcomes,  and  the  results  framework  aims  to  measure  these,  with  indicators  that  include  assessment  of  participant  performance within the various components\.     40\. Critical  assumptions  made  in  the  TOC  are:  A1—enhanced  coaching  and  mentoring  results  improved  completion  rates  and  absorption  of  training;  A2—external  entities,  such  as  vocational  training  institutes  and  micro‐finance  institutions,  can  deliver  the  levels  of  service  anticipated,  especially  in  respect  of  informal  sector  employment;  and  A3— overall economic conditions remain stable or improve and generate suitable employment opportunities\.         Diagram 1\.  Theory of Change (circled references are assumptions described in paragraph 40)    E\. Rationale for Bank Involvement and Role of Partners    41\. Building on the experiences of UYEP I, IDA has the resources and relationships to carry out a project of the scale  proposed  under  UYEP  II  with  its  country  and  global  experience  in  ALMPs,  Gender  and  Labor  Market  Study  and  experience  in  conducting  evaluations  to  provide  rigorous  evidence  about  the  employment  impacts  and  effects  of  Page 25 of 72  The World Bank Urban Youth Employment Project II (P166420) different interventions\.  IDA’s fiduciary oversight provides a high degree of confidence that funds will be used effectively,  and for their intended purposes\.  IDA also acts as a draw card for other donors, such as Australia, Korea and private sector  partners to invest in the project\. To date, UYEP I has more than doubled the Government’s original investment of US$15\.8  million,  leveraging  US$12  million  in  donor  funding85  with  additional  in‐kind  support  from  partners  in  the  private  sector,  such as BSP Ltd, estimated at over US$4 million over the past eight years\.  F\. Lessons Learned and Reflected in the Project Design    42\. While  maintaining  the  successful  design  elements  of  the  UYEP  I  model,86  UYEP  II  includes  changes  in  the  project’s technical design based on the experience of UYEP and citizen‐oriented consultations carried out in UYEP I and  during  the  preparation  of  UYEP  II\.  They  include:  (i)  more  attention  to  soft  skills  and  behavioral  support\.  Combining  soft  and practical skills training in all stages of the work cycle is seen to make a difference in increasing employment and social  outcomes  for  poor  uneducated  youth  looking  for  work,  and  employment  outcomes  increase  with  duration;  (ii)  more  regular  assessment  of  the  training  quality  and  accreditation  through  the  NTC  and  working  with  TVET  organizations,  provision of a competency‐based skills development pathway, and setting trainees on a path to obtain Certificate I and II  entry‐level  qualifications\.  (In  UYEP  I,  youth  reported  that  receiving  a  certificate  and  reference  were  major  in  factors  facilitating  the  search  for  employment);  (iii)  a  preference  expressed  by  employers  for  practical  training;87  (iv)  a  stronger  focus on gender equality and disability, and relatedly the provision of GBV prevention training; and (v) the introduction of  graduation pathways for youth through the referral services, including for self‐employment in the informal economy\.    43\. The project will aim to achieve gender equity and monitor the inclusion of indigenous youth, who are assessed  to  be  among  the  most  vulnerable\.  There  is  evidence  that  in  the  UYEP  I,  through  the  inclusion  of  women  in  a  range  of  work,  and  through  the  inclusion  of  gender‐equality  training  in  the  BLST,  has  helped  to  improve  the  status  and  economic  opportunities  of  women  participants\.88   The  project  design  will  build  on  existing  interventions  that  have  proven  to  be  effective\.89 To motivate participants to complete the learning pathways, facilitation services and gender targeting will be  provided  across  all  training  elements\.  In  addition,  UYEP  II  will  increase  the  stipend  amount  to  cover  childcare  costs  for  both males and females and provide a wider menu of labor‐based civil works activities (e\.g\., paving, landscaping, etc\.,) to  allow for improved social inclusion for young women and youth with disabilities\.     44\. To address risk‐factors associated with GBV, the project will build on existing GBV referral services\. The project  design  recognizes  GBV  as  a  significant  barrier  to  achieving  gender  equality  in  the  workplace  and  seeks  to:  (i)  utilize  specialized  response  efforts  by  linking  to,  and  strengthening  where  needed,  existing  referral  pathways  and  coordination  mechanisms adopted under UYEP I (primarily through NCDC’s Gender and FSV Secretariat); (ii) support prevention efforts  through  the  engagement  of  a  specialist  organization  to  deliver  specific  training  to  contractors,  BLST  trainers  and  project  85 US$10\.8 million from the Government of Australia; US$1 million from Exxon Mobil and US$0\.6 million from the Republic of Korea\.  86  This  includes  UYEP  I’s  targeting  of  unattached  youth,  citizen  engagement  mechanisms  (e\.g\.,  the  GRM,  CCP  as  well  as  the  On‐the‐Job  Training, delivery of small‐scale infrastructure and public services, gender focus and fiduciary arrangements)\.  87 The project’s consultations with employers and TVET providers revealed that the disconnect between industry and TVET institutions are  largely due to (i) a mismatch between industry requirements and TVET provided competencies; (ii) the limited capacity of TVET to provide  adequate learning facilities with up‐to‐date industry‐standard equipment; and (iii) a lack of capacity to insert trainees into work placement  opportunities  as  part  of  the  course\.    In  response  to  training  needs,  certain  industries  have  set  up  their  own  in‐house  training  and  apprenticeship  services  which  can  also  be  trade  certified\.  UYEP  II  will  focus  on  such  market  oriented  vocational  skills  with  provision  for  certification up to National Certification I and II or trade license where possible\. This will be done in coordination with NTC and NATTB\.   88 Based on the 2017 FUS, the percentage of participants who believed that women should be at home and not in waged work, fell from 13  percent before the program to 2 percent after the program (and fell from 16 to 9 percent for men)\.  89 Described under Introduction and Context\.  Page 26 of 72  The World Bank Urban Youth Employment Project II (P166420) staff to raise GBV awareness; and (iii) address underlying constraints that could help to stem GBV rates, including women’s  lack  of  economic  independence  being  a  barrier  to  safety  and  justice;  promoting  respectful  relationships,  positive  communications, problem solving and conflict resolution skills and challenging cultural / gender norms\.     45\. Key operational and fiduciary lessons include:    a\. Building  local  ownership  and  optimizing  the  delivery  and  sustainability  of  institutional  outcomes  through  partnerships with municipal authorities\.  A timely start‐up requires working with key staff and locally embedded  institutions to implement the project;  b\. Due  to  capacity  constraints  in  the  implementing  entities,  managing  financial  management  implementation  through a dedicated PMU allows for efficient disbursement and payments to beneficiaries and contractors;  c\. Partnering with a commercial bank to facilitate the opening of bank accounts enables access to banking services  for youth who otherwise may not have such access and decreases cash handling risks;  d\. Simplifying work and training flow arrangements to avoid bottlenecks and implementation delays;  e\. Supporting a participatory approach and ensuring that the training is merit‐based to incentivize performance but  also  aligned  with  youth  interests  through  the  provision  of  a  wider  set  training  options,  including  improved  preparedness to enter the informal economy; and  f\. Supporting data collection and evaluation efforts to move towards evidence‐based policy making\.     46\. A more detailed summary of experiences and lessons learned from UYEP is given in Annex 3\.    III\. IMPLEMENTATION ARRANGEMENTS    A\. Institutional and Implementation Arrangements    47\. The  two  Implementing  Entities  for  the  project  will  be  NCDC  and  LCA\.  Each  will  contain  a  PMU\.  NCDC  will  be  responsible for the implementation of: (i) Components 1 (including 1(d) Other Technical Assistance Activities), 2 and 3 of  the project as they each relate to the carrying of activities in NCD; and (ii) Component 4(a)\. LCA will be responsible for the  implementation of:  (i) Components 1(a), 1(b), 1(c),  2 and 3 of  the project as  they  each relate  to  the  carrying of activities  in  the  Lae  area;  and  (ii)  Component  4(b)\.  Each  Implementing  Entity  will  enter  into  a  Project  Agreement  with  IDA,  and  a  Subsidiary Agreement with DOT\. Portions of the Credit proceeds, as indicated in the table in paragraph 110, will be made  available by DOT to the respective Implementing Entities on a grant basis pursuant to the Subsidiary Agreements\.     48\. The  execution  of  a  project  agreement  by  NCDC  and  a  Subsidiary  Agreement  between  the  PNG  and  NCDC  would  be, among others, conditions that need to be fulfilled to declare the Financing Agreement effective\. LCA is a relatively new  entity established pursuant to the Lae City Authority Act 2015, No\. 11 of 2015 (LCA Act), with its Board being inaugurated  in  2018  and  is  yet  to  become  fully  operational\.  The  functions  and  responsibilities  of  LCA  under  the  LCA  Act  are  narrowly  described  and  limited  compared  to  LCA’s  roles  and  responsibilities  under  the  project\.  To  demonstrate  that  LCA  is  authorized to carry out its designated roles and responsibilities under the project, GoPNG will provide further clarification,  either through the issuance of a ministerial determination published in the national gazette or otherwise\. The submission  of  such  clarification  documents  by  GoPNG  as  well  as  the  execution  of  a  project  agreement  by  LCA  and  a  Subsidiary  Agreement  between  PNG  and  LCA  would  form  part  of  the  conditions  of  disbursement  of  funds  to  LCA,  and  they  would  need to be completed within six months after project effectiveness\.    49\. A  PCO  will  manage  inter‐agency  coordination  and  support  NYDA,  one  of  two  PSC  co‐chairs  and  the  lead  Page 27 of 72  The World Bank Urban Youth Employment Project II (P166420) government agency responsible for youth development\.  The PMU attached to NCDC under the UYEP I, operating for the  past eight years, is managed by an experienced Project Manager supported by experienced administration and operational  team members, most of whom will transition into UYEP II\.  Under UYEP II, the PMU in NCDC will be comprised of at least  a  Project  Manager,  a  Senior  Project  Accountant  and  a  Procurement  Officer,  and  supported  by  other  adequate  staff  and  personnel\.   A  second  PMU,  with  its  own  Project  Manager  and  support  team,  will  be  established  in  Lae  under  LCA\.   The  PCO, led by a PCO Manager, will manage inter‐agency coordination, and carry out certain overarching activities including  national  communications,  partnerships,  joint  PMU  training,  coordination  with  NYDA  on  project  implementation,  and  consolidated reporting to IDA, PSC (where appropriate), DOT and DNPM\.  The PCO will be attached to the NCDC PMU for  efficiency reasons, sharing some staff and resources, but also be functionally accountable to NYDA\.  The PCO will: (i) give  UYEP  II  greater  national  prominence  through  NYDA;  (ii)  harmonize  systems  and  processes  across  the  Implementing  Entities; and (iii) support DPLGA (as the parent ministry for the City Authorities) and NYDA (as the authority mandated to  oversee youth development) to report and coordinate with partners on the project, nationally\.    50\. A  Project  Steering  Committee  (PSC)  will  provide  strategic  and  governance  oversight  of  the  project,  oversee  performance  of  the  project,  facilitate  policy  discussions  and  coordination  between  agencies,  and  provide  advice  and  guidance  on  annual  work  plans  and  budgets  submitted  by  the  PMUs\.    The  PSC  will  also  set  the  project’s  policies  and  directions in accordance with the project’s development objectives\.  The PSC, co‐chaired by DPLGA and NYDA, will include  the  Secretaries  (or  equivalent)  of  NCDC  and  LCA,  Director  level  representatives  or  higher  of  DOT,  DNPM,  and  DLIR,  and  one  representative  from  each  of  Private  Sector,  Gender  and  Civil  Society  umbrella  organizations\.    Details  of  the  PSC  composition  will  be  set  out  in  the  POM\.  The  PCO  will  be  the  Secretariat  to  the  PSC\.  A  Memorandum  of  Understanding  (MOU) will be executed jointly between NCDC and LCA, and DPLGA and NYDA as co‐chairs of the PSC, defining the agreed  obligations of the parties and clarifying their respective roles and responsibilities in the project\.  The MOU will be executed  no later than 30 days after the effective date of the Financing Agreement\. Application of the MOU will ensure cooperative  working  relationships  between  the  parties  leading  to  effective  project  implementation\.  Key  operational  representatives  from the PCO, PMUs, and Implementing Entities, will meet regularly to coordinate planning, resources, works and services,  community engagement, safeguards compliance, budgeting, surveys, and monitoring activities\.        Diagram 2\.  Proposed institutional arrangements showing the Implementing Entities, PMUs, PCO, and PSC\.  Page 28 of 72  The World Bank Urban Youth Employment Project II (P166420) B\. Results Monitoring and Evaluation Arrangements    51\. The Monitoring and Evaluation (M&E) plan is based a set of outcome and intermediate outcome indicators and  targets  defined for each component in the Results  Framework\.   Data on trainees will first  be collected  on all applicants  using  a  condensed  Eligibility  Screening  Survey  (Component  1a)\.  All  selected  participants  will  need  to  complete  a  longer  registration  form  during  the  BLST  (Component  1b)\.   Progress  and  implementation  performance  data  will  be  updated  as  trainees progress through different stages of the project\.  The data will be entered and maintained in the project MIS (see  further  details  under  Section  II  B  [Sub‐component  3a);  technical  details  on  the  MIS  system  are  given  in  paragraph\.  99  of  Annex 1)\.    52\. The set of surveys comprise a baseline when youth enter the project, two FUS administered at the project’s mid‐ line  and  end‐line,  and  a  set  of  additional  community  perception  and  employer  surveys\.  The  two  Follow  up  surveys  are  planned  to  take  place  around  18  months  after  participants  are  screened\.  The  use  of  tablet  devices  for  data  collection,  combined  with  purpose  designed  software  such  as  Survey  Solutions  is  planned\.  Execution  of  the  FUS  will  preferably  be  done by a professional survey firm contracted for the purpose, working closely with the PMU\. The impact evaluation will  take  the  form  of  a  staggered  rollout  randomized  control  trial  to  be  conducted  in  six  wards  in  NCD\.  A  transparent  lottery  system  will  be  used  to  determine  the  random  allocation  of  the  timing  of  project  participation  opportunities  for  eligible  youth  in  these  wards\.  The  main  outcome  of  interest  is  the  project's  impact  on  participants’  formal  or  informal  sector  employment  opportunities  after  the  project\.  Further  detailed  analysis  in  the  context  of  planned  UW&S  activities  will  be  required to ensure that the ideal total sample and control group sizes can be realized\.    53\. Because the project covers NCD and Lae, requiring a consistent approach, the surveys will be managed under the  auspices  of  the  PCO  with  specialized  support  from  IDA\.    The  PCO  will  also  commission  specialist  analysis  of  the  data\.   Results from analysis of data collected in the MIS, and the formal surveys, will be used to test assumption and adjust the  project  over  time  as  well  as  fulfill  the  need  to  monitor  project  results\.    For  example,  the  assumption  that  all  trainees  undertaking  UW&S  before  being  offered  skills  development  training  under  Component  2  makes  for  more  employable  trainees can be assessed\.  Similarly, the relative proportion of trainees offered internships versus livelihood or vocational  training can be adjusted depending on the downstream outcomes\.    C\. Sustainability    54\. The  main  sustainability  risks  are:  (i)  the  project  offers  only  short‐term  training  and  employment  for  large  numbers of youth; and (ii) economic uncertainty is outside of the project’s control and that GoPNG will find it difficult  to  sustain  project  activities  after  closing\.   The  direct  employment  benefits  from  the  UYEP’s  training,  job  matching,  and  subsidized  job  placements  confirm  the  positive  impact  the  project  is  having  on  wage  employment  and  employment  prospects\.  Results  from  UYEP  show  the project  played  an  important  role  in  facilitating  trainee’s  entry  into,  and  engagement with, the labor market\. Even for those trainees not working after UYEP, there was “…increased job search […]  and greater optimism about future employment prospects, than before their involvement in UYEP\.”90 Evidence from UYEP  I  suggests  that  the  project  also  played  an  important  role  in  developing  other  important  social  skills,  including  citizen  engagement,  improved  attitudes  to  gender  equality  among  other  areas\.  Under  Component  1c,  the  urban  works  and  services  will  construct  or  improve  small‐scale  public  infrastructure  in  NCD  and  Lae\.  These  will  improve  the  living  environment  for  local  communities  and  will  have  an  operating  life  well  beyond  the  duration  of  the  project\.    The  City  Authorities  (NCDC  and  LCA)  will  own  the  assets  and  be  responsible  for  their  future  maintenance\.  With  the  additional  90 FUS 2017\.  Page 29 of 72  The World Bank Urban Youth Employment Project II (P166420) changes in the UYEP II’s design focused on: (i) embedding project activities where appropriate into relevant departments  of the City Authorities; and (ii) the provision of a wider menu, longer duration and certified approach to training and work  placements, the identified risks are further decreased\.       IV\. PROJECT APPRAISAL SUMMARY    A\. Technical, Economic and Financial Analysis    55\. The original UYEP has demonstrated that public works activities and internship placements, supported by basic  life skills and job readiness training, and coaching, and counseling services, can serve as an effective safety‐net for poor  and  vulnerable  segments  of  society\.  The  same  approach  is  appropriate  and  relevant  for  UYEP  II\.    The  main  technical  features of the project are: (i) communication and awareness campaigns, followed by application and screening processes,  to ensure all potential beneficiaries have an opportunity to join the project; (ii) ten days of prerequisite BLST for all trainee  beneficiaries; (iii) applying appropriate labor‐based technology for public urban works and services according to NCD and  LCA priorities covering all Wards in the target locations; (iv) offering beneficiaries either a three‐month internship with a  local  employer  or  vocational  training  with  established  industry‐based  or  accredited  training  providers;  (v)  operating  referral  services  desks  as  part  of  the  graduation  pathway  after  internships  or  formal  training;  (vi)  providing  counselling  and GBV referral services throughout all stages of the project cycle; and (vii) undertaking detailed surveys and analysis of  data collected from beneficiaries to assess the performance of, and tune, the project and its elements\.    56\. The approach to communications and awareness campaigns, BLST, urban works and services, and internships has  been well established and  proven under the  UYEP I\.   Some improvements to the BLST program will be introduced  based  on lessons, including a curriculum review, and completion in the urban works and services activities will be a prerequisite  for  entry  into  the  skills  development  training\.91   As  an  improvement,  the  BLST  will  be  formally  assessed  by  the  NTC  so  a  competency‐based  certificate  can  be  issued  to  trainees  on  completion  of  the  training,  a  desirable  feature  for  trainees  when  searching  for  employment\.    Standard  designs,  specifications,  drawings,  Bill  of  Quantities,  and  construction  or  implementation methods will be used for the urban works and services\.  The works and services contract will be managed  and  overseen  by  qualified  engineers  and  works  supervisors\.   The  vocational  training  is  a  new  subcomponent  to  UYEP  II\.   However, these services will be contracted through established providers and curriculum programs, rather than creating  something new\.    57\. The various surveys to be carried out at various stages of the project will be conducted formally, following robust,  internationally accepted survey and analysis methods\.  A technical audit may be included in the Mid‐Term Review (MTR)  to assess the quality of community investments\. An MTR will be conducted by no later than three years after the effective  date of the Financing Agreement\. In the MTR process, the PMUs will be required to provide by no later than 45 days prior  to  the  MTR,  a  report  on  the  parts  of  the  project  under  its  responsibility\.  Such  reports  will  be  consolidated  by  NCDC  into  the overall MTR report, and forwarded by the Recipient to the Association by no later than one month prior to the MTR\.    58\. The project will provide economic benefits from: (i) BLST training in which participants receive a daily stipend for  transport, lunches and increased education; (ii) urban works and services in which participants receive a stipend for wages  and  lunches,  health  and  safety  equipment,  and  gain  employment  readiness  experience;  (iii)  Urban  Works  and  Services  91 Under UYEP I, some beneficiaries went straight into internships after BLST, while the remainder were offered only participation in  urban works and services\.    Page 30 of 72  The World Bank Urban Youth Employment Project II (P166420) capital value; (iv) internships in which participants receive a training stipend, lunches, learning experiences, and increased  exposure  to  potential employment opportunities;  (v) vocational  training in which participants receive a  training stipend,  lunches  and  increased  education;  (vi)  employment  post  internships  and  vocational  training;  and  (vii)  crime  and  violence  prevention outcomes in specific communities benefiting from the pilot\.  For every US$1\.00 spent on the project, around  US$1\.15  is  expected  to  be  generated  in  benefits\.   The  project  is  expected  to  engage  6,700  unattached  youth  involving  446,000  training  days  in  various  forms,  and  486,000  paid  labor‐days\.   Further  details  on  the  economic  benefits  can  be  found in Annex 2\.    B\. Fiduciary    (i) Financial Management    59\. A  financial  management  assessment  was  carried  out  in  accordance  with  the  “Principles  Based  Financial  Management  Practice  Manual”  (February  04,  2015)  and  as  further  elaborated  in  the  Bank  Guidance  “Financial  Management  in  World  Bank  Investment  Project  Financing  Operations”  (February  24,  2015)\.  Under  the  Bank’s  Policy:  Investment Project Financing, with respect to projects financed by the Bank, the borrower and the project Implementing  Entities  are  required  to  maintain  financial  management  arrangements—including  planning  and  budgeting,  accounting,  internal  controls,  funds  flow,  financial  reporting,  and  auditing  arrangements—acceptable  to  the  Bank  to  provide  reasonable assurance that the proceeds are used for the purposes for which they were granted\.  These arrangements are  deemed acceptable if they are capable of correctly and completely recording all transactions and balances relating to the  project\.  In addition, such arrangements are acceptable if they can facilitate the preparation of regular, timely and reliable  information regarding project resources and expenditures and safeguard the projects assets; and are subject to auditing  arrangements acceptable to the World Bank\. There are two Implementing Entities for the Project, National Capital District  Commission (NCDC) and Lae City Authority (LCA)\. The project’s overall financial management risk is rated as “High\.”    60\. The  existing  financial  management  systems  for  the  NCDC  are  assessed  as  adequate  to  meet  the  financial  management  requirements  as  stipulated  in  the  Bank  Policy:  Investment  Project  Financing\.  The  project's  financial  management risk for NCDC is rated as "Substantial"\.    61\. The existing financial management systems for the LCA are assessed as not adequate to the meet the financial  management requirements as stipulated in the Bank’s Policy Investment Project Financing\. While LCA was established  by  the  Lae  City  Authority  Act  2015,  it  is  still  not  operational\.  In  late  2018,  a  board  and  acting  CEO  has  been  appointed,  PGK5m was appropriated to it in the 2019 National Budget and it is in the process of developing an accounting system to  account for the transactions of the entity or to produce financial reports and statements\. However, it is yet to receive any  funds, has no bank account, has no accounting system to account for the transactions of the entity or to produce financial  reports  and  statements,  and  has  no  other  staff  or  consultants  engaged  to  perform  its  functions\.  The  project’s  financial  management risk for LCA is therefore rated as “High\.”     (ii) Procurement    62\. Procurement for the Project will be carried out in accordance with the World Bank Procurement  Regulations for  Investment  Project  Financing  (IPF)  Borrowers  (Procurement  Regulations),  July  2016  revised  November  2017  and  August  2018,  as  well  as  the  provisions  stipulated  in  the  Financing  Agreement\.   The  project  will  finance  small  works  contracts,  goods,  services  and  consultant  assignments  (firms  and  individuals)  for  NCDC  and  LCA\.    To  avoid  duplication  of  some  procurement of some goods and services in both locations (e\.g\. upgrade of the MIS system, baseline and impact evaluation  Page 31 of 72  The World Bank Urban Youth Employment Project II (P166420) surveys, curriculum reviews and update of learning materials), the NCDC PMU will lead the procurement process in view  of  its  demonstrated  track  record\.    LCA  will  be  involved  in  these  procurement  processes  and  related  decision  making\.   Additional  procurement  support  will  be  provided  by  a  Procurement  Specialist  hired  to  support  implementation  of  key  procurement activities, development of systems and capacity building\.    63\. Procurement  Risk  Assessment\.  A  procurement  assessment  of  the  Implementing  Entities’  existing  capacity,  experience, and practices for managing procurement was carried out and informed the Procurement Risk Assessment of  the  Implementing  Entities\.    One  of  the  project  counterparts,  NCDC,  through  its  respective  PMU,  have  eight  years  of  experience implementing UYEP  I\.  Procurement  under UYEP  I  has been Satisfactory\.  LCA as a new implementing agency  under UYEP II, will have its own, dedicated PMU, replicating arrangements for NCDC\.  The LCA PMU, will have a designated  Procurement  Officer\.   However,  as  LCA  has  no  previous  experience  with  World  Bank  projects,  support  and  coaching  will  be provided by the NCDC PMU to harmonize systems and approaches\.    64\. Procurement Plan\. A detailed procurement plan for the first 18 months of the project was prepared based on the  information detailed in the Project Procurement Strategy for Development (PPSD)\.    65\. Systematic Tracking of Exchanges in Procurement\. The use of the World Bank’s Systematic Tracking of Exchanges  in Procurement (STEP) system will be mandatory for use under the UYEP II\.    C\. Safeguards    (i) Environmental     66\. The project is categorized as Category B and will trigger OP4\.01 Environmental Assessment\. An Environmental and  Social  Management  Framework  (ESMF)  has  been  prepared  that  represents  the  Environmental  Assessment  required  for  Category  B  projects\.  The  project  will  have  low  to  moderate  environmental  risks,  with  the  project’s  physical  investments  consisting  of  small‐scale  infrastructure  in  urban  areas\.  These  include  construction  of,  and  improvements  to,  pedestrian  pathways and steps, driveways and parking lots, recreational and market shelters, as well as beautification of public areas,  repair  and  maintenance  of  roads  and  public  buildings,  and  waste  management\.  All  civil  works  will  take  place  within  the  urban areas of Lae and Port Moresby, which have been extensively developed and do not contain critical natural habitats\.  Potential  impacts  are  related  to  the  construction  process  and  include  increased  dust  and  noise,  improper  waste  generation,  and  safety  risks  to  workers  and  pedestrians\.  These  risks  will  be  managed  through  processes  developed  on  UYEP I and adapted to UYEP II, as detailed in the ESMF\.     67\. Risks  relating  to  climate  change  and  geophysical  hazards  are  assessed  as  Moderate\.  IDA’s  Climate  and  Disaster  Risks  Screening  Tool  has  been  used  to  determine  the  exposure  of  the  project’s  physical  works,  and  where  non‐physical  components can modulate the climate change and geophysical‐related risks\.  The project has moderate overall exposure,  largely due to the prevalence of various natural disaster risk in the country (flooding, drought, landslide, earthquake, and  tsunami) and exposure to climate change risks (sea level rise, increased flooding, and storm surge)\.  The location of Papua  New Guinea on the Ring of Fire, as well its tropical climate, exposure to monsoon flooding, and collection of urban areas  in coastal areas, results in generally high exposure across the archipelago\.  The project design includes several measures  to plan for and mitigate the climate change and  geophysical risks\.   Road and drainage  maintenance under  Component 1  will contribute to the infrastructure’s climate resilience due to an anticipated reduction in flooding, and climate resilient  construction practices, where appropriate, will be incorporated into training for those activities\. With regards to climate  change  mitigation,  project  activities  will  produce  benefits  and  reduce  potential  greenhouse  gas  emissions  by  using  LED  Page 32 of 72  The World Bank Urban Youth Employment Project II (P166420) bulbs in street lighting and tree planting in urban areas as part of landscaping and beautification works to be undertaken  in Component 1\.    (ii) Social     68\. Most  people  living  in  cities  targeted  by  the  project  are  Indigenous,  with  the  highest  proportion  being  Moitu‐ Koitabu  and  Ahi  ethnicity\.  Building  on  the  approach  taken  in  UYEP  I,  the  project  will  not  prepare  a  separate  Indigenous  Peoples Plan (IPP)/Indigenous Peoples Policy Framework but will instead ensure that elements of an IPP, such as informed  consultations  and  stakeholder  participation,  will  be  incorporated  into  project  design\.    IP  issues  will  be  specifically  addressed through a community engagement and communication plan, and the Project will also set minimum targets for  participation of indigenous groups\. Involuntary land acquisition is not anticipated as project works are small scale and are  likely  to  be  confined  to  Government  owned  or  controlled  land\.   However,  as  the  location  of  works  is  not  known  at  this  stage,  OP4\.12  is  triggered  as  a  precautionary  measure  if  the  scope  of  works  widens,  or  suitable  land  is  not  available\.   A  Resettlement Policy Framework (RPF) has been prepared to ensure that the Bank’s policy requirements are met if access  to land is required\.  The Project is expected to result in social benefits through skill development and improved access to  employment opportunities in Lae and Port Moresby\.  It is unlikely to cause any significant social risks\. Measures to ensure  that  the  project  is  implemented  in  line  with  World  Bank  Policy  are  included  in  the  ESMF\.  As  with  UYEP  I,  the  CCP  and  GRM will be the main instruments for the project’s community outreach and citizen engagement    (iii) Other Safeguards    69\. No other safeguard policies are triggered for this project\.    (iv) Grievance Redress Mechanisms    Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project  may submit complaints to existing project‐level grievance redress mechanisms or the WB’s Grievance Redress Service  (GRS)\. The GRS ensures that complaints received are promptly reviewed in order to address project‐related concerns\.  Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel  which determines whether harm occurred, or could occur, as a result of WB non‐compliance with its policies and  procedures\. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's  attention, and Bank Management has been given an opportunity to respond\.  For information on how to submit  complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit  http://www\.worldbank\.org/en/projects‐operations/products‐and‐services/grievance‐redress‐service\. For  information on how to submit complaints to the World Bank Inspection Panel, please visit www\.inspectionpanel\.org\.    V\. KEY RISKS    70\. The  overall  Risk  Rating  is  Substantial\.   The  main  concern  pertains  to  high  fiduciary  risks\.  Risks  associated  with  political and governance, macroeconomic, institutional capacity for implementation and sustainability, and stakeholders  are  assessed  as  Substantial\.  Despite  low  institutional  capacity,  UYEP  I,  through  the  NCDC’s  PMU  has  delivered  excellent  results,  with  increasing  effectiveness,  since  its  start  in  2011\.    The  project  has  expanded  with  a  significant  Additional  Financing operation in 2016, funding from GoPNG, and in‐kind support from NCDC\.  Throughout the original and expanded  scope,  the  project  has  adapted  to  risks,  and  risk  mitigation  measures  have  been  successfully  tested\.    Keeping  central  Page 33 of 72  The World Bank Urban Youth Employment Project II (P166420) control  of  all  elements  of  delivery  under  the  PMU,  especially  procurement  and  finances,  is  critical  to  ensuring  good  implementation progress\.  Additional complexity will be introduced under UYEP II by operating in two locations, NCD and  Lae,  and  potentially  a  third  location,  after  the  MTR\.   The  key  risks  and  risk  management  measures  incorporated  in  the  project design or implementation methodology, are described in Table 1 below\.    Table 1: Risks and Mitigation Measures    Description of Risk and Classification  Mitigation Management Measures  Political and Governance ‐ Substantial  Institutional Mandate of LCA\.   ï‚ GoPNG will provide, within six months from effectiveness of the  The functions and responsibilities of LCA under  Financing Agreement, further clarification, either through the issuance of  its enabling legislation are narrowly described  a ministerial determination published in the national gazette or  and limited when compared to LCA’s roles and  otherwise, to demonstrate that LCA is authorized to carry out its  responsibilities under the project\.  designated roles and responsibilities under the project\. No funds will be  transferred to LCA until clarification is provided with respect to LCA’s  mandate\.  Macroeconomic ‐ Substantial  Foreign Currency Reserves Constraints  ï‚ IDA will be flexible with lowering the minimum value threshold for direct  Due to low foreign currency reserves in PNG,  payments to facilitate foreign currency payments while foreign currency  tighter foreign exchange controls are causing  reserve constraints exist\.  significant delays in foreign currency payments  of consultants and suppliers\.  Sector Strategies and Policies ‐ Moderate  Job limitations in the Labor Market and Quality  ï‚ Based on employer surveys conducted in UYEP I, employers report it is  of Training is Low  likely that the formal economy would be able to absorb a larger number  This is due to numerous factors including poor  of graduates if they had the “right skills\.” Therefore, despite limitations in  training facilities and teacher quality\. Various  the job market, reports by employers suggest there is opportunity for  studies have drawn attention to the mismatch  filling and creating more jobs, and, consistent with global evidence,  between training provided by TVET institutions  combining soft and practical skills training in all stages of the work cycle,  and employers’ needs in PNG  which UYEP II is doing, is seen to make a difference in increasing  employment and social outcomes for poor uneducated youth looking for  work, and employment outcomes increase with duration\.  Fiduciary ‐  High  Corruption  ï‚ Project will be implemented using similar fiduciary control mechanisms  Corruption and bribery concerns relating to  applied in the case of NCDC for UYEP I, which has been under  internal controls and external influences; PNG is  implementation for several years\.    ranked 145 out of 179 countries on  ï‚ Similar fiduciary controls mechanisms will be set up in Lae, which will be  transparency corruption perception index\.    implementing this type of Project for the first time\.    ï‚ The PCO will harmonize and oversee fiduciary arrangements\.   Weak In‐Country Procurement Capacity   ï‚ Hire a Procurement Consultant during preparation to ensure  Weak procurement capacity, as well as using  procurement activities (including contracting of relevant staff) are at an  existing Government processes affects time  advanced stage by effectiveness;   taken to complete tendering processes\. Limited,  ï‚ Retain the Procurement Consultant on‐call during life of the Project\.    experienced procurement personnel are  ï‚ Ensure that the client has access to the online training modules on the  available and existing staff are unfamiliar with  New Procurement Framework\.    application of the World Bank’s current  ï‚ Encourage sharing experiences among World Bank financed projects’  Procurement Framework\.  procurement staff\.      Page 34 of 72  The World Bank Urban Youth Employment Project II (P166420) Description of Risk and Classification  Mitigation Management Measures  ï‚ Organize workshops by World Bank Procurement Specialists periodically  when in‐country\.  Handling of Cash Payments  ï‚ Under a cooperation arrangement with BSP, payments will be made by  Large numbers of payments of stipends made to  direct credit into youth beneficiaries’ bank accounts using a bulk  beneficiaries brings security risks where paid in  payment, semi‐automated system (KunduPei)\.  Bank accounts will be set  cash\.  up for beneficiaries with BSP if they don’t already have one\.  ï‚ All contractors and consultants will be paid electronically\.  ï‚ Â  Institutional Capacity for Implementation and Sustainability ‐ Substantial  Low Institutional Capacity  ï‚ PMUs attached to the Implementing Entities will control all elements of  NCDC has low institutional capacity and LCA has  the project, including finances and procurement\.    No institutional capacity\.   ï‚ The existing PMU attached to NCDC will continue under UYEP II\.      ï‚ Wherever practical, subject to budget and performance, existing team    members will be retained to provide continuity\. LCA is a relatively new entity, with its board  ï‚ An LCA PMU will be established and control all local aspects of the  being inaugurated in 2018, but is not yet  project operations, including finance and local procurement\.  operational, and has not implemented a World  ï‚ Procurement and financial management of some activities that span the  Bank or any donor funded project before\.  whole project (e\.g\. surveys, MIS system upgrade, curriculum review,  audits, and midterm reviews) will be managed by the NCDC PMU or the  PMO on behalf of both PMUs\.  ï‚ The PSC, co‐chaired by NYDA and DPLGA, will provide strategic and  governance oversight of the project\.  ï‚ A MOU signed by NCDC, LCA, DPLGA and NYDA, will describe the  responsibilities of the various parties, and mentoring and support  arrangements\.  ï‚ LCA becomes operational, including, inter alia, the implementation of an  accounting system acceptable to the World Bank\.  Poor Consolidated Reporting  ï‚ The PCO will ensure data collected locally by the PMUs is entered in the  Data collected from trainees at different  MIS using common approaches and standards\. The PCO will be required  locations may be variable and difficult to  to submit consolidated financial (IFRs) and progress reporting (QPRs) to  combine for analysis purposes\.   the Association, PSC (as appropriate), DOT and DNPM\.  ï‚ A central MIS database will be use if practicable or, if not, data entered in  local databases will be regularly merged into a combined database and  checked for accuracy\.  Technical Design of Project or Program ‐ Moderate  Harmonization of Systems Between NCDC and  ï‚ Some existing members of the NCDC PMU will assist the LCA PMU, and  LCA  then coach and mentor PMU counterparts until fully established and  Different systems and approaches could be used  comfortable with procedures\.  in NCD and Lae, and team members recruited  ï‚ Common operating procedures will be adopted, documented in the POM,  for Lae will be new and inexperienced in a UYEP  with adaptation for specific, local requirements as necessary\.  II type operation\.  Coordination between the  ï‚ The Project Coordination Manager (PCM) will arrange joint PMU training  PMUs may be challenging\.  and be responsible for inter‐agency coordination\.  ï‚ Coordination between the PMUs will be done through regular meetings  Page 35 of 72  The World Bank Urban Youth Employment Project II (P166420) Description of Risk and Classification  Mitigation Management Measures  convened by the PCM, and communication between PMU team leaders,  to harmonize approaches and share resources as appropriate\.    New and Untested Training Interventions  ï‚ Training will be delivered through existing training instructions or industry  The vocational training elements of the project  providers with established curriculum programs and track records\.  are new and untested\.  ï‚ An extensive review of available training providers, capacity, and track  record was undertaken during project preparation\.  ï‚ Only a few training providers will be contracted initially in each location,  and evaluated for performance, before expanding the number of  providers or increasing trainee throughput numbers\.  Limited Supply Market  ï‚ Advance work and communication by the Implementing Entities must be  Few qualified suppliers/ contractors/consultants  done to encourage interest\.    are available in the market to fill key positions\.  ï‚ A remuneration scale for PMU staff has been set to be competitive within  The Project needs security of supply at a good  the constraints of a tax‐inclusive budget envelope\.    price despite a thin market\.   ï‚ Aspects of the project design have been adapted to fit with what NGOs  and Institutions can offer for GBV services and vocational training  services\.    ï‚ Contractors in NCD are familiar with the requirements of labor‐based  contracts, but additional effort will be required to encourage and support  contractors in Lae\.  Relevancy of BLST Training  ï‚ The BLST component of UYEP‐II is built on the successful UYEP‐I training\.  Basic life skills training does not equip trainees  ï‚ The BLST training period will be increased from five to ten days to  with the skills necessary to gain long‐term  increase the behavioral and soft‐skills elements of the program (seen as  employment   most desirable by employers), and more time for complex subjects such  as financial literacy (essential for success in the informal economy)\.  ï‚ The BLST curriculum will be formally reviewed independently and  modified as appropriate early in implementation of UYEP‐II\.  ï‚ Performance of trainees after the BLST will be monitored and reviewed  continually as part of the M&E under the project to assess effectiveness\.  Delays in Training Placements  ï‚ After BLST, trainees will participate in the urban works and services  Bottle necks in the project cycle, especially after  program before being offered an internship or entry into one of the  BLST, causes a backlog in internships or  vocational training programs\.  This is a more streamlined and simplified  vocational training placements\.  procedure compared to UYEP I\.    ï‚ Intake numbers will be tuned to match the capacity and absorption rate  of the various downstream activities\.  Sustainability of Employment Outcomes  ï‚ Social, behavioral, and financial literacy elements of training, desirable  Enough trainees may not enjoy long‐term  and sought after in prospective employees by employers, or essential to  employment after their participation with the  self‐employment, have been increased or improved in the project\.  project   ï‚ All trainees will participate in the urban works and services before being    offered internships or other training opportunities\.  Evidence shows  trainees with urban works and services experience are better equipped,  and are expected to be more successful, in the employment market\.  ï‚ Previous experience shows more than 40 percent of internship trainees  gain employment with their internship employer\.  Referral services are  now included in the project design (employment, small loans, and further  training desks) to give beneficiaries every opportunity after their  participation with the project\.  ï‚ The potential of operating a commercially oriented labor placement desk  Page 36 of 72  The World Bank Urban Youth Employment Project II (P166420) Description of Risk and Classification  Mitigation Management Measures  under NCDC as a sustainable long‐term service will be explored\.  ï‚ More specialized counseling and GBV referral services are being added in  the project design to help trainees better manage events that adversely  affect their employment opportunities\.  Sustainability of Infrastructure Outputs  ï‚ All design, procurement, contract management, and supervision of works  Infrastructure built as part of the urban works  and services will be managed by PMU engineers and works supervisors\.  and services activities may not be suitable or  ï‚ Designs will conform to common engineering standards and levels of  sustainable\.  service appropriate to the circumstances\.  ï‚ Climate change and disaster effects will be considered as part of the  design process as necessary\.  ï‚ The Implementing Entities will identify infrastructure works and services  and will formally take over and be responsible for maintaining completed  assets\.  Stakeholders ‐ Substantial  Perceived Biases in Participation  ï‚ Extensive information and awareness campaigns will inform youth of the  Youth complain about perceived biases in the  project, and eligibility and selection criteria\.  application and screening processes, or lack of  ï‚ The CCP and GRM, established under UYEP I, will be the main instruments  opportunity to enter the project\. Communities  for the project’s community outreach and citizen engagement and  may also feel the urban works and services are  continually adjusted as needed\.  not benefiting them or are not distributed  ï‚ Works and services will be cycled through Wards, so each receive an  equitably among Wards\.  equitable share\.  Community information campaigns will outline what is  coming and when\.  Communities will be consulted about aspects of the  works activities that affect them directly (especially relating to land use),  or where compensation may be due\.  Grievance Redress Mechanisms  ï‚ Contracts will outline processes for resolving grievances and contractual  Failure of LCA to effectively implement a  disputes\.    grievance redress mechanism causes lack of  ï‚ The Project Operations Manual will detail the grievance redress  confidence and support by beneficiaries and  mechanisms which shall be acceptable to the World Bank\.  communities\.  There is lack of will to undertake  ï‚ WB supervision missions will monitor the operation and effectiveness of  necessary groundwork to implement effective  the grievance redress mechanisms\.   grievance mechanisms\.      \.    Page 37 of 72  The World Bank Urban Youth Employment Project II (P166420) VI\. RESULTS FRAMEWORK AND MONITORING         Results Framework  COUNTRY: Papua New Guinea   Urban Youth Employment Project II   Project Development Objectives(s)  The development objective is to improve the capacity of participating young men and women in project areas to engage in productive income generating  activities\.    Project Development Objective Indicators    RESULT_FRAME_TBL_PDO                Indicator Name  DLI  Baseline  Intermediate Targets  End Target  1  2  3  4  Improve capacity of youth in project areas to engage in productive income generating activities   Total Number of direct project    0\.00  854\.00  1,891\.00  3,111\.00  5,185\.00  6,100\.00  beneficiaries (Number)   Of which are women    0\.00  427\.00  946\.00  1,555\.00  2,593\.00  3,050\.00  (Number)   Of which are Motu Koitabu    0\.00  68\.00  151\.00  249\.00  414\.00  488\.00  in NCD (Number)   Of which are Ahi in Lae    0\.00  26\.00  57\.00  93\.00  156\.00  183\.00  (Number)   Percentage of graduates who  report being employed 12    0\.00  10\.00  20\.00  30\.00  40\.00  40\.00  months after they complete  their internships (Percentage)   Of which are women    0\.00  10\.00  15\.00  20\.00  25\.00  30\.00  Page 38 of 72  The World Bank Urban Youth Employment Project II (P166420) RESULT_FRAME_TBL_PDO                Indicator Name  DLI  Baseline  Intermediate Targets  End Target  1  2  3  4  (Percentage)   Percentage of youth who are  assessed to have achieved  satisfactory performance in    0\.00  30\.00  50\.00  75\.00  75\.00  80\.00  the UW&S component  (Percentage)   Of which are women    0\.00  25\.00  30\.00  45\.00  40\.00  50\.00  (Percentage)   Percentage of participants  achieving minimum standards    0\.00  25\.00  50\.00  70\.00  70\.00  75\.00  in Vocational Training  assessments (Percentage)   Of which are women    0\.00  25\.00  30\.00  40\.00  50\.00  50\.00  (Percentage)     PDO Table SPACE    Intermediate Results Indicators by Components    RESULT_FRAME_TBL_IO                Indicator Name  DLI  Baseline  Intermediate Targets  End Target  1  2  3  4  Youth Job Corps   Number of youth entering BLST    0\.00  938\.00  2,077\.00  3,417\.00  5,695\.00  6,700\.00  (Number)   Of which are women    0\.00  469\.00  1,039\.00  1,555\.00  2,593\.00  3,350\.00  (Number)   Of which are Motu Koitabu    0\.00  75\.00  166\.00  273\.00  466\.00  536\.00  in NCD (Number)   Page 39 of 72  The World Bank Urban Youth Employment Project II (P166420) RESULT_FRAME_TBL_IO                Indicator Name  DLI  Baseline  Intermediate Targets  End Target  1  2  3  4  Of which are Ahi in Lae    0\.00  19\.00  42\.00  68\.00  114\.00  134\.00  (Number)   Number of youth who  complete Urban Works and    0\.00  798\.00  1,767\.00  2,907\.00  4,845\.00  5,700\.00  Services (Number)   Percentage of residents in  project locations that report  improved perceptions of safety   0\.00  20\.00  30\.00  30\.00  30\.00  30\.00  (Percentage)   Skills Training   Number of youth placed in    0\.00  644\.00  1,426\.00  2,346\.00  3,910\.00  4,600\.00  Internships (Number)   Percentage of youth  graduating from Internships    0\.00  50\.00  50\.00  60\.00  75\.00  75\.00  (Percentage)   Number of youth placed in  Vocational Training (Number)     0\.00  154\.00  341\.00  561\.00  935\.00  1,100\.00  Percentage of Vocational  Training graduates who report  being employed 12 months    0\.00  5\.00  8\.00  12\.00  15\.00  15\.00  after they complete their  vocational training  (Percentage)   Referral Services and M&E   Percentage of GBV cases  identified and reported in  accordance with GBV and  Sexual harassment guidelines    0\.00  50\.00  60\.00  80\.00  90\.00  100\.00  and referred for case  management (Percentage)   Percentage of youth accessing    0\.00  5\.00  10\.00  15\.00  15\.00  15\.00  Page 40 of 72  The World Bank Urban Youth Employment Project II (P166420) RESULT_FRAME_TBL_IO                Indicator Name  DLI  Baseline  Intermediate Targets  End Target  1  2  3  4  the training referral service  (Percentage)   Percentage of youth accessing  the employment referral    0\.00  10\.00  15\.00  20\.00  25\.00  25\.00  service (Percentage)   Percentage of youth accessing  the micro‐enterprise referral    0\.00  5\.00  10\.00  15\.00  15\.00  15\.00  service (Percentage)   Project Management   Percentage of participant  youth who believe that men  and women are equally    0\.00  33\.00  50\.00  75\.00  80\.00  80\.00  capable of participating in the  workforce (Percentage)   Percentage of participant  youth satisfied with the  Grievance Redress Mechanism    0\.00  30\.00  40\.00  50\.00  60\.00  75\.00  (Percentage)     IO Table SPACE    UL Table SPACE    Monitoring & Evaluation Plan: PDO Indicators  Methodology for Data  Responsibility for Data  Indicator Name  Definition/Description  Frequency  Datasource  Collection  Collection  Reported as the number of  Total Number of direct project  youth completing Basic Life  Quarterly  MIS  BLST Registrations  PMU  beneficiaries  Skills and Job Readiness          Training  Page 41 of 72  The World Bank Urban Youth Employment Project II (P166420) Number of women  Quarterly  MIS  BLST Registrations  PMU  Of which are women  completing BLST (50%          targeted)  Number of Moitu‐Koita  Quarterly  MIS  BLST Registrations  PMU  Of which are Motu Koitabu in NCD  youth completing BLST (10%          targeted)  Number of Ahi youth  Quarterly  MIS  BLST Registrations  PMU  Of which are Ahi in Lae  completing BLST (15%          targeted)  Target based on UYEP I (OJT)  experience, which yielded  an employment outcome of  41% according to the 2017  Follow Up Survey (FUS)\.  Percentage denominator is  number “graduating” (i\.e\.  satisfactorily completing)  the project; “Employed”  defined as:  Baseline,  Impact Evaluation using  Percentage of graduates who report being    Follow‐Up  Mid‐line and  a randomized control  Survey Firm  employed 12 months after they complete  a) Formal employment, part  Survey  End‐line  and treatment groups    their internships  or full time, regular ongoing        employment (not  temporary) during the past  6 months; and/or   b) Self‐employment as part  of an ongoing activity (i\.e\.  not "one‐off" assignment)  over the past six months, for  at least four weeks in total\.    Reports will include  Page 42 of 72  The World Bank Urban Youth Employment Project II (P166420) comparison with  employment levels at entry,  comparison with controls\.    Percentage of women  Internship graduates who  report being employed 12  Baseline,  Impact Evaluation using  months after the project\.  Follow‐Up  Mid‐line and  randomized control and  Survey Firm  Of which are women  The target of 30% is slightly  Survey  End‐line  treatment groups    higher against data that        suggests that females only  make up 27% of the labor  force\.  Percentage denominator is  the number entering each  component; Definition for  “satisfactory” completion  includes at a minimum:  Participation and exit    test for BLST and  Percentage of youth who are assessed to    Quarterly  MIS  participation and  MIS  have achieved satisfactory performance in  ‐ Attendance >= 80%      performance review for    the UW&S component  ‐ Satisfactory grading at  the UW&S  BLST assessment; and    ‐ Satisfactory assessment in  UW&S component by  Project staff as well as  Works Contractor staff\.    Percentage of women who  Participation and exit  are assessed to have  Quarterly  MIS  test for BLST and  PMU  Of which are women  achieved satisfactory      participation and    performance in the UW&S  performance reviews  Page 43 of 72  The World Bank Urban Youth Employment Project II (P166420) component  for UW&S      Based on assessment tests     Percentage of participants achieving  administered at entry and           Supervision and  minimum standards in Vocational Training  during/end of vocational  Quarterly  MIS  PMU  graduation reports  assessments  training\. Measures          absorption of training by  participants    Based on assessment tests     administered at entry and           Supervision and  Of which are women  during/end of vocational  Quarterly  MIS  PMU  graduation reports  training\. Measures          absorption of training by    female participants  ME PDO Table SPACE    Monitoring & Evaluation Plan: Intermediate Results Indicators  Methodology for Data  Responsibility for Data  Indicator Name  Definition/Description  Frequency  Datasource  Collection  Collection  Number of youth entering  Quarterly  MIS  BLST registrations  PMU  Number of youth entering BLST  BLST          Number of women entering  Quarterly  MIS  BLST registrations  PMU  Of which are women  BLST (50% targeted)          Number of MK entering  Quarterly  MIS  BLST registrations  PMU  Of which are Motu Koitabu in NCD  BLST (10% targeted)          Number of Ahi entering  Quarterly  MIS  BLST registrations  PMU  Of which are Ahi in Lae  BLST (15% targeted)          Number of youth who complete Urban  This is the number of youth  Quarterly  MIS  Contractor attendance  PMU  Works and Services  that remain engaged in      reports    Page 44 of 72  The World Bank Urban Youth Employment Project II (P166420) UW&S to completion\.    Assumes an attrition rate of  about five percent based on  experience under UYEP I  and improvements made to  UYEP II\.  The indicator represents the  increase in residents  reporting perceptions of  safety\. Measure pre and  post project in the selected  communities\. According to  the last Community Survey  conducted under UYEP I,  85% of community  members in project  locations believed crime and  violence reduced because of  Community  Percentage of residents in project  Randomized selection  the project\. The number of  Periodic  Perceptions  Survey Firm  locations that report improved  of residents  youth who reported having    Survey    perceptions of safety    friends involved in violence    or robbery fell by eight  percent (from 24% pre‐UYEP  I to 16% by the time of the  2017 Follow‐Up Survey)\. The  results also show a  significant decline in the  reported incidence of “using  threat or force with  somebody” for participant  youth (from 16% to eight  percent), while this behavior  Page 45 of 72  The World Bank Urban Youth Employment Project II (P166420) increased among control  youth\. However, the more  conservative target reflects  the limited number of  beneficiaries (less than in  UYEP I) and expectation that  security perception could  change from community to  community\.  Supervision and  Number of youth placed in  Quarterly  MIS  PMU  Number of youth placed in Internships  registration reports  Internships          Attendance >= 80% for OJT  participants and with  Supervision and  Percentage of youth graduating from  satisfactory exit rating from  Quarterly  MIS  PMU  attendance reports  Internships  employer; OR Participant          leaving assignment for other  employment  Target derived from number  graduating from UW&S\.  Supervision and  Number of youth placed in Vocational  Measures project success in  Quarterly  MIS  PMU  registration reports  Training  providing placements\.          Measures project success in  providing placements    Percentage of Vocational        Percentage of Vocational Training  Training graduates who  Baseline,     Impact Evaluation using     graduates who report being employed 12  report being employed 12  Mid‐line  Follow‐Up  randomized control and  Survey firm  months after they complete their  months after the project\.  and End‐ Survey  treatment groups    vocational training  Target set considerably  line      lower than Internships as    this is a new intervention,  Page 46 of 72  The World Bank Urban Youth Employment Project II (P166420) which is untested and based  on international evidence  which report generally low  employment impacts\.  “Employed” defined as:    a) Formal employment, part  or full time, regular ongoing  employment (not  temporary) during the past  6 months; and/or   b) Self‐employment as part  of an ongoing activity (i\.e\.  not "one‐off" assignment)  over the past six months, for  at least four weeks in total\.    Percentage of GBV cases  Percentage of GBV cases identified and  identified and reported in  reported in accordance with GBV and  accordance with GBV and  Quarterly  MIS  Case notes  PMU  Sexual harassment guidelines and  Sexual Harassment          referred for case management  Guidelines and referred for  case management  This will mainly focus on  helping the project assess  the relevance of the new  intervention and gauge  Percentage of youth accessing the  Quarterly  MIS  Supervision reports  PMU  demand and how it  training referral service          compares to the other  referral services\. The target  is 15% of youth completing  either the Internships or  Page 47 of 72  The World Bank Urban Youth Employment Project II (P166420) Vocational Training\.  This will mainly focus on  helping the project assess  the relevance of the new  intervention and gauge  Percentage of youth accessing the  demand and how it  Quarterly  MIS  Supervision reports  PMU  employment referral service  compares to the other          referral services\. The target  is 25% of youth completing  either the Internships or  Vocational Training\.  This will mainly focus on  helping the project assess  the relevance of the new  intervention and gauge  Percentage of youth accessing the micro‐ demand and how it  Quarterly  MIS  Supervision reports  PMU  enterprise referral service  compares to the other          referral services\. The target  is 15% of youth completing  either the Internships or  Vocational Training\.  Targets based on UYEP I  Follow up surveys which  showed that 16% of men  Baseline,  Impact evaluation using  Percentage of participant youth who  agreed with the statement  Mid‐line  Follow‐Up  randomized control and  Survey Firm  believe that men and women are equally  that women should stay at  and End‐ Survey  treatment groups    capable of participating in the workforce  home rather than enter the  line      workforce at baseline stage\.    This dropped to 8% in the  follow up survey\.  Page 48 of 72  The World Bank Urban Youth Employment Project II (P166420) Based on exit  Quarterly  interview of  Percentage of participant youth satisfied  Citizen engagement  and bi‐ BLST verified  Questionnaires  PMU and Survey Firm  with the Grievance Redress Mechanism  indicator  annual  by Follow‐Up        Survey      ME IO Table SPACE                  Page 49 of 72  The World Bank Urban Youth Employment Project II (P166420)   ANNEX 1: Implementation Arrangements and Support Plan    COUNTRY: Papua New Guinea   Urban Youth Employment Project II    Implementation Arrangements    71\. UYEP II consists of four components: Component 1—Youth Job Corps; Component 2—Skills Training; Component  3—Referral Services and Monitoring and Evaluation; and Component 4—Project Management\.      Component 4: Project Management    72\. The PCO in NCDC and Implementing Entities, (NCDC in Port Moresby and LCA in Lae), through their PMUs, will be  responsible for their respective  parts of the project\.   Staff from  the NCDC PCO  and PMU  will assist the LCA PMU  get up and running through coaching and training on systems and approaches\.  The NCDC PMU will also manage  procurement  and  delivery  of  some  activities  and  services  where  it  is  logical  to  do  (e\.g\.  will  involve  one  service  provider  such  as  for  the  MIS  upgrade,  curriculum  material  development,  impact  surveys  and  social/economic  survey analysis, or audit services)\.  Details of the components are given in Section II(B)\.    73\. The project implementation arrangements are described in Section III(A)\.  To support this, the organizational and  staffing structure in the PCO and PMUs is show in Diagram 3 below\.        Diagram 3\.  PMU and PCO staffing and reporting arrangements  Page 50 of 72  The World Bank Urban Youth Employment Project II (P166420) 74\. PMUs  will  be  established  in  NCD  and  Lae\.   A  PCO,  will  be  co‐located  to  the  NCDC  PMU  and  is  also  functionally  accountable  to  NYDA,  will  manage  the  inter‐agency  coordination,  national  communications,  partnerships,  joint  PMU training, coordination with NYDA on project implementation, and consolidated reporting to the Association,  PSC  (as  appropriate),  DOT  and  DNPM\.   The  NCDC  PCO  and  PMU  will  share  some  staff  and  physical  resources\.   A  Memorandum  of  Understanding  (MOU)  and  Project  Operations  Manual  (POM)  will  describe  the  arrangements  and define responsibilities between the PCO and PMUs, including how the functional and oversight relationships  will  work\.  The  POM  will  be  prepared  and  adopted  within  three  months  from  project  effectiveness,  and  the  adoption  of  a  POM  is  a  condition  of  disbursement  for  Categories  1  and  2  in  relation  to  expenditures  for  works  under the project\.    75\. PMUs  are  responsible  for  the  preparation  of  project  reports,  financial  reports,  POM,  Annual  Work  Plans  and  Budgets  and  any  other  reports  relevant  to  the  parts  of  project  under  its  implementation  responsibility\.  Such  reports/documents will be submitted to NCDC (through PCO) and/or Recipient for consolidation and submission  to the Association\. For project reports, they will need to be prepared in each calendar quarter\. PMUs will need to  prepare them no later than 2 weeks after the  end  of each reporting period, for incorporation and forwarding by  the Recipient to the Association of the overall Project Report with 45 days after the end of each period\. Similarly,  for Completion Report, PMUs will need to provide relevant information no later than 5 months for incorporation  into the Completion Report\. For Annual Work Plans and Budgets (AWPB), PMUs will need to prepare an AWPB for  relevant  its  respective  parts  of  the  project  by  no  later  than  November  1  of  each  year,  for  consolidation  and  submission to the Association of the overall AWPB by no later than December 1 of each year\.    76\. The youth development process is shown in Diagram 4\.        Diagram 4\.  Youth development processes and components\.  Page 51 of 72  The World Bank Urban Youth Employment Project II (P166420) Component 1: Youth Job Corps      Communications, Awareness, Application Screening, and Basic Life Skills & Job Readiness Training    77\. This  component  will  be  implemented  by  NCDC  and  LCA  involving  raising  awareness  in  targeted  urban  areas,  mobilizing  youth,  providing  them  with  basic  life  skills  and  job  readiness  training,  and  placing  the  youth  in  public  works schemes\.  As with UYEP I, the works and services will consist of waste management, maintenance activities  and public infrastructure investments\.  Other features are described in para\. 22 et seq\.  The public works scheme  will  be  closely  aligned  with  the  local  development  priorities  of  the  Municipal  Authorities,  youth,  and  the  Ward  communities\.  There will be four subcomponents:    78\. Communications  and  Mobilization  will  support  community  awareness  and  mobilization  campaigns  to  identify  eligible youth\.  The campaigns will be managed by each PMU in cycles rotating through selected wards\.  Eventually,  youth and communities in NDC and Lae are expected to participate in up to 3 cycles per ward\.  Campaigns will be  managed  by  a  Project  Operations  Officer  supported  by  Youth  Facilitators,  Eligibility  Screening,  and  Data  Entry  support people\.  At this stage, biometric and other data for each participating youth is entered in the MIS, through  which  each  participant  can  be  tracked  as  they  progress  through  the  program  and  beyond\.   Further  details  are  given in para\. 20\.    79\. Basic Life‐Skills and Job Readiness Training (BLST) will provide basic training for youth to increase their knowledge  and preparedness for transitioning into the work place both in the formal and informal economy\.        80\. Assessing Learning Achievements Including Numeracy and Literacy: UYEP I’s BLST administered a simple custom‐ designed literacy and numeracy test based on the Burt Read A‐loud Test\. It was designed to serve as a screening  (not diagnostic) tool to test for phonetic and numeric literacy\.  Most participants passed the test\. The test was not  standardized or normed to equate to school levels to scores of participations and no was it designed to diagnose  specific  shortcomings  or  propose  remedial  outcomes  for  respondents\.  UYEP  II  will  need  to  revise  and  improve  upon  the  pre‐training  and  post‐training  assessment  for  BLST  and  the  project  will  consider  using  the  early  grade  reading  assessment  instrument  for  PNG  as  well  as  establish  more  systemic  linkages  with  the  Department  of  Education\.  Regular  coaching  and  assessment  sessions  during  the  BLST  and  implementation  of  Urban  Works  and  Services is designed in part, to assist participants with low levels of numeracy and literacy\.      81\. Coaching and Counselling: The coaching and counselling services during UYEP I mostly centered around providing  support to address personal and logistical issues\.  The UYEP II will build on the lessons on UYEP I and strengthen  the  coaching  and  counselling  services  aimed  at  developing  life  skills  and  competencies,  competitiveness,  and  individual  plans  supported  by  personal  goals\.   The  referral  desk  services  will  support  this  during  and  after  the  completion of skills development activities\.  This will also include prevention and remedial action for gender‐based  violence and referral services right from BLST training\.    82\. Training Management: The implementation of BLST in UYEP II will be directly managed by PMUs in Port Moresby  and Lae\. The learning management during Urban Works and Services will be managed jointly by the training team  and works team through supervision, coaching and learning assessment\. The implementation of internship will be  managed  by  the  PMUs  using  the  good  practices  and  lessons  from  UYEP  I\.   The  delivery  of  Vocational  Training  courses  and  related  services  will  be  done  through  local  service  provides  in  Port  Moresby  and  Lae  using  off‐the‐ shelf courses or existing approaches used by inclusive finance and business development organizations\.  The aim  Page 52 of 72  The World Bank Urban Youth Employment Project II (P166420) of  such  an  approach  would  be  provide  functional  competencies  appropriate  for  employment\.   The  project  will  make  necessary  linkages  for  certification\.   The  initial  assessment  of  Lae  suggests  that  the  Vocational  Education  Service Providers providing industrial traders training are running at full capacity in terms of facility and trainers\.  Subject to further assessment, the UYEP II will include private sector providers and agri‐business training and trade  organizations that have enough physical facility and staff or ability to take UYEP II trainees\.    83\. Competency‐Based Training:  UYEP I  provided training  to improve life and job skills  through classroom  and work  experience through the public works program and on the job training\.  The youth gained knowledge and skills that  provided them recognition in the society and job market\.  However, the youth and other stakeholders expressed  the  need  for  a  competency‐based  qualification  to  compete  for  further  education  and  skilled  employment\.   The  UYEP  II  training  design  builds  on  this  lesson  and  expands  the  scope  of  BLST  to  ten  days  as  an  NTC  accredited  course\.    The  expanded  BLST  will  increase  emphasis  on  skills  development  for  workplace  communication  and  behavior,  works  safety,  and  prevention  and  remedial  measures  for  gender‐based  violence\.   The  curriculum  will  cover:  (i)  basic  literacy  and  numeracy,  (ii)  social  diversity,  gender  equity,  GBV  awareness  and  prevention92,  (iii)  personal health, hygiene, and nutrition (especially related to environmental sanitation and maternal‐child health),  (iv)  work  place  health  and  safety,  (v)  basic  finance  and  budgeting‐business  skills,  (vi)  banking  and  savings93,  (vii)  work place behavior, communication and relationships with co‐workers and supervisors and problem solving, and  (viii) preparing basic work‐related documents, e\.g\., job applications, CVs, etc\.    The youth will have an opportunity  to  continue  to  build  competency  during  public  works  and  skill  development  schemes  to  compete  in  the  labor  market\.  The certification for skills development through internship and vocational education will use the NTC and  NATTB  certification  system\.    The  BLST  trainers  will  go  through  a  training‐of‐trainers  course  to  increase  their  preparedness and meet the requirements of NTC\.     84\. Small Learning Groups: The technical review on training in UYEP I found that larger groups of 60‐70 participants  in  a  YJC  site  restricted  the  scope  of  learning  for  all\.   The  Extended  Skills  Work  (ESW),  on  the  other  hand,  which  provided  only  ten  days  of  employment  and  learning  opportunities  to  a  smaller  group  was  effective  to  learn  construction skills\.  The UYEP II will use a group size of 20–28 for all learning activities\.  The other variation from  UYEP I would be that all the youth completing BLST will have to go through the public works component for skills  development before they attain any skills training funded by the project\.    85\. Urban Works and Services (UW&S) will enable youth to develop and apply the soft skills learned through public  works  for  30  paid  days  after  they  complete  BLST\.    Youth  will  carry  out  simple  infrastructure  works  and  urban  services  through  contractors  engaged  under  the  project\.    Civil  works  contracts  will  be  issued  to  local  private  registered construction companies\.  The construction contractors will be invited to tender for fixed term contracts  that  include  civil  works  items  and  management  of  youth  groups,  selected  by  the  project\.    Contractors  will  be  obliged  to  work  with  groups  from  the  ward  where  the  works  take  place\.   Contractors  may  bid  for  contracts  that  include  multiple  wards  or  groups  or  multiple  contracts,  if  they  can  prove  to  have  the  capacity  described  in  the  conditions of contract\.  The contracts will be managed by Public Works Engineers at Port Moresby and Lae, each  supported  by  Works  Supervisors\.   Trainee  beneficiaries  will  receive  a  daily  stipend,  and  the  contractors  provide  lunch  and  water\.   Trainees  are  also  provided  all  Personal  Protective  Equipment  (PPE)  necessary  to  carry  out  the  work safely\.  Counselors will provide counselling services for trainees on demand\.  92 In terms of GBV awareness and prevention, the BLST will rely on specialized service providers who would oversee developing the  content for these modules\.   93 The BLST curriculum will align with the financial education modules established by Centre for Excellence in Financial Inclusion (CEFI)  and promoted by all micro‐banks and institutions for inclusive finance and include it in the scope for training of trainers for BLST\.   Page 53 of 72  The World Bank Urban Youth Employment Project II (P166420) 86\. Examples  of  infrastructure  and  services  to  be  delivered  include:  pedestrian  crossings  and  footpaths,  steps,  driveways  and  parking  lots,  transport  recreational  and  market  shelters,  beautification  and  landscaping  of  recreational public areas, maintenance and repair of roads and drainage, schools and other public buildings, waste  management  and  lighting\.    In  addition  to  supporting  core  functions  and  services  of  the  City  Authorities,  the  investments  allow  the  City  Authorities  to  achieve  more  than  they  could  otherwise  with  limited  financial  means\.   Households  in  target  neighborhoods  and  the  general  urban  population  will  benefit  from  the  infrastructure  and  services provided\.  Infrastructure improvement and maintenance need in NCD and Lae are similar\.  However, the  responsibility for the road network in Lae is with the Provincial Department of Works, under the Ministry of Work\.   Once the Lae City Authority (LCA) is fully operational, this responsibility may be transferred\.    87\. The  Urban  Works  and  Services  will  include  a  pilot  in  select  locations  to  monitor  the  project’s  impact  on  urban  safety  by  aligning  the  project’s  investments  with  the  local  development  infrastructure  and  service  delivery  priorities of the youth and their communities\.  The selected locations will be determined from a community‐based  mapping of areas prone to high levels of crime and violence\.  Activities under the Urban Works and Services will  be implemented by groups of youth, screened and selected through the project\.  As much as possible, youth will  work in their own communities\.    88\. Works  executed  under  the  UWS  will  be  selected  from  the  priority  listing  of  the  city  authorities  and  may  include  priority proposals from the communities\.  In NCDC, the Works Department will identify critical maintenance works  across the city and prioritize footpaths and other urban pedestrian infrastructure\.  Annual implementation plans  will be compiled and scheduled for NCD, whilst trying to ensure equal opportunities for participants across the 12  wards in the  city\.  The urban development plan for Lae covers all wards in Lae  Urban  (6 wards) and  Lae Ahi area  (23  wards)\.  The  plan  shows  development  priorities  across  all  public  sectors,  including  transport,  infrastructure,  electrification,  water,  health  and  education\.   This  development  plan  will  provide  the  basis  from  which  suitable  works activities will be selected\. Also, in Lae, the equity principle amongst the wards will be adhered to\.    89\. Consultations  with  NCDC  revealed  that  continuation  of  the  type  of  works  undertaken  under  UYEP  I  are  still  as  relevant  and  needed  as  it  was  at  the  start  of  UYEP  I\.   The  need  for  improvement  of  footpaths  and  pavements  of  public  places  is  still  far  greater  than  the  project  will  be  able  to  address\.   NCDC  will  increase  their  involvement  in  planning and prioritization of works that can be handled under UYEP I and align this with city development plans\.   Maintenance of road drainage is considered one of the highest priorities for NCDC\.    90\. Waste  management  services  and  improvement  of  dumpsites  is  high  on  the  priority  list  in  both  NCD  and  Lae\.   Consultations  with  Japan  International  Cooperation  Agency  (JICA)  revealed  that  there  is  scope  for  collaboration,  as  JICA  is  entering  a  second  phase  of  support  to  the  government  to  assist  in  dumpsite  improvements  and  waste  separation  and  recycling\.   Waste  management  services  may  provide  opportunities  for  beneficiaries  to  partake\.   The project can contribute to the improvement of collection services and possibly participate in the development  and execution of waste separation and processing, where back services and institutional support may be provided  by JICA\.    91\. In  consultations  with  the  Lae  counselors  and  other  stakeholders,  the  following  priorities  were  identified  across  both  the  Lae  Urban  and  Lae  Ahi  wards:  drainage  system  repair  and  maintenance;  grass  cutting  and  road  edge  repairs;  road  pavement  improvements;  market  flooring  and  roofing;  public  shelters;  recreational  facilities;  community  hall  construction;  school  renovations;  water  supply  and  sanitation  at  markets  and  schools;  garbage  collection; footpaths and steps; driveways and parking lots; beautification and landscaping of public areas; street  Page 54 of 72  The World Bank Urban Youth Employment Project II (P166420) lighting (solar) and lighting of public buildings\.  LCA has drafted a Five‐year Development Plan (2018–2022), aiming  at improving the livelihood of the people of Lae District by addressing the six main key Policy Goals of Development  in  line  with  the  Morobe  Provincial  Strategic  Plan  2018–2048  (“Morebe  Kunde  Vision”)\.   The  plan  covers  six  key  policy goals: (i) good governance and management; (ii) sustainable and robust economic development; (iii) growth  and  service  center  for  development;  (iv)  physical  infrastructure  development;  (v)  integral  human  development;  and (vi) partnership, networking, and cross‐cutting issues\.    92\. UYEP  II  can  contribute  to  several  objectives  under  the  plan,  including  upgrade  and  maintenance  of  physical  infrastructure  services  in  collaboration  with  government  agencies  responsible  for  electrification,  water  supply,  roads  and  bridges,  housing,  physical  planning  and  urban  and  improvement  of  facilities  for  education  and  health  services\.  UYEP II can also assist with access to these facilities, and, through training, assisting startup businesses  startups  to  service  such  works\.  Preliminary  estimates  of  quantities  and  costs  of  works  have  been  made\.    The  proposed works packages and costs over the first 18 months are summarized later in the Annex under the heading  “Procurement”\.    93\. A  preliminary  scheduling  of  beneficiary  groups  and  wards  in  NCD,  shown  in  Diagram  5,  allows  flexibility  in  contracting arrangements while keeping equal group sizes and number of participants from each ward\.  This may  be  adjusted  by  population  size  per  ward  or  by  using  other  criteria\.   A  total  number  of  6  contractors  would  be  engaged at the same time, while each contract would be for a duration of approximately 9 months, in which there  would be 6 cycles of group engagement\.    Preliminary Contracting schedule NCD 7 1 contract covering different Wards and different groups 32,760\.00 109,200\.00 20 = 20 trainees in 6 weeks UWS 20 = 20 trainees in 6 weeks UWS to 2019 2020 2021 2022 2023 Contract Wards Name 5-Aug 6-Jan 23-Mar 18-May 13-Jul 7-Sep 2-Nov 11-Jan 8-Mar 3-May 28-Jun 23-Aug 18-Oct 21-Feb 18-Apr 13-Jun 8-Aug 3-Oct 28-Nov 23-Jan 10-Apr 5-Jun 5-Jun 31-Jul 25-Sep 20-Nov G 1 20 20 20 11 20 20 20 20 1, 11 Ward 2 Konedobu - Koki 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 13 20 20 20 20 20 20 20 1, 13 Ward 7 Burns Peak - Hohola 1 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 2 20 20 20 20 9 20 20 20 20 20 20 20 2, 9 Ward 3 Kaugere - Taurama 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Preparatory Activities and Set up of new PMU First Intake ESS ans Base Line Surveys   starts  20 20 20 20 12 20 20 20 20 20 20 20 20 2, 12 Ward 5 Boroko 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 3 20 20 20 8 20 20 20 20 20 3, 8 Ward 12 ATS - 9 Mile 20 20 20 20 20 20 20 20 14th October 2019 20 20 20 20 20 20 20 20 20 20 20 14 20 20 20 20 20 20 20 3, 14 Ward 11 Gerehu - Renbo 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 4 20 20 20 20 20 20 10 20 20 20 20 20 20 4, 10 Ward 9 Gordons - Erima 20 20 20 20 20 20 20 20 20 20 20 20 5 20 20 20 20 20 20 5 Ward 6 6 Mile - Saraga 20 20 20 20 20 20 6 20 20 20 20 20 20 6 Ward 8 Tokarara - June Valley 20 20 20 20 20 20 15 20 20 20 20 20 20 15 Ward 10 North Waigani - Morata 20 20 20 20 20 20 7 20 20 7 Ward 1 Hanuabada 20 20 20 20 20 20 20 7 Ward 4 Hohola 3 20 20 20 20 20 20 Trainees 220 220 220 180 220 220 200 180 160 180 240 240 220 220 220 220 240 220 220 220 220 220 160 Groups 11 11 11 9 11 11 10 9 8 9 12 12 11 11 11 11 12 11 11 11 11 11 8 Wards in operation 3 4 4 4 4 4 4 4 5 5 5 5 4 4 4 4 4 4 4 4 4 4 3 UWS Intakes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 dropout: 9% BLST intakes (2-3 weeks prior) 240 240 240 196 240 240 218 196 174 196 262 262 240 240 240 240 262 240 240 240 240 240 174 0 dropout 6% Skills Development intakes 207 207 207 169 207 207 188 169 150 169 226 226 207 207 207 207 226 207 207 207 207 207 150   Page 55 of 72  The World Bank Urban Youth Employment Project II (P166420) Diagram 5\.  Schedule of contracts and work groups for urban works and services in NCD\.    94\. Works and services contracts in Lae will cover 23 Wards in total\.  The principle applied in this schedule is that the  group sizes are kept small to assist incumbent contractors in managing these groups, and to allow for an average  of three cycles of work in each ward (see Diagram 6)\.    Preliminary Contracting schedule LAE U1 A1 1 contract covering different Wards and different groups 20 = 20 trainees in 6 weeks UWS 10 = 10 trainees in 6 weeks UWS 2019 2020 2021 2022 2023 First Intake ESS  Surveys  starts 13th January 2020                                            Contract Lae Urban Name 5-Aug 30-Sep 20-Jan 2-Mar 27-Apr 22-Jun 17-Aug 12-Oct 7-Dec 1-Feb 29-Mar 24-May 13-Sep 8-Nov 10-Jan 7-Mar 2-May 27-Jun 22-Aug 17-Oct 12-Dec 6-Feb 3-Apr 29-May 24-Jul U-ward 3 U1 20 20 20 LAE-U1 U-ward 2 20 20 20 20 20 U-ward 4 20 20 20 U2 20 20 20 20 20 20 LAE-U2 U-ward1 20 20 20 20 20 20 20 20 20 20 20 First UWS engagement starts on 2nd  March 2020 U-ward 5 U3 20 20 20 20 20 20 Preparatory Activities and  Set up  of new PMU LAE-U3 U-ward 6 20 20 20 20 20 20 Contract Lae Ahi A-ward 1 A1 10 A-ward 2 10 10 A-ward 4 10 LAE-A1 A-ward 5 10 A-ward 6 10 10 A-ward 7 10 A-ward 3 10 10 A-ward 9 10 10 10 A-ward 15 A2 10 10 10 10 10 10 LAE-A2 A-ward 14 10 10 A-ward 17 10 10 10 10 10 A-ward 10 A3 10 10 A-ward 8 10 LAE-A3 A-ward 11 10 10 A-ward 12 10 10 10 A-ward 13 10 10 10 A-ward 16 10 10 10 10 10 10 Trainees 20 70 60 130 130 130 140 150 120 80 90 80 30 0 0 0 0 0 0 0 0 0 No of groups 1 5 4 8 8 8 9 10 8 6 7 6 3 0 0 0 0 0 0 0 0 0 Wards in operation 1 5 4 6 6 7 6 6 5 5 6 4 4 2 0 0 0 0 0 0 0 0 UWS Intakes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 dropout: 9% BLST intakes (2-3 weeks prior) 22 76 65 142 142 142 153 164 131 87 98 87 33 0 0 0 0 0 0 0 0 0 dropout 6% Skills Development intakes 19 66 56 122 122 122 132 141 113 75 85 75 28 0 0 0 0 0 0 0 0 0     Diagram 6\.  Schedule of contracts and work groups for urban works and services in Lae\.    Component 2: Skills Training    95\. Skills  training  under  UYEP  II  will  prepare  youth  for  employment  in  the  formal  and  informal  sectors\.  The  training  will  involve  creating  a  competency  framework  for  each  course,  and,  to  the  extent  possible,  putting  youth  on  a  pathway for competency‐based qualification\.  After going through 10 days of BLST training  followed by a 30‐day  experience in urban works projects, the youth will be channeled  to one of  two  steams of skills training for three  months  to  facilitate  their  transition  to  labor  markets:  (a)  internship  (or  firm  training  provided  by  employers  partnering with the project); and (b) vocational education delivered by credible organizations\.    96\. Key issues identified during the technical review of the UYEP I training include: (i) the need for more attention to  improving  soft  skills  for  youth  and  attitudes  to  work;  (ii)  the  need  for  more  regular  assessment  of  the  training  quality and provision of a competency‐based skills development pathway; (iii) a stronger preference expressed by  Page 56 of 72  The World Bank Urban Youth Employment Project II (P166420) employers  for  market‐oriented  or  industry‐linked  vocational  training94;  (iv)  the  need  for  formal  certification  or  trade  licensing;  (v)  the  importance  of  regular  coaching  and  mentoring  support;  and  (vi)  the  establishment  of  graduation  pathways  for  education  and  income  generation\.  The  training  design  in  UYEP  II  estimates  that  80  percent  of  the  participants  will  join  the  internship  scheme  and  the  remaining  20  percent  will  join  vocational  training\. However, the numbers will need to be monitored and may need to be adjusted accordingly after the first  12  months\.  The  training  quality  assurance  will  include:  (i)  developing  Request  for  Proposals  (RFPs)  that  involve  strengthening  the  provision  of  Vocational  and  Trade  Certification  and  standards  (e\.g\.,  inclusion  of  modernized  equipment to support practical training and demonstrated links to industry); and (ii) more regular monitoring and  management  of  trainers’  and  trainees’  data\.  The  project  will  engage  a  Skills  Development  Team  leader  and  Training  Quality  Assurance  Officer  supported  by  Short‐Term  technical  assistant  (Instructional  Designer  to  revise  the  BLST)  to  devise  a  pathway  for  accreditation  and  meet  the  minimum  requirements  for  NTC  and  NATTB  certification  as  well  as  monitor  quality  during  training  delivery\.   A  scoring‐based  ranking  of  students  will  also  be  administered  during  the  internship\.    The  Vocational  Education  training  will  execute  a  monitoring  and  measurement system in agreement with the service providers\.    Component 3: Referral Services and M&E    97\. This component will build on the systems and processes under UYEP I, focusing on delivering comprehensive data  and  analysis  to  support  project  operations  and  inform  public  research  and  policy  development\.      The  subcomponents are largely described in para\. 27 et seq\.  Further implementation details for the Referral Services  and MIS are given below\.    98\. Referral  Services  will  provide  support  services  to  the  youth  as  part  of  its  post‐training  support  services\.   It  will  involve:  (i)  the  provision  of  job  search,  microenterprise  and  training  referral  services;  and  (ii)  the  provision  of  referral  services  for  identified  GBV  cases\.   The  services  will  operate  as  “referral  desks”  in  Port  Moresby  and  Lae  which candidates can approach\.  Participants will be briefed on the arrangements during the BLST to ensure they  are aware of what is available and how to use the referral services\.  Coordinators will be appointed to manage the  referral  process  (i\.e\.  act  as  a  conduit  between  the  candidates  and  screen  and  refer  candidates  to  third‐party  services  such  as  job  recruitment  agencies,  other  training  providers,  micro‐finance  agencies,  industry  schemes,  company  HR  recruitment  departments  and  the  like)\.    Counselling  and  GBV  services  are  specialized  and  are  expected to be outsources to an NGO with good track record and contacts in PNG\.    99\. Management  Information  System\.    As  with  UYEP  I,  a  Management  Information  System  (MIS)  will  be  used  to  record  most  of  the  project’s  operational  information,  including  registration,  allocation  of  trainees  to  work‐sites,  attendance and performance score cards, survey data, electronic stipend payments, and training certificates\.  The  MIS  developed  in  UYEP  I  is  based  on  a  system  that  provides  operational  support  for  key  work  processes  of  the  project, from which it derives a range of detailed information on youth engaged by the program and their progress  through  the  project,  including  the  Quarterly  Progress  Report\.    This  currently  includes  the  screening  and  registration  process,  allocation  to  the  various  components,  attendance  within  those  components,  and  stipend  94  The  project’s  consultations  with  employers  and  TVET  training  providers  revealed  that  the  disconnect  between  industry  and  TVET  institutions are largely due to (i) a mismatch between industry requirements and TVET provided competencies; (ii) the limited capacity of  TVET to provide adequate learning facilities with up‐to‐date industry‐standard equipment; and (iii) a lack of capacity to insert trainees into  work  placement  opportunities  as  part  of  the  course\.    In  response  to  training  needs,  certain  industries  have  set  up  their  own  in‐house  training  and  apprenticeship  services  which  can  also  be  trade  certified\.  UYEP  II  will  focus  on  such  market  oriented  vocational  skills  with  provision  for  certification  up  to  National  Certification  I  and  II  or  trade  license  where  possible\.  This  will  be  done  in  coordination  with  NTC  and NATTB\.   Page 57 of 72  The World Bank Urban Youth Employment Project II (P166420) calculations\.  The raw data from the extended screening survey (baseline), and IE surveys are also recorded in the  database,  but  analysis  is  currently  done  through  external  statistical  tools\.   A  portal  for  public  dissemination  of  information, that draws upon periodic updates from the MIS database, is being developed and is now available as  a  working  prototype\.   The  MIS  is  supplemented  by  data  entry  software  for  the  various  surveys,  which  currently  record  data  on  paper  forms  for  subsequent  entry\.   It  is  proposed  that  the  new  project  will  progressively  deploy  tablet  devices  for  data  collection,  for  surveys  as  well  as  field  visits  by  supervisors\.  This  is  intended  to  improve  accuracy  and  verification  and  to  reduce  workload\.  It  is  further  proposed  that  other  technologies  that  provide  greater  verification  potential,  such  as  geo‐tagging  for  field  data  and  bio‐metrics  (facial  recognition  or  finger  printing) for identification, be explored and progressively introduced, subject to cost‐benefit assessments\.  Further  technology support option that are being investigated include more strategic use of social media to engage youth,  and enhanced GIS platforms to map project interventions against other relevant data, such as crime reports, new  economic developments and other projects that may impact the same groups and localities\.    Financial Management and Disbursements    100\. Budgeting\.   All  donor  funded  projects  will  be  included  in  the  Government  of  Papua  New  Guinea  (GoPNG)  Public  Investment Program (PIP) and National Budget to have aid on plan and aid on budget\.  Currently UYEP II is not in  either the PIP 2019‐2023 nor the 2020 National Budget\.  A Program Formulation Document (PFD) will need to be  submitted,  by  NCDC  and  LCA,  to  the  Department  of  National  Planning  and  Monitoring,  as  part  of  the  2020  supplementary budget, to have UYEP II included in future PIPs and National Budgets\.  Annual budget submissions  will be required to be submitted by NCDC and LCA to the Department of Treasury from 2020 onwards\.  LCA also  need to provide a copy of the budget to the Provincial Government\.  A budget for the whole project is required,  as well as one for each implementing agency\.  Each budget will need to be broken down by year, and appropriate  levels of detail (e\.g\. component or category, activities, etc\. whichever is deemed most relevant and useful)\.    101\. Counterpart  Funding\.    Under  PNG  Country  Financing  Parameters  (CFP),  funding  of  taxes  is  allowed,  and  the  project  costings  and  budget  will  be  prepared  inclusive  of  taxes\.   The  IDA  financing  will  also  be  inclusive  of  taxes\.   The IDA funding covers all planned activities under the Project to achieve the development outcomes, results and  indicators\.  World Bank Guidelines on CFP discourages waivers or reduction of duties and taxes of Bank financed  projects  and  activities\.   This  approach  is  taken  by  PNG  where,  under  PNG  laws,  when  donor  funds  are  financing  inclusive of taxes, no tax exemptions are allowed\.  Accordingly, no tax exemptions will be approved by GoPNG for  UYEP II\.  Therefore, no counterpart funding is required to cover the taxes\.    102\. Flow of Funds\.  Funds will flow from the World Bank to Government of PNG via: (a) advances; (b) direct payments;  (b) reimbursement of GoPNG expenditures; and (d) special commitments, if required (refer to the Disbursements  section  below  for  more  details  on  disbursement  arrangements)\.   Diagram  7  illustrates  funds  flow  arrangements  under UYEP II\.    Page 58 of 72  The World Bank Urban Youth Employment Project II (P166420)     Diagram 7\.  Funds Flow Arrangements Under UYEP II (solid lines show the transfer of funds subject to documentation  provided by the PMU to the World Bank/IDA\.  Actions required to issue, and supporting documentation required  for, special commitments is given in the IDA Disbursement Handbook)\.    103\. Accounting  and  Maintenance  of  Accounting  Records\.   All  government  funds  are  bound  by  the  Public  Finances  Management  Act  (PFMA)  1995  and  the  PNG  Financial  Management  Manual  (FMM)\.    GoPNG  is  currently  implementing  a  new  IFMIS  (Finance  One)  and  transitioning  national  departments,  provincial  governments,  and  statutory  authorities,  over  from  the  old  PGAS  system,  or  whatever  approved  accounting  systems  were  used,  to  the  new  IFMIS\.   At  present,  neither  NCDC  nor  LCA  have  been  transitioned  to  IFMIS\.   IFMIS  rollout  plans  do  not  currently include transition of either NCDC or LCA by the likely effectiveness date of the project\.  NCDC currently  use two different accounting systems and split their accounts across MYOB and Attache\.  NCDC will use MYOB for  reporting the financial transactions of the UYEP II aspects implemented by NCDC\.  LCA currently does not have an  accounting system to record accounting transactions and prepare financial report and statements (refer above on  LCA not having adequate FM systems to meet FM requirements of BP10\.00)\.  LCA will use Sybiz for reporting the  financial transactions of the UYEP II aspects implemented by LCA\.  GoPNG, NCDC and LCA operate on a cash basis  of accounting\.  Accounting  records are to be maintained by  NCDC and LCA and are to be made available to both  auditors and the World Bank, as required\.    104\. Internal Controls\.  NCDC and LCA are bound by the PFMA and PNG FMM for its policies and procedures manual\.   GoPNG required NCDC to have an internal audit division and audit committee\.  The Project should be included in  the  annual  internal  audit  plan  for  the  NCDC  and  included  in  relevant  reports  to  the  Audit  Committee\.   LCA  does  not  currently  have  an  internal  audit  unit  or  audit  committee\.   LCA’s  governance  structure  and  arrangements  of  internal  audit  and  oversight  will  be  established  by  LCA’s  Board  and  the  Provincial  and  Local‐level  Service  Monitoring Authority\.    105\. Financial  Reporting\.    Interim  unaudited  financial  reports  (IFRs)  of  the  consolidated  Project,  and  the  Project  activities of each implementing agency, will be prepared on a quarterly basis\.  The financial reports will include an  analysis of actual expenditure for the current period, year‐to‐date and for the cumulative to date, plus outstanding  commitments,  compared  against  total  project  budget\.    The  format  will  be  developed  and  agreed  by  the  implementing agency and the World Bank prior  to  due  date for  the submission of the first IFRs\.  The IFRs will  be  forwarded to the World Bank within 45 days of the end of each calendar quarter\. Copies of the consolidated IFRs  will be submitted to DOT and DNPM\.    Page 59 of 72  The World Bank Urban Youth Employment Project II (P166420) 106\. External Audit\.  An annual audit of the consolidated Project financial statements, and the project activities of each  implementing  agency,  will  be  required\.    The  Auditor  General’s  Office  (AGO)  of  PNG  is  mandated  to  audit  all  Government funds\.  The Auditor General requires annual financial statements to be prepared in accordance with  IPSAS  accounting  standards\.    The  audited  financial  statements,  audit  report  and  management  letter  must  be  received by the World Bank within six months of the end of the fiscal year and shall be made publicly available by  the  Recipient  in  a  manner  acceptable  to  the  Bank  as  per  the  General  Conditions  for  IDA  Financing,  Investment  Project Financing\.    107\. Financial Management Action Plan\.  A summary of the Financial Management Action Plan is shown below:    Date by which action  No\.  Action   Responsible  required  1  NCDC shall update its financial management and  (1) month after the  NCDC  information system for managing Project accounting and  project’s Effective  reporting, in a manner satisfactory to the Association\.  Date    2  An accountant or accounting firm has been appointed  Prior to disbursements  LCA  and commenced work to perform the financial and  of funds to LCA  accounting functions of LCA95   3  A bank account has been established for LCA’s  Prior to disbursements  LCA  operation\.96  of funds to LCA  4  An accounting system has been implemented and is  Prior to disbursements  LCA  functioning\.97  of funds to LCA  5  LCA has received adequate funding to support its  Prior to disbursements  LCA  operations\.98  of funds to LCA  6  Prepare and agree format of unaudited IFRs that will be  Prior to the due date  NCDC, LCA and  used for quarterly reporting\.   for the submission of  World Bank FM  the first IFR\.  Specialist    108\. Disbursement Methods and Supporting Documentation Arrangements\.  The project could use four disbursement  methods:  (a)  advances;  (b)  direct  payment;  (c)  reimbursement;  and  (d)  special  commitments\.   Direct  payments  would  be  used  for  most  of  payments  due  to  the  risks  and  issues  identified  by  audit  reports  on  incorrect  use  of  project  and  donor  funds\.   Reimbursement  would  only  be  used  if  the  Government  of  PNG  funds  were  used  for  project  expenses\.   Special  commitments  may  be  needed  if  goods  are  purchased  from  overseas\.   Disbursements  will  be  against  List  of  Payments  and  Statements  of  Expenditure\.    Required  supporting  documentation  for  disbursements will be outlined in the Disbursement and Financial Information Letter\.    109\. Designated Account\.  The PFMA and Financial Management Manuals allow for donor sourced funds for projects  to be held in separate trust accounts\.  Two segregated Designated Accounts (DAs) will be required, one for each  implementing agency in NCDC and LCA\.  At present, a single central treasury account is not being used for donor  95  Evidence of contract for the Accountant or Accounting Firm has been signed and is effective with start date\.  96 Evidence of bank account set up under LCA with bank accountant number provided\.  97 Evidence of Chart of Accounts set up and initial data loaded\. Book of accounts or manual ledger can be accepted\.  98 Evidence that funding has been received in the LCA bank account\.  Page 60 of 72  The World Bank Urban Youth Employment Project II (P166420) projects\.  Should donor projects also be moved to single central treasury account (likely after transition to IFMIS)  then,  while  there  may  be  one  physical  bank  account,  there  will  need  to  be  general  ledger  sub‐codes  for  each  implementing  agency  and  project  to  ensure  the  segregation  of  funds\.    The  ceiling  for  each  of  the  DAs  will  be  specified  in  the  Disbursement  and  Financial  Information  Letter  (DFIL)  and  be  set  to  enable  enough  cash  flow  to  cover 3–4 months of project operations\.    110\. Eligible Expenditures:      Percentage of  Amount of the  Amount of Credit  Expenditures to  Category  Credit Allocated   Allocated  be Financed  (expressed in SDR)  (expressed in US$)   (inclusive of  Taxes)  (1) Works for NCDC’s Respective Part of  4,440,000  6,079,000  100%  the Project  (2) Works for LCA’s Respective Part of  1,130,000  1,520,000  100% the Project  (3)  Goods, non‐consulting services,  15,450,000  21,238,000  100% consulting services, Operating Costs,  Training and Workshops and  Stipends for NCDC’s Respective Part  of the Project  (4) Goods, non‐consulting services,  4,480,000  6,163,000  100% consulting services, Operating Costs,  Training and Workshops and  Stipends for LCA’s Respective Part of  the Project  TOTAL AMOUNT  25,500,000  35,000,000      111\. Disbursement  Conditions\.    No  withdrawal  shall  be  made  under  Categories  (1)  and  (2)  unless  and  until  the  Association is satisfied that the Recipient, through NCDC and LCA, have adopted the POM satisfactory to the Bank\.   No  withdrawal  shall  be  made  under  Categories  (2)  and  (4)  unless  and  until:  (i)  document(s)  demonstrating  that  LCA is authorized to undertake its roles and responsibilities under the project, in form and substance satisfactory  to  the  Bank,  have  been  provided  to  the  Bank;  (ii)  the  Project  Agreement  between  the  Bank  and  LCA  has  been  signed; (iii) the Subsidiary Agreement between PNG and LCA has been signed; (iv) a Legal Opinion has been issued  on behalf of PNG and LCA attesting that the aforementioned Project and Subsidiary Agreements to which they are  a  party  have  been  duly  authorized,  executed  and  delivered  and  are  legally  binding  upon  them;  and  (v)  LCA  has  completed all the four actions listed in the table in paragraph 107,  all in a manner satisfactory to the Bank\.  112\. Retroactive Financing\.  As requested by GoPNG, to ensure the project’s timely start‐up, retroactive financing for  all categories of expenditure is required for payments up to SDR 3\.8 million (US$5 million equivalent) made on or  after July 1, 2019\.        Page 61 of 72  The World Bank Urban Youth Employment Project II (P166420) Procurement    113\. Institutional  Arrangement  for  Procurement\.    The  Implementing  Entities  will  be  responsible  for  ensuring  the  procurement requirements of all the sub‐components are met\.      114\. Applicable  Procurement  Regulations\.   Procurement  for  the  UYEP  II  will  be  carried  out  in  accordance  with  the  World Bank Procurement Regulations for IPF Borrowers (Procurement Regulations), July 2016 (revised November  2017 and August 2018), and the provisions stipulated in the Financing Agreement\.  For international competitive  procurement activities based on method thresholds, the Bank’s Standard Procurement Documents (SPD) shall be  used\.    115\. Procurement  Risk  Assessment\.    A  procurement  risk  assessment  of  the  IAs  responsible  for  implementing  the  procurement activities under the Project was carried out and the overall procurement risk rating is “substantial”\.    116\. Procurement Types\.  The various types of procurements to be financed by the proposed IDA grant and indicative  cost estimates are noted in the following table and described below\.    Type of Procurement  (1) Works (US$7\.518 million equivalent)  (2) Goods (US$1\.031 million equivalent)  (3) Consulting Services (US$14\.427 million equivalent)  (4) Non‐Consulting Services (US$1\.692 million equivalent)    117\. Procurement  of  Works\.    The  procurement  of  works  will  involve  some  21  contracts  for  the  Urban  Works  and  Services  under  Component  1  in  NCD  and  Lae\.    Contracts  will  typically  range  in  value  from  US$150,000  to  US$600,000\.  In the first 18 month it is anticipated the following contracts will be let: NCDC Works Contract (Wards  2 and 7); NCDC Works Contract (Wards 3 and 5); NCDC Works Contract (Wards 11 and 12); NCDC Works Contract  (Ward  9);  NCDC  Works  Contract  (Ward  8);  NCDC  Works  Contract  (Wards  1  and  4);  NCDC  Works  Contract  (Ward  12);  LCA  Works  Contract  (Lae  Urban  Ward  1);  LCA  Works  Contract  (Lae  Urban  Wards  2–4);  LCA  Works  Contract  (Lae Ahi Wards 1–9); and LCA Works Contract (Lae Ahi Wards 15–17)\.    118\. Procurement  of  Goods\.    The  procurement  of  goods  will  include  the  Personal  Protective  Equipment  (PPE)  for  trainees and  works supervisors; BLST  consumable materials and  training resources; vehicles; computers/tablets;  computer servers; survey entry tools; software; MIS database; and accounting systems\.    119\. Procurement  of  Consulting  Services  (firms  and  individuals)\.    It  is  anticipated  that  several  specialist  individual  consultants and/or firms will be hired to support: specialist procurement inputs (also see the paragraph below); a  curriculum  review;  a  MTR;  ICR  review;  violence  prevention  mapping;  M&E  surveys;  and  GBV  prevention  and  referral services\.  In addition, the PMUs will be staffed through with long‐term consultant positions necessary to  cover  all  the  activities  under  Components  1,  2,  3,  and  4\.   These  include  the  team  leaders  supporting  ITS,  youth  awareness  and  mobilization,  BLST  training,  urban  works  and  services,  skills  training  and  referrals,  financial  management, and procurement\.  Each team leader will be supported by other staff to carrying out assigned role  within their operation areas\.  The PMUs will be led by Project Managers based in NCD and Lae, and coordination  between  the  PMUs  and  other  stakeholders  will  be  led  by  a  Program  Coordination  Manager\.   Details  of  all  the  proposed  positions  are  defined  in  the  PPSD  and  an  initial  Procurement  Plan\.    A  summary  of  the  consulting  positions is given in Diagram 3 under para\. 73\.  Page 62 of 72  The World Bank Urban Youth Employment Project II (P166420) 120\. Advance Contracting\.  Provision for Advance Contracting will be included for the procurement process\.    121\. Frequency  of  Procurement  Supervision\.    In  addition  to  the  prior  review  to  be  carried  out  by  the  WB,  implementation  support  missions  will  be  undertaken  at  least  once  per  year\.  One  in  five  procurement  packages  not subject to WB prior review will be examined ex‐post on an annual basis\.    122\. Procurement Plan\.  A Project Procurement Plan has been prepared covering the planned procurement activities  for  the  first  18  months  of  project  implementation\.  The  procurement  arrangements  for  the  key  procurement  activities under the Project are detailed in the PPSD\.    123\. Systematic  Tracking  of  Exchanges  in  Procurement\.    Use  of  the  WB’s  Systematic  Tracking  of  Exchanges  in  Procurement  (STEP)  system  will  be  mandatory  under  UYEP  II\.   This  system  is  currently  being  used  on  UYEP  I  and  other Projects in Papua New Guinea\.  Ongoing face‐to‐face STEP training is being conducted in country on use of  the system\.    Implementation Support Plan and Resource Requirements    124\. The  implementation  support  strategy  proposed  for  UYEP  II  has  been  developed  based  on  the  project’s  requirements and risk profile\.  Notwithstanding the project is a follow‐on operation of a successful, long running  project, the overall risk rating is “Substantial”\.  This is because of the fiduciary risks and the scale up of the project  to a new Province with a relatively newly establish Implementing Agency (the LCA) with no prior record of World  Bank  projects\.   Risk  mitigation  measures  involve  retaining  the  existing  PMU  and  key  staff  based  in  NCDC,  using  that PMU to support the new LCA PMU until it is fully established and operating, and building on existing systems  and approaches\.  The PCO Manager, in part through the TCC, will oversee operations of both PMU, ensuring both  are operating smoothly and efficiently\.    Resource  Time  Focus  Skills Needed  Partner Role  Estimate  First twelve months  Team Leadership  Task Team Leader    Curriculum Design    BLST Curriculum    Sp\. and Training Sp\.    Procurement Training  Procurement Sp\.      FM Supervision  Financial Sp\.    US$200,000 per    Environmental Training  Environmental Sp\.  annum    Bid Documents and    Engineer    Engineering Services  Gender and Community    Social/Gender Sp\.    Engagement    Survey Design  M&E Sp\.    Page 63 of 72  The World Bank Urban Youth Employment Project II (P166420)   MIS Databased Design  ICT/MIS Sp\.      Team Support  Team Assistant    12‐48 months  Team Leadership  Task Team Leader    Training Specialist    BLST     (Sp)    Procurement Training  Procurement Sp\.      FM Supervision  Financial Sp\.          Environmental Training  Environmental Sp\.      Review of Bid Documents      Engineer      and Engineering Services  US$150,000 per  Gender and Community  annum    Social/Gender Sp\.    Engagement    Survey Design  M&E Sp\.      MIS Databased Design  ICT/MIS Sp\.      Team Support  Team Assistant    Other  ICR  Evaluations Sp\.  US5,000    Skills Mix Required  Skills Needed  Number of Staff Weeks  Number of Trips  Comments  Task Team Leader  48  8  Based in the region  FM Specialist Sp\.  4  8  Based in the region  Procurement Sp\.  4  8  Based in the region  Training Specialist  18  6  Based in the region  Engineering Sp\.  18  6  Based in the region  ICT/MIS Sp\.  18  6  Based in the region  M&E Sp\.  20  6  Based in the region  Social Safeguards Sp\.  4  5  Based in the region  Environmental Sp\.  4  5  Based in the region  Gender Sp\.  4  5  Based in the region      Page 64 of 72  The World Bank Urban Youth Employment Project II (P166420) ANNEX 2: Economic Analysis    COUNTRY: Papua New Guinea   Urban Youth Employment Project II    Experience with Similar Types of Programs    125\. Globally,  there  has  been  many  impact  evaluations  of  Active  Labor  Market  Programs  (ALMPs)  in  a  variety  of  contexts\.   The  majority  have  shown  their  costs  tend  to  outweigh  the  benefits  according  to  a  2017  World  Bank  working paper\.99  ALMPs often consist of one of the following components: subsidized job placements, vocational  training or job search and matching assistance\.  The direct employment benefits from subsidized job placements,  whereby participants complete ‘internships’ in which their wages are subsidized, tend to only be short lived as the  effect  quickly  diminishes  once  the  program  is  completed\.100    Another  World  Bank  paper  shows  that  providing  participants with technical and vocational education and training (TVET) rarely generates jobs (unless a cash grant  is  provided)\.101  The  final  type  of  ALMP  program  consists  of  reducing  friction  in  the  employment  market  through  job  search  and  matching  assistance\.    This  is  substantially  cheaper  than  the  first  two,  however,  there  is  little  evidence  to  suggest  they  have  any  effect\.102    Even  though  the  costs  of  ALMPs  tend  to  be  larger  than  the  quantifiable  benefits,  the  programs  are  still  justified  by  policy  makers  because  of  a  range  of  non‐quantifiable  benefits such as a reduction in crime and anti‐social behavior\.    126\. The  quantifiable  costs  and  benefits  of  UYEP  II  are  estimated  by  drawing  upon  project  administrative  data  and  the results of multiple impact evaluations that have been conducted on the first phase of the program\.103  There  are  other  benefits  associated  with  the  project  such  as  reduced  anti‐social  behavior  and  improved  job‐search  behavior,  confidence  levels  and  mental  health  that  are  difficult  to  quantify\.   E\.g\.,  UYEP  I  participants  were  less  likely to engage in aggressive behavior, gratuitous property damage and be out late at night by up to 65 percent\.104   In contrast, the costs of the program are easily measurable\.  Therefore, the analysis is likely to underestimate the  value for money of the project\.    127\. The  quantifiable  benefits  are  around  15  percent  larger  than  the  costs\.  The  table  below  shows  the  expected  benefits and costs from the program over the next five years (a detailed table of calculations is presented at the  end of this Annex105)\.  The main reason why the quantifiable benefits of UYEP II far outweigh the cost, is because  large post‐program employment impacts are expected\. Rigorous impact evaluations showed this was the case  for  the  first  phase  of  the  program  where  almost  half  of  the  youth  who  complete  the  internships,  and  around  one quarter of youth who complete vocational training, are expected to be gainfully employed well after they  exit  the  program\.   The  two  largest  costs  of  UYEP  II  are  the  stipends  paid  to  program  participants  and  materials  and capital costs associated with the public works\.   99 http://ibread\.org/bread/system/files/bread_wpapers/507\.pdf  100 ibid  101 https://papers\.ssrn\.com/sol3/papers\.cfm?abstract_id=2622220  102 http://ibread\.org/bread/system/files/bread_wpapers/507\.pdf  103 https://openknowledge\.worldbank\.org/handle/10986/26470\  104 ibid  105  For  the  purposes  of  the  economic  analysis,  the  US$5million  project  contingency  is  excluded  (i\.e\.  the  total  cost  of  the  project  for  the  purposes of the economic analysis is US$30million)\. It is expected the contingency will be drawn on to fund more opportunities for youth  to participate in the program, however the exact number of placements cannot be determined at this point in time\.  Page 65 of 72  The World Bank Urban Youth Employment Project II (P166420) Benefits  US$’000  Costs  US$’000  Post program employment  20,515  Youth Job Corps  15,783  Public works and infrastructure  9,480  Skills training  6,961  delivered   Stipends paid to youth  4,010  Project management  3,443  Training received  429  M&E and referrals  2,878      Contingency  935  TOTAL  34,435  TOTAL106  30,000    Methodology    128\. Benefits\.  The basis for each of the expected benefits from UYEP II are discussed one by one below\.  The value of  benefits  is  determined  over  a  ten‐year  time  frame  as  is  the  standard  practice  for  World  Bank  cost  benefit  analysis\.107  More than 90 percent of program funds will be spent in NCD or Lae so there is likely to be significant  multiplier effects\.  Previous analysis suggests the multiplier effects may be in the order of $5 for every $1 spent\.108   However,  the  precise  magnitude  is  debatable  and  as  such  the  multiplier  effects  are  excluded,  which  means  it  is  likely the total benefit of the program is underestimated    129\. BLST  Training—The  main  immediate  benefit  participants  receive  from  ten  days  of  BLST  training  is  the  daily  lunch/water  stipend  of  PGK  7\.   This  is  straightforward  to  quantify  as  it  is  the  total  payment  made  in  stipends  to  youth\.  There are other benefits from the program that are likely to exist such as increased knowledge about the  labor  market\.   However,  they  are  excluded  from  this  part  of  the  cost  benefit  calculation  as  it  is  assumed  these  benefits will be reflected in post‐Project employment\.    130\. YJC Stipends—The main immediate benefit for YJC participants that can be quantified is the training stipend they  are paid of PGK 3\.50 per hour (7 hours a day) for the 30 days of the program\.  There are other benefits from the  program that are likely to exist such as basic skill development and improved self‐confidence\.  However, they are  excluded  from  this  part  of  the  cost  benefit  calculation  as  it  is  assumed  these  benefits  will  be  reflected  in  post‐ Project employment\.    131\. Value of Public Works Program—The value of the public works component of this program is equal to the cost of  the  public  works  program  net  of  stipends  as  was  the  case  in  the  2015  economic  analysis  of  this  program\.  The  benefits are likely to be greater but difficult to quantify\.    132\. Post Project Employment—The 2017 UYEP I impact evaluation showed that YJC participants were on average 24\.1  percentage  points  more  likely  to  be  employed  than  the  comparison  group  12  to  18  months  following  the  completion of the program\.109  It is assumed that these additional employment benefits will last over a period of  ten years and the participants will receive the minimum wage\.  Based on a forthcoming impact evaluation around  60 percent of those employed are assumed  to work  full time  (240 days a year), while 40 percent work  part time  (120  days  a  year)\.  This  benefit  is  calculated  for  the  956  youth  who  are  only  expected  to  partake  in  YJC  (i\.e\.  not  participate in the training part of UYEP II) and the 1,494 youth who will complete the vocational training\.   106 The costs include taxation at a rate of around 15 percent\. For the purposes of the cost benefit ratio, we use costs net of taxes\.  107 https://openknowledge\.worldbank\.org/bitstream/handle/10986/2561/624700PUB0Cost00Box0361484B0PUBLIC0\.pdf?sequence=1  108 See the 2015 Economic Analysis for UYEP I  109 https://openknowledge\.worldbank\.org/handle/10986/26470  Page 66 of 72  The World Bank Urban Youth Employment Project II (P166420) 133\. Vocational Training—The main benefit from vocational training is the additional education youth receive\.  This is  challenging  to  measure,  but  an  earlier  World  Bank  report  provides  a  crude  estimate  of  the  economic  returns  to  education in PNG\.110  In this report, the average return to an additional year of education in PNG is estimated to  be 7\.7 percent\.  This rate of return for 66 days of education is applied to the minimum wage over a period of ten  years to arrive at an estimate of the gains in income from vocational training\.  Importantly, these benefits are in  additional to the higher rates of employment youth are expected to attain from completing YJC\.    134\. Internship Stipends—The main immediate benefit for internship participants that can be quantified is the training  stipend they are paid of PGK 3\.50 per hour (7 hours a day) for the 110 days of the program\.  Other benefits from  the  internship  (such  as  the  development  of  skills  relevant  for  the  formal  workforce)  are  excluded  from  this  component  of  the  cost  benefit  calculation  as  it  is  assumed  these  benefits  will  be  reflected  in  post‐Project  employment\.    135\. Post  Internship  Employment—A  2018  UYEP  I  impact  evaluation  has  shown  that  the  additional  benefit  of  doing  Internships (beyond just YJC) was an employment rate of 25 percentage points between 6 to 12 months following  the completion of the program\.  It is assumed these additional employment benefits will last over a period of ten  years and the internship participants will receive the minimum wage\.  Based on the forthcoming impact evaluation  around 60 percent of those employed are assumed to work full time (240 days a year), while 40 percent work part  time (120 days a year)\.    136\. Costs\.    Project  costs  are  broken  down  by  four  components,  which  are  YJC,  Skills  building,  monitoring  and  evaluation and referral services as well as project management\.  On average, the total cost per YJC youth trained  is around PGK10,990 (US$3,300) inclusive of overheads (i\.e\. project management, monitoring and evaluation and  referral services)\.  The additional cost per youth who completes an internship is around PGK3,690 (US$1,110) and  who  completes  vocational  training  is  around  PGK5,417  (US$1,627)  inclusive  of  overheads  (i\.e\.  project  management, monitoring and evaluation and referral services)\.  The table below shows the estimates of the costs  and benefits of the program using the assumptions outlined above\.    Days  Hours  No\.  Total  Hourly  BENEFITS  (per  per  PGK  US$  Beneficiaries  days  wage  year)  day  Youth Job Corps                BLST Training (lunches + water)  10  6,700  67,000  1\.0  7  469,000  140,841  Public works & services employment  30  6,700  201,000  3\.5  7  4,924,500  1,478,829  Value of works contracts            31,568,970  9,480,171  Skills Training                Vocational training                Vocational training—value of education  66  1,149    3\.5  7  1,430,608  429,612  Vocational training—Stipends paid  66  1,149  75,834  1\.0  7  530,838  159,411  Post training employment (part time)  120  200  239,970  3\.5  7  2,939,632  882,773  Post training employment (full time)  240  305  732,540  3\.5  7  8,973,615  2,694,779  Internships                Internship employment (stipends paid)  66  4,595  303,270  3\.5  7  7,430,115  2,231,266  Post internship employment (part time)  120  942  1,130,370  3\.5  7  13,847,032  4,158,268  110 http://documents\.worldbank\.org/curated/en/830831468147839247/Comparable‐estimates‐of‐returns‐to‐schooling‐around‐the‐ world  Page 67 of 72  The World Bank Urban Youth Employment Project II (P166420) Days  Hours  No\.  Total  Hourly  BENEFITS  (per  per  PGK  US$  Beneficiaries  days  wage  year)  day  Post internship employment (full time)  240  1,147  3,473,820  3\.5  7  42,554,295  12,779,068  Total Benefit            114,668,606  34,435,017  COSTS                Youth Job Corps    6,700        52,557,390  15,783,000  Internships    4,595        16,956,360  5,092,000  Vocational Training    1,149        6,223,770  1,869,000  Project Management            11,465,190  3,443,000  M&E and referrals            9,583,740  2,878,000  Contingencies            3,113,550  935,000  Total Cost            999,000,000  30,000,000  Benefit Cost Ratio            1\.15  1\.15    137\. The  success  of  UYEP  II  is  contingent  on  public  finance  as  the  employment  benefits  would  not  be  generated  if  left  to  the  private  sector  alone\.   Employers  face  large  screening  costs  that  UYEP  II  helps  overcome  by  providing  them an opportunity to examine participants’ capability who have been matched with that job at no cost\.  Surveys  of UYEP I employers highlight the subsidized wages and matching participants to roles is incredibly crucial without  which many employers would not hire the youth\.  In addition, UYEP II provides basic orientation training prior to  employment\.   This  helps  ensure  participants  have  skills  suited  for  the  workplace  which  directly  addresses  skill  shortages  in  the  labor  market\.   Most  participants  are  not  in  a  financial  position  to  borrow  money  in  advance  to  receive  this  training,  further  highlighting  that  relying  on  the  private  sector  is  not  a  realistic  substitute  for  public  finance\.    138\. In the past, UYEP I generated benefits beyond the participants and employers themselves, such as reduced anti‐ social  behavior  and  improved  job‐search  behavior,  confidence  levels  and  mental  health,  which  have  been  routinely verified in qualitative/incidence surveys  undertaken by the project\.111  E\.g\., 60  percent of youth  who  completed  an  Internship  were  involved  in  crime  in  the  six  months  prior  to  the  participating  in  the  program,  compared to 38 percent in the six months after the program\.112  These positive externalities are not fully captured  by  private  actors  as  they  benefit  the  community  at  large,  which  means  public  finance  is  required  to  ensure  that  these activities are not underfunded\.    139\. The  World  Bank  has  played  an  important  contribution  to  ensure  the  quality  of  UYEP  I  by  providing  international  expertise  on  the  design  of  the  program  and  monitoring  and  evaluation\.    By  drawing  upon  best  practice  from  programs across the globe, UYEP II has been designed to ensure that it is more comprehensive than most ALMPs  to  overcome  multiple  challenges  in  the  labor  market\.    In  addition,  the  impact  evaluations  that  have  been  conducted and will be conducted provide rigorous evidence about the order of magnitude of the effect of different  components of UYEP II\.  It would be challenging for these evaluations to be conducted without the World Bank’s  involvement\.  111 See the February 2018 World Bank UYEP ISM Aide Memoire  112 ibid  Page 68 of 72 The World Bank Urban Youth Employment Project II (P166420) ANNEX 3: UYEP I Impact Evaluation and Results Working Paper Executive Summary    COUNTRY: Papua New Guinea   Urban Youth Employment Project II    The following is an extract from the Papua New Guinea Urban Youth Employment Project 2018 Impact Evaluation  and Results Working Paper\.113    From  2015  to  2017,  there  were  two  impact  evaluations  of  UYEP  I  conducted  to  examine  how  well  the  project  is  meeting  its  development  objectives,  as  well  as  other  related  impacts\.    The  implementation  of  the  impact  evaluations  is  a  significant  achievement  in  itself  because  of  the  lack  of  availability  of  such  impact  evaluations  operating  at  scale  in  PNG  and  the  Pacific\.   UYEP  I  impact  evaluations  involved  a  baseline  survey  of  ‘treatments’  (youth  who  participated  in  the  UYEP  I  study)  and  ‘controls’  (selected  participants  that  do  not  participate  in  the  program), two major Follow‐Up Surveys of treatments in 2015 and 2017, an annual employer survey and an annual  community survey\.  The collected data was then analyzed to measure the following key indicators:     • Whether UYEP I increases the employment and labor market engagement (including job and education  seeking behavior) of participant youth;  • If  UYEP  I  provides  other  benefits  to  participant  youth  beyond  employment,  particularly  in  relation  to  social behavior, attitudes to gender and crime;   • If the project had a positive impact on communities and business, more broadly; and  • Whether all three components of UYEP I contribute to the increasing employment of participant youth\.    The  main  results  of  the  UYEP  I  demonstrated  in  this  working  paper  are:  (i)  increased  youth  employment;  (ii)  increased youth employability; and (iii) increased perceptions of youth resiliency to crime and violence\. In support  of  these  reported  achievements,  this  working  paper  presents  the  five  major  findings  of  the  impact  evaluations  and supporting surveys\.     First, there are large employment impacts from UYEP I\. The data shows that participation in the UYEP I significantly  increases  employment  rates  for  both  young  men  and  women  aged  between  16  to  35  years  by  eight  to  11  percentage  points\.  The  follow‐up  survey  conducted  in  2015  found  that  14  percent  of  YJC  participants  and  21  percent  of  OJT  participants  were  currently  employed,  while  only  3  percent  of  control  youth  reported  being  employed\. These results were statistically the same for men and women\. The 2017 follow‐up study also provides  strong  evidence  of  substantial  employment  gains  due  to  the  pre‐employment  training  and  the  work  placement  with a firm\. In  the 2017 follow‐up survey, 41  percent of  OJT  participants reported  having been  employed in full‐ time  or  part‐time  work  in  the  last  six  months\.  This  was  28  percentage  points  higher  than  for  a  control  group  of  participants,  who  did  not  receive  training  and  who  had  no  prospects  of  continuing  employment\.  The  UYEP  I  employment  results  are  also  corroborated  by  surveyed  community  members,  68  percent  of  whom  report  an  increase  in  employment  opportunities  for  youth  in  their  communities\.  These  results  are  particularly  significant  because none of the participants was employed in the six months prior to the project\.   113 The Paper was prepared by Sonya Woo, Team Leader, World Bank (East Asia and Pacific Region) and Darian Naidoo, Economist,  World  Bank  with  inputs  from  Christopher  Hoy  and  other  World  Bank  Task  Team  members,  the  Government  of  Papua  New  Guinea  through  the  National  Capital  District  Commission  and  with  the  support  of  the  Government  of  Australia,  Exxon  Mobil,  Bank  of  South  Pacific  Ltd  and  Republic of Korea\.  Page 69 of 72 The World Bank Urban Youth Employment Project II (P166420) The  UYEP  I’s  employment  results  are  much  stronger  than  for  similar  youth  employment  projects  in  other  countries\.114 There has been a significant number of impact evaluations of active labor market programs (ALMPs)  in  a  variety  of  contexts  and  the  clear  majority  have  shown  they  tend  to  have  limited  effect  ranging  from  no  employment  gains  to  increasing,  at  best,  employment  by  seven  to  eleven  percent\.    Other  studies  show  that  providing participants with technical and vocational training rarely generates jobs (unless a cash grant is provided)  and almost always the costs outweigh the benefits\.115    Second, there is evidence of increased youth employability\. While the main reason for employer participation in  the OJT was to contribute to development, employers also confirmed the importance of all three components of  UYEP  I ̶  training,  job  matching  and  fully  subsidized  work  placements\.  The  wage  subsidy  helps  to  off‐set  financial  risks for employers and provides youth with income while the skills training and work experience are designed to  increase  the  human  capital  and  employability  of  youth\.  Employers  reported  that  youth  are  developing  technical  skills  and  that  most  of  youth  are  “fairly”  or  “very  qualified”  for  formal  employment\.  Ninety‐seven  percent  of  employers  also  reported  that  participants  were  perceived  to  be  qualified  for  a  full‐time  job\.  The  main  reported  constraint for firms taking  on more permanent employees were difficulties in finding staff with the “right  skills”,  training  costs  being  too  high  followed  by  poor  economic  conditions\.  Taken  together  with  the  high  employment  rates,  particularly  for  OJT  youth,  these  findings  suggest  the  importance  each  of  these  three  activities  have  on  employment outcomes\.     Third, youth  who participated in UYEP  I were shown to be  more engaged with  the labor  market  than youth who  did  not  participate  in  the  project,  as  evidenced  by  increased  job  search  behavior  and  increased  confidence  in  future employment\. In the 2015 follow‐up survey, the number of participant youth seeking wage employment in  the last three months increased from 21 percent to 33 percent, reflecting their belief that they are more likely to  be employed in the future, because of their newfound experience and skills (gained in CV writing, public speaking,  work place experience)\. Similarly, 76 percent of OJT graduates and 64 percent of YJC graduates said that they felt  participation  in  the  project  increased  their  employability\.  Youth  participating  in  UYEP  I  were  also  more  likely  to  have bank accounts than controls\. The evidence shows that UYEP I youth are also more likely to want to enroll in  education in the next six months compared with control groups: half of the participant youth reported increased  interest in  pursuing education and  training following  the project (46 percent of  YJC youth and 50 percent  of OJT  youth,  respectively),  while  four  percent  of  YJC  and  six  percent  of  OJT  youth  were  already  enrolled  in  education\.  Pre‐ UYEP I, the majority (60 percent) of participants expressed interest in further education in the baseline survey  and this fell to 27 percent for control youth and 47 percent for treatment youth\. The effect of OJT is therefore a  21\.7 percentage point increase relative to control youth, which is highly significant\.    Fourth, there is evidence that UYEP I has improved the lives of youth participants and their communities in a few  non‐pecuniary  ways  beyond  employment,  including  through  increased  happiness  and  well‐being\.  85  percent  of  community members in project locations believed crime and violence reduced because of the project\. The number  of youth who reported having friends involved in violence or robbery fell by eight percent (from 24 percent pre‐  UYEP I to 16 percent by the time of the 2017 follow‐up survey)\. The results also show a significant decline in the  reported  incidence  of  “using  threat  or  force  with  somebody”  for  participant  youth  (from  16  percent  to  eight  percent),  while  this  behavior  increased  among  control  youth\.  The  survey  results  are  also  corroborated  by  114   McKenzie,  David  (2017)  "How  Effective  Are  Active  Labor  Market  Policies  in  Developing  Countries?  A  Critical  Review  of  Recent  Evidence" World Bank Research Observer, World Bank Group, vol\. 32(2), pages 127‐154  115   Blattman, Christopher and Laura Ralston (2015) “Generating employment in poor and fragile states: Evidence from labor market  and entrepreneurship programs”, Mimeo\. Chicago  Page 70 of 72 The World Bank Urban Youth Employment Project II (P166420) community members in project areas, 85 percent of whom believed UYEP I had reduced crime in their community\.  Because  of  the  training  and  work  experience  provided  by  the  OJT  program,  the  number  of  OJT  participants  who  reported “feeling happy most of the time” in the past four weeks, rose by 15 percent\.     Fifth,  there  is  evidence  that  UYEP  I  has  helped  to  empower  women  and  improve  attitudes  to  gender  equality\.  A  Gender and Labor Study for the UYEP I 116 confirms that in most aspects of training, women have shown a higher  propensity  to  complete  the  training  offered,  which  suggests  that  the  project  has  been  successful  at  engaging  young  women\.  UYEP  I  recruits  both  young  men  and  women  into  both  its  programs,  and  it  also  provides  gender  training  to  all  its  participants\.  In  providing  these  opportunities,  UYEP  I  has  improved  not  only  the  status  and  economic  opportunities  available  to  these  young  women,  but  it  is  also  transforming  gender  attitudes  among  its  youth  more  broadly\.  For  many  women,  the  biggest  incentive  to  participate  was  the  fortnightly  stipends  paid  by  UYEP I  to supplement household expenses\.  Survey results show that  the  percentage of  participant women who  believed  that  women  should  be  at  home  and  not  in  waged  work,  fell  from  13  percent  before  the  project  to  two  percent after the project (and from 16 percent to nine percent for men)\.      Recommendations and moving forward    The results of the Follow‐Up Surveys and the impact evaluation suggest that UYEP I has, to date, been successful  in improving the economic situation and social welfare of participant youth\.  The evidence also suggests that these  gains occur relatively quickly – within two years of youth graduating from UYEP I, however the longevity of these  impacts is yet to be determined\.  As such, the project’s short to medium term impacts and trends will need to be  verified  over  the  longer  term,  and  with  supplementary  data  and  evidence  to  capture  the  value  and  effects  of  individual  project  interventions\.   While  beyond  the  scope  of  the  project,  further  collection  and  analysis  of  labor  market  data  is  also  required  to  strengthen  our  understanding  of  the  nature  of  youth  unemployment  and  how  it  interacts  with  labor  force  participation  in  PNG,  as  well  as  the  economy  more  generally\.   Finally,  more  focused  research on UYEP I’s impacts on gender, crime and urban safety needs to be undertaken\.     Lessons learned, and evidence gathered from the impact evaluation will be used as a guide for the design of the  follow‐on project\. Some of these lessons learned include:    (i) The  importance  of  retaining  all  three  programmatic  components  of  UYEP  I ̶  soft  skills  training,  job‐ matching  and  fully  subsidized  work  placements  given  their  collective  role  in  promoting  positive  employment outcomes for youth and other externalities\.    (ii) Targeting  of  unattached  youth,  many  of  whom  were  highly  transient  and  reported  to  have  prior  experience with crime and violence, made the implementation of the impact evaluation, including the  screening and selection process particularly challenging\.  The experience from UYEP I highlighted the  importance of consulting with a range of local level community stakeholders in advance of screening  to  raise  awareness  and  disseminate  project  information  regarding  target  groups  and  the  application  116 Voight‐Graf, C\. 2018\. Gender and Labor Market Study, Port Moresby, Papua New Guinea\. Other key challenges faced by females related  to  household  and  family  obligations  includes:  not  finding  a  babysitter  and  pregnancy\.  Most  women  were  expected  to  tidy  their  houses  before leaving in the morning and therefore often arrived late\. For others, unsupportive husbands were a major obstacle\. Previous studies  reported that some female participants had to deal with aggressive resistance from husbands towards their participation in UYEP I\. Focus  group participants also talked about incidents of jealous husbands turning up at worksites and forcing women to withdraw\. Interviews for  this study suggest that there are considerable costs for providing childcare for mothers in terms of energy, financial expenses, and missing  training and work experience days\.  Page 71 of 72 The World Bank Urban Youth Employment Project II (P166420) of  the  randomization  process  as  well  as  maintaining  effective  communication  with  youth  on  project  participation selection\.  This includes potentially offering the program to the control group at a later  stage so that they do not feel discriminated against;     (iii) Problems acquiring and maintaining the quality and longevity of control groups with the re‐contacting  of  participants  proving  to  be  difficult  even  after  six  months\.   This  suggested  the  need  to  ensure  that  both control and treatment groups were oversubscribed to compensate for attrition; and      (iv) Problems in the management and execution of monitoring and evaluation activities suggest the need  for  additional  resourcing  and  enhanced  implementation  support  to  be  provided  by  the  World  Bank  and/or external partner with experience in implementing impact evaluations\.  Page 72 of 72

APPROVAL

P101994

43129 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No\.: Date ISDS Prepared/Updated: March 27, 2008 I\. BASIC INFORMATION A\. Basic Project Data Country: Russian Federation Project ID: P101994 Additional Project ID (ifany): Project Name: Ulyanovsk ­ Landfill Gas Recovery Project Task Team Leader: Helmut Schreiber Estimated Appraisal Date: 04/29/2008 Estimated Board Date: 06/14/2008 Managing Unit: ECSSD Lending Instrument: Carbon Finance Sector: Landfill Management Theme: Climate Change Mitigation IBRD Amount (US$m\.): IDA Amount (US$m\.): GEF Amount (US$m\.): PCF Amount (US$m\.): 3\.6 Other financing amounts by source: Environmental Category: B Is this a transferred project Yes [ ] No [X] Simplified Processing Simple [X] Repeater [ ] Is this project processed under OP 8\.50 (Emergency Recovery) Yes [ ] No [X] B\. Project Objectives: The Ulyanovsk Landfill Gas Recovery Project is a pilot demonstration project in Russia with the objectives to reduce green house gas emissions caused by methane generated in the landfill\. At local level, the project aims to improve solid waste final disposal practices, reducing the risk of uncontrolled fires and explosions in landfills and contributing to better air quality through a reduction in hazardous trace gases contained in LFG\. C\. Project Description: Disposal of solid waste on landfills is the main waste disposal strategy in Russia\. At the moment, the organic part of household waste is being decomposed under anaerobic conditions in landfills generating methane emissions which are emitted to the atmosphere\. Nowadays, capture and utilization or flaring of LFG is a well proven technology to reduce the methane emissions\. However, currently, the extraction and utilization or flaring of methane gas from landfill is not widely implemented in Russia and there are no landfills in Ulyanovsk Oblast that are capturing and flaring the LFG\. 1  The project has three components\. The main one and primary focus of the carbon finance operation is the establishment of a LFG flaring system on the existing landfill area and progressively on new areas as they are filled\. This is being done by the CF project proponent/beneficiary: JSC "Green Project Management" who has a 10 year landfill gas rights agreement: The second component is the upgrading of the existing landfill operation undertaken by the concession operator Center of Ecological Technologies Ltd\. The third component is the proposed plastics separation and processing operation undertaken by JSC "Green Project Management", based on the inclusion of claimed but minor carbon emission reductions from this project\. The main components of applied technology include gas extraction wells, gas transportation pipes, condensate wells, blowers and flaring stack\. Reductions of methane emissions will be achieved through flaring of captured landfill gas\. The equipment that will be installed will have gas metering system recording gas quality and quantity in accordance with the UNFCCC verification criteria\. D\. Project location and salient physical characteristics relevant to the safeguard analysis (if known): The landfill has been operative for about three decades\. The project area covers 30 ha, of which the landfill are 23 ha\. The landfill today contains just over 1 Mill m3 (0\.5 Mill t) of municipal waste\. The project foresees a total capacity of around 4\.5 Mill t\. Current waste production of Ulyanovsk amounts to about 350,000 t/year thus the lifetime of the project is estimated to about 11\.5 years\. The landfill is located about 5 km from the western boundary of Ulyanovsk on a river terrace elevated about 30 m above the Wolga valley and dipping gently southwards\. There are two villages near the LF, Barataevka (ca\. 1\.5 km S) and Krotovka (ca\. 3 km SW)\. About 3 km NW of the LF a group of drinking water wells is located, which draw water from an aquifer below the landfill level\. Near surface groundwater and surface water from a small stream (Seld, ca\. 1 km S) have been shown to be affected by landfill related contamination\. E\. Borrower's Institutional Capacity for Safeguard Policies: The project management of the operating company JSC "Green Project Management" (GPM) is also cooperating with the WB in other carbon finance projects and is one of the first companies in Russia to invest in Landfill gas reduction projects\. The landfill is operated according to the Russian sanitary regulation SP 2\.17\.1038-01 "Hygienic Requirements to Arrangement and Maintenance of SDW Disposal Landfills," which specifies the types of solid wastes allowed on the landfill and the requirements for sanitary and epidemiological supervision\. The regulatory authorities in Ulyanovsk are the environmental agency and the territorial center for sanitary and epidemiological supervision\. The list of permissible wastes used for reclamation of disposal quarries during their exploitation should also be coordinated with the territorial agency of the Federal Service for Supervision of Consumer Rights Protection and Human 2  Welfare (Rospotrebnadzor) in the Ulyanovsk District\. This organization also reviews analytical and toxicological data from environmental monitoring operations in the landslide vicinity\. The project has gone through Russian environmental approval process (OBOC/OVOS) and was approved by local and Oblast level regulatory authorities\. In the course of the OVOS process a detailed environmental and technical study was prepared by the landfill operator\. F\. Environmental and Social Safeguards Specialists on the Team: Environmental Specialist: Wolfhart Pohl, Alexey Retejum; Social Specialist: Sergey Artobolevsky; II\. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered (pleaseexplainwhy) Yes No TBD Environmental Assessment (OP/BP 4\.01) X The project is assigned Category B as the potential environmental impacts are well defined and site-specific, and the environmental risks associated with the project are probably lower than the risk of continued operation of the landfill facility as it is\. The project itself is not expected to have negative environmental impacts beyond those of routine civil works sites\. Instead, the project is expected to create an overall positive environmental balance: (i)The potential for groundwater contaminations would likely be reduced by the impermeable cover system, which would form a key component of the Methane capture system, as the percolation of precipitation water through waste body would be restricted\. (ii) The installation of a gas capture system and flaring of GHG, especially the conversion of Methane to CO2 by combustion, and the additional benefit of energy generation, will be clear positive impacts under the climate change agenda\. However, there are risks of harmful impacts and poor environmental performance of continued landfill operation\. Contaminations from the landfill could already have reached groundwater bodies, which are used as drinking water sources, or surface water courses\. This hazard should be carefully investigated and monitored during project preparation and implementation to exclude and additional risk induced by project activities\. Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X According to Russian regulations LF operations have to be surrounded by a 0\.5 km wide buffer zone, which must not be used for agricultural purposes or be inhabited\. This cordon sanitaire is not enforced; agriculturally used land starts immediately adjacent to the LF\. The project team will need to establish whether implementation of the project will impose restrictions on the use of the buffer area (i\.e\., whether the regulations will be enforced as a result of the project)\. If so, this would be equivalent to the taking of land, the safeguard would be triggered and a Resettlement Action Plan would have to be prepared and disclosed before appraisal\. The project is not expected to have any negative social impacts\. There will be positive signal for the local 3  Safeguard Policies Triggered (pleaseexplainwhy) Yes No TBD job market, the quality of life for the neighboring population and regional economic activity is expected to be improved by the project\. Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X Disclosure Policy 17\.50 X All relevant safeguard documents will be disclosed prior to appraisal\. III\. SAFEGUARD PREPARATION PLAN A\. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared: N/A B\. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS:04/20/2008 C\. Time frame for launching and completing the safeguard-related studies that may be needed\. The specific studies and their timing1 should be specified in the PAD-stage ISDS: EIA with an EMP before appraisal including all necessary public disclosures and consultations\. If OP4\.12 would be triggered a Resettlement Action Plan will be prepared and disclosed before appraisal\. IV\. APPROVALS Signed and submitted by: Task Team Leader: Helmut Schreiber 09/25/2007 Approved by: Regional Safeguards Coordinator: Agi Kiss 09/ 28/2007 Comments: Sector Manager: Charles Feinstein 02/27/2008 Comments: 1Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons\. 4

APPROVAL

P037410

Docam t of The World Bank FOR OFFICIAL USE ONLY Report No\. 6320 PROJECT PERFORMANCE AUDIT REPORT ISRAEL SEWERAGE PROJECT (LOAN 869-IS) June 27, 1986 Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their offlcial duties\. Its contents may not otherwise be disclosed without World Bank authorization\. THE WORLD SANK FOR OFFICIAL USE ONLY Washington\. D\.C\. 20433 U\.S\.A\. ite of ciectareneal Opeatin Evhluaa June 27, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report on Israel - Sewerage Project (Loan 869-IS) Attached, for information, is a copy of a report entitled "Project Performance Audit Report; on Israel - Sewerage Project (Loan 869-IS)" prepared by the Operations Evaluation Department\. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT ISRAEL SEWERAGE PROJECT (LOAN 869-IS) TABLE OF CONTENTS Page No\. Preface \. Basic Data Sheet \. iii Evaluation Summary \. vi PROJECT PERFORMANCE AUDIT MEMORANDUM I\. PROJECT SUMMARY \.*\.*\.*\.o 1 Background\. 1 Objectiveso\. \. 1 Project Description\. 2 II\. PROJECT IMPLEMENTATION--COUNTRY AT LARGE \. 3 Project Revisions\. 3 Project Implementation and Costs\. 4 Strengthening Municipal Financeo\.e\.o\. 5 Sewerage Tariffs\. 6 Project Management\.o\. 8 Operation, Maintenance, and Training\. 8 III\. PROJECT IMPLEMENTATION-DAN REGION \. 10 Previously Existing Facilities\. 10 Project Scope and Changing Objectives\. 11 Site Problems\.*\. 11 Design Studies\. 12 Project Implementation and Costs\. 13 Project Management\. 14 Planning for Operation and Effluent Reuse\. 14 IV\. SUPPLEMENTARY COMMENTS \. 16 Why Lend to Israel?\. 16 Performance of the Bank\. 16 Performance of the Borrower\. 18 Industrial Waste Control \. \. 19 Sustainability of Benefits\.o\. 21 This document has a rtted distdbution and may be used by recipients only in the pefoance of their official duties\. Its contents may not otherwise be disclosed without World Dank authorization\. TABLE OF CONTENTS (Cont'd) Vo EFFLUENT REUSE IN ISRAEL \. \. 23 VI\. CONCLUSIONS \. 25 ANNEX 1: List of People Interviewed \. 27 ATTACHMENT A: Comments from the National Sewerage Project Office \. 28 PROJECT COMPLETION REPORT I* Introduction \. 29 II\. Project Preparation and Appraisal \. 29 III\. Project Implementation and Cost \. 31 IV\. Project Operating Performance \. 34 V\. Financial Performance \.*****\.O* \.*\.ooo\. 36 VI\. Institutional Performance \.*\. 38 VII\. Bank Performance \. 40 VIII\. Project Justification *\. 40 IX\. Conclusions and Lessons Learned \. 41 ANNEXES 1\. Communities and Works Included in Project as Appraised and Actual \.o\.oo\.*\.e \. \.oee\.e 42 2\. Central Sewerage Loans Fund: Financial Statements \. 49 } IBRD 10099 PCR PROJECT PERFORMANCE AUDIT REPORT ISRAEL SEWERAGE PROJECT (LOAN 869-IS) PREFACE This project presents the results of a performance audit of the first national sewerage project consisting of a large group of individual systems or sub-projects ever financed by a Bank loan\. Loan 869-IS for US$30\.0 million, to assist with financing the project, was approved on November 28, 1972 and became effective on April 6, 1973\. The loan was made to the Government of Israel\. Responsibility for implementation was given to the National Sewerage Project Office (NSPO), a unit specifically established for this purpose under the tutelage of the Ministries of Agriculture, Interior, Finance and Health\. In 1978 the Dan Region Association of Towns (DRAT) established a separate project office to manage the sewerage sub-project for Tel Aviv and certain suburbs\. The original closing date of June 30 1978 was extended to November 30, 1979 when the project scope was revised in October 1975, and later extended again to December 31, 1981\. The loan account was finally closed on April 15, 1982 after a total of US$29\.7 had been disbursed\. The Project Performance Audit Report (PPAR) consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the Europe, Middle East and North Africa Region Office and dated October 3, 1984\. The PCR was based on a project completion mission which visited Israel in April/May 1984\. OED has reviewed the PCR, the Appraisal and President's Reports, and the transcript of the meeting of the Executive Directors when the loan was approved\. Documents in the Bank files have been reviewed, and staff familiar with the project have been interviewed to the extent possible\. An OED mission visited Israel in March 1986, interviewed staff of NSPO and other government agencies and visited several of the projects assisted by this loan\. The delay, between receipt of the PCR and the audit missions made it po3sible to observe the continuing level of activity in the sewerage sector since the formal closure of the project and to develop a better appreciation of the sustainability of its benefits, particularly in reuse of treated sewage effluent for irrigation\. The audit finds that this project is best addressed on two separate sub-projects: the first being the Dan Region sub-project and the second including all others throughout the country\. Construction of the treatment plant for the Dan River sub-project began in 1980 but implementation has been - ii - slow and startup of the facilities is scheduled for August 1986\. For the other sub-projects as a group, the audit agrees with the PCR that the basic objectives were met, especially with regard to effluent reuse and institutional strengthening\. Following standard OED procedures, copies of the PPAR were sent to the Government and to the executing agencies, NSPO and DRAT, for their comments\. Comments received from the National Sewerage roject Office have been reproduced as Attachment A to the report\. - iii - PROJECT PERFORMANCE AUDIT REPORT ISRAEL SEWERAGE PROJECT (LOAN 869-IS) BASIC DATA SHEET KEY PROJECT DATA Current Estimate Appraisal 1975 Revised or Item Estimate Estimate Actual Project Cost (US$ million) Dan Region 29\.8 39\.1 73\.1 /a Other schemes 45\.5 48\.9 38\.4 Total 75\.3 88\.0 111\.5 Overrun % Dan Region - - 87\.0 Other schemes - - (21\.5) Total 26\.7 Loan (US$ million) 30\.0 30\.0 30\.0 Disbursed 30\.0 30\.0 29\.7 Cancelled - - 0\.3 Date of Physical completion Dan Region 12/77 03/79 12/88 /b Other schemes 12/77 03/79 06/81 Proportion completed by above date % Dan Region 0 18 100 /C Other schemes 65 75 100 Time overrun % Dan Region - - - Other schemes 60 Internal rate of return % N/A N/A N/A Financial Performance Good Institutional Peformance Very Good /a A total of US$42\.6 million was disbursed through December 1981; by March 1986 the cost had reached US$64\.1 million\. The above total of US$73\.1 million includes US$9\.0 million for components (effluent reuse), not included in the original project and now estimated for completion by December 1988\. /b Estimated completion date\. 7r 59% was completed by December 1981\. - iv - BASIC DATA SHEET (CONT'D) STAFF INPUT (Staff-Weeks from Time Recording System) Bank FY: 1972 1973 1974 1975 1976 1977 1978 Preappraisal Appraisal 88\.9 14\.9 Negotiations 5\.6 Supervision 5\.4 17\.3 19\.9 4\.8 11\.0 5\.6 8\.9 25\.9 17\.3 19\.9 4\.8 11\.0 5\.6 1979 1980 1981 1982 1983 1984 1985 TOTALS Preappraisal Appraisal 103\.8 Negotiations 5\.6 Supervision 6\.9 8\.1 10\.8 5\.1 0\.5 9\.9 2\.4 107\.7 6\.9 8\.1 10\.8 5\.1 0\.5 9\.9 2\.4 217\.1 CUMULATIVE DISBURSEMENTS AND EVOLUTION OF EXCHANGE RATE Exchange Rate Bank Appraisal 1975 Revised (Annual Average) Fiscal Year Estimate Estimate Actual US$1 - IL US$ Thousand 1973 700 - 4\.2 1974 8,400 - - 6\.0 1975 16,100 2,800 2,000 6\.5 1976 22,500 10,900 5,000 8\.0 1977 27,800 18,700 9,400 12\.2 1978 30,000 24,400 11,700 17\.7 1979 30,000 15,600 27\.3 1980 18,600 53\.7 1981 23,700 112\.8 1982 29,700 186\.6 - v - BASIC DATA SHEET (CONT'D) OTHER PROJECT DATA Appraisal 1975 Revised Item Estimate Estimate Actual First mention in files 03/22/70 Government request 01/14/71 Appraisal 04/20-05/18/72 Negotiations 10/16-20/72 Board Approval 11/28/72 Loan Agreement date 12/21/72 Effectiveness date 03/23/73 04/06/73 Closing date 06/30/78 11/30/79 12/31/81 Borrower The State of Israel Executing Agencies - Water Commissioner, Ministry of Agriculture - Local Government Authorities Follow-on Projects (i) Bank financed: None (ii) Government financed: Sewerage projects in almost all local authorities outside of the Project area\. MISSION DATA No\. of No\. of Staff Date of Month/year Days Persons Weeks Report Identification 02/71 3 1 0\.6 03/19/71 Preparation I 07/71 8 3 4\.8 08/12/71 Preparation II 11/71 14 3 8\.4 12/01/71 Appraisal 04/72 22 3 13\.2 11/10/72 Supervision I 12/72 8 1 1\.6 12/20/72 Supervision II 06/73 8 1 1\.6 06/28/73 Supervision III 03/74 11 2 4\.4 04/25/74 Supervision IV 11/74 12 2 4\.8 11/25/74 Supervision V 05/75 9 2 3\.6 06/16/75 Supervision VI 10/76 8 2 3\.2 11/12/76 Supervision VII 05/77 10 1 2 06/03/77 Supervision VIII 06/78 8 1 1\.6 06/22/78 Supervision IX 07/78 8 1 1\.6 07/31/78 Supervision X 11/78 3 1 0\.6 12/06/78 Supervision XI 07/79 8 1 1\.6 08/23/79 Supervision XII 06/80 7 2 2\.8 07/18/80 Supervision XIII 02/81 4 1 0\.8 03/11/81 Supervision XIV 04/81 6 1 1\.2 04/24/81 Supervision XV 06/82 8 1 1\.6 06/24/81 Completion 05/84 12 3 7\.2 67\.2 - vi - PROJECT PERFORMANCE AUDIT REPORT ISRAEL SEWERAGE PROJECT (LOAN 869-IS) EVALUATION SUMMARY Introduction i\. Loan 869-IS, in the amount of US$30\.0 million, to the Government of Israel, was approved by the Bank on November 28, 1972, signed on December 21, 1972 and became effective on April 6, 1973\. Responsibility for implementation was given to the National Sewerage Project Office (NSPO) created for this purpose in 1973 under the joint direction of the Ministries of Agriculture, Interior, Finance and Health (PCR, para\. 6\.01)\. ii\. The Bank loan was intended to cover 40% of project costs, not tied specifically to foreign exchange costs\. Of the remaining costs 30% was to come from Government and 30% from two large commercial banks\. The commercial banks were to receive funds from the other two sources and then arrange and administer the sub-project loans directly with che local authorities (PCR, para\. 2\.07)\. This procedure was successful, but was terminated by agreement of all parties iL August 1978 because of potential problems in obtaining loan guarantees from individual municipalities of the Dan Association (PCR, para\. 5\.02)\. iii\. The project was developed through Bank preparation and appraisal missions in 1971 and 1972 and was considered by Government to represent the first 5-year segment of a long-term national seweraje program\. This was the first national sewerage project consisting of a large group of individual systems ever financed by a Bank loan\. It was also the first involving a joint IBRD/WHO appraisal mission (PPAM, para\. 1)\. The Project and Its Objectives iv\. In physical terms, the project initially comprised: a large scheme for the Dan Region (Tel Aviv and certain suburbs); two other regional sub- projects; and 75 additional sub-projects for individual municipalities\. The total population to be served by the project was estimated to be approxi- mately 2\.3 million\. The various sub-projects included all components of sewerage service--collection systems, trunk sewers, pumping stations, and treatment facilities of widely varying complexity\. v\. The principal objectives were (PPAM, para\. 2): - treatment and reuse of wastewater to augment Israel's water resources; - vii - - expansion of sewerage service for health and environmental benefits; - institutional strengthening in local authority (municipal) finance administration and self-supporting tariffs for sewerage service\. Implementation Experience vi\. The differences between the two division of this project (the Dan Region sub-project and all others) are so significant that it is more appro- priate to discuss them separately\. vii\. For the group if sub-projects other than the Dan Region, the physical scope was revised downward in 1975, then reduced slightly again before loan closure in June 1981\. Among the reasons for these changes in scope were the stretch-out from 5 to more than 8 years, and many technical changes during implementation (PPAM, paras\. 8-9)\. Some delays occurred because sub-projects were not fully ready, but the files iudicate that the additional time spent in preparation often resulted in better solutions at lower cost\. This was particularly true where much simpler pond systems were substitut\.d for small mechanical treatment plants of various types (PPAM, para\. 6; IR, para\. 3\.08)\. The performance of engineering consultants, civil works contractors, and equipment supplies was considered to be very satisfac- tory (PCR, paras\. 3\.10, 3\.11)\. viii\. Strengthening municipal finance institutions and procodures proved to be more difficult and time-consuming on the part of both Government and the Bank than expected\. The overall accounting systems and financial controls of the local authorities were known to be inadequate; there was no auditing in the generally accepted sense of the term (PP\.I, para\. 11)\. One loan condition required that each local authority enact fees and charges adequate to cover operation, maintenance and debt service on all sewerage activities (PCR, para\. 2\.07(vi))\. The local authorities were slow to adopt the necessary fees and charges\. During the runaway inflation experienced by Israel in the late 1970s, self-support seemed to be a target that was steadily moving further out of range\. In 1980, Government began requiring sewerage tariffs o be linked to the consumer price index (PPAM, para\. 19)\. ix\. The Dan Region sub-project has had a different history\. Soon after appraisal in 1972, the initial pond concept was scrapped; and the search began for a treatment process which could produce a very high quality efflu- ent for irrigation rather than potable use\. That search and the accompanying scientific debate and review took years\. It was 1978 before the treatment concept was sufficiently firm so that design could begin and 1980 before construction began\. Design, procurement, and construction all appear to have moved at a rather deliberate pace\. Since all investment for this project since closure of the loan in 1981 has come from Government, budget con- straints may have been a contributing factor\. - viii - X\. Meanwhile, beach pollution in the Tel Aviv area has increased year after year, and some 60mcm/year of sewage effluent is being lost to the sea rather than being reclaimed for irrigation\. There has been no institution- building within the Dan Region sub-project\. Tariffs are still only a token compared to what will be needed to operate the completed system\. No steps have been taken to assemble a management/operating team for the new treatment plant\. On the positive side, Government has continued its support\. Hope- fully, the treatment plant will begin at least partial operation in the fall of 1986\. Results xi\. For the group of sub-projects other than the Dan Region, project documeAts show a time overrun of three-and-one-half years\. The work com- pleted within the project included 44 local and 2 regional sub-projects, with a total cost of US$38\.4 million, compared to the initial estimate of US$45\.5 million for the 77 sub-projects listed in the appraisal report\. The objec- tives of expanded sewerage service and reclamation of treated effluent for irrigation were met in impressive fashion\. xii\. Because of economic disruptions, progress in strengthening munici- pal finance institutlons was erratic and some of the gains were lost st times\. Nevertheless, the overall result was a dram;\.tic improvement in municipal finance administration, audit, and in establishing self-supporting tariffs for the sewerage sector\. Collection of user fees is currently said to be in the range of 95%, better than any other tax or charge in Israel (PPAM, para\. 19)\. Much of this improvement can be credited to the Bank's sustained efforts over a long period\. xiii\. It is still too early to make any judgment on the performance or results of the Dan Region sub-project\. Sustainability xiv\. One evidence of sustained benefit from this project is Government's continued financial support to the sewerage sector\. NSPO continues an active program of appraising projects, helping to arrange financing, and supervising implementation\. Government loan support for approved projects continues at a level of more than US$3 million per year in addition to funds needed for completion of the Dan Region facilities (PPAM, para\. 56)\. xv\. Intensive efforts are being made to maintain those standards and policies of financial performance achieved by the local authorities (munici- palities) during the latter years of the Bank loan project\. Strong leverage is applied to try to keep fees and charges at a level such that the sewerage service can remain self-supporting\. Although many municipalities fell out of compliance with this goal during the 1984/85 siege of inflation, much pro- gress has been made in moving toward it again because of long association with Bank staff and commitment to their standards (PPAM, para\. 19)\. - ix - xvi\. Reuse of treated sewage effluent continues to increase, both from existing and new sewerage facilities\. It is predicted that by the year 2000 effluent reuse will reach 300mcm/year, about 25% of present agricultural consumption (PPAM, para\. 60)\. The typical combination of oxidation ponds followed by large reservoirs for storage of the treated effluent provides both economical and effective sewage treatment and a valuable source of addi- tional water for irrigation (PPAM, para\. 1\.61)\. Great skill is demonstrated by the NSPO staff in leveraging modest loan funds to stimulate construction of these multi-purpose projects\. All parties benefit\. One unique advantage of sewage effluent is that it is produced at a fairly consistent rate year- round; it does not dwindle or fail during dry seasons or extended drought\. Findings and Lessons xvii\. The audit concludes that the project objectives were appropriate, clearly expressed and understood, and well accepted for the most part\. The obvious exception would be the natural resistance on the part of those served to paying adequate tariffs for sewerage after being accustomed to low or no user fees for this service\. One unusual feature of this project wan the direct linkage between two principal objectives; implementation of many sewerage sub-projects not only achieved sanitation objectives but also pro- vided treated sewage 3ffluent for reuse in irrigation\. This is an example of a program for the public good being driven by the motivation of economic gain\. xviii\. Another unique aspect of the sewerage sector in Israel is that the farming communities using the effluent are increasingly taking over complete responsibility for operation and maintenance of the treatment facilities\. xix\. On the institutional side, the improvement in municipal finance administration was nothing less than dramatic\. This included development of standardized accounting and control systems, and routine outside auditing\. These improvements have accrued to municipal government operation, in the broad sense throughout the country as a whole\. In the opinion of the audit, much credit is due to the Bank's sustained efforts over a period of some 10 years--a case in which a time overrun produced benefits which probably could not have been achieved otherwise\. xx\. The need for improved operation and maintenance of sewerage facili- ties and more formally organized training of operating personnel was reorga- nized in the appraisal, made a part of the Loan Agreement, and occasionally mentioned in mission reports\. Beyond that, little was accomplished in this area\. This is only too common for water and sewerage projects\. Motivation and means must be found to increase and improve the commitment and perform- ance of both Bank and borrower on training and proper operation\. xxi\. The Dan Region sub-project has had a long and somewhat disap- pointing history\. On the positive side, Government has continued its support throughout its lengthy development\. It is an open question whether the Bank could have had a more constructive impact by further extending the loan period\. -x - xxii\. With its technical competence and practical experience in oxidation pond treatment and effluent reuse, Israel has a great deal to offer other countries with reasonably similar climates and limited water resources\. Repeated comments were made to the audit mission that Israel was very grateful to the Bank for its help and encouragement through the sewerage project loan and that it would be eager to share this experience\. xxiii\. It was pointed out in the introduction that this was the Bank's first experience in financing a large number of small sewerage facilities\. That experience must be considered eminently successful in Israel\. The objectives were met in impressive fashion\. The sewerage sector has gained visibility and respect through this project\. The Bank may have done more good and provided more stimulation in Israel with this sewerage loan than it could possibly have anticipated\. PROJECT PERFORMANCE AUDIT MEMORANDUM ISRAEL SEWERAGE PROJECT (LOAN 869-IS) 1\. PROJECT SUMMARY Background 1\. Israel's rapid population growth and intensive development have placed heavy demands on the country's water resources\. By the time of project appraisal in 1972, fresh water resources of approximately 1,500 mil- lion m3 per year were virtually all being used\. Augmentation of these re- sources was in itself one of the main stimuli for a national effort aimed at improved sewerage and wpste treatment facilities\. Reclamation and reuse of treated wastewater held the potential for important new supplies for agri- cultural and industrial use\. Bank missions in 1971 and 1972 led to prepara- tion of a project in this sector which Government considered to be the first 5-year segment of a long-term national sewerage program\. For the Bank it was also an innovative or pioneering venture\. This -as the first national (or sector) sewerage project consisting of a large group of individual systems or sub-projects ever financed by a Bank loan\. It was also the first involving a joint IBRD/WHO appraisal mission\. Objectives 2\. The main objectives of the project as listed in the PCR,1/ dealt with: (a) treatment and reuse of wastewater to augment Israel's water resources; (b) expansion of sewerage services for health and environmental reasons; and (c) study of new regulations for industrial waste disposal\. The audit notes that the inclusion of industrial waste control as item (iii) above is apparently a slip of the pen\. Although that subject was mentioned in the Loan Agreement, it was to be pursued by GOI as a separate effort complementary to the loan project\.2/ Instead, the third major objective was institutional strengthening in the area of local authority (municipal) I/ PCR, para\. 2\.03\. 2/ SAR, para\. 3\.03 and 3\.10 -2- finance administration, audit, and self-supporting tariffs for sewerage\.3/ The initial project documents refer to a much broader spectrum variously identified as justification, benefits, and co-aditions\. A broader listing would include: (a) wastewater treatment and reuse to supplement Israel's water resources; a water quantity goal; (b) prevention/control of surface and groundwater pollution; a water quality goal; (c) improved sanitation and general public health protection; (d) protection of the environment; ecology; aesthetic concerns; (n) economic development; wastewater reuse for industry and agriculture (f) tourism promotion via beach protection and aesthetic improvement; (g) improved operation and maintenance of treatment facilities; again a water quality (wastewater reuse) goal; (h) training of sewerage sector personnel; (i) technical advances in oxidation pond technology; an opportunity to make a contribution; (j) improved recognition and viability for the sewerage sector; water already had high respect and viability in Israel; (k) adequate tariffs to make sewerage self-supporting; (1) improvement of overall municipal finance/accounting/audit adminis- tration; (m) improved relationship, closer liaison between local authorities and Ministry of the Interior in financiL matters such as grants, oper- ating and development budget, and debt control\. Project Description 3\. Initial project documents and subsequent Bank supervision deal with this as a single project\. This audit will take the liberty of addressing it in two categories or divisions because, in actual performance, it proceeded as two very different projects\. The first, including sewerage facilities throughout Israel except for the grea\.er Dan Region (Tel Aviv and certain suburbs), is a pronounced success story whose momentum continues unabated even after closure of the loan in 1981\. The second, the Dan Region sub- project, has not yet succeeded; it is still not completed in early 1986, and its effluent reuse on a large scale appears to be at least two more years away\. 3/ SAR, paras\. 5\.12 through 5\.14, 6\.02, and 6\.16 through 6\.18\. - 3 - 4\. The following table summarize- the scope of the project at ap- praisal, as revised in 1975 and at closure by the Bank in 1981\. Initial 1972 Appraisal 1975 Revised 1981 Closure Description of Population Cost Estimate Cost Estimate Actual Cost Sub-projects to be Served US$ Million US$ Million US$ Million Dan Region 1 regional system 850,000+ 29\.8 39\.1 42\.6 (12/81) /a All Other 75 local authori- ties & 2 regional systems 11450,000+ 45\.5 48\.9 38\.4 (6/81) TOTALS 2\.3001000 75\.3 /b 88\.0 81\.0 /c /d /a Total cost to completion (December 1988) is estimated at $73\.1 million\. /b Bank loan was 40% of $75 million, or $30\.0 million\. T &ctual Bank Loan disbursement was $29\.7 million Td_ Total cost is estimated to be $111\.5 million at completion of the Dan Region sub-project by approximately December 1988\. II\. PROJECT IMPLEMENTATION-COUNTRY AT LARGE Project Revisions 5\. The sewerage project presented by Israel to the Bank was considered to include works of highest priority and urgency which could be completed within a 5-year first stage\. The 78 sub-projects were selected from a larger needs list whose estimated cost was well over US$100 million\. It was recog- nized from the start that changes could occur\. Periodic review of scope was anticipated so that am ndments and substitutions could be made, subject to approval by the Bank\.4/ For the individual sub-projects, only "outline designs and layout plans" were available at the time of the appraisal\.5/ While each sub-project was not examined in detail to verify whether the least-cost solution had been proposed, each had received a desk study and brief site inspection by Bank staff to ensure that the proposal was reason- able\.6/ This was perhaps adequate preparation for the many small projects 4/ SAR, para\. 3\.01\. 5/ SAR, para\. 3\.05\. 6/ SAR, para\. 3\.06\. involved and where the 5-year period ahead should provide adequate lead time to keep the project pipeline flowing with properly engineered and designed schemes\. Considering the disruptions of war and economic stress, good progress was made on the smaller systems and several farly large regional facilities\. 6\. Numerous adjustments and changes were made as work progressed\. Review of project files indicates that these were normally submitted with brief but succinct justification and promptly approved by the Bank\. Typical changes included addition of aerators to oxidation ponds to improve water quality for reuse, to resolve neighborhood objections; or to minimize land cost or encroachment; upgrading the design to produce higher quality efflu- ent; substituting a gravity line for a pumping station and force main on the basis of site relocation or more detailed least-cost calculations\. In some case-, entire segments (i\.e\., a collection system) were dropped from the pro- ject because the local authority had already built them with local funds or a government development grant\. 7\. When the project scope was revised in 1975, the number of local authority sub-projects was reduced from 75 to 48, with an accompanying de- crease of approximately 300,000 in population served\. Inflation and economic strains made it necessary to reduce the overall project cost to fit within the Government's austerity program\. It was emphasized by Government at the time that these sewerage projects were not being abandoned; some would be financed by government and the remainder postponed to a later stage\. Project Implementation and Costs 8\. By the end of 1977 (the initial target date), completion had reached 65 percent for this group of sub-projects\. By March 1979, this had advanced to 75 percent\. A supervision mission in June 1980 found 11 small projects under construction and four not yet begun\. It was then agreed to drop the four which had encountered technical difficulties such that they could not be implemented before June 1981, the final completion date\. The total of the sub-projects completed under the loan was then 44 Local Authori- ties and two Regional Systems\. 9\. Project costs are reviewed briefly in the PCR\.7/ This project was significantly affected by unexpected events and influences; namely, the October 1973 hostilities; the stretch out from an anticipated 5 years to more than 8 years before closure; economic austerity coupled with astronomical inflation; and many technical changes en route\. 7/ PCR, paras\. 3\.08 and 3\.09\. - 5 - 10\. The cost summary in paragraph 4 shows a 21 percent cost underrun for the group of sub-projects other than the Dan Region\. This is statis- tically correct in terms of the scope of the initial project\. Some of the sub-projects dropped in the 1975 review were carried out more or less on schedule with direct government financing\. Others were done wholly or in part by the local authorities with their own funds or with support from farm communities who were interested in receiving the effluent\. Total costs for this group were under the initial estimate because it was necessary to bring the Bank's involvement to a close in 1981\. Activity in this sector, not including the Dan Region, has continued at an average pace of more than US$3 million per year since then\. This work continues to be supported both by the Central Sewerage Loan Fund within the Ministry of Interior and local author- ity funding\. Strengthening Municipal Finance 11\. There was recognition at the time of appraisal8/ that the local municipalities were experiencing severe financial problems, largely through lack of local autonomy and authority to set taxes and service charges\. That authority was tightly held and exercised by the central government acting through the Ministry of Interior\. Further, the accounting systems and finan- cial controls were known to be inadequate\. Budgetary deficits in recurrent accounts were covered by temporary borrowing\. Although periodic checking was done by the Ministry of Interior, there was no auditing in the generally accepted sense of the term\. Experience during the early years of the project indicated that the problems and inadequacies were even worse than recognized during the appraisal\. The PCR provides an overview of the improvements achieved in the accounting and financial control systems and the development of routine standardized audit of municipal finances\. These improvements must be credited to a combination of consistent, sometimes intense pressures by Bank staff and a continuing commitment by GOI toward these reforms\. It is important to note that these changes were anything but swift\. The reforms described in the PCR occurred over a period of 10 years and, in fact, are still in progress\. The improvements have been dramatic\. They have accrued to the municipal government operation as a whole, not just the sewerage sector\. They also have been country-wide, not limited to the municipalities receiving Central Sewerage Loan funds\. 12\. During the 1984-85 period, Israel suffered another outbreak of rampant inflation, running as high as 20 percent per month in its later stages\. On April 1, 1985, the exchange rate was 864 shekels to one dollar; by June 28, the rate had climbed to 1,262 to one\. Effective July 1, 1985, the Government: (a) devalued the currency by a ratio of 1,000 to 1; (b) set an exchange rate of 1\.5 new Israel shekels (NIS) to one US dollar; 8/ SAR, paras\. 5\.07 through 5\.13 and 6\.02 and 6\.03\. - 6 - (c) ordered substantial staffing reductions in government companies and local authorities (municipalities); and (d) decreed a rigid freeze on all capital investments and most wages and prices\. 13\. The financial stresses of the last 2 years have led to large deficits for some of the municipalities, although over half have been able to avoid deficits\. Government is currently developing a plan to fund all municipal debt, which is generally in the form of overdrafts at local banks, and to implement strict controls against the recurrence of such deficits and overdrafts\. In the last two years, the integrity of many of the local sewerage funds has also suffered\. Ministry of Interior staff informed the audit that strenuous efforts are being made to restore these accounts to the balanced position most achieved during the latter years of the Bank project\. Some leverage is applied by the Ministry of Interior's Local Government Department in authorizing annual government allotments which make up a very substantial part of municipal budgets\. The National Sewerage Project Office (NSPO) has even stronger leverage over those local authorities desiring loan funds in support of sewerage projects; no loan disbursement will be made unless adequate sewerage tariffs have been enacted to cover capital and oper- ating costs of the new or upgraded facility\. Sewerage Tariffs 14\. It was recognized during appraisal that financial support of sewerage on the local level was indifferent\.*9/ Local authorities were expected to levy connection charges based on plot area and building area sufficient to cover all construction costs\. Receipts from these charges were usually inadequate to meet the resulting debt service\. The local authorities could also levy sewer use fees based on water consumption to cover operation and maintenance costs, but very few did; these costs were normally met from general revenues or from short-term borrowing\. 15\. One of the primary objectives of this project was to make the sewerage service independent and self-supporting\. However, this was only part of the larger goal of reforming and strengthening municipal finance pro- cedures as stressed in the presentation to the Executive Directors in November 1972\. The question was immediately raised as to what was meant in this case by the term self-supporting? In reaponse, it was stated that the Bank's position was simply that rates overall should produce an adequate return on the overall project cost; local tariffs could be adjusted to fit local conditions\. Bank staff then pointed out that it was indeed the bor- rower's intent that each local municipality, even the poorest and smallest, would levy fees and charges sufficient to support its own sewerage service\. It was the expressed preference of GOI that there would be no cross subsi- dization or income redistribution occurring within this project\. With regard 9/ SAR, paras\. 6\.13 through 6\.15\. - 7 - to income redistribution, the existing government grant program to local authorities was geared to respond to that need; therefore, it was the intent that sewerage be self-supporting\. 16\. The road to meeting this noble goal through actual sewerage tariffs was long and difficult\. Agreement was reached during appraisal, and it was also carefully spelled out in the Loan Agreement that, to be included in the project, an individual municipality must enact the required bylaws, then proceed to levy specific fees and charges adequate to cover all costs of sewerage service\. It proved to be difficult to adopt the necessary bylaws and tariffs--more difficult in some cases than in others\. During the period of runaway inflation, the difficult began to seem impossible\. On pledge of good faith and good intention, some municipalities received project loans and began construction before enacting the required bylaws\. However, the Bank could and did withhold disbursement for its share of such loans until the necessary bylaws were in place\. 17\. In June 1973, (File Search) GOI informed a Bank mission that municipalities had been given until the end of July to prepare suitable bylaws, failing which the Ministry of Interior would impose its own version on them, which would take about 3 months\. At the same time, an inquiry was made as to whether the Bank would agree to disburse its share of the project costs if the Ministry would promise to have all bylaws and tariffs in place by the end of 1973\. The answer was no\. In April 1974, a Bank mission found that little progress had been made on tariffs\. GOI was pursuing this through discussion and education rather than more forceful methods, but the results were minimal\. In August, the Bank informed GOI that no further loan dis- bursements would be made until this situation was rectified\. In November 1974, data showing satisfactory tariffs for 24 municipalities were provided to the Bank\. The ban on disbursements was then lifted but only upon addi- tional certification by the Water Commissioner that all loan-financed sub- projects were or would be in compliance (File Search)\. 18\. By the end of 1975, almost all municipalities had enacted new bylaws and tariffs\. This included Jerusalem which was not even included in the project\. Some were not adequate or were soon overtaken by inflation, but an important foundation had been laid\. During the next several years of severe inflation, most sewerage services were in deficit, despite continuing pressure from the Ministry of Interior to raise tariffs\. A Bank mission in June 1980 learned that 26 municipalities had updated their tariffs from October 1979 through March 1980\. This good news was dampened somewhat by the fact that most cities were now waiting until their financial Teports were completed well after the close of the fiscal year, then raising rates only to cover historical costs rather than attempting to forecast ahead and thus avoid the continuous series of deficits sure to result\. 19\. During FY 1980/81, sewerage fees were increased in 57 municipali- ties and connection charges adjusted in 72 local authorities\. In 22 local authorities, sewerage fees had already been linked to the consumer price index\. By April 1982, sewerage tariffs had been linked to this index for all - 8 - municipalities and were to be automatically adjusted every 6 months\. The results were impressive\. While the inflation rate of FY 1981/82 was about 110 percent, the average domestic sewerage tariff was increased by 167 percent and the average industrial tariff by 193 percent\. Unpaid bills were also linked to the price index plus 4 percent interest penalty\. This, along with more active cutoff for non-payment, improved bill collection substan- tially\. The Ministry of Interior had achieved a reasonable degree of success in assuring that revenues balanced costs for sewerage service\. If the budget proposed for the coming year did not project such a balance, central govern- ment grants to the local authority could be withheld\. The audit learned that some of this progress was lost during the 1984/85 burst of inflation, but intensive efforts are again being made to restore the sewerage systems to a self-supporting position consistent with the objectives and guidelines of the Bank project\. Sewerage user fees are based on metered water use and billed and collected with the water charges\. Collection of water bills is said to be in the range of 95 percent, better than any other tax or charge in Israel because of the authority to cut off service for non-payment and the occa- sional use of this authority when an example is needed\. Project Management 20\. Management of the country-wide effort through the National Sewerage Project Office (NSPO) has been at a consistently high level of technical and administrative competence\. The Deputy Project Director and Chief Engineer was appointed to this office in 1972 and has continued with this project to the present\. Continuity in such a key position can be as constructive as rapid turnover can be destructive to overall project performance\. Operation\. Maintenance, and Training 21\. Except for a few, operation of the existing sewerage systems was considered to be poor at the time of the appraisal\. It was acknowledged that central supervision over operation and maintenance was needed\.10/ Assur- ances were given that the Water Commissioner or other official would be given authority to require effective operation and maintenance of all participating facilities and to ensure enforcement of adequate standards\.1 / Further, provision would be made for collecting data on quantities and strength of raw sewage and effluents, possibly through a contract with Mekoroth, the National Water Company, or some other suitable agency\. Each local authority would be required to contract with Mekoroth or other suitable agency for operation and maintenance unless it could clearly show that it was capable of managing its own system effectively\.12/ It was acknowledged that additional skills would be needed to operate the new systems, and Government was asked to institute a 10/ PR' para\. 23\. 11/ SAR, para\. 3\.17\. 12/ SAR, para\. 3\.18\. - 9 - suitable training program covering the needed skills by December 1, 1974 or such later date as would be suitable to the Bank\.13/ These assurances on operation, maintenance, and training were then made a part of the Loan Agreement\. 14/ 22\. There is little in the files to indicate an organized effort toward improved operation and maintenance\. A 1974 mission report mentions good operation of the Haifa plant as an exception to continued poor maintenance at most other facilities\. The PCR15/ simply states that "the systems are gen- erally properly operated and maintained" because of the economic value of the treated effluent\. It further states that the Water Commissioner ensures good operation and maintenance and collects data which has been sparse but satis- factory for its present use\. The audit found little operating data available at any central location\. Some effluent quantity and quality data are being collected by district office personnel of the Ministry of Health as a matter of monitoring treatment results and potential polluting effect on receiving watercourses\. It is the audit's opinion that users of the effluent, espe- cially the larger farm organizations, do a much more thorough job of checking on effluent quality to verify its safe use on selected crops and determine what, if any, supplements or nutrients are needed for those crops\. 23\. With regard to training, one early suggestion was that the Haifa facilities could be used for an on-site training program\. In 1974, it was proposed instead that an environmental and sanitation training program be established at the Tel Aviv Technion\. This was later done at a different location\. Several years later, it was agreed16/ that the project office should survey present and future training needs in order to estimate addi- tional manpower requirements\. However, a June 1980 mission reported that rigorous adherence to the initial requirement of a suitable, formal training program was no longer relevant\. The reason given then and repeated in the PCR17/ was that increased public attention to the importance of sewerage had induced an upgrading of operating standards at the municipal level\. The operation and maintenance of the smaller treatment works were being taken over by the users of the effluent, primarily the farming communities\. Operating staff of the larger works received on-site training by the con- tractors and/or consultants\. There are only 6 or 7 mechanical treatment plants in Israel, contrasted to over 300 pond systems in a great variety of configurations\. Thus, the need for trained, full-time "plant operators" is not nearly as great as may once have been assumed\. 13/ SAR, para\. 3\.19\. 14/ LA, para\. 3\.07, (i) and (ii)\. 15/ PCR, para\. 4\.07 and 4\.08\. 16/ Aide Memoire, Tel Aviv, July 18, 1978\. 17/ PCR, para\. 6\.04\. - 10 - 24\. The Haifa plant c>ntinues to stand out as an example of good pro- fessional management and competent operation\. By contrast, a new activated sludge plant of medium size built as part of the Bank project has been all but abandoned; sewage is flowing through it and into the receiving stream with little treatment\. The reason is that the local authority feels it cannot afford the high power costs of the plant and has simply shut it down\. A similar situation has occurred at some aerated lagoons\. In order to avoid the power costs which average approximately 6 US cents/kw, the aerators are not operated; or if they fail they may not be repaired promptly\. 25\. A sanitary engineer, was recently added to the NSPO staff, has been given full-time assignment of working with local authorities to strengthen operation and maintenance of sewerage facilities throughout the country\. One operating manual on oxidation ponds has already been prepared in draft form, and others on collection system maintenance and pumping station operation are planned\. In addition, his assistance is available in calculating fees and charges adequate to meet the requirements of the Ministry of Interior and to qualify for project loans\. III\. PROJECT IMPLEMENTATION-DAN REGION Previously Existing Facilities 26\. The major facilities already existing to provide sewerage service to the greater Tel Aviv area before this project began were: (i) the Reading Pumping Station at the mouth of the Yarkon River, discharging to the sea (which it still does); (ii) the Bassa Pumping Station on the shore 5km to the south, designed to pump to an inland treatment location approximately 121 km farther south; (iii) a force main/gravity trunk sever from the Bassa Pumping Station to the Soreq Treatment Plant; (iv) approximately 200 ha of oxidation ponds at the Soreq site, operated in two stages with a lime mixing/settling step between the stages; (v) an adjacent effluent spreading area for groundwater recharge; (vi) collection wells for extraction of the groundwater and delivery to a pipeline system for reuse\. The Reading Pumping Station was built in 1956\. The Bassa Pumping Station, trunk sewer, and first-stage ponds at Soreq were built in 1967\. Additional - 11 - ponds were added several years later\. The capacity of the present ponds is limited by an injunction to 20 million cubic meters/year\. Project Scope and Changing Objectives 27\. At the time of the appraisal, the scope of the Dan Region sub-project included expansion of the two large pumping stations, major gravity and force main sewer construction, and additions to the existing pond treatment system at the Soreq site\. It was anticipated that by the time tht new treatment system was in operation, it would be receiving the domestic wastes from more than a million people plus an industrial waste load of unknown extent\. One objective was to deal with the sewerage and beach pollu- tion problems of the greater Tel Aviv area\. Another was to capture and treat for reuse an additional sewage volume estimated at some 60mcm per year\. The Bank's financial support was limited to sewerage, including treatment to the secondary level, and did not extend to effluent reuse, althougn its interest was much broader\. 28\. The initial goal was to reclaim this water for potable use\. Although the term "direct reuse" was used, the initial proposal was actually to recharge the treated effluent into the local groundwater, collect it again after a storage period of aproximately 400 days, and then, after disinfec- tion, add this flow to the potable water system\. After lengthy discussion with health authorities, the objective was shifted from potable to irrigation use\. At first, the target wap to provide water to meet the country's highest standard for irrigation, suitable for all crops and presenting no risk if accidentally used as a potable water source\. The initial plan was that this reclaimed water would be used for irrigation of yards, gardens, and small plots near residences as well as large-scale crop irrigation\. This plan has since been revised by design of its distribution system to limit the use of this reclaimed water to serve only large fields, not the smaller plots close to villages or residences\. Site Problems 29\. Even though large oxidation ponds were already in operation at Soreq, the site of the new treatment works, there were obstacles to further development there\. One was the existence of a security area; it was neces- sary to build a replacement at another location in 1978\. Another obstacle was objection to the existing ponds\. Odor problems had antagonized nearby residents to the extent that legal action was brought in 1974 to prevent increased load on the ponds\. One result was that newly-completed improve- ments at Bassa Pumping Station could not be used, and the discharge of untreated sewage to the sea continued at that location\. 30\. It was early 1977 before GOI formally committed financing for the new treatment facilities at Soreq and made application to the local planning commission\. Although the local commission approved the use of the land for the treatment plant, the mayor of the nearby municipality of Rishon le Zion objected strenuously\. His further objection, presented to the National Town Planning Council (NTPC) in May 1978, resulted in the Minister of Interior - 12 - withholding the necessary approval pending further review\. No building permits could be issued without this approval\. Ater the appeal process was carried to its ultimate resolution through the courts, building permits were finally issued, allowing construction to begin\. Design Studies 31\. The goals of the Dan Region project and the eventual use of the treated effluent, which was not part of the Bank's project, became involved in a very complex and lengthy series of studies and debates\. From its inception, this was far more than a sewerage project; the reuse potential of this large volume of treated Qffluent added an important dimension of water resource planning, not just for the Dan Region but for the country as a whole\. The reuse aspect came in for intense review by the technical and scientific community\. Out of concern for the methemoglobinemia (blue baby) risk involved with high nitrates in drinking water supply for infants, plans for pond treatment were scrapped; and the search began for a low-cost nitrification/denitrification treatment process which could produce a very high-quality effluent\. In early 1973, the Project Director outlined to the Bank a proposal for modifications including alternative treatment processes and erection of a pilot plant for testing their effectiveness under local conditions\. The cost of studies and pilot plant work was proposed to be included as part of the engineering fees for the project, and the Bank ap- proved this proposal\. However, it was late in 1974 before pilot plant work actually began\. By May 1975, the results with two very small bench models of the Blumental process were encouraging enough for the consultants to plan to build a larger pilot plant\. Also in May, the developers of the procesrs vis- ited Israel from Vienna for discussions with members of the National Sewerage Committee\. In 1976, an additional team of outside experts reviewed and approved the process\. The objective was stated as making maximum reuse of the effluent for agricultural or other non-potable purposes\. Even though this process was accepted, development moved very slowly\. 32\. Pilot plant work continued in 1976, and a start was made on con- ceptual design\. Preliminary planning envisioned ultimate construction of four very large low-rate oxidation modules with horizontal rotor aerators\. First phase construction of one module was aimed at treating the anticipated waste load through 1985 except for short-term peak loads\. In early 1978, an Israeli technical mission visited Vienna to obtain formal ratification of the preliminary design by an expert advisor on the Blumental process\. A June 1978 Bank mission noted that the conceptual design was essentially complete\. The first phase module would incorporate two reactors, five clarifiers, and ancillary work\. Each reactor would be equipped with 72 aerators\. Design detention time would be 12 hours in the reactors and five hours in the clarifiers\. Excess sludge would be pumped to waste through a sea outfall\. By the end of 1978, design had progressed far enough so that work could begin on preparing bid documents for major mechanical equipment and civil works\. - 13 - Project Implementation and Costs 33\. For the Dan Region sub-project alone, the planning budget at the time of appraisal in 1972 was as follows:18i Estimated Cost Coponent Israeli Pounds, Millions Sewers 7 Force Mains 4 Pumping Stations 7 Treatment Plant 62 Disposal Facilities 0 Land 0 SUBTOTAL 8U Engineering 12 Contingencies 33 TOTAL 12 or US$29\.8 million 34\. Actual construction on the Dan project was delayed far beyond the original schedule by the research work expended to determine the treatment process and by delays in obtaining land use approval and building permits\. Earthvork at the plant site was not begun until mid-1978\. Construction on the interceptor sewer along the coastline to the Bassa Pumping Station, which was also held up by litigation, was underway in the summer of 1978 and com- pleted in early 1980\. On April 28, 1980, the cornerstone of the Soreq Treat- ment Plant was laid, and concrete placement began shortly thereafter\. The target date for completion of the first module was set for September 1981\. However, a Bank mission in April 1981 reported that this was hopelessly opti- mistic and that mid-1982 might be the earliest possible date for completion\. 35\. In the meantime, costs were climbing, partly due to the extended delays and partly due to the worldwide inflationary spiral of that period\. When the project was revised in 1975, the cost estimate was raised from US$29\.8 to US$39\.1 million\. By the revised closing date of December 1981, actual spending had reached US$42\.6 million while the estimate for completion had risen to US$58\.3 million\. The audit found that the cost had reached US$64\.1 million through the fiscal year ending March 31, 1986, with an esti- mated US$9 million more budgeted for completion over the next two fiscal years\. The target date for plant startup with one reactor is August of 1986\. It is the intent to bring the second reactor into operation before the end of 1986\. The facilities still lacking and planned for construction over the next two years include an administration building, standby power station, workshops and stores, and amenities such as landscaping and paved roads\. The audit also found that the improvements at the two pumping stations are not 18/ SAR Annex 3, p\. 2\. - lb - yet completed\. The Bassa station can now deliver enough flow to serve one of the two reactors at the plant\. When electrical and building work are com- pleted in October 1986, capacity will be sufficient for full flow to both reactors\. Electrical work and building construction also remain at the Reading station, with completion now estimated for early 1987\. Project Management 36\. During its early years, the Dan Region sub-project was one of many being administered by the NSPO\. The PCR19/ cities "partly inadequate sub- project management" as one of several reasons for the delay in implemen- tation\. This may be a valid comment but only in the sense that the project management office was not staffed to provide this very large and different sub-project with the direction and supervision needed to keep it on a fast track\. In the report of a May 1977 supervision mission, it was pointed out that serious consideration was being given to setting up a separate corpora- tion for the development and implementation of the Dan sub-project\. Later in 1977, the files report further discussion regarding the "somewhat loose" relationship which then existed between the Project Office (NSPO) and the Dan Regional Association of Towns (DRAT)\. If DRAT was expected to manage and operate the facility when completed, it should begin to take a much more active role before then\. A November 1978 mission reported that DRAT had established a new project unit organized into separate divisions for finan- cial control, design review, construction management, and overall project coordination\. A project manager with long experience in shipyard work had joined the unit in October\. Appreciation was expressed to the Deputy Director of NSPO who was finally being relieved of a heavy burden he had carried almost single-handedly for the Dan Region\. 37\. At present, DRAT includes Tel Aviv and 6 other municipalities in the greater Tel Aviv area\. The governing board is made up of 19 members, most of whom are city council members in their respective mtnicipalities\. The board chairman, who is also vice-mayor of Tel Aviv, is responsible di- rectly to the Minister of the Interior\. Several other suburban or satellite cities discharge sewage to the Dan Region system through cost-sharing agree- ments but are not members of DRAT\. Planning for Operation and Effluent Reuse 38\. The audit found that no decision had yet been made on who would manage/operate the new Soreq mechanical treatment plant\. The two alterna- tives being considered were that either DRAT would assume full operational responsibility or that the operation would be contracted to Mekoroth, the National Water Company\. A decision was said to be imminent\. Whichever alternative is selected, the need for beginning recruitment and training of an operating staff is rapidly growing more urgent if a successful startup is to be achieved in a matter of months\. This plant and the Blumental process will clearly require a high level and broad spectrum of technical skills for effective operation\. 19/ PCR, Dara\. 3\.05\. - 15 - 39\. DRAT has only begun to contribute financially to this venture\. A capital contribution of approximately $1 million was spread over the two previous fiscal years as support for a line of credit which was then avail- able on favorable terms\. A further capital contribution of approximately $2 million is scheduled for the fiscal year beginning April 1, 1986 plus $1\.1 million for "running in" or startup operating expenses for a 3-month period\. There is no provision in the new budget for operation beyond the 3 months\. Sewer use fees, which are uniform throughout DRAT, have been nominal\. A rate increase, which was put on hold during the 1985 freeze and resulting economic austerity, was finally approved and became effective upon publication in March 1986\. A request to GOI for an additional rate increase was filed some time ago\. The relative tariff levels, all in New Israeli shekels (NIS), are as follows: Prior to Effective Additional Category March 1986 March 1986 Request Domestic use, NIS/cu m3 \.052 \.08 \.18 Industrial use, NIS/cu m \.137 \.21 \.48 The "additional request" tariffs are needed to provide the $1\.1 million budgeted for the first 3 months of operation\. 40\. For the existing pond treatment system at Soreq, Mekoroth provided most of the investment capital and bears most of the operating cost\. In return, Mekoroth receives all the effluent which is recharged into the local groundwater aquifer, then extracted for distribution largely for agricultural use nearby\. For the effluent from the mechanical plant, which is expected to be some 60mcm per year, a much more extensive system is under construction\. When completed, it will consist of two large pumping stations in series near the treatment plant, three spreading/recharge areas, the necessary injection, control and collection wells, and a new 65km pipeline which will carry most of the effluent from both plants south to the Negev area for irrigation\. The cost of this complete system for effluent reuse is estimated to be in the range of US$100 million\. Work on it had begun, then was frozen in 1985, but has resumed in 1986\. Completion of this pipeline, called Line No\. 3, is anticipated to be still two years away, but the audit was informed by offi- cials in the Ministry of Agriculture that "the budget is assured"\. The cost of this pipeline alone is estimated to be US$75 million\. 41\. Several interesting questions remain regarding reuse of the Dan Region effluent\. One has to do with potential payment for the effluent in cash or services\. Without question, the effluent has value, especially in water-short Israel\. Irrigation in the south is now largely with potable water which will be released or "exchanged" for this effluent as soon as it can be delivered to the south\. But who will pay what to whom, and on what basis? Government is now studying a proposed tariff schedule for the use of sewage effluent\. - 16 - 42\. In a related development, the question of intrinsic value of this effluent in terms of its nutrient qualities is being raised by potential users\. In many places in Israel no fertilizer is added when effluent is used for irrigation, and the results are equal to or better than irrigation with potable water supplemented with conventional fertilizers\. The farmers under- stand only too well that the nutrient levels in the effluent drop as the degree of treatment increases\. This has particular significance for the new Dan Region treatment plant because earlier pilot plant results indicated that the Blumental process can remove in the range of 97 percent of the nitrogen and 70 percent of the phosphorus from the raw sewage\. The power cost of removing these nutrients to that degree will be significant\. Discussions have begun between the various interests involved to decermine an appropriate policy on this issue\. IV\. SUPPLEKENTARI COMENTS Why Lend to Israel? 43 During the Excutive Directors' meeting at which the Israel Sewerage Loan was approved, the question was raised as to why the Bank should be lend- ing to Israel at all in light of the country's income level of over $2,100 per capita\. In response, it was acknowledged that this was marginal in terms of lending guidelines but that the Bank had made loans to other countries at similar economic levels\. A very important supporting factor in this loan was the objective of institutional reform in municipal accounting control and audit\. In addition to putting sewerage service on a self-supporting basis, this could benefit the overall performance of local government substantially\. Performance of the Bank 44\. As noted, this was the first national sewerage project, consisting of a large number of individual sub-projects, ever financed by a Bank loan\. The Bank deserves commendation for venturing into this new ground and for its part in the resulting success\. In the opinion of the audit, the project preparation and appraisal were competently and thoughtfully done\. Sector problems and objectives were well understood and properly addressed in the project framework and loan conditions\. They stood the test of time over the unexpectedly long years of implementation\. This seems particularly relevant to the objective of local government institutional reform\. It can be assumed that reasonable progress would have been made toward the objectives of water reuse and public sanitation without a Bank-supported project\. However, it seems rather unlikely that the striking advances--essentially a revolution-- in municipal finance control would have occurred otherwise; certainly not in the "short" space of ten yearst - 17 - 45\. How will Bank staff manage a project consisting of so many individ- ual systems and facilities? This is the essence of another question raised during the Executive Directors' meeting in November 1972\. For example, with the potential for 80 or more bid evaluations submitted to the Bank for review, would not this require too much staff time and result in too much delay to the project? The response was that the Bank intended to manage by exception\. Routine procedures and approvals would normally be handled by the project office in Israel with the Bank's concurrence\. Only unusual situ- ations and problems would be brought to the Bank for guidance and resolu- tion\. This proved to be an accurate forecast\. Bid evaluations submitted in which everything was in ,rder were approved with routine telex messages stating that "the Bank ha6 no objection\." or "the Bank has no comment\." (File Search)\. There were exceptions in which compliance with specifica- tions was questioned or where proper proceduies had not been followed\. One example was the "all sections or none" bidding ploy by a contractor where this was clearly prohibited\. In another case, the Bank sent the telex mes- sage "unable to agree with your recommendation to award contract to second lowest bidder without detailed explanation"\. (File Search)\. There is no evidence in the files to indicate any serious or extended disagreements over such matters between the Bank and the borrower\. There were many engineering changes as the individual sub-projects moved through the cycle\. Some of these were reviewed and approved by correspondence; others were reviewed during Bank supervision missions\. Here too, the Bank appears to have been fully cooperative in accepting such changes, placing reliance an local tech- nical talent and the project staff\. 46\. While the technical aspects of the project (except for the Dan Region) seemed to be amenable to the Bank's guidance, the institutional/ financial aspects did not\. In the early years, progress toward enactment of the required bylaws and adcquate tariffs by the local municipalities was slow by any standard\. Even though this was a loan condition, GOI seemed unable or unwilling to do battle with the local authorities on a scale necessary to meet loan requirements\. Of course, the 1973 war, then the siege of inflation and economic stress made any such reform very difficult\. It did become necessary for the Bank to take the ultimate step of stopping disbursement in 1974 until major steps were taken toward self-support of the sector\. The financial arena alone (accounting, audit, tariffs) dominated many of the mis- sions and most of the correspondence\. It was necessary for the Bank to be very persistent, although diplomatic, at times in order to bring about the dramatic reforms and upgrading which did, in fact, result\. 47\. When the loan became effective in April 1973, completion was pro- jected for December 1977\. In 1975, it became apparent that more time would be needed\. By this time, the Bank had informed GOI that the amount of the loan would not be increased nor would there be a second loan in this sector\. The project was then reduced in scope by withdrawing 27 sub-projects, some quite small, from the original appraisal listing\. A new completion target of March 1979 was agre&d upon\. Beginning in 1978 and continuing into 1980, there was further dialogue on how and when to bring this project to a close\. Because spending was so delayed during these years, GOI appealed several - 18 - times for an increase in bank support from 40 percent up to 60 percent of contract costs as a way of reaching the loan figure of US$30 million\. This was not granted\. Finally, December 1981 was agreed as the last date for pro- ject spending which could in turn be claimed for loan disbursement by March 31, 1982\. Even then, the claim period had to be extended to April 15, 1982 to accept the last claim submitted on April 5\. The length of this project was costly to both parties\. Israel continued to pay a 3/4 percent commitment charge on loan funds not drawn down; also, the purchasing power of the US$30 million loan declined substantially during the inflation of that period\. The Bank invested more staff time and cost than anticipated; a total of 15 super- vision missions were made over a period of 9 years, not including the com- pletion mission 2 years later\. 48\. Relations between the Bank and the borrower throughout the project ranged from good to excellent despite the problems and delays described\. This is never a one-way street\. This project became a cooperative effort between resourceful, talented, and highly motivated personnel in Israel and equally talented and experienced Bank staff\. Professional respect and a team spirit developed early and were sustained\. Even when the Bank had to be very persistent and demanding, the communications were positive and diplomatic\. There was a clear understanding *hat this was a partnership which had as its central purpose good results for Israel even though the medicine might seem bitter at times* The response from Israel was usually fully as diplomatic, with warm appreciation and agreement with the goal and acceptance of as much of the medicine as might seem practical at the moment\. Performance of the Borrower 49\. The audit finds that the performance of the borrower is more easily addressed in two separate segments or divisions; one being the Dan Region sub-project and the other including all other sub-projects in the country at large\. 50\. For the country at large, the audit supports the observations and conclusions of the PCR2U/ that this project met its basic objectives, was well managed, and was on the whole very successful\. A small but highly competent and highly motivated team in NSPO successfully handled a consistent flow of small and medium sized sewerage projects, often linking them to reuse of the effluent or creating opportunities for reuse\. The institutional/ financial advances made in local government have also been described in the PCR\.21/ The audit wishes to stress the importance of the continuity in the leadership positions in this project\. The Deputy Project Director/Chief Engineer joined the team in 1972 and continues with NSPO to the present\. The head of the Local Government Department of the Ministry of the Interior, who was instrumental in developing the accounting, self-supporting rates, and the 20/ PCR, para\. 9\.01\. 21/ PCR, paras\. 6\.04 through 6\.09\. - 19 - audit systems now used by the municipalities, has also been directly involved with the project since its inception\. GOI has supported the sewerage sector through inflation, austerity, and hostilities and continues to do so\. 51\. The Dan Region sub-project has had a much different history\. As a concept, the Dan Region project was first organized in the 1960s\. After appraisal in 1972, it was included as part of the overall Bank loan project and managed for some years through NSPO\. In 1978, a separate project manage- ment group was established under DRAT and continues to the present\. Techni- cally, the scope of the Dan Region project has experienced great change\. The initial proposal of very large oxidation ponds was dropped not long after appraisal, and the search began for a low-cost, high-performance mechanical treatment process which could meet the objective of a very high-quality effluent with very low nitrate content\. The Blumental process, in use in Vienna, was selected after extensive bench and pilot scale testing and much debate and consultation with technical experts from various countries\. 52\. The PCR22/ attributes the delays in the Dan Region implementation to (a) "protracted evaluation\.", (b) "\.management", and (c) "budget constraints"\. The audit finds these to be valid but would add two more; namely, (d) planning and land use constraints, properly pursued by local government to their ultimate limits in the courts, and (e) a pervasive, continuing lack of any sense of urgency to reach an end point\. There is an old saying that the search for the perfect must not be allowed to drive out the good\. One wonders if that outcome was not perilously close at times in this case\. Six years after the start of construction, the plant is still not in service; and the effluent quality target is again subject to debate\. The basic concept of the plant appears deceptively simple, but its successful operation will depend on a very complex and sophisticated system of con- tinuous respirometers which in turn will automatically control large hori- zontal aerators\. Reuse of the effluent on a substantial scale appears to be at least another two years away, dependent on completion of pipeline No\. 3 south to the Negev\. The return from this large investment to date has been zero\. To balance these negative observations, it is only fair to note that GOI has continued to support the Dan project and has provided all the invest- ment in it since 1981\. Implementation has been slow but has never stopped\. No doubt, the plant will be completed eventually, and the large volume of treated effluent will be an important addition to Israel's scarce water resources, Industrial Waste Control 53\. Control and treatment of industrial wastewater was not a stated project objective, although it was recognized in the Loan Agreement as a complementary effort which would be carried on by the borrower\. An amendment to Israel's water law passed by the Knesset in 1971 gave the Water Commis- sioner general powers aimed at preventing water pollution by industries\. 22/ PCR, para 3\.05\. - 20 - Preliminary data had been collected indicating that about 70mcm of wastewater per year was being discharged by about 550 plant ;\. Because of the antici- pated industrial growth, this was expected to double by 1980\. (File Search) Some preliminary consideration had been given to pretreatment and to a system of standards and tariffs to help prevent excessive discharges to the sewers\. A loan program for industrial waste treatment facilities was also in the planning stages\. The estimated cost of industrial waste treatment facilities was shown in the appraisal report as US$11\.2 million but a few years later was estimated to be in the range of US$24 to $30 million\. In 1974, a Director of Pollution Control was appointed in the Water Commissioner's office\. A regulation limiting the strength of industrial wastes discharged to the public sewer system had been enacted but was not being enforced\. There was a modest amount of activity in funding treatment facilities through the government loan program, which was not part of the Bank project\. In December 1975, two special committees completed their work on proposals for effluent requirements and tariffs for industrial wastes\. 54\. Partly at the urging of Bank staff, a detailed industrial waste survey of the Dan Region was made in 1976\. There was increasing concern as to whether the heavy organic load from local industries was being adequately factored into the design of the Soreq Treatment Plant\. A committee was then working on a formula for use by local authorities in charging industry on the basis of both volume and strength\. When that was available, it was intended that dialogue would begin with individual industries on the economics of reducing waste strength to the public sewer system by in-house control and pretreatment (File Search)\. In February 1977, the Director General of the Ministry of Interior appointed a new committee to study industrial waste tariffs and recommend changes to existing legislation if needed\. In 1978, sewerage fees were being levied at different rates for domestic/commercial and for industrial premises, but no effort was being made to collect sur- charges according to waste strength\. A Bank mission in April 1981 reported that various studies were underway, but regulations on industrial pollution control were still lacking\. A pollution control unit of DRAT was advising some 300 industries on the question of effluent reuse\. In October 1981, the Ministry of Interior proposed regulations under which pretreatment would be required for some industries and a system of surcharges could be established\. 55\. The audit found industrial waste control still to be a matter of rather low priority in Israel, although certainly not overlooked\. There appear to be two principal reasons for this\. First, the farmers so far have little or no concern about possible toxic or hazardous or other harmful mate- rials in the effluent they are receiving for reuse\. They assume that the biological treatment systems (including ponds) in place ahead of reuse pro- vide a first line of defense and early warning system against harmful con- stituents in the effluent\. The audit could learn of only one incident of crop damage attributed to use of effluent\. Second, the farmers are much more concerned about salinity level in the water used for irrigation\. This is a complex and much more real problem in terms of variation in the salinity of different water supplies or blends supplied for irrigation in different seasons and their use with a variety of crops\. With overpumping, the salin- ity of some groundwater supplies has reached unacceptable levels for certain - 21 - crops\. Also, the use of water for municipal purposes adds approximately another 100mg/1 of salinity to that already in the water supply\. Sustainability of Benefits 56\. The principal objectives of this project were the treatment and reuse of wastewater to increase Israel's water resources, environmental and sanitation improvement, and institutional strengthening\. All were achieved in an impressive manner\. The improvement in the financial practices of the municipalities, their relationships with the Ministry of Interior, and regular audits seem to be firmly established and accepted\. The combination of increased local responsibility and the control exercised through central government grants to local authorities should ensure that these gains are not lost\. Activity within the sewerage sector has expanded beyond those systems included in the loan project to involve many other municipalities with sani- tation problems or development needs\. The NSPO continues an active program of appraising new projects prepared by local consulting engineers, making appropriate recommendations, helping to arrange financing, and supervising implementation\. The sewerage program has clearly established a self- sustaining momentum assisted by central government loans following the pattern established for the Bank loan project\. The accompanying table shows the current level of investment in the sewerage sector\. Credit should also be given to early recognition that there would be no second bank loan in this sector, and the resources to sustain the program would have to come from within Israel\. 57\. The environmental and sanitation goals are less subject to being quantified or measured\. They are more a part of the social and cultural aspirations of the general population\. If improvements are desired and valued by the majority, as seems the case in Israel, ways will be found to move in that direction and to sustain the gains made\. With the high economic and education levels in this country, the prospects for this are excellent\. - 22 - CURRENT INVESTMENT LEVEL IN THE SEWERAGE SECTOR THROUGH NSPO (millions except as noted) IS FY 1984 IS FY 1985 IS FY 1986 to 3/31/85 to 3/31/86 to 3/31/87 (Old) IS US$ NIS US$ NIS US$ Billion 1 2 3 4 5 6 Budget Code 57-03 "Local Authorities Sewerage Project" -01 L\.A\.'s & Regional 1\.23 2\.77 3\.37 2\.2 3\.75 2\.50 Authorities - for Project Loans -02 Minorities - (Arab \.10 \.22 \.75 \.5 1\.32 \.88 & Druse Villages) for Project Loans -06 Dan Region Project 2\.07 4\.67 4\.65 3\.0 4\.89 3\.26 -07 Management of NSPO \.14 \.32 \.53 \.35 \.58 \.39 -08 Special fund for -- -- \.30 \.2 \.54 \.36 Assistance Grants -10 Reserve for Cost -- -- \.45 \.3 \.50 \.33 Escalation 3\.54 K_04' 10\.05 9 11\.58 7\.7 Notes for Table\. 1 - Israeli Shekels prior to revaluation of currency on July 1, 1985\. Note this column is in billions\. 2 - Conversion is based on 443 (old) Israeli shekels per US$, which is the average of monthly exchange figures from April 1984 throigh March 1985\. 3 - Although budgeted in (old) Israeli shekels, this shows approximate budget after conversion to new Israeli shekels (NIS) on July 1, 1985 (1,000 to 1 revaluation) and establishing new exchange rate of 1\.5 shekels per US$\. 4 - Exchange rage on 4/1/85 was 864, and on 6/28/85 it was 1,262/IS to US$\. Effective 7/1/85, it was set at 1\.50\. The amounts shown are an approxi- mation; no precise calculation is possible\. 5 - New Israeli shekels, millions\. 6 - Exchange rate during March 1986 mission remains at approximately 1\.5 NIS per US$\. - 23 - 58\. Increasing the country's water resources was the main objective, and this will continue to be a high development priority\. Water supply already has high visibility and high respect in Israel\. Treated sewage effluent is a supplementary water resource of direct economic value\. Because of its relationship with agriculture and the pressing need for more water, the sewerage sector is steadily gaining in visibility and importance\. The acceptance of effluent reuse is steadily growing\. During an interview, the Director General of the Ministry of Agriculture remarked that "5 years ago we had to bring pressure on some potential users to get them to accept effluent, or at least try it; but now they press on us to get the effluent"I V\. EFFLUENT REUSE IN ISRAEL 59\. Wastewater effluent reuse in Israel is impressive in terms of its magnitude alone\. The following table summarizes data available at the time of the PCR mission in 1984\. SUMMARY OF WASTEWATER VOLUMES?/a Total Raw Volume Effluent Sewage Volume Receiving Treatment Being Reused Year mcm/yr mea/yr mcm/yr 1971 actual 130 46 17 1982 actual 200 112 85 1985 projected* 210 179 152 /a PCR, paras\. 4\.02 and 4\.05\. * Assuming the Dan Region mechanical treatment plant to be completed and its effluent (67 mcm/yr) to be fully available for reuse\. 60\. The primary impetus for this impressive development was and still is the need for additional water, especially for agriculture\. The usual motivations for sewage treatment such as sanitation, public health, environ- ment, and protection of water resources are not ignored or overlooked; but it must be recognized that the real driving force here is economic gain\. In Israel, a cubic meter of municipal wastewater which can be diverted from dis- charge to the sea is a cubic meter which can do double duty\. It may be excihanged for a cubic meter of potable water which would otherwise have been used to irrigate cotton or fodder, or it may be used to irrigate an addi- tional crop increment\. Much more is involved here than simply irrigation; rather, it is total water resource management\. In addition to the usual surface and underground fresh water sources, Israel is aiming toward maximum - 24 - possible development of what have been described by Henkin23/ as marginal water resources; namely, surface rainfall runoff, intermittent springe, saline aquifers, agricultural drainage, and recycled sewage effluent, "which today is the most important\." Henkin further predicts that "within the next 15 years, effluent from secondary sewage treatment facilities will constitute 300 million cubic meters per year, about 24 percent of present agricultural consumption\." 61\. P\.L\. 92\.500, enacted by th\.U\.S\. Congress in 1972, called for "zero discharge" as a national water pollution control goal\. This was met with considerable skepticism by many environmental professionals in the U\.S\. How- ever, Israel is on track toward just such a goal and may well reach it by holding and reclaiming all effluent flows during many months of the year\. 62\. The agricultural sector in Israel is well organized and well informed\. The growers generally understand the value of effluent, and special studies have been made to determine its most effective use on various crops\. Fish ponds represent another use for effluent\. Other studies have concluded that there are no inherent health risks in working with properly treated effluent\. One unique advantage of effluent is that it is produced at a fairly consistent rate the year-round; it does not dwindle and fail during dry seasons or extended droughtl In many irrigation systems, water from several sources is blended depending on quality and availability\. Storage reservoirs may receive potable water from Mekoroth when it is available or may be replenished from local wells when groundwater levels permit\. Storm water runoff is prized for its high quality (low salinity), and some systems are designed to collect and store as much surface runoff as possible\. Efflu- ent is most important for irrigation during the long summer dry season\. More and larger reservoirs are being constructed to store a higher proportion of the effluent produced during the entire year\. One example is the complex network of reservoirs and water sources now serving the irrigation needs of the Jezreel Valley east of Haifa\. One new reservoir alone has a capacity of 12mcm; total storage capacity in the overall network is now 40mem\. Most of the effluent from the Haifa mechanical treatment plant is already being reclaimed for irrigation, and soon the effluent being pumped from Haifa to the reservoir system in this valley will reach 24mcm/year\. 63\. The manner in which all these interests can be pulled together is particularly interesting\. A typical but much simplified example is as follows\. A municipality with a sewer system but no treatment facility is polluting a nearby watercourse and causing a considerable nvisance\. Govern- ment is pressing the municipality to provide treatment\. A nearby farmers' organization (kiboutz) needs more water for irrigation\. Enter the NSPO with some money and (more important) with skill and experience in negotiating a 23/ "Integrated Soil Conservation Planning for Developing Marginal Water Resources in Israel", Unpublished paper by Henkin, Ezra, Lanir, Yitzhak, and Romem, Meir, Soil Conservation and Draina&e Division Israel Ministry of Agriculture, 1984\. - 25 - solution which provides something for everyone\. That solution often begins with a pipeline to transport the untreated wastewater to a series of oxida- tion ponds at the kibouts\. The pond effluent will then be delivered to a reservoir capable of storing many months of effluent for irrigation when needed\. Who has provided what and received what in return? The municipality has provided the investment in the construction cost of the pipeline, ponds, and reservoir, normally aided by a loan (not a grant) through NSPO\. The pol- lution problem is solved\. The kiboutz has invested no money but instead has contributed valuable land for the construction of the ponds and reservoir\. Who will operate the treatment system and pay the power costs for pumping? The kiboutz, as an even trade for receiving the effluent; no payment is normally made to the municipality for this water\. Of course, many variations and combinations occur\. Often several cities or villages and several farm organizations will be involved in one project\. The general principle remains the same in which modest funds available from Government are used to leverage surprising amounts of private resources to generate agri-environmental proj- ects from which every participant gains\. 64\. Clearly, Israel has much to offer in technical competence and prac- tical experience in effluent reuse\. As noted in the PCR, 74/ much of this experience was incorporated in Bank Technical Paper No\. 7, to which Shaul Streit, NSPO Chief Engineer, made an important contribution\. An unpublished paper by Ezra Renkin also contains valuable practical information on use of effluent and other non-conventional water resources\. VI\. CONCLUSIONS 65\. The differences between the two divisions or categories of this project (the Dan Region sub-project and all others) are so significant that it is more appropriate to discuss them separately\. 66\. For the group of sub-projects other than the Dan Region, project documents show a time overrun of 3 1/2 years coupled with an investment underrun of 15 percent\. Mitigating factors in this performance were severe inflation, economic austerity, and the 1973 war\. Some delay was experienced in detailed preparation of sub-projects but in many cases the result was a better solution at lower cost; for example, substitution of a simple pond system for a small mechanical treatment plant\. This was the Bank's first experience in financing a large number of small sewerage facilities\. That experience must be considered eminently successful in Israel\. 67\. The main objectives of the project were met in impressive fashion\. Very substantial advances were made in water pollution control and in reclaiming treated sewage effluent for reuse in irrigation\. Although the 24/ PCR, para\. 4\.10\. - 26 - institution-building proved to be much more difficult and time-consuming on the part of both GOI and Bank staff, the overall result was a dramacic improvement in municipal finance administration, audit, and in establishing self-supporting tariffs for the sewerage sector\. Much of this improvement must be credited to the Bank's sustained efforts over a long period of time\. 68\. The sewerage sector has gained visibility and respect through this project\. The typical combination of oxidation ponds followed by large reser- voirs for storage of the treated effluent provides both economical and effec- tive sewage treatment and a valuable source of additional water for irriga- tion\. Considerable skill is demonstrated In leveraging modest loan funds to stimulate construction of these -aulti-purpose projects\. All parties benefit\. The sustainability and momentum of benefits from the loan project is well demonstrated by the very large reclamation scheme currently nearing completion in the Haifa region\. 69\. The Dan Region sub-project has had a different history\. Soon after appraisal in 1972, the initial pond concept was scrapped; and the search began for a treatment process which could produce a very high quality efflu- ent for irrigation rather than potable use\. That search and the accompanying scientific debate and review took years\. It was 1978 before the treatment concept was sufficiently firm so that design could begin and 1980 before construction began\. Design, procurement, and construction all appear to have moved at a rather deliberate pace\. Since all investment for this project since 1981 has come from GOI, budget constraints may have been a contributing factor\. Meanwhile, beach pollution has increased year after year, and some 60mcm per year of sewage effluent is lost to the sea rather than being reclaimed for irrigatio\. 70\. On the positive side, GOI has continued its support of the Dan Region project throughout its long development and in spite of major economic upheavals\. Hopefully, the treatment plant will begin at least partial opera- tion late in the fall of 1986\. - 27 - ANNEX 1 ISRAEL SEWERAGE PROJECT (LOAN 869-IS) List of People Interviewed Shaul Streit Deputy (and in fact) Project Manager, National Sewerage Project Office Yehuda Zitter Principal Engineer, National Sewerage Project Office Ramy Halperin Chief Engineer, Ministry of Health Tovah Guttman Accounting Section, Ministry of Finance Abraham Zakay Project Manager, Dan Region Association of Towns (Sewerage) Gidon Zata Chief Engineer, Dan Region Association of Towns (Sewerage) Jacob Gadish Superintendent of Farms, Yavne Kibbutz Zemach Yishai Water Commissioner, Ministry of Agriculture Ezra Henkin Head, Soil Conservation and Drainage, Ministry of Agriculture Zvi Schein Agricultural Engineer, Haifa Region Water Users Council Bruno Kligher Manager, Haifa Water Pollution Control Plant Adam Avinoam Chief Engineer, Haifa Water Pollution Control Plant Ofer Bakish Manager, Kinneret Authority Moshe Gophen Director, Kinneret Limnological Laboratory Meir Ben-Meir Director General, Ministry of Agriculture Arieh Hecht Read, Local Government Department, Ministry of Interior Zachary Gavish Assistant Chief Engineer, Mekorot Water Company Note: This does not include the names of others met briefly in office visits and on field trips\. -28- ATTACHMENT A CONMENTS FROM NATIONAL SEWERAGE PROJECT OFFICt 202 634 S942 INTftMl feW\. 06/mS 11:3s a1 RIS6 RK-WUi 0650'EST 06/08/06 186 JP - Ni 1: 43 0451 04/08 CABLE 0 TION INTAMBNK64297 342696 TAHAL IL P/4745 4 8/6/86 00 WORLDBANK WUI 64145 ATT\. MR ,OTTO MtAISS ACTING I RE9 LOAN 86P-IS, AND YOUR LETTER OF MAY 15, 1986 AND YOUR TELEX OF JUNE 3\. 1986 DEAR SIR, I WISH TO EXPRESS MY SINCERE APPRECIATION AND THANKS AS TO YOUR THOROUGHLY WRITTEN DRAFT OF THE AUDIT REPORT (PPAR)\. THIS COMPREHENSIVE REPORT (PPAR) MAY SERVE AS AN EVIDENCE TO A REAL BENEPICIAL PERFORMANCE AND AS A LESSON TO BE LEARNED\. I HAVE NO SPECIFIC COMMENTS TO MAKE\. MAY I ADD THAT WE SHALL BE OBLIGED TO SHARE WITH BANK STAFF THE TRANSFER OF TECHNOLOGY AND EXPERIENCE GENERATED THROUGH OUR PROJECT TO OTHER BANK PROJECTS\. REGARDS S\. STREIT DEPUTY PROJECT DIRECTOR INTAMBNK64297 342696 TAHAL ILGOO THEY DISCONNECT Elapsed time 00802332 PRINTED AT 0653 EST 06/08/86 -29- PROJECT COMPLETION REPORT ISRAEL SEWERAGE PROJECT (LOAN 869-IS I\. INTRODUCTION 1\.01 In the 20-year period which ended in 1972 the population of Israel trebled, reaching 3,147,700 as evidenced by the census of May 1972\. This rapid expansion had been accompanied by intensive industrial and agricultural development, placing such heavy demands on the country's limited water resources that almost all the conventional resources were already being utilized\. At the same time, the provision of sewerage and more particularly of adequate treatment facilities had lagged far behind development, resulting in an unnecessary loss of potentially usable wastewater, causing pollution of groundwater and the environment, and creating serious health hazards, evi- denced particularly by the cholera outbreaks of 1970 in the Jerusalem and Gaza areas\. 1\.02 In 1971, the vastewater from about 78% of the volume of urban water supplied was evacuated by sewers, but of this only 35% was treated and 10% reused\. The Israel Sewerage Project for which Loan 869-IS was approved in November 1972, formed the first stage of the Government's national sewerage program to improve and extend sewerage services, to develop the treatment of sewage to a standard suitable for use in agriculture and industry\. The major aims of the project were to substantially contribute to the conservation of the country's water resources, and to alleviate potential health hazards as well as detrimental effects on the tourist industry created by the discharge of raw sewage into stream beds and onto beaches\. By 1982, after the project's completion, the wastewater from 91% of the volume of urban water supplied was sewered, 57% was treated and 24% was reused\. II\. PROJECT PREPARATION AND APPRAISAL Origin, Preparation and Appraisal 2\.01 As a result of the persistently growing number of immigrants in the 1960s and the rapid development of agriculture and industry, the total water use had virtually reached all of Israel's combined surface and groundwater resources\. In 1970 the Government drew up a national program for sewerage itt order to treat and reuse all possible wastewaters and to protect its ground- water resources from mineralization and toxic materials\. Two Bank missions, which visited Israel in July and November 1971, reviewed the feasibility study reports prepared by consultants for about 80 local authorities and reached agreement on the scope of the project, on basic design criteria and on pro- curement procedures\. The appraisal was initiated in April 1972\. The key issues were the responsibilities to be given to the national sewerage projects directorate, the adoption of acceptable procurement procedures and the adop- tion of appropriate sectoral financial policies and relending arrangements\. These issues were solved satisfactorily during negotiations\. Negotiations and Approval 2\.02 The loan was negotiated in October 1972, approved in November 1972 and signed in December 1972\. -30- Main Objectives of the Project 2\.03 The main objectives of the project were: (i) the provision of adequate treatment and reuse of wastewater in order to contribute to the conservation of the country's limited water resources; (ii) the improvement and expansion of the sewerage services in 78 major urban areas to alleviate potential health hazards and pollution of the environment; and (iii) the study of new regulations to be introduced for industrial wastewater disposal\. Project Description 2\.04 The project consisted of 78 sub-projects to extend or improve the sewerage and sewage disposal facilities in 75 local authorities and three regional associations of towns\. Its implementation was to take five years (193-1977)\. The project included the construction of about 500 km of sewers and force mains, about 80 pumping stations and about 40 treatment works\. The communities to be served ranged in size from a few hundred persons in small villages to over 850,000 in the Greater Dan (Tel Aviv) P\.egion\. The population in the project area totalled 2\.3 million in 1972, and was expected to increase to about 3\.5 million by 1985\. 2\.05 The sub-project for the Greater Dan Region was the largest, account- ing for 40% of total project costs and 24% of total population coverage\. 2\.06 It was envisaged at appraisal that development priorities might change during the project implementation and provisions were made for periodic reviews of the scope of the project and for eventual amendments and substitu- tions to the original sub-projects\. Special Conditions 2\.07 Special conditions were specified in the legal documents, as follows: (i) the Government would conclude loan agreements with the Bank Leumi Le-Israel B\.M\. (BLI) and with the Bank Rapoalim B\.M\. (BH) under which it should lend the proceeds of the loan and the Government financing towards the investment projects to BLI and BH, in addition to the financing of expenditures to be lent directly to local authorities by BLI and BR [Loan Agreement Section 3\.02(a) and (b)]\. These financing arrange- ments were concluded; (ii) the Government would employ a Project Director assisted by a full-time Assistant Project Director who would have adequate supporting staff and facilities to fulfil his functions, and who would be responsible for the coordination and supervision of the Project [Loan Agreement Section 3\.01(b), 3\.07(ii) and Schedule 4]\. Such were provided; -31- (iii) the Government would submit to the Bank, for its review and final approval, each sub-project's investment proposal prior to authorizing BLI and BH to make any loan to a local authority [Loan Agreement, Section 3\.03(a)]\. Such proposals were submitted; (iv) the Project Director would complete a thorough appraisal of each sub-project and certify to the Bank that the proposed investment is part of the national sewerage investment pro- gram anA that the local authority, beneficiary of the loan, is fully competent or has entered into a satisfactory con- tract to maintain its sewer system and has adopted sewerage fees and charges to satisfy the requirements of the agreed financial policy [Loan Agreement, Section 3\.03(b)]\. This has been done; (v) the Government would adopt a manual of project operating procedures (Loan Agreement, Section 3\.04)\. Such procedures were adopted; (vi) the Government would cause each local authority to enact by-laws in order to adopt and maintain sewerage fees and charges sufficient to produce revenues which would cover operation, maintenance and debt service on all sewerage activities [Loan Agreement, Sections 3\.05(b)(vi), 3\.06(a)(i) and 3\.06(a)(ii)]\. This requirement has been met and all local authorities have linked their sewerage charges to the national consumer price index since April 1982; (vii) the Government would adopt a training program for the munici- pal staff [Loan Agreement, Section 3\.07(i)]\. This was sub- stantially complied with; (viii) the Government would submit to the Bank, in January of each year, its proposed construction program for its following fiscal year [Loan Agreement, Section 3\.08(b)]\. Annual con- struction programs were presented regularly; (xi) BLI and BH would enter into a loan agreement with each local authority [Loan Agreement, Section 2\.02(c)(iii)]\. Such agreements were signed; (x) the Government would establish a Special Project Fund to record all financial transactions within the framework of the project [Loan Agreement, Section 4\.02(a), (b) and (c)]\. This Special Fund was established\. III\. PROJECT IMPLEMENTATION AND COST Effectiveness and Start-Up 3\.01 There was one special condition of effectiveness, i\.e\. the signing of loan agreements between the Government and BLI and BH, setting out the project -32- financing arrangements\. No delay occurred and the loan was declared effective on April 6, 1973 about 4 months after the Board presentation\. 3\.02 Consulting firms had already been engaged for project management and engineering and no initial delays were experienced in their consulting services\. 3\.03 As a result of (i) the disruption caused by the October 1973 events; (ii) the inflationary trend in Israel and abroad created by the 1975 oil crisis; and (iii) the additional information obtained when the final design of the different sub-projects was completed, the number of municipalities included in the project was reduced from 78 to 51 in October 1975\. Neverthe- less, the financing for the extension of the sewerage and sewage disposal facilities of the communities dropped from the project was still covered under the National Sewerage Plan but project implementation in these communities was postponed to a second phase (1980-82)\. Implementation Schedule 3\.04 During the 1975 project revision the estimated completion date was pnstponed 15 months to March 31, 1979\. In fact, except for the Greater Dan Region sub-project, the revised project was completed by mid 1981, i\.e\., three and a half years later than foreseen at appraisal\. This time overrun was mainly caused by changes introduced in the final design, by additional land requirement due to the substitution of conventional treatment plants for stabilization ponds, and by local financial constraints in a period of very high local inflation\. 3\.05 The Greater Dan Region sub-project consists of two pumping stations, trunk mains and interceptors, and treatment works\. The status of its imple- mentation can be summarized as follows: (i) the trunk mains and interceptors were completed in November 1981 but have yet to be commissioned; (ii) the pumping stations are projected to be completed by March 1985 (Basa) and February 1986 (Reading); however, part of the sewage flow can be pumped from the existing pumping facilities at Reading; and (iii) the commissioning of the treatment works, for which construc- tion started in 1978, is expected to take place by the end of 1985\. The delays in the implementation of the Greater Dan Region sub-project may be attributed to (a) protracted evaluation of numerous alternative solutions for the ultimate reuse of the effluent and for the protection of the aquifers which resulted in design changes; (b) partly inadequate subproject management; and (c) budget constraints\. The delay in the completion of the sewage treat- ment works leaves substantial investments in trunk mains and interceptors unutilized and seriously postpones the reuse of valuable water resources\. -33- Procurement 3\.06 Standard tender documents acceptable to the Bank were initially prepared by the National Sewerage Project Office of the Project Director (PD)\. Tender, bid evaluation and contract documents were prepared by the consultants engaged by the different communities and were subject to review by the PD\. All procurement was undertaken on the basis of international competitive bidding in accordance with the Bank's guidelines for procurement\. Local authorities and the PD had no difficulty in complying with these guidelines and procurement was accomplished in a satisfactory manner\. 3\.07 During negotiations agreement had been reached that contracts for civil works should be combined as far as feasible for groups of sub-projects, so that each contract would have a minimum estimated value of not less than US$ 250,000 equivalent\. This proved impracticable and the Bank therefore agreed to contracts being awarded on a sub-project basis\. This resulted in a far larger number of contracts than originally envisaged\. All civil works contracts were awarded to local contractors while major equipment supply contracts were awarded to foreign firms or trading agencies\. Project Cost 3\.08 Annex 1 shows by sub-project their estimated and actual costs in Israeli pounds (IE) and US$ equivalent using average annual conversion rates\. These costs are summarized below for the Greater Dan Region and for other municipalities combined\. Estimate Actual % Increase At Appraisal Revised (1975) (Decrease) ----------US$ (Million)------------ compared to compared to appraisal revised estimates estimates Greater Dan Region 29\.8 39\.1 58\.31' 95 49 Other Municipalities 45\.5 48\.9 38\.4 (16) (22) TOTAL 75\.3 88\.0 96\.7' 28 10 The substantial increase in the cost of the Greater Dan Region sub-project stems mainly from design changes and larger than anticipated price contingen- cies because of significant implementation delays\. The combined results for the other municipalities have been favorable\. Implementation delays and the related cost increase have been much less than for the Dan region\. There have been a great many instances where costs were actually reduced through the constant search and application by the project management, the municipalities and the farmers of the simplest possible technology compatible with wastewater reuse\. 1/ Includes US$ 15\.7 million of expenditures to be incurred from December 1981 to December 1985 to complete the Dan Region's treatment plant partly financed by the Bank\. -34- Disbursements 3\.09 The forecast and actual disbursements are given in the Basic Data Sheet\. The slippage in the actual disbursements reflects the implementation delays discussed in paragraphs 3\.04 and 3\.05\. Performance of Consultants, Contractors and Sub-Project Borrowers 3\.10 The engineering consultants who, under the supervision of the Project Director, assisted the local authorities in the design of the sub-projects were competent, and the design criteria and approaches which they proposed were generally followed\. However, design changes were introduced in some sub- projects following discussions between local authorities and the project office arising out of the fact that, the project having been appraised on the basis of feasibility studies, the detailed engineering designs could not have been agreed at the outset with the local authorities\. 3\.11 Project implementation involved a large number of local civil works contractors\. Overall t\.te quality of work was very satisfactory\. Equipment suppliers also performed well and met generally expected quality standards\. The staff of the local authorities (sub-loan borrowers) and the project management performed very well with the exception noted in paragraph 3\.05 for the Greater Dan sub-project management\. IV\. PROJECT OPERATING PERFORMANCE Introduction 4\.01 The present evaluation of project operating performance focuses on; (i) the achievements in the extension of sewerage and sewage disposal systems; (ii) the achievements in wastewater reuse; (iii) the operational experience; and (iv) the expertise gained in wastewater stabilization ponds operation\. Estimated and actual data on the different sub-projects are shown in Annex 1\. Sewerage and Sewage Disposal 4\.02 Population data and actual achievements in the provision or improvement of sewerage services and sewage disposal facilities have been as follows: (i) the combined 1982 population of the local authorities included in the project totalled 3\.62 million as compared with the 1975 revised estimate of 4\.18 million; (ii) in 1971 about 78% of the total population was served by public sewage systems, and by 1982 well over 90%; and (iii) in 1971 about 46 million cubic meters (MCM) or only about 35% of the total annual sewage flow received any treatment; by 1982 112 MCM or about 56% of the total flow was treated; and by 1985, after commissioning of the Greater Dan Region sewage treatment works, the sewage treated will amount to about 179 MCM or about 85% of total flow\. -35- 4\.03 The project objective to expand sewerage and sewage disposal facili- ties has been largely achieved\. Wastewater Reuse 4\.04 At the time of appraisal Israel was already using its total fresh water potential of about 1,500 MCM per year\. Additional water for the fast growing industrial and agricultural sectors could only come from water conser- vation, wastewater reuse or costly water desalination\. The project has helped Israel to develop the sewage treatment technologies most appropriate to its particular needs and circumstances\. 4\.05 Wastewater reuse for irrigation has evolved as follows: (M) while in 1971 only about 17 MCM or about 30% of the treated effluent was being reused, by 1982 the total volume of waste- water reused had reached 85 MCM\. The rural communities were reusing 7 MCM, the urban communities 50 MCM and privately owned systems 28 MCM\. It is estimated that the total volume of wastewater reused would increase to 152 MCM, or about 85% of the treated sewage with the commissioning of the Dan Region treatment plant; and (ii) between 1971 and 1982 the overall potential of usable water increased by about 6%, and it is estimated that it will have increased by about 10% by 1985\. 4\.06 In 1982 a total of about 8,800 ha, of which 77% for cotton, 7% for fodder, 7% for citrus groves, 4% for orchards and 5% for field crops were irrigated with treated effluents\. The treated effluents from the Dan Region will be infiltrated into the ground, blended with groundwater and subsequently extracted for use for potable water as well as for irrigation\. Operational Experience 4\.07 The sewer systems are operated by the local communities while the sewage disposal works are operated either by local communities, farmers organizations (Kiboutz), contractors or Mekoroth (the National Water Company)\. In a situation of scarce water resources such as prevails in Israel, the economic value of treated effluent is high and not surprisingly the systems are generally properly operated and maintained\. 4\.08 The Water Commissioner ensures that the sewerage and sewage disposal works are operated and maintained in accordance with sound public utility standards and collects data on quantities and strength of untreated and treated sewage\. The amount of data collected on effluent quality has been sparse but satisfactory for its present use\. 4\.09 It is too early to assess the eventual functioning of the Dan Region sewage treatment and disposal works\. -36- Wastewater Stabilization Ponds 4\.10 The project has provided valuable information on the design and functioning of stabilization ponds and on effluent reuse, with wide applica- bility not only in Israel but also in a number of other countries with similar conditions\. Much of the experience gained in Israel was incorporated in Bank Technical Paper No\. 7 entitled "Notes on the Design and Operation of Waste- water Stabilization Ponds in Warm Climates of Developing Countries\." This report evaluates operational experience for waste stabilization ponds from different countries\. Cost comparisons for alternative treatment processes show that where land is available stabilization ponds may be the most economi- cal and feasible solution\. V\. FINANCIAL PERFORMANCE Operating Results 5\.01 The local authorities maintain two budgets for their sewerage activi- ties: an "ordinary" budget which records recurrent annual revenues and expenditures, and an "extra-ordinary" budget which accounts for receipts and payments for development projects\. Up to 1979, aggregate figures for the ordinary budgets of the local authorities included in the project showed deficits\. This was due mainly to the fact that, although sewerage fees were revised annually in accordance with the sewerage fees covenant [para\. 2\.07 (vi)], revenues were eroded by rapidly increasing local inflation which has averaged 46% per year during the period 1974-1979, and reached 107% in 1979\. However, in 1980-1981, 22 out of the 51 local authorities involved in the project passed by-laws to link their sewerage fees to the consumer price index and adjust their tariffs automatically every six months\. Finally, in April 1982 this linkage was extended to all local authorities and the overall balance of their ordinary budget was restored\. Financing Plan 5\.02 The project was financed entirely with borrowings by the local authorities\. The Central Government provided 45% (appraisal 30%), the Bank 37% (appraisal 40%) and two local banks 18% (appraisal 30%)\. In August 1978, the Government and the Bank agreed to terminate the participation of the two commercial banks in the funding of the project mainly because these banks were insisting on obtaining guarantees from the constituent municipalities of the Dan Association on the grounds that the Issociation had no independent sources of revenue\. The transfer of the sewerage fees levied by the municipalities to the Association required legal arrangements which meant likely administrative inconvenience and additional implementation delays of the Dan Region sub- project\. The Central Government thus agreed with Bank concurrence to provide the remaining project funding\. Estimated and actual project financing (in current value) are as follows: -37- Estimated at Actual Estimated at Completion appraisal (1973-1981) of Dan Project US$ % us$ % us$ % --million-- --million-- -------million-------- IBRD 30\.00 40 29\.71 37 29\.71 31 Government 22\.67 30 36\.77 45 52\.47 54 Commercial banks 22\.66 30 14\.51 18 14\.51 15 73\.33 100 80\.99 100 96\.69 100 Consumer Charges 5\.03 As pointed out in para\. 5\.01, local authorities maintain (i) sewerage connection charges based on land area and floor space of buildings to cover their debt service on their investments and (ii) sewerage fees levied on water consumption to cover their operation and maintenance expenditures\. The con- nection charges and sewerage fees were revised annually throughout the period 1974-1979 and gradually linked and adjusted every six months to the national consumer price index\. By 1981, all local authorities had linked their tariffs to the consumer price index\. The level of charges and fees is currently adequate\. Financial Covenants 5\.04 The debt service coverage covenant was met throughout the 1974-1981 period, while the operation and maintenance expenditures coverage covenant was only met after 1979 when sewerage fees began to be linked to the national con- sumer price index\. Financial Position of the Sewerage Loans Fund 5\.05 The Bank loan was pooled with loans from the central Government and from two commercial banks in a Central Sewerage Loans Fund created specifi- cally for the project in April 1973\. The appraisal and actual financial statements of the Central Sewerage Loans Fund are shown in Annex 2\. 5\.06 The financial arrangements agreed upon called for a 0\.75% fee to be paid by the local authorities to the Government on the Central Government and IBRD loans\. This fee was intended to compensate the Government for carrying the risk of inflation on the loans from the two local commercial banks (these loans were linked to the cost of living index) and the foreign exchange risk on the Bank loan\. This fee proved to be grossly insufficient as a result of the dramatically fast rising local inflation (the cost of living index moved from 667 in 1973 to 50,032 in 1982, or an average annual increase of nearly 62%) and the constant deterioration of the Israeli pound against foreign currencies (52% per year on average against the dollar during the period 1973- 1982)\. The Government ended c\.p disbursing IE 950\.52 million to the Central Sewerage Fund while the 0\.75% iee generated only IE 89\.46 million\. In order to decrease the burden of its previous undertakings, the Government decided in -38- 1979 to link its own loans to the cost of living index and to shorten their repayment period to 20 years (previously 25 years) including a grace period of 5 years\. In 1981, the repayment period was further reduced to 13 years including 3 years grace\. As a result, the municipalities' debt service is expected to increase substantially from 1984 onwards\. Sewerage fees and charges will be affected accordingly (para\. 5\.03)\. VI\. INSTITUTIONAL PERFORMANCE Management and Organizational Effectiveness 6\.01 The project management and organization met appraisal expectations in all respects\. The National Sewerage Project Office (NSPO) created in 1973 is responsible to the Water Commissioner (Project Director) and to the Inter- Ministerial Sewerage Committee for the coordination and supervision of every sewerage project implemented in the country with the exception of the Dan Region administrated by a separate Project Unit also responsible to the Water Commissioner\. NSPO was instrumental in (i) arranging for adjustments to, and substitutions of sub-projects, (ii) ensuring that the appropriate tender and bid evaluation were followed and (iii) advising the local authorities on tech- nical operation aspects of the sewerage facilities, when implemented\. 6\.02 The Ministry of the Interior which has the statutory power to approve the local authorities' development plans and borrowings, approved expedi- tiously the project sub-loans on the basis of NSPO's recommendations and carried out an efficient administrative and financial control of the local authorities\. 6\.03 Finally, the consultant, designated as Project Engineer, coordi- nated and supervised, under the overall surveillance of the Project Director, the work of the consulting firms employed by the local authorities for the preparation, procurement and supervision of construction of the sub-pro- jects\. Their performance was excellent\. Staffing, Training and Development 6\.04 From the inception of the project, NSPO has been adequately staffed with four engineers and five staff assistants, and additional staff were recruited as required by the local authorities for the operation and main- tenance of the facilities constructed under the project\. The project helped to focus public attention on the importance of sewerage, both for environ- mental and water conservation purposes\. This in turn induced an upgrading of operating standards at the municipal level\. Operation and maintenance of the smaller treatment works were taken over by the ultimate users of effluents, i\.e\. Mekoroth (the National Water Company) and the farming communities (Khiboutz)\. For the larger treatment works municipal staff received on site training by the contractors and/or consultants\. In 1974 a technical school for the environment was created by the Government to train municipal sanitary and environment technicians\. In 1977 a comprehensive accounting training program was adopted for the municipal treasurers and senior accountants, and all senior municipal administrative staff and accountants attended at least one of the ten accounting seminars\. Since then these accounting seminars have been repeated annually\. -39- Billing and Collectiou 6\.05 Billing and collection are made either by Mekoroth (the National Water Compary) or by the local authorities\. Since April 1980 uncollected bills are linked to the consumers' price index and bear interest at 4% per annum\. After a slow start in the billing and collection of the sewerage fees and charges in the period 1973-1977, efforts were intensified and this func- tion is now performed efficiently\. Accounting 6\.06 During the period 1973-1976, the preparation of municipal accounts was subject to increasing delays and inconsistencies\. Audit reports covering this p\.-riod revealed weaknesses in internal control and erroneous records resulting in misallocations in the sewerage accounts which were kept separately from the general municipal accounts, a situation caused mainly by staff constraints and lack of training\. The Bank's emphasis on remedial actions was followed by various measures including the creation of a new accounting and auditing advisory unit in the Ministry of the Interior\. In March 1977, this unit prepared a detailed instruction manual for accounting and financial reporting to be used by the local authorities\. Municipal treasurers and accountants were trained in using the new set of accounting instructions and the external auditors of the local authorities agreed to assist in the upgrading of the municipal accounting function through a program of interim reviews\. 6\.07 From 1978 onwards, substantial improvements were noted in the munici- pal accounting function\. The presentation of municipal accounts and financial reporting have been standardized, provisions for inflation accounting intro- duced and sewerage related accounting transactions recorded properly\. How- ever, the present system is still maintained on a modified cash basis, i\.e\. revenues recorded on a cash basis while expenditures are maintained on an accrual basis\. The Ministry of the Interior is preparing an accrual account- ing system to be progressively introduced during FY 1985 and 1986\. Audits 6\.X8 The introduction as a result of the project of professional audit of municipal sewerage accounts, at first with some resistance on the part of local authorities, has had a very significant spin-off effect on all other municipal services\. Since 1974, about sixty external audit firms have been appointed every year by the Ministry of the Interior's Audit Committee to conduct audits on all municipal accounts in as many as 105 municipalities, thus going way beyond the project's requirements and creating an important urban development feature\. However, because of delays in the preparation of the municipal accounts and the lack of standardization in the presentation of these accounts, until 1977, audit reports reached the Bank with considerable delays\. Such delays are expected to be gradually reduced since the auditors are carrying out systematic interim reviews of the municipal accounts (para\. 6\.06) and all municipal accountants have been satisfactorily trained (para\. 6\.04)\. -40- Institutional Reforms 6\.09 The creation of NSPO (para\. 6\.01) and of the accounting and auditing advisory unit within the Ministry of the Interior (para\. 6\.06) have proved to be very efficient technical, managerial and administrative tools to control sector activities in the highly decentralized economy of Israel\. The sewerage project not only helped to set up or strengthen a number of institutions but also to improve the sector development process, including the establishment of closer liaison between Government departments, clearer definition of develop- ment objectives and financial support to the sewerage sector, promotion of wastewater reuse for irrigation through the direct involvement of the final users in the operation and maintenance of the sewage treatment facilities, as well as closer relations between the central administration and the local authorities\. VII\. BANK PERFORMANCE 7\.01 The Bank was instrumental in the creation of NSPO and the accounting and advisory unit of the Ministry of the Interior, and has continued to assist in their development\. 7\.02 * The project was supervised regularly at about seven and a half month intervals\. The missions' reports highlighted issues in project implementation and were followed by letters to the Government urging corrective actions when required\. The Bank was flexible in agreeing to modifications in the project scope and financial arrangements\. VIII\. PROJECT JUSTIFICATION Background 8\.01 At the time of appraisal, the project was justified mainly on the basis that it would meet the following objectives: (i) the proposed works would protect and conserve Israel's limited water resources; and (ii) the country's environment and public health would be improved by reducing pollution and by providing sewer systems and treatment plants to serve the growing needs of every significant Israeli urban community participating in the national sewerage program\. These objectives have been met\. Water Conservation and Reuse of Treated Effluents 8\.02 As a result of the implementation of the National Sewerage Project the overall water potential (1500 million m' per annum) was increased by 6% between 1971 and 1982 and is expected to be augmented by about 10% by 1985 (about 152 million m3) with the commissioning of the Greater Dan Region treatment facilities\. Furthermore, the national sewerage program gained very strong public support particularly from the farming communities and the sea- side local authorities when it was shown to reduce substantially the quanti- ties of untreated or inadequately treated sewage which was discharged to wadis, rivers and beaches while offering alternative supplies of water for irrigation at a reasonable price\. -41- Improvement in the Sewerage Sector as a whole 8\.03 While the project as revised in 1975 provided sewerage services and disposal facilities only to the 51 local authorities considered to have the highest priority in sewerage works, the National Sewerage Program, controlled and coordinated by the Sewerage Interministerial Committee, involved every municipality or group of municipalities encountering problems of poor sanitary facilities, potential health hazards, possible restrictions on development and deterioration of their water resources\. It is now common practice for the National Sewerage Project Office to appraise individual projects prepared by the consulting engineers of the local authorities and make appropriate recom- mendations to the Ministry of the Interior to secure financial arrangements and ensure adequate supervision\. This system is well organized and efficient\. IX\. CONCLUSIONS AND LESSONS LEARNED Conclusions 9\.01 The project has been very successful\. Its major achievements can be summarized as follows: (i) the sectoral approach of the project was technically and administratively well conceived and represented the most feasible solution; (ii) the primary objectives of providing sewerage and sewage dis- posal and reuse facilities to protect and conserve the limited water resources and to reduce pollution and its related health hazards have been achieved; (iii) the country's project evaluation, implementation and monitoring capacity have improved through the creation of the National Sewerage Project Office and the accounting and auditing advisory division in the Ministry of the Interior; (iv) the adoption of self financing policies in the sewerage sector has encouraged local authorities to devise least cost solution projects and to develop cost efficient operation and main- tenance practices; and (v) the provision of sewage disposal and reuse facilities consti- tutes a major environmental improvement and a significant supplementary source of water, particularly for irrigation\. Lessons Learned 9\.02 This project confirms the importance of adequate project preparation\. The project was appraised on the basis of feasibility studies which resulted, as foreseen during appraisal, in revisions to the project scope during imple- mentation\. - 42 - A~ i Page 1 of\. 7 åni 869-IS Caaunities and Wmks Incb in Project as -Awpaiseca L evised(1975Wiand Actu&Cl P ltion Total Cost Re\.No\. Sb-Project 1971 195 U rief Description of Sub-Project (thousanda) A\.1 Afula 1\. 18,000 25,000 1,638 390 Sme systen to be otnded and tratn plant eiqnde\. 2\. - - 1,136 189\.3 3\. 16,900 22,300 1,3m 217 (Sier systais in varicul zenea) A\.2 Akko 1\. 34,000 6000 1,610 383 Separatia of ccebined seer sys, ~aying of am a, englargment of paTig stations and force min\. 2\. - - - - 3\. (33,900) (37,900) - - (PS implmented with local funds) A\.3 Karmi'el 1\. 4,000 12,000 2,348 559 Installation of am~r\. 2\. - - 4,370 728 3\. (3,300) (20,700) (1590) (739) (Se~ge diepoual nin) A\.4 ma'alot 1\. 5,500 1800 2,126 506 Aditional a8~r, new pping station Tarshiha and force =ina\. 2\. - - - - 3\. (5,100) (8,100) - - (nplemnted with local fuda) A\.5 igdal Ha'eq 1\. 9,500 15,00 1,229 293 Nem biological stabilitatim ponds and 2\. - - 3,923 854 3\. (8ß00) (14,900) (19,300) (822) (Collector, force Muina, twO paping stations) A\.6 hariyya 1\. 23,000 38,000 4,515 1,075 Pri~ay treatment plant, puping statifo and am mstfall\. 2\. - - - - 3\. (21,900) (29,700) (3,17) (123) (No cmntruction vrka undern> A\.7 Naz~ret 1\. 35,000 60,000 2,523 601 NeM trPanit pIat ad expnsic of e sytm\. 2\. - - 1,341 223\.3 3\. (34 00) (46,900) (2,263) (236) (Deep reservoire ad seaer) A\.8 N~aet 'Illit 1\. 16,000 40ß00 103 453 Cannection to A7 tra~mme plent and e~p'aicn of amer aysten\. 2\. - - - - 3\. (1500) (25,700) - - (Iplented with local fda) A\.9 Qiryat fmn~ 1\. 15,00 30,00 1,133 270 Expanion of amer naturk and tratnent plant\. 2\. - - 5,242 873\.6 3\. (15,100) (16 00) (591) (39) (~éabilitatim of treau nt ka) A\.10 ~ieer'am 1\. 11f600 28,000 1,743 415 S~er net~xk plus c~nnectio to regi~nal eystem\. 2\. - - 5ß99 450 3\. (1100) (18,00) (4825) (416) (Nain ser utfall) A\.11 Tiberias 1\. 2500 37,00 3,037 723 Caletion of amer ~ ystw witk\. puping etations and force in, and enlargemt of treat t plant\. 2\. - - 6,123 1,020\.5 3\. (23ß00) (29 O0) (7,711) (940) (As apraised xcept treatmentiks) A\.12 Zeist 1\. 13,500 2000 3,134 746 Constructio of a9~a, sumping tation, force nin and treatment plat\. 2\. - - 16,552 2,758\.7 3\. (13,100) (17,200) (61,570) (1 J47) (abut as appraised) A\.13 ffiw1ni 1\. (2,00) (2,500) (5A80) (345) (Expe~nsi of amer systn and treatmnt p~at)\. 1hia si>-project has ben aded\. 2\. - - 3,104 5,173 - 43 - Page 2 of 7 Populatian Total Cost Fif\.No\. Sub-Project 1971 1965 I M 11 Brief Description of Sub-Project (ta ~ ) B\.1 Binyaia 1\. 3,000 5,000 1,52Q 364 Construction of m 8urs, puffirg stations and force Ming\. 2\. - - - - 3\. (2,500) (3,000) - - (Not inplemented) 8\.2 Haifa gio 1\. 320,000 500,000 21,146 5,035 F Jpansio of ne~tok of delivery nins and treatmt plant\. 2\. - - 51,896 8,649\.3 3\. (323,400) (404,400) (61,140) (6,866) (About as appraised) B\.3 hadera 1\. 37,000 51,500 4,127 983 New treamt plant, mein puping station, force uin and seue\. 2\. - - 20,610 3,440 3\. (30,700) (40,800) (574,166) (5,815) (As appraised plus collectors) 8\.4 Haita 1\. 230,000 330,000 1,706 406 Extenim of mm neturk\. 2\. - - 3,446 574\.3 3\. (217,100) (230,600) (16,840) (707) (Sewer netork, expansion of piping statim, force nin) B\.5 Nler 1\. 9,700 18,000 585 139 Aditional eners\. 2\. - - 1,929 321\.5 3\. (9,400) (9,500) (1,381) (182) (Collector and outfall agner) B\.6 or 'Aqiva 1\. 6,800 12,000 2,156 513 Censtruction of euers, pumpirg station and nev treatmnt plan\. 2\. - - - - 3\. (6,350) (8,500) - - (bplaanted with local funds) B\.7 Pardes Hanna 1\. 13,400 18,000 1,091 260 Nur pumping station, force wain am treat plant\. 2\. - - - - 3\. (13,400) (16,600) - - (Iuplemented with local funds) B\.8 Qiryat Ata 1\. 30,000 40,000 1,338 319 Constructim of ~sers and force min\. 2\. - - 5,365 894\.1 3\. (25,600) (34,700) (13,802) (557) (As appraied plus extension of puping statim) B\.9 Qiryat Bialik 1\. 16,000 29,000 768 183 Construction of murs, force umin and puping station\. 2\. - - 1,115\.0 319\.2 3\. (14,600) (35,500) (1,640) (254) (About as apwaisd) B\.10 qiryat ~otskin 1\. 16,200 29,000 1,157 275 Construction of sewers, pupirg station and force wain\. 2\. - - - - 3\. (15,200) (29,400) - - (hoplemnted with local funds) B\.11 Qiryat Tiv'n 1\. 12,000 14,000 711 169 Constuction of mars, puping statim and force win\. 2\. - - 1,682\.0 280\.3 3\. (9,850) (11,500) (2,690) (230) (Sears only) 8\.12 Qiryat Ya= 1\. 18,300 30,000 892 212 Constructim of se~ra, puffing station and force win\. 2\. - - - - 3\. (17,200) (33,300) - - (Iplemeted with local funda) B\.13 Tirat Kurmal 1\. 14,000 18,000 777 185 Constructim of pffing station and force win\. 2\. - - 2,544\.0 424\.0 3\. (13,300) (16,300) (22,8W) (679) (As appraised plus win collector) B\.14 Zikren 1\. 6,000 10,000 1,342 320 Constructim of additional , Ya'am paping station, settling pand am sea outfall\. 2\. - - 932 155\.3 3\. (4,480) (5,200) (6,226) (306) (Sners and southern main collector) B\.15 R asim 1\. (2,630) (3,900) (1,119) (161) (Sn and collectorå)\. 1his sproject has been added\. 44-~ i Page3 ot 7 PiNatiai Total Coat Re\.h\. ~ieProjet 1971 1985 is "f Deciptim of ub-Project (dø~mi) C\.1 De'er Ya'aq 1\. 4,200 6,500 1,391 331 New asers, j*pin station and force Min\. 2\. - - - - 3\. (4,100) (4,800) - - (Igplemented with ~eas bu~us) C\.2 Det aU2mdi 1\. 11,W0 25,00 2,382 567 Canstruetion of seer and nø trement plant\. 2\. - - 8,715 1,455 3\. (10,200) (13,600) (10,120) (931) (As appraied • ain collect~r and Pfi station) C\.3 Even Y~hua 1\. 4,000 7,000 1,007 240 New sus, paig statiou, force mains ani stabiliation pnds\. 2\. - - 2,784 464 3\. (4,000) (4,6W) (3,230) (287) (About as appraised but without pouds) C\.4 Ga 1\. 6,000 8,000 2,758 657 lnplemtatio øf ecaplete sMage facilities" seer net~k, paping statin and tret~ plant\. 2\. - - 11,438 1,905 3\. (5,200) (6,900) (57,270) (570) (Collectrs, min paping station and førce min) C\.6 Bod Unharu~ 1\. 13,000 18,000 911 217 M[tenain of seer nadk ad epansiaon af trust plant\. 2\. - - 2,629 438 3\. (12,700) (22,300) (1,227) (195) (Sewere, colletor ad tretmt plant shared with Jefar Sara) C\.7 getar Sava 1\. 25,000 40,000 1,872 446 Extensia to e traant plt and plant for tret of industrial efflufet\. 2\. - - 4,859 \. 813 3\. (24,400) (48,200) (16,089) (619) (Semere, trete plant shared with god Rasharn) C\.8 ld 1\. 30,000 51,000 3,566 849 Conpletim of seer system\. 2\. - - 1,653 258\.8 3\. (29,300) (43,100) (1,420) (225) (Seere, collectors and aeratrs in tr nnnt ~ada) C\.9 Ayya1 Regio 1\. 141,000 232,OW 15,130 3,602 eean1 achal e for the collection ad cem an of effluente and r~ sege, incle puping stations, force mi and tren~ ks\. 2\. - - 6,335 1,105\.8 3\. (N/A) (M/A) (83) (14) (Net inplemeted, part of af e to Dan ~eeim part to exstire irrigation ares) C\.10 mem Ziyenna 1\. 12,500 15,00 1,836 437 New seer and [tension to paping station and tresmont plant\. 2\. - - - 3\. (12,100) (15,900) - - (lapløent with local fbnds) C\.11 Netanya 1\. 67,000 110,000 9,697 2,309 Etnsim f seer nfemm k and constructi of pfng stations and 2\. - - 12,083 2,013\.8 3\. (65,400) (110,300) (23,167) (2,521) (About as appraised) C\.12 Petah Tique 1\. 85,000 110,000 4,456 1,061 Aditimal seer\. 2\. - - 3,591 598\.5 3\. (83,200) (134,000) (4,386) (527) (Collectora and sewere) C\.13 Qiryat 'Eqron 1\. 4,200 7,000 1,025 244 Construtim f seere\. \. 2\. - - 1,147 191\.1 3\. (4,100) (4,200) (1,090) (136) (Seere but les than appraised) C\.14 Ra'ananna 1\. 13,000 15,00 710 169 Constructian of pæping station, additinal seer, M1difi~aian of min pping statien i mi enlar~t of tr ~ plant\. 2\. - - 3,335 558 3\. (12,700) (46,60) (9,2Z) (381) (Trøsat plant amd paping satio c\.15 Ranl 1\. 34,0 55,000 1,349 321 Etsicn of seer s5etan ami ppitg station\. 2\. - - 1,354 225 3\. (30,800) (45,400) (1,A ) (110) (Colletr) Populati* Total Coast Ref\.No\. Sub-Project 1971 1985 is Us$ Brief Descriptim of Bu:-Project (thmuas) C\.16 Rehovot 1\. 37,000 55,000 3,872 922 Eaim of ser system and costrutiw of pping stations and foc aia 2\. - - 2,806 467\.3 3\. (36,600) (78,300) (1,859) (202) (As appraised exept texnsi of seers) C\.17 Ri~ho la Zim 1\. 60,000 90,000 6,491 1,545 Etai0 of ser systen and constructio of pumping statins nd fmc niu\. 2\. - - 18,120 3,021\.5 3\. (46,500) (117,600) 30,080 1,557 (Force umin and min coll~tnr connecting to Dan Regin) C\.18 Rosh Ha'ayin 1\. 12,000 15,000 1,460 348 Cnstructio of s rs\. 2\. - - - - 3\. (11,600) (11,800) - - (Nat implented - to be cmnæted to the Dan Regin) G\.19 Tel Man 1\. 3,500 5,000 1,100 262 Smeers, puping atim, force sm and treItn plant\. 2\. - - 5,164 860 3\. (2,900) (2,900) (4,112) (498) (About as appraised) C\.20 Yane 1\. 10,000 16,000 1,435 342 Treahm~t plant and mdiictæ to pupig station and face min\. 2\. - - 4,775 795 3\. (10,100) (14,700) (6,342) (654) (Treat~nt plant, force smin and disposal =uin) - 46 - V;F7of 7 Pqplation Total Cost Ref\.No\. Sub-Project 1971 1985 I Brief Description of Sub-Project (thousands) D\.1 Azor 1\. 5,500 10,000 521 124 Nw sanrs, pupig station and force tin\. 2\. - - - - 3\. (5,250) (7,100) - - (Implaented with local funds) D\.2 Bat Yam 1\. 90,000 120,000 2,810 669 Additional saeers, new pumping stations and force msins\. 2\. - - - - 3\. (83,500) (142,200) - - (IMpleented outside the project) D\.3 Bene Beraq 1\. 75,000 100,000 2,035 485 New s , pMping stations aN force asins\. 2\. - - - - 3\. (72,100) (99,000) - - (Implemnted outside the project) D\.4 Greater Dan 1\. 870,000 1,315,000 125,291 29,831 Extension of regional sewers, pumping stations and treatent plant\. 2\. - - 253,018 42,170 3\. (955,900) (1,193,800) (3,085,561) (42,560) (About as appraised) D\.5 Giv'atayim 1\. 47,000 67,000 611 145 Capletion of seer network\. 2\. - - - - 3\. (46,000) (47,700) - - (Ipleimented with local funds) D\.6 Herzliyya 1\. 40,000 55,000 3,713 884 Extensions to seer network anl treatmut plant\. 2\. - - 14,440 2,410 3\. (38,500) (69,200) (14,765) (1,892) (Coqmonents as appraised but more extensive) D\.7 Holon 1\. 100,000 160,000 2,756 656 Constructicn of sewers and force main\. 2\. - - - - 3\. (88,500) (144,800) - - (lplenented with local funds) D\.8 Or Yehuda 1\. 13,000 23,000 2,600 619 Extensions to sewer natuark, pumpir station amd treatment plant\. 2\. - - 2,541 423 3\. (12,300) (21,400) (100) (8) (No ConstrUCtiM Works uMertaken) D\.9 Qiryat Ono 1\. 17,500 25,00 2,743 653 Extension of seer systen and construction of pmping station and treatment plant\. 2\. - - 7,256 1,210 3\. (14,900) (23,800) (1,497) (224) (Campnents as appraised but less extensive) U\.10 anrat Gan 1\. 135,000 165,000 1,645 392 Constructim of aeurs\. 2\. - - - - 3\. (115,500) (118,500) - - (Inplemented with local funds) D\.11 eat masharm 1\. 19,000 35,000 3,082 734 Additional sears ant pumping facilities and audificatiM Of existing treatmInt plant\. 2\. - - 3,274 544 3\. (17,600) (36,700) (3,431) (495) (As appraised but no sears) D\.12 Tel AviV-Yafo 1\. 385,000 530,000 5,051 1,203 Construction of sears and ppin stations aml force mains\. 2\. - - 7,604 1,270 3\. (384,000) (321,400) (7,406) (869) (About as appraised) - 47 - Page 6of 7 Populatiom Total Cost Ief\.No\. Sub-Project 1971 1985 Brief Description of Sub-Project (thousands) E\.1 'Arad 1\. 6,500 20,000 1,360 324 Construction of sewers, pmping station, force main and treatent plant\. 2\. - 3,527 588 3\. (5,450) (14,600) (3,100) (436) (Main collector and treatment plant) E\.2 Aaidod 1\. 42,000 95,000 5,019 1,195 Construction of sewers, pumping stations, force mans ami treatment plant\. 2\. - - 2,725 455 3\. (37,600) (74,200) (2,819) (420) (As appraised but except treatent works) h\.3 Ahqelon 1\. 40,000 80,000 3,198 761 Construction of sewers aml pXping stations and udifications to treatment plant\. 2\. - - - - 3\. (40,100) (56,400) - - (Implemnted with local funds) E\.4 Be'er Sheva' 1\. 80,000 140,000 6,518 1,552 Construction of aeers, pimping station, force sain and extension to treatwent plant\. 2\. - - 9,208 1,535 3\. (72,400) (119,000) (8,330) (1,171) (Main collector, ptuping 3tation and force main) E\.5 Dimona 1\. 23,000 50,000 1,341 319 Construction of new sewers, pasping station ad force main and extension to treatient plant\. 2\. - - - - 3\. (22,500) (29,000) - - (laplemented with local funds) E\.6 Elat 1\. 15,000 24,000 5,066 1,206 Extension of sewer system arid treatment plant\. 2\. - - 4,808 803 3\. (14,600) (19,400) (6,610) (452) (Collector, force main and extension of treatnent plant) E\.7 Netivot 1\. 5,100 15,000 1,661 395 Construction of seers and a new treatment plant\. 2\. - - 4,228 704 3\. (5,350) (8,700) (1,483) (210) (Main collector and treatment works) E\.8 Ofaqim 1\. 11,000 15,000 840 200 New treatment plant, pimping station and force mamin\. 2\. - - 3,843 640 3\. (9,200) (13,700) (4,063) (552) (Couponents as appraised) E\.9 Qiryat Gat 1\. 21,000 40,000 1,068 254 New seers and treatment plant\. 2\. - - - - 3\. (18,000) (27,400) (150) (23) (Preliminary rehabilitation of existing treatment plant) E\.10 Qiryat Malakhi 1\. 8,500 15,000 1,735 413 New sewer network and paping station and extension to treatment plant\. 2\. - - 5,290 880 3\. (8,050) (13,200) (3,377) (319) (Pumping station, force main and modification to treatent plant) E\.11 Sederot 1\. 7,500 14,500 1,522 362 New seers, pamping station, force main and treattent plant\. 2\. - - 3,324 553 3\. (7,500) (9,400) (3,514) (370) (Collector, treatment plant with storage tank) - 48 - age 7 of 7 P1rim r Total Cost Ref\.No\. rProjct 1971 1if Dscriptim of ~bPoject F\.1 'Atlit 1\. 3,000 5,000 273 65 construetim of es, pu~pire statim and force unin\. 2\. - - - - 3\. (2,170) (2,800) - - (hTperimnted with local funds) F\.2 Gn Tiquo 1\. 3,000 5,000 181 43 Comtructim of se s\. 2\. - - - - 3\. (3,140) (6,800) - - (UP1IaM~d with local funds) F\.3 Gan Yane 1\. 3,000 5,000 564 134 ostruction of srs, foce main, pping statim ad stabilifation pods\. 2\. - - 492 82 3\. (2,730) (2,800) (43) (2) (ipl-mned with loa luds) F\.4 Hasar 1\. 5,500 9,000 370 88 Epansion of treaant plant\. 2\. - - - - 3\. (5,200) (6,700) - - (Not inplantned) F\.5 Qadina 1\. 4,000 8,000 258 61 Cnstruction of sme and di~posal facilities\. 2\. - - 609 101\.5 3\. (3,970) (3,600) (727) (82) (Saars) F\.6 Rat Yi~bay 1\. 900 4,000 1,101 262 Sees, paping statim, force sein and onatios ponds\. 2\. - - - - 3\. (800) (1,200) - - (bpanonen with Ical funds) P\.7 p ish Pima 1\. 800 1,200 661 157 Installatim of sms ad e~ onim of treat~n plant\. 2\. - - 3\. (805) (1,200) - - (Swrs iepimed with local funds) F\.8 Ya~ 1\. 5,400 10,000 782 186 CBuntruction of smrs ad inprovemnts to treamnt plant and disposal facilities\. 2\. - - - - 3\. (5,400) (6,300) - - (Tup1muned with local funds) F\.9 Yhud 1\. 9,0o 10,000 401 95 Installatim of srs ad expansim of treatimnt plant\. 2\. - - - - 3\. (8,600) (14,100) - - (Severe inplm~nned with local funds) F\.10 Yan'an 1\. 5,000 8,000 931 222 Enlar~ain of s netork ad 'Illit exte~im of Qiryat Tiv'a treat~nt plant\. 2\. - - - - 3\. (3,650) (5,400) - - (Thplam~nte with local funda) Total as appraised 1\. 3,611,700 5,546,700 316,420 75,335 2\. - - 553,382 92,211\.2 as eiuted 3\. 2,752,280 3,620,200 4,141,120 80,993 N\.B\.: U e tafled infatim n sul-projects are d~On ~ data dset\. in the Project Fil\. fAmest 20, 1984 ISRAEL SEWERAGE PROJECT COMPLETION REPORT Central Sewerage Loans Fund Apraisal and Actual Sources and Anlications of Funds Cabital Transactions (IL millions) Periods ending March 31 up to 1975** 1976 1977 1978 1979 19800** 1981 1982 App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual raisal raisal raisal raisal raisal raisal raisal raisal Loans raised Commercial banks 48\.10 9\.23 20\.50 21\.70 17\.30 22\.73 8\.90 25\.26 0\.40 56\.95 - 38\.42 - 1\.27 - - Central Government: - Main' 51\.80 9\.23 19\.70 21\.70 16\.70 22\.73 6\.10 25\.26 0\.90 56\.95 - 131\.85 - 550\.14 - 1,491\.05 - Supplementary2 0\.50 0\.25 1\.00 1\.43 1\.30 0\.77 1\.60 1\.37 7\.00 11\.43 7\.60 17\.67 8\.10 21\.52 8\.80 21\.37 IBRD U-Q\. 12\.30 1AS \.2 Z1AQ 140 28\.A 13\.4 2" 113J1 3 75\.9 \.113\.5 36 994\.04 160\.40 31\.01 69\.20 73\.76 58\.70 76\.55 31\.20 85\.57 8\.30 201\.26 7\.60 301\.45 8\.10 940\.53 8\.80 2\.506\.46 Repayments by local authorities 1\. 0\.2 \.3an 0,S \.6Q \.L23 4\.9 1\. \.L \.1 \.2A A \. \. \.10A \.270 16\.47 161\.SQ 1103 21JS 2i\.U 62\.J0 2\.78 16\.10 "2JS 12 \. L21 203\.L 130J\.8 1\.20 IAA \.11" 2\.522\.93 APPLICATIONS LoAns repaid % Commercial banks 1\.60 0\.27 3\.30 2\.01 4\.90 2\.00 6\.50 3\.19 7\.70 5\.30 8\.50 9\.21 9\.20 14\.03 10\.00 19\.16 Central Government: - main - - - - - - - - 2\.20 0\.46 2\.40 1\.55 2\.60 2\.70 2\.80 3\.95 - supplementary - - - - - - - - - - - - - \. - IBRO - _ \.- \.0 -2 _\.- J Q &1 \.20 10,3S J40 12\.89 \.71 14\.7 Sub-Total 1\.60 0\.27 3\.30 2\.01 4\.90 2\.00 6\.50 3\.19 12\.90 13\.88 14\.10 21\.11 15\.20 29\.62 16\.50 37\.84 Loans made to local authorities 119\.92 3\.7 6L\.2 21 \.0 2\.Z8J 292JA ,nQ "22 1 lA\. - \.28\.1 910\.z\. 22\.80z\.4s09 TOTAL 161S 11J3 Z1J 24Ji 77\. 22\.2 iA\.J1\. 8ZJS 14\.20 2071 11U s1idq I120 tSid1 \.j,A" 2\.22\.91 1/ Main project loan 2/ Supplementary loans to make good temporary cash shortages * Susmed up to 3\.31\.1975\. original forecast 1973-1975 Although IL (Iraeli pound) has been changed to IS (Shekel) reporting continues in IL to ease reference\. ISRACL StMWRAGE PADJECT COMPLMTON RK POffT Central Sewerace Loans Fund Appraisal and Actual Income Statements Current Transactions (IL millions) Periods ending March 31 un to 1975** 1976 1977 1978 1979 19oo*** 1981 1982 App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual raisal raisal raisal raisal raisal raisal raisal risal REVENUES: Interest from local authorities 14\.30 1\.15 17\.30 5\.48 22\.80 13\.55 26\.40 22\.18 27\.40 42\.87 26\.90 80\.97 26\.30 110\.13 25\.60 136\.90 Reimbursement of commitment charge by Central Government 1\.50 2\.19 0\.40 1\.49 0\.20 1\.53 - 1\.57 - 2\.45 - 3\.53 - 4\.85 - 7\.94 Reimbursement of linkage and exchange losses by Central Govern ment \.25\.-\. \.145 \.2\. \. \. 14 \.-\. 13\.J \.JS2 \.-\. 22\.J1 522 1\.9 AS 12 10\.42 2\.00 1"2 26\.A 86:1 27A4 2SA 2J 172L2 26J0 34, L22 2At212\.61 I? Interest payable to: Commercial banks 4\.40 0\.34 5\.10 1\.64 6\.50 3\.72 7\.30 5\.37 7\.10 8\.32 6\.40 11\.90 5\.60 12\.34 4\.80 11\.49 Central Government: - main' 4\.00 0\.54 4\.50 2\.40 S\.80 4\.87 6\.60 6\.53 6\.90 12\.87 6\.80 24\.28 6\.60 30\.35 6\.40 35\.08 - supplementary2 - 0\.25 - 2\.20 0\.10 4\.59 0\.20 7\.17 0\.30 11\.08 0\.90 15\.87 1\.50 16\.45 2\.20 46\.77 IBRD \.A0 JA \.40 1J 7 \.20 \.12 \.0 \.2 \.9\.1 1611 L\. 3SJf6 L\. \.29J \.40 191A 12\.40 1\.23 15\.00 7\.62 19\.60 15\.75 22\.70 25\.36 23\.40 48\.40 23\.00 87\.91 22\.40 138\.47 21\.80 284\.40 Charges payable to Central Government for exchange losses and linkage 0\.80 0\.07 1\.00 0\.25 1\.40 1\.29 1\.60 2\.97 1\.70 8\.01 1\.60 20\.24 1\.60 28\.49 1\.50 28\.14 Commitment charges 1\.50 2\.20 0\.40 1\.49 0\.20 1\.53 - 1\.58 - 2\.45 - 3\.53 - 4\.85 - 7\.94 Administration fee to com ercial banks 1\.10 0\.09 1\.30 0\.42 1\.80 0\.97 2\.10 1\.50 2\.30 2\.43 2\.30 3\.81 2\.30 5\.98 2\.30 14\.40 Linkage paid to commercial banks \.4 2\.70 - \. 0 - 11\.27 \.- \.3 167\.0 - 382-11 15\.J8 AA 1227 10\.42 23\.0 22,a 2" 321 Z,19 22,5 26AJ0 1722AJ lZ6,2 244, 217\.61 I/ Main project loan 2/ Supplementary loans to make good temporary cash shortages Summed up to 3\.31\.1975, original forecast 1973-1975 Although IL (Israeli pound) has been changed to IS (Shekel) reporting continues in IL to ease reference ISRAEL SEWERAGE PROJECT COMPLETION REPORT Central Sewerage Loans Fund ADDraisal and Actual Balance Sheets (IL million) IABLL1 As of March 31 up to 1975 1976 1977 1978 1979 1980*1% 1981 1982 App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual App- AcCual App- Actual raisal raisal raisal raisal raisal raisal raisal raisal ASSEI Loans to local authorities 15A\. AA \.A Ln =\.a M2an\.U M S\.AZ MA\. AUAA 2=2\.1= 222\.1A 2ALAA JA2L= 222\.,U AUl\.AZ LIABILITIES Loans from commercial banks 46\.50 8\.96 63\.70 28\.65 76\.10 49\.38 78\.50 71\.45 71\.20 123\.10 62\.70 152\.31 53\.50 139\.SS 43\.50 120\.39 Central Government: - main'" 51\.80 9\.23 71\.50 30\.93 88\.20 53\.66 94\.30 78\.92 93\.00 135\.41 90\.60 265\.71 88\.00 813\.15 85\.20 2300\.25 - supplementary2' 0\.50 0\.25 1\.50 '\.68 2\.80 2\.45 4\.40 3\.82 11\.40 15\.25 19\.00 32\.92 27\.10 54\.44 35\.90 75\.81 law 60\.An 12\.A n\. 21 ma2 1114 1\. 1\.t\.O 02n12 13n u1a 1 in\.A 22fLzi n1Lon 30\.t 112\.70 --ZQ 2 IABLLA Anoraisal and Actual Debt charges oaid by Local Authorities Periods ending March 31 uo to 1975 1976 1977 1978 1979 1980*** 1981 1982 App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual App- Actual raisal raisal raisal raisal raisal raisal raisal raisal Interest 14\.30 1\.15 17\.30 5\.48 22\.80 13\.55 26\.40 22\.18 27\.40 42\.87 26\.90 80\.97 26\.30 110\.13 25\.60 136\.90 Principal Payment 1,J U AZ 24Q LJS LAR 1Z2 690 LASZ LM LlU Lll 22 1647 Total debt charges JAfAA J\.=2 \.A 6\.Z 2AAA \.U\.A 1\.2 2\.88 13\.31 A\.32 U3=AA AL\. I\.M JL\.UI A\.11 U A 11 1/ Main Project Loan Oe 2/ Supplementary loans to make good temporary cash shortage IBRD 10099R ISRAEL SEWERAGE PROJECT LEBANON- AN inW! 19o\.: Simplemenfted with Local Funding AKKCW N 0 B T H =iemented with ER D S T R C T ~SSiSOflCOHAIF syatslA ~ e ted I5EFAR A o Towns - ' Rivers one om / Lokes gA' $\\sOccupied Ternitories '' sh\.A TARA R~ KEF TEL AV,V Y 1E 32 R 1 E A i Em tRt S SOUTNE R N D ST R ICT \ H AN E G E V ' ARAB REPUBLIC OF EGYPT I 3o THIS MAP l$SBASED ON IBRD 1099, juL Y' 1972 ICH4NGES HAVE Sfrk AD UE TO REFE CT TRE tATEST s/rVATIONd\. Mle1s \. ~ h b e p\.~ed tr JUNE 1986

APPROVAL

P146125

 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE I\. Basic Information Date prepared/updated: 06/03/2013 Report No\.: AC6950 1\. Basic Project Data Original Project ID: P083108 Original Project Name: RAIL TRADE AND TRANSPORT FACILITATION Country: Azerbaijan Project ID: P146125 Project Name: Rail Trade and Transport Facilitation AF Task Team Leader: Jacques Bure Estimated Appraisal Date: Estimated Board Date: June 27, 2013 Managing Unit: ECSTR Lending Instrument: Sector: Railways (90%);Other domestic and international trade (10%) Theme: Infrastructure services for private sector development (50%);Corporate governance (25%);Trade facilitation and market access (25%) IBRD Amount (US$m\.): 220 IDA Amount (US$m\.): 0 GEF Amount (US$m\.): 0 PCF Amount (US$m\.): 0 Other financing amounts by source: Borrower 0\.00 0\.00 Environmental Category: B - Partial Assessment Simplified Processing Simple [] Repeater [] Is this project processed under OP 8\.50 (Emergency Recovery) Yes [ ] No [X] or OP 8\.00 (Rapid Response to Crises and Emergencies) 2\. Project Objectives The project development objective is to "improve railway services in Azerbaijan, as well as the competitiveness, financial sustainability, operating and cost efficiency, and capacity of the Azerbaijan Railways (ADY) in particular along the transport corridor toward Georgia (east-west corridor)"\. 3\. Project Description The project finances some key elements of the Government's Rail Investment Program that will improve service on the East West mainline from Baku to the Georgian border, which carries most of ADY's traffic\. The Government's Rail Investment Program includes rehabilitation of track and replacement of signaling, electric power supply, and locomotives for the corridor\. The project also supports railway sector reforms through financing technical assistance for modernization\. The original project collectively financed activities under four below components while the additional financing will finance components 1, 3 and 4:  Component 1: Rehabilitation of East-West Main Line Provision of goods, works and services to: (a) rehabilitate about 240 km of mainline track; (b) convert power supply on the East-West Main Line; and (c) upgrade signaling, compatible with the new 25kV AC power supply system\. Component 2: New Mainline Locomotives Provision of goods and services in order to provide mainline 25kV AC electric locomotives to operate on the east-west corridor\. Component 3: Modernization of ADY Services Provision of works, goods, services and training in order to: (a) support the implementation of some activities in the framework of the Borrower's Government Program for the Development of Azerbaijan State Railways 2008-2011, including, but not limited to, for the transition to the International Financial Reporting Standards and legal restructuring of the ADY; and (b) improve its oil spill prevention capacity\. Component 4: Project Implementation Support of the PIU for effective implementation of the Project, through provision of goods, consultants' services and training 4\. Project Location and salient physical characteristics relevant to the safeguard analysis The project addresses the Azerbaijan side of an Azerbaijan-Georgian transport corridor, which is the most heavily used corridor and part of the larger corridor from Baku to Georgian ports that carries in particular transit oil traffic\. 5\. Environmental and Social Safeguards Specialists Mr Daniel P\. Owen (ECSSO) Ms Gulana Enar Hajiyeva (ECSEN) 6\. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X II\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The rehabilitation of rail track, the conversion to 25 kV power supply system and the renewal of the signaling are the primary investments of the project covered by the EMP – the EMP will be updated once the design for the signaling renewal is available\. The rehabilitations will allow more efficient transport of goods such as crude oil and oil products\. Impacts are expected to be temporary and related to the direct rehabilitation of these rails tracks and set up of potential new power substation, replacement of sleepers, reballasting replacement of tracks, including: noise in residential areas; rehabilitation of the track; dust and exhaust emissions from equipment; vibration; and waste management, possibly including hazardous wastes, for example when replacing old transformers\. The metal wastes and oil stained wooden bars from rail and sleeper replacement will be collected into special containers and transported to a disposal site\. The new power supply and locomotives will be significantly more energy efficient, and track upgrades will significantly reduce risks of derailments related to track condition\. No land acquisition through expropriation is anticipated, nor is loss of access to income expected\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Long-term impacts of the project are expected to be positive due to more energy efficient power supply system and locomotives, as well as due to the introduction of the Oil Spill Response Plan\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. N/A 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. The implementing agency - Azerbaijan Railways (ADY) - has been a member of the Railway Organization for CIS Countries since 1992\. This organization provides guidance to its member countries on environmental matters, spill management and procedures for the transport of hazardous materials\. In order to analyze the potential environmental impacts and identify mitigation measures and implementation arrangements for the project, the ADY prepared the Environmental Management Plan (EMP) in 2007 and updated in 2010\. The identified impacts include: (i) Impact on air quality: dust and exhaust emissions from operation of construction equipment will be mitigated by using water spraying, ensuring proper ventilation of internal areas and regular checkup of engines\.  (ii) Impact on water: contamination of water by discharge of untreated waste waters during the construction phase will be mitigated by mechanical treatment and/or disinfection of water prior to discharge into water reservoirs\. (iii) Impact on land: impact caused by excavation during construction / rail and sleepers replacement and by improper disposal of wastes, metal garbage and oil stained wooden bars will be mitigated by taking/disposing of excavated materials from/at approved sites; collection, transportation in covered containers and proper disposal of wastes during and upon completion of construction phase\. (iv) Impact of noise and vibration in residential areas, caused by operation of the construction equipment will be mitigated by keeping noise level below maximum permissible level for each type of equipment\. Since the project restructuring does not envisage any changes to the nature of track rehabilitation activities, the original EMP remains applicable for the purposes of restructuring\. The replacement of signaling system is considered by a separate specific EMP (already envisaged by the project overall EMP and currently under preparation) which is subject to Bank's prior review and approval\. The Metrology, Standardization, Certification and Ecology Department of the Technical and Production Service (TPSD) in ADY is responsible for environmental management including the development and implementation of this EMP, and is based in Baku\. TPSD has 3 staff in the central office that has specific responsibility for environmental management\. Environmental issues are managed on a day to day basis through local departments each having a staff member assigned to environmental matters\. The local departments in ADY are responsible for the preparation of Ecological Passports and action plans for each section of rail line in their district\. These passports are issued by the Ministry of Ecology and Natural Resources (MENR) and include limits for pollution\. They are renewed every 3 years following MENR audit\. In order to ensure overall compliance with the passport conditions, the TPSD carries out regular inspections of ADY operations\. The capacity of ADY is assessed to be relatively good in relationship with the type of works foreseen\. Staff are cognizant of good practices and their responsibilities for environmental management, emergency response and spill management as well as transportation of dangerous goods and wastes\. The project will provide capacity building (training, procedures, equipment) related to the prevention and response capacity for rail related oil spills that may result from derailment or regular operations\. Training and operational budget required for ADY to carry out its monitoring functions for this EMP are included in the project\. The TPSD will have primary responsibility for the implementation of the EMP\. The TPSD will ensure inclusion of environmental provisions into construction / rehabilitation and locomotive purchase contracts, and will supervise operation of contractor to ensure compliance with the environmental provision of the contracts\. ADY is expected to understand all the conditions under which the social safeguard OP4\.12 policy would be triggered\. ADY will need to communicate to the Bank immediately in the event this scenario arises in order that appropriate measures for compliance be taken\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. Azerbaijan State Railways (ADY), potential users / passengers of the east-west transport corridor, local communities residing along the corridor (likely to be affected by the project), local executive authorities and baladiyyas (municipalities) are the key stakeholders\. The preparation of the Environmental Management Plan has initiated a process of consultations with beneficiaries and stakeholders\. When the draft EMP was available for disclosure, ADY carried out public consultations in all rayons along the corridor, with participation of representatives of local communities, municipalities, local governments, NGOs\. During the consultations safeguard issues, measures envisaged by the EMP to mitigate potential impacts were discussed, and all issues raised by the audience were addressed by ADY\. The EMP has been placed at the Aarhus Convention Centre of the Ministry of Ecology and in executive authorities' offices along the route of the rail corridor\. Public has been informed through the local newspapers on availability of the EMP in English and Azeri for review\. The specific EMP which is being prepared for the replacement of the signaling system will also undergo a round of public consultation to be duly recorded\. B\. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 01/08/2007 Date of "in-country" disclosure 04/04/2007 Date of submission to InfoShop 05/30/2007 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Indigenous Peoples Plan/Planning Framework: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Pest Management Plan: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? N/A If yes, then did the Regional Environment Unit or Sector Manager (SM) N/A review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the N/A credit/loan? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Yes Infoshop? Have relevant documents been disclosed in-country in a public place in a Yes form and language that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities Yes been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project Yes cost? Does the Monitoring and Evaluation system of the project include the Yes monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the Yes borrower and the same been adequately reflected in the project legal documents?  D\. Approvals Signed and submitted by: Name Date Task Team Leader: Mr Jacques Bure 05/28/2013 Environmental Specialist: Ms Gulana Enar Hajiyeva 05/28/2013 Social Development Specialist Mr Daniel P\. Owen 05/28/2013 Additional Environmental and/or Social Development Specialist(s): Approved by: Regional Safeguards Coordinator: Mr Daniel P\. Owen 05/29/2013 Comments: AF is essentially covering a financing gap and is not proposing any extension or other change in the nature of activities to be financed, I can confirm the ISDS is cleared as acting RSC\. Sector Manager: Mr Juan Gaviria 05/29/2013 Comments: Per acting Regional Safeguards Coordinator's concurrence, I confirm this ISDS is cleared\.

APPROVAL

P098743

39482 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No\.: Project Name Kakira Cogeneration Carbon Offset Project Region Africa region Sector Renewable energy Project ID PO98743 Borrower(s) Kakira Sugar Works Ltd\. Madhvani Group 30 Kampala Road Post Box 6361 Greenland Towers, 6thFloor Kampala Uganda Implementing Agency World Bank Carbon Finance Unit The World Bank 1818H Street The World Bank Washington DC 20433 USA Environment Category [ ] A [ ] B [XI C [IF1 []TBD(tobedetermined) Date PID Prepared March 9, 2007 Date of Appraisal Authorization Date of Board Approval I This PID correspondsto the investmentsenvisaged under P069996\. Since no additional investmentsare planned under this Carbon offset operation,all necessary safeguardshave been conducted and disclosed under P069996\. For more information Contact point Malcolm Cosgrove-DavieslKaran Capoor Task Team Leader The World Bank 1818H Street,NW Washington DC 20433 Telephone 202 473 2344 Fax 202 473 5147 For more information contact: The Infoshop The World Bank 1818H Street,NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P057239

Report No\. PID7185 Project Name Russian-Coal Mining Safety\. Project Region Europe and Central Asia Sector Coal Project ID RUPE57239 Borrower Russian Federation Implementing Agency Reformugol Date PID Prepared July 30, 1999 Projected Appraisal Date July 1999 Projected Board Date November 1999 Country and Sector Background Russia is the world's sixth largest producer and fourth largest consumer of coal, accounting for about five percent of global production and consumption\. By end-1998, the Russian coal industry included 136 underground mines and 92 surface mines, which produced 81 and 143 million tons of coal respectively, for a total of 224 million tons produced in Russia during 1998\. There is a long history of the recognition of safety and health problems of the coal mining industry in Russia\. The inspection of mines for safety conditions, by State agencies, has existed historically in various forms\. The Government policy is stated in the Act for "Federal Mining and Industrial Safety Inspection of Russia, 1993", and the "Industrial Safety of Hazardous Production Facilities, 1997"\. Detailed regulations for the operation of coal mines, and mandatory guidelines for their design, construction and production have been prepared by the State Mine and Industrial Supervision of Russia (Gosgortekhnadzor of Russia-GTN)\. Under GTN there is an Industrial, Safety Scientific Technical Center, established in 1991, which provides technical and research support for the safety supervision activity\. Additional support is provided by safety research conducted at various institutes and universities\. However, the safety performance of the coal sector has remained poor as a consequence of many adverse factors\. In general, the working conditions in the underground coal mines are difficult, with hard-to-mine, deep coal seams\. These are relatively thin, steeply inclined, usually with difficult roof support conditions, and relatively high levels of in-situ methane\. In recent years, the inadequate replacement and modernization investments, including health and safety, have resulted in a progressive deterioration of existing systems and performance\. Virtually all mines have neglected needed investments in equipment, devices and training for health, safety and rescue services due to a lack of financial resources\. Project Objectives The project complements ongoing coal lending Bank operations which provide support to the Government's sector policy reform, and builds on their  achievements\. Its main objective is to enable the improvement of safety conditions and practices in the coal mining industry, through assistance to the mines and safety related institutions and agencies\. It will also foster improvements in rescue operations, occupational diseases, and possible reduction of dangerous mining conditions through dissemination of methane drainage technologies\. It represents a significant step in moving to reduce the number of coal mining accidents, disasters and fatalities, and constitutes a key element of the Government's priority health and safety strategy for the coal sector\. Project Description The project consists of the following components: 1\. Coal Safety Regulatory Framework\. This component will address improvements related to: a) policies, strategies, laws, regulations, standards and guidelines; b) monitoring, compliance and enforcement arrangements; c) safety framework for mine operations and closures; and d) occupational disease issues\. 2\. Institutional Capacity\. This component will support the improvement of safety institutional structure and organization\. It will concentrate on strategy, organization, staffing, training and work methodology\. 3\. Modernization of Safety Management\. The safety management setup will be modernized by placing emphasis on improving: a) the strategy, work program and capacity-building for safety institutions; b) the improvement of safety management and training programs for coal mines; c) the modernization of monitoring and safety evaluating functions; and d) the incorporation of consultative procedures and social assessment criteria\. The improved setup will be used as the foundation to support the establishment of comprehensive coal mining safety a comprehensive safety program\. 4\. Improvement of Mine Rescue Service\. The mine rescue services will be modernized, with emphasis placed on the improvement of organization, work program and training aspects\. The equipment and training facilities will also be up-graded\. 5\. Safety Equipment\. This component will principally include the provision and installation of safety equipment and devices, personal protective equipment, flame-proof electrical machinery, monitoring systems, and automatic controls\. 6\. Technical Assistance\. Assistance will be provided principally as support to improve the safety aspects of current mine layouts and designs, assess options for methane drainage/use on the basis of well proven technologies, and strengthen project management\. Project Financing The total cost of the project is estimated at US$180 million\. The proposed IBRD loan of US$150 million would contribute to approximately 83 percent of the total project cost\. The IBRD loan would be lent to the Russian Federation for a 17 year term including 5 years of grace on repayment of the principal\. -2-  Project Implementation The project would be executed over a period of four years\. The project implementation unit would be Reformugol\. Implementation will be monitored by the highest level of the Government's coal sector administration, through a Coal Mining Safety Oversight Council, which will enhance adequate inter- agency linkages, and focus on policy making and ensuring that funding and assistance for mine safety is efficiently utilized\. Project Sustainability\. [Note: Flag the factors critical for the sustainability of project benefits\.]The Coal Mining Safety Project aims to decrease accidents, improve working conditions for miners, refine mine layouts and designs, and also introduce a management safety culture and productivity improvements, which would enhance the viability of profitable mines\. The resulting additional revenues should maintain safe operations and related supporting activities in the future\. Subsequent prospective privatization should further increase the sustainability of coal mine safety activities\. Lessons Learned from past Bank Operations in the coal sector The implementation of the Bank's present lending operations in the coal sector demonstrate the Government's commitment to continue restructuring the sector\. The Government has assigned high priority to improving safety conditions and performance in coal mining\. The current implementation experience from the ongoing coal projects indicates that: a) clear responsibility must be assigned for each project component; and b) main requirements are to achieve rapid results to improve safety performance, while positioning the coal industry and institutions for establishing more efficient systems to enhance health and safety\. Poverty Category N/A Environmental Aspects Indigenous peoples plan: N/A Resettlement plan: N/A Environment: The proposed project has been assigned an environmental B category\. Various environmental analyses and programs have been prepared in Russia since 1992\. The environmental issues of the coal industry were reviewed extensively by the Bank in 1994\. Further environmental analyses of the coal industry were carried out during the preparation of recent coal lending operations\. The proposed loan is not production-oriented, and will not result directly in any adverse environmental impacts\. Moreover, it will likely result in positive environmental impacts through improvements in safety management and reduction in the frequency of mining accidents and associated discharges, and other adverse impacts\. Essentially, it will fund activities to enable the compliance with safety standards by the coal industry, which will consist - 3 -  mainly of: a) capacity-building, critical equipment and components to prevent and reduce accidental events; and b) restructuring of the coal mining safety framework\. In addition, the proposed project will include technical assistance to assess options for improving safety through the drainage of coal mine-methane and its subsequent utilization\. Contact Points Leo Maraboli Task Team Leader The World Bank 1818 H Street, NW Washington D\.C\. 20433 Telephone: (202) 473-5531 Fax: (202) 522-0396 The InfoShop The World Bank 1818 H Street, N\.W\. Washington, D\.C\. 20433 Telephone No\. (202)458 5454 Fax No\. (202) 522 1500 Note: This is information on an evolving project\. Certain activities and/or components may not be included in the final project\. Processed by the InfoShop week ending August 6, 1999 - 4 -

APPROVAL

P000753

 ICRR 11539 Report Number : ICRR11539 ICR Review Operations Evaluation Department 1\. Project Data: Date Posted : 07/22/2003 PROJ ID : P000753 Appraisal Actual Project Name : National Fertilizer Sector Project Costs 230\.3 413\.1 Project US$M ) (US$M) Country : Ethiopia Loan /Credit (US$M) Loan/ US$M ) 120\.2 131\.6 Sector (s): Board: RDV - Cofinancing 89\.8 202\.4 Petrochemicals and US$M ) (US$M) fertilizers (92%), Agricultural extension and research (5%), Central government administration (3%) L/C Number : C2740 Board Approval 96 FY ) (FY) Partners involved : African Development Bank Closing Date 12/30/2000 06/30/2002 , Italy, Netherlands, European Union, Japan, Sweden, Norway, Germany Prepared by : Reviewed by : Group Manager : Group : John R\. Heath Christopher D\. Gerrard Alain A\. Barbu OEDST 2\. Project Objectives and Components a\. Objectives "The project's objective is to help achieve accelerated and sustainable growth in agricultural production and productivity with a view to improving food security and reducing poverty " (SAR, p\. 15)\. To be achieved by\. (i) supporting policy reform to create an enabling environment for the growth of a competitive fertilizer sector; (ii) supporting institutional strengthening and human resource development; (iii) promoting increased, efficient and environmentally safe use of fertilizers by the largest possible number of farmers; (iv) addressing fertilizer supply-side constraints; and (v) promoting initiatives to maintain and improve the long -term fertility of the Ethiopian soils and ensuring environmental conservation b\. Components (i) Fertilizer policy reform (No cost assigned); (ii) Capacity building (US$8\.6 million, 2 percent of actual project cost ); mainly to finance fertilizer (iii) Fertilizer demand and supply (US$404\.0 million, 98 percent of actual project cost ---mainly imports ); and (iv) Soil fertility management and environmental conservation (US$0\.5 million, under 1 percent of actual project cost )\. c\. Comments on Project Cost, Financing and Dates On top of the initial credit of US$120\.2 million, IDA added a supplemental credit of US$ 44\.0 million, which was approved in July 2001, less than twelve months before closing \. Of this combined commitment of US$164\.2 million, IDA disbursed US$131\.6 (The shortfall of US$32\.6 million at project close begs the question why the supplemental credit was authorized so near to closing )\. The (multiple) cofinanciers committed US$89\.8 million at appraisal, rising to US$202\.5 million by closing, all of this devoted to component (iii), specifically for financing the importation of fertilizer\. 3\. Achievement of Relevant Objectives: (i) (Achieved)\. All the policy issues identified at appraisal were resolved, on schedule ----prices were deregulated, fertilizer subsidies were eliminated, quality controls were promulgated, and state -owned enterprises' preferential access to fertilizer imports was removed \. (ii) (Partially achieved)\. The capacity of various organizations --among them the Ministry of Agriculture and affiliates--was enhanced and training targets were met, but the overall institutional development outcome was modest: a new set of market-distorting phenomena emerged during project implementation (see Section 5 below), thus hindering the establishment and growth of a comptetitive fertilizer market; (iii) (Partially achieved)\. The area affected by increased fertilizer use was 1 million ha, compared to the 2\.8 million ha forecast at appraisal; fertilizer consumption peaked at 298,000 tons in 2000 (21 percent more than the 1995 baseline), compared to the 360,000 tons that was forecast at appraisal \. (iv) (Not Achieved)\. Fertilizer importation took place as planned but there was no resolution of key institutional problems that will constrain long-term use of fertilizers by farmers: (a) the attempt to stimulate multi-channel fertilizer distribution was only partly effective; (b) the extension services' increased involvement in delivering inputs and credit detracted from their advisory work, hindering the objective of sustainable agricultural growth; and (c) the private-sector arm of the fertilizer industry became more, not less, concentrated, with a decrease in the number of private retailers\. (v) (Achieved)\. A local firm was established to produce organic fertilizer, a program to supply biofertilizer on commercial terms was successfully launched, soil testing laboratories for use by individual farmers were put in place; and monitoring of water for fertilizer residues was introduced \. 4\. Significant Outcomes/Impacts: Government remains committed to the price deregulation that was achieved under project auspices \. Regional governments are committed to maintaining the 17 soil testing laboratories established under the project\. 5\. Significant Shortcomings (including non-compliance with safeguard policies): At US$0\.4 billion (79 percent above the initial estimate ), this was an extremely expensive way to provide a temporary boost to Ethiopian food security : food poverty decreased (from 47 percent malnourished in 1996 to 42 percent in 2000) but it is not clear to what extent this was attributable to the project; nor was the institutional framework sufficiently strengthened, making it likely that benefits will not be sustained \. The attempt to develop a competitive input market --a key factor for sustained growth in fertilizer consumption--was unsuccessful\. All credit sales of fertilizer are channeled through the cooperatives and the public extenson program, putting private retailers at a disadvantage \. Central and regional governments failed to challenge the rise of party -affiliated trading houses, undercutting the attempt to increase competition in the supply chain \. A 35 percent depreciation in the local currency has pushed up the price that farmers must pay for fertilizer imports, while grain prices have fallen over the last two years : the combined effect of this is to severely reduce the demand for fertilizer\. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev \.: Modest Modest Sustainability : Unlikely Unlikely Bank Performance : Unsatisfactory Unsatisfactory Borrower Perf \.: Unsatisfactory Unsatisfactory Quality of ICR : Satisfactory NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13\.55, but are listed for completeness\. NOTE: 7\. Lessons of Broad Applicability: Price deregulation is a necessary but not a sufficient condition for a competitive market to emerge; if state-regulated cooperatives and the government extension service supply fertilizer on soft credit terms (without a hard budget constraint), there will be little scope for private traders \. Financing fertilizer imports through separately administered mechanisms of foreign exchange allocation introduces inefficiencies in the fertilizer industry : importers should be allowed to directly purchase foreign exchange at the time and in the amounts of their choosing, for the purpose of importing the quantities and product mix of their choosing\. Agricultural intensification and increased use of fertilizer on a sustainable basis will require attention to management of risk and variability : in the absence of weather-based insurance, in the drought -prone areas of  Ethiopia input-intensive farming will remain highly risky, threatening to push farmers and financial institutions into debt\. Involvement of agricultural extension agents in input distribution and credit administration impedes development of the private sector and compromises the advisory function of extension \. 8\. Assessment Recommended? Yes No 9\. Comments on Quality of ICR: A very candid ICR, which correctly identifies the failure to address institutional weaknesses as the primary factor in judging the project's development outcome \.

APPROVAL

P002697

Dommatm of Th¢ World Bank FOR OFFIAL USE ONLY Report No\. 6483 PROJECT COMPLETION REPORT TANZANIA FOURTH HIGHWAY (MAINTENANCE) PROJECT (CREDIT 507-TA) November 7, 1986 Eastern and Southern Africa Regional Office Projects Department Transportation Division This document has a restricted distribution and may be used by recipients only in the performance of their offcial duties\. Its contents ma) not otherwise be disclosed without World Bank authorization\.  TO* WORLD &ANK Washington DC Od3 \.S A O\.gunrw IveIu\.tggm Novembe: 7, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Tanzania Fourth Highway (Maintenance) ProJect (Credit 507-TA) Attached, for information, 's a copy of a report entitled 'Proioct Completion Report on Tanzania Fourth Highway (Maintenance) Project (Credit 507-Tk) prepared by the Eastern and Southern Africa Regional Office\. Under the modified system for project performance auditing, further evaluation of this project by the Operations Evaluation Department has not been made\. Yves Rovani by Ram K\. Chopra Attachment This document has a restricted distribution and may be used by mcipients onl) in the performr"\.c of their ofhcial duties\. Its contents may not otherwise be d\.s:1osed withoul %'orld Bank authonziht,,r,  FOR OFFICIAL USE ONLY ,ANZANIA CREDIT 507-TA PROJECT COMPLETION REPORT TABLE OF CONTENTS Page i Basic Data Sheet \. \.ii-iv Highlights \. \.o\. o\. o\.,o\. o\.*\.o\. v-vi REPORT I IN'TRODUCTION \.** \. o\.oo\.*o*o\.o*\.9o*oo*\. 1 II\. PROJECT IDENTIFICATION, PREPARATION, AND APPRAISAL \. 4 III\. PROJECT IMPLEMENTATION AND COST 8 IV\. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT \. 16 V\. ECONOMIC RE-EVALUATION \.,\. \. \. o oo \.o\.o\. 18 VI\. CONCLUSIONS ooo\. ,oo\.o\.o*\.o*o**o 19 TABLES 1 Equipment Procurement Schedule *so## \.oo\. 21 2 Actuial and Expected Project Implementation\.,\.o\.o\. 22 3 Actual and Appraisal Estimates of Project Costs\. \. 23 MAP Highway Maintenance Project - Transport Network (IBRD 10949R) This docurnent has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  TANZANIA FOURTH HIGHWAY (MAINTENANCE) PROJECT CREDIT 507-TA PROJECT COMPLETION REPORT PREFACE This Project Completion Report (PCR) has been prepared for the Highway Maintenance Project in Tanzania for which the Credit 507-TA, in the amount of US$10\.2 million, was signed on August 21, 1974\. The Credit became effective on November 20, 1974 and was closed on December 31, 1982\. The total amount disbursed was US$9\.34 million and the remaining US$0\.86 million was cancelled\. This is the fourth project in the highway subsector, which the Bank Group assisted in Tanzania, and together with the Fifth Highway Project of March 1979, addresses the country's needs in road maintenance\. The PCR was prepared by the Eastern and Southern Africa Projects Department, Transportation Division, on the basis of information contained in the Staff Appraisal Report, a review of Bank files including supervision and progress reports, and information collected on a mission during February 1983\. In accordance with the revised procedures for project performance audit reporting, this Project Completion Report was read by the Operations Evaluation Department (OED) but the project was not audited by OED staff\. The draft report was sent to the Borrower for commen s; however, none were received\.  -ii - Page 1 of 3 TANZANIA FOURTrH HIGHWAY (MAINTENANCE) PROJECT (CREDIT 507-TA) PROJECT COMPLETION REPORT BASIC DATA S'qEET KEY PROJECT DATA Appraisal Actual or Item Estimate Re-estimate Total Project Cost (US$ million) 12\.45 10\.52 Overrun () - -16 Credit Amoant (US$ million) 10\.2 10\.2 Disbursed 9\.343 Cancelled - 0\.857 Repaid to December 31, 1985 - 0\.12 Outstanding to December 31, 1985 - 9\.343 Project Completion Date 06/78 12/82 Proportion Completed by Expected Date (%) 100 51 Proportion Completed by Completion Date (X) - 9$ Proportion of Time Overrun () 100 Economic Rate of Return 22 Negative Cumulative Estimates and Actual Disbursements (US$ million) FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 (i) Estimate 0\.5 2\.2 6\.5 9\.7 10\.2 - - - - - (ii) Actual - 0\.4 2\.3 4\.9 6\.43 7\.83 8\.47 8\.67 9\.17 9\.34 (iii) Actual - 18 35 51 63 77 83 83 90 92 as z of (i) Date of Final Disbursement: December 29, 1983\. OTHER PROJECT DATA Item Original Plan Actual First Mention in Files or Timetable 02/17/72 Government's Application - 09/06/73 Appraisal 2/73 12/73 Negotiations Completed - 96/28/74 Board Approval - (18/06/74 Credit Agreement Date 0 08/21/74 Effectiveness Date - 11/20/74 Closing Date 6/30/79 12/31/82 Borrower United Republic of Tanzania Executing Agency Ministry of Communications and Works Fiscal Year of Borrower July 1 - June 30 Follow-on Project Name Fifth Highway Project Credit Number Cr\. 876-TA Amount (US$ million) US$20\.5 million Credit Agreement Date March 2, 1979  - iii - Page 2 of 3 BASIC DATA SHEET MISSION DATA Month/ No\. of No\. of Staff Date of Mission Year Weeks Persons Weeks Report Identification 03/72 0\.4 2 0\.8 04/25/72 Preparation 06/72\. 0\.4 1 0\.4 07/28/72 Preparation 11/72 0\.4 1 0\.4 12/28/72 Preparation 02/73 0\.9 1 0\.9 03/21/73 Preparation 08/73 0\.6 1 0\.6 10/12/73 Appraisal 12/73 2\.5 4 10\.0 01/08/74 Post-Appraisal 05/74 0\.2 1 0\.2 07/19/74 Total: Seven missions totalling 13\.3 staff weeks within 26 months\. Supervision 10/74 0\.4 2 0\.8 11/27/74 Supervision 04/75 0\.3 1 0\.3 06/16/75 Supervision 09/75 0\.6 1 0\.6 10/17/75 Supervision 11/75 0\.6 1 0\.6 01/14/76 Supervision 03/76 0\.5 2 1\.0 05/28/76 Supervision 03/77 2\.5 1 2\.5 05/10/77 Supervision 10/77 2\.5 2 5\.0 12/08/77 Supervision 01/78 0\.5 1 0\.5 03/09/78 Supervision 10/78 0\.6 3 1\.8 12/15/78 Supervision 03/79 0\.5 2 1\.0 04/09/79 Supervision 06/79 0\.5 1 0\.5 06/26/79 Supervision 08/79 0\.5 2 1\.0 10/15/79 Recasting 12/79 4\.0 1 4\.0] 02/01/80 of Project 1\.3 1 1\.31 Supervision 03/80 0\.7 3 2\.1 04/22/80 Supervision 06/80 1\.0 1 1\.0 07/15/80 Supervision 11/80 0\.4 2 0\.8 01/23/81 Supervision 09/81 0\.4 1 0\.4 11/11/81 Supervision 03/82 0\.5 1 0\.5 05/19/82 Total: 18 missions totalling 25\.7 staff weeks within 74 years\. CURRENCY \. CANGB RATES Name of Currency Tanzania Shilling (TSh\.) Appraisal Year Average US$1 - TSh 7\.14 intervening Year Average (end 1978) US$1 - TSh 8\.00 Completion Year Average (end 1982) US$1 - TSh 9\.5  - iv - Page 3 of 3 BASIC DATA SHEET GLOSSARY OF ABBREVIATIONS CIDA - Canadian International Dezelopment Agency COMWORKS - Ministry of Communications aud Works DANIDA - Danish International Development Agency ICB - International Competitive Bidding PCR - rroject Completion Report SAR - Staff Appraisal Report TRM - Trunk Road Maintenance USAID - United States Agency for International Development  v TANZANIA FOURTH HIGHWAY (MAINTENANCE) PROJECT (CREDIT 507-TA) PROJECT C0-iPLETION REPORT Highliahts The Fourth Highway (Maintenance) Project changed the focus of Bank Group Lending in Tanzania from investments in highway construction to improvements in highway maintenance and institution building\. The project constituted the first phase of an intended two-phase etiort to establish a trunk road maintenance organization\. The first phase covered about 3,300 km of primary roads in the southern half of the country and the second phase which was financed under the Fifth Highway Project (Credit 876-TA) covered about 5,100 km of primary roads in the northern half of the country\. Although the project failed to achieve its physical objectives, a trunk road maintenance organization is in place in the regions and although budget allocations for road maintenance were unsatisfactory during the project period, they have been stepped up since then to satisfactory levels\. With the availability of more engineers trained under the Fifth Highway Project and gradual improvement in training of technicians and field personnel under the above project, accomplishment of maintenance works is improving in quantity as well as in quality\. The project was the outcome of a "Tanzania Highway Maintenance and Organization' study which was carried out in 1972 by consultants financed by the United States Agency for International Development\. The Association assisted the Government in reviewing the reports at various stages of the study\. The Government completed project preparation with the assistance of an advisor financed by the Canadian International Development Agency and a Government request for financing the project was made to the Association in September 1973\. The Association appraisal took place soon afterwards in December (Paras 2\.03 - 2\.05)\. Although the Credit Agreement became effective in November 1974, the technical assistance financed under the project was not in place until late 1977\. Initially, COMWORKS was not convinced of the need for technical assistance and considered its cost as too high for the project despite the fact that two-thirds of the engineering and technicians posts were vacant\. Further delay in securing technical assistance services occurred from unsuccessful attempts to obtain the services through bilateral aid\. COMWORKS also eid not succeed in negotiations with a consulting firm to provide individual experts as opposed to a team of experts proposed by the firm\. A second firm was then contacted but negotiations were not concluded until late 1976 (Paras 3\.01 - 3\.03)\.  - vi - By November 1979, the contract with consultants providing technical assistance and training services had expired and all tichnical assistance and training staff had left the country\. COMWORKS was not fully committed to hiring consultants for the technical assistance services, and poor housing and working conditions resulted in the majority of the staff remaining only for short periods in the country\. Counterparts were appointed late and most of them were found to be not suitable\. Hence, performance of technical assistance and training staff was not satisfactory (Para 3\.07)\. The procurement of equipment and spare parts was slow as a result of non-fullfilment by COMWORKS of Bank procurement procedures particularly over the requirement for prior review by the Association of bidding procedures and documentation for International Competitive Bidding\. When procurement was completed in 1978, war broke out between Tanzania and Uganda and the Government diverted the heavy equipment to military operations (Paras 3\.11 - 3\.14 & 3\.21)\. The project showed no progress and COMWORKS proposed a recasting of the project which was eventually approved by the Association in 1981\. The final agreement with the Association called for the procutement of spare parts, few pieces of equipment and technical assistance\. COMWORKS undertook to execute a highwey maintenance program consisting of resaaling 214 km, regravelling 186 km, pavement repairs for 640 km, and routine maintenance of a network which had expanded from 3,300 km at the beginning of project in 1974 to 4,900 km in 1979 with the incorporation of more roads into the network to be maintained by COMWORKS\. The project was closed on December 31, 1982 with US$0\.86 million of the original Credit of US$10\.2 million cancelled\. There was little improvement in routine maintenance and standards of resealing and regravelling\. The project had a negative economic rate of return (Paras 3\.23 - 3\.26\. & 5\.01)\. A number of lessons have been learned from the project\. First, successful highway maintenance depends mainly on the quality of local management and availability of requisite number of trained field personnel\. Second, the executing agency should be fully committed to employing technical assistance staff, where needed, and have the ability to administer and monitor the contracts for such services\. Third, technical assistance should play an advisory role only if there are suitable counterparts\. Fourth, the project demonstrated the need to develop the local contracting industry to increasingly participate in road maintenance and rehabl\.itation works as an alternative to force account for all works\. The lessc/os learned from the project have been extremely valuable and together with the experience on the recently completed Fifth Highway Project have guided the design of the Sixth Highway (Rehabilitation) Project (Credit 1688-TA) (Paras 6\.06 and 6\.07)\.  TANZANIA PROJECT COMPLETION REPORT FOURTH HIGhWAY (MAINTENANCE) PROJECT (CREDIT 507-TA) I\. INTRODUCTION 1\.01 Tanzania is a large country (945,000 km2) with a widely dispersed population (19\.8 million) and sharply contrasting terrain (O - 19,340 ft\. above sea level)\. This combination makes the transport system a complex one with transport movements over long distances an important characteristic\. Additional demands by its land locked neighbours for transit through the country contribute tl making the maintenance and operation of the transport system more difficult\. Overall, roads are the predominant transport mode with the rail systems catering mainly to importXexport traffic\. 1\.02 The Bank Group involvement in the transport sector in Tanzania began in 1955 when a loan was made to the East African Community (EAC) for a railway project\. Assistance in the highways subsector did not occur until 1964, two years after the country's independence\. Bank Group assistance was initially directed towards investment in new roads\. In the late sixties with t'lie departure of expatriate engineers and later, the indigeAous engineers of Asian origin, the deterioration of the road network through neglect of road maintenance became very evident\. Bank Group strategy, then, shifted towards institution building, training, and assistance to strengthen the road maintenance organization\. In all, the Bank Group has financed six projects in the highway sub-sector, totalling US$106\.7 million, including a Trucking Industry Rehabilitation and Improvement Project (Credit 743-TA, US$15\.0 million, 1977)\. 1\.03 In August 1974, soon after the Cridit Agreement for the Fourth Highway (Maintenance) Froject was signed, the executing agency, Ministry of Communications and Works, was split into two separate ministries, the Ministry of Communications and Transport and the Ministry of Works\. The latter ministry became the new executing agency\. In July 1984, the two combined again to form a single Ministry of Communications and Works (COMWORKS)\. Hereafter, reference is made only to COMWORKS\. 1\.04 The COMWOORKS is headquartered in Dar-es-Salaasa, the capital\. COMWORKS is primarily responsible for the administration of the trunk road system\. It has divided the country into 20 regions for trunk road maintenance (TRM)\. The project aimed at establishing TRM organization in 10 regions located in the southern half of the country and improving road maintenance operations\. The 10 regions in the northern half of the country are covered by a similar project, the Fifth Highway Project (Credit 876-TA, US$20\.5 millioat, 1979) which closed on December 31, 1985\.  -2- 1\.05 The Fourth Highway (Maintenance) Project (Credit 507-TA, US$10\.2 million, 1974), the subject of this Project Completion Report (PCR), i-cluded the maintenance/rehabilitation of about 3,300 km of primary roads, the construction and improvement of road maintenance camps, workshops and offices, the procurement of workshop equipment and tools and equipment, spare parts and materials for road maintenance, the training of road maintenance personnel and technical assistance to COMWORfKS\. The financing of the project was shared between the Government (20%) and the Association (80%)\. There were no cofinanciers\. 1\.06 The souirces of information on which the PCR was based are listed below: 1\. Bank Project Files - Fourth Highway (Maintenance) Project (Credit 507-TA)\. 2\. Appraisal Report and Credit Agreement\. 3\. Consultants Study on Tanzania Highway Maintenance and Organization - Inception Report of March 16, 1972; Draft Final Report (Summary) of March 1972; and Final Report (Vol\. I, III, and III) of August 1, 1972\. 4\. TRM/COMWORKSs Proposals for Tanzania Trunk and Territorial Road Maintenance, July 1973\. 5\. GOT/Consultants: Contract for Trucking Industry Study, April 1975\. 6\. Consultants: Final Report oiL the Trucking Industry Study, May and September 1976\. 7\. GOT/Consultants: Contract \.n Technical Assistance and Training for Highway Maintenance, September 1976\. 8 Technical Assistance Consultants and MOW Quarterly Reports\. 9\. MOW: Local Construztion Industry Study (1977)\. 10\. Staff Appraisal Report (1978), Tanzania Fifth Highway Project\. 11\. University of Dar-es-Salaam: Vehicle Load Regulation Study for the Tanzania - Zambia Highway, June 19?9\. 12\. Consultants: Draft Final Report on Technical Assistance and Training for Highway Maintenance, February 1980\. 13\. MOW/Consultants: Report on the Recasting of the IDA Fourth Highway Project, November 1980\. 14\. Project Performance Audit Report No\. 4030 on Tanzania - Second Highway Project (Loan 586-TA/Credit 142-TA) of June 30, 1982\.  -3- 15\. Project Performance Audit Report No\. 4031 on Tanzania - Third Highway Project (Credit 265-TA/Loan 586-TA) of June 30, 1982\. 16\. Tanzania - Transport Sector Memorandum, Vol\. I and II, May 17, 1982\. 17\. The World Bank Report No\. 5085 on Institutional Development in Africa: A Review of World Bank Project Experience, Vol\. I and II, May 17, 1984\. 18\. The World Bank Report No\. 5019-TA: Country Economic Memorandum - Tanzania - August 10, 1984\.  - 4 - II\. PROJECT IDENTIFICATION\. PREPARATION\. AND APPRAISAL Origin 2\.01 In 1970, the Government became concerned about deterioration of the primary road network\. It recognized the need to improve its road maintenance capability which had suffered through loss of senior and experienced staff and inadequate funding\. Faced with the problem of also h\.iving to maintain about 17,000 kms of rural roads previously maintained by the local authorities, the Government sought assistance from the United States Agency for International Development (USAID) to finance a Highway Maintenance and Organization Study\. 2\.02 The study made recommendations for (i) the improvement of the road maintenance organization, (ii) the reorganization of COMWORKS to take over and maintain the regional and district roads in addition to the trunk road system, and (iii) a five-year program (1972-76) for road rehabilitation and maintenance\. The Association assisted the Government by reviewing and commenting on the study reports emphasizing particularly the institutional aspects\. The study was completed satisfactorily in early 1972\. Preparation 2\.03 Based on the findings of the USAID financed study, COMWORKS began preparation of a trunk road rehabilitation and maintenance project for financing by the Association\. Progress was slow because of the lack of experienced staff and lack of interest shown by senior COMWORKS officials in an Association financed road maintenance project\. Most of the staff were new and inexperienced and were interested more in design and construction of new works rather than in road maintenance\. In order not to delay project preparation and at the initiative of the Association, an advisor, financed by the Canadian International Development Agency (CIDA), was appointed to COMWORKS to assist the ministry\. 2\.04 During the course of project preparation, the Government began implementing a policy of decentralization of government administration and a major reorganization of COMWORKS was taking place to decentralize its activities\. This was not consistent with the findings of the USAID financed study which recommended the consolidation of authority in COMWORKS over all roads in the country including the regional and district roads\. In the end, however, it was agreed with the Association to retain administration of the trunk road system including responsibility for execution of the trunk road maintenance in COMWORKS but responsibility for regional, district, and other roads passed to the regional and district governments\. 2\.05 A formal application for the Credit was sent by the Government on September 6, 1973\. The Government's application consisted of proposals for a trunk road maintenance project including the development of a capable trunk road maintenance organization in COMWORKS\. The Government's approach was considered by the Association as basically sound and a sufficient basis for an appraisal which took place in December 1973\.  -5- Appraisal 2\.06 The project as prepared by CONWORKS was found by the appraisal mission to be too large\. It was agreed with the Government to reduce the scope of the project because of: (i) the availability of only about US$8\.0 million of credit funds for the project, (ii) the shortage of adequately trained staff in COMWORKS to implement the project, and (iii) the need to test road maintenance methods suited to Tanzanian conditions on a reduced scale before applying them to the whole country\. 2\.07 The Government agreed to carry out its trunk road maintenance program in two stages\. The first stage to be financed under the p\.oject would cover about 3,300 kms of primary roads located in the southern half of the country out of about 7,200 k1m in the entire country\. The balance was to be covered under a subsequent project - the Fifth Highway Project\. 2\.08 Given the shortage of experienced staff, project preparation was satisfactory\. Many details were provided after the appraisal mission returned to headquarters and they were in respect to: (i) plans and speefications of road maintenance camps; (ii) costs of tools and mobile workshop equipment; (iii) cost of training aids; (iv) updated traffic counts for the roads to be rehabilitated under the project; and (v) inventory and costs of workshops, tools, and equipment\. 2\.09 From the outset, the appraisal mission was concerned about the availability of qualified and experienced manpower in COMWORKS and its ability to execute the project satisfactorily\. Only 16 of the 63 engineering posta were filled at tb t time and two-thirds of the approximately 180 technician positions were vacant\. How to meet this shortage of manpower was the main issue which was to shadow the implementation of the project and its outcome\. 2\.10 Although COMWORKS project proposal included a request for 21 expatriates to fill staff positions, the project component became a subject of repeated controversv between the Association and COMWORKS\. As early as March 1973, the minister had indicated that he was opposed to employment of consulting firms and intended to recruit individual experts under contract with the Government\. The Association mission in the field at that time suggested considering the issue at project appraisal\. 2\.11 CONWORKS was aiming to give Tanzanian staff the opportunity to learn on the job at a pace it was comfortable with\. It intended, therefore, to hire experts as individual advisors who could be integrated easily into the ministry compared to a consulting firm\. It also hoped to avoid the cost of overheads and profits that would be charged to the Government by a consulting firm\. Before independence and several years afterwards Government expatriate staff were recruited individually for appointment to the ministry and Government had the machinery and the experience in administering expatriate staff\.  - 6 - 2\.12 Unfortunately, the appraisal mission did not raise this as an issue in its issues paper and Association management accepted without discussion the misson's recommendation to recruit the expatriate technical assistance staff as a team\. This meant that the Government would have to contract with a firm to provide the technical assistance staff\. This was a subject of disagreement frequently during project implementation\. 2\.13 There was also a genuine feeling in the Government, that senior executive posts of an independent nation should not be seen to be managed by expatriate staff\. This led to the proposal to appoint all experts as advisors although it was apparent that there were few suitably qualified counterparts and that in reality, the advisors would be called upon to function in executive positions\. This resulted in continuing misunderstanding among the advisors as to their precise role\. 2\.14 In assessing the institutional capabilty of COMWORKS, the appraisal mission concluded that the shortage of qualified staff would be greatly alleviated wthin 5 to 10 yeara if COMWORKS were able to attract students graduating in engineering in the mid-seventies\. This conclusion greatly underestimated the demand in the country for engineers and the shortage has persisted to the present day\. 2\.15 The project aimed at the execution by force account of all road maintenance works including periodic and rehabilitation works\. Although the appraisal mission gave a bleak picture of the capacity of the local contracting industry to execute roadworks, it did not consider including provision for strengthening and developing the industry and did not consider this as a viable alternative to force account\. The overriding factor was an express Government policy of favoring the expansion of Government involvement in all sectors including the construction sector\. Targets and Goals 2\.16 The ultimate goal was to establish and operate, an organization to plan, manage, and carry ouw the maintenance of the trunk roads (primary) in the country to acceptable standards\. It was to be done in two phases: the first phase covering the southern half of the country and second phase, the northern half\. The project represents the first phase\. 2\.17 The successive project targets were to be as follows: i) to divest the regional government of responsibilty for trunk road maintenance (TRM) and to pass responsibility to COMWORKS; ii) to establish a TRM organization in each of the 10 regions covered by the project headed by a Resident Engineer; iii) to fu!inish each Resident Engineer with offices, camps, equipment maintenance workshops, equipment and vehicles ant spare parts and materials to enable him to execute a road maintenance and rehebilitation program\.  - 7 - 2\.18 The main project objective was to prevent the deterioration of the trunk road network and protect the investments made in it with a view to eliminating transport as a constraint to rapid economic growth\. In addition to the main objective, the project also included a study of the road transport industry in Tanzania\. Thus, as early as 1973, the need became apparent to direct attention also to the road users\. Prolect Description 2\.19 The project, as finally agreed between the Government and Assoclation, consisted of: a) the first stage of a road maintenance program, to be implemented over a four-year period and to include: i) the maintenance and, where necessary, rehabilitation of about 3,300 kms of primary roads; ii) the reconstruction and/or improvement of road maintenance camps, workshops, and offices; iii) the purchase of road maintenance and workshop equipment, vehicles, spare parts, tools and materials; iv) the training of maintenance personael; and v) technicai assistance to COMWORKSj and b) a study of the road transport industry for the purpose of developing recommendations as to pricing and licensing policies and other regulations concerning the industry\. 2\.20 The project was expected to be completed by June 30, 1978\.  - 8 - III\. PROJECT IMPLEMENTATION AND COST Start-Up 3\.01 The project started slowly\. Although funds were allocated in the Credit to finance technical assistance, the Government first made unsuccessful attempts to obtain technical assistance staff through bilateral aid\. In October 1974, at the request of CONWORKS, the Association recommended a consulting firm which was then invited by COMWORKS to submit a proposal for the technical assistance services\. The firm's proposal was unacceptable to COMWORKS since the firm offered experts as a team rather than as individuals\. 3\.02 The Association now shifted from the position it held during project preparation and appraisal and agreed (1) to amending the role of the consultants to that oi a staff recruiting agency and (ii) for the recruited experts to work as individual staff of COMWORKS\. But negotiations with the consultants, on this issue as well as on the costs issue, became protracted and yielded no result one year after the consultants submitted their proposal and 14 months after signing of the Credit Agreement\. A, Side Letter to the Credit Agreement had stipulated that three specialists (a maintenance management engineer, a training coordinator, and an equipment specialist) would assume duties by January 31, 1975, four months after signing of the Credit Agreement\. 3\.03 Again, at COMWORKS request, the Association recommended another firm as suitable for recruiting the technical assistance experts\. In September 1976, COMWORXS succeeded in signing a contract with this firm for the recruitment of all experts: an engineering and administration group of fifteen specialists to relieve the staff shortage and a training group of siX training specialists to develop training courses and on-the-job training programs\. The contract included varicous administrative costs but excluded specific mention of overheads\. 3\.04 The contract price of US$2\.57 million for 634 man-months was reasonable\. The fifteen especialists in the engineering and administration group were to fill managerial positions in COMWORKS\. The group consisted of 1 Maintenance Management Engineer, 1 Maintenance Administrator, 1 Equipment and Spare Parts Specialist, 2 Area Maintenance Supervisors, 7 Equipment Service and Maintenance Managers, 1 Special Projects Supervisor, 1 Premix Superintendent, and 1 Quarry and Rock Crushing Superintendent\. The training group consisted of 1 Training Coordinator and 5 instructors\. Technical Assistance 3\.05 The arrival of the technical assistance specialists was spread out in three phases\. The first batch of four was scheduled to arrive not later - three months following the date of signature of the contract ,\.oeptember 1, 1976), the second batch of fourteen not later than 8 months, and the third batch of three not later than 10 months\. The first batch of  specialists arrived close to contract schedule\. Only four out of the fourteen in the second batch arrived as scheduled\. By the end of the third phase, four specalists had still not arrived\. In two years, altogether 10 specialists had left the country either voluntarily or dismissed by the Government\. Others arrived to take their places\. Still others continued to leave and the picture as regards technical assistance was one of comings and goings\. At no time were all positions filled\. In June 1979, COMWORKS stopped further recruitment and some posts remained unfilled\. 3\.06 When the consultants' contract for technical assistance expired in November 1979, only three key specialists were in place\. The rest had left mainly because of poor living and working conditions\. Most of the specialists had families but, in early 1978, of the eight based in Dar-es- Salaam only one was provided with a house which was found by the consultant's own efforts although the Government was required under the contract to provide housing for technical assistance staff\. Later, two more houses were made available in Dar-es-Salaam\. 3\.07 Working conditions were difficult because of lack of office space, insufficient transport and poor communications between headquarters and the regions\. Slow progress with equipment procurement and building of road camps, workshops and stores and lack of spares and service and repair facilties and fuel contributed to the frustration faced by the expatriate staff\. Above all, they had difficulty in managing local staff\. Counterparts were also not provided until late 1977 and when they were provided, they were found mostly to be not suitably qualified and they lacked the aptitude to benefit from the training provided by the technical assistance staff\. Relations with counterparts were not satisfactory and many of the specalists were confused as to their precise role when counterparts were appointed\. The counterparts expected the expatriate specialists to work as advisors although the specialists were to fil' managerial positions under their contract with the Government\. 3\.08 The Association supervision mission in December 1979, in its evaluation of the technical assistance services, found that there was little physical evidence of their effectiveness in improving road maintenance\. No inventory of the trunk roads had been compiled and no procedures had been instituted for regular road inspections\. Consequently, there was little evidence of any realistic planning for routine and periodic road maintenance\. The TRM Organization had been established but there was no systematic execution of road maintenance works\. The few scattered and uncoordinated works that were carried out were of poor quality\. None of the ten regions covered by the project submitted progress reports\. Formal Training 3\.09 The Morogoro Training School was established in 1974 to train road maintenance field personnel - road inspectors, foremen, mechanics, equipment operators, and drivers\. The project objective was to support the school - to develop courses of instruction, prepare curricula and help COMWORKS staff to teach the courses and run the school\. Instead, the  - 10 - consultants carried out separately their own program for the TRM staff which was not integrated into the overall program of the school\. Thus, when the consultants left, the school was unable to sustain the additional courses started by the consultants\. Local instructors trained under the project were not cffered employment on completion of their training\. 3\.10 The courses themselves were poorly attended\. COMWORKS staff were reluctant to attend the courses because their salaries were cut by 35% (later reduceJ to 10%) to pay for board and lodging at the school\. As the training courses were conducted in English, many of COMWORKS staff, who were Swahili speaking, failed to benefit to the planned extent, When the consultants contract came to an end in late 1979, a total of 316 COMWORKS personnel had been trained in nine courses\. Only 56 had been trained in road maintenance\. Most of the training was directed at workshop and auto mechanics training\. Training targets were not set at appraisal\. Procurement 3\.11 The project implementation schedule called for early steps to be taken for procurement of equipment, spare parts, and tools\. COMWORKS was assisted by an expatriate financed by CIDA to prepare the bidding documents which were submitted to the Bank for approval in February 1975\. Substantial changes had to be made to the documents before the first round of bids could be invited in August 1975\. The bidding was scheduled in three phases\. The first round of bids was opened on October 31, 1975\. 3\.12 However, there was delay in bid evaluation by COMWORKS and it was not until about 4 months later that recommendations for contract awards were submitted to the Association for approval\. The Association agreed with all COMWORKS recommendations except for the contract award regarding 2 bull dozers and 8 front-end loaders which was made to the second lowest evaluated bidder\. These items of equipment were of a popular make common at that time in the country and were regarded by COMWORKS as more rel!-ble than those of the lowest bidder\. COMWORKS decided to go ahead without the Association's approval and financed the disputed items of equipment from its own resources\. The Association considered cancelling from the Credit the cost of the above equipment amounting to about US$500,000 but eventually it did not\. 3\.13 The second round of bids for equipment and spare parts was invited in late 1976\. Bidding documents and advertizing procedures were not sent to the Association for prior review\. Local competitive bidding was applied to purchase of bitumen in excess of US$50,000 when the credit agreement stipulated ICB in this case\. At the same time, contracts signed based on the first round of bids showed quantities and prices different from the bids\. The Association at this point felt that COMWORKS either did not understand Association's procurement procedures or chose to ignore them\. 3\.14 In the event, the Association reviewed the bidding documents for the second round of bidding ex post and was satisfied\. However, bid evaluation by COMWORKS again took over five months\. On this occasion, the  - 11 - Association approved the COMWORKS recommendations withvut comment\. In retrospect, COMWORKS understandably proceeded witi! bidding for the second batch of equipment without reference to the Association as COMWORKS was following procedures previously approved by the Association for the first batch of equipment\. Although the Association was eventually satisfied with the documents and proredures adopted, yet it demanded prior review of all bidding documents before the third round of bidding in late 1977\. The disagreement over quantities and contract prices in respect of the first round of bidding were also resolved to the satisfaction of the Association\. Table 1 provides details of the list of equipment procured under the project\. 3\.15 With regard to civil works for the construct'on of road camps, offices and workshops, although the Credit Agreement stipulated execution by contract unless it was not found feasible, COMWORKS carried out all works by force account with the approval of the Association\. There is no evidence of a basis for the Association's waiver of the requirement to execute the works by contract\. However, works did not commence until late 1976, over two years after the Credit was signed and none had been completed three years later\. Road Maintenance and Rehabilitation Works 3\.16 The project goal was to establish an organization for the maintenance of 3,300 km of primary roads\. Many of the roads had deteriorated and the project provided for the rehabilitation of these roads in order to restore them to a maintainable condition\. Practically, all the gravel and earth roads, about half the total road network, required some rehabilitation\. Most of the paved roads were adequate at the time of appraisal\. 3\.17 Twenty-three road camps and 7 workshops ;ere to be built in the ten regions covered by the project\. Thirty section crews for routine maintenance and six specialized crews for periodic maintenance and road rehabilitation works were to be organized and equipped, in stages, to execute the whole program\. 3\.18 By late 1979, COMWORKS had constructed only 9 camps out of the 23 scheduled\. There were shortages in supply of materials and fuel and insufficient funds in COMWORKS budget to construct the camps\. Only 10 crews for routine and 3 crews for periodic maintenance had been established, less than 50% planned for establishment\. There were only sporadic attempts at execution of road maintenance operations and rehabilitation works\. The quality was poor and, overall, there was little impact on the continuing deterioration of the primary road network\. 3\.19 Much of the poor performance in the field was due to the lack of adequately trained foremen and inspectors and shortage of experienced engineers\. Above all, the organization for the execution of the whole program was unsatisfactory\.  - 12 - 3\.20 Although the program was executed by the TRM organization headed by a Resident Engineer, an employee of COMWORKS, the TRM Resident Engineer reported to the Regional Engineer\. Responsibility for supervision of the TRM Resident Engineer was delegated by COMWORKS to the Regional Engineer\. The Regional Engineer was an officer of the Regional Government and as such was also responsible for the administration of all the secondary and feeder roads in the region, for which responsibility had passed to the Regional Government under the Government's decentralization policy together with responsibility for building works and water supply\. 3\.21 The Government's decentralization policy had the effect of strengthening the local administrations and the Regional Engineer took his orders from the Regional Development Director\. Thus, his time was divided between the demands of the Regional Government and COMWORKS with the Regional Government generally having priority when there were conflicting demands\. As a result, resources generated by the project such as skilled manpower and fuel were diverted to meet the needs of the Regional Government\. The war with Uganda in 1978/79 made matters worse when heavy equipment and trucks were diverted for use in constructing the airfield at Mwanza and for other military purposcs\. 3\.22 There was underutilization of equipment and low availability rates as well as \.frequent breakdowns caused by poorly trained operators and repair and servicing of equipment and vehicles were unsatisfactory\. Inadequate provisions were made to maintain a regular supply of spare parts; low priority was given to the execution of routine road ma?ntenance tasks for which hand tools were generally adequate\. Thus, the deterioration of the primary road network continued despite the inputs provided by the project\. The Recasting of the Project 3\.23 In late 1978, it became evident that, even after technical assistance staff had been in the ministry for nearly two years and most of the equipment had been delivered, there was little improvement in road maintenance\. During this period, the Government was preparing the Fifth Highway Project which aimed at implementing the second stage of establishing a trunk road maintenance capability in the northern half of the country\. 3\.24 At negotiations for the Fifth Highway Project in December 1978, the Government and Association agreed that COMWORKS would prepare a proposal for recasting of the fourth project in the light of lessons learned at that time and already incorporated in the fifth project\. The Fifth Highway Project differred in the following respects: i) the TRM organization would report directly to COMWORKS rather than to the Regional Engineer as was the case under the Fourth Highway Project; ii) the role of technical assistance staff would be clearly defined; and iii) the road rehabilitation program identified the road sections to be included in the project\.  - 13 - 3\.25 The project continued to show no perceptible progress for the next 12 months\. COMWORKS had not submitted its proposal to recast the project when, following a supervision in August 1979, the Association financed a consultant to visit the country to assist COMWORKS in its efforts to recast the project\. The objective was to make the project "organizationally and operationally consistent with the Fifth Highway Project" and prepare a program to apply the balance of the credit proceeds effectively\. 3\.26 In May 1980, COMWORKS officials were invited by the Association to Washington to discuss the problems facing the project\. The basis of the discussions was the report by the Association-financed consultant who visited the country in November/December 1979\. Following the meetings in Washington, COMWORKS submitted, in January 1981, a proposal for recasting the project, which was acceptable to the Association\. The proposal was to reallocate the balance of the credit proceeds (US$1\.5 million) and to establish a road maintenance program (January 1981 - June 1983) comprising (i) the resealing of 214 km of paved roads, (ii) regravelling of 186 km of gravel roads, (iii) patching of 1,400 km of paved roads, (iv) grading of 640 km of gravel roads, and (v) routine maintenance of about 4,000 km\. To implement the program, the Association approved the procurement of additional items of equipment (about US$340,000), spare parts, (US$960,000), and technical assistance (about US$240,000) for a total of about US$1,540,000\. However, there was little improvement in project performance and the project was closed on December 31, 1982 with US$857,000 cancelled\. Study of Road Transport Industry 3\.27 The contract for consulting services to carry out the study was signed in April 1975\. Unlike the case of selection of consultants for technical assistance services, there was little delay in the appointment of consultants for the road transport industry study\. Only one consulting firm was invited to submit proposals\. 3\.28 The inception report was delivered on time and a draft final report was produced in December 1975, about two months behind contract schedule\. Both reports drew comments from the Association and C0MWORKS\. The Association felt that there was no comprehensive analysis of the role of trucking in Tanzania, the constraints facing the sector and review of transport policy and investment options to alleviate these contraints\. Much of the criticism by the Association 'and COMWORKS went unheeded in the final report which was revised twice in May and September 1976\. The study identified various weaknesses and problems but was not very successful in analyzing them and developing an action program to remedy them\. Implementation Schedule 3\.29 A comparison between the original and actual implementation schedule is shown in Table 2\. Project implementation was three to four years behind schedule mainly due to the: (i) time taken for the selection of technical assistance specialists; and (ii) procurement disputes with the Association\.  - 14 - 3\.30 The project was expected to organize and equip 30 routine maintenance and 6 specialized crews\. At the close of the project on December 31, 1982, the division of crews according to function and task had disappeared and only 12 crews were operating in all; six were carrying out patching works on paved roads and 6 regrading gravel roads\. There was no other work being undertaken in the project area\. 3\.31 In retrospect, it is clear that the original implementation schedule was unrealistic\. However, even when the inputs were in place, progress in the road maintenance and rehabilitation program continued to be negligible\. The situation at the close of the project was no better than at commencement\. Reporting 3\.32 The consultants responsible for the technical assistance and the road transport industry study submitted their reports in accordance with their contracts\. There was no requirement in the Credit Agreement for reporting by the Government\. However, COMWORKS at the request of the Association, prepared progress reports at quarterly intervals\. The first report was submitted to the Association in August 1975 for the quarter ending July 31, 1975\. The reports were satisfactory\. Performance of Consultants (a) Technical Assistance 3\.33 The consultants providing the technical assistance services were employed by COMWORKS from September 1976 to November 1979\. Altogether 21 specialists were to be appointed for an average of 2 1/2 years to fill a variety of positions in COMWORKS\. However, the maximum number of positions filled at any one time was 16 and the average period of stay in Tanzania was approximately 18 months\. There were several replacemer-ts of technical assistance staff during the contract period\. Four remained in Tanzania less than one year and 9 less than 15 months\. 3\.34 The large turnover of technical assistance staff was mainly due to the lack of suitable housing and evacuations for medical reasons\. To a lesser extent, the frustrations at work were a contributing factor\. Except for the six instructors at the Morogoro Training School, the majority of the staff lived in hotels\. There were only three houses available in Dar- es-Salaam and those working in Mbeya, Songea, and Tanga Regions were mostly housed in the local hotels\. Most of the housing offered by COMWORKS were in need of rehabilitation\. There were 13 evacuations from the country for medical reasons including 6 by family members\. 3\.35 The consultants faced numerous constraints in the execution of their duties\. Office facilities were indequate, transportation was not always available, there were delays in the assignment of counterparts, particularly at the Morogoro Training School, spare parts and materials were in short supply, and equipment was diverted to the army during the Ugandan war\.  - 15 - 3\.36 In summary, work of the consultants was seriously hampered and they failed to achieve their contract objectives\. (b) Road Transport Industry Study 3\.37 The contract for the study called for a large scope of activities on the part of the consultants within a relatively short time\. Reliable data were difficult to obtain and in many instances non existent\. The consultants were generally satisfactory in identifying the problems facing the industry but failed to analyze satisfactorily the issues, recommend appropriate measures to resolve these issues and develop a program to rehabilitate and strengthen the industry\. Project Costs 3\.38 A comparison of the actual and estimated projected costs is shown in Table 3\. The project costs which reflect only the inputs financed under the project are close to the estimated costs\. While the Government's contribution to support the project's local costs was satisfactory, its allocations to the road maintenance budget were seriously cut during the project period\. Expenditures on routine maintenance dropped from TShs 37\.7 million in 1980/81 to TShs 22\.5 million in 1981/82\. Although expenditures rose slightly to TShs 24\.9 million in 1982/83, it was obvious that government was not as supportive of the project as it should have been\.  - 16 - IV\. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT 4\.01 At project appraisal, the Associaqion was concerned about two institutional problems\. First, in line with the Government's decentralization policy, the regional governments had taken over responsibility for all roads, but following agreement with the Association, responsibility for the primary or trunk roads was retained by COMWORKS\. However, while planning, budgetting and financial controls were exercised by COMWORKS, the responsibility for supervision of the execution of road maintenance tasks was delegated by COMWORKS to the regional governments\. Second, there was a serious shortage of staff at all levels, senior staff were inexperienced and technicians and field personnel were poorly trained\. 4\.02 With regard to the first problem, during negotiations the Government had agreed to discuss wvether any adjustments in the institutional arrangements might be required when implementing the project\. It was decided, when recasting the project in 1981, that the TRM Organization in the regions should be taken out of the control of the regional government as proposed for the Fifth Highway Project\. This did not prove to be entirely satisfactory as the Resident Engineers heading the TRMs were unqualified and were recruited from the badly trained ranks of technicians\. The Regional Engineers of the Regional Governments, on the other hand, were mostly qualified engineers\. 4\.03 With regard to the second problem, the project dealt with it only partially by implementing a training program for field personnel at the Morogoro Training School\. In the Fifth Highway Project, a program for the training of about 100 engineers in universities in India was successful and in the proposed Sixth Highway (Rehabilitation) Project, the Government would institute a Highway Technician Course at the Dar-es-Salaam Technical College\. In retrospect, many of these efforts should have been initiated earlier\. The experience and management capability of senior engineers continue to be a problem\. 4\.04 It was not realized at appraisal of the project that COMWORKS would not be able to provide suitably qualified counterparts to technical assistance staff financed under the project\. The assignment of counterparts did not begin until late 1977 (3 years after the credit had been signed)\. Only 3 counterparts were assigned at that time compared to 21 expatriate technical assistance specialists to be financed under the project\. Eight counterparts took up their duties in May 1978\. At no time did the number of counterparts exceed 12\. The Equipment Servi^es Manager counterparts were all unsatisfactory and were reassigned\. The others were also not qualified to benefit fully from the technical assistance, 4\.05 The shortage of engineers necessitated a heavy reliance on expatriates\. The Government recruited expatriate staff individually, either directly or under arrangements with bilateral aid agencies\. It was reluctant to accept staff from consulting firms\. A major problem was that Government did not plan ahead to make timely replacements for staff when  - 17 - their contracts expired\. Many did not renew their contracts because of unfavorable living and working conditions\. The lack of suitable housing was a critical factor\. Even the staff provided under the project by a consulting firm were not willing to extend their stay in the country\. 4\.06 By 1979, the results achieved by the project disappointed both Government and Association\. From the beginning there was a perception that the Association was attempting to provide jobs for consulting firms by introducing a large contingent 'f technical assistance staff\. Senior officials had shown little interest in a road maintenance project\. The Association refused to approve procurement that had been carried out without prior review of bid documents and procedures\. The delays that followed and the exchange of telexes evidently upset COMWORKS staff and it contributed to the eventual reluctance of COMWORKS staff to meet with Association missions in the field\. 4\.07 The dialogue between the Association and COMWORKS was resumed when COMWORKS officials were invited to Washington to discuss a recasting of the project particularly in the light of institutional arrangements for the subsequent maintenance project, the Fifth Highway Project\. Except for the separation of the Trunk Road Maintenance organization from the regional governments, the recasting merely aimed at reallocation of the balance of the credit proceeds\. Opportunities were lost by the Government and Association to scale down the project area and test the new arrangements\. 4\.08 The project closing date was extended four times from June 30, 1978 to December 31, 1982\. In April 1980, an Association mission reported that trunk road maintenance In the project area was 'little if any better than it was in 1974", over 6 years after the credit was signed\.  - 18 - V\. ECONOMIC RE-EVALUATION 5\.01 Field observations by an Association mission immediately after the close of the project showed that thare was no satisfactory planning of road maintenance in t\.ie project area, and that road maintenance operations were carried out on an ad hoc basis dependent upon availability of resources such as fuel, materials, equipment, transport, and spare parts\. The organization and management of the regional trunk road maintenance organizations were not effective and there was little control and supervision over field crews and their activities\. The few scattered road maintenance works carried out were of poor quality and road conditions reverted soon to their original deteriorated state\. Thus, the savings in vehicle operating costs projected at the time of appraisal did not materialize\. Therefore, the economic re-evaluation of the project shows a negative economic rate of return\.  - 39 - VI\. CONCLUSIONS Prolect Justification and Obiectives 6\.01 The project was a logical development after a decade of involvement in the highway sector to upgrade the highway network\. The departure of expatriate staff after independence in 1962 and the exodus of indigenous staff of Asian origin in 1972 brought into focus the decline in road maintenance capability that had been going on for some time\. Both COMWORKS and the Association realized the need to stem the deterioration of the highway network but while COMWORKS regarded the need for new construction and paiing of the highway netwcrk as of equal priority the Association considered road maintenance as the higher priority and initiated the Idea of a highway maintenance project wL_h the objective of (i) establishing institutional arrangements for trunk road maintenance, (ii) training COMWORKS staff and field personnel, and (iii) implementing a road rehabilitation and maintenance program\. Prolect Content and Scheduling 6\.02 Although the project covered only about 3,300 km, it was ambitious\. The project area encompassed almost the whole of the southern half of the country where communications have always been difficult and suitable housing for expatriates scarce\. For a pilot project, especially with obvious problems, the project area was too large\. The project should have been tried out in one or two of the ten regions included in the project located closer to Dar-es-Salaam\. 6\.03 The desirability of limiting the proje':t area becomes obvious when considering the complexity of the pt\. iect\. A highway maintenance project is necessarily a complex one requiring coaprehensive attention to institutional arrangements ana, in Tanzania, it is more so as the project had to cope with an environment of basic shortages - fuel, supplies, and skills\. Prolect Implementation 6\.04 The project design aimed to: (i) implement a program of road maintenance and rehabilitation and (ii) build an institution to plan, organize, execute, and monitor road maintenance activities\. However, it left out three important factors: (i) to defini\. the road maintenance and rehabilitation program; (ii) provide for training of engineers and technicians other than artisans; and (iii) consider the alternative of carrying out road maintenance activities by contract rather than by force account\. 6\.05 The implementation capacity of COMWORKS was inadequate as it was finding it difficult to fill vacant positions in the ministry, particularly engineers, because of its reliance on bilateral aid for this purpose\. Senior staff were, therefore, engaged in attending to the day-to-day  - 20 - running of the ministry with not much time available to administer and attend to the requirements of the technical assistance staff financed by the project\. However, the amount of technical assistance staff needed for project execution was correctly assessed\. Lessons Learned 6\.06 The project clearly demonstrates that, for a technical assistance component to be effective in Tanzania, several important conditions should exist\. First, the Government, particularly the executing agency, should be committed to employing technical assistance staff\. Second, the role of technical assistance should be clearly defined e\.g\. if it is to be advisory or executive\. An advisory role should not be agreed upon if suitably qualified local counterparts are not available\. Third, the Government should have a satisfactory capability to administer the contracts for technical assista;ace services\. Fourth, before technical assistance staff and their families arrive in the country, the Government should be satisfied t'hat suitable housing, office facilities, and local transportation have been earmarked\. Fifth, each technical assistance staff member should produce at the beginning of each half yearly period a detailed work program, satisfactory to the Government, in terms of actual tasks to be performed to achieve technical assistance objectives\. Sixth, the Governme-\.t should monitor performance based on the individual technical staff member's half yearly work program to see if it is justified to continue the technical assistance\. 6\.07 Most importantly, the point made by the project is whether it is possible at all to develop a full force account capability to execute road maintenance works\. Experience on the Fifth Highway Project also shows that COMWORKS should limit its force account operations and that the alternative of giving out most of the road maintenance works to be executed by ccut-act should be considered\. Accordingly, in the proposed Sixth Highway (Rehabilitation) Project, provisions have been made for technical assistance and training for the development of the local contracting industry\.  - 21 - TAWANIA Table I FaM HIGHWAY (AIWU ) F RM (CRITt 507-TA) PRl OMPIE1CN NOWE Ean FRl SCHlB (Prior to Recating of Project) C\.I\.F\. Price th\. Date Orrency T Sh Loa Costs Total Unit Item Del'cPec'd of Bid Eluiv\. (T Sh) Pric (T Sh) Remrks FIRST BID\. CALL Piups 57 May 77 Yen 8147W 22119 6155 282740 - Pippers 38 June 77 Yen3133330\.00 85312 23174 106486 Sixteen iere taken by Aky\. Concrete Mixr 2 Jun 73 TSh - - - - - Water Pump 17 Jne 77 $ 775 6346 700 7046 - CGopressor 250 CR4 3 Jim 77 $ 8,366\.00 68501 12199 30700 Ome ias taken by Army\. Water Tank 17 April 77 T Sh - - - 12500 - Angle Dwer D-7 2 March 77 $ 77,886\.00 637731 10707 648432 - Roller Hyster 2 March 77 $ 24,624 201621 48313 249934 - Wheel Loader 920 4 March 77 $ 35,513 290780 6100 296880 - Wheel Loader 930 2 March 77 $ 45,580 373209 6702 379911 Om was iaken by Army\. Track Loader 951C 2 March 77 $ 47,316 387423 8300 395723 - Heater/Spray 250 16 March 77 $ 4,076 69239 18320 875\.59 - Heater 500 8 March 77 $ 4,586 77902 20593 98495 - Roller Bom 3/4 tn 14 March 77 $ 2,013 34195 9043 43238 - 1hater 1500 1 March 77 $ 6,095 103536 27379 130915 - Desanter 3000 1 March 77 $ 9,442 160,391 42395 202786 Mwanza\. Grader D-720 15 Feb\. 77 $ 55,162 451,666 34748 486414 - Wheel Tractor 444 16 Feb\. 77 T Sh - - - 88622 - Wheel Tractor 574 20 Feb\. 77 TS - - - 89290 - TIuck Tractor Scania 2 May 77 SW%KR 199300 376278 11960 388238 Were taken by Army\. Trailer Law td\. 30r 2 May 77 9W-KR 126500 288832 8310 247142 W;4re taken by Army\. Crushing Plant/1131/5245 1 Aug 77 $ 140,022 2378554 628786 3007340 Mmanza\. Asphalt Plant 5(YPH 1 Aug 77 $ 105481 1791806 473691 2265497 %mnza\. SECOND BID CALU Caravan 2 Bed 6 July 78 $ 5,954 50050 1050 51060 - Mobile Wbtkshop 10 Jan-oct 78 $ 91,477 768966 16135 784540 Three were taken by ArW\. Roller Towed 13-wheel 6 April 78 $ 5,538 46242 2300 48542 - Trailer Low td\. 20T 2 Aug\. 78 nM 43364 149782 9192 158974 - Lubricating Unit 19 April 78 $ 7,333 101063 8937 110000 - Diesel Fuel Tank Irailer 20 Aug\. 78 EM 31774 109750 6379 116129 - Cbncrete Vibrator 2 Aug\. 78 T Sh - - - 11400 - Distributor Bitumen 1000 gal\. I July 78 $ 29,377 223956 16940 240896 - THIRD BID CALL Compactors Lot 2 June 79 S 52,422 419900 17470 437370 - Paver 1 June 79 $ 41,060 635608 31822 667431 - Air Track Drills 2 July 79 $ 34,598 277130 11540 288667 - Compressor 600 CFM 2 June 79 Yen 5723600 190024 21976 212000 - Cobpressor 125 CFM % June 79 Yen 1932600 64162 7838 71700 - Saloon Car Toyota 3 Feb\. 79 $ 4,79' 38408 5790 44198 - Minibus Toyota 2 Feb\. 79 $ 5,67u 45417 6847 52264 - Stawagon 4x4 Toyota 4 Feb\. 79 $ 8,095 64841 9775 74616 -  - 22 - Table 2 TANZANIA Fourth Highway (Maintenance) Project - (Credit 507-TA) Actual and Expected Project Implementation Dates of Percent of Begining of Completion of Completion Contract Award Work/delivery Work/delivery by Expect\. Project Component Actual Expected Actual Expected Actual Expectad Date 1\. Technical Assistance and Consulting Services (a) Advisory and Training Services 9/76 11/74 (i) First Group 11/76 1/75 11/79 12/77 33 (ii) Second Group 7/80 N\.A 12/80 N\.A N\.A (b) Trucking Industry Study 5/75 12/74 9/76 6/75 15 2\. Training Aids 12/76 8/75 9/78 6/78 99 3\. Road Maintenance Equipment E,uipment1 2/77 1/76 6/79 6/77 58 4\. Workshop Equipment 5\. Building Construction (a) Workshop and Offices 6/76 7/75 _1/ 12/77 _ \. ~~~10 (b) Road Camps 9/76 1/75 -1/ 6/77 6\. Materials 6/76 1/75 -1/ 6/78 20 1/ Not completed on project closing date\.  - 23 - Table 3 TANZANIA Fourth Highway (Maintenance) Project (Credit 507-TA) Project Completion Report Actual and Appraisal Estimates of Project Costs (US $ Thousands) Actual Cost/ A praisal Estimate1/ Actual Cost as Project Component Local Foreign1/Total Local Foreign Total7 % of Appr\. Est\. 1\. Technical Assistance (a) Advisory and Training Services 50 2,375 2,425 135 2,670 2,805 (b) Studies 10 80 90 5 40 45 _ 82 2\. Training Aids 5 953/ 100 65 270 335 3\. Road Maint\. Equipment 245 4,660 4,905 _ 1,000 6,765 7,865 _ 134 4\. Workshop Equipment _ _ 50 920 970 Subtotals4/ 10,480 9,058 116 5\. Building Construction 0 05/ 06/ 1,135 200 1,335 6\. Materials 15 25 40 615 1,440 2,055 Totals 1,180 9,340 10,520 2,250 10,200 12,450 1/ Rounded figures due to lack of accurate cost data; an exchange rate of US$1 = TSh 8 for actual cost and US$ 1 = T\.Sh 7\.14 for forecast estimate of costs was used\. 2/ Foreign exchange component used as basis for disbursement\. 3/ Included in technical assistance bills\. 4/ Since the expenditures, claimed for credit disbursements by the Borrower under items 5 and 6, are not representative for the building work actually executed and for the materials actually purchased, a comparison of costs with estimates has to be limited to items 1 to 4\. 5/ Less than US$200\. i/ Credit funds under these four items were, with minor exceptions, not claimed for disbursement\.  -24- MAP SECTION  U GAN DA I % ><BUKOBA iOMk / <s (<->/1 X K E N Y A A / IC A E1URUND +/ J ! A II ) N A i % 0 < ~~~AREA>III AREA illI-I - AREAe V AREAIV V ' M o b , 15;E\., \ ( \'Mpondp \ * 9 r ! TI\ \. l l / ndlIfl t, : RWNANAA FEFOlCO1 /1 dIll R oo ; \. d I e1\o Prg1 11140Ao e og1s1dIi J4ie$ HIGHWAY~ ~ ~ ~~~lk MANEANEPOEC reS <,lNCA,g i<z- v\.n P,la14n1140 Unrd01 \ /11f h14014 l - , R0100 140 P \.o\.\- 1/nBciponl tbdprt5n / AA f Vr -: -- b milonc Bondcds \MALAWI \AAI -- > r \. 0ILO0ETERS i/ \. OZA IQUE i

APPROVAL

P126372

 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: 64676 Recife Education and Public Management Project Project Name Region LATIN AMERICA AND CARIBBEAN Sector Pre-primary education (40%); Primary education (40%); Public administration- Other social services (8%); General finance sector (8%);General transportation sector (4%) Project ID P126372 Borrower(s) MUNICIPALITY OF RECIFE Municipality of Recife Implementing Agency Municipality of Recife Brazil Tel: 5581 3355 9444 Fax: 5581 3355 8014 elabanca@recife\.pe\.gov\.br Special Secretariat of Planning and Management Recife, Brazil Tel: 55 81 3355-9444 Fax: 55 81 3355-8014 elabanca@recife\.pe\.gov\.br Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared September 22, 2011 Date of Appraisal September 21, 2011 Authorization Date of Board Approval December 20, 2011 1\. Country and Sector Background The Municipality of Recife (MOR), capital of the State of Pernambuco, has the second highest unemployment rate of any metropolitan area in the country, and with 28% of its almost 471,000 households (and 1\.5 million inhabitants) earning under R$830 per month, the Recife Metropolitan Region (RMR) is the second poorest of any metropolitan area\. It is by far the largest Municipality in RMR, which is the sixth largest metropolitan region in the country\. It is on the northeast coast of Brazil, centrally located between two other regional centers, Salvador and Fortaleza\. Recife’s population has grown by 12\.5% over the last ten years\. The nature of the economy continues to evolve, with the vast majority (83%) of the Recife economy now focused in the service sector\. As the state capital, Recife needs a lithe workforce resulting from a quality education – beginning from an effective foundation in early child education – and an efficient public management system to provide that education\. The growth has led to increased urban transport planning problems, which are expected to worsen in the absence of significant policy changes\. Education 1  • In Brazil, the principal responsibilities of the municipal education system are Early Child Education (ECE) and fundamental education (primary and lower secondary, consisting of 9 years, from age 6 to age 14), as well as adult education, for which responsibilities are shared with the state\. • Recife lags behind both the region and the country in early child education\. • The low creche coverage is mainly caused by the dual problems of insufficient centers and existing centers with unsatisfactory infrastructure conditions to qualify for federal funds for expansion\. • Early child development (ECD) programs have great potential to compensate for inequalities in income and background\. An effective ECD program requires the engagement of other secretariats such as social assistance and health\. • Quality of fundamental education in Recife is weak\. A key factor in the low performance of Recife’s fundamental school students is high age-grade distortion rates\. A second factor in Recife’s low performance is high rates of illiteracy in the early years of primary school\. A third factor in Recife’s low performance is teacher quality\. • The current, short school day limits students’ opportunities to advance academically\. Public Sector Management (PSM) • Underlying the effective functioning of the education system and other public services is the efficiency of the public sector\. • Enhancing tax administration of IPTU and other locally generated resources is a key factor in stabilizing and augmenting funding for education and other public services\. • Management of the municipal debt also requires significant reform\. • Increasing the efficiency and quality of public expenditures will require improved control over the payroll and strengthening Recife’s public financial management and procurement capacity\. • The link between planning and budgeting is weak\. • Urban mobility planning\. In Recife, over the decades, rapid urbanization has resulted in uncontrolled urban sprawl with associated traffic congestion and increasing travel distances\. 2\. Objectives The Project Development Objective (PDO) is to expand coverage of improved early child education, create conditions more conducive to learning in fundamental education, and improve municipal public management\. 3\. Rationale for Bank Involvement The current Brazil Country Partnership Strategy 2008-2011 (Report No\.42677-BR) emphasizes strengthening education systems, reducing age-grade distortion, and public management effectiveness\. It also highlights the high returns to early child development\. Furthermore, the 2 current Brazilian administration has emphasized the importance of early child development as one of its key areas of focus\. 4\. Description The Project will have two components, the first of which will co-finance existing eligible government programs in early child and primary education via a SWAp approach, and the second of which will provide technical assistance to strengthen public sector management\. Component 1: Strengthen coverage of Early Child Education and create conditions conducive to learning in Fundamental Education (Estimated total cost: US$860\.5 million; Bank: US$100 million)\. This component will expand coverage to improved early child education and create conditions more conducive to learning at the fundamental education level\. It will also improve cross-sectoral articulation of services for young children, through the following subcomponents: Sub-Component 1(a): Expansion and rehabilitation of ECE center; Sub- Component 1(b): Implementation of a multi-sectoral early child development program to reach children ages 0-3; Sub-Component 1(c): Create conditions more conducive to learning in fundamental education; Sub-Component 1(d): Professional Development of the Municipal Teaching Force; and Sub-Component 1(e): Education Management\. Component 2: Strengthen institutions for more efficient and effective public management (Estimated total cost: US$29\.675 million; Bank: US$29\.675 million)\. This component will strengthen Recife’s public management in seven key areas through the following subcomponents: Sub-Component 2(a): Education Evaluation & Administration (US$ 1\.175\.000); Sub-Component 2(b) (estimated cost US$ 9\.100\.000): Tax Administration; Sub- Component (c) (US$ 300\.000): Public debt management; Sub-Component (d) (US$ 8\.600\.000): Increasing efficiency of Public Expenditures; Sub-Component (e) (US$ 3\.630\.000): Municipal planning, results-based management; Sub-Component (f) Urban Transport Planning (US$ 6\.000\.000): To support the implementation of the Mobility Plan; and Sub-Component 2 (g) (US$ 870\.000) Project management and external audit\. 5\. Financing Source: ($m\.) Borrower 760\.5 International Bank for Reconstruction and Development 130\.0 Total 890\.5 6\. Implementation The Recife SWAp is a multi-sector Project, covering education and a wide range of PSM activities\. Given its nature, the Project will be implemented by five different municipal Secretariats, but will also benefit several other Secretariats and institutions\. The five implementing Secretariats are the Secretariat of Education (SEEL), the Special Secretariat of Planning and Management (SEGESP), the Secretariat of Finance (SEFIN), the Secretariat of Public Administration and Personnel Management (SADGP), and the Secretariat of Public Services (SSP)\. Project activities will also benefit the Secretariat of Legal Affairs (SAJ), the General Controller’s Office, the Company of Urban Transport and Traffic (CTTU), and other transport-related agencies\. Thus, administration mechanisms require a certain degree of 3 complexity but will count on a centralized coordinating body and a Project Operational Manual (MOP) detailing Project implementation arrangements\. 7\. Sustainability Because this project includes the construction of new facilities, which also entail various recurring costs including staff and maintenance, sustainability is an important concern\. The MOR has already calculated the staffing needs of the new planned centers and factored those into its recurring budget projections\. Some of the education programs, such as those aimed to reduce age-grade distortion, are expected to run for several years and then – with the elimination (or significant attenuation) of the problem – be retired\. Others, such as expansion of the school day, will be incorporated into the ongoing operational budget of the Municipality\. The PSM component will support Recife addressing its fundamental municipal management problems, mainly tax administration and efficiency of public expenditures with a special focus on payroll management\. Due to the structural nature and political cost of some of these reforms, full implementation following completion of technical work is expected to represent the biggest challenge\. Given the structural nature and urgency of the activities, these are likely to be sustained over time once implemented\. The Government’s strong commitment to improvements in all the different PSM sub-areas has been evidenced during the preparation of the project, and political authorities of the concerned Secretariats (SEGESP, SEFIN, and SADGP) have explicitly requested and endorsed the project’s activities\. While a new administration may take office during project implementation, the structural and urgent nature of the Municipality’s main public management challenges supported by this loan will very likely remain as top priorities\. Studies in urban mobility have the goal of making the CTTU a stronger coordination body, charged with periodically updating the Mobility Plan to increase accessibility, affordability, availability and acceptability of public transport in Recife\. 8\. Lessons Learned from Past Operations in the Country/Sector The proposed Project has been designed taking into account lessons learned from analytical work in Brazil and elsewhere as well as previous World Bank operations in Brazil\. The focus on expanding access to early child education stems from extensive work both in Brazil and internationally demonstrating high returns to early child education, both at the pre-school level and at the creche level\. Analytical work specifically in the north-eastern region of Brazil supports the results on long-term returns to early child education\. Furthermore, recent research in six state capitals across Brazil demonstrates the importance of quality in early child education\. Children who attended low quality early child education centers performed similarly to children who attended no early education at all: Only high quality education centers had a positive impact on child development\. For that reason, the Project supports not only expansion of coverage through center construction but also the provision of materials and teacher training to ensure that children receive quality stimulation while at early child education centers\. Recent evidence from Rio Grande do Sul in Brazil also demonstrates the developmental benefits of a multi-sectoral home-based early child development program, a pilot of which is supported by the Project\.1 1 All this evidence is documented in Evans D & K Kosec, Early Child Education:Making Programs Work for Brazil’s Most Important Generation, forthcoming World Bank report, 2011\. 4 At the level of primary education, the emphasis on quality of learning is based on strong evidence that actual learning in school is much better guarantor of both individual returns and economic growth in the long run than is simply school attendance\.2 Furthermore, extensive research (cited earlier) has demonstrated the importance of sufficient academic learning time and the effective use of that time for improving student performance, hence the interventions to expand the school day and to improve the quality of teaching within the school day through training\. Accelerated learning programs like those supported by this Project have been included in several other World Bank projects (in the states of Pernambuco, Acre, and Rio de Janeiro), and have been correlated with reductions in age-grade distortion\. In terms of public sector management, the recent successful modernization of property tax administration in municipalities such as Belo Horizonte, Brazil, as well as Cartagena and Barranquilla in Colombia, have informed the design of the subcomponent of tax administration by, for example, including adequate planning and a communications campaign to accompany technical activities of property assessment and improvement in tax management systems\.3 The Bank’s operational experience in payroll audits and upgrades in the cadastre of public servants in projects such as BR PREVMUN (P074777) covering several municipalities, BR Alagoas Fiscal and Public Sector Reform Development Policy Loan (P103770) and BR PARSEP II (P089793), has informed the design of this project by, for example, separating the identification of anomalies and the implementation of the correcting measures, and will be further used in the design of the activities under subcomponent 2(d)\. Finally, the Bank’s extensive experience on results-based management in Brazil in several state-level projects (Ceará, Minas Gerais, Pernambuco and Rio Grande do Sul among other) as well as BR Rio de Janeiro Municipality Fiscal Consolidation for Efficiency and Growth Development Policy Loan (P111665) will also be used in Recife’s context to plan activities under subcomponent 2(e)\. 9\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Environmental Assessment (OP/BP 4\.01) Physical Cultural Resources (OP/BP 4\.11) Involuntary Resettlement (OP/BP 4\.12) The key stakeholders in the project include parent associations, teachers, teachers’ unions, Civil Society Organizations (CSOs) involved in education delivery, taxpayers, civil servants and the municipal administration\. The MOR has several ongoing consultative forums for involving key stakeholders in issues of education policy design and implementation\. This includes the Municipal Education Conference (Conferência Municipal de Educação, or COMUDE), which holds periodic consultations with teachers, parent associations, educational agencies and CSOs\. The Municipality has held discussions with COMUDE regarding the plan for construction of 2 Hanushek E and L Woessman, “The Role of Cognitive Skills in Economic Development,â€? Journal of Economic Literature, 46(3), 607-668, 2008\. 3 See: Pinto Domingos, O\., “Implementing Local Property Tax Reform in Brazilâ€?, Land Lines, Lincoln Institute of Land Policy, January 2011; World Bank, Colombia: Plan de Acción Rápida para la Mejora de la Gestión Pública de la Municipalidad de Cartagena de Indias, 2009; and World Bank, Colombia: Evaluación y Plan de Acción Rápida para la Mejora de la Gestión Pública de la Municipalidad de Barranquilla, 2010\. 5 CMEIs\. In addition, approximately half of the first group of CMEIs to be constructed has been selected by the population during a Participatory Budgeting process at the sub-municipal level, in which citizens directly vote and prioritize the selection of investments; the remainder were selected via a needs assessment carried out by the Municipality\. Additional Consultations on the entire project will be carried out during Project Appraisal with key stakeholders\. 10\. List of Factual Technical Documents All project documents are in the project files and disclosed in the World Bank’s website\. 11\. Contact point World Bank Contact: David Evans Title: Economist Tel: (202) 458-4146 Email: devans2@worldbank\.org Contact: Daniela Pena de Lima Title: Senior Operations Officer Tel: 55 61 3329-1036 Email: dpena@worldbank\.org Borrower/Client/Recipient Municipality of Recife Contact: Evelyne Labanca Title: Secretary, Special Secretariat of Planning and Management Tel: 55 81 3355-9444 Fax: 55 81 3355-8014 Implementing Agencies Special Secretariat of Planning and Management Contact: Evelyne Labanca Title: Secretary Tel: 55 81 3355-9444 Email: elabanca@recife\.pe\.gov\.br 12\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop 6 7

APPROVAL

P009438

Documnt of The World Bank FOR OMCLL USE ONLY Ropt No\. 12541 PROJECT COMPLETION REPORT BANGLADESH SECOND AGRICULTURAL RESEARCH PROJECT (CREDIT 1455-BD) NOVEMBER 29, 1993 MICROGRAPHICS Report No: 12541 Type: PCR Agriculture Operations Division Country Department I South Asia Region This document has a restrictes distribution and may be used bS recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIALET - ~~ - ~SAR Current (Feb\. 1984) (April 1993) US$1 Tk 25\.00 Tk -39\.00 Tk I US$ 0\.040 US$ 0\.025 Tkc 1 million US$40,000 US$ 25,641 WEIGHTS ANM MEASUREi 1 acre (ac) = 0\.405 hectare (ha) I mound (md) = 82,27 lbs(37\.3 kg) 1 metric ton (m ton) = 26\.8 md M - million B - billion ABBREVIATIQNS AND ACRONYMS ARP Agricultural Research Project BARC Bangladesh Agricultural Rtesearch Council BARI Bangladesh Agricultural Research Institute BFRI Bangladesh Forestry Research Institute BLRI Bangladesh Livestock Research Institute FAO Food and Agriculture Organization of the United Nations FRI Fisheries Research Institute GDP Gross Domestic Product C:OB Govemment of Bangladesh IDA International Development Association M & E Monitoring and Evaluation MOA Ministry of Agriculture MOEF Ministry of Environment and Forest MOFL Ministry of Fisheries and Livestock PCR Project Completion Report PP Project Proforma PPAR Project Performance Audit Report SAR Staff Appraisal Report TA Technical Assistance T&V Training and Visitation UNDP United Nations Development Programme USAID United States Agency for International Development FISCAL YEAR July 1 to June 30  Ik)R OFMCITAL U ONLY THE WORLD BANK W:ashinaton, D\.C\. 20433 U\.S\.A\. Offic of Otrnotoronerul Opertons Evauton November 29, 1993 MEMORANDUM TO THL EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Bangladesh Second Aaricultural Research Proiect (Credit 1455-BD) Attached is the Project Completion Report on Bangladesh - Second Agricultural Research Project (Credit 1 455-BD) prepared by the South Asia Regional Office\. Part 11 of the report was prepared by the Borrower\. The project continued the development of the Bangladesh agricultural research system which had been supported under an earlier Bank project, and gave additional emphasis to livestock, forestry and fisheries research\. The overall outcome is rated as satisfactory, but the institutional management aspects of the project did not evolve to be as effective as intended, and the recurrent funding arrangements were heavily dependent on the use of tagged funds through a USAID PL480 facility\. Consequently, the long-term sustainability of the system is uncertain, although a third project in support of the research system is nearing appraisal and may be able to consolidate appropriate institutional and funding arrangements\. The Project Completion Report is forthright and comprehensive\. The project is currently being audited in a cluster of Bangladeshi projects covering both research and extension investments\. Attachment This document has a rected dstbtion nd may be used by repent only In th perfonace of thi offclc duties Its contents may not otherwis be disdosed wthout Wodd Bank sutorato\.  FOR OMCIL& USE ONLY POnEC= MMMfiSMI Rue=B Mc=0N AGRRamI]iUAL Rfffi&CEIlC (Credit NH,lMUM TABL E OFOgN7E= PREFACE \. \. - i EVALUATION SUMMARY \. \. \. Hi, PARTI:PROJECTREVIEWFROM IDA'SPERSECTIVB \. 1 PI'rject Mentkyrn \. \. \. \. \. \. \. \.: \. \. \.*\. I1 prQect Objectves, D)esciption and Cost \.*\.2 P3rcqectTDesip and Orgnization \.*\. c c\. I o cc \. c \. \. I'oect \.3 EWect Bacd6 lPicq cRest1ts \. \. \. \. \. \.* \. \. \. c\. PnrojectS\.ta\. \.bi\. \.2\. e q \. 6 ID~APerformnance \. \. \. *\.*c\. \.7 Boffower Performance \.7 \. \. lsn Leamed 8\. c Consulting Services \.c\. c\. c c\.c c\. \.9 ProjRetions\.ip\. c \. c \. \. \.9 Poect aDoc a nnd Data \.1\. 0* \. \. \. \. 10 PART II: PROJECT REVIEW FROM BORROWER'S ESPECVE\. 11 PART m: rTIA L IN"IFORM(AX'ION c\. \.c\. \. \. \. \. 15 Related IDA Credits \. c\. \. \. 15 Projectlmetable \.e\. \. c \. \. \. 15 Credit Disbursements \.c\. 16 Project \.e\.etain c\.e* \.e\. #\.# \. ** \.cc\. cc\. 17 Project Cost and Financing \.c\. 20 PtqectResut \. 21 SausofCovenants \. \. 22 Use ofIDA Resouixes \. \. \. \. c\. 22 MAP IBRD 17139 This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  B SECNDAGRICULTRL RESEARCHIRQ (Credit No\. 1455-BD) This is the Project Completion Report (PCR) for the Second Agricultral Research Project in Bangladesh for which Credit 1455-BD in the amount of SDR 23\.4 million, equivalent to US$ 24\.5 million, was approved in March 1984\. The Credit became effective in April 1985 and closed on June 30, 1992, following three extensions, 2½ years behind schedule\. Actual disbursements amounted to SDR 14\.6 million, or 62% of the Credit amount\. A disbursement grace period of four months (to October 31, 1992) was allowed for expenditures incurred by June 30, 1992\. The final undisbursed balance of SDR 1\.8 million was canceled on November 19, 1992\. The PCR (Preface, EvalWation Summary, Parts I and Ill) was prepared by a Food and Agriculture Organization of the United Nations (FAO)IWorld Bank Cooperative Program missionl that visited Bangladesh from January 18 to February 4, 1993\. The Borrower contributed Prt I\. The PCR (Parts I and 111) is based on the Staff Appraisal Report (SAR); the Development Credit Agreement; supervision reports; project files held in Dhala contning inter alia co ondence between the Intranal Development Association (IDA) and the Borrower; internal IDA memoranda; documentation provided by the implementing agencies; fld visits to selected project sites; and discusions with project staff and IDA staff assoiated with project implementation\. Messrs\. 1M\. Sugimura (Agronomist, Mission leader) and D\.C\.M\. Corkett (Research Management specialist\. Consultant)\.  PRO\.EC COMPLETwION REPORT SECOND AGRICULTA BESEARCH PROJECT (Creit 1455-BD) EYALWATIQ SQREWY ProWect Obhjatives i\. The main objectJves of the project were to consolidate improvements in the research infastructure and research management systems made under the first IlDA-supported Agricultum\. Research Project (ARP-I, Cr\. 828-BD)\. In particular, it was intended to provide continued support fo the Government of Bangladesh's (GOB) efforts to develop a strong research planing, coordinating and monitoring organization at the Bangladesh Agricultual Research Council (BARC), bringing livestock, forestry and fisheries more effectively into the national research system, and to strengthen the national research station network\. ii\. The main activities to be supported were: strengthening BARC through additional acilits, including buildings and an Information Center, and extra senor staff, as well as improving BARC's financial management and accounting procedures; a BARC-administered Contract Research to fund priority research initiatives; construction of office and laboratry buildings and provision of equipment, machinery and vehicles for Bangladesh Agrcutur Resarch Institute (BARI, Bangladeh Forestry Research Institute (BRIU), Bangladesh iUvestock Research Istute (BLRI), and the Fisaeries Research Institute (FRI); profesonal and technical taining and trig in research management; and technical assstance in severa key areas\. iii\. The institutes to be sped by the project were chosen so as to bing livestock, fisheres and forestry within an integrated agricultal research service\. Support for the already established BARI was limnted to improvng its capacity to carry out research at regionil outstations\. Implementation Experience iv\. Delays were experinced in implementing all components, essentially because of delays in meetng effectiveness conditions\. Delays in approval by BARC of contract research proposals (subnutted by the relevant research institutes) led to disbursements of contract resch funds direct to institutes; in effect, these funds were used to top up local opeational funds\. Delays in approving the selection of candidates for training led to much of the taining budget remaining unused\.  iv v\. With tfie exception of technical assistance and BLRI and FRI support, all other components failed to meet their esdmated expenditure targets: contract research and staff development and training were particularly underspent\. Planned civil works were not completed at FRI or at the new fisheries research station in Khulna\. vi\. In US dollar terms, the actual project cost over eight years including the extended penod of 21/ years, was about US$27\.2 million or 85% of the amount estimated at appraisal\. The amount of underspending would have been much greater had the onginal project duration of five years been adhered to\. Reslts vii\. To a large extent, the project achieved its institution building objectives\. Fragmentation of the research system has been reduced, with ten institutes now responsible only to four ministries instead of seven as heretofore\. BARC's role has been more clearly defined and strengthened by an ordinance promulgated in 1988, although its links with the research institutes and the authonty to coordinate and evaluate research stll remain less than effective\. Two new research institutes (BLR & FRI) bave been established and, together with BFRI which has been substantially developed, have been brought within the agncultural research system and the ambit of BARC's mandate\. With help from the United States Agency for Interational Development (USAID), improved research management procedures have been developed and put in place at BARC and some of the institutes\. Much of the physical infrastructure to be built by the project has been completed\. Funded by the United Nations Development Programme (UNDP), there has been a large technical assistance input to the system, which has helped it in key areas\. Many scientists have been given post-graduat taining, and most have received in-country training in research management\. viii\. There were problems, however, as the Contract Research has not ffiled expectations\. An agreement reached at araisal, and recoded in the GOB Project Profonna (PP), to enable BLRI to take over the Savar Livestock Fann was abrogated by the Ministry of Fisheries and Livestock (MOFL) soon after the project becme effective\. This delayed establishment of BLIM, curtiled development of the institute's facilities and engendered cost overruns on the physical worls component for this instiatte\. As a consequence, effectively little livestock research was done during the project period\. Difficulties in site selection for the brackish water research station of FRI led to delay in its establishment; delays in handing over the marine research station at Cox's Bazar to FRI by Ministry of Fisheries and Livestock (MOFL) not only delayed its incorporation into the institute but also effectively prevented development of a bracldsh water or manne fishery research component under the project\. frdect Sustainabifty ix\. The project's sustainability is questionable\. Although BARC staff costs are in the process of being transferred from the development budget to the revenue budget, many staff at a number of institutes remain on the development budget; and, at the time of the PCR mission's visit,  v theme were cases of staff being unpaid for some months\. Operational funding, normally paid to a large extent from the development budget, has been reduced, so little resech is being done with GOB fmds at present\. Since closure of the Credit in June 1992, the research system has been strongly supported by USAID with PL 480 funds, without which there is little doubt that the system would collapse unless GOB were to arrange for increased budgetary allocations\. slons IMU x\. The main lessons leaened from the expezience of this project relate particularly to aspects of management and are: (a) the importance of ensuring that institutional changes critical to the project are covered by appropriate covenants; (b) the need to increase BARC's autonomy in relation to the operational ministries and to improve its organizational and managerial capability and performance; (c) the need to amend ordinances govening the autonomy of rsearch institutes to ensure that they become accountable to BARC for the purposes of research coordiiataon and monitoring & evaluation (M&E); (d) the misapprehension that a contract search scheme could be based on disbursing large numbers of grants to research workers who, in theory, were already fully empioyed and committed to core research programs (research grants or a contract research scheme have clear advantages, however, in the mobiLiion of agricutural research capacity at universities in support of priority research); (e) the need to undertake more carefdul assessment of the suitability of construction sites for project atvities and the acquisition and estat of clear title to sites before project implementadon; (f) in the context of Bangladesh, the planned project plementation period of five years was insufficient in view of some of the bureauraic pitfalls and the implementing agencies' lack of prior experience in dealing with their relevant ministries and IDA; (g) the need for more intensive supervision of projects, like the present project, where implementation progress is much slower than anticipated; (h) the need for a mid- term review geared to overcome problems which hinder the project's progress; and (i) the need to ensue sustained funding of opetng costs after project completon\.  BANGLASH V\.-CMN AGRMII,L1ffi$EMRH ELQJE: (Creit 14S"B) PART I: PRQ\.IECT REVIEW FROM DA'S ES VE PtoWect Identity Prqect Name : Second Agncultural Research Project Credit No\. : 1455-BD RVP Unit : South Asia Region country : Bangladesh Sector Agricultum Sub-sectors : Agricultural Support Seces Projed Backround 1\. Agriculture dominates the economy of Bangladesh, In 1983, the sector contributed to 57% of GDP, 75% of all employment and over 80% of the exports, and its predominance in the country's economy has continued more or less at those levels\. However, with a large and growing popon and inte-e pres on limited land resources, Bangladesh suffere from chroic shortages of food de\.' \.- an accelerted growth in foodgrain production during the late 1970s\. The country's Second Five-Year Plan (PY81 to FY85) and the Medium-Term Food Production Plan developed with IDA's assistance in early 1981 therefore gave top priority to increasing agricultural production, particularly to achiving sef-sufficdi in foodgrain production\. 2\. nTe Government's strategy for achieving high production depended agely upon greatly increased input levels\. It was recognized, however, that these alone would not bring about the anticipated increases in agricultural production\. Consistent agricultural improvement would only stem from large-scale adoption of improved technology, spearheaded by resch geared to produce items of new technology appropr to the needs of the country\. In fact, as far back as 1972, the IDA-prepared Land and Water Resources Sector Study (IBRD Report -  r\. PS 13) had recommended strengthening agricultural research and establishing strong linkages between te various research institutes\. 3\. In 1973, GOB established the Bangladesh Agricultural Research Council (BARC) as the apex organization for planning and coordinating the activities of the already existent and extensive agricultural research system\. During the 1970s and early 1980s, BARC and the reseac network were supported in three uccessive phases by the Unites States Agency for Intemational Development (USAID) and IDA\. The latter's support was through the first Agricultural Research Project (ARP-I)\. However, it was recognized tha an efficient national agricultural research system would not develop quickly and that a seies of projects, whether supported by 1DA or other agencies, would be required to assist Bangladesh's research development efforts\. The Second Agicultural Research Projet (ARP-11, Cr\. 1455-BD) constituted an integral part of that effort\. Project Objectis, Desecrintlon and Cost 4\. Project objectives\. ARP-II was IDA's follow-on lending operation to ARP-I (Cr\. 828-BD), which was closed in December 1984\. The project's objectives were to: (a) consolidate the gains under ARP-I and provide continued IDA support for the Government of Bangladesh's (GOB) efforts to develop a strong research coordination, planning an\.d monitoring organization at BARC; (b) bring livestock, fisheries and forestry research more effectively into the national agricultral research system; and (c) strengte the research station network\. The component intended for strengthening BARC included funds for the development of the BARC library into a National Agricultural Library and Documentation Center\. 5\. Project description\. The principal components of the project were: (a) strengthening BARC tirough additional fcilies (buildings, documentation center) and staff, and by improvming financial management and accounting procedures; (b) continued fumding of priority research areas through a Contract Research; (c) provision of inftucture, equipment, machbiey and vehicles for Bangladesh Agricultural Research Institute (BARI), Bangladesh Forestry Research Institute (BFRI), Bangladesh Livestock Research Institute (BLRI) and the Fisheries Research Institute (FRI); (d) provision of post-graduate training as well as in-service technical and resrch management training; and (e) technical assistamce (TA) for program development in livestock, fisheries, forestry, taining, contract research evaluation, data retieval and audit\.  3 6\. Total project costS, phased over 5^ yeam, were estimated at US$32\.2 million and an IDA credit of \.SDR 23\.4 million (US$24\.5 million equivalent) was to fund 76% of costs while GOB and the United Nations Development Program (UNDP) were to contribute respectively 17\.5% and 6\.5%\. 7\. Agricultura research activities within Bangladesh have also been supported by other agencies, notably USAID which, since 1978, has invested about US$60 million in the system and continues to support it with PL 480 funds\. Prolec Desim and (}rgnizafio 8\. Project design\. The project was prepared in July 1982 principally by BARC staff with assistance from IDA\. It was appraised by IMA in February 1983, negotiated wiffi GOB in December 1983, and approved by IDA's Board in March 1984\. The project was designed to provide for: eahancement of BARC's ability to fulfill its overall funcdon of coordination and M & E of all agricultumal research activities; establishment of research facilities of BLRI and FRI; strengthening of research activities of BARI and BFPR; promoting continued funding of priority research areas throu, \. conta research and supporting staff trining\. Provisions for expert services were also incl aded\. 9\. The project was implemented by BARC and four agricultural research institutes (BARI, BLRI, FRI and BFRI) belonging to three ministnes (Ministries of Agnculue, Environment & Forest; and Fisheries and Livestock) with the overall responsibility of project coordination given to BARC and the Ministry of Agriculture (MOA)\. freLbiBkUZn 10\. Credit effectiveness and project start-up\. The IDA Credit was approved in March 1984, became effective in April 1985 and was closed on June 30, 1992, after ftree extensions, for a total of 2½h years after the original closing date\. Delays in effectiveness were due to GOB's delays in establishing BLRI and FRI as autonomous institutes\. Final disbursement from the Credit was on November 19, 1992\. 11\. The project was over-ambitious in scope and scale\. In particular, given the circumstances in Bangladesh, it was unrealistic to expect (a) to establish two new research instimtes within five years, namely BLIU and FR!, and to get them working effectively; (b) to complete the establishment and construction of a new brackish wate research station to expand FRI's research coverage; and (c) to develop and insttutonalize new research management procedures to enable BARC to fufill its research coordinating and M & B roles\. Because of the need to maintain the impetus towards change strted by ARP-I, it was accepted that the livestock and fishienes components would be prerd in oudine only at appraisal, with full preparation to come during the early stages of the project\. As conceived, the Contr Reserch was unliely to augment BARC's authority with institutes supported by the project, but it provided  4 an incentive to universities to carry out priority resach in support of the insdtutes' research programs\. 12\. OrgatIonal AspecXt and Role of BARC\. Although BARC has been organizationaly strengthened, crtan problems became maifest dut ng implemlentation of some of the project componen\. Lin between BARC and research institutes were less than effective; for instance, in the opatdon of the Conta Research where delays blamed on BARC's administation led to fte funds being disbursed direct to the institutes\. Similarly, BARC seems unable to overcome problems arising from the reluctance of the ministries concemed with the project to relinquish responsbiity for various aspec of research planing and the approval of fellowships for taining\. It is uncertain if measures required for monitoring and evaluating research have been adopted yet by the insttutes\. Temporary or acting appointments of the Executive Vice-Chairman and five of the nine Member-Directors of BARC, and unc es over the role of Member-Directors in BARC's organization, may have cotributed unfavorably to the generally poor relationships between the mstitutes and the BARC Secrariat\. 13\. Contra research\. The prpect's Conta Research component amounted to US$9\.42 million or 29\.3% of the total proect cor\. All aspects of the procedures for research gant application, evaluation, arova, disbursement, retng and final assessment were developed durng earlier projects and embodied in a compreheive Manual for Contract Research, published in 1984, which is now under revision\. 14\. The Contact Research has not fulfilled expectations\. By 1987 the scheme was much underspent, and following complaints that BARC procedures for appval were too slow, funds were subsequently disbursed direct to the insttutes\. An examination of research progams poved and completed suggested that the orginal critera for contract reseach were not being meL Titles for most of the porams mdicate that research apoed for contr work formed part of the core program of institutes and that contract research funds were being used as a top- up for opational funds, a fault previously identified by the PCR on ARP-I: few projects were inter-disciplinary or contributed to integrated stulies\. Accoding to GOB's evaluation of the Schme ,shaq, 1991 - Evaluation Report of Secod Agricultura Research Project - ARP-I1, Cr\. 1455-BD), much of the work done was a repetion of earlier research, which suggests weakmess in BARC and the relevant institutes in assessing the importance and merit of reseach proposals\. 15\. Physcl works\. Most of the physical works planned for BARC and the other institutes have been completed (see Prt 4A)\. However, the original Government-owned land in Rhulna select at appaisal for the bracklsh water station of FRI proved unsuitable because the water on site was not sufficiently saline\. Difficulties arose in the purchase of a more suitable site neatby, so that consuction of the station at Paikgacha was neither started until 1989, nor completed before June 30, 1992, the project's closing date\. Building work still to be completed includes insStaion of a deep tubewell, a water control structure, one staff residential building, a sevie builng and a fltation unit\. Investigations during the preparation of the proposed  folRow-on Third Agricultural Research Project have also led to serious doubts about the suitability for bracldsh water fish and shrimp research of the present site because the water at the site is insufficiendy saline and contains too high a load of suspended solids\. The fish and shrimp tanks already built are reported to be more suitable in design and construction for production ta for rach purposes\. In addition, procrastination by MOFL led to delay in the handing over of the maine fisheries research station at Cox's Bazar to FRI\. Consequently, no research in either the brackish water or marine fishery sectors has been done under the project 16\. In general, progress of civil works planned for BARC and BARI was satisfactory, reflecting their previous experience through ARP-I, whereas progress by the two new institutes (BLRI and FRI) and by BFRI (which had no previous experience with an IDA project) was slower than anticipated at appraisal, with some civil works remaining incomplete at BFRI\. The agreement with the Ministry of Agriculture and Forests at appraisal that BLRI would take over the facilities of the Savar Livestock Farm was abrogated by the new Ministry of Fisheries and Livestock after the project began\. BLRI's establishment was therefore delayed; and because BLRI had to be built on a new site without roads, water, drainage or electricity services, the cost of civil works was in fact greater th provided for in the Staff Appraisal R eort (SAR)\. A seious omission from the constuction work at BRIM was the complete lack of animal housing, so that it has not been possible to initiate a livestock research program to accord with the priorities of the Department of Livestock Services and BARC\. The only research done to date is some ad hoc off-station work carried out on the personal initiatve of a few officers\. 17\. Training\. Implementation of this component was hampered by the unforeseen slowness of the bureaucratic process for the approval of selected candidates for local and overseas training\. The weakness of BARC's Training Cell had already been identified as a fctor in the under-performance of this component under ARP-L During supervision of the present project, IDA review missions repeatedly reported that selection and approval of candidates for training was unsatfactory because of the poor working relationship between BARC's Training Cell and the irastitutes involved: pocrastination by the ministries concerned seems equally to blame\. In view of these delays, this component was substantiy scaled down at the time of the first Credit extension in 1990 but later increased prior to the last extension\. The revised program was subsequently completed\. 18\. Disbursement and costs\. Disbursement of the Credit lagged well behind the SAR estimate throughout the project implementaton period, although the pace of disbursement improved after the first extension of the closing date in 1990\. Of the total Credit amount of SDR 23\.4 million, the actual disbursement was SDR 14\.6 million (62%)\. The final undisbursed balance of SDR 1\.8 million was canceled\. 19\. Actual project expenditure in US$ tems is esmated at about US$27\.2 million or 15% lower than the SAR estimate\. The decrease in total project cost was mainly due to: (a) reduced implementation of the original plans, particularly under the training and contract research scheme components; and (b) savings in ependiture because of substantial devaluation  6 of the Taka and the US dollar in relation to SDR values during the project implementation period (US$1 = Tk 25 in 1984 and Tic 39 in 1992; SDR 1 = US$1\.02 in 1984 and 1\.40 in 1992)\. PJ~Mect RMlts 20\. The objectives for the project, as outlined in the SAR, focused mainly on institution building\. In this limited context, the project's achievements, albeit over the extended period, are considerable\. Fragmentation of the research system has been reduced; the seven ministres responsible for the ten agricultural research institutes have been reduced to four\. BARC's role has been strengthened by an ordinance promulgated in 1988, although the links between BARC and the research institutes, and the former's authority to coordinate and evaluate the research programs of the institutes, sdll remain less than effective (para 12)\. Two new research institutes (BLRI and FRI) have been established and a third (BFRI) substantially developed, and all three have been brought within the agncultua research system and the ambit of BARC's mandate\. With help from USAID, improved resarch management procdures have been introduced and insttutionalized at BARC and some of the institutes\. Much of the physical infrastructure development required by the project has been completed\. There bas been a large international and national consultant input which has benefited the system\. Although fewer than provided for in the SAR, many scientists have been given post-graduate trainng and most scientists within the system have been trained in research management with project funds\. 21\. On the negative side, Contract Research failed to realize its objective of promoting applied research of an interinstitutional and interdisciplinary nature, directed towards solving problems of national priority\. Also, achievements in the livestock and fisheries sectors have been disappointing due to: (a) the decision to postpone full preparation of these components until after project commencement (par 11); (b) problems of site selection for the bracldsh water station of FRI and the delay in handing over the marine fisheries research station at Cox's Bazar to FRI (para 15); and (c) the action, with respect to BLRI, of the newly-formed MOFL to abrogate the agreement recorded in the SAR and the GOB project proforma (PP) for BLRI to take over the Savar Uvestock Farm (para 16)\. Prect ft9inambft 22\. Project sustainability is in doubt\. Although BARC staff are in the course of being transferred from the development budget to the revenue budget, staff at a number of institutes remain on the development budget and in some cases have not been paid for some months\. Opeational funding, normally paid to a large degree from the development budget, has been reduced so lttle research is being dt ae witih GOB funds at present\. Since closure of the Credit in June 1992, the research system has been strongly suported by USAID with PL 480 funds\. However, USAID have indicated that as a result of policy changes, they will be limiting support for the agncultural research sector in future\. Without this support there is little doubt that the system would collapse unless GOB were to arrange for increased budgetary allocation from its own funds, perhaps supplemented by funding from extral sources\.  7 23\. Through the project, IDA has contributed significantly to strengthening and diversifying the agricultu research capabiity in Banglades\. Its perfornmom, from guiding the peparation of the proect by BARC dhou to supervision, was generahy good\. During this process, Bank staff made a number of constuctive suggesins to improve BARC's organzaional sttre and to stengte its position so tat it could coordinate and evaluate research more etively\. Ihe 15 supervision missions mounted by IDA at an average frequency of si months over tie project's implentation period were considered very useful, both by GOB and the project's implementing agencies They wer able to resolve issues onmning procrement of equipment and realocaft of proect funds, and also to succely recommend throe extens of the proec period\. Bank staff were also istrumental in prmotng a high level worshop in January 1992 by MOA, at which the maagement of the whole agricuiral research system was mriewed\. An important outcome of this workshop is the preparation of a new drft ordinance to consolidate BARC's position as the apex organization for plnning, c g and evaluating agricultural reach\. 24\. In re,tospect, however, it would seem that certain acons on the part of IDA could have impwved the proect's overall performance\. For instance, the deailed pation of the livetok and fisheries compoets might not have been poponed to the early stages of project implementation\. Also, institutiona changes critical to the project - such as the takeover of the m Livestock Farm by BLRI and te timely tnsfer of the marine fisheies station at Cox's Bazr to FRI - should have been cowvered by including propriate covenants in the Credit Agrmet\. Furtier, in view of th contently low performance raig of the project, first during the p'jiod September 1985 to March 1987 and again during the period December 1989 to January 1991, IDA shoud have aranged for closer vision of the project during those perods and to include in such s vi ealists in livestock and fisheies research discipnes\. FaUlly, in view of the much sower than anticipated progress, a full-scale mid-term eview of the project, as prposed in the SAR, would have helped overcome problems hindering the smooth impemeton of the project including, in particular, the Contract Research componet  dommoo whids 003\. of hind oM Cnm lemare ws an dsv do ranow hub w disbrsd direct to imitates, bylpasiu SAW\. Audit and aIr v-es wo ofts -\.ao foir tdo moc pu beamm of pocaumlsby miuldsu ormuuI a b P SIwIs slow, so ta meesaw\. - - dtla It utlo of t su ad lbS*N*ua st un f wan delay in uhecdq a suibt alest for fthI b-api owate \.miish sA o fn dR\. md Is kg Am rps\. ron tW wgnly p_ad wnd dW li cosfo,m aao w usijns Audit repots althoug in wmH as mmnvaul* ddlayed 2?\. lbs Oda mncu lAed from fte exaleec ofth projec am 7%li =se to cum tht udw dhuguwhlba t lo rim a anem\.cu\.rby (b) Ifg ame d Ito lucmaw BAIC's autoimy in idiom to ft e \.peraaa\.a mllals and ()th ineed it o amn orimaessa mp " nIng t sam my ft uinr km"" _~~a at au lbosX b ltl _ Ibs of usig a COr dm6e to aye to ad , _Ai svgpoutd by fte proje wmoo in fthuy at be3atA oly nsmImhi to wm8 uIid progms and theefor shoul ave bee\. abl to make ve of maw prng am awuet\.ser grns or a C_sac DemUy di hvuroo hae b nIr o*mftnta in mobilizi fth agklcu*ma dimuc aeq aty ulvelde ins panu ofeIat_M Ipkft _ wfc The ls mtablty of coweaututoa site for project uvnatve and dhe acquIos and whdmao lrttet i\.ue t es nhymndbfr rjc ) n " a u $ _l@\.  9 0) d Ia tcntex of Bangadsh the planne project imleeto period of five ysu wasnsgicient In view of the diffclty of pqu y with some of dtmexevey buimucrmti procedues a,ounteed, and in view of sm of te Implemening anie lack of pdar xpeu in dea with thei relevant instles nd MDA\. In particular, the Iplementtio require t to establis two new rscb indtute (BLI and ) and to filly deveop NWRI during the plane proct perod was too ambitious\. (g) Tet need fbr IDA to cary out more Intnive suevision during the peiods (pan 24) when e n press was slower tn antisped, ad abo the need for a mid-trm review geared to overcome problems which hinder the projets (h) The need to emnsr sustaned funding of operating costs of BARC and the resarch insdtutes after projet compeion\. 28\. VNDP-funded ecbhnical assista CeA) for the devt of ELI and MRe, and for In PI!, was exoed by FAO for five yeas during 1985 to 1989\. TA for the project the of esec valuaion, data colecom and auit was executed by 1DA wit UNDP finacial inpu during 1985 to 1992\. TMe blendig of local and intentonas expet under the TA p _pm wa appreciatd by all intute roceiving s aid, and it proved to be gif \. NHoweve, the actual use of loca epert was less than the SAR esimate, miny becs of dhe diffilt of recrting exprs frm witi GOW's savice\. Despite this, the TA omponnt didbre US$2\.98 million agdast the SAR estimate of USS2\.58 million\. 29\. At t ie dof pret dosure, at were good bWe IDA and the Bower, rprentd by h vwaou ms invo d, mainly becausw of frequent conta and di consucv atiude of IDA's sient staff to problems as y avros\. Similarly, IDA smf wr pacte In supvising te prjet, as evidecd by r sdposorsi of the wo*ho to rview dt sau of BARC (pan 23), ad this led lo good rns beteen IDA and t*h agencies\. Ho ratins wer varabl betwemen th MIm eming -d s and gm ministe prentig th Borroe, ad betwe th ageces tmseves MACs ationshp with MOA seemed , but its co wit MOFL was a as tshtory beas ths minstry was less wiling to cocee to BARC any auhiy a UL 'S prgam Reatons betwen DARC ad th the research instutes - IR!X, Fi and NM - wee reanay sy,but wbA ld benefit from more ft et contat and mornlear de of soch redaionsip by BARC and terva minsati Mm poe's djei to empow DARC to coordnate and eauat rearch prgrms was not achieve largey beaus t insti' ordiac did not requir tm to seek ARC's approa for  10 rsearch prjects or pr ms Fut r he li e' govrng Coni, chaid by dhei rective minises wefe viwed as g \.1 (quIvalnt dau to BARC, ngadin anY attem to enhaceBRCs authorit i prom approvad thi did not make for good relatDonse\.tnan a 30\. Ibe Preparation Report prpad by BARC staff, with hep frm IDA, was not avaiable fof sudy, but the SAR geneally provided a uso frmework for IDA and de Borower during prect aii ports a povded vuable _Ifm an prject performance during it A mid-trm review, schduled for 1987 in te SAR, was not caried out BAARC, on bdelf of (301, enoae a team of consulta to vu prject perfomane in July 1991; their repon, issued in Novee 1991, provided valuable informaion\. I addiion, over 50 documents, Incuding tehnialpors and wordig paprs were produced an different aspect of ft resarch poject by consultants engagod der te TA componng was adeqat on de pa oft Om  11 BANGLADES} SECOND AG-RICULTURAL EEARCHI PROJECT (Credit 14SS-BD) BARC COMPONENT: CONTRIBUTION OF PROJECT- TO THE N T ON PART II: RENM RE THE PROM a PES The project contributed to the National Agicultural Research System partly through central coordination by BARC as well as by the component institutes, viz: BARI, BFRI, FRI and BLRI\. Development of infrastrutue, experimental form development, purchase of equipment were the responsibilities of the concemed instituions and these are not reported here\. Rather, the contributions of the project to BARC are described here\. The project contributed to Bangladesh Agricultual Research Council through achieving the objectives set in the PP\. These are discussed below: (a) Livestock, fishery and forestry sectors for research were neglected in the past\. The important prorty areas of research were identified for implementation through contract research system\. A manual of contract research was also prepared which was used as a guideline for opeting contrA research\. These contact rearch activities were not limited to the four institutes, rather they were distributed to other relevant professional organimzons like universities\. While these contract researchers were approved, many relevant equipment and cost for researh operation were provided to project investigators through BARC\. In most of the cases, a few skeleton staffs in the level of SSO and below were also recruited for the project period\. These skldled personnel were subsequently absorbed in the concerned institutes wherever there were opportunities\. In this way, research capability in livestock, fisheries and forestry were strengftened and upgraded\. 2 Provided by the Bangladesh Agricultural Research Council (BARC) on the project's BARC Component\.  12 (b) interinstitutional and interdisciplinary coordination were also strengthened\. For interinstitutional coordination, the listed institution (BARC, BARI, BPRI, PRI & BLRI) used to sit down regularly to discuss progress of the project and future line of action\. This coordination meeting has strengthened understanding among those five institutions\. Moreover, the budget for the contract research was coordinated at BARC level\. Fund used to flow through BARC\. In that case coordination was functioning better than style of direct fund disbursement to institutes\. (c) There was improvement in quality of research through development of skill and competence\. There are about 1,550 scientists in the NARS\. Training was conducted on several occasions by the institutions on various topics like statistics and biometry, management, foundation training for newly recruited scientists and long term training of agncultual diploma holders\. Fourteen scientists were sent abroad for Ph\.D\. 33 local PH\.D scholarships were planned, but only 22 candidates were offered\. There were 43 scientists trained for short term, 29 participated in seminar/workshop and 11 technicians were trained\. In addition, there was the training course for two months on nuclear research\. Over a period of September 1987 to June 1991, about 1,200 scientists were trained on research planning and evaluation where scientists from NARS institutes and universities participated\. The level of participants raged from Scientific Officer to Chief Scientific Officers\. The skills developed through such research planning and evaluation training course has been utilized in drafing five year masteplans of the institutes and exercise on strategic planning to the year 2010 which is under preparation\. Moreover, that knowledge has also been utilized in drafting the annual research program of the mstitutes including special studies projects for PL-480 funding\. Quality of writing scientific reports has also improved\. This is reflected in the cont resch reports and other scientific reporting\. There was only one expatriate contract research evaluation specialist who was engaged for six weeks as a fragmentary task\. Since his output was not found to be worthwhile, he was not engaged again\. The consultant(s) on research planning and evaluation training persistently worked to kep the training program moving smoothly resuldting in the training of 1,200 scientists of NARS\. Local experts used to be hired for evaluating contract research projects once a year for a day or two\. Depending on the number of projects and diversified expertise areas, different number of evaluators was engaged for contract research of different areas\. This used to be done when the contract research projects were reviewed at BARC annually\. These evaluators were remunerated on work bases instead of man-month basis\. Since FSR was a big component of contract research, four local evaluators were engaged each for one month to evaluate PSR projects at sites\. In addition, the entire research component was evaluated by a team of local experts on different expertise areas, each for a short period and the total duration was 11 man monhs\. The consolidation of information on all components was done by a team leader\.  13 (d) Improved efficiency of research and fast dissemination of information (documentation, data processing mobility)\. For the purpose of documentation dissemination of information, data processing equipment like computer, audiovisual equipment, videocassette recorder and display item, reporgraphic equipment are very vital\. These have been properly procured\. After procurement of these equipment, it has been possible to provide computer training and facilities to NARS scientists and institutions\. Collection, storage and retrieval of data and literature have been possible as service to NARS\. Scientists are approaching and getting scientific references through BARC from across the world\. The activity of documentation has been strengthened\. Most of the information available through conference seminars, workshops and discussion meetings are collected by Agncultural Information Center (AIC) and documented as microfiche or in computer diskette as well as bard copies\. These are retrieved as and when needed\. In connection with data processing, computers have been purchased and these are being used in data processing (e\.g\. climatological data base for agro-econonogical zoning and production planning), information collection/editing and retrieval, training and data analysis for NARS scientists and technicians\. Five computer operators were trained abroad on advanced software programming\. They are providing important sewrices to BARC and NARS\. Regarding mobility, Farming Systems Research Projects received 4 jeeps (given to FRI, BPRD, BARI, SRTI) for the FSR scientists for their field visit\. There was provision for 6 jeeps in BARC component\. But GOB clearance was not obtained and those could not be purchased\. Therefore, the project could not improve mobility, rather the scientists and officers had to move rough public transports, where field level visit as desired could not be really performed\. For local visits within the different districts, BARC offcials had to be dependent on institutes vehicles, which were also very limited in quantity and operational flexibility\. (e) Develop conductive research infrastructre and regional research capability (station development, research equipment and other physical facilities)\. BARC constructed 5,600 sq\. NALDOC (National Agricultal Library & Documentation Center, now Agricultural Information Center) and a guest house (2,900 sq\. ft\.)\. At BARC several office equipment were purchased\. However, the institutes purchased many research equipment through the contract research projects\. Through providing so many equipment, the research activifies and their analyfical capabilities have improved, because those are being used for core research of the respecdve institutes\. In addition, many scientists and technicians were also recruited under each contract  14 research project\. Many of the people have been absorbed in the respective institutes\. Thus, the institute have got readily available experienced scientists and technicians\. Lanws L&a Lessons leat from ARP II (Cr\. 1455-BD) are listed below: (a) Research grants or a Contract Research Scheme however, have clear advantages in mobilzing the agricultural research capacity at universities in support of priority research\. This has helped and strengthened monitoring and coordination activities with different institutions\. Information feedback has also been facilitated\. When contract research fund was channeled direct to the institutes through their respective PP, BARC had no opportunity to look into the research projects funded from Cr\. 1455-BD\. This has resulted into duplication and low priority research\. There was weak scope of monitoring those projects\. Thus the coordination role of BARC for research was weakened\. (b) In the context of Bangladesh, the planned project implementation period of 5\.5 years was insufficient in view of the difficult of proceeding quickly with some of the excessively lengthy procedures\. (c) There is need for more intensive supervision of projects where implementation progress is much slower than anticipated, and there is the need for a mid-term review geared to overcome problems which hinder the project's progress\. (d) Small amount of inital deposit in SAFE account compared to annual budget affected the prors seriously\. For adjustment and reimbursement, the procedural delay is the same for any amount of money\. Therefore, the amount for evolving from the SAFE account should be more and should not be less than 40% of annual budget\. (e) The restrictions on interdistrict movement with vehicles created problems in visiting different sites\. There should be special relaxation on this restriction for agricultural research activities and field monitoring of research projects\. (1) There is need to increase BARC's autonomy in relation to the operational Ministries and to improve its organizational and mangerial capabiity including the introduction of more strmlined procedures\. (g) There is need to amend ordinances governing the autonomy of research institutes to ensure that they are accountable to BARC for the purposes of research coordination, monitoring and evaluation\.  15 PRQHT CiOPUON SECOND AGXLU311L REV4AR (Credit 1455-BD) PART mif: STATI1lICALJQ 1\. Relted IDA Credits Credit ro punpess Date of S9ae Coumft Aprd Agul Extnio To impsow easn and applied _rh in the 97 Cosed PCR isued July 1982\. and Reswa I NW Rion\. 1982 PPAR Isud May 1984\. (Cr\.729-D) Ardouhwa Reseach I SUthenb aulua rseach, epecIly 1978 Closed PCR isued Dec\. 1986\. (Cr\.8BD) faclite, manaem ad manpaoer of BAIl, 1984 ad planng, cooridaon and moniming of B=AC\. Agrcurl Exteno To expandT & V exenion syste iWduced 1982 Clsed PCR issued Dec\. 1992 aNd Reseacb under Cr\.729-2D to 15 coA of 21 gIulal 1991 (Cr\.1215-D) disc, ad iwpove adatve garo\. 2\. Poect etabl ken Date lamnned Date Actu Idenification - May 12, 1980 V Preparaton may 1981 July 1982 Apprais Jan\. 1983 Feb\. 1983 Negotiations April 1983 Dec\. 20,1983 Roard Approval Nov\. 1983 March 29,1984 Credit Sigaure - May 18, 1984 Credit Effeciveness Aug\. 16 1984 Appdl 23, 1985 Credit Closing Dec\. 31, 1989 June 30, 1992 Credit Compleion Jun\. 30, 1989 Nov\. 19, 1992 tl Date of fist pujee bdif Issed\.  16 Coments Major issues raised at each stage of the project cycle as recorded in the Project Brief, Issues Paper, the Decision Memorandum, and the Minutes of Negotiations were as follows\. Identitlcaffon/lDPrertion: (1) Higher prOject costs ta those estimated in the first project brief (May 1980); (u) Radonale for the construcdon of new research stations; (dii) Ltion of proposed research support failities; (iv) The degree of cooperation that can be pected between BARC and the relevant resrch institutes\. Appraisal: (i) IDA finang percentage should be increased from the planned 75% to 90% to conform with Cr\. 828-BD (Agricultural Research D) and to giVe fUl support to research in Bangladesh; (ii) Production of a final National Agricultural Research Plan by GOB, and deignaton of the project in the GOB Core Program, would be conditions of effectiveness\. Negotiations: The conditions of Board Presentation agreed to during Negotiations were: i) establishment of MBMR and PRI and (i) publication of the Manual of Procedures for the contract research program\. Apparently, the first condiion was not met prior to Board Presetation and it became one of the special conditions of effectiveness\. 3\. C Cuuuklv Euli4 and Act Ma (USS =HBo) FM m N86 FM 7 FY8 FY FY0 F9 FM2 FYM3 A#ulua Egndu 0\.49 2\.94 9\.06 16\.90 22\.05 24\.50 24\.50 24\.50 24\.S0 24\.50 Actl - - 1\.06 2\.39 4\.76 7\.74 11\.05 1437 17\.80 19\.23 AAuas % ofNEstt' - - 12 14 22 32 45 59 73 78 Date of F\.nal Diftburnt: Nvember 19, 1992 U n SDRs, acul dbuburm was 62% (DR 14\.6 ;milo agais SDR 23\.4 milo\.  17 4\. Pro3ect hnpgementation A\. Key Indicators - Physical Progms 11 Itam un SAR TV Actl Ac as % of UAR Tar"t 1\. Ctii Woab BARC: * Doownw utakonir U 465 520 112 Guea ho 240 269 112 - Buldiap atAkbwpurati P 1,SO0 1,595 106 - Uulldlngsat Patal;satio fA2 1S5 285 IS4 - Roidpgat Pabza n2 380 232 61 -BundiutpatShyanpur m2 130 116 89 - Feig (boundy wall) m 4,880 6,005 123 - water mApplyEootlcaI wo Tk minlon 1\.80 4\.S 250 nu: -Laboffic \.2 3,1S0 1,935 61 -RWe buidings 2 1,845 1,687 91 UFML - LabOIndOUy buUdIdingS 22 400 400 iQ0 - Statut m2 810 720 89 - W o *'e' quart\.* 770 720 93 LK!: * Amnl\. bu 2 604 1,200 199 \.eRnidat buUidI m2 2,644 6,675 252 - mute!_ hd - 350 -Roads m - 6,000 ,Wa mppyIl Tk mimlin - 8\.1 3\. V des -car No\. 9 -Mcrb=s No\. S - 4wd Vehicles No\. - 14 - -Pick-wp No\. 19 9 47 No\. 37 35 94 - Moticyclas No\. 1 1 100 Basd on data provided by eahiUiplA0MWtqP aenY\.  18 B\. Contract Research Itm unit SAR Target Actu at Acta as % of SAR Tar UlWo k US$ milon 1\.71 1\.09 63 Fmhoslw USSm Uon \.iS OMl 46 FPorY USS millo 0\.88 0\.39 44 Othara USS min 4\.85 3\.60 72 1B Baed oa dMWeeman dat\. C\. Staff Developme-t and Traing im Usit SAR Tort Actua Actua as*of SAR Targe -PhD (hal man-year its 802 69 -Maeg\. (local) man-year 120 48 V 40 - PhD (albod) Mn-yea 48 562/ 116 - M So\. (abroad) manyear 60 20 2 33 - Rosou PlanAMaution van-month 600 (38) 3 * Shoatem trani man-mona _ 144 4)' coe Der_ - abba" do" man-year 180 - Loa woekbhpfoch\. taing No\. N\.A\. 13 5 - Oveag rain No\. ofpotions N\.A\. 83 V d on daa povidd by BARC\. 2' dmoted based on 4 yeai for PhD and 2 yem fA MSc\. 31 No\. of traing catn; 1,112 pos w trined in tloal 4/ go\. of riing courge; 2\.025 po e trained in togal 510 pS o padcin and 90 fed assiatante trained in diploma tra g prgrm\.  19 D\. Techical Assistace Itan Uni SAR Targct Acal Acual S of SA Tare" - LAl consul\. nun-month 184\.0 6\.0 3 - Eatiate consulats man-mont 29\.5 36\.S 124 - Local consutnts u\.nm anth 28\.0 18\.5 66 - Epatriate consulta man-month 85\.0 78\.5 92 Foares 11 - Expatriate contiat u\.n-month 48\.0 48\.0 100 BARC a - Loa costant vu\.n-month 99\.0 N\.A\.3/ - patriat consltarts u\.n-mouth 31\.0 373 120 U UNDPjPAO astnce to the Second Agdcutura Reseach Prect (DO83I010\. 2 UNDP/IDA assianc to the Second Agrdcul Research Projec (OD/4013) in the mam of Thrtg, Rchb Evaluatln, Dat CaUs:ton and AudL 31 Sub-contractd to local fitms ao indivdal constants on a hunip-m basis\.  20 S\. PftWe Cost and nnd A\. Project Cost Itan Apprais Estinate 11 Acual2/ (et minion)C (USS mlUUin (Tk nmlUon) (US$ millon) 31 Sftn=Whbecn*BAiRC 35\.06 1\.40 19\.48 0\.59 Conract Rssearch 235\.45 9\.42 195\.82 5\.95 Strengthening BARI 47\.73 1\.91 48\.04 1\.46 livestock 86\.03 3\.44 147\.66 4\.49 Fisheies 100\.65 4\.03 160\.99 4\.89 Fotestry 99\.58 3\.98 104\.08 3\.16 Staff Developmae & Training 135\.59 5\.42 122\.36 3\.72 Techical Assistance 64\.45 2\.58 98\.04 2\.98 Total 80kS4 32\.18 896\.47 27\.24 V As per SAl\. nhcuding bolb phyial ad price conneciea\. V Bued on dat pvided by ech ihupenVie g agency\. UNDP TA Ternal Repos and di_burun da\. -t Acu awa8t in USS obtaind by using anal rate of echae am publie y nrmlional Moety Faund (IM\. Comments The actual cost of the project over an eight-year period was Tk 896 million or about 11% higher tban the project cost esfimated at appraisal\. This cost overrun was mainly due to the iceased cost of civil works for the livestock and fisheries components, including the cost of land acquistion for the Khulna brackish water station\. In US dollar terms, however, the actual project cost was about 85% of the cost estimated at appraisal\. The main reasons for this are: (1) the devaluation of the Talm aginst the US dollar and the US dollar against the SDR; and (ri) reduced implementation of the contract research and tng components\. Subsequently, the unspent balance of SDR 1\.8 million was canceled\. B\. Project Tuanci4ng Source Appraisl Etitmate Actul (USS millon) (%) (US$ millon) (%) DDA 24\.5 76\.0 19\.23 70\.6 UNDP 2\.1 6\.5 2\.98 10\.9 GOB 5\.6 17\.S 5\.08 18\.5 Total 32\.2 ;100\.0 27\.24 100\.0  it\. X } a 1xl! 11~~~~i \.s~ : iX al iil  22 7\. &Ws ofQ2n DCA Set" CmGeAu Deadi he Complane Stow 3\.01 Psovd BMWs, aauseee, dilids a ed\. Uncfled h compHlia; atWoug deay in adequate sff provo observed\. 3\.0 Imploy aadanoey onaabanmto as"is IUnspCte to complianc\. NosWe in cauyq out pV|tq 303 E btld MM ad pmide dequate sa Uo"lfild In comlian, aQumo dwas of Sad and Aclie\. Sr Fam badover delayed pro ges of KmU coqpoet\. 3\.04() afta"h Flu d prde dea s, Un td in coampiace\. SAWds and 6ac111tes\. 3\.04(0) FuA develpame plan wr 0ulm un 30, 1985 o compiance, aahough dulays in Due" Wdar bsearb Sto sbmsio ofplan\. 3\.0U Adi a conuact rsearc prom In Unliecfied PWaal coiance\. accodancWI* manu\. 3\.06(s) ua plan ofaidy tuas and lbcal Ja 30 of ch yewr in compliange\. gRW\. S\.AS&) 1ainuin adequa zooa al proedumeto Unpcied Subsantialy pooied,v with Iod and mSW nt prqJet proSar; enable adiquat apog abovd\. via- of s ad famiuh au ; Qrmatho on -wo coo\. bneaelts, sipedinam amd 4\.01(a) Minimuasae rcord and \. Umpecifld in copance\. 4\.01(c) B Submit awdit depot\. W 9 mont (6-moth to compfiane, alhoug de In ARC) of ed of hFY sumission always obaed\. 8\. Use of HIA Re A\. Staff Inputs (staff weeks) SGuth Anta Region SAST039-TO1AL TINE CSTAPI"EMUS) RECSU BY FISCAL YEAR/ACTIVITY FOR PROJECTs 88APAIOS XAMEs AG R£S II otDscounted Locat HIL and C~tsutants Ct 4s1 ratio) COnty Reoutar Uudget) (Net of Overtim, excluding Tnet fI Cotn utants) TASK FY81 FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93 TOTAL \. \. \. \. \. \. \. \. \. \. ---- ----\. \. \. \. \. \. \. \. \. \. \. LEN 3\.5 7\.9 11\.4 LEM 47\.8 7\.2 55\.0 LEW 8\.8 8a\. LEP 1\.6 7\.7 9\.2 ART \.2 \.4 \.6 PCR \.6 14\.1 14\.7 WPM 1\.2 12\.5 16\.3 28\.5 14\.9 22\.7 6\.2 10\.0 8\.6 \.5 121\.3 TAS 33 TOTAL 1\.6 58\.9 25\.0 12\.5 16\.5 29\.2 14\.9 22\.7 6\.8 10\.0 8\.6 14\.6 221\.2 RMM DATE: 05/14/93  23 Slagt of Pject MOnuhYe No\. of Days In _seifiaow Rqte peI Pu*onane Te of Cydle P1siona Padd Ratin Stna 21 PiDoM 3' identiflcato may80 nsa\. u\.s\. A\. - - Pepato 81 and82 n\.a\. n\.S\. na\. Appraids Meb\. 83 5 28 AGM, FR,S, PA Supevoi July 84 1 7 AG 2 M, P Supervlsa2 Feb\. 8S 2 41 AG, RS 2 M, P SupeVso3 Sept\.85 2 54/ AGZ 3 - Supenvidi 4 Feb\. 86 3 S 41 AGC) 4 - Su&VSISl May86 2 74 AGM2) 4 - SupeVlS1o6 Mabc 87 3 8 41 AGO) 3 - Supevilson7 Sept\.87 1 21 AG 2 - Supevisi8 July88 2 49 AG\.RS 3 - Supervisoo9 Deo\. 88 2 29 AG, BC 2 SupevisioalO June89 1 19 AG 2 - Supevisoll Dec\.89 1 12 AG 3 - Superv 12 Aug\. 90 1 7 AG 3 - Supeisuvi13 Jan\.91 1 9 AG 3 - Supervso 14 Jul 91 3 8 4 AG, EN, PO 2 - -Super nIS Mabch92 2 8 AG,DO 2 - Compltioun Jan\. 93 2 18 AG, RS 2 - 1 Speizeti AG - Agruluis; DO - D isme Officer; IC = Economit; EN Eginh, FR PR oy Specslist; PA - Pect Anadyst; PO = Prnm Officer S R Resarch Managemen SpecHsl 2J pedornaae Ratin Stat: I - No sgnifiat problem; 2 - Modate pvablems, sfcn but ot cric deviationsm Frm rec go,as; 3 - Major problem, seo nough to eque Vscial anton n usally iutive svision 4 -As in 3\., but the problem ase not beig addressed adequately\. T Type of Prbl:em: - Financial; M - Manment; P - POli; T - TechnicaL Aflhr the Feb\. 85 wperiion, types of prblmsaoingU to the abelssfications wee not roded in supervision r becaue of a chae in reportn fmt\. However, ngedal problem w erea always teportd durthe last suoeris isons\. 4 Estimated becau the mision worbd on sver asntm but did not specl4 the time spent on each\. C\. Costs Data are not available on cost of staff inputs broken down by each stage of the project cycle\.  r7m\.v%pw -- -C , ~~~~' ~~ 7 TFIM , I I\.,tr:: ' g- I C) m 0 z  BANGLADESH AGRICULTURAL RESEARCH 11 PROJECT r BARI(Sangladesh Agricultural Research Institute) A BRRI(Bangladesh Rice Research Institute) TO B( i 1 \ V {~5 IB Goshosi ES8JRI(Bangladesh Jute Research Institute) a INA(Institute for Nuclear Agriculturel -26 0 SRI(Sugar Research Institute) * TRIlTea Research Institute) D ~~~~~~~~~~~~~~~~~LIVESTOCK STATIONS FISHERIES STATIONS O SOIL TESTING STATIONS FACILITIES BEING DEVELOPED UNDER THE PROJECT: t < t iX 2! < NR W F 8 use \ W S @ ~~~~BARI \ LIVESTOCK STATIONS 9 FISHERIES STATIONS 11l, FORESTRY STATIONS I: FORESTRY SEED ORCHARDS -25- R 251~ 2S ~ AS -24' ABNArd Joydeb I 24 Nf~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ TtO map ha been Prepared DI, \ bP rtiiaii rhe llso Br*s ve,ercstaffBa of1excAisivelyA J~K< < (AUAAI' readers and is exckisilIe forh CITAO mnlemaa use of The World Bank rATUi Li and fme t rlaftorw Fea z Co,poalia The daaronLiona f used and Bi bowdarifts hown) _ pan Of TheWodd Ban* awd me i 00|,X na- Ffow Coption C H I TT 4> k\. { ( \ eny AmeViwt onmW eigalsarsa Oafl aerw twory or any~J erdorsemet or acf ccepfancaof I - - ' I \' s\.uch budresi\y\\Dof ox, ,\. rz ' ROADS Dh\.k\.? -' RAILWAYS BANGkaJn#~V'~ Z l - -- DISTRICT BOUNDARIES cam7 IN\.A- '- DlViSION BOUNDARIES \.D - INTERNATIONAL BOUNDARIES -1 0 25 50 MILES J\.i^7S"af/\./sf ° 50 100 KILOMETERS 2 _ LANKA I 9AK

APPROVAL

P104528

Page 1 1 INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No\.: 41067 Date prepared/updated: September 25, 2007 I\. Basic Information 1\. Basic Project Data Country: Vietnam Project ID: P104528 Additional Project ID (if any) : Project Name: East Meets West Foundation (EMWF) GPOBA Vietnam Rural Water Supply Development Project Task Team Leader: Xavier Chauvot de Beauchêne Estimated Appraisal Date: September, 2007 Estimated Board Date: N/A Managing Unit: FEU, Global Partnership on Output-Based Aid (GPOBA) Lending Instrument 1 : Specific Investment Loan Sector: Rural Water Supply and Sanitation (90%); Sub-national government administration (10%) Theme: Access to improved piped rural water supply services GPOBA Grant Amount (US$m\.): 3\.0 IBRD Amount (US$m\.): IDA Amount (US$m\.): GEF Amount (US$m\.): PCF Amount (US$m\.): Other financing amounts by source: US$0\.5 million Environmental Category: B Is this a transferred project Yes [X] No [ ] Simplified Processing Simple [X] Repeater [ ] Is this project processed under OP 8\.50 (Emergency Recovery) Yes [ ] No [X] 2\. Project Objectives: The main development objective of the project is to increase sustainable access to piped water services to low income households in rural central provinces of Vietnam through an innovative community-based approach, involving public-private partnership\. Safe, affordable and reliable water service, coupled with improved hygiene and sanitation behavioral change will lead to better quality of life from improved environmental sanitation and improved community health, particularly for the rural low-income families, many of whom now have very limited access to sufficient quantity of good quality water that is reliable and affordable\. The proposed project will build u pon EMWF’s ten years of experience providing technical and management support to construct 94 piped water systems in the Central Region provinces where this project will be implemented\. The overall outcome of the project will be improved community health and socioeconomic status\. A complementary EMWF-financed program will further improve community environmental sanitation conditions through a targeted program supporting construction of sanitary latrines, and improved hygiene and sanitation behavioral change (HSBC)\. The HSBC program will build upon the availability of clean water to encourage project beneficiaries to construct and use sanitary latrines, and properly dispose of solid waste and household waste water\. These interventions are expected to produce: 1 There is no reference to Global Partnership on Output-Based Aid Grant, they are referred to as SIL\. Page 2 2 Health benefits from reduced exposure to environmental risks posed by unsafe water (reduced morbidity and mortality rates – especially in infants); Economic benefits from reduction in medical expenses to treat water borne diseases, increased productivity and capacity to work due to reduced morbidity and associated reduction in sickness related absence from work, reduced household expenditure of clean water (water tariff lower than cost of many alternative sources)\. 3\. Project Description: The project will grant $3 million to the East Meets West Foundation (EMWF), a US-based International Non-Governmental Organization, to develop an Output-Based Aid approach to provide access to clean water services through the construction of about 75 new small water schemes in low income rural communities in 5 Provinces in Central Vietnam\. The EMWF Clean Water Program (CWP) is already underway in each of these provinces\. As a result, EMWF has developed substantial political capital that will help expedite active support and cooperation from the local authorities, who play important roles in mobilizing communities to participate not only in the consultation process, but also to encourage beneficiaries to support the need for full cost recovery water tariffs and consumption-based payments\. Each small water scheme will be considered a subproject under the project\. Each community has around 500 households and the uptake for the proposed scheme is expected to be around 75% or 400 households\. The total beneficiaries are expected to be around 30,000 HHs or 150,000 people\. Under the project, EMWF will pre-finance the water schemes and will receive a pre-agreed fixed subsidy for each eligible HH connection\. Disbursement take place in two trenches, 80% of the subsidy amount after eligible have been realized and verified, and the remaining 20% upon evidence of acceptable service provision for at least six months\. Each water system will consist of a water treatment plant, storage tower, pumps, drilled boreholes (or other suitable water collection such as small surface water diversion gravity flow systems, or rainwater catchment), water treatment (e\.g\. de-sedimentation, filtration, flocculation, aeration where iron is a problem, chlorination, and improved in-house water storage and filtration where required), electrical controls, and transmission and distribution pipelines through the community service area\. EMWF will provide support for system design, procurement of all required goods and materials, community consultation, motivation and training, identification and training of water managers, and technical assistance for major repairs or extension planning, if and when required\. Every HH wishing to connect to the water system will meet the following obligations: Pay for the water meter, valves, pipe and fittings from the distribution line to their house, and dig the trench for their own house connection (supervised by EMWF Construction Supervisors to make sure all HCs are properly installed and leak-free); Contribute labor for digging and backfilling the transmission and distribution pipeline trenches, the labor for which will be equitably divided among all the participating HHs; Pay in full each month the cost of piped water consumption as indicated by their household meter, based on a water tariff that will be calculated (and periodically updated as necessary) to cover the full anticipated cost of operation, maintenance, repair and salaries for water managers; and Be willing to participate in the HSBC promotion activities\. Local government will provide the following at no cost to the project: All land required, in particular for the water storage tower, all associated equipment and an office for the water managers, and rights of way for the water pipelines; Legal access to water sources to be developed (including groundwater) Page 3 3 Convenient access to a power transformer with good quality and reliable electricity (to maximize the longevity of the electrical equipment, especially the pumps); and Active support for project promotion in the beneficiary communities, and within local government decision-making agencies\. 4\. Project Location and salient physical characteristics relevant to the safeguard analysis: The project activities will take place in the provinces of Quang Nam, Quang Tri, Quang Binh, Quang Ngai and Thua Thien Hue\. During the first year, the project is expected to develop schemes in 20 communities\. To date 19 suitable communities have been identified for the first year of operation, based on, inter alia, poverty rate, community willingness and ability to pay, feasible water source (adequate quantity, quality, proximity, and legal access)\. The remaining communities will be identified during implementation\. 5\. Environmental and Social Safeguards Specialists on the Team: Environment Team Member: Trang Phuong Thi Nguyen Social Dev\. Team Member: Hoa Thi Mong Pham Reviewers prior to Safeguards Review Meeting of September 6, 2007: Env\. Safeguards Reviewer Panneer Selvam Social Safeguards Reviewer: Samantha Forusz 6\. Safeguard Policies Triggered (please explain why) Yes No Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X II\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The project will not have any large scale, significant or irreversible environmental impacts\. The project triggers the World Bank’s Environmental Assessment Policy (OP4\.01)\. An Environmental Assessment Framework (EAF) has been prepared to evaluate potential negative impacts of the Project\. It concluded that there are potential safety, construction, and operation related adverse impacts (including water source protection, management of collected sediment filtered or Page 4 4 precipitated from water sources, use of chlorine for water disinfection) that are minor, largely reversible, and can be mitigated through easily implemented measures, as described in the environmental management plan (EMP) that has been developed as a part of the EAF\. Potential subprojects will be screened against a negative checklist (included in the EAF) and projects triggering certain safeguard policies will be disregarded\. In addition, a subproject EA will be prepared for each subproject, to ensure appropriate mitigation measures are in place in case any negative impacts materialize\. Environmental guidelines are set forth in the EAF for the screening of subproject and preparation of subprojects EAs\. Involuntary Resettlement (OP 4\.12): No resettlement has occurred to date under any of the EMWF's water supply schemes in the provinces targeted by the Project\. There will be no involuntary resettlement as part of the project\. The infrastructure and facilities required under each subproject will require very little land\. Such land will only be government land, free of encumbrances, or land provided through voluntary land donation\. In case of voluntary land donation, the key principles of OP 4\.12 will be applied and documented by EMWF, as set forth in Appendix 3 to the EAF\. Indigenous Peoples (OP 4\.10 ) Ethnic minorities do exist in the project provinces, but it is very unlikely that they will be affected by the project\. Ethnic minorities mostly live in mountainous areas, away from the coastal areas where subprojects are to be selected\. No ethnic minorities were encountered in any of the water supply projects financed by EMWF in the past, or in the 19 subprojects considered for the first year of implementation\. Nevertheless, in case any subproject does involve ethnic minorities, the key principles of OP 4\.10 will be applied and documented by EMWF, as set forth in Appendix 4 of the EAF\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: The project would not cause or contribute to long term or cumulative negative impacts\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts: The Project has been developed in order to minimize potential negative impacts\. As indicated above, potential subprojects will be screened against a negative checklist (included in the EAF) and projects triggering certain safeguard policies will be disregarded\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described: Based on its 15 years of working experience in Vietnam, and ten years implementing the Clean Water Program, EMWF’s institutional capacity for community consultation, established relationships with the local authorities at all levels, water engineering design, supervision, construction, operation and maintenance, and training of technical specialists (to date, local Water Managers are hired to operate, maintain and repair each system, and collect and allocate water tariffs), EMWF is well qualified to carry out the proposed project\. In addition to its current 12 full-time staff (not including numerous pipe fitters and storekeepers, nor the 196 trained Water Managers – two responsible for O&M at each of the 94 CWP piped water systems), the EMWF CWP is now in the process of expanding its staff to include the following additional staff: water design engineer, electrical engineer, environmental specialist, three additional construction supervisors, two additional site supervisors, and an MIS specialist\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people: Page 5 5 Stakeholders of the project include: (i) Low income households in Provinces of Quang Nam, Quang Tri, Quang Binh, Quang Ngai and Thua Thien Hue; (ii) EMWF and (iii) Quang Nam, Quang Tri, Quang Binh, Quang Ngai and Thua Thien Hue provincial and local officials\. The EAF has been disclosed in Infoshop, on EMWF’s website and in EMWF office in Danang\. It has also been disclosed to the Department Of Natural Resources and the Environment, through the Provincial People’s Committee in each of the five provinces targeted by the Project\. The project has been discussed with EMWF and provincial officials and with local officials and low- income households in the 19 subprojects identified for the first year of implementation\. For future subprojects, consultations with local authorities and low-income households will be carried out in the respective communities at the scale of each subproject\. Public consultations will be carried out to make sure that the affected people are informed before the construction work is started\. Minutes of such consultations will be attached to the respective subprojects EA\. B\. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: EA Framework including EMP Date of receipt by the Bank August 29, 2007 Date of "in-country" disclosure September 26, 2007 Date of submission to InfoShop September 14, 2007 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors N/A Resettlement Action Plan/Framework/Policy Process: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A Indigenous Peoples Plan/Planning Framework: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A Pest Management Process: Date of receipt by the Bank N/A Date of "in-country" disclosure N/A Date of submission to InfoShop N/A * If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: N/A C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes [X] No [ ] N/A [ ] If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? Yes [] No [ ] N/A [X] Page 6 6 Are the cost and the accountabilities for the EMP incorporated in the credit/loan? No OP/BP 4\.04 - Natural Habitats Would the project result in any significant conversion or degradation of critical natural habitats? Yes [ ] No [ ] N/A [X] If the project would result in significant conversion or degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? OP 4\.09 - Pest Management Does the EA adequately address the pest management issues? Yes [ ] No [ ] N/A [X] Is a separate PMP required? Yes [ ] No [ ] N/A [X] If yes, has the PMP been reviewed and approved by a safeguards specialist or Sector Manager? Are PMP requirements included in project design? If yes, does the project team include a Pest Management Specialist? OP/BP 4\.11 – Physical Cultural Resources Does the EA include adequate measures related to cultural property? Yes [ ] No [ ] N/A [X] Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on physical cultural resources? OP/BP 4\.10 - Indigenous Peoples Has a separate Indigenous Peoples Plan/Planning Framework (as appropriate) been prepared in consultation with affected Indigenous Peoples? Yes [ ] No [ ] N/A [X] If yes, then did the Regional unit responsible for safeguards or Sector Manager review the plan? If the whole project is designed to benefit IP, has the design been reviewed and approved by the Regional Social Development Unit? OP/BP 4\.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/process framework (as appropriate) been prepared? Yes [ ] No [ ] N/A [X] If yes, then did the Regional unit responsible for safeguards or Sector Manager review and approve the plan/policy framework/process framework? OP/BP 4\.36 – Forests Has the sector-wide analysis of policy and institutional issues and constraints been carried out? Yes [ ] No [ ] N/A [X] Does the project design include satisfactory measures to overcome these constraints? Does the project finance commercial harvesting, and if so, does it include provisions for certification system? OP/BP 4\.37 - Safety of Dams Have dam safety plans been prepared? Yes [ ] No [ ] N/A [X] Page 7 7 Have the TORs as well as composition for the independent Panel of Experts (POE) been reviewed and approved by the Bank? Has an Emergency Preparedness Plan (EPP) been prepared and arrangements been made for public awareness and training? OP/BP 7\.50 - Projects on International Waterways Have the other riparians been notified of the project? Yes [ ] No [ ] N/A [X] If the project falls under one of the exceptions to the notification requirement, has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? What are the reasons for the exception? Please explain: Has the RVP approved such an exception? OP/BP 7\.60 - Projects in Disputed Areas Has the memo conveying all pertinent information on the international aspects of the project, including the procedures to be followed, and the recommendations for dealing with the issue, been prepared Yes [ ] No [ ] N/A [X] Does the PAD/MOP include the standard disclaimer referred to in the OP? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Yes [X] No [ ] N/A [ ] Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? Yes [X] No [ ] N/A [ ] All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Yes [X] No [ ] N/A [ ] Have costs related to safeguard policy measures been included in the project cost? Costs related to safeguard policy measures have been calculated and included in the EAF\. EMWF will be responsible to ensure that safeguard policies are respected\. Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Yes\. Such monitoring will be a part of the Operations Manual for the Project, EMWF will have to report on compliance with safeguards policies, OBA independent verification agent will review such compliance on a quarterly basis\. Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Yes, through the Operations Manual in addition to the Grant Agreement\. Page 8 8 D\. Approvals Signed and submitted by: Name Date Task Team Leader: Xavier Chauvot de Beauchêne September 26, 2007 Environmental Specialist: Trang Phuong Thi Nguyen September 26, 2007 Social Development Specialist Hoa Thi Mong Pham October 2, 2007 Additional Environmental and/or Social Development Specialist(s): Approved by: Regional Safeguards Coordinator: Panneer Selvam Transferred Comments: Sector Manager: Patricia Veevers-Carter October 2, 2007 Comments: Page 9 9

APPROVAL

P109603

Page 1 INTEGRATED SAFEGUARDS DATASHEET APPRAISAL STAGE I\. Basic Information Date prepared/updated: 10/01/2009 Report No\.: 50920 1\. Basic Project Data Country: Croatia Project ID: P109603 Project Name: Disaster Risk Mitigation and Adaptation Project Task Team Leader: Jolanta Kryspin-Watson Estimated Appraisal Date: February 2, 2009 Estimated Board Date: January 26, 2010 Managing Unit: ECSSD Lending Instrument: Specific Investment Loan Sector: Central government administration (100%) Theme: Natural disaster management (100%) IBRD Amount (US$m\.): 36\.29 IDA Amount (US$m\.): 0\.00 GEF Amount (US$m\.): 0\.00 PCF Amount (US$m\.): 0\.00 Other financing amounts by source: Borrower 1\.91 1\.91 Environmental Category: B - Partial Assessment Simplified Processing Simple [] Repeater [] Is this project processed under OP 8\.50 (Emergency Recovery) or OP 8\.00 (Rapid Response to Crises and Emergencies) Yes [ ] No [X] 2\. Project Objectives The objectives of the proposed Disaster Risk Mitigation and Adaptation Project for Croatia is to enhance country’s preparedness, response to disasters, and monitoring of weather-related hazards in order to reduce disaster risk\. 3\. Project Description The project comprises two main components and a small component to support project management\. DRMAP will be implemented by National Rescue and Protection Directorate (NRPD) and Meteorological and Hydrological Service (DHMZ)\. -- Component A: Disaster Preparedness and Emergency Response The objective of component A is to strengthen capacity of the Government of Croatia to manage natural and man-made disasters and to effectively respond to emergencies\. This objective will be achieved through the support to the following activities: (A\.1) Enhancement of 112 Emergency Call System; (A\.2) Enhancement of National and Regional Fire Fighting Capacities\. Page 2 -- Component B: Strengthening Weather Forecasting The objective of Component B is to strengthen the capacity of the Government of Croatia to deliver severe weather forecasts in support of disaster risk mitigation\. This objective will be achieved through support to the following activities: (B\.1) Integrated Nowcasting System; and (B\.2) Designing DHMZ Facility\. -- Component C: Project Management The component will provide support to the implementation of the DRMAP\. It will consist of the technical assistance and training to the NPRD and DMHZ project staff\. In particular, the support will enhance the financial management and procurement functions, monitoring and evaluation as well as, if necessary, the technical aspects of project implementation\. 4\. Project Location and salient physical characteristics relevant to the safeguard analysis The project will be implemented country-wide but with majority of project coordination activities to be carried out in Zagreb\. The civil works are related to A2 and B1 components\. More specifically, the key civil works under the project will include: (i) refurbishment, modernization and reconstruction of Regional Fire Fighting Coordination Center in Divulje and polygon in Prgomet (near Split), and (ii) site preparation works for radar installation in three locations (possible locations are: Monte Kope near Pula, Kriz near Zadar and island Vis (or alternate island Lastovo)\. Component A1 will include establishment and integration of information and communication system with no civil works involved (beside small interior renovation to prepare rooms for the IT equipment), while component B2 will include financing of the design for a new DHMZ building whose construction will not be financed under this particular loan\. The sites where civil works will take place on public land, do not require any land expropriation, are free of encroachments, squatters and there is no legal or illegal private use of these properties\. The same applies to the planned site for the proposed DHMZ building, for which design and feasibility study will be supported by the project (under sub-component B\.2)\. Therefore, Bank Involuntary Resettlement Policy OP 4\.12 will not be triggered\. It should be noted that the four proposed sites for installation of DHMZ weather radars (of which three sites will be selected based on further technical reviews), currently belong to the Ministry of Defense and could not be visited by the Bank team during project preparation due to their “restricted military” status\. The team was informed by DMHZ that the considered land is guarded and free of encroachments or squatters, and there is no private legal or illegal use of these properties\. As soon as the sites are selected and the right of use transferred from the Ministry of Defense, but prior to installation of the new radars, the Borrower will provide to the Bank a written attestation and the Bank team will visit the sites to ascertain that no resettlement will arise as a consequence of the installation of the radars\. The Loan Agreement includes stipulations to this effect, with disbursement condition related to the investments in new radars\. Page 3 The Government of Republic of Croatia issued a decision on transferring right of use of former military site in Divulje to NPRD which is now awaiting such a transfer for the Prgomet site from the Ministry of Regional Development, Forestry and Water Management\. The former military sites consist of barracks, warehouses and polygons\. The proposed civil works will not require any land expropriation as the identified sites are under the Government\. The three sites (to be selected out of four) will be transferred from the Ministry of Defense upon completion of technical evaluation of their suitability for weather radars\. 5\. Environmental and Social Safeguards Specialists Mr Bekim Imeri (ECSS4) Ms Natasa Vetma (ECSS3) 6\. Safeguard Policies Triggered Yes No Environmental Assessment (OP/BP 4\.01) X Natural Habitats (OP/BP 4\.04) X Forests (OP/BP 4\.36) X Pest Management (OP 4\.09) X Physical Cultural Resources (OP/BP 4\.11) X Indigenous Peoples (OP/BP 4\.10) X Involuntary Resettlement (OP/BP 4\.12) X Safety of Dams (OP/BP 4\.37) X Projects on International Waterways (OP/BP 7\.50) X Projects in Disputed Areas (OP/BP 7\.60) X II\. Key Safeguard Policy Issues and Their Management A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: The project triggers OP 4\.01 (Environmental Assessment) and was determined to be World Bank environmental assessment cate gory “B\.” The physical investments under the project will include renovations and small-scale construction of selected facilities and installation of weather radars, and required preparation by the Croatian counterparts of an Environmental Management Plan (EMP)\. The civil works are of limited scope, therefore, the impacts are temporary, easily foreseen and mitigated\. The environmental impacts during construction phase are related to the typical building construction, such as air pollution, waste generation, noise, soil and water pollution and potential safety hazards\. The impacts during operation are mainly related to waste management\. The radars size is relatively small (radome sphere - 2\.5 m radius) and will be installed on ex-military sites with the existing infrastructure\. The radars will not have any significant environmental impact, including the impact on migratory or local bird species\. However, in Divulje and Prgomet, due to the training to be conducted, after completion of the investments, with potentially hazardous materials (fire extinguishers, etc\.) a certain impact to the environment may potentially occur\. To address it, the operator will prepare, in the early Page 4 phase of project implementation, the standard operational procedures which will provide procedures for handling the equipment and residues after trainings to prevent /minimize damage to the environment\. The operating procedures will be developed prior to launching any training with use of extinguishing materials in project-supported facilities\. The project includes renovations, reconstruction and construction of new facilities\. The sites for the proposed works are under the Government (transferred from the Ministry of Defense to the NPRD and to be transferred to DHMZ) and there is no legal or illegal private use of these properties\. According to the NPRD, these military sites are not contaminated since the land was used as stationeries, accommodation facilities and "physical fitness" training of solders\. The sites where civil works will take place on public land, do not require any land expropriation, are free of encroachments, squatters and there is no legal or illegal private use of these properties\. The same applies to the planned site for the proposed DHMZ building, design and feasibility study for which will be supported by the project (under sub-component B\.2)\. Therefore, Bank Involuntary Resettlement Policy OP 4\.12 will not be triggered\. The proposed four sites for installation of three weather radars (the three sites will be selected based on further technical reviews), currently belong to the Military and could not be visited by the Bank team due to their “military secret” status\. The team was assured by the DHMZ that the considered land is free of encroachments or squatter and there is no private legal or illegal use of these properties\. As soon as the sites are selected and the right of use transferred to DMHZ the team will visit them\. The project also triggers the Physical Cultural Resources (OP/BP 4\.11) due to possible chance finds at the project sites, especially in southern part of Croatia # Dalmatia, which is rich in remnants from Roman and Greek area\. The procedures/legislation in Croatia related to chance finds are in place and are regularly implemented\. The appropriate provisions compliant with the OP/BP 4\.11 and Croatian legislation have been included in the EMP\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: The project is expected to provide positive social impacts by decreasing the vulnerability of the population that is at risk to natural disasters\. This will be achieved through strengthening of the institutional and technical capacity of public institutions in managing and effectively responding to disasters; in providing people with more precise hydro- meteorological forecasts; thus, informing communities at risk of imminent hazards; and facilitating preparedness measures\. People in the coastal areas will particularly benefit from the activities related to wild fires hazard risk reduction and responses as wild fires are frequent along the coast\. The social assessment carried out during project preparation concluded that no indirect long-term negative social impacts are anticipated due to project-supported activities\. Page 5 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. The alternatives considered were related to the choice of locations for the above mentioned structures\. The locations for construction works were considered based on the strategic relevance for reaching the project objectives (for example: regional fire fighting center to be positioned in Dalmatia which is the area most affected by fires) and availability of unused military sites\. The selection of sites for radars installation will be made based on technical criteria which will determine the most suitable location\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. The borrower has prepared an Environmental Management Plan (EMP) which focuses on the physical interventions mentioned above\. The EMP identifies mitigation measures typical for the refurbishment and construction of buildings\. These include measures for dust minimization, construction waste management, site organization, temporary storage of the material, chance finds, working hours, etc\. For the operation phase the mitigation measures include good maintenance practices, waste management and operation emergency plans\. Update to ISDS as of March 1, 2009 The EMP also mentions future sites for the radars, which are not of the significant size (2\.5 m radius) and which will be located in coastal zone as they need to cover north, middle and southern Adriatic\. The publically disclosed EMP included three potential sites for the radars\. During the appraisal the DMHZ informed Bank mission that the Ministry of Defense has offered additional sites for DMHZ consideration\. Currently, the DHMZ is assessing the five sites form the technical point of view and will decide soon on the three most suitable ones\. Consequently, the new potential sites have been added to the updated EMP and disclosed\. During the process of selection of the sites for the purpose of radar installation, environmental conditions will be also taken into account\. If any of the chosen sites will be in the vicinity of protected areas or raise any other environmental concerns, additional environmental assessment for the radar sites will be carried out\. Due to the updates, the revised EMP was again disclosed\. In addition, the client will share the EMP with the Directorate for Nature Protection to make sure that from the nature protection point of view the sites are acceptable for radar installation\. All received comments will be addressed in the further revised version of the EMP\. The borrower will assign one person within the Implementation Team to be in charge of the coordination of the implementation of the EMP\. The person will participate in Bank training on environmental safeguards\. The EMP will be part of the bidding documents for contractors who will implement the measures as well as part of the bidding document for supervising engineer who will be in charge for monitoring of the civil works\. The supervising engineer will be required to submit biannual reports on the implementation of the EMP\. During the operation phase the maintenance of the facilities will be required to follow up and monitor implementation of the EMP as it will be part of the regular good maintenance practice\. The monitoring of the whole construction process will also be Page 6 supported by random inspections from the Ministry of Environmental Protection, Physical Planning and Construction\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. The key stakeholders are: NRPD and all members in the vertical and horizontal structure, DHMZ, Ministry of Finance, citizens of the municipalities involved, local NGOs and Ministry of Defense who provided the land\. The EMP was disclosed in Croatian and English on the websites of the NRPD and DHMZ\. At the same time, the hard copies were disclosed in project municipalities'™announcement boards so the main stakeholders can have an access to it\. After about two weeks of disclosure (which included announcement of public consultation) a public consultations on the EMP were held in Zagreb\. The public was able also to send the comments by email or regular mail\. The Implementation Team responded to all comments and updated the draft version accordingly\. As the EMP was disclosed again due to the fact that it had to be updated to reflect additional potential sites for radar installation, the received comments were addressed in the revised EMP\. B\. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other: Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 11/10/2008 Date of "in-country" disclosure 01/15/2009 Date of submission to InfoShop 01/28/2009 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Resettlement Action Plan/Framework/Policy Process: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Indigenous Peoples Plan/Planning Framework: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Pest Management Plan: Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of "in-country" disclosure Date of submission to InfoShop Page 7 * If the project triggers the Pest Management and/or Physical Cultural Resources, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes If yes, then did the Regional Environment Unit or Sector Manager (SM) review and approve the EA report? Yes Are the cost and the accountabilities for the EMP incorporated in the credit/loan? Yes OP/BP 4\.11 - Physical Cultural Resources Does the EA include adequate measures related to cultural property? Yes Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on cultural property? Yes The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Yes Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? Yes All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Yes Have costs related to safeguard policy measures been included in the project cost? Yes Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Yes Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? Yes Page 8 D\. Approvals Signed and submitted by: Name Date Task Team Leader: Ms Jolanta Kryspin-Watson 09/30/2009 Environmental Specialist: Ms Natasa Vetma 09/30/2009 Social Development Specialist Mr Bekim Imeri 09/28/2009 Additional Environmental and/or Social Development Specialist(s): Approved by: Regional Safeguards Coordinator: Ms Janis D\. Bernstein 10/01/2009 Comments: Sector Manager: Mr Wael Zakout 10/01/2009 Comments:

APPROVAL

P167914

 ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي )‪(P167914‬‬ ‫وثيقة معلومات المشروع‪/‬‬ ‫صحيÙ?Ø© بيانات اإلجراءات الوقائية المتكاملة (معًا)‬ ‫مرحلة التقييم المسبق | تاريخ اإلعداد‪/‬التحديث‪ 14 :‬نوÙ?مبر‪/‬تشرين الثاني ‪ | 2018‬تقرير رقم‪PIDISDSA25710 :‬‬ ‫‪Page 1 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي )‪(P167914‬‬ ‫معلومات أساسية‬ ‫‪OPS_TABLE_BASIC_DATA‬‬ ‫أ‪ \.‬البيانات األساسية للمشروع‬ ‫الرقم التعريÙ?ي للمشروع األصلي‬ ‫اسم المشروع‬ ‫الرقم التعريÙ?ي للمشروع‬ ‫البلد‬ ‫(إن وجد)‪:‬‬ ‫مشروع تحسين أداء قØاع الكهرباء ‪P148600‬‬ ‫‪P167914‬‬ ‫الضÙ?Ø© الغربية وقØاع غزة‬ ‫ــ تمويل إضاÙ?ي‬ ‫التاريخ التقديري للعرض على‬ ‫التاريخ التقديري للتقييم المسبق‬ ‫المنØقة‬ ‫اسم المشروع األصلي‬ ‫مجلس المديرين التنÙ?يذيين‬ ‫‪ 19‬ديسمبر‪/‬كانون األول ‪2018‬‬ ‫‪ 08‬أكتوبر‪/‬تشرين األول ‪2018‬‬ ‫مشروع تحسين أداء قØاع الكهرباء Ù?ي الضÙ?Ø© الشرق Ø§Ø£Ù„ÙˆØ³Ø ÙˆØ´Ù…Ø§Ù„ Ø£Ù?ريقيا‬ ‫الغربية وقØاع غزة‬ ‫الهيئة المسؤولة عن إدارة التنÙ?يذ‬ ‫المقترض‪/‬المقترضون‬ ‫أداة التمويل‬ ‫مجال الممارسة (الرئيسي)‬ ‫منظمة التحرير الÙ?لسØينية (لصالح سلØØ© الØاقة والموارد الØبيعية‬ ‫تمويل مشروعات استثمارية‬ ‫الØاقة والصناعات االستخراجية‬ ‫الÙ?لسØينية‬ ‫السلØØ© الÙ?لسØينية)‬ ‫الهدÙ? اإلنمائي للمشروع األصلي‬ ‫يتمثل الهدÙ? اإلنمائي للمشروع Ù?ي النهوض بالقدرات المؤسسية لقØاع الØاقة‪ ،‬وتحسين كÙ?اءة شبكة التوزيع Ù?ي المناØق المستهدÙ?ة‪ ،‬وتجربة نموذج عمل جديد‬ ‫لتقديم خدمات الØاقة الشمسية Ù?ي غزة‪\.‬‬ ‫الهدÙ? اإلنمائي للمشروع المقترح – التمويل اإلضاÙ?ي‪:‬‬ ‫يتمثل الهدÙ? اإلنمائي لهذا المشروع Ù?ي تحسين األداء التشغيلي لمؤسستي قØاع الØاقة‪ ،‬وتجربة نموذج عمل جديد للØاقة الشمسية Ù?ي غزة‪\.‬‬ ‫المكونات‬ ‫ّ‬ ‫المكون ‪ 1‬ــ النهوض بقدرات مؤسستي قØاع الكهرباء الÙ?لسØيني‪ ،‬وهما‪ :‬شركة النقل الوØنية للكهرباء ومجلس تنظيم قØاع الكهرباء‬ ‫المكون ‪ – 2‬تحسين األداء التشغيلي لشركات توزيع الكهرباء الÙ?لسØينية‬ ‫المكون ‪ 3‬ــ تحسين أمن الØاقة Ù?ي غزة باستخدام الØاقة الشمسية‬ ‫المكون ‪ 4‬ــ المساعدة الÙ?نية وبناء القدرات وإدارة المشروع‬ ‫بيانات تمويل المشروع (بماليين الدوالرات األمريكية)‬ ‫الموجز المختصر‪NewFin1-‬‬ ‫‪12\.00‬‬ ‫إجمالي تكلÙ?Ø© المشروع‬ ‫‪12\.00‬‬ ‫مجموع التمويل‬ ‫‪0\.00‬‬ ‫منها قدم البنك الدولي لإلنشاء والتعمير‪/‬المؤسسة الدولية للتنمية‬ ‫‪0\.00‬‬ ‫الÙ?جوة التمويلية‬ ‫التÙ?اصيل‪NewFinEnh1-‬‬ ‫التمويل خارج مجموعة البنك الدولي‬ ‫‪Page 2 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي )‪(P167914‬‬ ‫‪12\.00‬‬ ‫الصناديق االستئمانية‬ ‫‪7\.00‬‬ ‫الصندوق االستئماني متعدد المانحين للشراكة من أجل تØوير البنية التحتية‬ ‫‪5\.00‬‬ ‫تمويل خاص‬ ‫Ù?ئة تقييم التصنيÙ? البيئي‬ ‫باء "تقييم جزئي"‬ ‫القرار‬ ‫أجاز االستعراض لÙ?ريق العمل إجراء التقييم المسبق والتÙ?اوض‬ ‫قرارات أخرى (حسب الحاجة)‬ ‫ب‪ \.‬المقدمة والسياق‬ ‫السياق القØري‬ ‫كبيرا Ù?ي عام ‪ 2018‬بسبب تراجع Ø§Ù„Ù†Ø´Ø§Ø Ù?ي غزة‪ \.‬وبحسب الجهاز المركزي لإلحصاء‬ ‫تدهورا ً‬ ‫ً‬ ‫‪ \.1‬تدهورت األوضاع االقتصادية Ù?ي األراضي الÙ?لسØينية‬ ‫الÙ?لسØيني‪ ،‬انخÙ?ض نمو إجمالي الناتج المحلي الحقيقي إلى ‪ %2‬Ù?ي الربع األول من عام ‪ - 2018‬وهو نصÙ? المعدل Ù?ي السنوات الثالث السابقة‪\.‬‬ ‫وشهد Ø§Ù„Ù†Ø´Ø§Ø Ø§Ø§Ù„Ù‚ØªØµØ§Ø¯ÙŠ قيودًا ومعوقات ألكثر من عقدين من الزمان بسبب القيود المÙ?روضة على الحركة‪ ،‬والوصول إلى الخدمات‪ ،‬والتجارة التي‬ ‫أبقت معدالت االستثمار منخÙ?ضة للغاية وأدت إلى تراجع التصنيع‪ \.‬وساعدت عمليات النقل الكبيرة التي تتم Ù?ي الغالب على شكل معونات من المجتمع‬ ‫الدولي على تخÙ?يÙ? أثر هذه القيود من خالل دعم النمو المدÙ?وع باالستهالك‪ \.‬ومع ذلك‪ ،‬Ù?إن عمليات النقل آخذة Ù?ي التراجع وشهدت انخÙ?اضا كبيرا‬ ‫للغاية Ù?ي ‪ ،2018-2017‬ال سيما Ù?ي غزة‪ ،‬مما أدى إلى تراجع مسار عجلة نمو Ø§Ù„Ù†Ø´Ø§Ø Ø§Ø§Ù„Ù‚ØªØµØ§Ø¯ÙŠ بوجه عام‪\.‬‬ ‫‪ \.2‬يتمثل التحدي األكبر الذي يواجه الضÙ?Ø© الغربية وقØاع غزة Ù?ي ارتÙ?اع معدالت البØالة‪ \.‬وترجع هذه الزيادة Ù?ي معدالت البØالة إلى القÙ?زة الكبيرة التي‬ ‫شهدتها غزة‪ ،‬حيث إن ‪ Ùª53\.7‬من القوى العاملة Ù?ي غزة كانوا عاØلين عن العمل Ù?ي الربع الثاني من عام ‪ \.2018‬ويعد نقص إمدادات الكهرباء أحد‬ ‫العوامل العديدة التي تقيد بشدة الÙ?رص االقتصادية وتحسن جودة الحياة‪ \.‬ويتØلب الموقÙ? الحالي الذي يتسم بالحساسية بذل جهود مجددًا من جانب‬ ‫المانحين والسلØØ© الÙ?لسØينية وحكومة إسرائيل‪ \.‬وريثما يتم التوصل إلى اتÙ?اق سالم دائم‪ ،‬سيكون أداء االقتصاد الÙ?لسØيني أدنى من إمكاناته الكامنة‪،‬‬ ‫وسيؤثر ذلك على األداء االقتصادي وأداء المالية العامة‪ \.‬وأيًا ما كان األمر‪ ،‬وحتى من دون اتÙ?اق سالم نهائي‪ ،‬سيكون هناك مجال لبذل المزيد من‬ ‫الجهود لتعزيز أداء االقتصاد الÙ?لسØيني وتحسين موقÙ? المالية العامة‪ \.‬وهناك حاجة إلى زيادة مساندة المانحين واإلصالحات المستمرة التي تقودها‬ ‫السلØØ© الÙ?لسØينية لضمان تحسين القدرة على المناÙ?سة واستدامة المالية العامة لالقتصاد الÙ?لسØيني بمرور الوقت‪\.‬‬ ‫السياق القØاعي والمؤسسي‬ ‫‪ \.3‬يÙ?عد قØاع الكهرباء Ù?ي Ù?لسØين حديث العهد نسبيًا‪ \.‬Ù?قد تم إنشاء شركة النقل الوØنية للكهرباء Ù?ي عام ‪ 2013‬كمشتر ومشغل منÙ?رد للشبكة لضمان‬ ‫التعامل على نحو Ù…Ù†Ø¶Ø¨Ø Ù…Ø¹ شركة كهرباء إسرائيل‪ \.‬وتمثل الواردات اإلسرائيلية أكثر من ‪ Ùª99‬من إمدادات الكهرباء Ù?ي الضÙ?Ø© الغربية وأكثر من‬ ‫نصÙ?ها Ù?ي غزة‪ \.‬وتتمثل إستراتيجية سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية Ù?ي تحقيق قدر أكبر من االستقاللية من خالل بنية تحتية متقدمة للنقل‬ ‫والتوزيع؛ وتوليد الكهرباء محليًا؛ وتحقيق االستدامة المالية والتشغيلية Øويلة األجل‪ \.‬وتتشابك مشكالت قØاع الØاقة Ù?ي Ù?لسØين بعمق مع إسرائيل‪\.‬‬ ‫وال تقوم Ù?لسØين باستيراد معظم Øاقتها الكهربائية من إسرائيل Ù?حسب‪ ،‬وإنما تتقاسم معها أيضًا البنية التحتية اإلجمالية للنقل‪\.‬‬ ‫‪ \.4‬على مدى العشرين سنة الماضية‪ ،‬أدت عملية اإلصالح المستدامة المدعومة من مجتمع المانحين إلى تحسين وتعزيز منظومة قØاع الØاقة الÙ?لسØيني‬ ‫بعدما كانت تتسم بالتÙ?تت واالرتكاز إلى البلديات لتصبح نموذج المشتري األوحد الذي يتسم بالمزيد من الكÙ?اءة‪ \.‬وأدى هذا اإلصالح إلى تجميع خدمات‬ ‫توزيع الكهرباء التي يقدمها العديد من البلديات ومجالس القرى المÙ?تتة Ù?ي شركات توزيع أكبر حج ً‬ ‫ما لالستÙ?ادة من وÙ?ورات الحجم‪ \.‬وÙ?ي الوقت الحالي‪،‬‬ ‫لدى Ù?لسØين ‪ 6‬شركات توزيع للكهرباء (بواقع ‪ 5‬شركات Ù?ي الضÙ?Ø© الغربية وشركة واحدة Ù?ي قØاع غزة)‪ ،‬بيد أنه يوجد بها أكثر من ‪ 150‬بلدية‬ ‫ومجلس قرية ال يزال يتعين عليها نقل خدمات الكهرباء الخاصة بها‪ \.‬وقد تباØأت هذه العملية نتيجة للوضع المالي الصعب للبلديات الذي دÙ?عها إلى‬ ‫استخدام اإليرادات المتأتية من Ù?واتير الكهرباء لدعم الخدمات البلدية األخرى‪ \.‬وقد وقّعت السلØØ© الÙ?لسØينية وحكومة إسرائيل Ù?ي ‪ 13‬سبتمبر‪/‬أيلول‬ ‫‪Page 3 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي )‪(P167914‬‬ ‫‪ 2016‬اتÙ?اقية لتسوية ديون قØاع الكهرباء السابقة‪ ،‬واتÙ?قتا على مبادئ عامة بشأن سوق الØاقة الÙ?لسØينية Ù?ي المستقبل‪ \.‬ومن المتوقع أن يتم تنظيم‬ ‫العالقة التجارية بين شركة كهرباء إسرائيل وشركة النقل الوØنية للكهرباء من خالل اتÙ?اقية شراء كهرباء Øويلة األجل‪ \.‬ومن شأن هذه االتÙ?اقية‬ ‫المساعدة Ù?ي التزويد بالØاقة لما يبلغ ‪ 4‬محØات Ù?رعية ذات جهد عال قام بنك االستثمار األوروبي بتمويلها وقامت شركة كهرباء إسرائيل ببنائها Ù?ي‬ ‫الضÙ?Ø© الغربية‪ ،‬وهو ما يؤدي إلى زيادة إمدادات الكهرباء بصورة كبيرة والحد من الخسائر والÙ?اقد‪ \.‬ومن المتوقع أن تقلل هذه االتÙ?اقية من التكلÙ?ة‬ ‫اإلجمالية للكهرباء على المستهلكين الÙ?لسØينيين مع تحسين جودة وموثوقية إمدادات الكهرباء‪\.‬‬ ‫‪ \.5‬على الرغم من التحسينات الكبيرة Ù?ي أداء قØاع الكهرباء‪ ،‬ال تزال هناك حاجة لبذل المزيد من الجهود لتحقيق تحسينات مستدامة‪ ،‬وتعزيز إصالحات‬ ‫هذا القØاع‪ ،‬وضمان التنÙ?يذ الناجح التÙ?اقية تسوية ديون الكهرباء بين الجانب اإلسرائيلي والجانب الÙ?لسØيني‪ \.‬وزادت معدالت تحصيل Ù?واتير الكهرباء‬ ‫من جانب شركات التوزيع من ‪ %52‬Ù?ي ‪ 2007‬إلى ‪ %84‬Ù?ي ‪ 2015‬Ù?ي Ø§Ù„Ù…ØªÙˆØ³Ø Ø¨Ø³Ø¨Ø¨ اإلجراءات الحاسمة التي اتخذتها الشركات والتي ساندها‬ ‫نظرا ألن ‪ )2015( %25‬من الكهرباء‬ ‫كبيرا للقلق ً‬ ‫ً‬ ‫مصدرا‬ ‫ً‬ ‫البنك الدولي ومانحون آخرون‪ \.‬ومع ذلك ال تزال خسائر الشبكات (الÙ?نية وغير الÙ?نية)‬ ‫المشتراة يتم Ù?قدها‪ ،‬وال يمكن Ù?وترتها على المستهلك النهائي (صعودًا من ‪ %19‬Ù?ي ‪ \.)2007‬ويعتمد نجاح االتÙ?اقية الجديدة بشأن ديون الكهرباء على‬ ‫قيام شركة النقل الوØنية للكهرباء بدÙ?ع ‪ %100‬من قيمة الØاقة الكهربائية المشتراة لشركة كهرباء إسرائيل‪ \.‬وÙ?ي المقابل‪ ،‬يتعين على شركات التوزيع‬ ‫والمستهلكين اتخاذ هذا المسار Ù?ي سلسلة القيمة‪ \.‬وهناك تحسن الح Ù?ي األÙ?ق إذ انخÙ?ض صاÙ?ي اإلقراض بنسبة ‪ Ùª12‬Ù?ي النصÙ? األول من عام ‪2018‬‬ ‫(على أساس سنوي) نتيجة لجهود اإلصالح التي تبذلها السلØØ© الÙ?لسØينية‪ ،‬ال سيما Ù„Ø¶Ø¨Ø Ø§Ù„ØªÙƒØ§Ù„ÙŠÙ? المرتبØØ© بالكهرباء‪\.‬‬ ‫‪ \.6‬ال تزال غزة تعاني من قيود شديدة‪ \.‬ويعاني سكان قØاع غزة البالغ عددهم ‪ 1\.8‬مليون نسمة من نقص حاد Ù?ي إمدادات الكهرباء بسبب عدم القدرة على‬ ‫تنÙ?يذ خيارات إمدادات الØاقة الكهربائية المستدامة‪ \.‬وال تكاد تÙ?ي إمدادات الØاقة الكهربائية المتاحة Ù?ي غزة إال بربع الØلب‪ ،‬وهو ما يؤدي إلى حاالت‬ ‫انقØاع التيار الكهربائي بصورة متواترة‪ ،‬وال تتوÙ?ر الكهرباء إال لمدة ‪ 6 - 3‬ساعات Ù?ي اليوم‪ \.‬وتعتمد محØØ© توليد الكهرباء Ù?ي غزة بشكل شبه كامل‬ ‫على المساعدات الØارئة من الجهات المانحة السخية لشراء زيت الديزل‪ \.‬وهناك مÙ?اوضات تجري منذ أكثر من ‪ 10‬سنوات بشأن حلول بديلة لتقديم‬ ‫خيارات إمدادات أكثر استدامة‪ ،‬مثل زيادة الواردات من مصر وإسرائيل‪ ،‬وتحويل محØØ© كهرباء غزة كي تعمل بالغاز الØبيعي ً‬ ‫بدال من زيت الديزل‪\.‬‬ ‫لكن لم يحدث أي تقدم Ù?ي هذا الصدد بسبب جمود األوضاع السياسية‪ \.‬وال يعمل تØوير الØاقة الشمسية الكهروضوئية على تحسين الظروÙ? المعيشية‬ ‫لعدد كبير من األسر المعيشية Ù?حسب‪ ،‬بل من الممكن أن يكون ذلك ً‬ ‫حال للوÙ?اء باحتياجات القØاعين العام والخاص‪\.‬‬ ‫‪ \.7‬ضاعÙ? البنك جهوده Ù?ي قØاع الØاقة Ù?ي الضÙ?Ø© الغربية وغزة من خالل مشروع تحسين أداء قØاع الكهرباء‪ ،‬وذلك بالشروع Ù?ي عدة تدابير تضمنت‬ ‫بناء قدرات شركة النقل الوØنية للكهرباء ومجلس تنظيم قØاع الكهرباء وتوÙ?ير التدريب لموظÙ?ي هاتين المؤسستين‪ \.‬وÙ?يما يتعلق بتحسين األداء التشغيلي‬ ‫لشركات توزيع الكهرباء الخمس Ù?ي الضÙ?Ø© الغربية‪ ،‬شمل المشروع مبادرات لحماية اإليرادات ونظم معلومات اإلدارة‪ \.‬وÙ?ي Ø¥Øار هذا التمويل اإلضاÙ?ي‪،‬‬ ‫ستغØي هذه التدابير المعنية بحماية اإليرادات ونظم معلومات اإلدارة عمليات شركة توزيع كهرباء محاÙ?ظات غزة المسؤولة عن قØاع غزة‪ \.‬وتتمثل‬ ‫المناÙ?ع الرئيسية من اشتمال غزة Ù?ي أن تعمل جميع شركات توزيع الكهرباء Ù?ي Ù?لسØين على تØوير نظام موحد إلدارة اإليرادات ونظم معلومات‬ ‫اإلدارة‪ \.‬وباإلضاÙ?Ø© إلى ذلك ‪ ،‬سيزيد المشروع من مكون الØاقة الشمسية الكهروضوئية لتوÙ?ير المزيد من أنظمة الØاقة الشمسية الكهروضوئية ذات‬ ‫الحجم المناسب للعمالء من الشركات الصغيرة والمتوسØØ© من خالل الصندوق المتجدد‪ ،‬كما سيعمل على دعم إمدادات الØاقة Ù?ي المستشÙ?يات والعيادات‬ ‫الصحية‪ \.‬وسيعمل هذا التمويل اإلضاÙ?ي على توسيع نØاق مكونات مشروع تحسين أداء قØاع الكهرباء على نحو مباشر وبالتالي تعزيز نتائج المشروع‬ ‫األصلي‪\.‬‬ ‫ج‪ \.‬األهداÙ? اإلنمائية المقترحة‬ ‫الهدÙ? اإلنمائي للمشروع األصلي‬ ‫يتمثل الهدÙ? اإلنمائي للمشروع Ù?ي النهوض بالقدرات المؤسسية لقØاع الØاقة‪ ،‬وتحسين كÙ?اءة شبكة التوزيع Ù?ي المناØق المستهدÙ?ة‪ ،‬وتجربة نموذج عمل جديد‬ ‫لتقديم خدمات الØاقة الشمسية Ù?ي غزة‪\.‬‬ ‫الهدÙ? اإلنمائي الحالي للمشروع‬ ‫يتمثل الهدÙ? اإلنمائي لهذا المشروع Ù?ي تحسين األداء التشغيلي لمؤسستي قØاع الØاقة‪ ،‬وتجربة نموذج عمل جديد للØاقة الشمسية Ù?ي غزة‪\.‬‬ ‫النتائج الرئيسية‬ ‫يهدÙ? المشروع المقترح إلى تحسين كÙ?اءة مؤسستي قØاع الكهرباء الÙ?لسØيني‪ ،‬والحد من Ù?واقد الشبكة‪ ،‬وتجربة نموذج عمل خاص يستند إلى صندوق متجدد‬ ‫لتعميم أنظمة توليد الØاقة الشمسية Ù?ي قØاع غزة‪\.‬‬ ‫‪Page 4 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي )‪(P167914‬‬ ‫د‪ \.‬وصÙ? المشروع‬ ‫‪ \.8‬سيعمل هذا التمويل اإلضاÙ?ي على توسيع نØاق مكونات مشروع تحسين أداء قØاع الكهرباء‪ \.‬وÙ?يما يلي وصÙ? لألنشØØ© التي تجري مساندتها Ù?ي Ø¥Øار‬ ‫هذا التمويل اإلضاÙ?ي‪:‬‬ ‫المكون ‪ :1‬النهوض بقدرات مؤسستي قØاع الكهرباء الÙ?لسØيني‪ \.‬سيعمل هذا التمويل اإلضاÙ?ي على زيادة التركيز على األداء التشغيلي‬ ‫‪\.1‬‬ ‫لشركة النقل الوØنية للكهرباء من خالل األنشØØ© اإلضاÙ?ية التالية التي تعد ضرورية لـلشركة لالضØالع بمسؤولياتها كمشتر ومشغّل منÙ?رد لشبكة نقل‬ ‫الكهرباء‪ ،‬وتنÙ?يذ Ø®ØØ© شراء الكهرباء Øويلة األجل مع شركة الكهرباء اإلسرائيلية‪\.‬‬ ‫(Ø£) وضع Ø®ØØ© رئيسية لشركة النقل الوØنية للكهرباء؛‬ ‫(ب) تعزيز ومساندة خدمات صيانة شركة النقل الوØنية للكهرباء؛‬ ‫(ج) مساندة تركيب عدادات قياس لما يبلغ ‪ 80‬نقØØ© توصيل كهرباء ذات أولوية‪ ،‬وستديرها شركة النقل الوØنية للكهرباء Ù?ي Ø¥Øار‬ ‫الخØØ© االنتقالية المتÙ?ق عليها بموجب اتÙ?اقية شراء الكهرباء بين شركة النقل الوØنية للكهرباء وشركة كهرباء إسرائيل‪\.‬‬ ‫المكون ‪ :2‬تحسين األداء التشغيلي لشركة توزيع الكهرباء الÙ?لسØينية‪ \.‬سيمول هذا التمويل اإلضاÙ?ي عملية توسيع بسيØØ© ومباشرة لألنشØة‬ ‫‪\.2‬‬ ‫التي يجري تنÙ?يذها Ù?ي Ø¥Øار المشروع الرئيسي لتحسين أداء قØاع الكهرباء‪ ،‬وسيشمل ذلك جميع شركات توزيع الكهرباء الخمس Ù?ي الضÙ?Ø© الغربية‬ ‫وشركة توزيع الكهرباء Ù?ي غزة؛ كما سيعمل على تهيئة المساندة المناسبة لشركات التوزيع الجديدة التي سيتم إنشاؤها Ù?ي Ø¥Øار الجهود الجارية لتعزيز‬ ‫هذا القØاع‪ \.‬ومن شأن أعمال التركيبات والتخØÙŠØ Ø§Ù„Ù…ØªØ²Ø§Ù…Ù†Ø© Ù?ي جميع شركات توزيع الكهرباء ضمان التواÙ?ق بين قدرات التشغيل ورÙ?ع التقارير لدى‬ ‫شركات توزيع الكهرباء وتعزيز التخØÙŠØ ÙˆØ§Ù„Ù…ØªØ§Ø¨Ø¹Ø© Ù?ي هذا القØاع بأسره‪\.‬‬ ‫(Ø£) برنامج حماية اإليرادات‪ :‬استنادا إلى المراجعة الÙ?نية التÙ?صيلية لنظم عدادات القياس الحالية والتحديات الرئيسية‪ ،‬سيتم إنشاء بنية‬ ‫تحتية متØورة للقياس بالعدادات Ù?ي شركات توزيع الكهرباء الست Ù?ي الضÙ?Ø© الغربية وقØاع غزة‪ \.‬وسيدعم هذا التمويل اإلضاÙ?ي‬ ‫أعمال التوسع الخاصة بتعميم العدادات الذكية Ù?ي شركة توزيع الكهرباء Ù?ي غزة‪ ،‬باإلضاÙ?Ø© إلى تعميم هذه العدادات Ù?ي شركات‬ ‫توزيع الكهرباء Ù?ي الضÙ?Ø© الغربية Ù?ي Ø¥Øار مشروع تحسين أداء قØاع الكهرباء‪\.‬‬ ‫(ب) نظم معلومات اإلدارة‪ :‬استنادا إلى المراجعة الÙ?نية التÙ?صيلية لنظم معلومات اإلدارة الحالية Ù?ي شركات توزيع الكهرباء الست‪،‬‬ ‫واحتياجاتها اآلخذة Ù?ي الظهور وÙ?رص التنسيق لتحسين تدÙ?ق المعلومات داخل هذا القØاع‪ ،‬تم تحديد نهج شامل ومرن‪ \.‬وÙ?ي حين‬ ‫كان الهدÙ? من مشروع تحسين أداء قØاع الكهرباء هو مساندة شركتين من شركات توزيع الكهرباء Ù?ي الضÙ?Ø© الغربية‪ ،‬لكن مع‬ ‫التمويل اإلضاÙ?ي‪ ،‬Ù?إن المستهدÙ? هو أن يكون لدى كل شركة من شركات توزيع الكهرباء الست Ù?ي الضÙ?Ø© الغربية وقØاع غزة‬ ‫نظام معلومات إدارة Ù?عال يشمل جميع النظم الÙ?رعية األربعة التالية‪ :‬نظام تخØÙŠØ Ù…ÙˆØ§Ø±Ø¯ المؤسسة‪ ،‬ونظام إدارة العمالء‪ ،‬ونظام‬ ‫إدارة الوقائع‪/‬األحداث (‪ ،)IMS‬ونظام إعداد تقارير النشاØ‪ \.‬وعالوة على ذلك‪ ،‬سيتضمن نظام معلومات اإلدارة Ù?ي كل شركة من‬ ‫صا بإعداد التقارير مع شركة النقل الوØنية للكهرباء‪ ،‬ومجلس تنظيم قØاع الكهرباء‪ ،‬وسلØØ© الØاقة‬ ‫Øا خا ً‬‫شركات التوزيع راب ً‬ ‫والموارد الØبيعية الÙ?لسØينية‪ \.‬ومع مواصلة سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية العمل على تعزيز هذا القØاع‪ ،‬قد يتم إنشاء‬ ‫شركة أو شركتين جديدتين لتوزيع الكهرباء Ù?ي ‪ ،2020 - 2019‬وسيعمل هذا التمويل اإلضاÙ?ي على تعميم نظام معلومات اإلدارة‬ ‫نÙ?سه Ù?ي هاتين الشركتين‪\.‬‬ ‫المكون ‪ :3‬تحسين أمن الØاقة Ù?ي غزة بالØاقة الشمسية‪ \.‬سيعمل هذا المكون بصورة مباشرة على توسيع نØاق (Ø£) الصندوق التجريبي‬ ‫‪\.3‬‬ ‫المتجدد للØاقة الشمسية الذي تم إنشاؤه Ù?ي Ø¥Øار المشروع األصلي لتحسين أداء قØاع الكهرباء و(ب) الحلول الخاصة بتركيب ألواح شمسية على‬ ‫األسØØ­ Ù?ي المنشآت الصحية والمستشÙ?يات Ù?ي قØاع غزة‪\.‬‬ ‫(Ø£) الصندوق التجريبي المتجدد ألنظمة الØاقة الشمسية Ù?وق األسØح‪ :‬من شأن هذا المكون تجربة نموذج عمل مستدام Ù?ي صورة‬ ‫آلية صندوق متجدد لمساعدة األسر المعيشية والشركات الصغيرة والمتوسØØ© على تركيب ألواح شمسية على األسØح‪ \.‬ولن يكون‬ ‫لنموذج العمل المشار إليه تأثير مضاعÙ? Ù?حسب إذ إن قيام المستÙ?يدين بسداد ما عليهم من مستحقات من شأنه مساندة عمالء‬ ‫إضاÙ?يين‪ ،‬لكنه سيساند أيضًا تØوير السوق المحلية لتصميم وتوÙ?ير وتركيب أنظمة الØاقة الشمسية وتقديم خدمة ما بعد البيع‪\.‬‬ ‫ونظرا ألن هذه العملية Ù?ي Øور‬ ‫ً‬ ‫وستجري مساندة هذه اآللية من خالل برنامج التوعية وبناء القدرات لتحسين استدامة هذا األثر‪\.‬‬ ‫التجريب‪ ،‬Ù?من المتوقع أن تجري مراجعتها على نحو مستمر لضمان التحسين المتواصل وتصحيح المسار‪ ،‬وسيتم توثيق ذلك من‬ ‫خالل تقارير الدروس المستÙ?ادة الدورية‪ \.‬وسيتيح هذا الصندوق المتجدد مجموعة أوسع نØاقًا من أنظمة الØاقة الشمسية Ù?وق‬ ‫األسØØ­ تتراوح ما بين ‪ 2\.5‬إلى ‪ 10â€¬ÙƒÙŠÙ„ÙˆÙˆØ§Ø Ø£Ù‚ØµÙ‰â€ª \.‬ومن شأن هذا التمويل اإلضاÙ?ي استكمال الموازنة المالية للمشروع األصلي‬ ‫لتحسين أداء قØاع الكهرباء بهدÙ? المساعدة Ù?ي توÙ?ير عدد أكبر من وحدات الØاقة الشمسية مع التركيز بصورة خاصة على‬ ‫ونظرا العتبار نقص الوعي والمعرÙ?Ø© لدى العمالء من المعوقات الرئيسية‪ ،‬سيقدم هذا التمويل‬ ‫ً‬ ‫الشركات الصغيرة والمتوسØة‪\.‬‬ ‫اإلضاÙ?ي مساندة مستهدÙ?Ø© لتدريب القائمين على أعمال التركيبات والمستخدمين النهائيين‪\.‬‬ ‫‪Page 5 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي )‪(P167914‬‬ ‫إدارة نÙ?ايات البØاريات‪ :‬تمثل هذه النقØØ© أحد الشواغل البيئية والصحية الرئيسية؛ إذ تشير التقديرات إلى أن قØاع غزة سيكون‬ ‫به أكثر من نصÙ? مليون بØارية ميتة ومعاد تدويرها وجديدة‪ \.‬ومع اإلمكانات القوية للØاقة الشمسية الكهروضوئية‪ ،‬سيزيد معدل‬ ‫نمو واردات البØاريات‪ \.‬ومما يؤسÙ? له عدم إمكانية إخراج هذه البØاريات من غزة بسبب االعتبارات األمنية اإلسرائيلية‪ \.‬ومن‬ ‫شأن هذا التمويل اإلضاÙ?ي Ù?ي Ø¥Øار مشروع تحسين أداء قØاع الكهرباء إعداد مشروع جديد لتحسين تدوير البØاريات وتخزينها‬ ‫وإدارة نÙ?اياتها من خالل الورش الموجودة Ù?ي قØاع غزة‪ ،‬وتحديد خيارات التمويل لتنÙ?يذ هذا المشروع‪ \.‬وقد تم االنتهاء من مسح‬ ‫مبدئي للورش الموجودة وتم الوقوÙ? على بعض الÙ?رص إلدخال التحسينات المØلوبة‪ \.‬وهذا لن يÙ?ي بااللتزام الوارد Ù?ي Ø¥Øار‬ ‫اإلدارة البيئية واالجتماعية Ù?حسب‪ ،‬بل من الممكن أيضًا أن يساند جهود سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية وشركة توزيع‬ ‫كهرباء محاÙ?ظات غزة والقØاع الخاص ومجتمع التنمية الرامية إلى توسيع نØاق الØاقة الشمسية Ù?ي غزة‪\.‬‬ ‫(ب) يضم قØاع غزة حوالي ‪ 14‬مستشÙ?ى و‪ 51‬عيادة تقريبًا يمكن أن تستÙ?يد من حلول أنظمة الØاقة الشمسية Ù?وق األسØح‪ \.‬ويقوم‬ ‫الصندوق االستئماني البرامجي التابع للبنك الدولي حاليًا بتمويل أعمال التقييم الخاصة بمستشÙ?ى واحد و‪ 5‬عيادات Øبية‪ \.‬ويتم تحديد‬ ‫المستشÙ?يات ذات األولوية والمنشآت الصحية بالتشاور مع سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية‪ ،‬ووزارة الصحة‪ ،‬ومنظمة‬ ‫الصحة العالمية‪ ،‬وشركة توزيع كهرباء محاÙ?ظات غزة‪ \.‬ومن المتوقع أن تستÙ?يد المنشآت الصحية بصورة مثالية من الØاقة الشمسية‬ ‫عن Øريق استبدال نظم اإلضاءة ومعدات التبريد‪ \.‬وبناء عليه‪ ،‬سيساند هذا التمويل اإلضاÙ?ي ما يلي‪:‬‬ ‫تحديد نظام مقترح للØاقة الشمسية الكهروضوئية بقدرة ‪ 650â€¬ÙƒÙŠÙ„ÙˆÙˆØ§Ø Ø£Ù‚ØµÙ‰ Ù?ي مستشÙ?ى ناصر كأول مستشÙ?ى تجريبي‪\.‬‬ ‫‪)1‬‬ ‫وتساند منظمة الصحة العالمية هذا النظام (‪ 250â€¬ÙƒÙŠÙ„ÙˆÙˆØ§Ø Ø£Ù‚ØµÙ‰)‪ ،‬ومن الممكن أن يحظى بمساندة إضاÙ?ية من مشروع‬ ‫تحسين أداء قØاع الكهرباء لتركيب نظام يصل إلى ‪ 400â€¬ÙƒÙŠÙ„ÙˆÙˆØ§Ø Ø£Ù‚ØµÙ‰ (‪ 200â€¬ÙƒÙŠÙ„ÙˆÙˆØ§Ø Ø£Ù‚ØµÙ‰ من مشروع تحسين‬ ‫أداء قØاع الكهرباء و‪ 200â€¬ÙƒÙŠÙ„ÙˆÙˆØ§Ø Ø£Ù‚ØµÙ‰ من التمويل اإلضاÙ?ي)؛‬ ‫تركيب أنظمة الØاقة الشمسية على األسØØ­ Ù?يما يصل إلى ‪ 5‬عيادات صحية؛‬ ‫‪)2‬‬ ‫التدريب وبناء القدرات لÙ?رق العمل الهندسي من المنشآت الصحية والمستشÙ?يات‪\.‬‬ ‫‪)3‬‬ ‫‪ \.9‬المكون ‪ :4‬المساعدة الÙ?نية وبناء القدرات وإدارة المشروع‪ :‬يخصص هذا التمويل اإلضاÙ?ي موازنة مالية أكبر لمساندة المساعدة الÙ?نية بهدÙ? توجيه‬ ‫الموارد للتقييمات الÙ?نية ودراسات الجدوى إلعداد سلسلة مشروعات عالية األولوية‪ \.‬ويستجيب هذا Ø§Ù„Ù†Ø´Ø§Ø Ù„Ø§Ù„Ù‡ØªÙ…Ø§Ù… من جانب أصحاب المصلحة‬ ‫الرئيسيين Ù?ي تحديد المشروعات ذات األولوية وإعداد سلسلة مشروعات جاهزة للتنÙ?يذ من أجل الحصول على التمويل المحتمل من شركاء التنمية‬ ‫والقØاع الخاص‪ \.‬وباإلضاÙ?Ø© إلى ذلك‪ ،‬سيعمل هذا المكون على مساندة ورش العمل والدورات التدريبية لموظÙ?ي سلØØ© الØاقة والموارد الØبيعية‬ ‫وشركة النقل الوØنية للكهرباء ومجلس تنظيم قØاع الكهرباء وشركات توزيع الكهرباء‪ ،‬ومساندة الموظÙ?ين األساسيين من وحدة إدارة المشروع‪ ،‬إلى‬ ‫جانب تعيين موظÙ?ين متخصصين (على سبيل المثال‪ ،‬Ù?ي نظام معلومات اإلدارة) لمساندة المشروع أثناء التنÙ?يذ‪\.‬‬ ‫ه‪ \.‬التنÙ?يذ‬ ‫الترتيبات المؤسسية وترتيبات التنÙ?يذ‬ ‫‪ \.10‬تعتبر سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية هي الهيئة الحكومية المسؤولة عن هذا المشروع‪ \.‬وستقدم وحدة إدارة المشروع التابعة لـسلØØ© الØاقة‬ ‫والموارد الØبيعية الÙ?لسØينية المساندة وستقوم بأعمال التنسيق بوجه عام من أجل التنÙ?يذ وستكون مسؤولة عن تنÙ?يذ جميع المكونات األربعة‪ \.‬وستتلقى‬ ‫سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية مساندة Ù?ي التنÙ?يذ من مؤسسات قØاع الØاقة‪ ،‬وهي شركة النقل الوØنية للكهرباء‪ ،‬ومجلس تنظيم قØاع‬ ‫الكهرباء‪ ،‬وشركات توزيع الكهرباء Ù?ي الضÙ?Ø© الغربية وغزة‪\.‬‬ ‫‪\.‬‬ ‫و‪ \.‬موقع المشروع وأبرز الخصائص المادية ذات الصلة بتحليل اإلجراءات الوقائية (إن كانت معروÙ?Ø©)‬ ‫ستستهدÙ? أنشØØ© المشروع شركات توزيع الكهرباء (مثل شركة توزيع كهرباء غزة‪ ،‬وشركة كهرباء الشمال‪ ،‬وشركة كهرباء الخليل) التي تغØي المنØقة‬ ‫الجغراÙ?ية بأكملها Ù?ي الضÙ?Ø© الغربية وقØاع غزة‪ ،‬أي المحاÙ?ظات Ù?ي الضÙ?Ø© الغربية وقØاع غزة‪ \.‬وسيتضمن هذا المشروع تعميم العدادات الذكية وأنظمة الØاقة‬ ‫الشمسية Ù?وق األسØØ­ Ù?ي جميع أنحاء الضÙ?Ø© الغربية وغزة التي تغØيها شركات توزيع الكهرباء‪ \.‬وسيكون المستشÙ?ى والعيادات الصحية Ù?ي قØاع غزة وسيتم‬ ‫اختيارها بعد إجراء تقييم Ù?ني‪\.‬‬ ‫‪Page 6 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي ()‪P167914‬‬ ‫ز‪ \.‬خبيرا السياسات الوقائية البيئية واالجتماعية Ù?ي Ù?ريق العمل‬ ‫هيلين شهرياري‪ ،‬أخصائية شؤون اجتماعية‬ ‫زياد أبو حسنين‪ ،‬أخصائي شؤون بيئية‬ ‫السياسات الوقائية التي قد يتم تÙ?عيلها‬ ‫‪SAFEGUARD_TBL‬‬ ‫التÙ?سير (اختياري)‬ ‫هل تم تÙ?عيلها؟‬ ‫السياسات الوقائية‬ ‫يÙ?صنÙ? المشروع األصلي ضمن الÙ?ئة (باء) وÙ?ق سياسة عمليات البنك‬ ‫الدولي (‪ \.)OP 4\.01‬وسيشتمل تمويل المشروع على إجراءات تدخلية‬ ‫لتركيب ألواح الØاقة الكهروضوئية على األسØح‪ ،‬وعدادات ذكية‪،‬‬ ‫وتجهيزات لتشغيل المحØات الÙ?رعية‪ ،‬Ù?ضال عن تركيب عدادات أخرى‬ ‫Ù?ي الشبكات‪ \.‬وتعد اآلثار البيئية لتلك اإلجراءات التدخلية محدودة وتتسم‬ ‫بالصبغة المحلية ويسهل تخÙ?يÙ?ها‪ ،‬وهي بالدرجة األولى الصحة‬ ‫والسالمة المهنية المرتبØØ© بالعمال أثناء أعمال اإلنشاءات والصيانة‪\.‬‬ ‫ومن المتوقع‪ ،‬أثناء التشغيل‪ ،‬أن تتولد نÙ?ايات بØاريات‪ ،‬وسيقدم‬ ‫المشروع المساعدة الÙ?نية لمعالجة نÙ?ايات البØاريات الرصاص Ù?ي غزة‬ ‫من خالل تحديث قدرات الورش الموجودة لمعالجة نÙ?ايات البØاريات‬ ‫وإعادة تدويرها‪ \.‬ونظرا ألنه سيتم‪ ،‬بشكل كامل‪ ،‬تحديد المواقع الدقيقة‬ ‫للمشرعات الÙ?رعية خالل مرحلة تنÙ?يذ المشروع‪ ،‬Ù?قد تم إعداد Ø¥Øار‬ ‫لإلدارة البيئية واالجتماعية والتشاور مع الجهة المستÙ?يدة‪ ،‬وواÙ?ق عليه‬ ‫البنك‪ ،‬وسيتم اإلÙ?صاح عنه قبل التقييم المسبق Ù?ي مارس‪/‬آذار ‪\.2017‬‬ ‫التقييم البيئي ‪ -‬منشور سياسة العمليات‪/‬إجراءات البنك‬ ‫ولغرض هذا التمويل اإلضاÙ?ي‪ ،‬ستتم إعادة اإلÙ?صاح عن Ø¥Øار اإلدارة‬ ‫نعم‬ ‫(‪)OP/BP 4\.01‬‬ ‫البيئية واالجتماعية محليًا على موقع سلØØ© الØاقة والموارد الØبيعية‬ ‫الÙ?لسØينية على شبكة اإلنترنت Ù?ي نوÙ?مبر‪/‬تشرين الثاني ‪\.2018‬‬ ‫وسيمول هذا التمويل اإلضاÙ?ي أنشØØ© مماثلة Ù?ي قØاع غزة لتركيب‬ ‫األلواح الشمسية الكهروضوئية على أسØØ­ المباني السكنية والعيادات‬ ‫والمستشÙ?يات والشركات الصغيرة والمتوسØة‪ \.‬وسيحدد تقييم الجدوى‬ ‫المواقع الدقيقة للمستÙ?يدين‪ ،‬وبمجرد تحديدها‪ ،‬سيقوم الØرÙ? المتعامل‬ ‫مع البنك بإعداد Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±Ø© البيئية واالجتماعية المحددة وÙ?قًا لمتØلبات‬ ‫إØار اإلدارة البيئية واالجتماعية‪ \.‬وستحدد Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±Ø© البيئية‬ ‫واالجتماعية المخاØر المرتبØØ© بكل موقع محدد‪ ،‬كما ستبين إجراءات‬ ‫التخÙ?يÙ? لمعالجة هذه المخاØر‪ \.‬كما سيمول هذا المشروع أيضًا تحديث‬ ‫الخØØ Ø§Ù„Ø±Ø¦ÙŠØ³ÙŠØ© لشركات التوزيع Ù?ي الضÙ?Ø© الغربية وقØاع غزة‪،‬‬ ‫ما لضمان‬ ‫وستتضمن Ø§Ù„Ø´Ø±ÙˆØ Ø§Ù„Ù…Ø±Ø¬Ø¹ÙŠØ© (المهام واالختصاصات) أحكا ً‬ ‫إدراج االعتبارات االجتماعية والبيئية Ù?ي الخØØ Ø§Ù„Ø±Ø¦ÙŠØ³ÙŠØ© على نحو‬ ‫صحيح‪\.‬‬ ‫معايير األداء ألنشØØ© القØاع الخاص ‪ -‬منشور سياسة‬ ‫لن يقوم القØاع الخاص بتنÙ?يذ أي أنشØØ© للمشروع‪\.‬‬ ‫ال‬ ‫العمليات‪/‬إجراءات البنك (‪)OP/BP 4\.03‬‬ ‫من المتوقع تنÙ?يذ التركيبات وأشغال اإلنشاءات Ù?ي مناØق حضرية‪ ،‬وال‬ ‫الموائل الØبيعية ‪ -‬منشور سياسة العمليات‪/‬إجراءات البنك‬ ‫ال‬ ‫يتوقع أن تتأثر الموائل الØبيعية بأنشØØ© المشروع‪\.‬‬ ‫(‪)OP/BP 4\.04‬‬ ‫من المتوقع تنÙ?يذ التركيبات وأشغال اإلنشاءات Ù?ي مناØق حضرية‪ ،‬وال‬ ‫الغابات ‪ -‬منشور سياسة العمليات‪/‬إجراءات البنك‬ ‫ال‬ ‫يتوقع أن تتأثر الغابات بأنشØØ© المشروع‪\.‬‬ ‫(‪)OP/BP 4\.36‬‬ ‫‪Page 7 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي ()‪P167914‬‬ ‫ال يمول هذا المشروع شراء أي مبيدات أو معدات لمكاÙ?حة اآلÙ?ات‪\.‬‬ ‫ال‬ ‫مكاÙ?حة اآلÙ?ات ‪ -‬منشور سياسة العمليات (‪)OP 4\.09‬‬ ‫من غير المتوقع أن تؤثر أنشØØ© المشروع على أية موارد حضارية‬ ‫الموارد الحضارية المادية ‪ -‬منشور سياسة‬ ‫ال‬ ‫مادية‪\.‬‬ ‫العمليات‪/‬إجراءات البنك (‪)OP/BP 4\.11‬‬ ‫الشعوب األصلية ‪ -‬منشور سياسة العمليات‪/‬إجراءات البنك‬ ‫لن تؤثر أنشØØ© هذا المشروع على الشعوب األصلية‪\.‬‬ ‫ال‬ ‫(‪)OP/BP 4\.10‬‬ ‫ال يÙ?عّل المشروع سياسة البنك الدولي المعنية بإعادة التوØين ( ‪OP‬‬ ‫‪ \.)4\.12‬وتقتصر األشغال المدنية المØلوبة على أماكن تركيب ألواح‬ ‫الØاقة الشمسية على أسØØ­ الوحدات السكنية الموجودة Ù?ي قØاع غزة‬ ‫على أساس تجريبي‪ \.‬وستتم Ù?ي Ø¥Øار المكون ‪ 3‬تجربة نموذج األعمال‬ ‫الخاص بتركيب ألواح الØاقة الشمسية على األسØح‪ \.‬ويهدÙ? هذا‬ ‫إعادة التوØين القسرية ‪ -‬منشور سياسة العمليات‪/‬إجراءات‬ ‫ال‬ ‫النموذج إلى Ø®Ù?ض العوائق القائمة أمام مشاركة جميع شرائح الدخل Ù?ي‬ ‫البنك (‪)OP/BP 4\.12‬‬ ‫هذا المشروع‪ ،‬بما Ù?ي ذلك الÙ?قراء‪ \.‬وعلى الرغم من عدم تÙ?عيل سياسة‬ ‫العمليات )‪ ،)OP 4\.12‬Ù?قد تم إعداد Ø¥Øار اإلدارة البيئية واالجتماعية‪،‬‬ ‫وسيتÙ?حص مسؤولو اإلجراءات الوقائية بوحدة التنÙ?يذ جميع المشروعات‬ ‫الÙ?رعية لضمان التزامها باإلجراءات البيئية واالجتماعية‪\.‬‬ ‫سالمة السدود‪ ،‬منشور سياسة العمليات‪/‬إجراءات البنك‬ ‫ليس للمشروع أي أثر على أي سدود‪\.‬‬ ‫ال‬ ‫(‪)OP/BP 4\.37‬‬ ‫المشروعات على مجاري المياه الدولية‪ ،‬منشور سياسة‬ ‫ال تتضمن أنشØØ© المشروع أي أعمال على المجاري المائية الدولية‪\.‬‬ ‫ال‬ ‫العمليات‪/‬إجراءات البنك (‪)OP/BP 7\.50‬‬ ‫المشاريع المقامة Ù?ي المناØق المتنازع عليها ‪ -‬منشور‬ ‫ال يوجد‬ ‫ال‬ ‫سياسة العمليات‪/‬إجراءات البنك (‪)OP/BP 7\.60‬‬ ‫قضايا السياسات الوقائية األساسية وإدارتها‬ ‫‪OPS_SAFEGUARD_SUMMARY_TBL‬‬ ‫أ‪ \.‬موجز لقضايا السياسات واإلجراءات الوقائية األساسية‬ ‫‪ \.1‬اشرح أية قضايا أو آثار مصاحبة للمشروع المقترح تتعلق بالسياسات واإلجراءات الوقائية‪ \.‬ثم حدÙ?ّد واشرح أي آثار محتملة واسعة النØاق وكبيرة و‪/‬أو‬ ‫ال يمكن إزالتها ناتجة عن المشروع‪\.‬‬ ‫سيشتمل تمويل المشروع على إجراءات تدخلية لتركيب وحدات خاليا Øاقة كهروضوئية على األسØØ­ Ù?ي غزة‪ ،‬وعدادات ذكية‪ ،‬وتجهيزات لتشغيل المحØات‬ ‫الÙ?رعية‪ ،‬Ù?ضال عن تركيب عدادات أخرى Ù?ي الشبكات الخاصة بشركات التوزيع Ù?ي الضÙ?Ø© الغربية‪ \.‬وتعد اآلثار البيئية لتلك اإلجراءات التدخلية محدودة وتتسم‬ ‫بالصبغة المحلية ويسهل تخÙ?يÙ?ها أثناء أعمال اإلنشاءات والتشغيل‪ ،‬ويشمل ذلك الضوضاء والغبار وانقØاع الخدمات والمخاØر على الصحة والسالمة والتخلص‬ ‫من نÙ?ايات البØاريات‪ \.‬وسيؤدي المشروع إلى تÙ?عيل سياسة عمليات البنك (‪ )OP 4\.01‬المعنية بالتقييم البيئي‪ ،‬ويÙ?صنÙ? المشروع ضمن الÙ?ئة "باء “‪ ،‬وهو ما‬ ‫يتØلب تقييما ً جزئيا ً Ù?قØ‪ \.‬ونظرا ألنه سيتم بشكل ;كامل تحديد المواقع الدقيقة للمشروعات الÙ?رعية خالل مرحلة تنÙ?يذ المشروع‪ ،‬Ù?قد تم إعداد Ø¥Øار لإلدارة البيئية‬ ‫واالجتماعية والتشاور بشأنه مع الجهة المستÙ?يدة (المتعاملة مع البنك) Ù?ي مارس‪/‬آذار ‪ ،2017‬وواÙ?ق عليه البنك‪ ،‬وتم اإلÙ?صاح عنه على موقع سلØØ© الØاقة‬ ‫والموارد الØبيعية الÙ?لسØينية على شبكة اإلنترنت‪ \.‬ويشتمل هذا اإلØار على تدابير مقترحة للتخÙ?يÙ? من المخاØر المحتملة‪ ،‬وكذلك على منهجية Ù?حص للمشاريع‬ ‫الÙ?رعية استنادا إلى سياسات اإلجراءات الوقائية‪ ،‬وخØØ© للمتابعة وترتيبات تنÙ?يذ إلØار اإلدارة البيئية واالجتماعية‪ \.‬وبموجب Ø¥Øار اإلدارة البيئية واالجتماعية‪،‬‬ ‫سيتم إعداد Ø®ØØ Ø¥Ø¯Ø§Ø±Ø© بيئية خاصة بمواقع المشروعات الÙ?رعية‪ ،‬على سبيل المثال‪ ،‬أنظمة الØاقة الشمسية الكهروضوئية على األسØØ­ لمستشÙ?ى ناصر Ù?ي‬ ‫مدينة غزة وغيرها من العيادات المختارة والشركات الصغيرة والمتوسØØ© Ù?ي قØاع غزة‪\.‬‬ ‫‪ \.2‬اشرح أي آثار محتملة غير مباشرة و‪/‬أو Øويلة األمد ناتجة عن األنشØØ© المتوقعة Ù?ي المستقبل Ù?ي منØقة المشروع‪\.‬‬ ‫من المتوقع تغيير قØع الغيار والبØاريات لوحدات الخاليا الشمسية كل ثالث سنوات‪ \.‬وينص Ø¥Øار اإلدارة البيئية واالجتماعية على ضرورة التخلص من‬ ‫البØاريات وقØع الغيار على نحو سليم بيئيا لدى منشأة مرخصة وÙ?قا لسلØØ© جودة البيئة الÙ?لسØينية‪ \.‬وتمثل نÙ?ايات البØاريات أحد الشواغل البيئية والصحية‬ ‫الرئيسية؛ إذ تشير التقديرات إلى أن قØاع غزة سيكون به أكثر من نصÙ? مليون بØارية ميتة ومعاد تدويرها وجديدة‪ \.‬ومع اإلمكانات القوية للØاقة الشمسية‬ ‫الكهروضوئية‪ ،‬سيزيد معدل نمو واردات البØاريات‪ \.‬ومما يؤسÙ? له عدم إمكانية إخراج هذه البØاريات من غزة بسبب االعتبارات األمنية اإلسرائيلية‪ \.‬ومن‬ ‫شأن هذا التمويل اإلضاÙ?ي Ù?ي Ø¥Øار مشروع تحسين أداء قØاع الكهرباء إعداد مشروع جديد لتحسين تدوير البØاريات وتخزينها وإدارة نÙ?اياتها من خالل الورش‬ ‫الموجودة Ù?ي قØاع غزة‪ ،‬وتحديد خيارات التمويل لتنÙ?يذ هذا المشروع‪ \.‬وقد تم االنتهاء من مسح مبدئي للورش الموجودة وتم الوقوÙ? على بعض الÙ?رص إلدخال‬ ‫‪Page 8 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي ()‪P167914‬‬ ‫التحسينات المØلوبة‪ \.‬وهذا لن يÙ?ي بااللتزام الوارد Ù?ي Ø¥Øار اإلدارة البيئية واالجتماعية Ù?حسب‪ ،‬بل من الممكن أيضًا أن يساند جهود سلØØ© الØاقة والموارد‬ ‫الØبيعية الÙ?لسØينية وشركة توزيع كهرباء محاÙ?ظات غزة والقØاع الخاص ومجتمع التنمية الرامية إلى توسيع نØاق الØاقة الشمسية Ù?ي غزة‪\.‬‬ ‫‪ \.3‬اشرح أي بدائل للمشروع (إذا كان مناسباً) تتم دراستها للمساعدة Ù?ي تجنب اآلثار السلبية أو الحد منها‪\.‬‬ ‫ال يوجد‬ ‫‪ \.4‬اشرح التدابير التي قام بها البلد المقترض لمعالجة قضايا السياسات الوقائية‪ \.‬وقدÙ?ّم تقييما ً لقدرات البلد المقترض لتخØÙŠØ Ø§Ù„ØªØ¯Ø§Ø¨ÙŠØ± الوارد وصÙ?ها وتنÙ?يذها‪\.‬‬ ‫تعتبر شركات توزيع الكهرباء Ù?ي غزة المسؤولة عن تركيب أنظمة الØاقة الشمسية الكهروضوئية على األسØØ­ مسؤولة عن تنÙ?يذ Ø´Ø±ÙˆØ ÙˆØ£Ø­ÙƒØ§Ù… Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±Ø©â€¬ ‫البيئية واالجتماعية الخاصة بالمواقع والتخÙ?يÙ? من أي آثار سلبية أثناء أعمال اإلنشاءات والتشغيل‪ ،‬ويشمل ذلك مخاØر الصحة والسالمة المهنية‪ ،‬وينØبق‬ ‫الشيء نÙ?سه على شركات توزيع الكهرباء Ù?ي الضÙ?Ø© الغربية التي تقوم بتركيب العدادات الذكية والمعدات األخرى على الشبكات‪ \.‬وسلØØ© الØاقة والموارد‬ ‫الØبيعية الÙ?لسØينية مسؤولة عن متابعة امتثال شركات التوزيع Ù„Ù„Ø´Ø±ÙˆØ ÙˆØ§Ø£Ù„Ø­ÙƒØ§Ù… ذات الصلة‪ \.‬وتم تعيين أخصائي بيئة مؤهل Ù?ي سلØØ© الØاقة والموارد الØبيعية‬ ‫الÙ?لسØينية‪/‬وحدة تنÙ?يذ المشروع‪ ،‬وهو مسؤول عن Ù?حص المشروعات الÙ?رعية‪ ،‬وتحديد المخاØر البيئية واالجتماعية‪ ،‬والتواصل مع سلØØ© جودة البيئة حسب‬ ‫االقتضاء‪ ،‬ومراقبة امتثال شركات التوزيع المستÙ?يدة والمقاولين المتعاقدين معها من الباØن ألحكام Ø¥Øار اإلدارة البيئية واالجتماعية‪ \.‬وبوجه عام‪ ،‬Ù?إن تصنيÙ?‬ ‫أداء اإلجراءات الوقائية واالمتثال أثناء Ù?ترة التنÙ?يذ السابقة للمشروع األصلي مرض‪\.‬‬ ‫‪ \.5‬حدÙ?ّد األØراÙ? األساسية صاحبة المصلحة المباشرة‪ ،‬ثم اشرح اآلليات الخاصة بالتشاور واإلÙ?صاح بشأن السياسات الوقائية‪ ،‬مع التركيز على السكان‬ ‫المحتمل تضررهم من المشروع‪\.‬‬ ‫سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية هي الجهة صاحبة المصلحة األساسية‪ ،‬أما شركات توزيع الكهرباء Ù?ي الضÙ?Ø© الغربية وغزة Ù?هي المستÙ?يدة المباشرة‬ ‫من المشروع‪ \.‬وقامت وحدة إدارة المشروع‪/‬سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية بإجراء مشاورات مع أصحاب المصلحة الرئيسيين بشأن Ø¥Øار اإلدارة‬ ‫البيئية واالجتماعية‪ ،‬وتضمن ذلك سلØØ© جودة البيئة‪ ،‬Ù?ي Ù?براير‪/â€¬Ø´Ø¨Ø§Ø â€ª ،2017‬وسيتم القيام بذلك مرة أخرى خالل مارس‪/‬آذار ‪ 2019‬وقبل االنتهاء من المجموعة‬ ‫األولى من المواقع‪ \.‬ووÙ?ق Ø¥Øار اإلدارة البيئية واالجتماعية‪ ،‬ستجري شركات التوزيع المزيد من المشاورات بشأن أدوات المتابعة (أي Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±Ø© البيئية‬ ‫واالجتماعية المحددة) مع األØراÙ? المتضررة بمجرد تحديد هؤالء األØراÙ?‪ ،‬ومن بينهم النساء والرجال وكذلك الشركات الصغيرة والمتوسØØ© التي يقودها‬ ‫رجال وإناث أثناء تنÙ?يذ المشروع‪ ،‬بداية من مارس‪/‬آذار ‪ 2019‬عندما يتم تحديد المجموعة األولى من المواقع‪ \.‬وسيتم ضمان اإلÙ?صاح عن Ø®ØØ Ø§Ø¥Ù„Ø¯Ø§Ø±Ø© البيئية‬ ‫واالجتماعية قبل بدء أعمال اإلنشاءات التي من المتوقع أن تكون Ù?ي أغسØس‪/‬آب ‪ \.2019‬باإلضاÙ?Ø© إلى ذلك‪ ،‬ستتم إعادة اإلÙ?صاح عن Ø¥Øار اإلدارة البيئية‬ ‫واالجتماعية محليًا على موقع سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية على شبكة اإلنترنت Ù?ي نوÙ?مبر‪/‬تشرين الثاني ‪\.2018‬‬ ‫وÙ?يما يتعلق بمشاركة المواØنين وآراء ومالحظات المستÙ?يدين‪ ،‬يجري إنشاء آلية لمعالجة المظالم كي يتسنى للمستÙ?يدين والمواØنين البحث عن المعلومات أو‬ ‫تقديم االستÙ?سارات أو تقديم الشكاوى‪ \.‬وستتم إحاØØ© األÙ?راد (ويشمل ذلك الشركات الصغيرة والمتوسØØ©) واألسر المعيشية بإجراءات وخØوات التعبير عن عدم‬ ‫الرضا والقنوات المعنية Ù?ي سبيل تحقيق االنتصاÙ?‪ \.‬وستتضمن حمالت التوعية Øباعة نشرات توعوية وتوزيعها‪ \.‬كما ستتضمن Ù?اتورة الكهرباء رقم هاتÙ?‬ ‫مركز االتصال لØلب المعلومات‪ ،‬وتوجيه االستÙ?سارات‪ ،‬ورÙ?ع الشكاوى‪ \.‬وستراعي آلية معالجة المظالم المساواة بين الجنسين‪ ،‬مما يضمن تيسير سبل وصول‬ ‫المرأة إلى نظام رÙ?ع الشكاوى‪ \.‬وستكون إجراءات التظلم بسيØØ© وستتم إدارتها على مستوى شركات توزيع الكهرباء Ù?ي غزة وسلØØ© الØاقة والموارد الØبيعية‬ ‫الÙ?لسØينية‪\.‬‬ ‫‪OPS_SAFEGUARD_DISCLOSURE_TBL‬‬ ‫ب‪ \.‬متØلبات اإلÙ?صاح (تنبيه مهم‪ :‬األقسام أدناه ال تظهر إال عند تÙ?عيل سياسة اإلجراءات الوقائية ذات الصلة)‬ ‫البيئية‪/‬وغيرها‬ ‫التقييم البيئي‪/‬المراجعة البيئية‪/‬خØØ© اإلدارة‬ ‫‪OPS_EA_DISCLOSURE_TABLE‬‬ ‫بالنسبة للمشاريع من الÙ?ئة ألÙ?‪ ،‬تاريخ توزيع الموجز‬ ‫تاريخ التقديم لغرض اإلÙ?صاح‬ ‫تاريخ تلقي البنك للوثيقة‬ ‫الواÙ?ي للتقييم البيئي على المديرين التنÙ?يذيين‬ ‫‪ 20‬مارس‪/‬آذار ‪2017-‬‬ ‫‪ 19‬مارس‪/‬آذار ‪2017-‬‬ ‫اإلÙ?صاح داخل البلد المعني‬ ‫الضÙ?Ø© الغربية وقØاع غزة‬ ‫‪ 19‬مارس‪/‬آذار ‪2017-‬‬ ‫مالحظات وتعليقات‬ ‫‪Page 9 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي ()‪P167914‬‬ ‫لغرض هذا التمويل اإلضاÙ?ي‪ ،‬ستتم إعادة اإلÙ?صاح عن Ø¥Øار اإلدارة البيئية واالجتماعية محليًا على موقع سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية على‬ ‫شبكة اإلنترنت Ù?ي نوÙ?مبر‪/‬تشرين الثاني ‪\.2018‬‬ ‫‪OPS_PM_PCR_TABLE‬‬ ‫إذا أدى هذا المشروع إلى تØبيق سياسات عمليات البنك الخاصة بمكاÙ?حة اآلÙ?ات و‪/‬أو الموارد الحضارية المادية‪ ،‬تتم معالجة القضايا ذات الصلة واإلÙ?صاح‬ ‫عنها Ù?ي Ø¥Øار التقييم البيئي‪ /‬المراجعة البيئية‪/‬خØØ© اإلدارة البيئية‪\.‬‬ ‫Ù?ي حالة عدم توقع اإلÙ?صاح داخل البلد المعني عن أي من الوثائق الواردة أعاله‪ ،‬يرجى شرح أسباب ذلك‪\.‬‬ ‫تسري جميع أحكام Ø¥Øار اإلدارة البيئية واالجتماعية على هذا التمويل اإلضاÙ?ي‪ ،‬وستتم إعادة اإلÙ?صاح عن Ø¥Øار اإلدارة البيئية واالجتماعية على موقع سلØة‬ ‫الØاقة والموارد الØبيعية الÙ?لسØينية على شبكة اإلنترنت Ù?ي نوÙ?مبر‪/‬تشرين الثاني ‪ \.2018‬وسيتم إعداد Ø®ØØ Ø¥Ø¯Ø§Ø±Ø© بيئية واجتماعية خاصة بالمواقع المحددة‬ ‫بنا ً‬ ‫ء على Ø¥Øار اإلدارة البيئية واالجتماعية بمجرد تحديد المواقع الدقيقة أللواح الØاقة الشمسية على أسØØ­ المباني السكنية والمستشÙ?يات والشركات الصغيرة‬ ‫والمتوسØØ© على نحو تام‪\.‬‬ ‫‪OPS_COMPLIANCE_INDICATOR_TBL‬‬ ‫ج‪ \.‬مؤشرات مراقبة مدى االلتزام على المستوى المؤسسي (يتم استيÙ?اؤه عندما ينتهي اجتماع اتخاذ القرار بشأن المشروع من وضع صحيÙ?Ø© بيانات‬ ‫اإلجراءات الوقائية المتكاملة) (تنبيه هام‪ :‬األقسام أدناه ال تظهر إال عند تÙ?عيل سياسة اإلجراءات الوقائية ذات الصلة)‬ ‫منشور سياسة العمليات‪/‬إجراءات‬ ‫‪OPS_EA_COMP_TABLE‬البنك (‪ - )OP/BP 4\.01‬التقييم البيئي‬ ‫هل يتØلب هذا المشروع إعداد تقرير تقييم بيئي منÙ?صل (بما Ù?ي ذلك Ø®ØØ© اإلدارة البيئية)؟‬ ‫نعم‬ ‫إذا كانت اإلجابة نعم‪ ،‬هل قامت وحدة اإلدارة البيئية أو مدير قØاع الممارسات بمكتب المنØقة باستعراض تقرير التقييم البيئي والمواÙ?قة عليه؟‬ ‫نعم‬ ‫هل تم إدراج التكلÙ?Ø© وحدود المساءلة عن Ø®ØØ© إدارة شؤون البيئة ضمن االئتمان‪/‬القرض؟‬ ‫نعم‬ ‫‪OPS_PDI_COMP_TABLE‬‬ ‫سياسة البنك الدولي المعنية باإلÙ?صاح عن المعلومات‬ ‫هل تم إرسال المستندات ذات الصلة بالسياسات الوقائية إلى البنك الدولي لإلÙ?صاح عنها؟‬ ‫نعم‬ ‫هل تم اإلÙ?صاح عن المستندات ذات الصلة داخل البلد للجمهور Ù?ي مكان عام بشكل ولغة مÙ?هومتين ويسهل على الÙ?ئات المتأثرة بالمشروع والمنظمات غير‬ ‫الحكومية المحلية الوصول إليه؟‬ ‫نعم‬ ‫‪Page 10 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي ()‪P167914‬‬ ‫‪OPS_ALL_COMP_TABLE‬‬ ‫جميع سياسات اإلجراءات الوقائية‬ ‫هل تم إعداد جدول زمني مالئم وميزانية وتحديد مسؤوليات مؤسسية واضحة لتنÙ?يذ التدابير ذات الصلة بالسياسات الوقائية؟‬ ‫نعم‬ ‫هل تم إدراج التكاليÙ? المتصلة بتدابير السياسات الوقائية Ù?ي تكلÙ?Ø© المشروع؟‬ ‫نعم‬ ‫هل يشمل نظام المتابعة والتقييم الخاص بالمشروع متابعة اآلثار والتدابير الوقائية ذات الصلة بالسياسات الوقائية؟‬ ‫نعم‬ ‫هل تم االتÙ?اق مع المقترض على ترتيبات مالئمة للتنÙ?يذ‪ ،‬وهل تعكس الوثائق القانونية للمشروع ذلك على نحو كاÙ?Ù? ومالئم؟‬ ‫نعم‬ ‫مسؤول االتصال‬ ‫البنك الدولي‬ ‫مونالي رانادي‬ ‫أخصائي أول شؤون Øاقة‬ ‫المقترض‪/‬البلد المتعامل مع البنك‪/‬الجهة المستÙ?يدة‬ ‫منظمة التحرير الÙ?لسØينية (لصالح السلØØ© الÙ?لسØينية)‬ ‫ليلى صبيح الغريب‬ ‫دائرة العالقات الدولية والمشاريع‬ ‫الهيئات المسؤولة عن التنÙ?يذ‬ ‫سلØØ© الØاقة والموارد الØبيعية الÙ?لسØينية‬ ‫ظاÙ?ر ملحم‬ ‫رئيس مجلس اإلدارة باإلنابة‬ ‫‪zafer\.milhem@menr\.org‬‬ ‫للمزيد من المعلومات الرجاء االتصال بـ‪:‬‬ ‫البنك الدولي‬ ‫‪1818 H Street, NW‬‬ ‫‪Washington, D\.C\. 20433‬‬ ‫هاتÙ?‪(202) 473-1000 :‬‬ ‫موقع الويب‪http://www\.worldbank\.org/projects :‬‬ ‫‪Page 11 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬  ‫البنك الدولي‬ ‫مشروع تحسين أداء قØاع الكهرباء ــ تمويل إضاÙ?ي ()‪P167914‬‬ ‫المواÙ?قة‬ ‫مونالي رانادي‬ ‫رئيس Ù?ريق العمل‪:‬‬ ‫تمت المواÙ?قة‪:‬‬ ‫‪ 15‬نوÙ?مبر‪/‬تشرين الثاني ‪2018‬‬ ‫نينا تشي‬ ‫المستشار المعني باإلجراءات الوقائية‪:‬‬ ‫‪ 15‬نوÙ?مبر‪/‬تشرين الثاني ‪2018‬‬ ‫إريك ماغنوس Ù?يرنستروم‬ ‫مدير قØاع الممارسات‪:‬‬ ‫‪ 19‬نوÙ?مبر‪/‬تشرين الثاني ‪2018‬‬ ‫مارينا ويس‬ ‫المدير القØري‪:‬‬ ‫‪Page 12 of 12‬‬ ‫‪ 19‬أكتوبر‪/‬تشرين األول ‪2018‬‬

APPROVAL

P058038

Document of The World Bank Report No: 29556 IMPLEMENTATION COMPLETION REPORT (IDA-32700) ON A CREDIT IN THE AMOUNT OF US$ 5 MILLION TO THE REPUBLIC OF RWANDA FOR A Agricultural and Rural Market Development Project (LIL) June 28, 2004  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2003) Currency Unit = Franc Rwandais (FRw) FRw 535\.62 = US$ 1 US$ 1 = 0\.00186 FRw FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS ADB African Development Bank AFMS Administrative and Financial Management Specialist ARMD Agricultural and Rural Market Development Project BNR Banque Nationale du Rwanda CAS Country Assistance Strategy CRDP Community Reintegration and Development Project DEM Direction of Extension and Marketing DPM Direction de la Politique Monétaire DRSA Direction Régionale des Services Agricoles EMES Extension, Monitoring and Evaluation Specialist FEWS Food Security Early Warning System FRw Franc Rwandais FY Fiscal year GDP Gross Domestic Product ICIF Input Credit Insurance Facility ICR Implementation Completion Report IDA International Development Association IFAD International Fund for Agricultural Development IPM Integrated Pest Management MIS Management Information Systems LIL Learning and Innovation Loan MINAGRI Ministry of Agriculture, Animal Resources and Forestry MINECOFIN Ministry of Finance and Economic Planning MININTER Ministry of the Interior, Communal Development and Resettlement NGO Non-governmental organization PAD Project Appraisal Document PFI Participating Financial Intermediaries PNAS Programme National d'Actions Sociales PRA Participatory Rural Appraisal PS Procurement Specialist PSD Private Sector Support Project RSSP Rural Sector Support Project SLO Specialized Local Organization SFICF Small Farmer Input Credit Facility SIM Système d'Information sur les Marchés TSU Technical Support Unit UBP Union des Banques Populaires du Rwanda  UNDP United Nations Development Program USAID United States Agency for International Development Vice President: Calisto Madavo Country Director Emannuel Mbi Sector Manager Joseph Baah-Dwomoh Task Team Leader/Task Manager: Ousmane Badiane  RWANDA Agricultural and Rural Market Development Project (LIL) CONTENTS Page No\. 1\. Project Data 1 2\. Principal Performance Ratings 1 3\. Assessment of Development Objective and Design, and of Quality at Entry 2 4\. Achievement of Objective and Outputs 4 5\. Major Factors Affecting Implementation and Outcome 10 6\. Sustainability 13 7\. Bank and Borrower Performance 15 8\. Lessons Learned 16 9\. Partner Comments 20 10\. Additional Information 20 Annex 1\. Key Performance Indicators/Log Frame Matrix 21 Annex 2\. Project Costs and Financing 24 Annex 3\. Economic Costs and Benefits 26 Annex 4\. Bank Inputs 27 Annex 5\. Ratings for Achievement of Objectives/Outputs of Components 29 Annex 6\. Ratings of Bank and Borrower Performance 30 Annex 7\. List of Supporting Documents 31 Annex 8\. Beneficiary Survey Results 32 Annex 9\. Stakeholder Workshop Results 40 Annex 10\. Summary of Borrower's Completion Report 50  Project ID: P058038 Project Name: Agricultural and Rural Market Development Project (LIL) Team Leader: Ousmane Badiane TL Unit: AFTS4 ICR Type: Intensive Learning Model (ILM) of ICR Report Date: June 28, 2004 1\. Project Data Name: Agricultural and Rural Market Development L/C/TF Number: IDA-32700 Project (LIL) Country/Department: REPUBLIC OF RWANDA Region: Africa Regional Office Sector/subsector: General agriculture, fishing and forestry sector (39%); Agricultural marketing and trade (31%); Micro- and SME finance (22%); Central government administration (8%) Theme: Rural services and infrastructure (P); Rural markets (P); Other rural development (P); Infrastructure services for private sector development (S) KEY DATES Original Revised/Actual PCD: 01/21/1999 Effective: 12/30/1999 12/30/1999 Appraisal: 04/02/1999 MTR: 07/15/2001 02/24/2002 Approval: 07/01/1999 Closing: 06/30/2003 12/31/2003 Borrower/Implementing Agency: RWANDESE REPUBLIC/MINISTRY OF AGRICULTURE; ANIMAL RESOURCES AND FORESTRY Other Partners: STAFF Current At Appraisal Vice President: Callisto E\. Madavo Callisto E\. Madavo Country Director: Emmanuel Mbi Emmanuel Mbi Sector Manager: Joseph Baah-Dwomoh Joseph Baah-Dwomoh Team Leader at ICR: Ousmane Badiane Ousmane Badiane ICR Primary Author: Remileku Rakey Cole 2\. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: H Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S S Project at Risk at Any Time: No  3\. Assessment of Development Objective and Design, and of Quality at Entry 3\.1 Original Objective: 1\. The project's main objective was to contribute to the revitalization of Rwanda's agricultural and rural economy by successfully identifying policies and institutional mechanisms: (a) to promote efficient, private sector based, local agricultural input distribution and output marketing systems in order (b) to raise modern farm input use among farmers and thereby the productivity of labor and hence the levels of income in the rural sector\. The project's subsidiary objectives were to test alternative approaches to: Facilitate access of farmers to credit for modern farm inputs; Provide technical advisory services to farmers on the use of modern farm inputs; Encourage the emergence of a sustainable modern input import and distribution system; and Encourage investments by private traders in marketing services in rural areas\. 2\. The above objectives are fully in line with the government's goal of fostering agricultural intensification and commercialization of the primarily subsistence-oriented smallholder sector\. The project's objectives were deemed achievable because its key activity components, in addition to being well articulated with one another and mutually supportive, follow logically from these objectives\. The significant results that were achieved already during the second year of the project are a good illustration of that fact\. 3\. Project Response: The project design was guided by: (a) a detailed analysis of the strategic issues surrounding the question of agricultural intensification in Rwanda; and (b) a structured baseline survey, using detailed questionnaires, of the input distribution, output marketing, rural transport, and farm household sectors, both carried out during project identification\. The first report of the former analyzed the problem of agricultural intensification, identified the strategic issues and proposed policy options that have served as guidelines in drawing the activities of the project\. The baseline survey covered a representative sample of 8 districts and included randomly selected samples of farm households, input distributors, transporters, and output traders\. The information gathered from the survey on the constraints to increased supply and use of modern farm inputs as well as greater integration of farmers into the market exchange system were used to finetune the design of the activities and mechanisms to be tested under the proposed project\. The project's main objective is well defined and the project responded adequately to the issues highlighted in the strategic analysis as well as the baseline survey\. 4\. Project Achievements: The project was successfully implemented in 20 districts representing about 25% of the total number of districts; it affected 21,000 farm families, constituting a population of 1\.05m, including about 1,000 lead farmers and 1,000 farmers associations\. The project has reached its objectives\. The large majority of its impact indicators have been fully achieved, many substantially exceeded\. In line with its subsidiary objectives of testing alternative approaches indicated above, the project has: (a) successfully mobilized private operators to enter the modern input import sector, especially fertilizers; the number of fertilizer importers have increased several fold; likewise, imported quantities of modern inputs have increased substantially; (b) succeeded in testing an innovative farmer-led extension system that has achieved greater private sector involvement in the provision of agricultural advisory services and greater responsiveness of these services to farmers' needs; and (c) provided incentives and institutional support to encourage investment by private traders in marketing services in rural areas by modernizing infrastructure and raising management capacities of marketing facilities\. - 2 -  3\.2 Revised Objective: The project's objectives were judged pertinent throughout project implementation\. 3\.3 Original Components: In support of its objectives, the project had three components: Promotion of input use and distribution systems; Support to local agricultural marketing systems; Technical support, monitoring, and evaluation\. 3\.4 Revised Components: The project was not redesigned during implementation\. 3\.5 Quality at Entry: 1\. The quality assurance group (QAG) rated the project `satisfactory' for quality at entry on the basis of a review carried out in December 1999, prior to project effectiveness\. The ICR also deems the quality at entry of the project overall to be `satisfactory' and deems, as did the QAG review panel in 1999, that: (a) the appropriateness of project concept, the clarity of the objectives and the use of a LIL to experiment with the said approaches and (b) the quality of the Bank's input and processes during preparation to be highly satisfactory, both representing the project's major strengths at entry\. 2\. While "risk assessment and sustainability" was rated satisfactory at QAE, issues were raised, on the project's classification as a Poverty Targeted Intervention (PTI) given the absence in its design, of direct mechanisms to monitor and evaluate the effects of the project on the poor; rather the project carried an assumption that any general improvement in the economic condition of farmers would automatically result in poverty reduction\. While this assumption may not necessarily have qualified the project as poverty targeted at the design stage, it was in line with Rwanda Country Assistance Strategy\. Moreover, implementation has proven this assumption to be accurate and provided a learning of innovation experience of strategies that are effective in rural poverty reduction in Rwanda\. 3\. The operation was considered `ambitious' in nature and therefore, adequate and careful monitoring was maintained throughout implementation on the basis of the ample data and information that was assembled for its preparation\. The project preparation was guided by sector analysis and stakeholder surveys and an institutional analysis namely: (a) A strategy note on the issues related to the intensification of agricultural production in Rwanda and modern input use, and the operations of local input and output markets; (b) A structured baseline survey, using detailed questionnaires, of the input distribution, output marketing, rural transport, and farm household sectors\. The survey provided a baseline data base against which future project impact were evaluated, in addition to two technical notes on (i) the constraints to higher modern input adoption and (ii) the characteristics and opportunities of modern input distribution and output marketing systems; - 3 -  (c) An assessment of the capacities of NGOs (local and international) involved in rural development in Rwanda, with a view to their participation in the implementation of project activities; (d) An environmental analysis ­ in lieu of a full assessment, given that the project was rated category B; (e) An IPM study to develop a Pest Management Plan to address risk factors and potentially negative effects associated with utilization of modern inputs, particularly pesticides\. 4\. The overall design and implementation arrangements, which were guided by the above studies and assessments, in addition to extensive consultations with Government and other sector stakeholders, is judged to be sound\. Given the fact that the project was a Learning and Innovation Loan, it had to be prepared fast track (eight months) to permit sufficient scope to implement pilot activities in preparation for a full scale support program in the rural sector\. Weaknesses at the time of project processing were the large number of conditions of effectiveness (eight) and one condition of disbursement\. Some of these conditions, such as (i) the appointment of a qualified audit firm that is satisfactory to IDA, (ii) supplemental legal opinion confirming that the subsidiary loan agreement and project agreement have been duly and legally binding on BNR authorized and ratified by BNR, and (iii) letter to IDA clarifying the meaning of emergency reintegration and poverty alleviation programs in Ministerial instruction No 01/99 on regulatory framework for distribution of modern farm inputs, are normally met for appraisal and proved to be sources for delayed effectiveness and start-up implementation\. 4\. Achievement of Objective and Outputs 4\.1 Outcome/achievement of objective: 1\. The project has achieved its overall objective and outcomes\. The impact of project activities were evaluated based on the indicators identified in the Project Appraisal Document (PAD) and the development objectives and output targets defined therein (See Annex 1)\. The review of the project impact was based on comparison of the results of the baseline survey of beneficiary farm households and crop marketing and input distribution sectors in the project areas and the two subsequent updates carried out during the second and final years of project implementation\. Consideration was also given to available information on the input import sector, the outcome of participatory extension activities, and other on-farm advisory services\. 2\. The key project outcome and output indicators are summarized in Annex 1 and include: (a) the percent increase (+75%) in the quantities of modern used per capita by beneficiary farmers compared to the baseline levels; (b) the percent increase (+75%) in the average output per capita among beneficiary farmers; (c) the percent increase (+100%) in the number of modern input importers; (d) the percent increase (+100%) in the volume of modern farm inputs imported by the private sector; (e) the minimum share (90%) of beneficiary farmers that have received training in the use of modern farm inputs; (f) the percent increase (+50%) in the quantities marketed by beneficiary farmers; and (g) the number (15) of improved agricultural marketing sites\. 3\. The rating of satisfactory outcome is based on the following results which shows the impact that has been achieved during project implementation under each of the two main project's objectives\. A overview of individual outcome and output indicators at the beginning and end of project can be found in the Key Performance Indicators/Logframe Matrix and Tables a to e in Annex 1, and in the summary of the Beneficiary Survey Results in Annex 8\. Per capita numbers in the case of farm households refer to individual beneficiary farmers who usually represent an entire household\. In other words, per capita in the case of beneficiary farmers is to be understood as per farm household\. - 4 -  Objective 1: To Promote efficient, private sector-based, local agricultural input distribution and output marketing systems: (a) The aggregate number of private fertilizer importers (NPK, Urea, and DAP) increased from 5 to 30, representing a 600 percent increase compared to the project's end target of 75 percent\. This excludes institutional (parastatals, large agribusiness companies) and informal cross-border importers in the province of Ruhengeri, who have not used resources from the project's line of credit through local commercial banks but who have contributed about 20 percent of total imports into the country; (b) Cumulative quantities of modern inputs imported into the country during the three-year implementation period increased from 674 tons at baseline to 7000 tons by project closing\. This represents more than tenfold increase compared to the project target of a 100 percent increase\. (c) Average marketed quantities of inputs per retail trader increased significantly from the baseline averages as follows: NPK - from 16\.7 tons to 43 tons; Urea from 4\.7 tons to 21 tons and seeds from 0\.21 tons to 14 tons\. End of project target was a 75-percent increase across the board\. (d) High output levels by beneficiary farmers have affected the trading activities of private traders through the increase in average quantities of selected crop sales by private traders as follows: beans - from 18 kg to 66 kg; potatoes - from 17 kg to 128 kg; and sorghum - from 13 kg to 148 kg; Objective 2: To raise modern farm input use among farmers and thereby the productivity of labor and the level of income: (a) Input use increased significantly among beneficiary farmers by the following quantities compared to the baseline averages: beans seeds - from 3\.9 kg to 10\.7 kg; maize seeds - from 8\.8 kg to 60 kg; Urea - 2\.0 to 19\.6; NPK 3\.8 kg to 29\.3 kg\. The rates of changes in all these areas (input imports, marketing, and utilization) have far exceeded their respective targets of 75 - 100% (b) Average output per capita of key crops among beneficiary farmers increased by the following quantities: beans - from 27kg to 347 kg; potatoes - from 387 kg to 2636 kg; cassava - from 390 kg to 1061 kg; bananas - from 361 kg to 6897 kg; and sorghum - from 27 kg to 500kg\. The respective targets have also been significantly exceeded; (c) Quantities of output marketed per capita, by beneficiary farmers of same key crops increased by the following quantities: beans - from 30 kg to 174 kg; potatoes from 86 kg to 1904 kg; cassava - from 66 kg to 574 kg; bananas - from 164 kg to 5813 kg; and sorghum - from 15 kg to 365 kg; (d) Estimates made from five provinces for which data was available throughout project period (see table 3, annex 8) show that net average income from farm production by beneficiary farm households across the five provinces increased from Rfw229,000 in 1998 to Rfw 943,000 in 2001 and reached Rfw 1\.05 million in 2002\. Net income is estimated as gross value of production minus costs of inputs including seeds\. The figures show that net average incomes across the five provinces ranged from Frw 6,694 to Frw 383,103 in 1998 but increased to a range of Frw 51,111 to Frw Frw 685,414 in 2001\. They reached a range of Frw 74,265 to Frw 854,468 in 2002\. These figures reveal a marked increase in net average income of 350% across the five provinces over the project period\. (e) The technical skills of more than 20,000 farmers have been strengthened through in-depth training on the use of modern farm inputs and the management of credit\. - 5 -  4\.2 Outputs by components: Component 1: Promotion of input use and distribution systems\. The specific objectives of this component are: (i) to sustainably raise the supply of modern farm inputs, i\.e\., fertilizers, improved seeds, agro-chemicals, and livestock supplies; and (ii) to stimulate demand and facilitate access by farmers to these inputs\. This component is rated satisfactory\. Main activities under this component include: (a) Farmer access to seasonal credit for modern farm inputs through (i) a line of credit (LOC) to private importers of modern farm inputs; (ii) an Input Credit Insurance Facility (ICIF) to make term credit available to farmers in case of production shortfalls from natural calamities; (iii) a Small Farmer Input Credit Facility (SFICF) for farmer cooperative lending for the acquisition of inputs; Implementation Performance and Output by activity 1\. Line of Credit - LOC: Its initial objectives (to mobilize the private sector in the import and distribution of inputs to farmers) had already been fully achieved before the project's planned closing date of June 30th 2003\. The sub-loans that had already been granted by the Commercial Banks had amounted to US$1\.28m representing 64% of the total amount allocated under the LOC\. All loans had already been fully paid with no recorded delays which represents a noteworthy outcome in the context of Rwanda\. In light of the early achievement of this objective with less than the total allocated resources, the Government requested that the remaining funds from the LOC be re-allocated to other project activities\. 2\. Input Credit Insurance Facility - ICIF was created to provide incentives to private traders to sell fertilizers on credit, in particular, by eliminating the default risk that might have resulted from changing climatic conditions, was started with an initial Borrower contribution of US$100,000\. Continued funding for the facility was generated through loan repayments from input importers under the LOC which had increased the ICIF resources to an equivalent of US$ 800,000 by the second quarter of 2003\. While input import quantities had continued to increase several-fold during project implementation, traders continued to sell primarily on a cash bases generating no need for the ICIF resources\. The Government and the Bank therefore agreed during the July 2003 supervision mission that the future use of the ICIF resources would best be served under the Small Farmers Input Insurance Facility (SFICF), designed to provide small grants for the establishment of revolving credit schemes for the acquisition of modern inputs\. 3\. Small Farmer Input Credit Facility - SFICF: The facility ensured broad access to credit through grants provided to farmer groups to encourage cooperative lending activities for input acquisition\. It was added during negotiations at the request of the Borrower and became operational more than a year after effectiveness\. The Facility, once operational in 2001, was implemented through the vast network of cooperative banks that are part the Union des Banques Populaires (UBP)\. Even with its late start, disbursement increased steadily and so did the number of farmers and farmers associations receiving credit\. By the end of the first year of implementation, the SFICF resources had already been exhausted - 6 -  rendering it necessary to increase significantly, the original allocation\. The SFICF utilization has had phenomenal impact on the demand for modern agricultural inputs and along with the training program, and extension activities, has resulted in increased per capita production of key crops within a range of 800% to 1800% during project implementation (see annex 1)\. (b) Advisory services for the adoption of modern farm inputs and access to credit to farmers through specialized local organizations (SLOs) and producer groups\. This included training and demonstration activities as well as support to the access, use, and management of credit; Implementation performance and output 1\. Advisory Services: The project's approach was very effective in the provision of advisory services to raise the adoption and improve the utilization of farm inputs\. The project subcontracted with 6 SLOs in 21 districts and mobilized MINAGRI extension services in 5 others to provide in-depth training and technical support to more than 1,000 farmers associations involving about 21,000 farmers\. 10,000 demonstration plots have been established under the leadership of the lead farmers\. The high rate of adoption of demonstrated techniques is a good indication of how well the component has performed\. Early adopters had already started moving ahead of the project after the first year and some farmers have promptly continued to replicate the demonstrated techniques on their own plots\. By the end of the project, all beneficiary farmers directly applied new technologies\. The technology dissemination and demonstration activities have proven very sustainable, lead farmers as well as their respectively trained groups of farmers (20 trainers) continue to conduct extension in their respective associations\. Verifications from the various operating districts concludes that the innovative farmer-based extension system is both effective and sustainable\. A collaborative program for service provision has been established between farmers and SLOs with the option for farmers to pay for advisory services received\. The option to pay was a proposition that came from farmers themselves\. Other elements of sustainability are that (i) existing MINAGRI capacity has been strengthened; (ii) targeted complementarity has been established between extension services and SLO support; and (iii) a clear transition program has been prepared an is being implemented\. (c) Multiplication and distribution of improved seeds encouraged farmers to engage in seed multiplication and traders in seed distribution across local markets\. SLOs and Producer groups conducted targeted technical training and advisory services support\. Implementation Performance and Output 1\. Seed multiplication: Output in the area of multiplication and distribution of improved seeds is satisfactory in the rice sector, but less so in other sectors\. An important collaboration program initiated with WARDA, introduced nine hundred (900) new lines of NERICA rice varieties which were tested at the Institute des Sciences Agronomiques du Rwanda (ISAR)\. Through the program, two approaches, the participatory varietal selection (PVS) and the community based seed multiplication approach to multiply and disseminate successful varieties have been introduced\. The preliminary results show that out of the 900 varieties introduced, only 40 have not responded to the conditions in Rwanda\. 50 varieties have been pre-selected and distributed for participatory on-farm selection\. As a result of this program, 120 Mts of improved rice seeds have been produced and a further 1,500 ha have been planted\. It is expected that within 2 to 3 years, new responsive varieties will be available to rice growers in Rwanda\. In the meantime, in collaboration with the National Seed Services (NSS) and - 7 -  farmer associations in the country's five major rice growing perimeters, the project has supported the multiplication and distribution of more than 3 tons of improved local rice seeds, sufficient to cover the need for the country's 3600 ha currently under cultivation in these perimeters\. In addition, a convention signed with NSS covered the need for base seeds in other sectors\. Component 2: Support to local agricultural marketing systems\. This component was designed to: (i) encourage farmers to enter the market exchange system; and (ii) to improve the performance of local markets in the rural areas\. The component is rated satisfactory: (a) Crop conservation, processing and marketing technologies through: (i) training to promote improved crop conservation and marketing techniques among farmers; and (ii) funding of R&D activities to develop, test, and disseminate adapted crop processing technologies\. Key outputs include: (1) prevision of improved crop conservation , processing and marketing techniques; (2) strengthening of rural agricultural marketing poles; (c) support to private traders investing in marketing services\. Implementation performance and output 1\. Crop Conservation and Marketing: The project has been successful in carrying out only two of the three main activities it has initiated\. Various processing technologies were pilot tested in the provinces of Umutara and Gitarama but needed to be scaled up to allow significant impact\. Main activities included (i) a convention signed with the Kigali Institute of Technology (KIST) to develop and disseminate adapted technologies and pilot adapted storage systems; (ii) testing of technologies for the processing of soybean and sunflower and (iii) testing of small scale storage technologies\. The convention with KIST, which did not make progress, was cancelled late in the project's implementation process (3rd quarter of 2003)\. The unused resources were re-allocated, at the Government's request, to other activities geared towards the acquisition of small processing technologies\. Adapted technologies for the processing of soybean (tofu and milk) and sunflower (oil) for marketing have been fully adopted in the province of Gitarama\. Prepared tofu and bottled sunflower oil are being marketed successfully in local markets by Farmers associations and one of the key issues now is meeting the demand for both along with their by-products (e\.g\. animal feed from sunflower extracts and other by-products of soybean)\. SLOs are currently working with small scale farmers to develop a promotional program for the continued implementation of processing activities\. Success has also been achieved in sourcing and pilot testing innovative, low-cost small-scale storage technologies\. Fifteen hermetic silos ranging from 5MT to 150MT and grain safes between 0\.5MT and 1MT have been successfully piloted and distributed selectively across the 20 project operational districts\. Training on the use of the facilities have been conducted and preliminary signs for adoption levels are encouraging\. However, given the low level grain availability, adoption levels could not be determined prior to project closing\. Plans are in place to continue storage in collaboration with the rice activities within the upscaled RSSP program\. (b) Strengthening of rural agricultural marketing poles was conducted through the provision of grants to local communities for the improvement of basic marketing infrastructure, the strengthening of local capacities to effectively manage rural marketing sites, and training of private traders to raise their management skills\. Implementation performance and output 1\. Strengthening of Rural Agricultural Marketing Poles: Technical studies carried out for the first set of four market sites revealed that the planned budget for the activity would not be sufficient due to the - 8 -  rapid changes in the Rwandan economy between the reference planning period and the situation during implementation; consequently, the number of sites were reduced to 15 from the 21 previously planned\. The construction of 15 markets sites have been completed satisfactorily\. Management committees including traders and local administration representatives are operational in all markets\. The training program for traders on the management of marketing sites and distribution services has been established and training for the first batch of four markets have been completed\. Training for the remaining management committees (11 markets) and the follow-up activities for market management will be continued beyond the life of the project and has been included in the transition program to be implemented by the Ministry of Agriculture using training materials developed by the project\. (c) Support to private sector investment in marketing services included the promotion of investment in marketing services through technical and institutional support to traders and producer groups to facilitate their access to and management of credit from local banks for investment in infrastructure and equipment for storage, processing, transport, and marketing of agricultural products\. Implementation performance and output 1\. Marketing Services: Advisory services for the investment in marketing services has been successfully provided to 400 traders\. Services included training of management committees of traders associations; training of traders; and other aspects of capacity strengthening to support newly constructed markets\. Component 3: Technical support, monitoring, and evaluation\. The main tasks under this component were to: (i) coordinate the implementation of project activities, specifically to work with local organizations and specialized NGOs to provide effective technical support to beneficiary groups; (ii) manage project funds, including the (a) preparation and production of annual financial statements; (b) monitoring of all disbursement activities; (c) monitoring the records and accounts of all components; and (d) implement a detailed monitoring and reporting system focusing on both output and outcome of the project\. M&E activities included organizing the updates of the baseline surveys and gathering other necessary information at the district level to evaluate and document progress status of project activities\. This component is rated satisfactory\. 1\. Technical Support: The Technical Support Unit has performed highly satisfactorily in piloting a farmer-led extension services, working through SLOs to provide technical support to beneficiary farmers\. While all planned activities have been completed and the formal agreement between the project, the SLOs and the MINAGRI district extension staff is no longer in effect\. A transitional extension program has been put in place in collaboration with the upscaled RSSP within the MINAGRI for sustained farmer-led extension in the 20 operational districts\. 2\. Project Management: The quality of financial management of the project is satisfactory in general\. The 2002 interim audit report highlighted a few administrative weaknesses that has been addressed by the project\. Procurement management has been satisfactory overall, however, procurement has been hampered by contracts under the NTB threshold of Rfw 3\.00 mill\., which, in some cases have caused significant delays due to controls by the Ministry of Agriculture\. The initial rate of disbursement overall has been relatively slow due to two main factors: (i) the initial delay in project implementation start-up and (ii) activities that were subcontracted to SLOs which have been pre-financed by the latter to be reimbursed at the end the first contract year\. Following the successful completion of the first year, the project proceeded by providing advances to SLOs for the implementation of field activities and that move helped the disbursement rate\. Infrequent submission, another factor that hampered - 9 -  disbursement, picked up after the MTR\. 3\. M & E: The monitoring of field activities has been highly satisfactory\. The monitoring system has been very efficient in tracking all field activities in terms of planned costs, planned timing and planned outputs\. Some of the SLOs with whom the project has been working have adopted the M&E system and are now using it in their regular work outside of the project\. 4\.3 Net Present Value/Economic rate of return: Due to the LIL nature of the project, an economic analysis was not conducted at preparation\. 4\.4 Financial rate of return: NA 4\.5 Institutional development impact: The project has made substantial institutional development impact in the following ways: (a) The project has successfully promoted the emergence of private sector based input import and distribution system for the first time in the country's history and this has contributed to achieving the Government's goal of enhancing the efficiency and effectiveness of the private sector (b) It has provided a model and guidance for Government and other development projects in its maximum use of local institutions to implement project activities\. Besides the success in ensuring proximity and participation, the added benefit is that the sub-contracting arrangements with local organizations contributed to promoting the emergence of a local market for technical advisory services that have clearly outlived the project; (c) The project has successfully strengthened local institutions to function more efficiently in the agriculture and rural sector in the following ways: (i) the existing capacities of the MINAGRI extension system has been strengthened to work more effectively with farmer associations; (ii) the technical and organizational capacities of farmers associations has been strengthened through training and on-farm demonstrations to enhance their agricultural and off-farm activities; (iii) the lead-farmer extension system has been institutionalized and informal proposals are being made to create careers for lead farmers; (iv) local non-government institutions (SLO) have now acquired the ability to provide services to agricultural clients and develop business relationship with government and local entities; (v) local community groups have now acquired the capacity and know-how to manage marketing sites and agricultural business activities; (vi) targeted complementarity/collaboration has been established between extension services and local organizations in the provision of advisory services; (vii) strong ties have been established between farmers association and local agricultural institutions (KIST, NSS, ISAR)\. 5\. Major Factors Affecting Implementation and Outcome 5\.1 Factors outside the control of government or implementing agency: 1\. There were no apparent factors outside the control of the Government or the implementation agency - 10 -  that affected the project's implementation and outcome\. However, the depreciation of the Rwandan franc could have raised the price of modern inputs in local markets and thereby jeopardize the objective of raising access to and use of modern inputs\. The effect of the exchange rate was mitigated by lower input costs through the emerging private sector which resulted in nearly steady prices in nominal terms throughout most of the project life\. 5\.2 Factors generally subject to government control: Plant protection law 1\. Knowledge and skills in the adoption of integrated pest management practices for sustainable crop production are strongly lacking within the national agricultural extension services system in Rwanda\. A Plant Protection Law and a national Pesticides Registration and Control Scheme is absent and thus risks associated with pesticide abuse by importers and users are potentially high\. One of the main recommendations from the IPM study, undertaken early during project implementation, was that the GOR (i) finalize and make effective, the draft Plant Protection Law initiated in 1998 and (ii) through the ARMDP support both its implementation and that of the Pesticide Registration and Control Scheme\. The plant protection law is yet to be finalized and this has implications on continued project operations in the context of the follow-up RSSP as well as within the MINAGRI\. Establishment of an MIS System: 2\. The project was to implement a Market Information System (MIS) that would consolidate and disseminate price data of agricultural products and inputs across 30 markets distributed in all provinces of the country\. In preparation for this, the project established a collaborative program with the MINAGRI's newly established MIS unit and an on-going PASAR project which had been gathering market price data for a number of years but with limited capacities for data gathering and dissemination\. The ultimate goal of the MIS system was to disseminate price data on a daily basis\. While all preparation for the MIS system was undertaken by the project, it faced difficulties in the actual launching due to delays in obtaining the necessary clearance/approval from the MINAGRI\. 5\.3 Factors generally subject to implementing agency control: Financial Management: 1\. As a condition of effectiveness, a financial management/accounting software was selected and installed to conduct the day-to-day financial management of the project\. The software however, was never used by the project staff who were able to maintain an up-to-date, satisfactory accounting of project expenditures using a parallel system on an excel software\. It is the general view of the project staff however, that the installation of the software, as an effectiveness condition, that is, prior to the full recruitment of the project team, or in some cases, while the project staff was still very new to the project, served as a handicap as the team were not in a position to apply themselves effectively, to the productive use of the software\. A lesson drawn from this handicap is that such a software be installed about six months or so after project start-up when the full project team is in place and are able to identify problems that could easily be resolved with the software\. 2\. Throughout implementation, (i) the turnover of financial management personnel and (ii) inadequate capacity to conduct the tasks caused difficulties in overall financial management, and maintenance of project financial records, procurement records, as well as maintaining order in its disbursement activities\. - 11 -  Periodic training of financial management personnel is recommended for the future upscaled RSSP project, along with close monitoring by the Bank's Country Office based Financial Management Staff\. M&E: 3\. One of the strong aspects of the project is the maintenance of a systematic and detailed monitoring and reporting system focusing on both output and outcome of the project activities\. Experience after the first six months of the project M&E of field activities revealed that the system, while designed to do so, did not capture the effectiveness and impact of activities on the ground\. For instance, training conducted showed targets achieved such as people trained, timing and costs, however, it was deficient in showing the quality and effectiveness of training on participants\. To address this and several related issues, the project team re-designed field reports and demonstration plans to reflect the quality and depth of field activities\. Further evaluation of the M&E system following that adjustment portrayed greater success and show detailed outcomes of field activities\. Project Implementation Timeline: 4\. The project could not adhere to its implementation timeline and required a six-month extension of the closing date for the following reasons: (a) Project implementation at start-up experienced an initial delay of about six months due to the slowness in appointing project support staff and hiring the Specialized Local Organizations (SLOs), through which several activities were implemented; (b) One or two of the project activities were moving much slower than anticipated, in particular, the utilization of the Line of Credit (LOC)\. As of the first quarter of 2003, only about a third (40%) of the LOC resources had been disbursed\. The utilization of the Line of Credit had been slow due to two main factors: (i) the initial attempt, by the Government of Rwanda, to limit the margin charged by Commercial Banks to 4% (which was 50% less than their regular margin) discouraged many banks to use the line of credit extensively\. This lack of incentive for banks delayed the implementation of the LOC for at least a year when the margin was freed and banks were given the leeway to set the margin at which they lend; and (ii) the stipulation, that the contribution of the line of credit to the cost of import operations by a given trader would be reduced from 70% for the first operation to 55% for the second and 40% for the third and subsequent operations, had been understood by local banks to mean that the balance had to be covered by the out-of-pocket contributions of traders\. Traders had therefore avoided using the line of credit beyond the first application until the necessary clarification was made; (c) The Small Farmer Input Credit Facility became operational more than a year after project effectiveness\. This activity was added during negotiations to provide farmers and farmers associations the scope and purchasing power for input acquisition through traders and importers\. It was thus necessary to prepare the sub-component and elaborate its implementation procedures late in the process\. 5\.4 Costs and financing: Actual total project cost were US$5\.59 million compared with the appraisal estimate of US$5\.61 million\. Government contributions amounted to US$0\.61\. As of May 25, 2004, IDA contribution totaled US$4\.78 million compared to the appraisal estimate of US$5 million\. The credit is almost fully disbursed at 92\.99 percent\. An undisbursed balance of US$384,702 remains\. The closing date for the credit was extended once, for a six-month period of June 30, 2003 to December 31st 2003 to ensure completing of all initiated activities\. - 12 -  6\. Sustainability 6\.1 Rationale for sustainability rating: Likely: Rating for sustainability is being based on an assessment of pre- and post-project implementation in terms of targeted outcomes and performance, demonstrating that the achievements generated would be maintained: 1\. Policy and Institutional Reforms: The project has successfully identified an effective set of policies, incentives and institutional mechanisms to encourage the private sector to enter the importing, marketing, and trading systems of agriculture which represents the country's largest economic sector\. It has done so through innovative strategies which have complemented policy reforms with targeted local institutions and technical support for response by the private sector\. Through the policy and institutional support provided, the project has fueled the Government's efforts to deepen economic and institutional reforms as a means of improving competitiveness of the economy\. It has successfully contributed to laying a strong foundation for sustained private sector-led growth in the agricultural sector by encouraging investment and by enhancing cooperation between the private and public sectors\. The project has successfully provided the following key policy and institutional support to ensure its sustainability: (a) Removal of 20% tax of imported inputs; (b) Elimination of subsidies; (c) Elimination/restriction of free distribution of inputs; (d) Promotion of participation of the private sector/NGOs in enterprise delivery; (e) Creation of an institutional environment for the emergence of private-sector a based input import and distribution system for the first time in Rwanda's history; (f) Development of a farmer-led, demand driven extension system; (g) Creation of a framework for rural savings and loan (Banques Populaires) to lend to farmers for investment in modern inputs; (h) Setting up of management committees allowing cooperation between local administration and traders to mainstream marketing infrastructure\. 2\. Input Supply System: Prior to the initiation of the project - (a) Very few traders were willing to or had the capacity to source fertilizers from foreign suppliers; the project has successfully provided, through the LOC, incentives and support to (i) private traders to enter the input importing sector and establish a sustainable business relationship with foreign suppliers and (ii) banks to lend to traders and thus sustain business relationship for fertilizer related activities\. Moreover, the project has attracted and retained several new private input importers who continue importation activities outside of the LOC; (b) Farmers had very little know-how on the access to and use of modern inputs\. The project has, through technical advisory services coupled with the small farmer input credit facility (SFICF), successfully stimulated demand for modern inputs and created markets and business opportunities for the emerging input distribution sector; (c) Price distortions and other policy obstacles had created disincentives to private operators\. The project has been instrumental in ensuring that Government take the necessary measures to eliminate those - 13 -  disincentives in particular (i) the removal of a 20% tax on imported inputs and (ii) the prohibition of subsidized or free distribution of modern inputs; (d) Farmers could not adequately access inputs due to limited availability and high prices in local markets\. The project has succeeded in establishing effective demand through increased fertilizer supplies and consequently, fertilizer prices in the local markets remained stable throughout, despite the strong appreciation of the US dollar against the Rwandese franc when real prices (e\.g\. 2000/2001) had declined by at least 30%; (e) The European Union had set up a program that directly or indirectly imported modern farm inputs, namely fertilizer, for sale through private distributors\. However, this served as a disincentive for private traders to develop business contact with foreign suppliers and therefore, did not contributed significantly to an effective private-sector based modern farm input supply system\. (f) At the close of the ARMDP, there is an eminent risk of further intervention into the fertilizer distribution system by the European Union through the STABEX fund\. A strong recommendation of the ICR is that sustainability be ensured through continued work with the private sector on fertilizer import and distribution\. Further intervention through subsidization would erode the Government's 3-year effort, through the ARMDP project, in making fertilizer available to farmers\. Marketing activities: Prior to the initiation of the project - (a) There was a high level of subsistence orientation among smallholder farmers; higher levels of outputs and overall marketed surpluses have increases significantly for the three main crops (beans, potatoes and sorghum) and this has triggered a change in the subsistence orientation among smallholder farmers in the district where project was operational; (b) There was a high level of market segmentation and a subsequent low intensity of commodity movement across markets\. The construction and rehabilitation of local marketing sites have stimulated marketing activities among local markets\. In particular, the reduced distance among markets have increased the intensity of commodity movements\. Follow-on project: (a) Many of the project's activities are being scaled up or replicated through a major agricultural sector support program (RSSP) which was envisaged by the government early during the design of the LIL and which is based o the reform objectives outlined for the LIL implementation\. The centerpiece of the RSSP program is agricultural intensification and diversification of the rural economy, both of which requires the effective and sustainable input and output distribution systems that has been successfully put in place by the LIL\. Lessons derived from the LIL have made major contributions to the design and implementation of the RSSP\. 6\.2 Transition arrangement to regular operations: The follow-on project, RSSP through which many of the project's pilot activities are to be replicated or scaled up is based on the reform objectives outlined in the project\. A transitional program has been put in place in collaboration with the MINAGRI and the RSSP team\. The continued implementation of some of the project's activities will be housed and conducted within the MINAGRI under the supervision of the Directorate of Extension\. - 14 -  7\. Bank and Borrower Performance Bank 7\.1 Lending: Highly Satisfactory: The Bank's performance in the identification, preparation and appraisal of the project was highly satisfactory\. The identification process focused on critical gaps for intervention in Rwanda's agriculture and rural sector\. In particular, it identified an effective set of policies, incentives and institutional mechanisms that ensured a smooth operation of the input supply system that was being piloted\. Furthermore, it proposed support and innovative strategies that complemented policy reforms with targeted local institutions for response by respective target groups\. The project design ensured consistency with the Government's development priorities and the Bank's country assistance strategy\. In addition, the project design included non-traditional innovative means that derived high impact and outputs that exceeded their targets by far\. The preparation team was of good skill mix that provided for flexibility and responsiveness to local needs\. The Bank's preparation and appraisal processes incorporated adequate design of all major and relevant aspects including technical, financial, economic and institutional as well as procurement and financial management\. Furthermore, the Bank assessed the project's critical risks and proposed measures to mitigate those risks\. The Bank maintained a good relationship with the Borrower during preparation and appraisal and was involved in extensive stakeholder consultations with the Borrower and this reinforced ownership that proved invaluable during implementation\. 7\.2 Supervision: Supervision of the project is rated Satisfactory\. Adequate supervision was conducted with close monitoring twice a year on average, adhering closely to the Bank's guidelines for supervision\. Supervisors were carried out jointly by the Government and the Bank and implementation shortfalls were identified early and addressed proactively with the strong support of the MINAGRI\. Great attention was paid to likely development impacts and deviations were promptly picked up and reversed through advice, agreed actions and follow-up\. The skill mix and continuity of staff and consultants for supervision was adequate; there was no staff/consultant turnover\. The team remained intact except for additional expertise that were included as necessary\. Planning and timing of supervision missions was adequate, Bank and field office managers were involved at critical points and field office staff were fully involved in missions as necessary\. PSR ratings accorded for each supervision mission was realistic and loan covenants were closely monitored by supervision teams\. The Bank supervision teams had a consistently good relationship with the project and government teams and ample opportunities were available for constructive and open exchange\. The LIL nature of the project warranted much time for communication and learning in the context of testing strategies and institutional arrangements\. 7\.3 Overall Bank performance: Overall Bank performance is rated satisfactory\. Borrower - 15 -  7\.4 Preparation: Highly Satisfactory\. The borrower displayed high commitment to the concept, objectives and innovative nature of the project\. During the conception and preparation phase, the MINAGRI staff played a crucial role in providing the necessary support in ensuring all needed actions are undertaken, reflecting the high priority that the Government attach to agriculture and rural development\. Likewise, rural communities, agricultural clients, and local institutions responded proactively to the concept and ideas put forward\. The MINAGRI worked throughout preparation with Bank preparation teams and, guided by the studies conducted, provided input in elaborating the elements under each component as well as the financial, institution and environmental factors\. 7\.5 Government implementation performance: The Government's implementation performance is rated satisfactory overall but there were some important shortcomings\. Government consistently maintained its financial and legal covenant requirements throughout implementation\. The counterpart funds provided were more than required and expected\. It also adopted and maintained all agreed upon policy measures\. On the other hand, the project experienced significant delays in acquiring clearances for procurement related issues as well as decisions to take certain steps during the implementation process\. This has resulted in the inability of the project to implement the Market Information System and complete the training of market management committees before project closing\. Also, follow up on actions agreed upon during missions has often been quite slow\. 7\.6 Implementing Agency: The performance of the implementing agency is rated satisfactory\. In view of its size, the TSU has performed extremely well in providing technical oversight and M&E\. Staff turnover for financial management has, however, caused some shortfalls in financial management, the frequency of disbursement request and production of audit reports; action plans following all audit exercises have been put in place and implemented in a timely manner\. Procurement, on the other hand went smoothly given the support they received from the Bank's Field Procurement staff\. 7\.7 Overall Borrower performance: Overall borrower performance is rated satisfactory 8\. Lessons Learned 8\.1 Key lessons derived from project implementation and recommendations for future activities: One of the main goals of the design of the project was to determine (a) the extent to which the project has performed and achieved its development objectives and (b) how replicable its activities are based on the following learning and innovation objectives: (i) to sustainably improve the supply of and access to modern farm inputs in the context of liberalized markets; (ii) accelerate the transition towards greater market orientation among Rwanda's farmers; and (iii) foster the emergence of markets for technical and institutional advisory services in rural areas\. The achievement of the learning and innovation experience is demonstrated through the effectiveness of the approaches used and the following lessons derived from implementation: 1\. Input Supply System : - 16 -  The project implementation has shown that a viable and sustainable input supply system is possible in the context of Rwanda under the right set of policies, incentives and institutional mechanisms\. The project's main approach in ensuring such a viability was to identify and remove main bottlenecks that would encourage private sector entry into the input supply system\. The two policy reforms that represented the major strength in the project's implementation was the support for the removal, by Government of the import tax on the importation of agricultural inputs during the period of project implementation and the decision to eliminate subsidies and limit free distribution of inputs\. A key recommendation highlighted during the evaluation of the project is that the exemption of the import tax, due to expire in 2005, be renewed to avoid its affect on fertilizer imports as well as price in the upcoming few years that are critical for Rwanda's agricultural growth\. The following lessons are to be learned from the implementation of project activities for the supply of inputs in Rwanda: Line Of Credit : (a) Given the significant investment of large-scale importers in the input supply business, there is a need to ensure profitability and greater knowledge of inputs on the part of suppliers; (b) The project has induced a positive change in the attitudes and behavior of Rwanda's Banking system towards lending to agricultural entities\. Both commercial and local banks are now convinced of alternatives available for investment in the agricultural and livestock sector; (c) Information about the project's activities could have been more widely disseminated to allow for greater sensitization about project activities beyond the urban Kigali\. Small Farmer Import Credit Facility : (a) The combination of revolving scheme in the rural areas and the targeted training of farmers in the use and management of credit in beneficiary areas represents a major break through in terms of access to credit and modern inputs for farmers in Rwanda\. Schemes have provided farmers associations the scope to work in teams for credit purposes and other agricultural (extension) activities; (b) Access to inputs through resources from the credit schemes has, combined with the extension program for input use, stimulated significant yield increases in main crops and improved farmers' understanding of input use; (c) The staff of the local rural banks have limited understanding of the modalities and procedures for granting the SFICF\. There is a need to establish workable mechanisms for the implementation of input credit activities; (d) The interest rate charged on the SFICF was considered relatively high by some beneficiaries leaving the desire for review and possible revision\. On the contrary, the lesson derived is that access and technical know-how including management of credit matter much more; (e) Additional mechanisms should be put in place for rural micro finance through other institutions; (f) Local leaders need to be sensitize on the management of input credit; Input Credit Insurance Facility: The fact that the ICIF resources were never put into use as planned indicates that even though it might be a good strategy for protecting importers and traders in circumstances of low/non repayment resulting from weather failures, it was not applicable under the circumstances of the LIL\. No informed climatic calamities occurred in project areas during implementation\. Non-the-less, the following important lessons may be applied to the future use of similar insurance facilities designed to address risks related natural calamities: (a) A clear mechanism guided by specific criteria be put in place to assess the extent of damage - 17 -  experienced by farmers from natural disasters, this was not evident in the ICIF implementation procedures; (b) ICIF resources be managed by a competent institution such as an insurance firm, agricultural banking or micro-finance institution; 2\. Extension System : The use of SLOs in project implementation and the introduced culture of lead farmer extension system in particular, the demonstration of field activities, have made positive changes in the Rwandan cropping system\. The lead farmer extension system should therefore be adopted at the national level, and the concept broadened and replicated to other sectors for developmental activities\. The following lessons are derived from the implementation of extension activities: SLOs and Lead Farmer Extension System: (a) Project activities ended too soon for beneficiaries; (b) Extension activities did not sufficiently cover (i) environmental protection; (ii) adequate link/contact between input traders and farmers; (c) Future activities under the lead farmer extension should include a more enhanced monitoring mechanism; (d) Given the successful nature of the implementation of the lead farmer extension system and in view of the scope for national adoption, the Government should (i) set up a network and develop a system, a forum or body where farmers could periodically convene to discuss constraints and solutions; (ii) reinforce and integrate agricultural extension activities at different levels to include cropping, processing and conservation, and marketing activities; (iii) create a formal system of support and capacity reinforcement for lead farmers; (iv) provide the scope for farmers in lead roles to take on extension as a career and work in a more formal environment\. Training Program (a) Farmers were trained on many activities using detailed curricula and well prepared training materials\. However, there was insufficient scope to apply several aspects of the training components; (b) There was no consideration for gender issues in training program; 3\. Seed Multiplication and Distribution Activities: The project has initiated a sustainable method of seed multiplication and distribution in Ruhengeri and Gisenyi which incorporated the views of farmers in seed activities\. The project has demonstrated that there are high payoffs in using international seed centers (i\.e\. the WARDA experience); seed multiplication and distribution activities, along with its training program should be scaled up under the RSSP\. The following are areas for improvement for seed activities: Seed Multiplication: (a) There were very few seed multiplication sites overall; (b) Method of seed activities were different from one place to another; there is need for greater consistency to provide the scope for replicability and learned lessons; (c) Seed multiplication should be conducted alongside the pilot demonstration fields or at least they should go together\. - 18 -  Seed Distribution: (a) The certification of quality seeds need to be taken into consideration in future distribution activities, the scope should have been broadened even at the pilot stage; (b) It would be necessary to put in place an adequate collaborative program between seed multipliers and the national seed service to ensure an efficient distribution of seed on a timely basis; there were delays in making seeds available to farmers on time and quality seeds when available, was not sufficient to cover the respective needs\. (d) Enhance the seed distribution system by establishing selling counters in proximal locations; (e) Identify individual seed multipliers and strengthen their capacity; 4\. Agricultural Technology Development and Transfer: Beneficiaries participated in the design of adaptable technology including those for processing and conservation and acquired a good understanding of the importance of technology in the agricultural sector\. On those basis, they were able to come up with their own income generation micro projects\. Due to the pilot nature and short duration of the project, the need is highlighted that technology development be scaled up and replicated country-wide\. The following lessons were derived from the implementation of those activities: (a) Highlighted areas that need to be incorporated in upcoming or future programs include techniques for (i) appropriate land management and (ii) livestock development and maintenance; (b) Involve traders in the livestock sector to facilitate the importation of inputs for livestock development; ; (c) Adapted processing technologies once developed, generated significant outputs that need to be marketed\. There is a need to develop a program for advertising and market search as well as skills development for marketing activities; 5\. Agricultural Marketing Poles and Private Sector Investment: The modernization of marketing infrastructure along with the training program for local leaders in the management of the constructed markets is considered one of the best practices for rural market development\. The newly constructed markets, even though in only 25% of the districts, have strongly responded to the rural population marketing needs\. It has provided farmers the scope to participate fully in the market exchange system, and enabled traders to extend their trading activities especially in agricultural inputs and outputs\. Livestock markets were particularly highlighted as key development approach to kick-off livestock development\. There is an urgent need to scale up market development across the country\. The following were considered key to the continued improvement and modernization of rural marketing infrastructure: (a) As a long-term development perspective, and considering the growing population and business development activities in Rwanda, the size of the market infrastrusture need to be increased\. Constructed markets under the project were deemed small in size overall, as well as individual trading stalls; (b) The location of markets need to be proximal to farming communities; some market constructed under the project were considered at long distance from farmers which suggests the need for additional markets in some areas\. This is with the view that current locations were actual sites of former markets; (c) Unlike traders and local administrators, farmers views were not fully incorporated in plans for market construction and as a result their needs in marketing were not fully met; (d) Market management committees should be trained and functional before marketing activities are - 19 -  launched; the design for training and functionality of committees were not fully adhered to\. 9\. Partner Comments (a) Borrower/implementing agency: The draft ICR from the Bank has been received and the Government and its implementing agencies are of the opinion that information contained in the ICR represents a true picture of what took place during the implementation of the project from the effective date to the completion of the project\. The Borrower's comments are fully represented in our Borrower ICR which has been reflected, overall, on the Bank's ICR This is an opportunity for the borrower to express appreciation for the efforts that the Bank's team have put into the successful implementation of the project, and look forward to further collaboration with the Bank especially in the context of the on-going Rural Sector Support Project\. (b) Cofinanciers: (c) Other partners (NGOs/private sector): 10\. Additional Information - 20 -  Annex 1\. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate 1\. Percent increase in the quantities of modern farm inputs used per capita by beneficiary farmers compared to the baseline*: BASELINE INFO (QTY (KG/TONS)) QUANTITIES (KG/T) & (% CHG) QUANTITIES (KG/t) & (% CHG) B = Bean Seeds : 3\.9 B = 6\.82 (+ 75%) B = 10\.7 (+175% ) M = Maize Seeds : 8\.8 M = 15\.40 (+ 75%) M = 60 (+580% ) U = Urea : 2\.0 U = 3\.50 (+ 75%) U = 19\.6 (+880% ) N = NPK : 3\.8 N = 6\.65 (+ 75%) N = 29\.3 (+ 670%) 2\. Percent increase in the average output per capita among beneficiary farmers compared to the baseline: BASELINE INFO (QTY (KG)) QUANTITIES (KG) & (% CHG) QUANTITIES (KG) & (% CHG) B = beans : 37 B = 65 (+ 75%) B = 342 (+ 840%) P = potato : 387 P = 677 (+75% ) P = 2635 (+ 580%) M = manioc : 390 M = 683 (+75%) M = 1061 (+ 172%) BA = banana : 361 BA = 632 (+75%) BA = 6897 (+ 1810%) S = sorghum : 27 S = 47 (+75%) S = 500 ( + 1750%) * Per capita numbers in the case of farm households refer to individual beneficiary farmers who usually represent an entire household\. In other words, per capita in the case of beneficiary farmers is to be understood as per farm household\. Output Indicators: 1 Indicator/Matrix Projected in last PSR Actual/Latest Estimate 1\.1(a) The percent increase in the number of modern input importers compared to the baseline: BASELINE INFO\. # IMPORTERS # IMPORTERS (%CHG) # IMPORTERS (%CHG) N = NPK importers : 5 N = 10 (+ 100% ) N = 30 + 500% U = Urea importers : 4 U = 8 (+100% ) U = 30 + 650% S = Seeds importers : 1\.1(b) The percent increase in the volume of modern farm inputs imported by the private sector compared to the baseline: BASELINE INFO\. (QTY (TONS)) (QTY (TONS)) (%CHG) QTY (TONS)) (%CHG) N = NPK : 674 N = 1384 (+ 100%) N = 1927 ( + 185% ) U = Urea : 154 U = 308 (+100% ) U = 320 ( +107% ) S = Seeds : 0 S = 0 (+100%) S = 965,617 NA 1\.2(a)\. Percent share of beneficiary farmers receiving training in the use of modern farm > inputs BASELINE INFOR # FARMERS # FARMERS (%CHG) # FARMERS (%CHG) 0 18,000 ( 90%\.) 20,000 ( 100%) - 21 -  2\.1(a)\. The percent increase in the quantities marketed by beneficiary farmers per capita compared to the baseline: BASELINE INFO (QTY (KG)) QUANTITIES (KG) & (% CHG) QUANTITIES (KG) & (% CHG) B = beans : 29\.8 B = 44\.74 (+ 50%) B = 174 (+ 480%) P = potato : 86\.2 P = 129\.30 (+50%) P = 1904 (+2108%) M = manioc : 66\.2 M = 99\.30 (+50%) M = 574 ( +767%) BA = banana : 164\.0 BA = 246 (+50%) BA = 5813 (+3442%) S = sorghum : 15\.3 S = 22\.95 (+50%) S = 365 (+2286%) Number of improved agricultural marketing 15 15 sites 1End of project - 22 -  View of Changes in Outcome and Output Indicators Compared to the Baseline: An Evolution of Updates 2001 and 2002 against End of Project Targets Table a: Changes in Input Use Per Capita (Qty) Year Beans Maize Urea NPK (kg) (kg) (tons) (tons) 1998 3\.9 8\.8 2\.0 3\.8 2001 5\.4 52\.7 9 32\.4 2002 10\.7 60 19\.6 29\.3 Table b: Changes in Output Per Capita (Qty) Year Beans Potato Manioc Banana Sorghum (kg) (kg) (kg) (kg) (kg) 1998 37 387 390 361 27 2001 289\.5 1714 226\.1 1890\.6 153 2002 347\.7 2635\.7 1060\.7 6897\.3 500 Table c: Changes in Number of Inputs Importers (Qty) Year NPK Urea (N) (N) 1998 5 4 2001 12 11 2002 30 30 Table d: Changes in Volume of Inputs Imported (Qty) Year Urea NPK (tons) (tons) 1998 674 154 2001 6460 1940 2002 1927 320 Table e: Changes in Quantities Marketed by Beneficiary Farmers Year Beans Potato Manioc Banana Sorghum (kg) (kg) (kg) (kg) (kg) End Target 29\.8 86\.2 66\.2 164\.1 15\.3 2001 84 1017\.5 106\.9 1658\.6 70\.4 2002 174\.1 1904\.1 574\.2 5812\.8 365\.1 - 23 -  Annex 2\. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million Promotion of Input use and Distribution Systems 3251\.50 3528\.17 108\.5 Support to Local Agricultural Marketing Poles 1663\.60 1424\.83 85\.6 Technical Support Unit 530\.00 644\.79 121\.6 Total Baseline Cost 5445\.10 5597\.79 Physical Contingencies 42\.00 Price Contingencies 125\.40 Total Project Costs 5612\.50 5597\.79 Total Financing Required 5612\.50 5597\.79 Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category NCB-1 NS 2/ Other-3/ N\.B\.F\. Total Cost 1\. Works 535\.90 240\.00 112\.50 0\.00 888\.40 (465\.60) (232\.70) (0\.00) (0\.00) (698\.30) 2\. Goods 70\.00 119\.20 2000\.00 0\.00 2189\.20 (70\.00) (119\.20) (1900\.00) (0\.00) (2089\.20) 3\. Services 0\.00 2382\.50 0\.00 0\.00 2382\.50 (0\.00) (2175\.20) (0\.00) (0\.00) (2175\.20) 4\. Miscellaneous 0\.00 0\.00 152\.40 0\.00 152\.40 (0\.00) (0\.00) (37\.30) (0\.00) (37\.30) 5\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 605\.90 2741\.70 2264\.90 0\.00 5612\.50 (535\.60) (2527\.10) (1937\.30) (0\.00) (5000\.00) 1/ National Competitive Bidding or IAPSO 2/ National Shopping 3/ Other: Beneficiary contribution, line of credit and input credit insurance fund - 24 -  Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category NCB-1 NS 2/ Other-3/ N\.B\.F\. Total Cost 1\. Works 732\.00 0\.00 0\.00 0\.00 732\.00 (658\.80) (0\.00) (0\.00) (0\.00) (658\.80) 2\. Goods 1069\.00 59\.00 1280\.50 0\.00 2408\.00 (1069\.00) (59\.00) (1152\.50) (0\.00) (2280\.50) 3\. Services 0\.00 992\.00 0\.00 0\.00 992\.10 (0\.00) (845\.80) (0\.00) (0\.00) (845\.80) 4\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 5\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) 6\. Miscellaneous 0\.00 0\.00 0\.00 0\.00 0\.00 (0\.00) (0\.00) (0\.00) (0\.00) (0\.00) Total 1801\.00 1051\.00 1280\.50 0\.00 4132\.00 (1727\.80) (904\.80) (1152\.50) (0\.00) (4059\.30) 1/ Figures in parenthesis are the amounts to be financed by the Bank Loan\. All costs include contingencies 2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units\. Project Financing by Component (in US$ million equivalent) Percentage of Appraisal Component Appraisal Estimate Actual/Latest Estimate IDA Govt\. CoF\. Bank Govt\. CoF\. Bank Govt\. CoF\. Promotion of Input use and 3\.03 0\.26 3\.25 0\.28 107\.3 107\.7 Distribution Systems Support to Local 1\.56 0\.21 1\.25 0\.17 80\.1 81\.0 Agricultural Marketing Poles Technical Support Unit 0\.41 0\.14 0\.48 0\.16 117\.1 114\.3 The higher level of expenditures reflect additional expenses occured during extension of closing date\. - 25 -  Annex 3\. Economic Costs and Benefits Due to the LIL nature of the project, an economic analysis was not conducted at preparation\. - 26 -  Annex 4\. Bank Inputs (a) Missions: Stage of Project Cycle No\. of Persons and Specialty Performance Rating (e\.g\. 2 Economists, 1 FMS, etc\.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 02/14/1999 7 SR\. AG\. ECONOMIST (TL) (1); S PROGRAM ASSISTANT (1); CONSULTANT (2); TEAM ASSISTANT (1); OPERATIONS OFFICER (1); FMS (1); Appraisal/Negotiation 04/02/1999 8 SR\. AG\. ECONOMIST (TL) S (1); PROGRAM ASSISTANT (1); CONSULTANT (2); TEAM ASSISTANT (1); OPERATIONS OFFICER (1) LAWYER (1); FMS (1); PROCUREMENT PECIALIST (1) Supervision 02/28/2000 2 TEAM LEADER, SR\.AG\.EC\. S S (1); CONSULTANT, (1) 06/23/2000 5 SR\. AG\. ECONOMIST (TL) (1); S S PROGRAM ASSISTANT (1); CONSULTANT (1); TEAM ASSISTANT (1); OPERATIONS OFFICER (1) 11/17/2000 6 MISSION LEADER (1); S S PROGRAM ASSISTANT (1); YOUNG PROFESSIONAL (1); SR\.FIN\.MGMT\.SPECIALIST (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT ASSISTANT (1) 05/20/2001 5 TEAM LEADER,SR\.AG\.ECON U S (1); CONSULTANT, ECONOMIST (1); CONSULTANT, FMS (1); TEAM ASSISTANT, DISB\. (1); OPERATIONS OFF\., PROC\. (1) 10/08/2002 4 MISSION LEADER (1); S S SENIOR ECONOMIST (1); PROCUREMENT OFFICER (1); - 27 -  PROGRAM ASSISTANT (1) 07/15/2003 5 LEAD SPECIALIST (1); S S MISSION TEAM LEADER (1); PROGRAM ASSISTANT (1); PROCUREMENT ANALYST (1); TEAM ASSISTANT (1) ICR 12/08/03 5 LEAD SPECIALIST (1); S S MISSION TEAM LEADER (1); PROGRAM ASSISTANT (1); PROCUREMENT ANALYST (1); TEAM ASSISTANT (1) (b) Staff: Stage of Project Cycle Actual/Latest Estimate No\. Staff weeks US$ ('000) Identification/Preparation 431\.66 Appraisal/Negotiation 72\.00 Supervision 57\.21 404\.35 ICR 38 40\.55 Total 948\.56 - 28 -  Annex 5\. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 29 -  Annex 6\. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6\.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6\.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 30 -  Annex 7\. List of Supporting Documents 1\. Aide memoires, Back-to-Office reports and Project Status Reports of seven supervision missions, January 2000 - December 2003; 2\. Project quarterly progress reports January, 2000 - December 2003 3\. Baseline survey and two updates , 1998, 2001 & 2002; 4\. Technical note on the constraints to higher modern input adoption, 1999; 5\. Technical note on the characteristics and opportunities of modern input distribution and output marketing systems; 6\. Mid-term review report, June 2002; 7\. Quality at entry review report, December 1999; 8\. Project Appraisal Document, July 1999; 9\. Independent evaluation reports conducted by University of Butare students, 2003 10\. Borrower evaluation report, January 2004; 11\. Implementation completion workshop report, January 2004; 12\. Integrated Pest Management (IPM) report, March 2000 13\. Strategy note - Agricultural Intensification in Rwanda, World Bank 1998; 14\. ARMDP procedures manual, October 1999\. - 31 -  Annex 8\. Beneficiary Survey Results In lieu of conducting a separate beneficiary survey, the project team has opted to use the structured baseline survey carried out early during project preparation and two subsequent updates conducted in the project districts during years two and three of project implementation\. Data that were gathered through the baseline survey and two updates focused on farm household, transport, input distribution, and crop marketing sectors and allowed the project team to quantify all the project performance indicators and benchmarks\. Therefore, the baseline and its updates have provided a comparative set of data that allowed the team to compute changes with respect to individual indicators\. The original baseline survey was conducted in 1998, the two updates were conducted in 2001 and 2002 respectively\. The following are key constraints highlighted under four respective themes that guided the project design\. The tables/charts below illustrates some of the project's response to the indicative constraints vis-a-vis changes that have been achieved during project implementation: The Farming Sector Limited availability of inputs in local markets; Insufficient technical knowledge and deficiencies in the distribution system; High prices and weak purchasing power\. Table 1: Quantities of Modern Inputs Imported Monthly, 1998-2002 Mth/Yr Jan Feb Mar Apr May Jun Jly Aug Sep Oct Nov Dec 2001 511 890 171 441 225 119 146 1,573 1,840 604 1390 776 Cum\.2001 511 1401 1572 2013 2238 2357 2503 4076 5916 6520 7910 8686 2002 215 314 421 576 372 119 225 214 335 175 267 3690 Cum\.2002 215 529 950 1526 1898 2017 2242 2456 2791 2966 3149 6439 2003 181 171 921 895 165 276 170 319 2036 374 1365 207 Cum\.200 181 352 1273 2168 2333 2609 2779 3098 5134 5508 6873 7080 3 Cum = cumulative quantities Source: BNR importers and Rwanda Revenue Authority Chart 1\. Yearly Fertilizer Imports: 2001 - 2003 4,000\.00 3,000\.00 tons NPK 2,000\.00 DAP UREA Metric 1,000\.00 0\.00 1 2 3 Year: 2001-2003 - 32 -  Chart 2: Comparison Between Target and Achievement on Importation of inputs Target Achievement 10000 8000 6000 4000 2000 0 1998 2001 2002 2003 - 33 -  Table 2: Use of fertilizer and improved seeds among households: 1998-2002 Yrs Bean Price Manioc Price Maize Price Urea Price NPK Price PROVINCE kg Frw/kg kg Frw/kg kg Frw/kg kg Frw/kg kg Frw/kg BUTARE 1998 1,8 296 0 0,7 200 2001 2\.2 150\.0 150\.0 0\.8 150\.0 0\.5 1,8 2002 11\.7 2\.8 130\.0 5\.6 220\.0 9\.4 223\.0 BYUMBA 1998 5,8 218,7 4,9 12,5 81,5 1,1 150 11,4 228 2001 -- -- -- -- -- -- -- -- 2002 KIBUNGO 1998 8,2 166,3 3 0 0 0 0 0 0 2001 1,8 250 250 0 250 0 0,3 2002 1200 0,5 245 2 247 CYANGUGU 1998 3,6 164,3 3,6 0,5 96,7 10,2 153 12,2 162 2001 1,5 0 69,8 29,9 2002 20,7 1100 2,9 18 233 28,9 243 GIKONGORO 1998 1,4 264,7 3,2 26,5 136,5 1,6 131,4 3 143 2001 10,1 190 190 27,8 190 12,2 74,2 2002 9,3 300 12 170 3,8 200 39,8 220 GITARAMA 1998 3,8 240,9 1,5 26,6 153 0,8 150 0,2 290 2001 0,5 0,6 2 5,9 2002 5,9 650 6 200 5,9 237 9,8 237 KIGALI 1998 2,7 223,3 25 2,8 100 0,3 120 0,7 122 RURAL 2001 12 120 120 5,2 120 13,5 23,1 2002 16 650 10,3 200 34,4 220 33,8 223 KIGALI 1998 3,6 153,3 0 153,3 0,5 100 2,2 116,7 3 120 URBAN 2001 2002 GISENYI 1998 \. \. \. \. \. \. \. \. 2001 8,3 412,9 0,4 108,2 2002 9,3 120 56 220 95,2 223 KIBUYE 1998 \. \. \. \. \. \. \. \. 2001 0,6 120 120 7,3 120 0,3 4,5 2002 13,3 500 4,1 2,6 215 5,2 247 Total 1998 3,9 5,2 8,8 2 3,8 Average 2001 5,4 171,3 171,3 52,7 171,3 9 32,4 2002 10,7 733,3 6 19,6 218,3 29,3 231 % 1998 46 13 17,5 13 16,5 Farmers who 2001 23 0 21 19 48 declared use of this product to use 2002 37 \. \. \. 25,9 \. 35,2 \. 53,2 \. inputs (*) EAF = Per capita - 34 -  Chart 3: Changes in Average Input Use Among Beneficiary Farmers 70 60 50 1998 40 2001 30 Kg/tons 2002 20 10 0 Beans Maize Urea NPK Seeds and Fertilizer Chart 4: Price trends on the Main Inputs Imported - July 2001 ­ Sept 2003 350 300 250 200 150 100 50 0 Jul-01 Sep-01 Nov-01 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 Sep-03 NPK DAP UREA - 35 -  Chart 5: Price Trends on Agro Chemicals Imported - July 2001 ­ Sept 2003 2500 2000 1500 1000 500 0 7/1/01 9/1/01 11/1/01 1/1/02 3/1/02 5/1/02 7/1/02 9/1/02 11/1/02 1/1/03 3/1/03 5/1/03 7/1/03 9/1/03 Dithane Actellic Table 3\. Output/Input Differentials for Selected Crops Across Five Provinces PROVINCE Year Total Output Total Input Differential KIBUNGO 1998 82,929\.00 1,363\.66 81,565\.34 2001 685,864\.66 450\.00 685,414\.66 2002 198,061\.10 494\.30 197,566\.80 CYANGUGU 1998 10,823\.00 4,128\.48 6,694\.52 2001 51,111\.82 0\.00 51,111\.82 2002 108,252\.20 33,986\.70 74,265\.50 GIKONGORO 1998 40,447\.00 1,009\.82 39,437\.18 2001 83,936\.31 1,919\.00 82,017\.31 2002 235,425\.50 12,306\.00 223,119\.50 GITARAMA 1998 25,604\.00 1,093\.42 24,510\.58 2001 72,554\.38 0\.20 72,554\.18 2002 392,543\.50 7,555\.90 384,987\.60 KIGALI RURAL 1998 383,828\.00 724\.31 383,103\.69 2001 260,021\.41 1,440\.70 258,580\.71 2002 879,973\.50 25,505\.40 854,468\.10 Agricultural Marketing Low marketed surplus; Inadequate means of transportation; Low price margins on the sale of agricultural products; Inadequate marketing outlets; - 36 -  Chart 6: Changes in Average Outputs Among Beneficiary Farmers 8000 6000 1998 KG 4000 2001 2000 2002 0 Beans Potato Manioc Banana Sorghum Selected Crops Chart 7 Changed in Average Quantities of Crops marketed by Beneficiaries Farmers 700 600 500 1998 Quantities 400 2001 300 200 2002 100 Marketed 0 Beans Potato Manioc Banana Sorghum (10kg) (10 kg) Selected Crops - 37 -  Table 4: List of markets constructed and cost Province District Market Total cost 1 Gitarama Ntongwe Kinazi 23,239,902 2 Ruhengeri Nyarutovu Gakenke 20,986,120 3 Umutara Bugaragara Matimba 33,840,670 4 Kibuye Budaha Nyange 26,667,505 5 Cyangugu Bugarama Bugarama 24,262,841 6 Gitarama Ruhango Ruhango 15,894,608 7 Byumba Kisaro Gaseke 27,610,259 8 Gikongoro Mudasomwa Gasarenda 24,019,025 9 Kibuye Kiruhura Ruhashya 24,168,423 10 Gisenyi Kanama Mahoko 20,549,481 11 Umutara Murambi Kiramuruzi 25,742,784 12 Umutara Gabiro Gabiro 15,541,912 13 Kibungo Mirenge Sake 29,375,307 14 Umutara Rukara Ku Gitega 18,850,578 15 Kigali Ngali Ngenda Ruhuha 48,729,690 Total in Frw 379,479,105 Private Sector - Traders Low procurement capacity due to low capital and higher output prices; Inadequate transport means High level of taxation for imported materials including agricultural inputs; Chart 8: Trends in Credit Receipt by Traders 1400 1200 1000 Rfw 800 600 1000 400 200 0 1998 2001 2002 Avg\. Credit - 38 -  Table 5: Increased Private Sector Participation in Agricultural Marketing Average Q uantities of C rops Traded(1998- Geographic 2002) a coverage Bns Pota Sorg Oni Pnuts Rice Avg\. Dist Avg Qty Yr (tons) (tons) (tons) (tons) (tons) (tons) Km Tons 1998 17,8 16,6 12,5 3,0 2,4 8,5 69,3 2,3 2001 50,4 57,9 36,2 0,4 5,4 11,3 93,5 3,7 2002 66,0 127,7 148,0 7,5 6,9 26,3 22,5 2,1 Input Distribution Sector Low purchasing capacity of farmers; Inadequate transport means; Heavy taxation; Weak farm extension and technical support systems; Limited access to credit; Chart:9 Overall Trend in Credit Disbursement to Farmers A m o u n t ( F r w ) 2 5 0 , 0 0 0 , 0 0 0 2 0 0 , 0 0 0 , 0 0 0 1 5 0 , 0 0 0 , 0 0 0 1 0 0 , 0 0 0 , 0 0 0 5 0 , 0 0 0 , 0 0 0 - 02 02 02 03 03 toMarch toJune toJune toSept April toSeptembe\. toDece\. toMarch April July January July October January - 39 -  Annex 9\. Stakeholder Workshop Results Workshop on Implementation Completion of the Rwanda Agricultural and Rural Market Development Project (ARMDP) MINAGRI, December 16 -17, 2004 Summary of Final Report I\. INTRODUCTION 1\. The MINAGRI/World Bank has organized a two-day workshop on the implementation completion of the Agricultural and Rural Market Development Project (ARMDP)\. The purpose of this workshop was to evaluate the achievements of the project using a SWOT participatory analysis (Strengths, weaknesses, opportunities and threats)\. 2\. To ensure adequate focus on the project's implementation and its achievements at closing, the SWOT analysis took into account only strengths and weaknesses, complemented by an assessment of lessons learnt and the formulation of key recommendations\. Every observed strength, weakness as well as lessons learned have been cited in this report in order of importance on a scale of "very important" to "least important"\. Through this, it is then possible to identify areas of strengths that needed to be reinforced or replicated, areas of weaknesses that needed to be adequately addresses in similar/future projects and likewise, provide a scope for lessons to be applied as appropriate in the future\. 3\. The workshop was represented by about 100 participants including representatives of farmers' associations, local banks, inputs traders and importers, NGOs, various Ministries and Government agencies, District heads (local government), donor agencies, the private sector and the staff and coordinators of Bank and other donor projects\. 4\. Participants worked in five sub-groups each focusing on specific themes relevant to each of the project's components\. Group results were presented and discussed in a plenary session along with lessons learned and key recommendations\. II\. SUMMARY OF RESULTS FROM DISCUSSION GROUPS AND PLENARY SESSION Group 1: Access to Credit by Importers, Farmers and Farmers Associations (beneficiaries) 1\.1\. Line of Credit (LOC) 1\. The Project has demonstrated the following three main strengths in the implementation of the line of credit (LOC); (a) Tax reduction measures for importation of agricultural inputs which ensured profitability to importers; (b) Governments' decision eliminate the free distribution of agricultural inputs; (c) Reduced interest rate applied to LOC by local banks and improved terms of collaboration and cooperation between local banks and importers; - 40 -  2\. The following two weaknesses were observed: (a) The delay in information transfer to project stakeholders and beneficiaries; (b) Importers outside of the urban Kigali were not made aware of the LOC; participants noted that the pilot nature of the project may have been the cause of this weakness\. 3\. The following two important lessons were derived from the workshop: (a) The large investment by importers and traders in the agricultural inputs sector implies that the input trade sector can be targeted for greater profitablility and increased knowledge; (b) Banks are now convinced that the agriculture and livestock sectors are areas for sustained investment; 4\. It is recommended for future projects that: (a) The population and future beneficiaries be informed of credit schemes before project launch; (b) Such a mechanisms of credit accessibility, identified strengths in particular, be applied to future projects as appropriate; (c) The decree-law approving the removal import taxes on agricultural inputs be renewed; it is due to expire in 2004/5\. 1\.2\. Small Farmer Input Credit Facility (SFICF) 1\. Two strengths were identified as very important under the facility (SFICF): (a) Accessibility of credit to farmers on a revolving basis and the proximity of institutions that implemented the facility\. (b) Trainings of farmers on the use and management of credit\. 2\. Three weaknesses identified include: (a) The relatively high interest rate on the credit; (b) Inadequate understanding of implementation modalities of credit by staff of implementing local banks; (c) Inadequate understanding of credit facility by staff of government agencies and projects; 3\. The following lessons were derived from the implementation of the facility: (a) Increased outputs from production due to availability of credit and modernized extension system; (b) Greater understanding and knowledge of input use by farmers; (c) Greater sensitization of farmers' associations to work in teams regarding the receipt and use of credit; 4\. It is recommended under the SFICF that: (a) Credit be granted at a reasonable interest rate ; (b) Staff of local banks be adequately informed on the management of input credit facility; (c) Monitoring of the credit allocations be enhanced; (d) Local leaders be sensitized on the implementation and management of input credit facility; Group 2\. Extension System 2\.1 Specialized local Organizations (SLO) and Lead Farmers Extension System 1\. The following strengths were identified under extension activities: (a) The pilot / demonstration activities have changed/modified the cultivation system; (b) Production have increased substantially in project areas; (c) Greater collaboration has been initiated between local leaders and project beneficiaries (farmers); - 41 -  2\. Weaknesses identified include: (a) Inadequate preparation for project completion for phasing out; (b) Insufficient scope to implement activities for which training had been conducted; (c) Policy options conveyed by the project were not adequately explained; (d) Inadequate consideration for environment shortfalls (protection) regarding project activities; (e) Insufficient contact between inputs traders and farmers ; 3\. Lessons derived from the implementation of extension activities include: (a) The proximity of inputs selling counters (input shops) contributed to the increased use of inputs; (b) The project contributed to income generation for beneficiaries and increased availability of appropriate seeds\. 2\.2\. Training Program (content and approach) 1\. The main strengths under the project's training program include: (a) Sufficient training that enhanced the productivity of farmers; (b) The training curriculum covered the needs and concerns of the beneficiaries; (c) The training of farmers by lead farmers at the village level was a plus; (d) The curriculum and training materials were well prepared; (e) Monitoring and follow-up of trainings were adequately undertaken; (f) Field visits and tours of beneficiaries were very useful\. 2\. The only main weakness observed is the training activities was the non-consideration of gender issues in trainings program\. 3\. Lessons derived under the training program include: (a) Exploring a means by which lead farmer extensionists system can be used for other development activities; (b) How cooperation between local leaders and project beneficiaries can be enhanced; (c) How farmers can be better sensitized to work with local banks and other credit institutions\. 4\. Specific recommendations to be addressed by the MINAGRI include: (a) Project completion procedures must be planned and indicated to avoid surprising beneficiaries; (b) The modified extension system need to be widely diffused; (c) There should be a network system, a forum or body to enable farmers conduct discussions on agricultural constraints and solutions; (d) Seeds multiplication activities should be intensified and expanded and demonstration fields be replicated widely; (e) The lead farmers extension system should be adopted at the national level; (f) Extension activities should be reinforced and integrated at different levels; this should include, in addition to cultivation techniques, processing and conservation, marketing etc\. (g) More basic means of agricultural extension activities should be extended\. Group 3\. Seed Multiplication and Distribution Activities 3\.1\. Seeds Multiplication Activities 1\. Main strengths identified under seed multiplication and distribution activities include: - 42 -  (a) The project worked with individuals, NGOs and Associations; (b) The project trained farmers on seeds multiplication and used pilot fields for demonstration; (c) The project took farmers' views into consideration; (d) The project has initiated a sustainable activity of seed multiplication in key provinces like Ruhengeri and Gisenyi\. 2\. The following weaknesses were identified: (a) Seed multiplication activities were done in a limited number of areas by the project; (b) Methods of seed multiplication were inconsistent, conducted differently from area to area; (c) Follow-up of seed multiplication activities were not sufficient\. 3\. Two important lessons were derived: (a) The lead farmers extension system, while very much appreciated\. need better monitoring; (b) Seed multiplication can now be conducted by individual farmers\. 4\. Two main recommendations were highlighted: (a) The pilot/demonstration fields program should be put together with a seed multiplication plan; (b) The upscaled Rural Sector Support Project (RSSP) should pick up and continue the project's activities and integrate its strengths ; 3\.2\. Seed Distribution Activities 1\. The following strengths were identified relevant to seed distribution activities: (a) The project has distributed seeds for use in pilot/demonstration fields; (b) Free distributing of seeds is no longer in effect; (c) Seeds are now accessibility at the association level and to individual farmers; 2\. The following weaknesses were identified: (a) Seeds were not always available to farmers at times of need; (b) The certification and quality seeds were not taken into consideration during the distribution; 3\. Lesson Learned: Seed multiplication techniques have been mastered; however, improved seeds are insufficient and often unavailable, and those available are facing storage constraints\. 4\. Specific recommendations for projects currently implemented under the MINAGRI: (a) Encourage collaboration between farmers' associations, individual conscious farmers and enhance the scope of their activities; (b) Enhance the distribution system of selected seed through assistance for the establishment of selling points (comptoirs de vente); (c) Establish an adequate program of cooperation between seed multipliers and the National Seeds Service; (d) Review and improve the seed storage infrastructure\. - 43 -  Group 4: Agricultural Technology - Processing and Conservation 4\.1 Technologies and their Extension 1\. Important strengths identified under the activity include: (a) Trained lead farmer extensionists; (b) Modern cultivation techniques reinforced; (c) Self design by beneficiaries of income generating micro projects; (d) Pilot / demonstration field models; (e) Use of organic inputs encouraged; (f) Knowledge for the use of input credit; 2\. Weaknesses include: (a) Perpetuation of poor land management techniques, specially the mixing plants and trees; (b) Artificial Insemination was conducted minimally - in some places (c) Weak cattle management (in cowshed) 3\. Three main lessons derived include: (a) Farmers have acquired significant understanding of the importance of technology in the Agriculture sector; (b) Farmers have become accustomed to credit now have no fear of credit or of the prospect; (c) Farmers are in a better position to buy and use inputs\. 4\. The following recommendations emerged relevant to agricultural inputs: (a) There is a need of additional agricultural projects that could pick up and continue the ARMDP activities (b) Adequate mechanisms are needed to monitor the credit facility after project completion; (c) Sensitize farmers better on the use of improved inputs; (d) Greater attention needed for processing of agricultural products; (e) Develop markets exchanges at inter-region levels\. Group 5: Agricultural Marketing Poles and Private Sector Investment 5\.1\. Market Construction Activities 1\. The following have been identified as important strengths relating to sites of constructed markets: (a) The constructed markets serves as a bases for development oriented activities; (b) The cattle markets are particularly well constructed; 2\. Weaknesses identified include: (a) Some markets are relatively too small (b) Markets' plots are too small with no scope for extension; (c) Some markets sites were constructed far from farmers and travel distance is significant; 3\. The following lessons were derived from the above strengths and weaknesses: (a) Market construction activities should be implemented at the country level; (b) Adequate mechanism needed to ensure maintenance of cattle markets\. - 44 -  4\. It is recommended that: (a) Future planned construction of additional markets should focus on larger size markets; (b) Larger plots be allocated for market construction; (c) Construction of markets be based on a participatory designed plan and approved at the district level\. 5\. 2\. Trainings on Market Management\. 1\. Main strength: The principal strength of the project was the evident advantage of modern markets in the rural area\. The constructed markets have responded to the needs of traders in expanding their trading activities as well as of the local districts\. However, training on the management of markets have only been extended to some traders, not on all constructed sites; 2\. Other serious weaknesses identified are that: (a) The views of farmers were not considered in the design and planning of market construction; (b) The needs of farmers were not adequately met in the constructed markets; (c) Not all market management committees have been trained by project closing and those trained are not effective in conducting activities; (d) There is mismanagement of market activities, and lack of markets committees for some constructed sites\. 3\. The following main lessons were derived: (a) There is a need for additional modern markets ; (b) There is need to explore modalities in which farmers can increase their role and participation in market management 4\.It is recommended that: (a) Consideration be given to farmers' views prior to project implementation; (b) Market committees be trained and functional before launching of market activities\. III\. CONCLUSION After analyzing the results of the discussion groups and plenary sessions during the workshop, it was concluded that in general, the objectives related to the following themes have been largely achieved: (a) An innovative lead farmers extension system; (b) A successful line of credit for inputs; (c) An innovative small farmers input credit facility; (d) The private sector is now convinced to invest in the agricultural input sub-sector; (e) The content and approach for training of beneficiaries was effective and appreciated; (f) Local banks are now integrated in input credit activities; (g) The project was development focused\. IV\. OVERALL WORKSHOP RECOMMENDATIONS The following recommendations were presented during the plenary and adopted at the official closing ceremony: - 45 -  1\. Access to Credit by Importers, Farmers and Farmers Association (a) Disseminate more widely, information relevant to credit prior to project launching; (b) Renew/extend expiration of timeframe for law approving the reduction/elimination of taxes on agricultural inputs; (c) Provide information to importers outside of urban Kigali (include other provinces about) the procedures of credit acquisition; (d) Provide credit at reasonable or convenient interest rate; (e) Enhance the skills of local bank staff on procedures and management of inputs credit; (f) Monitor credit activities regularly using specified criteria; (g) Enhance mechanisms for financing under credit activities; (h) Sensitize local leaders on credit activities as well as it management; (i) Review and develop modes for credit management by recognized institutions; 2\. Extension System (a) Ensure adequate mechanisms for project completion and thereby avoid surprises on the part of beneficiaries at project closing; (b) Agricultural extension should include livestock activities; (c) Provide a networking system or a forum that would enable farmers to exchange on issues and solutions to common problems in agriculture; (d) Intensify seed multiplication activities and increase the pilot/demonstration fields; (e) Expand and replicate the innovate extension system developed by the project; (f) Ensure that the agricultural lead farmers extension system is adopted at the national level; (g) Reinforce extension activities at different levels - - cultivation techniques, processing and conservation, marketing, etc\. 3\. Seeds Multiplication Activities (a) Pursue the activities under pilot/demonstration fields and improved seeds multiplication; (b) RSSP should continue with the implementation of ARMDP activities especially areas of strength; (c) Reinforce the capacity of agricultural lead farmers extensionists (d) Increase materials for seeds multiplication; (e) Reinforce training on improved seed multiplication; (f) Enhance credit for agricultural inputs; (g) Explore means, with farmers associations and individual farmers the possibility of strengthening their capacities as formal or certified lead farmers; (h) Reinforce the distribution system for improved seeds by creating selling centers; (i) Put in place an adequate collaborative program for seed multiplication between farmers and the National Seeds Service (NSS); (j) Review and reinforce seed storage infrastructure\. 4\. Agricultural Technology, Processing and Conservation (a) Continue the implementation of ARMDP activities under other projects; (b) Provide greater assistance and facilities to agricultural input importers; (c) Increase the number of available agronomists and lead farmer extensionists and improve their work conditions; (d) Provide credit to farmers and ensure ease of procedures for application; (e) Develop market systems and product exchange at the regional level; (f) Ensure greater sensitization of farmers on the use of agricultural inputs; (g) Pay particular attention to processing of agricultural products\. - 46 -  5\. Agricultural Marketing Poles and Private Sector Investment (a) Construct fewer but larger markets; (b) Market design should include sufficient plots for construction; (c) Incorporate views of stakeholders before the project implementation; (d) Train and reinforce the market committees before the start of market activities; (e) Construction plan of markets should be approved at the district level\. III\. List of Participants NAMES INSTITUTIONS POSITION CONTACTS (P\.O\.Box, N°PHONE, E-MAIL) 1\.RUTAGARAMA Salehe Virunga Ruhengeri 0853 7871 2\.MBARAGA Faustin AAPM Mirenge 0842 587 3\.KAMANZI Michel District Kiruhura Prezida w'Impuzamashyirahamwe 4\.NIKUZE Espérance Disetrie Ruhengeri Ass\.APSAR 0845 9298 5\.MUTURENDE Martin Kahi District Prezida w'Impuzamashyirahamwe 6\.MPAGAZEHE Manassé Kamonyi District Lead Farmer IMPABARUTA 7\.GATABAZI Zablon Ndiza District Impuzamashyirahamwe I\.A\.B\.N\.D\.I 8\.KAYUMBA Godefroid Ville Ruhango VATA 9\.RWIGENZA Jean Paul District Budaha Budaha 0846 5623 10\.RWAMBIBI Callixte IAKI (Mutovu) Nshili Gikongoro 11\.NGANGURE Laurence R\.I\.R\.C\. Ruhengeri/Gisenyi 08524951 12\.KARANGWA Claude APDR Cyangugu 08620724 13\.NDIYUNZE Bertin ITABN Nshili 14\.KARANGWA J\.M\.V MINALOC 08434017 15\.ER GASORE ISAR Directeur B\.P\.138 Butare; 0830 6962 16\.RULINDA Jean Baptiste Budaha Umukangurambaga 08465623 17\.KAREMERA G\.Protais CARE Chef de Programme B\.P\. 550 Kigali 18\.MUGISHA Faustin MINAGRI Directeur (DAF) 08302785 19\.GATARE Callixte Caritas Rwanda Chargé des Programmes B\.P\.124 Kigali ; Tél\.574344/0845 3322 20\.MUNYAKAZI Sadate Banque Populaire Kinazi Agent de Crédit B\.P\. 96 Kinazi ; 0884 2304 msadate1@carmail\.com 21\.BARATIMANA Gaspard COGEBANQUE Chargé des Analyses de crédits B\.P\.5230 Kigali ; Tél\. 86875 ; 0840 3270 22\.RWABIDADI Eric CEPEX / MINECOFIN Chargé des Programmes Banque Mondiale et Tél\.0856 2216 FIDA eric\.rwabidadi@minecofin\.gov\. rw 23\.KABALISA Eric Centre IWACU Chercheur-Formateur B\.P\.1313 Kigali ; Tél\.0852 2391 24\.MUZEYI Anicet Banque Pop\.Bugarama Gérant District Bugarama : 0879 0585 25\.GASAMUNYIGA Evariste AAPM Technicien Agronome 08645293 26\.NYAGATARE André District Mirenge Agronome de District PDMAR- Kigali 27\.SERUSHAGO J\.Baptiste Mutura -Gisenyi Président IADUGI 28\.BATURA Vianney District Mirenge Animateur PDMAR- Kigali 29\.NSENGIYUMVA Franeois Mutura Gisenyi Président I\.A\.Turikumwe 30\.SEMASAKA Léonard Cyanzarwe-Gisenyi Gérant BP Rwerere 31\.MUNYANEZA J\.Claude I\.Z\.M\.G\.M Agronome de l'Association 08866884 32\.HABIYEZE J\.D I\.Z\.M\.G\.M Président w'Ishyirahamwe Ngenda/Kigali Ngali 33\.AHISHYIZE Prosper ABIYUNZE Président Intergroupement Gitarama/ Ntongwe 34\.RUHARA Déogratias Centre IWACU Chercheur-Formateur B\.P\.1313 Kigali ; Tél\.520193 35\.HARELIMANA Gaspard TMS Président Intergroupement 08844828 36\.ABIZEYIMANA Nuru UBPR Conseillcre Technique Gitarama : 0842 8070 37\.BAZIYAKA Aloys UBPR Assistant Administratif/DAT 0865 1480 38\.KALISA Eric UBPR Conseiller Technique Kigali Ngali; 0843 1356 39\.KAGWENDERI André D/AEF Cyangugu Directeur Agriculture Elevage\. 08517326 40\.KARANGWA Charles DAEF Butare Directeur Agri-Elev\.&Forzts 08500811/ 530077 ; kapchar2@yahoo\.fr 41\.MUKAMANZI Julie Akarere ka Save Umuhinzi Mworozi 0849 2859 42\.KANYEMERA Pe Imp\. Ahujumugambi Umuhinzi - 47 -  43\.NDABARASA Bernard District Bicumbi Agronome 0834 9340/ 502317 44\.SIMPUNGA Innocent CSC Gitarama Chercheur-Formateur 0853 3272 /562096 45\.SEZIBEERA Thomas Gisenyi Agronome/Cyanzarwe 08587748 46\.NYIRASOKO Espérance Gisenyi Présidente KAIGA 0841 4801 47\.RWAMUNINGI Pierre Gisenyi Umukangurambaga 48\.GAHIZI Blaise PECIPHO Journaliste 0848 6669 49\.KAGOFERO Michel UBPR Délégué Régional/ Gisenyi 0852 9352 50\.MUNZUYARWO Denys COODAF Coordinateur 08527669 51\.RWABUKWANDI J\.de Dieu ENAS Service Marketings 08421388 52\.UWIMANA Etienne ALICOMEC R\.B Coordinateur B\.P\.3137 Kigali ; 0851 0887/ 546555 ; alicomec2001@yahoo\.fr 53\.HAKIZIMANA Laurent Kigali Ngali-Ngenda Umuhinzi/ Impuzamashyirahamwe ABAHUJUMUGAMBI 54\.NKURIKIYINKA Innocent District Kiruhura Maire a\.i 0868 6217 55\.KAYITARE Joseph District Kiruhura Agronome 0845 2817 56\.RURANGIRWA Innocent District Kiruhura Umuyobozi w'Impuzamashyirahamwe ABADACOGORA 57\.RUSEKERABIGWI Jacques District ITABIRE Umuyobozi w'Impuzamashyirahamwe IMPABAYITA 58\.NZABAMWITA Thomas District Bugarama Umukangurambaga (L\.F\.) 59\.SINDAMBIWE Charles District Ndiza Umukangurambaga I\.A\.B\.N\.D\.I 60\.SEMANYENZI Didier ORINFOR Journaliste 0845 0227 61\.MPIRIKANYI Appolinaire BP Nyamata Gérant 561022 62\.BICAMWIGUGU Valens District Nyamata Agronome 561174 63\.RWABUZISONI J\.M\.V District ITABIRE Umunyamabanga Impabayita 64\.NSHIMYUMUKIZA Donat Ntongwe Maire 0853 3145 65\.MBONIGABA Théodose SDA-IRIBA Chargé de Gestion et Autonomie 0844 9739 ; 535215 iribassociation@yahoo\.fr 66\.KABILIGI Juvénal ITABAN Membre Nshili-Gikongoro 67\.HATANGIMANA Thomas World Vision/ Butare DAP Agriculture Coordinator thahatangimana@yahoo\.fr 0840 7411 68\.MIVUMBI Jean Claude CEPEX/ MINECOFIN Chef de service 0852 2371 ; jclaude \.mivumbi@minecofin\.gov\.rw 69\.NDAHUNGA Jean Bosco MINAGRI RSAD Tél\.Mobile :0868 6756 70\.NTIRUSHWA Félicien Centre IWACU Chercheur- Formateur Tél : 0886 7185 71\.HAKIZIMANA Théophile DAEF/ Cyangugu Agronome/District Bugarama 0879 0535/ 0885 9606 72\. MUSENGAYEZU Franeois Murenzi Supply Co Chef de service B\.P\.57 Kigali ; Tél\. 0830 0759 73\.NDIYUNZE Bertin ITABN Président Nshili- Gikongoro 74\.NIREMBERE Innocent BP Mutura Agent de Crédit Tél : 0885 7219 75\.MWIGERA J\.B PDMAR P\.A Tél\. 0841 6262 76\.RURANGWA Raphael DAEF/ Ruhengeri Directeur 0830 1498 ; pgerb@rwanda1\.com 77\.UMUTONI Nadia B\.C\.D\.I\. Chef de Bureau/Sce crédit 0850 5453 78\.KWIZERA Jean Claude TM Auditors SARL Assistant Auditor 0859 8593 ; claumba@yahoo\.fr 79\.SAFARI Philcmon BMR Directeur des marchés monétaires 0830 2256 ; saphilemo@yahoo\.fr 80\.TWAHIRWA Franeoise PDCRE DAF 0841 3489\. fafatwa@hotmail\.com 81\.KARANGWA Alex CEPEX Staff 0850 2135 82\.CYUBAHIRO Louis CEPEX Staff 0845 4362; cublewis@yahoo\.fr 83\.BUCAKARA David MINAGRI Directeur de la planification & statistiques 0886 0855 agricoles 84\.KAYITAYIRE Renée RDO Program Officer 0884 5988 85\.NGWIJE Pascal MINAGRI Cadre a la Planification 0853 2811 86\.NSANZIMANA Fidcle BP Nshili Gérant 0862 5124 87\.NKUSI GISANABAGABO UBPR Conseiller Technique Régional 0863 8969 88\.RUDACOGORA Jérome UBPR Conseiller Technique Régional 0865 0805 89\.MUKANTABANA Patricie BP Murehe Gérante 0845 8216 90\.BAGANINTWALI J\.B SOCOGEC Save Directeur 0830 5049 91\.MUKARUGWIZA Médiatrice CRS / Catholic Relief Services Agro Enterprise Coordinator 0853 0301; 82126 mediatricem@crs\.org\.rw 92\.KAMANA Théophile Ass\. ABUNGANIRANA Conseiller (ventes des intrants agricoles) 0883 5289/ Ruhengeri - 48 -  93\.NTIRUGIRISONI Samuel Collectif IMPA\.BO\.BU Président de l' IMPA\.BO\.BU Tél\.537 152 94\.N\.NSHIMIYIMANA Ester AMIABU Président de l'AMIABU Tél\.537 154 95\.GATWAZA P\.Claver MINAGRI Directeur de l'Agriculture 0863 6221 96\.UWIMANA Innocent MINAGRI/SNS Directeur 0830 2301 ; nss@rwanda1\.com 97\.GATORANO F\.Xavier Impuzamashyirahamwe Président - 49 -  Additional Annex 10\. Summary of Borrower's Completion Report 1\. Introduction The Agricultural and Rural Market Development Project (ARMDP) was funded by a World Bank credit to the Government of Rwanda under an agreement signed on the 16th July 1999\. The project was a three-year LIL (Learning and Innovation Loan) which was scheduled to close on 30th June 2003 but was extended to December 31st 2003 at the request of Government of Rwanda to enable completion of the activities which were still pending\. The purpose of the project was to study and test strategies that were to be used to implement the relevant agricultural and rural development programs in a flexible manner so that methodologies can be adjusted to suit needs of the beneficiaries and ensure that the planned outputs are achieved\. 2\. The Documents used to prepare the Government ICR In preparation of the ICR the following documents were used: (a) The project document; (b) Implementation manuals; (c) Supervision Aide Mémoires; (d) Quarterly/Annual reports and activity reports; (e) Interviews of persons, beneficiaries, implementing partners and field visits\. 3\. Objectives of the Government ICR The purpose of the Government ICR was to: (a) Assess the extent to which the project has achieved its development objectives and outputs as set out on the project documents, as well as any other significant outcomes and impacts; (b) Review the prospects for sustainability of the project activities; (c) Performance of the Bank and Government, including compliance with relevant Bank safeguards and business policies; (d) Provide data and analysis to substantiate the above assessments\. 4\. Implementation Completion Results by Component and Activities The results of the project implementation is presented below by activities within each component as follows: (i) objectives, (ii) strategy used to achieve objectives; (iii) outputs; (iv) impact on targeted beneficiaries; (v) problems encountered if any; (vi) comments and recommendations; and (vii) lessons learned\. Component 1\. Promotion of input use and distribution system\. The objectives of this component were to sustainably raise the supply of modern farm inputs, i\.e\., fertilizers, improved seeds, agrochemicals, and livestock supplies; and to stimulate demand for and facilitate access by farmers to these inputs\. Activities under this component include (i) Line of Credit (LOC); (ii) Input Credit Insurance Facility (ICIF); (iii) Small Farmer Input Credit Facility (SFICF);(iv) Advisory Services for the Adoption of Modern Inputs and Access to Credit; and (v) Multiplication and Distribution of Improved Seeds\. - 50 -  4\.1\. Line of Credit (LOC) a\. Objectives: The line of credit was to facilitate access to capital for modern input imports, avail the necessary resources and incentives to commercial banks to extend sales credit to agricultural input importers, and avail the necessary resources to a sufficiently large number of importers and thus promote competition in the sector thus control the prices; b\. Strategy used to achieve objectives: (a) Government stopped the importation of fertilizers for free distribution into country (subsidized fertilizer) (b) It suspended import duties on imported agricultural inputs from 2000 to 2005; (c) Government provided through a World Bank loan - a line of Credit which was to be used to reimburse Implementing Commercial Banks that would give credit to agricultural input importers; (d) Government and BNR agreed on a reduced interest rate for the funds given under the line of credit c\. Output as a result of use of line of credit The number of importers of agricultural inputs increased from 5 (baseline) to over 30 by the end of the project; Volumes of agricultural inputs imported increased over the project life\. The targets set for the importation of agricultural inputs were over exceeded, and this could be clearly be a result of the efforts put in place by government to attract the private importers, the banks and create an enabling environment to do good competitive business which include: (a) Removal of importation of free distribution fertilizers; (b) Removal of import duties as a strategy to attract private importers; (c) Putting a line of credit in BNR to reimburse Commercial banks that would give credit to importers; (d) Reduction of interest rates on the credit for importation of agricultural inputs; (e) Advisory services for the adoption of modern inputs and access to credit for the farmers\. d\. Impact (a) Increase in private importers of agricultural inputs from 5 in 1998 to over 30 by the end of the project; (b) Increase in volumes of importation of agricultural inputs into the country; (c) Stabilization of agricultural input prices; (d) As a result of the promotion of input use and distribution system there has been significant increase in the following aspects: i) in input trade in the country; ii) increase use of improved seeds and fertilizers among farm households; iii) increase in yields among the farmers; iv) increase in marketed produce by the farmers and; v) increase in production by the farmers\. e\. Lessons learnt This project has shown that it is possible to create demand for use of modern agricultural inputs through training farmers on economic advantages of modern agricultural input use\. f\. Comment of sustainability - 51 -  (a) The private traders and the banks have demonstrated that the importation of fertilizer is a credit worthy and profitable business that both parties are willing to invest into e\.g\. in 2002 only 650 MT of inputs were imported using the line of credit but the importers imported inputs totalling to over 6439 MT through credit outside the line of credit and their personal funding\. (b) As a result of increased demand stemming from sensitizing farmers in the use of modern inputs and access to credit, importers are willing to engage in importation of agricultural inputs and banks are willing to extend credit to importers\. g\. Recommendation Farmer training program should be strengthened and extended to all parts of the country so that demand for utilization of agricultural inputs is increased and sustained, and this will result into increased income to the beneficiaries and thus increasing their standard of living\. 4\.2\. Input Credit Insurance Facility (ICIF) a\. Problems encountered in the implementation of this activity This facility was planned for reimbursement of loans granted by traders or banks to farmers in case of natural calamities\. As a result of the line of credit which would avail funds to importers to borrow from commercial banks on a low interest rate, those that developed the project believed that this would be an incentive to the importers to give farmer input credit\. However, the importers after realizing that they had to provide full collateral as any other loan were not willing to give unsecured input credit to farmers associations for fear of loosing their assets in the event that they were not repaid\. There was a risk that in case the farmers realized that some payments had been done towards the credit they had defaulted they would never bother to pay\. There was no mechanism to assess the extent of damage to farmers activity in case of natural calamities\. b\. Recommendation The funds under this component can be used by the following facilities 1\. The Input Credit Insurance Facility (ICIF) can be a good system to safeguard those traders and banks that give agricultural inputs on credit to farmers, but it is recommended that these funds could be managed by a competent institution like an insurance firm\. The lending private trader or bank would be the one to take insurance using this facility (not exceeding two times) for the amount that they intend to lend to the farmers\. 2\. Since Bank Populaire (BP) has been given a grant through which will help in the establishment of a relationship between BP and the farmers, and since the bank is allowed to set a commercial interest rate, it is recommended that BP manage those funds like their own funds and prudently enough so that there is no need to safe guard them from risky loans\. 4\.3\. Small farmer Input Credit Facility SFICF (revolving fund) a\. Objective 1\. At the conception of the project the purpose of this facility was to establishment of a Small Farmers - 52 -  Input Credit facility (SFICF) to promote farmer cooperative lending activities for poor farmers and farmers groups, especially those in remote areas who may not be able to have access to bank lending or sales credit by traders\. This component provided grants to these poor farmers through their cooperatives through the establishment of revolving credit funds to finance the acquisition of modern farm inputs However this approach was modified to create a facility that would be available to farmers and farmers cooperatives that would have viable project that could be financed through Bank Populaire\. 2\. The objective of this facility was to avail funds to farmers who would have benefited from the training program of the project and did not have capacity to purchase agricultural inputs\. In this case these farmers and farmers association would apply for credit from their banks\. b\. Strategy of the Government (a) Developed a Memorandum of Understanding with Bank Populaire to give credit to farmers who applied and qualified for it; (b) Encourage meetings and interactions between farmers and bank staff so as to remove the mistrust between the two; (c) The project would train the farmers and farmers association on credit preparation credit application, credit management and repayment; (d) Support the preparation of project that are to be submitted to the banks (correction and guidance); (e) Liaison between the borrowers and the bank on credit requests that have been submitted to the bank, especially reasons for acceptance or nonacceptance so that further guidance can be given to farmers on their application\. c\. Role of the Banks (a) Timely evaluation of the project submitted to the banks; (b) Evaluation of the collaterals demanded by the banks on time; (c) Timely approval or rejection and communication to the applicants; (d) Sole responsibility to approve or reject an application\. d\. Outputs As a result of the efforts of all the parties involved a total of Frw 241,309,256 was disbursed, Frw 125,741,141 and 11,538,358 interest repaid with only Frw 23,739,875 representing only 20\.05% as delayed\. Since the beginning of this program of training farmers using the farmer lead extension system, there has been a significant increase of production as a result of a combination of factors namely: Better agronomical practices Improvement in the availability and utilization of modern agricultural inputs, access to credit ; Training through fertilizer utilization demonstration e\. Comments on credit disbursement and repayment (a) There has been a steady increase in disbursement of credit since this activity was started; (b) The level of repayment is reasonable good; (c) The level of delayed repayment is below the national level of defaulting which stands now at about 30% of all the credit disbursed (remarks by the Governor - BNR); (d) There is a steady increase in the number of farmers and farmers Associations receiving credit\. With more extension programs going on country wide it is clear that more credit will be availed to farmers and - 53 -  farmers associations which will create increased demand for modern agricultural inputs\. f\. Reasons which hinder farmers from accessing credit from banks The main finding of this project is that the main reason that prevents farmers from accessing credit is lack of: (a) knowledge in the advantages in the use of credit; (b) demand for credit; (c) knowledge in the management of credit; (d) knowledge on preparation of credit application; (e) skills to profitably implement their farming activities\. g\. Recommendations 1\. Training farmers and farmers associations is the main tool which can help farmers access credit and utilize it profitably and thus enable them to repay their loans\. It is therefore recommended that training programs be expanded country wide from the 1\.2% homesteads served by the project and target the whole country in the next 4 to 5 years\. 2\. The approach recommended is the use of lead farmers to train their fellow farmers and through group discussions, guided by training materials prepared by the project or from other sources as well as demonstrating the use of modern agricultural inputs and better agronomical practices\. These demonstrations should be small but frequent and done on farmer's fields 3\. The lead farmers can be organized and trained by extension partners like NGOs, churches, consultants and trained for a shorter time on specific topics which help them to understand market and profit oriented farming practices\. The trainers should always prepare and leave training materials to lead farmers to help them while training their fellow farmers\. Programs to support the installation of demonstration plots should always be provided for where they are applicable\. 4\. Sensitization programs involving Bank staff should be developed to increase access of credit to farmers and emphasized on a more regular bases\. Meetings between the bank staff and farmers and farmers associations should be organized on regular basis\. Such activities will bring the bank closer and to the people in terms of farmers understanding the credit conditions of the banks\. 5\. Improving the understanding of the workings of the bank and greater knowledge in the preparation of profitable projects will increase the number of farmers acquiring credit and the number of defaulters will reduce\. This will bring confidence to both the bank and the borrowers especially the farmers\. 6\. For the success of this program, the Ministry of Agriculture and Animal Resources must intensify monitoring of these programs and projects implementation by the farmers and also evaluate if the banks are not hindering the success of this activity, e\.g\. by delaying the approval of credit applications and not explaining to the applicants the reasons why these delays have taken place\. 7\. The Ministry should develop a uniform credit package to farmers' country wide so that all projects speak a uniform language when it comes to the credit facilities in the Ministry\. At times beneficiaries have become confused indicating that one facility is better than the other\. If possible all farming programs of credit should be of the same modalities, be that they are from which Ministry or which organizations\. - 54 -  8\. All projects and programs should include a component which will encourage farmers to start saving and credit programs in their associations so that banks will find it easy to work with them\. h\. Supervision methodology of SFICF credit disbursement and repayment 1\. MINAGRI has now a revolving fund in all BP branches in the country, the project which was supervising this facility has ended\. It is therefore recommended that since there are several MINAGRI projects operating in different parts of the country, there should be a system that will designate provincial personnel to these projects for supervising these funds so that these projects are given a role of supporting the farmers in acquiring modern agricultural inputs\. This will not burden the other program since all have some credit facility that they are also implementing and mainly through BP\. This supervision will ensure sustainability of access to credit by farmers\. 2\. Considering RSSP and Cash Crop Project in relation to the existing methodology on SFICF credit disbursement and repayment: The Rural Sector Support Project could support farmers in Provinces where they are rehabilitating marshlands for the purpose of acquiring credit for agricultural inputs to use in growing rice and use in other crops\. 3\. The Cash Crop Project could support farmers in those areas that they are mainly operating in so that farmers can access those funds for acquiring credit for purchasing agricultural inputs for those crops the project is specializing in and other crops, etc\. 4\.4\. Advisory services for the adoption of modern inputs and access to credit a\. Objectives Training and demonstration activities were used to raise farmers technical know-how about usage of modern agricultural inputs, access and management of credit\. This training would reduce repayment risks and sustain access to credit; this would in turn increase farmer's access to modern inputs, increase in productivity, profitability, encourage adoption and improve their standard of living\. b\. Strategy The strategy used involved many activities being identified before the project signed contracts with the SLO's and developed programs with field staff: (a) identification of farmers training needs; (b) preparation of training materials; (c) training of trainers to train lead farmers; (d) training lead farmers using specialized local organizations (partners) and MINAGRI extension staff in some districts; (e) training of farmers using the lead farmers that have been trained (for number of beneficiaries; (f) training members of farmers association management committees in recommended association management techniques; (g) training private traders in business management and assisting them to organize their enterprises, and who, in turn helped them apply for credit from bank populaire using their businesses and stocks as collateral\. This attracted traders into dealing in agricultural input trading, produce marketing and agricultural produce processing; (h) implementation of demonstration plots on farmers gardens; (i) assisting traders in investment into agro related businesses- input marketing, produce marketing and - 55 -  processing, through training them in business management and organization, records keeping and preparation of credit application and management; (j) filling farmer's technical data sheet helped farmers keep records and be able to evaluate their progress as a result of use of modern agricultural inputs in combination with the technical knowledge they have acquired through the training in the topics selected\. c\. Outputs 1\. Farmers training materials (14 booklets on different topics) were prepared, printed and distributed to lead farmers during the training exercise by the project as shown below, 2\. A total of 1,242 lead farmers, 1,109 farmers association management committees, 400 private traders and 22,306 have benefited from the training program\. About 22,843 homesteads have been trained using lead farmers\. Even these farmers that have been trained are training other farmers on what they have been trained and from their improved agricultural practices\. The local leaders have been instrumental in supporting developmental activities like: (a) Increased use of modern agricultural inputs; (b) Increased agricultural productivity; (c) Increased income from agricultural activities; (d) Increased effective demand for modern agricultural inputs; (e) Increased supply and availability of modern agricultural inputs; (f) Increased access to agricultural credit especially from Bank Populaire; (g) Better management and repayment of credit\. Generally there has been improvement in capacity of farmers to increase their income and thus better standards of living d\. Sustainability (proposal) 1\. Secondary school, Universities and Institutions of Higher Learning have a big population of people who could be targeted by the MINAGRI for training in agricultural extension services if anything to contribute to the economic well being of their families through assisting their homes in practicing better agricultural methods\. In most cases students from such institutions have not been contributing any technology or practices to their parents' agricultural activities\. It is recommended that education syllabi should include studies about practical agricultural extension at all levels\. 2\. In the next few years most of these student will be the rural population which will be due to proper orientation while they were in schools and practicing agriculture as there fore parents did, this will not change their income nor that of the country\. In some cases these students have been on long holidays and have acquired no capacity to assist their parents\. It is sad that this resource is not exploited when for example there is one or two students from every ¨UMURENGE¨ in this country or one student from every twenty three homesteads in this country\. In fact to make this approach more integrated in our educational system this approach should be developed for all educational levels\. Ministry of Agriculture and Animal Resources should strive to influence the Ministry of Education to consider introduction of agricultural extension syllabus at all levels in our Educational system in secondary schools and other institutions of higher learning\. 3\. It would be important therefore for MINAGRI to initiates and carry out a study of this program and initiate a discussion with the Ministry of Education for the purpose of developing agricultural extension - 56 -  curriculum for students in all levels in schools\. This curriculum should be leading students to contribute to their parents' agricultural activities in: (a) use of modern agricultural inputs; (b) preparation of credit applications; (c) agricultural business plans and cash flows so that they develop the practice doing their farming activities on program; (d) train their people in better agricultural practices ­ agro forestry, crop rotation, contour planting, soil conservation, preparation and use of organic manure, post harvest management and marketing techniques, etc\. e\. Recommendations 1\. Expansion of the Farmer Led Extension System (FLES) in all dimensions ­ in geographical coverage and depth of the understanding of farming technology 2\. Ensure a sustainable support to training of lead farmers in collaboration with other developmental organizations like NGOs; churches, schools, Consultants and projects 3\. Target existing farmers' organizations for training and where need be encourage and support the formation of new associations for the purpose of better management and organization of training programs 4\. Influencing the Ministry of Education to include subjects that can contribute to student's capacity to assist their parent's ability to improve their agricultural practices and preparation of credit applications, through courses like agricultural extension, small project preparation for credit acquisition\. 5\. MINAGRI should concentrate on designing of agricultural policy and strategy and making sure that it is enforced, preparation of technical packages for use by the different extension agents, monitoring and coordinate extension services for these organizations, development of quality seeds which are high yielding, resistant to disease and if possible for specific areas of Rwanda\. 4\.5\. Multiplication and distribution of improved seeds a\. Objective The objective of this activity was to in collaboration with the National Seed Services (NSS) engage and give capacity to farmers association in seed multiplication and seed distribution\. With the Extension program the project was implementing, using the farmer lead extension system, it was foreseen that this could increase demand for improved seeds\. It was therefore planned that in order obtain enough quantities of seed required, there would be need to use farmers associations for multiplication and marketing\. b\. Strategy (a) Identification of improved seed needs; (b) Identification of existing seed multipliers and those potential associations; (c) Development and implementation of a program to train those selected associations in seed multiplication and marketing; (d) Support associations in acquisition of basic seeds and fertilizers to start seed multiplication\. The resources so provided would be used by the association as a revolving fund in seed multiplication and marketing; (e) Sensitizing traders and seed multipliers in the special seed packaging, quantity and labelling of the NSS - 57 -  purposely for quality control\. This would assist NSS in ensuring that their products are protected from adulteration at the same time improve on quality guarantee; (f) Support the NSS to monitor and supervise seed multiplication activities for purpose of quality control and certification of the right quality seeds; (g) Create demand for improved seeds through training and demonstrations; (h) Support the National Seed Service in Publicity and marketing of improved seeds; (i) For the rice crop, and in particular that Government has a program to improve the production of rice to make the country self sufficient and have a surplus for export\. The project supported the introduction of several rice lines from WARDA for selection to those well adapted to our climatic conditions\. Those varieties can therefore be introduced to our farmers for multiplication and commercial farming\. This is in view that for the last decade no new varieties had been introduced due to the break down of research, the seeds had been mixed and thus quality of rice had been lost\. The introduction of variety selection would be done through the participatory method and this would enhance the introduction of the adapted varieties to the farmers as they would have been participating in its selection; (j) Creating capacity of specialized local organizations to train farmers organizations in seed multiplication and distribution\. c\. Outputs (a) Overall, well organized and trained farmers organizations in rice seed multiplication and marketing; (b) Increase in production of improved seeds; (c) Increase availability of improved seeds; (d) Improved marketing system of improved seeds; (e) Increased productivity by farmers due to better agricultural farming practices and availability of quality seeds; (f) As a result of improved packaging farmers have confidence in the quality of the seeds they purchase than before, as they are clearly market and in different quantities that they can buy sealed, thus reducing the chances of adulteration; (g) Traders dealing in marketing of other agricultural inputs other than seeds have been attracted to trade also in improved seeds thus making it even easier for the distribution of seeds\. d\. Recommendations 1\. Organize more farmers' organization to get involved or take seed multiplication as a business county wide so that the needs of improved seeds can be satisfied 2\. Support capacity building for the National Seed Service so that the institution can effectively monitor seed multiplication for the purpose of quality control and certification\. This will ensure the availability of high quality seeds to farmers resulting into increased demand for seeds, increased income for seed multipliers thus sustainable production and marketing and this will result to increased income for the farmer due to increased productivity 3\. With enough capacity of farmers' organizations (private seed multipliers) to multiply enough improved seeds, the National Seed Service can relinquish the role of seed multiplication and concentrate on registration monitoring and certification, this will reduce the conflict of interest that could result of the NSS producing seed and at the same time doing certification on its own multiplied seeds\. Component 2\. Support to local agricultural marketing system - 58 -  To encourage farmers to enter produce market exchange system to improve the performance of local markets in the rural areas through the following activities\. Activities under this component include: (i) Crop conservation, processing and marketing technologies; (ii) Strengthening of Rural Marketing Agricultural Marketing Poles; 4\.6\. Crop conservation, processing and marketing technologies a\. Objectives (a) To maintain quality of the farmers produce in order to assist farmers find the best markets possible or enable farmers to be able to market their produce when the market prices are their peak so as to maximize their profits, for example packaging for produce which adds value and maintains quality; (b) For the purpose of enabling farmers compete for the best markets without fear that their produce will loose quality if it stays any longer thus loose better price forcing the farmer to sell their produce just soon after harvest when normally the prices are at their lowest for example, coolers for milk and cold storage for fresh fish; (c) To assist farmers acquire processing facilities for their produce so that they can add value to them or have longer shelf life for their produce thus earn better income for example grinding grains for marketing purposes and processing of fruits\.; (d) Work with Research and Development institutions and organization to develop, test and disseminate adapted agricultural produce conservation and processing technologies to farmers and farmers associations\. b\. Strategy (a) Developed a program with Kigali Institute of Science and Technology to develop, test and disseminate adopted technologies; (b)Organized farmers association to participate in processing their produce so that they can easily get markets and thus stimulate increase production; (c) Introduce small processing machines which are affordable to farmers associations and traders with small capital, so that after demonstration and adoption, farmers associations and interested private investors can engage in process farmers produce \. c\. Observations (a) The main objective of this activity was to develop conservation, processing and marketing technology, but due to the lack of Research and Development Institution, the only one, KIST did not succeed in introducing any new technology; (b) There are a number of small scale artisans who have some knowledge of how to maintain and repair some machinery but are not qualified to participate in developing and disseminating of any type of technologies\. The project should find a way of organizing these artisans for training to improve their skills, so that they attain the knowledge to maintain, repair and fabricate spares and simple tools for the existing machinery and machines which are rendered useless due to the lack of spare parts; (c) During the implementation of this project, it was evident that there was need for introduction of new technologies, but from examining the technologies available, the biggest problem is with the repair, maintenance and fabrication of small parts so that the technologies available can be operational to their capacities; (d) There is also need to train the users of the existing technologies to improve their capacities to maintain, and repair the existing technologies thus increasing their life span and also in reduce the operational costs\. - 59 -  d\. Outputs (a) In collaboration with CSC, introduced a TOFU making machine and a sunflower oil extraction machines to farmers associations, this was intended to attracted an increase in production of Soya beans and Sunflower production in the district\. This resulted in adding value to the produce by increasing their market competitively thus increasing farmer's income\. Increase in farmer's income enables them to utilize more modern inputs as the results from increased productivity are easily tangible; (b) Introduction of a one pass Small Rice Milling Machine to rice growers associations was aimed at availing affordable technologies, so that they can participate in processing thus adding value to their produce\. This reduced the number of middle men thus increasing earnings for farmers and their association; (c) Introduction of Hermetic silos and Grain safes and trained farmers and prospective users so that the quality of the farmers harvest is improved through proper storage\. The advantage of these silos and grain safe is that they do not need any chemicals to control insects which causes big loses once they attack the produce\. It is estimated that almost 30% of the farmers harvest is lost due to poor post harvest handling which includes storage\. e\. Recommendations 1\. There is need to create capacity in machinery maintenance and repair; 2\. There is need to organize and train artisans to improve their skill in maintenance and repair of the machines and machinery in the country; 3\. Train artisans to produce fabrications which can be used to replace small parts on machines and machinery; 4\. Train artisans in credit applications so that they can have access to credit for purposes of financing their operations; 5\. Support Research and Development institutions in the development of new technologies suitable to our requirement;\. 6\. There is need to organize women associations to assist in the transfer of technology from Research and Development Institutions\. 4\.7\. Strengthening of Rural Marketing Agricultural Marketing Poles a\. Objectives - Infrastructure improvement The improvement of basic marketing infrastructure, which would (i) create the incentives for supplementary investment in storage and other marketing infrastructure and equipment by private traders\. The improved market infrastructure would (ii) also assist the farmers in improving the quality of their produce while marketing their produce and being protected from direct sunshine and rain and without fear of returning home their produce because of not being sold on a particular day by storing them at the market in their stalls\. (iii) Also train farmers in marketing techniques for their produce (this activity was accomplished under the training and extension program), (iv) train livestock keepers in good animal husbandry practices in order to increase the value of their animals and reduce costs of production thus increasing their income\. b\. Strategy - 60 -  1\. Identification of market sites: In the identification of market site to be improved the following conditions were suppose to be guiding factors: (a) Be a major trading zone or has clear potential to become one; (b) Demonstrated capacity of beneficiaries to participate in infrastructure investment; (c) Guarantee that improved market site would be open on a daily basis\. 2\. In this regard all Provincial administration heads were requested to list four markets based on the criteria's indicated above for the markets they prefer to be constructed in order of their preference\. 3\. A team of Project staff visited most of the sites and discussed with the local leaders on which of the markets would better suit the conditions\. 4\. At the level of the District the project recruited a consultant who would study with the help of the district leaders of the design of the market\. This design was approved by the District leaders before the project would recruit a contract through the Nationals Tender Board, to construct the market\. 5\. The construction of the market was supervised by the Engineer who designed the market\. 6\. On regular basis a progress reports from the supervising Engineer was to be sent to the project Coordinator\. A total of 15 markets were constructed among which three were livestock markets and the rest crop markets\. c\. Observations - 1\. Design of the market: Though the procedures prescribed consultation with the local leadership on the design of the market within the budget provided, it was realized that there was need to widen the consultations further so that the beneficiaries get the feel of what was being done for them\. This means that at least two meetings should have been held with market traders so that a program of market is discussed with them and reflected in the design\. This would maybe have increased the beneficiaries contributions to the construction of the markets\. 2\. Contribution of beneficiaries: Though beneficiaries were expected to contribute towards the cost of construction of markets there was no willingness from the most of the local authorities\. This could be attributed to failure to mobilize the beneficiaries by the local authorities of the beneficiaries so that the contribute their part\. Most of the contribution was supposed to be in kind like building stones, sand, poles and labor so it was easy to be achieve if there was willingness on the part of the leadership\. d\. Outputs (a) Construction of 12 crop markets and 3 livestock markets; (b) Training farmers in marketing techniques, this activity was implemented under the training and extension program which was done by the Specialized Local Organizations (SLO) and Ministry extension staff who were operating in other districts\. e\. Recommendations - 61 -  1\. In the same light of assisting farmers to improve quality and security of their crops at the marketing points, it is recommended that more market sites are improved upon especially on the basic infrastructures like toilets, abattoirs, water trapping form the roof tops and building some stores where farmers can keep no perishable surplus not sold for the next market\. 2\. After now discussing with beneficiaries during the process of construction, there has now come up a strong need to build a concrete floor covering the market area and be covered with iron sheets so that farmers can sell their produce under shade from sunshine and rain\. 3\. It is also recommended that a storage facility be added to the market infrastructure of storage of surplus produce to reduce transport costs which may result to farmers selling off their produce at a give away price to escape the burden of taking them back home\. 4\. Working with the local committees, modalities to increase the frequency of opening the markets on a daily basis should be put in place\. Such a facility of great importance to the farmers where are the main outlets of their produce should be let to operate on a daily basis\. 5\. The management of the market sites should be left to the Market management Committees which are elected by those who use the markets\. This will ensure better maintenance of the markets\. The district authorities may continue with the collection of taxes and market dues\. - 62 -  - 63 -

APPROVAL

P174251

 The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 06-Dec-2021 | Report No: PIDA31923 Oct 21, 2021 Page 1 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Serbia P174251 Serbia Local Infrastructure and Institutional Development Project Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) EUROPE AND CENTRAL ASIA 23-Dec-2021 24-Feb-2022 Transport Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Republic of Serbia Ministry of Construction, Transport, and Infrastructure Proposed Development Objective(s) The Project Development Objective is to improve LSGs' capacity to manage sustainable infrastructure and to increase accessibility to economic and social opportunities in climate aware manner\. Components Component 1\. Climate Smart Mobility Component 2\. Strengthening Capacity for Infrastructure Service Delivery Component 3\. Project Management and Awareness Raising PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 300\.00 Total Financing 300\.00 of which IBRD/IDA 100\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 100\.00 Oct 21, 2021 Page 2 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) Non-World Bank Group Financing Other Sources 200\.00 FRANCE: French Agency for Development 200\.00 Environmental and Social Risk Classification Moderate Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B\. Introduction and Context Country Context 1\. Serbia is an open upper-middle-income economy that aspires to become a member of the European Union (EU) and reach European levels of prosperity\. Major fiscal consolidation and other reforms since 2014 have helped to restore macroeconomic stability and pave the way for the decisive response to the COVID-19 pandemic\. As a result, the economy contracted only 0\.9 percent in 2020 and is projected to grow 6 percent in 2021\. At the same time, the country needs a stronger focus on the key constraints to inclusion, sustainability, and resilience\. Poverty and inequality levels in Serbia are still significantly higher than in comparator countries, with disadvantaged groups and subnational regions persistently lagging behind the average population\. Environmental sustainability concerns have become more prominent, with pressing issues such as air pollution and an extremely carbon-intensive economy\. Improvements in government effectiveness and accountability have stagnated in recent years, despite some reform efforts, holding back stronger progress across other areas1\. 2\. The ongoing global COVID-19 pandemic reveals the need to further build resilience for a range of vulnerable people and institutions in Serbia\. The COVID-19 and related containment measures are taking a heavy toll on the Serbian budget as the authorities provided a massive stimulus package to the economy and households totaling around 12\.8 percent of GDP\. However, the budget deficit expanded significantly – to around 8 percent of GDP in 2020, and 6\.9 percent in 2021\. Public debt is expected to flatten as of 2021 and stay around 60 percent of GDP\. Going forward and supported by the recently approved IMF program (June 2021) fiscal deficits are expected to return to levels similar to those before the pandemic (1-3 percent of GDP) which will ensure a sustainability of the public debt\. The economic growth prospects will depend on the length and depth of the crisis caused by the pandemic and the implementation of containment measures\. 1 Sources: World Bank\. 2020\. Serbia Systematic Country Diagnostic: Update Oct 21, 2021 Page 3 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) The World Bank has taken a number of actions to support the Government of Serbia (GoS) in responding to the COVID-19 global pandemic crisis\. 3\. The European Green Deal will impose significant obligations on Serbia to take steps toward a cleaner, low carbon future because of Serbia’s accession ambitions, and the fact that the EU is the major trading partner\. The European Green Deal – a new growth strategy towards modern, climate neutral, resource- efficient and competitive economies – sets ambitious climate action goals, including reduction of GHG emissions by 55% by 2030 and carbon neutrality by 2050\. Serbia’s ambitions towards the EU Green Deal and addressing climate change and environmental challenges was endorsed by signing the Sofia Declaration on the Green Agenda for the Western Balkans in November 2020 and the adoption of 58-point action plan for Green Agenda for the Western Balkans for the period until 2030 at EU-Western Balkan Summit in Slovenia on October 6, 2021 as well as number of relevant policies such as the adoption of the Sustainable Urban Development Strategy (SUDS) from June 2019 and its Action Plan in March 2021, adoption of the Law on Climate Change in March 2021, enactment by the Parliament of four new energy related laws in April 2021\. 4\. Much of the burden for delivering on the green commitments of the Sofia Declaration will fall to Local Self Governments (LSGs) who are already struggle with infrastructure in need of renewal and increasing environmental pollution\. Serbia has Europe’s worst per capita record for pollution-related deaths2 (175 per 100,000 inhabitants) and the Environmental Performance Index shows Serbia’s environmental health and ecosystem vitality scoring below most Western Balkans Six (WB6) countries and comparator transition economies of Europe\. Serbia’s CO2 emissions per unit of GDP (in PPP terms) are about twice those of the EU average\. Energy productivity is low, at one fourth of the EU28 average according to Eurostat data and is highly dependent on fossil fuels\. Transport is the second main contributor to GHG emission and significant source of air and noise pollution in cities\. This is a sector where emissions are growing the most\. At the same time, the country has some of the lowest resource productivity and recycling rates in Europe, with much of municipal waste being disposed in landfills that do not meet sanitary standards while most wastewater is discharged into recipients without treatment\. Sectoral and Institutional Context 5\. Serbia is organized as a unitary state, with a dominant central government level and is characterized by significant regional inequalities\. At the subnational government levels, local self-government units (also known as LSGs) consist of municipalities, cities and the city of Belgrade\. The 145 eligible LSGs (117 municipalities, 29 cities and the capital City of Belgrade) have an average population of 48,000, being 37 percent higher than EU average 3\. They are grouped in 25 districts, 13 are classed as “lagging regions,â€?4 of which four regions (JablaniÄ?ki, PÄ?injski, TopliÄ?ki and RaÅ¡ki) are among the poorest in Serbia, and in recent 2 https://gahp\.net/wp-content/uploads/2019/12/PollutionandHealthMetrics-final-12_18_2019\.pdf 3 Law of Territorial Organization of the Republic of Serbia, ("Official Gazette of the Republic of Serbia ", no\. 129/2007, 18/2016, 47/2018 and 9/2020\. The scope of activities under this Project is limited to investments in the local infrastructure and institutional development of eligible LSGs as defined in the Project Operations and Grant Manual only\. 4 Identified as in the EU cohesion policy’s “Lagging Regions Initiativeâ€?, regions are divided into four categories in line with the “Lagging regions initiativeâ€?: (i) leading regions; (ii) “low growthâ€? lagging regions (iii) “low incomeâ€?, conver ging lagging regions and (iv) ‘low income’, diverging lagging regions\. Oct 21, 2021 Page 4 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) years their relative poverty has also been worsening5\. Most responsibilities are shared between the central government and the LSGs\. Regions mostly play a coordinating role with limited functions, but there are efforts of the GoS and the LSGs to create intermunicipal cooperation bodies\. The main body lobbying on behalf of the LSGs is the Standing Conferences of Towns and Municipalities (SCTM), which represents their interests and may provide a convening forum for more integrated planning and policy development\. 6\. Among the main functions of the LSGs6 in Serbia are services delivery, management of existing assets, and implementation of local investments, often through local public service companies owned by the LSGs\. The LSGs are established to support local economic development, develop, maintain and manage local roads and other public infrastructure, and provide local services including for waste, water, public transportation, education and health facilities and other services important for local development\. In addition, the LSGs are obliged to exercise so called “public responsibilities“, tasks under the competences of the GoS delegated to LSGs through special laws (sectorial laws)\. In undertaking these functions, the LSGs are guided by regulation around planning, implementation and service delivery, finance and infrastructure network management\. While much of the policy and regulation around these areas is in place, the LSGs often lack the capacity and financing to effectively implement them\. This means that existing resources are either not used or not used effectively\. A key objective of this project will be to build capacity for the more effective execution of existing systems of implementation\. 7\. Decades of underinvestment and weak management of infrastructure and service provision have left LSGs’ infrastructure in a poor state and contributing significantly to environmental pollution\. This has led to deteriorating living conditions in many cities and towns, increased vulnerability and considerable variability in living standards across the country\. Local roads, estimated at twice the length of the national road network, need renewal, while the residential sector accounts for the largest share of electricity and heat energy consumption in the economy\. Less than 25 percent of the population has access to safe water sanitation services, and collection rates of household waste are low and much of the municipal solid waste deposited in unsanitary landfills\. The renewal, upgrade, and greening of ageing infrastructure and public service delivery and improved accessibility to markets, jobs and services are crucial to increase the attractiveness of the cities, towns and lagging regions and to drive economic growth\. 8\. Local transport infrastructure, which is among the largest expenditure items for LSGs and the main focus for this operation, suffer from poor infrastructure quality and poor road safety performance, rapidly increasing car ownership and declining public transport services\. The poor quality of LSG transport infrastructure is considered a major factor preventing people from regularly accessing social and educational services and employment opportunities outside their immediate communities\. With an average car age of 17 years and poorly maintained diesel engines, transport is the second biggest contributor to GHG emissions and the third main contributor to overall air pollution levels\. In addition, emissions from the transport sector are increasing with forecast vehicle ownership levels increasing by 30 percent to reach 429 cars per 1,000 inhabitants by 2033\. According to WHO (2018) the road crash fatalities for 2016 in Serbia are 7\.4 per 100000 population, which is 50 percent higher than the EU average, with an estimated cost of 3\.1 percent of GDP7 in 2016\. The majority of accidents happen on local streets and roads and the Bank has supported Serbia with their Road Safety Strategy which was adopted in 2016\. 5 Western Balkans and Croatia Urbanization and Territorial Review (2019) 6 Law on Local Self-Government, "Official Gazette of the Republic of Serbia", no\. 129/2007, 83/2014, 101/2016, 47/2018 7 World bank group, global road safety facility, https://www\.roadsafetyfacility\.org/country/serbia Oct 21, 2021 Page 5 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) 9\. Serbia is prone to natural hazards with significant potential impacts on people, infrastructure, and accessibility to affected regions\. For example, frequent floods in the country affect up to 200,000 people annually at an estimated cost of $1 billion8 and the floods in May 2014 pushed around 125,000 people into poverty with damage estimated at 2\.7 percent of GDP\. Much of the burden of addressing the consequences of disaster impacts falls on LSGs\. Serbia has already taken initial steps in establishing a more effective institutional framework for disaster risk response but there are only very limited incentives to fully mainstream disaster mitigation activities and climate change adaptation at the local level\. The Bank supported development of the methodology for the transport network vulnerability risk assessment at central level but there is no equivalent approach for the local network\. With the support of EU, the GoS is currently working on developing standards for local road networks and low volume roads and on usage of recycled material for road construction useful for the project implementation\. Addressing disaster risk assessment and climate change adaptation will be a key component for this operation, both in terms of individual investments and technical assistance\. 10\. To support local economic and urban development, the GoS adopted the Sustainable Urban Development Strategy (SUDS) 9\. The SUDS present an integrated package for planning the next stage of the development of Serbia’s cities and municipalities\. Its implementation will contribute to Serbia’s EU accession process and harmonization of its urban development policy with the objectives of the EU Urban Agenda and the EU Green Deal\. The SUDS is the first step in implementation of the UN Habitat III New Urban Agenda\. The SUDS envisages that the Ministry of Construction, Transport and Infrastructure (MCTI), as a responsible body, will establish a special unit for the implementation of the Strategy\. Among main weaknesses recognized in Serbian LSGs are (i) insufficient and unstable access to financing, (ii) missing and/or outdated infrastructure, (iii) low accessibility, (iv) lack of participatory approach, (v) legacy and ineffective public utility companies and services, (vi) vulnerability to climate change and air pollution, and (vii) lack of sound asset and investment management frameworks, making wide range of opportunities for improvement of these aspects\. The SUDS will be complemented by various local sectoral plans including Sustainable Urban Mobility Plans (SUMPs) which will be an important focus for the proposed operation\. The SUMP is a strategic plan overlooking the whole functional urban area and necessary cooperation between different sectors and ensuring a variety of sustainable transport options for the safe, healthy and fluid passage of people and goods\. 11\. Citizens’ participation in planning infrastructure services is weak in practice although there is a legal obligation for all LSGs in Serbia to organize public debates in the process of budget preparation \. The potential of e-Government portal10 is still not fully utilized while partnerships and bottom-up approaches for community engagement are missing\. Citizens provide limited input to the investment planning and selection process11\. A recent survey suggests that 85 percent of citizens reported not having been consulted or aware of planned infrastructure investments\. While most LSGs report practicing a typical top-down approach through (mandatory) public hearings, less than half have developed citizen engagement guides, and most rely on announcements at the municipal bulletin boards\. While the regulatory environment for participatory 8 The Global Facility for Disaster Reduction and Recovery (GFDRR), WBG, Europe and Central Asia (ECA) Risk Profiles 9 Sustainable and Integrated Urban Development Strategy of the Republic of Serbia until 2030\. 2018\. Ministry of Construction, Transport, and Infrastructure of Serbia, http://www\.fao\.org/faolex/results/details/en/c/LEX-FAOC189515/ 10 E-Government portal is the central government portal for electronic services for all citizens, businesses, and public entities\. www\.Euprava\.gov\.rs 11 World Bank Group (2020) Draft Serbia Systematic Country Diagnostic Update (SCD) Oct 21, 2021 Page 6 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) infrastructure investment planning exists12, there is a lack of knowledge, skills, and guidance about available instruments and models of participation in decision making\. MCTI is working on establishing the e-Space platform where all planning documents will be linked and published to provide better visibility and information sharing\. This operation will employ a strong consultative approach and citizen engagement through participatory strategic planning and enhancement of e-Government portals to reinforce existing policy\. 12\. Serbia’s overall strategy development and policy coordination have seen some progress, but implementation gaps pose challenges\. Numerous new strategic documents and action plans have been developed, based on the 2018 Law on the Planning System\. These include a new Local Self-Government Strategy, as well as a wide range of environmental and climate-related and sectorial strategies\. One of the most important LSG documents is the Local Development Plan (LDP), a long-term development planning document, for a period of at least seven years that determines the three years mid-term plans and resulting mid-term, and annual budgeting processes\. Pre-Covid, the national plan for LSGs was to develop and adopt their LDPs by January 202113, articulating priority development goals and providing description of appropriate measures needed for their achievement\. A significant challenge for LSGs is going to be ensuring horizontal and vertical compliance of different planning documents and coordination across sectoral boundaries as well as alignment of strategies, action plans, and linking it to the budgeting processes and mobilizing financial resources\. 13\. As part of the EU accession process, Serbia started improving the links between planning and budgeting, but further efforts are needed\. The legislative framework for the main planning documents seems to be well developed in the GoS’ Decree on Capital Projects Management, but there is a gap in rules regarding smaller scale public investments\. In addition to planning documents and multiannual budgets, the LSGs are obliged to apply newly defined and more rigorous framework to appraise, select, prioritize and implement capital investment projects with the value above EUR 5 million\. Provisions of the GoS’ Decree on Capital Projects Management do not apply to investments under EUR 5 million but includes an obligation of LSGs to establish local databases of capital projects, that must be compatible with the Integrated Capital Projects Database so as to allow interchange of data with the central PIMIS (According to Art 6 of the Decree, currently in the pilot phase)\. However, relatively low local capacity hinders good coordination among the relevant documents\. For successful infrastructure service delivery, it is essential to raise medium-term planning capacities and to strengthen planning and budgeting processes for infrastructure investments and maintenance\. There is also a need to create appropriate databases at the local level with mandatory procedures and features given LSG capacities on the one hand, and national requirements on the other hand\. 14\. The regulatory framework for managing local government finances is relatively well developed, but limited guidance and enforcement of policies are delaying its implementation and quality\. LSG financing, budgeting and public finance management are regulated by means of several laws, the most important being the Law on the Budget System, the Law on LSG Financing and the Public Debt Law\. The Ministry of Finance (MoF) provides guidelines for preparation of budgets but LSGs have autonomy in terms of expenditures and their 12 Law on State Administration, Law on Local Self-Government, Law on Planning and Construction, and Law on the Planning System 13 The establishment of the new planning system in Serbia has just stared at all levels of government, so development planning documents at the national and provincial level - RS Development Plan, AP Development Plan and RS Investment Plan - are not going to be available in the initial phase of preparation of LSGs Development Plans\. Oct 21, 2021 Page 7 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) design, amount and structure\. The level of LSG financing has remained below legally prescribed levels, particularly with respect to non-earmarked funds, and the criteria for allocation have not been specified\. Generally, allocations have been frozen since 2013, leading to a drop in un-earmarked funds from 0\.87 percent in 2013 to 0\.65 percent of GDP by 2019\. All LSGs use the Single Treasury Account but reporting occurs at an aggregate level, limiting the MoF’s ability to analyze in detail the efficiency of local government finances\. Oversight and control of the local government public finance management, transparency and accountability is performed by the State Audit Institution, which audits certain number of LSGs every year, on a sample basis, in line with its capacity\. The Project will propose Monitoring and Evaluation (M&E) framework for public investments with special focus on green impact and other measures to strengthen Project Finance Management (PFM) at the local level\. 15\. LSG revenues in Serbia have increasingly been spent on expenditures related to goods and services rather than on investment, which makes only 16 percent of overall spending\. The financing envelope for LSGs is defined by the Law on LSG Financing, which has been amended several times since its first introduction in 2006\. In 2011, the share of the wage tax revenues assigned to LSGs increased from 40 percent to 80 percent\. The increased resources discouraged LSGs from collecting own-source revenues – property tax revenues posted a real decline of 22 percent\. In 2014 legislative changes reduced the share of wage tax revenues assigned to LSGs from 80 percent to 74 percent\. As a result of these changes LSGs revenues were 12 percent higher (in real terms) in 2019 compared to 2010, but this did not result in increased investment while total expenditures increased by over 19 percent in the same period, driven by soaring expenditures on goods and services\. The share of LSGs spending in total public investment was 40 percent in 2011 but it halved over the next decade\. 16\. Annual Infrastructure investment is low by EU standards and stands at EUR 450 million (a third of which in Belgrade and Novi Sad) with the majority spent on maintenance and rehabilitation of existing assets, seldom for implementing capital infrastructure investments which is often delegated to the national level\. The share of public funds assigned to LSGs (5\.9 percent of GDP) is below the EU (9\.9 percent of GDP) and OECD (15\.9 percent of GDP) averages14\. Relatively low LSG public investment in Serbia in comparison with the other CEE countries (equaling 1 percent of GDP, significantly below the EU-27 average of 1\.4 percent of GDP and the CEE average of 1\.5 percent of GDP) may be, to some extent, explained by the low overall level of LSG public spending, although, as discussed above, LSGs are also allocating limited resources within their budgets to investment\. In 2019 average investment spending per LSG was EUR 2\.76 million, only 9 LSGs had total public investments above EUR 5 million, while 60 LSGs spent less than EUR 1 million\. As a result, LSGs investment in Serbia is low, both as a share of GDP and as a share of total spending, with only 16 percent of LSG expenditure going for investment, and within it, 26 percent being used for transport infrastructure\. Low public investment led to deteriorated infrastructure and slow provision of new infrastructure that is needed to support overall development\. There is a need to assess current fiscal decentralization framework and identify policies that could support productive spending, potential to increase commercial participation in local infrastructure investments, and how green funds and potential municipal infrastructure fund scheme could lead to more efficient and resourceful spending\. 17\. Weaknesses in planning, public investment management and public financial management systems, and lack of asset management systems combined with low technical capacities and defragmented institutions 14Network of Associations of Local Authorities of South- East Europe, NALAS (2019) Local Government Finance Indicators in South- East Europe\. Statistical Brief Oct 21, 2021 Page 8 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) contribute to underperformance in providing sustainable local infrastructure and enabling economic development at the local level15\. Based on the “Infrastructure Project Management at Local Levelâ€? survey16, implemented by the MCTI and the World Bank, the main obstacles in delivering infrastructure service as reported by LSGs are financing, human capacities, infrastructure management practices and defragmented institutions\. Other issues reported but with less weight are PFM and strategic planning\. The LSGs lack (financial and technical) capacity to prepare, execute, and coordinate numerous strategic planning documents and budgets and effectively manage infrastructure\. In terms of human capacities, they reported lack of engineers as main obstacle to better service delivery and defragmented institutions\. Efforts are also needed to continue to improve transparency (e\. g\. the continuation of the Open Data Initiative), procurement, and supervision\. According to the same Survey, sectors that are in biggest need for support and reforms at the LSG level are: transport, solid waste management and environmental protection - including historic pollution, climate change mitigation and natural disasters\. 18\. Only a minority of the 145 LSGs in Serbia can sustain a dedicated local roads department but a focus on simple asset management systems and high quality, citizen informed, designs can enhance the resilience and efficiency of infrastructure delivery\. Local roads consist of a mixture of rural roads connecting villages and towns and streets within urban areas and villages\. LSGs do not have formal asset management systems and instead rely on committees to prioritize road rehabilitation and maintenance expenditure\. While management of small-scale road networks does not require complex asset management methods, simple systems could ensure continuity, transparency, and objectivity in decision making\. Resources assigned to the preparation of high-quality designs and tender documentation is also a constraint and can result in weak implementation performance, poor quality of works and/or cost overruns\. Designs have to better reflect citizen engagement and impact on safety and more systematically address complementary investments such as in public transport, design of green sidewalks, bicycle lanes, lighting, and other community facilities\. Designs also have to address climate vulnerabilities and design for resilience through better drainage, slope and bank protection works and resilient pavements\. The project will support the building of a pipeline of projects addressing these features to maximize the social impact, improve resiliency and quality of life in LSGs\. 19\. A fundamental rethink of transport service delivery at the local level is needed to address the mobility challenges of the future, to decarbonize the sector and reduce its impact on local air quality\. Current mobility is focused on cars and road infrastructure, while highly attractive environmentally friendly modes, especially for medium and small-size LSGs, are not systematically considered\. LSGs are lacking active mobility infrastructure and these possibilities are often neglected in transport planning, despite their positive impact on the environment and the overall wellbeing of citizens\. Where provision has been made for sidewalks and bike lanes they are often occupied by parked cars, there are no safe parking lots for bikes, street lighting is often missing, and driver behavior is risky\. Road safety is being addressed by Local Road Safety councils that have a clear funding stream earmarked for road safety interventions and the Republic Local Road Safety Agency has strong capacity to mobilize all stakeholders to work on this issue in a coordinated manner\. A key 15 Ministry of Construction, Transport and Infrastructure, 2018, Sustainable and Urban Development Strategy of the Republic of Serbia until 2030\. 16 Online survey “Infrastructure Project Management at Local Levelâ€?: https://forms\.office\.com/Pages/DesignPage\.aspx?auth_pvr=OrgId&auth_upn=bdomine%40worldbank\.org&lang=en- US&origin=OfficeDotCom&route=Start#FormId=wP6iMWsmZ0y1bieW2PWcNszn7ZIZ0nFMhj49Pp7LX1NUNzhMUjdHUURYUFN VWkw2RFhTSlk0SUpCOS4u Oct 21, 2021 Page 9 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) area of concern is the safety of children, 1000 children were heavily injured in traffic accidents over the past 5 years\. LSGs need to renew their infrastructure in a sustainable and green way, by offering priority to public and non-motorized transport while increasing safety, managing use of private car by traffic and parking management approaches and utilization of ICT, along with special emphasis on the specific mobility needs of vulnerable groups\. E-Mobility is in its early stages and will be important for the future and the World Bank is currently supporting the government by providing recommendations on its implementation\. 20\. Local Public Utility Companies (PUCs) have an important role in the provision of infrastructure services, but their operations are not adjusted to the changing citizen needs and technological advancements\. According to the data from the Business Registry, the Chamber of Commerce and line ministries, there are 477 local-level PUCs with close to 60 thousand employees in Serbia\. Their total annual business revenues amounted to almost EUR 1\.9 billion in 2019, with total assets of more than EUR 5\.2 billion\. Local PUCs are often inefficient and are accumulating debts and liabilities\. The total liabilities of local PUCs at the end of the year stood at approximately EUR 1\.8 billion, out of which more than EUR 330 million relates to arrears\. Fixed assets of local PUCs amount to more than EUR 4\.3 billion, while annual depreciation costs amount to more than EUR 170 million\. This means that local-level PUCs need to invest in fixed assets more than EUR 170 million every year only to preserve the capital base of their operations, while for further development and improvement of the quality of services, significantly larger investments are needed\. The project will also provide support to strengthening SOE’s PFM practices and reporting on performances\. 21\. Many donors and IFIs are active in the provision of support to LSGs, through investments and capacity building activities, technical assistance in development of planning and technical documentation or improvements of regulatory frameworks\. Some of the most prominent projects are: EU funded Municipal Infrastructure Support Program (focused on institutional and regulatory framework for municipal infrastructure services and support for local public utilities reforms) and the EXCHANGE Program; Local Finance and Public Administration Reform Projects funded by the Swiss Government; program on solid waste with EBRD and Agence Française de Dévelopement (AFD), and a multibillion Euro program on wastewater with Chinese bilateral partners\. Several other development partners are also active including IFC, UNDP, EIB, KfW/GIZ and USAID in support of local economic development\. 22\. The GoS has requested the World Bank’s and AFD support to strengthen infrastructure service delivery at the local level with a special focus on improving mobility in a sustainable manner to increase accessibility to economic and social opportunities\. This operation will support the scale-up of inclusive, green, and sustainable transport infrastructure service delivery as a means of ensuring green growth and equal wealth distribution across the country\. Through its development agency, AFD, France is contributing US$ 200 million in co-financing to the project\. This is advantageous in several ways including financial burden-sharing and furthering the agenda of aligning to EU standards especially in urban transport efficiency and climate goals\. AFD has been working side by side with the Bank in critical aspects of the design of the operation\. 23\. The transition to an environmentally sustainable, low-carbon, and climate-resilient economy is gaining traction in Serbia and needs acceleration in view of regional political commitments and potential economic gains\. The Project will apply a holistic approach, where current policies and practices important for overall local infrastructure service delivery will be strengthened through mixture of investments, technical assistance, and capacity building\. In terms of investments, the Project will focus on improving mobility in climate aware manner and overall LSGs’ resilience\. Both the European Green Deal and the EC Economic Oct 21, 2021 Page 10 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) Investment Plan for the Western Balkans recognize that connectivity is crucial for decarbonization and include mobility as the basis to pursue it\. Also, the EU Green Agenda for the Western Balkans identifies mobility as one of the main topics for decarbonization and will support the WB6 countries in transitioning toward more environmentally friendly transport modes and deploying smart mobility solutions\. Technical support will focus on equipping the LSGs with road asset management tools and sustainable urban mobility plans and will help rethink the way transport and mobility service is delivered in the LSGs and how safety and resilience is improved\. Overall infrastructure service delivery framework will focus on targeted technical assistance and capacity building activities that should guide future policy directions and green investments in the areas of strategic planning, financing, and public financial management\. Strong citizen participation and gender considerations will be incorporated across the Project activities\. C\. Proposed Development Objective(s) Development Objective(s) (From PAD) The Project Development Objective is to improve Local Self Governments’ capacity to manage sustainable infrastructure and to increase access to economic and social opportunities in climate aware manner\. Key Results PDO Level Indicators • LSGs with developed annual and multi-annual budgets corresponding to development plans and asset management systems (Number) • LSGs utilizing simple road asset management methods developed under the project (Percentage) • Citizens reporting satisfaction with process of infrastructure service delivery, gender disaggregated (Percentage) • Commercial and social services connected by improved, safe and resilient transport network (Number) • Subprojects supporting climate adaptation and/or mitigation actions (Percentage) Indicators Component 1\. Climate Smart Mobility • SUMPs and Action Plans adopted by LSGs (number) • Smart mobility pilots implemented and contractual modalities developed (Yes/No) • LSGs with Road Safety interventions for children identified and budgeted (number of LSGs) • PAs signed between LSGs and central government (number) • Share of investments dedicated to nonmotorized transport (percentage) Indicators Component 2: Strengthening capacity for infrastructure service delivery • LSGs piloted enhanced strategic participatory planning approaches (number) • Roadmap for improved access to financing developed (Yes/No) • Database for public investments at the local level, compatible to central level PIMIS developed (Yes/No) • Increase in number of works contracts finished within planned time (percentage) • Pipeline of Urban development and Municipal infrastructure projects prepared (number) Oct 21, 2021 Page 11 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) • Number of Internships completed, with women making at least 70 percent (number) Indicators Component 3: Project Management and Awareness Raising • Awareness campaigns on greening of infrastructure and sustainable mobility delivered (number) D\. Project Description 24\. The objective of the project is to improve LSGs capacity to manage sustainable infrastructure and improve access to economic and social opportunities in climate aware manner\. The Project will finance a mixture of investment and technical assistance to improve green and inclusive infrastructure service delivery at the local level, including the implementation of the relevant chapters of SUDS\. The Project will focus on strengthening capacities and technical approaches to implement existing regulatory, planning, and legal frameworks\. Investments will focus on improving integrated mobility infrastructure and overall resilience of LSGs\. 25\. The Project should open a path for a long-term engagement in support of LSGs in Serbia\. It will inform the development of a policy and investment framework that can be strengthened over time, allow the Bank and other development partners to contribute and improve absorption capacity\. It is designed to potentially secure resources from other donors and also extend the sectorial coverage above and beyond local roads and mobility\. 26\. The following principles are followed in the design of the operation: a\. Provide investments and technical support for sustainable improvement of local roads and mobility and overall resilience of LSGs\. Infrastructure investment will be supported by improved transport asset management and concepts of building back better, safety and resilience, inclusion, natural based design, decarbonization of the economy and creating a cleaner living environment\. The Project will support LSGs to improve mobility, accessibility, resilience, and safety and lower emissions, and therefore bring along incremental benefits vs\. the business as usual without Project\. Detail description of the subproject approval process and rules will be defined in Project Operations and Grant Manual (POGM)\. b\. Decentralize implementation to increase local capacities in a sustainable manner, induce spillover effect, and allow for high absorption of resources\. All LSGs will receive financing from the Project, subject to a signed Project Agreement (PA) setting out performance expectations and compliance with the Bank procedures\. c\. All works will be below the threshold for big works, allowing for usage of national work contracts\. The average amount per LSG over 5 years period will be USD 1\.9 million\. Size of the contracts and type of works will not be limited but will be such that construction works (excluding project preparation, consultation, bidding, etc\.) can be finished within one construction season, reducing a risk of not absorbing the resources\. Given that the LSGs annual expenditures on infrastructure are EUR 450 million, the amount envisaged under the component will raise infrastructure investments by LSGs by around 8 percent during a 5-year period\. An increase will ensure that the LSGs absorption capacity is not overwhelmed\. Capacity support will be provided to all LSGs, but the special focus and efforts will be on weakest LSGs\. d\. The grant amounts will be set in accordance with an agreed formula (based on population, area, development gap, and environmental index)\. The formula will ensure fair distribution of resources with focus on poorer and more vulnerable LSGs\. Equally important, it will determine the known Oct 21, 2021 Page 12 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) amounts of available resources, allowing for LSGs to properly plan and scope proposed investments\. Detail description of the formula and parameters will be included in the POGM\. e\. The project aims at strengthening capacities and implementation of existing country policies by building technical, implementation, planning, and financial management expertise, raising awareness among stakeholders including citizens, and implementing project at decentralized level\. The project will follow existing government systems (procurement, FM, planning and execution) where possible\. Appropriate resources are assigned to cover both capacity building flows - top down by delivering targeted trainings to experts and decision makers and bottom up by raising awareness among citizens and civil servants\. The continuous assessment of performance and consequent adjustment of the capacity building activities will be embedded in their design\. 27\. To incentivize change, the LSGs will receive grant transfers from the central level for infrastructure investments, and will sign an PA with the GoS, which will include a set of commitments to improve public financial and transport infrastructure management at the local level\. The PA will define the accountabilities and commitments of LSGs to improve strategic planning, PFM, and transport infrastructure management\. The PA will also specify investment project implementation arrangements and responsibilities, including supervision, safeguards, citizen engagement, etc\. The draft PA will be part of the POGM\. The financing for infrastructure to be provided by the project will be additional, and not substitute for existing infrastructure spending by LSGs\. To this end, the PA will include provision that average annual capital spending from own resources during the project life cannot be lower than the average of the past three years (exempting 2020) plus inflation\. 28\. The Project goal will be achieved through implementation of the following three components: (i) Climate Smart Mobility; (ii) Strengthening capacity for infrastructure service delivery; and (iii) Project Management and Awareness Raising\. Project Costs and Financing 29\. The total Project cost of USD 300 million will be jointly co-financed by the IBRD and the AFD, where the IBRD will be providing USD 100 million and the AFD USD 200 million\. Co-financing by the World Bank and the AFD is on a pari-passu basis and follows the modalities established under the World Bank–AFD Co- Financing Framework Agreement of 2018\.17 This requires a separate Financing Agreement between the AFD and Serbia for the co-finance\. The World Bank and the AFD will jointly finance the same contracts under the Project in accordance with agreed financing parameters and supervision of the Project will be conducted by the World Bank under its rules\. The disbursement percentages in the IBRD Loan Agreement will reflect the IBRD’s share of the cost\. Component 1\. Climate Smart Mobility (USD 282 million) 30\. The objective of this component is to improve mobility within the LSGs through strengthening system for transport infrastructure service delivery and by supporting transport infrastructure renewal that will 17Co-financing Framework Agreement between Agence Francaise de Developpement and International Bank for Reconstruction and Development and the International Development Association, June 13, 2018\. Oct 21, 2021 Page 13 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) increase resilience to natural disaster while reducing emissions of GHGs and local pollutants including PM2\.5 and NoX\. The component will finance targeted investments, analytics, technical assistance, and tools\. Support to improved planning and management will ensure that these investments are inclusive, gender informed, and that infrastructure is managed in a sustainable way over the long term\. Each LSG will be eligible for grants for infrastructure investments up to a value determined per predefined formula, but the award of a grant will be subject to compliance with agreed eligibility and compliance criteria\. The component will be implemented through (i) Infrastructure renewal; and (ii) Sustainable mobility\. Subcomponent 1\.1\. Investments in Climate Smart Mobility (USD 273\.5 million) 31\. The objective of this subcomponent is to improve existing transport and associated infrastructure to support climate smart mobility and a move toward safe, green and clean transportations systems\. The infrastructure financing will be provided through existing mechanisms for strictly targeted grant transfers from the central government to LSGs\. The investments will aim at accelerating the shift to sustainable and smart mobility and establishing green and clean transportations system\. The investments will contribute to reducing the environmental footprint of delivering transport services and improving overall LSGs’ resilience to natural hazards\. The majority of investments will be in transport infrastructure reconstruction and rehabilitation, within the existing infrastructure perimeters\. Minor green field investments will be considered, for example the construction of side-walks, bicycle lanes and dedicated public transport infrastructure where required\. The promotion of resilient and inclusive approach and of active mobility and priority for public transport will be central to the project design\. 32\. The project will finance a range of investments to build climate resilience of the transport network including slope and bank protection, and drainage facilities\. Some complementary activities will be considered where necessary to promote greener transport modes such as the greening of public spaces and addressing legacy pollution\. Installation of digital infrastructure where applicable will be included and the project will promote the utilization of modern technologies for the recycling of materials in civil works, as per the guidelines that will be defined under ongoing EU IPA program\. This sub-component will also finance technical assistance required for the execution of the works including services for design, supervision, technical audit, and road safety audit\. Table 1 provides an indicative list of eligible investments\. Table 1: Examples of types of investments that will be supported through the operation ✓ Rehabilitation of roads, bridges and streets ✓ Dedicated non-motorized transport infrastructure ✓ Traffic management schemes (traffic (walking and bicycling) including public green calming measures, parking management, spaces and lighting pedestrian access, safety, congestion management, ✓ Measures to improve climate adaptation including street lighting, etc\.) slope stabilization, river-bank protection, drainage ✓ Infrastructure for public transport (bus stops, bus works lanes) ✓ Measures to improve environment including but ✓ E-Mobility (charging stations, e-bikes/scooters) not limited to provision of green space (forestation), legacy pollution cleanup Subcomponent 1\.2 Sustainable Mobility (USD 8\.5 million) Oct 21, 2021 Page 14 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) 33\. The objective of this subcomponent is to strengthen LSGs systems to plan, manage, implement, and operate resilient transport networks that promote patterns of climate smart mobility in sustainable manner\. This subcomponent will finance technical assistance, capacity building and demonstration pilots in three main areas: i\. Improve local road network management and resilience\. The output from the work will be a framework for local roads management including guidance on institutional arrangements, policy, standards, maintenance contracting, asset management, resilience and road safety with special focus on safety of children\. An easy-to-use Road Asset Management System (RAMS) will be developed and introduced in participating LSGs; ii\. Mainstream sustainable and integrated mobility planning; The output will be approximately 40 gender sensitive Sustainable Urban Mobility Plans (SUMPs) with transport management plans for medium and small size LSGs\. The activity will streamline a gender sensitive approach in urban planning, design of mobility solutions and public space enhancement as well as in development of recommendations and identification of priority investments\. Development of interactive guidelines and training of LSGs staff throughout the project life and knowledge exchange will be integral part under SUMPs activity; iii\. Pilot smart mobility solutions through digital technologies\. The output will be proposals for smart mobility contractual modalities and up to 5 smart mobility pilots in areas such as optimizing public transport services, intelligent transportation systems, real-time information and infrastructure or service sharing schemes\. The pilots will be implemented through call for proposals that will prioritize solutions that could be scaled up across the country\. Component 2\. Strengthening Capacity for Infrastructure Service Delivery (USD 11\.5 million) 34\. The objective of this component is to improve the effectiveness and sustainability of infrastructure service delivery at the local level through strengthening LSGs’ capacity to implement improved local planning and PFM processes\. The component will finance a mixture of technical assistance and capacity building activities focused on: (i) enhanced strategic participatory planning and identification of pipeline projects; and (ii) strengthened institutions, PFM, and access to financing\. Subcomponent 2\.1\. Enhanced Participatory Planning and Preparation of Pipeline Projects (USD 6\.5 million) 35\. The objective of this subcomponent is to enhance participatory approaches in local development planning, improve coordination among different development planning documents and sectorial strategies, include climate and resilience considerations into the planning approaches and better integrate them into the capital investment and budget planning process\. In addition, the sub-component aims to identify and support the early preparation of urban development and municipal infrastructure projects that go beyond the roads and mobility sector\. Specifically, the subcomponent will finance technical assistance and capacity building in three main areas: (i) Improve Participatory Local Development Planning in Pilot LSGs\. The activities will support the development of critical planning documents and linking them to corresponding capital investment and budget planning processes\. The focus will be on reducing defragmentation of multiple plans and incorporating climate and resilience considerations into the planning documents\. The specific planning documents to be supported will be based on an initial assessment of the planning status and Oct 21, 2021 Page 15 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) capacity in a selected pilot LSGs\. The improved planning will strengthen linkage between broad development plans and asset management systems and annual and multiannual budgets and will also enhance the budgeting of individual infrastructure project\. Supporting the quality of infrastructure budgeting will strengthen programmatic budgeting practices\. Specific emphasis will be given to ensuring improved citizen engagement, including from women and vulnerable groups to mainstream participatory approaches\. The development of manuals and templates would also be supported so that lessons learned can be applied beyond the pilot LSGs\. The activity will include extension of E- Government portal with the feature of informing the users on the planned infrastructure investments and planned consultations as well as to annually collect citizen opinion on main infrastructure priorities in their LSG\. (ii) Identification and Preparation of Pipeline Projects in Pilot LSGs\. The activities will focus on the identification and early project preparation activities for the future urban development and municipal infrastructure investment projects that that go beyond the roads and mobility sector\. The activities will be based on the improved participatory planning approaches piloted under activity 2\.1(i)\. Specific technical assistance would be provided for preparation (pre-feasibility, feasibility etc\.) to ensure readiness of investments\. Subcomponent 2\.2\. Strengthened infrastructure service delivery enablers (USD 5 million) 36\. The objective of this subcomponent is to promote sustainability and long-run improvements of the infrastructure service delivery by improving technical capacities and tools for infrastructure service delivery and PFM and by proposing set of recommendations for enhancement of institutional arrangements and access to financing\. It will equip the LSGs with capacities and tools to perform their infrastructure related functions in a sustainable and climate aware manner and will propose set of recommendations for further policy and institutional enhancements\. The support being provided under this sub-component will be especially critical for smaller and poorer LSGs where funding and experience with managing public investments has been lower, while it will seek to address capacity constraints and the need for institutional strengthening across LSGs\. The subcomponent will be implemented through set of analytical work, technical assistance, and development of tools, in particular: (i) Improving access to financing\. The output will be assessment the current local infrastructure financing framework and recommendations to improve the LSGs’ ability to raise private capital for infrastructure investments, potentials of green funds, and perspective of the municipal fund scheme; (ii) Strengthening institutions and human capacities\. The outputs will be a review of the currently fragmented institutions and human capital and recommendations for consolidated approaches and process simplification – including ‘fit for purpose’ digitization - to enable existing staff to work efficiently and meet national and local requirements, as well as to develop prioritized approaches to staff expansion and training\. Introduction of young workforce to the sector will be supported through 40 paid three to six months internships placed at PIU, MCTI and LSGs\. Out of these at least 28 (70 percent) will be for women\. Public Investment Management System (PIMS) Database and Project Management tool will be delivered that each LSG will be able to use to plan and manage infrastructure contracts\. (iii) Enhancing capacities for climate aware infrastructure service delivery\. The output will capacity building and implementation support in a number of areas with special focus on efficiency, transparency and green procurement; PFM/PIM with a special focus on monitoring and reporting Oct 21, 2021 Page 16 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) on green impacts and SOEs performance and transparency and inclusion of citizen feedback; contract management; and social and environmental management\. It will also support inter municipal cooperation and knowledge exchange on sustainable LSG development\. Component 3: Project Management and Awareness Raising (USD 6\.5 million) 37\. The objective of this component is to establish institutional set up that will enable successful implementation of the project and raise awareness about importance of green transition and sustainable mobility\. The subcomponent will support the establishment and maintenance of the strong PIU and strengthening of Centralized Fiduciary Unit (CFU)\. The PIU will be responsible for overall management of the Project and will provide day-to-day project management support to the LSGs to ensure transparency and accountability of the Project’s interventions and results\. Expenses that may be financed by this activity include the PIU and the CFU staff positions, operating costs, office equipment, dedicated web page and supervision platform, awareness raising campaigns, communication strategy, and the PIU training\. To facilitate online \. supervision the georeferenced platform will be introduced\. \. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 Yes Projects in Disputed Areas OP 7\.60 No Summary of Assessment of Environmental and Social Risks and Impacts \. 38\. The project will have long-term positive impacts, given its aimed green and sustainable footprint, but there is a number of potential short-term risks that need to be considered, mostly related to infrastructure investments under Component 1\. The scope and exact locations of these interventions are yet to be determined, but all works are envisaged to be carried out within the scope of existing infrastructural facilities\. In this regard, the potential environmental risks that could be identified are (i) impacts on ground and surface water, soil and air contamination (dust and noise); (ii) occupational health and safety (OHS) and access to work sites; (iii) improper waste management\. To mitigate these risks the Environmental and Social Management Framework (ESMF) is prepared, as the guiding instrument in addressing and mitigating community, environmental, and OHS risks in Project implementation\. Components 2 and 3 should have no significant environmental impacts as they are focusing on strengthening policies and practices and project management and capacity building\. The ESMF includes, inter alia, gaps and responsibilities for ESF implementation and mitigation measures, a methodology for environmental and social risks and impact screening, as well as a list of non-eligible activities\. The ESMF also sets forth a screening mechanism to ensure no substantial or high-risk activities are financed under the Project\. The ESMF also includes provisions for the avoidance of any sensitive environments or protected areas, guidance for pollution prevention, waste management, and environmentally sound resource use under ESS3, and any guidance on cultural heritage or chance finds as stipulated under ESS8\. The ESMF includes Labor-Management Procedures (LMP) and sections on Environment Health and Safety (EHS) which will set out the way OHS will be managed in accordance with the requirements of national law and ESS2\. Oct 21, 2021 Page 17 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) The site-specific ESMPs, as stipulated under the ESMF, will include provisions on traffic management, and other components on community safety in line with ESS4\. Furthermore, a POGM will be prepared in order to provide in a more detailed manner a list of eligible activities, selection process, and tools for environmental screening in line with the provisions of the ESMF\. 39\. Given the nation-wide scope and multisectoral character of the Project, the community engagement process will be two dimensional: (I) Presentation of Project and sector and sub-project selection and (ii) sub-project-specific community engagement\. The first dimension of community engagement will focus on informing the public about the Project, Project objective, eligibility criteria for grants, etc\. Once the sub- project is selected, the second dimension of engagement will present to the public the site specific impacts, opportunities, and challenges of the sub-project\. In order to ensure timely and precise stakeholder identification a Project level Stakeholder Engagement Plan (SEP), acceptable to the Bank is developed\. Considering the nature of the project, it can be presumed that the interventions will not cause large land take impacts\. Mostly, small scale impacts for spot widening in urban areas are expected\. Furthermore, minor impacts on livelihood are possible (e\.g\. relocation of kiosks or formal or informal stands)\. Resettlement resulting from Project activities is not expected\. In order to address the aforementioned risks, the borrower prepared Resettlement Policy Framework (RPF) to establish resettlement principles, organizational arrangements, and design criteria to be applied to subprojects, and to mitigate potential resettlement impacts\. Moreover, the RPF sets out guidance for a detailed Social Analysis and screening procedure to assess the potential scale and scope of the loss of private assets and determine the potential relevance of the ESS5 for each selected sub-project\. 40\. The draft RPF together with draft ESMF, Environmental and Social Commitment Plan (ESCP), SEP, and LMP, satisfactory to the Bank were prepared, disclosed, and consulted ahead of Project Appraisal\. Starting from November 18, 2021, the MCTI disclosed the draft ESMF, ESCP, RPF, SEP and LMP documents on MCTI web site and announced invitation for Public Consultations for the public, entities and organizations interested in subject documents prepared for LIID Project\. Same announcement was published in the daily newspaper with national coverage “Politikaâ€? on November 18, 2021\. Public and other interested parties and organizations were invited to participate in process of public consultation\. The consultation process finished on December 3, 2021\. Note: To view the Environmental and Social Risks and Impacts, please refer to the Appraisal Stage ESRS Document\. Please delete this note when finalizing the document\. E\. Implementation Institutional and Implementation Arrangements 41\. The Project will be managed by the PIU18 housed at MCTI\. The already existent PIU will be extended with the team to implement the Project\. The PIU will be responsible for the overall management of the Project 18The PIU in MCTI is currently managing implementation of World Bank projects including the Western Balkan Trade and Transport Facilitation MPA and Railway Modernization Project MPA\. Oct 21, 2021 Page 18 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) and will support the LSGs in the selection, preparation, supervision, and management of investments\. Fiduciary issues will be managed by the CFU\. The CFU will be responsible for financial management; review and approval of procurement documents including bid evaluation reports; and capacity building support to the LSGs on fiduciary issues\. The PIU will be strengthened with the appropriate managerial and technical capacity to enable it to carry out the implementation of the Project and the CFU will be strengthened with a minimum of two additional procurement specialists\. The Project implementation arrangements will be set out in the POGM including the division of responsibilities between the PIU, CFU and the LSGs\. An PA will be a part of the POGM and will define obligations of the LSGs related to project planning and budgeting, transparency in procurement, preparation of sub-project(s), data delivery, open data platforms, supervision of works, improved planning documents, etc\. 42\. Infrastructure investments will be implemented in decentralized manner through the LSGs\. The objective is to build the capacity of LSGs in public investment and infrastructure management\. To this end, the LSGs will be responsible for the implementation of sub-projects including project prioritization, preparation, procurement, safeguards, supervision, monitoring and reporting and on-going management of infrastructure\. Each beneficiary LSG will sign a Project Agreement with the MCTI where general mutual responsibilities and obligations under the Project will be defined\. For each approved investment project, separate Project Contract will be signed between MCTI and LSG\. Each LSG will assign dedicated person to be responsible for communication with the PIU and overall management of LSG participation in the project\. The LSGs will be responsible for sub-project design and supervision as per the national law, while relevant safeguard documents will be prepared through PIU\. During implementation the LSGs will transfer the worksite to contractor subject to necessary safeguards documents, regularly monitor the progress of works, and alert the PIU of any omissions to the initial designs and safeguard frameworks\. Any expropriation will be done as per the Resettlement Policy Framework under the project and corresponding Resettlement Action Plans (RAP)\. The LSGs will be able to use project proceeds to cover the costs of sub-project preparation and supervision\. 43\. The PIU and CFU will be responsible for building the capacity of LSGs to enable them to undertake these activities affectively\. The PIU/CFU will provide template documents such as for procurement, reporting and safeguards as per the Bank policies\. The LSGs will be expected to participate in technical assistance and capacity building activities and ensuring the tools introduced through the project are utilized at the local level\. The LSGs will regularly update information about the project on their relevant communication boards and websites\. 44\. A Project Steering Committee will be established within MCTI to coordinate support for the improvement of local infrastructure service delivery and implementation of SUDS\. The Steering Committee will be chaired by the MCTI with members including the MoF, Ministry of Environmental Protection, Ministry of Public Administration and Local Self-Government, SCTM, and on ad hoc basis representatives of Local Self Governments\. 45\. The AFD would follow the World Bank Financial Management and procurement operational guidelines as well as the Environmental and Social Framework\. The collaboration between the World Bank FM team and Oct 21, 2021 Page 19 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) the AFD would be as follows: (a) the World Bank FM team would review all annual audited project financial statements and quarterly un-audited interim financial reports provided by the Implementing agency; (b) the World Bank FM team will follow up with the implementing agency on these reviews, including monitoring and consultation on the implementation of recommendations in the auditors’ reports; (c) the World Bank FM team would serve as the focal point for AFD vis-a-vis the implementing agency in all matters related to FM under the Project\. From the Disbursement perspective, the World Bank would: (a) review each withdrawal application furnished by the implementing agency to verify that the amount requested is eligible for financing under the AFD’s Financing Agreement; and (b) notify AFD that the withdrawal application is in proper order, and that it has determined that the amount requested is eligible for financing under the AFD Financing\. \. CONTACT POINT World Bank Svetlana Vukanovic Senior Transport Specialist Axel E\. N\. Baeumler Senior Infrastructure Economist Borrower/Client/Recipient Republic of Serbia Implementing Agencies Ministry of Construction, Transport, and Infrastructure Djordje Milic Assistant Minister djordje\.milic@mcti\.gov\.rs Oct 21, 2021 Page 20 of 21  The World Bank Serbia Local Infrastructure and Institutional Development Project (P174251) FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Svetlana Vukanovic Task Team Leader(s): Axel E\. N\. Baeumler Approved By Practice Manager/Manager: Country Director: Nicola Pontara 07-Dec-2021 Oct 21, 2021 Page 21 of 21

APPROVAL

P009304

FILE COPY DOCU1MENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Publc Use Report No\. 66a-AF APPRAISAL OF A FIRST PROJECT TO ASSIST THE INDUSTRIAL DEVELOPMENT BANK OF AFGHANISTAN April 6, 1973 Development Finance Companies Division Europe, Middle East and North Africa Region | This report was prepared for official use only by the Bank Group\. It may not be published, quoted or cited without Baok Group authorization\. The Bank Group does not accept responsibility for the accuracy or completeness of the report\.  CURRENCY EQUIVALENTS Prior to Feb\. 12, 1973 US $1\.00 - Af 80 AS 1,000 - US $12\.50 Since Feb\. 12, 1973 US $1\.00 = Af 71\.55 Af 1,000 = US $13\.98 (Approximate Free Narket Rates) FISCAL BAR March 21 - March 20 This report was prepared by Henry B\. Thomas on the basis of a visit by Douglas Gustafson, Raj Krishna and Henry B\. Thomas to Afghanistan in July 1972 and of an earlier visit by Douglas Gustafson and Peter Mbdeen in January 1972\.  APPRAISAL OF A FIRST PROJECT TO ASSIST THE INDUSTRIAL DEVELOPMENT BANK OF AFGHANISTAN Table of Contents Page No\. SUMARMY \.,,\.,\.,,, \.,, \. i-ii I\. INTRODUCTION \. \. ,\. \. 1 II\. THE ENVIRONMENT \. \. \. , 2 General Background \.2\. \. 2 Private Sector Manufacturing Activity \. 3 The Financial Environment \. 5 Conclusion 00\.o\. 7 III\. THE PROPOSAL \. , 8 Legal Basis \. \. 8 Ownership \. \. 0\. 8 Objectives and Powers \. \. \. 8 Policies \. \. \. 8 Resources ,\. \.* \. 9 Board of Directors and Executive Committee 11 Management and Staff \. \. 12 UNDP Technical Assistance \. 12 Application of FDPIL \. \. 12 Audit \. \. \., \.,\.13 IV\. BUSINESS PROSPECTS AND FORECASTS o\. 13 V\. CONCLUSIONS AND RECOMMENDATIONS\. 14 Conclusions \. , 14 Reconmendations \.15   LIST OF ANNEXES 1\. Members of the Sponsoring Committee 2a\. Law of Industrial Banks in Afghanistan 2b\. Regulations for Obtaining Loans for the Industrial Development Bank of Afghanistan 3\. Summary of the Foreign and Domestic Private Investmeni: Law 4a\. Afghan Subscribers to the Share Capital 4b\. Prospective Foreign Subscribers to the Share Capital 5\. Policy Statement 6\. Members of the Board of Directors 7\. Assumptions Relating to Financial Projections 8\. Projected Cash Flow Statements-Optimistic Assumption 9\. Projected Profit and Loss Statements-Optimistic Assumption 10\. Projected Balance Sheets-Optimistic Assumption 11\. Projected Cash Flow Statements-Conservative Assumption 12\. Projected Profit and Loss Statements-Conservative Assumption 13\. Projected Balance Sheets-Conservative Assumption 14\. Schedule of Estimated Disbursements of the Proposed Credit   SUMMARY i\. The proposal to establish the Industrial Developmernt Bank of Afghanistan (IDBA) has been under consideration since 1963\. The enactment in 1967 of the Foreign and Domestic Private Investment Law (FDPIL) has provided a setting sufficiently conducive to private industrial investment to support such an institution\. The passage in 1971 of the Law of Industrial Banks in Afghanistan (the IDBA Law) provided the legal basis for IDBA's establishment\. ii\. Since the FDPIL came into effect, making financial incentives available for approved projects, there has been an upsurge in private investment activity, although the present level of about $7 iLllion a year can only be considered moderate\. However, there is at present: essentially no institutional source of long-term capital in Afghanistan; this lack has certainly inhibited investment as most projects have had to rely completely on owners' capital\. The IDBA is designed to fill this gap, as well as to provide technical assistance and to act as a catalyst in deveLoping new projects\. iii\. It is proposed that the IDBA be established with a share capital of Af 240 million ($3\.4 million equivalent), 40% of which will be held by foreign investors including a proposed investment of about $250,000 equiva- lent by IFC, and 60% by local investors (mainly private)\. The IDBA Law pro- vides for a Government loan to the IDBA of Af 560 million ($7\.8 million equiv- alent) on concessionary terms\. iv\. An IDA credit of $2 million is proposed; it would be made available to the Royal Government of Afghanistan which would on-lend it to the IDBA at 7-1/4% p\.a\. interest for 18 years including three years grace\. This credit is expected to cover the foreign exchange cost element of projects the IDBA finances during its first two years\. It (and IDBA's local currency resources) will be relent by IDBA at 10%, with the foreign exchange risk being covered by IDBA's borrowers\. The Government feels, however, that with foreign ex- change loans, because the risk is being passed on, the 10% rate would be too high for small-scale industries\. As a matter of policy, therefore, the Gov- ernment, through rebates to small-scale borrowers, will bring the effective interest rate on foreign exchange loans down to 8%\. v\. The IDBA will be able to provide both debt and equity financing and to underwrite and guarantee credit from other sources\. Initially it is expected to focus on the private industrial sector, though it will not be precluded from assisting Government enterprises or enterprises in other sectors such as mining or tourism\. It will be guided by a Policy Statement similar in most respects to policy statements adopted by other development finance companies\. vi\. The Board of Directors of IDBA is responsible for general policies and procedures\. An Executive Committee deals with all investment proposals\. The President is Dr\. Nour Ali, a prominent Afghan citizen\. A UNDP technical  - ii - assistance grant has been arranged to cover the cost for up to five years of an expatriate General Manager, financial manager and engineer; arrangements have been made to fill these positions\. The World Bank has agreed to be the Executing Agency for this project\. vii\. Forecasting the level of business the IDBA is likely to receive is difficult\. However, it seems reasonable that the IDBA should be able to commit the equivalent of about $2 million in the first year, with the amount increasing gradually in subsequent years\. With the low operating costs prevalent in Afghanistan, the UNDP assistance and the concessionary Government loan, the IDBA should be profitable from the beginning and be able to give moderate returns to shareholders\.  I\. INTRODUCTION 1\. Since 1963 the possibility of establishing a development finance company in Afghanistan to provide long-term finance to soundly based manu- facturing enterprises has been periodically explored by the Royal Government of Afghanistan (RGA), Afghan private investors and the Chase Manhattan Bank (Chase)\. The Bank Group was associated with this endeavour in the early years but could not see its way to support the proposal as it then emerged and ceased to be actively interested in 1966\. The other sponsors pursued the idea\. In 1967 a Law of Industrial Banks in Afghanistan was proposed to Parliament authorizing the establishment of development finance companies, and in particular, through special provisions within the Law, of the Indus- trial Development Bank of Afghanistan (IDBA)\. At the same time a Sponsoring Committee of Afghan businessmen was formed (the membership is; given in Annex 1), the framework of a development finance company proposal was developed and local subscriptions to the share capital were invited\. Consideration of the proposed Law by Parliament, however, became quite protracted, and as a result the Sponsorlng Committee became inactive\. 2\. The proposal was reactivated in August 1971 by the passage of the Law (hereinafter referred to as the IDBA Law)\. 1/ In October 1971 the Association was invited to re-examine the prospects for the proposed company\. The Government also requested that Chase, due to its historical interest in the project, re-examine the situation\. An Association mission visited Afghanistan in January 1972 to undertake this examination\. Preparatory work for this mission was carried out in Afghanistan by Dr\. Mohammed Aman, former Minister of Finance and Chairman of the Sponsoring Coimmittee, with the assistance of a number of foreign advisors\. Following that mission, discussions were held with Chase and agreement was reached on a general proposal for the establishment of IDBA\. This proposal was sent to the interested Afghan parties and the Government\. Chase also presented this proposal to a group of potential foreign investors\. A second Association mission, together with a representative of Chase, visited Afghanistan in July 1972 to discuss the proposal with the Afghans\. General agreement was reached by all parties during that visit that the proposal represented a suitable basis for establishing the IDBA\. 3\. On the basis of this agreement, Chase received firm expressions of interest from four other foreign banks to subscribe to part of the share capital of the IDBA\. IFC also considered the proposal and agreed to consider an equity investment if the Association decided to proceed with the proposed credit\. Local subscriptions had already been obtained by the Sponsoring Committee\. On March 3, 1973 the IDBA was incorporated with the Afghan in- vestors paying in their portion of the share capital (60%)\. Negotiations for the proposed IDA credit were held in Washington D\.C\. from March 12 to 21\. 1/ An unofficial translation of this Law is given in Annex 2a\.  -2- II\. THE ENVIRONMENT General Background 4\. The level of manufacturing activity in Afghanistan is small and substantial increases in industrial output face serious obstacles\. 1/ To cite a few parameters, per capita GNP is estimated to be about $80 (there are no national accounts)\. In a country of some 15 million people cement con- sumption is below 100,000 tons\. Cotton cloth consumption is slightly above 100 million meters\. Total imports of consumer, intermediate and capital goods are only about $70 million per annum\. These low levels of consumption reflect a population that is still struggling to meet its most basic needs rather than one that has begun to enjoy, in any significant way, expansion of incomes\. Given its landlocked position, a difficult internal communication system, relative lack of exploitable raw materials, plus an agricultural economy still highly dependent on the vagaries of weather, it is not surpris- ing that the manufacturing sector of the economy is small\. 5\. The RGA's attitude toward industrialization has also had an impact on the sector's development\. Private initiative was active in the pre-World War II ear and private sector enterprises, some with monopoly powers, did extrenely well\. So well, in fact, that one result was a reaction against private enterprise\. During the 1950's some private firms were nationalized and the RGA undertook substantial new investments in manufacturing facilities\. In many cases the RGA made these investments because it felt that private initiative would not undertake the projects\. Many mistakes were made, the most serious being that, with one or two notable exceptions, government companies suffered, and continue to suffer, from very poor management\. Few government enterprises even have balance sheets; most are undoubtedly losing money--how much no one really knows\. 6\. The RGA now operates, among others, firms making cement, metal tools and forgings, cotton textiles, ginned cotton and bakery goods\. By 1970 public sector enterprises accounted for about 75% of the investment and about half of the sales and employment of all manufacturing enterprises employing 50 or more workers\. The Government has let the private industrial sector expand but rarely allowed private investments in industrial sectors where it is heavily involved\. 7\. The private sector has also made mistakes\. Business failures have not been uncommon\. Indeed, the only major manufacturing investment made by the RGA in the last two years was necessitated when a new private textile mill defaulted on loans guaranteed by the RGA (it was built without a power supply--now due two years later than planned), and consequently the RGA had to take it over\. 1/ For a description of the economic condition and prospects of Afghanistan see IBRD Report No\. SA-29a; February 1, 1972\.  -3- 8\. In recent years, however, the problems of the past and the lack of Government resources appear to be dampening the RGA's interest for going into those manufacturing activities which could be undertaken by the private sector\. In 1967 the Foreign and Domestic Private Investment Law (FDPIL) 1/ was passed, making possible a range of import duty and tax relief incentives for approved investments\. In the Fourth Five Year Plan (1972/73-1976/77) now under consideration, there are no firm plans for new manufacturing investments by the RGA and the climate for private sector investment is probably as good now as it ever has been in Afghanistan\. Indeed, there is evidence that the RGA in some cases may have been overly generous in its incentives to new private manufacturing facilities\. Competitiveness has not been systematically used as a test, the screening of projects for fiscal incentives has not been very vigorous and all available incentives under the FDPIL have been given to projects approved by the Investment Committee 2/ irrespective of their relative economic worth\. Recently, however, new investment criteria were established with a view to avoiding creation of over-capacity and balance of payments problems\. The Investment Committee has started to heed these criteria\. Private Sector Manufacturing Activity 9\. There is little reliable data for employment or output of private, very small-scale manufacturing activities, traditional in Afghanistan, which include such activities as rug weaving, some textile production, shoe-making, furniture making, metal houseware goods, basic processed foods, etc\. Most of these activities are primitive household-type production and, unless put on a more organized basis, are not the sort of activities which offer much scope for development with inputs from financial institutions\. Exceptions, however, are two sub-sectors that could assume increasing importance, partic- ularly in terms of their export potential, namely embroidered cloth and leather garments and related handicraft items and carpets\. 10\. Data is, however, available on private sector firms employing more than 50 workers\. A review of this data gives a good picture of the existing larger scale manufacturing units in the private sector\. A convenient way to review this sector is to consider those projects established before the FDPIL and then to consider those established subsequently\. There are about twelve private companies employing more than 50 workers that pre-date, and therefore do not have the privileges extended by, the Law\. The twelve include a tex- tile mill, a sugar mill, a cement plant, four cotton ginning firms, two wool product plants and three small workshop-type enterprises\. Within this group the Afghan Textile Company is dominant\. A Bank Millie enterprise (see para- graph 18), it has a capacity of 85 million meters and employs 6,400 people; this is about 38% of total private sector manufacturing employment in firms employing 50 or more\. These twelve "old" companies have total (depreciated) 1/ The main provisions of this Law are summarized in Annex 3\. 2/ The Committee consists of the Ministers of Finance, Commerce, Planning, Mines and Industries, and Agriculture\.  - 4 - assets at present of about $18 million equivalent\. The textile company accounts for about 70% of this total\. Interestingly, almost all of the above companies are currently experiencing difficulties\. Most are operating substantially below capacity due to raw material supply problems, lack of demand, or poor managerial and marketing skills\. 11\. As to the firms operating with approved status (and virtually every significant new investment made since 1967 is an approved project under the FDPIL), the number is larger although the magnitude of invest- ment is smaller than that represented by the twelve older firms\. From the passage of the FDPIL through September 1972 some 175 projects have been approved by the Investment Committee\. Of these, about 120 have been or are being implemented\. (Some of the remainder are not likely to be implemented as in many cases more projects were approved in a given line of business than demand warranted\.) From an analysis of the data on these projects it is possible to get a rough idea of private manufacturing investment in the last few years\. In the 1967-1969 period it was very modest, but it seems to have totalled about $6 million in both 1970 and 1971 and probably totalled about $7 million in 1972\. This excludes whatever investment took place in firms not enjoying approved status, but this is probably not a significant exclusion\. 12\. The approved projects that are now operating, some 80 ventures, cover a wide field of activities\. On the export side, a number of raisin cleaning and packing plants have been established\. Also, plants for the initial phases for processing casings and skins have been set up\. Some tanning facilities have also been established, although this activity is still at an early stage of development in Afghanistan\. Finally, a few leather and embroidery goods manufacturers have expanded and are beginning to enjoy favorable export results\. On the import substitution side there has been a rash of rayon weaving plants based on imported yarn, plus sundry plastic and metal goods assembly and manufacturing plants\. The most sizeable projects in the last few years include a pharmaceutical plant, a cotton textile mill, a soft drinks plant, a soap factory, a shoe factory and a lubricating oil plant; in advanced stages of implementation are a viscose rayon yarn plant, a match factory and an electronic data processing installa- tion\. 13\. Of the approved projects that have been, or are being, implemented, almost one-quarter involve foreign investors, often in partnership with local investors\. Pakistanis head the list of foreign investors and Indian and Pakistani firms are likely to be the major foreign investors (by number if not by amount of investment) in the foreseeable future\. Foreign investment prior to 1967 was almost non-existent\. 14\. In considering the level of private manufacturing investment there are two related questions that are difficult to answer\. First, to what extent has the absence of the possibility of borrowing long-term capital been a brake on the expansion of business activity? Second, what sort of invest- ment trend is reasonable to forecast for the future? As to the first question,  - 5 - it is a common complaint that many Afghan companies depend completely on owners' capital and are capital-starved\. (Some larger firms have had access to suppliers' credits\.) Quantification of this problem in terms of the amount of good banking business that is not being done is well-nigh impossible\. However, by and large it would be true to say that the lack of long-term loan capital has been an inhibiting factor for investment\. 15\. As to the level of future investment, the scanty data base makes quantification even more difficult than the determination of past investment\. However, there is investment potential\. One area is import substitutioni activities\. For example, in the textile sector some of the cloth varieties locally consumed are not produced in Afghanistan\. Additional rayon spinning capacity is required to supply the several rayon weaving plants that have been established and which now depend on imported yarns\. Agricultural pro- cessing possibilities, including export opportunities, are fa,r from being fully exploited\. Processing of meat, vegetables and other perishable products is almost non-existent\. Further processing of skins is likely to become more important with the organized development of the livestock sub-sector that the Government is now implementing\. Industry based on livestock slaughtering and products is another area which has been almost totally neglected\. (The recently approved livestock development project will begin to develop this industry in Herat province)\. The quality of the products of the existing dry fruit processing plants is inadequate and quality improvement could raise Afghanistan's exports substantially\. Fruits and nuts accounted for $29\.3 mil- lion or 35% of exports in 1970/71\. As noted earlier, handcrafted products such as coats and other leather items and carpets represent good potential for exports if quality and design standards are improved and if these can be transformed from the present small "household-type" activities\. The scope for trucking business, and hire-purchase facilities for it, has also increased as Afghanistan has recently become a party to the International Road Transport (TIR) convention, the first step to obtaining trucking transit rights in other participating countries' territories\. (The RGA has agreed, in conjunction with the livestock development project, to complete the other steps needed for obtaining transit rights within a year\.) In short, while it is not justified to project a rapidly rising curve for private manufacturing investment, there are reasonable prospects for the level of recent private industrial investment activity to be at least maintained, if not to grow moderately in the immediate years ahead\. The surge of applications following the passage of the FDPIL, and the applications presently in the pipeline, indicate that there is invest- ment interest\. The availability of term financing should contribute to the realization of that interest, and in fact kindle the realization of some proj- ects that would otherwise not go ahead\. The Financial Environment 16\. There are three commercial banks In Afghanistan which provide finance to the private sector\. 1/ Their activities are supplemented by bazaar money- 1/ While there is a Commercial Code, there is no legislation related to banking as such other than the IDBA Law\. Each bank's policies are based on its Articles of Incorporation and historic practices\.  -6- lenders, although the magnitude of the services of the bazaar bankers is not quantifiable\. Of the three banks, the Governiment-owned Da Afghanistan Bank is by far the largest with assets of about Af 40 billion\. This bank also acts as the bank of currency issue\. However, although it serves in part as a Central bank, it has no powers of credit control vis-a-vis the other two banks\. The great majority of its business is related to government activities\. Its total credit to the private sector has fluctuated around Af 1 billion in recent years and most, if not all, of it is short-term trade credit\. The amount of credit which it proposes to channel to the private sector each year is subject to Cabinet approval\. Its operations with new manufacturing firms have so far been inconsequential, and becausq of the support the Government gives the IDBA proposal, this is unlikely to change\. 17\. The other two banks are of about equal size, each having assets of about Af 2 billion\. One of these, the Pashtany Tejaraty Bank (PTB) is controlled by the RGA (65% of the shares) and was set up about 17 years ago to specialize in the financing of exports, particularly the karakul trade\. Its other shareholders are largely trading firms, although Bank Millie (see below) is also a shareholder and is represented on its board\. In principle, it is more amenable to financing light manufacturing enter- prises than the Da Afghanistan Bank, although its credit is normally short- term\. In a few instances it has taken minority equity participations in manufacturing enterprises, but this is rather exceptional\. It is plausible to expect that it will continue to be a bank that primarily provides short- term credit to importers, exporters and traders\. 18\. The third bank, Bank Millie, is a private bank that was established in 1930\. It has about 2,000 shareholders\. The largest shareholding group is the Zaboli family, which founded the bank, although it does not now have a controlling interest\. One major difference between Bank Millie and the other banks is that its net worth is about equal to its liabilities, and of its assets, equity investments (Af 640 million at cost) are almost as large as its outstanding loans\. Its major investments (direct and indirect) are in the Afghan Textile Company, Baghlan Sugar, Jabulseraj Cement, a bus transport firm and two government-controlled firms, Jangalak Foundry and Spinzar Cotton\. In some of the above companies Bank Millie has the major and controlling interest\. Its equity portfolio has not expanded to any significant extent in the last six years and thus, while it remains, in aggregate terms, the dominant equity owner in the private sector, its importance is declining as most of the new manufacturing enterprises coming on the scene in Afghanistan are outside the Bank Millie group\. 19\. Interest Rates\. Because there is little or no medium- and long- term credit available from institutional sources, there is no empirical base for determining the interest rate for such funds\. Neither is there a good basis for determining the opportunity cost of capital in Afghanistan\. Commercial banks pay 6% for deposits (tax free) and their short-term loans bear an effective cost of 10-13% for normal facilities for financ$ng trade\. The cost is 8% for special government-supported activities such as financing the cotton crop\. These rates have been applied for many years\. They have  -7- to be viewed in the context of stability of prices for non-food items over the past 10 years and substantial fluctuations in food prices induced by the variations in the volume of cereal crops\. The present deposit rate is inadequate to attract substantial increases in private deposits\. The bazaar rates are very different from the commercial bank rates\. Bazaar credit, which in any case is not medium- or long-term credit of the type needed for industrial investment, costs from 18% to 36% per annum\. No one knows the amount of funds mobilized in the bazaar, but bazaar lenders certainly pay higher rates for deposits than do the banks\. Thus it would not be surpris- ing if their mobilization of private resources has exceeded that of the banks in recent years\. The bazaar moneylenders are very skillful and they maintain close connections with Afghan and foreign banks\. 20\. An additional indicator of "market" values is the price at which shares are traded in the bazaar\. To the extent that it can be determined, these shares are all currently traded at prices below par ancd which give net dividend yields (after the 20% withholding tax) of 10-12%\. This dividend yield has been typical for several years, although there is no detailed data available on the volume of trading or price movements\. One other indicator of the current cost of credit is that the Agricultural Development Bank (reorganized in 1970 in conjunction with IDA credit No\. 202-AF) charges 8% for term loans financing farmers' capital investments and 10% for short-term working capital loans\. 21\. In short, it is difficult to determine what would be an appropriate interest rate for medium- and long-term loans to industrial enterprises in the Afghan context\. From the available data it would appear that a rate of about 10% would be reasonable, at least for medium and large-size enterprises, and would ensure that resources are not misallocated\. During negotiations it was agreed that this subject would be reviewed after the market for these funds is established and tested (see paragraph 33)\. Conclusion 22\. It is in this context--a lack of medium- and long-term institutional finance while interest in private manufacturing investment has been stimulated by passage of the FDPIL--that all parties concerned in Afghanistan, private and public, are anxious to see the long discussed IDBA proposal realized\. There is no institution existing in Afghanistan with sufficient experience to enable it to undertake, without an uneconomic effort, efficient term financing functions like those envisaged for IDBA\. On balance, a new institution re- presents a more satisfactory solution\. The IDBA would provide emerging Afghan entrepreneurs with both capital and advice; it would also play an important role in promoting and crystallizing new project ideas\. Through proper project appraisal the IDBA would assist in identifying those projects that have good potential for making a long-term contribution to the development of the coun- try\. As discussed later, it seems reasonable to expect the IDBA to be able to commit about $2 million equivalent, including about $1 million in foreign exchange, during its first year of operation, with this level rising modestly in future years\.  -8- III\. THE PROPOSAL Legal Basis 23\. The IDBA Law provides for the establishment of the IDBA, under the Commercial Code, as a legal entity with its own Articles of Incorporation\. This Law defines the purposes and powers of institutions such as the IDBA (see Annex 2)\. IDBA's administration is determined by its Articles of Incor- poration\. The Articles were prepared by the Afghan Sponsoring Committee in consultation with the Bank Group\. They were adopted at the first meeting of shareholders held on March 3, 1973\. Ownership 24\. The initial share capital of the IDBA will be Af 240 million ($3\.4 million equivalent) of which 60% is now held by Afghans (mainly private) and 40% will be held by foreign investors, including, it is proposed, the IFC with an equity investment of approximately $250,000, provided the Association approves the credit proposed in this report\. According to the IDBA Law, no single in- terest can hold more than 15% of the shares and foreign investors as a group cannot hold more than 49% of the shares\. Afghan shareholders comprising in- dividuals, business enterprises and banks have already paid in their subscrip- tion (Annex 4a)\. Chase and four other foreign banks (Annex 4b) have agreed to invest in the IDBA if the IFC also invests\. Objectives and Powers 25\. It is expected that IDBA will provide finance to a wide range of business enterprises\. It will focus on the development of the private sector, though it will not be precluded from investing in Government enterprises; it will also undertake to act as a catalyst in developing new project proposals\. It will be able to provide both debt and equity financing as well as to under- write securities and guaranteee credit from other sources\. Policies 26\. IDBA'a operations will be in accordance with its Policy Statement (Annex 5), which was drafted in consultation with the Bank Group and adopted by IDBA's Board of Directors at its first meeting, held on March 4, 1973\. This Policy Statement will not be changed without prior consultation with IDA\. It conforms in most respects to policy statements adopted by other develop- ment finance companies\. According to it, the IDBA will normally limit its total financial assistance to a single enterprise to 20% of its own share capital and free reserves\. Its equity investment in an enterprise will normally not exceed 10% of its own share capital and free reserves, and its total equity holdings will not be greater than its share capital and free reserves\. It will normally not hold more than 20% of an enterprise's share capital\. IDBA will normally finance only up to 50% of the cost of a project, including working capital\.  -9- Resources 27\. In addition to its share capital of $3\.4 million equivalent, the IT)BA has a local currency loan of $7\.8 million equivalent from the Government for use in its operation\. It is also proposed that an IDA credit be made available at the outset\. These are dealt with below\. 28\. Government Loan\. As established in the IDBA Law, the IDBA will receive a loan from Da Afghanistan Bank (see paragraph 15) of Af 560 million ($7\.8 million equivalent)\. Af 60 million was paid in upon IDBA's establish- ment: the remainder will be paid in five annual instalments of Af 100 million each\. Each tranche will be repaid over a 20-year period including 10 years of grace\. The interest rate is 2% p\.a\. The loan is subordinated to other debt obligations of IDBA\. An agreement, satisfactory to the Association, covering this loan was entered into by Da Afghanistan Bank and the IDBA on March 7, 1973\. 29\. The local currency resource endowment is a carry-over from judgments made in 1967, at the time the Government first proposed the IDBA Law to Parliament\. Chase and the local sponsors felt it necessary to ensure that sufficient local currencY resources were available at the outset to meet the institution's needs for about five years or so\. That approach was reflected in the share capital subscriptions that were pledged in Afghanistan in 1967 and in the size of the Government loan proposed to Parliament at that time as a part of the IDBA Law, and which was approved in 1971\. When the Association was invited to re-examine the IDBA proposal in 1971, it had to face the re- ality that the size of the Government loan was established by Law\. On reflection, the large size of that loan was acceptable in view of the diffi- culties that had to be overcome in having the Law passed\. Also, in order to have the IDBA maintain a reasonable debt-equity ratio, it was felt necessary to keep the share capital at the level of $3 million equivalent\. 30\. Proposed IDA Credit\. A $2 million IDA credit is also envisaged to help the IDBA cover the foreign exchange cost element of the projects it finances during its first two years of operations\. The credit would be granted to the RGA on normal IDA terms and relent to the ITBA on terms satisfactory to IDA\. These terms include an interest rate of 7-1/4% p\.a\. and a repayment period of 18 years, including three years grace\. This amortization schedule would be amended from time to time to conform substan- tially to the aggregate of the amortization schedules of loams and investments made by the IDBA\. Because the IDBA will be a new institution with no prior experience in project appraisal, a low free limit of $50,000 would be estab- lished, with an aggregate free limit of $500,000; for the same reason the ratio of IDRA's long-term debt to its net worth has been set at a maximum of three\. A commitment fee of 3/4 of 1% would be payable by the IDBA to the RCA, but would apply only when IDA authorizes a sum for withdrawal with res- pect to a specific project, and only to the amount so authorized; this con- forms to normal World Bank policy in respect to first credits to a new devel- opment finance company\. The IDBA would charge its borrowers a similar commit- ment fee\. A draft Subsidiary Loan Agreement between the RCA and IDBA, reflect- ing the above terms, has been prepared and is satisfactory to IDA\. IDA would have to be satisfied with the standard terms of the loan agreement IDBA will enter into with its borrowers\.  - 10 - 31\. IDBA intends to charge all of its borrowers an interest rate of 10% p\.a\. on all funds it lends, regardless of their source, and to pass any foreign exchange risk on to its borrowers\. Such loans will have a maximum term of 15 years\. As mentioned in paragraph 19, there is no empirical base for determining what should be the most appropriate interest rate for IDBA to charge\. In view of the fact that borrowers will be accepting the foreign ex- change risk on IDBA's foreign exchange loans, the 10% rate in general appears reasonable\. 32\. The RGA feels, however, that this rate on foreign exchange loans (not local currency loans) is too high when the borrower is a small-scale industry 1/ because the foreign exchange risk is also being passed on\. They believe that such a rate with the foreign exchange risk might act as a dis- incentive for the establishment of small-scale enterprises for which there is potential and which deserve encouragement\. Because of the lack of any comparable lending experience in Afghanistan, and in view of the manifest need to encourage Afghan entrepreneurs, who are mainly traders, to enter industrial pursuits and make long-term investments in productive enterprises, the Government's argument has strength\. As a matter of policy, therefore, RGA has decided to assist such borrowers (regardless of from whom they borrow) by reducing their effective interest expense to 8% by rebating to them any excess interest above 8% that they pay\. As a matter of administrative con- venience, the RGA proposes to appoint IDBA as its agent for making such re- bates to small-scale industries which borrow from IDBA\. 33\. IDBA's management will review its policies regarding interest rate and foreign exchange risk coverage, and the effect of RGA's policy of assist- ing small-scale industry, in the light of experience gained during the first year of IDBA's operations\. This review will focus on the effect of the in- terest rate level and the foreign exchange risk coverage arrangements on IDBA's business prospects and on the need to safeguard IDBA's financial position as well as on the effect of governmental assistance in promoting small-scale in- dustry\. During this review a judgment will be reached as to a suitable cost of capital for industrial development in Afghanistan\. The results of this review, together with any recommendations for changes in these policies, will be made available to the RGA and the Association, with any changes to be agreed upon by the RGA, the Association and IDBA\. Satisfactory assurances on the cost of IDBA's lending were obtained during negotiations\. 34\. Under the IDBA Law and the Regulations for Obtaining Loans for the Industrial Development Bank of Afghanistan (Annex 2b), the RGA is authorized to borrow on behalf of the IDBA\. The matter of parliamentary authorization of the proposed credit is appropriately covered under the IDBA Law and the Regulations\. 1/ A small-scale industry is defined as an enterprise where the investment in equipment and installations (fixed assets other than buildings and land -- the value of buildings and land varies greatly from one part of Afghanistan to another) is less than $100,000 equivalent\.  - 11 - Board of Directors and Executive Committee 35\. The Board of Directors will be responsible for general policies and procedures\. The Articles provide for a Board of between seven and 15 members; at the first meeting of shareholders the number was set at nine\. The Articles also provide that the President and General Manager are ex officio members with the same rights and obligations as other Directors\. They are in- cluded with other Directors in determining the size of the Board\. The Afghan shareholders will be represented by four Directors and the foreign shareholders, by three\. Cumulative voting procedures will be used for elections\. 1/ An under- standing has been worked out among the prospective foreign shareholders that for the first few years IFC will designate one of the foreign Directors, with the other two rotating among the other foreign shareholders\. In accordance with the IDBA Law, so long as any part of the government loan is outstanding, the RGA will have an observer on the Board\. The observer will not have voting rights\. All Directors of IDBA were elected at the first meeting of shareholders (see Annex 6)\. Mr\. Kyaw Myint, the Bank's resident representative in Afghanistan, was elected to the Board seat which the shareholders would like to be filled by an IFC nominee if IFC's Board approves the proposed investment\. 36\. The IDBA Law also provides that all Directors be elected for four- year terms\. The Articles provide for an election every four years unless a vacancy occurs, in which case the new Director will serve out the term of the Director he replaces\. Retiring Directors may stand for re--election\. 37\. It is expected that the Board will meet once or twice a year\. A majority, present in person or by proxy, will constitute a quorum\. Board decisions will be taken by a simple majority vote of those present except for (a) amendment of the Policy Statement, 2/ (b) election of and delegation of power to the Executive Committee, (c) appointment of and delegation of power to the President and General Manager and (d) elections to fill vacancies on the Board, in which cases a two-thirds majority of all members of the Board will be required\. 38\. The Articles provide that the Board shall elect from among its mem- bers an Executive Committee\. This Committee, which was elected at the first Board meeting (see Annex 6), has five members: the President, the General Manager, two local Directors and one foreign Director\. The Director from Chase is the initial foreign member\. The Board delegated to the Executive Committee power for day-to-day management including the power to approve all investment projects\. It will meet more often than the Board, perhaps once a month\. 1/ Under cumulative voting each shareholder is entitled to as many votes as are equal to the number of shares he owns multipled by the number of directors to be elected\. He may cast all these votes for one candidate or distribute them among the candidates in any way he sees fit\. This procedure prevents shareholders representing only a bare majority from electing the entire Board\. 2/ If an IDA credit is made, such an amendment would also need the approval of the Association\.  - 12 - 39\. The Articles provide that members of the Board and of the Executive Committee can appoint alternates, and that members unable to attend a meeting in person can vote by mail or cable\. Management and Staff 40\. The President\. As specified in the IDBA Law, the President of the IDBA is an Afghan citizen\. He is a full-time officer of the company and its chief executive\. At the first Board meeting Dr\. A\.J\. Nour Ali was appointed the first President of IDBA\. Dr\. Nour Ali is a former Minister of Commerce and a former representative of the Afghan Trading Company in New York and London\. He is well regarded by those in the Bank who know him\. 41\. General Manager\. It is recognized both within and outside Afghanistan that there is no Afghan available with the required experience to manage a new development finance institution like IDBA\. It has therefore been agreed that in the initial years there will be an experienced expatriate General Manager with, in a practical sense at least, executive powers\. His detailed responsi- bilities and authority, satisfactory to the Association, were established by IDBA's Board at its first meeting\. Mr\. Varadachari Srinivasan, an Indian national and until recently a member of the World Bank staff was appointed the first General Manager at the same time\. Before joining the World Bank, Mr\. Srinivasan organized and managed the successful State Industrial and Investment Corporation of Maharashtra\. 42\. Staff\. Initially only a small professional staff will be required\. Given the need to train Afghans for development finance company work, three other experienced expatriate staff, in addition to the General Manager, will be employed during IDBA's early years\. One would be a financial manager responsible for appraising the financial and economic aspects of projects and for supervising investments\. The second would be an engineer responsible for appraising the technical aspects of projects\. Arrangements have been made to fill these two positions\. The third would be the chief accountant\. In addition to the four expatriates, it is expected that about ten other profes- sional staff would be required during the first two years\. UNDP Technical Assistance 43\. Given the small income base for the IDBA, and the relatively high cost of foreign personnel in Afghanistan, the RGA has requested, and the UNDP has agreed to make, a technical assistance grant to cover the cost to IDBA of the General Manager, the financial analyst and the engineer for up to the first five years of operation\. The a:countant is not included in the re- quest to the UNDP\. The Project Document was signed in February 1973\. The Bank has agreed to be the Executing Agency\. Application of FDPIL 44\. The RCA's Investment Committee approved IDBA's sponsors' applica- tion for approved status under the FDPI]\. on February 28, 1973\. Approved status means that, like most other new enterprises in Afghanistan, the IDBA  - 13 - will be exempt from income tax for its first five years of operation and that dividends will be tax exempt in the hands of the recipient for five consecutive years if distributed within eight years from receiving approved status\. 1/ Under the FDPIL dividends can be freely repatriated and the foreign capital investment plus capital gains may be repatriated after five years at the rate of 25% per annum\. Audit 45\. The IDBA has hired Coopers and Lybrand, an experienced firm of auditors satisfactory to the Association, to audit IDBA's accounts annually in accordance with generally accepted accounting standards\. IV\. BUSINESS PROSPECTS AND FORECAStS 46\. Forecasts were prepared in Afghanistan by IDBA's sponsors against the background discussed in paragraph 15\. They assumed an eaverage annual growth of about 18% p\.a\. in manufacturing investment and that the IDBA would finance up to 20% of the total\. There is not adequate evidence that this rate of growth is achievable\. There is, however, reason to believe that, given the virtual absence of institutional long-term finance for industry, the IDBA could in fact provide 20% of the capital required for new industrial investment\. A majority of the entrepreneurs who have received approved status or who are seeking it have indicated that they would welcome loan capital if it were available\. 47\. Two sets of projections have been prepared, one based on the average 18% p\.a\. growth rate assumption of the Sponsors and a second on a more modest 10% p\.a\. growth rate\. These two assumptions result in the iEollowing rates of commitment by IDBA: ($ million equivalent) Years 1 2 3 4 5 6 7 Optimistic 2\.0 2\.5 3\.0 3\.5 4\.1 4\.7 5\.4 Conservative 2\.0 2\.2 2\.4 2\.7 2\.9 3\.2 3\.5 1/ Normally, IDBA would have to pay a 5% gross receipts tax and 20% on earnings after (a) provisions for losses, (b) the 5% gross receipts tax and (c) cash dividends\. Dividends would normally be subject to a 20% withholding tax\.  - 14 - These projections do not include estimates of financing in sectors such as tourism and transport that could materialize in modest amounts in the next few years\. The projections assume that IDBA's lending rate will be 10% p\.a\. and that liauid funds will be temporarily invested at the general deposit rate of 6% p\.a\. They also assume that commitments will be half in foreign currency and half in local currency which may understate the need for financing the importation of capital equipment\. Ilowever, there is no material disadvant- age in using this assumption for the purposes of this exercise\. The detailed financial results based on these commitment rates, plus more details on the assumaptions used, are given in Annexes 7 to 13\. 48\. The profitability of the IDBA under both projections is about the same: net profit to share capital in years three to five averages about 14%\. Profitability under the conservative projection is not that much less than uiider the optimistic projection because of several factors: income is still earned on the local currency funds not invested in projects, though at a lower rate; interest expense is less as less foreign currency funds are drawn dowm; and the provision for doubtful debts is lower\. 49\. A dividend of 6% is not an impossibility in the third year, and an 8% or even a 10% dividend in the fifth year may be possible\. The debt to equity ratio under either projection increases to only about 3 to 1 in the seventh year due to the buildup of retained earnings; these amount to about 50% of share capital in that year, after assuming a 6% dividend in the third year, a 7% dividend in the fourth year, and an 8% dividend yearly thereafter\. The project will therefore give moderate returns to shareholders\. V\. CONCLUSIONS AND RECOMMENDATIONS Conclusions 50\. There is a need in Afghanistan for a development finance company, albeit a moderately sized one in keeping with the present stage of development in the country\. Its establishment would make institutional iong-term finance available to the private sector for the first time\. A privately controlled comapany, vis-a-vis a government institution, has great advantages in Afghanistan in terms of the quality of management and staff that can be mobilized and the efficai&cy of operations that is likely to be achieved\. 51\. The proposed IDA credit and IFC equity investment would enable wt-, BiaiV Gro\.p to make a significant contribution towards the successful establishment of the IDBA and, through it, the expansion of the industrial and service sectors, and thus over time the diversification of the economy zr&wav fron thte preponderant agricultural sector\. This contribution would be through providing not only capital but also, and perhaps more importantly in the early stages, guidance\. The proposal set forth in this report represents a suitable basis for commencing IDBA's operations\.  - 15 - Recommendations 52\. The proposed IDA credit would be lent to the Government of Afghanistan on IDA's standard terms\. In turn, the proceeds of the IDA credit would be relent to the IDBA on agreed terms as detailed in paragraph 30\. The IDBA will enter into a Project Agreement with the Association containing those provisions, other than those relating to the making and repayment of the IDA credit, normally applied to Bank loans to developmerLt finance com- panies and as further detailed in paragraph 30 of this report\. The proceeds of the proposed credit would be used to finance the cif cost: of imported goods\. 53\. An undertaking was received from IDBA during negotiations that its management will, during the first year of operation, review IDBA's interest rate policies and foreign exchange risk coverage, and the effect of RGA's policy of assisting small-scale industries\. Any recommendeci changes would have to be agreed upon by the Association, RGA and IDBA (paragraph 33)\. 54\. The effectiveness of the credit would, in addition to the standard provisions relating to IDA credits, be conditioned on: (1) the payment by the foreign shareholders of their share capital subscription; and (2) submission by IDBA to the Association of the draft loan agreement, satisfactory to the Association, which IDBA would conclude with its borrowers (paragraph 30)\. 55\. On the basis of the above arrangements, an IDA credit of $2 mil- lion and an IFC equity investment of Af 18 million (about $250,000 equivalent) are recommended to assist in the establishment of the IDBA iand to meet its foreign exchange requirements for the first two years of its operations\.   ANNEX 1 THE INDUSTRIAL DEVELOPTMEfT BANK OF AFGHANISTAN Members of the SponsoringL Committee Dr\. Mohammed Aman Former Minister of Finance and Chairman of the Sponsoring Committee Dr\. A\. J\.Nour Ali- London Manager, Trading Company of Afghanistan\. Former Minister of Commerce\. Mr\. Abdul Njadjid Zabuli Founder and Chairman of the Board of Bank Millie 4r\. Jana3t Khan Gharwal-/ President, Pashtany Tejaraty Bank Mr\. Abdul Rahim Hatif Private Businessman 2/ Mr\. Said Murtaza -' President, Omaid 'Textile Co\. Mr\. Mohammed Jaafar Mukhtar-Zadeh President, fifghan Textile Co\. Mr\. Haji Habibullah Kandahari Private BusinessmnEn Mr\. Haji Aziullah President, Chamber of Commerce - Herat 1/ Now the President of the IDBA 2/\. iNow Directors of the IDBA EMENA/DFC March 26, 1973   ANNEX 2a THE INUSTRIAL DEVELOPMET BANK OF AFGHANISTAN Page 1 of 6 Law of Inudutrial Banks in Afghanistan Chapter One General Provisions Art\. I Any industrial bank established in conformit,y with this law shall be a legal entity and be represented by the President of the bank\. Art\. II Industrial banks shall be established for the following purposes: (1) To assist in the establishment, expansi(Dn and modernization of industrial enterprises in Afghanistan\. (2) To advise and encourage foreign and domestic persons to participate in industrial enterprises in accordance with the Foreign and Domestic Private Investment Law of Afghanistan\. (3) To facilitate the acquisition of industrial securities through private investment in industrial enterprises concerned with manufacturing and assembly\. Art\. III Industrial banks shall have the following rights and obligations: (1) To provide medium and long term loans for industrial enterprises\. (2) To purchase bonds and convertible securities issued by industrial enterprises and to issue bonds and convertible securities\. (3) To guarantee the sale of shares and to underwrite the purchase of bonds, convertible securities and other securities issued by industrial enterprises\. Participation of the bank in industrial enterprises is allowed for the purpose of reselling the shares\. The bank's shares shall not exceed twenty percent of the total capital of the enterprise in question\. (4) To guarantee loans and other obligations of industrial enterprises in case these loans and obligations are provided from other investment sources\. (5) To cooperate in obtaining managerial, technical and professional assistance of industrial enterprises\.  ANNEX 2a Page 2 of 6 (o) To make short-term loans of less than one yearts maturity\. (7) To accept securities on moveable and immovable property in conformity with the bank's objectives and to sell the securities according to the provisions of the law when fulfillment of the obligations is postponed, or in case when suc[l rights are given to the bank on the basis of mutual agreement\. (b) To cooperate in preparing useful industrial projects and to assist in organizing industrial enterprises with the Government's consent\. (9) To provide consulting services for borrower and non- borrower industrial enterprises\. (10) To conduct research and study possibilities and to publish information of interest to investors and probable borrowers in accordance with objectives of the bank\. (11) The bank may accept grants, unconditional assistance and possessions\. Grant assistance of foreign institutions can be accepted with Government approval\. (12) To sue and defend in the bank's name\. (13) To have a bank seal\. (14) To make contracts and incur liabili-ties in the bank's own name in accordance with the objectives of the bank\. (15) To appoint and employ officials, foreign and domestic representatives and employees of the bank in accordance with the pertinent laws and regulations\. In selection of officials and employees, the bank shall give preference to employment of Afghan nationals\. In addition to good performance,, the training of Afghan nationals shall be provided by the bank\. The bank shall attempt to replace, as soon as possible, foreign officials and employees by Afghans who are capable of performing the duties\. (16) To determine all other duties relative to the bank's objectives, according to the Articles of Incorporation of the bank within the provision of law\. Art\. IV Authorized capital and the mode of payment shall be determined by the Articles of Incorporation of the bank\. Art\. V Tax exemptions of the bank shall be determined in accordance with the Foreign and Domestic Private Investment Law of Afghanistan\.  ANNEX 2a Page' 3 of 6 Art\. VI The bank shall establish suitable conditions in accordance with its objectives in each loan agreement or service contract, within the limits of the law\. Art\. Vll If the following conditions are met, the bark may request a debtor to repay all liabilities: (1) If substantial inaccurate information is posted on the loan application\. (2) If the borrower does not observe the conditions set forth in the loan agreement\. (3) If the insured property, given to the bank as a security, has not been inisured sufficiently or the security loses its value so that additional security is needed while such security is not provided\. Art\. VI13 The bank's accounts shall be kept in accordEance with the Commercial Code and banking practices\. Art\. IX The account to the bank shall annually be audited by a firn, in accordance with the ForeiEp and Domestic Private Investment Law\. Such an audit shall be performed by an organization with international standards, elected annually by a majority vote of shareholders in general meetings\. Such an organization must be licensed in Afghanistan\. Art\. X If transactions of the bank are contrary to law, the government is obliged to take legal action\. Art\. XI Participation by foreign stockholders in the issued capital of industrial banks shall not exceed forty-nine percent of that capital\. LTo one person, family, entity or units of common interest can hold more than fifteen percent of the issued capital of the bank\. This limitation shall be applied with respect to allocation and registration of shares transferred to a person in any manner of ownership\. Art\. XII For the purpose of this Law, units of common interest are as follows: A\. A person affiliated with a legal entity or business enterprise in which such person acts as President, ownier, director or manager\. B\. Two or more entities or business enterprises the ownership or management of which is substantially the same\.  ANNEX 2a Page t of 6 Chapter Two A aini stration of' Industrial Banks Art\. )Jl1 The acuinistration of industrial banks shall be determined by the banks' Articles of Incorporation in accordance with thleir juridical nature\. The banks' Articles of IncorporatioD shall not be contrary to the text and spirit of the laws of Afghani stan\. Chapter Three Special Provisions Art\. XIV (1) In the first stage, an industrial bank shall be established by the name of Industrial Deve'oprment Bank, in\. accordance with the provisions of this Law\. (2) Da Afghanistan Bank shall give a loan of five hundred and sixty million Afs to this bank\. The repayment of each installrent, as mentioned below, shall be postponed for the first ten years of the loan disbursement and begiining with the eleventh year of disbursement the repayment of' the loan shall be made in ten ecqual installments\. Sixty million Afs shall be paid to the bank when it is established\. The remaining five hundred million Afghanis shall be paid to the bank gradually, within five years\. The interest rate of Da Afghanistan Bank loan shall be two percent per annum from the time the loan is given to the Bank\. (13) In case of the (lissolution or liquidation of the bank, the repayment of' tihe government loan and of' other creditors shall be prior to rights to shareholders\. (4) Up to the time of full repayment of the governmert loarn, the govenmient shall appoint its representatives as an observer on the Board of Directors of the Industria] Development Bank\. The observer shall not have voting rights\. (5) Concerning interest rates, the bank is obl\.iged to f'ollow the policy of the governmient with respect to average interest rates f'ixed for such banks\. Art\. XV 'The Goverrinent oII the basis of this Law and on the basis of conditions and liun-\.tations that it may establish, can guarantee the loans to the Industrial Development Bank of Afghanistan\. Such loans and the relatted guarantees as well may be designated in foreign currency\.  ANNEX 2a Page of 6 Art\. XVI As long as tLle Da Afghanistan Bank loan, given to the bank according to Art\. XlV is outstanding, the bank shall annually allocate 10 percent of its profits to a special reserve\. Allocating of profits to the special reserve shall continue until this reserve equals the outstanding amount of Da Afghanistan Bank loan\. Whatever part of the profits allocated for other reserves (not more than fifteen percent of the annual profilts) and, also, the amount allocated for the special reserve mentioned in this Article with regard to tax exemptions is subject to the Forei\.g and Domestic Private Investment Law of Ufghanistan\. Art\. XVII The bank shall be established only when the following conditions have been met: (l) Sixty percent of the authorized capital has been subscribed and allocated\. (2) One-half of the subscribed capital has been transferred into a special account in one of the Aflghan banks\. (3) A general meeting of the shareholders has been held and the bank's Articles of Incorporation have been approvJed by two-thirds of the shareholders or their legal agents\. The Board of Directors also shall be seLected in this meeting\. (4) A written memorandum certifying the above items (1, 2 and 3) of this Article has been forwarded to the concerned legal registration authority\. Art\. XVIIJ\. If' a shareholder fails to pay any part of his subscribed shares, he shall be given a grace period of 60 days to complete payment\. Such a shareholder shall be informed by registered mail\. If after this period he still fails to pay, his earlier payments shall be accepted as shares and he shall lose the right to buy the remaining part of his shares\. Artl\. XIX it is not necessary for the Board of Directors of the barik to own shares\. The Board of Directors shall be elected for four years\. Trhe composition of the Board shall be deterndned in the bank's Articles of Incorporation\. The President of' the bank shall be appointed by the Board of Directors according to the bank's Articles of Incorporation\. lIe shall be an Afghan national\. \.rt\. XX All foreign exchange transactions of the bank shall take place through the Da Afghanistan Bank, on the basis of the free rate of Da Afghanistan Bank on the day of the transactions\. Da Afghanistan Bank shall provide the required amounts of foreign exchange needed by the bank to meet its liabi\.lities  ANNEX 2a Page 6 of 6 to foreign creditors, distribution of payable dividends and the proceeds from the sale of shares of foreign share- holders in accordance with the Foreign and Domestic Private Investment law\. The purchase price of shares belonging to foreign shareholders shall take place only on the basis of freely convertible foreign exchange\. The bank is obliged to sell its hard currency throughl Da Afghanistan Bank at the free market rate\. Art\. XXI Idithin a period of six months after the close of the fiscal year, a condensed annual balance sheet together with a profit-and-loss statement, shall be published in Pashtu, )ari\. and in one foreign language\. Art\. XXII If the bank becomes a plaintiff or a defendant in) Afghanistan, the case shall be decided by a competent court of Afghanistan in accordance with the provisions of law\. A -rt\. XXIII If disputes on legal cases arise between the bank and its foreign shareholders, it shall be referred to an arbitration committee in Kabul provided both sides agree\. In respect to foreigp creditors, the arbitration place shall not be limited to Kabul\. The decision made by the arbitration committee shall be final and both sides will have to honor it\. This decision, in order to be executed, shall be sent to the concerned authorities\. Chapter Four Miscellaneous Provisions Art_\. XXIV Provisions concerned with private enterprises shall not prevent, in this law the establishment of industrial banks in the form of government enterprises or any other form of' companies in which the goverrment holds more than fifty percent of the shares\. , > t\. \.<,- lMatters not covered by this law shall be regulated by the Commercial Code, the Foreign and Domestic Private Investment Law, Government Enterprises Law and other Laws\. Art\. \.XVI \. This law shall be effective after completion of its legislative stages\. December 29, 1972\.  ANNEX 2;b Page 1 of 2 THE INDUSTRIAL DEVELOPMENT BANK OF AFGHANISTAN Regulations for Obtaining Loans for the Industrial Development Bank of Afghanistan ARTICLE I The regulations based upon Article 94 of the Constitution of Afghanistan and pursuant to Article 15 of the Industrial Banks Law of Afghanistan are enacted and regulated by the Royal Government of Afghanistan as follows: a) The Industrial Development Bank of Afghanistan shall, prior to raising any Loan from any source from outside Afghanistan, obtain the agreement of the Royal Government of Afghanistan that such Loan shall be used for productive purposes and for the economic development of Afghanistan\. b) The Industrial Development Bank of Afghanistan shall repay the principal of, interest and other charges on, the Loan punctually\. c) To enable the Industrial Development Bank of Afghanistan to meet its obligations under paragraph (b) of Article I, the Royal Government of Afghanistan shall make available or cause to be made available to the Industrial Development Bank of Afghanistan, whenever necessary, such foreign currencies as shall be required for the Industrial I)evelopment Bank of Afghanistan to discharge its obligations\. d) The Industrial Development Bank of Afghanistan shall carry out all its obligations under any agreement or arrangement the Royal Government of Afghanistan may enter into with the Industrial Development Bank of Afghanistan for the guarantee of any such Loan\. e) The Industrial Development Bank of Afghanistan shall carry out all its undertakings, covenants or agreements entered i-nto with any foreign person, agency or institution or international organization which shall have provided such Loan to the said Bank\. f) Loans may be obtained directly by the Industrial Development Bank of Afghanistan in accordance with the provisions of the Industrial Banks Law of Afghanistan\. lWhenever it is considered necessary and desirable by the Royal Goverment of Afghanistan and the Industrial Development Bank of Afghanistan so to do the Royal Government of Afghanistan may borrow for, or on behalf of, or for the purpose of or use by, the Industrial Development Bank of Afghanistan, on such tenms and conditions as the Royal Government of Afghanistan may detenmine, provided, however, that it shall be deemed as if the loans so raised were loans obtained by the Industrial Development Bank of Afghanistan and the Royal Government o:F Afghanistan were the Guarantor thereof pursuant to Article 15 of the Tidustrial Banks Law of Afghanistan; provided, furthermore, that nothing contained herein  ANNEX 2b Page 2 of 2 shall be so construed as to affect in any way whatsoever any rights or financial or other obligations of the Royal Government of Afghanistan under any agreement entered into by it based upon Article I with any foreign lender\. AP\.TICLE I The term "industry" wherever used in the Industrial Banks Iaw of Afghanistan shall include manufacuturing, assembly, agricultural processing, mining, tourism and related service industries\. AR'TICLE III The Regulations shall upon publication in the Official Gazette enter into force\. EMENA/DFC January 11, 1973  ANNEX 3 Page 1 of 2 THE INDUSTRIAL DEVELOPIENT BANK OF AFGhIANISTAN Summary of the Foreign and Dcmestic Private Investment Law 1\. Scope Explicitly eligible to receive the incentives under the law are the following sectors: industry, mining, agriculture, tourism\. The Investment Committee (IC) may include other service sectors under the scope of the law and has done so, e\.g\. in the case of transportation, computer activities, and dry cleaning\. 2\. Tax Benefits (a) Exemption from all income taxes for the first five years of operation\. (b) Exemption from import duties on capital goods and replace- ment parts for the approved investment and on raw materials and components for production resulting from the invest- ment for five years from approval by the IC\. (c) Exemption from personal income tax and corporate tax on dividends for five consecutive years if distributed within eight years of approval by the IC\. (d) Exemption, without time limit, from personal income tax and corporate tax on interest on foreign loans to finance part of an approved investment\. (Nlormally, such interest is subject to a 20% tax\.) (e) Exemption from export duties for products of approved invest- ments for ten years\. 3\. !epatriation Rights (a) Payment of principal and interest on foreign loans and dividends on foreign investments may be freely repatriated\. (b) Foreign capital investment and reinvested profits may be repatriated after five years at the rate of 25% p\.a\. of the foreign capital invested\. (c) Licensing fees for patents or know-how may be repatriated in accordance with licensing agreements approved by the IC\. L\. Audit T'he accounts of enterprises with investments approved under the law have to be audited by auditors of international standing and licensed to operate in Afghanistan\.  ANNEX 3 Page 2 of 2 \.Foreign Onership There is no limitation on foreign ownership in enterprises with investments approved under the law\. 6\. Activities Outside the Scope of the Law (a) Afghan nationals whose investments do not qualify under the law may carry on business in accordance with the Commercial Code and other relevant laws\. (b) Foreign nationals whose investments do not qualify under the law may be licensed to do business pursuant to the "Licensing Regulations for Private Foreign Traders and Firms in Afghanistan"\. EMENA/DFC Duecember 29, 1972  ANIIEX l-a THE INDUSTRIAL DEVELOPMENT BANK OF AFGHANISTAN Afghan Subscribers to the Share Capital Af 1000 Percent of Total Equity Pashtany Tejaraty Bank 36,000 15\.O Bank Millie group 36,000 15\.0 Chaimber of Commerce 25,000 lO\.4 "ement I\.Factory, Jabulsaraj 10,000 14\.2 About 200 companies and individuals, each less than AF3a,500,000 37000° Total 144,0O0 60\.00 E1DNA/DFC Ma^rch 26, 1973  ANNEX hb THE INDUSTRIAL DEVELOPNENT BANK OF AFGHANISTAN Prospective Foreign Subscribers to the Share Capital Af '000 US$ '000 Percent of equivalent Total Equity Chase Manhattan Bank 18,000 252 7\.5 IFC 18,000 252 7\.5 First lIational City Bank 18,000 252 7\.5 Industrial Bardk of Japan 18,000 252 7\.5 National Westninister Bank 18,000 252 7\.5 Credit Lyonnais 6,ooo 84 2\.5 Total 96,ooo l,3t2 4 40\.0 1/ Figures do not add to total because of rounding\. EMENA/DFC [T,3 rch 28, 1973  ANNEX 5 Page 1 of 3 THE INDUSTRIAL DEVELOPMENT BANK OF AFGHANISTAN Policy Statement (Adopted by the Board of Directors on March 4, 1973) General Objectives 1\. These provisions define the general policies governing the operations of IDBA, which is a private development finiance company established to assist in the promotion and development of sourdly-based productive enterprises in Afghanistan, and particularly to encourage the development of private investment, domestic and foreign, in such activity\. IDBA shall provide assistance to enterprises in the manufacturing industry\. It may in appropriate cases also finance projects in mining, agricultural processing, tourism and related service industries\. 2\. IDBA shall finance only enterprises expected to contribute to the economic growth of Afghanistan\. IDBA will extend its assistance only for those projects which are financially and technically sound and which are competently managed\. Investment decisions will be made on the basis of sound investment principles and only after careful appraisal of projects\. 3\. IDBA shall also assist in the broadening of industrial ownership and in the development of the capital market\. 4\. IDBA shall provide its assistance in one or more of the following forms: (i) Short, medium- and long-term loans, with or without conversion options\. IDBA's lending will primarily be for financing fixed assets or permanent working capital requirements; (ii) Purchase of bands/debentures; (iii) Equity investments; (iv) Underwriting of shares, bonds or other securities; (v) Guarantee of medium- and long-term credit fromn other sources\. Financial Policies 5\. In accordance w:ith normal business practice IDBA will obtain adequate security, whether by mortgage, other charges on assets, personal and bank guarantees, or other means\. Nevertheless, its decisions to provide financinp will be based principally on the souindness and viability of the enterprise in question\. 6\. IDBA's total financial assistance to any one enterprise shall not normally exceed 20 percent of the total of IDBA's paid-in share capital and free reserves\.  ANNEX 5 -2 - Page 2 of 3 7\. IDBA shall not normally purchase shares in a single enterprise which exceeds in amount 10 percent of its own paid-up share capital and reserves\. It will noi in normal circumstances hold more than 20 percent of an individual enterprise's share capital\. The total of IDEA's equity holdings shall not exceed the total of its own share capital and reserves\. IDBAts equity invest- ment policy shall be guided by the need to foster investment and it shall take steps to sell off its equity holdings when appropriate\. &\. IDBA shall not normally finance more than 50 percent of the capital cost of an investment project, including working capital\. Exceptions to this general\. policy may be made if there is special justification such as in the case of financial assistance to small-scale enterprises and expansion projects where the sponsor already has a large stake in the enterrrise\. 9\. IDBA shall3 endeavor to diversify its assistance geographically and by sectors\. It will also seek to support as wide a group of entrepreneurs as possible\. 10\. IDBA shall not undertake management responsibility for any enterprise, except where, after due consideration by the Board or the Executive Committee, it is regarded as necessary for the safety of an enterprise which has received substantial financing from IDBA\. In any such case IDBA shall seek to establish otner management as soon as possible\. 11\. 'Where a Director of IDEA has any direct or indirect interest in an enterprise requesting financing from IDBA, such financing shall only be approved after consideraLion by the Board without the participation of the Director concerned\. 12\. IDBA shall charge interest on its loans consistent with the nature of its business, the cost of capital in Afghanistan, the cost of resources to IDEA, the need to earn a reasonable return on its own capital, and the need to encourage development of productive eniterprises in Afghanistan\. 13\. IDBA shall adequately protect itself from the foreign exchange risk on loans to it which are denominated in foreign currency\. 1\. IDBA's total debts, including guarantees outstanding, and maturing beyond one year shall not exceed four times the total of its paid-up share capital and reserves\. 15\. IDBA shall establish provisions for losses commensurate with the risks in its portfolio and will also build up general reserves\. 16\. IDBA shall follow prudent policies with respect to its liquidity\. Care will be exercised in balancing the maturities of its assets and liabilities\. 17\. IDBA's accounts shall be kept in accordance with generally accepted international accounting principles and shall be audited annually by a firm of accountants of international standing\.  ARTEX 5 -3- Page 3 of 3 Organization 18\. IDBA shall recruit competent personnel for its proper functioning\. Special efforts will be made to train staff in all Departments of the Bank\. 19\. IDBA shall try to maintain a capacity to provide techinical assistance to enterprises\. Future Revisions 20\. The Board of Directors shall only amend these policies upon due con- sideration and with the concurrence of a two-thirds majority of the Board of Directors\. EMENA/DFC Mbrch 26, 1973   A NRTEX 6 TR'E TNU3DT JIAL DEVE,OPrJENT BANTK OF AFO iANISTIM jK\.embjrs of the l3oard of Directors 1/ ?lr\. Janet L,h>an -½arwal (Chairman)F President, PashLa iy 'r r >:^-,y ",un I 1/ Dr\. Abdjl \.Ohani 'IhcAussi Presidern,\. 93anlk J'Ai\.ie ,o\. Mha-m-med la'cim Karimzada President, <abul Chamber of oizie rce ?/ 'tr\. K:~aw,ra*\.! Minb \. !esident )epresentative, Mr\. 33i1( 'trtaza President, Omaid T'extile Company Mr\. Edwin Frank Nightingale Seior egional MIanager, Net,onai 'estminister Th3ank A\. J\. J\. 'To,ir Auli Presiden\.t, IDPA 1/ Hr\. Varadachari Srinivasan Gen-\.ra1 r'annager, ITD,A 1/ lir\. 7rancis :\. Stanikard Senior Vice President, ';hase 'Ianhattl-in Overseas Bankinc, Co-roraLion 1/ Members of the Execuitive ;ommittee\. 2/ To be rep1aced by an TIC nominee if the IEC Board approves the proposed 1IPU in5vestment\. ljP All I 'I\.' `hirAi 26, 1973   ANZEX 7 Page 1 of 2 INDUSTR1AL DEVELOPIiENT BAIIK OF AFGHANISTAN Assumptions Relating, to Financial Projections 1\. Local/Foreign Currency Loans\. The projections assume the 1D)B's financial assistance would be only in the form of loans and that 50p of IDBA's lending would be in foreign exchange\. (Some equity 'business will probably be done but it is hard to say how much\.) This is probably less than the average foreign exchange component of investment projects in the manufacturing sector\. The projections assume that 50% of IDBA's commit- ments will be financed from foreign loans\. The projections are based on manufacturing activity and do not include financial assistance to other sectors which could add marginally to IDBA's volume of business\. 2\. Disbursements\. Of commitments iri anly one year, 330%, 50% and 20%6 would be disbursed in that year and in the two follcving years respectively\. 3\. Borrowir_L\. The Af 560 millicn ($7\.8 million) Loan\. from Da Afghanistan Bank will be paid in instalments--Af 60 million when it is established and Af 100 million in the middle of each of the first through fifth year\. Repayment is over ten years starting ten years from draw-down of each instalment\. The rate of interest is 2%\. IBDA's other borrowings would be in Lore _Dfn exchange irom various sources, includin\.- IDA\. Seven and one-quarter percent is used as a probable average interest rate\. Commitment fees and other charges, which largely shoul' be off-set by similar charges payable to IDBA, have not been taken into account\. Repayments have been assumed to confirm to repayments from sub-borrowers\. 4\. Lending Terms\. IDBA's lending rate is assumed to be 10%\. The average lending term is assumed to be ten years including two years of grace\. The cash flow projections do not provide for shortfalls in collections\. '\. LiqLuid Ftuids\. Throughout the projection period, IDBA has a relatively large amount of liquid funds\. It is assumed that these will be deposited at 6%, the general deposit rate in Afghanistan\. Since there is a large unfilled demand for seasonal working capital, IDBA may, if desired, be able to inivest its liquid funds short-term at a higher rate (commnercial banks presently charge up to 13%, includ-ing conmissions and other charg,es)\. 6\. Administrative Expenses\. Operating costs are low in Afrhanistan\. Moreover, it is assumed that three foreign staff members will be financed by the UT4DP for the first five years\. Two expatriates are assumed to be retained beyond the five years and will be financed ($70,000/year) out of IDBA's own funds\. Checci and Co\. made a detailed forecas-t of IDBA's administrative costs which formed the basis for these estimates\. The fore- cast provides for 12 local professional staff with an average salary of Af 15,000 ($190) per month\. The number should be sufficient given the modest volume of business forecast\. The average monthly salary is more than what top civil servants and department heads in commercial banks get at present\. It also compares favorably with salaries paid in trade and industry\. It is assumed that IDBA would have to pay top salaries to be able to get and  ANNEX 7 Page 2 of 2 to retain good people who are scarce\. Appropriate provisions have been made for clerical and other staff'\. Other administrative expenses, which are based on detailed estimates of rent, office expenses, travel costs and Directors fees, come to about 75lY of salaries\. 7\. Provisions\. Provisions for doubtful debts are forecast equivalent to 3% of the increase in the outstanding loan portfolio\. Provisions could be much higher from a tax point of view (see below under "Taxes")\. 8\. Taxes\. IDBA will receive the incentives under the Private Invest- ment Law\. This means a f'ive-year holiday and no tax on the five first dividends if distributed within eight years from Investment Committee approval of the project (February 28, 1973)\. After the tax holiday IDBA and its shareholders will be liable to taxation as follows: (i) 5% on gross revenue excluding capital gains\. (ii) 20% on net profit including capital gains but after deduct- ing (a) provisions for doubtful debts, (b) the 5$ tax on gross gross revenue, and (c) cash dividends\. Provisions for doubt- ful debts are tax deductible up to 25% of the increase in out- standing loans during the year, but they should bear some relation to the real risk f'or losses\. In practice, commercial banks have been allowed to maintain provisions at about 8% of portfolio\. IDBA could thus reduce its income tax con- siderably by making higher provisions\. (iii) 1% of the income tax, i\.e\. 0\.2% of taxable income, for the Kabul municipality\. (iv) 20% withholding tax on dividends\. Afghanistan has no double taxation agreements with other countries\. EMENk\.'DF March 26, 1973  iNTDILhI AL DE\.VElll0'iNt BANK O1 AFGH&NISTAN Projcted C ash Fl ow Statements-2timis tic,Asmpto (na, 000) sources Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Profit before depreciation and provisions 200 282 418 564 726 654 740 Share capital 3,354 - - - - - - DAB loan\. 2,237 1,398 1,398 1,398 1,398 - Foreign loans 300 875 1,275 1,525 1,790 2,080 2,395 Loan collections - - 250 562 938 1,375 1,&87 Total sources 6,091 2,555 3,341 4,049 4,852 4,109 5,022 Uses Disbursement of loans 600 1,750 2,550 3,050 3,580 4,160 4,790 Repayment of borrowings - - 125 281 469 688 943 Fixed assets 14 5 2 2 2 2 2 Payment of dividends - - 201 235 268 268 268 Total us 61 1,755 2,878 3,568 4,319 5,118 6,003 Cash surplus/(deficit) 5,477 800 463 481 533 (1,009) (981) Cash - opening balance - 5,477 6,277 6,740 7,221 7,754 6,745 Cash - closing balance 5,477 6,277 6,740 7,221 7,754 6,745 5,764 EMENA/DFC March 26, 1973   INDUSTRIAL DEVELOPME: BANK OF AFGHANISTAN Projected Profit and Loss Statements-Optimistic Assumption ($1,000) Income Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Interest on loans 30 148 350 590 846 1,117 1,h01 Interest on liquid funds 284 344 384 409 436 361 Total income 311, Lt92 734 999 1,282 1,540 1,762 Expenses Interest expense 42 122 214 328 449 562 665 Administrative expenses 75 101 106 111 Il 177 178 Provision for doubtful debts 18 53 69 74 79 84 87 Taxes - - - - 151 183 Total expenses 135 266 389 513 639 974 1,113 Net Profit 179 226 345 l 86 'Al 566 6h9 Provision for reserve fund 18 23 34 49 64 57 65 Dividend (gross) - - 201 235 268 268 268 Retained earnings 161 203 110 202 311 9h1 316 Total income less interest expense as % of average total assets 5\.2 5\.2 5\.3 5\.3 5\.4 5\.5 Administrative expenses as % of average total assets 1\.4 1\.1 0\.9 0\.7 1\.0 0\.9 Net profit as % of share capital 6\.7 10\.3 14\.5 19\.2 16\.9 19\.4 Net profit as % of average net worth 6\.2 9\.0 12\.1 1h\.8 12\.1 12\.9 EMRNA/DFC March 26, 1973  INDUSTRIAL DEVEiOPMENT BANK OF AFGHANISTAN Proj ected Balance Sheets-Or,timlistic Assumption ($1,000) Assets Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Cash & temporary investments 5,477 6,277 6,740 7,221 7,754 6,745 5,764 Development loans 600 2,350 4,650 7,138 9,780 12,565 15,468 Less provisions (18) (71) (140) (214) (293) (377) (464) 582 2,279 4,510 6,924 9,487 12,188 15,004 Fixed assets (net) 11 13 11 9 7 5 3 Total assets 6,070 1,569 11,261 14,154 17,248 18,938 20,771 Liabilities DAB loan 2,237 3,635 5,033 6,L31 7,829 7\.829 7,829 Foreign loans 300 1,175 2,325 3,569 4,890 6,282 7,734 Total loans 2,537 4,810 7,358 10,000 12,719 14,JlL 15,563 Equity Share capital 3,354 3,354 3,354 3,354 3,354 3,354 3,354 Reserve fund 18 41 75 124 188 245 310 Retained earnings 161 364 474 676 987 1\.228 1,544 Total equity 3,533 3,759 3,903 4,154 4\.529 4\.827 5,208 Total liabilities 6,070 8,569 11,261 14l,15 17,248 18,938 20,771 Debt/equity ratio 0\.7:1 1\.3:1 1\.9:1 2\.4:1 2\.8:1 2\.9:1 3\.0:1 EMENA/DfC March 26, 197)  INDUbTRIAL DEVELOPMENT BANK OF AFGHANISTAN Projected Cash Flow Statemnents-Conservative Assumption (41,ooo) Sources Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Profit before depreciation and provisions 200 280 410 539 676 591 644 Share capital 3,354 - - - - - DAB loan 2,237 1,398 1,398 1,398 1,398 - Foreign loans 300 830 1,113 1,224 1,347 1,481 1,629 Loan collections - - 250 525 827 1,161 1,526 Total sources 6,091 2,508 3,171 3,686 4,248 3,233 3,799 Uses Disbursement of loans 600 1,600 2,226 2,449 2,693 2,962 3,259 Repayment of borrowings - - 125 262 414 560 763 Fixed assets 14 5 2 2 2 2 2 Payment of divi-dends - - 201 235 268 268 268 Total uses 614 1,665 2,554 2,948 3,377 3,812 4,292 Cash surplus/(deficit) 5,477 843 617 738 871 (579) (493) Cash - opening balance - 5,077 6,320 6,937 7,675 8,546 7,967 Cash - closing ba'\.ance 5,477 6,320 6,937 7,675 8,546 7,967 7,474 EMENA/DFC March 26, 197\.  INIXJSTRIAL DEVELOPMENT BANK OF AFGHANISTAN Projected Profit and Loss Statements-Conservative Assumption ($1i,000) Income Year 1 Year 2 Year 3 Year b Year 5 Year 6 Year 7 Interest on loans 30 143 325 520 709 893 1,069 Interest on liquid funds 284 346 391 44 486 52 Total income 314 489 716 949 1,183 1,379 1,521 Expenses Interest expense )2 111 20L 303 400 480 547 Administrative expenses 75 101 106 111 111 177 178 Provision for doubtful debts 18 50 59 58 56 54 52 Taxes - - - - 135 156 Total expenses 135 262 369 472 567 846 933 Net Profit 179 227 347 477 616 533 588 Provision for reserve fund 18 23 34 48 62 53 59 Dividend (gross) - - 201 235 268 268 268 Retained earnings 161 204 112 194 286 212 261 Total income less interest expense as % of average total assets 5\.2 5\.2 5\.2 5\.2 5\.3 5\.4 Administrative expenses as % of average total assets 1\.L 1\.1 0\.9 0\.7 1\.1 1\.0 Net profit as % of share capital 6\.8 10\.4 14\.2 18\.4 15\.9 17\.5 I Net profit as % of average net worth 6\.2 9\.1 11\.9 14\.3 11\.5 12\.C f EKENA/DFC March 26, 1973  INDUSTRIAL DEVELOPMENT BANK OF AFGHANISTAN Projected Balance Sheets-Conservative As6umption ($1,000) Assets Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Cash & temporary investments 5,477 6,320 6,937 7,675 8,546 7,967 7,474 Development loans 600 2,260 4,236 6,160 8,026 9,827 11,560 Less provisions (18) (68) (127) (185) (241) (295) (347) 582 2,192 4,109 5,975 7,785 9,532 11,213 Fixed assets (net) 11 13 11 9 7 5 3 Total assets 6,070 8,525 11,057 13,659 16,338 17,504 18,690 Liabilities DAB loan 2,237 3,635 5,033 6,431 7,829 7,829 7,829 Foreign loans 300 1,130 2,118 3,080 4,013 4,914 5,780 Total loans 2,537 4,765 7,151 9,511 11,842 12,743 13,609 Equity Share capital 3,354 3,354 3,354 3,354 3,354 3,354 3,354 Reserve fund 18 41 75 123 185 238 297 Retained earnings 162 365 477 671 957 1,169 1,430 Total equity 3,533 3,760 3,906 4,148 4,496 4,761 5,081 Total liabilities 6,070 8,525 11,057 13,659 16,338 17,504 18,690 Debt/equity ratio 0\.7:1 1\.3:1 1\.8:1 2\.3:1 2\.6:1 2\.7:1 2\.7:1 EMENA/DFC M-arch 26\. 1973  OINFx 14a lTF5? TNUFTTzTrIAL T)RVX\.7Pt'r'NT Tr'\.NK OP Jr',T-ATANTFTAI 17 -Indlle r- t-t;-nt\.f C )-1 n1---nE the "rorosed\. rredit, ve, r 1 I! 2r-?r ? R75 at'nr ~3 R - nn 'rtT t;re " Q "rirnt!nn v>S 1 \.3rir VP~r 2 R3n srae ^i970 lGEMEA/r7-Fr: J\.nu\.qrv 20, 197 3

APPROVAL

P164954

 The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) Combined Project Information Documents / Integrated Safeguards Datasheet (PID/ISDS) Appraisal Stage | Date Prepared/Updated: 12-Mar-2018 | Report No: PIDISDSA24048 Feb 08, 2018 Page 1 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Cameroon P164954 Health System P156679 Performance Reinforcement Project - Additional Financing Parent Project Name Region Estimated Appraisal Date Estimated Board Date Health System Performance AFRICA 19-Feb-2018 03-Apr-2018 Reinforcement Project Practice Area (Lead) Financing Instrument Borrower(s) Implementing Agency Health, Nutrition & Population Investment Project MINEPAT, MINSANTE Ministry of Public Health Financing Proposed Development Objective(s) Parent The proposed Project Development Objective (PDO) is to increase utilization and improve the quality of health services with a particular focus on reproductive, maternal, child and adolescent health and nutrition services\. Proposed Development Objective(s) Additional Financing The new Project Development Objective (PDO) is (i) increase utilization and improve the quality of health services with a particular focus on reproductive, maternal, child and adolescent health, and nutritional services for the population of Cameroon, including refugees and refugee host communities, and (ii) in the event of an Eligible Emergency, to provide immediate and effective response to the said Eligible Emergency Components Strengthening of Health Service Delivery Institutional Strengthening for Improved Health System Performance Strengthening emergency, sexual and reproductive health services, and WASH and nutrition service delivery for refugee and host populations in the northern and East regions Contingent Emergency Response Financing (in US$, millions) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 163\.00 Total Financing 163\.00 Feb 08, 2018 Page 2 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) Financing Gap 0\.00 DETAILS -NewFin3 Total World Bank Group Financing 136\.00 World Bank Lending 136\.00 Environmental Assessment Category Partial Assessment (B) Decision The review did authorize the preparation to continue B\. Introduction and Context Country Context 1\. Cameroon is a lower middle-income, central African country that shares boarders with six countries1 Nigeria and Chad in the North, and Central African Republic (CAR) in the East\. Cameroon’s population is large (22\.8 million), young (41 percent under 15 years) and diverse, with 250 ethnic groups spread across its ten regions2\. Four of Cameroon’s poorest regions (Far North, North, Adamawa and East) experience persisting fragility due to security threats in its borders with CAR (East, Adamawa, and North regions) and Nigeria (Far North)\. These four regions collectively host an estimated 341,000 refugees - the 11th largest number of refugees in the world, and 6th largest in Africa - who fled the conflict in CAR and Boko Haram insurgents on Cameroons’ borders with Nigeria and Chad\. Refugees constitute over 2 percent of Cameroons population, and 60 percent of refugees are below the age of 18 years\. 2\. Cameroon’s dependency on commodity prices has rendered macroeconomic performance volatile and uneven\. Cameroon is well endowed in natural resources, (oil, timber, fertile land, agricultural production, including coffee, cotton and cocoa) and in 2016, the gross domestic product (GDP) per capita per year (purchasing power parity (PPP)) was estimated at US$3,285\. Following a recession during the mid-90s, growth accelerated to almost 6 percent (2014-2015), reflecting strong public infrastructure investments, coupled with favorable commodity prices and financial deepening\. Growth declined to an estimated 3\.7 percent in 2017, driven by the continued decline in rubber, coffee and oil production, precipitated by the sharp decline in oil prices (from US$110 per barrel in 2014 to US$55 per barrel in 2017), and aging plantations\. Cameroon’s growth slowdown, in the presence of a relatively diversified and resilient 1 Nigeria, Gabon, Equatorial Guinea, Republic of Congo, and Chad and Central African Republic (CAR)\. 2 Cameroon is administratively divided into 10 regions: Far North, North, Adamawa, West, North-West, Littoral, South-West, South, Central and East\. Feb 08, 2018 Page 3 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) economy, reflects a narrowing of it’s fiscal and external margins of maneuver and an increase in its public debt\. Cameroon remains unable to realize its full development potential mostly because of its poor infrastructure, unfavorable business environment and weak governance of the private and public sectors\. 3\. Despite more than a decade of consistent economic growth, 37\.5 percent of Cameroonians live below the poverty line, chronic poverty stands at an estimated 26 percent and the number of absolute poor increased by 12 percent between 2007 and 2014 to 8\.1 million people3\. Poverty is increasingly concentrated in rural areas and the northern regions\. 56\.8 percent of people in rural areas, and the majority of people in the Far North (74\.3 percent), the North (67\.9 percent), the North-West (55\.3 percent) and, to a lesser extent, Adamawa (47\.1 percent) live on less than US$1\.95 a day\. Inequality has increased, per capita income has stagnated, and the Gini coefficient is high at 44\.0 (2014), implying that the bottom 20 percent consume less than 5 percent of all consumption, whereas the richest 20 percent consume almost half of all consumption\. Refugee and humanitarian crisis in the Northern and East regions 4\. There are two distinct refugee situations in Cameroon – with marked differences in the challenges faced by refugees and host communities\. 5\. Approximately 235,000 CAR refugees live along the eastern border (the majority of them in the East region and the rest in the Adamawa and North regions)\. These refugees generally fled violence in the CAR in two waves\. Approximately 100,000 refugees fled the Central African Republic between 2003 and 2006, primarily from border regions\. While some of these refugees have achieved a degree of socio- economic inclusion, living out of camps and integrated in their host communities, the majority remains extremely vulnerable in terms of food security and has very limited access to livelihoods\. An additional 160,000 CAR refugees arrived after 2013\. Some of these refugees originated from more distant parts of the CAR, including Bangui\. Overall, 30% of CAR refugees live in of the seven dedicated refugee sites while 70% live in villages\. CAR refugees represent around 5 percent of the total population in Adamawa and 18 percent in the East region; it should be noted that in some of the most affected municipalities such as Garoua-Boulai (Adamawa) or Kenzou (East), refugees largely outnumber the local population\. Areas hosting refugee populations are poor and isolated, with limited access to services\. In some areas, post-2013 refugee arrivals strained previous host-refugee relationships that were largely positive, and have in some localities led to tensions related to access to scarce resources and land\. Humanitarian assistance being primarily directed to refugees, in particular in the dedicated sites, has also caused resentment among host communities\. 6\. Approximately 90,000 Nigerian refugees live in the Far North region\. The destabilizing impact of refugee populations in this region is compounded by the presence of 241,000 internally displaced persons (IDPs)\. These refugees fled the Boko Haram attacks, and most have been in exile for three to four years\. Approximately one-fourth of these refugees have experienced multiple displacements\. The traumatic events they have experienced, coupled with suspicion and stigmatization from security forces, authorities, and in some instances host populations following incidents of indiscriminate violent attacks against civilians by armed elements, have hindered opportunities for social inclusion\. The inadequate recognition of UNHCR- issued refugee documents for refugees registered in Minawao camp and a lack of identification papers out- of-camp refugees place significant restrictions on freedom of movement and, in the case of out-of-camp 3 Cameroons fourth household survey (ECAM-4) Feb 08, 2018 Page 4 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) refugees also makes it difficult to distinguish between them, IDPs, and hosts\. Approximately 62,000 refugees live in the Minawao refugee camp that opened in July 2013, where living conditions are poor and the populations remains fully dependent on humanitarian assistance\. Refugees who live outside the camp and IDPs face an even more precarious situation with some living in areas that are extremely difficult to access or are unregistered and lack any documentation\. Overall, the situation remains very fluid, with ongoing movements of people that follow the ebb and flow of the conflict\. Inflows of refugees and IDPs, continued insecurity, and cross-border traffic restrictions have destabilized the economy of a region that was already very poor, under-serviced, and largely dependent on trade with Nigeria\. Looking ahead, there is the risk of further increases in the number of people displaced by the Boko Haram conflict\. 7\. The refugee crisis primarily affects remote and poor border regions Even prior to the massive influx of displaced populations, refugee-hosting regions (particularly Adamawa and the Far North) presented the highest and deepest levels of poverty, highest inequality rates and lowest human development indicators in Cameroon\. Hosting regions are subject to multiple poverty traps, including low agriculture productivity, increasing vulnerability to external shocks4, poor infrastructure, high fertility and limited access to basic social services (health, education, water, sanitation), and livelihood\. The increased fragility, insecurity and violence has led to a loss of livestock, interrupted agricultural activities and trade, and closed markets, roads and frontiers, further exacerbating poverty levels, particularly in cross-border areas5\. Altogether, these four regions (North, Far North, East and Adamawa) account for 66 percent of poor households in the country (even though they are home to only 38 percent of the total population)\. The continued volatility in CAR and increasing frequency of attacks by Boko Haram, reduces the likelihood of refugees returning home; if anything, increasing numbers are expected in the northern and East regions\. 8\. According to preliminary results of CAR refugee poverty analysis (American University of Beirut, forthcoming), using expenditure data from a Household Economy Analysis (UNHCR/IFORD 2017), CAR refugees in the East, Adamawa and North regions show alarming levels of poverty\. Data suggests that 98% of CAR refugees fall below the national poverty line (FCFA 22,500 per person per month) and 96% of refugees fall below the extreme poverty line (less than FCFA 17,962 per person per month)\. If the Minimum Food Basket (MFB) calculated by the World Food Program is used as a reference, 71% of the CAR refugee population fall below this line, meaning that their expenditure is less than FCFA 8,800 per person per month – the amount necessary to purchase minimum food energy requirements (emergency standards: 2,100 kcal / person / day)\. Sectoral Context 9\. Refugees, particularly women and children, have a disproportionately higher burden of disease compared to the host population\. These include: (i) malnutrition and anemia, (ii) infectious diseases like worm and parasitic infestation, cholera, shigella, measles, malaria and tuberculosis and (iii) treatable non-communicable diseases, which are further exacerbated by a lack of access to regular medication6\. The increased predisposition to disease coupled with restricted access to high quality healthcare due to poor health seeking behavior, limited access to health facilities, and poor quality of health services, leads to high rates of mortality\. 4 Vulnerability to food insecurity, malnutrition and epidemics are exacerbated by the deterioration of the economic landscape, recurring floods and droughts and by the lack of access to adequate basic social services 5 The bordering regions of Nigeria in the Far North (Mayo Sava, Mayo Tsanaga, Logone-Chari districts) and the CAR in the East (Lom-Jerem, Kadei and Bouma-Ngoko districts) and Adamawa (Mbéré and Vina districts) are more directly and more severely affected by the crises\. In these areas, physical destruction (Far North), lack of pre-crisis administrative services, high flows of displaced populations, and growing insecurity, including serious security incidents, and an increase in crime makes the lives of local and displaced people particularly difficult\. 6 Langlois, EV, et al\. (2016) Refugees: towards better access to health-care services\. The Lancet; 387;10016 p319-321 Feb 08, 2018 Page 5 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) 10\. The most common causes of death in refugees globally are acute upper respiratory tract infections (URTI) (21 percent), malaria (14 percent), lower respiratory tract infections (LRTI) (11 percent), intestinal worms (6 percent), and watery diarrhea (6 percent)7\. Acute URTIs are the leading cause of morbidity and death in refugee children under-five years\. The disease profile in refugees in Cameroon mirrors that observed globally\. The most prevalent diseases in refugees in Cameroon are URTIs (20\.8 percent), Malaria (7\.6 percent), intestinal worms (7\.4 percent) and watery diarrhea (6\.8 percent)\. Furthermore, refugees in Cameroon have a high burden of non-communicable diseases like musculoskeletal disorders (31\.8 percent) and cardiovascular diseases (26\.3 percent)\. Mental health problems have been identified as a critical challenge for refugees in Cameroon, and in 2016, epilepsy (63 percent), and psychotic disorders (22\.1 percent) were the most common mental health illness in refugees8\. 11\. Risks associated with hosting refugees include disease outbreaks, food scarcity, unsafe drinking water, overburdened schools and health facilities, and environmental degradation9\. In the northern and East regions of Cameroon, 2\.4 million people are food-insecure, including 253,000 children who suffer from moderate or severe acute malnutrition\. WASH services are a critical need in refugee affected areas10\. Only 28 percent of the population in the North, East and Adamawa regions has access to potable water11 and less to adequate sanitation\. This increases the risk of diseases directly attributed to the lack of water and sanitation facilities and hygiene, including diarrheal diseases, intestinal worms and parasitic infestations, as well as preventable outbreaks like cholera and hepatitis E\. 12\. The situation of displaced women and girls, who account for 53 percent of refugees in Cameroon, is particularly difficult\. In comparison to men, women have fewer completed years of education (8\.2 years versus 6\.7 years) and lower literacy rates (87 percent versus 74 percent), with negative impact on economic welfare, fertility, child survival and access to reproductive and health services\. Entrenched patriarchal norms dictate that girls and women in these communities are married early 12, have limited access to land and are prohibited from inheriting on the death of their husband\. Sexual and gender- based violence (SGBV) against women is pervasive, including rape, sexual exploitation, physical assault, and domestic violence, and the levels of prostitution is high\. Women are particularly vulnerable to sexual violence when collecting firewood, drawing water, using latrines at night, and moving outside their camp\. An estimated 55 percent of women over 15 years, and 60 percent of married women have experienced either physical, sexual or emotional violence\. Harmful traditional practices, including breast ironing and female genital mutilation or cutting (FGM/C) is prevalent in Cameroon (1percent of girls and women age 15-49 years who have undergone FGM/C, 2004-2015)13, and in female refugees from Chad (44 percent)14, Nigeria (25 percent)13 and CAR (24\.2 percent)13\. While FGM/C was criminalized in Cameroon in 2016, concrete measures have not been implemented to enforce this law, which reduces the likelihood that these practices will stop, particularly in refugee communities\. 13\. At least 22 percent of refugees in the northern and East regions of Cameroon are women of 7 UNHCR\. Global strategy for public health 2014-2018\. Source : http://www\.unhcr-strategy-2014-2018\.html 8 UNHCR\. UNHCR public health 2016 Annual global overview\. Source : http://twine\.unhcr\.org/ar2016/ Accessed : 11/29/2017 9 Tataha, L, et al\. (2016) Impact of Refugees on Local Health Systems: a difference-in-difference-analysis in Cameroon\. PloS One, 11 (12): e0168820 10 UNICEF\. Cameroon Humanitarian Situation Report, September 2017\. Source: https://reliefweb\.int/report/unicef-cameroon-humanitarian-situation- report-september-2017, Accessed: 11/26/2017 11 Source: Republic of Cameroon, Development Policy Letter; 14 August 2017\. 12 The legal age of marriage for girls in Cameroon is 15 years, versus 18 years for boys, and in Adamawa, Far-north and North west regions, girls are married between 8 and 9 years\. UNHCR\. Cameroon: information on forced or arranged marriage\. Source: http://www\.refworld\.org/docid/3f51ec864\.html \. Accessed: 11/28/2017 13 OHCHR\. Committee on the rights of the child examines the report of Cameroon\. Source: http://www\.ohchr\.org/EN/NewsEvents/Pages/DisplayNews\.aspx?NewsID=21675&LangID=E Accessed: 11/28/2017 14 Percentage represents the prevalence of girls and women age 15-49 years who have undergone FGM/C, between 2004-2015 Feb 08, 2018 Page 6 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) reproductive age (2016), and 20 percent are children under 5 years\. Displacement complicates the delivery of maternal and obstetric care, increases the risk of illegal abortion, and unsafe childbirth\. In crisis settings, at least 15 percent of pregnant women need emergency obstetric care, 9-15 percent of newborns need live-saving emergency care, young girls have less control over where they fall pregnant and married adolescents have the lowest contraception use\. Consequently, the majority (over 60 percent; 2015) of preventable maternal and child (53 percent; 2015) deaths occur in countries affected by humanitarian crisis or fragile settings\. This translates to an estimated 500 women dying during childbirth every day from giving birth in humanitarian and fragile settings\. 14\. The majority if refugee children do not have birth certificates\. Only 35 percent of refugee children in the North, under 5 years, have (30 percent) or are in the process of receiving (5 percent), a birth certificate\. Furthermore, 13 percent of refugees in the East region have registered all their children, with 11 percent in the process of registration\. Only 18 percent and 35% respectively of medium and wealthy refugee households have registered all their children, and none of the poor households\. In contrast, nearly 70% of host community families have registered all their children\. Institutional Context 15\. The Government of Cameroon has identified PBF as a central strategy to address weaknesses in its health systems and aims to: (i) improve the efficiency of the allocation and use of resources; (ii) improve health worker performance through increased motivation, satisfaction and autonomy for decision-making at the point of service delivery; and (iii) increase the population’s use of e ssential health services through improved quality of health services and cost reduction of these services\. Cameroon has a rich experience in PBF, which has been implemented in the country for six years\. The HSSIP project supported the implementation of PBF in 44 of the 189 health districts in Cameroon\. Indeed, the scaled up of PBF to a national program by the HSPRP (P164954) parent project builds on the results and lessons learned from the HSSIP (P104525) project and the experiences of other countries implementing similar projects\. Since the launch of PBF, the quality and utilization of maternal and child health services has been increased substantially\. C\. Proposed Development Objective(s) Original PDO 16\. The proposed Project Development Objective (PDO) is to increase utilization and improve the quality of health services with a particular focus on reproductive, maternal, child and adolescent health and nutrition services\. Current PDO 17\. The revised PDO is to: “increase utilization and improve the quality of health services with a particular focus on reproductive, maternal, child and adolescent health, and nutritional services for the population of Cameroon, including refugees and refugee host communitiesâ€?\. Key Results 18\. The proposed AF has eight PDO level indicators, and five intermediate level indicators that will be used to monitor progress in reaching the project development objectives: 19\. PDO level indicators: • Number of people who have received essential HNP services (Target 6,020,987) • Percentage of children 12-23 months fully immunized in the 3 Northern regions and the East Feb 08, 2018 Page 7 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) (Target 80\.00 percent) • Percentage of births attended by a skilled professional in the 3 Northern regions and the East (Target 55\.00 percent) • Percentage average score of the quality of care checklist (Target 50\.00 percent) • Number of children 24 months being weighed for growth monitoring in the 3 Northern regions and the East (Target 1,646,480) • Number of direct project beneficiaries (Target 8,267,467)\. • Number of female beneficiaries (Target 4,216,408)\. • Number of refugees who have received healthcare (curative and preventative) at health facilities in the northern and East regions (Target 600,000)\. 20\. Intermediate level indicators: • Number of children aged 6-59 months who received a vitamin A supplement in the last six months (Target 504,286)\. • Number of consultations provided to the poor and vulnerable free of charge (Target 1,502,057)\. • Number of patients/people referred to the health facilities by community health workers (Target 343,890)\. • Number of children and pregnant women dewormed (Target 3,542,000)\. • Number of refugee children and pregnant women dewormed (Target 637,000)\. D\. Project Description 21\. The proposed AF aims to mitigate the health and economic impact of the conflict in the Far North region, and refugee crisis in the northern (Far-North, North, Adamawa) and East regions of Cameroon by providing essential health, nutrition, and soft water, sanitation and hygiene (WASH) services to refugees and refugee-host communities\. Summary of activities under each components: Component 1: Strengthening health service delivery at facility and community level 22\. Original project activities: • National scale up of PBF to all 189 districts in Cameroon • Implementation and supervision of PBF • Implementation of GFF investment case, including reproductive, maternal, newborn, child and adolescent health (RMNCAH) activities • Health system strengthening • High quality nutrition services 23\. Proposed AF activities: • PBF payments to health facilities to waive fees for refugees and vulnerable host populations for primary healthcare, maternal and child healthcare, and nutrition services\. • PBF payments to sub-contract community health workers (CHW) and community-based organisation (CBO) from host community and refugee camps to provide\. • PBF quality improvement bonuses for destroyed health facilities in crisis areas, to make them operational\. Feb 08, 2018 Page 8 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) Component 2: Institutional strengthening for improved health system performance 24\. Original project activities: • Institutional strengthening of information systems, monitoring and evaluation and performance mechanisms for health systems • Building of a reliable health information system • Supports ongoing rollout of District Health Information Software 2 (DHIS2) platform • Supports national PBF portal • Supports linkage between DHIS2 platform and national PBF portal • Reinforcement of civil registration and vital statistics (CRVS) system • Support operating costs for the PBF Technical Unit and Project Implementation Unit 25\. Proposed AF activities: • Scale up CRVS • Provision of birth certificate • Support the reinforcement of the monitoring and evaluation system and information systems • Strengthen communicable disease surveillance systems and epidemic preparedness and response Component 3 (new): Strengthening emergency, sexual and reproductive health services, and WASH and nutrition service delivery for refugee and host populations in the northern and East regions\. 26\. Proposed AF activities: • Emergency health services • Life-saving sexual and reproductive health services, including rape, FGM and GBV • Nutrition intervention including deworming • Soft WASH interventions • Comprehensive mental health and psychosocial support program • Institutional capacity building: sensitivity training; training on basic and comprehensive emergency Obstetric and Newborn Care; training on the management of rape, FGM and GBV, including physical, sexual and psychological violence\. Component 4 (new): Contingent Emergency Response 27\. Proposed AF activities: • This will allow for rapid reallocation of project proceeds in the event of a natural or man-made disaster or crisis that has caused, or is likely to imminently cause, a major adverse economic and/or social impact Detailed description of activities under each components: 28\. Component 1: Strengthening health service delivery at facility and community level (Total new costs under AF: US$119 million: US$89 million IDA, US$20 million GFF, US$6 million IDA credit and US$4 million IDA18 RSW Grant)\. This component currently supports the national scale up of PBF, starting in the three Northern regions\. It consists of 3 subcomponents: sub-component 1\.1: Payment of performance, which supports the incremental scale up of PBF to all 189 districts in Cameroon, and provides PBF payments: (i) to health facilities conditional on the quantity and quality of services delivered via in- clinic activities and/or via health-outreach activities, and (ii) to CHWs for providing select basic preventative and referral health services, as well as ensuring community organization to support positive Feb 08, 2018 Page 9 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) health behavior\. Subcomponent 1\.2: supports the implementation and supervision of PBF\. Sub-component 1\.3: provides support for the implementation of the GFF investment case for Cameroon, which includes RMNCAH activities, health systems strengthening approaches and high quality nutritional services in the northern and East regions\. 29\. The AF will support the reinforcement of equity mechanisms to ensure provision of primary healthcare, maternal and child health care and, nutrition services for refugees and vulnerable host populations\. It includes (i) PBF payments to Health facilities to waive fees for all refugees and vulnerable host populations for primary healthcare, maternal and child healthcare, and nutrition services and sub- contract CHWs and CBOs from the host community and refugee camps to provide select basic preventative and referral services, and support positive behavior; and (ii) PBF quality improvement bonuses for health facilities in crisis areas that have been destroyed due to conflict, which will be used to make the health facility operational\. 30\. Component 2: Institutional Strengthening for Improved Health System Performance (Total new cost under AF: US$23 million: US$11 million IDA, US$7 million GFF (US$5 million RMNCAH, US$2 million for CRVS) and US$5 million IDA18 RSW grant)\. The current project supports three sub- components\. Sub-component 2\.1 supports institutional strengthening of information systems, monitoring and evaluation, and performance measurement mechanisms for the health system\. This sub-component contributes to the building of a reliable health information system for tracking key performance indicators\. It provides resources to support the ongoing rollout of the District Health Information Software 2 (DHIS2) platform, the national PBF portal, and the linkages between the two\. Sub-Component 2\.2 reinforces civil registration and vital statistics systems and supports the building of the national CRVS systems\. Sub- Component 2\.3 component supports operating costs for the PBF Technical Unit and Project Implementation Unit (housed within the PBF Technical Unit) for activities directly related to the project and the PBF program, including internal performance contracts for the PBF Technical Unit and other central\. 31\. The AF will support (i) the scale up of activities carried out by BUNEC to strengthen civil registration and vital statistics activities for refugees and host communities\. Birth registrations will be conducted for all deliveries, and birth certificates provided to mothers irrespective of nationality\. Civil registration centers under performance contracts will receive high level subsidies for registration documents delivered to refugees and vulnerable host population (ii) support the reinforcement of the monitoring and evaluation system, as well as information systems, by integrating related activities into the performance contract of health facilities, Districts, regional delegations, CDVAs and CIS (Cellule d’information Sanitaire) of the Ministry of Health (iii) strengthen communicable disease surveillance systems and epidemic preparedness and response in refugee host communities and refugee camps\. In recent years, Cameroon has had numerous disease outbreaks, particularly in refugee affected areas in the North and Far North regions\. These include Leishmaniosis (2017)15 Polio (2014)16, yellow fever (2013)17, measles (2015)18 and cholera (2011-2014)\. Between 2011-2014, Cameroon reported 26, 621 cases of cholera leading to 1031 death19\. These periodic outbreaks affect thousands of households each year, and kill as many as 10 percent of those who contract the disease\.20 Despite Cameroons vulnerability to outbreaks, particularly in the Far North, there has been minimal investments in strengthen communicable disease surveillance and response systems, and the first Public Health Emergency Operation Center (PHEOC) is still under construction in Yaoundé\. Once fully operational the PHEOC can coordinate an emergency 15 Outbreak news today (2017)\. Leishmaniosis outbreak reported in Cameroon\. Source: http://outbreaknewstoday\.com/leishmaniasis-outbreak-reported-cameroon-58045/ Accessed: 11/30/2017 16 WHO (2014)\. Poliovirus in Cameroon – update\. Source: http://www\.who\.int/csr/don/2014_03_17_polio/en/ Accessed: 11/30/2017\. 17 WHO\. (2013)\. Yellow fever Cameroon\. Source: http://www\.who\.int/csr/don/2013_10_08/en/ Accessed: 11/30/2017 18 Reliefweb (2015)\. Cameroon: Measles and cholera outbreaks – Nov 2015\. Source: https://reliefweb\.int/disaster/ep-2015-000156-cmr \. Accessed 11/30/2017 19 CDC\. (2017) CDC Fights Cholera in Cameroon\. Source : https://www\.cdc\.gov/ncezid/dfwed/stories/fighting-cholera-cameroon\.html\. Accessed: 11/30/2017 20 Idem\. Feb 08, 2018 Page 10 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) response within 120 minutes of identification of a public health emergency21\. The AF will support the enhancement of community-level and regional level surveillance and reporting systems in the northern and East regions, by integrating surveillance indicators in the performance contract of health facilities, health districts and regional delegation and CIS (ii) analytical work on existing surveillance systems in refugee affected regions, (iii) review and update of disease priorities in the northern and East regions, and review and develop guidelines, protocols and tools to enhance surveillance and reporting processes (iv) enhancement of the communicable diseases outbreak preparedness and response capacity\. 32\. Component 3 (new) : Strengthening emergency, sexual and reproductive health services, and WASH and nutrition service delivery for refugee and host populations in the northern and East regions\. (Total new cost US$21 million IDA18 RSW Grant)\. The AF will finance the following activities using the PBF strategy: (i) provision of emergency health services and life-saving sexual and reproductive health services, including those related to the management of rape, FGM and GBV; (ii) support the provision of select nutrition, deworming and soft WASH interventions in preschools, schools, health facilities, at community-level, including refugee camps; (iii) deliver a comprehensive mental health and psychosocial support program for refugees, IDPs and host populations, (iv) support institutional capacity building, including; (a) sensitivity training of frontline health professionals, CHW and CBOs from refugee and host communities, and civil registration officers (b) training of skilled birth attendants on basic and comprehensive emergency Obstetric and Newborn Care (c) training of health professionals, CHW and CBOs from refugee and host communities on the management of rape, FGM and GBV, including physical, sexual and psychological violence\. 33\. The proposed soft WASH activities include, but are not limited to, ASA on water and sanitation practices in health facilities, and formative research on sanitation marketing, handwashing, household water treatment and safe storage (HWTS), and menstrual hygiene management (MHM)\. Evidence-based programming based on these analytical work is expected to ensure socio-cultural and gender sensitivity with special attention to vulnerable populations, to synchronize impact from an integrated multisectoral approach, as well as to inform more inclusive and comprehensive policies\. The project also supports strengthening health communication towards good sanitation and hygiene behaviors among refugees and host community populations at health and nutrition facilities, schools (including pre-schools if any), and communities in an enabling environment\. CHWs and school children will most likely be agents of change for good sanitation and hygiene behaviors in their entire communities\. 34\. Component 4: Contingent Emergency Response (Total new cost US$0)\. A CERC will be included under the project in accordance with Operational Policy (OP) 10\.00 paragraphs 12 and 13, for projects in Situations of Urgent Need of Assistance or Capacity Constraints\. This will allow for rapid reallocation of project proceeds in the event of a natural or man-made disaster or crisis that has caused, or is likely to imminently cause, a major adverse economic and/or social impact\. 21 CDC\. (2017) Global Health Security Agenda: GHSA Emergency Operations Center Action Package\. Source : https://www\.cdc\.gov/globalhealth/security/actionpackages/emergency_operations_centers\.htm \. Accessed 11/30/2017 Feb 08, 2018 Page 11 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) E\. Implementation 1\. The implementation arrangements will remain largely the same as for the parent project in the Far north, North, Adamawa and East regions\. 2\. At the central level of the Ministry of Public Health (MOPH), the Health Sector Strategy (HSS) Steering Committee (created in 2005), chaired by the Minister of Public Health, will continue to provide oversight and strategic guidance to the project, and will oversees the achievement of the project objectives\. Under the authority of the HSS Steering Committee, a specific project technical committee has been created to provide direct oversight and support to the project\. The technical committee, chaired by the general secretary of MOPH, includes: (i) select directories of the MOPH; and (ii) key ministries whose support is needed for successful implementation and sustainability of PBF in Cameroon (Ministry of Economy and Planning and Ministry of Finance)\. The technical committee’s tasks include to: (i) validate the overall strategic direction of the PBF program; (ii) validate the overall strategic direction of other interventions supported by the project; (iii) ensure that the procedures set forth in the project implementation manual are followed; (iv) examine the different contracts and intervene where necessary to resolve issues; (v) monitor PBF and other activities’ implementation and intervene where problem resolution may require the support of committee members; and (vi) disseminate the results of the evaluations with a view toward mobilizing additional resources and expanding the PBF approach in the country\. 3\. Project implementation will continue to be coordinated by the PBF technical unit (Cellule Technique Nationale PBF) of the Ministry of Health, and supported if needed by appropriate consultants\. The PBF technical unit is responsible for the day-to-day management of the project; informs the HSS Steering Committee of progress achieved in implementing the PBF approach; oversees both the coordination of the overall PBF program, and specific project implementation for activities supported by the GFF trust fund\. Also, it will manage and oversee achievements of the interventions related to the AF for the IDA 18 refugee sub-window\. The PBF technical unit is tasked with: (i) developing norms and procedures for the PBF program; (ii) coordination and leadership of development partners, vertical programs and departments within the MOPH involved in the PBF program; (iii) conducting performance contracting, evaluation and coaching activities for decentralized actors such as the Regional Health Delegations, Contracting and Verification Agencies, and Regional Funds for Health Promotion; (iv) preparing and implementing PBF training programs; and (v) developing the scale-up plan for national coverage\. The procedure for activities supported by the AF will be incorporated in the project implementation manual and the national PBF manual\. The national PBF manual will be the key strategic document providing operational guidelines for implementation of PBF and refugee related activities\. 4\. The project will continue to use CDVAs established in each region for the following tasks: (i) contracting and coaching health service providers, (ii) contracting CBOs for community verification, and verification of declared results by contracted agents\. In the regions where refugees are established, CDVAs will be responsible for the coaching of health facilities to provide essential health, nutrition and WASH services to refugees and vulnerable host populations, according to the PBF manual\. Upon verification, CDVAs will send payment requests through the PBF portal22, which will be received, validated and processed by the National PBF Technical Unit\. Payments will be made directly to health facilities and regulatory bodies, each of which will have their own independent bank account\. CDVAs will pay CBOs directly for community verification activities\. 5\. To stimulate the demand-side, community PBF is integrated in the project as a complement to PBF at the health facility level\. CHWs and CBOs are trained and contracted by health facilities to provide prevention and promotional activities at the community level\. These include, but are not limited to, (i) the referral of poor and vulnerable patients, pregnant women, infants and women of child bearing age to health facilities, (ii) identification of patients lost to Feb 08, 2018 Page 12 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) follow-up, and (iii) home visits\. CHWs and CBOs are supervised by health personnel from health facilities\. Their activities are evaluated and verified by health facilities, and counter verified by CDVA verifiers\. Their performance payment is made monthly through the health facilities\. For the AF, the package of activities carried out by CHWs and CBOs will be expanded to include refugees, and host populations as beneficiaries\. CHWs and CBOs (e\.g\. schools and NGOs) from refugee and host communities will be contracted to provide community activities in refugee and host communities, and refugee camps, under the supervision of the health facilities\. \. F\. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) The project will be implemented in all ten regions of the country\. These regions are divided into five (5) agro-ecological zones of Cameroon: bimodal and mono-modal agro-ecological zone (On the coastal area, it has a multitude of anthropogenic pressure and it is also a highly urbanized zone with acute air pollution and urban waste management issues); the Sudano-sahelian and Guinean savannah zones (These are dry zones that are mostly affected by pressures such as fuel wood harvesting, which lead to indoor air pollution, nutritional emergency, exposure to floods, which always bring a threat of cholera, malaria and dengue) and the Western Highlands\. Indigenous Peoples live in the East region and OP/BP 4\.10 has been triggered in order to ensure that these populations will be effectively included in project benefits\. G\. Environmental and Social Safeguards Specialists on the Team Kristyna Bishop, Social Safeguards Specialist Charlotte Noudjieu Cheumani, Social Safeguards Specialist Cyrille Valence Ngouana Kengne, Environmental Safeguards Specialist SAFEGUARD POLICIES THAT MIGHT APPLY SAFEGUARD _TBL Safeguard Policies Triggered? Explanation (Optional) The additional financing will not change the safeguard category of the project, which remains category B, as it is not anticipated that the project activity will have a large scale negative impact on the Environmental Assessment OP/BP 4\.01 Yes environment and population\. The AF triggers the same two safeguard policies triggered by the parent project: OP/BP 4\.01 - Environmental Assessment\. OP/BP 4\.01 is triggered because they are predictable 22 www\.fbrcameroun\.org Feb 08, 2018 Page 13 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) potential negative environmental and social risks and impacts related to the handling and the disposal of medical waste (such as placentas, syringes, and material used for delivery of pregnant women)\. In addition, soft WASH interventions in schools and in refugee camps might lead to conflicts\. To comply with OP/BP 4\.01-Environmental Assessment,a Medical Waste Management Plan (MWMP) was prepared in 2008, updated and disclosed on Infoshop in 2014\. A social assessment was undertaken in 2016\. Based on these instruments, the project developed an action plan and a Performance Based Financing and Quality of care checklist that includes waste management, hygiene and safety issues\. Their implementation has been satisfactory\. The checklist and the action will be updated to include GRM requirements, GBV measures, occupational safety measures, etc\. To better mitigate and manage the environmental and social risks and impacts, the project will recruit a safeguards specialist\. In addition, the MWMP was transformed into a Hygiene and Waste Management Plan (HWMP) and disclosed on the Bank website on March, 9 2018\. HWMP includes new technical and geographical scope, measures related to GRM, occupational safety, GBV risks, menstrual hygiene management, household water treatment and safe storage (HWTS), etc\. The project will report on the implementation of environmental and social development aspects on a quarterly basis\. The project is not expected to impact on natural Natural Habitats OP/BP 4\.04 No habitats\. Forests OP/BP 4\.36 No The project is not expected to impact on forests\. Pest Management OP 4\.09 No The project is not expected to impact on pests\. The project is not expected to impact on physical Physical Cultural Resources OP/BP 4\.11 No cultural resources\. This policy has been triggered as indigenous peoples are present in the East region\. A social audit and assessment, reviewing the implementation of the IPPF for the previous Health Sector Support project Indigenous Peoples OP/BP 4\.10 Yes and evaluating the current health status and concerns of these communities, has informed the IPP that was prepared for the project, consulted on and disclosed in country and the Bank website on March, 9 2018\. Feb 08, 2018 Page 14 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) The project will not include any involuntary Involuntary Resettlement OP/BP 4\.12 No resettlement\. The project will not include construction or Safety of Dams OP/BP 4\.37 No rehabilitation of dams, nor rely on dams\. Projects on International Waterways The project is not expected to impact on any No OP/BP 7\.50 international waterway\. Projects in Disputed Areas OP/BP 7\.60 No The project will not be located in a disputed area\. KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT OPS_SAFEGUARD_SUMMARY_TBL A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: In accordance with OP/PB 4\.01, the Medical Waste Management Plan (MWMP) was prepared for the parent project, disclosed in 2014, and is being successfully implemented as planned\.This project does entail significant impacts\. However, they are predictable potential negative environmental and social risks and impacts related to the handling and the disposal of medical waste (such as placentas, syringes, and material used for delivery of pregnant women)\. In addition, soft WASH and Nutrition interventions including deworming in schools, community and in refugee camps might lead to conflicts and gender based violence\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: There are no long term impacts due to the anticipated future activities in the project area\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. The project will limit its support to health facilities, refugees camps and communities with limited environmental and social adverse risks and impacts\. The project will not support refugee sites that are in or near national forest reserves, national parks, wildlife reserves and national historic monuments\. In addition, when selecting and supporting beneficiary camps established by UNHCR, due attention will be paid to the risk of man-made or natural hazards and the potential risk of conflict with the local population, protection of water resources, drainage and soil conditions, rainfall patterns, analysis of seasonal variations in water yield and quality throughout the year, solid waste disposal, number of animals in camps, availability of an environmental Action Plan for refugee camps or settlements\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. The Gov\. of Cameroon has already taken significant steps to protect its environment through a National Policy on Environmental Protection and a series of legislative and regulatory texts for environmental protection and nature conservation (i\.e\. comprehensive environmental and social legal framework, including the 1996 Environmental Law and its implementation decrees)\. The Decree 2012/2809 of 26 September 2012 stipulating conditions of waste management in Cameroon, including health care waste (medical and pharmaceutical), regulates waste management in Cameroon\. Per this Decree, it is the responsibility of the waste generator to ensure that the waste is packaged, transported, treated and disposed of in terms of the legal requirements and that there is an auditable record of the steps involved in storing, collecting and transporting the waste\. To comply with national legislative and regulatory requirements and with the WB policies triggered (OP/BP 4\.01-Environmental Assessment),a Medical Waste Feb 08, 2018 Page 15 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) Management Plan (MWMP) was prepared in 2014\.Based on this instrument the project developed a Performance Based Financing and Quality of care checklist that includes waste management, hygiene and safety issues\. The level of compliance of these activities with environment and safeguards has been satisfactory\. To better mitigate and manage the above-mentioned risks, the project will recruit a safeguard specialist; in addition, the MWMP was transformed into a Hygiene and Waste Management Plan (HWMP), and was updated and disclosed in country march 8 and on the Bank website on March, 9 2018\. HWMP includes new technical and geographical scope, measures related to GRM, occupational safety, GBV risks, menstrual hygiene management, household water treatment and safe storage (HWTS)\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. During the project preparation process, the stakeholders (health officials, affected people, CSOs and public administration partners) and there is an ongoing social dialogue with key stakeholders\. They was consulted during the update of the preparation of the Hygiene and Waste Management Plan (HWMP)\. The key stakeholders include indigenous peoples (Baka) of the East region, health service providers and health system managers (district, regional and central level administrative units), and patients and communities that are served in the project's implementation zone\. These groups have participated in the process to prepare the safeguard instruments and their inputs have been incorporated into the final documents\. Specific consultations with indigenous communities and the staff working at the health centers that provide care for these communities were undertaken in the preparation of the updated Indigenous Peoples Action Plan\. OPS_SAFEGUARD_DISCLOSURE_TBL B\. Disclosure Requirements (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_DISCLOSURE_TABLE Environmental Assessment/Audit/Management Plan/Other For category A projects, date of Date of receipt by the Bank Date of submission for disclosure distributing the Executive Summary of the EA to the Executive Directors 09-Feb-2016 25-Feb-2016 "In country" Disclosure Cameroon 25-Feb-2016 Comments OPS_I P_DIS CLOSURE_TAB LE Indigenous Peoples Development Plan/Framework Date of receipt by the Bank Date of submission for disclosure 09-Feb-2016 25-Feb-2016 "In country" Disclosure Cameroon 25-Feb-2016 Feb 08, 2018 Page 16 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) Comments OPS_PM_ PCR_TABLE If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP\. If in-country disclosure of any of the above documents is not expected, please explain why: OPS_COMPLIANCE_INDICATOR_TBL C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_COMP_TABLE OP/BP/GP 4\.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? If yes, then did the Regional Environment Unit or Practice Manager (PM) review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the credit/loan? OPS_I P_COM P_TABLE OP/BP 4\.10 - Indigenous Peoples Has a separate Indigenous Peoples Plan/Planning Framework (as appropriate) been prepared in consultation with affected Indigenous Peoples? If yes, then did the Regional unit responsible for safeguards or Practice Manager review the plan? If the whole project is designed to benefit IP, has the design been reviewed and approved by the Regional Social Development Unit or Practice Manager? OPS_ PDI_ COMP_TAB LE The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank for disclosure? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs? Feb 08, 2018 Page 17 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) OPS_ALL_COMP_TABLE All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? CONTACT POINT World Bank Ibrahim Magazi Senior Health Specialist Borrower/Client/Recipient MINEPAT Mr\. Louis Paul Motaze Minister of Economy , Planning and Regional Development MINSANTE Implementing Agencies Ministry of Public Health Andre Mamma Fouda Minister of Public Health Feb 08, 2018 Page 18 of 19  The World Bank Health System Performance Reinforcement Project - Additional Financing (P164954) FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Task Team Leader(s): Ibrahim Magazi Approved By Safeguards Advisor: Maman-Sani Issa 12-Mar-2018 Practice Manager/Manager: Gaston Sorgho 13-Mar-2018 Country Director: Elisabeth Huybens 13-Mar-2018 Feb 08, 2018 Page 19 of 19

APPROVAL

P168308

FOR OFFICIAL USE ONLY Report No: PAD3407 INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED IDA SCALE-UP FACILITY CREDIT IN THE AMOUNT OF EUR 287\.7 MILLION (US$315 MILLION EQUIVALENT) TO THE REPUBLIC OF CÔTE D'IVOIRE FOR AN URBAN RESILIENCE AND SOLID WASTE MANAGEMENT PROJECT MAY 20, 2020 Urban, Resilience, and Land Global Practice Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2020) Currency Unit = CFA Francs (CFAF) CFAF 599 = US$1 US$1 = EUR 0\.9133 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AECID Spanish Agency for International Development Cooperation (Agence Espagnole pour la Coopération Internationale au Développement) AFD French Agency for Development (Agence Française de Développement) AfDB African Development Bank ANAGED National Waste Management Agency (Agence Nationale de Gestion des Déchets) AWPB Annual Work Plan and Budget BCEAO Central Bank of West African States (Banque Centrale des Etats d'Afrique de l'Ouest) BOAD West African Development Bank (Banque Ouest Africaine de Développement) CAPEX Capital Expenditure C2D Debt Reduction and Development Contract ( Contrat de Désendettement et de Développement) CERC Contingent Emergency Response Component C-ESMP Contractor's Environmental and Social Management Plan COVID-19 Coronavirus Disease of 2019 CPF Country Partnership Framework CQS Selection Based on the Consultants’ Qualifications CURB Climate action for URBan sustainability CVET Landfill and recycling center (Centre de Valorisation et d'Enfouissement Technique ) DA Designated Account DAA Abidjan Autonomous District (District Autonome d'Abidjan) DAF Directorate of Administration and Finance DAGRU Directorate of Addressing Management and Urban Restructuring (Direction Adressage Gestion et Restructuration Urbaine) DAUD Office of Urban Sanitation (Direction de l'Assainissement Urbain et du Drainage ) DB Design-Build DBFO Design-Build-Finance-Operate DBO Design-Build-Operate DGAS Directorate of Sanitation and Salubrity (Direction Générale de l’Assainissement et de la Salubrité) DGTCP Directorate of Debt (Direction Générale du Trésor et de la Comptabilité Publique ) DPF Development Policy Financing DRM Disaster Risk Management DRR Disaster Risk Reduction EIRR Economic Internal Rate of Return EPC Engineering, Procurement, and Construction EPIC Public Industrial and Commercial Establishment (Etablissement Public à Caractère Industriel et Commercial) ESCP Environmental and Social Commitment Plan ESF Environmental and Social Framework ESIA Environmental and Social Impact Assessment ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan ESS Environmental and Social Standards EU European Union EWS Early Warning System FA Framework Agreement FBS Fixed Budget Selection FM Financial Management GBV Gender-Based Violence GDP Gross Domestic Product GHG Greenhouse Gas GIS Geographic Information System GoCI Government of Côte d'Ivoire GRM Grievance Redress Mechanism ICT Information and Communication Technology ID Identification IDA International Development Association IC Individual Consultant ICB International Competitive Bidding IFC International Finance Corporation IFR Interim Finance Report IGF General Inspectorate of Finance (Inspection Générale des Finances) IMF International Monetary Fund IPCC Intergovernmental Panel on Climate Change IPF Investment Project Financing IRF Property Income Tax (Impôt sur le Revenu Foncier) IT Information Technology LCS Least-Cost Selection LMP Labor Management Plan M&E Monitoring and Evaluation MCLU Ministry of Construction, Housing, and Urbanization ( Ministère de la Construction, du Logement et de l'Urbanisme) MDGs Millenium Development Goals MFD Maximizing Finance for Development MINASS Ministry of Sanitation (Ministère de l'Assainissement et de la Salubrité ) MSW Municipal Solid Waste NBS Nature-based Solution NCB National Competitive Bidding NGO Nongovernmental Organization NPV Net Present Value EHS/OHS Environmental/Occupational Health and Safety O&M Operation and Maintenance ONAD National Office of Sanitation and Drainage (Office National de l'Assainissement et du Drainage ) ONPC National Civil Protection Office (Office National de la la Protection Civile) OPEX Operational Expenditure PA Project Account PCU Project Coordination Unit PDNA Post Disaster Need Assessment PDO Project Development Objective PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PPA Project Preparation Advance PPP Public Private Partnership PPSD Procurement Project Strategy for Development PRICI Infrastructure Renewal and Urban Management Project ( Projet de Renaissance des Infrastructures de Côte d'Ivoire) QBS Quality-Based Selection RAF Financial Management Officer (Responsable Administratif Financier) RAP Resettlement Action Plan REoI Request for Expression of Interest RDF Refuse-Derived Fuel RECIDE Resilient City Development RPF Resettlement Policy Framework SAI Social Accountability International SDAD Sanitation and Drainage Master Plan (Schéma Directeur d'Assainissement et de Drainage ) SEAH Sexual Exploitation, Abuse and Harassment SEP Stakeholder Engagement Plan SIA Specialized Implementation Agency SMEs Small and Medium Enterprises SODEXAM Airports, Aeronautics, and Meteorology Operating and Development Company ( Société d'Exploitation et Développement aéroportuaire, aéronautique et météorologique ) SoE Statement of Expressions SUF Scale-up Facility SWM Solid Waste Management TEOM Garbage Removal Tax (Taxe d'Enlèvement des Ordures Menagères) TOR Terms of Reference TSCP Special Tax on Specific Plastic Product (Taxe Spéciale sur Certains Produits en Matières Plastiques) TSPE Special Tax of Environmental Protection (Taxe Spéciale de Protection de l'Environnement) TTL Team Task Leader TVHA Road, Hygiene, and Sanitation Tax (Taxe de Voirie d'Hygiène et d'Assainissement ) UNDP United Nations Development Programme UVICOCI Ivorian Union of Cities and Municipalities Union des Villes et Collectivités de Côte d’Ivoire WAEMU West African Economic and Monetary Union Regional Vice President: Hafez M\. H\. Ghanem Country Director: Coralie Gevers Regional Director: Simeon Kacou Ehui Practice Manager: Sylvie Debomy Task Team Leaders: Mahine Diop, Lorenzo Carrera The World Bank Urban Resilience and Solid Waste Management Project (P168308) TABLE OF CONTENTS DATASHEET \. 1 I\. STRATEGIC CONTEXT \. 6 A\. Country Context\. 6 B\. Sectoral and Institutional Context \. 7 C\. Relevance to Higher Level Objectives\. 13 II\. PROJECT DESCRIPTION\. 15 A\. Project Development Objective \. 15 B\. Project Components \. 15 C\. Project Beneficiaries \. 24 D\. Results Chain \. 25 E\. Rationale for Bank Involvement and Role of Partners \. 25 F\. Lessons Learned and Reflected in the Project Design \. 26 III\. IMPLEMENTATION ARRANGEMENTS \. 27 A\. Institutional and Implementation Arrangements \. 27 B\. Results Monitoring and Evaluation Arrangements\. 29 C\. Sustainability\. 29 IV\. PROJECT APPRAISAL SUMMARY \. 31 A\. Technical, Economic, and Financial Analysis \. 31 B\. Fiduciary\. 35 C\. Legal Operational Policies \. 38 D\. Environmental and Social \. 38 E\. Grievance Redress Services \. 41 V\. KEY RISKS \. 42 VI\. RESULTS FRAMEWORK AND MONITORING \. 45 ANNEX 1: Implementation Arrangements and Support Plan \. 55 ANNEX 2: GHG Emission Analysis \. 72  The World Bank Urban Resilience and Solid Waste Management Project (P168308) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name Cote d'Ivoire Urban Resilience and Solid Waste Management Project Project ID Financing Instrument Environmental and Social Risk Classification Investment Project P168308 High Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Performance-Based Conditions (PBCs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [✓] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) Expected Approval Date Expected Closing Date 15-Jun-2020 31-Oct-2026 Bank/IFC Collaboration No Proposed Development Objective(s) The development objectives of the project are to reduce vulnerability to flooding in selected urban areas and improve solid waste management in targeted municipalities\. Components Component Name Cost (US$, millions) Page 1 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) Component 1: Flood risk mitigation infrastructure and services 181\.00 Component 2: Improvement of solid waste management infrastructure and services 124\.00 Component 3: Project management 10\.00 Component 4: Contingent Emergency Response Component 0\.00 Organizations Borrower: Republic of Cote d'Ivoire Implementing Agency: Ministry of Sanitation PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 315\.00 Total Financing 315\.00 of which IBRD/IDA 315\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Development Association (IDA) 315\.00 IDA Credit 315\.00 IDA Resources (in US$, Millions) Credit Amount Grant Amount Guarantee Amount Total Amount Cote d'Ivoire 315\.00 0\.00 0\.00 315\.00 Scale-up Facility (SUF) 315\.00 0\.00 0\.00 315\.00 Total 315\.00 0\.00 0\.00 315\.00 Expected Disbursements (in US$, Millions) Page 2 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) WB Fiscal Year 2020 2021 2022 2023 2024 2025 2026 2027 Annual 0\.00 15\.75 47\.25 78\.75 78\.75 63\.00 31\.50 0\.00 Cumulative 0\.00 15\.75 63\.00 141\.75 220\.50 283\.50 315\.00 315\.00 INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas Urban, Resilience and Land Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1\. Political and Governance  Substantial 2\. Macroeconomic  Moderate 3\. Sector Strategies and Policies  Substantial 4\. Technical Design of Project or Program  Moderate 5\. Institutional Capacity for Implementation and Sustainability  Substantial 6\. Fiduciary  Substantial 7\. Environment and Social  High 8\. Stakeholders  Moderate 9\. Other 10\. Overall  Substantial Page 3 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No Does the project require any waivers of Bank policies? [ ] Yes [✓] No Environmental and Social Standards Relevance Given its Context at the Time of Appraisal E & S Standards Relevance Assessment and Management of Environmental and Social Risks and Impacts Relevant Stakeholder Engagement and Information Disclosure Relevant Labor and Working Conditions Relevant Resource Efficiency and Pollution Prevention and Management Relevant Community Health and Safety Relevant Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Relevant Biodiversity Conservation and Sustainable Management of Living Natural Relevant Resources Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Not Currently Relevant Local Communities Cultural Heritage Relevant Financial Intermediaries Not Currently Relevant NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS)\. Legal Covenants Sections and Description Page 4 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) Financing Agreement, Schedule 2, Section I\.A\.1 (e): The Recipient shall ensure that the PCU: (i) recruits an accountant and acquires an accounting software no later than two (2) months after the Effective Date; and (ii) recruits a communication officer, a monitoring and evaluation expert, a drainage engineer, a digital and geospatial technology specialist and a solid waste management specialist no later than three (3) months after the Effective Date; and an external auditor no later than five (5) months after the Effective Date\. Sections and Description Financing Agreement, Schedule 2, Section I\.B\.2 (a): No later than one (1) month after the Effective date, the Recipient shall prepare, under terms of reference acceptable to the Association, and furnish to the Association, an implementation manual for the Project containing detailed arrangements and procedures for: (i) institutional coordination and day-to-day execution of the Project; (ii) Project budgeting, disbursement and financial management; (iii) procurement; (iv) monitoring, evaluation, reporting and communication; (v) safeguards monitoring and mitigation; and (vi) such other arrangements and procedures as shall be required for the Project\. Conditions Type Description Effectiveness Financing Agreement, Article V, 5\.01 (a): the Recipient has recruited (i) a coordinator, (ii) a financial management specialist and (iii) a procurement specialist (iv) a social development specialist, and (v) an environmental specialist, all with qualifications, experience and terms of reference acceptable to the Association\. Type Description Effectiveness Financing Agreement, Article V, 5\.01 (b): the Delegated Management Contracts have been duly executed, on terms and conditions acceptable to the Association, between the Recipient, acting through the Project Coordination Unit, and each of the Specialized Implementing Agencies\. Page 5 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) I\. STRATEGIC CONTEXT A\. Country Context 1\. Economic growth has remained strong in recent years\. With gross domestic product (GDP) growth estimated at 7\.4 percent in 2018 (4\.8 percent in per capita terms) and 7\.31 percent in 2019, Côte d’Ivoire continues to be one of the fastest growing economies in Sub-Saharan Africa (which grew overall at 2\.3 percent in 2018)\. The services and industrial sectors supported the country’s strong economic performance\. The services sector recorded a strong performance due to the growth of telecommunication, trade, and transport services\. Public investments (in the Fourth Bridge and metro projects in Abidjan) and private investments (particularly in the housing sector) supported the construction sector while agro-processing boosted manufacturing activities\. In the primary sector, higher cocoa, coffee, and cotton crops offset the lower production in the cashew sector\. 2\. Economic growth has been associated with a moderate decline in poverty and inequality, but the gap between the poor and the rich remains high\. At the national level, poverty has slightly decreased from 29\.1 percent in 2008 to 24\.4 percent in 20192 (international poverty line US$1\.90 PPP3)\. In urban areas, however, poverty has increased, partly as a result of migration from rural to urban areas\. The decline in poverty at the national level is driven by a reduction in poverty in rural areas where the proportion of people living below the poverty line decreased from 62\.5 percent in 2008 to 56\.8 percent in 2015\. Though universal enrollment and gender parity have been nearly achieved in primary education, gaps remain in secondary education, with the lowest participation rates in rural and poor communities\. Employment is predominantly informal and the country faces major challenges in terms of job quality and urban mobility\. 3\. The medium-term outlook has been generally favorable, but the COVID-19 pandemic is expected to have a significant negative impact\. Growth projections are being revised downward, now expected to be around 2-3 percent in 2020\. The government’s confinement measures, and a domestic outbreak will hurt domestic demand – a key driver of growth in past years - and global spillovers will negatively affect exports\. This, coupled with the cost of a crisis response economic stimulus package, will put pressure on government finances, drive up debt and widen the budget deficit\. However, 2021 and beyond are expected to see a recovery to the previous levels of 7 percent and above\. In the medium run, growth will be driven by increased productivity in the agricultural and industrial sectors, and a dynamic services sector\. The use of improved seeds is expected to increase agricultural productivity and the expansion of cocoa and cashew processing will support the manufacturing sector\. Greater agricultural productivity and processing will lead to an increase of exports\. The construction sector will continue to grow as new industrial zones as well as public infrastructure are developed both in Abidjan and in the secondary cities\. All these sectors should both benefit from and contribute to the country's rapid urbanization and economic progress\. As a result of reforms improving the business climate, private investment is expected to further accelerate in the agribusiness and service sectors\. Inflation is expected 1 World Bank Macro-poverty Outlook : http://macropovertyoutlook\.worldbank\.org/mpo_files/mpo/mpo-sm20-civ\.pdf 2 World Bank Macro-poverty Outlook : http://macropovertyoutlook\.worldbank\.org/mpo_files/mpo/mpo-sm20-civ\.pdf 3 PPP = purchasing power parity\. Page 6 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) to gradually increase, reaching 2\.0 percent in 2022 (well below the West Africa Economic and Monetary Union [WAEMU] target) as the output gap remains positive\. 4\. While the medium-term outlook remains favorable, risks are tilted to the downside, notably in the short run\. Vulnerability to external shocks remains one of the main challenges to achieving sustainable growth\. Rising concerns over cocoa-related deforestation and child labor in Côte d’Ivoire might lead to reduced access to markets in Europe and the United States (which account for about 85 percent of cocoa exports)\. A stronger-than-expected decline in cocoa prices could adversely affect fiscal revenues, economic growth, and the significant share of the population whose livelihoods depend directly on cocoa\. A tightening of monetary policy in international and regional markets would increase the cost of borrowing and affect debt sustainability\. As for domestic risks, the 2020 presidential elections could lead to an increase in spending (social spending as well as public investments)\. With the COVID-19 crisis expenditure, the GoCI will not be able to comply with the regional convergence criterion for the fiscal deficit of 3 percent of GDP in 2020\. Given the Regional crisis, the WAEMU convergence criterion has been suspended\. Going forward, compliance next year (2021) is also at risk due to the COVID-19 crisis\. However, the overall macroeconomic framework is adequate and the Government is committed to compliance with the convergence criterion on fiscal deficits in the longer run\. Greater political uncertainty, as well as the resurgence of sociopolitical tensions, may also have a negative impact on investor confidence in Côte d’Ivoire and affect economic growth\. Finally, adverse climatic conditions may negatively affect agricultural output and exports\. Most of these risks are exacerbated by the COVID-19 crisis, which has brought about heightened global volatility in commodity prices and tightening of financing conditions\. In addition, the public budget will be under further pressure from increased expenditure needs, notably to combat the pandemic\. B\. Sectoral and Institutional Context Rapid and Uncontrolled Urbanization 5\. The urban sector in Côte d'Ivoire is characterized by an unprecedented population growth\. More than 50 percent of the Ivorian population lives in cities in 20204, with an urbanization rate of around 5 percent per year\. The Abidjan Autonomous District includes the highest human and economic concentration in the country: a population estimated today between 5 and 6 million inhabitants or 20 percent of the total population and nearly 45 percent of urban dwellers\. The Abidjan Autonomous District alone accounts for more than 60 percent of the country's economic activities\. By 2025, one Ivoirian out of four will live in the Abidjan metropolitan area\. Eleven other cities with more than 100,000 inhabitants are considered as secondary cities; the largest five are Bouaké, Daloa, Korhogo, San Pedro, and Yamoussoukro\. Between 1998 and 2014, the population grew by 53 percent in Abidjan, 43 percent in San Pedro, and 17 percent in Bouake, which was severely affected by civil unrest\. 6\. Basic sanitation, solid waste management (SWM), and stormwater infrastructure facilities in the urban sector have not kept up with rapid urban growth\. The country’s booming economic development combined with a lack of land planning and infrastructure maintenance have deepened Côte d’Ivoire’s urban problems and led to environmental degradation and greater vulnerability to natural hazards\. Major factors exacerbating this vulnerability include (a) occupation of ‘non-aedificandi’, or areas 4 UN Habitat Côte d’Ivoire Country Profile : https://population\.un\.org/wup/Country-Profiles/ Page 7 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) not suitable for construction, building dwellings in high-risk areas such as storm basins; (b) a deficit in alternative housing exacerbated by rural to urban migration; (c) a lack of investment for implementation of master plans for sanitation and drainage; (d) an inadequate SWM system, causing unsanitary conditions and spreading diseases; and (e) insufficient involvement of local authorities in development management\. Incomplete (or Unachieved) Decentralization Process 7\. The Government’s 2003 decentralization policy and transfer of responsibilities of the state to local authorities specifies 16 main areas of expertise\. The institutional framework governing decentralization and the law changed in 2012, reducing formerly five levels of decentralized entities into two: regions (31) and municipalities (197)\. In addition, two autonomous districts were created for Abidjan and Yamoussoukro\. Nevertheless, devolution has not been accompanied by a full transfer of financial and human resources, and local authorities lack autonomy and capacity to manage rapid urbanization and provision of infrastructure and urban services\. 8\. The Abidjan Autonomous District (District Autonome d’Abidjan, DAA) is a special type of local authority with legal and financial autonomy\. Its main sources of funding come from the taxes collected and transferred by the state, including taxes for built-up land, patents, casino gaming licenses, and state subsidies, among others\. The district comprises 13 municipalities and 96 villages\. The district’s authority was set into law in 20145 and includes (a) environmental protection, (b) land use planning, (c) mitigation of the adverse effects of urbanization, (d) promotion and implementation of social and cultural economic development, (e) public safety, and (f) protection and promotion of cultural traditions\. Disaster Risk Profile and Climate Change 9\. Côte d’Ivoire is prone to natural disaster risks such as flooding and landslides, which are exacerbated by the effects of rapid urbanization and climate change\. The country is in the transition zone between a humid equatorial climate in the south and the drier tropical climate in the north\. In the north, the rainy season is from June to October, while in the southern region, May to June brings heavy rains, averaging 2,000 mm annually along the coast, and shorter rains occur during August and September\. High rainfall in the south supports an abundance of agriculture, namely cocoa, cashews, and coffee\. 10\. Floods are a perennial hazard in Côte d’Ivoire, especially in the southern part of the country with the highest rainfall\. An estimated 60,000 people are affected by floods and nearly 0\.7 percent of the country’s GDP is lost every year\. Furthermore, other coastal cities like Abidjan and Grand-Bassam, are particularly vulnerable to natural disasters associated with sea-level rise\. 11\. Climate trends are characterized by rising temperatures and increasing extreme events\. An analysis of climate data from 1970 to 2015 shows an average rise of a little more than 1°C\. But future change in precipitation is not easily predictable, and different climate modeling scenarios present a large variability over the very long term\. However, by 2050, the country could face an estimated 9 percent decrease of precipitation in May coupled with an increase of 9 percent in October and 30 cm of sea level rise\. Rising temperatures and increased variability will also increase the frequency and magnitude of extreme events\. These will further exacerbate the risk of flooding due to more frequent extreme 5 No\. 2014-453 of August 5, 2014\. Page 8 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) precipitations and lack of capacity to discharge stormwater by the existing drainage systems, as well as due to sea level rise in coastal cities\. In the absence of a comprehensive study on the impact of climate change on the Ivorian economy, estimates can be made based on extrapolations of data from African continent-wide studies\. According to the Intergovernmental Panel on Climate Change (IPCC), climate change could reduce Africa's GDP by 2–4 percent by 2040 and between 10 and 25 percent in 2100\. For Côte d'Ivoire, this would correspond to an equivalent loss of CFAF 380–770 billion\. More concerning is the possibility that climate change could push 2–6 percent of additional households into extreme poverty by 2030\. For Côte d'Ivoire, this would correspond to nearly 1 million additional people in a situation of extreme poverty (people living on less than US$1\.90 a day) in addition to the existing 6 million\. 12\. The Abidjan Autonomous District is particularly prone to disaster risks such as flooding and landslides\. According to the available statistics, more than 26 percent of the district’s area is at risk of floods and landslides\. Over the past decade, Abidjan has experienced recurrent floods, resulting in significant human and economic losses\. The immediate causes include (a) inadequate drainage infrastructure and associated investments to adapt the system to current and future urban/climate conditions; (b) operating deficit and sanitation and drainage networks; (c) human occupation of the right- of-way of sanitation and drainage and sites unsuitable for construction; (d) dumping of household and other waste into sewage and drainage networks; (e) uncontrolled extraction of land, deforestation, and disordered land clearing; and (f) obstruction of gutters and drains\. Storm Water Management 13\. In the city of Abidjan, climate change and the poor condition of the storm drainage network contribute to increasing flood risk\. The post-flood assessment proved that lack of an adequate drainage system was one of the most aggravating factors contributing to recurrent flooding\. Except for a few investments, such as the Abidjan East-West Watershed (funded under the IDA Infrastructure Renewal and Urban Management Project (P124715), , and the Mahou neighborhood discharge system, the rainwater drainage system in the Abidjan Autonomous District has received little investment since the 1990s\. In some neighborhoods, such as Abobo in the north, only an estimated 11 percent of the landmass is serviced with rainwater drainage\. In addition to the recurring damage to public and private assets, the lack of functioning drainage systems has a knock-on effect on urban mobility, as unchecked rainwater increases the speed with which road networks deteriorate\. 14\. In Côte d’Ivoire, sanitary and stormwater systems are overseen by the National Office of Sanitation and Drainage (Office National de l'Assainissement et du Drainage, ONAD), which serves as the management entity for projects within this sector\. The ministry responsible for the sector is the Ministry of Sanitation (Ministère de l’Assainissement et de la Salubrité, MINASS)\. Within MINASS, the Directorate of Sanitation and Salubrity (Direction Générale de l’Assainissement et de la Salubrité, DGAS) is tasked with oversight roles\. The DAA has also assumed an important role in the same sector, albeit limited to the Greater Abidjan area\. The 13 communes that make up the Abidjan Autonomous District also play a role at the local ‘neighborhood’ level\. 15\. To tackle flood risk and poor sanitation in Abidjan, the Government of Côte d’Ivoire (GoCD) commissioned the preparation of a Sanitation and Drainage Master Plan (Schéma Directeur d’Assainissement et de Drainage du District Autonome d’Abidjan, SDAD ) which was finalized in 2018\. The plan, financed by the French Agency for Development (Agence Française de Développement, AFD), Page 9 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) through the C2D (Debt Reduction and Development Contract - Contrat de Désendettement et de Développement) provided an estimate of the financial needs for drainage and sanitation for Abidjan by 2030 and a vision for sewer infrastructure development in Abidjan through 2030\. The plan was set up in eight phases, with US$2,100 million for sanitation infrastructure and US$505 million for stormwater infrastructure\. The cost of Phase one is around US$280 million for stormwater, with a first tranche of around US$220 million\. 16\. In addition to the Abidjan Autonomous District, secondary cities within Côte d’Ivoire are also in dire need of investment in drainage infrastructure\. Some have already prepared drainage and sanitation master plans for planification and programming of investments\. These include Soubré, Séguéla, San Pedro, Daloa, Man, Grand-Bassam, Bouaké, Dimbokro, Abengourou, Yamoussoukro, Gagnoa, Odienne, Bondoukou, Daoukro and Korhogo\. The total investment for studies and design of drainage infrastructure in secondary cities is estimated at US$3\.3 million, and the construction cost is estimated at US$310 million\. Solid Waste Management 17\. Ivorian cities urgently need to tackle solid waste, including overflowing collection centers and proliferating open dump sites\. Along with stormwater management issues, Abidjan’s post-flood assessment clearly identified solid waste as one of the most aggravating factors contributing to recurrent flooding and therefore a key sector for addressing urban flooding\. During the past decade, cities have increased their daily solid waste production, but collection rates have not kept pace, worsening public health and safety hazards\. 18\. In 2018, Côte d’Ivoire produced over 4 million tons of solid waste, of which 2\.5 million tons were uncollected\. Because of low formal collection rates, open dumping and burning are commonly used to eliminate residual household waste\. Even formally collected waste is disposed of at unsanitary dumpsites without processing\. Access to waste collection and treatment is uneven across regions\. Existing collection services are irregular and unreliable (especially in secondary and peripheral municipalities), and with no sanitary landfill, open dumping and burning are prevalent\. In 2018, the collection rate in Abidjan was estimated at only 48 percent\. After launch of new private concessions at the end of 2018, this rate has increased sharply to about 85 percent after one year of operations\. However, in secondary municipalities, the current collection rate remains at 40 percent and waste management is rudimentary and sporadic\. 19\. At the institutional level, SWM in Côte d'Ivoire is overseen by the National Waste Management Agency (Agence Nationale de Gestion des Déchets, ANAGED), which is a public industrial and commercial establishment (Etablissement Public à Caractère Industriel et Commercial) created in 2017\. ANAGED oversees the management of all types of solid waste, including disposal of hazardous waste and medical waste\. The DGAS is in charge of the supervision\. ANAGED is placed under the technical and administrative supervision of MINASS and the financial supervision of the Ministry of Economy and Finance\. Thus, from an institutional stance, the Government has given a strong message about the public service vocation in SWM\. 20\. To deal with the hazardous situation in the Abidjan Autonomous District, the Government has worked with the private sector to modernize and improve SWM\. In 2016, the MINASS launched international tenders to contract private international operators for provision of SWM services in 13 municipalities of the Abidjan Autonomous District (villages and peripheral municipalities are not Page 10 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) included)\. Currently, two international operators (with a seven-year contract) are in charge of collecting and transporting solid waste of three sectors, covering (geographically) most of the urban agglomeration of Abidjan, to a single landfill\. A third seven-year concession was awarded to a private operator for the construction and operation of a landfill in Kossihouen (north west of Abidjan) for the treatment of 1,250,000 tons per year\. The entire investment for this contract is provided by the private sector against the repayment (both capital expenditure [CAPEX] and operational expenditure [OPEX]), by the Government, of a fixed portion relating to the investment (monthly fixed payment) and a remuneration per ton received at the landfill\. Revenues for the sector are provided by the national budget through a portion of a set of taxes (Property Tax [Impôt sur le Patrimoine Foncier]; Property Income Tax (Impôt sur le Revenu Foncier, IRF]; Road, Hygiene, and Sanitation Tax [Taxe de Voirie d'Hygiène et d'Assainissement, TVHA]; Garbage Removal Tax [Taxe d'Enlèvement des Ordures Menagères, TEOM]; Special Tax on Specific Plastic Product [Taxe Spéciale sur Certains Produits en Matières Plastiques, TSCP]; and Special Tax of Environmental Protection [Taxe Spéciale de Protection de l'Environnement, TSPE], among others), which cover costs for collecting, transporting, and operating the consolidation points and the transfer centers, as well as cleaning costs\. Current concessions include a three-month renewable guarantee on operating costs and guarantee the investment of the landfill\. Figure 1\. Mapping of SWM System: Current Situation in the Abidjan Autonomous District Map created using Google map\. 21\. Additional public-private partnerships (PPPs) should further unleash the potential of private sector financing and demand-responsive SWM services, including solid waste valorization\. The Page 11 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Government’s ambition for integrated and sustainable SWM cannot be financed and supported by the public sector alone\. Global experience shows that private sector participation in solid waste infrastructure and service provision, if done properly, can leverage investment by orders of magnitude and greatly improve service provision—as is already evident by the successful first efforts described earlier\. The Government will need to take even bolder steps to level the playing field and unlock the potential of the private sector for further improvements in the SWM sector’s performance, sustainability, and geographical coverage while managing public perception\. The Government, through the proposed project, will seek to attract further private investment in the solid waste sector by (a) engaging the service of an international firm as a PPP transaction adviser; (b) ensuring more balanced allocation of responsibilities and risks in the tender documents; and (c) considering de-risking measures, such as guarantees, necessary to incentivize strong private sector participation in SWM\. Moreover, the project will support waste valorization initiatives, including reuse, recycling, composting, and so on, which will reduce the huge amount of waste going to landfill (currently only small-scale waste valorization activities are in place)\. Among other initiatives, the project will support the SWM system in Abidjan Autonomous District by completing the envisioned system with transfer centers and a second disposal and recovery facility, to supply the areas not covered by the current concessions and reduce the massive amount of waste currently transferred to the existing landfill in Kossihouen (see figure 1)\. Institutional Capacity and Digital Technologies 22\. Although the deficits in drainage and SWM infrastructure are a main cause of flooding, the situation is worsened by the fact that even current infrastructure is not performing at the expected level, due to poor maintenance, deliberate clogging with waste, illegal occupation of public rights of way, and natural factors such as landslides and silting of watercourses\. Simply adding more infrastructure will not resolve the flooding issue; it also requires regular maintenance of current infrastructure, enforcement of zoning, and development of future infrastructure, all using an evidence- based approach, coordinated across all relevant institutions\. 23\. Currently the lack of use of information systems and institutional coordination for planning and operations is preventing an effective and efficient use of resources\. This is particularly important for an environment as complex as Abidjan with multiple and intricate interactions between sectors, people, and the urban space\. The baseline can be described along the lines of four main pillars—institutional arrangements, standards, data, and system integration—which can be described as follows: (a) there is no institutional framework for foundational and sectoral data management; (b) there is no regulation of mandates or responsibilities, making data access, sharing, and usage difficult for governmental agencies or other stakeholders; (c) data are not exploited in sectoral operational structure; and (d) systems are being developed or planned with limited integration of specific sectors, such as drainage or urban planning, or part of them only\. However, none of the systems are operational or embedded in institutional business processes\. These systems will need to be implemented while incorporating technological and institutional mechanisms to ensure that data can be exchanged smoothly and dynamically and in an integrated fashion across sectors\. 24\. Other examples such as the ‘Eco-quartier’ (Eco-neighborhood), a large District-led land valorization initiative, or the support to local startups by the Ministry of Information and Communication Technology demonstrate that Abidjan and Côte d’Ivoire could potentially leverage digital development opportunities to increase the impact of urban development interventions overall\. Page 12 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Addressing Flood Risk by Enhancing Urban Resilience - Climate Adaptation and Mitigation 25\. The proposed project aims to address current and future flood risk in the city of Abidjan and selected secondary cities, by (a) improving stormwater management capacity through construction/rehabilitation of primary and secondary drainage systems; (b) improving and scaling up the collection, transfer, disposal, and valorization of SWM, which is a direct cause of flooding; and (c) enhancing digital technologies and building institutional capacity for improved urban services and planning, including early warning systems (EWSs)\. These actions will enhance urban resilience to climate change and disaster risk by providing better planning, reducing impacts of extreme events, and facilitating faster recovery from these events\. The project will provide significant climate adaptation (to increased weather and climate variability and sea level rise) and mitigation (better management of waste, which is often burned, and reduced traffic congestions due to reduced high-frequency flood events and road upgrading) with a particular focus on gender issues and empowering women and youth\. C\. Relevance to Higher Level Objectives 26\. The proposed project is aligned with the World Bank FY16–FY19 Country Partnership Framework (CPF)6 for Côte d’Ivoire, extended to FY21\. To achieve its objectives, the CPF comprises three pillars of intervention: (a) accelerating sustainable private sector-led growth; (b) building human capital for economic development and social cohesion; and (c) strengthening public financial management and accountability, as well as two cross-cutting themes: (a) governance and (b) spatial inequality\. The proposed project is linked to the first pillar by directly contributing to two of its four objectives: objective 2: to strengthen economic infrastructure and objective 4: formalize and improve access to land for business and agriculture\. Through reducing the risk of floods, the project will limit losses and damage suffered by economic actors, increase the mobility of goods and people through better quality, all-season roads, and protect land from flooding allowing better use for economic activities\. Lastly, through enhancing the capacity of institutions in urban resilience planning and zoning and developing community engagement for urban flood risk reduction and adaptation to climate change, the project will help create an urban environment more conducive to private sector development\. 27\. The project will contribute to the World Bank’s twin goals of eliminating extreme poverty and boosting shared prosperity\. By improving infrastructure services in participating cities, the proposed interventions will directly improve living conditions, especially for residents in extremely poor households, through better access to services and economic opportunities\. By improving drainage and SWM services, the project will help reduce the high health and flood risks currently faced by poor urban households, thus protecting them from losses of family assets caused by flooding/illness\. The proposed investments in urban infrastructure will create jobs for the poor, especially youth, thus improving the livelihoods of those households both in the short run (due to increased income from temporary jobs) and in the long run (due to gained job skills and increased employment opportunities)\. 28\. The project will contribute to the implementation of the strategy for Africa, by (a) unlocking Maximizing Finance for Development (MFD) opportunities in the solid waste sector, where significant private investments are expected to be leveraged by the proposed project through the setting up of PPPs for solid waste collection, transfer, disposal, and valorization; (b) contributing to the digital economy 6 Country Partnership Framework (CPF) for the Republic of Côte d’Ivoire, FY16-FY19, August 2015 Page 13 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) agenda with the creation of digital platforms (EWSs, common municipal database repository), the support to local innovation ecosystem and entrepreneurs on local digital solutions for urban management, the promotion of digital skills through capacity building, with a focus on geospatial technologies; (c) contributing to the development of the human capital, by reducing the vulnerability of communities at risk of climate and disaster shocks, which could undermine the hardly gained improvements in poverty reduction; and (d) improving resilience to climate and disaster risk by reducing potential impacts of extreme events and promoting a preparedness approach, which will provide significant economic and social co-benefits, including community engagement and awareness\. 29\. The project will contribute directly to the achievement of Sustainable Development Goal 11: Sustainable Cities and Communities, including access to services and sanitation of poor neighborhoods, inclusive urbanization, and participatory planning addressing environmental issues related to municipal waste management\. 30\. The project will contribute to the Côte d’Ivoire National Development Plan (2016–2020), particularly for (a) Pillar II: accelerating the development of human capital and promoting well-being and (b) Pillar IV: development of infrastructures harmoniously distributed over the national territory and preservation of the environment\. By reducing the risks of flooding, the project will allow a better preservation of the health and school infrastructures, a better urban mobility, and a good social integration of the populations living in the deprived neighborhoods, thus contributing to increasing the productivity of the people, the ultimate goal of the development of human capital\. By improving the quality of waste management, the project will also contribute to improving the health of populations and the preservation of the environment\. 31\. The project will work as a financial and technical platform for multi-development partner engagements and mobilizing finance for development\. The project is part of a larger initiative undertaken by the Government and several development partners to strengthen urban resilience in Côte d’Ivoire\. In particular, the World Bank supported the Government with the organization of a round table to coordinate different contributions for the implementation of the SDAD in Abidjan\. The round table took place in May 2019 and elicited investment commitments for about US$700 million\. Several development partners have already committed or are discussing financial supports, such as US$150 million from the African Development Bank (AfDB), the French Development Agency, and the European Union (EU)\. The project is also discussing co-financing activities with the Spanish Agency for International Development Cooperation (AECID) and the EU, through the EU External Investment Plan (EIP)—Resilient City Development (RECIDE) for a Payment Guarantee from the EU to provide an extra layer of confidence to international private sector firms willing to enter the SWM market in Côte d’Ivoire\. 32\. Rationale for accessing IDA Scale-up Facility (SUF) funding \. The project has benefited from IDA’s SUF program because of its strong impact on the development and its support toward resilience building of the DAA and selected secondary cities\. The proposed project will improve (a) resilience to flood risk and (b) access to public services for SWM in the most vulnerable neighborhoods of Abidjan\. Investing in urban resilience, disaster risk management (DRM), and SWM will yield triple dividends: (a) avoiding losses and saving lives when disasters strike, particularly in the most vulnerable and poorest communities of Abidjan; (b) unlocking economic potentials in a greener, safer, and stronger Abidjan, for example, through land value capture and land zoning; and (c) developing co-benefits, or uses, of a specific investment, for example, human well-being and health from nature-based solutions (NBSs) or improved emergency Page 14 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) response though EWSs\. DRM projects typically provide short time frame for the return of investment, particularly for the reduction of disaster losses, which can be experienced since project implementation\. 33\. The operation is designed to enhance resilience in selected urban areas \. In the context of the COVID-19 pandemic, this is even more relevant, as the activities supported by this operation contribute to the Government’s efforts to: (a) improve the country’s ability to manage disaster risk, by strengthening preparedness, prevention, response and recovery capacities; (b) quickly mobilize resources in the aftermath of catastrophic events, including COVID-19 and other causes of pandemics, through the CERC; as well as (c) improve sanitary and hygiene conditions in densely populated and underserved communities in the District of Abidjan and selected secondary cities, while ensuring sustainable basic urban services (such as drainage and solid waste management) and resilience\. II\. PROJECT DESCRIPTION A\. Project Development Objective PDO Statement 34\. The objectives of the Project are to reduce vulnerability to flooding in selected urban areas and improve solid waste management in targeted municipalities\. PDO-level Indicators 35\. The progress toward achieving the PDO would be assessed by the following proposed results indicators: ï‚ Number of residents protected against flooding (gender disaggregated)\. ï‚ Number of people provided with access to improved solid waste services (gender disaggregated)\. B\. Project Components Component 1: Flood risk mitigation infrastructure and services (US$181 million) 36\. This component focuses on mitigating the negative impacts of recurrent flooding through a hybrid approach that combines green and grey infrastructures, including urban drainage and associated roadworks, and NBSs for erosion control and water retention\. It also includes ‘soft’ measures such as flood EWSs and urban planning\. The component is implemented through four subcomponents\. Subcomponent 1\.1: Urban drainage and associated roadworks (US$135 million) 37\. The recently completed Abidjan Autonomous District SDAD identified infrastructure gaps for stormwater and wastewater management in the District\. The master plan is organized in phases of implementation based on priority criteria\. The subcomponent will contribute to the implementation of Phase 1 of the master plan, with a specific focus on reducing flood risk in vulnerable communities of the Page 15 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Abidjan Autonomous District\. Moreover, it will provide interventions in other secondary cities vulnerable to flooding such as Grand-Bassam and Bouake\. 38\. Specific activities to be supported by this subcomponent include (a) Construction/rehabilitation of primary and secondary drainage in selected vulnerable neighborhoods of the Abidjan Autonomous District and in targeted areas of Grand-Bassam, Bouake, and other selected secondary cities; (b) Construction/rehabilitation of roadworks associated with drainage works where feasible and needed; and (c) Rehabilitation of selected water retention areas to reduce peak flood discharge to drainage and to reduce the size of downstream structures\. 39\. Moreover, the component will support the establishment of sustainable operation and maintenance (O&M) mechanisms for drainage infrastructure including using digital technology to monitor and manage the maintenance of the stormwater management systems and the development of new sanitation and stormwater master plans for five district capital cities and associated detailed technical studies for priority investments\. To ensure they will be adapted to the needs of the population, stakeholder consultations will be undertaken throughout project implementation\. Subcomponent 1\.2: Nature-based solutions for erosion and landslide control (US$15 million) 40\. NBSs are effective in reducing flood risk while providing environmental and socioeconomic benefits\. They can improve environmental quality by restoring green spaces in cities, providing recreational opportunities for citizens, lowering temperatures and pollution in urban areas, and optimizing the cost of infrastructure investments\. Within the Abidjan Autonomous District, many green spaces originally dedicated to urban water management are now degraded\. For example, canal banks are often abandoned, polluted, or occupied\. This worsens erosion causing sedimentation of sand in adjacent canals\. Moreover, it favors the accumulation of garbage, which is washed away during precipitation events, exacerbating flood risks in already vulnerable areas\. This subcomponent will introduce the concept of NBSs for flood risk management in the Abidjan Autonomous District and Grand-Bassam, Bouaké, and other selected secondary cities\. 41\. Specific activities to be supported by this subcomponent include (a) Revegetation and improvement of canal banks; (b) Erosion control works for selected thalwegs prone to landslides and erosion, including revegetation works; (c) Revegetation and double use of water retention areas with green spaces and leisure areas; and (d) Construction/rehabilitation of micro water retention areas following nature-based approaches in available selected areas such as parks, parking lots, sidewalks, and playing Page 16 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) fields\. Subcomponent 1\.3: Emergency preparedness and early warning system (US$16\.5 million) 42\. To complement structural investments and have a comprehensive flood management approach, this subcomponent will reinforce the capacity of the institutions and population to prepare for and manage flood emergency to avoid losses in the events where a structural approach is not sufficient\. It is one of the most effective ways to reduce loss and damage from disasters (reaching cost-benefit ratios between 4 and 367)\. 43\. Specific activities to be supported by this subcomponent include the following: (a) Deployment of a flood risk EWS and emergency preparedness measure in selected cities (around 3) to collect and communicate hydrometeorological information, warning, and alerts and support real-time intervention management\. This includes emergency measures (for example, contingency plans at municipal level) and strengthening response capacity\. (b) Capacity building targeted toward most vulnerable groups (for example, the disabled, women) to reinforce awareness of disaster risk, knowledge for behavior change, and ability to cope with emergencies\. These activities respond to needs identified during the 2018 Post Disaster Needs Assessment (PDNA) particularly on (i) raising public awareness through information campaigns, plans, and trainings on DRM issues such as flooding and landslides, (ii) setting up local networks of female leaders for disaster risk reduction (DRR) and waste management, (iii) organizing trainings on EWSs share risk information in real time\. Subcomponent 1\.4: Resilient urban planning (US$14\.5 million) 44\. The objective of this subcomponent is to prevent the creation of new risks as the cities develop and the pressure from rapid urbanization further intensifies and to drive development in unsafe areas , by enabling resilient planning and integration of risks in all sectors, particularly in land management, to avoid the encroachment of non-constructible areas and the public domain of the state\. It will focus on integrating resilience in urban planning by developing studies and skills in resilient urban planning\. These activities will be underpinned by investment in digital technology and data that will provide the foundation for better urban planning\. 45\. Specific activities to be supported by this subcomponent include the following: (a) Studies and plans including (i) preparatory studies and community engagement for preventive resettlement and slum upgrading for communities at risk, (ii) detailed urban plans integrating flood risk management for five municipalities of the Abidjan Autonomous District, and (iii) studies to plan integrated resilient urban development in specific neighborhoods of Abidjan and secondary cities with a lens on potential private capital mobilization to build flood mitigation measures 7Hallegatte, S\. 2012\. “A Cost-Effective Solution to Reduce Disaster Losses in Developing Countries: Hydro-Meteorological Services, Early Warning, and Evacuation\.” Policy Research Working Paper\. Page 17 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) (b) Foundational digital data, systems, and skills to support data-driven resilient spatial planning trough activities such as (i) a strategy for geospatial data management in Abidjan and two secondary cities; (ii) urban digital platforms with a common municipal data repository to facilitate data sharing between stakeholders, including in two secondary cities, the acquisition of digital elevation model and aerial imagery and the digitization of parcels and ownership data, with the attribution of parcel unique ID (this work is already financed for Abidjan); and (iii) the associated capacity building programs\. Component 2: Improvement of solid waste management infrastructure and services (US$124 million) 46\. Trash accumulating along waterways prevents the flow of rainwater and is a major cause of flooding\. As long as trash collection remains spotty, flooding will continue affecting people living in poor neighborhoods disproportionately\. The component aims to help further improve the SWM system in the Abidjan Autonomous District, expand the model to other secondary cities, and optimize the systems through better governance, reducing waste quantities buried, and use of digital technology\. The component is divided into three subcomponents, the first focused on the delivery of key facilities and equipment, the second on capacity building and institutional strengthening, the third on improving the system performance\. Subcomponent 2\.1: Strengthening solid waste management capacities in the Abidjan Autonomous District and two selected intercommunal groups of secondary cities (US$118 million) 47\. To improve solid waste services for citizens in selected municipalities, this subcomponent will finance SWM facilities and equipment needed to establish or improve (where it already exists) the delivery of SWM services in the Abidjan Autonomous District and two intercommunal groups of secondary cities\. This subcomponent is divided into two parts\. (a) Abidjan Autonomous District 48\. In 13 communes of the Abidjan Autonomous District, SWM services are currently provided by two private operators\. Ongoing concessions cover a large part of the urban population of the District and provide good collection rates, estimated between 80 percent and 100 percent of the quantities foreseen in the concession contracts\. However, some peripheries and adjacent areas (such as Grand-Bassam) and categories of waste (green, industrial, construction, and so on) are not included in the current concessions\. Moreover, the planned infrastructure system (collection centers, transfer stations, and final disposal sites) remains incomplete due to lack of financial resources and because most of the waste is disposed of with limited valorization (that is, limited reuse, recovery, and composting), which results in excessive use of the only existing landfill (thus reducing its life-span) and a large production of leachate to be treated, in addition to nonoptimal cost of collection and transfer\. 49\. To complete and optimize the current SWM system in the District and adjacent areas, authorities identified and planned for additional facilities, including a second disposal site, three transfer stations, and a recycling center, in addition to waste valorization initiatives and equipment, which will reduce the total amount of waste to be disposed of (see figure 2 for indicative location of the new planned facilities)\. The second disposal site is expected to reduce by around 40 percent the volumes processed by Kossihouen Landfill (currently >3,400 tons per day with growing trends) extending its lifespan\. The diverted waste Page 18 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) from Kossihouen included in the current concession (lot1) will account for 80 percent of the new landfill daily capacity (see figure 2)\. The proposed subcomponent of this project will support the sector to (a) reduce the costs of transporting solid waste to the existing Kossihouen Landfill by redirecting waste from sector 1 (North-East sector; see figure 2) of Abidjan to the new Attiekoi landfill (this option is already foreseen in the current concessions); (b) set up collection and transport systems for categories of waste that are currently not processed by the current concessions, such as, among others, green waste, construction waste, bulky waste, ordinary industrial waste, waste from other economic activities, and medical waste; (c) promote and support activities for sorting, reuse, composting, and recycling of selected categories of solid waste collected, such as, among others, plastics, paper, and tires\. At the new landfill site, the private operator will undertake recycling and recovery of waste for the secondary raw material market (for example, compost, refuse-derived fuel, and biogas) to reduce landfilling of waste; and (d) improve cleanliness in communities of the DAA and adjacent areas by providing three new transfer facilities to serve these areas\. Figure 2\. Mapping of Project Intervention in the Abidjan Autonomous District Note: Location of new facilities is indicative and not final\. Map created using Google map 50\. Specific activities to be supported by this subcomponent include Page 19 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) (i) Technical feasibility studies for the optimization of SWM in the Abidjan Autonomous District and contractual modalities for PPPs; (ii) Technical feasibility, preparation of safeguard documents, detailed engineering design studies, and supervision services related to the proposed investments; (iii) Technical feasibility study for the management of solid waste from health activities in the Abidjan Autonomous District and for the mode of contracting with the private sector; (iv) Construction of a new solid waste treatment/valorization and disposal facility, including fixed equipment and associated roadworks in the Abidjan Autonomous District; (v) Construction of three transfer centers and a recycling center, including civil works and fixed equipment to complete the existing system already included in the current concessions; and (vi) Elimination of uncontrolled deposits and dumpsites in the localities of Grand-Bassam, Sikensi and Dabou once the new solid waste treatment/recycling and disposal facility is constructed and operational\. 51\. The proposed investments included in this subcomponent will be implemented though a PPP\. Under this PPP, the private sector will design, construct, co-finance, and operate the new waste management system described earlier (landfill and transfer stations) along the value chain of transfer, recycling, treatment, and disposal\. Within the PPP preliminary structuring, private sector co-financing is kept to a minimum to show government commitment and attract private sector firms for a potential design-build-finance-operate (DBFO) approach\. Therefore, the risk of this approach not materializing is low as it was already undertaken by the Government and private operators for the current concessions, whose CAPEX was 100 percent financed by private operators\. However, as a contingency measure, if that option does not materialize, the construction of the new infrastructure will be carried out as design-build- operate (DBO) or as design-build (DB)\. The new PPP will not merge with the existing ones but will optimize and complete the current system as initially envisioned and add an additional concession to the system for the operation of the new landfill and transfer stations\. 52\. At this preliminary stage, it is too early to precisely define the risks that fall under the responsibility of the state and the private sector\. Although a preliminary financial analysis and structuring of the investment has been prepared during project preparation, a more detailed analysis and final structuring will be prepared during project implementation by the Government with the support of a transaction advisor, to better target the main risks (commercial, political, environmental and social risks, and so on) and their allocation among the various stakeholders\. (b) Secondary Cities 53\. Implementation of integrated waste management systems in two targeted intercommunal groups of secondary cities: (a) Toumodi, Yamoussoukro, Tiebissou, Djebonoua, and Bouaké and (b) Korhogo, Sinématiali, Ferkessédougou, and Ouangolodougou\. These agglomerations were selected by the Government, following feasibility studies, using three main criteria: (a) total population and population growth, (b) current socioeconomic situation and expected positive impacts that improved SWM could Page 20 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) have, and (c) technical and geographical suitability for intercommunal systems\. In these secondary agglomerations, the project will introduce a new way to manage solid waste in small and medium-size municipalities, by leveraging inter-municipal cooperation around SWM to address land scarcity, take advantage of economies of scale, and attract private sector participation for greater efficiency\. To these ends, the project will support the establishment of intercommunal agreements among municipalities within the same agglomeration\. The inter-municipal agreements will specify (a) location of waste management infrastructure, (b) management structure for operating and maintaining common infrastructure, and (c) grievance redress mechanisms (GRMs) disaggregated by gender\. 54\. Specific activities to be supported by this subcomponent include (i) Preparation of intermunicipal waste management strategies through a thorough consultation process for all actors (including specific consultations with women’s groups) in each agglomeration; (ii) Preparation of municipal waste management plans for municipalities within each agglomeration, identifying specific investments in infrastructure, equipment, service delivery models, and cost recovery and entry points for the private sector; (iii) Technical feasibility, preparation of safeguard documents, detailed engineering design studies, and supervision services related to the proposed investments; (iv) Construction of 2 new facilities for solid waste treatment/valorization and disposal, including fixed equipment and associated roadworks for the two targeted intercommunal groups of secondary cities; (v) Construction of transfer centers, including civil works and fixed equipment, in the two targeted intercommunal groups of secondary cities; and (vi) Elimination of uncontrolled deposits and dumpsites in the localities concerned once the 2 new facilities for solid waste treatment/valorization and disposal are constructed and operational\. Subcomponent 2\.2: Strengthening sector governance, institutional capacity, and citizen engagement (US$2\.7 million) 55\. This subcomponent aims to strengthen the institutional framework governing the sector to ensure the effectiveness of investments under Subcomponent 2\.1 , by creating a favorable environment for private sector investments in the solid waste sector\. It will also support the strengthening of instructional capacity to plan and manage the solid waste system and contribute to citizen engagement and awareness\. 56\. Specific activities to be supported by the subcomponent include the following: (a) Operationalization of the existing laws and regulations governing SWM, through ensuring (i) effective municipal and intercommunal planning for SWM, (ii) the availability of financial Page 21 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) resources for secondary cities waste collection, and (iii) an increase in local solid waste taxation to strengthen the sector’s self-financing capacities and sustainability (b) Technical assistance seeking to (i) strengthen the institutional framework through a range of activities from legal support to capacity building; (ii) promote a sustainable financing mechanism for the sector, including support for carrying out surveys and tax databases for solid waste fees/taxes; (iii) reinforce the PPP framework, with the standardization of key bidding documents and contracts; and (iv) enhance solid waste service delivery by promoting private sector participation in SWM and optimizing the upstream value chain of waste collection and transportation in view of overall services improvement and their effective link with the newly established downstream infrastructure and tailoring capacity- building activities to participating municipalities to support them in managing the newly established SWM system, including preventing marine and sanitary litter in the Abidjan Autonomous District Subcomponent 2\.3: Improving solid waste management through citizen engagement, recycling, reuse, composting, and digital technology (US$3\.3 million) 57\. Specific activities to be supported by this subcomponent include the following: (a) An outreach program to sensitize and improve public behavior on solid waste and litter management, to reduce solid waste in the drainage network\. The activity will adopt a participatory and inclusive approach with citizens, communities, and nongovernmental organizations (NGOs) (with a particular focus on women’s’ organizations), who will be engaged throughout the project for implementation and monitoring of results\. (b) A strategy to develop and operationalize best practices in waste reduction, recycling, and circular economy including the identification of three to four value chains with high potential for local recycling and circular economy opportunities\. (c) A gender-focused training program to develop the skills of small and medium enterprises (SMEs) on relevant recycling tools and techniques as well as on entrepreneurship skills focusing on the most profitable and relevant value chains\. (d) Technological tools to be used by national agencies, municipalities, and citizens to allow better monitoring and control of SWM services\. It will involve the use of technologies such as geolocation, web applications, and smartphones to collect operational information, measure and monitor performance of service providers, and plan and communicate service quality\. Component 3: Project management (US$10 million) 58\. This component will support project management activities\. Specifically, it will support technical assistance, equipment, training, and operating costs for the Project Coordination Unit (PCU) and specialized implementation agencies (SIAs), including establishing and implementing a comprehensive monitoring and evaluation (M&E) system as well as geospatial data, training of the implementing agencies Page 22 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) in environmental and social management, grievance redressal, procurement, and financial management (FM)\. Component 4: Contingent Emergency Response Component (CERC) (US$0 million) 59\. This Contingent Emergency Response Component (CERC) is included under the project in accordance with World Bank Policy on Investment Project Financing (IPF), (paragraphs 12 and 13), for situations of urgent need of assistance, as a project-specific CERC\. Given the increasing climate risks in Côte d’Ivoire, particularly the risks of flooding and drought, the Government may request the World Bank to reallocate project funds to support mitigation, response, recovery, and reconstruction\. Therefore, it is advisable to have a contingent component to prepare for quick responses to emergencies\. This will allow for rapid reallocation of project funds in the event of a natural or artificial crisis during the implementation of the project\. 60\. Sequencing of activities and readiness\. The project is designed along a structured road map that aims to enable relatively rapid and efficient implementation of activities\. In the first year of implementation, the focus will be on implementation of priority activities to improve resilience to flood risks\. This includes construction/rehabilitation of drainage works in the most vulnerable and risk-prone district areas and cities for which detailed technical studies already exist\. Consultants have already been recruited to update the studies and prepare the tender documents\. These works, estimated at US$37 million, will cover the cities of Abidjan and Grand-Bassam\. It is expected that the tender documents will be launched after effectiveness so that works can start as soon as possible after the project is effective (end of year 2020), subject to readiness of all safeguards instruments\. It is worth noting that all the selected activities are already part of the priority works identified in the sanitation and drainage master plans of the targeted cities\. In parallel with these selected works, the Government submitted a long list of priority works (for US$82 million) from the Abidjan SDAD for which preliminary technical studies are available\. As part of the Project Preparation Advance (PPA), technical feasibility studies are being carried out to set up a portfolio of subprojects to be implemented in subsequent years\. The bidding and environmental and social documents related to this portfolio will be ready by February 2021\. In the meantime, most of the preliminary studies necessary for the identification of the waste management works, as well as those relating to digital technologies, have already been launched and will continue during the first months of implementation\. Subsequently, feasibility and viability studies will be launched for prompt implementation of the works/activities from year one\. Works for landfill sites will likely start in 2021 for Abidjan and 2022 for secondary cities\. The Environmental and Social Management Framework (ESMF) disclosed on February 14, 2020 on the World bank website, the Resettlement Policy Framework (RPF) disclosed on March 24, 2020 as well as two Environmental and Social Impact Assessments (ESIAs) disclosed on February 18, 2020 and two Resettlement Action Plans (RAPs) disclosed on April 10, 2020, have been prepared as part of the priority activities\. Project Cost and Financing 61\. The total project cost is US$327 million, with financing of US$315 million from the IDA SUF and US$12 million from the private sector\. Table 1 summarizes the project cost breakdown\. Page 23 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Table 1\. Project Cost Breakdown Source of Finance Project Cost Project Components/Activities Private (US$ million) IDA Sector Component 1: Flood risk mitigation infrastructure and services 181\.0 181\.0 0 Subcomponent 1\.1: Urban drainage and associated roadworks 135\.0 135\.0 0 Subcomponent 1\.2: Nature-based solutions for erosion and 15\.0 15\.0 0 landslide control Subcomponent 1\.3: Emergency preparedness and early warning 16\.5 16\.5 0 system Subcomponent 1\.4: Resilient urban planning 14\.5 14\.5 0 Component 2: Improvement of solid waste management 136\.0 124\.0 12 infrastructures and services Subcomponent 2\.1: Strengthening solid waste management 130\.0 118\.0 12 capacities in the Abidjan Autonomous District and two selected intercommunal groups of secondary cities Subcomponent 2\.2: Strengthening sector governance, 2\.7 2\.7 0 institutional capacity, and citizen engagement Subcomponent 2\.3: Improving solid waste management through 3\.3 3\.3 0 citizen engagement, recycling, reuse, composting, and digital technology Component 3: Project management 10\.0 10\.0 0 Component 4: Contingent Emergency Response Component 0\.0 0\.0 0 Total financing required 327\.0 315\.0 12 A PPA of US$ 6 million was allocated to the GoCI during project preparation\. C\. Project Beneficiaries 62\. The main beneficiaries of the project will be the populations in project intervention areas including in the Abidjan Autonomous District and in the secondary cities targeted by the project\. They will benefit from the rehabilitation/construction of drainage works and the improvement of the SWM system\. Beneficiaries will be sensitized on good habits and practices in terms of resilience and waste management to ensure proper appropriation of investments for their preservation and maintenance\. It is expected that interventions will reach a significant number of poor and disadvantaged people as the expected covered areas include the most vulnerable of the District, which are also the most populated, namely, Yopougon and Abobo, with approximately 1\.6 million inhabitants\. 63\. It is worth noting that these two communities are also among the most exposed and faced seven events (floods and landslides) between May 2017 and June 2018, destroying thousands of houses, damaging infrastructures, and causing human casualties\. The population of those areas will also benefit from a healthier environment and easier access to their daily tasks\. 64\. In addition, the project will create job opportunities for young people and women, particularly through construction activities, collection, recycling, and solid waste treatment services related to the implementation of the project, as well as through the use of digital technologies for urban planning and management\. Page 24 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) 65\. The public institutions involved in the project will benefit from the capacity building planned in urban planning and risk management through the implementation of a digital data management and sharing system, through the benefits of Component 3, which is innovative and strategic in a context where digital is growing and necessary for a controlled and effective capacity for adaptation\. 66\. The private sector will benefit from the contract opportunities offered under the project through the design and execution of public works\. Moreover, they will also see their assets better protected and therefore less subjected to loss and damage recorded each year because of recurrent floods\. The land value capture that will result from drainage works and household waste collection operations will boost the construction sector and offer investment opportunities to the private sector\. 67\. More broadly, the project will benefit the entire Abidjan Autonomous District (5 million inhabitants) as the positive impact of drainage works and household waste collection services will be felt everywhere\. The population of Abidjan will benefit from a strengthened waste management system, an EWS coupled with an effective capacity stakeholder’s response to risks and disasters, and improved access to social services at all seasons through project activities\. D\. Results Chain Figure 3\. Project's Theory of Change E\. Rationale for Bank Involvement and Role of Partners 68\. The World Bank has extensive experience with financing and implementing urban projects in Africa, in similar contexts\. The proposed project deals with the rehabilitation of infrastructure in Page 25 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) underserviced settlements and urban planning, development, and management\. The proposed project builds on key achievements and lessons learned from PRICI and other developing countries in Africa and South Asia and is further coordinated with other ongoing and planned World Bank-supported activities\. The investments will complement other activities financed by the Government and other donors involved in the urban sector, such as the EU, AFD, West African Development Bank (Banque Ouest Africaine de Développement, BOAD), and AfDB, while the technical assistance will lay the ground for leveraging more resources and investments from other development partners for years to come\. In sum, the World Bank has the required experience to link financing for provision of basic services with institutional strengthening for enhanced development outcomes and higher overall efficiency\. 69\. The World Bank’s involvement is important given its comparative advantage in preparing and financing major infrastructure operations\. For this project in particular, the value added of the World Bank’s support will not only come from its knowledge, skills, and experience in preparing and organizing the infrastructure sectors in developing countries but also from its good insights and experience gained during PRICI in handling some of the most intractable urban management issues in Côte d’Ivoire\. Furthermore, the World Bank’s track record and large-scale investment are expected to incentivize other development partners to expand the project’s scope of support\. 70\. The World Bank has a strong knowledge of the sector, which has been enhanced with the preparation of the PDNA\. Following the floods of June 2018, the World Bank conducted, at the Government's request, a PDNA with the support of the United Nations Development Programme (UNDP) and EU\. This assessment enabled the Government to assess (a) its capacity to respond to disasters and unanticipated phenomena and (b) the losses and damages and thereby the needs for effective recovery\. The World Bank supported the Government in organizing a donor round table on the Abidjan SDAD\. The project will support the early implementation of priority recovery actions by providing financing and technical assistance from the World Bank's solid experience in similar countries\. F\. Lessons Learned and Reflected in the Project Design 71\. Integration and consultation of stakeholders in the identification, preparation, and implementation of the project\. The World Bank’s substantial experience in African countries has shown that the early, continuous, and effective involvement and participation of the involved institutions and beneficiary populations is crucial for the successful preparation and implementation of the project, to achieve its development objectives\. The World Bank’s urban projects in Côte d’Ivoire and in the subregion have demonstrated how the active participation of stakeholders supports the identification of appropriate activities, boosts implementation, and ensures sustainability of built infrastructure through better ownership—a key element for maintenance and management\. Since the identification of the proposed project, multiple information and awareness-raising sessions have been held to ensure that communities fully understand the project and its expected impacts and thus obtain their support in implementation\. 72\. An effective policy and institutional framework\. A regulatory framework that clearly defines the roles and responsibilities of various stakeholders (for example, central and local government agencies and service providers) and the procedures necessary to implement it are key for integrated and efficient drainage and SWM systems\. However, not only must legislation be clear, it must also be enforceable, which requires adequate institutional capacity, financing, and legitimacy, to be effective\. To create a Page 26 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) favorable environment for the long-term sustainability of the sector, the proposed project will thus support the operationalization of critical reforms and provide institutional strengthening\. 73\. Prioritizing activities is critical to ensure a controlled sequence of implementation\. During the execution of the projects, it appeared that the disbursement of funds was slow due to either the unavailability of technical studies or the forecasting of excessively heavy activities that could not be carried out within the initially planned time frame\. The project has established a set of priority activities to be carried out in the first year of implementation for which technical studies are available\. Attention has been paid to ensuring that the implementation of activities will require the minimum displacement of populations/losses of economic activities at the intervention sites and have a high impact on the living conditions of the populations; this will make it possible to reduce the necessary funds to compensate project-affected-people and thus allow them to be made available quickly\. 74\. Ownership of the project at the central government level is essential to address any bottlenecks and ensure high-level coordination\. Strong government commitment and good coordination between the sectoral ministries involved are critical\. The project, in its institutional arrangement, has set up a Steering Committee that will ensure the sectoral strategy and intersectoral coordination of the project\. 75\. The role of the private sector\. Private sector participation can be an efficient way to improve operational effectiveness as it seeks to reduce costs and make the best use of available resources\. The private sector can also draw upon highly qualified staff when required for specific technologies\. The keys to success are strong contract management, realistic outcomes (usually established as levels of service), and appropriate financing frameworks\. To meet the potential challenges associated with the establishment of sustainable PPPs for SWM, the proposed project will (a) provide technical assistance to enhance the financing sustainability of the sector in Côte d’Ivoire, also in collaboration with the International Finance Corporation (IFC); (b) co-finance infrastructures within PPPs; and (c) consider financial guarantees to attract reputable firms and reduce costs associated with payment and political risk in the sector in Côte d’Ivoire\. III\. IMPLEMENTATION ARRANGEMENTS A\. Institutional and Implementation Arrangements 76\. In line with the World Bank’s policy to host sectoral projects in the relevant sectoral ministries and thus strengthen their capacities, the MINASS will be the main implementing agency \. Therefore, the institutional arrangement of the project will be composed of (a) a Steering Committee, (b) a “light” PCU located in the MINASS and hosted by the DGAS, to ensure the coordination of the implementation and day-to-day management of the project, and (c) a set of SIAs\. 77\. The Steering Committee will be chaired by the Minister of Sanitation (MINASS) or his representative and will include, among others, the following ministers or their representatives: the Minister of Economy and Finance; the Minister to the Prime Minister in charge of budget and state portfolio; the Minister of Construction, Housing, and Urban Planning; the Minister of Digital Economy and Post Office; the Minister of Cities; the Minister of Territorial Administration and Decentralization; the Governor of the Abidjan Autonomous District; the President or his representative of the Ivorian Union of Page 27 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Cities and Municipalities (UVICOCI, Union des villes et communes de Côte d’Ivoire); and the mayors or representatives of involving municipalities\. The Steering Committee will provide overall supervision of the project, ensure coherence of activities with the sector strategy, and convene intersectoral coordination for the subcomponents of other ministerial departments\. The committee also validates annual budgeted work plans (ABWPs)\. 78\. A PCU hosted by the DGAS will be created within the MINASS\. The PCU will manage the project at the central level, coordinating overall project implementation in various locations, ensuring the timely availability of fund transfer, maintaining Project Accounts (PAs) and producing financial reports, monitoring and evaluating program implementation and impacts, and reporting results to various stakeholders as detailed in the Project Implementation Manual\. It will be headed by a competitively recruited project coordinator who will be in charge of the day-to-day project management, communicating with the Government, IDA, and all stakeholders of the project and overseeing project M&E\. In addition, the PCU will include, among others, (a) a procurement specialist (with extensive experience in engineering works and contract management), (b) a communications officer, (c) a drainage engineer, (d) an FM specialist, (e) an accountant, (f) an environmental safeguards specialist, (g) a social safeguards specialist, (h) an M&E expert and (i) a digital and geospatial technology specialist, and (j) the solid waste management specialist all with experience and qualifications acceptable to WB\. The following key staff: the coordinator, the financial management specialist, the environmental specialist, the social development specialist and the procurement specialist will be recruited by effectiveness and the others composed of the communication officer, the drainage engineer, the M&E expert, the digital and geospatial technology specialist and the solid waste management specialist will be recruited no later than three months after effectiveness\. The PCU will have specific performance criteria to ensure knowledge transfer from the PCU to the staff in the MINASS\. The PIU will have to rely on SIAs for the implementation of the project\. 79\. SIAs\. The technical management of each component will be coordinated by the main beneficiary structure of the activity, called an SIA in its mandate\. Delegated management contract will therefore be signed between the PCU and these agencies\. The contracts will define the scope of roles and responsibilities for the agencies involved in the project implementation (see Annex 1 for further details on the distribution of project implementation responsibilities across the different agencies involved)\. Page 28 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Figure 4\. Institutional Arrangements Note: E&S = Environmental and social; MCLU = Ministry of Construction, Housing, and Urbanization ( Ministère de la Construction, du Logement et de l'Urbanisme); SODEXAM = Airports, Aeronautics, and Meteorology Operating and Development Company ( Société d'Exploitation et Développement aéroportuaire, aéronautique et météorologique ); TOR = Terms of reference\. B\. Results Monitoring and Evaluation Arrangements 80\. The GoCI will evaluate progress on the indicators presented in the Results Framework and Monitoring section, through regular reports from the PCU\. The GoCI, through its PCU, will be responsible for gathering data, reporting, and using the information for monitoring during implementation\. The PCU will be supported by SIAs, which will help collect data within their area of expertise\. An M&E specialist will therefore be recruited into the unit and will be supported by the PRICI coordination unit during project preparation\. C\. Sustainability 81\. O&M\. Proper management and effective O&M of drainage systems are key for the sustainability of investments\. To this end, an O&M mechanism will be set up with the involvement of project stakeholders and beneficiaries to ensure the effective ownership necessary for its viability\. The commitment of beneficiaries is crucial for the change in attitude needed to avoid the dumping of solid Page 29 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) waste into drainage works and the occupation of flood-prone areas (at risk)\. In addition, institutional and capacity building of relevant stakeholders will improve institutional skills in urban resilience to reduce flood risks\. 82\. Sustainability of investments for the improvement of the SWM system\. The current SWM system in Côte d'Ivoire is managed through concessions in which the private sector receives a monthly payment from the Central Government\. Revenues for the sector are provided by a percentage of a set of taxes (property tax, IRF, TVHA, TEOM, TSCP, and TSPE, among others), that is, 25 percent of property tax (the land value tax provides the most financially significant amount to the sector)\. However, a recent study found gaps between costs and resources available\. To overcome this deficit and ensure sustainability of another private partnership, the Government has initiated a tax adjustment to increase the share allocated to waste management from 25 percent to 50 percent\. An analysis of the firm’s viability with a 50 percent share will allow the sector to increase its operating resources and thus ensure the viability and sustainability of the waste management sector\. This increase has been approved for the current budget (2020), and this is expected to continue for the next three years, but more long-term financial sustainability actions are needed\. 83\. The long-term sustainability will be based on the following points: (a) the SWM sector is a sensitive public sector that needs the continued support of the state, (b) the involvement of the private sector in the SWM sector which is important to increase the sector's effectiveness and efficiency in optimizing operating costs and collection routes and improving the service, (c) on the financial level, a fair balance between state participation in the form of subsidies and the provision of private capital, and (d) the integration of a circular economy into the current system by developing the recycling and sale of derived products to expand the sources of financing\. For example, a waste recovery module will be set up for the new landfill and revenues from product sales (for example, compost, refuse-derived fuel, and biogas) should reduce the cost per ton paid by the public\. As part of the PPA, the project is financing a study on sustainable financing, economic viability, and fiscal reforms of SWM in Côte d'Ivoire to put in place measures and recommendations to optimize the sustainability of the sector\. IFC will continue to support the World Bank in the pursuit of long-term sector sustainability by trying to find the right balance between minimizing the necessary government subsidy to the sector and open and effective private sector participation\. 84\. A guarantee scheme is under consideration for the PPP in Abidjan, in collaboration with the EU, to support the Government’s payment security obligations\. If it materializes, the guarantee would further strengthen the financial viability and operational sustainability, decrease the risk of nonpayment or lower revenue generation than projected for the PPP operations, and attract top international private operators to the Ivorian market\. Should the guarantee not materialize, the PPP will still be carried out with a payment guarantee from the Government, as already in place within the current concessions\. The Multilateral Investment Guarantee Agency will also consider covering eligible investors of the new landfill against political risks\. Page 30 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) IV\. PROJECT APPRAISAL SUMMARY A\. Technical, Economic, and Financial Analysis Technical 85\. Project investments follow methodologies used under other recent operations \. The project will use standard flood management approaches with drainage canals, as well as innovative technologies such as NBSs, which can reduce construction costs and improve livability\. In addition, procurement packages have been prepared in advance to ensure bidding by qualified companies/consultants and to avoid delays during construction\. Another significant innovation included is the integration of digital technologies in urban planning, the collection and sharing of urban data for digital management, which will allow optimization of targeted investments and create opportunities for job creation\. The PPP structure for SWM is based on a model suited to the current needs of the Government\. The proposed structure differs from the existing model by minimizing the up-front private sector investment and instead using a Design Build Finance and Operate (DBFO) model\. Economic Analysis 86\. A cost-benefit analysis was undertaken on the first two components to quantify the potential economic effects on the beneficiary population\. Component 1: Flood risk mitigation infrastructure and services 87\. Under Component 1, approximately 2 million people living in the most affected and flood- vulnerable localities will benefit from a set of interventions that will substantially reduce the risk of flooding\. These interventions include the rehabilitation/construction of primary and secondary canals, basins, and retention ponds as well as nature-based activities for about CFAF 85 billion (US$150 million)\. The cost-benefit analysis considered the most significant benefits projected by the project\. They include the quantification of the reduction of flood damage and losses and the reduction of costs related to the treatment of malaria\. The analysis showed an economic internal rate of return (EIRR) of 28 percent for the drainage activities, calculated with a discount rate of 7 percent\. Table 2\. Cost-Benefit Analysis Results for Component 1 2026 Benefits NPV (US$, Investment Costs (US$, millions) Flood Damages EIRR (%) millions) (at Health Benefits Reduction 7%) 150 10\.4 25\.5 28 419\.8 Sensitivity tests Sensitivity test (+10% on CAPEX) 23 407\.4 Sensitivity test (+20% on OPEX) 27 412\.3 Sensitivity test (−10% on flood 25 403\.9 damage reduction) Note: NPV = Net present value\. Page 31 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Component 2: Improvement of solid waste management infrastructure and services 88\. For Component 2, direct costs include the construction of a new landfill and recycling center and three transfer centers, as well as the related O&M costs \. The economic benefits accruing from this operation include avoided leachate pollution by the controlled treatment in the new sanitary landfill, avoided greenhouse gas (GHG) emissions due to more efficient waste management operations (sorting center, organic valorization, and methane capture), decreased harms for the surrounding areas, health benefits due to reduced air pollution as fires are decreased, and creation of jobs from collection to valorization\. The economic analysis was conservative and quantified only the benefits related to the reduction of GHGs and avoided costs of landfilling diverted waste through recovery and composting, for which data were available\. 89\. The costs and benefits have been evaluated for 17 years including the construction period (2 years), starting in 2021\. Depending on the social cost of carbon (low/high), the EIRR and NPV of Component 2 were calculated using an interest rate of 7 percent\. The results are presented in Table 3\. Table 3\. Cost-Benefit Analysis Result for Component 2 Description EIRR (%) (at 7%) NPV (US$, millions) Social cost of carbon (low) Base 13 75\.6 Sensitivity test: +10% investment costs 11 70\.4 Sensitivity test: +10% O&M costs 12 68\.4 Sensitivity test: −20% benefits 13 60\.5 Social cost of carbon (high) Base 35 262\.0 Sensitivity test: +10% investment costs 32 257\.0 Sensitivity test: +10% O&M costs 34 254\.7 Sensitivity test: −20% benefits 35 209\.5 Gender 90\. Considerations on bridging the gender gap\. In the 2015 edition of the Africa Gender Equality 8 Index, out of 52 African countries, Côte d'Ivoire ranked 49 in economic opportunities for women and 29 in terms of possibilities for women to become active and responsible citizens\. The project will help reduce the following identified gender gaps\. Gender gap 1: Gap in voice and leadership to address disaster EWSs 91\. Analysis\. Natural disasters do not affect all people equally\. According to the World Bank report Shockwaves,9 women and girls are particularly vulnerable during disasters and floods and 14 times more likely to die than men\.10 This can be explained by the fact that natural disasters exacerbate the existing 8 Africa Gender Equality Index, AfDB, 2015\. 9 Hallegatte, S\., et al\. 2016\. Shock Waves: Managing the Impacts of Climate Change on Poverty\. 10 Reaching Out to Women when Disaster Strikes, K\. Peterson, White paper, Soroptimist, 2007\. Page 32 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) patterns of discrimination that render females more vulnerable to their fatal impact\. 11 Although women tend to be disproportionately negatively affected by disasters, their concerns are least likely to be addressed, in particular because national land laws do not give women the same rights as men\. As a result, those who are victims of property loss have more chances to become vulnerable\. Women’s status and voice in the Ivoirian society are weak, as highlighted by their low (11 percent) political representation\.12 Consequently, very few women are in decision-making positions, and DRR initiatives at the community level are often led by men\. However, a gender study on EWSs conducted by the World Meteorological Organization13 demonstrates that women’s’ involvement at all stages of early warning is critical to help women protect themselves and react appropriately during an emergency\. Women are key players for risk reduction, and when they are empowered in EWS management, the whole community benefits from their leadership\. 92\. Action\. Based on the gender gap analysis conducted, the project will specifically address the fourth pillar of the World Bank’s gender strategy: “Enhancing women’s voice and agency\.” The project will participate in increasing women’s voice, leadership, and access to information by involving existing local women’s organizations in risk management and EWSs in flood risk vulnerable neighborhoods\. As part of the project’s Subcomponent 1\.3 “emergency preparedness and early warning systems “, local networks of women leaders for DRR and waste management will be set up, to carry out community educational programs on disaster preparedness, with an emphasis on the prevention of violence against women and girls, during and after disasters\. For that purpose, women-only meetings will also be organized to provide a safe space for women and girls to voice their opinions, concerns, and needs\. Progress toward women’s empowerment will be monitored by assessing not only the percentage of women involved in the DRR committees in each commune but, most importantly, the percentage of women designated as the committee focal point to improve their level of involvement in the decision-making process\. Strengthening female representation in early warning and disaster preparedness will increase the population’s capacity to prepare for and manage flood emergency to avoid losses and prevent the negative effects that gender-based violence (GBV) in emergency situation can have on the entire populations’ recovery\. 93\. M&E\. Gender indicators are (a) percentage of DRR committees’ focal points who are women and (b) the number of women covered by an EWS to flood risk\. Gender gap 2: Gap in qualifications and entrepreneurship skills to enter the labor market in SWM 94\. Analysis\. Women in Côte d’Ivoire have difficulties entering the labor market, apart from the agriculture sector, and are largely concentrated in small informal enterprises and low-productivity occupations\. There are various reasons for this: their lower level of education, difficulty accessing finance, discriminatory laws and practices, cumbersome business regulations, their household responsibilities, and 11 London School of Economics and the University of Essex\. 12 From Crisis to Sustained Growth, Priorities for Ending Poverty and Boosting Shared Prosperity, World Bank Côte d’Ivoire Systematic Country Diagnostic, 2015\. 13 Review of the EWS in the Caribbean, World Meteorological Organization, Climate Risk Early Warning Systems (CREWS), GFDRR, the World Bank, UN office for Disaster Risk Reduction, 2018\. Page 33 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) the fact that they do not benefit from professional and social networks\.14 Even with secondary and tertiary education, they face serious employability challenges because of a mismatch between skills acquired at school and labor market demands\.15 In the urban agglomeration of Abidjan, the private operators of the SWM sector in charge of collecting and transporting solid waste and operating the main landfill currently have, on average, not more than 33 percent of women as part of their workforce\. Although the Ivoirian legal framework makes positive discrimination toward women employment in the private sector particularly difficult, it is possible to capacitate women so that they can develop tangible business initiatives to provide SWM services through start-ups and small enterprises\. Innovative ideas to develop a circular economy and reduce waste ending up in landfills are vitally needed and will provide new business and employment opportunities in the near future\. Hence, increasing women’s chances to enter the labor market through the development of their technical and entrepreneur skills is identified as a major leveraging instrument in Côte d’Ivoire to support women’s role in the rapidly evolving waste management sector\.16 95\. Action\. Under Subcomponent 2\.3, “Improving solid waste management through citizen engagement, recycling and digital technology” activities will focus on developing the skills, chances of success, and impact of emerging small and medium enterprises, aimed at operationalizing best practices in waste reduction, recycling, and circular economy\. In this context, a support program with a specific focus on women entrepreneurs will be provided, including technical content and trainings to improve their entrepreneurship skills such as the development of business plans and market assessments\. The objective is to develop a more professional and larger recycling economy while improving chances for women to enter the waste management sector job market, which is shown to be a major factor to achieve gender equality as it incentivizes women to become economically active\. The support program and capacity-building activities will serve as incubators to nurture ideas, creativity, and business abilities, giving young entrepreneurs and particularly women the necessary skills to compete more effectively on the existing SWM market\. 96\. M&E\. Gender indicators are (a) number of women in small and medium enterprises completing the support program to enhance their chances to enter the SWM market, and (b) a system monitoring the number of women economically active in the SWM sector is in place\. Climate Co-benefits 97\. Strengthening climate resilience and co-benefits\. The consequence of climate change in Côte d’Ivoire will induce dramatically increased flooding risks in Abidjan due to the combination of extreme precipitations during the rainy season associated with sea level rise and a greater exposure to those disasters of vulnerable people due to rapidly expanding and uncontrolled urbanization patterns\. The project’s interventions bring significant benefits to the Government, communities, and population by mitigating and adapting to the consequences of climate change\. The project’s Component 1 will bring notable adaptation co-benefits to the country by reducing the negative impact of recurrent urban floods 14 Evaluation de la participation économique des femmes en Côte d’Ivoire, résultats et recommandations , Avril 2017, Comité National pour la Mise en Œuvre du Programme Compact de la Millennium Challenge Corporation (CNPC)\. 15 From Crisis to Sustained Growth, Priorities for Ending Poverty and Boosting Shared Prosperity, World Bank Côte d’Ivoire Systematic Country Diagnostic, 2015\. 16 Terraza, Horacio, Maria Beatriz Orlando, Carina Lakovits, Vanessa Lopes Janik, and Anna Kalashyan\. 2020\. The Handbook for Gender Inclusive Urban Planning and Designs\. World Bank\. Page 34 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) and integrating climate change scenarios into sanitation and stormwater master plans and disaster risk contingency plans\. Subcomponents 1\.3 and 1\.4 will also allow for adaptation co-benefits by integrating climate change scenarios into disaster risk preparedness and urban development plans with the help of newly developed digital tools and geographic information system (GIS) information made available through project’s activities\. Education, training, and capacity-building activities of Component 1 will ensure raising citizens’ awareness on climate change adaptation and mitigation issues and measures that can be applied to limit carbon emissions\. 98\. The project’s Component 2 will also bring mitigation co-benefits in that it will significantly contribute to the reduction of the GHG emissions in Abidjan by (a) streamlining the solid waste sector in the city; (b) promoting reduction, reuse, and recycle of solid waste; (c) allowing for methane emissions capture; (d) reducing open dump-site and burning practices; and (e) contributing to revegetation of canal banks and large thalwegs and creation of green spaces for erosion control that will promote atmospheric CO2 capture and incentivize the use of soft and nonmotorized transport modes\. The existing and potential GHG emissions of waste disposal within the project area were estimated (Annex 3) and the project will result in a net emissions reduction of 6\.9 million of tons CO2 over 15 years\. The emissions reduction is primarily driven by the reduction in open dumping sites and the methane gas management systems in the newly constructed sanitary landfill associated with closure of existing open dumping sites\. The project also aims at optimizing waste collection routes, which in turn will allow to reduce transport-generated carbon emissions\. This target will also be achieved both by improving the collection trucks’ fuel efficiency and by partially replacing the fleet with zero-emission vehicles\. The intended benefits in carbon emission reduction have been cautiously estimated, as it has been considered, for GHG emissions calculations, that only 10 percent of the waste collection and operational fleet will be replaced (for example, electrical street sweepers or small electrical operating trucks)\. However, this percentage is likely to be higher\. Citizen Engagement 99\. The project will (a) employ a proactive communication strategy to explain the benefits of the project to beneficiary communities and the public at large, (b) develop robust information request and grievance redress measures for project activities, and (c) support the engagement of project beneficiaries in the implementation and monitoring of all project activities \. Subcomponents 1\.3, 1\.4, and 2\.3 will carry out extensive citizen consultations for preventive resettlement actions and will seek the involvement of community associations for DRR activities including setting up of contingency plans at the municipal level\. Citizen participation will also be allowed using innovative collaborative platform where advanced data collection methods (such as street-level photo data collection) involve the contribution of citizens\. 100\. The planned citizen engagement events and communication campaigns will also incorporate a gender approach\. The preparation of events and campaigns will consider venues, timing, and discussion dynamics that effectively enable the participation of both women and men\. To reflect this approach, the project includes a gender-disaggregated citizen engagement indicator in the Results Framework: ‘Number of beneficiaries consulted during project implementation’\. B\. Fiduciary (i) Financial Management Page 35 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) 101\. The FM arrangements for the project have been designed considering the country’s governance situation as well as the World Bank’s minimum requirements under World Bank Policy and Directive for IPF and new Guidance issued by OPCS related to COVID-19, which describes the overall FM World Bank policies and procedures\. 102\. In 2018, the Government adopted a new strategic framework for reforming public financial management (PFM) based on the progress made during the implementation of the 2014–2017 PFM reform actions plan and the findings of the 2017 Public Expenditure and Financial Accountability (PEFA) report\. Côte d’Ivoire also adopted WAEMU PFM and procurement directives, whose implementation is ongoing\.17 103\. However, there are opportunities to strengthen internal and external audit, procurement, and anti-corruption mechanisms\. 104\. Thus, at this point the World Bank cannot fully rely on the public expenditure framework for this project\. The Government requested using a ring-fenced financing mechanism for the fiduciary aspects of the project\. A new PCU anchored within the DGAS at MINASS has been proposed by the Government to manage the project\. The FM team of the PCU to be established under the responsibility of the Coordinator for this project will manage the overall FM aspects of the project\. 105\. The main finding arising from the assessment of the Directorate of Administration and Finance (DAF) of MINASS as well as the FM Unit of the PCU conducted in January 2020 was that the DAF as well as the staff of the DGAS of MINASS are not familiar with World Bank-financed projects including FM procedures\. Furthermore, the PCU, especially the FM Unit, was not yet created at the time of the FM assessment\. 106\. The overall residual FM risk is rated substantial mainly due to the lack of familiarity of the DAF of MINASS and the DGAS with World Bank FM procedures as well as the fact that the PCU is not created yet and the FM Unit is not operational\. Furthermore, effectiveness of some of the proposed mitigation measures will be measured during project implementation period\. 107\. Due to the critical areas for operationalization of the FM team of the PCU associated with the risk level, the conclusion was that the PCU to be established within the DGAS could manage World Bank funds once the following measures are implemented before and after the project effectiveness: (a) appoint on a competitive basis, the key FM staff including an FM officer (Responsable Administratif Financier, RAF) and an accountant (comptable); (b) draft the FM procedures manual; and (c) acquire and install the accounting software and train the users of the software\. Finally, the PCU established within the DGAS will be required to prepare and submit (a) an annual work plan and budget (AWPB) not later than November 30 of the year preceding the year the AWPB should be implemented; (b) unaudited interim financial reports (IFRs) on a quarterly basis 45 days after the end of each quarter; and (c) audited annual financial statements (for example, audit reports prepared by independent external auditors) within six months following the end of the period audited\. 17 2017 PEFA Assessment for Cote d’Ivoire\. Page 36 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) 108\. A Designated Account (DA) in CFA francs managed by the Directorate of Debt (Direction Générale du Trésor et de la Comptabilité Publique) will be opened at the Central Bank of West African States (Banque Centrale des Etats de d'Afrique de l'Ouest, BCEAO)\. A PA, managed by the public accountant assigned to the PCU, will be opened in a commercial bank under terms and conditions acceptable to the World Bank\. (ii) Procurement 109\. Procurement for the project will be carried out in accordance with the World Bank’s Procurement Regulations for IPF Borrowers for Goods, Works, Non-Consulting and Consulting Services, dated July 1, 2016 (revised in November 2017 and August 2018)\. The Project will be subject to the World Bank’s Anti-Corruption Guidelines, dated October 15, 2006, revised in January 2011, and as of July 1, 2016\. The Project will use the Systematic tracking of Exchanges in Procurement (STEP) to plan, record and track procurement transactions\. 110\. A new Procurement Code (Order No\. 2019-679 dated July 24, 2019) has been adopted in Côte d’Ivoire, in line with the WAEMU’s procurement directives and international good practices, along with key implementing regulations and documentation\. A national procurement capacity-building program exists and is being implemented at the central level and among relevant decentralized entities\. An electronic system for collecting and disseminating procurement information and for monitoring procurement statistics has been set up and needs to be mainstreamed in the work of all contracting authorities\. 111\. General procurement notices, specific procurement notices, requests for expression of interest (REoIs), and results of the evaluation and contracts award should be published in accordance with advertising provisions in the procurement regulations mentioned above\. 112\. Advertising procedure\. When approaching the international market and seeking requests for proposals that involve international consultants, the contract awards shall be published in the United Nations Development Business (UNDB) online within two weeks of receiving IDA’s ‘no objection’ to the recommendation of contract award\. For goods, the information to publish shall specify (a) name of each bidder who submitted a bid; (b) bid prices as read out at bid opening; (c) name and evaluated prices of each bid that was evaluated; (d) name of bidders whose bids were rejected and the reasons for their rejection; and (e) name of the winning bidder, the price it offered, and the duration and summary scope of the contract awarded\. For consultants, the following information must be published: (a) names of all consultants who submitted proposals; (b) technical points assigned to each consultant; (c) evaluated prices of each consultant; (d) final point ranking of the consultants; and (e) name of the winning consultant and the price, duration, and summary scope of the contract\. The same information will be sent to all consultants who submitted proposals\. The other contracts should be published in national gazette periodically (at least quarterly) and in the format of a summarized table covering the previous period with the following information: (a) name of the consultant to whom the contract was awarded, (b) price, (c) duration, and (d) scope of the contract\. 113\. Capacity assessment\. The DGAS is responsible for leading the national policy on sanitation, hygiene, and waste management and coordinating the activities of the agencies under its authority\. The Page 37 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) PCU established in the DGAS will be in charge of the fiduciary management of the project\. An assessment of the PCU’s capacity to implement procurement was carried out by World Bank procurement specialists\. A key risk identified by the assessment is that the PCU lacks previous experience with implementing World Bank-financed projects\. Consequently, the PCU’s capacity in this area needs to be strengthened, more generally, (a) organize frequent meetings and trainings by the World Bank’s procurement team during the project implementation and (b) if necessary the procurement staff in the World Bank Côte d’Ivoire Country Office will be available to provide hands-on extended implementation support (HEIS) to the PCU\. While many audits of single source awarded contracts have been conducted in Côte d’Ivoire in the past years and findings have been published, issues remain and affect the transparency and efficiency of the national procurement system\. The procurement risk is assessed as moderate\. 114\. The Procurement Project Strategy for Development (PPSD) has been developed to analyze the key features of the project and related procurement risks and opportunities, building on the lessons learned from similar projects\. The largest part (around 80 percent) of the project’s investment will be used for the construction of drainage, SWM, and recycling facilities\. Also, in a vision of more integrated and managed urban planning, the project dedicates a portfolio for the implementation of digital tools to boost resilience and urban management\. While there is a market with qualified national and international contractors, potential risks include the unavailability of specific expertise required for the establishment of the digital geoportal, the designing of innovative and adapted NBSs, delays in receiving imported goods, and delays in national procurement approval channels\. For the PPP component, the project will finance a consultancy service to identify appropriate contractual arrangements for the PPP\. Several other specialized consultant services requiring highly qualified urban management or sector reform experience will be performed in support of the project activities\. \. C\. Legal Operational Policies \. Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No \. D\. Environmental and Social 115\. The project will finance the construction of new primary drainage and associated roadworks and the rehabilitation of existing primary drainage network\. This new operation will also fund the construction/rehabilitation of water retention basins, the construction of micro water retention areas following NBSs in available areas such as parks, parking lots, sidewalks, and playing fields\. Moreover, it aims to finance the construction of new solid waste treatment/valorization and disposal facilities for around 600,000 tons per year and associated roadworks and the construction of transfer centers (around 3) in the Abidjan Autonomous District\. The project will also finance the construction of SWM infrastructures in selected secondary cities\. Some of the mentioned activities are potentially associated with major environmental adverse impacts\. However, the expected environmental and social impacts of the project will be overall positive\. Page 38 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) 116\. Environmental and social risk classification (ESRC) conducted at the concept stage under the new Environmental and Social Framework (ESF) rated the project overall risk as high and environmental and social standards (ESSs) which are relevant for the project are ESS1: Assessment and Management of Environmental and Social Risks and Impacts; ESS10: Stakeholder Engagement and Information Disclosure; ESS2: Labor and Working Conditions; ESS3: Resource Efficiency and Pollution Prevention and Management; ESS4: Community Health and Safety ; ESS5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement; ESS6: Biodiversity Conservation and Sustainable Management of Living Natural Resources; and ESS8: Cultural Heritage\. Based on this assessment, the Government has prepared the appropriate safeguards instruments including (a) an ESMF, (b) an RPF, (c) two ESIAs), and (d) two RAPs\. ESIAs and RAPs were prepared for Grand-Bassam’s canals and Anonkoua’s canal\. In addition to the previous mentionned documents, three other documents which are required under the new ESF have also been prepared: the Environmental and Social Commitment Plan (ESCP), the Stakeholder Engagement Plan (SEP), and the Labor Management Procedures\. 117\. Environmental safeguards\. The ESMF and the ESIAs have been prepared, in full compliance with national legal and regulatory framework and World Bank ESSs, including a broad consultation framework involving all relevant stakeholder groups, both public and private, as well as civil society organizations\. The ESMF describes the procedures and processes to be followed in preparing and disclosing site-specific safeguard instruments, namely, the ESIA, including an Environmental and Social Management Plan (ESMP), as may be required, as soon as the exact locations and scope of a specific activity are known\. Any specific ESIA, including the corresponding ESMP, prepared in accordance with the screening result, will be approved in consultation with all the stakeholders before the corresponding activity starts\. 118\. As part of the mentioned ESIAs’ preparation, soil samples were analyzed and the results have shown the presence of heavy metals (lead, mercury, nickel, and chromium)\. However, their concentrations are below the permissible limit values in the soil\. Pesticides, cadmium, and arsenic are found in very small quantities below the limit of quantification of the analytical equipment\. Therefore, these soils do not pose a risk to their destinations or end uses\. Furthermore, the environmental assessment of civil works has shown that the project will deal with three main challenges\. These are the land issue, the anarchic occupation of urban space by the populations after the displacement of the populations from the easements of the canals to construct, and the maintenance of sanitation structures once they have been completed\. 119\. After their approvals, the ESMF was disclosed in Côte d’Ivoire on February 4, 2020, and on the World bank website on February 14, 2020, and the two ESIAs have also been disclosed within Côte d’Ivoire and on the World Bank website on February 18, 2020\. 120\. Guidelines on environmental/occupational health and safety (EHS/OHS) requirements will be included in bidding documents so that companies take them into account in their companies’ ESMP (Works-ESMP)\. The PCU and its partners will have to approve Works-ESMPs including those guidelines before the commencement of the works\. 121\. To ensure that the safeguard instruments prepared in line with ESSs to apply to the project are implemented properly, the PCU will hire an environmental safeguard specialist and a social safeguards specialist\. The environmental safeguards specialist must have additional experience in EHS/OHS, and the social safeguards specialist in GBV, social inclusion, and labor-related risks management\. Both specialists Page 39 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) will be fully in charge of all aspects of environmental and social safeguards aspects and will regularly monitor all safeguard requirements\. More specifically, the two specialists, the entire PCU, the implementing agencies, and the other stakeholders will ensure that children under 14 years are not employed in civil works as labor force\. For those whose age is between 14 and 18 years, the type of civil works they have to do must be consistent with their age\. World Bank implementing support missions will also include environmental and social safeguards specialists to ensure that all safeguard issues are addressed properly and on time\. 122\. Also, national capacity building will be carried out for all the actors involved in the preparation of safeguarding instruments and the application of environmental and social measures\. 123\. Social safeguards\. As part of this project, the client prepared the RPF on the basis of TOR reviewed and approved by the World Bank\. The RPF was reviewed and approved by the World Bank team in accordance with the directives of ESS5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement\. In this project, social issues are important with regard to land acquisitions and population displacements because most of the work will take place in urban and peri-urban areas\. 124\. The social risk assessment on the project shows that there will be potential negative social impacts relating to the loss of assets (land, infrastructure, trees, and so on), the reduction of means of production, the loss or restriction on sources of income, and so on\. The legal and legislative framework for expropriation, land acquisition, resettlement, and stakeholder consultation has been defined in accordance with national laws and the World Bank's ESF guidelines\. Thus, for all of sites that will receive the investments, social assessments will be carried out to identify potential social impacts and risks\. Whenever necessary, RAPs will be prepared and implemented before the start of works\. 125\. To this end, two RAPs have been prepared as the sites have already been identified and the planned investments are known precisely\. These are (a) the RAP for the development of stormwater drainage works in Grand-Bassam and (b) the RAP for the development of the Anonkoua basin of Abobo\. These two RAPs were reviewed by the World Bank team and are in advanced acceptable stages\. These advanced RAPs (for Abobo and Grand Bassam) were disclosed in-country on April 8, 2020 and at the Bank’s website respectively on April 9 and 10, 2020\. In addition, despite the World Bank comments on the need to deepen the consultation exercises and to provide additional clarity on the absent RAPs, their negotiation did not happen because of the Government national measures to ban any travel within and outside of Abidjan and restriction of public gathering for any reasons, to increase social distancing in response to the coronavirus pandemic\. It was therefore agreed that the RAPs will be published in an acceptable draft form and the Government committed to finalizing and updating these RAPs as soon as the situation is restored and becomes normal for consultation\. The updated RAPs will be redisclosed before the implementation and the commencement of any civil works\. This commitment made by the Government is also reflected in the ESCP which is updated accordingly\. 126\. A GRM is already set up to allow affected people and other interested stakeholders to report any concerns regarding the project to the PCU to find solutions\. This GRM will be operationalized and disseminated in all localities where the project will make investments \. 127\. Labor influx will be a constant concern in this project given the many civil engineering works that will be done and that will require migrations of workers\. Regarding potential labor influx, the project will Page 40 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) establish guidelines and rules for contractors to improve ESMPs and workers’ contracts will include measures to manage the potential impacts of this outside workforce on the local community\. Specific details will be prepared during investment activities for contractors who will bring in workers and operators from outside the area, and these will likely be accommodated in labor camps during construction\. On the basis of the risk assessment which will be made at the start of the works, the World Bank may ask the client to prepare a specific plan for managing the labor influx\. 128\. An SEP is also prepared and approved by the client\. Its objective is to identify and mobilize organizations and people likely to be directly or indirectly affected (positively or negatively) or to have an interest in the project\. During the preparation of the SEP, the identification of stakeholders was done in a participatory and inclusive manner based on their interest in the project, the needs for participation and information, the level of vulnerability, expectations in terms of participation and priorities, and so on\. The SEP will be a living document and its implementation will be an opportunity to set up more participatory and more inclusive process and to continuously identify the concerns or priorities of actors with regard to the impacts of the project and mechanisms to resolve all issues\. It will also be the most relevant tool to improve the benefits of the project for communities, citizen control, accountability, and so on, which may require different forms of participation and engagement\. 129\. Potential environmental and social risks associated with the project could be pollution with the unsafe management of soil that could be contaminated with heavy metals (lead, mercury, and so on) and impacts on biodiversity due to the discharge of rainwater into rivers and Aghien and Ebrie Lagoons\. Additionally, as civils works will take place in inhabited areas, there are risks of accidents and GBV\. 130\. The project, in its preparatory phase and during implementation, could involve public consultation activities and, in some cases, stakeholder participation\. The way these are carried out may include public hearings, community meetings, group discussions, field surveys and individual interviews\. In view of the growing concern about the risk of COVID-19 virus transmission, arrangements will be made to adapt the working approach and methodology in accordance with the requirements of national legislation\. For these activities, the Grievance Redress Service and the planned awareness-raising activities, an action plan will be developed to take into account measures related to the prevention of COVID-19 transmission\. E\. Grievance Redress Services 131\. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS)\. The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns\. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures\. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond\. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www\.worldbank\.org/en/projects-operations/products-and-services/grievance-redress-service\. Page 41 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) For information on how to submit complaints to the World Bank Inspection Panel, please visit www\.inspectionpanel\.org\. V\. KEY RISKS 132\. The overall risk rating of the project is substantial\. While Côte d'Ivoire has a good track record in implementing World Bank and its own investment projects, the substantial risk of the project stems from (a) the potential environmental and social impacts of the project activities, given the high risk category of the project; (b) cumulative impacts of poor waste management and infrastructure maintenance, leading to flooding, groundwater contamination, public health and safety impacts, or even social unrest; (c) the lack of enforcement of the land use rules resulting from urban plans leading to the occupation of thalwegs and storm basins; (d) the lack of coordination of the various institutions at the central and local levels in the implementation of the urban master plan of the Greater Abidjan; (e) the financial and economic viability of the solid waste collection system in Abidjan and in the secondaries cities; (f) the lack of maintenance of the infrastructures built in Côte d’Ivoire constituting a major handicap that can jeopardize the sustainability of investments; (g) capacity constraints of the Government to prepare quality studies, particularly for some complex activities: the quality of technical studies for the preparation of projects is often lacking and leading to several rounds of reviews by the World Bank to prepare bankable projects of an acceptable standard\. Table 4 summarizes the rating of each category\. Table 4\. Key Risks Risk Categories Rating (H, S, M, or L) 1\. Political and governance S 2\. Macroeconomic M 3\. Sector strategies and policies S 4\. Technical design of project M 5\. Institutional capacity for implementation and sustainability S 6\. Fiduciary S 7\. Environmental and social H 8\. Stakeholders M 9\. Other 10\. Overall S Note: H = High; S = Substantial; M = Moderate; L = Low\. 133\. Political and governance risk is substantial\. The Government is pursuing its reconciliation agenda with opposition parties\. Though the peaceful 2015 presidential election helped further normalize the sociopolitical situation, recent events (including military and civil service financial claims in 2017) have created some uncertainty in the political and social environment\. The upcoming presidential elections in 2020 may create further uncertainty and lead to fiscal slippages as well as wait-and-see attitude from the private sector\. However, it should be underlined that the fiscal deficit was reduced during the last presidential election in 2015\. Moreover, the Government has reiterated its commitment to avoiding the use of extraordinary spending procedures and its commitment to fiscal control as part of a three-year program agreed with the IMF\. On the security front, the prospects of future terrorist threats, such as the one in March 2016, could divert financial resources away from the reform program toward security and mitigations measures\. Increased security spending could weigh on fiscal balances and weaken the fiscal Page 42 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) consolidation supported by the Development Policy Financing series\. Close monitoring of the political and security situation, in collaboration with the IMF and the EU, will help assess those risks and their subsequent impact on the fiscal program\. 134\. Risk related to sector strategies and policies is substantial\. The Government does not have a clear and viable strategy for drainage facilities and SWM system and therefore for improving its resilience capacity\. In fact, the new national DRR strategy is not yet operational and as noted previously the institutional context is characterized by a lack of synergy and coherence between the various concerned government institutions\. Although the SDAD is in place, there is no clear road map for its implementation\. The need to review this strategy is urgent to redefine and adapt actions in a highly evolving context of development, emerging risks, and the dynamism of society\. Actions are planned as part of the recently initiated recovery framework and as noted before sectorial activities are prioritized as well\. However, through this project, strong emphasis will be placed on building institutional capacity at the central and local levels as well as sharing international good practices to ensure effective coordination\. 135\. Institutional capacity for implementation and sustainability risk is substantial\. It is expected that the project will be executed by a new implementation unit under MINASS, which has no track record in managing large multisectoral projects such as the proposed project\. However, key project implementation risks will be mitigated through strong capacity building, training, and hands-on support throughout the project cycle\. During project preparation and implementation, training will be provided in procurement, FM, contracts management, supervision of works, safeguards, and project management to improve governance at the project level\. 136\. Fiduciary risk is substantial\. The overall FM risk for the project is rated substantial (a) due to the lack of experience and familiarity of the DAF with World Bank FM procedures, (b) because the PCU with a dedicated FM staff and FM tools (manual of procedures, accounting software, and so on) is not established yet, and (c) due to the design of the project which involves several subcomponents and activities combined with the multiplicity of actors lacking familiarity with World Bank-financed project procedures\. The project will be supervised using a risk-based approach\. It is expected that the PCU in the DGAS will be able to manage World Bank funds once the following measures are incorporated before and after project effectiveness: (a) appointment, on a competitive basis, of key FM staff including an RAF and account; (b) drafting of the FM procedures manual; and (c) purchase and installation of the accounting software and the provision of appropriate training to its users\. In line with the use of country systems as stipulated in Decree No\. 475 governing the modalities of donor-financed project implementation in Côte d’Ivoire, (a) a financial controller and a public accountant (two civil servants from the Ministry of Finance) will be assigned to the new PCU and (b) the internal audit function of the project will be managed by the General Inspectorate of Finance (Inspection Générale des Finances, IGF) in line with the Decree No\. 106 dated February 20, 2018\. Finally, the PCU established within the DGSU will be required to prepare and submit (a) an AWPB not later than on November 30 of the year preceding the year the AWPB should be implemented; (b) unaudited IFRs on a quarterly basis; and (c) audited annual financial statements (for example, audit reports prepared by independent external auditors)\. The project will comply with the World Bank disclosure policy of audit reports and place the information provided on the official website within one month of the report being accepted as final by the team\. 137\. The procurement risk is assessed as moderate\. The country is familiar with the Bank’s procedures and standard bidding documents\. During the implementation the following mitigation Page 43 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) measures have been proposed to reduce procurement-related risk in the project: (a) a senior procurement specialist familiar with World Bank procurement regulations and with experience in the procurement of works should be recruited by the PCU before project implementation, who should also have knowledge of procurement issues related to PPPs; (b) during project implementation, it may be advisable to hire one or two additional procurement staff to assist the senior procurement specialist; and (c) if necessary the procurement staff in the World Bank Côte d’Ivoire country office will be available to provide hands-on extended implementation support (HEIS) to the PCU\. 138\. Environmental and social risks is high\. The project foresees the construction/rehabilitation of primary canals and substantial investments in solid waste sector which could affect the surrounding environment through contamination and pollution\. To mitigate these risks, environmental impact studies have been and will be undertaken to specifically identify the risk profile of each activity and propose appropriate and effective mitigation measures\. A specialist in environmental protection will be recruited within the PCU to monitor and address any related issues that may arise, with the close support of the World Bank’s specialists\. \. Page 44 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) VI\. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: Cote d'Ivoire Urban Resilience and Solid Waste Management Project Project Development Objectives(s) The development objectives of the project are to reduce vulnerability to flooding in selected urban areas and improve solid waste management in targeted municipalities\. Project Development Objective Indicators RESULT_FRAME_TBL_ PD O Indicator Name PBC Baseline End Target Improve resilience to flood risk in vulnerable neighborhoods Number of residents protected against flooding (Number) 0\.00 800,000\.00 Of which women (percentage) (Text) 0\.00 50% Improved solid waste services in the district of Abidjan and targeted secondary cities Number of people provided with access to improved solid waste 0\.00 1,350,000\.00 services (number) (Text) Of which women (percentage (Text) 0\.00 50% PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline End Target Component 1: Flood risk mitigation infrastructure and services Page 45 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline End Target Primary/secondary drainage network and associated roadworks 0\.00 75\.00 rehabilitated/built (Kilometers) Hectares of Green spaces and leisure areas created including NBS 0\.00 15\.00 for erosion control (Hectare(Ha)) Number of additionnal secondary cities provided with Sanitation and Storm Water Master Plans through the project (Number) 0\.00 5\.00 Operational Drainage Operation and Maintenance strategy No Yes (Yes/No) Number of studies supporting urban planning for municipalities 1\.00 5\.00 (Number) Number of people covered by an early warning system (number) 0\.00 TBD (Text) Of which women (percentage) (Text) 0\.00 50% Percentage of designated Disaster Risk Reduction committees’ 0\.00 90\.00 focal points who are women (Percentage) Number of cities covered by a digital information system for 0\.00 2\.00 urban planning created by the project (Number) Component 2 : Improvement of solid waste management infrastructure and services Number of Solid waste management infrastructure built and 0\.00 7\.00 functional (Number) Number of signed delegation contract to the private sector in the waste management sector for the District of Abidjan (Number) 0\.00 1\.00 Number of people trained on solid waste management (number) 0\.00 TBD (Text) Of which women (percentage) (Text) 0\.00 50% Number of women in small and medium enterprises completing the support program to enhance their chances to enter the SWM 0\.00 TBD market (Text) A system monitoring the number of women economically active No Yes Page 46 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) RESULT_FRAME_TBL_ IO Indicator Name PBC Baseline End Target in the SWM sector is in place (Yes/No) Number of digital information systems for solid waste management created by the project (Number) 0\.00 1\.00 Number of beneficiaries consulted during project 0\.00 200\.00 implementation (Number) Of which women (percentage) (Text) 0\.00 50% Grievances registered related to project that are actually addressed (Percentage) 0\.00 100\.00 Percentage of workers recruited under the project who signed a 0\.00 100\.00 Code of Conduct (Percentage) IO Table SPACE UL Table SPACE Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Number of additional GIS analysis based on residents living in the Progress the report from the Number of residents protected against expanding flood areas along Semi annual reports by PCU construction flooding the drainage network PCU supervision firms rehabilitated by the project protected against flooding Percentage of additional Progress GIS analysis based on women living in the Semi annual reports by the report from the PCU Of which women (percentage) expanding flood areas along PCU and construction the rehabilitated drainage surveys\. supervision firms Page 47 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) network, protected against flooding Number of additional people benefitting from GIS analysis of improved collection of solid Progress population living in waste and recyclable reports by areas serviced by the Number of people provided with access to Semi annual PCU materials, including the PCU and improved solid waste improved solid waste services (number) transport of these materials surveys\. collection network to an appropriate location made under the Project where the waste is disposed and processed adequately Percentage of women benefitting from improved GIS analysis of collection of solid waste and Progress population living in recyclable materials, report by areas serviced by the Semi annual PCU Of which women (percentage including the transport of PCU and improved solid waste these materials to an Surveys collection network appropriate location where made under the Project the waste is disposed and processed adequately ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Total number of kilometers Project Declared length of of drainage primary and implementati networks constructed Semi Primary/secondary drainage network and secondary network on report or rehabilitated in the PCU/ONAD annual associated roadworks rehabilitated/built rehabilitated or rebuilt based on reports from the including adjacent reports from construction roadworks\. the supervision firms Page 48 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) construction supervision firms Project implementati Cumulated surface of on report Project implementation planted areas on roadsides based on Hectares of Green spaces and leisure Semi report based on reports alley works and slopes reports from PCU/ DAUD areas created including NBS for erosion annual from the construction along the drainage network the control supervision firms rehabilitated, and on construction erosion control areas supervision firms Project Number of secondary cities implementati Number of additionnal secondary cities Semi that have approved a on report by Municipal reports PCU provided with Sanitation and Storm Water annual Sanitation and Storm Water PCU and Master Plans through the project Master Plan\. surveys\. Strategy describing the Project methodology and Municipal reports implementati Operational Drainage Operation and organization of the drainage Annual mentioning the PCU on report Maintenance strategy network operation and adopted O&M plan from PCU maintenance including the annual allocated budget Studies supporting Urban planning (including a study Project Municipal reports and Semi Number of studies supporting urban on urban informal implementati final reports for the annual planning for municipalities settlement) in Abidjan and on reports studies secondary cities have been conducted and results are Page 49 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) made available Number of people living in areas covered by a Flood Early warning system, GIS and statistical including those who analysis of the benefited from a training in population in areas disaster risk and Project where Flood early Number of people covered by an early participated into focus Annual implementati PCU warning information is warning system (number) groups to create on reports disseminated, including contingency and emergency population trained in plans in flood prone areas\. disaster risk reduction\. The final target for this indicator will be determined within the first year after project effectiveness\. Percentage of women living GIS and statistical in areas covered by a Flood analysis of the Early warning system, population in areas including those who Project where Flood early benefited from a training in Annual implementati PCU Of which women (percentage) warning information is disaster risk and on reports disseminated, including participated into focus population trained in groups to create disaster risk reduction\. contingency and emergency plans in flood prone areas Percentage of women Disaster risk reduction designated as the focal Project Percentage of designated Disaster Risk and solid waste point in the Disaster Risk Annual implementati PCU Reduction committees’ focal points who committees surveys or Reduction and solid waste on reports are women reports committees created in each commune to improve solid Page 50 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) waste good practices, risk management and early warning systems information in flood risk vulnerable neighborhoods Number of cities covered by Number of cities covered by a digital Semi Implementati Project implementation digital tools created to help PCU information system for urban planning annual on reports reports managing and facilitate created by the project urban planning Twice - at Number of solid waste Progress mid-term Reports from work Number of Solid waste management management facilities reports from PCU and supervision firms infrastructure built and functional constructed under the PCU completion project and operational Number of contracts concluded by engaging the private sector in Progress Number of signed delegation contract to construction or operation & reports from Monitoring of project the private sector in the waste maintenance of solid waste Annual PCU PCU and activities management sector for the District of services including collection, contract Abidjan transfer, recycling or disposal system in the district of Abidjan, under the project\. Cumulative number of people who benefitted from Progress Monitoring of professional trainings on Semi reports from institutional capacity Number of people trained on solid waste solid waste management PCU annual PCU and building activities and management (number) under the Project\. The final surveys surveys target for this indicator will be determined within the first year after project Page 51 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) effectiveness\. Percentage of women who Monitoring of Project benefitted from Semi institutional capacity implementati PCU Of which women (percentage) professional trainings on annual building activities and on report solid waste management surveys under the Project\. Number of women completing the non-financial support program including technical content on Solid waste management and Progress Monitoring of Number of women in small and medium trainings to improve their Semi reports from institutional capacity enterprises completing the support entrepreneurship skills such PCU annual PCU and building activities and program to enhance their chances to as the development of surveys surveys enter the SWM market business plans and market assessments\. The final target for this indicator will be determined within the first year after project effectiveness\. A system monitoring the number of women economically active in the Desk reviews of solid waste sector in the Project available information A system monitoring the number of Abidjan region covered by Annual implementati on the SWM market, PCU women economically active in the SWM the project, including on reports public statistics, survey sector is in place accessible data from the of private operators public, private, small and medium-sized enterprises and self-entrepreneurship Page 52 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) Number of digital information systems for Number of digital tools Semi Implementati Project PCU solid waste management created by the created to help managing annual on reports implementation reports project and monitoring Solid waste Number of beneficiaries consulted at each steps of the project implementation, including citizen consultation before Project Focus groups reports, Semi Number of beneficiaries consulted during construction works, focus implementati municipal reports on PCU annual project implementation groups for disaster risk on reports public consultations reduction and population covered by a feedback mechanism for suggestions or complaints related to public services Percentage of women consulted at each steps of the project implementation, including citizen consultation before Project imple Focus groups reports, construction works, Semi mentation Municipal reports on PCU Of which women (percentage) participation to focus annual reports public consultations groups for disaster risk reduction and population covered by a feedback mechanism for suggestions or complaints related to public services Percentage of grievances Grievance Analysis of Grievance Semi Grievances registered related to project related to the project Redress Redress Mechanism PCU annual that are actually addressed sufficiently addressed out of Mechanism, data and any other all registered grievances in Implementati potential sources Page 53 of 74  The World Bank Urban Resilience and Solid Waste Management Project (P168308) the GRM on report Number of workers hired by Reports from The clause should be the construction firms/ work construction included in all contracts supervision firms that have Semi firms, with firms\. Percentage of workers recruited under Municipalities / PCU been explained and have annual contracts Municipalities will be the project who signed a Code of Conduct signed the code of conduct mentioning responsible for which addresses GBV/SEAH the clause\. enforcing this rule\. and regular worker training ME IO Table SPACE Page 54 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) ANNEX 1: Implementation Arrangements and Support Plan COUNTRY: Côte d'Ivoire Urban Resilience and Solid Waste Management Project A\. Project Institutional and Implementation Arrangements 1\. The implementation of IDA-funded projects involves the daily monitoring of project activities, the validation of AWPBs, the review and validation of annual reports, the resolution at the highest level of issues, and the involvement and coordination of several agencies\. To ensure effective implementation, the project adopts an institutional arrangement combining central and local levels and composed of (a) a Steering Committee, (b) a PCU, and (c) different SIAs\. At the central level, MINASS, Chair of the Steering Committee, will be the main interlocutor of the World Bank to discuss strategic issues for the achievement of development objectives\. The coordination unit will be created within the DGAS of MINASS for the day- to-day monitoring of the project\. 2\. The Steering Committee was established to ensure high-level coordination of the project\. Given the predominant aspect of sanitation and hygiene in the project, the Steering Committee will be chaired by the Minister of Sanitation or his representative and will include the following ministers or their representatives: the Minister of Economy and Finance; the Secretary of State to the Prime Minister in charge of the budget and the state portfolio; the Minister of Construction, Housing, and Urban Development; the Minister of Digital Economy; the Minister of the City; the Minister of Territorial Administration and Decentralization; the Governor of the Abidjan Autonomous District; the President of the UVICOCI; and the mayors or representatives of involving municipalities\. The Steering Committee ensures consistency of activities with the sectoral strategy and intersectoral coordination for subcomponents of other ministerial departments and local authorities\. It will also validate the AWPBs\. Its modalities of operation will be defined through a decree\. 3\. PCU\. An implementation unit hosted in the DGAS will be created within MINASS\. It will be made up of competitively recruited staff and will coordinate project implementation and management activities\. The MINASS institutional chain involved in the implementation of the project will receive capacity building through training and support of consultants that it will receive from the preparation and throughout the implementation of the project\. The PCU will be composed of a project coordinator; an environmental safeguard specialist; a social safeguard and gender specialist; a digital and geospatial technology specialist; an FM specialist; an M&E specialist; an accountant; a procurement specialist; an urban drainage engineer; a waste specialist; and a communications, social marketing, and community development specialist\. To ensure better ownership of the project by the unit, the following minimum staff will be recruited during the preparation phase: a project coordinator, an environmental safeguard specialist, a social safeguard and gender specialist, an FM specialist, an accountant, and a procurement specialist\. For the technical aspects, the PCU will be supported in its task by various SIAs\. 4\. SIAs\. The technical responsibility for each component will be entrusted to one or more government agencies whose institutional mandate falls to the component’s sector of intervention\. The implementing agencies will be responsible, among other things, for establishing the TOR of the project Page 55 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) activities and reviewing feasibility, viability, and technical studies\. The PCU will sign delegated management contracts with selected agencies identified by the project, which will define the scope of each agency's role and responsibilities\. Table 1\.1 summarizes the SIAs by component\. Table 1\.1\. Distribution of SIAs per Project Components Project Components/Activities SIAs Component 1: Flood risk mitigation infrastructure and services Subcomponent 1\.1: Urban drainage and associated roadworks ONAD Subcomponent 1\.2: Nature-based solutions for erosion and landslide control ONAD Subcomponent 1\.3: Emergency preparedness and early warning system SODEXAM, ONPC, DAA Subcomponent 1\.4: Resilient urban planning MCLU Component 2: Improvement of solid waste management infrastructure and services Subcomponent 2\.1: Strengthening solid waste management capacities in the Abidjan DGAS Autonomous District and two selected intercommunal groups of secondary cities Subcomponent 2\.2: Strengthening sector governance and institutional capacity DGAS, ANAGED Subcomponent 2\.3: Improving solid waste management through citizen engagement, DGAS, ANAGED, recycling, reuse, composting, and digital technology DAA Component 3: Project management PCU Component 4: Contingent Emergency Response Component (CERC) PCU B\. Financial Management 5\. The FM arrangements for the project have been designed considering the country’s governance situation while also taking into account the World Bank’s minimum requirements under World Bank Policy and Directive for IPF, which describes the overall FM World Bank policies and procedures\. The FM system of the project must be capable of (a) correctly and completely recording all transactions related to the project; (b) facilitating the preparation of regular, timely, and reliable financial statements; and (c) safeguarding the project’s assets\. The FM system can be subject to auditing diligences as required by the World Bank\. The arrangements also aim to facilitate disbursements and ensure effective use of project resources while using the country’s own systems to the extent possible\. 6\. In 2018, the Government adopted a new strategic framework for reforming PFM based on the progress made during the implementation of the 2014–2017 PFM reform actions plan and the findings of the 2017 PEFA: Côte d’Ivoire PFM counts in particular with strong legal and institutional framework, effective PFM planning and budget system, and strong internal control system with clear and relevant segregations of duties at each step of the budget execution\. Budget execution and internal control systems are computerized and interlinked with procurement and treasury systems\. There is an adequate legal and institutional framework for fraud and anti-corruption in line with international standards\. Côte d’Ivoire also adopted WAEMU PFM and procurement directives, whose implementation is ongoing\. 18 7\. However, there are opportunities to strengthen internal and external audit, procurement, and anti-corruption mechanisms\. The internal audit functions need to adopt international standard and increase the number of staff and capacity, and a reform is ongoing for this purpose\. While the Court of Accounts (Social Accountability International [SAI]) created in 2014 is operational, it is affected by human 18 2017 PEFA Assessment for Cote d’Ivoire\. Page 56 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) and financial resources challenges to comply with SAI international standards and the ability to conduct performance audit\. Procurement timeliness could be improved by streamlining processes, and enforcement of sanctions could be enhanced, particularly in the infrastructures sector where it remains challenging\. Finally, the level of enforcement of anticorruption mechanisms could be enhanced\. 8\. Thus, at this point the World Bank cannot fully rely on the public expenditure framework for this project\. The Government requested using a ring-fenced financing mechanism for the fiduciary aspects of the project\. A new PCU including an FM Unit anchored within the DGAS at MINASS has been proposed by the Government to manage the project\. The FM team of the PCU to be established under the responsibility of the project coordinator will manage the overall FM aspects of the project\. 9\. An assessment of the DAF of MINASS including the FM Unit of the PCU was conducted during the project preparation to check whether this directorate and the FM team of the PCU could manage the proposed project\. The main finding arising from this assessment conducted in January 2020 was that the DAF of the DGAS at MINASS is not familiar with World Bank-financed projects including FM procedures\. Furthermore, the PCU including the FM Unit was not created yet\. However, the assessment revealed that the DAF follows the country public expenditure chain for budget execution and financial reporting through the SIGFIP and ASTER software, the government budget, and accounting software\. None of the staff of the DAF including the financial controller (Contrôleur financier) and the public accountant (Agent comptable) assigned to the DGAS within MINASS are familiar with World Bank-financed project procedures and requirements\. It is worth pointing out that the assessment revealed that part of the PPA has been allocated to support the creation of the PCU including the staffing and the development of FM tools (for example, accounting software and manual of financial procedures)\. The selection of the PCU key FM staff has already been launched and is well advanced\. Risk Assessment and Mitigation 10\. The World Bank’s principal concern is to ensure that project funds are used economically and efficiently for the intended purpose\. Assessment of the risks that the project funds will not be so used is an important part of the FM assessment work\. The risk features are determined over two elements: (a) the risk associated with the project as a whole (inherent risk) and (b) the risk linked to a weak control environment of the project implementation (control risk)\. The content of these risks is described in table 1\.2\. 11\. The overall residual FM risk for the project is rated Substantial (a) due to the lack of experience and familiarity of the DAF with World Bank-FM procedures; (b) because the PCU with a dedicated FM staff and FM tools (manual of procedures, accounting software, and so on) is not established yet; and (c) due to the design of the project which involves several subcomponents and activities combined with the multiplicity of actors lacking familiarity with World Bank-financed project procedures\. Consequently, additional mitigation measures will be incorporated into the design of the project FM arrangements as described in table 1\.2\. Page 57 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Table 1\.2\. Risk Assessment and Mitigation Measures Risk Mitigating Measures Conditions for Risk Residual Risk Incorporated into Project Effectiveness Rating Risk Design (Yes/No) Inherent risk S S Country level H Beyond the control of the No H The PEFA and Public Investment project\. The Government is Management Assessment committed to a reform undertaken, respectively, in 2018 program that includes the and 2016 have highlighted some preparation of a strategic strengthens as well as some areas of framework for PFM reforms weaknesses in PFM that the in Côte d’Ivoire\. However, Government needs to address (see there are still weaknesses\. above) Use of IDA FM procedures supported by the Decree 475 is required for this project\. Entity level S The recruitment of a RAF by No S MINASS and the DAF are not familiar effectiveness and an with World Bank-financed FM accountant two months after procedures\. A new PCU will be effectiveness and the created; hence, the FM team is not adoption of an FM procedures established and operationalized yet\. manual one month after effectiveness will mitigate internal control and financial reporting weaknesses\. Project level S For efficiency purposes, the No S The resources of the project may not DAF (FM team of the PCU) will be used for the intended purposes\. strengthen ex ante and ex Complex design; delays in the post control of activities reporting system and auditing due to implemented by SIAs\. The the lack of familiarity of the DAF and scope of audit will include the new PCU with the World Bank review of expenditures FM procedures\. The numerous incurred by implementing stakeholders would possibly entities as well as physical negatively affect the implementation inspections of works of the project\. completed\. Control risk S S Budgeting S AWPB required each year and No S (a) Weak capacity at the PCU and proclaimed\. AWP reviewed implementing entities to prepare and and approved by the Steering submit accurate work program and Committee\. The project FM budget; (b) weak consolidation of procedures manual will define budgets; (c) weak budgetary the arrangements for execution and control; and (d) cost budgeting, budgetary control, overrun or underrun and reasons not and the requirements for detected/justifications not provided budgeting revisions\. IFRs will on time provide information on budgetary execution and analysis of variances between Page 58 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Risk Mitigating Measures Conditions for Risk Residual Risk Incorporated into Project Effectiveness Rating Risk Design (Yes/No) actual and budget\. Accounting H FM aspects handled by the Yes S Poor policies and procedures, lack of FM team of the PCU to be set qualified accountant staff (capacity up within the DAF: (a) the staff), and no familiarity with project will adopt the SYSCOHADAa system and World Bank SYSCOHADA accounting requirements; delays in recruitment system; accounting of the FM team procedures will be documented in the procedure’s manual, (b) the FM team will be headed by an RAF recruited on a competitive basis, and (c) training on IDA FM procedures will be provided to the staff\. Internal control H (a) Preparation of the FM No H Internal control system may be weak procedures manual and due to weak FM capacity of the training on the use of the team\. The lack of procedures manual manual will be a dated may lead to inappropriate use of the convenant\. funds and delays in financial report\. (b) The IGF will play the The Steering Committee may not be internal audit function and effective; the manual may not be report to the coordinator of available at project effectiveness\. the PCU, who will in turn share the report with the Steering Committee and IDA\. Funds flow S (a) Payment requests, per the No S (a) Risk of misused of funds and PCU manual, will be approved delays in payment of by the coordinator before invoices/expenditures of activities payment of funds to implemented by various actors; (b) contractors or consultants delays in transfers of funds from the and implementing entities\. DA to the PA by the SIA; and (c) (b) Compliance with Decree ineffectiveness of public accountant 475 by all actors (financial and financial controller functions controller and project public leading to payment of ineligible accountant)\. expenditures or works not (c) Scope of work of the IGF as completed well as the external auditors includes regular field visits (physical controls of works, goods, and services acquired)\. (d) Adequate budget allocated to the IGF to conduct periodic controls and training of financial controller and public accountant on Page 59 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Risk Mitigating Measures Conditions for Risk Residual Risk Incorporated into Project Effectiveness Rating Risk Design (Yes/No) World Bank FM procedures Financial reporting S (a) A computerized No S Inaccurate and delay in submission of accounting system will be IFR due to delays from SIAs and weak used\. capacity of actors; lack of familiarity (b) IFR and financial of PIU team leading to some delays statements formats have in recording of expenditures as well been agreed on at project as preparation of periodic financial negotiations\. reports (c) FM team of the PCU recruited on competitive basis and capacity building planed before project effectiveness (hands on support and training of the preparation team of the DGAS)\. Auditing S The project’s institutional No S Delays in submission of audit report\. arrangements allow for the The scope of the mission may not appointment of adequate cover expenditures incurred by external auditors and the implementing entities\. TORs (to be reviewed by IDA) will include field visits and specific report on findings of physical controls of goods, services, and works acquired by implementing entities\. Fraud and corruption S (a) The TOR of the external No S Possibility of circumventing the auditor will comprise a internal control system with specific chapter on corruption colluding practices such as bribes, auditing\. abuse of administrative positions, (b) The IGF will report to the misprocurement is a critical issue; coordinator of the PCU and lack of demand-side for the Head of the IGF, who in accountability turn will report directly to the Steering Committee\. (c) Copy of IGF reports will be submitted to the World Bank\. (d) FM procedures manual is approved before project effectiveness and there will be quarterly IFRs including budget execution and monitoring and physical progress\. (e) Technical auditing if required\. (f) Measures to improve transparency such as Page 60 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Risk Mitigating Measures Conditions for Risk Residual Risk Incorporated into Project Effectiveness Rating Risk Design (Yes/No) providing information on the project status to the public and to encourage participation of civil society and other stakeholders are built into the project design\. OVERALL RESIDUAL FM RISK Substantial Note: SYSCOHADA = West African Francophone countries accounting standards\. Strengths and Weaknesses 12\. The design of the project follows existing FM arrangements to implement World Bank-financed projects in Côte d’Ivoire which include partial use of country systems (Decree 475) for the following FM components (for example, planning, budgeting, accounting, disbursement, procurement, financing reporting, and internal control)\. 13\. The country political situation has had an impact on governance and affected the corruption environment\. However, significant improvements have been noted in the recent years, in the context of the project, the main weaknesses include the lack of familiarity and lack of experience of MINASS and the DGAS in World Bank FM procedures\. Furthermore, the PCU, including the FM Unit, is not created yet\. However, effective implementation of FM mitigation measures as well as strengthened and effective oversight of the Steering Committee and the involvement of the country institutions of control (for example, IGF) would contribute to mitigate the weaknesses identified at country, entity, project, and control levels\. FM Action Plan 14\. The FM action plan described in table 1\.3 has been developed to mitigate the overall FM risks\. Table 1\.3\. Action Plan FM Responsible Completion Issue/Topic Remedial Action Recommended Effectiveness Body/Person Date Conditions Staffing Finalize the selection and appointment PCU within By Yes of the Financial management specialist DGAS effectiveness (RAF) Finalize the selection and appointment PIU within Two months No of the accountant DGAS after effectiveness Appoint the financial controller and PCU within One month No public accountant (Agent comptable DGAS after du Projet) in accordance with Decree effectiveness 475 Information Acquisition and installation of an PCU within Two months No system accounting software for the project DGAS after accounting and training of the users effectiveness Page 61 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) FM Responsible Completion Issue/Topic Remedial Action Recommended Effectiveness Body/Person Date Conditions software Administrative Finalize and disseminate the FM and PCU within One month No accounting and procurement procedures manual DGAS after financial manual effectiveness Internal auditing Discuss with the IGF, the government PCU within Three months No institution of control in charge of the DGAS after internal audit function in World Bank- effectiveness financed operations, to agree on the modalities of its interventions including allocation of adequate resources (HR and financial) to fulfill its mandate External auditing Appointment of the external auditor PCU within Five months No completed and contract signed DGAS after effectiveness 15\. Internal control system and internal audit\. An internal control system is aimed to ensure (a) the effectiveness and efficiency of operations, (b) the reliability of financial reporting, and (c) the compliance with applicable laws and regulations\. An FM procedures manual should be developed and adopted one month after project effectiveness\. The accounting, financial, and administrative procedures manual including procurement document explains and describes work processes, information flow, authorization and delegation of authority, timing, job segregations, auto and sequential controls, compliance with project objectives, and micro and macro rules and regulations\. In line with the new Decree No\. 475 governing the modalities of donors-financed project implementation in Côte d’Ivoire and the Decree No\. 106, the IGF will oversee the internal audit function of the project managed by the PCU\. Once the IGF is appointed, the PCU within the DGAS and IGF will discuss to agree on the modalities of IGF interventions including the necessary human and financial resources to fulfil its mandate\. 16\. Planning and budgeting\. The PCU within the DGAS will prepare a detailed consolidated AWPB for implementing the activities of the project\. The AWPB will be submitted to the project Steering Committee for approval and thereafter to IDA for ‘no objection’, not later than November 30 of the year preceding the year the work plan should be implemented\. 17\. Accounting policies\. The prevailing accounting policies and procedures in line with the West African Francophone countries accounting standards—SYSCOHADA—in use in Côte d’Ivoire for ongoing World Bank-financed operations will apply\. The accounting systems and policies and financial procedures used by the new project will be documented in the project’s administrative, accounting, and financial manual\. The PCU within the DGAS will acquire and install a project accounting software to meet the project requirements\. 18\. Interim financial reporting\. The unaudited IFRs will be prepared every quarter and submitted to the World Bank regularly (for example, 45 days after the end of each quarter) and on time\. The consolidated quarterly IFR for the project includes the following financial statements: (a) Statement of Sources of Funds and Project Revenues and Uses of funds; (b) Statement of Expenditures (SoE) classified Page 62 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) by project components and/or disbursement category (with additional information on expenditure types and implementing agencies as appropriate), showing comparisons with budgets for the reporting quarter, the year, and cumulatively for the project life; (c) cash forecast; (d) explanatory notes; and (e) DA activity statements\. 19\. Annual financial reporting\. In compliance with International Accounting Standards and IDA requirements, the PCU within the DGAS will produce annual financial statements\. These include (a) a balance sheet that shows assets and liabilities; (b) a statement of sources and uses of funds showing all the sources of project funds and expenditures analyzed by project component and/or category; (c) a DA activity statement; (d) a summary of withdrawals using SoEs, listing individual withdrawal applications by reference number, date, and amount; and (e) notes related to significant accounting policies and accounting standards adopted by management and underlying the preparation of financial statements\. 20\. External auditing\. The PCU within the DGAS will submit audited project financial statements satisfactory to the World Bank every year within six months after closure of the fiscal year (see table 1\.4)\. The audit will be conducted by an independent auditor with qualifications and experience acceptable to the World Bank\. A single opinion on the audited project financial statements in compliance with the International Federation of Accountants will be required\. In addition, a Management Letter will be required\. The Management Letter will contain auditor observations and comments and recommendations for improvements in accounting records, systems, controls, and compliance with financial covenants in the Financial Agreement\. The report will also include specific controls such as compliance with procurement procedures and financial reporting requirements and consistency between financial statements and management reports as well as findings of field visits (for example, physical controls and works completed)\. The audit report will thus refer to any incidence of noncompliance and ineligible expenditures and misprocurement identified during the audit mission\. The project will comply with the World Bank disclosure policy of audit reports and place the information provided on the official website within two months of the report being accepted as final by the team and the World Bank\. Table 1\.4\. Due Dates of the Audit Report Responsible Audit Report Due Date Party Audited financial (a) Not later than June 30 (2,000 + N) if effectiveness has PCU/DGAS statements including audit occurred before June 30 (2,000 + N−1)\. report and Management (b) Not later than June 30 (2,000 + N+1) if effectiveness has Letter occurred after June 30, (2,000 + N−1) C\. Disbursement 21\. Upon credit effectiveness, transaction-based disbursements will be used\. The project will finance 100 percent of eligible expenditures inclusive of taxes\. A DA will be opened at the BCEAO and a PA in a commercial bank under terms and conditions acceptable to IDA\. The PA will be managed by the public accountant (Agent Comptable du Projet) assigned to the PCU by the Minister of Finance\. The ceiling of the DA will be stated in the Disbursement and Financial Information Letter\. An initial advance up to the ceiling of the DA will be made and subsequent disbursements will be made against submission of SoE reporting on the use of the initial/previous advance\. The option to disburse against submission of quarterly unaudited IFRs (also known as report-based disbursements) could be considered, as soon as the project Page 63 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) meets the criteria\. Other methods of disbursing the funds (reimbursement, direct payment, and special commitment) will also be available to the project\. The minimum value of applications for these methods is 20 percent of the DA ceiling\. The project will sign and submit withdrawal applications electronically using the e-Signatures module accessible from the World Bank’s Client Connection website\. Table 1\.5\. Category Amount of the Credit Percentage of Expenditures to Allocated (expressed in EUR) be Financed (inclusive of Taxes) (1) Goods, works, non-consulting 281,180,750 100% services, consulting services, Training and Operating Costs for Parts 1, 2 and 3 of the Project (2) Emergency Expenditures under 0 100% Part 4 of the Project (3) Refund of Preparation Advance 5,800,000 Amount payable pursuant to Section 2\.07 (a) of the General Conditions (4) Front-end Fee 719,250 Amount payable pursuant to Section 2\.03 of this Agreement in accordance with Section 3\.08 (b) of the General Conditions (5) Interest Rate Cap or Interest 0 Amount due pursuant to Rate Collar premium Section 4\.06 (c) of the General Conditions TOTAL AMOUNT 287,700,000 22\. Payments to implementation agencies and services providers: The PCU within the DGAS under the responsibility of the public accountant will make payments to contractors, services providers, and implementing agencies with regard to the specified activities in the components of the project\. Payments will be made in accordance with the payment modalities, as specified in the respective contracts/conventions\. In addition to these supporting documents, the PCU within the DGAS will consider the findings of the IGF while approving the payments\. The PCU within the DGAS will reserve the right to verify the expenditures ex post, and refunds might be requested for noncompliance of contractual/convention (for example, MOD) clauses\. Misappropriated activities could result in the suspension of financing for a given entity\. All payments will be made by the PCU within the DGAS for the activities directly related to specific components\. Therefore, in line with the country PFM system, a finance controller and a public accountant will be appointed before disbursement of the initial advance to the DA\. In line with the use of country systems as stipulated in the new Decree No\. 475 governing the modalities Page 64 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) of donors-financed project implementation in Côte d’Ivoire, the two (civil servants should be involved in the management of the project funds mainly undertaking prior review and check of effectiveness of physical delivery of goods, work, and services and making all payments based on supporting documents (contracts, invoices, and so on) validated by the financial controller ‘ visa services faits’ (service provided)\. 23\. Local taxes\. Funds will be disbursed in accordance with project categories of expenditures and components, as shown in the Financing Agreement\. Financing of each category of expenditure/component will be authorized as indicated in the Financing Agreement and will be inclusive of taxes according to the current country financing parameters approved for Côte d’Ivoire\. However, the Government will allocate some budgets to support the operating costs of civil servants involved in the implementation of the project\. The use of such budget should comply with the FM procedures approved by the World Bank and applicable to the project\. 24\. Support to the implementation plan\. FM supervisions will be conducted over the project’s lifetime\. The project will be supervised on a risk-based approach taking into account the alternative options developed in OPCS Guidance issued on March 24, 2020 (Streamlined Fiduciary Implementation Support Measures for Active Bank-financed Operations given Travel Limitations due to COVID-19 Pandemic) and the Guidelines IPF Projects under the Global MAP\. Based on the outcome of the FM risk assessment, the following implementation support plan is proposed\. The objective of the implementation support plan is to ensure the project maintains a satisfactory FM system throughout its life\. Table 1\.6\. FM Implementation Support Plan FM Activity Frequency Desk reviews IFRs’ review Quarterly Audit report review of the program Annual Review of other relevant information such as interim internal Continuous, as they become available control systems reports and IGF reports On-site visits Review of overall operation of the FM system (Implementation Every six months for Substantial risk Support Mission on a risk-based approach and OPCS new flexibility due to COVID-19) Monitoring of actions taken on issues highlighted in audit reports, As needed auditors’ Management Letters, internal audits, and other reports Transaction reviews As needed Capacity-building support FM training sessions Before project effectiveness and during implementation as needed D\. Procurement 25\. A new Procurement Code (Order No\. 2019-679 dated July 24, 2019) has been adopted in Côte d’Ivoire, in line with the WAEMU procurement directives and international good practices, along with key implementing regulations and documentation\. A national procurement capacity building program exists and is being implemented at the central level and among relevant decentralized entities\. An electronic system for collecting and disseminating procurement information and for monitoring procurement statistics has been set up and needs to be mainstreamed in the work of all contracting authorities\. Page 65 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) 26\. The Procurement Plan and PPSD\. A PPSD has been developed to analyze the key features of the project and related procurement risks and opportunities, building on the lessons learned from similar projects\. The largest part (around 80 percent) of the project’s investment will be used for the construction of drainage, SWM, and recycling facilities\. Also, in a vision of more integrated and managed urban planning, the project dedicates a portfolio for the implementation of digital tools to boost resilience and urban management\. While there is a market with qualified national and international contractors, potential risks include the unavailability of specific expertise required for the establishment of the digital geoportal, the designing of innovative and adapted NBSs, delays in receiving imported goods, and delays in national procurement approval channels\. For the PPP component, the project will finance a consultancy service to identify appropriate contractual arrangements for the PPP\. Several other specialized consultant services requiring highly qualified urban management or sector reform experience will be performed in support of the project activities\. A Procurement Plan detailing the first 18 months’ activities was agreed upon during the credit negotiations\. The Procurement Plan will be updated annually in agreement with the World Bank or as required to reflect the actual project implementation needs and improvements in institutional capacity\. Market Approach Options Goods, Works, and Non-consulting Services 27\. Open competition - International Competitive Bidding (ICB)\. Approaching the international market will be appropriate when the participation of foreign firms will increase competition and may ensure the achievement of best value-for-money and fit-for-purpose results\. The time allowed for the preparation and submission of bids/proposals shall be determined with due consideration of the particular circumstances of the project and the magnitude, risk, and complexity of the procurement\. The minimum period allowed for preparation of bids/proposals shall be 30 business days for open ICB, unless otherwise agreed with the World Bank\. For complex procurement, the borrower may arrange a pre- bid/pre-proposal conference in which potential bidders/proposers/consultants may meet with borrower representatives to seek clarifications\. The borrower should also provide reasonable access to project sites for prospective bidders/proposers/consultants\. 28\. Open ICB for which international advertisement is required (in accordance with Procurement Regulations) is the preferred approach for complex, high-risk, and/or high-value contracts\. The World Bank has set specific thresholds for this purpose (see table 1\.7)\. 29\. The deadline and place for the receipt of bids/proposals shall be specified in the Specific Procurement Notice and the request for bids/request for proposal document\. 30\. Open competition - National Competitive Bidding (NCB)\. Approaching the national market may be appropriate when the procurement is unlikely to attract foreign competition because of (a) The size and conditions of the market; (b) The value of the contract; (c) Activities that are scattered geographically, spread over time, or are labor-intensive; or Page 66 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) (d) The fact that goods, works, or non-consulting services are available locally at prices below the international market\. 31\. If foreign firms wish to participate in open national competitive procurement, they can do so on the terms and conditions that apply to national firms\. 32\. Limited competition - Direct Contracting: A limited competitive approach to market is by invitation only, without advertisement\. It may be an appropriate method of selection where there are only a limited number of firms or there are other exceptional reasons that justify departure from open competitive procurement approaches\. 33\. These procurement features, procedures, and approaches are applicable to the following: (a) competitive dialogue, (b) PPPs, (c) commercial practices, (d) UN agencies, (e) e-reverse auctions, (f) imports, (g) commodities, (h) community-driven development, and (i) force accounts\. 34\. Particular type of contractual arrangements\. During project implementation, particular types of contractual arrangements may be used: (a) Framework Agreements (FAs) and (b) performance-based contracts\. Consulting Services 35\. During project implementation, firms and individual consultants (ICs) can be selected \. The following are approved selection methods for consulting firms: (a) Quality and Cost-Based Selection (QCBS), (b) Fixed Budget Selection (FBS), (c) Least-Cost Selection (LCS), (d) Quality-Based Selection (QBS), (e) Selection Based on the Consultants’ Qualifications (CQS), (f) Direct Selection, and (g) Commercial Practices\. 36\. ICs are selected for an assignment, for which (a) a team of experts is not required, (b) no additional home office professional support is required, and (c) the experience and qualifications of the individual are of paramount importance\. 37\. Open competition - consulting firms\. An open competitive approach to market provides all eligible prospective firms or ICs with timely and adequate advertisement of the borrower’s requirements and an equal opportunity to provide the required consulting services\. Open and competitive procurement approaches, including the advertisement for expression of interest, are preferred for World Bank-financed selection of consultants\. 38\. An open international competitive bidding/selection market approach, with mandatory international advertisement in accordance with Procurement Regulations, is used when the participation of foreign firms is most likely to achieve the best fit for purpose and value for money\. 39\. As agreed in the Procurement Plan, national selection through advertisement in the national media/press may be used when the nature, scope, and value of the consulting services are unlikely to attract foreign competition and there are adequate qualified national consultants to carry out the assignments\. If foreign consultants wish to participate in national selection, they may do so\. When Page 67 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) approaching the national market, the country’s own procurement procedures may be used, as specified in paragraphs 5\.3 to 5\.6 of the Procurement Regulations\. 40\. Limited competition - consulting firms\. The limited competition approach exists when the borrower prepares a short list without advertising\. It may be appropriate when there are only a limited number of qualified consultants that can carry out the subject assignment or other justifiable exceptional reasons\. Borrowers shall seek expressions of interest from a list of potential consultants that is broad enough to ensure adequate competition\. 41\. Project implementation support personnel\. Project implementation staff and individuals contracted by the borrower to support project implementation, other than individual consulting positions identified in the Legal Agreement, may be selected by the borrower according to its personnel hiring procedures for such activities, as reviewed and found acceptable by the World Bank\. 42\. Particular type of contractual arrangements - FAs\. During the project, implementation FAs may be used\. An FA is an agreement established with firms or ICs (panel of consultants), as required, over a specified period\. The FA sets out terms and conditions under which specific consulting services (call-off contracts) can be provided directly or competitively throughout the term of the agreement\. FAs may be appropriate for the recurring selection of consulting services or to consolidate requirements when different entities of the Borrower procure the same types of consulting services\. Consulting Individuals 43\. Open competitive\. Advertisement through REoIs is encouraged, particularly when the borrower does not have knowledge of experienced and qualified individuals, or of their availability, the services are complex, there is potential benefit from wider advertising, or advertising is mandatory under national law\. REoIs shall include a complete TOR\. ICs are selected from those that expressed interest in response to an REoI\. 44\. Limited competitive - Direct Selection\. When the borrower has knowledge of experienced and qualified individuals and their availability, instead of issuing an REoI, it may invite those ICs that it deems qualified to provide the required consulting services\. The complete TOR shall be sent with the invitation\. ICs shall be selected from those that expressed interest in response to the invitation\. 45\. Direct selection can be mobilized under the following circumstances: (a) Tasks that are a continuation of previous work that the IC has carried out after being selected competitively (b) Assignments with a total expected duration of less than six months (c) Urgent situations (d) When an IC has relevant experience and qualifications of exceptional worth to the assignment Page 68 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Table 1\.7\. Thresholds for Procurement Methods and Prior Review Expenditure Category Contract Value Procurement Contract Subject to Prior (Threshold, US$) Method Review ≥10,000,000 RFB US$15,000,000 and above <10,000,000 (*) NCB Works <200,000 RFQ No threshold Direct Selection ≥1,000,000 RFB US$4,000,000 and above <1,000,000 (*) NCB Goods <200,000 RFQ Direct Selection Consultants QCBS FBS >300,000 All of US$2, 000,000 and Firms QBS CQ above LCS Diect Selection >100,000 IC (RoEI) All of US$400,000 and <100,000 IC (At least 3 CV) above Individuals Direct Selection All ToRs regardless of the value of the contract are subject to prior review\. Note: All TORs regardless of the value of the contract are subject to prior review\. a\. In specific circumstances, for example, when there is no sufficient number of qualified firms to ensure competition in the local context, ICB will apply even if the estimated amount is below the thresholds\. 46\. Procurement of consulting services other than those covered\. Eventually, those might include designing, editing, and printing project promotion supports and providing logistic support such as car rental for field visits, travel services, and logistic support for workshop and the like; LCS or shopping will be used\. 47\. Training, workshops, and conferences\. Training (including training material and support), workshops, and conference attendance will be carried out based on an approved annual training and workshop/conference plan\. A detailed plan specifying the nature of training/workshop, number of trainees/participants, duration, staff months, timing, and estimated cost will be submitted to IDA for review and approval before initiating the process\. The appropriate methods of selection will be derived from the detailed schedule\. After the training, the beneficiaries will be requested to submit a brief report indicating which skills have been acquired and how these skills will contribute to enhance their performance and contribute to the attainment of the project objective\. 48\. Operating costs\. Operating costs financed by the project are incremental expenses, including office supplies, vehicles O&M, maintenance of equipment, communication costs, supervision costs (that is, transport, accommodation, and per diem), and salaries of locally contracted staff\. They will be procured using the procurement procedures specified in the Project Financial and Accounting Manual\. 49\. Procurement documents\. For international competitive bidding, the borrower shall use the World Bank’s Standard Procurement Documents, available on its external website\. 42 For procurement Page 69 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) involving NCB, the borrower may use its own procurement documents, acceptable to the World Bank\. The recipient will develop standard documents based on the World Bank’s Standard Bidding Documents for NCB for goods and works and the World Bank’s RFP for the selection of consultants through methods other than QCBS, with modifications that will be submitted to the IDA for prior approval\. 50\. The different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the recipient and the World Bank in the Procurement Plan\. 51\. Country Overall Procurement Risk Assessment: moderate E\. Strategy and Approach for Implementation Support 52\. The implementation support strategy is based on the nature and complexity of the project\. It describes how IDA and other development partners will ensure the successful implementation activities and risk mitigation measures and provide the expertise and technical support necessary to achieve the project's development objectives\. Supervision and field visits will be carried out semiannually and will focus on the following aspects: ï‚ Close coordination between the World Bank, the implementing agencies, and development partners\. ï‚ Technical\. The World Bank will provide a comprehensive set of instruments and expertise and advice on project activities throughout implementation\. It will work closely with the implementing agency to ensure achieving PDOs\. ï‚ Fiduciary\. The FM and procurement specialists will (a) support the PCU in its familiarization to World Bank guidelines and procedures, (b) train the PCU staff to work with any updates to procurement guidelines, and (c) ensure that the PCU has capacity to manage flow of funds and accounting procedures in line with FM guidelines\. Supervision of the project’s fiduciary arrangements will be conducted semiannually over the project’s lifetime and will focus on PCU’s performance in managing contracts, procurement, and financial matters, as well as on completing the agreed implementation plans\. ï‚ M&E\. The World Bank will review the updated Results Framework submitted semiannually by the PCU during supervision missions\. The leaders will evaluate the progress toward achieving the PDO and will identify any areas where additional help is needed\. ï‚ The World Bank will develop a comprehensive communications strategy and implementation of responsive feedback mechanisms for quality assurance\. Page 70 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) F\. Implementation Support Plan and Resources Requirements Table 1\.8\. Implementation Support Plan Resource Number of Time Focus Skills Needed Estimate (Staff Trips Weeks) Project management, coordination, Team task leader (TTL) and 4 30 and supervision Co-TTL FM experience, knowledge of World FM specialist 0 4 Bank FM norms, and training First 12 months Procurement experience, World Procurement specialist 0 4 Bank’s procurement norms knowledge, and training Environmental and social safeguards, Social/environmental 0 5 World Bank norms knowledge safeguards specialist Implementation support and Solid waste specialist 2 4 monitoring DRM specialist 2 4 Digital technology specialist 2 2 Drainage specialist 2 6 Project management, supervision, and TTL and Co-TTL 15 150 coordination FM (FM reviews and supervision, FM specialist 0 20 training, and monitoring) 12–72 months Procurement management (reviews Procurement specialist 0 20 and supervision, training as needed) Environmental safeguards, supervision Social/environmental 0 25 and monitoring, training as needed safeguards specialist Implementation support and Solid waste specialist 10 30 monitoring DRM specialist 10 30 Digital technology specialist 10 10 Drainage specialist 10 30 Table 1\.9\. Skills Required Number of Number of Skills Needed Comments Staff Weeks Trips TTL and co-TTL 180 19 (TTL in Abidjan, Co-TTL in Accra) FM specialist 24 0 Based in Abidjan Procurement specialist 24 0 Based in Abidjan Social safeguards specialist 30 0 Based in Abidjan Environmental safeguards specialist 30 0 Based in Abidjan Solid waste specialist 34 12 Based in Washington, DC Disaster risk specialist 34 12 Based in Washington, DC Digital technology specialist 12 12 Based in Washington, DC Drainage specialist 36 12 Based in Washington, DC Page 71 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) ANNEX 2: GHG Emission Analysis COUNTRY: Côte d'Ivoire Urban Resilience and Solid Waste Management Project 1\. Solid waste management is a universal issue affecting every single person\. Individuals and governments make decisions about consumption and waste management that affect the daily health, productivity, and cleanliness of communities\. Poorly managed waste contaminates oceans, clogs drains and causes flooding, transmits diseases through breeding of vectors, increases respiratory problems through airborne particles from burning of waste, harms animals that consume waste unknowingly, and affects economic development such as through diminished tourism, as well as increases GHG emissions\. In line with the World Bank Group’s environmental strategy since FY13 (see box 3\.1), an analysis of GHG emissions generated by waste management investments has been conducted\. Box 3\.1\. World Bank Group Environmental Strategy The Board endorsed the World Bank Group environment strategy, which includes a proposal for the World Bank to start undertaking GHG analysis of investment projects starting in FY13\. The new environment strategy, released on June 5, 2012, provides an overview of the progress made at IFC and the World Bank in the development and application of methodologies and tools for GHG analysis\. While IFC began estimating GHG emissions for all new real sector projects in 2009, the environment strategy proposed that World Bank should start undertaking GHG emissions analysis in mid-FY13 for all energy, transport, and forestry projects that have agreed methodologies and tools while continuing to test and develop approaches for additional sectors\. It is envisaged that GHG assessments for investment lending operations will be phased in as a World Bank business requirement over two years starting in mid-FY13\. This exercise will help the World Bank understand its portfolio’s impact on GHG emissions and learn from such analysis; it is not intended to guide project selection\. 2\. The analysis relied on the results of the economic and financial analyses of PricewaterhouseCoopers that studied the current waste sector in Abidjan as well as the trends and components of the investments planned by the project\. Most of the data and inputs will refer to its report, especially since all the data used have been discussed and validated by the Directorate General of Sanitation\. Methodology 3\. The analysis was based on two scenarios (the baseline scenario [the non-project situation] and the project scenario) to estimate the net emission that could result from the project activities\. It relied on The Climate Action for Urban Sustainability (CURB) Tool used to assess existing and potential emissions of waste treatment in the waste intervention area, following the methodology of the IPCC\. Analysis Boundary 4\. The project covers the Abidjan Autonomous District and three surrounding localities: Grand- Bassam, Dabou, and Sikensi\. Page 72 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) Time Frame 5\. The analysis was conducted over a 15-year period, starting from 2023\. Scenarios and Assumptions Baseline Scenario 6\. Since 2018, solid waste of the 13 communes of the Abidjan Autonomous District is managed by a set of private operators and its destination is a landfill in the locality of Kossihouen\. This landfill does not yet have optimal facilities for the effective treatment of methane emissions from landfill\. For the purpose of the analysis, the baseline situation is considered static and therefore assumed to be the same throughout the study\. The following inputs and assumptions were used for the modelling of the baseline scenario: ï‚ For waste management purposes, the Abidjan Autonomous District has been divided into three sectors (Sector 1 [Abobo, Anyama, Bingerville, Cocody, the Plateau]; Sector 2 [Koumassi, Marcory, Port-Bouet, Treichville]; Sector 3 [Adjamé, Attécoubé, Yopougon and Songon])\. Approximately 1,510,247 tons of waste was sent to the Kossihouen landfill in 2019\. ï‚ Waste from the cities of Grand-Bassam, Dabou, and Sikensi is deposited in open dumps\. ï‚ The existing landfill (Kossihouen) does not operate as a sanitary landfill (no methane capture/no waste recovery facility) at present\. This situation was assumed to be constant throughout the analysis\. ï‚ The composition of the waste, described in table 3\.1, was used for the different localities\. Table 3\.1\. Waste Composition in Côte d’Ivoire Components Abidjan District (%) Other Municipalities (%) Organic 61\.45 64\.45 Vert 5\.00 5\.00 Plastic 6\.99 5\.49 Papers 6\.66 5\.16 Textiles 2\.65 2\.15 Metals 1\.03 0\.53 Glass 0\.71 0\.21 Inert materials 15\.51 17\.01 Total 100\.00 100\.00 Source : Directorate General of Sanitation (Direction générale de la Salubrité)\. Project Scenario 7\. The project foresees the implementation of a new sanitary landfill site that complies with standards and good practices for landfill treatment \. The landfill will be composed of a sorting module, a Page 73 of 74 The World Bank Urban Resilience and Solid Waste Management Project (P168308) composting module, waste disposal cells and a methane recovery module, and a composting module\. The inputs and assumptions used are as follows: ï‚ Waste from Sector 1 in Abidjan, as well as from Grand-Bassam, Dabou, and Sikensi, will be transported to the new sanitary landfill\. Approximately 657,588 tons of waste will be treated and disposed of at the new landfill\. ï‚ Calculation assumptions: o Through the activities of Component 3 of the project, an IT system will be put in place to optimize the itineraries and hence the fuel consumption of the mobile equipment needed for the collection and transport of waste\. To be conservative, it has been assumed that this system will result in a 10 percent optimization in fuel consumption\. o Due to the sorting that will take place at the entry of the landfill, the portion of plastics will no longer be landfilled but transferred to the recycling module\. o About 10 percent of the organic material (including green waste) will be transferred to the composting module\. o Considering the potential leaks and probable imperfections of the equipment, it was assumed that about 90 percent of the methane can be captured and controlled, with a minimum of 20 percent, so that it will not come in contact with the atmosphere\. Results Table 3\.2\. GHG Emissions Analysis Results Economic lifetime (years) 15 Gross emissions over economic lifetime (tCO 2e) 42,223,632 Net emissions over economic lifetime (tCO2e) 6,993,304 Average annual emissions (tCO2e)a 2,354,689 Note: a\. Average annual emissions of the project are reduced by 16 percent compared to the average annual emissions in the ‘business as usual’ scenario (gross emissions over economic lifetime divided by 15 years)\. Page 74 of 74

APPROVAL

P163525

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APPROVAL

P122990

 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: PIDA437 Public Disclosure Copy Project Name Congo: Transparency & Governance Repeat Project (P122990) Region AFRICA Country Congo, Republic of Sector(s) Central government administration (60%), General public administration sector (40%) Lending Instrument Specific Investment Loan Project ID P122990 Borrower(s) Government of the Republic of Congo Implementing Agency PRCTG Ministry of Finances Environmental Category C-Not Required Date PID Prepared 09-May-2012 Estimated Date of Appraisal Completion 20-Dec-2011 Estimated Date of Board Approval 28-Feb-2012 Decision I\. Project Context Country Context The Republic of Congo remains at the crossroads between what prevailed prior to the HIPC related reforms in the form of a largely unaccountable state where private interest outweighed public interest, to becoming a more accountable and transparent state where decisions are taken to meet shared development goals\. Many of the reforms initiated over the last 3 years are becoming irreversible in the sense that their positive impact has been demonstrated (lower cost of investment projects, higher relevance of public investments and the positive impact of oversight and accountability institutions)\. However, in order to retain this positive trajectory, significant further steps still need to be taken, in particular in reforming the PFM and PIM systems\. Providing technical advice on these reforms, as well as leveraging the domestic resources required to finance their implementation are critical contributions at this point in time\. The TGCBP project has shown its value as a vehicle for providing such support, but the project ended in June 2011 and cannot be further Public Disclosure Copy extended\. The design of a follow up or ‘repeater’ project is therefore a critical contribution to the reform process\. The new project will finance continued implementation of reforms to the PFM system, in particular the full implementation of the Schema Directeur, as well as serving as a platform for debate on those reform areas highlighted above where a consensus on the way forward has not yet been achieved II\. Sectoral and Institutional Context The objective to which the Transparency and Governance Capacity Building Project will contribute is to strengthen the capacity of targeted public sector ministries, agencies and accountability structures for improved management of human and financial resources\. The proposed KPIs for the PDO are the following: 1\. Deviation between actual and budgeted expenditure by targeted ministries; 2\. Ghost workers (as determined by payroll audits) removed from payroll; 3\. Public contracts > FCAF 250 million awarded on competitive basis; 4\. Yearly publish reports for Supreme Audit Authority and the State General Inspectorate\. III\. Project Development Objectives To strengthen the capacity of targeted public sector ministries, agencies and accountability structures for improved management of human and financial resources\. Project Beneficiaries Direct Project Beneficiaries will include the Ministries of Finance, Planning, Public Service, Health, PME (Small and Medium Scale Enterprises), Trade, Agriculture Transport, Education, and Energy, as well as the General Directorate for Public Works, (DGGT), the Regulatory Authority for Public Tenders (ARMP), General Directorate for Public Contracts (GGCMP), Parliament, Supreme Audit Authority, the State Inspector General, Independent Governance Observatory, Anti-Corruption Commission, Media and selected NGOs\. Indirect Project beneficiaries will include the population who can expect to see improved performance in public service delivery\. PDO Level Results Indicators Progress towards the achievement of the Project development objectives will be measured by the following indicators:  1\. Deviation between actual and budgeted expenditure by targeted ministries; 2\. Ghost workers (as determined by payroll audits) removed from payroll; 3\. Public contracts > FCAF 250 million awarded on competitive basis; 4\. Yearly publish reports for Supreme Audit Authority and the State General Inspectorate\. The project has three components that are equally funded by IDA and the Republic of Congo: Public Disclosure Copy • Component 1\. Increased Capacity of Targeted Ministries to Manage Financial and Human Resources (US$ 19, 8 million, of which IDA: US$ 3\.76 million, Gov: US$ 16\.04 million): The objective of this component is to provide support to further increase transparency and accountability in financial operations through technical assistance, provision of equipment and training in budget and human resources management, and procurement\. It also includes technical support to extend the Rapid Results approach in selected ministries\. • Component 2\. Strengthened Capacity to Ensure Public Sector Accountability and Transparency (US$ 3\.5 million of which IDA: US$ 0\.67 million, Gov: US$ 2\.83 million): The objective of this component is to support the Independent Governance Observatory, the Governmental Anti-Corruption Commission, the Economic and Financial Commission of Parliament, the Supreme Audit Institution, the State General Inspectorate, Media and selected NGOs by providing technical assistance and training to enhance their capacity to monitor governance and anti- corruption measures\. • Component 3\. Monitoring and Evaluation system (US$ 3\.0 million of which IDA: US$ 0\.57 million, Gov: US$ 2\.43 million): The objective of this component is to ensure the effective management and coordination of project implementation\. IV\. Project Description Component Name Component 1: Increased Capacity of Targeted Ministries to Manage Public Finances and Human Resources Component 2: Strengthened Capacity of Accountability Structures Component 3: Monitoring and Evaluation system V\. Financing (in USD Million) For Loans/Credits/Others Amount BORROWER/RECIPIENT 21\.30 International Development Association (IDA) 5\.00 Total 26\.30 VI\. Implementation The proposed project will finance both the continued implementation of reforms to the PFM system, in particular full implementation of the computerized budget management system, as well as serve as a platform for debate on those reforms highlighted above\. Public Disclosure Copy Based on close consultations with the Government, the project will have three components: (i) Increased Capacity of Targeted Ministries toManage Public Finance and Human Resources (US$ 19\.8 million); (ii) Strengthened Capacity of Accountability Structures (US$ 3\.5 million); and (iii) Enhanced Monitoring and Evaluation system (US$ 3\.0 million)\. Component 1: Increased Capacity of Targeted Ministries to Manage Public Finances and Human Resources (US$ 19\.8 million) Discussions held in the context of the preparation of the project highlighted three main issues: • The HRM system currently in place does not provide government a good overview of skills and capacity available to it, which prevents effective deployment of staff\. The ‘fichier unique function publique-solde’, which was planned to be completed under the previous Governance project, is not yet fully operational, and the elements that remain to install include the career management system\. Completing this work is therefore urgent\. • Management systems and practices in line ministries do not allow for the implementation of results based management approaches, which in turn are critical to ensuring effective planning and management and investment projects • The effective implementation of the reform programs initiated by Government require a rapid increase in skills in critical professions, in particular in budget management, IT systems, procurement and project management\. However, the public service legal and management framework in its current form does not provide the mechanisms permitting government to recruit and develop capacity in a focused and effective manner\. The project will provide support to continue PFM reforms, to implement the new Procurement Code, to improve HR management, and to introduce Results Based Management approaches\. (a) Sub Component 1: Continuing PFM reforms (US$ 16\.7 million) Activities to be financed under this sub-component are: • Completing implementation of the computerized budget management system (US$ 14\.2 million)â€?\. The new Project will support the operationalization of the Recipient’s computerized budget management system through the: (i) acquisition and installation of required software; (ii) connection of its customs and tax authorities and department-level finance units of its ministries to said system; and (iii) provision of training to the personnel responsible for utilizing said system\. • Supporting critical elements of the implementation of the revised Public Investment Action Plan (US$ 1\.5 Million) and MTEF (US$ 1\.0 Million)\. The Project will continue strengthening of the Recipient’s public investment management through the: (i) design within the key planning and finance directorates of the Recipient’s ministries responsible, respectively, for finance, planning, transport, trade, agriculture and energy, of information systems and databases and manuals needed for the effective identification and selection, monitoring and evaluation of their investment projects and planning of the recurrent costs thereof; (ii) provision of training in budget planning for relevant personnel of the Recipient  in order to facilitate progressive decentralization of public expenditure management; (iii) updating of strategies for the education, health, agriculture and energy sectors; and (iv) updating of macro-economic data for all sectors in order to prepare a suitable medium term expenditure framework\. The planned work under this component has benefited from the 2010 IMF AFRITAC study on the public expenditure management system, and will help address key recommendations contained in this study\. Public Disclosure Copy Sub-component 2: Support of the implementation of the new procurement law (US$ 1\.3 million) The new Procurement code was adopted in 2009 and the TGCB Project supported its design and the establishment of the institutions charged with the implementation of the Code\. While the new code is being implemented, capacity constraints related to its application remain and need to be addressed\. This sub-component will finance the following activities: • Provision of procurement training and technical assistance to relevant personnel of the Recipient (US$ 1 million): This activity is critical to improve the ownership and implementation of the new procurement system\. Training will be supported by the Project to familiarize stakeholders with the new procurement system\. • Support the development and the operationalization of a ‘Hotline’ to handle procurement complaints (US$ 0\.3 million)\. Sub-component 3: Enhanced payroll and personnel management capacity (US$ 1\.0 Million) This activity aims to address identified deficiencies in the public service management system, including the existence of a high numbers of ghost workers and thus the ineffective use of wage bill resources\. It responds to the identified need to strengthen HRM and payroll management processes as noted in the AFRITAC report\. Assistance provided will build on the ‘automated payroll system’ which was established under the previous TGCB project\. While installation of an integrated payroll and HRM system was largely completed under the previous project, some of the accompanying activities, in particular installation of installed software to permit effective career management and HR records keeping and the training of staff at the Ministry of Public Service, remain to be completed\. Work will focus on: • Completing the civil service master file system and related training (US$ 500,000); • Training of staff on using new instruments (US$ 500,000)\. Sub-component 4: Extending RBM Approach to address budget and program implementation problems: (USD 0\.8 million) A pilot approach to building Results Based Management practices in the Congolese administration was conducted under the previous Governance project, focusing on the Ministry of Civil Service\. The pilot approach was based on the Rapid Results methodology\. The initial evaluation of results conducted in June 2011 showed the strong potential of this approach as teams were able to address the concrete issues identified within set timeframes\. Considering the political commitment at the highest level to introducing results based management practices in the Republic of Congo, and the experience gained through the pilot, it was decided to scale up this work in the next phase of implementing governance reforms and to extend it to a further six ministries (Planning, Finance, Health, Transport, Energy, Trade, Civil Service, and SME)\. It was also decided that the issues to be addressed using RRA, would be those that critically affect their ability to execute their budgets and investment projects under their responsibility (Activity 1)\. In a second phase, the experience gained during the Rapid Results Initiative pilots would be used to define and roll out a performance Public Disclosure Copy management framework, including the development of an M&E framework linking at all levels within the ministry concerned, performance targets to outputs to be delivered under the ministry’s budget, and linking them to performance targets for units and the design of a capacity building program, and provision of related training\. (Activity 2)\. Component 2: Strengthened Capacity of Accountability Structures ($3\.5 million) This component has two sub-components: Sub-component 2\.1: Supporting the Independent Observatory on Governance and the Anti-Corruption Commission US$ 1\.5 million) The project will provide technical assistance and training to enhance the capacity of the Independent Observatory on Governance and the Government Anti-Corruption Commission to monitor governance and anti-corruption measures\. Technical assistance will be focused on the two following areas: Budget and Procurement\. A training program will be prepared\. Further investment in capacity development is required to ensure both institutions fully play their role in the accountability system\. The Independent Observatory on Governance is an independent structure created in 2007 to monitor and evaluate progress made by the Government in the implementation of anti-corruption measures\. The Anti-Corruption Commission, created in 2004 and restructured in 2007, is responsible for implementation of the Government Anti-corruption policy\. Both these structures are funded by the government\. The previous Project provided capacity building support to both structures, and continued support is required to enhance their internal governance, transparency and effectiveness\. Sub-component 2\.2: Demand for Good Governance (US$ 2, 0 million) The Project will also provide technical assistance and training to reinforce the capacity of selected national NGOs to monitor and evaluate implementation of key public reforms\. The capacity building activities to be financed under this sub-component will allow the NGOs to: - Monitor the governance reforms underway and inform the population of the issues regarding public finance, procurement and other reforms; - Gather feedback from the population concerning their experience and level of satisfaction regarding the quality of public services, how to implement the reforms and how to improve national development strategies\. - Monitor and analyze implementation of the national budget and how to advocate with the Parliament to ensure the budget reflects local needs and priorities\. - Collaborate with the existing anti-corruption structures to establish an effective coalition to pursue transparency, accountability and  integrity in public administration\. The national NGOs and the media will be selected based on objective criteria and will prepare action plans\. In addition to technical assistance and training, the Project will support them in disseminating the results of their analysis and monitoring of their activities\. As the Bank has much less leverage to pressure the Government to continue implementing reforms, such support will be extended to public accountability structures, such as Economic and Finance Committee in Parliament, the Supreme Audit Authority, and the State Inspector General\. Selected NGOs and media will, as a condition of receiving the TA and training, be required to (a) prepare proposals for the TA they wish to receive and an action plan Public Disclosure Copy for applying the TA they receive to specific activities designed to enhance the monitoring and evaluation of public finances and services and dissemination of the results of the monitoring and evaluation; and (b) enter into agreements with the Recipient undertaking to carry out their action plans\. Component 3: Monitoring and Evaluation system (US$ 3\.0 million) This component will support the government of Congo in the development and institutionalization of monitoring and evaluation functions and systems at national level and targeted sectors\. Congo has no results-based M&E functions built-in as part of the duties and responsibilities of the public administration\. Production, management and user of performance information in government decision-making and accountability processes are very week and there is a lack of sufficient, timely and reliable information to monitor budget planning implementation of programs and accountability processes\. More specially, the project will support the following activities: • Design and implementation of a national monitoring and evaluation system: The project will finance (i) the development of a Government evaluation strategy with the necessary policy guidelines for implementation; (ii) preparation of arrays of indicators for economic and finance programs; (iii) design and implementation of an evaluation agenda with the Government ministries\. The Ministry of Planning will play a key role as it will also coordinate the development of a M&E system for the PRSP second generation\. • Implementation support to the Project Coordination Unit including the Project Coordinator, a Finance Manager, an accountant, a finance officer, a procurement specialist, internal auditor, and a monitoring & evaluation (M&E) specialist\. The project will also provide resources for training in relevant areas for staff of relevant Ministries, as well as resources to recruit consultants with specific expertise as needed\. The World Bank’s contribution to the proposed operation will be a small IDA amount (US$ 5 million) with US$ 21,3 million from the Government to move the agenda reform in PFM, Public Procurement and Accountability\. VII\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 ✖ Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Public Disclosure Copy Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ VIII\.Contact point World Bank Contact: Jean Mabi Mulumba Title: Senior Public Sector Specialist Tel: 5377+3032 Email: jmulumba@worldbank\.org Borrower/Client/Recipient Name: Government of the Republic of Congo Contact: Title: Tel: Email: Implementing Agencies Name: PRCTG Ministry of Finances Contact: Marie Alphonse Itoua Title: Coordinator  Tel: 002426355322 Email: IX\. For more information contact: The InfoShop The World Bank Public Disclosure Copy 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Public Disclosure Copy

APPROVAL

P159085

PROJECT INFORMATION DOCUMENT (PID) IDENTIFICATION/CONCEPT STAGE Report No\.: PIDC54813 Public Disclosure Copy Project Name Public Procurement Improvement Project Region SOUTH ASIA Country Nepal Sector(s) General public administration sector (100%) Theme(s) Public expenditure, financial management and procurement (50%), Managing for development results (50%) Lending Instrument IPF Project ID P159085 Borrower Name Government of Nepal Implementing Agency Public Procurement Monitoring Office, Public Procurement Monitoring Office Environment Category C - Not Required Date PID Prepared 30-Apr-2016 Estimated Date of Approval 31-May-2016 Initiation Note Review The review did authorize the preparation to continue Decision I\. Introduction and Context Country Context Public Disclosure Copy 1\. Nepal is a land-locked country, with a population of 28\.1 million and a per capita income of US$ 717 (as of 2014)\. About 23\.8 percent of the Nepali population lives on less than US$ 1\.25 per day, and the current annual rate of poverty reduction is 2\.5 percent \. Despite a decade-long armed insurgency and protracted political transition, it has made good progress in poverty reduction and human development\. Nepal halved extreme poverty in seven years from 53 percent in 2003/2004 to 23\.8 percent in 2010/2011, and thus attained the first Millennium Development Goal ahead of time\. However, as per the post-disaster needs assessment preliminary report, population of poor is estimated to rise between 2\.5 and 3\.5 percentage points due to devastating earthquake of April 25, 2015\. 2\. Though population living below poverty line has declined, the disparity between rich and poor still remains high\. The Gini Coefficient based on consumption expenditure reached 0\.353 in urban area, 0\.311 in rural area, and 0\.328 in Nepal overall\. The Gap in the indices between geographical regions and ethnic groups is much wider\. In addition, Nepal has achieved gender parity in education and reductions in infant and maternal mortality\. 3\. Resulting the deadlock of the First Constituent Assembly in delivering new Constitution, elections were held on November 19, 2013 to elect Second Constituent Assembly (CA)\. After the extensive deliberation and consultation, the Parliament has recently promulgated the Constitution with several important constitutional features including federal structure of the governance, role and scope of the oversight institutions, political parties and the Judiciary incorporated\. 4\. Remarkably, Nepal economy grew steadily even during the height of conflict and economic Page 1 of 8  management remained prudent\. The average growth during 2010?14 was 4\.22% with lowest 3\.4% recorded in 2012\. The economic growth for the Fiscal Year 2014 was 5\.5%\. According the Economic Survey of 2015, the current fiscal year growth is estimated to stagnate at 3\.0 percent\. Public Disclosure Copy This is basically owing to unfavorable climate for agriculture sector and adverse impact on non- agriculture sector activities due to earthquake of April 25, 2015 are attributable for such low economic growth rate in current fiscal year\. Sectoral and Institutional Context 5\. There is a growing recognition within the country that enhancing performance and improving governance with accountability in spending public resources is a prerequisite to further expediting poverty reduction, and improving the investment climate with accelerated private sector led growth\. These are priority objectives of the Government?s strategy as laid out in the Thirteenth Plan (2013-2016)\. With a multi-tier governance structure, the scope and the challenges for sound, efficient public procurement is bound to increase\. The recent disaster (earthquake of 25th April 2015), although, has been a great loss for the country, has also provided opportunities for the government to look afresh in the development agenda ensuring better accountability and good governance\. The Government is committed to initiate Second Phase of Public Financial Management (PFM) Reform Action for which public procurement is considered to be a critical area for improvement to demonstrate effectiveness in service delivery\. 6\. The journey of public procurement reform started as early as in 2002 with the Country Procurement Assessment Report (CPAR) using the Bank?s Institutional Development Fund (IDF) grant\. Based on the recommendations of the CPAR, the GoN initiated the process of implementing reforms\. Initially the Financial Comptroller General Office took lead in framing the Public Procurement Act (PPA) which was passed in the Parliament in 2007\. Within the same year, the PPA was supplemented with the Public Procurement Regulations, followed by the establishment of the Public Procurement Monitoring Office (PPMO) under the Office of the Prime Minister\. PPMO is the nodal agency to regulate and monitor public procurement in Nepal\. Subsequently, ADB Public Disclosure Copy provided three Technical Assistances (TA) to PPMO during 2008-2010 focusing mainly on the following areas: standard tender documents for goods/ works/ consultants? services, capacity development and training activities through National Administrative Staff College (NASC), and initiation of e-procurement\. In 2011, the Bank provided an IDF grant to develop a long term strategy and standard operating process of PPMO\. Since 2012, through TAs, ADB has been continuing its engagement with PPMO in successive phases by developing and operationalizing the e-GP system\. JICA also contributed in carrying out a capacity assessment of PPMO in 2013\. Over the years, though several assistances were provided in reforming the system, most of them were in a piece-meal basis to cater the immediate demand, without laying an appropriate strategic framework\. The major achievements and challenges are: uniform law governing all public procurement though its enforcement and compliance remains challenging; establishment of PPMO as the nodal agency, however, its capacity is largely constraint due to inadequate skilled professionals and frequent turn- over of key officials; development of 79 national trainers and provided major procurement training of three weeks to 100 officials; operationalizing the e-GP platform in five key sector agencies with its initial phase\. 7\. Concurrently with the procurement reform, a major PFM program has been continuing under a Multi-Donor Trust Fund (MDTF) for about six years with major support to the Office of Auditor General (OAG) and Financial Controller General?s Office (FCGO)\. The on-line submission of program and budget and Treasury Single Account (TSA) system has been in operation since last three years\. The budget process is partially integrated with the procurement Page 2 of 8  planning\. During preparation of the budget, it is mandatory to submit procurement plan\. However, such a pan may need subsequent revision depending on the actual allocation of budget\. 8\. In Nepal, the budget process is partially integrated with the procurement planning\. During Public Disclosure Copy preparation of the budget, it is mandatory to submit procurement plan\. Major responsibility for the management of the public finance in Nepal rests by law with the Parliament, Ministry of Finance, the National Planning Commission (NPC), the Public Procurement Monitoring Office (PPMO) and the Financial Comptroller General Office\. Procurement of goods, works and services in Nepal is carried out in accordance with the provisions of the Public Procurement Act of 2007 (PPA) and accompanying regulations\. Procurement operations are decentralized to procuring entities all over the country\. Nepal?s annual procurement volume is over US$1 billion comprising of significant proportion from external sources , and it is increasing fast with the economic growth\. 9\. The PPMO under the Office Prime Minister and the Council of Ministers (OPMCM), as per the PPA, has the mandate to support procuring entities, monitoring and oversight\. PPMO functions are to prepare a public procurement policy and recommend implementation measures to the Government\. The office also coordinates procurement, including debarment proceedings, and supports capacity building through professional development plans and training for public officials and bidders\. It also plans and coordinates technical assistance on public procurement and functions as the secretariat of the Procurement Review Committee\. The PPMO reports to the Government annually\. It also monitors public procurement through site visits and documents\. Other functions include: a) developing indicators for continuous monitoring of the public procurement proceedings; b) providing the support of electronic Government Procurement (e-GP) platform for public procurement entities to facilitate and use e-procurement; c) advising on public procurement; d) establishing and maintaining websites dedicated to public procurement management; e) developing and issuing standard bidding documents for civil works, goods, and consultancy; f) issuing manuals, directives, instructions, and technical notes for public procurement\. 10\. There are numerous challenges facing public procurement in Nepal, including low capacity of the PPMO and most procuring entities, and a weak private sector, aggravated by law enforcement issues\. The function of public procurement at the local levels (e\.g\., districts), where Public Disclosure Copy capacity to implement procurement is almost non-existent, needs more attention\. The review of Nepal Public Procurement Strategic Framework I (NPPSF I) demonstrated that progress over the three year period is mixed but much below expectations\. Important initiatives like online bidding and the development of e-government procurement system has taken place but the overall achievements fell short of the targets and expectations of the stakeholders\. Public procurement environment continues to suffer due to weak compliance of PPA/PPR, and the low capacity of PPMO, procurement entities and the private sector\. Procurement performance continues to be affected by process variances due to lack of standardized documents, guidelines and technical notes\. PPMO has not been able to play a lead role in the enforcement of PPA/PPR in the face of deteriorating political economy and rising fiduciary risk associated with public procurement (PP environment has been deteriorating)\. The shortfalls in the achievement are mainly due to lack of resources and expertise with PPMO\. PPMO did not receive national priority and organized donor support commensurate with its importance\. Programs and measures have been implemented on a piecemeal basis, and not in an organized and sustained manner largely due to the inadequacy of required resources\. The recently concluded Public Expenditures and Financial Accountability (PEFA) assessment clearly establishes the shortcomings in public procurement in demonstrating the transparency, competition and complaints mechanisms in procurement practices\. These include: a) procurement plan not published; b) limited data availability on public procurement to determine its efficiency & transparency (e\.g\. the share of direct contracting); c) rampant practice of splitting the contracts to bring them under the threshold to avoid competitive tendering; d) low credibility of Page 3 of 8  procurement complaint mechanism (only 22 complaints registered in 2013)\. 11\. The Government of Nepal (GON), supported by different development partner active in the country, is implementing several initiatives to strengthen the capacity of the PPMO, procuring Public Disclosure Copy entities, and oversight bodies, and to modernize the system through the introduction of electronic- Government Procurement (e-GP)\. However, it appears that the resources needed to successfully complete the ongoing and additional initiatives for improving different aspects of public procurement are limited\. Furthermore, the GON has realized that in order to solve the current public procurement capacity and other issues, it needs to have a more focused and comprehensive approach\. Prepared through wider consultation with all stakeholders (including procurement entities, private sector/bidding communities and development partners), the Nepal Public Procurement Strategic Framework (NPPSF II) 2013-2016 has listed three key areas of intervention/ actions to improve the performance of public procurement\. They are a) Standardization of Public Procurement Process and Dissemination; b) Capacity Enhancement of Public Procurement System; and c) Operationalization and Mainstreaming of e-GP\. The capacity constraints of procurement entities have been largely responsible for executing timely procurement and timely award of contract\. The transition of traditional procurement to e-GP represents an important phase in procurement reform process in Nepal\. A review of the implementation progress reveals that the success of e-GP will greatly depend on (i) the readiness and acceptability of the bidding communities, Procuring Entities (PEs) and oversight agencies, (ii) availability of support including logistics to switch over, and (iii) uninterrupted IT services including round the clock access to the central server of e-GP\. These are the areas where PPMO, in collaboration with the key sector agencies, has to invest major efforts in terms of training, technical backstopping and infrastructure support\. With these initiatives, it is imperative that the performance of the public procurement is measured and disseminated to the stakeholders with a set of key measurable performance indicators and increasing accessibility to the data on public procurement through e-GP\. 12\. According to the annual report of the Auditor General, 5 key sectors: roads, irrigation, urban development, defense and health are the high spending agencies constituting 75\.86% of the total Capital Expenditures \. The annual expenditures of two other agencies, Nepal Electricity Public Disclosure Copy Authority (NEA) and Nepal Telecom, are reported to be high\. Relationship to CAS/CPS/CPF 13\. The proposed project supports the implementation of the GON?s strategy to make public procurement an effective tool of public expenditure\. It is also consistent with the objectives of the Country Partnership Strategy (CPS) for Nepal for FY 2014-2018, dated May 1, 2014\. The section on ?Foundations and Cross-Cutting Dimensions? under Pillar II of the CPS, says that the Bank remains committed to continue its dialogue on public procurement reform in coordination with other development partners, with the aim of harmonizing public procurement practices and developing the overall procurement capacity at regulatory, implementation, and at service provider (private sector) levels\. The proposed project is fully consistent with this commitment of the Bank\. II\. Project Development Objective(s) Proposed Development Objective(s) The project development objective (PDO) is to improve project implementation and service delivery to the citizens progressively with enhanced public procurement performance, largely focusing on the five key sector agencies\. Key Results Page 4 of 8  ? Enhanced public integrity and governance structure in PPMO and key sector agencies; ? Improved monitoring of the implementation of PPA; ? Professionalized procurement capacity with institutionalization and sustainability; Public Disclosure Copy ? Improved procurement performance of the key sector agencies; and ? Enhanced public procurement accountability with civic engagement and stakeholders\. III\. Preliminary Description Concept Description The proposed project is a part of the public procurement improvement initiative planned for an intervention of about five years\. Nevertheless, recognizing the availability of funds from the Multi- Donor Trust Fund (MDTF), at this stage, only part of the intervention with a duration of about 30 months is being processed\. Addressing the priority issues of PPMO and five key sector agencies (KSAs7), the project will concentrate on three major areas: (i) public procurement governance and oversight; (ii) procurement capacity development and institutionalization; and (iii) procurement performance monitoring and open contracting with e-GP platform\. In consultation with the PPMO, these KSAs have been chosen on the basis of their large share of annual capital expenditures and the numbers of contract these agencies let out in a year\. In due course of time, with the availability of additional fund from the MDTF, the remaining activities under the above three components will be further undertaken for other sector agencies as well\. The details of components are as follows: Component 1 ? Public Procurement Governance and Oversight: This component would aim to improve governance and accountability of the public procurement system with necessary oversights\. This would help reinforce the policy reform processes and practices of PPMO including its own strengthening so that it can more effectively fulfill the mandated oversight functions\. Key areas would cover PPMO; public integrity; policy reform actions; grievance redress mechanism; procurement audits; information disclosure; right to information functions; etc\. Major sub- Public Disclosure Copy components are described below\. i\. Strengthening PPMO: This subcomponent would strengthen PPMO\. In order to play its role more effectively, PPMO needs substantial enhancement in its structure and operational model including its set up, type of staffing, capacity, skills mix, and inputs of consultants as and when necessary\. This will be done in a way to be compatible with the future needs taking cognizance of the rapidly changing technology in the sector, with specific reference to advanced procurement technologies, like e-GP\. ii\. Reinforcing public integrity and governance: The subcomponent would strengthen public integrity, governance, and accountability of the public procurement system, and would be achieved by implementing a number of accountability actions\. Key areas of activities would include: implementing grievance redress mechanism; post procurement audits by Auditor General?s Office; public disclosure of invitation of bids and bidding outcomes with brief reasons for the rejection of bids; disclosure of procurement processes and plans; validity of contract data; red flags in procurement; and implementing demand side of good governance including civic engagement, possible third party monitoring, and citizen oversight\. iii\. Advancing policy reforms: This would help update the policy reform actions with secondary legislations\. Activities include: updating the secondary legislations; standardization of procurement Page 5 of 8  procedures; updating standard bidding documents including preparation of remaining model documents; preparation of bid evaluation guidelines, contract management manual and technical notes including specific to sec toral needs\. Public Disclosure Copy Component 2 ? Procurement Capacity Development and Institutionalization: The component would help the above five Key Sector Agencies- KSA and six Other Sector Agencies- OSA to improve organizational capacity with a view to enhance their performance in conducting and managing procurement\. Attempts would include progressive institutionalization with greater sustainability of the procurement training system\. While the component is dedicated to procurement management and capacity development, it will have direct linkages with Component 3 in specific reference to the performance measurement resulting out of the activities of Component 2\. The subcomponents are described in the following paragraphs: i\. Procurement management improvement: This subcomponent would help improve procurement management at the key sectoral agencies\. Major areas of activities would include: operationalization of dedicated and functional procurement units; strengthening procurement units with qualified staff and equipment; reinforcing agencies? internal audit of procurement; exposure to innovative and proven practices; and twinning with better functioning institutions in other countries of the region\. ii\. Capacity building and institutionalization: This subcomponent would aim to enhance procurement capacity of the key sectors with greater institutionalization\. Workforce Study in Nepal has identified over 47,000 procuring entities (cost centers) under about 350 agencies\. It is estimated that the selected five KSA would be having over 500 cost centers excluding Village Councils\. The total number of procurement entities under six OSA is estimated to be around 350 (excluding schools, colleges etc\.)\. The major activities include capacity enhancing of key sector agencies and other sector agencies by designing and implementing massive training program of various types of targeted long and short training courses to cover audiences (policy level/entry civil servants, procurement officers, estimators, auditors and accountants, bidding community, e- Public Disclosure Copy procurement learning, etc\.)\. A network with PPMO, the National Administrative Staff College (NASC) and its affiliates in the regions, the Ministry of Local Development and its Local Development Training Academy will be developed to support gradual operationalization of e- learning\. Under the component a testing and certification/accreditation program would also be established and made operational\. iii\. Citizen engagement and behavioral change communication: The subcomponent would deal with possible citizen engagement in the monitoring of public procurement including behavioral change among the stakeholders that participate in public procurement services (for example, procurement officials, bidding community, beneficiaries, etc\.)\. Specific attention will be provided in the area of gender sensitivity and the formation of civic engagement forums\. Activities would include: formation of citizen engagement forum, developing communication strategy; awareness program for agencies/beneficiaries; education program; advocacy campaign at the grass root decentralized levels; social media campaign, engagement of beneficiary groups; and government- contractors? forum\. Component 3 ? Performance Monitoring and Open Contracting with e-GP Platform: This component would help monitoring and evaluation of performance of the public procurement system, in particular reference to the five KSA\. The e-GP system is already there in the PPMO\. Also, the detailed requirements of open contracting has been studied\. In the proposed operation, the performance measurement and open contracting modules will be developed and integrated within Page 6 of 8  the e-GP framework\. The focus would be on the measurement of performance by developing a set of indicators with its data collection procedures and analysis including open contracting, specifically using the e-GP platform to ensure better integrity of data with efficient use of time at the working Public Disclosure Copy levels of the agencies\. Subcomponents are described below\. i\. Developing and implementing procurement performance measurement system: This subcomponent would help in developing a set of key performance indicators to measure efficiency, transparency, effectiveness, and value for money aspects of the public procurement system in general, and five KSA in particular\. Once the indicators are developed, a specific module would be introduced with necessary features within the existing e-GP system of PPMO, with direct connectivity to the key sectoral agencies who actually implement procurement\. It would be an on- line automated system, without requiring duplication of data entry as procurement events occur; the system would automatically capture those data\. Also, PPMO would have a dedicated wing for research and analysis of those indicators, and the performance reports at national as well as agency level would be published on the website\. ii\. Implementing open contracting: The aim is to make the procurement data more open, accessible and useful to policy makers, development partners, civil society, and private sector for development effectiveness, using principles of open contracting\. Key activities would include: creating/expanding the public database with database already on e-GP sites; standardizing contract data with key features; incorporating visualization features including mechanism to receive and respond to public comments/complaints; facilitating dialogue between PPMO and key implementing agencies; capacity building to increase coverage of procurement information and using contracting data for policy making; creating tool to track individual department?s publication of contracting data; leveraging non-state actors to monitor public contracting and contractor performance at the local level\. IV\. Safeguard Policies that Might Apply Public Disclosure Copy Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment OP/BP 4\.01 ✖ Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ V\. Financing (in USD Million) Total Project Cost: 4\.8 Total Bank Financing: 0 Financing Gap: 0 Financing Source Amount Borrower 0\.8 Page 7 of 8  Nepal Public Financial Mgmt Support 4 Public Disclosure Copy VI\. Contact point World Bank Contact: Zafrul Islam Title: Lead Procurement Specialist Tel: 5764+4304 Email: zislam@worldbank\.org Borrower/Client/Recipient Name: Government of Nepal Contact: Baikuntha Aryal Title: Joint Secretary Tel: 977-1-4211360 Email: baryal@mof\.gov\.np Implementing Agencies Name: Public Procurement Monitoring Office Contact: Mr\. Ramesh Sharma Title: Secretary Tel: 977-1-4030518 Email: secretary@ppmo\.gov\.np Name: Public Procurement Monitoring Office Contact: Mr\. Naresh Chapagain Title: Joint Secretary Tel: 977-1-4030518 Email: info@ppmo\.gov\.np VII\. For more information contact: Public Disclosure Copy The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Page 8 of 8

APPROVAL

P001623

Doamnmt of The World Bank FOR OFICLIAL USE ONLY Report No\. 13634 PROJECT COMPLETION REPORT MALAWI NATIONAL AGRICULTURAL RESEARCH PROJECT (CREDIT 1549-MAI) OCTOBER 25, 1994 Agriculture and Environment Division South Africa Department Africa Regional Office This document has a restricted distribution and may be used bv recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQUIVALENTS 1985USS 1\.0 = MK 1\.72 1986USS 1\.0 = MK 1\.86 1987USS 1\.0 = MK 2\.21 1988USS 1\.0 = MK 2\.56 1989USS 1\.0 = MK 2\.76 1990USS 1\.0 = MK 2\.73 1991USS 1\.0 = MK 2\.80 1992US$ 1\.0 = MK 3\.60 1993US$ 1\.0 = MK 4\.39 (Av\. Jan\. -Sept\. 1993) WEIGHTS AND MEASURES Metric System GOVERNMENT FISCAL YEAR April 1 - March 31 ABBREVIATIONS ADD Agricultural Development Division AGREDAT Agricultural Economics, Statistics and Data Processing Unit ARC Agricultural Research Council ART Adaptive Research Team ASP Agricultural Services Project CARO Chief Agricultural Research Officer CIMMYT Wheat and Maize Improvement Centre CTL Commodity Team Leaders DAR Department of Agricultural Research DCA Development Credit Agreement DCARO Deputy Chief Agricultural Research Officer DEVPOL Development Policy FAO/CP FAO/World Bank Cooperative Programme GOM Government of Malawi ICRISAT International Crop Research Institute for the Semi-Arid Tropics IFAD International Fund for Agricultural Development IITA International Institute for Tropical Agriculture INIBAP International Institute for Banana and Plantain Research ISNAR International Service for National Agricultural Research LLDP Lilongwe Land Development Programme MAEPS Malawi Agricultural Extension and Planning Support Project MARE Malawi Agricultural Research and Extension Project MOA Ministry of Agriculture NARP National Agricultural Research Project NRC National Research Coordinators NRDP National Rural Development Programme PCR Project Completion Report RMEA Regional Mission in Eastem Africa SACA Smallholder Agricultural Credit Administration SAR Staff Appraisal Report SFFRFM Smallholder Farmers' Fertilizer Revolving Fund of Malawi TA Technical Assistance TRFCA Tea Research Foundation of Central Africa USAID United States Agency for Intemational Development  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D\.C\. 20433 U\.S\.A\. Office of Director-General Operations Evaluation October 25, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Malawi - National Agricultural Research Project (Cr\. 1549-MAI) Attached is the Project Completion Report on Malawi National Agricultural Research Project (Cr\. 1549-MAI) prepared by the Africa Regional Office\. Part II was contributed by the Borrower and is in general agreement with Parts I and III of the Report\. The project was the first phase of a longer term effort to develop the agricultural research institutional framework and capacity to provide relevant technology to Malawi's smallholders\. The organizational structure was modified along commodity program lines; Research Master Plans and Action Plans were developed; annual review and planning procedures were improved; external evaluations made useful contributions; collaboration with international centers was enhanced; research infrastructure and facilities were improved and rationalized; and substantial training was carried out\. The project contributed to significant achievements of the research system in developing hybrid flint maize valued by smallholders, in promoting the use of high-content fertilizers, and in the biological control of the cassava mealy bug\. However, serious implementation problems were incurred, including the inability to improve terms of service for researchers, a 30 percent loss of researchers trained under the project, poor management of procurement and planning of facilities resulting in delayed and inappropriate purchases, ineffective adaptive research team activities which constrained farming system diagnostic programs, and a chronic shortage of operating funds for the system\. On balance, the project is rated as having a satisfactory outcome with a modest institutional impact\. Sustainability of the institutional achievement is uncertain, however, due to the continued budgetary constraints and the lack of a career structure which would promote the retention and encouragement of trained and experienced researchers\. The Completion Report provides a good and comprehensive record of project performance\. An individual project audit is not planned, but will likely be undertaken in conjunction with the parallel extension project (Cr\. 1626-MAI) and possibly with the ongoing Agricultural Services Project following its completion\. Attachment This document has a restricted distribution and may be used by recipients only In the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT MALAWI NATIONAL AGRICULTURAL RESEARCH PROJECT (CREDIT 1549-MAI) TABLE OF CONTENTS Page No\. PREFACE \. i EVALUATION SUMMARY \. iii PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE \. 1 1\. Project Identity \. 1 2\. Background \.1 Introduction \.1 The Agricultural Sector \.1 The Department of Agricultural Research\. 2 The Agricultural Development Policy\. 2 3\. Project Objectives and Description \. 2 4\. Project Design and Organization\. 3 5\. Project Implementation \. 3 Project Costs and Disbursement \. 10 6\. Project Results \. 10 7\. Project Sustainabilityl\.1 8\. Bank Performance \. 11 9\. Borrower's Performance \. 12 10\. Lessons Learned \. 12 11\. Project Relationship \. 14 12\. Consultancy Services \. 14 13\. Project Documentation \. 14 PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE \. 15 PART III: STATISTICAL INFORMATION \. 24 This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  Page No\. TABLES 1\. Related Bank Loans and/or Credits \. 24 2\. Credit Timetable \. \. 25 3\. Credit Disbursements \. \. 26 4\. Project Implementation \. 27 5\. Project Costs and Financing \. \. 30 6\. Project Results \. 33 7\. Status of Covenants \. 34 8\. Use of Bank Resources \. 36 ANNEXES 1\. Seasonal Credit Recovery for 1992/93 Season as on 03/12/93 \. 38 2\. Switch of Fertilizer Mix: Estimated Savings in Fertilizer Import Expenditures in 1992/93 39 3\. Civil Works \. \. 40  PROJECT COMPLETION REPORT MALAWI NATIONAL AGRICULTURAL RESEARCH PROJECT (CREDIT 1549-MAI) PREFACE This is the Project Completion Report (PCR) for the Malawi National Agricultural Research Project (NARP) for which Credit 1549-MAI in the amount of SDR 24\.3 million (US$ 23\.8 million) was approved by IDA on 19 February 1985\. The credit became effective on 19 November 1985\. Originally expected to be implemented over a five-year period the credit was actually closed, after three one-year extensions on 31 October 1993\. Actual disbursement totalled SDR 24\.0 million (US$ 32\.1 million)' or approximately 99%, in SDR terms, of the originally approved credit amount\. The last disbursement was made on March 14, 1994, and SDR 230,200 was cancelled\. Parts I and III of the PCR were prepared by the FAO/World Bank Cooperative Programme (FAO/CP) for the Agriculture and Environment Division of the Southern Africa Department (AF6AE) of the World Bank\. Part II was prepared by the Borrower\. Preparation of the PCR was started during a visit to Malawi by a team2 from FAO/CP in December 1993, and is based, inter alia, on information gathered in Malawi discussions with project staff and officials of the Department of Agricultural Research within the Ministry of Agriculture and with staff of USAID which participated in project co-financing\. The report also takes into account information and data gathered from the Staff Appraisal Report (SAR), the Development Credit Agreement (DCA), Supervision Reports, USAID Agricultural Research and Extension Project (MARE) final evaluation report, correspondence between IDA and the Borrower and internal IDA memoranda\. Excludes the revolving fund amount of SDR 67,032 (US$ 89,562) 2 Messrs\. R\. Suppa, Economist and Mission Leader; D\. Corbett, Agricultural Research Specialist (Consultant)\. i   MALAWI NATIONAL AGRICULTURAL RESEARCH PROJECT (CREDIT 1549-MA) EVALUATION SUIMMRY Objectives The project's general objectives were to provide the first phase of long-term improvements in the research capabilities of the Department of Agricultural Research (DAR), by focusing on the infrastructure and planning, management procedures, and the skill levels of its staff\. The main features of the project were: (i) the creation of an Agricultural Research Council (ARC) to advise on research priorities; (ii) the rationalization of DAR's research station network and the relocation of staff; (iii) the reorganization of DAR's research staff into multi-disciplinary commodity research teams and the introduction of a programme and budgeting system; (iv) the introduction of a technical career stream, staff evaluation system, training needs identification procedures, and the provision of training and technical assistance for DAR staff; (v) increased collaboration with International Agricultural Research Centres and Regional Research Institutes; (vi) improvement in research/ extension links; and (vii) improved economy and efficiency in ongoing research activities\. Implementation Experience T'he project was originally scheduled to be completed by 1989/90 after an implementation period of five years\. This proved to be too ambitious as actual implementation ended in 1993 after three one-year extensions of the original closing date of 31 October 1990\. The original credit agreement was amended twice in 1992, first to reallocate SDR 0\.6 million to non-salary operating expenses and the second was to enable SDR 6\.0 million to be used for smallholder agricultural credit to provide funds for a drought recovery scheme\. ARC was established by the Ministry of Agriculture (MOA) internal memorandum in 1985 with a supporting Secretariat in DAR\. Effectiveness of ARC was severely compromised as it is regarded as an internal committee, without legal standing and little status\. Progress in infrastructure consolidation and improvement was satisfactory throughout the project\. A considerable civil works program was undertaken, including the building of a new research facility at Mkondezi\. The main research library at Chitedze was provided with a new building and equipment and smaller libraries were revitalized at Bvumbwe and Lunyangwa\. Data processing capacity was improved in the Agricultural Economics, Statistics and Data Processing Unit\. Relocation, which affected principally professional and some support staff, was severely impeded by the training programme, with many scientists overseas on post-graduate courses\. Procurement performance throughout the project was poor; bid document preparation was sub-standard and led to delays, with mismanagement compounding the problem\. DAR headquarters, within MOA, was reorganized, with two Deputy Chief Agricultural Research Officers (DCARO) assigned to support the Chief Agricultural Research Officer (CARO)\. While the DCARO for Research Programmes was made responsible for the planning and conduct of research programmes through National Research Coordinators and Commodity Research Team Leaders, the DCARO for Technical and Administrative Services was made responsible, through Station Administrative Officers, for all operations at research stations\. However, the organizational iii  structure developed by the project was complex and exacerbated administrative pressure on senior staff from the CARO downward\. A Programme and Budgeting system essential for managing the research was planned, but not developed\. The expatriate consultant hired to undertake the task left, for personal reasons, before the end of the contract, and the work he had done did not comply with the project requirements\. The CARO did not place high priority on a replacement, and Bank supervision missions failed to monitor the work of the consultant prior to his departure or to insist on the employment of a suitable replacement\. Enhanced staff conditions of service, to improve motivation and retain returning post- graduate trainees in the research service, were to be introduced as part of a new scientific career stream, but opposition from GOM prevented this\. GOM's opposition was because of the budget implications and the concern that a new career stream would isolate scientists from other civil service career streams\. A large training component, co-financed by USAID, led to post-graduate training and much short-term training in-country and overseas\. However, this meant that during project implementation large numbers of staff were overseas and several research programmes were impeded\. The considerable technical assistance component in the project provided four key long-term TA positions and many other shorter term positions\. Their performance was variable with few leaving fully trained and competent counterparts in post when they left\. Adaptive Research Teams (ART) composed of an economist and an agronomist were appointed to all eight Agricultural Development Divisions (ADDs) in the country to improve research/extension links, by conducting on-farm trials and identifing socioeconomic constraints affecting small farm productivity\. The ARTs did not function effectively, and contributed very little to strengthening the research-extension linkage as their links with DAR were extremely weak\. It was found difficult to retain staff, especially economists, and at the end of the project only one ADD had a full ART in place\. A few agronomic trials were conducted but the results have never been disseminated\. Overall, project design provided very little focus on Malawi's research problems\. Results In spite of the implementation problems as described above, it can be stated that the overall project performance was satisfactory, and most of the original objectives were achieved\. A Research Master Plan was prepared and now provides strategic direction, Action Plans were prepared to provide tactical guidance to scientists preparing their Annual Work Plans, and a structured and systematic procedure was instituted for annual research planning, following Annual Reviews of the previous season's work\. External evaluation of the research and its management was introduced and two Triennial Research Reviews, held in 1989 and in 1992, made valuable recommendations\. Collaboration with International Agricultural Research Institutes improved during the project\. Contract research funded some research projects at the University of Malawi\. A contract research programme on coffee was successfully completed with the Tea Research Foundation of Central Africa (TRFCA)\. DAR now has a well constructed and equipped research station network based on three regional stations (Chitedze, Bvumbwe, Lunyangwa) and a number of sub-stations\. Some sub-stations and many trial sites have been closed or handed over to other departments of MOA to reduce DAR's overheads\. A new research sub-station has been built in a hitherto unrepresented agro-ecological area\. The training programme has provided DAR with a body of well trained scientists\. The most significant result of the project has been the development of hybrid flint maize varieties valued by small farmers\. They are higher yielding than local varieties, whether fertilized or not, and, during the drought year (1991-92) produced some yield when local varieties failed\. First released in 1990, by 1992-93 they occupied about 25% of the maize area, increasing rapidly in acreage annually\. The iv  collapse of the credit system in 1993 has thwarted this processing trend, but it is anticipated that the hybrid maize area will recover and continue to increase\. On a number of important areas, as mentioned above in the Implementation discussion (i\.e\. the development of a programme and budgeting system, introduction of a scientific career stream, research/extension linkage), progress was not satisfactory\. Project Sustainability Sustainability of the activities/programmes supported by the project and the facilities provided is in doubt\. For most of the project duration, GOM was unable to provide operating costs as agreed at negotiation\. This affected both the conduct of experimental programmes and maintenance of buildings and plant\. DAR, despite strong pressure from IDA, was unable to establish a separate scientific career stream that would provide incentives to motivate and retain research scientists\. Consequently, numbers of professional staff remain about the same as before despite the large overseas graduate training programme\. Thus, the quality of the working environment is affecting staff retention\. About 30% of those trained sought employment outside the research service on their return\. The situation is particularly evident with the ARTs who have been unable to retain any of the economists whose role was regarded as crucial in the SAR\. In view of the fact that this project was the first in a long-term sequence to restructure Malawi's research capacity, the problem of project sustainability should be fully examined by the recently initiated Agricultural Services Project (ASP) under which further assistance for agricultural research in Malawi is being provided\. Lessons Learned The major lessons learned include: - Institutional reforms require a long-term commitment and should be phased, build on existing institutions where possible, and based on detailed action plans and broad consensus\. - Project scope should take into account realistic budgetary, institutional and human resources constraints; - An independent body with adequate financial autonomy is needed to coordinate research, and such a body should have the authority and influence to set research priorities; - An improved program budget system for recurrent cost funding should be developed and implemented in MOA, this should be coordinated with an ongoing review of staff levels and job description; - In order to improve the relevance of research to farmers' needs, there is a need for a promotion and rewards scheme to encourage scientists to re-orient more of their work towards on-farm research and form closer links with extension, aside from the provision of mechanisms such as ARTs and research/extension workshops etc; Field supervision of financial, technical, and management aspects of the project with IDA donor assistance is extremely important, especially the need to supervise procurement, and strong government procurement arrangements and capacity are also essential; v  More care should be taken in drawing up terms of reference, selection and supervision of technical assistants; Overseas degree training should not be emphasized, especially when incentives are weak in the public sector, in addition, future training programmes should be designed to allow fewer trainees away at one time, if research activities are not to be impeded; and - Sustainability may be improved if the new varieties of crops produced by DAR scientists could generate an income by a formal sale of appropriate material to seed or agricultural merchants under a royalty or similar agreement; The design features of the follow-up project (ASP) have taken into account all of the above lessons\. It is important that ASP implement effectively the various action plans prepared to address the key lessons from NARP\. Regarding the development of a cost-effective and sustainable research system that is geared to serving the needs of the majority of the farmers in Malawi, ASP action plans give emphasis to: - formulating and implementing research plans consistent with realistic budgetary constraints that will generate technologies responsive to farmers' needs, especially those of the resource poor (many of whom are women), and improving mechanisms to promote research-extension-farmer linkages; - improving the mechanisms to update research priorities, diversifying participation in publically funded research through the commercialization of some research activities, and improving the allocation of funding by strengthening the DAR; and * improving DAR's management systems and the motivation and accountability of its researchers\. vi  PROJECT COMPLETION REPORT MALAWI NATIONAL AGRICULTURAL RESEARCH PROJECT (CREDIT 1549-MAI) PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE 1\. Project Identity Project Name : National Agricultural Research Project Credit No\. 1549-MAI RVP Unit AF6AE (Formerly AF6AG) Country Malawi Sector Agriculture 2\. Background Introduction 2\.1 The project was identified following the 1981 National Rural Development Programme (NRDP) review which concluded that a strengthening and reorientation of agricultural research was essential for increased agricultural production\. An overview of the research system was carried out by the International Service for National Agricultural Research (SNAR)\. This was followed by preparation by the Department of Agricultural Research (DAR) of the Ministry of Agriculture (MOA) with Bank and consultant assistance, in 1982\. The project was appraised by IDA in March 1984 with USA'D participation at selected meetings\. The IDA credit was negotiated in January 1985 and the Credit Agreement, signed on May 23, 1985, became effective on November 19, 1985 (Part III, Table 2)\. The Agricultural Sector 2\.2 Agriculture is the backbone of Malawi's economy\. Up to 1990, it accounted for about 40% of GDP, and 85% of exports and employment\. Maize is by far the most important crop in terms of cultivated area, number of growers and food security\. Other major food crops include groundnuts, pulses, cassava and rice\. Exports are dominated by three crops: tobacco, tea and sugar\. Production is predominantly under rainfed conditions\. Malawi's agriculture is characterized by smallholders and estates, differentiated by regulations concerning production, marketing, pricing and land tenure\. While estate production focuses mainly on export crops, the smallholder sector accounts for about 80% of food production and only 10% of exports\. It involves about 1\.8 million families operating under customary tenure on about 1\.75 million hectares, producing primarily for subsistence\. Land and labour productivity among the majority of smallholders is very low, and nearly half of the population lives below the level of absolute poverty\. High population growth, low productivity of I  land and labour in agriculture, limited employment opportunities, and low quality of human capital due to low nutritional levels and limited access to education and health services, are the main causes of poverty\. This situation was further aggravated by the absence of high-yielding maize varieties acceptable to smallholder farmers, inadequate supply and use of fertilizers, and a narrow range of high-value cash crops available to smallholders\. The Department of Agricultural Research 2\.3 The DAR has national responsibility for research on all commodities with the exception of tobacco, tea and sugar\. It is also responsible for the production of breeders' seed of agricultural crops, for the propagation and distribution of selected cultivars of fruit and nut trees, the provision of plant quarantine, soil survey and analytical services, and seed inspection and testing services\. Information about improved technology is made available to the farming community reasonably regularly\. At the time of the SAR, effective management in DAR was hindered by lack of staff continuity and by inadequate support staff\. Planning and coordination of research programmes needed improvement to avoid duplication of effort and ineffective cost allocation of expenditures\. Other major constraints included (i) the lack of adequate training programmes, (ii) an over-expensive research-station network, (iii) the absence of a policy advisory board or forum, (iv) the inadequate policy covering staff recruitment, evaluation and promotion, (v) the sporadic research collaboration with international and regional programmes; and (vi) the ineffective linkage with the extension system\. The Agricultural Development Policy 2\.4 As outlined in its "Development Policy (DEVPOL) 1987", the Government accorded first priority to promoting agricultural growth\. The primary objectives for the agricultural sector were to ensure food security at the household and national levels, improve rural incomes, and increase export earnings, while protecting the environment\. In addition to increasing agricultural productivity, the strategy envisaged policies and investment measures to expand off-farm employment opportunities\. The donor community, including the Bank, supported this Government strategy\. 3\. Project Objectives and Description 3\.1 The project aimed to improve the focus and quality of Malawi's smallholder-oriented agricultural research programme; formulate an overall strategy (master plan) for agricultural research; strengthen critical linkages, particularly between the research and extension programmes; and improve the efficiency and economy of DAR's ongoing activities\. The ultimate objectives were the development of new varieties, husbandry practices and farming systems aimed at responding to farmers' regionally specific problems and significantly increasing smallholder production and incomes\. 3\.2 The main features of the project, involving investments, policies and institutional development, were: (i) the creation of an Agricultural Research Council to include the Controller of Agricultural Services, the Chief Agricultural Research Officer, the Chief Agricultural Officer, the Chief Veterinary Officer, the Chief Forestry Officer, the Secretary of the National Research Council, and representatives of the Tea Research Foundation, the Tobacco Research Authority, the sugar plantations, the Estates Advisory Board, and the Economic Planning Division; (ii) the rationalization of DAR's station network, including investments in civil works and equipment; (iii) the reorganization of DAR into multi-disciplinary research teams and the introduction of management and systems improvement; (iv) the introduction of a technical career stream, staff evaluation system and the 2  provision of training and technical assistance for DAR staff; (v) intensified collaboration with International Agricultural Research Centers and Regional Research Institutes; (vi) improvement in extension-research linkages through the establishment Adaptive Research Teams (ARTs) and research- extension workshops; and (vii) improved economy and efficiency in ongoing research activities\. 4\. Project Design and Organization 4\.1 The Bank's interest in strengthening agricultural research in Malawi arose from emphasis of the 1981 National Rural Development Programme (NRDP) Review and the need for stronger research to improve and accelerate technologies for smallholders\. USAID had already embarked on this process in 1979/80 by funding technical assistance, graduate training for DAR staff, modest civil work construction and procurement of equipment\. The resultant project for co-financing by the Bank and USAID was to be the first (for the Bank) project of a 10-15 year programme to strengthen research for smallholders and reflects investments to deal with the identified deficiencies (para 2\.3)\. One criticism of this approach is the emphasis on organization, management, cost effectiveness and staff development to the exclusion of ideas on how to deal with Malawi's most urgent and important problem, how to improve the productivity of the maize crop, occupying about 70% of the arable area\. An innovative design feature was the inclusion of the US$ 15\.5 million non incremental recurrent costs that were to account for over 90% of the Government's contribution\. 4\.2 The Ministry of Agriculture administered by the Principal Secretary for Agriculture was made responsible for implementing the project\. The Chief Agricultural Research Officer who reports to the Principal Secretary through the Controller of Agricultural Services, was directly responsible for project management\. Some guidance for this purpose was also expected from ARC\. Internationally recruited specialists were to underpin financial management and procurement activities\. The Ministry of Works had responsibility for the large civil works programme and a firm of architects, funded by the project, was to supervise the programme\. The large training programme was to be managed by consultants supporting the MOA Training Unit, which was to be established under the companion Malawi Agricultural Extension and Planning Support (MAEPS) project\. The USAID contribution to the project, under its Malawi Agricultural Research Extension (MARE) project, which was approved in July 1985, was managed by the consortium for International Development, involving four universities, with Oregon State University serving as lead institution\. 4\.3 However, with hindsight, it is possible to identify some design weaknesses\. An agricultural research council, as commonly understood, cannot function effectively within a Government department because such a council requires autonomy\. In the case of this project, this weakness was evident in two aspects: (i) the Council itself was perceived by members and by DAR as an unimportant, powerless internal committee, which led to poor attendance by members and its advice being ignored by Treasury; and (ii) DAR's inability to develop a separate career stream with better pay and other incentives for scientists, who are still within the civil service\. The management structure outlined in the SAR was unworkable, especially in the face of the many staff changes at senior levels in DAR\. Proposals described in the SAR, therefore, were not fully implemented\. Senior scientists continued to be Officers-in-Charge of stations with senior administrators appointed to lighten their administrative work load\. This was not wholly successful, however, and at Chitedze, the largest research station, a Deputy Officer-in-Charge was appointed in 1993 to share the work load\. 5\. Project Implementation 5\.1 Implementation Schedule\. The development credit was signed on 23 May 1985 and became effective on 19 November 1985\. A delay in implementation was caused by problems in finalizing 3  recruitment of four key consultants\. The project, due to end on 31 October 1990, closed on 31 October 1993 after three extensions (Part III, Table 2)\. Extension of the project was primarily to provide bridging finance for ongoing research programmes until a follow-up project could be launched\. 5\.2 The original credit agreement was for SDR 24\.3 million\. In 1991-92, during the project extension, Malawi suffered a severe drought and there was an urgent need in the agricultural community for funds for drought recovery\. Devaluation of the Malawi Kwacha during the project period led to savings of SDR 6\.0 million by October 1992, and the original credit agreement was amended (para 5\.24) to enable the SDR 6\.0 million (MK 36 million) to be used for smallholder agricultural credit, especially for the purchase of fertilizer and seeds for the small farm sector (Annex 1, Table 1)\. The original project objectives, therefore, were met for a total actual disbursement of SDR 17\.6 million (Part III, Table 5)\. 5\.3 Establishment of an Agricultural Research Council\. ARC was established by MOA internal memorandum in 1985 and held two meetings before project implementation\. The ARC, chaired by the Controller of Agricultural Services, was to give policy guidance and general support to DAR\. A Secretariat was established in DAR, eventually in the Agricultural Economics, Statistics and Data Processing Unit (AGREDAT)\. Technical and Finance sub-committees were appointed to give detailed consideration to research programmes and contract research proposals before their eventual submission, with appropriate comment, to the Council, which approves the annual research programme and budget before forwarding them to Treasury\. 5\.4 The effectiveness of ARC was severely compromised by several factors\. Its creation by internal memorandum established ARC as an internal committee, without legal standing and little status\. Meetings were ill-attended and held irregularly because of competing claims on members' time\. The Treasury did not fund ARC's approved programme and budget recommendations fully but, instead, cut them quite severely\. These weaknesses were recognized and changes proposed but they were not put into effect under this project\. ARC has been helpful to DAR in the provision of policy advice, development of the Master Plan and identifying strategic research issues\. 5\.5 DAR Infrastructure Consolidation and Improvement\. At appraisal, the total investment cost under the three budget heads forming this component (Civil Works, Staff Relocation, Equipment) was US$ 14\.9 million\. The building programme, which included library, laboratory, office and utility buildings as well as staff houses, was completed almost in line with SAR estimates (Part III, Table 4)\. An extension programme, with construction of a health centre and drying shed and seed store at Chitedze, was also completed\. Final disbursement under the Civil Works component, expressed in SDR, amounted to about 73% of the Development Credit Agreement (DCA) estimate (Part III, Table 5-C)\. 5\.6 However, there were problems in design and quality in the civil works programme\. Following economies in house construction, as suggested by the World Bank, the designs of houses were the subject of complaints (too small, proximity of servants quarters leading to lack of privacy, outside access for toilets)\. Glasshouses were too complex in design, with problems in maintenance and operation under Malawi conditions; the quarantine glasshouse at Bvumbwe did not conform to the minimum requirements for quarantine purposes, with no security, no containment and no provision for sterilizing used plant and soil material\. Poor quality was evident at several sites, most notably at Kasinthula where the wiring of the cold room and store shed were not completed and connected to the mains\. Surface drainage at Mkondezi was not provided for, making the site vulnerable to floods during heavy rain\. 4  5\.7 The research station network envisaged in the SAR was varied somewhat after discussion\. The three main regional stations, i\.e\. Chitedze, Bvumbwe, Lunyangwa were retained as proposed, but Makoka's proposed closure was rescinded and it remains a substation, housing the cotton research programme and workers\. Mbawa was retained to house the national Malawi Zebu herd, and Bolero was retained as a trial site\. Otherwise closures and changes were as proposed at appraisal\. 5\.8 Relocation, which affected principally professional staff and some support staff was severely impeded by the training programme, with many scientists overseas on post-graduate courses while the relocation occurred\. However, a significant achievement was the consolidation of the maize research team at Chitedze\. Actual disbursement under this component, which constituted only 0\.4% of the total IDA planned contribution, came to about 84% of the DCA estimate\. 5\.9 Equipment and Vehicle Procurement performance throughout the project was consistently poor and was rated accordingly during supervision\. A lack of procurement expertise in MOA and frequent staff changes meant that bid document preparation was sub-standard and led to delays\. Mismanagement compounded the problem\. The nature of equipment and quantities of supplies ordered were not scrutinised critically, so expensive equipment, for some of which were of little or no use and some of which did not have trained users (e\.g\., three freezing microtomies, two in store) and unrealistic quantities of supplies (e\.g\. 3 tons of plasticine, most of which went unused; over 3,000 litres of absolute ethyl alcohol; 1 km of soft rubber tubing) were bought\. On receipt no checks were made against delivery notes or invoices, no inventories drawn up or proper storage provided or inventory procedures instituted\. 5\.10 The main store is at Chitedze and is a disused laboratory with wooden shelving, no safety or fire precautions or equipment and no established stores procedures or ledgers\. Some attempt has been made since a particularly critical supervision report to bring order into the store, but delicate equipment (e\.g\., freezing microtomies) is in the same store room with corrosive material and there is potential danger from co-storage of flammable liquids (e\.g\., ethyl alcohol, benzene, chloroform) and powerful acids (e\.g\., concentrated sulphuric acid, concentrated nitric acid)\. Furniture for houses and offices was not ordered until near the end of the project, so completed houses had to remain unoccupied for months until they were furnished\. Some of the furniture supplied was sub-standard and had to be replaced\. 5\.11 Reorganization\. A requirement of the project was the reorganization of DAR HQ, with Chief Agricultural Officer (CARO) supported by two Deputy Chief Agricultural Officers (DCAROs), one for Research Programmes and the other for Technical and Administrative Services\. All research planning on commodities were to be vested in multi-disciplinary Commodity Teams, each reporting to a relevant National Research Coordinator, who in turn, would have reported to the DCARO Research Programmes\. Also included was a reorganization at the operational level, displacing Directors or Officers in Charge of stations by Administrative Officers having responsibility for all non-research activities (research farm managers, labour, machinery and operations), reporting to DCARO Technical and Administrative Services, who would have also controlled plant protection and quarantine activities, seed services, regulation of pesticides and library services, but not soil analytical services\. Funding was also to be split\. Funds for research programmes were to be assigned through National Research Coordinators (NRC) to each Commodity or Adaptive Research Team Leader and thence to each project leader who would be accountable for their expenditure\. Funds for station activities were placed directly with station Administrative Officers\. Thus organization and planning of research programmes as well as their funding were separated completely from their operation in the field\. Former Directors of Stations were supposed to be freed of administrative duties by this change and able to devote their attention entirely to research\. Adaptive Research Teams were also to be 5  appointed to each Agricultural Development Division (ADD), operating locally but coordinated by NRC (Adaptive Research), and reporting to DCARO Research Programmes\. They were principally to do adaptive research trials on farmers' fields, cooperating closely with extension services\. 5\.12 Separating the management of research planning and research operations at the stations, as well as funding them separately, was clearly going to increase management complexity, which could only exacerbate, not relieve, administrative pressure on senior staff from CARO downwards\. This was recognized by a supervision mission as early as February 1986 and later by the First Triennial Review (1989) which recommended reinstatement of scientists as Officers in Charge of stations\. Management/administrative overload on senior scientists was greatly increased also by the preparation of the Master Plan, done with the expenditure of much time and effort of senior scientists with some central secretariat TA support\. Furthermore, the need to prepare Action Plans to amplify the Master Plan and the preparation for two Triennial Reviews, were additional to the scientists normal annual administrative burden of preparing Annual Plans and Budgets, Annual Reviews and Reports and the updating and revision of the Guide to Production Practices\. In addition, Commodity Team Leaders (CTL) were expected to produce monthly, and National Research Coordinators quarterly, reports\. Taken together with the staff absences caused by the training programme (para 5\.21), these time consuming administrative requirements hampered the research programme and decreased the time available for writing scientific publications\. 5\.13 Management and System Improvements\. The project was intended to provide for a Programme and Budgeting system for managing the research\. Although a start was made on such a system, it was not concluded successfully\. The expatriate consultant appointed to help in this development provided adequate financial accounting systems, but these were not suitable for a programme and budgeting system which required a cost and management accounting approach\. The consultant left prior to the end of his contract for personal reasons and the CARO did not attach a high priority to replacing him\. Bank supervision failed to monitor the work of the consultant prior to his departure or to insist on the employment of a suitable replacement\. There is, therefore, no system in operation in DAR to enable it to manage its research programmes properly\. An effective programme and budgeting system should describe the research work well enough to permit assessment of its scientific soundness as well as providing a means to ensure that the research is in accord with GOM policy and MOA research strategy\. Research proposals also need to be costed so that value for money judgements can be made as well as views formed on the balance of research, making sure that the proportion of research funding of different scientific and commodity areas accords with policy\. Research programme and budgeting systems are based on cost and management accounting, which differs greatly from normal public service financial accounting\. In Uganda, provision was made in the research project SAR for a two year expatriate consultancy, with short follow-up visits in years three to five, for the development and installation of a programme and budgeting system\. The Ugandan experience would be worth studying to see if it could be applied in Malawi\. 5\.14 Programme Planning and Review\. The project built on existing programme planning procedures to establish a structured planning and review system based on meetings at three levels\. Each Commodity Team Leader (CTL) was to convene working meetings of his team of research workers, including, if possible, a biometrician, to review the previous year's results and propose programmes for the following year\. These meetings would be followed by meetings of CTLs with their respective National Research Coordinators (NRCs), at which the CTL would summarize their reports and present their proposals and budgets for the next season\. These meetings should then be followed immediately by all the NRCs meeting as a group with DCARO Research Programmes to plan the overall research programme\. Presumably, DCARO Technical Services would institute analogous meetings to apportion Plant Protection personnel to research programmes and later, to plan 6  Research Station programmes and budgets to carry out the projects planned by the NRCs\. Following these series of meetings, the consolidated programme and budget would be forwarded to the Technical sub-Committee for review and approval before submission to ARC for final DAR approval\. After endorsement by the Council, the final programme and budget would be submitted to Treasury as part of MOA's budget estimates for inclusion in GOM's budget for the following year\. By starting the series of meetings in mid-August, when the previous season's research results should be available, it was expected that the DAR budget proposals would be ready in time for submission in the normal GOM estimate rounds held in October\. 5\.15 In addition to the procedure for Annual Reviews and Planning outlined above, the project provided for Triennial Research Reviews in which the whole research programme and its management would be subject to external evaluation by experienced scientists of international standing\. Two such reviews were held in 1989 and in 1992 and both reported extensively on research programmes as well as some management issues\. While they provided valuable information to help guide the research effort and its management, external reviews need considerable preparatory work by research workers, especially the CTL and NRC, which reduces significantly the time available for research during the period they are preparing for the review\. The reviews themselves are also very costly, with international travel expenses and subsistence to be taken into account\. Triennial reviews are unusual: the International Agricultural Research Centres in common with some large national research systems (e\.g\., UK AFRC) have for long settled on reviews every four years for their external evaluation\. A similar interval for DAR would save expenses (25% in a 12 year period), reduce the time occupied by preparation and would provide essentially the same information\. Future projects, therefore, should move to reviews every four years in place of the present Triennial Reviews\. 5\.16 Research Collaboration as foreseen at appraisal, was a small component (US$ 0\.96 million) but an important one\. Collaboration with international institutes, including the International Institute for Tropical Agriculture (IITA), the International Crop Research Institute for the Semi-Arid Tropics (ICRISAT), the Wheat and Maize Improvement Centre (CIMMYT), and the International Institute for Banana and Plantain Research (INIBAP) occurred with several programmes\. Valuable flint maize material was received for the maize breeding programme from IITA, following a very successful visit of scientists to IITA programmes in Nigeria and Cameroon\. Subsequently cooperation with CIMMYT, which is Malawi's official maize research collaborator, has been good\. 5\.17 The Contract Research programme funded a successful coffee research programme at the Tea Research Foundation of Central Africa (TRFCA), for which houses and office and laboratory facilities were built on the main tea research station at Mimosa\. Macadamia nut research was instituted late in the project with contract funds through the Tree Crops Authority\. Several smaller research contracts were awarded for research proposals from Bunda and Chancellor Colleges\. There does not seem to be a formal review or evaluation procedure for contract research, and most research contracts have not produced reports\. 5\.18 Library and Data Processing\. The research library at Chitedze was moved into a new building constructed under the project and now functions effectively as a central library for the whole research system\. The smaller libraries at Bvumbwe and Lunyangwa were improved\. Inter-library loans, current contents and reprint photocopy services are provided to scientists at other institutes on demand\. CD-ROM readers are available and used to extract information on demand from several databases\. The salaries offered to librarians in government service, and lack of career prospects do not attract suitable candidates\. The salary and career structure issues, of course, cuts across DAR\. Nevertheless, there is a librarian trained by the project in post working as counterpart to the expatriate technical assistant\. However, the cataloguer in training during the project has not yet 7  returned, and this post at present remains unoccupied with a large backlog of material to be catalogued\. Data processing capacity was improved, but, AGREDAT, HQ, in common with other parts of DAR has lost key staff\. 5\.19 Publications Development\. Provision was made to equip the library with facilities for publishing and binding\. These are now in operation and have improved the standard of presentation of reports\. Scientific publication of results in journals and other media has been slowed down by the absence of scientists on training or preoccupied with management reporting\. The Guide to Agricultural Production in Malawi, a handbook for use by extension staff, was regularly updated by research staff to include the latest research results: the 1993-94 revision has just been published\. Although extremely valuable as reference material and much used by extension staff, the way the ART system actually operated, prevented a systematic supply of results of on-farm regional research trials, which devalued the book somewhat\. All research stations now produce timely Annual Reports on research done and these are available to Subject Matter Specialists and other extension staff\. 5\.20 Career Development components of the project required comprehensive job descriptions for all professional staff, an improved staff evaluation system and the implementation of a scientific career stream for DAR which would provide sufficient incentives to retain scientists within the system and enhance promotion prospects for the best scientists\. Despite strong pressure from IDA, the establishment of a scientific career stream outside the main Civil Service grade structure was not achieved due to GOM opposition\. The opposition was based on budgeting implications and concern that is would isolate researchers from other civil service career streams\. Job descriptions and a personnel evaluation scheme appropriate to research workers have not been implemented\. However, there has been some improvement in promotion procedures recently in that Scientific Interview Boards have been instituted, the members of which are proposed by MOA and not the Public Service Commission, as was done before\. Three or four of the best researchers have received accelerated, or special merit promotions to keep them within the service\. Conditions of service, including pay and normal promotions, still remain within the province of the Public Services Commission\. The recently introduced retirement age of 50 years is unrealistically low and will deprive the research system of its most experienced managers as they reach their most effective age\. 5\.21 The Training component of the project was substantially supported by USAID\. Total overseas graduate training during the project period included four M\.Sc\. candidates and nine Ph\.D\. candidates out of IDA funding and 27 M\.Sc\. and four Ph\.D\. candidates with USAID, supplemented by considerable short-term training for both professional and research support staff\. Overseas short-term training consisted of 374 person-weeks (of which USAID supported 104) out of a total 1,728 planned weeks\. In-country short-term training, for which 3,102 person-weeks were provided, led to 715 persons being trained during a total of 2,500 person-weeks (Part III, Table 4)\. This big investment in training meant that during the project period large numbers of staff, especially graduates, were overseas at the same time\. This had the unintended effect of impeding several research programmes during the project\. Less overseas training should therefore be needed in the future\. The training to be eventually considered necessary and its timing should form part of a manpower development plan to be included within a comprehensive personnel strategy for the research system\. Problems in the management of the trainees' allowances were alleged: apparently trainees were not all paid the same subsistence rates, allowances to attend approved conferences were not forthcoming and frequently maintenance grants were paid late\. Many returning trainees resigned from DAR to take better jobs elsewhere, so despite the large training programme, DAR has about the same number of trained scientists as before\. 8  5\.22 The Technical Assistance element of the project provided for four key long- term technical assistants who were appointed early in 1986 and others later\. Their performance was variable, few leaving fully trained and competent counterparts in post when they left\. Agro-forestry, library and AGREDAT support was very good, and adaptive research weak: the horticulturist TA took over the running of this programme during the absence or graduate training of all the professional horticulture staff\. The Research Adviser, appointed for three years in the first instance with an option to renew his contract for a further two years, was not reappointed\. The TA accountant did not develop a programme and budgeting system as required, leaving DAR without this essential tool in research management\. As indicated in Part III, Table 4, long-term TA included a total of 625 (244 IDA and 381 USAID) person-months or 116% of SAR estimate\. Under the short-term TA programme, 40 person-months (70% of SAR estimate) were provided with USAID assistance\. 5\.23 Research/Extension Linkages\. Adaptive Research Teams were appointed to all Agricultural Development Divisions (ADDs) to improve the link between research (DAR's responsibility) and extension (ADD responsibility) links\. Each ART was composed of an economic and agronomist and they were to conduct on-farm trials and identify constraints affecting small farm productivity\. Their level of performance, however, was below expectation, partly because of the excessive work load, and also because the economists, who were needed for diagnostic work on farmers' constraints found more lucrative employment and left\. At close of the project, only one ADD (Kasungu) had a fully staffed Adaptive Research Team and three (NADD, LWADD, LADD) had no adaptive research personnel\. The remaining four ADDs had only one ART member each\. Before discarding this approach, however, an investigation should be launched into the reasons for its failure and a revised system installed and tested\. Scientists at various research stations should regard adaptive work as the final step in the research process and should be held responsible for its success\. Until a system is formalized whereby adaptive research results are fed systematically into the recommendation making process, it would be difficult to obtain from the adaptive research team concept, successful results\. 'he teams may need to be more selective in their approach, only taking on a workload that is achievable\. This would require some management training so that the adaptive research specialists would know how to rank tasks in order of priority\. Research/extension workshops were required under the project\. The first one was held in PYI and others annually thereafter\. Research stations held annual field days, highly regarded by extension personnel, at which research findings were presented to extension officers\. In addition, less formal meetings in which extension and research staff participate were held from time to time\. Extension staff were welcome to visit research stations informally to seek advice or specialist information\. Although the research and extension services do not form a seamless, integrated organization, relations between the two were thought to be good, with an excellent working relationship ensuring that research results were made available to extension services with little delay\. 5\.24 Support for Drought Recovery\. In early 1992, the Smallholder Agricultural Credit Administration (SACA), which provides agricultural credit to smallholders, faced a financial shortfall of about US$ 31 million to finance urgently needed agricultural inputs for the 1992/93 agricultural season\. This gap was due to the low loan recovery rate experienced by SACA as a result of the drought in 1991/92 and of increases in the price of fertilizer\. Given its severe financial constraints, the GOM requested IDA help to cover SACA's financing gap\. As indicated in para 5\.25, the legal document was amended and approved in 1992 in order to help finance drought recovery activities and a total of SDR 6\.0 million was made available for this assistance\. Under the overall programme carried out by SACA during the 1992/93 season, some MK 144 million, of which MK 36 million or SDR 6\.0 million equivalent from IDA, were disbursed benefitting about 384,000 smallholders representing about 15,600 farmer clubs\. It is estimated that some 110,000 farmers benefitted from the IDA-assisted programme\. 9  According to data provided by SACA (Part III, Annex 1, Table 1) the seasonal credit recovery rate for the 1992/93 season was about 16%, well below the traditional recovery rate of 88% experienced by SACA between 1985/86 and 1990/91\. A recovery rate of 38% was recorded in 1991/92\. A Smallholder Credit Repayment Study, recently carried out by the Centre for Social Research of the University of Malawi, indicates the following main reasons for the current smallholder loan repayment crisis: (i) breakdown of the recovery system; (ii) credit design and administration; (iii) low gross margin; (iv) political dispensation; (v) 1991/92 drought; and (vi) delinking extension work from credit\. These issues are being addressed through the recently appraised Malawi Rural Financial Services Project\. Project Costs and Disbursement 5\.25 The project was scheduled to be implemented over five years starting from 1985, and expected to cost US$ 49\.9 million to be financed by a IJS$ 23\.8 million (SDR 24\.3 million) IDA credit, a US$ 9\.2 million USAID grant and a US$ 16\.9 million equivalent GOM's contribution, mainly to cover DAR ongoing programmes\. There were two amendments to the legal document for the project approved in 1992 (Part III, Table 5-C)\. The first, as advised by the July 1992 supervision mission, to reallocate SDR 0\.6 million to non-salary operating costs\. The second amendment was approved in order to help finance urgently needed drought recovery activities in the form of agricultural inputs to smallholder farmers for which the GOM had requested IDA assistance\. Under the restructured project, a total of SDR 6\.0 million were made available for this assistance\. To date, against an actual project cost of US$ 58\.2 million, IDA disbursed US$ 32\.1 million (SDR 24\.0 million)' and USAID disbursed US$ 9\.2 million\. Government contribution included mainly DAR ongoing programmes and at the end of the project amounted to an estimated total of US$ 16\.9 million (Part III, Table 5-A and B)\. While actual project costs in US$ terms exceeded SAR estimates by about 16% , total IDA disbursement in SDR reached 97% of the total foreseen in the DCA (Part III, Table 5-C)\. 6\. Project Results 6\.1 In spite of the implementation problems as described above, it can be stated that the overall project performance was satisfactory, and most of the original objectives were achieved\. The large training programme has now given Malawi a highly trained body of scientists able to efficiently utilize the resources furnished under the project, provided that staff can be retained within the research system on their return from training\. A new research sub-station has been built in a hitherto unrepresented agro-ecological area; many superfluous sub-stations and trial sites have been closed with consequent savings in overheads; new houses, laboratories and offices have been built on the main research stations; and older buildings have been refurbished\. Library buildings and services have been improved; new laboratory equipment has been installed; and supplies of needed laboratory chemicals provided\. New and more efficient research management procedures have also been institutionalized\. A Research Master Plan, first prepared in the early years of the project, has been extensively revised during the project and now provides strategic guidance for priority research\. 6\.2 Benefits (Part III, Table 6) are difficult to quantify in this type of project since benefits arising from adaptive research cannot be separated from those arising from the associated use of additional inputs\. Therefore no attempts were made at appraisal to calculate and economic rate of return for the project\. The success in breeding the consumer acceptable and high yielding flint hybrids should bring about considerable benefits comparable to those of hybrid maize in Kenya and Zimbabwe and on a Excludes the revolving fund amount of US$ 89,562 (SDR 67,032)\. 10  smaller scale to HYV dwarf rice and wheat in Asia\. There has been some doubt about the returns to research expenditures in Africa\. In the case of DAR, there are at least three instances in which research staff brought about massive benefits, far above the roughly US$ 2 million per year operating costs and probably worth more than the entire project cost to the economy\. The first was the work on high content (HC) fertilizers\. It is estimated that the switch to HC fertilizers, as recommended by research, saved the country some US$ 14 million in 1992/93 if comparison is made with the 1987/88 agricultural season (Annex 1, Table 2)\. The second was the release of parasites and predators which successfully controlled cassava mealy bug infestation\. While controls were introduced by IITA, it nevertheless needed DAR staff to collaborate and follow-up\. Finally a hybrid maize breeding programme to produce flint type grain of high yield and acceptable to local farmers' tastes has been outstandingly successful\. Two new hybrid flint varieties (MH17 and MH18) released in 1990 outyielded local varieties by more than 30% even when unfertilized\. When fertilized, yields on farm doubled to about 3 t/ha although official statistics to support this performance are not yet available within MOA\. The new hybrid flint varieties are very popular with farmers and by 1992-93 occupied 25% (about 100,000 ha) of the area planted to maize'\. They have the potential to make Malawi self sufficient in maize\. Other programmes (e\.g\., rice, sorghum, cotton) have new varieties ready for release\. It should be mentioned that the extension service under MAEPS, contributed less than expected towards the successful introduction of hybrid flint maize varieties in Malawi\. 7\. Project Sustainability 7\.1 Sustainability of the activities/programmes supported by the project and the facilities provided is in doubt\. For most of the project duration, GOM was unable to provide operating costs at the level agreed to at negotiation\. This affected both the conduct of experimental programmes and maintenance of buildings and plant\. DAR, despite strong pressure from IDA, was unable to establish a separate scientific career stream that would provide incentives to motivate and retain research scientists\. Consequently, despite the large overseas graduate training programme, the professional staff remains about the same as before the project, with many seeking employment outside the research service on their return\. Thus, the quality of the working environment is affecting staff retention\. About 30% of those trained sought employment outside the research source upon their return\. The situation is particularly bad with the ARTs, who have been unable to retain any of the economists whose role was regarded as crucial in the SAR\. However, as it was recognized that this project was the first in a long-term sequence to restructure Malawi's agriculture research capacity, the problem of project sustainability should be properly addressed by the recently initiated Agricultural Services Project, under which further assistance for research in Malawi is being provided\. 8\. Bank Performance 8\.1 Bank supervision was good with 15 supervision missions from October 1985 (pre- effectiveness) to May/June 1993\. Actual Bank staff inputs from preparation to PCR work, amounted to 287 staff-weeks (Part III, Table 8)\. One key feature of the Bank's performance was the intensive supervision, amounting to technical assistance, provided by its Agricultural Department\. This led to considerable improvements in research management, notably Action Plans to operationalize the Master Plan proposals\. The Bank played a particularly active role in supporting the hybrid maize breeding programme\. Based on information by DAR of MH18 and MH17 seed sales estimated at 2,500 tons in 1992/93\. 11  8\.2 In retrospect, however, Bank supervision should have paid closer attention to the monitoring of the work of the consultant responsible for developing the programme and budgeting system prior to his departure, and should have insisted that a suitable replacement be hired\. 9\. Borrower Performance 9\.1 The Borrower showed commitment to the ideals, objectives and substantive goals of better research planning by the development of a Research Master Plan, and research action plans\. Borrower support for hybrid maize programme was instrumental to its success\. GOM complied with 15 of the 22 covenants requiring action, however, a number of covenants have been in default, some consistently: (i) the MOA did not maintain payment of operating costs of research during the whole project; (ii) the ARC secretariat was not adequately staffed until near the end of the project, when improvements were made; (iii) there were weaknesses in procurement for the whole project duration as reflected by sub-standard bid document preparation, mismanagement, insufficient DAR scrutiny and evaluation of procurement requests and poor procedures for recording delivery, receipt, inventory, storage and distribution of goods delivered; (iv) DAR did not introduce a scientific career stream with enhanced prospects for scientists because GOM was adamantly opposed to this because of the budget implications and concern that scientists would be isolated from other civil service career streams, consequently IDA agreed to "waive" this condition; (v) DAR was unable to implement a programme and budgeting system as required leaving it without an essential tool in research management; (vi) reporting was irregular and often overdue, especially submission to IDA of the reviews of the previous year's work and prioritized proposals for the following years; (vii) project account audits were frequently delayed and submitted long after their due date; and (viii) DAR was unable to comply fully with requirements to maintain project installations adequately because of its limited operating budget\. 10\. Lessons Learned 10\.1 The major lessons to be learned from this project are: - Overseas degree training should not be emphasized, especially when incentives are weak in the public sector, in addition, future training programmes should be designed to allow fewer trainees away at one time, if research activities are not to be impeded; - More care should be taken in drawing up terms of reference, selection and supervision of technical assistants; - Sustainability may be improved if the new varieties of crops produced by DAR scientists could generate an income by a formal sale of appropriate material to seed or agricultural merchants under a royalty or similar agreement; - Field supervision of financial, technical and management aspects of the project with IDA donor assistance is extremely important, especially the need to supervise procurement, in addition, strong government procurement arrangements and capacity are essential; An independent body with financial autonomy is needed to coordinate research, and such a body should have the authority and influence to set research priorities; 12  An improved program budget system for recurrent cost funding should be developed in MOA, this should be coordinated with an ongoing review of staff levels and job description, in addition, a reputable local accountancy firm can be used on a short term consultant basis for the introduction of such system; In order to improve the relevance of research to farmers' needs, there is a need for a promotion and rewards scheme to encourage scientists to re-orient more of their work towards on-farm research and form closer links with extension, aside from the provision of mechanisms such as ARTs and research/extension workshops etc; Project scope must be kept simple and adjusted to realistic budgetary, institutional and human resources constraints; Institutional reforms require a long-term commitment and should be phased,build on existing institutions where possible, and based on detailed action plans and broad consensus\. 10\.2 Other lessons include: - More rigorous inspection is needed by the line ministry to certify completion of civil works before payment of contracts; - Building (house and glasshouse) design should be suitable for the purpose, the climate and other environmental variables; - The overriding importance of suitably built stores, proper storage and efficient stores accounting/management procedures to ensure the proper storage and inventory of consumables and equipment; - Triennial Reviews, are very costly and entail much preparation, four yearly reviews which would provide information of the same value at much less cost and with less interference in the research programme should be adopted; - The need exists for MOA to continuously maintain at least a building engineer as well as transport management to ensure the proper management and maintenance of buildings and equipment, if the considerable investments structures and vehicles as a result of the project are to be safeguarded; and - Training in financial management, research management, operation of equipment and research station management are essential to ensure the sustainble benefits of the project\. 10\.3 The design features of the follow-up project, ASP, have taken into account all of the above lessons\. It is important that ASP effectively implements the various action plans prepared to address the key lessons from NARP\. Regarding the development of a cost-effective and sustainable research system that is geared to serving the needs of the majority of the farmers in Malawi, ASP action plans give emphasis to: - formulating and implementing research plans consistent with realistic budgetary constraints that will generate technologies responsive to farmers' needs, especially 13  those of the resource poor (many of whom are women), and improving mechanisms to promote research-extension-farmer linkages; improving the mechanisms to update research priorities, diversifying participation in publically funded research through the commercialization of some research activities, and improving the allocation of funding by strengthening the DAR; and improving DAR's management systems and the motivation and accountability of its researchers\. 11\. Project Relationship 11\.1 There was good Borrower/Bank collaboration, due largely to the constant dialogue between MOA and the Bank's Field Office\. In addition, as pointed out elsewhere (para 8\.1), supervision missions provided considerable implementation assistance (especially on technical and policy matters), which was effective, and appreciated by the Government\. There were times, both in the early and closing stages when there were some differences between Bank and MOA specialists (e\.g\., hiring a replacement for the expatriate consultant hired to develop the programme and budgeting system), but the discussions always remained constructive\. 12\. Consultancy Services 12\.1 These were described in the context of the various components\. The Government liked the USAID recruitment method, under which USAID financed management identified candidates and brought MOA managers to the USA for selecting the seven MARE financed consultants\. The result of consultancy services was mixed, some did good work, while four of the seven multi-year consultancies gave less than satisfactory results\. More care is advisable in drawing up terms of reference for consultants and, in some cases, their selection and supervision\. 13\. Project Documentation 13\.1 The Legal Document gave clear guidance on the Borrowers' obligations, but the SAR lacked detailed cost tables and consultant terms of reference, which made implementation, supervision and even PCR preparation more difficult\. The cost tables, for instance, are the only record of proposed investment details\. The DAR progress reporting was reasonably regular and kept the Bank informed of progress, but annual research results reporting was either very late or given in raw detail (trial by trial) that was difficult to digest\. DAR was addressing this aspect, with the objective of establishing punctual and effective annual reporting, but had not yet been achieved at project closure\. Due to incomplete data on actual project cost by category and by year, the PCR mission was not in a position to provide an accurate total project cost table\. In particular, figures on GOM's contribution, which under the project was supposed to meet mainly the operating costs of DAR's new activities, were not available\. 14  PROJECT COMPLETION REPORT MALAWI NATIONAL AGRICULTURAL RESEARCH PROJECT (CREDIT 1549-MAL) PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE Introduction: 1\. Following the revised preparation of the PCRs, Part I and 3 have been prepared by the Consultants hired by the World Bank, as a lender of funds to the Malawi Government\. Part 2, on the other hand has to be prepared by the borrower, who in this case is the Malawi Government (MG)\. Within the borrower, there were other components of the project\. For example, Agricultural Extension was also a beneficial of the project, besides the Agricultural Research, (AR)\. This report covers the AR component\. 2\. To write this report, visits to major research stations and interviews of Senior Scientists were made between December 7 and 15, 1994\. Two Malawian counterparts, Dr\. A\.S\. Kumwenda of the Department of Agricultural Research and Mr\. Chanza of the Department of Extension and Training accompanied a three man team of the Food and Agricultural Organization (FAO) hired as consultants of the World Bank\. The report is further based on some experience by the author during the implementation stages of the project in 1989 to 1992\. AR Stations Visited and Interviews Made\. DateStation Scientist Interviewed 7/12/93 Chitedze Dr\. B\.T\. Zambezi, Dr\. C\. Matabwa, Miss C\. Wern 8/12/93 Dr\. M\. Theu - Plant Protection Mr\. H\.N\. Soko - NRC Legumes and Oil Seeds 10/12/93 Bvumbwe All Senior Staff Members Makoka Mr\. M\.H\. Banda, Officer-in-Charge 11/12/93 Kasinthula Mr\. E\.M\. Chinthu and Mr\. Kauta 14/12/93 Chitedze Mr\. A\.W\.C\. Zimba - Livestock 15/12/93 Mkondezi Mr\. C\. Chizala, officer-in-Charge Lunyangwa Mr\. M\.S\.L\. Kumwenda, Officer-in-Charge 20/12/93 MOA Wrap up meeting with Ministry Officials 15  3\. The following is a consolidated factual account gathered during the above visits\. The report further incorporates the critical comments made by scientists interviewed during the visits\. The report is by station followed by a summary of common issues across stations\. Chitedze Agricultural Research Station 4\. The overall feeling of the few scientists interviewed was that the project was beneficial to the stations and the DAR overall\. This was clearly expressed by the Head of the station who is also an active research scientist as a Maize commodity Team Leader\. This feeling was further amplified by the comments made by the individual scientists interviewed at the station\. 5\. The station had overall benefit in buildings and research facilities\. These included the dwelling houses, the internal road network, library, renovations to buildings, laboratory building complex, health unit and vehicles\. Through NARP, Chitedze was completely transformed\. Dissatisfaction was nevertheless expressed on various issues of the Project as follows: 6\. Operational Funds: Although the concept of NARP was to strengthen the AR Institutes of the MOA through infrastructure and manpower development, an acute shortage of operational funds was felt during the implementation of the project\. Through NARP, a large consignment of laboratory equipment and vehicles was acquired\. Unfortunately this was not matched with adequate maintenance funds on revenue accounts\. Often times vehicles broke down and could not be properly maintained\. Some of them became obsolete quicker than expected\. This also applies to laboratory equipment\. 7\. Equipment: Along with the laboratory equipment, there were several other farm equipment acquired through the project\. However, there were some which could not be used because they were of wrong types\. Ploughs acquired were too heavy to be pulled by the tractors available at the station\. There were also wrong laboratory equipment which could not also be used because they were wrong designs e\.g\. in the Virology Laboratory which could not be utilized\. What became apparent during the course of the Project was that there was poor planning and coordination in ordering such equipment\. The absence of Professional Procurement Officer and poor interaction between the users and the buyers aggravated the usefulness of some of the ordered equipment\. 8\. Re-organization of the Commodity Groups: Through NARP, the DAR was organized into seven commodity groups\. While this proved beneficial in centralizing the research plans, some groups turned out to be too big\. For example the Technical Services is currently large\. Further more, the attachment of some Commodity Teams to this group had its own drawbacks\. Plant Pathologists who are in the Technical Group are in a way isolated from the commodity teams in which their research activities are based\. In a way it does not fit the multi-disciplinary approach of activities\. Most commodity teams feel they had better had their own pathologists and not those in the service group\. Resources permitting, some of the major commodities should have a complete set of staff from a breeder, agronomist, pathologist to an entomologist and indeed some commodities deserve this set up while others do not\. 9\. Training: As indicated by the scientists interviewed at Chitedze the feeling of the Department is that long term-training through NARP was adequate\. The project has transformed the level of trained manpower from few PHD holders to several of them now\. 16  10\. What was felt lacking in the Project was the level of short term training\. Technical staff did not benefit as much as the professional staff\. This was felt in Soils and Engineering Commodity where many of the Technical staff who handle the laboratory equipment were not trained to use them\. 11\. Library: There are several achievements that had been noted in Library through this project\. More relevant books were ordered and access to information has greatly improved as a result of these improvements\. Indirectly, as a result of trained library manpower, sub-station library units also benefited\. The trained library manpower at the Central Library have trained some individuals at the sub-stations\. This was not possible without NARP\. Furthermore, books on specific topics for stations such as Makoka and Lifuwu were transferred to the appropriate stations where they could be utilized more than at the central station\. The library is now considered a Ministry of Agriculture institution, within which there are four departments\. These do not all contribute to the costs of running the library\. Whether or not it was through NARP, the situation would be better if other components of the MOA shared the running costs\. Consolidation of Research Stations 12\. To save overhead costs of running stations, there were plans to consolidate the stations\. There were to be three major stations and about eight sub-stations\. Some stations were closed down, either because they were in the wrong areas or because it was economical to close them\. The centralizing of researchers in major stations was hoped to enhance interaction among scientists\. Overall this has improved\. But as to whether or not overhead costs have been saved is another question\. Per capita expenses of several scientists at a major station is lower than per capita expenses of few scientists at a small station\. Nevertheless stations like Chitedze have become very large with its own associated social problems\. Likewise, coordination of activities by the station management can sometimes become difficult for such a large institution\. 13\. Another problem in the process of consolidating stations, was that small stations were overlooked in the numbers of buildings, they could have benefited from NARP\. Soon after the project was launched it was found out that there were far too many infrastructures for the major stations and almost none for some of the sub-stations\. As a result, improvements which would have been achieved through NARP of such stations were little achieved\. It was completely forgotten that major stations on their own would not conduct research effectively\. They need the support of small stations\. Bvumbwe Agricultural Research Station 14\. Again the overall impression was that NARP was a success\. However, as lessons for the future, the following observations were made: 15\. Civil Works/Houses/Laboratories: The planning of what buildings needed to be built where, was poor\. Consequently some of the needed buildings which could have been covered under NARP were not included\. For example, a Horticultural laboratory is needed at Bvumbwe and yet it was excluded in the plans of buildings for the station\. For the buildings that were finally agreed upon, the designs were unsuitable\. A good example was the Quarantine Glass House which will probably never be utilized\. The main problem is that it is not meant for the tropics and it lacks the essential components of a suitable quarantine glass house in the tropics\. A cold room which was not completed at the end of the project was due to poor planning and co-ordination\. 17  16\. Regarding laboratory equipment, some sections e\.g\. the pathology section had not received some of the ordered equipment\. Again as expressed at Chitedze the co-ordination of the procurement of equipment was poor\. There was need for a professional procurement officer\. Procurement of wrong equipment was ascribed to the absence of a procurement officer - conversant with scientific equipment\. 17\. The station also benefitted from the project through houses, but rooms of the houses were too small and had no furniture\. During the project, some houses were rehabilitated using NARP funds\. Whether or not with the view of saving costs, the local contractor was poor and did a substandard job\. In addition, senior staff houses which were planned for at the beginning were eventually not constructed\. This further reflected on the initial poor planning\. The general feeling among the staff interviewed was that limited scientists were involved in the planning\. While NCRs were supposed to consult their commodity group scientists, often times, they did not and the input from them was missed\. 18\. Library: The library at Bvumbwe was again upgraded through NARP and it is serving a useful purpose\. Access to journals and needed information had equally been improved\. However, there is no trained librarian\. This has its associated problems e\.g\. assessment of the needs of the scientists at the station is inadequate\. Some key journals are missing as a result of this\. 19\. Training: On the question of training, the feeling was that it was good\. Depending on the country where the training took place, NARP funded students were not equally administered\. British trained NARP students were receiving lower rates of per diem than their colleagues funded by the same World Bank\. Regardless of where the training took place, the sponsor, in this case, World Bank through the NARP should have had standard rates of allowances for their students\. Generally, as reflected in the rate of attrition, the level of investment in training mismatched the level of investment in career development of the trained staff\. Through the project implementation, NARP highly trained scientists were frustrated with their careers upon return to their countries\. Their salaries and conditions of service were not commensurate with their level of training - consequently some of them left the department\. 20\. Vehicles: Bvumbwe station acquired some NARP vehicles\. A general feeling was that the pickup vehicles were unsuitable because no three scientists could travel together because it meant the third being seated at the back of the vehicle\. Pajero type of vehicles were suitable for big stations like Bvumbwe\. With these type of vehicles scientists could combine their field trips\. 21\. Contract Research: Regarding contract research, there were strong opinions expressed against the whole rationale of allotting more money to contract research than to the commodities\. A comparison was made within the coffee commodity team\. The Coffee Research Unit in Mulanje was more funded that the sister components of the commodity at the station\. This could have been better planned\. 22\. Although the Coffee Research Unit (Breeding) was working collaboratively with its sister components (pathology) this was not enough\. Often-times the two units, the Bvumbwe and Mulanje, were working as two separate entities\. This was undesirable\. Other commodities in DAR who had part of their research programmes under contract research felt the same generally\. 18  Makoka Agricultural Research Station 23\. Makoka Agricultural Research Station was one of the beneficiaries of the NARP\. The station acquired some vehicles, houses, motor cycles, office and laboratory equipment\. This was contrary to the original agreements\. The station was supposed to be closed down and staff move to Kasinthula where cotton research would have been based\. As it turned out, local management found this agreement unsuitable because the basis of the decision that the station was not in a cotton growing area meant that the station was there solely for cotton\. The station had other commodity teams based there or conducting research there\. There are now pigeon peas, roots and tubers, other grain legumes, maize commodity work at the station\. Towards the end of the NARP, the station had also an SADC/ICRAF Agroforestry Project based there\. It has therefore turned out to be a more useful station to the Department than it was when NARP was planned and initiated\. The idea of closing down Makoka was in the end found not necessary\. 24\. Like at Chitedze and Bvumbwe, the house built at Makoka were found to be of poor finish\. In addition, the electrification system was poor\. Once again indicating that the firms which were given contracts of some major works under NARP lacked supervision and were generally perhaps cheap types\. Kasinthula Experiment Station: 25\. Kasinthula Research Station with a team of 4 professional staff members benefitted from NARP through several civil works, laboratory equipment and training\. Eight offices, 3 laboratories, 1 open shed, a cold room and water boreholes were completed under the NARP project\. In addition a large quantity of laboratory equipment for Irrigation and Drainage Commodity were acquired\. Based on the accounts by the Officer-in-Charge and the irrigation agronomist who was interviewed and observations made, it was apparent the following were not properly planned for and done: 26\. Civil Workws: The finish of the offices was very poor\. The inside walls were not plastered\. One problem which was location specific were the damage to the ceilings by the bats\. It was so obvious that it will not be long before the ceilings collapse\. The type of ceilings used in NARP buildings are made of cemented compressed straw and are heavier than the normal ceiling board\. Bat secretions in the cavity between the ceiling and the roof apparently make the ceilings more heavy and will easily fall off the roof\. 27\. Another problem that was noticeable again reflecting deficiencies in planning, was the recently installed air conditioners\. Whether or not it has to do with the weather conditions of the area, the conditioners had not functioned properly since they were installed\. Constant requests by the station management to have them serviced by the company that installed them had borne no fruit\. 28\. Besides the air conditioners, the cold room which was built under the project was not completed because it was not connected to electric power\. The reason for this was never known and hence is simply idle up to now\. The large consignment of laboratory equipment received at the station did not match with the work load of researchers\. There were far too many equipment which had not been utilized since they were received\. Crammed in a limited laboratory space were leaf area meters with TV monitors which nobody seemed to have known how to operate\. There were piles and piles of metal brief-case type containers of soil core samples which might not be used for a long time\. There were other small items which were in their original packing containers clearly indicating they were not used\. Overall, the obvious impression was that the station was over-supplied with the equipment and could be re-distributed/re-allocated to other stations who could perhaps use them better\. 19  29\. The domestic water supply which had to be rehabilitated was eventually found expensive and the alternative was to dig up two bore-holes\. These unfortunately had salty water and have been abandoned\. The initial plans to rehabilitate the supply would have involved replacement of water pipes, old water pumps, purification of the water from the Shire river and provide a new water tank\. Having not done this, a new water tank which was installed was thus connected to the old piping system\. Consequently the high maintenance costs of the water supply system which was initially planned to be eliminated still exists\. This again demonstrated that the initial plans in most of the NARP civil works were not based on adequate baseline data and that there was inadequate interaction between the end users and the contractors\. It seems there were hasty plans without enough information on costs e\.t\.c\. and hence plans could not match the resources in the project\. Unfortunately in most cases, the quantity was not adjusted and quality of the work was traded off\. 30\. On a happy note regarding the station, training under the project was indeed useful to the Sorghum and Pearl Millet and the Irrigation and Drainage Commodity teams\. This was evident through the scope of work that was on the ground\. It was quite sensible and quite applicable to the nature of the crop production problems in question\. Mkondezi Experiment Station 31\. This is one station that could be classified as a complete baby of the NARP\. It was established with the thinking that Lunyangwa Agricultural Research Station would move from Mzuzu City to the station site\. The reason was that the city was growing and would not be ideal to have a station within the city\. Lunyangwa was in the end not moved to Mkondezi and it had to become a sub-station of Lunyangwa\. The station was opened in 1989 and it has one professional officer, one technical officer and 14 field assistants\. A total of five commodity teams conduct their experiments at the station\. The main commodities being cassava, tropical fruits, spices and rice\. 32\. Civil Works: As a new station, all the civil works, most equipment and other amenities are quite new\. They include 5 offices, 2 laboratories, 1 work-shop, 1 cold room, 2 farm input stores, 14 class F, 1 class C and 4 class D houses\. Again under NARP an access road was improved by grading and graveling\. The water supply also improved under NARP by connecting the station supply system to the Nkhata-Bay Township grid which is quite good and reliable\. Electrification was done well and is also functioning quite reliably\. 33\. Problems cited at Mkondezi regarding the dwelling houses were also cited at Bvumbwe and Makoka\. The class F houses had no kitchen and the toilets can not be accessed easily from the house\. The class D houses had a small bath-room which could have been bigger\. The class C house's bedrooms were poorly ventilated\. This was improved by constructing an additional window\. 34\. As at Kasinthula, some houses within the station have an incomplete electrification work\. They have been wired but no transformer has been installed for 6 field assistants houses, an office block and a working shed\. Another incomplete supply of equipment was the tractor without implements\. A trailer and plough were not bought together with the tractor which was expected\. The office block has no window burglar bars and hence liable to break in\. 35\. Overall, the station has substantial civil works which are being utilized\. The workshop shed is the only facility that does not match with the single vehicle and tractor\. The shed is too large and it could have been utilized by a bigger station\. Once again this is a clear indication of the errors of the initial planning exercises\. 20  Lunyanewa Research Station 36\. Lunyangwa Research Station is one of the 3 regional research centres in the country\. It has 5 sub-station under itself in the Northern Region\. It has 600 ha of land, 326 ha are under natural woodland and 230 ha as arable land\. There are 7 professional officers and 25 technical assistants\. At the station are also based the following Research Development Projects: GTZ Biological Control Programme, FAO Cassava Research and Development and the FAO small-holder Coffee Research Unit\. Besides these donor funded projects, there are cassava, maize, oil seeds and livestock commodity teams working there\. 37\. The station benefited from NARP through the acquisition of vehicles, field implements, laboratory equipment and civil works - including 5 vehicles, 6 class C houses, 10 class D houses, office block of 11 offices, 1 library, 2 laboratories, 1 glass house, 1 screen house, a spraying equipment for livestock\. One of its substations, Ntchenachena also benefitted through the building of a crop storage, 1 class D house, 1 laboratory, 2 class E houses and 2 offices\. Several houses were also rehabilitated using NARP funds at the station and at Bolero, Baka, Meru and Mbawa\. 38\. Civil Works/Laboratory: Problems cited by the station management were not at variance with what was cited at other stations and they included: (1) Wiring of houses was poor and switches had already been burnt\. (2) Roofs of some houses were leaking (3) Ground surface drainage was poor and there were water pools around houses after rain\. (4) Class E houses inside walls were not plastered (5) Class C houses had boys quarters attached to the houses and had poor stoves difficult to use for cooking (6) Furniture for the houses and offices were of very low standard - made of weak wood and for Lunyangwa the total furniture was not adequate for the house built\. (7) Glass houses have wood bases on the concrete slab and they are already rotting 2 years after starting using it\. 39\. One of the recommendation under NARP was to consolidate research stations by upgrading Bvumbwe, Chitedze and Lunyangwa as regional research centers\. Lunyangwa is not upgraded to that level until now\. The officer-in-charge post is not upgraded to DCARO level\. 40\. Training: Regarding training, management felt strongly that the station benefitted little from this programme\. There was nobody sent, using NARP funds, on neither long nor short-term training\. Even if the training was claimed to be inadequate, the quality of work going on in the laboratories shows appropriate training of technical support staff had been obtained otherwise\. 41\. Considering their large number of civil works and several rehabilitations of old buildings, the station benefitted significantly from NARP\. 21  Across Research Stations and DAR Issues 1\. DAR Research Stations Consolidation 1\.1 NARP generally strengthened the infrastructure development of many stations with emphasis, of course, on the 3 main stations\. Through NARP improvements are evident through improved office and library facilities at the main stations\. Some sub-stations like Kasinthula and Chitala also benefitted in similar manner quite significantly\. Other sub-stations have, of course, indirectly benefitted from the main station improvements through improved research programmes of highly trained scientists\. 1\.2 The most significant error, which can serve as a lesson for the future, was the little input from scientists on the ground who could have suggested appropriate adjustments and changes to the design of the dwelling houses, laboratories and glass-houses\. 1\.3 Another significant error was that sub-stations benefitted much too little compared to major stations\. What was overlooked was that major research stations need improved research facilities at the minor stations for improved results of out-reach trial sites\. 2\. DAR Re-Organization 2\.1 With the exception of the composition of the Technical Services group, that of the remaining 6 commodity groups is acceptable\. As originally conceived, the grouping of the research programmes into groups of seven has turned out to be very acceptable\. The only notable flaw is that the grouping has reduced the interaction between different commodity team scientists which, at a departmental level is not ideal\. Scientists in the DAR should interact more and promote the cross-fertilizations of ideas\. 2\.2 While multi-disciplinary approach was emphasized under NARP and thereafter, commodity team scientists in pathology, entomology and the like (Plant Protection) having been included in the Technical Services group, appear isolated from the commodity in which their research activities exist\. For few selected commodity teams, a full package of scientists including breeders, agronomists and relevant plant protection scientists would be most ideal\. 3\. Master Plan and Action Plans 3\.1 Following the agreements with the Bank, the DAR prepared the first and second editions of the Master Plan\. Specific to commodities were the Action Plans which had also been prepared towards the end of the NARP\. Although the second edition is not bound - it serves as a good guide for DAR on policy issues\. What is clearly a guide to research programmes are the Action Plans which have been reviewed by the World Bank and are now being used by scientists\. 4\. Preparatory Exercises of the Project 4\.1 As evidenced by the findings at the research stations, contractors of civil works were working in isolation of the end users of the work they were contracted for\. In some cases, because of cost saving motives, some houses were built in wrong areas of the stations\. Unfortunately they were not as flexible in their plans as would have been desired\. This was further indicated by the resistance to improve on the dwelling houses which were later found unsuitable\. Had there been consultations with station staff coupled with an in-built flexibility, some of the changes that were requested later on 22  would not have taken much of the extra money - e\.g\. an addition of a single window to a class C house to improve its ventilation\. S\. Training 5\.1 This was a successful component of the project, especially with regard to the long-term type of training\. It has transformed the trained manpower level of the DAR\. 5\.2 Unfortunately, the high expectations accruing from the high calibre trained manpower was not accompanied by improved working conditions\. The final result was that rate of attrition increased which the department had to bear with\. 5\.3 The impact of such trained manpower has already started being felt in the DAR\. There is a significant improvement in reporting - particularly in timeliness\. The impact on crop and livestock production is difficult to assess now\. One hopes however, that with improved research capabilities of the scientists, improved results will be obtained which should contribute to increased crop and livestock production\. Comments on Part I of PCR Item 2 - Under Summary Recently initiated ASP is mostly concerned with the provision of operational funds\. The project does not provide maintenance for the infrastructure procured under NARP\. Item 5\.11 While this is true, who else could have written the reports\. Past experience showed that it is better to engage local scientists plan for the department\. Item 5\.12 Scientific soundness of research proposals is intended to be achieved at the annual project meetings Item 5\.16 In addition to the absence of a formal review and perhaps because of this, most research contracts have not produced reports\. Item S\.17 The question of salaries and career structure cuts across the board in the Department, not just library staff\. Item 5\.21 Because DAR has about the same number of trained scientists as before the project, long term higher training programme under ASP is therefore justified for the remaining or newly recruited staff members\. 23  PART m: STATISI'ICAL INFORMATION Table 1\. Related Bank Loans and/or Credits Loan/Credit Title Purpose Calendar Year of Status Comments I I Approval I I (1) National Rural The project was designed November 1978 Closed The project included co- Development to assist GOM to June 30, 1986\. financing from CIDA, EDF, Programme implement the first five- PCR dated UK and Fed\. Rep\. of NRDP Phase I year phase of the June 1987\. Germany\. (Credit 857-MAI) programme\. Completion of Lilongwe Land Development Programme (LLDP)\. (2) National Rural Very similar components October 1981 Closing date Third IDA project to support Development to NRDP IV\. Main September 1986 rural development in Karonga Programme objectives to increase extended to Agricultural Division (ADD) NRDP Phase ElV agricultural production, September 1988\. in North Malawi\. (Credit 1183-MAM) income and welfare of the PCR dated smallholder sector\. It also May 1990\. included forestry\. (3) National Rural The project included April 1983 Closed Fourth IDA project to support Development components to strengthen April 30, 1991\. rural development in Programme and support extension PCR dated Lilongwe ADD\. Extension NRDP Phase IV services, training and April 1991\. services satisfactory and an (Credit 1343-MAI) adaptive research and effective mechanism for the made provision for issue and recovery of seasonal improved credit and credit was established\. marketing facilities\. (4) Agricultural Improving extension work September 1985 Closed The project formed part of Extension and nationally and research- June 30, 1993\. the fifth phase of NRDP\. It Planning Support extension linkages\. PCR dated succeeded in changing Project February 1994\. extension methodology but the (Credit 1626-MAI) impact on improved staff training, technical competence and widening farmers' contracts had not yet occurred at the time of PCR\. (5) Agricultural Services Designed to help formulate 1993 Under Total project cost: US$ 79\.2 Project and implement Institutional implementation\. million\. Co-financing (Credit 2514-MAI) and Management reforms Launched in provided by IFAD and in Research, Extension and December 1993\. African Development Bank\. Input Supply Systems\. NRDP 11 was a Wood Energy Project\. 24  Table 2\. Credit Timetable Item Date Planned Revised Date Actual Date - Identification' - 1981 - Preparation2 - September 1983 - Appraisal3 - March 1984 - Credit Negotiations January 7-11, 1985 - January 7-11, 1985 - Board Approval February 19, 1985 - February 19, 1985 - Credit Agreement May 23, 1985 - May 23, 1985 - Credit Effectiveness November 19, 1985 - November 19, 1985 - Credit Closing October 31, 1990 April 30, 1991 October 31, 1993 October 31, 1992 I Following the 1981 NRDP review\. 2 By the Department of Agricultural Research (MOA), following an overview of Malawi's agricultural research system carried out in April 1982 by ISNAR\. The World Bank's Regional Mission in Eastern Africa (RMEA) undertook regular reviews during preparation\. 3 With USAID participation at selected meetings\. 25  Table 3\. Credit Disbursements Cumulative Estimated and Actual Disbursanenis (IDA) IDA Fiscal Year 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1|91/92 1992/93 | 1993/94 \. (US$,million)\. A\. In USS Appraisal Estimates 1\.8 7\.3 14\.9 20\.5 23\.0 23\.8 23\.8 23\.8 23\.8 Actual 1\.5 4\.5 7\.0 10\.3 14\.8 17\.6 19\.6 30\.2 32\.1 Actual % of Estimats 83 62 47 50 64 74 82 127 135 \. (SDR'million)\. B\. In SDR Appraisal Estimates' 1\.8 7\.5 15\.2 20\.9 23\.5 24\.3 24\.3 24\.3 24\.3 Actual 1\.3 3\.7 5\.6 8\.1 11\.6 13\.5 15\.0 22\.7 24\.0 Actual as % of Estimates 72 49 37 39 49 56 62 93 99 Date of Final Disbursement: March 14, 1994: SDR 160,751 (US$ 225,153\.62) SDR 230,200 was cancelled\. Mission's Estimates: Figures in SDR were not given in SAR\.  Table 4\. Project Implementation (Page 1) Indicators Appraisal Estimates | Actual (or PCR Estimates) A\. Civil Works' Adm\./Offices Blocks n\.a\. 10 Library 820 m2 4 Laboratory Blocks n\.a\. 12 Greenhouses n\. a\. 3 Glasshouses n\.a\. 62 Houses: - class C 47 - class D 115 41 - class E J 63 Houses Rehabilitation 62 n\.a\. Crop Sheds n\.a\. 6 Stores n\.a\. 6 Dispensary 1 Other n\.a\. 43 B\. Relocation of Applied To be relocated by end PY 4 Impeded by the Training Research Staff Programme but most Conmmodity Teams were satisfactorily staffed at project end\. C\. Establishment of ART's - HQ PY I PY 1 - LADD PY I PY 1 - KADD PY I PY 1 - BLADD PY I PY 1 - MZADD PY 3 PY 2 - SLADD PY 3 PY 3 - NADD PY 4 PY 4 - KRADD PY 5 PY 5 D\. Master Plan PY 2 PY 2 (draft report) PY 4 (lst Edition) PY 6-PY 8 (Revised Editing) See details in Annex 1, Table 3\. 2 Including one quarantine glasshouse\. 3 Including workshops, insectary and access road\. 27  Table 4\. Project Implementation (Page 2) Indicators Appraisal Estimates Actual (or PCR Estimates) E\. Technical Assistance ARC Adviser By effectiveness PY I P&B Specialist/Fin\. Controller By effectiveness PY 1 Procurement Specialist By effectiveness PY 1 Librarian By effectiveness PY 1 Training Adviser July 1985 October 1986 F\. Staff Evaluation Process PY 1 Not Achieved G\. Scientific Career Stream PY 3 Not Achieved H\. Training Malawi Counterparts Financial Controller September 1985 June 1987 Librarian September 1986 June 1987 I\. Publications - Agricultural Handbook of Malawi PY 2 Considered unnecessary duplication of comprehensive guidelines revised and published annually\. - Annual Report PY I Annual Commodity Team reports produced regularly but DAR consolidated reports years out of date\. J\. Workshops and Reviews - Annual Planning & Reviews \. DAR PY 1 PY I \. ARC PY I PY 1 - Triennial Review PY 3 PY 4; PY 7 - Nat\. Res\. - Ext\. Workshops PY 1 PY I - ADD Res\. - Ext\. Workshops 6/annum/ADD Not imnplemented K\. Contract Research First Contracts to University PY 1 PY 5 Coffee Research Facility PY 2 PY 3 L\. Library Utilization System Established PY I PY 2 Cataloguing Completed PY 2 Not completed (Target was unrealistic) 28  Table 4\. Project Implementation (Page 3) Indicators T Appraisal Estimates T Actual (or PCR Estimates) M\. Vehicles Pick upl4WD n\.a\. 47 Saloon cars n\.a\. 10 Bus n\.a\. 1 Trucks n\.a\. 12 Motorcycles n\.a\. 42 N\. TA Persons/Months - Long-term \. IDA 264 244 \. USAID 273 381' - Short-term \. USAID 57 40 (Used for two triennial reviews and Short-term T\.A\. for Master Plan priority assessment and DAR restructuring) 0\. Training (i) Degree Training - PhD (3 years) 6 132 - MSc (2 years) 38 313 (ii) Short-term Training (person/weeks) - In-country research 3,102 2,5004 - Training abroad 1,728 3745 (iii) Study Tours 1 Including 2 training advisers for an estimated 100 person/months\. 2 Of which 4 financed by USAID\. 3 Of which 27 financed by USAID\. 4 Total of 715 persons were trained\. 5 Of which 104 financed by USAID\. 29  Table 5\. Project Costs and Financing A\. Project Costs SAR Estimates Revised Actual" 2 l l I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~Estimates' Local Costs j Foreign Exchange j Total \. (US$'000) \. 1\. Civil Works 6,633 4,277 10,910 9,480 9,322 2\. Staff Relocation 53 51 104 141 115 3\. Equipment 2 Vehicles 23 3,840 3,863 4,962 5,245 4\. T\.A\. & Training 407 16,700 17,107 16,3723 15,5713' 5\. Recurrent Costs 11,144 6,770 17,914 19,4064 19,5984' 6\. Refunding of Project Preparation Advance - - - 326 313 7\. Special Account - - - 568 8\. Eligible Expend\. for Incremental Seasonal Credit - - - 8,317 8,010 9\. Unallocated - - - 212 Total 18,260 31,638 49,898 59,784 58,174 Figures in Local Costs and Foreign Exchange Costs not available\. 2 Actual Disbursement as provided by World Bank\. 3 Including US$ 9,220,000 USAID Grant\. Total USAID Grant of US$ 15\.0 million was available for both NARP and MAEPS projects\. A total of US$ 14\.8 million was actually disbursed for both projects but not break down was available\. It is therefore assumed that US$ 9\.2 million were disbursed for NARD in line with SAR's estimates\. ' Including US$ 16,884,000 as GOM's contribution to cover ongoing DAR programmes\.  Table 5\. Project Costs and Financing B\. Project Financing SAR Estimates' | Revised2 Actual3 Actual as a % l l | of SAR Estimates \. \.(US$'OO) \. A\. IDA Financing 1\. Civil Works 9,390 9,480 9,322 99\.3 2\. Staff Relocation 100 141 115 115\.0 3\. Equipment & Vehicles 3,360 4,962 5,245 156\.1 4\. Technical Assistance and Training (a) Other than (b) below 5,766 4,851 4,818 83\.6 (b) Contract Research 980 2,301 1,533 156\.4 5\. Oper\. Costs of new Activities 1,195 2,522 2,714 227\.1 6\. Refunding of Project Preparation Advance 587 326 313 53\.3 7\. Special Account 401 568 - - 8\. i\. Unallocated 2,015 - - 8\.ii\. Eligible Expend\. for Incr\. Seasonal Credit - 8,317 8,010 9\. Unallocated - 212 Total IDA Financing 23,794 33,680 32,070 134\.8 B\. USAILD Financing' 9,220 9,220 9,220 100 C\. Government Contribution 16,884 16,8845 16,8845' 100 Total Project Financing 49,898 59,784 58,174 116\.6 As given in SAR; IDA Financing as per DCA amounted to SDR 24\.3 million equivalent as indicated in part C below\. 2 For IDA rinancing, figures are derived from the amended DCA expressed in SDR and converted into US$ using the exchange rate of 1 SDR = 1\.336 (Average 1992)\. 3 IDA financing derived from actuAl World Bank disbursement equivalent to SDR 24\.0 million (US$ 32\.1 million) as indicated in part C below\. 4 Mainly for Technical Assistance and Training\. s Actual figures not available: assumed to be the same as SAR estimate\.  Table 5\. Project Costs and Financing C\. tDA Financing Planned' Revised' Revised3 Actual Actual as a % Categories Value Value Value Value of Planned (SDR'000) (SDR'000) (SDR'000) (SDR'000) I\. Civil Works 9,590 39\.5 9,590 39\.5 6,840 28\.2 6,977\.4 29\.1 72\.8 2\. Staff Relocation 102 0\.4 102 0\.4 102 0\.4 85\.9 0\.4 84\.3 3\. Equipment & Vehicles 3,430 14\.1 3,430 14\.1 3,580 14\.7 3,925\.8 16\.4 114\.5 4\. Consultants and Training (a) Other than (b) below 5,890 24\.2 5,890 24\.2 3,500 14\.4 3,606\.2 15\.0 61\.2 (b) Contract Research 1,000 4\.1 1,000 4\.1 1,660 6\.8 1,147\.1 4\.8 114\.7 5\. Oper\. Costs of new Activities 1,220 5\.0 1,820 7\.5 1,820 7\.5 2,031\.0 8\.5 166\.5 Introduced by Project 6\. Refunding of Project Preparation Advance 600 2\.5 600 2\.5 235 1\.0 234\.6 1\.0 39\.1 7\. Special Account 410 1\.7 410 1\.7 410 1\.7 - - - 8\.i\. Unallocated 2,058 8\.5 1,458 6\.0 - - - - 8\.ii\. Eligible Expend\. for Incr\. Seasonal Credit - - - - 6,000 24\.7 5,994\.8 25\.0 9\. Unallocated - - - - 153 0\.6 - - - Total IDA Financing 24,300 100\.0 24,300 100\.0 24,300 100\.0 24,002\.8 100\.0 98\.8 Original DCA\. Approved in by the IDA in September 1992\. Amended DCA\.  Table 6\. Project Results A\. Direct Benefits SAR Estimates PCR Estimates SAR assumptions that comprehensive benefits could accrue soon, were generally optimistic\. i\. Inputs Optimize the use of inputs\. Research, on request, proved that high content (HC) fertilizers were as effective per unit nutrient as low content materials and developped recommendations for HC use\. The switch to these fertilizers, based on a comparison of the fertilizer mix imported by SFFRFM in 1987/88 and in 1992/93 saved the country some US$ 14\.4 million in 1992/93 (Annex 1, Table 2)\. ii\. Improved Varieties Selection of improved varieties of The release of flint maize hybrids should important crops\. Resistance to bring about substantial benefits by way of pests and diseases\. Good storage higher productivity, and higher returns to qualities\. fertilizers and labour\. iii\. Crop Husbandry Systems To ease major constraints of the The switch to hybrid maize would enable small farmer such as labour farmers to produce as much as before from a shortages at peak periods\. smaller sown area\. iv\. Range of Options To enable farmers to maximize Flint hybrids maize sould serve as an for Small-scale Farmers return to labour and land important step in raising returns from every resources and increase income\. resource applied or applicable to farmers\. v\. Land Improved farming systems for No special programmes for this objective underutilized land\. were launched other than irrigation related trials in the Shire Valley which are at an early stage\. vi\. Natural Resources Conservation and improvement of Dynamic Agro-forestry Research has led to the natural resources of the findings that are now in the large-scale field country (soil, water and forestry)\. trial stage and some measures, notably planting Feidherbia albida as bio-fertilizer method and vetiver grass for erosion control, are in the implementation stage and form part of extension workers' advisory programmes\. vii\. Number of Beneficiaries n\.a\. At least 250,000 farm families to date, and likely to benefit the majority of Malawi's farmers in future\. However, under the Short- term Credit assisted programme introduced in 1992 as a result of the amendment of DCA, some SDR 6 million were made available to SACA\. It is estimated that some 110,000 farmers benefitted under this programme (Annex 1, Table 1)\. B\. Economic Impact Not Applicable C\. Financial Impact Not Applicable 33  Table 7\. Status of Covenants (Page 1) Covenants Subject Status Section 3\.01(b) Borrower to sustain its annual contribution GOM had difficulty in complying with this to DAR's operating expenditures at the requirement for some years\. MOA made level in real terms reached during 1984/85\. allocation as specified by IDA for 1992/93, but whether this can be maintained in future remains to be seen\. Section 3\.01(c) ARC Secretariat to be adequately staffed\. The original proposals did not prove very satisfactory\. The Borrower made some progress towards establishing a more effective and modified staffing arrangement\. Section 3\.01(d)(i) Borrower to employ a qualified and Initially MOA did employ an expatriate experienced procurement officer\. procurement officer and did fully comply with this covenant\. Following the end of the expatriate procurement officer's contract, the staffing of the procurement unit with Malawian officials has been very weak\. Although new proposals were made, as a condition of extending the Closing Date, for strengthening the unit, they were only partially fulfilled\. Section 3\.01(d)(ii) DAR to appoint a deputy chief agricultural Complied with\. research officer\. Section 3\.01(d)(iii) DAR to employ qualified and experienced Complied with\. administrative officer at three main research stations\. Section 3\.01(e) DAR to introduce a scientific career stream This has not been complied with and because by April 1987\. Government had difficulty meeting this requirement, IDA agreed to 'waive' this condition\. Section 3\.01(f)(i) DAR to prepare research master plan by DAR has prepared a research master plan\. March 1988\. The original 1988 version has been updated twice\. Section 3\.01(f)(ii) Borrower to implement the agreed research DAR is implementing a maize action plan, master plan\. which is an important element of the overall research program; and has prepared other action plans for priority programs identified by the Master Plan\. Section 3\.01(g)(1) DAR to appoint counterpart financial This has been complied with\. However, controller\. accounting and financial planning and management, remained weak\. The accountant after returning from graduate training and attending ISNAR training to introduce improved accounting and information systems, has left DAR for better pay elsewhere\. 34  Table 7\. Status of Covenants (Page 2) Covenants Subject Status Section 3\.01(g)(ii) By April 1987 DAR to review with IDA the The expatriate left DAR for personal reasons need to extend the contract of the expatriate and his place was taken by a Malawian financial controller\. accountant with IDA's concurrence, but the purpose for which the expatriate had been hired, to introduce a suitable research costing and information system was not attempted, and IDA should have insisted on employment of a replacement\. Section 3\.02 DAR to employ consultants satisfactory to Complied with\. IDA using acceptable selection procedures\. Section 3\.02(a) Goods to be insured in transit\. Complied with\. Section 3\.03(b) Goods to be used exclusively for the Complied with\. project\. Section 3\.04(a) Borrower to provide IDA with project Complied with\. plans, specifications, etc\. Section 3\.04(b)(i) Maintain satisfactory records\. Complied with\. Section 3\.04(b)(ii) Enable IDA staff to have free access to the Complied with\. project\. Section 3\.04(b)(iii) Regular reporting and review of project Routine project progress reports have usually progress\. been submitted but were often late\. The annual reporting requirements require DAR to submit to IDA a review of the previous year's research and a prioritized research programme for the following year\. This was complied with for the first time in 1991, although the format of the report was not satisfactory\. TA has since been used to improve the format - also an Editorial Committee has been established for that purpose\. The first triennial research review was completed to IDA's satisfaction; the second took place punctually\. Section 3\.04(d) Borrower to prepare project completion Part II of PCR is to be prepared by the report\. borrower\. Section 3\.05 Borrower to provide all land needed for Complied with\. project\. Section 4\.01(a) Borrower to maintain satisfactory records Complied with, although finalization of and accounts\. accounts frequently delayed\. Section 4\.01(b) Borrower to maintain adequate records for Compliance believed to be satisfactory\. expenditure claimed against statements of expenditure\. Section 4\.01(c) Borrower to have project accounts audited\. The audit has frequently been delayed\. Section 4\.02 Borrower to maintain project installations DAR has had difficulty complying with this adequately\. covenant due to its limited operating budget\. 35  Table 8\. Use of Bank Resources A\. Bank Staff Inputs Planned Actual \. \. \. \. \. \. \. \. \. \.(Staff-w eeks) \. Preparation n\.a\. 23\.6 Appraisal n\. a\. 32\.2 Negotiations n\. a\. 4\.7 Supervisions n\. a\. 226\.4 PCR n\. a\. 0\.3 Total n\.a\. 287\.2 36  Table 8\. Use of Bank Resources B\. Mission Data Stage of Project Cycle | Monthi/Year Number of Specialization Days in Field2 Performance Rating | Typcs of l j Persons T Represented' Status3 Problems4 Pre-preparation n\.a\. n\.a\. n\.a\. n\.a\. Preparation n\.a\. n\.a\. n\.a\. n\.a\. Appraisal February/March 84 4 n\.a\. n\.a\. Final Appraisal June/July 84 4 n\.a\. n\.a\. Supervision I October 85 2 R, E 9 Pre-effectiveness Supervision 2 February 86 2 R, T 12 1 Supervision 3 June 86 2 R, E 11 I Supervision 4 February/March 87 2 R, A 20 (10) 2 PM Supervision 5 October/November 87 45 A, A, E, R 26 (10) 2 PM Supervision 6 May/June 88 55/ A, A, E, R, AR 26 (7) 2 PM Supervision 7 October/November 88 35' A, A, E 31 (8) 2 AF Supervision 8 February/March 89 3 A, E, R 31 (10) 2 AF, PP w Supervision 9 November/December 89 25' A, A 25 (10) 2 AF, PP Supervision 10 June/July 90 1 E 26 (8) 3 DO, LC, AF, PP Supervision 11 December 90/January 91 2 E, R 30 (11) 2 AF, PP Supervision 12 April/May 91 ,3 A, R, P 22 (7) 2 PP Supervision 13 October/November 91 35/ A, A, T 26 (6) 2 LC, PP Supervision 14 June/July 92 35/ A, A, R 28 (6) 2 PP Supervision 156 May/June 93 2 A, R, 18 (9) n\.a\. 6 n\.a\.6/ 'Specializations are: R = Research Specialist; A = Agriculturist; E = Economist; T = Training Specialist; AR = Architect; P = Procurement Specialist\. 2 From the forth Supervision mission, the World Bank combined the supervision of other IDA assisted projects; e\.g\. MAEPS, NRDP III, NRDP IV, Agricultural Marketing and Estate Project, Dowa West Rural Development Project, Kasungu Agricultural Development Project and Smallholder Agricultural Credit Project\. Figures in brackets are attributed to NARP\. 3 Performance rating status: I = Problem free or minor problems; 2 = Moderate problems; 3 = Major problems\. 4PM = Project Management; AF = Availability of Funds; Pr = Procurement Progress; DO = Development Objectives; LC = Compliance with Covenants\. Including consultants\. 6 No Form 590 was prepared\.  MALAWI: Nationai Agricultural Rescarch Project (Credit 1549-MAI) - Project Completion Repon Part Ill: Annex 1: Seasonal Credit Recovery for 1992/93 Season as on 03/12/93 Amon\.unt Anmout Amount Borrowers ADD Loaned Recovered X Recovery Batance Clubs | Paid Off Not Start Out Starding Beneficiaries (MHK'000) (K('000) X( \. \. \. \. \. \. \. \. \. \. \. \. K'000)\. \. (No\.) \. \. \. KRADD 1,772 746 42\.08 1,026 610 99 167 511 6,779 MZADD 15,739 1,675 10\.64 14,064 2,002 70 700 1,932 38,384 KADD 43,892 4,066 9\.26 39,826 3,772 68 2,620 3,704 95,931 LADD 48,001 6,193 12\.90 41,808 3,571 43 2,406 3,528 116,419 SLADD 8,076 714 8\.84 7,362 1,151 35 698 1,116 24,559 LWADD 14,316 3,874 27\.06 10,442 2,001 280 733 1,721 50,125 BLADD 10,963 1,901 17\.34 9,062 1,786 113 635 1,673 40,040 NADD 1,528 845 55\.34 683 741 138 99 603 11,981 Total 144,287 20,014 13\.87 124,273' 15,634 846 8,058 14,788 384,218' 00 Source: SACA\. ' Of which MK 36 million (SDR 6 million) from IDA\. 2 Of which 110,000 benefitted from the IDA assisted programme\.  MALAWI: National Agricultural Research Project (Credit 1549-MAI) - Project Completion Report Part IlIl: Annex 2: Switch of Fertilizer Mix: Estimated Savings in Fertilizer Imports Expenditures in 1992/93 Fertilizer (Title) Quantities' Nutrient Content\. Prices 1992/93 of Values of Fertilizers 1987/88 1992/93 ~~~~~Fert iIi zerS2 III 11987/88 1992/931987/88 12/93 1987/88 1992/93 \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. (Tons) \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. (MK/kg) \. \. \. \. \. \. (MK million) \. \. \. \. \. S/A (21%) 8,500 - 1,785 - 1\.000 8\.5 - CAN (26%) 30,000 25,000 7,800 6,500 1\.390 41\.7 34\.8 20:20:0 (40%) 20,000 - 8,000 - 1\.300 26\.0 - 23:21:0:4S (44%) 5,000 18,751 2,200 8,250 1\.400 7\.0 26\.3 UREA (46%) 9,000 55,000 4,140 25,300 1\.216 10\.9 66\.9 DAP (64%) 5,000 37,500 3,200 24,000 1\.323 6\.6 49\.6 Total 77,500 136,251 27,125 64,050 100\.7 177\.6 Average Price of Fertilizer in 1987/88: MK 1\.3/kg (MK 100,700,000: 77,500,000) N\.B\. in 1992/93 terms\. Average Price of Fertilizer in 1992/93: MK 1\.3/kg (MK 177,600,000:136,251,000) NP\. in 1992/93 terms\. '\.0 Average Price of Nutrient in 1987/88: MK 3\.712/kg (MK 100,700,000: 27,125,000) N\.B\. in 1992/93 terms\. Average Price of Nutrient in 1992/93: MK 2\.7m7/kg (NK 177,600,000: 64,050,000) N\.B\. in 1992/93 terms\. Total Savings in Fert\. lIports Expend\. in 1992/93 as coupared to 1987/88: ((64,050,000 x 3\.712) - (64,050,000 x 2\.773)] = MK 60\.2 million (USS 14\.4 million) 1 Source: MOA (SFFRFM Fertilizer Imports)\. 2 Source: MOA\.  MALAWI: National Agricultural Rescaerh Project (Credit 1549-MAI) - Project Completion Report Part III: Amex 3: CiviL Works Number Research | Adm\. Library Laboratorie Houses Crop Access of Stations Blocks/ Blocks s Blocks Greenhouse Glasshouses Sheds Hostet Dispensar IJorksho Stores Insectory Roads Contract Offices s Class C|Class DIClass E Y P 1 Chitedze/Makoka 2 2 3 2 22 16 - 2 1 1 - - - - (8 rooms) 2 Chitala & Salima 2 - 2 - 6 2 10 - 2 - 1 - - 3 Lunyangwa, 3 1 4 1 11 15 2 2 - - 1 2 Mkondezi, Karonga, Ntchenachena, Baka 4 Kasinthula, 2 - 2 - 2 - - 1 - - - 2 - Ngabu, mimosa 5 Bvumbwe, 1 1 1 - 6 8 2 - - - - 2 1 1 Liwonde, (1 quarantine) Blantyre Total 10 4 12 3 47 41 6 6 1 1 1 6 1 1 Source: Norman & Dawbarru (Contractor)\.

APPROVAL

P007860

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 4254 PROJECT COMPLETION REPORT PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) December 30, 1982 Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.   FOR OFFICIAL USE ONLY PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT TABLE OF CONTENTS Page No\. PREFACE \. i KEY PROJECT DATA \. ii MISSION DATA \. \. iii HIGHLIGHTS \. \. \. -- \.iv I\. INTRODUCTION \. 1 II\. PROJECT PREPARATION, APPRAISAL AND NEGOTIATIONS \. 1 III\. PROJECT IMPLEMENTATION \. \. \. 5 IV\. COST ESTIMATES AND DISBURSEMENTS \. 8 V\. ECONOMIC RE-EVALUATION \. \. 9 VI\. PERFORMANCE OF THE BORROWER \. 10 VII\. ROLE OF THE BANK \. \. \. 12 VIII\. CONCLUSIONS \. \. 12 TABLES 1\. Appraisal Estimates and Actual Cost \. \. 13 2\. Scheduled and Actual Disbursements \. \. \. 14 3\. Traffic and Vehicle Operating Costs on Project Roads 15 MAP IBRD - 3770R1-PCR | This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed witbout World Bank authorization\.   PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT PREFACE The following is a Project Completion Report on the Fourth Highway Project in Paraguay, for which Loan 1059-PA in the amount of US$14\.5 million was approved by the Board on December 10, 1974\. The Loan was closed on June 30, 1981, and, on July 21, 1981, undisbursed funds amounting to US$27,243\.14 were canceled\. This Completion Report was prepared by the Bank's Latin America and the Caribbean Regional Office and is based on information obtained from the files of the Bank's Record Center, LAC Information Center, Appraisal and Supervision Reports for Loan 1059-PA and on the final reports prepared by consultants responsible for supervision of the civil works\. In accordance with the revised procedures for project performance audit reporting, this Completion Report was read by the Operations Evaluation Department but was not audited by OED staff\. The Draft Completion Report was sent to the Borrower; however, no comments were received\.   - ii - PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT KEY PROJECT DATA Original Item Plan Actual Total Project Cost (US$ million) 20\.0 21\.1 Overrun (%) - 5\.5 Loan Amount (US$ million) 14\.5 14\.5 Disbursed 14\.5 14\.5 1/ Date Physical Components Complete 12/78 7/80 Time Overrun - 40% Estimated Economic Rate of Return 21% 31\.5% Financial Performance - Good Institutional Performance Fair Other Project Data Original Item Plan Actual First Mention in Files or Timetable 07/70 Appraisal 11/71 Re-appraisal - 03/74 Negotiations 03/72 03/07-10/74 Board Approval 05/72 12/10/74 Loan Agreement 05/72 12/12/74 Effectiveness 08/72 03/11/75 Closing Date 06/30/79 12/31/80 Borrower Republic of Paraguay Executing Agency Ministry of Public Works and Communications (MOPC) Fiscal Year of Borrower January 1 - December 31 Follow-on project Fifth Highway Project Loan Number 1529-PA Amount US$33\.0 million Loan Agreement 03/17/78 Country Exchange Rates Name of Currency Guarani (¢) Appraisal Year Average US$1\.00 = ¢126\.0 Intervening and Completion Year Average The rate of exchange of US$1 = ¢126\.0 did not change during the project implementation period\. 1/ On July 21, 1981, undisbursed funds amounting to US$27,243\.14 were canceled\.   - iii - PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT MISSION DATA No\. of No\. of Date of Type Month/Year Staff Weeks Staff/Weeks Report Preparation 09/70 2 1 2 11/70 Preparation 04/71 4 1 4 06/71 Appraisal 11/71 4 2 8 12/72 Reappraisal 03/74 2 3 6 08/74 Totals 7 20 No\. of No\. of Date of Type Month/Year Staff Weeks Staff/Weeks Report Supervision 03/75 2 2 4 04/22/75 Supervision 09/75 2 2 4 10/05/75 Supervision 11/75 1 1 1 12/30/75 Supervision 06/76 1 1 1 07/27/76 Supervision 10/76 1 1 1 11/03/76 Supervision 02/77 2 2 4 04/07/77 Supervision 04/77 2 2 4 06/24/77 supervision 10/77 2 1 1 11/29/77 Supervision 04/78 2 2 4 06/20/78 Supervision 10/78 2 2 4 11/29/77 Supervision 02/79 1 2 2 04/29/78 Supervision 07/79 1 2 2 08/09/79 Supervision 10/79 2 2 4 11/07/79 Supervision 05/80 2 2 4 06/02/80 Supervision 10/80 2 1 2 11/20/80 Totals 25 42 Total Supervision Time (Includes Mission and Headquarters Time) FY-75 - 10\.4 Staff-weeks FY-79 - 4\.9 Staff-weeks FY-76 - 13\.3 " FY-80 - 3\.9 " FY-77 - 4\.9 FY-81 - 4\.0 1/ FY-78 - 5\.2 " 1/ Estimated and includes preparation of Project Completion Report\.   - iv - PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT HIGHLIGHTS Loan 1059-PA for US$14\.5 million supported road construction and reconstruction of 102 km of high priority roads, purchase of spare parts for road maintenance equipment and technical assistance to improve road main- tenance operations, transport planning and development of the local construction industry\. The project was generally implemented as planned except for substantial delays in the completion of the Encarnacion-Pirapo Road (para 3\.04)\. The actual cost of the project, US$21\.1 million, was in line with the appraisal estimate of US$20 million\. The reestimated ERR for the Encarnacion-Pirapo Road (39%) is well above the original estimate (24%), mainly because agricultural development along this project road exceeded that foreseen at appraisal (paras 5\.02, 5\.05)\. On the other hand, the reestimated ERR for the Mbocayaty-Colonia Independencia Road does not show a significant difference from the appraisal estimate of 12% (paras 5\.06, 5\.07)\. Although the technical assistance for transport planning and road maintenance proved of value to the Government, its impact was below appraisal expectations (para 8\.02)\. The main objective of strengthening indigenous capabilities to enable the phasing out of consultants' services is being achieved, at a slower pace than foreseen at this project appraisal, within the framework of three follow-on projects\. However, the recurrent problem encountered during the implementation of the Fourth Highway Project, the loss of qualified technical staff to the highpaying hydroelectrical projects, still persists and is being addressed under the Seventh Highway Project (Loan 2140-PA) (para 6\.04)\. Also, the abundance of work for the construction industry greatly diminished the interest in the recommendations for aid to the industry developed under the project, and no action resulted from them (para 8\.02)\.   PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT I\. INTRODUCTION 1\.01 Paraguay's highway network, including the primitive track system serving the Chaco, totals about 8,500 km of which some 6,700 km are under the jurisdiction of the Ministerio de Obras Publicas y Comunicaciones (MOPC)\. Of the latter, some 85% are unpaved and susceptible to closure for up to 100 days per year because of rain\. Road development has been concentrated on paving the more heavily trafficked roads and expanding the network to connect economic and population centers\. Adequate maintenance is critical and improve- ments are required to meet growing traffic volumes and facilitate the develop- ment of new agricultural areas\. 1\.02 Over the past 20 years, the Bank has been continuously involved with highway development in Paraguay\. Since 1961, seven highway projects (total lending about US$149 million) have been approved which, when the ongoing Fifth, Sixth and Seventh Highway Projects are completed, will have resulted in the up- grading of more than 900 km of primary roads, construction of about 500 km of feeder roads and improvements in maintenance management and operations\. In addition, four agricultural projects have provided US$17\.5 million for improve- ment and maintenance of about 1,500 km of additional feeder roads\. 1\.03 This Completion Report is based on information obtained from the files of the Bank's Record Center, LAC Information Center, Appraisal and Supervision Reports for Loan 1059-PA and on the final reports prepared by consultants responsible for supervision of the civil works\. II\. PROJECT PREPARATION, APPRAISAL AND NEGOTIATIONS 2\.01 Project preparation began in early 1969 when, under financing provided by the Second Highway Project (Loan 443-PA; US$2\.1 million; April 1966), a contract was awarded to a US consulting firm for carrying out feasi- bility studies for about 460 km of roads included in the so-called "Plan Triangulo" area (Map IBRD-3770RI-PCR)\. Detailed engineering for about 250 km of the highest priority roads was also included in the consultant's contract\. The feasibility studies were completed in early 1970, the priority roads were selected in July 1970, and detailed engineering was completed in November 1971\. However, the Highway Department (Vialidad) of MOPC questioned the final cost estimates which were substantially higher than those of the feasibility studies\. Although the consultant had followed the design standards recom- mended in the feasibility studies, final quantities and unit price estimates produced results well above the current range of costs per kilometer for similar roads in Paraguay\. Subsequently, in mid-1973, the consultant revised the engineering using lower design standards where appropriate to reduce major quantities and lower costs to an acceptable level\.  - 2 - 2\.02 During project preparation the Bank felt that the project should not be appraised until Government made clear its intentions regarding improvement or closing of the state-owned, 376 km Presidente Carlos Antonio Lopez railway (PCAL) and that there was acceptable evidence of adequate local financing being available for the project because of serious fiscal problems in the country\. The Government informed the Bank by letter in May 1971 that it would provide no additional financial support to the PCAL beyond the level of funds currently assigned to meet deficits (about US$0\.6 million per year); this was accepted by the Bank\. Although no formal confirmation concerning counterpart funds was received, the Bank, under strong pressure by Government, sent an appraisal mission to Paraguay in November 1971\. 2\.03 Five "Plan Triangulo" roads, for which detailed engineering and cost estimates had been prepared, were considered at appraisal\. These roads were: Cost Length 1/ Estimate 2/ B/C Ratio Km US$ Million Encarnacion-Pirapo 76 6\.9 1\.9 Villarica-Numi 29 3\.0 0\.6 Mbocayati-Col\. Independencia 27 2\.0 0\.7 Paraguari-Villarica 83 6\.3 0\.9 Carapegua-Col\. La Colmena 51 4\.0 0\.6 Totals 266 22\.2 1/ Including bypasses of towns and access roads\. 2/ Feasibility study estimates, excluding contingencies\. As only the Encarnacion-Pirapo road showed an acceptable economic rate of return, the project proposed at that time included construction and supervision of that road alone\. The appraisal report was advanced to the yellow cover stage in December 1972 but further action was deferred by the Bank because of the continuing difficult fiscal situation in the country\. 2\.04 Paraguay's financial situation had improved considerably by early 1974 and in March that year the Bank agreed to reappraise the proposed project on the basis of revised engineering and cost estimates (para 2\.01)\. The Government had asked that the other four "Plan Triangulo" roads be again considered in the reappraisal and Vialidad had been requested to obtain new traffic counts on the roads prior to the mission's visit\. Unfortunately, a fuel shortage in February 1974 caused a substantial drop in traffic and, therefore, the new traffic figures were not representative\. Traffic counts were again taken in mid-1974 when fuel supplies and traffic had returned to normal\. As a result, the Mbocayaty-Colonia Independencia road showed an acceptable economic return and was included in the project\.  - 3 - 2\.05 The Government requested that the project also include financing of spare parts, tires and batteries for road maintenance equipment procured under the previous highway project\. The Bank agreed with this request and suggested that, in addition, other components aimed at institution building and prepara- tion of the next highway projects be included\. The following elements were added to the project: (a) Continued technical assistance for highway maintenance - During recent years, road maintenance had been managed by consultants rather than by Vialidad\. Therefore, the pro- ject included financing of consulting services for an interim two-year period during which it was expected that Vialidad would strengthen its maintenance department and take over all maintenance operations\. (b) Preparation of a study to determine further maintenance requirements - The objective was to prepare a five-year highway maintenance program to improve planning and operations and which would provide the basis for possible Bank and other financing\. (c) Technical assistance for transport planning - Neither the Technical Secretariat for Planning nor MOPC Planning Office were capable of proper transport planning\. Therefore, consultant assistance was provided to establish and make operational the Office for Coordination and Integral Planning of Transport (OCPIT) within MOPC as had been recommended by the 1973 UNDP-financed transport survey\. Training abroad of selected local personnel was also included\. (d) Aid to the local construction industry - The Bank, in agree- ment with MOPC and the Paraguayan Chamber of the Construction Industry, included financing of consulting services for a study to improve the performance of the local construction industry mainly in the fields of work planning, site manage- ment, equipment usage, personnel training, costing and bid preparation\. 2\.06 Negotiations were carried out in Asuncion between March 7 and 10, 1974, and, on December 10, 1974, a loan amounting to US$14\.5 million was approved by the Executive Directors\. The Loan Agreement was signed on December 12, 1974 and became effective on March 11, 1975\. 2\.07 The project items and their estimated costs, as shown in the appraisal report, were:  -4- US$ Million Equivalent % Foreign Local Foreign Total Exchange A\. Construction and Reconstruction of Roads (a) Encarnacion-Pirapo road, about 70 km 2\.70 6\.30 9\.00 70 plus a 1\.5 km bypass and a 4\.5 km spur road (b) Mbocayaty-Colonia Independencia road, 0\.90 2\.10 3\.00 70 about 24 km plus a 2 km acess road Subtotal 3\.60 8\.40 12\.00 B\. Right-of-Way 0\.30 - 0\.30 C\. Purchase of Spare Parts, Tires and Batteries for Maintenance Equipment - 1\.15 1\.15 100 D\. Consulting Services (a) For supervision of construction of roads under A above 0\.20 1\.00 1\.20 80 (b) For extension of the present maintenance assistance 0\.04 0\.16 0\.20 80 (c) For a study of future maintenance 0\.04 0\.16 0\.20 70 (d) Technical assistance for transport planning and training 0\.08 0\.32 0\.40 80 (e) Aid to local construction industry - 0\.10 0\.10 100 Subtotal 0\.36 1\.74 2\.10 E\. Contingencies Physical (10% of Item A) 0\.36 0\.84 1\.20 Escalation: 25% of Item A 0\.86 2\.14 3\.00 13% of Item D 0\.02 0\.23 0\.25 Subtotal 1\.24 3\.21 4\.45 Total 5\.50 14\.50 20\.00 72% All project elements were expected to be completed by December 31, 1978 and the loan closing date was set at June 30, 1979\.  - 5 - III\. PROJECT IMPLEMENTATION Construction and Reconstruction of Roads 3\.01 Fo- bidding purposes the 76 km Encarnacion-Pirapo road was divided into two contracts with the option of bidding individual contracts or the two in combination\. The Mbocayaty-Colonia Independencia Road (26 km) was tendered as a single contract\. Bids, by prequalified contractors, were opened in September 1975 and, with Bank agreement, awards were made to the lowest bidders as follows: (i) both contracts of the Encarnacion-Pirapo road to a Japan/Paraguay joint venture for US$10,950,000, about 10% below the appraisal estimate, including contingencies; and (ii) the Mbocayaty-Colonia Independencia Road to an Argentine/Paraguay joint venture for US$4,154,688, about 3% above the appraisal estimate, including contingencies\. Two joint venture Paraguay/Argentine firms (one for each road) were retained to supervise construction\. 3\.02 Contractor mobilization began in January 1976, somewhat earlier than originally scheduled\. However, work on the Mbocayaty-Colonia Independencia road encountered delays after a few months when the contractor in order to provide suitable materials, was required to locate and develop a new gravel quarry located some 90 km from the project as compared with a possible quarry adjacent to the road which was indicated in the bidding documents\. The documents, however,'clearly specified that it was the contractor's respon- sibility to provide acceptable materials for the base and pavement works\. Additional delays resulted from a management reorganization by the contractor and late provision of some key construction equipment, particularly for crushing operations\. 3\.03 The Mbocayaty-Colonia Independencia road was satisfactorily completed in mid-July 1978, about eleven months behind the contract schedule\. Upon completion, the contractor submitted a claim amounting to US$666,000 mainly to cover additional transport costs from the new quarry\. Vialidad agreed to pay US$320,750 of the claim but, at the same time imposed a fine of US$98,500 in liquidated damages for late completion\. The final cost of the works, without the fine and including price escalation, was US$4,133,819, about 0\.5% below the bid proposal and about 2% over the appraisal estimate, including contingencies\. 3\.04 Works on the Encarnacion-Pirapo road suffered delays from the outset\. Initially the contractor concentrated all efforts on constructing a large camp near the center of the project and delayed mobilizing needed construction equipment, especially crushing plant, together with adequate equipment repair facilities\. The contractor's field management was initially very poor and was changed several times but without significant improvement in work organization and execution\. By the contract completion date of March 1978 only about 55% of the work was completed and construction was not finished satisfactorily until July 1980, about 28 months behind schedule\. Liquidated damages amounting to US$530,000 were levied for the delay\.  - 6 - 3\.05 Shortly after completion the contractor submitted a claim for US$5\.5 million mainly for additional administrative costs caused by the longer construction period and for additional equipment, materials and labor costs required to finish the work\. Vialidad rejected the entire claim as not justified\. Thus, the final cost, including price escalation, was US$11,380,000 which is about 4% over the bid price and nearly 5% less than the appraisal estimate including contingencies\. 3\.06 Construction supervision by the consultants was satisfactory\. Final costs, including necessary contract extensions, were US$504,800 for the Mbocayaty-Colonia Independencia road and US$1,370,000 for the Encarnacion-Hohenau-Pirapo road\. Both costs are about 12% of the final construction cost, which is reasonable under the circumstances but are about 38% over appraisal estimates mainly because of the longer than expected construction periods\. Purchase of Spare Parts, Tire and Batteries for Maintenance Equipment 3\.07 Spare parts and other items were procured by direct purchase and negotiated contracts as specified in the Loan Agreement\. Following deter- mination of final costs for road construction and other project elements, all funds remaining in the loan account (about US$1\.1 million) were used, with Bank agreement, for the purchase of additional spare parts for rehabilitation of road maintenance equipment\. Consulting Services for Road Maintenance 3\.08 The same joint venture of US/Paraguay consulting firms that carried out the maintenance assistance under the previous Bank highway project was engaged for the extension of assistance\. This continued assistance was intended to phase out consultant management and return operations to Vialidad's control but this was not accomplished entirely, mainly because of serious losses of professional and technical Vialidad staff, particularly to a major hydroelectric project where salaries were up to four times those paid by the Civil service\. The situation, however, was partially corrected under the Fifth Highway Project (Loan 1529-PA; US$33\.0 million; March 1978) when a Main- tenance Project Unit was created\. The Unit was initially staffed with some expatriates, but most of these have been replaced and a majority of staff is now from Vialidad\. 3\.09 The joint venture consultant also completed a report in mid-1977 which recommended a comprehensive five-year road maintenance program\. The program, which was the principal basis for appraisal of the Bank's Fifth Highway Project, included proposals for rehabilitation and enlarge- ment of Vialidad's equipment fleet; improvement of inventories, cost account- ing and budgetary control; and a road betterment program to be carried out simultaneous with the maintenance program\. Vialidad accepted the report's major recommendations and their implementation is being carried out under the Fifth Highway Project\.  - 7 - Technical Assistance for Transport Planning 3\.10 The assistance in transport planning by the Office of Coordination and Integral Planning for Transport (OCPIT) was carried out satisfactorily by a joint venture of Argentine and Paraguayan consultants\. Among the tasks performed were: (i) preparation of feasibility studies for several high priority roads; (ii) evaluation of the operating efficiency and service of the various transport modes and recommendations for improvements; (iii) preparation of a ten-year investment program for the different transport modes (except civil aviation) on the basis of economic priorities; (iv) determination of transport costs and tariff policies; (v) study of road user charges;-and (vi) development of basic data for the transport sector\. 3\.11 The results of the above tasks proved of value to Government but, unfortunately, only minimum training was imparted to OCPIT staff by the consultants in the course of their work\. This was due entirely to OCPIT's inability to recruit and retain qualified staff because of non-competitive civil service salaries\. Technical assistance to OCPIT is being provided for under ongoing projects\. Development of the Local Construction Industry 3\.12 Vialidad engaged the services of a joint venture of Argentine/ Paraguay consulting firms to carry out a study of the local construction industry and to conduct seminars for MOPC staff and contractors\. Some major recommendations of the report, which was submitted in early 1979, were: (i) creation of a Register of Contractors; (ii) improved contractor insurance and financing; (iii) reliable Government work program with related funding; and (iv) continuing training courses for contractors\. 3\.13 Vialidad has not yet taken action on implementing,the study recom- mendations and, in an effort to induce action, a covenant was included in the Loan Agreement for the Sixth Highway Project (Loan 1736-PA; US$39\.0 million; June 1979) requiring the Borrower to prepare an implementation plan of action satisfactory to the Bank\. Successive supervision missions have reminded MOPC of this obligation but the matter has continued to receive little priority\.  - 8 - This is due in part to the fact that there is abundant work for contractors, particularly in Paraguay, on major hydroelectric projects where prices paid are substantially higher than on normal construction works and, therefore, industry interest in new regulations and laws is limited\. IV\. COST ESTIMATES AND DISBURSEMENTS 4\.01 A summary comparison between appraisal estimates and final costs is shown in Table 1\. Final project cost was US$21\.1 million, less than 6% over the appraisal estimate of US$20\.0 million, including contingencies\. The variations in actual costs and appraisal estimates for the various project components have been explained in previous paragraphs\. 4\.02 The allocation of loan funds was revised three times, as shown below, to meet actual construction costs and to provide for necessary additional spare parts, tires, etc\. Original First Second Third Category 12/12/74 10/14/77 11/20/80 6/30/81 1\. Civil Works 8,400,000 11,530,000 10,432,000 10,431,203 2\. Spare Parts 1,150,000 1,400,000 2,462,000 2,435,652 3\. Consultants 1,740,000 1,570,000 1,606,000 1,605,902 4\. Unallocated 3,2l0,OO0 - - - Totals 14,500,000 14,500,000 14,500,000 14,472,757 1/ 4\.03 Disbursements lagged behind appraisal estimates from the start (Table 2)\. This reflects the initial slow pace of the construction works and the considerable delay in completing both project roads (paras 3\.03 and 3\.04)\. The closing date was extended three times: from the original date of June 30, 1979 to June 30, 1980; then to December 31, 1980; and finally, to June 30, 1981 to allow for additional spare part purchases (para 4\.04)\. 1/ On July 21, 1981, undisbursed funds amounting to US$27,243\.14 were canceled\.  - 9 - V\. ECONOMIC REEVALUATION Encarnacion-Pirapo Road 5\.01 Reconstructing, improving and shortening by 20 km the road between Encarnacion and Pirapo has already contributed significantly to the economic development of Itapua Province\. Further, this 76 km section of Route 6 was the first link in completing a paved through road from Encarnacion to Ciudad Stroessner, Paraguay's principal entry port to Brazil\. The continuation of Route 6 from Pirapo to Ciudad Stroessner and construction of about 500 km of feeder roads in the region are being financed under the Sixth Highway Project with completion scheduled for 1984\. Over the next ten years this through road will substantially support and augment agricultural development and rural accessibility in Itapua and Southern Alto Parana Provinces\. 5\.02 Development along the project road has exceeded that foreseen at appraisal\. The many highly efficient colonies and cooperatives in the area have prospered rapidly and the value of export crops such as cotton, soya beans and tuna oil has been growing at over 10% p\.a\. during the period 1976-80\. The Bank's Second Rural Development Project (Loan 1418-PA; US$ 22\.0 million; May 1977) has been a major factor in the area's accelerated development\. 5\.03 Although the road was not formally completed until July 1980, by November 1978, 60% of its length was open to traffic and actual traffic in February 1980, when the entire road was opened, exceeded the appraisal estimate for 1980 by 80%\. Average daily traffic for 1980, based on counts both in and out of harvest season, was 1,050 vehicles of which more than 50% were trucks (Table 3)\. This traffic growth occurred despite rapid escalation in motor fuel costs and it can be expected that the continued rapid growth of production in this richly endowed area will continue for at least the next 15 years, the period used for forecasting benefits in this reevaluation\. It has therefore been conservatively assumed that traffic will grow at the following rates - Light vehicles, 6% p\.a\.; buses, 4% p\.a\.; and trucks, 7% p\.a\. This compares with appraisal estimates of 5\.4%, 3\.5% and 6%, respectively\. 5\.04 The nominal construction cost taking into account price escalation was US$11\.38 million and the supervision nominal cost was US$1\.37 million\. Thus, total cost for the project road was US$12\.75 million\. Due to delays in completing the works (para 3\.04) Vialidad assessed the contractor liquidated damages amounting to US$530,000\. The cost to Vialidad of the project was, therefore, US$12\.22 million\. 5\.05 The appraisal estimated economic rate of return (ERR) for this road averaged about 24% for the two sections, Encarnacion-Hohenau and Hohenau-Pirapo\. The reevaluation considers the entire 76 km as a whole, taking into account the 20 km distance saving over the old road\. The economic cost of construction (US$16\.5 million) is calculated by inflating nominal costs to 1980 prices; benefits are also in 1980 prices\. With a revised estimated ERR of 39%, this highway investment has proved much more successful in economic terms than expected\.  - 10 - The higher ERR is due to greater than expected traffic, reflecting fast economic development which the road helped to generate, and much greater than estimated vehicle operating cost savings (Table 3), principally due to the rapid escalation in real fuel prices\. Mbocayaty-Colonia Independencia Road 5\.06 Very little information is available on development of the influence area for this 26 km road improvement\. However, traffic counts taken in October 1980 show average daily traffic on the road of 310 vehicles with about 55% being buses or trucks\. This is slightly higher than the appraisal estimate for 1981\. 5\.07 The works were completed and the road fully opened to traffic in July 1978, ahout eleven months behind schedule\. The final construction cost of US$4\.13 million is about 2% over the appraisal estimate, including contingencies\. The economic cost of the project including supervision is US$6\.52 million in 1980 prices\. The estimated ERR on this road is 12% as compared with the appraisal estimate of 13%\. The reevaluation confirms that the improvements were justified\. VI\. PERFORMANCE OF THE BORROWER 6\.01 Considering the serious staff constraints under which the project was executed, the Borrower's performance was generallv 0atlsractorv The long delay in completing the Encarnacion-Hohenau-Pirapo road was caused mainly by contractor problems\. Although the Government made numerous and strong representations to the contractor's headquarters concerning needed improvements in work scheduling and overall project management, little or no action was taken on the Ministry's complaints\. 6\.02 The institution building components of the project were not entirely successful\. Good results were obtained from the assistance to improve transport planning (para\. 3\.10), and in preparing a road main- tenance program (para 3\.09) but, the exodus of qualified personnel, par- ticularly to the nearby hydroelectric works, prevented Vialidad from assuming all highway maintenance activities during the agreed two year period of consultant assistance\. The consultant's recommendations for aiding the local construction industry have not been implemented by Vialidad because of limited interest by the industry (para 3\.13)\. 6\.03 Paraguay has kept the lid on the size of its government agencies\. Institutional capacity is, therefore, clearly lagging behind requirements\. On the other hand, the public sector has not claimed large shares of GDP and has not built up large and inefficient administrative establishments\. Restraints on administration growth within a framework of containment of the public sector will continue to limit opportunities for improvements\.  - 11 - 6\.04 The Borrower, in general terms, has complied with the principal covenants of the Loan Agreement except for the following: (a) Section 4\.03(b) Sets forth the Borrower's obligation to improve the enforcement of regulations limiting dimensions and weights of vehicles using the national roads\. The Borrower has only three obsolete fixed weighing scales which do not have any cross-check system and control is loosely carried out\. The Fifth Highway Project provided financing for a thorough study of the problem as well as for the purchase of electronic scales and construction of the weighing stations\. This study was completed in August 1980\. The scales have been purchased and construction of the weighing stations is under way\. The vehicle weight control system is expected to be operating in 1983\. (b) Section 4\.40(b) Requires adequate staffing and funding of the OCPIT\. The local staffing has been insufficient and of inadequate quality because of low authorized salary scales\. Consultants have assisted OCPIT in carrying out its designated functions which otherwise could not have been carried out because of the above mentioned reasons\. The Fifth and Sixth Highway Projects include the financing of consultants for continuing the assistance to OCPIT\. (c) Section 4\.05 Requires that Vialidad employ and retain qualified personnel for carrying out highway maintenance operations and provide funding and supporting services for its staff\. Vialidad has not been able to meet the staffing obligation mainly because of low salary scales (para 3\.08)\. The Seventh Highway Project includes the Borrower's obligation to complete, by no later than June 30, 1983, the hiring of engineers in order to meet the staffing targets set forth in the Loan Agreement\. (d) Section 4\.06 requires Vialidad to assume all highway maintenance functions within two years from the effective date of the loan\. The shortage of staff explained in the above paragraph, has prevented compliance with this covenant\. The ongoing program to improve highway mainte- nance and strengthen MOP's field and headquarter capacity is presently being coordinated by a Project Unit within Vialidad (para 3\.08)\.  - 12 - VII\. ROLE OF THE BANK 7\.01 The Bank was significantly involved in project identification and preparation by inclusion of feasibility studies and detailed engineering in the preceding Second Highway Project and by participation in the review of that work\. The scope and size of this, the Fourth Highway Project, addressed priority needs in the highways sub-sector which, at the time, were within MOPC's administrative capabilities and the original implementation schedule was tight, but reasonable\. The Bank was accommodating and flexible in agreeing to use loan funds remaining after road construction was completed for purchase of additional spare parts\. 7\.02 The number and timing of supervision missions were appropriate for project needs and good relations with the Borrower were maintained throughout the project period\. The Bank is continuing to provide essential technical assistance to MOPC under the three follow-up projects presently being implemented\. VIII\. CONCLUSIONS 8\.01 Although delayed, the road improvement elements of the project were successful and are meeting the main objectives of lowering transport costs between agricultural regions and domestic and internationel markets and providing all weather accessibility to improve general living conditions in the areas of influence\. 8\.02 Accomplishments resulting from the projects' technical assistance components were mixed\. Some significant gains were realized in improved transport planning and in establishing a long-term road maintenance program for which implementation assistance is being provided under subsequent Bank projects\. Although recommendations for aid to the local construction industry were developed under the project, no action resulted mainly because of an abundance of work\. The need, however, for such aid continues\. 8\.03 The project emphasizes the importance of a patient and supportive attitude by the Bank to assist Borrowers through difficult institutional circumstances, such as developed here during implementation\. It also high- lights the benefits to the Borrower resulting from a long-term view and participation in the sector such as in this case where three follow-up projects are being carried out\.  - 13 - TABLE 1 PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT Estimates and Final Costs (US$ millions) Appraisal Final % Project Items Estimate!\./ Cost Change A\. Construction and Reconstruction of Roads (a) Encarnacion-Pirapo 12,150 11,380V/ - 6 (b) Mbocayaty-Colonia Independencia 4,050 4,1332/ + 2 B\. Right-of-Way 0,300 0,300 C\. Purchase of Spare Parts, Tires and Batteries for Maintenance Equipment 1,150 2,436 +112 D\. Consulting Services (a) Supervision of construction 1,360 1,875 + 38 (b) Extension of maintenance assistance 0,440 0,309 - 30 (c) Study of maintenance needs (d) Technical assistance for transport planning 0,440 0,568 + 29 (e) Aid to the local construction industry 0,110 0,104 - 5 Totals 20,000 21,105 + 5\.5 1/ Including contingencies 2/ Total cost without reduction for liquidated damages Source: MOPC and consultant report  - 14 - TABLE 2 PARAGUAY FOURTH HIGHWAY PROJECT (LOAN 1059-PA) PROJECT COMPLETION REPORT Scheduled and Actual Disbursements (Cumulative) Appraisal Estimate Actual Actual as % of % of % of Appraisal IBRD FY Amount Total Amount Total Estimate -------------…=US$ Thousands----------- 1975 100 6\.9 3 0\.0 3\.0 1976 3,000 20\.7 300 2\.1 10\.0 1977 7,500 51\.7 4,000 27\.6 53\.3 1978 11,500 79\.3 8,600 59\.3 74\.8 1979 14,500 100 11,400 78\.6 78\.6 1980 - - 12,600 87\.0 86\.9 1981 - 14,4731/ 99\.8 99\.8 1/ On July 21, 1981, undisbursed funds amounting to US$27,243\.14 were cancelled\. Source: Appraisal Report and Controllers Department  - 15 - TABLE 3 PARAGUAY PROJECT COMPLETION REPORT FOURTH HIGHWAY PROJECT (LOAN 1059-PA) Encarnacion Pirapo Road Comparison Between Forecast and Actual Traffic Volumes SAR Actual Years AADT Estimate AADT 1978 458 525 1979 480 630 1980 588 1,050 Source: Staff Appraisal Report and Final Report by Consultants Estimated Vehicle Operating Costs for Encarnacion-Pirapo and Mbocayaty-Colonia IndeDendencia Roads (in UST/km) SAR March 1974 1980 MOPC Estimate Paved Gravel/Earth Paved Gravel/Earth Light Vehicles 8\.0 11\.2 21\.0 28\.0 Buses 8\.4 14\.3 39\.0 60\.0 Trucks 11\.4 21\.8 52\.0 75\.0 Source: Staff Appraisal Report and Final Report by Consultants   t ~~~~~~~~~~-25<8 Tro\. Mor'l t011 S ?\. 5!7- To Mbuyt 'So rkJoaquin I O' To Salto j 1_ BRAZIL5tAigrrdo HY `roYos y Esteros Cecilio Bez 7? 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APPROVAL

P009791

D\.nst of The World Bank FOR OMCuL USE ONLY Report No\. 6517 PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) December 1, 1986 Industry Department This document has a restricted distribution and may be used by recipients only in the performance of their official dudes\. Its contents may not otherwise be disclosed without World Bank authorizadon\.  ABBREVIATIONS AND ACRONYMS BCE - Base Cost Estimate Government - Government of India IDBI - Industrial Development Bank of India IDC - Interest During Construction IFI - Industrial Financial Institutions DAF - Development Assistance Fund SPB - Seshasayee Paper and Boards Limited (Project Consultant) TNPL - Tamilnadu Newsprint and Papers Limited (Project Sponsor) tpy - Tons per year tpd - Tons per day WEIGHTS AND MEASURES 1 metric ton (t) = 1,000 kilograms (kg) 2,204 pounds 1 kilometer (km) - 0\.621 mile 1 meter (m) = 1\.0936 yards = 39\.37 inches i cubic meter (m-) = 35\.31 cubic feet = 264 US gallons 1 hectare (ha) = 10,000 square meters - 2\.47 acres 1 kilovolt (kV) 3 1,000 volts 1 megawatt - hour (MWh) - 1,000 kilowatt hours CURRENCY EQUIVALENTS Currency Unit - Indian Rupees Appraisal Year US$1\.0 = Rs 8\.0 Investment Period US$1\.0 = Rs 8\.0-12\.6 Completion Year US$1\.0 - Rs 12\.3 GOVERNMENT OF INDIA FISCAL YEAR April 1 - March 31  THE WORLD 5ANK Washington, D\.C\. 20433 U\.S\.A\. ONt ni DvfttlwAW?h Opuatmm fVwAtuw December 1, 1986 MIMORABDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report: India - Tamilnadu Newsprint Project (Loan 2050-IN) Attached, for information, is a copy of a report entitled "Project Completion Report: India - Tamilnadu Newsprint Project (Loan 2050-IN)" prepared by the Industry Department\. Under the modified system for project performance auditing further evaluation of this project by the Operations Evaluation Department has not been made\. Attachment This document has a restricted distribution and may be used by recipients only in the performance of their omcial duties\. Its contents may not otherwise be disclsed without World Bank authorization\.  FOR OMCIAL USE ONLY PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) TABLE OF CONTENTS Page No\. PREFACE \.\. , BASIC DATA \. \. a a * \. e @ a0 a0 0 a a il HIGHLIGHTS *e \.e\.0 0 0 \.e\.o\.e\.,\.ee\.,ea\.,\. iv I\. INTRODUCTION \.I\., ,,\.,\. \. 1 Il\. PROJECT BACKGROUND *\.,\.,\.e\.eeeo\.eoe 2 A\. Project Preparation, Appraisal and Loan Approval 2 Be Project Description and Objectives \. 3 III\. PROJECT IMPLEMENTATION AND MANAOEMENT 4\. 4 A\. Achievement of Objectives \. ,, 4 B\. Project Scope Changes \.o****** \.** * 4 C\. Project Management *\.,\.***\.*****\.************* 4 D\. Employment and Training \. 5 E\. Use and Performance of Consultants 5 F\. Procurement \.5\. 5 G\. Implementation Schedule \. \. \. 6 He Ecology \. 7 I\. Capital Costs, Financing and Loan Disbursement \.*****\. 7 IV\. OPERATING PERFORMANCE \. \. \. 10 As Production Buildup \.,\. * 10 B\. Market Developments \. \.*** 11 V\. FINANCIAL PERFORMANCE o\.e\.e\.,\.eee\.e\.,e\.,o\.ooeoe\. 12 A, Basis of Projection\. s \.*O\. \.o\. 12 S\. Financial Analysis \. \.e 14 VI\. ECONOMIC PERFORMANCE \.,\.,,\.eoeoee\.a0Seeee0e\.ee 14 VII\. BANK ROLE AND LESSONS LEARNED *\.,,,,,,,,\.,,\.,,\.,,,,, 15 dhis document has a restricted distribution and may be used by recipients only in the performance of their offlcil dutia\. Its contents may not otherwise be discled without World Bank authorization\.  TABLE OF CONTENTS (co:\.t'd) ANNEXES Pafe No\. 1-1 Development of TNPL Technology \. 17 3-1 Actual Monthly Newsprint Production and Its Pulp Furnish \. 20 3-2 Procurement of Bank-Financed Goods and Services by Country of Origin \. 21 3-3 Implementation Schedule \. 22 3-4 Summary Expenditure Profile in Current Terms \. 23 3-5 A\. Capital Costs and Financing Required (US$) \. 24 B\. Capital Costs and Financing Required (Rs) \. 25 3-6 Estimated and Actual Disbursement Schedule \. 26 4-1 Actual Monthly Newsprint & Printing & Writing Paper Production \. \. \. 27 5-1 Comparison of Appraisal Estimate & Actual Production Cost \. 28 5-2 Comparative Estimate of Unit Prices - Appraisal vs\. Actual, March/86 \. 29 5-3 Comparison of Appraised and Revised Cost Structure \.* 30 5-4 A\. Projected Income Statement for: Case I/Base Case \. 31 B\. Projected Income Statement for: Case 11/15% Imported Long Fiber to be Used During Life of Project \. 32 C\. Projected Income Statement for: Case III/Part of Printing & Writing to be Sold at Levy Price \. 33 D\. Projected Income Statement for: Case IV/Only Newsprint Is Produced and 15% Long Fiber To Be Used During Life of the Projez:t \. 34 5-5 A\. Cost/Benefit Streams for Case I - Financial Rate of Return \. 35 B\. Cost/Benefit Streams - Financial Rate of Return with 10% Real Price Increase *\. 36 C\. Cost/Benefit Streams for Case II - Financial Rate of Return \. \. 37 D\. Cost/Benefit Streams for Case III - Financial Rate of Return \. 38 E\. Cost/Benefit Streams for Case IV - Financial Rate of Return \. 39 6-1 A\. Assumptions Used in Economic Analysis \. 40 B\. Worksheet for ERR Capital Cost Adjustment\.e 41 C\. Worksheet for Production Cost Adjustment for ERR Calculation \. , \., , \. 42 6-2 Cost/Benefit Streams for Economic Rate of Return \. 43 6-3 Cost/Benefit Streams for Economic Rate of Return for the Case of 10% Real Price Increase \. 44 7-1 Profile of Estimated and Actual Disbursement Schedule \., 45  - i - PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) PREFACE Loan 2050-IN for che Tamilnadu Newsprint Project for US$100\.0 million was signed on September 23, 1981, and was closed on August 31, 1985\. The full amount of the loan has been disbursed\. The main objective of the loan was to finance the establishment of an integrated pulp and paper mill with a capacity to produce about 100,000 tons per year of newsprint or about 80,000 tons per year of printing and writing paper, or any combination thereof, using bagasse (about 80X overall) as fibrous raw materials\. The Project uses bagasse from five existing sugar mills in the vicinity of the Project\. Bagasse is a residue of sugar cane crushed to produce sugar, and is commonly used as a fuel for generating steam in the sugar mills\. In addition to an increase in productior )f newsprint and other grades of paper to substitute and reduce dependency on import and hence foreign exchange savings the Project provides for India: (a) an option for better use of fiber resource by an economic repl1cement of bagasse by coal as a source of energy; (b) an increase in fiber production by releasing bagasse without any addition to land under cultivation, since bagasse is based on an annual crop generated on land already dedicated to sugar production; and (c) a possibility to participate in development and export of indigenous technology for production of newsprint from bagasse\. The Project Completion Report has been prepared by the Industry Department based on a draft prepared by the Borrower, and the findings of an Industry Department mission in February 1986\. No further comments were received from the Borrower\. This project has not been audited by the Operations Evaluation Department\.  - ii - PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) BASIC DATA Original Disbursed Cancelled Repaid Outstanding Loan amount (US$ M) 100\.0 100\.0 - _ 100\.0 Cumulative Loan Disbursement 1981 1982 1983 1984 1985 1986 Planned 15\.0 49\.0 84\.0 100\.0 - - Actual - 18\.7 52\.9 88\.1 98\.3 100\.0 % of Planned - 38\.0 63\.0 88\.1 98\.3 100\.0 Appraisal Estimate Actual Start of Implementation 06/81 09/81 Appraisal Date - 11/80 Board Approval - 09/81 Loan Signing - 09/81 Effectiveness 07/81 03/82 Loan Closing 08/85 08/85 Date of Physical Completion Completion Time (in months) a/ 42 45-54 Time Overrun (in months) b/ - 3-12 Date of Start-up of Operations: Papermill with Purchased Pulp 06/84 09/84 Hardwood Pulping Line 06/84 02/85 Chemical Bagasse ?ulping Line 06/84 04/85 Mechanical Bagasse Pulping Line 06/84 07/85 Cost Underrun (in US$ million) - 2\.8 Cost Overrun (in Rs million) - 600\.0 Total Financing Required (US$ million) 237\.5 234\.7 Total Financing Required (Rs million) 1,900\.0 2,500\.0 Installed Cost (US$ million) c/ 189\.8 190\.8 Financial Rate of Return (%) d/ 12\.4 11\.1 Economic Rate of Return (Z) 18\.7\. 13e4 a! Paper was produced using imported pulp after 45 months\. The 54 months refers to completion of mechanical pulp line\. b/ Paper mill, hardwood pulp line, chemical bagase pulp line and mechanical bagasse pulp line had 3, 8, 10, and 13 months time overrun\. c/ Excluding working capital and interest during construction\. d/ After tax\.  - iii - PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) MISSION DATA No\. of Mission Month/Year No\. of Days Staff Report Date Appraisal 11/80 12 3 12/01/80 Post Appraisal 03/81 17 3 03/20/81 Supervision I 03/82 7 2 04/09/82 Supervision 11 02/83 6 3 03/25/83 Supervision III 01/84 6 2 02/07/84 Supervision IV 05/85 10 2 07/12/85 Supervision V 02/86 7 2 03/03/86  - iv - PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) HIGHLIGHTS The project was conceived specifically to meet the Government's twin objectives of expanding production of both newsprint and printing and writing paper and utilizing bagasse as a fibrous raw material\. Bagasse is a residue of sugar cane crushed to produce sugar-(para\. 1\.01)\. Bagasse has been widely used to produce printing and writing paper both in India and elsewhere, but its use as a raw material for newspriat is fairly new\. In recent years there have been major developments in this field and many pilot plant tests were successful\. The Project concept is based on these developments, and an Anglo-American consortium that has been active in these developments assumed a prime respondibility for supplying process know-how, project engineering and main equipment packages\. However, to minimize technological risks of newsprint production the Project was designed with the capability also to produce printing and writing paper for which the process is well proven\. This approach increased the project cost by about 4%(paras\. 1\.02,1\.03,2\.09,2\.10)\. The project is considered to have been well prepared and efficiently implemented by the Project sponsors\. The Project was completed with a slight cost underrun ir US$ terms (1%), but with a cost overrun in Indian Rupees (31\.5%)\. The paper mill was commissioned in 44 months, a time overrun of three months\. The pulp mill was commissioned in stages\. Hardwood pulp line and chemical bagasse lines were commissioned in 50 and 52 months, a time overrun of 8 and 10 months, respectively\. Finally the mechanical bagasse line was commissioned in October 1985, a 13-month time overrun(paras\. 3\.01-3\.04, 3\.11, 3\.14-3\.19)\. Although on a short run basis (one or two days) TNPL has succeeded in producing newsprint of good quality using 100% indigenous raw material including 50% mechanical bagasse pulp, and 25% chemical bagasse pulp, continuous production has not yet been achieved for extended periods\. TNPL started production of newsprint using imported pulp in September 1984, and as of October 1985, with the commissioning of the mill-produced pulp lines, domestic pulp has gradually replaced the imported pulp\. In January 1986, the mill-produced pulp amounted to 58% of the pulp used to produce newsprint, of which bagasse pulp was 34%\. The company is making good progress in this technological breakthrough and it is expected that within six months the blend will reach the appraisal target\.(paras\. 4\.01-4\.03)\.  At the time of appraisal the challenge of producing newsprint from bagasse and the associated technical risk was fully realized\. To minimize this risk, a fall back position to produce printing and writing paper was planned\. TNPL has fully tested this fall-back position and has successfully produced on a continuous basis good quality printing and writing paper using on average about 95% mill-produced pulp, with bagasse amounting to about 80%, as envisaged at the time of appraisal (para 2\.10)\. In the first full year of operation, 1985, paper production was 16% higher than anticipated at appraisal and in the latest three months has reached an average of 90% of design capacity\. It was not expected to reach this level until the third full year of operation (para 4\.03)\. Manufacturing costs are approximately 13% higher in real terms then estimated at appraisal due primarily to higher requirements for chemicals brought about by a change in process technology during imp'lementation which was necessary to achieve newsprint quality and runability targets (para\. 3\.14)\. The financial internal rate of return (FIRR) before and after taxes for the project is 12\.3% and 11%, respectively, compared to 15\.4% and 12\.4% estimated at the time of appraisal\. The lower FIRR is mainly due to higher capital cost\. The economic rate of return (ERR) for the Project is 13\.4% compared to 18\.7% estimated at the time of appraisal\. 7-te lower ERR is mainly due to higher capital costs and lower output prices (paras 5\.06 and 6\.02)\. Although one of the Project's objectives, to produce newsprint of acceptable quality, at high speed, on a continuous basis using at least 75% bagasse furnish, has not been yet fully realized, significant technological progress has been made towards the production of newsprint using bagasse as fibrous raw material (paras 3\.01-3\.02)\. The Company and the Bank are confident of full technological success\. This progress has been made possible primarily because of the Bank's and the Government of India's willingness to take risks and to participate actively in development and eventually export of indigenous technology for production of newsprint from bagasse\. In addition to providing financing, the Bank provided advice and assistance to TNPL in various aspects of project implementation\. Of particular importance, the Bank insisted that the individual contracts with each member of the Consortium be supplemented with a single responsibility contract to ensure continuity in the event of default on the part of any member of the Consortium (paras 3\.09 and 7\.02)\. As with many other projects in various parts of the world, the Bank was too optimistic on the international price prospects, resulting in a higher estimated economic rate of return for the Project than is now expected (paras 6\.02-7\.05)\. The Bank's appraisal should concentrate more on price issues and develop more realistic price assumptions\.  - vi - Actual disbursement profile was similar to the forecast except for a lag of about 9 months, mainly due to an 8-month delay in loan effectiveness compared with the appraisal estimate (para\. 3\.18)\. This Project explored and introduced new technology to India\. The successful start-up and continued good operational results at TNPL demonstrate that in certain circumstances, and with suitable training and technical support, introduction of new technology to developing coantries can be successful\.(para\. 7\.07),  PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) I\. INTRODUCTION 1\.01 Over the last 25 years India's pulp and paper industry has progressed tc the point where it now supplies virtually all of India's requirement of printing and writing paper\. But India is short of long fiber coniferous wood resources that are traditionally used to produce newsprint and it still imports about 50% of its newsprint requirement\. 1\.02 Bagasse has been widely used to produce printing and writing paper both in India and elsewhere, but its use as raw material for newsprint is fairly new\. In recent years there have been major developments in this field and many pilot plant tests were successful\. 1\.03 The Project concept is based on these developments, and an Anglo-American consortium that has been active in these developments assumed a prime responsibility for supplying process know-how, project engineering and the main equipment packages\. However, to minimize technological risks of newsprint production the Project was designed with Lhe capability also to produce printing and writing paper for which the process is well proven (Annex 1-1)\. This approach increased the project cost by about 4%\. 1\.04 India is one of the world's largest sugar cane producers\. If all the cane produced in India were crushed and the bagasse made available for paper production, this fiber could support an output of about eight million tons of paper or about six times India's present domestic consumption\. With such an immense potential, it is natural for India to be a leader in bagasse-based technological development\. Currently, most of the bagasse which is produced in sugar mills is inefficiently used internally as fuel for generating process steam\. 1\.05 The major paper-producing industrial countries have sufficient wood-based long fiber resources to produce newsprint and hence, have little incentive to undertake the full development and risk associated with bagasse-based technology\. Accordingly, some development risk has fallen on several developing countries which have abundant supplies of bagasse\. Among developing countries, India was well placed to test this technology\. It has the bagasse, plenty of relatively cheap coal to replace the bagasse as a fuel, a large enough market to absorb both printing and writing and newsprint and the engineering and paper production experience required\. The Project was conceived to meet specifically the Indian Government's twin objectives of expanding production of newsprint and utilizing bagasse as a fibrous raw material\.  - 2 - II\. PROJECT BACKGROUND A\. Project Preparation, Appraisal and Loan Approval 2\.01 The Project preparation and promotion started in mid-1970 by Seshasayee Paper and Boards Limited (SPB), which owns and operates a successful paper mill in India, at Erode, in Tamilnadu\. SPB was one of the first Indian paper mills to use bagasse, although only for printing and writing paper and only intermittently in small quantities\. 2\.02 In April 1979 the Project sponsors, Tamilnadu Newsprint and Paper Limited (TNPL) was incorporated as a public limited company promoted and controlled by the Government of Tamilnadu\. The Managing Director of SPB was appointed Chairman of TNPL, five other members of the Board were senior civil servants, and the Executive Director was the Commissioner Secretary of the Tamilnadu Department of Industry\. SPB was appointcl as the Project Consultant\. The SPB Project team continued preparation and a detailed feasibility study was completed by SPB in late 1979\. 2\.03 The Project was appraised on the basis of the feasibility study in November 1980, and post appraised in March 1981\. The appraisal missions focusse\.4 their work mainly on the following aspects: technological risk, coal surply and alternative sources of fuel, supply contract for the main machinery, process design and project implementation, financing plan and level of Government ownership and control in TNPL\. These areas are discussed in the following paragraphs\. 2\.04 Technological Risk\. It was noted that there is virtually no unusual technological risk associated with the production of printing and writing paper from bagasse for the Indian market\. The additional cost of capital required for the production of newsprint was estimated at only US$4-5 million, so the cost associated with the relatively risky aspect of the Project is quite low, especially when compared with the potential technological benefits to be derived\. Moreover the pilot tests indicated that the mechanical pulping process proposed for the Project was technically feasible and issues like paper quality and factors affecting pulp yield were expected to be resolved by the time project came on stream\. 2\.05 Coal Supply\. It was noted that TNPL had received letters from the coal companies confirming that they would be able to supply coal to the Project\. Nevertheless, it was agreed between TNPL and the Bank that while the probability of a significant shortfall in supply of coal was small, the potential shortfall needed to be secured by an array of alternative fuels\. Therefore it was decided that boilers in the paper mill would be designed to burn coal, oil, pith or lignite, or a combination thereof\. 2\.06 Supply contract for the main machinery, and process design\. It was noted that the consortium for the supply of the main equipment package and provision of process technology included three companies under independent contracts\. However, to ensure accountability for the suppliers of goods and services and for coordination between process design, basic  - 3 - and detail engineering, and hardware, it was agreed that a single responsibility contract should be drawn with the consortium\. 2\.07 Level of Government Ownership\. Originally the Government of Tamilnadu controlled 100% of TNPL\. It was agreed that the Company should be professionally managed and become autonomous from the state Government in its day-to-day operations\. Therefore, the composition of the Board of Director was changed, and the Government of Tamilnadu's shareholding was reduced to about 47%\. The balance of the equity came from the Development Assistance Fund (DAF) of the Government of India (27%), Indian Financial Institutions (20%) and small institutional shareholders (6%)\. 2\.08 In July 1981, negotiations between the Indian authorities and the Bank took place, and on September 15, 1981, the Bank's Executive Directors approved a loan of US$100\.0 million to the Government of India on standard Bank terms\. The Government agreed that the proceeds of the Bank loan of US$100\.0 million equivalent would be on-lent to the Development Assistant Fund (DAF), administered by the Industrial Development Bank of India (IDBI) for a period of 15 years, including 5 years' grace, at an interest rate of 8\.25%\. DAF/IDBI would pass on US$77\.5 million equivalent as loan on equal repayment terms (i\.e\., 15 years including 5 years' grace) with its then normal onlending interest rate (14\.0%)\. The remaining US$22\.5 million equivalent would be passed on to TNPL for the Project as equity\. The loan became effective on March 22, 1982\. B\. Project Description and Objectives 2\.09 The Project was conceived specifically to meet the Government's twin objectives of expanding production of both newsprint and printing and writing and of utilizing bagasse as a fibrous raw material\. 2\.10 The Tamilnadu Newsprint Project ComFrises: (a) an integrated pulp and paper mill, which, operating at 90% of design capacity, could produce 100,000 tpy of newsprint or 80,0C0 tpy of printing and writing paper or any combination of the two, using bagasse (about 80% overall) and eucalyptus (20%) as fibrous raw materials; and (b) coal fired boilers and fuel handling equipment installed and operated at five sugar mills to release bagasse for use in the paper mill\. 2\.11 The Project is located near the town of Pugular, in Central Tamilnadu State, about 300 km southwest of Madras, ser¶'iced by satisfactory road and railway connections\. To provide for an efficient transport flow to the site the Government of Tamilnadu upgraded the road connection from Pugular to the site and the Government of India permitted the constructioP of a railway spur from Pugular to the plant site\.  - 4 - III\. PROJECT iMPLEMENTATION AND MANAGEMENT A\. Achievement of Project Objectives 3\.01 A primary objective of this project tJas to produce newsprint economically using sugar cane bagasse as the main raw material, with no imported long-fiber chemical or mechanical woodpulp\. This objective has been substantially achieved, and represents a significant technological advance of importance to India and other developing countries\. TNPL h\.as demonstrated this achievement with the production of several thousand tons of newsprint of acceptable commercial quality using the new process and a furnish of more than 75% bagasse pulp and the balance mill-produced hardwood chemical pulp\. The quality of this newsprint is significantly better than any other newsprint produced in the country\. The operating crews are currently perfecting their operating procedures and techniques to allow continuous long-term production using the new process\. Details of actual monthly paper production and its furnish are given in Annex 3-1\. The Company is making good progress with this technological breakthrough and it is expected that within six months the blend will reach the appraisal target on a continuous basis\. 3\.02 The objective of producing printing and writing paper of good quality from a furnish of not less than 80% bagasse pulp has been fully achieved\. B\. Project Scope Changes 3\.03 At the time of appraisal it was envisaged that only 66 dwelling units would be constructed and financed as part of the Project, at a cost of about Rs 10 million\. In addition, construction of 400 dwelling units was planned as non-project housing for which the Project was to contribute Rs 4\.0 million\. TNPL was unable to secure the assistance of the Government of Tamilnadu in this area and hence the company proceeded with the construction of 300 dwelling units out of the 400 units using approximately Rs 30 million of the Project funds to avoid difficulties in attracting and retaining trained manpower\. Apart from this minor change there was no chaige in Project scope\. C\. Project Management 3\.04 TNPL appointed SPB as project consultants responsible for project implementation, supervision of detailed engineering, procurement and coordilnation with suppliers\. SPB with a designated team from TNPL, assisted intermittently by expatriates and local consultants (at one time by Reed International of UK), was responsible for undertaking among others, supervision of basic engineering, supervision of detailed process design, preparation of tender documenits, and evaluation of bids\. Civil works design and detailed engineering were carried out by Indian consultants\.  -5- D\. Employment and Training 3\.05 The mill has provided direct permanent employment for some 1,425 workers in addition to those who are employed by cotltractors engaged in harvesting pulpwood, and in delivering pulpwood and bagasse to the mill\. About 825 of these workers are skilled and the remaining 600 are unskilled and semi-skilled workers\. 3\.06 Recruitment posed problems for TNPL at the initial stages of project implementation\. The mill is located in a backward area and had considerable difficulties in attracting experienced persons\. To address this issue TNPL adopted a policy of manning only about 25% of the posts of its operators with experienced hands, local people with little industrial background were re^-uited for the remaining positions\. This policy called for an elaborate training program including sending workers to SPB and Mysore paper mills\. About 200 of TNPL's operators were trained in these mills, and later, when the TNPL plant went into production, it was able to give in-plant training to more than 400 of the recruits\. For the highly skilled technical staff a comprehensive training program was drawn up and some 20 persons from various engineering disciplines received training abroad ranging from one to six months\. E\. Use and Performance of Consultants 3\.07 The Project consultant has been involved in the entire project cycle, starting from project idea and identification to preparation, planning, implementation, training, start-up and operational assistance\. The project consultant performance was judged to be very good by both TNPL and the Bank\. According to the company, the project consultant not only performed a remarkable job, but also contributed considerably to the creation and stabilization of the TNPL organization and corporate culture\. P\. Procurement 3\.08 All major machinery and equipment was procured under international competitive bidding (ICB) using Bank Guidelines\. TNPL/SPB report that they experienced no difficulties following these Guidelines\. The loan was fully disbursed in the original categories with no changes\. 3\.09 The procurement through ICB was spread among 11 countries\. The major package consisting of the paper machine, and all the specialized bagasse pulping equipment and basic engineering services for the entire Project, was procured from an Anglo-American Consortium\. Indian suppliers selected through ICB supplied 32\.1% of the Bank financed goods\. For purpose of bid evaluation local suppliers enjoyed a preference margin of 15%\. UK, USA and French firms supplied 28\.0%, 11\.9%, and 8\.7% respectively\.' Full procurement details are shown in Annex 3-2\. 3\.10 In the Draft Project Completion Report prepared by the Company, TNPL states that they believe further improvements are possible in the procurement procedures which will benefit the project in terms of reduction in cost\. Their suggestion is as follows: I  - 6 - "With open tendering procedure, the-prices quoted by the tenderers are\. read out and are known to all tenderers\. TNPL's experience with such a procedure is that tenderers are deliberately vague in defining their scope of supply particularly in respect of auxiliary items\. Such auxiliary items, for example, are supporting structures, degree of automation/instrumentation, electrical drives, etc\. Depending upon the price differential available in relation to the nearest competitor, the tenderer redefines his scope of supplies of these auxiliaries\. In other words, open tendering procedure restricts the negotiating capacity of the project authorities to a large extent but provides more leverage to the suppliers\. In order to overcome the above shortcoming, it is suggested that tender opening can be done in the presence of nominated representative of the Bank (perhaps local financial institutions) but not in the presence of tenderers\." This criticism can best be met by ensuring more detailed and carefully prepared bidding documents to avoid the need for negotiating extra items in the scope of supply\. G\. Implementation Schedule 3\.11 A comparison of the implementation schedule for the Project at the time of appraisal with the actual experience is given in Annex 3-3\. At the time of appraisal it was estimated that the Project take off date was June 1981, and the commercial production would start in July 1984, and in one stage\. These targets were not achieved\. The Project implementation commenced in September 1981 (3 months behind original schedule), the paper mill started its operation in September 1984 (about 3 months late) using imported pu\.p, and subsequently the pulp mill started its commercial operation in three stages: hardwood pulp lizte in February 1985 (8 months late); chemical bagasse pulp line in April 1985 (10 months late); and finally mechanical bagasse pulp line in July 1985 (13 months behind the original schedule)\. In the Company's view, no delays were caused by Bank or IDBI's procedures\. The main causes of the delays are listed below\. (a) Natural Causes (i) Development of process technology took longer than anticipated\. The final configuration could only be fixed in April 1984\. To accommodate these final configurations several delays in pulp mill construction were necessary\. (ii) The casing of turbine rotors supplied by a reputable foreign manufacturer was rejected due to poor workmanship\. This resulted in the turbo generator arriving about 6 months behind original schedule\. (iii) Problem with the design of steam lines feeding to the generator system\. This caused a further 3 months delay\.  -7- \.(b) Force MaJeure (i) The Madras port strike during April 1984 coincided with the arrival of 30 ships carrying some of TNPL's equipment and machinery\. The strike, which lasted 6 weeks, resulted in about one month delay in project implementationo (ii) Collision between a ship carrying some of TNPL's equipment (power boiler) and a tug boat resulted in equipment being received by TNPL after about two months delay\. H\. Ecology 3\.12 The Government of India has specific standards for pulp and paper effluents\. These standards are in line with international standards and are satisfactory to the Bank\. In accordance with these standards, the Project is equipped to deal with liquid and solid effluent and air emission through installation of in-plant controls and external treatment facilitieso 3\.13 The mills' liquid effluent, after primary and secondary treatment, discharges to a canal outside the plant site and is subsequently fully used for irrigation of sugar cane fields\. These systems and arrangements have been operating according to plan and design expectation\. However, in the last quarter of 1985 the main liquid effluent treatment plant ran into some technical difficulties when the treatment plant was upset due to excessive spillage of fiber in the drainage system from the bagasse storage pile\. This resulted in an over-loaded aeration lagoon operation to the extent of 25-30%\. While this condition was considered temporary and avoidable, TNPL has initiated measures to cope with any recurrence of such conditions\. While the episode involved no significant danger to the environment and/or public reaction to the mills' pollution levels, TNPL is committed to continue its efforts in closely monitoring the environmental impact of the Project\. 1\. Capital Costs, Financing and Loan Disbursement 3\.14 The actual total financing required for the Project was US$234\.7 million equivalent, of which US$82\.5 million (35\.1%) was for foreign exchange, compared with the appraisal estimate of US$237\.5 million, of which US$115\.0 million (48\.4%) was foreign exchange, representing cost underrun of 1% in US$ terms\. However, the Project experienced significant cost overrun in Indian Rupee terms\. The total financing required for the Project amounted to (Rs 2,500 million) 1/ as against (Rs 1,900 million) estimated at the time of appraisal, representing about 31\.5% cost overrun\. The profile of capital expenditures is given in Annex 3-4\. A comparison 1/ On the basis of actual expenditure and exchange rate, the average parity rate between US$ and Indian Rupees has been worked out to 10\.6 which has been used for developing dollar equivalent of costs\. Details are in the Project File\.  - 8 - between appraisal estimate and the achieved estimate is given in Annexes 3-5A and 3-5B and summarized below: India - TNPL: Total Financing Required (Rs million) Appraisal Estimate Actual Installed Cost 1,518\.8 2,031\.8 Working Capital 142\.8 181\.4 IDC 238\.4 286\.8 Total Financing Required 1,900\.0 2,500\.0 3\.15 The major source of cost overrun is attributed mainly to: the adverse effect in exchange rate between the US$ and Indian Rupee (about Rs 190 million); increase in "Auxiliary Duty" imposed by the Government of India (The auxiliary duty at the time of appraisal was 5% of cif prices\. This was increased to 25% in stages\. As a result, payment to the Government on imported goods increased by about Rs 110 million); increase in provisions for spare parts (Rs 61 million); increase in cost of civil works (Rs 140 million - increase in price of cement, steel, increased in covered area and inclusion of non-project housing - 300 dwelling units (para 3\.04) - end some changes in conceptual design)\. 3\.16 A comparison between appraisal and the actual financing plan is as follows:  9-9 Indjia - TMW: FanigPlan (hAxmts In nilions) Apprisal Estimte Actual US$ Ps % US s Gwnment of Tuil Nads (GUIN) \.39\.4 315 17\.5 34\.5 367\.5 15\.5 Sain & urmspuiar1 'i1s 3\.1 25 1\.4 2\.4 25\.0 1\.1 Seshasayee Paper & Boards (SPB) 1\.9 15 0\.8 0\.1 1\.5 0\.1 Indiam FirEncial Institutios (DI): - On Pesources 16\.2 130 7\.3 12\.1 129\.0 5\.5 - From Proeeds of Bank Loan thrug DA Facility 22\.5 180 10\.0 22\.5 239\.6 10\.1 Equity 83\.1 665 37\.0 71\.6 762\.6 32\.3 9tibordinated Lon from GUrN (Qasi-Equity) - - 8\.7 9/\. 5 3\.9 83\.1 665 37\.0 80\.3 835T\. 36\.2 Dabt Inian Finacial Institutions (WI): - Own Resources 64\.4 515 28\.6 63\.3 674\.5 28\.5 - Frm Proceeds of Bank Lan throgh DMF Facility 77\.5 620 34\.4 77\.5 825\.4 34\.9 Total Lwg-term Debt 141\.9 1,135 63\.0 140\.8 1,499\.9 6 Total Euity & IaTVterm Debt 225\.0 1,800 100\.0 222\.0 2,365\.0 100\.0 - Comrcial Short-term Debt 12\.5 100 - 12\.7 135\.0 - 237\.5 1,900 - 234\.7 2,500\.0 - 3\.17 The Bank loan of US$100 million provided Rs 1,065 million as against Rs 800 million at the time of appraisal\. Additional funding was provided by the Government of Tamilnadu as equity and subordinated loan, and from Indian Financial Institutions, in such a way and amount that each Government & Indian Financial Institution remained below the threshold of 50% to ensure corporate autonomy (para 2\.07)\. 3\.18 The loan closed at the original closing date of August 31, 1985\. The loan was fully disbursed and the account closed on April 17, 1986\. Compared to the appraisal estimates (Annex 3-6), disbursements were as follows:  - 10 - India - TNPL Project Cummulative Disbursements (US$ million) Fiscal Appraisal Year Estimates Actual 1981 15\.0 - 1982 49\.0 18\.7 1983 84\.0 52\.9 1984 100\.0 88\.1 1985 100\.0 98\.3 1986 (April) 100\.0 100\.0 3\.19 The allocation of the loan proceeds compared to the appraisal estimates were as follows: India - TNPL Project Loan Allocation (US$ million) Appraisal Actual Category I Engineering, equipment, materials, & spares 90 98 (100% foreign cif and local ex-factory) Category II Technical assistance & training 1 2 Unallocated 9 - Total 100 100 IV\. OPERATING PERFORMANCE A\. Production Build-up 4\.01 The mill is currently licensed to produce 50,000 tpy of newsprint plus 40,000 tpy of printing and writing paper\. Production of paper began in September 1984, when 134 tons of newsprint was produced ueing imported pulp\. Since that time, the various pulping lines have been brought on stream, and by late 1985 all pulping facilities were operational\. However, at the time of preparing this report, significant quantities of imported pulp were still being used for the production of newsprint\. On the other hand, printing and writing paper is now (since March 1986) produced with 100% mill-produced pulp\. 4\.02 The monthly pulp furnish used for each paper grade is detailed in Annex 3-1, which shows that printing and writing paper is being produced with a pulp furnish reasonably close to that anticipated at the time of appraisal\. In the case of newsprint, however, not more than 58% of own pulp has been used over a monthly period, and of this, no more than about  - 11 - 35% has been bagasse pulp\. For short periods (one or two days) newsprint has been produced with no imported pulp, and even from 100% bagasse pulp, wiVh mechanical bagasse pulp making up to 50% of the mixture\. However, on a steady basis, the mill is still using large quantities of imported pulp whe:n producing newsprint, and this is expected to continue until the end of 1986, while the operating crews build up experience with the new technology, particularly in the area of balancing the mechanical pulping section\. 4\.03 Annex 4-1 shows the total monthly actual production of paper as a percent of capacity\. These data show that the mill has quickly reached a high level of capacity utilization in terms of paper production, although it must be remembered that significant quantities of imported pulp have been used in this production\. However, this point aside, capacity build-up has exceeded expectations of appraisal\. In the first full year of operation, 1985, production was 16% higher than anticipated at appraisal, and in the latest three months has reached an average of 90% of design capacity\. It was not expected to reach this level until the third full year of operation\. Bo Market Developments 4\.04 Printing and writing paper currently represents about 50% of all paper consumption in India and most of this is produced domestically\. As shown in the following table, the demand of printing and writing paper as estimated at the time of appraisal is close to the actual experience\. India - Tamilnadu Newsprint Project Comparison of Appraisal and Actual Demand ('000 tons) Appraisal Actual Estimate Apparent Year of Demand Consumption a/ 1979 640 601 1980 680 524 1981 730 689 1982 770 721 1983 820 854 1984 880 861 a/ FAO Yearbook of Forest Products\. 4\.05 At the time of appraisal, the effective installed productive capacity for printing and writing paper in India was slightly less than demand, and it was projected that domestic demand would grow faster than qstalled capacity\. Therefore a growing supply gap was predicted for printing and writing paper which was estimated to reach about 130,000 tons by 1986\. In fact, a large number of mills, mostly very small sized, have been built in the last five years, and many of these are producing, or have  -12 - the capacity to produce, printing and writing paper\. The result is that the anticipated supply gap for printing and writing paper has not developed to the expected degree\. Lack of firm data on the new mills makes it virtually impossible to quantify the gap or surplus, but it is clear that TNPL does not, for the present, enjoy the secure market in printing and writing paper that was anticipated at the time of appraisal\. However, many of the new mills are small and inefficient and TNPL will have a competitive advantage\. In any case, the medium-term situation for all paper grades in India, particularly printing and writing paper, is one of significant shortage, because of increasing emphasis on literacy coupled with a steady decline in the capacity utilization of most of the existing mills which are old, inefficient and suffering from long-term lack of maintenance\. 4\.06 Newsprint\. Domestic demand for newsprint during 1979-85 grew at a rate of about 4\.5% per annum, compared with an estimated 5% at the time of appraisal\. Details of annual quantity of newsprint indigenously produced and imported are given below: India - Newsprint Comparison of Appraisal and Actual Demand for Newsprint ('000 tons) Appraisal Financial Domestic Actual Estimate Year Production Imports Consumption For Demand 1978/79 - - 301 301 1979/80 48 313 361 315 1980/81 47 305 352 330 1981/82 64 316 380 350 1982/83 118 202 320 365 1983/84 163 214 377 380 1984/85 (provisional) 190 200 390 400 Source: "Development Council Paper, Pulp and Allied Industries - Report on Demand," 21/9/83\. Indigenous newsprint production which was equivalent to about 14% of total demand in 1979-80 was able to meet about 49% of demand in 1984/85\. In summary, the market for TNPL newsprint output is secure\. V\. FINANCIAL PERFORMANCE A\. Basis of Projection 5\.01 The assumptions used for the financial analysis of the Project are discussed in the following paragraphs\. The basic projection has been prepared at first quarter 1986 price levels\. 5\.02 Volume\. The paper mill started its commercial operation, using home made pulp blended with some imported pulp in October 1985  - 13 - (para 4\.01)\. The following table shows the forecasts for annual production until the Project reaches its steady state\. India - Tamilnadu Newsprint Project (Projected production in tons) 1986 1987 1988 1989 Newsprint 37,500 45,000 50,000 50,000 Printing & Writing 30,000 36,000 40,000 40,000 Total 67,500 81,000 90,000 90,000 5\.03 Prices\. The ex-factory price for newsprint in March 1986 is Rs 9330 (US$746) per ton which is about 11% higher, in real terms, than the price at time of appraisal\. The weighted average ex-factory price for printing and writing in March 1986 is Rs 11,588 (US$927), assuming a mix of 52\.5% cream wove paper (reel and sheets), 10% duplicating paper, 25% maplitho sheets and the balance of the 12\.5% in color printing paper\. This weighted average price for the same mix is about 2% lower, in real terms, than the price at time of appraisal\. 5\.04 Production Cost\. The estimated annual production cost, excluding depreciation and financial charges, in 1986 terms, is about Rs 485 million compared to Rs 431 million at the time of appraisal, an increase in direct manufacturing costs of about 13% (Annex 5-1)\. While the unit price of some of the inputs has increased, others have dropped\. For example, in real terms, coal price increased by 42% while caustic soda price dropped 14% (Annex 5-2)\. Similarly, physical quantities have varied considerably from the estimates made at appraisal (Annex 5-3)\. The major reason for this is the change in process technology (para 1\.03 and Annex 1-1)\. This change, which was necessitated to achieve acceptable quality and runability, results in higher pulping yield, a lower requirement for bagasse, and consequently less coal for bagasse replacement in the sugar mill\. The yield improvement is estimated to reduce coal requirement by about 10,000 tpy\. On the other hand, this same change in technology results in higher electrinal energy demand and a higher consumption of bleaching chemicals\. The net result of the technology change is to increase manufacturing cost\. Compared with traditional newsprint manufactured from coniferous wood, bagasse-based newsprint cests about US$50/ton more (about 10% of current international selling price) due primarily to higher costs of fiber and chemicals\. 5\.05 Projected financial results for four significant cases have been prepared and are shown in Annexes 5-4A through 5-4D\. For the Base case thb Project is expected to show its first profit in 1991, the sixth year of operation\. This is four years later than the appraisal estimate\. The main reason is the company's policy to exploit the provision of accelerated depreciation allowed under the new tax code of February 1986\. The company would have reached profitability in the third year of operation if the  - 14 - original depreciation provision were used\. In the unlikely event of the company's being forced to continue importing long fiber pulp to the extent of about 15% of its fiber consumption, profit would not be achieved until 1992\. For the case of TNPL being required to sell some of its white printing and writing paper at levy price of of Rs 7,200 per ton, profitability would be delayed until 1993\.2/ Finally, for case of TNPL to produce only newsprint from its second year of operation and import 15% long-fiber pulp during the life of the Project, profitability would be delayed until 1993\. B\. Financial Analysis 5\.06 The financial internal rate of return (FIRR) before and after taxes for the Project is 12\.3% and 11\.1%, respectively - Case I/Base Case (Annex 5-5A) - compared to 15\.4% and 12\.4% estimated at the time of appraisal\. The lower rate of return is mainly due to higher capital cost and higher manufacturing cost (paras 3\.15-3\.16 and 5\.04)\. The sensitivity analysis indicates that 10% real increase in ex-factory prices would enhance the FIRR from 12\.3% to 15\.2% (Annex 5-5B) If the company is to import long fiber pulp for the entire life of tne Project, the FIRR before taxes will decrease to 11\.7% - Case II (Annex 5-5C)\. If the company is required to sell part of its printing paper at a concessional price the FIRR will decrease to 11\.1% - Case III (Annex 5-SD)\. Finally, if the company was to produce only newsprint using 15% imported long-fiber pulp during the life of the Project the FIRR before tax would be reduced to 10\.8% - Case IV (Annex 5-5E)\. VI\. ECONOMIC PERFORMANCE 6\.01 The detailed assumptions and calculations concerning adjustments made to financial costs and benefits to obtain economic values are detailed in Annexes 6-LA through C\. In short, to obtain economic costs and benefits, financial figures have been adjusted by correcting for customs duties, taxes, subsidies, and transfer payments\. Tradeable items are valued at their CIF border prices\. On this basis economic costs of coal and wood have been developed which are about 14% and 39%, respectively, higher than the financial costs based on notional imports of coal and 2/ As the result of the amendments to Paper (Regulations of Production) Order 1978 and Paper (Control) Order 1979 through GOI notifications dated April 11, 1983, exemptions granted to units manufacturing paper with 75% bagasse pulp in the furnish, from the applicability of above two orders have been withdrawn\. As a result TNPL will be required to manufacture white printing paper to the extent of 5% of its paper production in the first year, 10% in the second year, 15% in the third year, 20% in the four year and 25% in the fifth and subsequent years and make the same available at concessional rate of Rs 7,200 per tonne\. Since, compliance with provisions of said orders will result in substantial reduction in profitability of the project, TNPL has already sought exemption from the applicability of these orders and is hopeful of getting favourable considerations from GOI\.  - 15 - wood\. Unskilled and semiskilled labor which represents about 40% of the total labor force has been shadow priced at two thirds of its financial cost\. For newsprint and printing and writing the prices used in economic analysis are Rs 8,400 (US$672 vs\. US$700 used at the time of appraisal) and Rs 11,500 (US$920 vs\. US$1,005 used at the time of appraisal), respectively, equal to the CIF prices of imported paper of comparable grade and quality\. 6\.02 Economic cost and benefit streams and the economic rate of return (ERR) are shown in Annex 6-2\. The ERR for the project is 13\.4% compared to 18\.7% estimated at the time of appraisal\. The lower ERR is mainly due to higher capital costs, higher manufacturing cost (paras 3\.15 and 5\.04) and lower prices\. The difference in ERR due to lower prices accounts for 2\.1%\. The sensitivity analysis indicates that the ERR will increase to 16\.5% if there is a 10% real price increase for both paper grades (Annex 6-3)\. VII\. BANK ROLE AND LESSONS LEARNED 7\.01 Although one of the Project's objectives, to produce newsprint of acceptable quality, at high speed, on a continuous basis using at least 75% bagasse furnish, has not been yet fully realized, significant technological progress has been made towards the production of newsprint using bagasse as fibrous raw material (paras 3\.01-3\.02)\. Based on progress made so far, the Company and the Bank are confident of full technological success\. This progress has been made possible primarily because of the Bank's and the Government of India's willingness to take risk and to participate actively in development and eventually export of indigenous technology for production of newsprint from bagasse\. 7\.02 In addition to providing financing, the Bank provided advice and assistance to TNPL\. Specifically during the project appra'sal the Bank assisted the project sponsors in the design of the scope of the responsibility to be included for the major equipment package supplied by a consortium (paras 2\.06 and 3\.10)\. The Bank requested from TNPL that in addition to the individual responsibility provisions stipulated by each supplier of goods and services within the consortium, TNPL should ask for a single responsibility contract from one of the consortium members acceptable to the Bank\. This request, which provided the framework of contractual agreement with the consortium and TNPL, subsequently proved to be useful in safeguarding TNPL's interest\. A few months after the contract effectiveness between TNPL and the consortium, one of the members of the consortium unilaterally decided to restrict its activities and withdraw its services from the Project\. The single responsibility contract was instrumental to ensure the continuity of responsibility\. 7\.03 The Project is considered to have been well prepared by the Project sponsors\. The Project was jointly appraised by the Bank and the Indian Financial Institutions (IFI)\. There was good cooperation among the Bank, IFI, the Government of India, the Government of Tamilnadu and many other agencies in India indirectly dealing with the Project (India Coal  - 16 - Limited, Neyveli Lignite, Indian Railways, etc\.)\. TNPL has been set up as a newsprint Project which has to depend on the supply of bagasse from various sugar mills\. This involves transportation of coal from the newsprint site to the sugar mills, operation of coal-fired boilers in the sugar mills and transport of bagasse to the newsprint plant from the sugar mills\. If an integrated sugar mill-cum-paper complex can be established, this would improve the economics in operation by way of reduced transportation cost of coal and bagasse, besides lower capital cost on account of common steam and power systems\. These savings are estimated to be about US$100 per ton of paper output, or about 20% of manufacturing costs\. 7\.04 As stated earlier the Project was under preparation by SPB since mid-1970 and the Project sponsors had invested a significant amount of time and resources to develop the Project\. The Project sponsors, and subsequently the project management were a dynamic, professional and business oriented team, committed and involved in the Project concept, technical details and commercial aspects\. This resulted in a well conceived, and efficiently implemented project\. The lesson learned is that good project preparation, and commitment from project sponsors, is a key to project success\. The Bank should put more emphasis on the appraisal of the project sponsors and management\. 7\.05 As with many other projects in various parts of the world, the Bank was too optimistic on the international price prospects, resulting in a higher estimated economic rate of return for the Project than is now expected (para 6\.01)\. The Bank's appraisal should concentrate more on price issues and develop more realistic price ass4umptions\. 7\.06 Actual disbursement profile was similar to the forecast except for a lag of about 9 months, mainly due to delayed loan effectiveness caused by among others delays in preparation of the Subsidiary Loan Agreement\. Annex 7-1 shows pictorially actual and forecast disbursement profiles for the Bank loan\. The lesson learned is that the Bank's appraisal should focus more on the loan effectiveness prerequisites, and be more realistic on the time required for borrowers to fulfill their requirement\. 7\.07 This Project explored and introduced new technology to India\. The successful start-up and continued good operational results at TNPL demonstrate that in certain circumstances, and with suitable training and technical support, introduction of new technology to developing countries can be appropriate\. June 26, 1986  ANNEX 1-1 - 17 - Page 1 PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) Development of TNPL Technology Introduction 1\. The utilization of sugar cane bagasse for the production of various types of paper and board has been practiced in a number of countries for many years\. Currently there are approximately 100 bagasse-based pulp and paper mills in the world with installed capacity of more than 2 million tons\. For the most part, these mills produce a medium-quality printing and writing paper for domestic consumption\. Several other paper grades have been successfully produced, but the production of newsprint has met with very little success\. Most of the world's newsprint is produced in temperate zone countries which have natural forests of coniferous species and cheap electric power\. Newsprint Characteristics 2\. Because of its one-time short-term use, newsprint must be inexpensive to produce, but still it must have specific quality characteristics\. Primarily, it must be sufficiently strong to run at high speed through printing presses without breaking, have the correct surface characteristics and whiteness for printing, and be sufficiently opaque so that it can be printed on both sides without show-through\. All of these requirements are best achieved by using long-fibered coniferous wood as the main pulping raw material\. Most developing countries do not have coniferous forests, and when they do, prefer to use the wood for higher valued products such as sawnwood, plywood, or high-quality bleached pulp\. Therefoie, developing countries have had to turn to other fibers, and sugar cane bagasse has been the most promising\. History of Bagasse Newsprint Production 3\. There have been a number of attempts to produce newsprint from bagasse in the past 30 years\. Most of these attempts have been based primarily on chemical pulping processes and have been largely unsuccessful because the yield of pulp and the opacity of the paper have been too low\. In most cases, the only way these mills have been even partly successful is by using significant quantities of imported pulp - long fiber chemical pulp for strength, and mechanical pulp to achieve opacity\. Otherwise, production of newsp-int has been abandoned and the mills have reverted to making printing and writing paper from chemical bagasse pulp, or have shut down completely\.  ANNEX 1-1 - 18 - Page 2 Development of TNPL's Newsprint Process 4\. In 1980, TNPL entered into a contract with an Anglo-American consortium to supply equipment, engineering, and technology, for the production of newsprint from bagasse\. The contract guaranteed product quality, paper machine speed, and the levels of material and utilities inputs\. A key element of this contract was the development of a new process which required an extensive program of laboratory, pilot plant, and commercial testing\. TNPL deputed two scientists to work with the consortium in their USA laboratories\. After a thorough literature search and visits to all of the mills which had attempted bagasse newsprint production, TNPL concluded that the key to success lay in the utilization of mechanical pulping to the maximum extent possible in order to reach the twin goals of high yield and high opacity\. It was also recognized early in the program that the inherent heterogeneity of bagasse fibers would pose a special problem, but could be beneficial if properly exploited\. 5\. Early laboratory work was encouraging and it was at this time that the TNPL project was appraised and approved\. During the early stages of implementation, pilot plant trials were undertaken on the basis of the laboratory work\. These proved unsuccessful\. Opacity was too low, and even more important, the sheet of newsprint could not be carried through the newsprint machine at reasonable speed without frequent breaks\. This failure, after project implementation had already begun, was obviously cause for great alarm, and inspired a new round of laboratory investigations and new approaches at a fundamental level\. 6\. The new research effort led to a significant change in process flow, with the addition of an intermediate chemi-mechanical pulping stage\. The laboratory results were tested at the pilot plant level in April 1984, and were judged to be successful\. Newsprint was produced with all guarantees of paper machine speed and input levels of materials and utilities being met\. 7\. With the success of the pilot plant trials, the decision was made to alter the mill process configuration\. This involved additional equipment for the new chemi-mechanical pulping line, and in accordance with the provisions of the contract, the Consortium provided this equipment at no extra charge\. The change did, however, contribute to a delay in implementation\. Current Status of Technology 8\. The TNPL mill began operation in September 1984, using imported chemical and mechanical pulp\. In the case of printing and writing paper, only mill-produced pulp is now used\. For short periods, newsprint has also been produced using only mill-produced pulp, including 50% mechanical bagasse pulp\. However, control of the process at the mill level has proved to be more difficult than expected, particularly in the technique of balancing fiber flow within the mechanical pulping section\. Therefore, while the operating crews are gaining experience, imported pulp is still  ANNEX 1-1 -19- Page 3 being used for part of the pulp furnish for newsprint\. It is expected that imported pulp will not be used after the end of 1986\. 9\. Although successful newsprint production has only been achieved for relatively short runs, the mill staff are confident that the process as it now stands Is successful and no further changes are considered necessary\. Industry Department liay 1986  - 20 - ANNEX 3-1 INDIA - TAMILNADU NEWSPRINT PROJECT lift llY amp NWIMTI I USw P IU \.4\. \. \. nontb hwit Pro - --\.u \.- - ----- NW~ Pup lywtw Pulp kV ul kg\. Pulp NI \. b~lOt 8\.30 hi \.30$ ,~~~~~~w c \. \. \. - -- Total tow TotalTO W 13 Ctl Ut It TtI lobl litul Total Sgv\.9114 134 0 0 0 IIt II 0 0 0 Oct\. 1818 Q 0 0 za1 mel 0 0 0 Nos\. * a 0 O4% O% 0 hec 1644 a a 0 161 1621 0 0 0 Jan\.198 37m7 0 0 0 3836 33Q 0 0 reb\. 253 0 0 0 2018 2010 0 0 0 lr\. 4611 0 0 321 4618 199 6 0 PoR - 7 0 0 7\. 362 1322 1a 0 a NW 321 Ss 1317 30 71 29 1 Jun\. ,,806 a O 2 72S im 2tl0 36 3 0 Jul\. 7731 52 3 2 1t11 3721 613 1 20 1 Rug, 6121 is 1226 1297 201 5151 41 24 Sep\. 3183 12 sn s5o 1463 2Z31 41 23 0 Ost\. 1505 9f 576 138 2597 3706 32 1i s mu\. 6747 366 1618 700 3172 S61 41 31 6 oc\. 350 21 S11 790 1662 3000 S t 1 J 1916 3501 321 692 701 12201 24 51 34 11 feb\. 6469 321 1011 1092 2109 101 So 20 7 Mr\.? 5075 423 1126 O89 1709 1227 S 37 10 Apr\. 6522 822 1038 1372 2519 5751 56 32 14 (Ift HilY nm116 11 1LV116 POU[TIODN I its PUU Vu191 \. Ilooth Printing & ItUrng Prwctio\. -\.-\.-\.-\.--\.ulp Furunis \.---------- iN Pulp jlparted Pl be Pulp Bow NPl -- \. \. \. \. -------- \. AS IOf a sI ot 16 U IM P It Total Total totl Sep\.1904 0 0 0 0 0 0 0 0 Oct\. a 0 0 0 0 a a 0 Nov \. 0 0 0 0 0 a 0 0 hec\. a a 0 a a I a a Jan\.1985 0 0 0 0 0 0 0 0 rte\. 0 a 0 0 0 0 0 0 Miar\. 0 0 0 0 0 0 00 Apr\. Jun\. 00 0 0 0 0 0 0 Jul\. 0 0 0 0 0 0 0 0 Rug\. 223 0 1S l8 6 139 97 73 Sep l2l1 0 1336 \.07 118 1661 93 80 Oct\. 2529 0 1892 267 138 2217 14 9l Nol\. 365 0 258 N 17 3l3 9S 80 De\. 3174 0 2124 398 159 2611 91 73 Jan\.108 27m1 0 171 416 51 2254 98 79 feb 564 0 382 97 15 18 97 79 ar\. 181 0 1200 411 0 1699 1OO 76 prI ?44 0 532 160 0 7W 100 76 Inustry DeparbOt nq 1986  - 21 - ANNEX 3-2 PROJECT COMPLETION REPORT INDIA TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) Procurement of Bank-Financed Goods and Services by Country of Origin Amount (US$ million) Percentage 1\. India 32\.1 32\.1 2\. United Kingdom 28\.0 28\.0 3\. USA 11\.9 11\.9 4\. France 8\.7 8\.7 5\. West Germany 5\.4 5\.4 6\. Japan 5\.2 5\.2 7\. Sweden 4\.8 4\.8 8\. Finland 2\.0 2\.0 9\. Austria 0\.7 0\.7 10\. Switzerland 0\.7 0\.7 11\. Canada 0\.5 0\.5 Total 100\.0 100\.0 Industry Department May 1986  TNPL PROJECT IMPLEMENTATION SCHEDULE 1980 1981 1982 1983 1984 1985 1986 MONTH OND JFM AHJ JAS OND JFI AMJ JAS OND JPM AMJ JAS OND JFM JFM AMJ JAS OD AMJ ARRANGING FINANCING _w SITE ACQUISITION x= _ = Xxxxxxxx PLANNED ACTIVITY GOVERNMENT APPROVALS _ ACTUAL ACTIVITY SELECTION OF CONSORTIUM……--- INTERRUPTED/RESIDUAL BASIC ENGINEERING ACTIVITY SELECTION OF DETAIL ENGINFERS =_8= SITE PREPARATION DETAILED ENGINEERING CIVIL CONSTRUCTION ORDER PLACEMENT -TIME-CRITICAL EQUIPMENT -I - = -- - -SUGAR MILL BOILERS xx - O THER MAJOR EQUIPMENT - MINOR EQUIPMENT EQUIPMENT DELIVERY - TIME-CRITICAL EQU!PMENT - SUGAR MILL BOILERS - OTHER MAJOR EQUIPMENT - MINOR EQUIPMENT ERECTION - RECOVERY BOILER - TURBO GENERATOR - PAPER MILL -POWER MILL - SUGAR MILL BOILERS - OTHER EQUIPMENT COMMISSIONING - TRAINING OF KEY OPERATORS xx-- - START-UP OF SUGAR MILL BOILERS ____ - BAGASSE PROCUREMENT -…- g - - - - TRAIL RUNS WT = - CONTINUOUS PRODUCTION WITH __ HOME PULP -T-t  - 23 - ANNEX 3-4 INDIA- TAMILNADU NEWSPRINT PROJECT Summary Expenditure Profile in Current rerms(all figures in million Rs\.) 19?9/80 1980/81 1981/82 1982 83 1983/81 1984/85 1985/86 Locai foreign Local Fveign Local foreign Local foreign Local roreign Local foreign Local fore19n Ci vilUorks 0 \.00 0\.00 0\.00 0\.00 19\.88 2 \.21 7\.28 8\.14 96\.28 10\.71 30\.36 335 0\.00 0\.00 Equ1ptlent 0\.00 0\.00 0\.00 80\.60 9\.53 223\.12 102\.5 147\.8? 182\.91 153\.?7 78\.27 3\.t? 11\.93 1\.47 Erection 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 1\.25 0\.14 10\.41 4\.19 8\.75 0\.97 0\.00 0\.00 Duties a Taxes 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 169\.02 0\.00 124\.34 0\.00 19\.30 0\.00 88\.54 0\.00 Eng\.l Super\. 0\.00 0\.00 1\.28 4\.79 2\.65 11\.16 6\.52 6\.95 8\.19 7\.15 2\.59 5\.38 3\.27 5\.87 Total Plant Cost 0\.00 0\.00 1\.28 85\.39 32\.06 24O\.0V 352\.60 163\.10 452\.16 176\.42 139\.27 19\.17 106\.74 10\.34 Rail\.Siding 0\.00 0\.00 0\.00 0\.00 2\.39 0\.00 12\.10 0\.00 1\.81 0\.00 0\.00 0\.00 0\.00 0\.00 Housing 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 Sugermills Fac\. 0\.00 0\.00 0\.00 0\.00 21\.53 0\.00 38\.06 0\.00 75\.33 2\.41 18\.58 0\.00 0\.00 0\.00 Train\.&Tech Rss\. 0\.00 0\.00 0\.00 0\.00 0\.12 0\.00 0\.6 0\.00 3\.01 1\.29 0\.51 13\.22 0\.00 2\.23 Preoperating Exp 0\.55 0\.00 3\.14 0\.00 "\.39 0\.00 4\.13 0\.00 11\.88 0\.00 32\.21 0\.00 0\.00 0\.00 Subtotal 0\.55 0\.00 3\.11 0\.00 6\.43 0\.00 r4\.55 O\.00 92\.03 9\.70 51\.30 1322 0\.00 l\.23 Installed Cost 0\.55 0\.00 1\.12 85\.39 58\.19 210\.09 07\.15 163\.10 544\.19 186\.12 190\.5? 32\.39 106\.74 12\.57 Uorking Capital 0\.00 0\.00 0\.00 0\.00 0\.91 0\.00 1\.90 0\.00 1\.65 41\.91 52\.80 0\.00 82\.23 0\.00 lOC\. 0\.00 0\.60 0\.00 0\.00 0\.00 0\.00 2\.50 0\.00 94\.60 0\.00 1214\.70 0\.00 65\.00 0\.00 TOTRL O\.S5 0\.00 t\.t2 85\.39 59\.40 213\.039 111\.55 163\.10 640\.14 228\.06 368\.07 32\.39 253\.97 12\.57 xzs:: , :s:::: =s_ = =: ::=::: \. == t =, _s:: 2:-:sa: -s :s ursa sX X: :s: Capital Expenditure in Current Iermsiall figures in million Rs\.) Year Ia;talled Cost Qorking Capital I teret During Total Cons,truction 1979,80 C\.55 d\.D9 D\.D0 C\.55 1980/81 89\.81 0\.00 0\.00 89\.81 1981/82 298\.58 0\.°l 0\.0 299 t9 198 e83 570\.25 1\.90 \.50 "t\.65 1 5B3;Q0l 730 \.3 11 4\. O4 0G68\.50 198415 2 2\.96 52\.92 124 - 400\.16 1985/86 119\.31 92\.234 U5\.0i 26\.54 -- - - -- -- - \. \. --- --- 6ROND TOTRI \. O , 1I\.f 181\.3 \.8Q6\.80 7500\.00 Inddry Dewputnt NWl 1lg  - 24 - ANNEX 3-5A PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) Capital Costs and Financing Required (US$ million) Planned Actuals Local Foreign Total Local Foreign Total Civil Works 9\.0 1\.0 10\.0 16\.5 1\.8 18\.3 Equipment & Spares 23\.2 67\.8 91\.0 36\.5 58\.2 94\.7 Erection 3\.0 0\.4 3\.4 4\.7 0\.5 5\.2 Duties & Taxes 23\.9 - 23\.9 37\.7 - 37\.7 Eng\. & Supervision 3\.9 3\.9 7\.8 2\.3 4\.2 6\.5 Total Plant Cost 63\.0 73\.1 13\.1 97\.7 64\.7 162\.4 Railway Sidings 0\.7 0\.1 0\.8 1\.5 - 1\.5 Housing & Amenities 1\.7 0\.2 1\.9 4\.2 0\.5 4\.7 Facilities at Sugarmills 6\.2 7\.7 13\.9 14\.4 0\.2 14\.6 Training & Tech\. Assistance 0\.9 0\.9 1\.8 0\.4 2\.1 2\.5 Preoperating Expenses 2\.3 0\.2 2\.5 5\.1 - 5 Subtotal 1l\.8 9\.1 25\.6 8 28\.4 Base Cost Estimate (BCE) 74\.8 82\.2 157\.0 123\.3 67\.5 190\.8 Physical Contingencies 6\.0 6\.6 12\.6 included in BCE Price Escalation 10\.3 9\.9 20\.2 included in BCE Installed Cost 91\.1 98\.7 189\.8 123\.3 67\.5 190\.8 Working Capital 17\.0 0\.9 17\.9 13\.1 3\.9 17\.0 Int\. During Construction 14\.4 15\.4 29\.8 15\.8 11\.1 26\.9 TOTAL FINANCING REQUIRED 122\.5 115\.0 237\.5 152\.2 82\.5 234\.7 __- - - _-_ Industry Department May 1986  - 25 - ANNEX 3-53 PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) Capital Costs and Financing Required (Indian Rupees million) Planned Actuals For- For- Local eign Tota\. Local eign Total Civil Works 72\.2 8\.0 80\.2 175\.4 19\.5 194\.9 Equipment & Spares 185\.1 542\.8 727\.9 388\.2 619\.6 1007\.8 Erection 24\.8 2\.8 27\.6 50\.4 5\.6 56\.0 Duties & Taxes 191\.3 - 191\.3 401\.2 - 401\.2 Eng\. & Supervision 31\.0 31\.0 62\.0 24\.5 44\.9 69\.4 Total Plant Cost 504\.4 584\.6 1,089\.0 1,039\.7 689\.6 1,729\.3 Railway Sidings 6\.1 0\.7 6\.8 16\.3 - 16\.3 Housing & Amenities 13\.8 1\.5 15\.3 44\.4 4\.9 49\.3 Facilities at 3uilarmills 49\.8 61\.9 111\.7 153\.5 2\.4 155\.9 Training & Tech\. Assistance 7\.1 7\.1 14\.2 3\.9 22\.8 26\.7 Preoperating Expenses 18\.0 2\.0 20\.0 54\.3 - 54\.3 Subtotal 94\.8 73\.2 168\.0 272\.4 30\.1 302\.5 Base Cost Estimate (BCE) 599\.2 657\.8 1,257\.0 1312\.1 719\.7 2,031\.8 Physical Contingencies 47\.9 52\.6 100\.5 included in BCE Price Escalation 82\.3 79\.0 161\.3 included in BCE Installed Cost 729\.4 789\.4 1,518\.8 1,312\.1 719\.7 2,031\.8 Working Capital 135\.7 7\.1 142\.8 139\.5 41\.9 181\.4 Int\. During Construction 115\.5 122\.9 238\.4 168\.4 118\.7 286\.8 TOTAL FINANCING REQUIRED 980\.6 919\.4 1900\.0 1738\.4 761\.6 2,500\.0 m = Industry Department May 1986  - 26 - ANNEX 3-6 PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) Estimated and Actual Disbursement Schedule Actual vs\. Month Appraisal % Disbursed Estimate & Year gtr\. Estimate Actual Appraisal Actual (%) 12/81 4 15\.00 15\.00 03/82 1 23\.00 23\.00 06/82 2 31\.00 31\.00 08/82 3 40\.00 18\.70 40\.00 15\.70 46\.75 12/82 4 49\.00 18\.71 49\.00 18\.71 38\.18 03/83 1 58\.00 18\.71 58\.00 18\.71 32\.26 06/83 2 67\.00 38\.42 67\.00 38\.42 50\.55 09/83 3 76\.00 38\.42 76\.00 38\.42 50\.55 12/83 4 84\.00 52\.86 84\.00 52\.88 62\.93 03/84 1 91\.00 71\.59 91\.00 71\.59 78\.67 06/84 2 96\.00 81\.85 96\.00 81\.85 85\.26 09/84 3 100\.00 81\.85 100\.00 88\.12 88\.12 12/84 4 100\.00 88\.12 100\.00 88\.12 88\.12 03/85 1 100\.00 91\.40 100\.00 91\.40 91\.40 06/85 2 100\.00 95\.10 100\.00 95\.10 95\.10 09/85 3 100\.00 97\.60 100\.00 97\.60 97\.60 12/85 4 100\.00 98\.27 100\.00 98\.27 98\.27 03/86 1 100\.00 99\.87 100\.00 99\.87 90\.87 04/86 100\.00 100\.00 100\.00 100\.00 100\.00 Industry Department May 1986  -27 - ANNEX 4-! INDIA - TAMILRATAT NEWSPRINT PROJECT 1161 HWNLMmY a I1 I fAIIla B ItilUS PV1 PIOUIlN ----- \. \. \., \. PapeW fchine Production ktual As I of Caitv \. hree lonth Honthl ftowing Heath HeapWrInt Printing a Uriting lotal Rwre Aera Sep\.1901 134 0 13 Oct 181s 0 1818 24\.' 10\.7 Nov 440 0 448 6\.0 17 4 Dec 1644 0 1644 21\.9 '6\.1 Jan\.1985 3771 0 3771 50\.3 36\.7 Feb\. \.53 0 Z853 38\.0 501 la\. 641 0 4641 61\.9 S4\.2 Avr\. 4704 0 4704 62\.7 652 \.4V \. 53'8 0 53\.8 71\.0 S\.?' Jun 2806 0 106 37\.4 68\.3 Jul\. 7\.31 0 \.231 96\.4 t 2\.8 Avg\. 6124 "73 634? , 84\.6 82\.2 Sev\. 3183 !?:4 4907 65S\.4 81 3 Oct 450S '5$9 7034 93\.8 64\.7 Nod\. 6747 365 711' 1 \.8 92 5 ec 3S0' 3174 6676 89 0 89\.1 Jn\.1986 3508 2'51 659 83\.5 84\.3 ' teb 5469 5L4 6033 804 85\.5 ar 5075 18,1 6946 9,'\.6 90\.0 6652 744 7 '66 96\.9 Industry Department May 1986  - 28 - AWEX 5-1 INDIA - TAMILNADU NEWSPRINT PROJECT Comprim Of \.%Mal Ltiste I ktul Prsc1p tt \.e\.t\. \. \._\. (at fudl caponty,to wch 1986 tow) Production Cut Rowl \.al Rctel Percentage Utuiste Ral Dinge \. \. \. \. \. \. \. - - -\. s nilllon \. PAW Itaterils 1\. 135\.1 6\.6 Ctoicals 7\.1 132 \.6 52\.3 Pier a fuel 102\.4 94\.3 *7\.9 m a hrs1 nnt\. ( 22\.S ierits a ges( 33\.7 WAn\. laoew s (" Stores Sto\.tont( 114\.1 6\.? \. \. \. total t3C\.6 484\.7 12\.6 YVear Uolesal Prices Consmr Prices " \. ~ ~ \. \. \. \. \. \. 1980 100\.00 M00\.0 1981 11ZIO 113\.00 190t 11S\.00 121\.90 1983 124\.0 136\.30 1984 131\.60 117\.70 198S 143\.9 161\.50 1916 1M6\.70 164\.73 \.,\. * (stirte a Source-lnttrnotial fiamial Statastics(IH) *"Reised fWraius (stifste lodustr Oetat  -29 - i u SANNEX 5-2 ,tt_ bAte if t W'tm wu ;tu br 11S &ntl Un t1- ki AW tMb 1 - ire1m1'- -Wigtlos 14\.- lawuam It him (fl/t) hum \.U tut rcIhr A hcrh 86 tibe 2 1\.4? 38 360 6\.6 ahrw-pu 214 1\.7 31x 306 2\.6 DmlCal Mmw OI*oute 1500 1\.4? 3669 3150 -14\.2 Sos Sulhitt t1o1 1\.47 6018 5750 -4\.5 life 550 117 0? 1050 30\.1 tcrint a0 1\.47 1174 1830 55\.8 alum 1 1\.47 1468 1600 9\.0 losin 30 I\.A? 13210 1S10 14\.? alic IS0 I\.47 661 1360 0IS\.9 Utib2ties Cml 264 1\.7 38? 5 41\.9 hi 2100 1\.4? 3082 3260 5\.9 Purchad Pawr 30 117 140 780 77\.1 C\.tlve Pew 10Q 1\.4? 11? t73 86\.0 Nsviwlm S740 1\.47 8425 9330 10\.? Printing I ritirng 080 1\.47 11801 1188 -1\.8 ro 116  3o~~ - - 30- -NE - INIA-TMILMIW NEUSPRINI PROJECT \.*\. CIPORISON Of APPRAISRL a REUISED COST STRUCTURE NEUSPRINT Printing a Uriting Appraisal Revised Revised ----------------- \. \. \. \. \. \. \. fwpprallRevised RppraisalRevised lotal total total Prire Quatitieuatities Quatithes0otitmes Nov\.-D0 Prices Nov\.-80 Prices tr\. -86 Prices unit Rs/ton Units Units Units Units R3 nillion Rs million Rs nillion - gsse t 21 203671 O058\.0 194885 178808 85\.3 81\.2 110\.3 * Uood t 230 \.6615 23t10 355\.6 30188 11\.3 12\.3 16\.8 Cmicals C oking Liquor SodiM U Sulphate t 2500 3100 1709 3800 \.591 18\.0 10\.8 11\.6 Line t 550 9300 64i5 10480 9764 10\.9 8\.9 12\.1 Bleaching - Chlorine t 800 IO0Q 1440 4090 6\.8 3\.3 1\.t Lime t 550 5350 1280 1207 5\.3 2\.3 3\.1 Sodium Nyroxidet t1OO 100 "8 560 571 2\. 5\.5 '\.5 If-Paeing Rlo t 1000 3000 3000 320 3200 6\.2 6\.2 8\.1 Rosin t 9000 600 600 S\. 5\.4 \. \.3 Tolc t ISO 10000 5555 8000 0888 8\.1 6\.5 8\.8 - Soa Ash t 4500 120 120 0\.5 0\.5 0\.7 Utilities Coal t 261 31595 31730 29105 31512 16\.9 16\.7 \.7 - Lrte t s520 32432 2140 27568 21608 31\.2 24\.3 33\.0 -t 41l 3 2100 400 100 320 320 1\.5 IS 2\.1 Peer I 300 25000 61100 20000 15960 13\.5 23\.1 31\.1 Gen\. lax IIJ 100 50000 13850 10000 18720 9\.0 9\.3 12\.6 - lloter 1\.9 0\.5 0\.7 Other OP\.Supp\. 30\.6 30\.6 t1\.6 Tlanten\. 11\.7 11\.7 15\.9 Salaries & Jages 18\.3 18\.3 21\.9 Overhed \.0 15\.0 20\.1 Sub\. 313\.1 293\.9 399\.3 Additional Input as result if process chnges5 Sodiw, Hydroxitet 1387 0 588 0 0 0\.0 4\.6 3\.6 - Sodti Sulphite t 3568 0 M8 0 0 0\.0 2\.1 2\.9 - Hydrog\. Peroxidet 31870 0 22? 0 0 0\.0 7\.2 10\.1 - Sodi Silicate t 1873 0 871 0 0 0\.0 1\.6 '\.3 - IntS\.Sulphte t 9g 0 9 0 0 0\.0 0\.3 0\.4 -trSu lPhic Rcid t 1376 0 349 0 00\.0 0\.5 0a o Sub\. 0\.0 11\.3 20\.0 TOTmAlexc\.dep\.) 313\.1 308\.2 130\.6 rq 19  -31- ANNEX --4A iin*A-mIuM NwPTua mtircr POJECIEO ICU StRtoit rOR cmS£ I 19%6 197 191 1669 1990 1 991 19 19 1993 199 195 \.s+\. \. \. \. \. \. \. \. \. \. \. \. lisnlled Upcty(tWy) \. NOWint S1905 56905 58901S 590S 58 S10 5890 60 58905 515 5890S FU Paper 9 i995949995 99 499 49s 4ss 9 49 99995 4999 5 Total 108900 109900 10900 106900 109000 106900 106900 10900 1061900 108900 Uorking hws 330 330 330 330 330 330 330 330 330 330 Production (tpy) \. \. NoIks nt 37500 0SOM SOO0 SO0O0 s4a00 S000 S000 50000 500 50000 PSUIPver 30000 36000 40000 40000 40000 n0000 10000 40O00 40000 90000 Total 67500 81000 30000 90000 90 000 0 9000 91000 90000 capcity Utilization (,A) 62\.0 N4\.4 82\.6 82\.6 82\.6 82\.6 82\.6 82\.6 82\.6 92\.6 Total Incme (nillion RP) SaWes IP 349\.9 919\.9 466\.5 966\.S 166\.S 166\.5 166\.5 466\.5 966\.5 66\.5 Sales Pl 347\.6 417\.2 463\.5 463\.5 163\.5 463\.5 963\.5 963\. 43\.5 463\.5 Total Sales Iwes s 697\.5 837\.0 930\.0 930\.0 930\.0 930\.0 930\.0 930\.0 930\.0 930\.0 Cost Of Production tV l \.teld 120\. 121\.6 13S\.3 11\.3 15\.3 13S\.3 135\.3 \.1\. 15\.3 135\. ftOcal, W9? 119\.3 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 Sw 16\.5 1\.1 2t\.0 22\.0 22\. 22\.0 U\.l 22\.0 22\.0 22\.0 Pur 31\.1 36\.1 40\.1 46\.6 S4\.0 6\.0 61\.0 6\.0 5\.9 5\.4 k Iitr \.7 1\.3 sn3 59\.3 59\.3 51\.3 5U 5 54\.3 5U\.3 54\.3 59\.3 1pg a Ih1nt\. 16\.9 2\.3 U2\.S ""\.I 22\.5 22\.5 22\.5 22\.5 2\.S 12\.S wow - N 1 ^# 31\.6 3t\.1 33\.? 35\.1 37\.? 39\.1 41\.0 93\.1 91\.: 47\.5 i 22~~~~~~~~~\.? \.1?\.3 9\.6 9\.6 9\.6 9\.6 9\.6 91 1\.61 \.6 51* ' 372,M 915\. 49\.1 959\.? 16\.5 97S\.4 7\.3 \.9 W7\.9 SI\.? ku4strativ Eq\. 19\.6 19 5 26\.1 2t\.S 21\.0 21t\. U\.0 22\.6 23\.1 2\.? < hPack Eap\. 11\.0 13\.2 14\.? 11\.? 14\.7 11\.? 11\.? 19\.? 19\.? 14\.7 Sub 66\.0 32\.? 34\.? 35\.2 3S\.? 36\.? 36\.7 37\.3 3V\.A 31\.9 Total Iertilq Cat 402\.6 99\.2 484\.? 99\.6 S03\.1 Sll\.S 514\.9 517\.6 SS\.6 MU6\.5 rm Proftt 299\.7 31\.6 45\.3 13S\.2 2\.9 4191\.5 915\.1 412\.4 3\.9 31\. ftwd E lt_t lat t Cowp \. 240\.2 227\.0 175\.? 1S9\.5 132\.? 110\.9 9\.1 67\.3 6\.5 Prtit hWe Inretil S 3\.1 146\.6 218\.3 251\.5 m2\. 25\.6 310\.2 323\.3 317\.1 5\.0 Oupsiati\. 261\.2 261\.2 261\.2 262\.0 z \.? 2\. 2\. 12\.S 13\.2 19\.6 1waft t 221\.1 32\.6 62\.9 -22\.S *11\.3 2\.3 20\.0 310\.6 \.33\. \.0 fugue 0 0 0 I I I07J61\.1 Pot Mt1 tax 22\.1 132\.6 62\.9 -22\.S 10\.3 2\.3 26\.0 313\.6 2\.1 231\. * K Iis tto M5 CIu rw 1^~N'  AINNEX 5-4B - 32 - 1H018-11LZNU USPRINt MACt PSICtO 311 Sl UU1 fS 11E 1t6 11 to t1 to 913 11192 114 191 \. \. \. _ \._\. \. _\. \. \. \._\. \. _\. ur us s us ms us us 5s ms us Total 106U 1060 1000 10W 106 1006 100 1060 1000 100 U*"W "Y M MS 3M " Ms M 3X 3X "" Uwhskqng 3Om33030 I 3a 3 33 33 330 30 33 projtlo (t,) \. Nwwt= S0000 SW m s on 5m SW se m sOO Fig hW rn m tom im am inm ins mu im io Total \. 6750 m 810 iou urn iou gmn 911m ilO Cacty Utiliatieo (2) 62\.0 74\.4 82\.6 82\.6 62\.6 0\.6 82\.6 02\.6 62\.6 82\.6 Total Inca (aillm 11) \. Sales IF 349\.9 419\.9 66S \. 166S \. 166\.5 166\.5 466\.S 166\. 5 166\.5 16\.5 Sales FM 347\.6 417\.2 463\. 463\.5 43S 463\. W635 W63S 463\.6 463\. Total Suluo tmn 697\.5 637\.0 930\.0 930\.0 130\.0 930\.0 9310\.0 930\.0 90\.0 930\.0 Cost Of Production RN hteritus 120\.8 141\.1 154\.6 154\.6 1S4\.6 154\.6 154\.6 IS1\.6 154\.6 IS4\.6 ChCuols 9\.? 119\.3 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 Store 16\.5 19\.8 22\.0 l2\.0 22\.0 22\.0 22\.0 22\.0 22\.0 22\.0 Powe 30\.1 36\.1 40\.1 45\.0 54\. 60\.0 61\.0 61\.0 0\.4 86\.4 ruel & Voter 40\.7 48\.6 54\.3 5S43 54\.3 54\.3 54\.3 54\.3 S, 54\.3 teperes * Rnt\. 16\.9 20\.3 22\.5 22\. 22\. 22\.S 22\.5 22\.5 22\.5 22\.5 Salartes I imp 30\.6 32\.1 33\.7 35\.4 37\.2 39\.1 41\.0 43\.1 45\.2 47\.5 LO31tlsp 22\.7 18\.3 9\.6 9\.6 9\.6 9\.6 9\.6 9\.6 9\.6 9\.6 Sub 372\.9 435\.8 4169\.4 479\.0 486\.8 19\.? 497\.6 499\.7 527\.2 529\.5 Amsatrative 81p\. 19\.0 19\.S 20\.0 20\.5 21\.0 21\.6 22\.0 22\.6 23\.1 23\.7 Packing Exp\. 11\.0 13\.2 14\.7 14\.? 14\.7t 14\.7 14\.7 14\.7 14\.7 14\.7 sub 30\.0 32\.7 34\.? 35\.2 35\.7 36\.2 36\.7 37\.3 37\.8 38\.4 Total perdti Cost 402\.8 468\.5 S04\.0 S14\.1 522U\. 30\.6 534\.2 536\.9 564\.9 567\.8 6ro Profit 294\.? 36\.S 426\.0 41S\.9 407\.6 399\.2 395\.8 393\.1 365\.1 362\.2 Vinucial Expense \._\. Intertit Chrs 241\.6 240\.2 227\.0 17S\.7 IS\.5 132\.7 110\.9 89\.1 67\.3 45\.5 Profit fore Owireciation 53\.1 128\.3 199\.0 240\.2 253\.1 266\.5 281\.9 304\.0 297\.6 316\.7 Owreclatli 281\.2 281\.2 281\.2 282\.0 282\.? 283\.5 284\.2 12\.5 13\.2 14\.0 Operating Profit -22\.1 152\.9 -6\.2 -41\.8 -29\.6 -17\.0 0\.7 291\.5 214\.6 32\.7 taation 0 0 0 0 0 0 0 0 7\.8 1\.1 rfit Utter etx -226\.1 -IS2\.9 -\.2 -41\.8 29\.6 -17\.0 0\.7 291\.5 276\.8 212\.6 * CASE 11-52 u1 se 1uI flibw p*lto sble to tte U lw tfwai ding tl lift sf the project 11w 1%  ANNEX 5-4C - 33 - IHOtI-JRII OU llSlINT PlOJlCt \.~~\. \. \. _ \._ \. \. PU0ECtC IKgE StUPUOJ fO Cm lIii 1966 16 19116 1969 1150 11,1 11,2 113 im 1"59 InstAlltd EacWtV(ty) \. \. mawit Sm S s s s m 91 W PW m5 5S 5 585% 5S M65 580 85 5mx nn Total 10610 1018006186 106180 10650 0 106100 10631 1065061 106510 106911 Uorking hys 330 330 330 330 3 30 330 330 330 froduct1on (ty) \. Ikwtfmt 37500 15100 S 0000 SW011006 S SW0000 S 000 SI UP4er ~~~~~30000 3600\.0 3000 40000 9600 §015 00tII0 tOOO0 40100 4i001 Total 67500 10 50000 D00 000 000 90600 90001 9000 10000 5000 Cawity Utiliation (S) 62\.0 71\.4 82\.6 62\.6 62\.6 62\.6 82\.6 82\.6 82\.6 02\.6 Total Ince (mlillon P) \. Sales 11 341\.1 419\.9 466\.S 466\. 4 6\.5 WS66\.5 466\.S 466\. 466\.5 Sales Flu 3n1\.0 401\.4 437\.2 428\.4 419\.6 415\.6 19\.6 4\.6 419\.6 419\.6 lotal Sales Rvems 690\.9 821\.2 903\.? 614\.1 6S6\.1 8161 66\.1 16\.1 616\.1 886\.1 Cost Of Pr*ution Rawtlateriuls 120\.6 121\.6 135\.3 1353 135\.3 135\.3 135\.3 135\.3 135\.3 135\.3 D umsals 91\.7 119\.3 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 132\.6 Stores 16\.5 19\.6 22\.0 22\.0 22\.0 22\.0 22\.0 22\.0 22\.0 22\.0 Pwer 30\.1 36\.1 40\.1 48\.0 5S\.0 60\.0 61\.0 61\.0 86\.4 86\.4 ruel I Later V0\.7 46\.8 54\.3 S4\.3 54\.3 S4\.3 54\.3 43 S4\.3 54\.3 rliio re5 1 Ibmt\. 16\.9 20\.3 22\.5 t 2 2\.5 22\.5 22\.5 25 22\.5 22\.5 Isne5 VW ^9ts30\.6 32\.1 33\.7 35\.4 37\.2 39\.1 41\.0 43\.1 4S\.2 47\.5 Contingency \. 22\.7 17\.3 9\.6 9\.6 9\.6 9\.6 9\.6 9\.6 9\.6 9\.6 MA SV32\.1 4\. 4\.1 41S\.? 467\.5 475\.4 478\.3 46i\.4 507\.9 i10\.1 Rhnmstrative ELp\. 19\.0 19\.5 20\.0 20\.S 21\.0 2\.1\.5 2\.0 I2\.6 23\.1 23\.7 Packing LAp\. 11\.0 13\.2 14\.7 14\.7 !1\.? 14\.7 14\.7 14\.7 14\.7 14\.7 ,SA 30\.0 32\.7 34\.7 352 35\.7 36\.7 36\.7 37\.3 37\.6 36\.4 Total Operating cost 402\.8 141\.2 484\.' 414\.8 503\.1 511\.5 514\.9 517\.6 546\.6 S48\.5 Gross Profit 266\.1 373\.0 418\.9 400\.1 383\.0 374\.6 371\.2 368\.5 3S0\.5 337\.6 fin,alcal Expews Interest hoges 241\.6 210\.2 227\.0 175\.7 154\.5 132\.7 110\.1 89\.1 67\.3 4S\.5 Profit Before epeciation 46\.5 132\.8 191\.9 224\.4 228\.5 211\.9 260\.3 271\.4 273\.2 292\.1 Oepritloa 261\. 281\.2 261\.2 62\.0 282\.7 283\.5 284\.2 12\.5 13\.2 14\.0 Operating Prtfit 23t\.7 -148\.4 -8$\.3 -57\.6 -54\.2 -41\.6 -23\.9 266\.9 260\.0 276\.1 laxtIon 0 0 0 0 0 0 0 0 7\.1 1\.1 Profit Mter Tax -234\.7 -14t\.4 -89\.3 -57\.6 -54\.2 -1\.6 -23\.9 266\.9 252\.2 111\.0 * CM; Il-Part f the printi I writlolow is sold at the lew price Irnttv 114t Ibg 191t6  ANNEX 5-4D 34 19S WD 1i 119 19 1it" M 1" 19 19 I0111 low In low lo i ont low trn im I11 \. \. \.e\. \. \. \. _ sms sms ur ur urns s w sum sur w~~~m - mu mu mu muzs mu t~s mu Y Uvkuoh 31 31 33 33 33 3 33 a 331 Pro*t1 (tpv) kont 3751 _ loom1 IllO01101lo l_ lowli lOOOt1 lowIII 101_ POW _30Q00 0 0 1 0 0 0 0 0 0 \.otat M7S W lrn I0rn 011 t_rn Ir lorn tlr 0urn I0n1 C4Atv Utuliatiu\. () 62\.0 S2\.6 91\.0 91\.1 91\.0 9I\. 91\.3 91\.6 91\.1 91\. Totl Incom WlHIM I) \. \. Sals 34"\.9 09\.7 933\.0 \.0 933\. 933\.0 933\.0 933\.0 933\.0 933\.0 Sad 34\.6 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 0\.0 lotat Sl b s 697?\.S 139\.7 933\.0 93\.30 933\.0 933\. 3\.0 933\.0 933\.0 933\.0 Cut Of N&Ctiou to Ihtrials 120\.6 1"\.3 150\.1 151\. 158\.0 150\.0 IS\.9 150\.8 158I\. 158\.0 Chwcals 94\.? 115\.? 121\.5 126\.5 121\.5 120\.5 128\.5 120\.S 128\.5 I12\.S Starts 16\.5 25\.2 28\.0 20\.0 21\.0 21\.0 21\.0 21\.0 28\.0 2Z\.0 Ps 30\.1 57\.2 63\.6 71\.5 77\.S 13\.5 4\.S 84\.5 109\.9 109\.9 full I ter 40\.7 *a\.s 53\.1 53\.1 53\.0 53\.0 53\.8 53\.0 53\.0 53\.1 Re r I efint\. \. 16\.9 22\.S 25\.0 25\.0 2S\.0 25\.0 25\.0 25\.0 2S\.0 2\.0 Salaries a gs 30\.6 32\.1 33\.? 35\.4 37\.2 39\.1 11\.0 13\.1 1S\.2 47\.5 Cuntinpwv 22\.? 19\.6 10\.3 10\.3 10\.3 10\.3 10\.3 10\.3 10\.3 10\.3 sub 372\.9 16S\.6 581\.0 Sl1\.4 519\.2 S7\.1 530\.0 532\.1 SS9\.6 561\.9 Ni,unustratuve tx\. 19\.0 19\.S 20\.0 20\.5 21\.0 31\.5 22\.0 22\.6 23\.1 23\.7 PFaking tip\. 11\.0 13\.1 14\.5 14\.5 1\.S 11\.S 11\.5 1W\.S S\.S 11\.5 SIA 30\.0 32\.6 34\.5 35\.0 35\.5 36\.0 36\.5 37\.1 37\.6 18\.2 Total Opeatig Cost 02\.1 498\.2 S36\.3 5S6\.4 551\.? 563\.1 566\.S 569\.2 597\.2 608\.1 Ers Profit 294\.7 341\.5 396\.? 386\.6 371\.3 369\.9 366\.5 363\.8 335\.3 332\.9 Iaterat Chog 241\.6 210\.2 227\.0 175\.? 154\.S 132\.7 110\.9 89\.1 67\.3 4S\.S Profit feD 0preciatimn 53\.1 101\.3 169\.7 210\.9 223\.0 237\.2 255\.6 274\.7 268\.5 207\.4 Opctlaa 2M1\.2 201\.2 2M1\.? 212\.0 202\.? 23\.5 204\.2 12\.5 13\.2 14\.0 O4 atilg Profit -220\.1 -179\.9 -111\. 71\.1 -S\.9 -6\.3 -71\.6 262\.2 255\.3 271\.4 Taldlo 0 0 0 0 0 0 0 0 7\.8 1u\.1 Pwit ter To -2\.1 -19\.9 -111\.S 71\.1 -51\.9 4\.3 -21\.6 262\.2 247\.5 113\.3 *CUE WD Mt, \.W'At is rou IWO 15 lapote lug fiber gulp IS blenE t\. the Pul fWnitl MuOO the lift Of the prJujt loi t$lxFd"bv$t*^* " titS W 0olg  35 - ANNEX 5-5A INOIR TRlILNQOU NEUSPRINT PROJECT COST/KNEFIT STREMIS FOR fIIRNCIRL RRtE Of RETURN FOR CRSE I * \. \. \. \. \. \. \. (niillions of rupees at constant march 1986 prices) --------Net Benefts--------- Capital Operating Sales Income 8efoe tax Rfter Tax Costs Costs Revenues Tax Cash flow Cash Flol 1980 0\.74 0\.00 0\.00 0\.00 -0\.74 *0\.71 1981 88\.95 0\.00 0\.00 0\.00 -88\.95 -88\.95 I982 310\.21 0\.00 0\.00 0\.00 -310\.21 -310\.21 1983 625\.55 0\.30 0\.00 0\.00 -625\.55 -625\.55 198i 807\.89 0\.00 0\.00 0\.00 -807\.09 -807\.89 198S 281\.20 0\.00 0\.00 0\.00 -81\.28 -81\.28 1986 20I\.5t 102\.85 697\.50 0\.00 93\.11 93\.11 1987 30\.59 448\.21 837\.00 0\.00 358\.20 358\.20 1988 22\.16 484\.74 930\.00 0\.00 423\.11 423\.11 1989 6\.00 494\.81 930\.00 0\.00 429\.16 429\.16 1990 6\.00 503\.11 930\.00 0\.00 420\.86 420\.86 1991 6\.00 511\.54 930\.00 0\.00 112\.46 412\.46 1992 6\.00 514\.94 930\.00 0\.00 109\.06 109\.06 1933 6\.00 517\.64 930\.00 0\.00 406\.36 406\.36 1991 6\.00 545\.61 930\.00 7\.80 378\.36 370\.56 1995 6\.00 548\.54 930\.00 9010 375\.46 285\.36 1996 6\.00 551\.tt 930\.00 130\.40 372\.56 212\.16 1997 6\.00 554\.SS 930\.00 137\.70 369\.46 231\.76 1998 6\.00 554\.51 930\.00 137\.70 369\.46 231\.76 1999 6\.00 554\.54 930\.00 137\.70 369\.46 231\.76 2000 6\.00 554\.54 930\.00 137\.70 369\.46 231\.76 2O01 6\.00 554\.54 930\.00 137\.70 369\.46 231\.76 '002 -442\.53 554\.5 930\.00 137\.70 818\.00 680\.30 CRSE I s the BASE CASE financial Rate Of Return -Before Tax 12\.3 -After Tax 11\.1 Ind pt v O trmnt inw" swbo  - 36 - ANNEX 5-5B INlIR-tIIILNROI I NEUSPEINt PROCT \. COSIJiEUil SIREMN tOR FINANCIAl RAlE Of RETURN FOR U1111 101 REAL PRICE INCRERSES \. \. (millions of rupes at constant rerch 1986 prices) ------e-Ikt Benefits--------- Capital Operating Sales Income efore Tax Rfter Tax Costs Costs Reuenues Tax Cash Flow Cash ltou \. --------\. \.------\. \. \. \. \. \. \. \. 1980 0\.74 0\.00 0\.00 0\.00 -O\.74 -0\.74 1981 88\.95 0\.00 0\.00 0\.00 -88\.9S -88\.95 1982 310\.21 0\.00 0\.00 0\.00 -310\.21 -310\.21 1983 625\.55 0\.00 0\.00 0\.00 -625\.55 -625\.SS 1984 807\.89 0\.00 0\.00 0\.00 -807\.89 -807\.85 1985 281\.20 0\.00 0\.00 0\.00 -\.81\.28 *281\.28 1986 201\.54 402\.85 767\.25 0\.00 162\.86 162\.86 1987 30\.59 148\.21 920\.70 0\.00 441\.90 411\.90 1988 22\.16 484\.74 1023\.00 0\.00 516\.11 516\.11 1989 6\.00 494\.81 1023\.00 0\.00 522\.16 522\.16 1990 6\.00 503\.11 1023\.00 0\.00 513\.86 513\.86 1991 6\.00 511\.54 1023\.00 0\.00 505t\.6 505\.46 1992 6\.00 514\.94 1023\.00 0\.00 502\.06 502\.06 1993 6\.00 517\.61 1023\.00 0\.00 199\.36 499\.36 1994 6\.00 545\.64 1023\.00 7\.80 471\.36 463\.56 1995 6\.00 548\.54 1023\.00 90\.10 468\.46 3\.8\.36 1996 6\.00 SS1\.44 1023\.00 130\.40 465\.56 335\.16 1997 6\.00 554\.54 1023\.00 137\.70 162\.46 324\.76 1998 6\.00 554\.54 1023\.00 137\.70 462\.46 324\.76 1999 6\.00 551\.54 1023\.00 137\.70 162\.46 324\.76 2000 6\.00 S51\.54 1C23\.00 137\.70 462\.46 324\.76 2001 6\.00 554\.94 1023\.00 137\.70 462\.46 324\.76 2002 -442\.53 SS4\.54 1023\.00 137 \.70 911\.00 773\.30 CASE Of 101 REAL PRICE INCREASES FOr BOTH GRAOES Firncial Rate Of Return -Betore lax 15\.2 -lffter fax 11\.3 In-stO rw 1906  ANNEX 5-5C -37 - IIA-llO ILAR WEUSPRINT PROJECT \. \. \. \. COSST/NEMIt STREIIS fOR fINRKIRL RATE Of REtURN ro0 CRSE II ,,,,,,,,,,,,,,,- \. \. \._\. (millions of rups at constant werch 1986 prices) --- --- Net Benefits ---- Capital Operating Sales Incw'e Before tax Rfter Tax Costs Costs Revenues tax Cash flo cash riv \. --------\. ----- \. \. \. \. \. \. \. \. 1980 0\.74 0\.00 0\.0o 0\.00 -0\.74 -0\.74 1981 88\.9S 0\.00 0\.00 0\.00 -88\.95 -88\.95 1986 310\.21 0\.00 0\.00 0\.00 -310\.21 -310\.21 1983 625\.55 0\.00 0\.00 0\.00 -625\.55 -625\.SS 1984 807\.89 0\.00 0\.00 0\.00 -807\.89 -807\.89 1985 \.81\.28 0\.00 0\.00 0\.00 -281\.28 le81 8 1986 201\.S 402\.85 697\.50 0\.00 93\.11 93\.11 197 3M\.59 %68\.47 837\.00 O \.Q0 337\.94 337\.14 1988 X2\.16 S04\.04 930\.00 0\.00 403\.81 403\.81 1989 6\.00 514\.14 930\.00 0\.00 409\.86 409\.86 1990 6\.00 522\.44 930\.00 0\.00 401\.56 401\.56 1991 6\.00 530\.84 930\.00 0\.00 393\.16 393\.16 i992 6\.00 5324 930\.00 0\.00 389\.76 389\.76 1993 6\.00 536\.94 930\.00 0\.00 387\.06 387\.06 1994 6\.00 564\.14 930\.00 7\.80 359\.06 351\.26 1995 6\.00 S67 84 930\.00 90\.10 356\.16 266\.06 1996 6\.00 570\.74 930\.00 130\.40 353\.26 222\.86 1997 6\.00 573\.84 930\.00 137\.70 350\.16 212\.46 1998 6\.00 573\.81 930\.00 137\.70 350\.16 212\.16 1999 6\.00 573\.84 930\.00 137\.70 350\.16 212\.46 2000 6\.00 573\.84 930\.00 137\.70 350\.16 212\.46 2001 6\.00 573\.84 930\.00 137\.70 350\.16 211\.46 \.002 -442\.53 573\.84 930\.00 137\.70 798\.70 661\.00 CASE \.I - 5I imported long fiber pulp is blended to the pulp furnish during the life of the project rinanclil Rate Of Return =,\. \. \. -Before tax 11\.7 -After tax 10\.4 InXry OeP"rat NW 198  -38 - ANNEX 5-5D INIA-TIIILNADU NIUSPRINt PROJECT COST/SENFIT STREMIS fOR FINANCIRL ROE Of RETiuRN fOR CASE III v \. \. \. \. \. \. \. (nillions of rupees at constant wrch 1986 prices) Net Benefits--------- Capital Operating Sales Incole Before tax After tax Costs Costs Revenues tax Cash flow Cash flow \. \._ \. \. \. \. \. \. \. \. --------- 1980 0\.74 0\.00 0\.00 0\.00 -0\.74 -0\.71 1981 88\.95 0\.00 0\.00 0\.00 -80\.95 -88\.95 1982 310\.21 0\.00 0\.00 0\.00 -310\.21 -310\.21 1983 62S\.SS 0\.00 0\.00 0\.00 -62s\.SS -65\.55 1981 807\.89 0\.00 0\.00 0\.00 -807\.89 -807\.89 1985 281\.28 0\.00 0\.00 0 00 -281 \.8 -281\.28 1986 ZOI\.54 402\.05 690\.92 0\.00 86\.53 86\.53 1987 30\.59 418\.21 821 \.21 0\.00 342\.t1 342 1 1988 22\.16 484\.74 903\.68 0\.00 396\.'8 396\.78 1989 S\.00 194\.81 894\.90 0\.00 394\.06 391\.06 1990 6\.00 503\.14 986\.13 0\.00 376\.99 376\.99 1991 6\.00 511\.54 886\.13 0\.00 368\.59 368\.59 1992 6\.30 514\.94 886\.13 0\.00 365\.19 365\.19 1993 6\.00 517\.64 d86\.13 0\.00 362\.49 362\.49 1 6\.00 S45\.64 886\.13 7\.80 334\.49 326\.69 199X 6\.00 548\.54 886\.13 90\.10 331\.S9 241119 1996 6\.00 551\.44 886\.13 130\.40 328\.69 198\.29 1997 \. 6\.00 554-\.S 886\.13 13M\.A0 325\.59 187\.89 1998 6\.00 554\.5 886\.13 137\.70 325\.59 187\.89 1999 6\.00 SD\.S4 986\.13 :37\.,0 325\.59 187\.89 2000 6\.00 S54\.54 886\.13 137\.70 325\.59 197\.89 2001 6\.00 54\.54 886\.13 137\.70 325\.59 187\.89 2002 -412\.53 554\.54 806\.13 137\.70 ,74\.12 636\.42 * CRSE III-Part of the printing a unting paper 1i sold at the levV price financial Rate Of Return -Before Tax 11 \.1 -Rfter Tax 9\.6 rw 198  39 - ANNEX 5-5E INOIR-TlILMACU NEUSPRINT PROJECT \. COSTl/NErIf STRE£S roR rIHRINCIRL ROTE Of RETURN FCR CASE IU ' \. \. \. \. (millions of rupees at constant march 1986 prices) --------Net Benefits---- Capital Operating Sales Income Before lax Rfter tax Costs Costs Revenues tax Cash rloJ Cash Flow --- -\. -- ----- ------- \. ------- \. 1980 0\.74 0\.00 0\.00 0\.00 -0\.74 -0\.74 1981 88\.95 0\.00 0\.00 0\.00 -88\.95 -88\.95 1982 310\.21 0\.00 0\.00 0\.00 -310\.21 -310\.21 1983 6S\.55 0\.00 0\.00 0\.00 -625\.55 -625\.55 1984 807\.89 0\.00 0\.00 0\.00 -807\.89 -807\.89 1985 E31\.28 0\.00 0\.00 0\.00 -281\.28 -\.81\.28 1986 201\.54 102\.85 697\.S0 0\.00 93\.11 93\.1 1987 30\.S9 198\.17 339\.70 0\.00 310\.94 310\.M 4 1988 22\.16 536\.30 933\.00 0\.00 374\.54 374\.54 1989 6\.00 5M6A0 933\.00 0\.00 380\.M 0 380\.60 1990 6\.00 554\.70 933\.00 0\.00 372\.30 372\.30 1991 b\.00 563\.10 933\.00 0\.00 363\.90 363\.90 1992 6\.00 566\.50 933\.00 0\.00 360\.50 360\.50 1993 6\.00 569\. 0 933\.00 0\.00 357\.80 357\.80 1994 6\.00 597\.20 933\.00 7\.80 3\.9\.80 322\.00 1995 6\.00 600\.10 933\.00 90\.10 326\. 90 236\.80 1596 6\.00 603\.00 933\.00 130\.40 324\.00 193\.60 1997 6\.00 606\.10 933\.00 137\.70 3\.0\.90 183\.20 1998 6\.00 606\.10 933\.00 137\.70 320\.90 183\.20 1999 6\.00 606\.10 933\.00 137\.70 320\.90 183\.20 2000 6\.00 606\.10 933\.00 137\.70 3\.0\.90 183\.20 2001 6\.00 606\.10 133\.00 137\.70 320\.90 183\.20 2002 -442\.53 606\.10 '333\.00 137\.70 769\.43 631\.3 C ASE TIj- Only neusprint i5 produced 8 15X imported long fiber pulp i5 blended to the pulp furnish during the life of the project financial Rate Of Return -Before tax 10\.8 -After lax 9\.3 Industry htneWnt flay 1986  - 40 - ANNEX 6-IA PROJECT COMPLETION REPORT INDIA - TAMILNADU NEWSPRINT PROJECT (LOAN 2050-IN) Assumptions Used in Economic Analysis 1\. Economic rate of return calculations for the Project have been carried out with the same basic cost and benefit steams as for financial analysis (Annex 5-5A), adjusted as follows: (a) Customs duty, excise duty and sales tax have been eliminated from the capital cost estimates\. The overall effect is a reduction of about 20Z in the total plant cost (Annex 6-lB)\. (b) Production costs have been adjusted as follows: (i) excise duty, sales tax and generation tax have been eliminated; (ii) concessional power tariffs available to the project during initial five years of operations are not taken into account; (iii) an economic cost for fuel has been developed based on notional imports of coal having calorific value at 6,000 kcal/kg at Rs 850 per ton (landed cost)\. Adjustments for calorific value give equivalent price at Rs 628 for coal and Rs 425 for lignite as against the financial price of Rs 550 and Rs 353 for coal and lignite, respectively; (iv) economic cost of wood is estimated at Rs 500 per tonne as against Rs 360 per tonne taken for financial cost; and (v) based on the economic cost for fuel, bagasse cost works out to Rs 338 per tonne as against Rs 306 per tonne taken for financial cost\. 2\. Selling prices assumed for economic production are (Rs per tonne): For Economic Projection Newsprint 8,400 P&W Paper 11,500 3\. Cost and benefit streams have been brought to constant March 1986 prices\. Industry Department May 1986  ANNEX 6-IB - 41 - ImDIm-rmiuwo INCJP T MEOECT Uork Sheet for E Capital ldjustmnt (all figures in million Is\.) \. \. \. \. \. \. \.- -----Cu rre nt Pr4ices----------------------------------- Financial Rdjusted financial Rdjusted Year -Installed Cost----Taxes---Installed Cost-- U\.orking Capital---Taxe--Uorking Capital- Local fveign Duties Local foreign local foreign Duties Local foreipn \.__\. __\. \. \. \. \. \. \. _\. \. \. _ __\._,\. \. \. \. \. \. \. \. _\._\. 1979'80 0\.55 0\.00 0\.00 0\.55 0\.00 0\.00 0\.00 0\.00 0\.00 0\.00 1980/81 4\.42 85\.39 0\.00 4\.12 85\.39 0\.00 0\.00 0\.00 0\.00 0\.00 1981/82 58\.49 240\.09 0\.00 58\.49 210\.09 0\.91 0\.00 0\.10 0\.81 0\.00 1982/83 407\.15 163\.10 169\.02 238\.13 163\.10 1\.90 0\.00 0\.10 1\.80 0\.00 1983/81 541\.19 186\.12 124\.34 419\.85 '186\.12 1\.65 41\.94 0\.10 1\.55 11\.94 1984/85 190\.51 32\.39 19\.30 171\.27 32\.39 52\.80 0\.00 2\.60 SO\.20 0\.00 1985/86 106\.74 12\.57 88\.54 18\.20 12\.57 82\.23 0\.00 4\.10 78\.13 0\.00 \. \. \. \. \. \. \. \. \. \. \. \. \. GRAND TOTAl 1312\.11 719\.66 401\.20 910\.91 719\.66 139\.19 41\.94 7\.00 132\.49 41\.94 ts322 mSuss-x uassUal 5u33 ZstsS 333st3s #35t83 11333 s1a3t3 1:8:33 Uork Sheet for ERR Capital Cost from Current To Constant lerns(all figures in million Rs\.) ------------Current Prices-------- \.-Constant 1985 Terms\.--------- -86 Terms- Rdjusted Rdjusted Year --Installed Cost---Uorking Capital- Oiestic InflatioridVJ Inflation -Installed Cost--- lorking Capital- Local foreign Local foreign Index 1985 100 Index 1985t100 Local for;\.gn Local foreign Total Total \.---- ---- \. \. \. \. ------\. ------\. ---------- -------- ---- ----- \. \. ------\. ----- 1979/80 0\.55 0\.00 0\.00 0\.00 76\.20 104\.20 0\.72 0\.00 0\.00 0\.00 0\.72 0\.74 1980/81 4\.4i 85\.39 0\.00 0\.00 78\.20 104\.70 5\.65 81\.56 0\.00 0\.00 87\.21 88\.95 1981/82 58\.t9 240\.09 0\.81 0\.00 83\.10 103\.20 70\.39 23\.65 0\.97 0\.00 301\.01 310\.09 1982/83 238\.13 163\.10 1\.80 0\.00 90\.70 100\.50 262\.55 162\.29 1\.38 0\.00 426\.82 435\.36 1983/84 419\.85 186\.12 1\.55 41\.94 97\.30 98\.70 431\.50 188\.57 1\.59 42\.49 664\.16 677\.44 1984/85 171\.2? 32\.39 50\.20 0\.00 100\.00 100\.00 171\.27 32\.39 50\.20 0\.00 253\.86 258\.91 1985/86 18\.20 12\.57 78\.13 0\.00 102\.00 102\.00 17\.81 12\.32 76\.60 0\.00 106\.76 108\.90 6RAND TOTAI 910\.91 719\.66 132\.49 41\.94 959\.92 709\.78 131\.35 12\.49 1843\.51 1880\.41 Indtry Oepartmnt NW "s 9  DIA - TAHIL kW NWSPRU PW Welkibeet for Productim ost AdjubIe for ER Caloxatim (Million \. Rupee at Oonst\. 1986 Prices) 1 2 3 4 5 6 7 8 9 10 11 12-17 1\. Adjustment for salaries and wages (4\.0) (4\.2) (4\.4) (4\.6) (4\.8) (5\.1) (5\.3) (5\.6) (5\.9) (6\.2) (6\.5) (6\.8) 2\. Adjusbonat for gmeration tax - - - - (25\.3) (25\.3) (25\.3) (25\.3) 3\. Adjustmant for duties and taxes om dhemical (12\.8) (16\.0) (17\.8) (17\.8) (17\.8) (17\.8) (17\.8) (17\.8) (17\.8) (17\.8) (17\.8) (17\.8) 4\. Adjustmet for Adtes and taxes on stores (6\.6) (7\.9) (L8\.) (8\.8) (8\.8) (8\.8) (8\.8) (8\.8) (8\.8) (8\.8) (8\.8) (8\.8) 5\. Adjustment for dutles and taxes on repair (1\.7) (2\.0) (2\.3) (2\.3) (2\.3) (2\.3) (2\.3) (2\.3) (2\.3) (2\.3) (2\.3) (2\.3) 6\. Adjustmn t for gridpower wcXmssoA 13\.3 18\.0 2D\.0 12\.0 6\.0 - - - - - - - 7\. Adjusutit on acoot of wcod 5\.7 6\.8 7\.5 7\.5 7\.5 7\.5 7\.5 7\.5 7\.5 7\.5 7\.5 7\.5 8\. Adjustment on accomun of fuel price 6\.7 7\.5 8\.3 8\.3 8\.3 8\.3 8\.3 8\.3 8\.3 8\.3 8\.3 8\.3 9\. Adjustmen on aeount of bagasse price 8\.4 10\.9 12\.1 12\.1 12\.1 12\.1 12\.1 12\.1 12\.1 12\.1 12\.1 12\.1 Nit effect 9\.0 13\.1 14\.6 6\.4 0\.2 (6\.1) (6\.3) (6\.6) (32\.2) (32\.5) (32\.8) (33\.1)  - 43 - ANNEX 6-2 IlIf-TIMIlNROU NEJSPRINT PROJECT \. ,\. COSTA8ENEfIM STRENIS fOR ECONOtIC RRTE Of RETURN \. (millons of rupees at constant nrch 1986 prices) Capital Operating Sales Net Costs Costs Reuenues Benefits \. \. \. \. \. 1980 0\.74 0\.0 0\.00 -0\.74 1981 88\.95 0\.0 0\.00 -88\.95 1982 310\.01 0\.0 0\.00 -310\.09 1983 435\.36 0\.0 0\.00 -435\.36 1984 61774 0\.0 0\.00 -677\.44 1985 258\.94 0\.0 9\.00 -258\.91 1986 100\.90 111\.9 660\.00 139\.18 1987 '8\.99 461\.S '92\.00 301\.48 1988 21\.06 499\.9 880\.00 359\.09 1989 6\.00 SO1\.3 880\.00 3\.2\.75 1990 6\.00 503\.4 880\.00 370\.65 1991 6\.00 s05\.5 880\.00 360\.55 1992 6\.00 508\.7 880\.00 365\.35 1993 6\.00 511\.1 880\.00 362\.95 1994 b\.00 513\.5 880\.00 360\.$5 199S 6\.00 516\.1 880\.00 357\.95 1996 6\.00 518\.7 880\.00 35S\.35 1997 6\.00 521\.5 880\.00 352\.55 1990 6\.00 521\.5 880\.00 352\.55 1999 6\.00 521\.5 880\.00 352\.55 2000 6\.00 521\.5 880\.00 352\.55 '001 6\.D0 521\.5 880\.00 352\.55 2002 -442\.53 521\.5 880\.00 801\.08 Economic Rate Of Return \. [RR, 13\.t 1w 19116  - 44 - ANNEK 6-3 IN0IR-ItIMLHROU NEUSPRINT PROJECT \. \. \. COST/lU£FIT STRESS FOR ECONMWIC RHTE Of REITURN fOR tHE CASE Of 10 REAL PRICE INCRERSE \. \. \. \. (nillions of rupees at canstant erch 1986 prices) Capital Operating Sales met Costs Costs Revenues Benefits \. \. \. \. \. 1980 0,74 0\.0 0\.00 -0\.74 1981 88\.95 0\.0 0\.00 -88\.9S 1982 310\.09 0\.0 0\.00 -310\.09 1983 435\.36 0\.0 0\.00 -43S\.36 1981 677\.t1 0\.0 0\.00 -677,44 1905 258\.91 0\.0 0\.00 -258\.94 1986 108\.90 411\.9 ,26\.00 205\.18 1987 28\.99 461\.5 871\.20 380\.68 1988 21\.06 199\.9 968\.00 117\.09 1989 6\.00 S01\.3 968\.00 460\.75 1990 6\.00 503\.4 968\.00 158\.65 1991 6\.00 SOS\.5 968\.00 4S6,55 1992 6\.00 508\.7 968\.00 M3\.35 1993 6\.00 511\.1 968\.00 45\.95 1991 6\.00 513\.5 968\.00 118\.SS 1195 6\.00 516\.1 968\.00 115\.95 1996 6\.00 518\.7 968\.00 113\.35 199? 6\.00 5'1\.5 968\.00 410\.55 1998 6\.00 521\.5 968\.00 4O\.SS 1999 6\.00 52\.S Q68\.00 440\.SS 2000 5\.00 1\.l 968\.00 14O\.SS 2001 6\.00 S21\.5 968\.00 140\.SS 2002 -44?\.53 S42\.5 968\.00 889\.08 Economiic Rate Of Return ERRS 16\.5 tn Dep6  PROJECT COMPLETION REPORT India - Tamilnadu Newsprint Project Profile of Estimated and Actual Disbursement Schedule Loan No\.: 2050-IN TAMILNADU Closing Date: 8/31/85 Amount: $100\.0 M Completion Date: 9/30!85 100 90 80, / 70 ,@ 01 60 J\. 50 ,f 40 30 / 20 10 %ppraisal ~ ~~12'81 6'82 12 82 6'83 1283 6'84 12'B4 6'85 1'85 6'86 1'86 stiate ~ * 15\.0 31\.0 49\.0 67\.0 84\.0 96\.0 %ctual 18\.7 38\.4 52\.9 81\.8 88\.1 95\.1 98\.3 100\. O

APPROVAL

P001003

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 16592 IMPLEMENTATION COMPLETION REPOIAT REPUBLIC OF GIINIA-BISSA-! INFRASTRUCTURE REHABILITATION PRO\.JECT (Cr\. 2074-(GtUB) MVay 20, 1997 Water, Urban and Energy 2 Africa Region This document has a restricted distribution and may be used by recipients only in the perforrnance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURRENCY EQlUIVAILFNTS C'(rrencxl Inil1 v (,13 IPCe) (GBIP) US$1 (,131' 2 o()(J (at appraisal, l)ecembCr 1989) Us[5$] 1 [I(,1' 28212 ' (at closilo\. [)cceintbre- * 1, I Q)96) WEIGHTS AND MFASlRES M/ltric S\stiClil ABBREVIATIONS ANI) A( RONYMS AlI)3 Ati-icani Developmilt Blailk AGEI:OPPE Public Works lF\.xecutiue> Aenlc\ BC(:' l'uF1\.op1eanl ('Co0 tin 1\.itx D)GEII (jenieral Directorate ot Roads anid B3ridcies i ND [National Developinieict lUnd (il'lPORT Private corinpainy t'or n1iaacemiielim ol'Bissau Port ICR lilmplemeneltationl C'orilpletion Repo rt IDA International [)evelopmi eut Ax ,soc atio IRP InlrastrLicture Reliabil iation Pro jlct \.IAPPC) Port Autliority l\.l-\.(il!l N atolial l-,uiieeriin, LIaboratorx MFl-S Ministr\ of Social IltfriaStRtiCiiirC MOPC lJ Miiistr ot0 'ublic WNorks\. ( onsiniction anli t r1aii AFi'Fai rs MNi1'C Miilisti-N o0 l'ranlspolrt and (Comnminl ications Pl(IJ/lRP IRI' Coordiniation I'niit in M(O)PC I PCU)/PC T I1R C'oordination Unit in NiMistmr oi'Tr-anisport and ('orimmillUicatios RODO[IUVIAI\. [APUblic trucking and ri\e l traillspl(it corinpaln> SAR Stall Appraisal Report SDR Special D)rawing Rieoht SIL-() DIA'A PuLblic hus compal\n 'I'A GB National Airline of Gincica-B3issaa I'l)lP ITransport anid U\.rbali tii;ntfrsCttiruc PolojecC I IGREP Management I lilit for the Ref Orin o' Public FInterpriscs FISCAI, Y A zlR \.Janlarl\ I - Dcceilh1cr I Vice Presidenit: Jean- l\.ou_is Sarhih\. AFIR ('ouLIntr\ [)ircctor: \'1Mah n od A\. A tub, AFI' I4 sechnica Mariade-r Is Ic Pulan\.-Vidal\. A[ TU 2 1 askx Ieanli L eader \. I \.~i Pe \. 'an, A l ''l'J  FOR OFFICIAL USE ONLY IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU INFRASTRUCTURE REHABILITATION PROJECT (Cr\. 2074-GUB) TABLE OF CONTENTS PREFACE \.i EVALUATION SUMMARY \. ii PART I-IMPLEMENTATION ASSESSMENT \.1 A\. PROJECT IDENTITY \.1 B\. BACKGROUND \.1I C\. STATEMENT/EVALUATION OF PROJECT OBJECTIVES \.2 D\. ACHIEVEMENT OF PROJECT OBJECTIVES \.3 E\. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT \.4 F\. PROJECT SUSTAINABILITY \.5 G\. BANK PERFORMANCE \.5 H\. BORROWER PERFORMANCE \.6 1\. ASSESSMENT OF OUTCOME \.6 J\. FUTURE OPERATION \.6 K\. KEY LESSONS LEARNED \.6 PART II\. STATISTICAL ANNEXES \.7 TABLE 1 - SUMMARY OF ASSESSMENTS \. 7 TABLE 2 - RELATED BANK LOANS/CREDITS \.9 TABLE 3 - PROJECT TIMETABLE \.9 TABLE 4 - LOAN/CREDIT DISBURSEMENTS \. 10 TABLE 5 - KEY INDICATORS \. 10 TABLE 6 - STUDIES \.1\.1 TABLE 7A - PROJECT COSTS \. 12 TABLE 7B - PROJECT FINANCING \. 12 TABLE 8 - ECONOMIC EVALUATION \. \. 12 TABLE 9 - ECONOMIC RATE OF RETURN \. 13 TABLE 10 - STATUS OF LEGAL COVENANTS \. 13 TABLE 11 - IDA RESOURCES: STAFF INPUTS\. \.14 TABLE 12\. BANK RESOURCES: MISSIONS \. 15 LIST OF ANNEXES ANNEX I - BORROWER CONTRIBUTION TO THE ICR ANNEX 2 - LAST MISSION'S AIDE-MEMOIRE MAP - IBRD 21464 This document hag a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not odierwise be disclosed without World Bank authorization\.  l  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU INFRASTRUCTURE REHABILITATION PROJECT (Cr\. 2074-GUB) PREFACE This is the Implementation Completion Report (ICR) for the Infrastructure Rehabilitation Project (IRP) in Guinea-Bissau, for which Credit 2074-GUB in the amount of SDR 18\.5 million (US$23\.6 million equivalent) was approved on December 14, 1989, and made effective on June 5, 1990\. The credit was closed on December 31, 1996, a year later than originally planned\. It was fully disbursed and the last disbursement made on April 11, 1997\. No cofinancing was involved\. The ICR was prepared by Leslie R\. Pean, Task Manager, AFTU2, in the Africa Region, reviewed by Mr\. Mahmood A\. Ayub, Country Director (CD14), and edited by Mrs\. Pushpa N\. Schwartz\. Preparation of this ICR began during the Bank's final supervision/completion mission of June 1996\. The ICR is based on the Staff Appraisal Report, the Credit Agreement, supervision reports, field visits, discussions with the project staff, and materials in the implementing agency files, and the project file\. The Borrower contributed to preparation of the ICR providing information for the statistical tables, and commenting on the draft ICR\. These comments have been incorporated\.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU INFRASTRUCTURE REHABILITATION PROJECT (Cr\. 2074-GUB) EVALUATION SUMMARY Introduction 1\. IDA assisted the transport and infrastructure sectors in Guinea-Bissau through six previous credits: the First and Second Roads Projects (Cr\. 878 and 1473/F0l 8-GUB), the Port of Bissau Project (Cr\. 1392-GUB), the First and Second Reconstruction Import Credits (Cr\. 1531 and A 14- GUB), and the Social and Infrastructure Relief Project (Cr\. 2020-GUB)\. The operations supported by these credits sought to modernize the Port of Bissau, strengthen road management, provide spare parts and equipment, and rehabilitate road and water transport, improve basic services and community facilities, and generate employment\. The Infrastructure Rehabilitation Project (IRP) was designed to meet the country's needs and was in line with the Bank's Country Assistance Strategy which sought to create conditions for long-term economic development and remedy financial imbalances by limiting new investments to the most essential needs\. The transport sector, which could have required 30% of public investment over the coming five years, was a critical area where failure to achieve balanced development could have implied heavy losses in other sectors and a slow down in the impetus for liberalization under the Government's Structural Adjustment Program (SAP)\. Project Objectives 2\. The main objectives of the IRP were to (a) strengthen Government institutions involved in the transport sectors in the management of maintenance and operations; planning and coordination of sector activities; and financial management of public transport companies; (b) contribute to a greater equilibrium between road and river transport; (c) remove bottlenecks to increased agricultural production; (d) improve municipal management and services in Bissau and other centers and provide serviced plots and construct low-cost demonstration houses; and (e) support a comprehensive training program to increase capacity in Government agencies, municipalities, and the private sector to operate, maintain, and manage urban and transport infrastructure and services\.  Implementation Experience and Results 3\. In spite of the many difficulties arising from the shortfalls in the availability of counterpart funds and cofinancing by other donors\. project objectives were substantially achieved\. The major and significant factors that affected implemenitationi were: (a) resistance to the restructuring and private participation in the public transport companies, and (b) chironic delays in the availability of counterpart funds and unwillingness of other donors to participate as co-financiers\. 4\. The institutional capacity of the MOPCU and MTC was significantly improved through technical assistance (TA) and the training provided that benefited 1012 people through some 51 courses\. The private sector institutions benefited as well\. IRP brought about participation of the private sector in the transport sector in a transparent and impartial manner\. The bus company, SILO DIATA, was dissolved and a mixed public-private company, TRANSTER, was established in its place\. A privatization study on RODOFLUVIAL, the public trucking and river transport company dealing with the transport of merchandise, was completed, based on which its privatization is underway\. The privatization of trucking transport component is already completed and the privatization of river transport component is nlow under coordinationi of the Managemenit Unit for the Reform of Public Enterprises (UGREP)\. Managemenit of the Port of Bissau was privatized and the port's operational efficiency has improved markedly\. TAGB, the national airline company, benefited from TA and provision of equipment and traininig provided for its repair shops; privatization of the TAGB is also underway and is being carried out under UGREP\. 5\. Only 50 kms of the planned 180 kms of paved roads, including the Bissau-Nhacra and the Safim-Joao Landim roads, were rehabilitated and the rest were to be upgraded through cofinancing that did not materialize\. Anothier II kms of paved roads and 4\.5 kms of unpaved (earth) roads in Bissau were rehabilitated\. Some 130 kms of rural feeder roads in the eastern part of the country were improved with financing from the European Community (EC); another 60 kms of rural roads that were to be rehabilitated with labor-intenisive methods were not because of the absence of donor financing\. About 244 kms of roads were maintainied in the southerin and northern regions of the country\. With respect to the construction and rehabilitationi of ferry ramps nothing was accomplished because of inadequate finanicing; however, the ferry ramps at Sao Vincente and Joao Landim were rehabilitated, even though this had not been originally planned\. Two new rafts were acquired for Joao Landim and Sao Vincente with Europeani Community financing\. Equipment, spare parts, and materials for road and waterway maintenance and logistical support were provided to the General Directorate of Roads and Bridges (DGEP)\. A road mainteniance program for 1990-95 was developed for the rehabilitation of 1,615 kms of roads, or about 320 kms each year\. A Road Fund was established to finance the future maintenance and rehabilitation of the road network\. 6\. Under the urban program: (i) low-cost houses were constructed on urban lots in Bissau, Bafata, Bissora, and Buba to test their viability; however, only forty or about 50% of the planned number were built, as the remaining funds were diverted to the urgent rehabilitation of urban roads and the drainage system in Bissau; (ii) studies were completed that analyzed the mechanisms for reorganization of the municipality of Bissau and suggested ways to improve its revenues; and (iii) vehicles and equipment to be procured for garbage collection in Bissau could not be purchased because the necessary financing from the French did not materialize\. Because of shortfall in IRP financing, the urban program was reduced in size and some funds were transferred to implement other IRP components\.  iv 7\. The project finances had to be reallocated on four different occasions because of shortfalls in financing\. The project suffered from delays in counterpart financing and deficiencies in financial management; three audits were qualified\. The closing date was extended by one year to December 31, 1996\. 8\. With the on-going reorganization of the Road Fund, the results achieved under the IRP are likely to be sustainable\. The training and upgrading of skills had beneficial effects in increasing management capacity in both the public and private sectors\. The success of the training argues for its continuation to assure better maintenance and operation of the couLntry's infrastructure\. IRP contributed to the creation of small- and medium-size companies in civil architecture, road maintenance, and other technical areas and led to the consolidationi of existing companies\. Bank performance was generally satisfactory, while the Borrowe-'es performance was deficient in implementation, particularly witlh respect to counterpart finaniciing, lack of financial accounting, and delays in allowing the participation of the private sector in lie transport companies\. Summary of Findings, Future Operations, and Key Lessons Learned 9\. The implementation of IRP and its outcome can be judged as partially successful\. The experience gained was useful in designing the ongoing Transport and Urban Infrastructure Project as well as the preparation of the Water and Energy Project\. These follow-up projects can be expected to further strengthen institutional capacity and sustainahility of infrastructure maintenance in Guinea-Bissau\. 10\. The key lessons learned from the IRP are: (a) Project activities and their related costs need to be carefully analyzed and take into account the further deterioration of infrastructure that can occur between project preparation and implementation\. (b) Cofinancing should not be counted upon unless the co-financiers give their firm assurances\. Reliance on a substantial amount of cofinancing that did not materialize led to implementation delays, chaniginig priorities, scaling down of the project, demoralized staff, and a revision in the Project Agreement\. (c) The Borrower should be asked to make a firm commitment for the funding of maintenanice and operations of the infrastructure through a mechanism such as the Road Fund\. A Special Account should be considered and established in accordance with the norms of the Bank's Special Accounit\.  IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU INFRASTRUCTURE REHABILITATION PROJECT (Cr\. 2074-GUB) PART I-IMPLEMENTATION ASSESSMENT A\. PROJECT IDENTITY Name I Infrastructure Rehabilitation Project Credit Number: : Cr\. 2074-GUB RVP Unit : AFRICA Region Country : Guinea Bissau Sector : Transportation B\. BACKGROUND I\. Since independence in 1974, Guinea-Bissau has faced the major task of rebuilding its economy which was heavily damaged during the war of indepenldence\. The Government embarked on a comprehensive Structural Adjustment Program (SAP) in 1987 to liberalize trade, restrai-\. public expenditures, and introduce production incentives and other market-oriented measures\. The infrastructure sector had a key role in the SAP\. Improved transportation was essential to broadening the market and freeing productive forces, especially in agriculture\. Road infrastructure, partially improved under the IDA-supported First and Second Highway Projects, needed further improvement to provide adequate access to agricultural production areas\. The Government's strategy, as presented in its Transport Policy, focused on strengthening the operations and financial management of all public transport companies and on training skilled and semi-skilled personnel essential for management and operations of the sector\. In the urban sector, housing and sanitary conditions needed to be upgraded urgently to enhance the productivity of and reduce the health risks for the labor force\. 2\. The country's transport sector comprised 2,630 kilometers (km) of roads, 75% of which were in poor condition; a deep-water port, managed by the port authority, JAPG, and 27 small coastal and river ports; and an international airport and 1 7 landing strips for domestic traffic, under the Department of Civil Aviation\. Road and river transport had an equal share of the domestic freight traffic\. The national airline, TAGB, carried about 25% of international passenger traffic and all domestic traffic\. RODOFLUVIAL, the Public Trucking and River Transport Company, took over freight transport from two earlier public trading companies and passenger river transport from the national shipping agency, GUINEMAR\. The bus company, SILO DIATA, was severely constrained by the lack of workshop equipment and spare parts\. All transport modes suffered from debt problems, poor financial management, and inadequate operational revenues\. Despite the presence of these parastatals, the private sector had a significant share of the transport market, particularly road transport, but its productivity was low because it, too, lacked adequate repair facilities and spare parts supply\.  3\. IDA involvemenit in the linfrastiuctujre Rehabilitation Project (IRP) was based on the critical importance of transport for the long-term developmenit of the economy and to remedy financial imbalances and limit new transport investmenits to the most essenitial needs and improve municipal management and housinig programiis to alleviate the very poor living conditions in the urban areas\. C\. STATENIENT/EVAXI\.jVI10N OF PROJECT OBJEC TI ES 4\. The major- objectiv\es of I RP were to (a) establishi a sounid and etfficient infrastructire mainiteniance capacity, (b) reniioxe hottlenecks to increased agricultural productivity, particularly in the South, by implrox \Hig parts of the existing feeder- road netvork; (c) address cakncsses in roa(d maniagement, transport planning, and financial rianagememnt of the public transport companies, and further encourage private participat ion i1 transpoll: (d) contribute to a more econ:olmical balanicc between the road and river transport modes; (e) inplement a comprehenisive training programi lor maniagers and skilled and semi- skilled personal Ineeded for thc infIrastrLIctuel- sectors; (t) improve ilunicipal seCvices in Bissau anid other urban centers; and (g) expanid on the sites and services operation initiated under the Social and Inlfrastiuctuire Relief l'roject (Cr 2(020-GUB13)\. as well as build low-cost demronstration houises to help address the need for more housinig\. 5\. The project comprised the following components: (a) institutional support to the Ministry of Social Infrastructure (MIES) and its State Secretariat for Transport (SET) to strengthen planning and management of transport and url-ban projects and monitoring of transport companiies, including training programs and sector stuldies\.: (b) assistance to tilc public transport companies--SILO DIATA, RODOF\.UVIAL\. \.AP( , and I ,AGB--bv providing equipimienit and spare parts, tools, and technical assistance (TA) to strcngthen their managemnenit and mainitciance capabilities and facilitate private sector involvemeint in th\.ci operations: (c) ioad infrastriuc-tire rehabilitation and maintenance, including improvement ol feeder roads and training of domestic contractors in labor-based road works; and (d) urban development, including preparatiotn of a Hlousing Policy, establishing systems for housing finan-ce, eNpais,on of sold-waste collectiorn, distributioll of plots and houses, and developing municipal ser-vices in 13issau and other cities\. 6\. The objectives of the IRP werc clear and appropriate given the urgent need for the Government to restructure its policies to the realities of the market place, reduce its fiscal imbalances, increase the participation of the private sector\. and provide adequate investment and maintenance resources and skills for essential inftastructuLe in both the urban and rural areas\. They were in liie with the Bank's ('ountrv Assistance Strategy that sought to create conditions for long- term development of thc cconomiy and remedy the financial imbalances by limiting new investments to the most essential neecds\. espicciallv in a sector that would have required about 30% of public investment over the ncxt five years, 1989-94\. But given the critical institutional weaknesses and the very poor condition of the existing, infrastructure and inadequate repair facilities, equipment, and materials, the ob jectives xcrc too dcmanding and ambitious, especially as the hoped for cofinancing did not materialize\. Pro'ect implemncitationi delaN s \ycre caused by the chronic shortfalls in  3 counterpart funding, delays in work done by contractors because thev were paid lite, ancd the lack of cofinancing, which led to shiftling priorities and frequenit reallocation of available fhinds\. D\. ACHIEVEMENT OF PROJECT OBJECTIVES 7\. In spite of the many difficulties arising fiom the shortlills in IRI' iRIlancing, the project objectives were substantially achieved\. 8\. At the completioni of the IDA-assisted Seconid Roads Projfect in 1 988 the couinitry had no private companies engaged in road constructioni, rehabilitation, or maintenance\. I RIP entcouraged the creation and participation of private companies in the transpori sector in a transparent anid imilpartial manner\. Jobs were created and the qualifications and skill, ol pesoninlel in thec Ministry of Public Works, Construction and Urban Affairs (MOPCUI\. which relaiced MlFS) and the MNinistrv of Transport and Communications (MTC) were implroved\. Iicrciascd emiplo'ment and the employability of people througi tr-ainiilng and enhanced skills n Wshlionied th-e ilmlpact of structural adjustment and privatization\. Many of the employees of M(JPU anid N/1i \. xNho were laid-off as a result of institutional streamlininig, found employment in Ih'e I a "tiel comiiparic> engaged in road construction and rehabilitation\. 9\. Institutional support and training, were highil\ satisfa( tor\, attend(led h\ I () I2 people with a level of success higher thani 90%, provided throughi 51 separaie courses\. [hc tr\.aininl0 programn had included people coming from MOPCU (33%)\. MTC (23,o,) aid 44%' wit\ otIsl)c origilns, iciliding private companies\. The program helped to improve the technical and proftssioinal capacily of the national staff\. The operational capacity of the Coordination I nts inl( il(1 and Ml ' was strengthened\. Several individuals who benefited 1ronit 1A and r \. are io w upt tii" other development projects in the country, some are filling respons lHe technical posit ions in various ministries, while others have established their own privatt conlsulltilng hbuInesses 10\. As for the reforms of transport companies, at credit et l ctiveles>\. thc lour transport companies (Silo Diata, Rodofluvial, JAPG, TAGE3 antd CGiincinar) eNre notl\ in a delicient or even unrecoverable, operational and technical situation\. Ihe hus conipaiy - Sl( I I) IATA\. had onily one bus, operating on the lile Bissau-Dakar without any securit\ \.:ondilt in\. Matleivlliallce, administrative and financinig services were not operating\. There \ere no accontling registrations or capacity to pay the debts of the enterprise, namely wvagcs Klr,ical k wh\n ic\cliding some taxis, there were no urban transportation in Bissau\. As for ROI)OIl 1 'ViAl\. in lost the market in the fluvial and road transport of merchanidising due to several factors such a>: dcrgadat ion of leiries and infrastructures to support to the fluvial and maritimlle nla igatio;ll triansfer the use ol fluvial tranisport of merchandising to the road ones, due to the noni existenice t i centers for agriculture pr-oducts whicl would justify the transport of large quantities and the terinim,tion ol the credit flacilities given by the government, tihrough a special credit line, for the acquisition ot truckisC\. AP( hlad sionificant difficulties in the managemenit of the port of Bissau\. no ol oii iin adn inisirative and financial areas, but also in operational and security matters\. Becausc of its dfIhcienlt cxpniaitaiilom\. IPG was draining resources from t'he national budget whille not offering a miniul iniii service e\.g\. lack of loading facilities, to the port users\. TAGB, the nationial airliOe pr esenied la-re dilficulties in terms of management and operations\. It did not have its ow\n plaiws to uralllntce intercontinental connections, and decided to associate with EAS; this association only brouglit problemis to both enterprises because, as they never made an ob jective coFItraLt\. he'\ wlert mi con,stat discussion\. As for GUINEMAR, it presented several managemilenit irregilar (tIes and (didi tom n\.lamatCc the mlillimum agency services to the ships coming alongside the Port of bivSau  4 11\. In this context, actions conducting to the launching of a liquidation and privatization process of these companies were favored instead of technical assistance to improve their competitiveness at the operational level\. Among the public transport companies, the bus company--SILO DIATA\. was dissolved and a new company, TRANSTER, with over 60% private ownership was created il its place\. GUINEMAR was dissolved and several private maritime companies were created with technical assistance from the project\. A privatization study on RODOFLUVIAL, the public merchandise trucking and river transport company which liad steadily been loosing market share, was completed and private participation in its ownership is underway: the privatization of trucking transport component is already concluded and the privatization of river transport component is now under the coordination of UGREP\. IRP finaniced the repair of three of RODOFLUVIAL's boats\. Traffic signs and the buoy systems for river transport were also improved\. Management of the Port of Bissau was privatized, a mixed company, GUIPOR, with 70% private ownership, was created in the place of JAPG; the port's operational efficiency has improved to handle increased traffic\. TA was provided to TAGB, the nationial airline, for its repair shops; and privatization of TAGB is also underway under the coordinationi of UGREP\. 12\. About 50 kms of the planned 180 kms of paved roads, including the Bissau - Nhacra and Safim-Joao Landim roads, were rehabilitated and the rest were to be upgraded through cofinancing that failed to materialize\. Another I I kms of covered roads and 4\.5 kms of urban roads in Bissau were rehabilitated\. Some 130 kms of rural feeder roads in the eastern part of the country were improved with financing from the CE; another 60 kms of rural roads that were to be rehabilitated with labor-intensive methods could not be, again because donor financing did not materialize; the TA needed for this purpose was, therefore, not required\. The construction and rehabilitation of ferry ramps was not accomplished because of inadequate financing; however, the docks at Sao Vincente and Joao Landin were rehabilitated, even thoughi this had not been originally planned\. Two new rafts were acquired for Joao Landim and Sao Vicente with EC financing\. Equipment, spare parts, and materials for road and waterway maintenanice as well as logistical support were provided to the General Directorate of Roads and Bridges (DGEP)\. A road maintenance program for 1990-95 was developed for the rehabilitation of 1,61 5 kms of roads, or about 320 knis each year\. About 244 kms of roads were maintained in the northern and southiern regions of the country\. A Road Fund was established for the orderly maintenance and rehabilitation of roads\. TA was provided to the National Engineering Laboratory (LEGUI) and its facilities were rehabilitated\. 13\. Under the urban program, (i) low-cost houses were constructed on urban lots in Bissau, BafatA, Bissora, and Buba to test their viability; however, only 50% of the planned number were built, as the remaining funds were diverted to the rehabilitation of urban roads and the drainage system in Bissau; (ii) studies were completed that analyzed the mechanisms for reorganization of the municipality of Bissau as well as the ways to improve its revenues; and (iii) vehicles and equipment that were to be procured for garbage collection in Bissau could not be purchased because the financing from the French was not forthcoming\. E\. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 14\. Implementation of the IRP was affected by several factors\. A major one was the lack of cofinancing\. During project preparation, several donors active in Guinea Bissau's development showed interest in cofinancing for the IRP, among them the African Development Bank (AfDB), EC, and the French, German, and Portuguese aid agencies\. In the end, despite sustained efforts to obtain cofinancing, besides IDA none of the other donors provided any support\. About half way into the implementation the EC came in to support rehabilitationi of the rural feeder roads in the eastern part  5 of the country\. Because of the shortfall in financing, IRP targets had to be scaled down and funds reallocated for the most urgent tasks as described on this report\. Factors Subject to Government Control 15\. Local counterpart finanicing\. It was anticipated that the Government would provide financing for IRP through the National Fund for Development (FND) and the Road Fund\. Its contribution from FND was less than $100,00, in contrast with its obligation to provide US$1\.4 million equivalent\. Some additional resources came from the Road Fund, but these fell far short of the level originally programmed under the IDA Credit Agreemenit\. IRP resources thus fell short by US$4\.2 million\. A Special Account for IRP was established abroad and managed by the Central Bank of Guinea Bissau; but serious difficulties arose with account reconciliation and inadequate funding of the account, which in turn delayed payment of invoices to contractors by the IRP Coordination Units\. These problems were overcome after an agreement was reached between the Government and IDA that led to the establishment of a Special Project Account with the International Bank of Guinea-Bissau that was managed directly by the Project Coordination Unit (PCU) in MOPCU\. 16\. Institutiolal factors: MES was responsible for IRP durlilng the preparation phase, but during the implementation phase responsibility was devolved to MOPCU and the MTC, after MES ceased to exist\. Coordination between these two m inistries was inieffective at times because of their failure to resolve differences on key issues whichI resulted in implemiienitationl delays\. F\. PROJECT SUSTAINABILITY 17\. Project sustainability is rated likely\. The reorganization of institutional structures to continue the activities carried out under IRP make its achievements sustainable\. The reorganization of the Road Fund under the new Transport Policy and, in particular, under the Transport and Urban Infrastructure Project (TUIP)\. provides some assurance that the road infrastructure will be maintained\. A new decree was signed by the Government detailing specific resources to be provided to the Road Fund from customs duties, gasoline taxes, and port taxes\. Also a new management has been put in place for the Road Fund and relationships and convenltions have been designed for the Road Fund to transfer the funds collected to AGEOPPE to carry out road maintenance\. With the Road Fund reorganization, the system for carrying out road infrastructure maintenance will be put in place and be sustainable\. G\. BANK PERFORMANCE 18\. Overall, Bank performance in identification, preparation, and appraisal of IRP was satisfactory\. The Staff Appraisal Report (SAR) correctly identified the risks that might be faced during implementation, i\.e\. noii-compliance witlh the agreed transport policy, Government reluctance to facilitate private sector participation in works and transportationi, and delays in project implementation because of conistrainlts in institutionial and management capacity\. However, staff failed to consider adequately the risk of cofinanicinig not becoming available\. This was a major shortcoming, as the lack of cofinancing affected the project outcome in a major way\. Also an important constraint on the project supervision was the discontinuity affecting the project team\. Four task managers supervised the project during the first four years of project implementation\. 19\. Project supervision was satisfactory and helped to resolve problems quickly; for example, the changes required in the Credit Agreement and reallocation of finances in the face of resource shortfalls\. The project was extended for one year to complete some road works\.  6 H\. BORROWER PERFORMANCE 20\. The Borrower's performance in project preparation was satisfactory\. However, there were some deficiencies in the provision of counterpart funds, reestructuration of the Road Fund, and management of the Special Account\. Therefore, the Covenanit Compliance in respect to counterpart funds is rated deficient\. Chronic delays in counterpart funding in turn led to delays in project execution\. Also restrictions on Government expenditures imposed by the SAP, caused delays in execution\. Financial management of the public transport companies was weak\. Three of the project audits were qualified\. I\. ASSESSMENT OF OUTCOME 21\. The outcome of IRP is partially satisfactory\. IRP promoted the private sector and contributed to the creation of small- and medium-size companies in civil architecture, road maintenance, and other technical areas and led to the consolidation of some existing companies\. It also led to the reform of public sector enterprises in the transport sector\. 22\. IRP contributed to capacity building in the ministr-ies by helping to improve the technical capacity and skills of personnel in the MOPCUJ and MTC and the privatized companies through training and technical assistance\. Finally, IRP rehabilitated physical infrastructure, thereby promoting trade and improving the transport of goods and movement of persons in the country\. J\. FUTURE OPERATION 23\. The experience gained in execution of the IRP was useful in designing of the Transport and Urban Infrastructure Project (TUIP--Cr\. 2748-GUB), and is also being built upon in the preparation of the Water and Energy Project\. These follow-up projects should serve to strengthen institutional capacity and sustainability of operation and maintenianice of the country's infrastructure\. K\. KEY LESSONS LEARNED 24\. The key lessons learned from implementationi of the IRP are: (a) Project activities and their related costs must be carefully analyzed during project preparation and due account taken of the possible further deterioration in infrastructure facilities that can occur between the preparation and implementation stages\. The road, air, and marine transport infrastructure deteriorated further between the appraisal and implementation and led to additional finalicilig needs for which adequate provision had not beeni made\. (b) Cofinancing should not be counted upon unless the co-financiers give their firm assurances\. The scope of IRP was formulated in a way that relied on a substantial amount of cofinancing\. When it failed to materialize, the project had to be scaled down, which demoralized staff in the implementing agencies, led to a revision of the Credit Agreement, and left some urgent needs unmet\. (c) The Borrower should be asked for firim asSuranices of funding maintenance and operations through a mechaniism such as the Road Fund\. A Special Account should be considered and established in accordance with the norms of the Bank's Special Account for project financinig\.  7 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU INFRASTRUCTURE REHABILITATION PROJECT (Cr\. 2074-GUB) PART II\. STATISTICAL ANNEXES TABLE 1 - SUMMARY OF ASSESSMENTS A\. Achievement of Objectives Substantial Partial Negligible Not applicable (1/) (S1 () Macro policies LI EI J 7 Sector policies m EJ LII FII Financial objectives EII L] L I Institutional development LII ] L-I El Physical objectives El [7 EL I Poverty reduction LI LI ] [ Gender issues El LI EL [K Other social objectives L LI [ Environmental objectives 1 L L W Public sector management L]I EL Private sector development FL EL Other (capacity building) LI [I] LI LI B\. Project sustainability Likely Unlikely Uncertain (/) (/) (E) z~ L LIC  8 C\. Bank erfarmtan Highly satisfactory Satisfactory Deficient (1) (1) (1) Identification 11111 Preparation assistance E E0 Appraisal FI E E Supervision El EF l D\. Borrower performance Highly satisfactorv Satisfactoy Ueficient () (1) (a ) Preparation E[ El Implementation El [ Covenant compliance (counterpart funds) D I L Operation (if applicable) El E] El] E\. Assessment of Outcome Highly High satisfactory Satisfactor Unsatisfactorv unsatisfactory (El E El) ([) En m Eo  9 TABLE 2 - RELATED BANK LOANS/CREDITS Loanlcredit fitie l'urposc I*igr of approval Stabts Preceding Onerations 2020-GUB Social and Rehabilitate and maintain basic urban and 1989 Concluded on Infrastructure Relief social infrastructure by improving the roads and drainage network, and repairing and 0630/96 and rted constructing health and education facilities satisfactory and markets Following operations 2748-GUB Transport and Urban Improve management of public sector 1995 Project was effective in Infrastructure resources; rehabilitate transport and urban January 1995 and is now infrastructure and improve competitiveness of rated unsatisfactory construction industry Water, Energy and Urban Under Preparation Environment Management TABLE 3 - PROJECT TIMETABLE Identification (Executive Project Summary) 05/87 Preparation 10/87 Pre-Appraisal 09/23/88 Appraisal 11/7-1 1/18/88 11/7-11/18/88 Negotiations 10/89 10/89 Board Presentation 11/89 11/89 Signing 02/08/90 02/08/90 Effectiveness 02/10/ 06/06/90 Project Completion 08/10/95 06/30/96 Conclusion 08/10/95 12/31/95 Closing 08/10/95 12/31/96  10 TABLE 4 - LOAN/CREDIT DISBURSEMENTS (in US$ thousand) FVk'90 IFIV91 Ft 92 1 U93 F'\. 94 *:\.: \. Appraisal estimate 3,500 5,300 5,300 4,000 3,000 1\.800 700 Actual 1,661\.74 3,529\.60 6,891\.10 7,659\.40 2,983\.10 1,742\.44 1,649\.29 Actual as % of estimate 45% 66% 130% 192% 100% 94% 228% Appraisal estimate cumulative 3,500 8\.800 14,100 18\.100 21,100 22\.900 23,600 Actual cumulative 1\.661\.74 5,191\.34 12,082\.44 19,741\.84 22,724\.94 24,46738 26,116\.67 Actual as % of est\. cumulative 45% 59% 85% 108% 107% 106% 110i/a The last disbursement was made on 04/11/97\. TABLE 5 - KEY INDICATORS Estimated = = iual achiie_\.nt Institutional Support 4,30000 6,90(\.00 Public Companies Reformed 5 3 Road Infrastructure Rehabilitation of paved roads 182 Kms 50 Kms Travel roads 175 Kms 253 Kiiis Urban roads 9 Kms 6 Kms Other Infrastructure Construction and rehabilitation of ferry 5 ramps 2 ramps ramps Replacement of ferry i Low-cost houses 100 40 7,733\.10 8,835\.64 Urban Program 1,972\.40 1,260\.80 Road Maintenance 9,501\.10 6,345\.18 Total 28,357\.00 26,609\.25 Source: PR] Coordination Unit (UCP/PRI)  11 TABLE 6 - STUDIES Purpose as defined at appraisal | Status -- Itwpaet f-t - Studl!l Demand and Supply of Public Fleet measure, routes definition and Completed TRANSFER creation, private Transports to the Town of Bissau timetable to urban public transports company concessionaire of the to the SILO DIATA urban public transports privatization/extinction Demand and Supply of Interurban Localization and measure of the Completed Fleet topology identification and Transports interurban transports future terminal interurban transports demand between the Capital and the Country\. future Terminal measurc and localization Study to the Creation of a Not expected C'ompleted Gathering, treatment and analysis Management Information System of informatization of companies Public and Participated Companies in productivity, and financial indicators the Sector Study About the Valuation of the Clarification of the State (Completed Decision of the State joint stock in JAPG immovable transferred to the participation of port services by the the (itIlIPORT Gt IIPORI' concession of the same to the GUIPORT Informatization of the MTC Budgetary\. patrimonial and staff Completed Informatized treatment of these Administrative Proceedings management services, becoming more operational Study About the Tariffary Policy' and Definition of a cost structure Completed Definition of a tariffar3' policy' Structure of Transports Operation available to public and private Costs goods and passengers transports operators Study to the RODOFLUJVIAL Diagnosis of the company situation Completed It was used as principal element in privatization and decision of stages, as well as the running privatization process the value of this company in the incomes and assets view Statistic Yearly Publication of the Completed Gathering, treatment and synthesis Transports and the Communications of all sector activity as well as the investment and employmcnt level to each subsector tutored by the M']'C Yearly Accessories to Transports Accessory to Companies Accounts Completed It made possible with accuracy' the Public Companies diagnosis ror the better choice between the same companies privatization or extinction Studies of Diagnosis and Technical Identification and quantification of Completed Improvement of work conditions Intervention in the Marine and Ports material and logistics lacks; and increase of the technical General Management\. National detinition if intervention strategies intervention capacity of those Meteorology, Civil Aviation, to exceed technical insufficiencies services and results with better Terrestrial Transports and Central and limitations performance\. Organs of the MTC Study to an informatized basis Informatization of these services ('ompleted Easy identification and creation to driving licenses and allowing basis efficient and quick quantification of the operational car vehicles registration consultations park, and decision of collection of incomes capacities by the Road Fund Management of a Documentation Pedagogical and formation 'on-\.job' Completed It made possible the sudden start of Center nature the actual MTC Documentation Center  12 TABLE 7A - PROJECTI COSTS 4raI ite(USThsad)AutS$hoa,) Institutional Support 247\.5(0 7\.564\.50) 7,812\.00 19\.98 9\.842\.31 9,862\.29 Public Companies 13\.00 1,325\.40 1,338\.40 0\.63 304\.70 305\.33 Road Infrastructure 1,105\.00 6\.628\.1( 7733\. 1 0 72\.35 8,763\.29 8,835\.64 Urban Program 27\.30 1\.945\.10 1\.972\.40 29\.70 1,231\.10) 1,260\.80 Road Maintenance 3,363\.60 6,137\.50 9\.50(1\.10 369\.86 5,975\.33 6,345\.19 Total 4\.756\.40 23\.600\.60 28\.357\.0(0 492\.52 26,116\.73 26,609\.80 TABLE 7B - PROJECT FINANCING - -|; -0 ; -0 f;f 7 -0A-- raital sd m te ( S f Th thsafl )4 * a :U S Th5: w ut ~~~~~~~~~~~~~~~~~~~~~~~A _W = f, AM:\. ff Siurce Lo~~~~~~~~~~~al Foreign Total' Loaqoeg oal IDA 2,487\.5(0 21\.116\.80) 23\.6001 \.70 492\.52 26,1 16\.73 26\.609\.25 RGB 4,756\.30 )0 ( 4( 4756\.40 413\.00) ()\.() 413\.00( Others 1,766\.60 13\.176\.20) 14\.939\.200 ()\.00 (\.00 'Total 9,011 04(0 34,293\.0)0) 13\.296\.3(0 905\.00 26, 116\.73 27,022\.1)0 TABLE 8 - ECONOMIC EVALIJATION 199D 1991 1992 :1993 :994, 99 i9 1997 I\. Roads Social Benefits 10)64 2298 3663 1831 1689 1922 2188 Social Cost of Investment 348 3608 2823 19X 19 21) 21 Net Present Value (I 5%O) 8036 Economic Rate of Return 40  0 0\. (--3 w - (- K) - - 0 0 0 - 0-  0- 0- - - E  - K) - (--3 (-3 (- W (- - = - '0 '0 '0 '0 '0 '0 K) - - z '\.0 - z -z '- -, -- -'0 z'j- \. \. c 0 - 0-' - -orro ' 0 2 C - 0 £ -  - c-I - - \. SI - - 'C 3; ' = ;\. C 0- - 0C ' C; C C - C C-  -' \.0 C CfC ' C C- 0-  rj; 0- - o- 0 2 - - 2 2 a' S S  14 TABLE 11 - IDA RESOURCES: STAFF INPUTS Actui\. Stgie af PrjectCycle \. \. \. \.Weks \. : Through Appraisal 37\.8 64\.3 Appraisal-Board 45\.1 91\.6 Board-Effectiveness 14\.3 27\.0 Supervision 78\.8 166\.0 Completion 7\.9 17\.5 Total 183\.9 369\.7  15 TABLE 12\. BANK RESOURCES: MISSIONS StagLe of l'riject (Cycle Month/ Number Days ill Specialized Rating Rating oIfvi,p ol \. \. ~~~~~Year orl'Prsonis F;ihld slJr Yhll 1ml\. DeIvelop\. I' btns | S\.xff Skills Statun; Impact Pr_ _ -_- Preparation 01/88 5 10 TTL, CON, PA\. uP, rTs Pre-Appraisal 09/88 2 I EC\. CON Appraisal 11/88 4 I J TTL, CON\. I'A Follow-up Appraisal 8/89 I 10 TTL I Supervision 02/90 2 12 'TL, UP Supervision (part of Sup 06/90 3 4 TTL, IJP\. CON I CR-2020-GUB) Supervision 10/90 2 7 TTL\. AR I Supervision 02/91 4 10 TTL, TS\. UP, I CON Supervision 11/91 5 17 TTL, UP, CON, 2 Res\. Rep Supervision 05/92 4 18 TTL, TS, UP\. 2 2 CON, Res\. Rep\. Supervision (New TTL) 11/92 5 12 TTL, TS, UP, 2 2 CON Supervision 04/93 4 14 TTL, UJP, CON 2 2 Supervision (New TTL) 02/94 5 16 DC, TTL\., UP, S S CON Supervision (part of Sup\. 07/94 4 14 LJP, CON S S of CR-2020-GUB and Ident\. of CR-2748-GUB) Supervision (part of prep\. 02/95 1 20 CON S S of CR-2748-GUB) Supervision (part of Sup\. 07/95 3 17 TTL, C'ON, PO S S of CR-2748-GUB) Supervision (part of Sup\. 10/95 2 22 TTLI CON S S of CR-2748-GUB, CR-2020-GUB and Prep\. of Proposed Water and San\. Project) Supervision (part of Sup\. 02/96 2 18 TTL, CON S S of CR-2748-GUB) Supervision (part of Sup\. 06/96 2 1 1 TTL\., CON S S of CR-2748-GUB) AR - Architect PO - Project Officer HS - Highly Satisfactory CON - Consultant TTL - Task Team Leader S - Satisfactory DC - Division Chief TS - Training Specialist NS - Not Satisfactory EC - Economist UP - Urban Planner I - Minor Problem PA - Project Adviser 2 - Moderate Problem 3 - Major Problem  Annex I Page 1 of 7 IMPLEMENTATION COMPLETION REPORT REPUBLIC OF GUINEA-BISSAU INFRASTRUCTURE REHABILITATION PROJECT (Cr\. 2074-GUB) PROJECT IMPLEMENTATION ASSESSMENT BY THE GOVERNMENT Introduction/Background In November 1988, an IDA mission consisting of specialists in the infrastructure field joined forces with the Guinea-Bissau authorities to appraise a proposed Infrastructure Rehabilitation Project\. In the process, the following were identified as the key objectives of the operation: (1) to strengthen the institutions involved in the urban and transportation sectors (Ministry of Social Infrastructure and State Secretariat for Transport) in: (a) management of maintenance and operations (b) planning and coordination of sector activities (c) financial management of public transport companies; (2) to contribute to a better balance between road and river transport; (3) to remove bottlenecks to increased agricultural production, especially in the South, by improving parts of the feeder road network; (4) to improve the management of municipal services in Bissau and other centers, and to expand on the sites and services operation initiated under the Social and Infrastructure Relief Project as a means of addressing the need for low-cost housing; (5) to support a comprehensive training program to provide government agencies, municipalities and the private sector with personnel equipped to operate, maintain and manage urban and transport infrastructure and services\. The total cost of accomplishing these objectives was estimated at US$37 million\. Given that IDA credit proceeds were estimated at US$18 million and local counterpart funding at US$2 million, it became obvious that potential cofinancers would have to be identified and means found of increasing the revenues of the Road Fund, the main source of counterpart resources\.  Annex_1 Page 2 of 7 Cofinancing The following agencies and organizations indicated their willingness to participate in one way or another in financing the project: African Development Bank (AfDB), United Nations Capital Development Fund (UNCDF), European Union (EU), Swedish Intemational Development Agency (SIDA), Arab Bank for Economic Development in Africa (ABEDA), and KfW of Germany\. Local Counterpart Financing Under the terms of the original Credit Agreement, national counterpart contributions to local currency expenditures, particularly on road maintenance\. were to be as follows: 10% of overall cost in 1990 10% of overall cost in 1991 20% of overall cost in 1992 40% of overall cost in 1993 40% of overall cost in 1994 In order to meet these obligations, the Government proposed to rely mainly on substantial changes in Road Fund revenue-collection powers, and inclusion/adjustment of other revenue sources as follows: (1) gasoline tax (from 5% to 20% of c\.i\.f\. value); (2) annual vehicle tax (from PG 5,000 to PG 8,000 on light vehicles, and from PG 10,000 to PG 16,000 on heavy vehicles); (3) tax on import of vehicles and spare parts (5% and 10% of c\.i\.f\. value, respectively)\. At the same time, the toll system would be abolished, given the well-documented difficulties affecting its operation and management\. Organization and Implementation In order to facilitate implementation of the project, a Coordination Unit had been set up with a mandate to supervise execution of all its components and to assist the institutions whose capabilities and jurisdictions it was focused on, namely the then Ministry of Social Infrastructure and State Secretariat for Transport\. In the case of the Ministry, supervision was to be effected by technical units attached to and coordinated by its General Directorates\. The State Secretariat for Transport was guaranteed technical assistance for LEGUI (National Engineering Laboratory) and DGEP (General Directorate of Roads and Bridges) through UCT (Transport Consulting Unit), and for DGHU under a contract with the consulting firms CESC and BCEOM\.  Annex 1 Page 3 of 7 Project implementation began in 1990 and was completed in 1994, although, for reasons that had to do with the final disbursement, the actual project closing date was deferred until mid 1996\. Consequently, and given the goals and objectives set out in the Appraisal Report in 1989, it is considered important to enumerate the lessons to be drawn from the project as a whole, as well as to make a special assessment of certain issues raised by its implementation history\. Assessment of Project Outcome Despite the difficulties encountered in executing this project, it is the considered opinion of the Guinea-Bissau authorities that its effects are readily apparent and that it must be regarded as having proved a very positive undertaking, a conclusion borne out by the following results: (1) Rehabilitation and/or upgrading of both paved and earth roads in the interior, especially in the southern region of the country, which has led to a significant reduction in transport costs and to the expected degree of stimulus for the agriculture sector\. Building of ferry docking facilities on major rivers\. (2) Development of serviced building sites and construction of low-cost housing in both the capital and the interior, and the logistical support provided for the Bissau City Council, have set the foundations for a policy of cost recovery in the housing sector (3) The Ministry of Public Works, Construction and Urban Affairs and the Ministry of Transport and Communications have been equipped with minimum operational structures and with comprehensive data on the national infrastructure network and housing stock, basic requirements for their respective roles\. With establishment of the technical units attached to the General Directorates, the essential conditions have been created for a gradual transfer of technical capabilities through technical assistance\. Evidence of this can be seen in the fact that during the last years of the project its technical management was entirely in the hands of Guinea-Bissau nationals\. (4) Creation of a stock of local capabilities through a lange of project-financed training programs\. (5) Gradual transfer of management responsibilities to the private sector from such public transport enterprises as SILO DIATA, the Autonomous Port Authority, and GUINE-MAR\. (6) Creation of private enterprises in the sector, with an associated increase in employment opportunities, mainly for individuals let go from the civil service\. The preceding factual and realistic statement of project achievements needs to be accompanied by a short catalogue of those aspects of project organization that contributed to this general outcome:  Annex 1 Page 4 of 7 (1) Existence of a simple, functional organizational structure based on careful definition of the duties and responsibilities of all parties involved - plus compliance with/acceptance of these provisions\. (2) Guarantee of an operational environment compatibl\. \vith the importance of the objectives in view - or, in other words, the logistics and equipment in place covered the essential requirements of the structural organization created\. (3) Appointment of stable work teams which took part in all phases of the project (design, negotiations, execution)\. Selected on a basis of competence, capacity for initiative, and contractual ties to the project, they were assured of remuneration at the levels Guinea-Bissau professionals considered "acceptable minimums\." (4) Careful formulation of, and the most scrupulous adherence possible to, a timetable for physical and financial execution of the project\. Continuous evaluation of project work team performance through quarterly progress reports\. Bottlenecks and Remedial Measures During the project implementation process, which began in June 1990, various problems arose\. In some cases they were satisfactorily resolved but in others were simply kept as much as possible to a minimum: Special Account: (Memorandum on problems encountered during implementation of the Infrastructure Rehabilitation Project and the steps taken to solve them\.) At project commencement, an account was opened abroad with Crecdito Predial Portugues (Banco Comercial), to be managed by Guinea-Bissau's Central Bank\. This invariably involved a long bureaucratic process which led not only to delays in settling accounts but also to difficulties in obtaining bank statements for purposes of Special Account reconciliation with the World Bank's Disbursements Division in Washington\. Remedy: The problem was resolved in late 1992 when the Government decided to place direct management of the Special Account in the hands of the Project Coordination UJnit\. Cofinancing: There can be no doubt that the initial involvement of [potential] cofinancers in the project [followed by their later failure to provide support] became the major source of difficulties\. In addition to the Bank, the only other contributor ultimately was the European Community, which participated in specific rural road rehabilitation and maintenance programs\. The African Development Bank had already shown interest in cofinancing the project at the time the Staff Appraisal Report was being written, but because of penalties imposed on Guinea-Bissau for non- payment of arrears to this financial institution no sums were ever actually forthcoming\.  Annex I Page 5 of 7 Local counterpart financing: The Government was to participate in project financing through: (i) the Road Fund, whose articles of incorporation were amended to enable it to support the Road Maintenance Program; and (ii) the National Development Fund, which was to cover the cost of other local- currency expenditures, specifically institutional civil works and operations\. The Road Fund, with great difficulty, covered 10% of the cost of road maintenance works, as follows: 1990 US$54,000 1991 US$68,150 1992 US$74,550 1994 US$111,320 National Development Fund performance was less satisfactory, since it contributed no more than US$45,000, in the first year of the project (1990)\. In the circumstances, the Credit Agreement had to be amended several times in order to avert suspension of the project\. Notwithstanding, a number of difficulties arose during the final phase of the project, when disbursements to contractors scheduled to be made before the project closing date looked as if they might become part of the public debt\. Lessons The Government believes the foregoing material warrants the following observations on issues arising from the implementation history of the project: 1\. In future, a fundamental concern should be to foster discussion of existing views as an essential step toward formulation of a truly comprehensive sector policy which not only establishes the mechanisms for project or program implementation but also lays out a national maintenance strategy, independently of the provider of financing\. In the Government's view, this would assist greatly either in reducing the major obstacles to the mobilization of cofinancing, or, should this prove impossible, in keeping project scope on a scale commensurate with basic assured funding\. 2\. The technical capabilities created by the project and vested in the special units attached to government departments are essential functional elements that need to be preserved from the "obliteration" that will otherwise be their lot\. This dilemma, like the "abrupt" insistence on privatization of the many work teams (brigadas) created through World Bank projects, raises questions regarding the coherence and consistency of the policies applied under the different projects, namely Road Projects I and II, SAL I, the Infrastructure Rehabilitation Project (IRP) under review here, and the Transport and Urban Infrastructure Project (TUIP)\. The project under review (IRP) provides a textbook example: the technical assistance provided to ensure successful project implementation, while indispensable, absorbed 60% of the funding earmarked for strengthening the institutional capabilities of the executing agency, a figure almost double the volume of local counterpart funding\.  Annex 1 Page 6 of 7 3\. Failure to heed the two preceding lessons can lead only to a situation where, while the achievements of a project are verified by explicit data and values as the results of specific interventions, the same objectives elsewhere may require new but vir\.ually similar interventions\. This is tantamount to saying that the country benefits from the physical outcome of a particular operation, but without any assurances that there has been a transfer of the skills and capabilities that would ensure self-sustainability in the field in question\. 4\. There appears to be a need to review the concept of "local counterpart funding" for projects\. When it is expected in fixed amounts that quantify governmental participation in or commitment to financing a particular operation, it can seriously jeopardize important undertakings\. Guinea-Bissau believes it should be regarded instead as an assurance of the effort the authorities are prepared to make in the future to ensure that wealth created by an initial investment of capital is maintained\. In other words, external financing is sought because a country recognizes its financial and institutional inability to meet the needs on which the program focuses\. But such financing goes hand in hand with requirements for counterpart funding which the sector is not yet in a position to generate\. precisely because of the extent to which the resources or services it supplies or performs have deteriorated\. When this type of situation is exacerbated by the accompaniments to acceptance of external assistance, the house of cards collapses -the project or program closes down without having solved the problem, a heavy debt has been created, and there is the added aggravation of finding that the same need persists\. 5\. As far as cofinancing is concerned, experience shows clearly that few donor agencies are willing to surrender control over their funds to others\. Each and every one of these institutions has its own project implementation policy and criteria, besides its interest in appearing as the prime mover in the actions to be carried out\. The proposed arrangements to finance sites and services programs under SAL I by UNCDF/UNDP\. and under the present project by the European Union and AfDB, are clear warnings not to have high expectations of the concept of cofinancing, and in the future to insist on commitments being confirmed before loan agreements are signed, or otherwise to scale projects to the volume of guaranteed funding\. Conclusion Analysis and evaluation of the extent to which project objectives were accomplished, and the experience gained through the project implementation process itself, lead the Government of Guinea-Bissau to the following conclusions: (1) The outcome of the project was sufficiently positive in terms of its physical components, namely road construction and maintenance, rehabilitation of urban infrastructure, and construction of pilot housing\. (2) The same can be said of withdrawal by the state from the management of transport operations (SILO DIATA, Port Authority, and GUINE-MAR)\.  Annex 1 Page 7 of 7 (3) Support for private sector promotion was also satisfactory, in the sense that newly created enterprises were strengthened by the award of public works contracts\. (4) Especially positive was the institutional support made available to the Ministry of Public Works, Construction and Urban Affairs and the Ministry of Transport and Communications, which made possible the achievement of fundamental sector objectives\.  Annex2 Page 1 of 5 REPUBLIC OF GUINEA-BISSAU INFRASTRUCTURE REHABILITATION PROJECT (IRP) AIDE-MEMOIRE FROM THE WORLD BANK's SUPERVISION MISSION (June 29-July 9, 1996) Introduction 1\. An IDA supervision mission comprising Mr\. Leslie Pean, mission chief and project officer, and Mario Antao, consultant, visited Guinea-Bissau from July I to 9, 1996 to supervise and prepare for closure of the Infrastructure Rehabilitation Project (IRP)\. 2\. The mission met with the following government representatives: Armando Ant6nio Napoco, Minister of Public Works, Construction and Urban Development (MOPCU), and Ansumane Mane, Minister of Transport and Communications\. The mission maintained regular contact and held working meetings with Domingos S\. Pereira, Director General of Infrastructure and Transport, Agostinho Fernandes, Director General of Housing and Urban Development, Ernest T\. Menezes d'Alva, IRP Coordinator, Joao Pess6a de Magalhaes, expatriate coordinator, and Domingos F\. Gomes, managing director of AGEOPPE\. 3\. At the first meeting with the mission, the Minister of Social Infrastructure took the opportunity to give a status report on the IRP project\. Although the project was in its final phase, a number of related financial issues still remained unsettled\. Roads program Rehabilitation of roads network 4\. Road maintenance contracts for 1995 were cut down to less than 20% of those for earlier years, and are still six months behind schedule\. Of the 1,050 km of priority network roads, only 142 km of the paved system and 50 km of earth roads have received any current maintenance\. Public invitations to tender were issued in May of last year, and the contracts were signed at the end of June that same year\. 5\. SAO VICENTE-M'PACK ROAD, BULA-CANCHUNGO-CACHEU ROAD (Contract No\. 206/UCP/PRI awarded to NO CUMPU, for US$57,328\.50, signed June 27, 1995)\. The works  Annex 2 Page 2 of 5 under this contract have been completed and accepted\. With respect to payment, the performance guarantee has yet to be released\. 6\. SAO DOMINGOS-VARELA ROAD (Contract No\. 217/UCP/PRI awarded to GUINCONSTROI L\.da, for US$112,000, signed June 27, 1995)\. This contract included not only normal maintenance, but also a general upgrading of the road and heavy work between Pk 0 and Pk 12, including scraping [escarificacdo], upgrading and construction of the wearing course in laterite gravel\. The work has been completed and accepted\. Operation of Chuvas Dam 7\. EASTERN AND SOUTHERN HIGHWAY (Contract No\. 209/UPC/PRI awarded to SADU GUINE, for US$17,995\. signed June 27, 1995)\. Contract performance and billing comp!eted\. 8\. NORTHERN HIGHWAY (Contract No\. 208/UCP/PRI awarded to NO CUMPU, for US$4,740, signed June 27, 1995)\. Contract performance and billing completed\. Rehabilitation of urban roads 9\. BAIRRO MILITAR ROAD, 2nd segment (Contract No\. 214/UCP/PRI awarded to CONSORCIO NO CUMPU-SENARCO, for US$150,826\.90, signed November 3, 1995)\. The contract provided for rehabilitation of 690 m of roads and construction of 980 m of ditches [valetas] and 18 m of water mains\. The road component was completed last January, and the defects that prevented provisional acceptance of this part of the project have now been corrected\. Provisional acceptance is now scheduled for the end of July\. 10\. The drainage component is still in progress, owing mainly to the delays in the moving of a large section of the water supply network within the work area\. Some 200 m of ditches still remain to be completed by the agreed deadline of July 20 of this year, provisional acceptance being scheduled for the end of July\. Pluba road 11\. DRAINAGE COMPONENT (Contract No\. 231/UCP/PRI awarded to URTEC-N, for US$54,650, signed May 6, 1996)\. The contract provides for the construction of 480 m of ditches [valetas] and 26 m of I x I water mains\. About 50% of the works have been completed\. No billing has taken place\. The works should be completed by the end of this month\. 12\. ROAD COMPONENT (Contract No\. 230/UCP/PRI awarded to EMPRESA GUICONSTROI, L\.da, for US$17,350)\. Work on this component has not yet started, pending completion of the water mains\. The works should be completed by the end of this month\.  Annex2 Page 3 of 5 ADB COFINANCING 13\. REHABILITATION OF ROADS (Jugudul-Bambadinca, Jugudul-Mansoa-BissorA, Bambadinca-Xime, Cati6-Rio Cumbija, Buba-Cati6)\. The program to be financed by the ADF is still not ready to be launched since the Ministry of Cooperation has still not informed MOPCU of its actual cost\. 14\. In May of last year, the Minister of Public Works, Construction and Urban Development sent a letter to the ADB requesting that the program be launched again\. One the actual cost of the program has been deterrnined, its component projects will have to be brought up to date\. Urban Program Construction of 40 serviced lots and houses Subdivisions in the interior (Buba\. Bafata and Bissora) 15\. With respect to the construction of demonstration houses on serviced lots in the cities of Buba (Contract No\. 220/UCP/PRI awarded to the Thomas Nartey company), the work is somewhat behind schedule because the company lacks capital, alleging that its bills have not been paid\. UCP informed the mission that there is only one outstanding invoice owing to that company, pending the upcoming replenishment of the Special Account; since the amount involved is lower than US$20,000, the minimum required for bill payment by direct disbursement, this invoice cannot be sent to the World Bank for settlement\. 16\. Bafata (Contract No\. 221 awarded to the Mamadiu Djal6 company)\. These works are also behind schedule, but in this case UCP has not yet received any bill for payment, owing to the virtual absence of supervision on the part of the Ministry\. The fact is that after the allocations for the domestic brigades assigned to this component were used up, the Ministry lost most of them, and supervisory responsibility passed to MOPCU's regional agents, who draw governnent wages and do not have the logistical equipment to enable them to adequately monitor works in progress\. 17\. Bissora (Contract No\. 222 awarded to URTEC-N)\. The work is in its final phase and provisional acceptance is scheduled for the end of July\. 18\. Having reviewed the available documentation concerning the contracts mentioned in paragraphs 15, 16 and 17 above, the mission did not find sufficient evidence to justify the delays\. It therefore asked the Government to take all necessary steps to bring the respective works back on track as soon as possible\.  Annex 2 Page 4 of 5 Audit 19\. The mission received confirmation of the request for funding for the upcoming Project Audit, covering the activities of the current fiscal year, which in this case runs until all payments have been made, probably up to September or October\. The finn of Ernst and Young, which has audited the project for the past three years, has submitted a proposal of US$15,000 to audit the IRP only, and the mission has no objection to this being financed by AGEOPPE\. Financial situation of the IRP Status of requests for payment 20\. Given that the IRP project closed on June 30, 1996, the mission asked the UCP/IRP Financial Department for an exhaustive survey of the status of all outstanding contracts, invoices, and payment requests\. As a result of this survey a number of documents were voided, either because they had been drawn up without regard for the proper procedures or because it was found that they were not eligible for payment\. A list of those documents appears in Annex 1, "Payment requests voided\." Annex 2, "Payments outstanding at July 4, 1996," also reflects the findings of the survey and contains a list of eligible invoices on which payment is currently being made\. Status of contracts 21\. During the process of the survey the effective costs of certain contracts were corrected so as to objectively identify the commitments given by the IRP\. 22\. Given that it was not possible by June 28\. 1996 to achieve consensus between the Government and CESO - Consultores Internacionais on the matter of the addenda to contracts nos\. 14 (UCP/IRP), 15 (GT/IRP), 17 (UCT) and 19 (DGHIJ/CMB), the Government asked the mission for a statement of no objection to signature of a contract with AGEOPPE whereby the latter would provide MOPCU with support in aspects related to supervision of the road and urban works in progress under the IRP, support in closing the IRP project, and all necessary technical assistance\. Having checked the terns of reference, the mission issued a statement of no objection to signature of the contract\. The mission also reminded the Government that it would not be possible to sign any contract related to the IRP project after its closure on June 30, 1996\. 23\. To monitor the status of the contracts, a table headed "Financial Monitoring of Credit Agreement 2074-GUB" was drawn up\. This table, shown in Annex 3, lists all of the IRP contracts, broken down into disbursements and commitments, in US dollars and SDRs, through July 4, 1996\.  Annex 2 Page 5 of 5 Balance available under Credit Agreement 2074-GUB 24\. Annex 4, "Estimated financial implementation of the IRP at July 4, 1996," contains an overview of the IRP's financial situation\. The annex also shows the costs assigned to each category, amounts already disbursed, amounts committed, and the balance available\. 25\. The mission reminded the Government that the undisbursed balances available in any category on the date of project closure cannot be subsequently withdrawn, which means that after that date only those payment commitments made by June 30, 1996 can be honored\. Annex 5, "Commitment of IRP allocations (works, urban plots, and road maintenance)," contains a list of active IRP contracts, and gives in column "Dif' the amounts to be billed and for which no request has been received to date\. (Signed) (Signed) Leslie Pean Armando A\. Napoco Head of Supervision Mission Minister of Public Works, Construction and Urban Development   MAP SECTION   IBRO 214, / \.6 0 S6W 35-33 5SW - IO em1 SENEGAL Xf H t ,~~~~003\.6 4 - a\.s,\.e\.s roe 0\.0 -6 - 1 ,_cu' O CEA N s > ( / / {; CbU j < 4 / G UINEA-BISSA U OCEAN IFALACU~~S L-II L- ~~~~~~~~~~ -/ee tO TaI 35 30\.o\.a \.63\.~ 7~~56~~~~50l =-36563\.0 \.9 ' A U Z Road\. RefIablo,Seed L'nder __- - Foode, Roads MAL RITANL_ > 6 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ \ _ v 9 i/ L'nder th, Pnp,2c\. (IRP) L'npaved 10ad5~~~~~Uner Ie rotct IRP SENEGAL + ~ ~ ~ tsw eJi4ss 2 ox tI4t~SANOIOZIIOLHO F e o&_ / der Road InOplooemenIs Paoed Roads TH /::t\.- tRW /o, '0s Ram ps to oe Relabdiraloed O StIocM0 d b eas S4 ?CHIRR&A I ACO-to ' EstmRns - Rep\.on Roandasaes a 'ISIS 1135RpM I I~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~GUNE-ISA !i'' c 6 \.'\.'5 INFRASTRUCTURE REHABILITATION 3 IC 30 E0 R{d\.I&I Ploj- -d, R-d, 1w t5 E R U~~~d\.l th\. P~~~~~~~~mll (IRRP)01073    IMAGING Report No\.: 4592 Type: ICR

APPROVAL

P125799

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 66921-MA PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF EURO 12 MILLION (US$15\.8 MILLION EQUIVALENT) TO THE KINGDOM OF MOROCCO FOR A JUDICIAL PERFORMANCE ENHANCEMENT FOR SERVICE TO CITIZEN PROJECT ("Mahkamati") May 16, 2012 This document is being made publicly available prior to Board consideration\. This does not imply a presumed outcome\. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank's policy on Access to Information\. CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2012) Currency Unit = EUR EUR 0\.75651549 = US$1 FISCAL YEAR January 1 - December 31 Acronyms and Abbreviations AOP Annual Operating Plan CdA Court of Appeal (Cour d'Appel) CdAC Court of Appeal of Commerce (Cour d'Appel de Commerce) CdC Court of Commerce (Tribunal de Commerce) CEPEJ European Commission for the Efficiency of Justice (Commission Europdenne pour l'Efficacit de la Justice) CdST Technical Steering Committee (Comit de Suivi Technique) CMS Case Management System CAP Performance Improvement Committees (Comit d'Amlioration de la Performance) CPS Country Partnership Strategy CQS Selection Based on Consultant's Qualifications CSM Superior Judicial Council (Conseil Supirieur de la Magistrature) CSO Civil Society Organization CSPJ Superior Council of the Judicial Power (Conseil Supirieur du Pouvoir Judiciaire) DECM Directorate of Research, Cooperation and Modernization (Direction des Etudes, de la Coopiration et de la Modernisation) DPL Development Policy Loan EU European Union EU MEDA EU Euro-Mediterranean Partnership Program GEPEC Strategic Planning of Human Capital (Gestion privisionnelle des Effectifs, Emplois et Comptences) GoM Government of Morocco (Gouvernement du Maroc) GPN General Procurement Notice IC Individual consultant ICT Information and Communications Technology ICB International Competitive Bidding IL Investment Loan ISM Superior Judicial Training Institute (Institut Supirieur de la Magistrature) LCS Least-cost Selection MAGG Ministry of Economic and General Affairs (Ministre des Affaires Gindrales et de la Gouvernance) MEF Ministry of Economy and Finance (Ministre de l'Economie et Finances) MENA Middle East and North Africa M&E Monitoring and Evaluation MdJL Ministry of Justice and Liberties (Ministre de la Justice et des Libertis) MTEF Medium-Term Expenditure Framework NCB National Competitive Bidding NGO Non-governmental organization PAPJ Court performance improvement plan (Plan d'amlioration de la performance de la juridiction) PDO Project Development Objective PER Public Expenditure Review POM Project Operational Manual QCBS Quality & Cost Based Selection REC Strategic Staffing Framework (Rdfirentiel des emplois et des comptences) SAJ Automated case management software of the MdJL (Systme Informatisk de Gestion des Affaires du MdJL) SBD Standard Bidding Document SGG Secretary General of the Government (Secrtaire Gindral du Gouvernement) SOE Statement of Expenditures SRA Annual Reform Strategy (Stratigie de Riforme Annuelle) SSS Single Source Selection TPI Court of First Instance (Tribunal de Premidre Instance) UGP Project Management Unit (Unit de Gestion du Projet) Regional Vice President: Inger Andersen Country Director: Neil Simon Gray Sector Director: Manuela Ferro Sector Manager: Guenter Heidenhof Task Team Leader: Philippe de M6neval Table of Contents I\. Strategic Context\. \. \.1\. A\. Country Context \.1\.1 B\. Sectoral and Institutional Context \. 2 C\. Higher Level Objectives to which the Project Contributes \. 6 II\. Project Development Objectives\. 6 A\. PDO \. 6 i\. Project Beneficiaries\. \. \. 7 ii\. PDO level results indicators\. \.7\. \.7 III\. Project Description\.7 A\. Project components\.7 B\. Project Financing\.12 i\. Lending Instrument\.12 ii\. Project Cost and Financing\.13 C\. Lessons Learned and Reflected in the Project Design \.14 IV\. Implementation\.16 A\. Institutional and Implementation Arrangements \. \.16 B\. Results Monitoring and Evaluation\. \.17 C\. Sustainability \.17 V\. Key Risks and Mitigation Measures\.18 VI\. Appraisal Summary \.19 A\. Economic and Financial Analysis\.19 B\. Technical\. 20 C\. Financial Management\. 21 D\. Procurement\. 22 E\. Social (including safeguards)\. 22 F\. Environment (including safeguards)\.24 Annex 1: Results Framework and Monitoring\.25 Annex 2: Detailed Project Description\. 30 Annex 3: Implementation Arrangements\. 43 Annex 4 Operational Risk Assessment Framework (ORAF)\.54 Annex 5: Implementation Support Plan\. 58 PAD DATA SHEET Morocco Judicial Performance Enhancement for Service to Citizen Project ("Mahkamati') (P125799) PROJECT APPRAISAL DOCUMENT MIDDLE EAST AND NORTH AFRICA MNSPS Basic Information Date: 16-May-2012 Sectors: Law and justice (100%) Country Director: Neil Simon M\. Gray Themes: Access to law and justice (60%), Other rule of law (40%) Sector Manager/Director: Guenter Heidenhof/Manuela V\. Ferro Project ID: P125799 EA Category: C - Not Required Lending Instrument: Specific Investment Loan Team Leader(s): Philippe De Meneval Joint IFC: No Borrower: Government of Morocco Responsible Agency: Ministry of Justice and Liberties Contact: Mr\. Abdelmajid Rhomija Title: General Secretary of Ministry of Justice and Liberties Telephone No\.: 212537732274 Email: rhomija@justice\.gov\.ma Project Implementation Period: Start Date: 01-Jul-2012 End Date: 30-Jun-2016 Expected Effectiveness Date: 30-Oct-2012 Expected Closing Date: 31-Dec-2016 Project Financing Data(US$M) [X ] Loan [ ] Grant Terms of the Loan: Variable Spread Loan, denominated in EUR with a final maturity of twenty-nine [ Credit [ ] Guarantee (29) years including a grace period of six (6) years For Loans/Credits/Others Total Project Cost (US$M): 15\.80 Total Bank Financing (US$M): 15\.80 Financing Source Amount(US$M) Borrower 0\.00 International Bank for Reconstruction and Development 15\.80 Total 15\.80 Expected Disbursements (in USD Million) Fiscal Year 2012 2013 2014 2015 2016 Annual 0\.47 3\.42 6\.40 3\.91 1\.60 Cumulative 0\.47 3\.89 10\.29 14\.20 15\.80 Project Development Objective(s) The Project Development Objective is to strengthen the capacity of the Borrower's justice sector to deliver efficient, timely and transparent services to citizens and businesses through: (a) piloting of a participatory reform process involving judges, administrative staff, judicial auxiliaries and users in selected courts in the Project Area; and (b) strengthening the institutional capacity of the central functions of the Ministry of Justice and Liberties (MdJL) to better support and monitor the court system\. Components Component Name Cost (USD Millions) Component 1: Improving Court Performance in the Project Area 9\.80 Component 2: Upgrading the Strategic Planning and Management Capacities of the 4\.90 Ministry of Justice and Liberties (MdJL) Component 3: Project Management, Monitoring and Evaluation 1\.10 Compliance Policy Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [X] Does the project require any waivers of Bank policies? Yes [ ] No [X] Have these been approved by Bank management? Yes [ ] No [X] Is approval for any policy waiver sought from the Board? Yes [ ] No [X] Does the project meet the Regional criteria for readiness for implementation? Yes [X] No Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 X Natural Habitats OP/BP 4\.04 X Forests OP/BP 4\.36 X Pest Management OP 4\.09 X Physical Cultural Resources OP/BP 4\.11 X Indigenous Peoples OP/BP 4\.10 X Involuntary Resettlement OP/BP 4\.12 X Safety of Dams OP/BP 4\.37 X Projects on International Waterways OP/BP 7\.50 X Projects in Disputed Areas OP/BP 7\.60 X Legal Covenants Name Recurrent Due Date Frequency Establishment of the Technical Steering Committee X Yearly (CdST) Description of Covenant The Borrower, through the MdJL, shall maintain during the implementation of the Project, under the chairmanship of the Secretary General of the MdJL, the CdST composed of representatives of the core MdJL directorates and decentralized units\. Name Recurrent Due Date Frequency Project Operational Manual (POM) - Implementation x Yearly Description of Covenant The Borrower shall implement the Project in accordance with the provisions of the Project Operation Manual (POM) and with the applicable Annual Operating Plan (AOP), as approved by the Bank\. Name Recurrent Due Date Frequency Establishment of the Project Management Unit X Yearly (UGP) Description of Covenant The Borrower shall maintain the UGP with qualified staff and adequate resources for the day-to-day implementation of the Project and for the disbursement, financial management and procurement activities, as well as monitoring and evaluation Name Recurrent Due Date Frequency Partnership Agreement with ISM X Yearly Description of Covenant The Borrower shall ensure that the Partnership Agreement is maintained and implemented in accordance with its terms and conditions, at all times during the implementation of Part B\.3(ii) of the Project Name Recurrent Due Date Frequency Establishment of local working groups and task X Yearly forces Description of Covenant The Borrower shall provide all the assistance necessary to the UGP in establishing local working groups and task forces required for implementing the participatory approach at the level of each selected pilot court, in accordance with the procedures described in the Project Operational Manual (POM)\. Name Recurrent Due Date Frequency Safeguards X Yearly Description of Covenant The Borrower shall ensure that no works in any historical buildings or in any building where asbestos is present shall be carried out, and shall ensure that all works shall be performed in accordance with the World Bank Group's Environmental, Health and Safety Guidelines and as further specified in the POM\. Name Recurrent Due Date Frequency Safeguards x Yearly Description of Covenant The Recipient shall implement the Project activities in accordance with the environmental standards as described in the POM Conditions Name ype Adoption of Project Operational Manual Effectiveness Description of Condition The Project Operational Manual, satisfactory to the Bank, has been adopted by the MdJL Name ype Strengthening the capacity of UGP Effectiveness Description of Condition The UGP has recruited a Project coordinator/monitoring and evaluation specialist, a procurement specialist, and a Project assistant, all in compliance with the provisions of Section III\.C of Schedule 2 to the Loan Agreement Name ype Partnership agreement between the MdJL and the ISM Disbursement Description of Condition No withdrawal shall be made for non consulting Services, Goods, Consultants' Services, including Training, for Part B\.3 (ii) of the Project (Category 2 of Eligible Expenditures) unless the Bank has received a signed copy of the Partnership Agreement, satisfactory to the Bank Team Composition Bank Staff Name Title Specialization Unit Philippe De Meneval Senior Private Sector Team Lead MNSF1 Development Specialist Guenter Heidenhof Sector Manager Governance MNSPS Jean-Charles De Daruvar Senior Counsel Legal LEGEM Hassine Hedda Finance Officer Finance CTRLA David F\. Varela Sr Public Sector Spec\. Justice Reform PRMPS David A\. Bontempo Operations Analyst Operations MNSPS Herimpamonjy Mavoarisoa Program Assistant Program Assistant MNSPS Ranaivoarivelo Heike P\. Gramckow Senior Counsel Justice Reform LEGJR Nathalie Munzberg Senior Counsel LEGEN Gael Gregoire Senior Environmental Safeguards Specialist MNSEN Specialist Abdoulaye Keita Senior Procurement Procurement MNAPR Specialist Anas Abou El Mikias Consultant Financial Management MNAFM Lamyae Hanafi Benzakour Financial Management Financial Management MNAFM Specialist Sanaa Bouchikhi Program Assistant Program Assistant MNCMA Non Bank Staff Name Title Office Phone City Jan Richter Consultant Anis Mahfoud Consultant Farid Laaboudi Consultant Juan Pablo Molina Consultant John Sherman Consultant Locations Country First Location Planned Actual Comments Administrative Division Morocco Grand Casablanca R6gion du Grand X 6 pre-selected pilot courts for Casablanca indicative purpose Morocco Chaouia-Ouardigha R6gion de Chaouia- X 2 pre-selected pilot courts for Ouardigha indicative purpose Morocco Gharb-Chrarda- R6gion de Gharb- X 4 pre-selected pilot courts for Beni Hssen Chrarda-Beni Hssen indicative purpose I\. Strategic Context A\. Country Context 1\. Since acceding to the throne in 1999, King Mohammed VI has promoted an agenda of rapid growth, poverty eradication and improved social conditions\. Successive governments have articulated this vision through ambitious programs of political, economic and social reforms, whose effects are starting to become visible\. Morocco has made strong economic progress since 2001 with growth rates averaging 5\.1 percent over 2001-09, almost twice the average rate of the 1990s (2\.8 percent)\. The good growth performance allowed for tangible improvements of the population's economic situation\. GDP per capita almost doubled over the last decade and reached US$2,890 in 2009\. The overall poverty rate decreased from 15\.3 percent in 2001 to 9 percent in 2007\. Unemployment rates have fallen from 13% in 2000 to 8\.9% in 2011, although they do remain high for young people and higher education graduates\. Despite this progress Morocco is still confronted with significant challenges, which include vulnerability to shocks (natural and economic); inadequate social indicators relative to the country's income level; high inequality; and increasing pressure on natural resources, especially water\. Large segments of the population remain socially and economically marginalized and, notwithstanding the reduction of absolute poverty, economic vulnerability remains widespread\. 2\. The wave of democratization that has swept the MENA region since the start of the Arab Spring has also reached Morocco\. Morocco's experience of the Arab Spring underlines its political distinctiveness in the region even though many of the same grievances affect the population (corruption, poor housing, social inequality, unemployment)\. This experience has shown that Moroccans seem more inclined to seek evolution within the system - gradual change continuous with the country's history and religious values\. Social protests took place regularly across the country during 2011\. This social movement started with calls for political change, curbing of corruption and a more inclusive development process\. As a response, King Mohammed VI proposed, in March 2011, a broad and comprehensive package of political reforms that gathered the support of the population through a constitutional referendum\. 3\. On July, 1, 2011, the new Constitution was approved by referendum\. The new constitution notably revised the country's governance structure by: (a) strengthening the Parliament, the Prime Minister' and the Judiciary; (b) empowering local governments; and (c) promoting a more open governance system and public administration based on the principles of transparency, accountability and participation\. The new constitution provides for more independence of the Judiciary through the creation of the Superior Council for the Judicial Power (Conseil Superieur du Pouvoir Judiciaire - CSPJ), which will replace the Higher Council of the Judiciary (Conseil Superieur de la Magistrature - CSM)\. The CSPJ will be chaired by the King and will comprise 20 members, including 3 judges from the Cassation court, 10 judges elected among the judges of Court of Appeals (Cour d'Appel - CdAs) and First Instance Tribunals (Tribunal de Premiere Instance - TPIs), 5 members selected by the King, the Ombudsman of the Kingdom, and the Head of the National Council for Human Rights\. The level of independence 1 Article 47 of the Constitution provides that the King appoints the Head of the Government from the leading political party\. 1 of the judiciary will also depend on two organic laws that will be drafted in line with the new Constitution, one regarding the CSPJ and the other one regarding the professional status of judges\. It is envisaged that the new Parliament and Government will launch in the coming months the revision of the legal, regulatory and institutional framework necessary to implement the constitutional changes\. 4\. The parliamentary elections on November 25, 2011, brought in a new coalition government\. Elections were won by the "Parti de la Justice et du D6veloppement" (Party for Justice and Development - PJD), an Islamist party that had traditionally been in active opposition and has seen its support increasing steadily in recent years\. This party campaigned on a platform that included justice reform and won 27% of the vote, almost twice of what the second largest political party achieved\. Elections were followed by an intense period of discussions among political parties, from which a four-party coalition Government emerged in early January 2012 with the leader of the PJD as Head of Government\. 5\. In January 2012, the new government presented a program for democracy ("The Charter of the Majority")\. This program focuses on "the implementation of the provisions of the new Constitution, in order to carry out more reforms and build the rule of law, freedom, justice and solidarity among the different components of the Moroccan people and different regions of the Kingdom\." A major objective of the government is to "restore the morality in political work and trust in public life by restoring faith and trust in the country's institutions"\. Toward this end, the government intends to fight resolutely "illegal practices and the cash economy in all areas related to the rights, dignity and freedom of citizens\." These themes are all central to the new Government's program that was articulated by the Head of Government in January 2012 and that covers the 2012-2016 period\. As regards good governance, the areas of future focus are multiple, but launching a profound reform of the justice sector through a participatory approach figures prominently\. B\. Sectoral and Institutional Context Reform Progress: 6\. The justice sector has witnessed a number of important structural reforms in the past decade\. Significant progress has been made in the area of economic reforms\. A more business-friendly legal and regulatory framework has been established through the enactment of a new banking law, a modern securities law, and new legislation providing for modem accounting standards\. These efforts have been motivated in large measure by the Association Agreement with the European Union (EU) that requires Morocco to harmonize its legal framework with that of the EU\. In the field of justice reform, the establishment during the 1990s of specialized courts, such as administrative and commercial tribunals at the first instance and appeal levels is among the most important advances\. During the 2000s the World Bank contributed to the enhancement of the functioning of the commercial courts\. 7\. Progress has also been achieved in the area of court modernization with the support of the European Union through the Euro-Mediterranean Partnership Program (MEDA II, 2004-2010)\. Out of the 110 existing courts, 40 jurisdictions were covered by that project, among 2 which were 19 Courts of Appeal (CdAs) and 21 Courts of First Instance (TPIs)\. Beyond improvements of court infrastructure and equipment, basic home-grown electronic systems for case management and user orientation were introduced\. Archives were established at the regional level and a website was set up to facilitate access to regulation and jurisprudence\. The MdJL continues its efforts to roll out the modernization program to the remaining courts\. 8\. In August 2009, the King highlighted in a landmark speech the need to improve the justice sector reform and highlighted the following six main axes for additional reforms: (i) strengthening independence of the judiciary; (ii) modernizing its legal framework; (iii) raising the standard of judicial and administrative structures; (iv) raising the standard in the area of human resources; (v) improving its efficiency; and (vi) establishing ethical standards for the judiciary\. The King's speech triggered a major reorientation of the scope and focus of legal and judicial reforms\. The MdJL developed an integrated and detailed plan addressing the strategic challenges of justice reform which forms the basis for this Project\. 9\. Reforms aimed at fighting while collar crime and facilitating access to justice are underway\. The code of judicial organization, the code of civil procedure, the code of criminal procedure and the law on access to justice were modified in August 2011\. Since March 2012, these amendments have resulted in the setting up of a specific framework and procedures for community justice ("justice de proximit6")\. Under this approach, the MdJL has established CdAs attached to the TPIs to deal with smaller cases valued at less than 20,000 Dirham (approximately US$ 2,400)\. The reform allows the establishment of specialized TPIs for labor, criminal and civil matters\. Accordingly, in Casablanca, the former TPI has recently been replaced by three smaller TPIs, each specialized as mentioned above\. In addition, a simplified procedure has been established for minor claims below 5000 Dirham (approximately US$ 600), permitting notably hearings with a single judge and mobile hearings for remote cities\. A single judge will be dealing with criminal cases entailing a fine less than 1200 Dirham (approximately US$ 143)\. 2 Finally, to battle corruption and white collar crime, divisions specializing in financial crimes have been be set up in the CdAs in Rabat, Casablanca, Fes and Marrakech\. 10\. The new government has reiterated its commitment to addressing the systemic weaknesses in the judiciary\. To build consensus about the legal and judicial reform agenda, the new Minister of the MdJL is launching a national dialogue about the scope and priorities of justice reform\. The draft reform program that will be submitted to the stakeholders has been developed following a structured participatory approach and the MdJL will follow the same approach for its implementation\. Accordingly, it is envisioned that the national dialogue, through several thematic workshops organized in key judicial districts, will gather views from all stakeholders and the civil society at large on the reform priorities and means\. A national conference will approve the reports and the recommendations emanating from the workshops and adopt a 2012-2016 National Charter for reforming the justice sector\. 2 These streamlined procedures will not be applicable to family, real estate and decisions involving evictions, neither to the specialized courts such as administrative courts and the commercial courts\. 3 Remaining Challenges 11\. Despite the above-listed improvements, the Moroccan justice sector is still perceived, internally and externally, to be inefficient and lacking the trust of the citizenry at large\. The Global Corruption Barometer released by Transparency International in 20103 ranks Morocco slightly above the regional average on broader governance indicators but the judicial sector is rated as one of the less efficient in this area\. The 2010 Global Integrity Report also rates the rule of law in Morocco as "very weak" (56 out of 100 points) based on a set of "de jure" and "de facto" indicators\. These rankings are corroborated by assessments of the justice sector that were completed by the Bank in 2003 and updated in late 2010 during the preparation of this Project, which outline notably the need to: (i) enhance the transparency of the judicial decision process; (ii) improve the qualification and specialization of judges and auxiliaries of justice; (iii) reduce delays in case management and enforcement of court decisions; (iv) facilitate access to justice and to legal and judicial information; and (v) enhance the capacity of the MdJL in the area of budget and human resources management\. 12\. Improving the efficiency of the justice sector remains a key challenge as evidenced by the backlog of cases\. The total number of cases has risen significantly, from 786,791 cases per year in 1975 to around 2\.7 million cases in 2010\. While the population grew between 1994 and 2010 from approximately 26 million to almost 32 million, the number of pending cases grew by 58\.06 % in the same period\. The total backlog of cases went up significantly, from 676,591 cases unresolved in 2006 up to 812,480 in 2010\. The slow execution of judicial decisions in particular is perceived as a major problem that has a negative impact on the functioning of the justice sector\. Morocco is ranked No 89 out of 183 countries with respect to the "enforcing contracts" indicator of the Doing Business\. 13\. The justice sector is understaffed and existing human resources are not used efficiently\. While the number of cases grew significantly over the past 3 decades, staffing has not been adapted accordingly\. As a consequence, the number of cases per Magistrate grew from 922 in 1994 to 1,011 in 2006\. In addition, existing human resources are not used to their full potential\. In 2010, women represented only 22% of total number of judges (826 out of 3,792)\. The responsibilities of court clerks (greffiers) are currently restricted to administrative tasks, while their involvement in the review and settlement of minor disputes could alleviate the pressure on the courts\. Additional 1,000 positions of various levels have been granted annually to the Justice sector in the budget laws over last three years\. In addition, in August 2011, the MdJL The other countries from the MENA region that have been included in the survey are: Iraq, Israel, Lebanon, and Palestine\. On a scale from 1 (not at all corrupt) to 5 (extremely corrupt), the judiciary in Palestine received the best score (2\.4) and the judiciaries in Lebanon and Morocco the worst (3\.5)\. See: Transparency International, Global Corruption Barometer 2010: http://www\.transparency\.org/policy_research/surveys_indices/gcb/20 10/results\. 4 See Global Integrity Report 2008, scorecard for Morocco: http://report\.globalintegrity\.org/Morocco/ See: World Bank, Doing Business Report 2011, p\. 182\. Doing Business measures the time, cost and procedural complexity of resolving a commercial lawsuit between two domestic businesses\. The dispute involves the breach of a sales contract worth twice the income per capita of each country\. The report assumes that the court hears an expert on the quality of the goods in dispute\. This distinguishes the case from simple debt enforcement\. 4 decided to increase significantly the salaries of the court clerks (around 60% increase) as it was perceived that the low wages increased the risk of corruption\. 14\. Efficiency of reforms is reduced by weak organizational management and outdated service culture\. With the exception of a few more advanced courts, prosecutors and judges seem often unaware of modem management techniques, strategic planning, and implementation constraints\. In particular, internal organization changes are often decided in a non-inclusive and hierarchical fashion\. Accordingly, the Project will focus on building a more open and participatory approach so that improvements are identified, prepared and implemented with all relevant court stakeholders\. Rationale for World Bank Involvement 15\. The Government has engaged the World Bank's support in the justice sector over several years and, more recently in 2009, specifically asked for a Bank project in this area\. Since that request, the Bank and the Government have explored the best way to support the sector, and it was agreed that a DPL was pre-mature given the lack of a robust reform program in place at that time\. Together with the Government, the Bank concluded that it would be more opportune to pursue a relatively small investment lending project in the justice sector that would build on the knowledge base and lessons learned to date, would support the design of the sectoral reform program, and thus set the stage for a stepped-up financing and support in the future\. 16\. Lending support for Developing Commercial Justice\. The Project follows previous Bank engagements in Morocco, in the context of a continued dialogue in this sector\. Following a Private Sector Assessment, the Bank took a leading role in enhancing the functioning of the Moroccan Courts of Commerce (CdCs), the modernization of business-related legislation and the overhaul of the training framework for judges (FY 2000-2004 Legal and Judicial Development Project - Investment Loan 3567)\. This Project is considered successful by local stakeholders and was rated as satisfactory by the Bank\. The Bank also played a critical catalytic role in mobilizing financial resources from other donors and partners, including the EU, USAID and UNDP, all of which have contributed to reforming the Moroccan justice sector\. 17\. Legal and Judicial Assessments\. In parallel, the Bank has worked closely and continuously with GoM on justice sector related ESW pieces, including an Insolvency and Creditors' Rights (ICR) Report on the Observance of Standards and Codes (ROSC) and a full- fledged Judicial Sector Assessment in 2003\. As part of the policy notes prepared in November 2007, a Justice Sector Policy Note was prepared, which, in GoM's views accurately reflected the diagnostic of the sector and the prevailing consensus for the need to accelerate the reform of the justice sector\. Finally, in 2010, the Bank updated the Judicial Sector Assessment of 2003, which focused on the legal environment for justice, the judicial organization and functioning, and the access to justice\. This review was instrumental in reenergizing the dialogue on the justice sector with the MdJL and informing the participatory approach and the components of the present Project\. The Bank is also working on a Public Expenditure Review in the justice sector which looks at planning and allocation of resources and institutional performance of the judiciary\. The preliminary results of this review indicate the need to reinforce the monitoring and evaluation of courts performance\. The review, which will be completed by mid-2012 will provide additional analytical underpinnings for the implementation of this Project\. 5 18\. International Experience with the Participatory Approach\. The update of the Judicial Sector Assessment revealed that in spite of many significant reforms undertaken by the Ministry of Justice over the past ten years concrete impact on users and ownership of court staff had been weak due to a lack of a more consultative and transparent approach to reform\. Following this assessment, the GoM requested the assistance of the World Bank with a view to gaining access to international experience in this area\. During the preparation of the Project, the World Bank team conducted a number of consultations with civil society representatives as well as with professional organizations of justice stakeholders\. Stakeholders confirmed that World Bank support would add value to the justice reform process by bringing in best international experiences with participatory reforms in the justice sector\. In parallel, the new Constitution specifically states that the Government is obliged to work in a more participatory and inclusive manner\. C\. Higher Level Objectives to which the Project Contributes 19\. The Project is fully consistent with the focus on governance of the current CPS and will consolidate the outcomes of past Bank and EU interventions in the justice sector\. The Project will contribute to the development of a more efficient justice sector, a commitment at the core of the current institutional and governance reform process\. The King's speech in August 2009, the new Constitution approved in July 2011, the legislative changes approved in August 2011, and the program of the new coalition government, are all evidence of the priority attached by the highest authorities to this higher level objective\. The current CPS (FY 2010-13), and the CPS Progress Report (being discussed at Board at the same time as this project) confirm governance as an overarching priority for Morocco, in line with the Government's program considering improved justice as a key to good governance and efficient business environment\. The justice sector reform is thus a priority for the World Bank's partnership in Morocco support under the first CPS pillar - on growth, competitiveness and employment- as well as a priority of its cross-cutting governance agenda\. 20\. The Project is fully consistent with the new government's emphasis on strengthening service delivery to citizens within a new governance framework structured around transparency, accountability and participation\. The GoM is currently sponsoring a National Dialogue on Justice that aims at building broad consensus about the goals and objective of justice reforms among all relevant stakeholders\. Project design is flexible enough to accommodate conclusions and recommendations of this dialogue\. It is expected that the dialogue process and its main outputs will also help mobilizing additional resources to the sector from other donors\. For example, the EU is considering a new program for 2013 that would be aligned to the results of the National Dialogue\. II\. Project Development Objectives A\. PDO 21\. Objective of the Project\. The Project Development Objective is to strengthen the capacity of the Borrower's justice sector to deliver efficient, timely and transparent services to 6 citizens and businesses through: (a) piloting of a participatory reform process involving judges, administrative staff, judicial auxiliaries and users in selected courts in the Project Area; and (b) strengthening the institutional capacity of the central functions of the MdJL to better support and monitor the court system\. i\. Project Beneficiaries\. 22\. The primary target groups of the Project will be: (a) the pilot court users, judicial auxiliaries (lawyers, notaries, bailiffs, and experts), judges, clerks and other administrative staff of the pilot courts of the Project, (b) the MdJL, and (c) the ISM\. The Project is also intended to benefit users of all courts more generally as it will provide the MdJL with the methodology and operational tools needed to scale up at other courts the approach tested in the pilot courts\. To emphasize the participatory approach followed in design and implementation the official name for the Project in Arabic will be Mahkamati ("My Court")\. ii\. PDO level results indicators\. 23\. Results will be measured by a mix of objective indicators and perception-based indicators, which will capture the following: - Level ofpublic trust and confidence in the judicial system: Increase in the awareness of the public in selected districts about; (a) standards of transparency, competency and effectiveness applicable to the justice sector, and (b) their rights and duties in connection with the justice sector; - Quality of service delivery: Increase in the level of satisfaction of users of the pilot courts of the selected districts with the quality, timeliness and effectiveness of access to court services, court files, and information about court procedures as a result of the PAPJs; - Effectiveness of case processing: Increase in the clearance rate of cases in the pilot courts of the selected districts; - Institutional capacity of MdJL: Increase in the capacity to monitor the performance of courts and allocate resources according to court needs and performance\. III\. Project Description A\. Project components 24\. Overall approach\. The Project will consist of three components that will assist the MdJL in developing and implementing action plans aimed at improving the quality of service delivery of courts\. This Project will be anchored on feedback received from the various target groups and will aim at introducing international best practices for court organization and MdJL's central management and support functions\. Accordingly, the Project activities will be implemented both at court level and in MdJL\. The learning process at the level of 10 to 12 pilot courts, selected among the judicial districts of the Court of Appeals of Casablanca, Kenitra and Settat, in the 7 Regions of Chaouia-Ouardigha, Grand Casablanca and Gharb-Chrarda-Beni-Hssen ("Project Area") will support the development of broader reform action plans to be implemented throughout the court system\. 25\. The GoM and the Bank have agreed to design the Project with a limited scope, while retaining the flexibility as to activities that will be financed\. To address the fact that the entire court system is undergoing a range of ambitious reforms which might limit the appetite as well as absorption capacity of sector institutions, the Project will addresscourt organization and management; it will not focus on specific issues relating to criminal law, prison administration and administrative courts\. As infrastructure issues have already been largely addressed by the MdJL, the Project will not finance the construction of court buildings but only limited space reconfiguration and refurbishment (other than structural rehabilitation, enlargement or expansion) required for the installation of IT systems and the separation of front/back offices inside the pilot courts\. 26\. While not directly targeted judicial independence and fighting corruption will remain overarching pre-requisites for the achievement of the objectives of the Project (i\.e\. sufficient assurances of judicial independence are expected to remain in place during implementation)\. The enactment and implementation of the previously mentioned two organic laws (i\.e\. CSPJ and professional status of judges) will be key to ascertain the achievement of the objectives of the new Constitution in this area\. Reducing corruption is an indirect objective of Components 1 and 2 through activities that reinforce transparency/accountability\. Component 1 - Improving Court Performance in the Project Area (EUR 7\.4 million) 27\. The objective of this component is to have a direct impact on the quality and efficiency of service delivery by the courts\. The main subcomponent focuses on the preparation of court performance improvement plans (PAPJs) following a participatory approach involving key stakeholders in the Project Area\. Each PAPJ will have to address four strategic objectives set by the Ministry of Justice: (a) modernizing court management and organization; (b) standardizing application of procedures and reducing delays in processing cases; (c) improving regular interaction with court users, including notably a gender perspective that aims at removing gender-specific barriers to justice 6, and (d) developing specific solutions to local issues (see Table 1 in Annex 2)\. The PAPJs will inform an Annual Reform Strategy (SRA) which will gradually be expanded based on the outcome of the solutions tested in pilot courts\. The two other sub-components aim at organizing a functional separation between a "front office" and a "back office", and upgrading and developing critical ICT tools that will allow systematizing and automating jurisdictional and administrative processes in the pilot courts\. Under this component, the Project will finance the following: 6 The gender perspective of the PAPJs will be developed taking into account the results of the ongoing initiatives sponsored by UNIFEM, UNDP and UNICEF that focus on improving the performance of selected family courts\. 8 28\. Sub-component 1\.1 (EUR 3\.7 million) - Provision of non-consultants' services, goods and consultants' services, including training for improving the court administration and case management through, inter alia: (i) selecting pilot courts from the Casablanca, Kenitra and Settat judicial districts located in the Project Area to develop court performance improvement plans (PAPJs) according to the criteria and procedures described in the Project Operational Manual (POM); (ii) conducting court users surveys in the selected pilot courts; (iii) identifying the issues and options of PAPJs through a participatory approach in the selected pilot courts; (iv) disseminating best international practices relevant for PAPJs through workshops; (v) structuring of PAPJs and annual reform strategies (SRAs) including monitoring and evaluation mechanisms and indicators; and (vi) assisting in the implementation of the PAPJs and SRAs activities in the selected pilot courts\. 29\. Subcomponent 1\.2 (EUR 0\.6 million) - Provision of small refurbishment works, non- consultants' services, goods and consultants' services, including training for reengineering of administrative processes for improved service delivery through, inter alia: (i) assessing current organizational structures for providing services in the selected pilot courts; (ii) designing new service delivery processes by rationalizing court organization based on the separation of the "front office" and "back office" functions; (iii) drafting an operation manual detailing the handling of all administrative tasks related to justice services delivery; (iv) providing training to staff of the selected pilot courts regarding the use of the new service delivery procedures; and (v) limited space reconfiguration and refurbishment (other than structural rehabilitation, enlargement or expansion of existing buildings) inside the selected pilot courts' buildings for implementing the new service delivery processes and court layout\. 30\. Subcomponent 1\.3 (EUR 3\.1 million) - Provision of non-consultants' services, goods and consultants' services, including training for the development of innovative court ICT applications through: Subcomponent 1\.3\.1 - Revamping of Automated Case Management Systems (CMSs), including inter alia: (a) assessing current procedural rules and milestones to determine the causes of recurrent delays and congestion, and identifying possible solutions, including the improvement of the CMSs already operational; (b) upgrading the existing CMSs for effective monitoring and control of case status requests and pending judicial deadlines; (c) training court personnel to ensure effective use of the upgraded automated CMS and procedures; and (d) ensuring that the new upgraded CMS generates reliable statistics on court performance in the selected pilot courts, and is gradually expanded to other courts\. Subcomponent 1\.3\.2 - Development of additional ICT applications identified under the ICT Strategic Plan, including inter alia: (a) developing an electronic filing program allowing externally-originated documents to be added to the existing file; (b) developing an information system by extending the 9 connectivity between the central and regional court offices (intranet) in order to improve the effective communication of policies, practices and procedures; (c) allowing user access in real time to a central registry for collaterals registered in the commercial registry; and (d) enhancing digital systems for archiving electronic court records so as to improve access to court records using electronic retrieval methods, and to reduce physical space for storage of court records\. Component 2 - Up$radin$ the Strategic Planning and Management Capacities of the MdJL (EUR 3\.7 million) 31\. The objective of this component is to improve the MdJL's capacity to monitor the performance of the courts and provide them with adequate support, in particular to attain the strategic objectives of Component 1\. As such, this Component will provide support to the MdJL's Directorates entrusted with a cross-support function, and to the Superior Judicial Training Institute (ISM): (a) sub-component 2\.1 will assist the Office of the Minister and the Secretary-General of MdJL in fulfilling their coordinating and strategic planning functions; (b) sub-component 2\.2 will assist the Budget and Control Directorate in implementing the performance budgeting framework resulting from ongoing reforms of Morocco's budget reform; (c) sub-component 2\.3 will assist the Human Resources Directorate and the ISM in furthering their strategic approach to staffing, promotion and skills development; (d) sub-components 2\.4 and 2\.5 will assist the Statistics, ICT and Communications Units of the Directorate for Studies, Cooperation and Modernization (DECM); and (e) sub-component 2\.6 will assist the newly created Directorate for Legislative Reform in developing methodological tools for improving legal reforms\. Under this component, the Project will finance the provision of non-consultants' services, goods and consultants' services, including training for: 32\. Sub-component 2\.1 (EUR 0\.5 million) - Strengthening of the MdJL's Planning, Coordination and Control Capacity, through, inter alia: (i) reviewing internal policies and procedures of MdJL; (ii) selecting appropriate job profiles for the revised planning, coordinating and control functions and responsibilities of MdJL's central services; (iii) developing a performance and productivity assessment framework for central services; and (iv) developing effective information tools among MdJL directorates and units for policy-making purposes\. 33\. Sub-component 2\.2 (EUR 0\.6 million) - Developing Strategic Budget Planning through Performance-based Budgeting by, inter alia: (i) identifying performance objectives, indicators and targets; (ii) developing and implementing an action plan for the MdJL's strategic budget planning; (iii) developing and implementing a training plan addressing the different dimensions of the budget reform with workshops in each judicial district, and an annual seminar with participants; and (iv) strengthening the budget and financial management capacities of the various units involved in the expenditure management process\. 10 34\. Sub-component 2\.3 (EUR 0\.5 million): Supporting the Human Resources development of the MdJL through the following: (i) designing and implementing standard performance evaluation mechanisms and parameters for court staff and establishing new M&E mechanisms to improve performance; and (ii) designing specific training modules for the MdJL and the ISM to disseminate best practices in the field of court management and performance, and to support the implementation of the PAPJs by the selected pilot courts\. 35\. Sub-component 2\.4 (EUR 0\.7 million) - Strengthening of M&E tools for court performance through the following: Subcomponent 2\.4\.1 - supporting the MdJL in developing an upgraded system that would ensure court statistics are appropriately collected, analyzed and disseminated by, inter alia: (a) reviewing the existing judicial statistics system and its implementation in the pilot courts; (b) upgrading and designing a statistical system with manual procedures and computerized applications compatible with the CMSs; and (c) assisting the selected pilot courts in the implementation of the new data system to ensure they generate reliable statistics about court performance, and assist in gradually expanding this system to other courts; and Subcomponent 2\.4\.2 - supporting MdJL to develop an ICT Strategy for court performance by, inter alia: (a) preparing short to medium-term ICT action plans; (b) reformulating the MdJL's policies on technological standards; and (c) assisting MdJL in supervising the implementation of the short to medium-term ICT action plans and new policies on technological standards\. 36\. Subcomponent 2\.5 (EUR 1\.0 million) - Improving MdJL's communications with users and citizens through the following: (i) improving the MdJL's communication strategy; (ii) providing training on communication techniques for MdJL's relevant units; (iii) carrying out workshops, training activities and publications for civil society, the private sector and the general public, and awareness campaigns about justice sector issues and citizens' rights; (iv) designing and implementing specific communication plans and activities in the selected pilot courts, linked with PAPJs and SARs; and (v) undertaking nationally representative surveys aimed at assessing perceptions about justice services throughout the country, and access to and use of the court system in Morocco\. 11 37\. Sub-component 2\.6 (EUR 0\.4 million)- Strengthening the capacities of the MdJL to prepare draft laws and regulations and to disseminate laws and regulations and case law through, inter alia: (i) developing a strategy and methodology for: (a) identifying legal reform needs relevant for improving court performance; (b) laying out reform options and assessing their impact; (c) implementing a consultative process with stakeholders; and (d) preparing judicial reforms; (ii) supporting the implementation of the strategy and methodology adopted through the development of ICT applications, training and workshops; and (iii) reviewing and updating the tools for disseminating laws, regulations and judicial decisions\. Component 3: Project Management, Monitoring and Evaluation (EUR 0\.87 million) 38\. The objective of this component is to support the MdJL's capacity to manage, monitor and evaluate Project activities\. As such, this Component will provide support to the UGP responsible for coordinating day-to-day Project activities and administering loan funds\. The UGP will be headed by a MdJL staff appointed by a decision of the MdJL and will report to the Secretary General of the MdJL\. The UGP will also include MdJL staff from the DECM and will be physically located in the offices of the DECM\. The UGP will also comprise MdJL staff assigned from other key MdJL Directorates, in particular the Budget Directorate\. Finally, the UGP will comprise external experts hired to fulfill the position of project coordinator/monitoring and evaluation specialist, procurement specialist and project assistant\. 39\. Under this component, the Project will finance the provision of provision of goods, consultants' services and training to the Project Management Unit (UGP) for the implementation and monitoring and evaluation of the Project\. B\. Project Financing i\. Lending Instrument 40\. The Investment Loan (IL) instrument was agreed with Government as being the most appropriate instrument as it was consistent with the technical assistance focus of the Project\. Initially a Development Policy Loan (DPL) was considered, but this option was left for future support (see below) as Morocco is developing a broader policy framework for legal and judicial reforms\. 41\. A Technical Assistance Loan (TAL) was also considered as it would have helped to build institutional capacity\. However, a TAL would have been too narrow as it would not have allowed sufficient investments to implement the modem physical design for delivery of administrative services by courts, and to support the development and revamping of ICT systems in the courts\. 42\. The possibility of supporting Morocco's justice reform program through a series of DPLs designed as a programmatic, multi-year development policy lending could be considered in the near future\. Providing a DPL as part of future Bank support remains an 12 option but would only be considered once there is a robust reform program with clear objectives and indicators in place\. Hence, the preferred option for the Bank and the Government was the IL approach\. This choice was motivated by the success of the previous IL implemented between 2000-2004 to support the development of CdCs\. Bank assessments have confirmed the need to focus on identifying performance flaws at court level, design concrete actions plans and implement activities that are supported by local stakeholders\. Such a "bottom-up" approach entails implementing activities that are not immediately visible, take time to prepare, and require often complex consultations with stakeholders\. It is hoped that this bottom-up approach would then assist in the development of a well-grounded reform program that could eventually be supported by a DPL\. ii\. Project Cost and Financing Project Cost IBRD % Project Components Description of Components Estimates (EUR) Financing Financing Total Component 1 Improvement of court administration and Improving Court Performance case management 3\.7 Reengineering of administrative processes 0\.6 for improved service delivery Development of innovative court ICT 3\.1 applications Sub Total Component 1 7\.4 7\.4 62% Strengthening of MdJL's planning, 0\.5 Component 2 coordination & control capacity Strategic budget planning 0\.6 Upgrading the strategic Human resources development 0\.5 planning & management Strengthening of monitoring and evaluation 0\.7 capacities of the MdJL tools for court performance Improving communication with users and 1\.0 citizens Modernizing of legal drafting and 0\.4 dissemination of laws and case law Sub Total Component 2 3\.7 3\.7 31% Component 3 0\.87 Project Management, Management and Project Monitoring Monitoring and Evaluation Sub Total Component 3 0\.87 0\.87 6\.75% Front-End Fee 0\.03 0\.03 \.25% Total Project Costs 12 100% 100% 13 Expenditure Amount estimated in % Millions of EUR Works 0\.48 4% Goods 0\.48 4% Consultants' services and 11\.01 91\.75% training training0\.03 0\.25% Front-End Fee Total Financing 12 100% Required C\. Lessons Learned and Reflected in the Project Design 43\. The introduction of automated systems has become a critical element of justice reform programs\. These experiences have shown that effective automated systems: (a) streamline manual processes, and establish milestones and performance indicators; (b) phase-out manual processes as automated systems become operational; (c) track how cases move through the court system; and (d) connect CMSs with other court management functions, in particular human resources and financial management\. Under Subcomponent 1\.3, this Project will conduct solid pilot testing in a small number of locations, and will follow the "multiple waves" approach (i\.e\. rolling-out only one application at the same time in a given number courts at the same level) avoiding the high costs and risks of rolling-out all applications in the entire court system\. 44\. Separation between administrative and jurisdictional functions has become standard in modern justice institutions\. Experience in OECD countries has shown that the establishment of new functions or the shifting of responsibilities may be a challenging undertaking that requires cost-benefit analyses and consensus-building\. Roles and responsibilities of non-judge staff can vary widely and requires to clearly identify which functions are really needed, and how the required capacities can be established\. As part of the PAPJs developed under Subcomponent 1\.1, each pilot court will review staff functions and processes in search for a clear allocation of responsibilities\. 45\. Implementation of justice reform projects requires continued consultation with key stakeholders, especially targeting women to be better integrated into consultations\. A demand-driven approach that involves broader communities in the definition of improvements to core court services throughout project implementation has been used in countries such as Australia, Canada, the Netherlands, the US, and the UK\. In preparation for this Project, in-depth consultations in selected courts were carried out to build trust in the reform process\. This consultative process will continue during the implementation of the Project and a gender- sensitive outreach will also be pursued when preparing the PAPJ\. 46\. Strategic planning is a critical element for justice reform projects\. Strategic planning exercises should be comprehensive and inclusive processes that define the overall goals for the justice sector at large\. Strategic planning should lead to a shared vision for the future of the sector, its agencies and the services they deliver to citizens, supported by inter-institutional agreements on current needs and realistic priorities for achieving this vision\. As sufficient 14 information is essential to assess gaps, and identify alternative models, this Project will provide the required support to MdJL under Subcomponents 2\.1 and 2\.2\. 47\. Structure the Project around a problem-solving strategy and engage all the actors required to implement a proposed solution\. One of the main lessons learned from justice reform projects is that demands for assistance should be processed under a problem-solving framework that looks at the functions to be improved and the services to be delivered\. Accordingly, a central activity of component 1 of the Project will be the preparation and implementation of the PAPJs, which will be designed by involving all the main actors at court level in a problem solving exercise\. 48\. Flexibility during implementation is critical, especially in an uncertain governance environment\. Justice sectors are typically affected by a broad and complex set of internal and external variables, which are difficult to fully address at the design stage\. While reform projects should be highly explicit in their stated goals and strategies, they should also have flexibility to accommodate unforeseen situations by adapting project activities to new opportunities to advance deeper reforms\. That flexibility will be built-in for this Project through the periodic updates to the MdJL's annual operating plans (AOPs)\. 49\. Financing of limited physical infrastructure may reinforce institutional reforms when it is closely linked to internal process reengineering\. The absence of suitable facilities for court operation is a major obstacle to the judiciary's chances of providing adequate services, in particular for vulnerable communities\. Dilapidated facilities may delay organizational changes, internal communication improvements, and the ICT systems' upgrading\. The financing of limited remodeling/refurbishment of courts buildings under Subcomponent 1\.2 of this Project will support the separation of front/back offices, which is expected to improve work processes and increase operational effectiveness\. 50\. Select relevant impact and performance indicators with the appropriate monitoring and evaluation tools\. Justice projects have faced the challenge of identifying the right set of impact and performance indicators, baseline statistics, and monitoring and evaluation mechanisms to collect the required information from the Project's outset, plus an agreed reporting schedule\. This Project has defined improvement of judicial performance both in quantitative and qualitative terms, as the internal and external perceptions about change are often as important as the change itself\. Measures of qualitative improvements will be articulated through user surveys under Subcomponent 1\.1 as well as through the development of a reliable statistical system\. 51\. Develop a communication strategy to ensure the Project is seen as a vehicle of change\. The communication strategy proposed under Subcomponent 2\.5 will position the proposed reforms as a public policy issue, provide periodic information on the progress of the reform efforts, and generate demand for transparency\. Surveys of citizens and users - ensuring appropriate representation of women - will be an effective tool to monitor the results of this strategy\. 15 IV\. Implementation A\. Institutional and Implementation Arrangements 52\. The Project will be implemented by MdJL, with the CdST acting as the supervising authority\. A CdST and a UGP will be set up by the MdJL\. The CdST will be in charge of coordinating and monitoring activities between various stakeholders\. To this effect, it will be composed of representatives of the core MdJL Directorates and decentralized units involved in the Project, such as the pilot courts and the regional Sub-Directorates of the Judicial Districts covered by the Project\. It will be chaired by the Secretary General of the MdJL or by a director of the central administration appointed by the Secretary General\. The CdST will meet upon request of its president as many times as necessary and at least four times a year\. The task of the CdST is to facilitate/supervise the implementation of Project activities\. More specifically, the CdST validates the draft PAPJs and SRA prepared under component 1 and submitted by the UGP\. It facilitates the coordination of the main actors and builds consensus\. It will examine and approve the progress reports, and will post periodic monitoring and evaluation reports in the Project website for comments\. It will also review and endorse the draft AOP for each year of Project implementation\. 53\. The Project Management Unit (UGP)\. The UGP will be responsible for coordinating day-to-day Project activities and administering loan funds\. It will ensure that all financial management and procurement functions are performed in accordance with the provisions of the Loan Agreement\. The UGP will be headed by a MdJL staff appointed by the Minister and will report to the Secretary General of the MdJL\. He/she will be in charge of supervising and monitoring the UGP in the performance of its respective tasks\. The UGP will receive support from the DECM and will be physically located in the offices of the DECM\. The UGP will also comprise staff assigned from other key interested Directorates from the MdJL (Civil affairs, Criminal Affairs, Commercial Affairs, Budget, Human Resources, Infrastructures and Equipment) that will actively support its mandate, in particular the staff from the Budget Directorate that will act as the financial management expert for the Project\. Finally, the UGP will comprise external experts hired to fulfill the position of (i) Project coordinator/monitoring and evaluation specialist, (ii) procurement specialist and (iii) Project assistant\. The hiring of said experts is a Condition of Project Effectiveness\. If neededthe Project will hire a financial management specialist to assist the staff of the MdJL assigned to fulfill this function\. 54\. A specific institutional and operational framework will be established for activities involving pilot courts under Project component 1\.1\. The Project will assist in establishing at least one local working group and/or task force at the level of each pilot court, the exact number to be determined in conjunction with local stakeholders based on the size of each pilot court\. It is envisioned that the local operational framework will comprise: (a) a local committee for improving the delivery of justice services (Comite d'Amelioration de la Performance - CAP) that will bring together the representatives of key public and private stakeholders (court presidents, royal prosecutors, chief clerks, representatives of the local Bar, representatives of the bailiffs, notaries, experts, municipal council, police, etc\.); and (b) thematic working groups that will be bring together judicial stakeholders, users and non-users of the judicial system to prioritize issues, devise solutions, and structure a PAPJ\. 16 55\. The ISM, a legally independent agency, will be a beneficiary of the Project\. In view of its legal status as an autonomous agency, a partnership agreement will be set up between the MdJL and the ISM to specify their respective roles and responsibilities in the implementation of activities aimed at improving the training capacity of the ISM and providing specific training to judicial stakeholders to disseminate best practices in the field of court management and performance, and to support the implementation of the PAPJs by the selected pilot courts\. In addition, some discrete project activities may potentially involve the CSPJ once it is established and its responsibilities are determined\. Submission of the Partnership Agreement to the Bank is a Condition of Disbursement for this part of the Project\. B\. Results Monitoring and Evaluation 56\. The Monitoring and Evaluation (M&E) system will be based on the agreed Results framework and monitoring arrangements (See Annex 1)\. The UGP will be responsible for supervising the M&E activities at component level, and the CdST at PDO level\. The contractor selected by the UGP for Component 1\.1 will be in charge of developing an M&E framework for Component 1\. Indicators were selected considering that this Project is a seminal experience in Morocco and MENA\. As a consequence, it was important to be modest and realistic about what can be measured (and how) so as to ensure that the MdJL and the pilot courts could commit to reaching particular targets\. 57\. Perception-based indicators will be detailed after conducting initial surveys aimed at establishing baseline indicators among the general public and users of the pilot courts of the Project\. Progress in achieving outcomes will be measured through the publication of regular performance monitoring reports\. The format for these reports will be developed by the Project and the baseline for each pilot court established in year 1 of implementation\. Only limited use will be made of "perception-based" indicators, in particular those based on general public perceptions as experience has shown that they tend to be swayed by media reports or anecdotal information, and are not reliable sources to measure court performance \. Perception indicators will be used only about specific areas of court performance for which baseline data will be captured at the inception and can be tracked throughout the life of the Project by user surveys\. Perception-based indicators for the general public will only be used to measure the impact of public education campaigns on the citizens of the judicial districts of the pilot courts\. Generally, the Project will use perceptions indicators with caution, as a proxy for institutional performance issues that cannot be measured directly (i\.e\. quality of service delivery)\. C\. Sustainability 58\. One of the underlying objectives of the Project is to establish a sustainable reform process in the Justice Sector\. This objective will be attained by establishing progressively a "bottom up" approach to reform, which takes into account the views and diagnostics of local stakeholders, rather than merely relying on specialists at the center of Government, as has been 7 Too many intervening factors could influence general public perceptions and progress with court reforms may take a long time (sometimes more than 20 years) before changes in such perceptions began to be recorded in surveys\. More reliable surveys of recent court users are better gauges of progress injustice projects\. 17 the case so far\. Consultations show that this approach has the commitment of the MdJL and the beneficiaries, which is essential for sustainability\. GoM commitment to the Project goals can be seen through the close fit of the Project with broader strategic goals related to providing justice services to the citizens and fighting corruption\. Project beneficiaries will be closely involved in determining "how to" that will be applied by the working groups at court level\. Moreover, new equipment and infrastructure work in the pilot courts should be maintained easily, in particular as the pilot courts are selected from among courts that have already been renovated and whose capacity to maintain infrastructures has already been upgraded\. 59\. Stakeholder involvement\. The support of specialized non-governmental organizations will be crucial for the sustainability of the Project\. The "Amicale Hassania", an association of reform-oriented judges, the Young Lawyers Association, and the union and the association of court clerks will be involved in the design and implementation of activities envisaged under the Project\. The confederation of Moroccan companies (CGEM) has developed bold proposals for justice reform which are relevant for the functioning of the pilot courts\. Also, bailiffs have recently created a professional body which will be an important partner in addressing remaining obstacles to the enforcement of judgments\. Finally, average citizens will participate in surveys and the development of proposals for improved service delivery at court level and the project will ensure that women are sufficiently represented in these surveys to ensure their credibility\. V\. Key Risks and Mitigation Measures A\. Risk Ratings Summary Stakeholder Risk High (H) Implementing Agency Risk - Capacity High (H) - Governance Moderate (M) Project Risk - Design Moderate (M) - Social and Environmental Low (L) - Program and Donor Low (L) - Delivery Monitoring and Sustainability High (H) Overall implementation risk Moderate (M) B\. Description 60\. Stakeholders perception and expectation\. The high level of public expectation regarding justice reform and overall perception of corruption in the justice sector could prove an impediment to the success of the targeted approach of the Project\. This perception will be addressed by the Project through systematic engagement of relevant stakeholders (including the users of the justice sector) at the level of the pilot courts, through communication campaigns and 18 by developing a better monitoring and evaluation system for managing the courts, a key activity of the Project\. 61\. Centralization of decision-making process in MdJL and lack of ownership of judicial stakeholders\. The MdJL is highly centralized, thereby reducing the efficiency of the decision-making process\. This weakness may have a negative impact on Project implementation\. Involvement of judicial stakeholders into decision-making processes is currently limited, and various legal professionals and other stakeholders may be resistant to change\. To minimize this risk, the Project will be implemented following a participatory approach, involving all relevant stakeholders\. Criterias for selecting pilot courts include the willingness and commitment to reform of court leadership (Court President and Chief Prosecutor notably)\. Finally, the Project will incorporate third party monitoring to ensure unbiased assessment of court performance\. 62\. Weak capacity of MdJL's staff\. MdJL's staff capacity in critical areas (planning and general court management, financial management, procurement, monitoring & evaluation) remains weak and could generate delays\. Accordingly, the project will support the capacity of the UGP under component 3, and each of components 1 and 2 will be supported by a main contractor in charge of assisting the MdJL in addressing technical issues and coordinating the various stakeholders involved in the related activities\. These contractors will focus on operational areas and will also be in charge of capacity building for implementation of Project activities\. Training will be provided to all stakeholders under the Project\. 63\. MdJL has limited experience with the Bank's procurement and financial management procedures, but has experience in managing large donor projects (e\.g\. EU project)\. The Project will build on MdJL's previous experience while adapting it to Bank's policies and procedures\. Accordingly, the recommendations of the procurement/financial management assessments will be implemented and a Project Operational Manual (POM) will be developed to avoid delays and ensure consistency of the approach among various units of MdJL involved in Project implementation\. The Manual will detail the financial management and procurement arrangements based on Bank's guidelines\. A public procurement specialist will be hired externally and be a key member of the UGP\. Adoption of the POM by MdJL is an Effectiveness Condition of the Project\. VI\. Appraisal Summary A\. Economic and Financial Analysis 64\. Improved delivery of justice services will generate significant benefits for Moroccan institutions and society at large\. Component I will improve the quality, timeliness and reliability of judicial decisions, thereby facilitating an improved private sector decision-making environment\. Component 2 will improve the effectiveness of resource administration by the MdJL and ISM, thereby allowing the authorities to redeploy resources where justice services demand is higher\. Efficiency gains are expected from the strengthening of financial and human resources management, and anticipated improvements in the efficiency of personnel allocation, since the organizational restructuring of the Judiciary will provide the authorities with an opportunity to identify and eliminate duplication in functions and responsibilities\. No fiscal 19 impact is expected\. In-kind incentives for judges and judicial officials will be provided through training and greater decision-making opportunities as a part of Project activities\. No incremental personnel will be hired to staff the MdJL or the pilot courts\. Existent professional staff will be reassigned as needed\. B\. Technical 65\. The proposed Project components are technically sound and viable\. Project design is comprehensive, yet also flexible enough to effectively address the diverse set of institutional development problems identified\. It is built on extensive consultations, reviews of previous studies (including Bank assessments), and diagnostic studies and modernization plans developed during Project preparation with Bank and donor assistance\. Institutional improvement, organizational culture change, knowledge management, process reengineering, community participation and outreach, and transparency/accountability initiative are part of the proposed Project\. A key factor will be the involvement of stakeholders in the design and implementation of solutions, by encouraging participatory learning-by-doing techniques\. 66\. The Project will rely on international tools to assess court performance issues and options\. A number of assessment tools have been developed recently by international bodies, which will be used and adapted to the Moroccan context to raise the awareness of pilot court stakeholders on elements of performance and quality, and identify potential areas for improvement\. During Project preparation, a test assessment was conducted locally using tools developed by the European Commission for Court Efficiency (CEPEJ) to introduce participants to the concept of Quality of Justice or to assess stakeholder perceptions\. These tools include checklists for promoting the quality of justice in the Courts, and time management, and questionnaires for lawyers and court users (parties, lawyers, witnesses, etc\.)\. Other international tools may be considered, as appropriate, such as the International Framework for Court Excellence (IFCE)8 and the National Center for State Courts (NCSC) developed in the United States9\. 67\. Transparency and accountability of the judicial system at large and of individual officials in particular will be a key cross-cutting theme, supported by ICT solutions\. The technical work supported by Component I will be complemented with external, independent oversight to ensure sustained performance\. Thus the automation subcomponent will reinforce mechanisms of judicial oversight by MdJL and external stakeholders\. For instance, traditional areas of complaint such as notifications and the non-enforcement of decisions will be better tracked through ICT applications\. Automation will also reduce opportunities for corruption- related inefficiency in areas such as assignment of cases and scheduling of hearings\. The possibility of developing ICT links with Executive agencies that share responsibility for certain 8 The IFCE, inspired by approaches developed in Australia, Europe, North America and Singapore, was launched in 2008\. It allows the assessment of court performance against seven excellence criteria\. These criteria are based on commonly accepted court values such as equality, fairness, impartiality, independence, competence, integrity, transparency, accessibility, timeliness and certainty\. The IFCE uses a balanced scorecard to facilitate self- assessments\. It acknowledges that the effective implementation of improvement initiatives is a gradual process which requires the collection of data measuring both quantity and quality of justice services provided\. 9 http://www\.ncsc\.org/Information-and-Resources/High-Performance-Courts\.aspx 20 services (taxes, land registration, powers of attorney) will be explored\. Finally, one of the key activities under Component 1\.3 will be the development of an ICT link for the public/lawyers as a mechanism for allowing easier access to case information (judge assignment, hearings schedule, etc) to lawyers and parties\. In Morocco and other countries such a Jordan, one of the primary causes of physical congestion at courts is the users' following-up on the status of their cases - online access to this information may relieve considerable stress from court administrative staff\. 68\. The possibility of working with a broader range of courts was considered and rejected\. The strategic choice was made to maintain the Project focused on a limited set of pilot courts concentrated in high-impact geographical areas, to set the ground for further reforms and avoid overstretching the limited capacity of a court system undergoing rapid change\. The Operational Manual will specify eligibility criteria for the addition or substitution of pilot courts during Project implementation\. 69\. The focus of the Project will be on improving court performance while reinforcing judicial independence in line with the new Constitution\. The new CSPJ will have different functions and responsibilities from the existing CSM\. The powers of the new CSPJ are broadly described in the Constitution, and an Organic Law will determine the exact extent of these powers\. Stakeholders met during project preparation believe that new Organic Law will most likely not entail any major reorganization of the judiciary but rather a targeted strengthening of the independence of the judiciary\. As a consequence, it is expected that the change from the CSM to the CSPJ probably will have only a minimal impact on the activities supported by the project\. C\. Financial Management 70\. The financial management system, including necessary arrangements to address Project needs satisfies Bank requirements\. The financial management system was appraised to ascertain compliance with the requirements of OP/BP1O\.02\. The financial management evaluation of MdJL covered the areas of accounting and financial management, as well as the reporting and auditing processes applicable to the Project\. The assessment concluded that the MdJL has sufficient capacity to manage Project financial matters and administer loan funds\.10 Financial management responsibilities will be entrusted to the UGP, including project budgeting, payment, accounting and reporting\. The financial management inherent risk for the country, the entity and the Project is considered low\. Disbursements will be handled through the Ministry of Economy and Finance (Ministere de Economie et Finances - MEF) following established procedures\. 71\. Interim unaudited financial reports will cover all the activities and sources of funds of the Project\. They will be prepared biannually by MdJL and transmitted to the Bank within 45 days after the end of each period\. 10 MdJL is planning to establish an internal audit unit\. 21 72\. The external annual audit report of the Project accounts and the management letter covering recommendations to improve the internal controls and the accounting system will be transmitted by MdJL to the Bank no later than six months after the end of each exercise\. Moreover, the annual audit report of the Project accounts will be carried out in accordance with the Bank guidelines by an acceptable auditor and according to terms of reference acceptable to the Bank\. Financial flows will come from the loan account open in the Bank\. Flows of funds between the Bank and MdJL will be organized according to normal disbursement procedures of the Bank\. D\. Procurement 73\. Procurement will be conducted for the selection of consultants for technical assistance, for Goods and non consulting services (e\.g\. ICT equipments and networks) and minor civil works\. The UGP will be in charge of the implementation of the Project\. At the decentralized level the sub-directorates of the MdJL in the targeted areas will also be involved in the implementation of Project activities\. The capacity assessment carried out during Project preparation showed that the MdJL does not have experience in implementing Bank projects in recent years and thus staff in place has limited experience in Bank procurement procedures, even though the MdJL benefitted from other donors support in this period (e\.g\. USAID, EU, UNDP)\. 74\. The overall risk for procurement is considered substantial\. This risk level results from: (a) the lack of experience in Bank procedures of MdJL's staff working directly on Project implementation; and (b) the absence of training in Bank procurement procedures provided to MdJL's staff\. To mitigate this risk and facilitate Project implementation the following measures are recommended: (i) a well-tailored training program for MdJL staff, including the UGP, before Project Effectiveness; (ii) recruitment of an individual consultant to carry out the procurement specialist function within the UGP11; (iii) the preparation of Standard Bidding Documents (SBDs) for National Competitive Bidding (NCB) acceptable to the Bank; and (iv) preparation of an Operational Manual for the Project, with a detailed procurement section\. More details are provided in Annex 3\. E\. Social (including safeguards) 75\. Project design has emphasized the importance of consultations to ensure that the participatory approach that was followed during Project preparation is retained during implementation and meets the expectations of the various stakeholders\. Various types of consultations were undertaken during Project preparation, at central and local levels, targeted to various stakeholders such as judicial personnel, lawyers and other professional organizations I During Project preparation it was found that MdJL did not have recent experience with Bank procedures and was agreed to hire a full-time procurement specialist for the UGP who will be responsible for day-to-day procurement tasks and in charge of coaching and mentoring other MdJL staff involved in the Project\. From the procurement standpoint, the Bank will follow up closely Project implementation, especially at the beginning, and will provide support through its own procurement specialist in the Morocco country office\. 22 such as bailiffs, and civil society organizations involved in judicial reform\. These consultations confirmed the general perceptions about the weaknesses of the judiciary in terms of efficiency\. 76\. To promote the engagement of different stakeholders inside and outside the courts, the Project worked with courts and communities in the selected judicial districts early during preparation\. Pilot surveys, using CEPEJ tools, were conducted during preparation, as well as consultations with civil society and confirmed strong support to the Project approach\. Participatory/consultative tools used during preparation confirmed not only the commitment of key staff of MdJL but also the strong support from court staff and communities in the selected locations\. This consultation process also managed expectations by making clear that the experience from other justice reform programs shows that the full impact of the envisioned reforms may take time to materialize\. However, it sets out realistic targets that could be achieved during the Project lifetime in terms of streamlined processes, greater access and community trust\. 77\. The Project will also support significant participation and consultation events about the reform process during implementation\. These consultations will include CSOs and private sector representatives, to complement the views of justice sector officials on service delivery and demand\. As the Project seeks to modify the role and responsibilities of judicial stakeholders, it will work closely with the pilot courts in Casablanca, Kenitra and Settat to ensure buy-in\. The baseline will be collected by an independent consulting firm\. 78\. The consultation and participation process will be led by local and international experts with proven ability to engage stakeholders and to provide best practices that are relevant for the Moroccan context\. The experts will assist stakeholders in developing the PAPJs with access to international best practices and identify not only the local issues but also effective solutions\. TORs will be designed to ensure that these experts operate as "non-invasive" resources that provide information but do not skew the final choices for the PAPJ that must be the result of a local decision\. 79\. As a particular implementation arrangement for this component, local "user committees" (CAP) will be established\. These committees are expected to interact with pilot court officials and other justice sector representatives\. Based on the experience of some OECD countries, the possibility of formal agreements with local bar associations on the expected duration of certain kinds of cases and other matters that affect court performance may be explored in some pilot courts\. 80\. As resistance to change is a common issue detected in justice reform projects, change management becomes a critical tool to engage various stakeholders\. While ICT technical design will follow international standards, particular efforts will be made to adapt these technical aspects to the Moroccan reality in a way that a cultural change can be advanced in the shortest possible time in the pilot courts\. 81\. Citizens will be given a voice in the process of formulating public policy for justice reform\. Gender disaggregated users' surveys will be financed under component 1\.1 (see details in Annex 2)\. This Project will work with bar associations, law schools, private sector and academic institutions that have particular interest in the reforms\. Coalition-building will also 23 include allies from inside the judiciary, such as judges and court staff\. In accordance with the recently announced MdJL's planned debat national initiative, it is foreseen that MdJL will set up a high level public-private committee involving the major stakeholders of the justice sector, from public sector institutions and civil society\. To ensure that the Project's activities are aligned with this overarching initiative, the CdST will regularly liaise with this high level committee\. F\. Environment (including safeguards) 82\. The proposed Project is rated Category C for environmental purposes\. Under component 1\.2 of the proposed operations, civil works consisting of limited space reconfiguration and refurbishment to set up a functional separation between a "front office" and a "back office" inside the pilot courts buildings will take place in some pilot courts\. No structural rehabilitation, enlargement or expansion of existing buildings will be carried out\. The Safeguard Policy (OP/BP 4\.01) relating to environmental assessments has been triggered so as to properly manage the work of contractors and minimize any adverse impacts when such rehabilitation is conducted\. The Project will not finance any works in any historical building\. A list of the environmental standards that contractors will have to observe when minor works are conducted is included in Annex 3\. These requirements will be referenced in the POM\. When hiring contractors to carry out minor works, bidding documents and contracts will include specific requirements/guidelines as needed to be followed in order to avoid any potential adverse environmental impact\. 24 Annex 1: Results Framework and Monitoring Project Development Objective (PDO): The objective of the Project is to strengthen the capacity of the Borrower's justice sector to deliver efficient, timely and transparent services to citizens and businesses through: (a) piloting of a participatory reform process involving judges, administrative staff judicial auxiliaries and users in selected courts in the Project Area; and (b) strengthening the institutional capacity of the central functions of the MdJL to better support and monitor the court system\. Cumulative Target Values Data Responsibili Description (indicator PDO Level Results Baseli Source/ definition etc\.) Inictos*Unit of Measure n R Y R YR Frequency ty for Data Indicators* ne 1 YR 2 YR3 YR 4 Methodolo Collection gy Indicator One: Number and impact 0 0 1 1 2 Every two 2 household DECM - Surveys measuring the impact Increase in the of public awareness years surveys Communicat of the public education awareness of the campaigns during the ion Division campaigns in selected districts public in the selected life of the districts about Project standards of (years 2 and transparency, 4) will competency and measure the effectiveness impact of applicable to the the public justice sector; and awareness their rights and campaigns duties in connection with the justice sector Indicator Two: Percentage of NA 0 50% 60 70 Annual Users' DECM and Surveys in the pilot courts of Service quality\. satisfied users in surveys UGP the selected districts Increase in the level pilot courts of satisfaction of users of the pilot courts of the selected districts with the quality, timeliness and effectiveness of access to court services, court files, and information 25 about court procedures as a result of the court performance improvement plans (PAPJs) Indicator Three: % of reduction in 0% 0% 5% 10% 15% Annual Reports DECM - Data generated by the Increase in the number of pending generated Statistical statistical system of the MdJL clearance rate of cases by the Division in connection with the pilot cases in the pilot statistical courts of the selected districts courts of the selected data system districts of MdJL Indicator Four: No\. of periodic 0 0 0 1 1 Annual MdJL and MdJL and Report evaluating the MdJL's Increase in MdJL's monitoring reports independent independent capacity to monitor the capacity to monitor consultants consultants performance of the courts and the performance of the allocation of resources courts in terms of according to court quality, timeliness performance and effectiveness, and allocate resources according to court performance INTERMEDIATE RESULTS Intermediate Result (Component One): Improving Court Performance in the Project Area Intermediate Result Strategic 0 0 1 1 1 Once MdJL UGP Strategic objectives and M&E indicator One: The objectives and during document approved by MdJL CdST approves M&E framework Project life strategic objectives document (subject to and a court periodic performance M&E updates, as framework needed) Intermediate Result Number of pilot 0 0 5 5 10 Annual MdJL UGP Periodic reporting on the indicator Two: The courts progress in the SRA and PAPJs are implementation of SRA and 26 satisfactorily PAPJs by pilot courts implemented in the pilot courts according to the M&E framework Intermediate Result Number of pilot 0 0 5 5 10 Annual MdJL UGP Periodic reporting on the indicator Three: courts progress in the New physical layout implementation of new for access to court physical layout in pilot courts services is fully operational in pilot courts Intermediate Result Number of pilot 0 0 5 5 10 Annual MdJL UGP Periodic reporting on progress indicator Four: courts in the implementation of Automated Case automated case management Management System systems by pilot courts (CMS) satisfactorily implemented in pilot courts Intermediate Result Number of pilot 0 0 0 5 10 Annual MdJL UGP Periodic reporting on progress indicator Five: courts in the implementation of Electronic archiving electronic archiving and filing and filing system systems by pilot courts established and operational Intermediate Result Central collateral 0 0 0 0 1 Once at the MdJL UGP and Final report on the indicator Six: Central information system end of the independent establishment and operation collateral Project consultant of the central collateral information information system established and operational to be accessible online in real time by users Intermediate Result Single MdJL- 0 0 0 0 1 Once at the MdJL UGP and Final report on the indicator Seven: Courts information end of the independent establishment and operation 27 Information system system Project consultant of the MdJL-Courts connecting MdJL information system and the pilot courts is established and operational Intermediate Result (Component Two): Upgrading the Strategic Planning and Management Capacities of the Ministry of Justice and Liberties (MdJL) Intermediate Result MITEF 0 0 0 1 2 Twice in MdJL UGP and Structuring of annual budget indicator One: the second independent around the updated METF MdJL's annual half of the consultant budget structured Project around the updated MTEF Intermediate Result Standard 0 0 0 0 1 Once at the MdJL UGP and Final report on the indicator Two: performance end of the independent development and operation of Standard evaluation system Project consultant the standard performance performance evaluation system evaluation system developed and operational for court personnel Intermediate Result A training plan to 0 0 1 1 1 Once at the MdJL and UGP and Final report on the indicator Three: support Project beginning ISM independent development and Training plan to activities of the consultant implementation of the training support Project Project plan to support Project activities prepared activities and specific training and specific training modules to support the new modules to support performance management the new performance model of the courts management model of the courts designed and operational Intermediate Result Statistical reports 0 0 0 1 2 Twice MdJL UGP and Two annual statistical reports indicator Four: on pilot courts and during the independent on pilot courts 28 MdJL's upgraded judges performance second half consultant statistical system, of the based on the Project automated CMS, collects and disseminates reliable statistical data on pilot courts and judges performance Intermediate Result ICT medium-term 0 0 0 1 2 Twice MdJL UGP and Evaluation of the ICT indicator Five: ICT strategy during the independent medium-term strategy for medium-term second half consultant improved court performance strategy for of the improved court Project performance adopted and operational Intermediate Result (Component Three): Project Management, Monitoring and Evaluation Intermediate Result Number of 0 2 4 7 10 Once UGP UGP Mandatory operational indicator One: operational (ICR, mid- reports\. documents generated with the AOPs, progress documents term Consultant required quality and timing reports, and ICR review) s' reports delivered on time\. annual Annual reviews and (AOP); mid-term review semestrial carried out on time\. (progress reports); 29 Annex 2: Detailed Project Description 1\. Component 1: IMPROVING COURT PERFORMANCE IN THE PROJECT AREA (Estimated cost: 7\.4 million Euros) 1\. Overview: This Component will have a direct impact on the quality and efficiency of service delivery by the courts\. The main subcomponent focuses on the preparation of court performance improvement plans (PAPJs) following a participatory approach involving key stakeholders in 10-12 pilot courts in the judicial districts of Casablanca, Kenitra and Settat\. This activity will take into account the outcome of the national dialogue for justice reform launched by the MdJL\. Each PAPJ will have to address four strategic objectives set by the Ministry of Justice: (a) modernizing court management and organization; (b) standardizing procedures and reducing delays in processing cases; (c) improving regular interaction with court users, and (d) developing specific solutions to local issues (see Table 1)\. These PAPJs will inform an Annual Reform Strategy ((Strategie de Reforme Annuel) (SRA)) adopted by the MdJL\. The content and scope of the SRAs will gradually expand based on the outcome of the solutions tested in pilot courts\. While ensuring a coherent approach to key issues faced by the courts, this approach will provide some flexibility to accommodate the diverse institutional needs of the courts\. Because the Project will work on organizational issues common to all jurisdictions, it is expected that changes made in the pilot civil and commercial courts will be replicated to other courts\. 2\. The two other sub-components will support required investments in infrastructure, and information and communications technology (ICT) to support the implementation of the PAPJs\. Sub-component 1\.2 will provide for limited reconfiguring and refurbishment of office space in the pilot courts' buildings to implement new delivery processes for services organized around a functional separation between a "front office" and a "back office"\. Sub- component 1\.3 will support the upgrading and development of several critical ICT tools that will allow systematizing and automating jurisdictional and administrative processes at court level, and produce detailed statistics on the status of judicial cases\. Table 1 - Strategic objectives and issues for improving court performance Court Performance Improvement Plan (PAPJ) Strategic Objectives Key issues to be considered by court stakeholders > Tools and methods for improving management and Modernizing court monitoring, and evaluation of court activities 1 organization and > Organization an sharing of tasks between court management stakeholders for handling court management, case management, and day-to-day interaction with users > Standardizing of case procedures and implementation of Standardizing the automated Case Management System (CMS) 30 2 procedures and > Review of the main civil and commercial procedures reducing delays in responsible for delays in case management: scheduling of processing cases hearings, notification of court decisions, enforcement of judgement, inefficiency of fast track procedures (injonctions, referes), etc\. > Targeted reduction in number of pending cases and delays in case management > Transparency and accountability in the provision of Improving services to individuals and companies 3 interaction with (information/communications, forms, service charters) court users including a gender perspective that aims at removing - * 12 gender-specific barriers to justice\. > Physical and virtual access to courts\. > Relationship with local stakeholders (Bar associations, police, judicial auxiliaries, witnesses, experts, civil society) 4 Developing specific > Areas selected by local stakeholders solutions to local issues Monitoring and Evaluation Framework 1\.1 Improving court performance (Estimated cost: 3\.7 million Euros) 3\. Rationale and objectives\. The Project will follow a participatory approach to identify key bottlenecks that prevent efficient service delivery in the pilot courts and favour ownership during implementation of the identified solutions\. Major investments have been undertaken during the past decade by the MdJL mostly for upgrading courthouses' physical infrastructure and establishing a national ICT infrastructure\. At present, issues in court reform are more structural or organizational, and, e\.g\. outdated organizational allocation of tasks between court personnel and judges, excessive delays in proceedings due to strict interpretation of court procedures, problems with service of process, delays in execution of judgments, ineffectiveness of existing fast-track procedures\. In the absence of objective court performance standards and a structured public-private dialogue, these issues are difficult to characterize and solve: the public blames the court personnel for inefficiency and professional malfeasance, while court personnel complain of weak salaries and excessive workload\. Hence, this Project component will ensure that civil society and other judicial stakeholders are involved early in the identification of issues and options at the local, regional and national level\. 12 The gender perspective of the PAPJs will be developed taking into account the results of the ongoing initiatives sponsored by UNIFEM, UNDP and UNICEF that focus on improving the performance of selected family courts\. 31 4\. Selecting Pilot Courts from the Casablanca, Kenitra and Settat judicial districts to develop PAPJs\. The Project will ensure that selected pilot courts constitute a representative sample of courts of different levels (first instance, appeals) and different sizes from amongst the courts whose physical and ICT infrastructures have already been renovated by MdJL\. Preliminary discussions with MdJL have resulted in the pre-selection of First Instance Courts (TPIs), Court of Appeals (CAs) and commercial courts (CdC) of the Casablanca, Kenitra and Settat judicial districts (only the CdA and TPI of Settat), from which 10 to 12 pilot courts will be selected\. The judicial region of Kenitra was identified because its CdA and TPI are already used as model courts by the MdJL to test and implement best practices\. The judicial region of Casablanca has been identified in view of its size (more than 60% of the caseload in the whole country), which increases the potential impact of Project activities\. The judicial region of Settat was identified in view of its proximity to Casablanca and high priority for the MdJL\. The pilot courts will be divided into clusters so as to ensure that the Project remains focused on particular interventions, and the results of the prior cluster are evaluated before moving into the subsequent cluster\. The first cluster will include a limited number of TPIs and CdAs in order to test solutions and develop model courts that could then be tested again in other pilot courts\. However, the Project will allow flexibility to add, withdraw or replace pilot courts in accordance with the eligibility criteria determined in the POM agreed upon during Negotiations\. 5\. Conducting court users surveys in the selected pilot courts\. The Project will design and implement a structured questionnaire seeking various kinds of feedback from respondents\. The questionnaires developed by the CEPEJ for surveying individuals and lawyers will provide the basis for designing a questionnaire adapted to the Moroccan context\. The results of these questionnaires will feed the working groups\. They will also be used to design a monitoring and evaluation framework to measure the impact of the Project\. Gender disaggregated user surveys could include questions such as: the extent to which respondents were aware of their rights, how long the case had been in court, the number of times it had been adjourned, whether the respondent believes there has been unreasonable delay and the apparent cause of delay, whether the respondent was asked for a bribe at the court, whether the respondent had confidence in the integrity and competence of the judge or other court officials, whether the respondent intended to pursue other ways of resolving his case, etc\. These questionnaires will allow the respondent to remain anonymous or identify themselves\. The Project will also devise a mechanism aimed at processing responses and providing feedback to the public\. 6\. Identifying the issues and options of PAPJs through a participatory approach in the selected pilot courts\. The Project will support the identification of issues and solutions related to the four strategic objectives (court organization, case management, access to justice, and local specific solutions) based on a participatory approach\. Stakeholders in the pilot courts will be organized in working groups with the assistance of a professional facilitator, to identify problems, devise solutions, and prioritize reform efforts, within the overarching goal of increasing court performance and quality of service delivery\. Practically, it is envisioned that two to four working groups will be established at the level of each court, depending on the local context\. Justice sector stakeholders could include: (a) internal stakeholders such as 32 judges, prosecutors, court clerks and administrative staff; (b) justice auxiliaries, such as lawyers, notaries, bailiffs, experts, witnesses; and (c) external stakeholders such as court users, private sector representatives (e\.g\. chambers of commerce) and non-governmental organizations (NGO) representing citizens and groups interested in justice sector reform\. 7\. Disseminating best international practices relevant for PAPJs through workshops\. The Project will organize a series of workshops to present to the working groups and other interested stakeholders a selection of case studies presenting best international practices relating to the strategic objectives\. The objective will be to disseminate innovative practices that have been implemented by courts in other countries, notably in middle income countries and transition countries and test with stakeholders the feasibility of adapting these best practices to the local Moroccan context\. The Project will rely on existing case studies developed by the Bank and other donors involved in justice reform\. 8\. Structuring of PAPJs and SRAs including monitoring and evaluation mechanisms and indicators\. The draft PAPJs and proposed activities will be screened and validated by the CdST by applying specific criteria determined in the POM, notably: (i) consistency with the strategic objectives of the Project; (ii) testing of a change in behaviour, organization or procedure that could be replicated to other courts or inform other courts with similar profile and issues (except for activities related to the fourth strategic objectives, which could be court-specific); (iii) success criteria determined in advance; (iv) classification of the activity in terms of relevance, urgency, and potential impact on short, medium or long-terms\. Once the first set of PAPJs is designed and implemented, the MdJl will approve the first SRA for improving court performance that will determine priority reform activities based on the lessons learned in the pilot courts\. In principle, the first SRA could be adopted by the MdJL during year 2 of the Project and then updated yearly\. 9\. Assisting in the implementation of the PAPJs and SRAs activities in the selected pilot courts\. Due to the potential complexity of preparing PAPJs and SRAs, the Project will provide the pilot courts and working groups with the technical assistance of a consulting firm with a solid track-record in similar exercises\. This firm will work at local level and help stakeholders from the selected pilot courts to follow a methodology to prepare a PAPJ\. The consulting firm selected under the Project will also provide technical assistance for the carrying out of the PAPJ, including: training, expertise for the drafting of handbooks and guidelines, local events, equipment needs assessments, etc\. In principle, no equipment will be financed under this subcomponent except for accessory and essential equipment for the preparation or implementation of the PAPJs\. Civil works will not be financed under this subcomponent\. 10\. Activities to be financed: Provision of non-consultants' services, goods and consultants' services, including training for improving the court administration and case management through, inter alia: - selecting pilot courts from the Casablanca, Kenitra and Settat judicial districts located in the Project Area to develop PAPJs according to the criteria and procedures described in the POM; 33 - conducting court users surveys in the selected pilot courts; - identifying the issues and options of PAPJs through a participatory approach in the selected pilot courts; - disseminating best international practices relevant for PAPJs through workshops; - structuring of PAPJs and SRAs including monitoring and evaluation mechanisms and indicators; and - assisting in the implementation of the PAPJs and SRAs activities in the selected pilot courts\. 1\.2 Reen$ineerin$ of Administrative Processes for Improved Service Delivery (Estimated cost: 0\.6 million Euros) 11\. Rationale and objectives\. To better channel interactions between stakeholders and court services' providers (i\.e\. court officials responsible for dealing with user requests, mostly at the clerical level), it is critical to reorganize internal administrative services in pilot courts by developing a modem structure of "front office" and "back office" functions 3\. By reorganizing how the user interacts with the courts, this Component will aim at fostering the new culture of a citizen oriented court system\. The front office will be the physical location where court officials interact with the users and provide the service requested\. The back office will support the activities of the front office and will not deal directly with user requests\. This activity focuses on the delivery of court administrative services and will not include major courtroom refurbishment which has already been undertaken by the MdJL in all the pilot courts of the Project\. The Project will not finance the construction of court buildings but only limited space reconfiguration and refurbishment (other than structural rehabilitation, enlargement or expansion) required for the installation of IT systems and the separation of front/back offices inside selected pilot courts\. 12\. Activities to be financed: Provision of small refurbishment works, non-consultants' services, goods and consultants' services, including training for reengineering of administrative processes for improved service delivery through, inter alia: - assessing current organizational structures for providing services in the selected pilot courts; - designing new service delivery processes by rationalizing court organization based on the separation of the "front office" and "back office" functions; - drafting an operation manual detailing the handling of all administrative tasks related to justice services delivery; - providing training to staff of the selected pilot courts regarding the use of the new service delivery procedures; and - limited space reconfiguration and refurbishment (other than structural rehabilitation, enlargement or expansion of existing buildings) inside the selected pilot courts' buildings for implementing the new service delivery processes and court layout\. Most physical and ICT infrastructure of the Moroccan courts have been renovated by MdJL with support from the EU MEDA program to facilitate physical access to the courtrooms\. This subcomponent will focus on the delivery of court services and, as such, it will not include any courtroom refurbishment\. 34 1\.3 Development of Innovative Court ICT Applications (Estimated cost: 3\.1 million Euros) 1\.3\.1 Revamping of the Automated Case Management Systems (0\.9 million Euros) 13\. Rationale and objectives\. Moroccan courts have been equipped with either: (a) automated case management software application (Systeme Informatise de Gestion des Affaires - SAJ) developed as part of the EU MEDA Project by MdJL; or (b) an older case management software in the Casablanca courts, and the CdCs, which will be replaced by SAJ\. The existing manual case management systems (CMSs) are organized around the civil and criminal codes of procedure which require record-keeping for key case milestones (filing, scheduled hearing, decision, etc\.)\. These manual CMSs remain the foundation of court record-keeping as courts are reluctant to discontinue manual records in the absence of effective enforcement of the automated system\. Moreover, the automated system has not optimized or significantly improved the manual processes when it was introduced, as it was implemented intentionally to automate existing processes but not to change them, in order to facilitate its adoption by stakeholders\. As a result, the SAJ system has not been effective to monitor and control the performance of the courts, or to provide valuable information to the users\. To address this issue, the Project will assist the selected pilot courts in the process of revamping the automated CMs\. 14\. Activities to be financed: Provision of non-consultants' services, goods and consultants' services, including training for the development of innovative court ICT applications through revamping of the automated case management systems (CMSs), including inter alia: (a) assessing current procedural rules and milestones to determine the causes of recurrent delays and congestion, and identifying possible solutions, including the improvement of the CMSs already operational; (b) upgrading the existing CMS for effective monitoring and control of case status requests and pending judicial deadlines; (c) training court personnel to ensure effective use of the upgraded automated CMS and procedures; (d) ensuring that the new upgraded CMS generates reliable statistics on court performance in the pilot courts, and is gradually expanded to other courts\. 14 1\.3\.2 Development of Additional ICT Applications Identified Under the ICT Strategic Plan (2\.2 million Euros) 15\. Rationale and objectives\. The existing medium-term ICT development plan of the MdJL provides for the development of a number of applications for improving the management 14 The development of this CMS will follow the action plan and standards defined under sub-component 2\.5 on judicial statistics\. It is also expected that the CMS developed under the Project will be robust enough to generate court performance evaluation data by the Project end, once the main case milestones have been standardized and streamlined\. 35 systems of courts\. While the CMSs are at the core of court functioning, other applications may be needed to further expand the potential impact of technology for improving service delivery\. The Project will finance the development and testing in the pilot courts of a selected number of key applications identified by the MdJL as priority for improved court management and service delivery\. The list of priority applications below will be validated by the ICT strategy to be prepared under subcomponent 2\.4\.2 described below\. 16\. Activities to be financed: Provision of non-consultants' services, goods and consultants' services, including training for the development of innovative court ICT applications through development of additional ICT applications identified under the ICT Strategic Plan including inter alia: - Developing an electronic filing program allowing externally-originated documents to be added to the existing file\.15 - Developing an information system by extending the connectivity between the central and regional court offices (intranet) in order to improve the effective communication of policies, practices, and procedures\. - Allowing user access in real time to a central registry for collaterals registered in the commercial registry\. 16 - Enhancing digital systems for archiving electronic court records so as to improve access to court records using electronic retrieval methods, and reduce physical space for storage of court records\.1 Component 2: UPGRADING THE STRATEGIC PLANNING AND MANAGEMENT CAPACITIES OF THE MdJL (Estimated cost: 3\.7 million Euros) 17\. Overview: The objective of Component 2 is to improve the MdJL's capacity to monitor the performance of the courts and provide them with adequate support, in particular to attain the strategic objectives of Component 1\. As such, this Component will provide support to the MdJL's Directorates entrusted with a cross-support function and the Superior Judicial Training Institute (ISM): (a) sub-component 2\.1 will assist the Office of the Minister and the Secretary-General of MdJL in fulfilling their coordinating and strategic planning functions; (b) sub-component 2\.2 will assist the Budget and Control Directorate in implementing the performance budgeting framework resulting from ongoing reforms of Morocco's budget reform; (c) sub-component 2\.3 will assist the Human Resources Directorate and the ISM in furthering their strategic approach to staffing, promotion and skills development; (d) sub- components 2\.4 and 2\.5 will assist the Statistics, ICT and Communications Units of the Directorate for Studies, Cooperation and Modernization (DECM); and (e) sub-component 2\.6 will assist the newly created Directorate for Legislative Reform in developing methodological tools and advancing pilot legal reforms\. E\.g\. electronic filing by lawyers\. 16 Currently, collateral has to be recorded in each of the seven commercial registries of Morocco, as creditors cannot retrieve data from these various registries in a single one-stop-shop\. 17 E\.g\. decisions, judgments, notices, etc\. 36 2\.1 Strengthenin$ of the MdJL's Planning, Coordination and Control Capacity (Estimated cost : 0\.5 million Euros) 18\. Rationale and objectives\. While the internal organization of the MdJL's was recently modified, MdJL still needs to develop adequate capacity and coordination mechanisms for an efficient interplay among strategic planning, investment programming, resource management, budgeting, accountability and controls\. This activity will take stock of the results of other components of the Project to ensure that coordination mechanisms and planning capacity are strategically managed by MdJLis 19\. Activities to be financed: The Project will finance the goods, consultants' services and training required to strengthen MdJL's planning, coordination and control capacity by, inter alia: - Reviewing internal policies and procedures of MdJL\.19 - Selecting appropriate job profiles for the revised planning, coordinating and control functions and responsibilities of MdJL's central services\. - Developing a performance and productivity assessment framework for central services\.20 - Developing effective information tools among MdJL Directorates and Units for policy- making purposes\. 2\.2 Developing Strategic Budget Planning through Performance-based Budetin$ (Estimated cost: 0\.6 million Euros) 20\. Rationale and objectives\. Morocco has engaged in a broad reform to modernize its budget planning and management, notably through the adoption of performance-based budgeting\. Building on nearly ten years of pilot testing, a new organic budget law is currently under preparation and will be submitted to Parliament\. The MdJL was part of the pilot and developed a Medium Term Expenditure Framework (MTEF), in which it has allocated resources among three programs: (i) judicial case management; (ii) justice sector development and modernization; and (iii) judicial administration\. While this first functional budget is an important step, full-fledged program budgets remain to be developed\. The Project will inform this process, in line with the new budget classification currently under preparation and international best practices\. Activities to be financed: The Project will finance the goods, consultants' services and training required to strengthen MdJL's strategic budget planningcapacity by, inter alia: 1 MdJL may also have to adapt its organizational structure to share some of its functions and responsibilities with the CSPJ established by the new Constitution approved on July 1, 2011\. 19 This review will take into account the sharing of roles between the MdJL and the CSPJ that may result from the new Constitution; it will also support the implementation of the recent internal reorganization of the MdJL and establishment of the Internal Audit function\. 20 This activity will be based on the outcome of sub-component 2\.4 aimed at developing monitoring and evaluation (M&E) tools for measuring court performance\. 37 - identifying performance objectives, indicators and targets21; - developing and implementing an action plan for the MdJL's strategic budget planning; - developing and implementing a training plan addressing the different dimensions of the budget reform with workshops in each judicial district, and an annual seminar with 22 participants ; and - strengthening the budget and financial management capacities of the various units involved in the expenditure management process\. 2\.3 Supporting the Human Resources Development of the MdJL (Estimated cost: 0\.5 million Euros) 21\. Rationale and objectives\. Until recently no rules existed for auxiliary and administrative staff, and the status, salaries and functions of most judicial staff other than judges was a major issue\. In August 2011 the MdJL agreed to increase significantly the salaries of the 23 court clerks and submitted to the Council of Ministers draft decrees for reforming their functions and career framework, and the role of the secretariat-greffe, the key clerk official for the running of the day-to-day business of the courts\. While the Project may not address all aspects of the Judiciary's human resources challenges, it will focus on supporting ongoing human resources strategic planning reform, and reinforcing the career and skills of administrative staff in order to contribute to the development of a new court management model\. In addition, this subcomponent will aim at strengthening the capacity of MdJL and ISM to identify, design and provide quality training, with a particular focus on court management and performance improvement techniques\. 22\. Activities to be financed:The Project will finance the goods, consultants' services and training required to support the human resources of the MdJL by, inter alia: - designing and implementing standard performance evaluation mechanisms and parameters for court staff and establishing new M&E mechanisms to improve performance; and - designing specific training modules for the MdJL and the ISM to disseminate best practices in the field of court management and performance, and to support the implementation of the PAPJs by the selected pilot courts\. 2\.4 Strensthenins of M&E Tools for Court Performance (Estimated cost: 0\.7 million Euros) 21 The development of MdJL's performance objectives, indicators and targets will be participatory, associating all relevant stakeholders, including at the regional and court level\. 22 This may include workshops in each judicial district, and an annual seminar\. 23 Between 600 and 2900 DH depending on their grade level\. 38 2\.4\.1 Supporting the MdJL in Developing an Upgraded System of Court Statistics (0\.4 million Euros) 23\. Rationale and objectives\. Statistics generated by the MdJL do not allow tracking progress towards performance improvements\. Official court statistics are collected manually at regular intervals (monthly, quarterly or yearly) or in response to specific data or statistical requests from the MdJL\. No statistics are retrieved from data stored in the automated CMSs\. Manual procedures generate simple statistics that do not allow an effective monitoring and control of the performance\. While there are data available on the backlog of cases and clearance rate by courts, there is no data available on the duration of the main types of cases\. To address this issue, the Project will assist the Statistics Unit of the MdJL in developing an upgraded system that would ensure statistics are appropriately collected, analyzed and disseminated\. 24\. Activities to be financed: The Project will finance the goods, consultants' services and training required to strengthen the court statistics capacity of MdJL by, inter alia: - Reviewing the existing judicial statistics system and how it is being implemented in the pilot courts\. - Upgrading and designing a statistical system with manual procedures and computerized applications compatible with the CMSs, to include: (a) definition of data quality standards; (b) periodic collection and analysis, quality control and information processing mechanisms; (c) adoption of standard judicial workload measurements among comparable courts; and (d) dissemination of statistics through the publication of periodic reports for distribution among judicial districts and sector users - Assisting the pilot courts in the implementation of the new data system to ensure they generate reliable statistics about court performance, and assist in gradually expanding this system to other courts\. 2\.4\.2 Supporting MdJL to Develop an ICT Strategy for Court Performance (0\.3 million Euros) 25\. Rationale and objectives\. ICT may affect virtually all aspects of justice service delivery and has become an essential tool to improve court performance\. However, its impact is often delayed due to the complexity of the culture and skills changes that the implementation of an ICT solution requires\. The MdJL's automation experience has shown the need to carefully program ICT investments to ensure that they address user needs, and are rolled out with appropriate support\. The Project will finance the development of software applications and their installation in pilot courts based on best international practices and tools\. 26\. Activities to be financed: The Project will finance the goods, consultants' services and training required to support MdJL's development of an ICT Strategy for court performance by, inter alia: - Preparing a medium-term strategic ICT plan, comprising: (a) an ICT resource inventory and a needs assessment; (b) standardization and upgrading of ICT equipment (with emphasis on consolidating SAJ); (c) adaptation and strengthening of the technical support mechanisms for ICT equipment, (d) training of the personnel of the ICT support units of MdJL to ensure effective maintenance and utilization of technological resources, (e) 39 strengthening and reorganization of the ICT units; and (f) specific action plans for the acquisition, allocation and maintenance of computer equipment in accordance with the identified priorities\. - Reformulating the MdJL's policies on technological standards, including: (a) information administration and security policies; (b) acquisition, utilization, maintenance, upgrading and replacement of computer equipment, to ensure effective customer service; and (c) applications such as digital signatures and certification of electronic mails\. - Assisting MdJL in supervising the implementation of the ICT action plan and new policies on technological standards\. 2\.5 Improving MdJL's Communication with Users and Citizens (Estimated cost: 1\.0 million Euros) 27\. Rationale and objectives\. Substantial efforts have been undertaken by the MdJL to improve access to judicial information\. All laws and regulations are made public in the official gazette of the Government, accessible online on the website of the Office of the Secretary-General of the Government (SGG) (www\.sgg\.gov\.ma)\. The MdJL has also created a comprehensive legal and judicial database (adala\.justice\.gov\.ma) with the support of the EU\. The Supreme Court publishes a selection of case law every two years, while a number of specialized law reviews analyze landmark court decisions\. Nevertheless, key stakeholders, such as lawyers and civil society, continue to complain about insufficient transparency, access to case law, and lack of communication about the court services, legal rights, and ongoing reform process\. While most issues regarding insufficient information at local court level will be addressed under Component 1, there is a need to develop and implement a communication program to inform and educate current and potential users The MdJL's national communication strategy will support the development of a new culture in the justice sector based on "user-friendly approaches\." The communication strategy will be based on a household survey that will help assess perceptions vis-A-vis the justice sector\. In spite of recurrent complaints about the lack of fairness and effectiveness of the formal court system, there is no comprehensive and reliable study that provides hard core data on perceptions of, and access to, justice in Morocco\. This lack of data is a critical constraint in setting evidence 24 based priorities for access to justice interventions 28\. Activities to be financed: The Project will finance the goods, consultants' services and training required to improve MdJL's communications with users and citizens by, inter alia: (i) improving the MdJL's communication strategy; 24 The only available surveys focused on users of the CdCs and registries were carried out in 2003 and 2004, under a Bank-financed project, and showed that on average over 80 percent of users of the commercial courts and registries were satisfied; lawyers and litigants perceived significant gains in the enforcement of judgments between the first and the second survey; users also reported a significant improvement in the information available before using a commercial court\. UNDP is currently conducting a user survey on the implementation of the new Family Code in five pilot Family Court Districts\. 40 (ii) providing training on communication techniques for MdJL's relevant units; (iii) carrying out workshops, training activities and publications for civil society, the private sector and the general public, and awareness campaigns about justice sector issues and citizens' rights; (iv) designing and implementing specific communication plans and activities in the selected pilot courts, linked with PAPJs and SARs; and (v) undertaking nationally representative surveys aimed at assessing perceptions about justice services throughout the country, and access to, and use of, the court 25 system in Morocco\. 2\.6 Stren$thenin$ the capacities of the MdJL to prepare draft laws and regulations and to disseminate laws and regulations and case law (Estimated cost: 0\.4 million Euros) 29\. Rationale and objectives\. Almost all draft laws in Morocco originate from Government agencies, with a few drafts being prepared by Parliament\. Each line ministry remains in charge of drafting laws that are within the scope of its sectoral mandate\. Due to the relatively weak capacity of most line ministries, the quality of legal drafting does not meet international standards\. Together with the SGG, the MdJL plays a key role in ensuring the quality of legal drafting, either by providing expert support to other Ministries, or by leading reforms on subject-matters that are directly under its purview, i\.e\. laws relating to the court system, or the commercial registry\. In this context, the Project will enhance the capacity of the new Directorate of Legislative Studies and Drafting established by the MdJL in August 2011 and charged with ensuring that laws are drafted and disseminated following best international practices, with due emphasis on the clarity of the rules to facilitate their application by the executive and the judiciary\. 30\. Activities to be financed: The Project will finance the goods, consultants' services and training required to modernize legal drafting and dissemination of case law by, inter alia: (i) developing a strategy and methodology for: (a) identifying legal reform needs relevant for improving court performance; (b) laying out reform options and assessing their impact; (c) implementing a consultative process with stakeholders; and (d) preparing judicial reforms; (ii) supporting the implementation of the strategy and methodology adopted through the development of ICT applications, training and workshops; and (iii) reviewing and updating the tools for disseminating laws, regulations and judicial decisions Component 3: PROJECT MANAGEMENT, MONITORING AND EVALUATION (Estimated cost: 0\.87 million Euros) 25 Considering the practical challenges of implementing this survey, results will not be used to monitor or evaluate the impact of other Project components, in particular Component 1\. 41 31\. Rationale and objectives\. The UGP will be responsible for coordinating day-to-day Project activities and administering loan funds\. It will ensure that all financial management and procurement functions are performed in accordance with the provisions of the Loan Agreement\. The UGP will be headed by a project manager appointed by a decision of the MdJL and will report to the Secretary General of the MdJL\. He/she will be in charge of supervising and monitoring the UGP in the performance of its respective tasks\. The UGP will receive support from the DECM and will be physically located in the offices of the DECM\. The UGP will also comprise staff assigned from other key interested Directorates from the MdJL (Civil affairs, Criminal Affairs, Commercial Affairs, Budget, Human Resources, Infrastructures and Equipment) that will actively support its mandate, in particular the staff from the Budget Directorate that will act as the financial management expert for the Project\. Finally, the UGP will comprise external experts hired to fulfill the position of (i) Project coordinator/monitoring and evaluation specialist, (ii) procurement specialist and (iii) Project assistant\. If needed, the Project will hire a financial management specialist to assist the staff of the Budget Directorate assigned to fulfill this function\. The composition of the UGP and assignment of MdJL staff to the UGP will be detailed in a formal decision of the Minister\. 32\. The head of the UGP will be a key member of the CdST chaired by the Secretary-General of MdJL, and comprising the heads of the interested Directorates of MdJL and court staff assigned by pilot courts involved in the Project\. The CdST will monitor closely the implementation of the Project\. 33\. Activities to be financed: Provision of goods, consultants' services and training to the UGP for the implementation and monitoring and evaluation of the Project\. 42 Annex 3: Implementation Arrangements 1\. The Project implementing agency will be the MdJL\. ISM will be a beneficiary under a partnership agreement with MdJL for the purposes of Subcomponent 2\.3\. To facilitate supervision, Procurement Plans will be prepared to package most activities into large contracts to be awarded to international and/or local firms that have proven capacity to deliver results under "turn-key" contracts or similar results-based approaches\. Project institutional and implementation arrangements 2\. The Technical Committee (CdST)\. The CdST is in charge of coordinating and monitoring activities at the technical level\. To this effect, it is composed of representatives of the core MdJL Directorates and decentralised units involved in the Project, such as the pilot courts and the regional Sub-Directorates of the Judicial Districts covered by the Project\. The task of the CdST is to facilitate/supervise the implementation of Project activities\. More specifically, the CdST validates the draft PAPJs and SRA prepared under component 1 and submitted by the UGP\. It facilitates the coordination of the main actors and builds consensus\. It is chaired by the Secretary General of the MdJL\. The CdST will meet upon request of its Chair as many times as necessary and at least four times a year\. It examines and approves the progress reports, and will post periodic monitoring and evaluation reports in the Project website for comments\. It will also review and endorse the draft AOP for each year of Project implementation\. 3\. The Project Management Unit (UGP)\. The UGP will be responsible for coordinating day- to-day Project activities\. It will ensure that all financial management and procurement functions are performed in accordance with the provisions of the Loan Agreement\. The UGP will be headed by the Director of DCEM who will be assisted by a mid-level MdJL management staff dedicating a substantial portion of its time to the Project, at least during the first year of the Project\. The UGP will also comprise staff assigned from other key interested Directorates from the MdJL (Civil affairs, Criminal Affairs, Commercial Affairs, Budget, Human Resources, Infrastructures and Equipment) that will actively support its mandate, in particular the staff from the Budget Directorate that will act as the financial management expert for the Project\. Finally, the UGP will comprise external experts hired to fulfill the position of Project coordinator/monitoring and evaluation specialist, procurement specialist and Project assistant\. If needed, the Project will hire a financial management specialist to assist the staff of the Budget Directorate assigned to fulfill this function\. The composition of the UGP and assignment of MdJL staff to the UGP will be detailed in an official decision of the Minister\. 4\. Specific implementation mechanisms: * Activities involving the Judicial Training Institute (ISM)\. ISM is a legally autonomous public entity, with its headquarters in Rabat\. The Board of Directors of ISM is chaired by the Minister of Justice and comprises the heads of all major public 43 institutions involved in the justice sector\. 26 In view of its legal status as an autonomous agency, a partnership agreement will be entered into between the MdJL and the ISM to specify their respective roles and responsibilities in the implementation of activities aimed at improving the training capacity of the ISM and providing specific training to judicial stakeholders within the scope of the Project\. * Activities involving pilot courts under Project component 1\.1\. The Project will assist in establishing local working groups and task forces at the level of each pilot court: (a) a local committee for improving the delivery of justice services (Comite d'Amelioration de la Performance - CAP) will bring together the representatives of key public and private stakeholders (court presidents, royal prosecutors, chief clerks, representatives of the local Bar, representatives of the bailiffs, notaries, experts, municipal council, police, etc\.); and (b) thematic working groups will be organized to bring together judicial stakeholders, users and non-users of the judicial system to prioritize issues, devise solutions, and structure a PAPJ (see Annex 2)\. MdJL observers may participate in the discussions of the working groups\. Internal stakeholders will be nominated by the Court President and the Chief Prosecutor of each court\. External stakeholders will be identified and nominated by the UGP from a representative sample from civil society organizations and court users following a methodological approach detailed in the POM agreed upon during negotiations\. The size and number of the working groups may be limited to facilitate efficient, candid and productive discussions\. The particular commitments of each court will be established by agreement between MdJL and the President of each court\. Financial Management, Disbursements and Procurement 5\. Public Financial Management\. The Bank's experience in Morocco and the main conclusions of the 2009 PEFA indicate that the Moroccan public finance system is governed by an elaborate legal and regulatory framework\. It also contains strong reliability and transparency safeguards\. The financial management risk of the Moroccan public finance system is considered low\. 6\. Assessment of the Financial Management System\. An assessment of the financial management system in place at MdJL was carried out to determine whether it complied with Bank requirements for Project management under OP/BP1O\.02\. The Financial Management System (FMS) in place in the MdJL, implementing agency for the Project, is based on principals and procedures defined by the legal framework applicable to the public sector and more specifically to governmental institutions\. 7\. Budget\. An annual approved budget for commitments and disbursements is issued by MdJL based on the needs and actions to be undertaken\. The annual budget is submitted to the MEF for approval\. 26 Law No -02-240 of October 3, 2002\. 44 8\. Staffing\. The MdJL will have a dedicated team to manage the Project\. The UGP will be staffed with a Project coordinator/monitoring and evaluation specialist, and a Project assistant, all competitively selected\. An external financial management specialist may be hired if needed to strengthen the MdJL's capacity in this area\. The head of the UGP will be the Director of DECM who has been recently appointed and has a proven track record working with international donors\. 9\. Accounting\. A cash based accounting system with the outline of budget components is operational according to the regulations described in the public accounting law\. The transactions in terms of commitments and disbursements are reflected in the integrated management system for expenditures\. The overall principles for Project accounting are outlined below: (a) books of accounts for the Project will be maintained on cash basis principles\. Maintaining the reporting financial system to reflect all the transaction flows and issuing of the semi-annual Interim unaudited financial reports will complete this system; and (b) Project accounting will cover all sources and utilization of Project funds\. This will include payments made and expenditures incurred\. All Project-related transactions will be taken into account in the reporting system\. Disbursements made will also be included in the Project accounting system\. 10\. Reporting\. Interim unaudited financial reports for the Project for the Project will be generated from a computerized financial management system\. An internal application will be designed to satisfy the reporting requirements\. These reports will be management- oriented and will be used for Project monitoring and implementation by MdJL\. The Interim unaudited financial reports will include the following: summary of sources and uses of funds, uses of funds by Project component and by Project category, cash withdrawal, and cash forecast\. 11\. Internal Audit\. A unit dedicated to internal audit has been recently established in the MdJL, which should improve the internal audit function\. 12\. External control\. MdJL's responsibility for control of budget execution and monitoring is assigned to the General Inspectorate of Finance (IGF) and to the Audit Court\. The Budget Directorate of MEF also plays an important role in controlling transactions financed by external donors\. A recent performance audit of the MdJL by IGF stressed the priority of the internal audit department\. It also emphasized the monitoring and evaluation functions that provide permanent controls\. 13\. Annual Audit of the Project: The annual audit will be performed by an independent auditor acceptable to the Bank\. The auditor's terms of reference must be acceptable to the Bank\. The auditor will issue an audit opinion on the financial statements\. In addition to the audit opinion, the auditor will also, either in the audit report or in the report to management: (a) provide comments and observations on the accounting records, systems, and controls that were examined during the course of the audit; (b) identify specific deficiencies and areas of weakness in systems and controls and make recommendation for their improvement; 45 (c) report on instances of non-compliance with the terms of the financial agreement(s); (d) communicate matters that have come to attention during the audit which might have a significant impact on the implementation of the project; and (e) bring to the borrower's attention any other matters that the auditors considers pertinent\. 13\. The auditor's opinion on the financial statements and management letter should be received by the Bank no later than six months after the end of each fiscal year\. 14\. The auditor will Audit the Project Financial Statements (PFS) that will include: (i) a statement of sources and utilization of funds or balance sheet, indicating funds received from various sources, Project expenditures, and Project assets and liabilities; (ii) schedules classifying Project expenditures by components, expenditure categories; and (iii) a statement of reimbursement made on the basis of Statements of Expenditure (SOEs)\. The auditor is entitled to unlimited access to all information and explanations considered necessary to facilitate the audit including legal documents, project preparation and supervision reports, reports of reviews and investigations, correspondences, and credit account information\. Flow of funds/Disbursement 15\. Disbursements\. The proceeds of the loan will be used to finance Project activities and will be handled through the MEF, following established procedures\. Documentation supporting expenditures will be available for review by Bank supervision missions and Project auditors\. All disbursements will be subject to the conditions of the Loan Agreement and the procedures defined in the Disbursement Letter\. Interim Unaudited Financial Reports and Annual Financial Statements will be used as a financial reporting mechanism and not for disbursement purposes\. The Bank will honor eligible expenditures for works completed, services rendered and goods delivered by the Project closing date\. A four months' grace period will be granted to allow for the payment of any eligible expenditure incurred before the grant closing date\. 16\. Statement of Expenditures\. Necessary supporting documents will be sent to the Bank in connection with contract that are above the prior review threshold, except for expenditures under contracts with an estimated value of (a) US$ 200,000 or less for works; (b) US$ 100,000 or less for goods; (c) US$ 100,000 or less for consulting firms; (d) US$ 50,000, or less for individual consultants, as well as training which will be claimed on the basis of SOEs\. The documentation supporting expenditures will be retained at the MdJL and will be readily accessible for review by the external auditors and periods Bank supervision missions\. All disbursements will be subject to the conditions of the Loan Agreement and disbursement procedures as defined in the Disbursement Letter\. 46 17\. Planning of Supervision\. A supervision mission will be conducted twice every year based on the risk assessment of the Project\. The mission's objectives will include: (i) ensuring that strong financial management systems are maintained for the Project throughout its life; (ii) conducting a semi-annual review of IFRs, and an annual review of audited financial statements and management letters\. Procurement Arrangements General 18\. Procurement for the proposed Project will be carried out in accordance with: (i) the World Bank's Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, known as the 'Anti-Corruption Guidelines' dated on October 15, 2006 and revised in January, 2011; (ii) the 'Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers' (known as Procurement Guidelines) published by the Bank in January 2011; (iii) the 'Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers,' (known as Consultant Guidelines) dated January 2011; and (iv) all the accompanying standard bidding documents (SDBs) and (v) the provisions stipulated in the Loan Agreement\. 19\. The procurement procedures and SBDs that will be used by the implementing agency (MdJL) will also be defined in the POM, which will include specific and detailed sections regarding Procurement\. 20\. The following provisions will apply when using NCB method: * The bidding documents will include explicitly the bid evaluation method, award criteria and bidder qualification criteria\. * Technical, administrative and financial envelopes will be opened immediately after the bid opening session has started and prices are read aloud\. * The bids will be evaluated on the basis of the price and any other criteria expressed either in pass/fail terms or in monetary terms\. * Contracts will be awarded to the qualified bidder who has submitted the least-cost evaluated and substantially responsive bid as stipulated in the bidding document\. * Standard bidding documents and bid evaluation reports found acceptable by the Bank will be used\. 21\. Moreover, the Loan Agreement will stipulate that each contract financed out of the proceeds of this loan shall provide that suppliers, contractors and subcontractors will permit the Bank, at its request, to inspect their accounts and records relating to the bid submission and performance of the contract, and to have said accounts and records audited by auditors appointed by the Bank\. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to "obstructive practice"\. 47 22\. Advertisement and Procurement Plan\. In addition to advertising pertaining to each contract, a General Procurement Notice (GPN) will be published, in United Nations Development Business, and in at least two national newspapers\. The GPN will be published after the Project is approved by the Bank and prior to effectiveness\. The GPN will provide a description of the Project and information on related procurement\. A Procurement Plan in a format acceptable to the Bank will be prepared and updated at least once a year\. The procurement plan for the first eighteen (18) month period will be agreed during the negotiations\. The procurement plan shall indicate which contracts will be subject to the Bank's prior review\. All other contracts shall be subject to post review by the Bank\. Procurement methods 23\. Procurement of Works: Procurement of small works for upgrading the tribunals working environment in Project targeted areas will be carried out using the NCB methods acceptable to the Bank, as prescribed in the Loan Agreement\. SDBs acceptable to the Bank will be used\. 24\. Procurement of Goods and non-consulting Services: Procurement of goods and non consulting services comprising the acquisition of ICT and office equipment, and the installation of an ICT network, among others, will be carried out using the following methods: * NCB: Each package estimated to cost less than the equivalent of US$3,000,000 may be procured on the basis of NCB procedures acceptable to the Bank\. * Shopping: Goods and non consulting services estimated to cost US$100,000 or less may be procured using Shopping procedures\. * Direct Contracting: Under circumstances which meet the requirements of paragraph 3\.7 of the Procurement Guidelines, goods, non-consulting services and works may be procured in accordance with the paragraph 3\.7 of the Procurement Guidelines using the Direct Contracting procurement method\. 25\. Selection of Consultants: Consultants services comprise mostly technical studies, capacity building activities, as well as audits, engineering studies and remodeling supervision services\. Terms of reference will be designed to encourage partnerships between local and international individuals and firms\. The following Bank methods and corresponding standard documents will be used: * Quality & Cost Based Selection (QCBS) for consultant services\. * Least-cost Selection (LCS)\. Services for assignments which meet the requirements of paragraph 3\.6 of the Consultant Guidelines may be procured using the Least-cost Selection method in accordance with the provision of paragraphs 3\.1 and 3\.6 of the Consultant Guidelines\. 48 * Selection Based on Consultant's Qualifications (CQS)\. Services estimated to cost less than US$100,000 equivalent per contract may be procured in accordance with the provisions of paragraphs 3\.1 and 3\.7 of the Consultant Guidelines\. * Single Source Selection (SSS)\. Under circumstances which meet the requirements of paragraph 3\.8 of the Consultant Guidelines for Single Source Selection, consultant services may be procured in accordance with the provisions of paragraph 3\.8 through 3\.11 of the Consultant Guidelines, with the Bank's prior agreement\. * Individual Consultants (IC)\. Services for assignments that meet the requirements set forth in the paragraph 5\.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provision of paragraph 5\.2 and 5\.3 of the Consultant Guidelines\. Under the circumstances described in paragraph 5\.6 of the Consultant Guidelines, such contracts may be awarded to individual consultants on a sole-source basis\. 26\. Short lists may be composed entirely of national consultants for contracts of less than US$100,000 equivalent per contract\. 27\. Publication of Results and Debriefing\. Online (UN Development Business, and/or Client Connection) publication of contract awards would be required for all Direct Contracting, and the Selection of Consultants for contracts exceeding a value of US$200,000\. All consultants competing for an assignment involving the submission of separate technical and financial proposals, irrespective of its estimated contract value, should be informed of the result of the technical evaluation (number of points that each firm received) before the opening of the financial proposals\. MdJL will be required to offer debriefings to unsuccessful bidders and consultants should the individual firms request such a debriefing\. 28\. Fraud, Coercion, and Corruption\. MdJL, as well as bidders, suppliers, and contractors shall observe the highest standard of ethics during the procurement and execution of contracts financed under the Project in accordance with paragraphs 1\.16 & 1\.17 of the Procurement Guidelines and paragraphs 1\.23 & 1\.24 of the Consultants Guidelines\. 29\. Frequency of Procurement Supervision\. Supervision of Procurement by the Bank is an integral part of Project supervision and implementation monitoring\. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the implementing agency recommends two (2) supervision missions, to visit the field and to carry out post review of procurement actions\. 49 30\. Thresholds for Procurement Methods\. The following contracts will be subject to Bank prior-review: Expenditure Contract Value Contracts Subject to Prior Category Threshold Procurement Method Review (US$ thousands) 1\. Works - NCB The first contract under NCB < 200,000 Shopping Direct contracting All 2\. Goods, non>= 3,000,000 ICB All contracts consulting < 3,000,000 NCB The first contract under NCB services < 100,000 Shopping Direct contracting All 3\. Services Firms QCBS > =200,000 < 100,000 Other (QCBS, LCS,Terms of Reference and Shortlists CQS) of all contracts Individuals >= 50,000 Single Source All 31\. Based on the capacity assessment, and the risk associated with procurement (substantial), the following actions need to be implemented by the date indicated below in order to reduce risks: * By Negotiations: * MdJL will establish: (a) the UGP (including a MdJL official responsible for financial management); and (b) the CdST, and determine their respective membership structure and functions\. * MdJL will finalize the draft procurement plan for the first 18 months of Project implementation\. * By Effectiveness * MdJL will issue the POM satisfactory to the Bank\. This manual will clearly describe procurement procedures, responsibility sharing and document flow among the parties involved in Project implementation\. The manual should comprise in an annex, all standard bidding documents that will be used under the Project for works, goods and services\. * MdJL will hire 3 key permanent external consultants for the UGP: (a)Project coordinator/monitoring and evaluation specialist, (b) procurement specialist, and (c) Project assistant\. 50 Environmental and Social (including safeguards) 32\. The objective of the proposed Project is to strengthen the capacity of the Moroccan justice sector to deliver efficient, timely and transparent services through: (a) piloting a participatory reform process at court level involving judges, administrative staff, judicial auxiliaries and users in selected pilot courts; and (b) strengthening the institutional capacity of the central functions of the Ministry of Justice and the Judicial Training Institute to better support and monitor the court system\. More specifically, the objective of component 1\.2 ("Reengineering of administrative processes for improved service") is to better channel interactions between stakeholders and court services' providers (i\.e\. court officials responsible for dealing with user requests, mostly at the clerical level)\. To this end, internal administrative services will be reorganized in pilot courts by developing a modern structure of "front office" and "back office" functions\. No structural rehabilitation, enlargement or expansion of existing buildings will be carried out\. Limited space reconfiguration and refurbishment inside the pilot courts' buildings for implementing the new service delivery processes and court layout will take place within the existing buildings of the 10 to 12 pilot courts selected from the following jurisdictions in the judicial Districts of Casablanca, Kenitra, and Settat: Court of Appeal (Cour d'Appel) of Casablanca Court of Appeal (Cour d'Appel) of Kenitra Court of Appeal (Cour d'Appel) of Settat Court of Appeal of Commerce (Cour d'Appel de Commerce) of Casablanca Court of Commerce (Cour de Commerce) of Casablanca Court of First Instance (Tribunal de Premi&re Instance) of Kenitra Court of First Instance (Tribunal de Premi&re Instance) of Settat Court of First Instance (Tribunal de Premi&re Instance) of Sidi Kacem Courts of First Instance (Tribunal de Premi&re Instance) for Penal Affairs of Casablanca Court of First Instance (Tribunal de Premi&re Instance) of Mohammedia Court of First Instance (Tribunal de Premi&re Instance) of Benslimane Court of First Instance (Tribunal de Premi&re Instance) of Sidi Slimane Court of First Instance (Tribunal de Premi&re Instance) of Ouazzane Court of First Instance (Tribunal de Premi&re Instance) of Souk Larbaa 33\. Based on the activities to be carried out, this Project is rated as a category "C" for environmental risk purposes\. No new construction will be financed only minor works in existing infrastructure \. No construction or land acquisition will be financed\. The Project will not finance any works in any historical building or in any building where asbestos is present\. In order to avoid the potential adverse environmental impacts of such minor works, contractors will be required to observe the World Bank Group Environmental, Health, and Safety General Guidelinesas well as Moroccans laws, regulations or guidelines\. 34\. The following provides a list of the environmental requirements that contractors will have to observe when such minor works are conducted\. These requirements will be referenced in the POM\. When hiring contractors to carry out minor works, terms of reference, bidding documents and contracts will include the following requirements in order 51 to avoid any potential adverse environmental impact of the proposed works\. Specific additional references will be included as needed in the same documents to ensure that the implementation of the planned minor works will be carried out according to the Bank World Bank Group Environmental, Health, and Safety General Guidelines\. 35\. Requirements to be observed by contractors for the implementation of minor works under the Project will include the following: 36\. Applicable laws, regulations and guidelines\. Minor works for the rehabilitation, enlargement, adaptation and modernization of infrastructure will be implemented following national laws, regulations and guidelines for the treatment of the materials used, demolitions and management of all direct and indirect effects of the minor works to avoid affecting the environment, including but not limited to: * Dahir no 1-03-194 (11 September 2003) for the Labor Code * Law no28-00 on waste management (BO 7 d6cembre 2006) * Inter-ministerial Order of the Minister of Labor and Vocational Training, the Minister of Health, the Minister of Commerce and New Technologies, the Minister of Energy, Mines, Water and Environment no3352-10 (26 October 2010) determining asbestos standards * Order of the Minister of Labor and Vocational Training no93-08 (12 May 2008) determining specific and general measures applicable to the safety standards included in the Labor Code\. 37\. Safety: Contractors will: (i) use nets to contain bricks and building material to avoid accidents to third parties; (ii) ensure appropriate signaling is used for pedestrians, workers and other persons in the work area or nearby; (iii) facilitate the transit of pedestrians, taking into account their safety, and (iv) ensure safety rules are known and understood among construction workers to avoid accidents\. 38\. Solid waste and sanitation: Contractors will: (i) specify the location where dirt will be disposed of, as regulated by local environmental laws, regulations or guidelines; (ii) specify the treatment of oils and liquids used by machinery and staff; (iii) determine the appropriate storage of refurbishment materials during the refurbishment period; (iv) dispose of leftovers of food consumed by the workers, identify and ensure availability of appropriate garbage pails; (v) ensure that the leftovers of the people that sell prepared food for the workers are disposed of to avoid the accumulation of additional garbage in the work area; (vi) ensure the availability of appropriate toilet/sanitation facilities for the workers during the period when the minor works are being carried out; 27and (vii) control and mitigate the effects of the dust produced by the works\. 27 Toilet services will be established according to the gender of the users\. 52 39\. Work hours and noise: Contractors will adopt an adequate work schedule, ensure noise does not unduly affect neighbors, and implement tools to control the noise produced by the minor works\. 40\. Municipal permits: Contractors will make the necessary arrangements to obtain permits as needed and comply with environmental norm established by the relevant municipality\. 41\. The "Direction des Equipement et des Travaux" in the MdJL will coordinate the overall implementation process and will be in charge of monitoring and evaluation\. Monitoring & Evaluation (M&E) 42\. M&E organizational arrangements\. The M&E system will be based on the agreed results framework and monitoring arrangements (See Annex 1)\. The UGP will be responsible for supervising the M&E activities at component and PDO level\. The contractor selected by the UGP for Component 1\.1 will be in charge of developing an M&E framework for the whole Component 1\. The contractor selected for component 2\.1 will be in charge of developing an M&E framework applicable to activities under Component 2\. Progress in achieving outcomes will be measured through the publication of periodic monitoring reports in the Project website\. The format for these reports would be developed by the UGP and the baseline for each pilot court will be established in the beginning of year 1 of implementation\. 43\. M&E actions\. User surveys will be implemented in each pilot court using best international assessment tools at the beginning and at the end of the implementation of Project activities\. The household surveys will be carried out to analyze key social variables and trends\. Additional surveys in the Project districts will be conducted to assist in measuring performance toward improving service delivery and broadening access to Judiciary facilities\. MdJL and the Bank will collaborate during the course of Project execution to assess progress, identify issues and propose measures to ensure that the Project objectives remain relevant while risks are minimized or contained\. M&E results will feed back into the MdJL's decision-making to improve performance, and will serve as the basis for discussions of the CdST to receive feedback on outcome indicators\. The primary sources of Project data will be: (i) periodic reports from the UGP; (ii) semi-annual Project progress reports and financial statements; and (iii) specially commissioned surveys\. Periodic reporting by the UGP will be accessible, through the Project website, by the general public\. 53 Annex 4 Operational Risk Assessment Framework (ORAF) Morocco: Judicial Performance Enhancement for Service to Citizen Project ("Mahkamati") (P125799) Stakeholder Risk Rating High Description: Risk Management: The oM my no be ble o coplyComponent 1\. 1 is based on a participatory approach to court reform that engages local stakeholders (both court users and thneoayti grnot eblicoml internal judicial stakeholders) in the identification of problems and solutions\. During project implementation, workshops with unrealistic growing public with stakeholders will allow ensuring that challenges to justice sector reform are well understood and that the expectations expectations of short-term justice arising from the project are properly managed\. reform results\. Court support staff is unprepared to respond to reform Resp: Clie Stgerrent: Frequency: Yearly atus: Not Yet demands; individual judges may have t Implementation 0D Date: [ __________jDue various levels of support and Risk Management: resistance to the reforms\. At the same time, MdJL and influential Component 2\.5 will finance communication campaigns and household surveys to better take into account the needs and stakeholder associations (judges, priorities of citizens\. greffiers, and business community) Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet are eager to address current problems 0e Date: Due adhvtaecoceesestdo Resp: Both Stage: Both Recurrent: Due Frequency: Yearly Status: Not Yet 0O Date: Due Resp: Client Stage: Both Recurrent: Due Frequency: Yearly Status: Not Yet 0 i Date: Due 2 \. Imlmetn Agnc ()Rss(nldngFdcayRss Capacity Rating H1igh Description: Risk Management: tim,MdJL an d influena with Components 2 will finance a consulting firm in charge of assisting the MdJL in upgrading the organization and takhs lr iamtd eeinnc wite performance of its central monitoring and support functions management procedures, but has Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet 54 significant experience in managing Date: Due other large donor projects (e\.g\. EU Risk Management: project)\. The recommendations from procurement/financial management assessments will be implemented and an Operational Manual agreed upon before effectiveness\. Resp: Client Stage: Preparation Recurrent: Due 30- Frequency: Status: Not Yet o Date: Oct- Due 2012 Risk Management: Training will be provided to all stakeholders under the project\. Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet _ _ Date: Due Risk Management: Component 3 provides for the hiring of external expertise needed for strengthening the capacity of the MdJL in managing and monitoring the project Resp: Client Stage: Preparation Recurrent: Due 30- Frequency: Status: In Progress o Date: Nov- 2012 Governance Rating Moderate Description: Risk Management: i aCriteria for selecting pilot courts includes the willingness and commitment to reform of the court leaders (Court president Centraihzed and non-transparent and Chief Prosecutor), and MdJL is committed to ensure that assignments and rotations of leaders in pilot courts are ecisinmakg n Mdoject mmanaged with a view to minimizing disruption to project activities\. negative impact on project implementation\. The project will incorporate independent third party monitoring to ensure unbiased assessment of project performance\. Lack of systemic involvement of Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet relevant stakeholders reduces the _ Date: Due credibility of the reforms and may Risk Management: cause implementation issues (e\.g\. lack of understanding, resistance to Project oversight will be ensured by a CdST that involves all relevant stakeholders change)\. Resp: Client Stage: Preparation Recurrent: Due 11- Frequency: Status: Completed 0 Date: May- 2012 Rating Low 55 Risk Management: The project will have an Operational Manual that will provide clear guidance to MdJL staff about Bank policies and procedures, and significant training and capacity-building activities will ensure compliance with Bank guidelines\. IGF is reliable and will conductinternal audits of the project\. In addition, a qualified independent auditor acceptable to Bank will audit the project's accounts\. Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet Date: Due Design Rating Moderate Description: Risk Management: The project is focused on addressing The PAPJ design will follow a determined framework but will also be kept flexible and adaptable to the lessons learned issues related to pilot courts from their implementation in the pilot courts, and regular reviews will be built into the change process\. organization and management in Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet order to improve performance, and Date: Due stakeholders may want to expand beyond this scope during project implementation\. Social and Environmental Rating Low Description: Risk Management: Morocco has made great strides to Component 1 of the Project aims at improving access to justice and information about judicial proceedings\. These strengthen access to justice for activities will include support for women that require court services\. women but some inequalities still Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet exist\. Date: Due Access to justice is considered problematic, mainly because of issues of complexity of judicial proceedings especially in rural jurisdictions\. These issues will be addressed by the Project in the geographical areas of the pilot districts and courts\. Program and Donor Rating Low Description: Risk Management: In absence of effective coordination, EU support to the justice sector ended in 2009 and was focused on infrastructure\. This Project will build on achievements 56 engagement of other development of the EU support and focus on addressing issues such as efficiency, transparency and access to justice\. partners could interfere with Project implementation Meetings with the local EU team, EU member countries delegations and USAID have taken place and will continue to ensure alignment of the reform approaches\. Periodic consultations with the EU, a Resp: Client Stage: Both Recurrent: Due Frequency: Ongoing Status: Not Yet key partner of MdJL, are continuing 0 Date: Due to ensure such coordination exists\. Delivery Monitoring and Rating High Sustainability Description: Risk Management: W s Training and technical assistance will be made available to strengthen the capacity of MdJL, especially on Project Weaknesses in the monitoring monitoring and evaluation\. capacity of the project management m m ea R rteqnal a: t unit of the MdJL were revealed by a Resp: Client Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet previous EU project\. With the Date: Due exception of commercial courts, the Risk Management: pilot courts do not have previous The Bank will remain closely engaged with the UGP and pilot courts to identify implementation issues and address them experience with Bank projects\. throughout Project life\. Resp: Bank Stage: Implementation Recurrent: Due Frequency: Yearly Status: Not Yet Date: Due Implementation Risk Rating: Moderate 57 Annex 5: Implementation Support Plan Strategy and Approach for Implementation Support 1\. The Bank's approach for Implementation Support (IS) will be characterized by flexibility and adaptability\. The Bank's team will be able to provide just-in-time support to MdJL and the various project implementation partners, because much of the core team - including the TTL and key FM and procurement staff - will be present in-country\. 2\. As detailed in Section IV of the main text, there are multiple GoM agencies involved in different parts of Project implementation\. For example, the responsibility for training activities will be shared between the MdJL and ISM\. Therefore, these agencies will have to formalize their respective roles and responsibilities through "Partnership Agreements" early during Project implementation; the Bank team will assist in reviewing the drafts of these documents and providing technical advice to ensure that such agreements provide the required clarity for each partner agency\. 3\. There are identified weaknesses in the capacity of the MdJL implementation unit, and no experience in the pilot courts with Bank projects\. Therefore, targeted technical assistance will be provided to the MdJL, in particular to the UGP and its members, and the courts\. 4\. The reform aspects of the Project, particularly the implementation of the pilots, will give stakeholders a major role in identifying some Project activities\. Regular reviews will therefore be built into the reform process, to allow all stakeholders to provide feedback on how the reforms are progressing\. This will allow for lessons learned in the pilots to be incorporated into later phases\. 5\. More broadly, the recent changes to the Constitution should give more voice and power to the public\. Reform can only succeed if public perception of the courts improves\. It is also expected that civil society organizations (CSOs) will be deeply engaged with the issues being addressed by the Project\. As part of the Bank's broader engagement with CSOs in Morocco, the Bank will use its implementation support role as a tool to engage CSOs interested on justice issues\. 6\. The most important external partner to-date in justice sector reform has been the EU, although it program ended in 2009\. Nevertheless, to ensure that the Project's activities are complementary with past EU support, meetings with the local EU team as well as USAID have been ongoing throughout Project preparation and will continue throughout the life of the Project\. 7\. To help with ensuring efficiency and simplicity in procurement, most of the activities will be packaged into a few large contracts, likely to be "turnkey", which would be attractive for international firms, either alone or in partnership with well-established local firms\. 8\. As financial management systems are generally adequate, relevant arrangements for the Project will be handled by a dedicated team within MdJL\. In addition, as a recent external audit has stressed the importance of internal audit functions, the Project will assist the MdJL in establishing an internal audit department, train necessary staff, and develop the internal audit manual\. 58 Implementation Support Plan Time Focus Skills Needed Resource Estimate Partner Role First twelve Compliance of conditions Task Team Leader US$150,000 Consultation, months of effectiveness, Project Operations Analyst coordination launch, training of Justice Reform MdJL's officials involved Specialist in the Project Senior Counsel Program Assistant Sector Manager Senior Procurement Spec\. Procurement Spec\. Senior FM Specialist FM Specialist 12-48 months Compliance with Task Team Leader US$450,000 Consultation, standard/tailor-made Operations Analyst coordination legal covenants Justice Reform Specialist Senior Counsel Program Assistant Sector Manager Sr\. Procurement Spec\. Procurement Spec\. Senior FM Specialist FM Specialist Other N/A II\. Skills Mix Required Skills Needed Number of Staff Weeks Number of Trips Comments Task Team Leader 30 10 Operations Analyst 15 10 Justice Reform Specialist 15 5 Senior Counsel 5 0 Program Assistant 10 0 Sector Manager 5 0 Senior Procurement Specialist 20 5 Procurement Specialist 30 0 Senior Financial Management Specialist 20 5 Financial Management Specialist 30 0 III\. Partners Name Institution/Country Role European Union Resident Mission in Technical; Rabat consultation, coordination 59

APPROVAL

P010145

Document of The World Bank FOR OFFICIAL USE ONLY Report No\. 7236 PROJECT COMPLETION REPORT SRI LANKA SECOND WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 1041-CE) May 6, 1988 Asia Country Department 1 Infrastructure Division Asia Regional Office This document has a resricted distibution and may be used by reripients only In the performance of t r * h - h b v W i ,, , ' it W j 4 I  AURUsU al aND ADS - Asian Developmnt Bank Ci1 - Cost Insurance and Freight CHC - Colombo Municipal Council DANIDA - Danish International Development Agency FEEC - Foreign gxchange Entitlement C*Ftificate WDWSSD - International Drinking Water Supply and Sanitation Decade FINIDA - Finnish International Development Corporation Agoncy GSL - Government of Sri Lanka LAS - Local Authorities MC - Municipal Council MLGHC - Ministry of Local Government Housing and Construction NIH - National Institute of Management\. Sri Lanka ODM - United Kingdom Ministry of Overseas Development RDA - Road Devolopment Authority SFD - Saudi Fund for Development tC - Town Council UC - Urban Council UNDP - United Nations Development Program UNICEF - United Nations International Children's Emergency Fund USAXLI - United States Agency for International Development WDB - National Water Supply and Drainage Board WHO - World Health Organisation RS - Sri Lanka Rupee SR - Saudi Riyal SAR - Staff Appraisal Report Ganga - Major River MRAS=S ANlD - millimeter (3 millimeter a 0\.039 inches) m a meter (1 metor a 3\.28 feet) km - kilometer (1 kilometer - 0\.62 miles) kmz * square kilometor (1 kma a 0\.368 square miles) ha - hectare (I hectare - 10,000 square metere - 2\.47 acres) 1 a liter (0\.22 Imperial gallons or 0\.264 US gallons) lcd - liters per capita per day M3 cubic metors (220 Imperial gallons or 264\.2 US gallons) ml a million liters or 1,000 cubic meters mid a million liters per day (0\.220 million Imperial gallons per day or 0\.264 million US gallons per day mgd \. million gallons per day (1 mgd a 4,545 mI/day) FISCAL YEAR January 1 to December 31  Ka OFflCIL UK OOLT TIE WOtLD BANK Wash\.Von, D\.C\. M33 U\.S\.A\. Oie o wutm G~ahhI May 6, 1988 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Sri Lanka Second Water Supply and Sewerage Project (Credit 1041-CE) Attached, for information, is a copy of a report entitled "Project Completion Report on Sri Lanka Second Water Supply and Sewerage Project (Credit 1041-CE)" prepared by the National Water Supply and Drainage Board of Sri Lanka and reviewed by the Asia Regional Office\. Further evaluation of this project by the Operations Evaluation Department has not been made\. Attachment IThis document has a restricted distribution and may be used by recipitnts only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Dank authorintion\.  FO OFFICeL USE ONLi PROJECT COMPLETION REPORT SRI LANKA SECOND SRI LANKA WATER SUPPLY & SEWERAGE PROJECT (CREDIT 1041-CE) Table of Contents Page No\. BASIC DATA SHEET \. \.ii HIHIGHTH\. v I\. INTRODUCTION \.1 II\. PROJECT PREPARATION & APPRAISAL \.7 Preparationeos*\., , \.^ 7 Principal Objectives and Descriptionri\.ptio\.on\. 9 III\. PROJECT IMPLEMENTATION \. Credit Effectiveness4\. \. \. \.e\.* \. o4\.4\.*o** 12 ¢ ~~~~Project Soe1 Project Start Up\. \. \. \.***\.** * a\.13 Project Costs and Disbursements\. \.23 Performance of Consultants, Contractors, Suppliers, Borrowerso\.25 IV\. OPERATION PERFORMANCE \.30 Water & Sewerage Service Demand and Market Potential \.30 Consumer Metering\.34 Billing and Collectione\.4\.4\. \. \. \.4\.4\.37 Leak Detec:ion Programme in Greater Colombo Areae\.38 V\. FINANCIAL PERFORMANCE \. \. Financial Covenants\. o\. * \. \.44\.40 Operating Results and Rate of Returno48 Financing Plan \.48 VI\. INSTITUTIONAL PERFORMANCE \.50 Organization and Management\.e\. \. \.50 Staff Recruitment and Training\. \.55 VII\. PROJECT JUSTIFICATION \. Projection Objectives \.58 This document hasarestricted distribution and may be used by recipients only in the performance oftheirofflcialduties its contents may not otherwise be discksed without World Bank authorization\.  Table of Contents (Clnt'd) Page No\. Project Achievements\. \.e\.o\. \. \. \.58 Service Levels in Greater Colombo Area\.58 Consumer Metering/Meter Rectification\.S9 Billing and Collection of Water and Sewer Service\.60 Institutional Development \.o\.o\. o\. oo\. o\. o\. \. \. \. \.60 VIII\. CONCLUSIONS AND LESSONS LEARNED\.o\.o\.64 FIGURES 1\.1 Location of the Project Area\.**o**e***ee*oo* \.oo\.o*\.* \.o\.o\. \.67 2\.1 Greater Colombo Area Water Sources Transmission and Treatment Facilities\.o\.oo\. *o\.o,\.oe\.o\.o\. oe 68 2\.2 Sewerage works in CMC Areao\.o\. \. oo\. \.o\.69 2\.3 Sewerage works in Mattakkuliya within CMC Areao\.o\.o**o\.o\.oo\.o70 2\.4 Sewerage works in Kolonnawa Urban Council Area**\.oo\.e\.o\.o\.oo71 2\.5 Sewerage works in Dehiwela-Mount Lavinia Areao\.*o\.o\.72 3\.1 Construction Schedule\.oo\. \.o\. o \.o\.73 ANNEXES 1A WDB Organization chart at the time of Appraisal*\.***\.o\.74 1B WDB Present Organization Chart \.oo\.o\. \. \. \.o\.o\. o75 2 Project Elements\.76 3 Completion Dates for Major Project Components \.o80 4 Schedule of Contracts\.o\.o\. oooo\. oo\.o\.o\. oo \.82 5 Estimated and Actual Project Cost \.o\.o\.o\.e\.oo\.o\.o85 6 Details of Disbursements\.o \.o\.o\.o\.o\.o\. \.92 7 Details of TeLhnical Assistance Programme\. \.94 8 Details of Metering Programme\. \.ooo\. o\.o\. o\. \. 97 9 Details of Water Production, Billing & Collection in Project Area \.o\.*o\.o \.98 10 Details of Leak Detection Programme\.99 11 Annual Revenue and Loan Repayments of LAS\.100 12 Annual Budget of Operation and Maintenance Cost of the Greater Colombo Sewerage System\.102 13 Income Statement \. *o\.ooooo*\.ooe oo\.o\.oe\.l 14 14 Balance Sheet\.o\.oo\.o\.o\.o\.o\.o\.o\.o\.105 15 Training of Officers\.o\.o\. ,ol06  SRI LANKA CREDIT NO\. 1041-CE SECOND SRI LANKA WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT PREFACE This report presents the results of a performance review of the Second Sri Lanka Water Supply and Sewerage Project for which Credit No\. 1041-CE of US$30\.0 million equivalent was made to the Democratic Socialist Republic of Sri Lanka in June, 1980\. The Credit became effective in February 1981 and was closed in March 1987\. The implementing agency was the National Water Supply and Drainage Board (WDB)\. The Project Completion Report was prepared by WDB in February 1987\. It is based on information obtained from a review of the Staff Appraisal Report (No\. 2904-CE), the Project and Oredit Agreements, the Sri Lanka Water Supply and Sanitation Sector Study R -rt (No\. 4190-CE) and WDB's project files\. In accordance with the revised procedures for project performance audit reporting, this PCR was read by the Operations Evaluation Department (OED) but the project was not audited by OED staff\. OED sent copies of the draft report to the Borrower for comments; however, none were received\.  JA\.& SRILAK CRNDIT 1041-CU 6 SID 1tI30 SECOND SRI LANKA WATUR SUPPLY AND Smt!RAGR PROJECT PROJECT CCOPLWTION PoRT BASIC DATA SHU3T KE PROJECT DATA APPRAISAL ESTIMATE ACTUAL OR CURRENT ESTIMATE Total Project Cost 94\.0 96\.07 (US$\. Million) Over Run (%) -- 2\.2% Loan Amount (US$\. Million) 30\.0 30\.0 Disbursed 30\.0 Cancelled Nil Completion of Physical Components 3/85 9/87 Time Over Run (%) 148% Financial ) Performance) Poor Institutional) Performance) Fair Agreement over of 2\.2% is due to variation in exchange rate, through the project\. Actual over run of 58\.3% in local currency and under run of 14\.3% in foreign currency costs occured\.  CUMULATIVE DISBURSEMENTS (USS\. million) FISCAL YZAR APPRAISAL ESTIMATS ACTUALS FY 1981 3\.4 0\.0867 FY 1982 14\.9 1\.493 FY 1983 24\.8 5\.828 FY 1984 29\.4 11\.035 FY 1985 30\.0 17\.021 FY 1986 - 20\.552 FY 1987 (March 31) - 30\.000 OTHER PROJECT DATA COMPONENT APPRAISAL REVISIONS ACTUALS ESTIMATE i\. First mention in time table ii\. Government\. appli- cation Mar\., 1979 iii\. Negotiations --- --- 25 April, 1980 iv\. Board approval --- --- 10 June, 1980 v\. Loan agreement date 24 Sept\., 1980 vi\. Effective date 23 Dec\., 1980 26 Feb\., 1981 vii\. Closing date 30 Sopt\.,1985 30 Sept\., 1986 31 March, 1987 viii\. Borrower and Grantor DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA ix\. Executing agency NATIONAL WATER SUPPLY AND DRAINACE BOARD x\. Follow on projects THIRD SRI nIATER SUPPLY AND SANITATION REHABILITATION PROJECT  a MISSION DATA month no\. of so\. of Date of Year Da person Kbanweeks Report Supervision 11/80 3 2 1\.0 11/17/80 Supervisi3n 01/81 11 2 3\.0 01/27/81 Supervision 11/81 7 2 2\.0 11/13/81 Frpervisinn 02/82 10 2 3\.0 02/01/82 Supervimion 08/82 6 1 0\.9 08/21/82 Supervision 11/83 12 3 5\.0 10/24/83 supervision 02/84 5 1 0\.8 02/12/84 Supervision 04/J4 18 3 5\.2 03/20/84 Supervision 10/84 14 2 4\.0 08/03/84 Supervision 10/84 7 1 1\.0 10/20/84 Supervision 07/85 5 1 0\.7 07/07/85 Supervision 09/85 13 2 1\.9 09/01/85 Supervision 03/86 4 2 1\.2 02/27/86 Supervision 05/86 10 1 1\.4 05/20/86 j S\.upervision 08/86 14 3 6\.0 08/11/86 Supervision 11/86 5 3 2\.1 11/19/86 STAFF INPUT (Staff-weeks) Bank FY 1977 1979 1980 1981 1982 i983 1984 1985 1986 1987 TOTAL a Preappraisal \.1 7\.7 23\.2 31\.0 Appraisal 28\.8 28\.8 Negotiation 9\.4 9\.4 Supervision 1\.4 23\.3 19\.4 7\.6 19\.5 13\.9 5\.4 s\.0 95\.4 Other \.3 2\.3 \.2 \.5 \.3 3\.6 CURRENCY EXCHANGE RATES Currency unit SRI LANKA RUPEE (SLRS\.) Appraisal Year Average (1980) USS\. 1\.0 - SLRS\. 16\.5344 Averago Over Project period (1980 - 1986) US$\. 1\.0 - SLRS\. 22\.9619 Completion year average (1986) VSS\. 1\.0 - SLRS\. 28\.0173 Exchange Rates s- 1980 1981 1982 1983 1984 1985 1986 16\.5344 19\.2401 26\.8124 23\.5226 25\.4380 27\.1626 28\.0173  SRI LANKA CREDIT NO\. 1041-CE SECOND SRI LANKA WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT HICHLIGHTS 1\. The National Water Supply and Drainage Board (WDB) was created in 1975 from the Department of Water Supply and Drainage\. Initially WDB was responsible for design and construction supervision of water supply and sewerage works and distribution and operational responsibilities were left with the local authorities\. The local authorities were found not to be capable financially, technically or institutionally to continue in that role\. Therefore, in 1981, WDB was given responsibility for operation and main- tenance of a number of water supply and distribution systems outside of Colombo and for the water distribution and sewage collection systems in Colombo municipality area\. 2\. The second project was conceived by WDB and its consultants to respond to urgentlv needed water supply and sewerage facilities in the Greater Colombo area and to support the Government's goals within the United Nations International Drinking Water and Sanitation Decade plan\. The physi- cal works of the project were identified in 1972 master plan which was updated in 1979\. The project also included components to strengthen WDB's financial and institutional performance, prepare designs for future implemen- tation and provide technical assistance and training\. 3\. The project was appraised in January 1980\. The estimated project cost was US$94 million and an IDA credit for US$30 million was approved in mid 1980\. Co-financing was provided by a US$30 million loan from the Saudi Fund for Development\. Originally expected to be completed in 1985, the projec:t was completed (eccept for some sewerage works) in 1987\. The remain- ing sewer work is expected to be completed in late 1987\. Actual project costs totalled US$96 million\. The total credit of US$30 million has been disbursed (paras 3\.16-3\.18) 4\. With the commissioning of most of the major water supply works the quality and quantity of water improved\. The new works at Ambatale treatment plant are yet to go into service\. The sewerage system improved significantly with the commissioning of the rehabilitated pumping stations and the two sea outfalls\. Sewers were installed in several new areas during the project but connections are not yet being made pending a Government decision on connec- tion charges and tariffs to beneficiaries (paras 7\.03 - 7\.06)\. Many meters installed in the first project (Credit 709-CE) were defective\. Public  protests and resistance to pay grew to a point that Government intervened - ordering WDB to charge a maximum Rs 150 flat rate to domestic consumers until the meters were rectified\. The rectificatior\. program is continuing under the third IDA project and the Rs 150 cap remains in place (para 7\.07)\. 5\. Revenue from water tariffs increased considerably under the project until the institution of the Rs 150 cap\. The revenue increase was due to a more aggressive disconnection program and WDB's improved billing and collec- tion performance\. However WDB's deficit for FY86 was in the order of Rs 288 million (para 7\.11)\. 6\. Strengthening of WDB's institutional, financial and managerial capability was a key project objective\. WDa benefitted from training and technical assistance, especially in the areas of project appraisal, implemen- tation, finance and construction management, and operation and maintenance\. During the latter stages of the project WDB also received institutional strenghthening assistance from the US$19\.6 million USAID project (para 7\.13)\. 7\. As with the first project, the second project was adversely affected by cost overruns, an overly ambitious implementation schedule, less than satisfactory performance of contractors, small size of civil works contracts and less than adequate coordination and planning\. IDA's major concerns were the project finances and the continued poor financial performance of WDB (8\.01-8\.14)\. 8\. WDB and its consultants prepared a US$155 million investment program for urban water supply sewerage, drainage, sanitation and technical assis- tance\. The US$65 million third IDA-financed project was identified from that program\. In July 1986 a Credit of US$37 million was approved by IDA\.  PROJECT COMPLETION REPORT bRI LANKA SECONDI SRI LANKA WATER SUPPLY AND SEWERAGE PROJECT (CREDIT 1041-CE) I\. INTRODUCTION Background 1\.01 Sri Lanka is an Island in the Indian Ocean and approximately 225 km wide by 433 km long (fig\. 1\.1)\. Its capital city Colombo, located in the South West coast is the principal sea port and center of industry and commerce\. 1\.02 The pipe borne water supply system in Colombo has been in existence since early 19th century when the city obtained it's water supply from wells and canals\. The first impounding reservoir and treatment facilities were built in 1886 at Labugama and an additional similar facility was built and put into commission in 1960 at Kalatuwawa\. These sources of supply are located about 44 km from Colombo and have been fully developed to supply 135 mld(30 Imgd) to the city of Colombo under gravity\. 1\.03 The above sources of supply were supplemented subsequently in 1966 by a treatment plant at Ambatalo with direct intake pumping station at Ambatale on the bank of Kelani Ganga\. This source is located about 11 km from Colombo\. The original capacity of the facility at Ambatale was 91 mld (20 Imgd) and was subsequently upgraded to supply 182 mld (40 Imgd) under a rrenchline of credit in 1976\. The facilities required to convey the additional quantity of water improvement to the distribution area including the construction of reservoirs, pump houses and scraping and lining of mains were accomplished under the First Water Supply Project (IDA Credit 709-CE)\.  1\.04 The sewer system in the city of Colombo was in existence since early 20th century\. The system constructed between 1906 and 1913 had been sub divided into a large Northern zone draining to the Kelani Ganga, near Madampitiya serving approximately 2270 ha through a sewer network and pumping stations at Madampitiya, Vystwyke, Polwatte, Slave Island, Borella, Wanathamulla, Maligawatte and Kotahena (near Colombo Harbour) and a comparatively smaller Southern zone draining to the ocean near Wellawatte serving approxi- mately 750 ha through a network of sewers and pumping stations at Bambalapitiya, Thimbirigasyaya and Wellawatte\. The Northern system bullt provided primary treatment with silt pit, twin screens with mechanical rakes, primary sedimentation tank and a grit chamber\. However, precolating filter beds in the plant were removed in 1913 when they suffered blockage by solids overflowing the settling tanks\. The silt pit and screens too became blocked and finally sedimentation tanks proved inadequate to cope up with the flows\. The Southern treatment works built during the some period too incorporated with a silt pit, twin screens with no rakesand a detritus and a sedimentation tank\. The discharge into the ocean was through an outfall extending 82 m off shore\. The silt pit and screens here too frequently clogged and became ineffective\. The sedimentation tanks were abandoned due to public complaints on bad odour eminated\. The entire system, designed for year 1951 became heavily over loaded by late forties due to excessive and indiscrimi- nate sewer connections\. The rectangular sedimentation tanks at the Northern plant were modified subsequently in 1956 into four tanks with scraper blades and three circular sedimentation tanks were constructed\. However, by early sixties the tanks became ineffective mainly due to poor maintenance and finally raw sewage was diverted from the plant and pumped directly into the Kelani Ganga from the Madampitiya pumping station\. Since then extensions and modifications have been added to the system\. However,  general conditions and overall efficiency of the system continued to be poor\. The sewerage system in the city of Colombo now consists of nearly 244 km of sewers, eleven area pumping stations, and two abandoned treatment plants\. The system was designed for sewage only and was not intended to handle sewage combined with storm water drainage except in a few densely populated areas where overflows were provided for flood water\. 1\.05 An overall evaluation of water supply and sewerage system and recommendations of new facilities in Greater Colombo area through year 2000 year was done by Consulting Engineers team in the form of a Master Plan and Feasibility Study of water supply and sewerage services for the South West Coastal area (referred as UNDP Master Plan Studies), under the auspices of the World Health Organisation (WHO) as executing agency for the United Nations Development Programme\. As far as water supply is concerned bilateral assistance received by the Government of Sri Lanka from France and United Kingdom helped to implement part of the works reconmnended in the Master Plan\. Again financial assistance given by the World Bank under First Water Supply Project (credit 709-CE) enabled Sri Lanka to implement another part of recommendations namely, the improvement to the distribution system in the Greater Colombo area without any increase in the supply output and to construct new water supply systems in Kalutara and Ambalangoda - Balapitiya areas\. However the assistance so obtained from various external sources was insufficient tiot only to imple- ment recommendations made in order to supply sufficient potable water to the consumer, 'but also to *imple- ment any recommendations made in Master Plan to the fast deteriorating sewerage system\.  - 4 - 1\.06 Te- Government of Sri Lanka (GSL) thorefore requested the Bank to assist finance a project to imorove the existing water suppLy and sewerage service in the Greater Colombo area\. The IDA Credit 104;-CE was the Second Bank Participation in this sector in Sri Lanka in an effort to respond to the urgent needs in water supply and sewerage service in the Greater Colombo area and to continue it's support GSL goals within the water supply and sanitation decades plans which were conformed in the 1977 bnited Nations (UN) conference to provide adequate water supplies to 100% of urban and estate populations and 50% of rural population and to provide sanitation facilities to 100l\.of the national population by 1990\. 1\.07 The GSL alsQ requested a loan from the Kingdom of Saudi Arabia in the form oE Saudi Fund for Development (SFD) loan 1/130 in order to co-finance the sewerage works in the Greater Colombo area\. The identified project set out to expand the water supply and also to improve the available sewerage facilities in the Greater Colombo area, provide sewerage facilities in those areas of Colombo where none existed, provide new sewerage facilities to a part within Dehtwela-Mount Lavinia Municipal limits and to almost whole of Kolonnawa Urban Council area and to the Mattakkuliya area in the Colombo Municipal Council area, strengthen the institutional, management and opea- operational capability of the executing agency, the National Water Supply and Drainage Board (WDB) which is an autonomous body formed in 1975 under the Ministry of Local Government Housing and Construction (MLGHC) and headed by a General Manager, and Chairman (annex\. 1) and to provide technical assistance to undertake design study for water supply (including rehabilitation of existing facilities) and sewerage work\. 1 Report on community water supplies, United Nation Water Conference, Mar del Plata, Argentina, 14-25, March, 1977  - \.1 1\.08 Due to various reasons culminating in communalriots in July 1983, and the subsequent prolonged terrorist activities in the North and East of Sri Lanka the project has suffered cost and time over runs and the executing agency was unable to meet major financial covenants\. 1\.09 The purpose of this document is to outline the project history and discuss achievements and shortfalls in respect to the project appraisal objectives\. Special attention has been paid to the project performance in relation to t - sector objective - operating performance - financial performance - institutional performance This document is based on information in the Staff Appraisal Report (2904b-CE), the project files, and the Sri Lanka Water Supply and Sanitation Sector Study Repo:t (4190-CE) and has been prepared by WDB, assisted by IDA Supervision Missions\. 1\.10 The major contraints which affect GSL in achieving the goals of Decade Plan are the lack of : - adequate institutional and operational capaci- cit' of WDB, - sufficient recurrent revenues to properly operate and maintain existing and new facilities, - available foreign and local capital resources, - participation by foreign contractors, - application of appropriate technology to the local construction and service levels\.  1\.11 In urban areas simple water supply service levels to suit consumer affordability and, in rural areas, extensive use of hand pumps (deep as well as shallow wells), together with implementation of appropriate technology and low cost sanitation systems as developed by the UN Project have been adopted to achieve the targets of the International Drinking Water Supply and Sanitation Decade (IDWSSD) Plan\. This approach minimizes capital investment and also reduces recurr^nt operation and maintenance costs\. Since 1978, tlebre has been tremendous response from foreign donors to assist GSL in its endeavours to improve sector service levels and more financial assistance is underway\. Further during 1980 - 85 GSL invested approximately US$ 225 million towards capital improvement in the sector representing about 5% of the total national capital expenditure budget\. GSL's Public Investment Plan for 1985 - 89 indicates, an average annual capital budget of USS 44 million for invest- ment in the sector, ropresenting about 4\.5% of the total annual capital budget\. This relatively high percentage indicates GSL's commitment to the IDWSSD targets\. However, in the past, GSL sometimes embarked on foreign aided projects without adequate consideration of provisions, viabilities, availability of local funding and investigating operational and maintenance recurrent costs\. In instances, projects were over designed or incorporated with highly sophisticated components and supervision of construction by technical staff was inadequate\. The Bank initiated a water supply and sanitation sector study highlighting the urgent necessity for a much improved managaement capability within the WDB (executing agency) with the establishment of an adequately staffedoperation and maintenance organisation to implement a thorough programme of preventive maintenance as most of the existing pipe borne water systems are incapable of supplying adequate potable water due to lack of proper operation and maintenance\. It also highlighted the necessity of metering entire property connections to discourage waste and excessive water useage, fcrmation of a Leak Detection Unit to reduce water waste by leaks in the system, creation of a Commercial Unit for billing and collection in order to improve overall revenue from the system\.  II\. PROJECT PREPARATION AND APPRAISAL Preparation 2\.01 As mentioned before the Master Plan prepared in 1972 by the consulting engineer defined the overall development of water supply and sewerage facilities in the South West Coastal area\. The consulting engineer also completed preliminary engineering and feasibility studies of water supply and sewerage requirements for the first five years of the Master Plan period\. Parts of the recommended programne under the Master Plan and Feasibility Report were implemented under the bilateral assistance from the Government of France and the United Kingdom\. Part of the programme was implemented under the First IDA assisted Sri Lanka Water Supply Project (credit 709-CE)\. Parts of the above Master Plan and Feasibility Reports revised by the engineering consultant in 1979 reflected current population levels and conditions\.When GSL approached Bank financial assistance to implement at least a part of the revised progranme covering priority area with high population density and greater need, Bank agreed to support GSL in its effort In spite of GSL's somewhat unsatisfactory performance under first IDA assisted water supply project (credit 709-CE), in order to assit GSL to reach it's goals agreed at UN Conference of 1977\. After a Bank review of sector and local issues it was agreed that the Bank will finance full components of water supply and a part of sewerage project\. The balance part of sewerage component was to be financed by the Saudi Fund for Development under a separate loan agreement\.  2\.02 Negotiations took place in Washington in April, 1980 with representatives of WDB and GSL\. At the negoti- ation it was agreed, inter alia, by GSL that s - financial assistance of US$ 30 million (SR 99\.9 million) shall be obtained from tha Saudi Fund for Development to finance other part of sewerage component of the project, - necessary counterpart funds will be provided by GSL annually to complete the project successfully irrespective of it's other financial commitments that may arise from time to time, - it will take necessary steps to ensure that bills rendered by WDB to the LAS in the project area are duly paid, - it will ensure that a management advisor to WDB is appointed by 1\.1\.1981, - it will implement a programme satisfactory to the Bank for provision of assistance to lower income property owners in the project area to meet the cost of sewer connections, - it will ensure that WDB takes control of retailing water and sewerage services in the Greater Colombo area, - it will ensure that WDB is given adequate authority to charge consumers for sewerage services in the project area, - shall agree with the Bank on a formula for establishment of appropriate sewerage user charges by 1\.1\.1984\. - it will allow WDB to take all steps deemed necessary to adjust tariff structure to provide sufficient revenue from the first project area so as to cover expenses arising out of operation and maintenance and repayment of loan\. - rate of return of al least 8% shall be achieved by the financial year ending December 31, 1982\.  -9- Principoal ObJectives and DescriPtion 2\.03 The project appraised in Jan\., 1980 was aimed at the following objectives, namely a) improving water supply and sewerage services in the project area b) strengthening WDB's financial and operational performance c) improving the institutional organisation of WDB and d) prepare water supply sewerage component designs for future implementation (fig\. 2\.1 - 2\.5)\. It was planned to be carried out over a period of 4½ years (1980 - 1985) and it's objectives were s i\. Improving the reliability and quality of pipe borne water to a population of almost 1\.5 million (1984) rising to 2\.2 million by 1991\. ii\. Improving sewerage system in the Colombo Muni- cipal Council area through renovation and extension of the existing sewerage networks\. iii\. Providing new sewerage services in the Mattak- kuliya area within the Colombo Municipal Council limits\. iv\. Providing new sewerage services in the highly populated area within the Dehiwela-Mount Lavinia Municipal Council limits\. v\. Providing new sewerage services to almost entire Kolonnawa Urban Council area\. vi\. Strengthening technical, financial and operating performance of WDB through consultancy services on engineering, management, finance and through training of WDB staff\.  -10- The project components designed to meet the above objectives are as follows\. PART As Water SuPDly i\. Construction of river water intake on the Kelani Ganga\. ii\. Construction of a transmission main from the said intake to Ambatale treatment plant\. iii\. Construction of two sedimentation tanks at Ambatale treatment plant\. iv\. Modification of 12 existing filters at Ambatale treatment plant to increase their capacities\. v\. Provision and installation of additonal chemical feed equipment at Ambatale treatment plant\. vi\. Construction of a pumping station and transmissin main to convey water to Kolonnawa\. PART Bs Sewerage i\. Construction of sewage collection and conveyance facilities in Colombo, including renovation of sewers, modification and improvement of existing pumping stations and the construction of a now sewer pumping station and force mains\. ii\. Construction of sewage disposal facilities including two ocean outfalls\. iii\. Construction of sewerage collection and conveyance systems in parts of Kolonnawa and Dehiwela - Mount Lavinia including sewers, sewage pumping stations and force mains\.  - 11 - PART C: Eguipment and Materials i\. Provision of replacement and spare parts for existing plant and equipment, provision of vehicles for construction and maintenance works, and miscellaneous items of equipment, including a multi purpose computer\. PART Cs Techanical Assistance and Taining i\. Technical assistan-e for detailed design for a further group of water supply and sewerage works, a distribution study for the Colombo Municipal area and Towns South, a solid waste collsction and disposal study for the Colombo Municipal area, and ar organisation management and finance study for WDB\. ii\. Training for WOB's finance and management staff, engineers and supervisors\. J A comparison of the scope of the originally appraised project and project as finally executed is shown In annexure 2\.  - 12 - III\. PROJECT IMPLEMENTATION Credit Effectiveness 3\.01 The execution of a subsidiary loan agreement between GSL and NOD on terms and conditions acceptable to IDA for re-lending the proceeds of the IDA credit to WD8 was a condition of credit offectiveness\. Though the above con- dition was fulfilled on 18\.12\. 1980, the credit could not be declared effective until 26\.02\.1981 due to Banks requirement of satisfactory arrangement for the commitment of the Saudi Fund loan and the IDA credit 1041-CE was finaly established in the sum US\. 30\.0 m on 26\.2\.81\. ProJect Scope 3\.02 As the funds made available from the proceeds of IDA credit (1041-CE) was not sufficient to implement the scope of entire project, it was agreed by Bank and GSL that the funds under the above shall be utilised to finance all parts from A through D except a portioa of part B\. It was also agreed that GSL shall apply to Saudi Fund for Development for a loan (SFD loan 1/130) amounting to USS\. 30\.0 million (SR 99\.9 million) to linance the balance part of 8 of the project and engineering supervision of sewerage component\. 3\.03 Accordingly an agreement between GSL and SFD was signed for SFD loan (SFD loan 1/130) on 8\.1\.1981\. As per this agreement the proceeds from this loan amounting to USS\. 30 million (SR 99\.9 million) shall be utilised to finance a portion of Part B and engineering supervision- of sewerage components of the entire project lubject to SFD's boycott requirement\. The physical elements of the project implemented under IDA credit (1041-CE) and SFD loan (SFD 1/130) are shown in annex\. 2\. 1 SF3 will not finance the cost of goods, services or transport supplied or undertaken which originates from any person, compahy\.or other body, which is subject to the boycott requirement in force by the League of Arab States or the requirement in force in Saudi Arabia\.  - 13 - Project Start up 3\.04 Tho project started slowly and a part of this is still in pro%ress\. The project is now expected to be completed in September, 1987? two years and six months behind schedule (fig\. 3\.1)\. The implementation schedule propared at appraisal judging on performance of WDB on First Water Supply lroject under credit 709-CE was optimistic\. The completion dates for major project components at the time of appraisal against actual completion dates are presented in annex\. 3\. 3\.05 The project experienced delays due to various reasons including s- i\. All tender documents were prepared by the engineering consultants and approved by the Cabinet Appointed Tender Board and IDA before tendering\. The first ICB was advertised in June, 1981\. four months after credit effective- ness, and the first contract was awarded in February, 1982\. ii\. After contracts have been awarded it was found necessary to re award the following contracts for the reasons stated herein\. It should be mentioned here that al' contracts under water supply part of the project were awarded under IDA guidelines on ICD without prequalifying the prospective tenderers\. j - the contract awarded in late 1982 for construction of reservoir and pump house (C 1SA) had to be mutually terminated in 1983 immediately after the contractor cleared the site and carried out part of excav\.ition at his request following the  - 14 - civil distutbances of July, 1983\. This contract was again awarded to another contractor in early 1984 at a higher price\. The second contractor on ectpleting construc- tion of pump house and excavation for reser- voir base reported a weak soil zone in the base area\. This resulted in re designirg a reservoi\. with lesser capacity to suit soil conditions\. The change of design also raised the contract price to nearly double the contract sum\. the contract awarded in early 1932tor cons- tructioa of raw water pump station and appurtenant structures (C 13) had to be mutually terminated in early 1985 due to extremely slow progress of work shown by the contractor\. The balance works under this contract was subsequently re awarded in mid 1985 to a local contractor working in colla- boration with a foreign contractor at a higher price\. The performance of this con- tractor too was extremely slow mainly due to lack of competence on this type of work and hence the contract had to be mutually terminated in January, 1986\. The outstanding work under this contract was again re awarded in March, 1986 to a local contractor to work in collaboration with a foreign contractor at a very high price\. Some of the work done by the previous coatractors had to be abandoned on account of change of method of construction adopted by the third contractor\.  - 15 - 3\.06 The contract for laying of raw water main and transmission main (C 11) experienced delays on account of problems associated with land acquisition and change of type of piling needed to support pipes\. The timber piling originally quoted by the contractor had to be changed to precast concrete piling due to non availabi- lity of timber\. The precast reinforced concrete piles were again changed to insitu reinforced concrete piles to cut down time needed for piling operation\. The change of type of piles from timber to insitu reinforced concrete piles not only caused deliy% but also doubled the contract value\. 3\.07 The contractors for the supply and installation of pumps and equipment (C 12 and C 14) and for the supply, installation and construction of Ambatale treatment plant extension and modification (C 1Z) could not fulfill their obligations under the contracts within the respective contract periods satisfactorily due to non completion of civil works at intake in time\. 3\.08 The tenders issued for the construction of sea outfalls (C 101) to the prequalified contractors in early 1982 had to be declared null and void when the lowest bidder failed to agree with WDB on the terms and conditions ot the contract\. This tender recalled in late 1982 was finally awarded to a toreign company\. The contractor who signed the contract agreement in mid 1983 could not mobilize until late November, 1983 due to civil disturbances of July\. 1983\. Further, while executing the work three change orders were issued on account of sea bed profile being differed from that shown in the contract drawings which caused a considerable time and cost over runs\. Delays of nearly 9 months also experienced in seeking legal adv -a on these change orders on the instructions of Cabinet Appointed Tender Board to determine whether a) the consul- tants should bear the responsibility for change orders  - 16 - on account of their incomplete investigation works on sea bed and designs of sea outfalls and if so should WDB take legal action against the consultants to recover the additional costs arising out of change orders 2) the contractor should absorb the extra cost within his contract sum for this type of sea bed variations is not uncommon in a job of this nature and that an experienced contractor should have priced his tender anticipating such sea bed variations c) WDB should take the responsi- bility and bear the full cost of change orders\. After the review of legal advice Tender Board (oally decided that approval of such change orders was a n:tter for the S/MLGHC and WDB\. A comnittee consistit-o tff three lembers with wide experience appointed subsequently by S/MLGHC finally decided that WD8 should bear the extra cost arising out of change orders\. The variation orders were then appxved by GSL\. However, the undue delays encoun- tered in approving the above change orders by GSL caused untold financial difficluties to the contractor and WD8 for SFD could not make payments on these variation orders without the approval of GSL and the concurrence of SFD Board of Directors\. Suspension of payments by SFD to the contractor for more than a year and the subsequent 2 delay in extending the credit beyond the otiginal expiry date by SFD too resulted in slow progress of works and caused considerable financial difficulties to the contractor and WD8\. It compelled WDB to make payments to the contractor out of its annual capital budget directly to tide over his financial difficulties pending payment by SFD\. The rough sea conditions prevailed during annual North East monsoons too caused delays\. 1 Consultant Engineers MLHGC 2 SFD loan was technically closed on 31\.12\.86 after an extension of 1½ years from the original expiry date\. The loan shall be operative until 30\.12\.1988 for disbursement\.  - 17 - 3\.09 The contract for the construction of sewer pump houses (C 102) awarded to a foreign firm was signed in late 1982\. The contractor's repeated request to WDB to allow change of manufacturers of pumps and equipment from those he quoted in his tender, and the WDB's repeated refusal to his request slowed the initial progress of works\. His progress was further slowed due to a) delays in hand'ng over some sites by WDB on account of acquisi- tion problems involved b) civil disturbances in mid 1983 and c) suspension of payments by SFD and the subsequent SFD's delay in extending the loan (SFD 1/130) beyond its original expiry date\. At times WDB had to make payments out of its annual capital budget directly to the contractor to tide over his financial difficulties pending payment by SFD\. 3\.10 The contract awarded to a toceign company for supplyinig and laying sewers and force mains (C 103) in late 1982 faced inordinate delays on account of uncharted utilities encountered\. The numerous claims forwarded by the contractor for loss of production on account of such uncharted utilities caused enormous financial problems to WDB\. Though WDB accepi d in principle that the contractor should be adequately compensated for toss of production on account of consultant's failure to prepare a comprehensive tender document with full details of utilities, however, WDB was not in a position to determine as to what quantum of compensation should be paid to the contractor, in the absence of a clear cut policy on number of utilities to be considered for payment\. Further, contractor too was expected to price his tender anticipating a reasonable number of uncharted utilities when he tendered ----------- __-------------------------------------------- -- 1/ Contractor's request was not granted by WDB  - 18 - for a job of this nature\. When this matter was referred tn S/MWIC he appointed three independent ~Ambers with wide experience for a decision\. The committee in their report recommended payment to be made to the contractor for the loss of production\. Unjustifiable rates demanded by the contractor for labour, equipment and material caused further delays in settling such claims\. This situation at times lead WDB being criticized by IDA mission for WDB's failure to settle claims speedily\. Several discussions between WDB and contractor, over two years did not bring any agreement on rates until late 1986\. The finalized claims approved by GSL are now being paid by IDA\. More and more c\.laims are likely to come from the contractor even after the ixpiry of IDA credit The claims also gave rise to enormous cost over runs\. Some of the routes suggested by the consultane had to be changed on account of a) poor soil condition b) problem associated with land acquisition c) limited working space which could have otherwise resulted in more damages to properties\. The change of routes had invariably resulted in time and cost over runs\. The net result is that the contractor could not complete the enitre work within the contract period\. The work is still in progress and now expected to be completed in September, 1987\. 3\.11 Other major causes of delays were t 1\. WDB's limited capactiy to generate funds from operations to finance project investment and the 25% across-the-board cut in 1982 mandated by GSL for local counterpart funds in all Ministries resulting in the Minimum Works Programme 1981 - 82 and the subsequent further cut on budget by GSL as a result of its heavy expenditure on defence on combating terrorism in the Northern and Eastern parts of the island\. The GSL allocated only limited 1 Consultant Engineers, MLGHC 2 IDA credit expired on 30\.9\.86 after an extension of 1 year from the original expiry date\. The credit was in operation until 30\.3\.87 for disbursement\. The credit was fully utilized by 30\.3\.87\.  - 19 - funds (some times cut down WDB's capital budget requirement by 50%) after 1984 when terrorist activities were on the increase\. The availability of counterpart funds for project implementation became so scarce that WDB had to make arrangements with the Bank/SFD\. with the concurizzn oE Treasury and Central Bank of Sri Lanka to make payments directly to the contractors by the Bank/SFD on certification of invoice by WDB since late 1986\. 2\. Slow and cumbersome review of bidding documents by &binet Appointed Tender Board\. 3\. Slow and cumbersome proceduare involved in the selection of consultants for detailed design work for future water supply and sewerage services\. 4\. Suspension of project activities for over 2 - 3 months immediately after civil disturbances of July, 1983 and the absence of expatriate contractors, WDB staff and engineering supervision staff on account of their temporary departure from the island for security reasons\. 5\. Delay caused in filling vacancies by the exodus of in house experienced engineers involved in contract administration on account of civil distur- bances in 1983 and the subsequent unstable political situation prevailed in the island resulting in limited project management and construction capabili- ty of WDB\. 6\. Delay caused in taking management decisions due to frequent change of management which included posts of Chairman and General Manager\. 7\. Stoppage of work by contractors every time GSL declared curfaw in the project area to prevent backlash between different communities following terrorists' attack on civilians in the North and East Tender document and tender award of any works exceeding Rs\. 5 m is subject to Cabinet Appointed Tender Board's approval\.  'v 8\. Delay caused due to inability of the contractors to carry out the work with correct approach\. This is specially so in the case of\. civil contractors (water supply components) who were awarded contracts without prequalification\. 9\. Delay caused in settling payments due to the contractors by the financing institution\. This is especially so in case of contracts financed by SFD\. 3\.12 Recurring delays in implementation occurred for varitieC of reasons including X - problem of land acquisition - inadequate bearing capacity of soil - delayed start up by contractors after contract has been awarded - lack of access roads to work sites - change of route due to non suitability of route recommended by the consultants - delays in obtaining power from the Ceylon Electricity Board - delay in obtaining permission from other agencies such as RDA, LAS to excavate roads, - presence of high water tab&e in the project area - excessive surcharge due to damaged sewers and manholes - uncharted utilities on roads - conditions imposed by RDA and LAS on number of roads to be excavated at a time - extra work issued to the contractors by WDB  - 21 - excessive time spent by the contractors on carrying out renovation/rebuilding of private properties damaged as a result of laying sewer mains change of route made by WDB undue time spent to obtain authority to close public roads before excavation is commenced time spent by contractors in settling issues with owners of propertie3 damaged as a result of laying of sewer mains\. Procurement 3\.13 The procurement made under the project could generally be classified into four categories namely s 1\. Supply of matecials such as pipes, Eittings, valves etc\. 2\. Supply, installation and construction of structures such as treatment plant, laying of sewers, etc\. 3\. Supply and installation of pumps and equipment\. 4\. Civil engineering contracts for the construc- tion of structures such as intake, reservoir, pump houses, laying of pipes and fictings etc\. 3\.14 All contracts awarded for water supply components were made on ICB based on IDA guide lines on open bids whereas those contracts for sewerage components were awarded after prequalifying the tenderer$S For supply of pipes and fittings tenders were invited for the alternative D\.I\. or steel pipe materials\. The type of pipe material was then selected based on the lowest evaluated bids\. Unlike procurement made under First Water Supply Project where seperate contracts were awarded for different pipes, fittings and valves in order to procure them at the cheapest price, supply of material contracts were reduced to one and further that contract document was prepared in such a  - 22 - way that the contractor would deliver the material to WDS stores at site\. This prevented WD8's involvement in clearing materials from the port and perhaps payment of heavy demurrag- due to delayed clearance of goods\. However, one disadvantage%in this method was that number of complete offers received was limited to a few only\. This may perhaps due to the reason that each tenderer has to obtain goods from more than one manufac- turer to offer a complete bid\. Having learned a lesson under the First Water Supply Project (IDA credti 709-CE) WDD made sure that its involvement in clearing goods from ware houses was minimum in all contracts under this project\. In all there were 13 major contracts awarded under this project namely s - Supply of pipes, fittings, etc\. (C 10) - Laying of raw water main and transmission main (C 11) - Supply and installation of intake pumps and equipment (C 12) - Construction of intake and pump house (C 13) - Supply and installation of pumps and equipment for Ambatale clear water pump house and Kolonnawa booster pump house (C 14) - Construction of Kolonnawa reservoir and booster pump station (15 A) - Construction of Ambatale clear water pump house (15 B) - Supply, installation and construction of Ambatale treatment plant, modification and extension (C 16) - Construction of ocean outfalls at Colombo North and Colombo South (C 101) - Construction of sewage pump stations at Colombo, Kolonnawa and Dehiwela-Mount Lavinia (C 102) - Supplying and laying of sewers and force mains (C 103)  - 23 - - Reinstitement of roads after pip- laying (SLSP/GEN/RR/1) - Supply of sewer cleaning equipment (C 112) - Procurement of equipment such as computers, generators, water meters etc\. The details of the contracts awarded are given in annex\.4\. 3\.15 All tender documents for procurement were prepared by the Engineering consultant, approved by the Cabinet Appointed Tender Board and IDA before tenders were called\. Tenders were evaluated by a Committee approved by Chairman, WDB and S/MLGHC consisting of WDB officials and representa- tives of MLGHC\. The tender committee evaluation reports and recommendations submitted to the Cabinet Appointed Tender Board, in which S/MLGHC and the Chairman, WDB were Chairman and a Member respectively for approval, and subsequently reviewed by IDA before awards were made\. Supply of materials; for this project were done by United States of America, United Kingdom, India, Japan, Malaysia and Indonesia\. Proiect Costs and Disbursements 3\.16 The estimated cost of this project at appraisal was Rs\. 759 million and US$\. 45\.4 million which was equi- valent to a total of US$\. 94\.0 million at the exchange rate of Rs\. 15\.60 to USS\. 1\.0 at that time, July, 1980\. The project was originally scheduled to be completed by March, 1985, but continued until 1987 resulting in cost over runs\. The actual cost has now gone to Rs\. 1201e3 million and USS\. 38\.9 million which is equivalent to a total of US$\. 96\.1 million at the exchange rate varying between Rs\. 15\.6 and Rs\. 28\.8 to USS\. 1\.0 prevailed during the project implementation period\. In US dollar equivalent the costs show an apparent overall project cost increase of about 2\.2* due to increased exchange rate after July,1980 (from Rs\. 15\.60 to Rs\. 28\.8 to US$\. 1\.0) against an actual cou\.t ove*rrun of 58\.3%  - 24 - in the local component and 14\.3% under run in the foreign cost component\. 3\.17 The SAR estimated a foreign base cost of US$\. 36\.9 million for equipment and material, specialised civil works, engineering service by consultants, t-chnical assistance and training\. This cost excludes of physical contingencies of USS 1\.5 illion and a price contingency of USS\. 7\.0 million estimated in SAR\. The physical congin- gencies were expected to vary between 4 and 15* depending on the nature of the work and degree of completeness of the engineering and cost contingencies were to vary from 21 - 10% for local civil works and and local materials and equipment over years 1980 - 1984\. The project costs estimated at the time of appraisal and actual/anticipated costs on a component basis are depicted in annex\. 5\. It could be seen that civil works costs for all components have gone up in some cases by upto five times the appraisal estimates with an average increase of 2\.5 times\. The actual costs of supply of materials amount to USS\. 34\.51 million indicating increasing of 24\.6% when compared with the appraisal figures\. These unusual cost over runs may be attcibuted to under estimation at the time of appraisal, design\.changes, incompetence of civil contractors who were awarded contracts without prequalifying and the resulting re-awards of contracts, poor soil condition which necessi- tated expensive piling operation, fluctuation in exchange rates and also due to delayed implementation on account of civil disturbances and the prevailing political situation in the country\. 3\.18 As a result of implementation mentioned above, actual disbursements appreciably behind the appraised disbursement\. This position changed considerably as the project approahed tail end of the implementation period, mainly due to the political pressure tocnplete the project to supply additional water to the city of Colombo and its suburbs, also to complete all road reinstatement work after pipe laying before March, 1987\. The details of  - 25 - appraisal disbursement and the actual disbursement are presented in annex\. 6\. it is also seen that it has taken over six years to disburse the full credit compared with 4h years estimated at the time of appraisal\. Operations 3\.19 The progress on this project was closely monitored by frequent IDA missions\. WDS requirement of suibmitting quarterly progress report was regularly met by WDB\. Aide Memoires prepared and left with WDB at the end of each IDA Mission high lighted critical activities which needed to be addressed by WOB and MLGHC and also provided necessary guide lines for the successful implementation of the project\. At times targets set for completion by applying extreme pressure by IDA Mission on WDB and MLGHC could not always be achieved due to political and legal issues involved\. Performance of consultants, contractors, suppliers, borrowers Consultants 3\.20 Several consultants from various firms were employed under the project to offer their sernies to WDB on s - Engineering - Finance - Management - Operation & Maintenance The types of consultants employed and period served under this project are presented in annex\. 7\. The consultants performed their duty generally to the satisfaction of WDB and MLGHC\. The services of management consultant appointed to WDB inJan\., 1983 to assist WDB was terminated in Dec\., 1983 for personal reasons and the consultant who was appoin- ted subsequently in his place was assigned to S/MLGHC to assist the latter and co-ordinate the activities of WDS\.  - 26 - The engineering services were provided for a\. Consultancy services associate(i with Second Proiec?t 1\. A study on solid waste management 2\. Leak detection study in Greater Colombo, area 3\. Sewer cleaning in CMC area 4\. Large scale base mappings in Urban local authorities b\. Consultancy services associated with project preparation for Third Projeect : 1\. Identification of Greater Colombo area water supply improvements 2\. Identification of Ampara & Anuradhapura W\.S\.S\. improvements 3\. Project preparation of Colombo Surface drainage 4\. Final designs for Ambatale - Jubilee transmissio"n mains, Jubilee reservoir, Ampara & Anuradhapura W\.S\.S\. augmentations 5\. Storm drainage record drawings The works under (b) provided basic data for the Third Water Supply and Sewerage Project under IDA credit 1700-CE\. 3\.21 The engineering supervision consultant appointed to supervise sewerage contractors (C 101 through C 103) urder SFD loan 1/130 too performed a fairly satisfactory service even though a satisfactory transfer of technology to WDB staff could not be achieved\. 3\.22 The performance of consultants employed under USAID project is fairly satisfactory\. However, it is too early to predict whether the reorganisation will yield the desired result in strengthening the institutional, management and other capabilities of WDB\. The consultants' progress on establishing regional support centres, workshop and labora- tory is appeared to be very slow\. Further, the amalgamation of project finance branch with that of non project area has proved to be counter productive as far as Second Water Supply and Sewerage Project is concerned\. Lack of priority shown to project activities by the present finance department has created numerous problems to technical staff involved in  - 41 1- contract administration in the project area\. These are -some of the problems faced by WDB as a result of reorgani- sation suggested by USAID consultants\. The image of WDB is being degrated in the eyes of the public over the issues of defective meters and excessive billing which resulted in poor revenue collection\. The present trend is detrimenta\. to very existance of WDB\. Hance it is desirable to make use of the services of USAD consultants to address on metering, billing and collection in the near future\. 3\.23 The performance of consultant for sewer cleaning has been excellent\. During his short stay of three months he has done good services by training CMC/WDB staff as to how to use the sewer cleaning equipment imported some years back, under the project\. This equipment has not been fully utilised in the sewer system earlier due to lacl of\. knowledge on proper use of it\. 3\.24 The services of local finance consultantr are satisfactory\. However, there is a certain amount of resentment among WDB staff over employing of a local consul- tant at high remunerations and other fringe benefits\. 3\.25 While mentioning the performance of consultants it is necessary to state a few words about the performance of consultants whose works provided basic data in the form of design of water supply and sewerage systems for this project under Sri Lanka First Water Supply Project (credit 709-CE)\. WDB is now in a better position to judge the quality of their works since the project has now been completed\. It was observed in some instances that inadequate preliminary investi- gations and project planning done by the consultants caused WOB a large number of variation orders of considerable value (upto 100% over the original contract value in some contracts) and a set back to timely project completion\. Some of the plant and equipment installed on the recommendation of the consultants are too sophisticated for operation by local staff who are used to plant and equipment with more simple processes\.  - 28 - Contractors 3\.26 All civil works contracts under sewerage part of the project were awarded after prequalifying the prospective tenderers and all of them happened to be foreign contractors\. Even though none of them could complete their contracts within their contract periods due to reasons beyond their control, they all carried out their w-wrk precisely with competence\. The contract awarded for supplying and laying of sewers and force mains is still in progress\. The initial work programme prepared by this particular contractor could not be adhered to due to long delays caused on account of uncharted utilities\. 3\.27 The civil works contracts under water supply part of the project were awarded on ICB without prequalifying the prospective tenderers\. This lead to contracts being awarded to contractors without sufficient competence\. All civil works contractors selected were happened to be local contrac- tors\. One reason for foreign contractors not being involved in the water supply contracts is that the size of the works involved is small compared to the contracts under the sewerage part of the project\. The local civil contractors did not perform well, were slow to mobilize and unable to meet implementation mainly due to their limited resources\. Most cf them have under quoted for the works and some times their contract sums were even less than WDB's estimates\. Other reasons for unsatisfactory performance of contractors are given in 3\.09 and 3\.10\. S'ippliers 3\.28 Performance of suppliers of materials and equipment have been satisfactory\. Though the contractors for supply of pumps and equipment delivered goods within their contract periods, pumps and equipment could not be installed and connissioned due to delays in completing the civil works\.  - 29 - The Borrower 3,29 The project amply demonstrated WDB's capability to handle construction supervision of large water supply and sewerage works carried out by multi national contractors\. It also served to highlightshort falls in WDS's operational and managetnent ability in the process of 4mplementing the proJect including i - lack of appreciation of operation and maintenance aspects of the project such aS staffing levels, office and living accommodations, transportation etc\. - lack of appreciation of importance of metering and rectification of defective meters in the project area and thereby failure to address the importance of billing and collection aspects of the project\. - delays encountered in implementation of the proj"-t due to delays in decision making and due to frequent change in management\. - need for overall project planning and co-ordina- tion by WDB\.  - Ju IV\. OPERATION PERFORMANCE 4\.01 At the time of appraisal it was intended to complete the project by March, 1985\. In view of various reasons mentioned earlier, the completion of the project was delayed d it Is now very likely to be completed by September, 1987\. Water and Sewerage Service Demand and Market Potential 4\.02 Imnediately after the installation of consumer motors under the First Water Supply Project (IDA credit 709-CE) the per capital water demand in the Greater Colombo area was reduced\. The consumer reaction to metering did conserve water and improved supply in the sytem\. Some towns like Dehiwela Mount Lavinia even had 24 hour supply for the first time\. The systematic leak detection programme carried out by the consultant assisted WDB to reduce the waste in the system to a great extent\. The 1987 water demand for Colombo and Towns South was forecast at 380 mld compared with the production capacity of 445 mld from three headworks namely, Labugama, Kalatuwawa and Ambatale\. The Towns North demand was forecast at 30 mld\. 4\.03 The consumer metering and billing introduced in January, 1984 brought an immediate reduction in water waste and water demand in the project area appeared to be below the production from the headworks\. This situation existed for nearly one and half years\. However by the end of 1985 the demand appeared to be above production\. This may perhaps due to consumers coming back to the habit of using water with much waste after an initial 'shock' from metering and billing and also due to introduction of a 'cap' of Rs\. 150/u per month by GSL on billing in late 1985\. By late 1985 additional water required by Colombo Municipality and Towns South areas was 45 mld and 22\.5 mld respectively\. This problem became more acute in 1986 and early 1987\. The commissioning of Wolfendhal tower in Color4bo Central in September, 1986 did not produce much desired result  - 31 - in improving the supply in Colombo Central area\. The main which supplies to the tower through booster pumps at St\. Sebastian Hill did not receive additional water from Maligakanda service reservoir\. As a result though the booster pumping station improved supply in certain highly elevated zones in Hultsdorf and Wolfendhal area which were upto now badly affected due to low pressure in the system, it also created wa\.er shortage in some other zone in Colombo Central area\. This problem will be solved once Maligakanda service reservoir receives additional water directly and indirectly as a result of commissioning the new intake and treatment plant at Ambatale\. 4\.04 There is a belief among staff in WDB that the commissioning of Ambatale new intake and treatment plant will not bring the required additional quantities of water to Colombo Central and Towns South areas, as a result of unplanned development in the project area\. Studies are underway to take remedial measures if such an event-occurs\. 4\.05 The existing sewerage system in Colombo serves nearly 80% of the Colombo Municipal area and about 50% of the housing units within the area are connected to the system\. Since the existing sewerage system is heavily over loaded, the Colombo Municipality has been reluctant to enforce the ordinance which makes it compulsory for owners of premises located within 30 metres (100 ft\.) of a public sewer to connect to the sewer or to convert any existing facilities within the premises to a form suitable for use with the public system\. The other local authorities namely, Dehiwela - Mount Lavinia MC and Kolonnawa UC has neither existing sewer system nor such an ordinance in force in their areas of authorities\. When the project was planned it was expected to provide sewerage service nearly to all of Colombo MC and parts of Dehiwela - Mount Lavinia MC and Kolonnawa UC areas\.  - 32 - 4\.06 Though all sewer pump stations, sea outfalls have been comnissioned and nearly all force and gravity sewer mains have boen completed, only sewer system in Colombo Municipality area is in operation now\. The property sewer connections in the project area has not been comnenced due to various reasons including :- - delay in taking a decision by MLGH&C, WD8 and LAS concerned as to who should operate and maintain the sewer system in the project area, - lelay in implementing a policy on the form of revenue collection for sewerage service especially in Dehiwela - Mount Lavinia MC and Kolonnawa UC areas where only a part of the local authority area is provided with sewer facilities\. - inability to generate sufficient revenue by Dehiwela - Mount Lavinia MC and Kolonnawa UC to repay the loan and to meet the annual operation and maintenance cost of the system, - lee-k of necessary iy-law in Dehiwela - Mount Lavinia MC and Kolonnawa UC to make it compul- sory for owners of premises located within a certain distance (usually 30 m) of a public sewer to connect to the sewer -or to convert if necessary any existing facilities within the premises to a form suitable for use with the public system - decision on subsidies to be given to local authorities by GSL towards repayment of loan, 1 Though WDB has this power utnder Act operation and maintenance of sewer systen by WDB may not suit GSL/ Bank in view of the latest policy of handing over water supply ind sewerage systems to local authorities\. 2 GSL has already taken a positive step by making SFD loan equity\.  -3 - inability by LAS except Colombo MC to operate and maintain the sewer system within their areas, decision on form of financial relief to be given to the property owners against high cost of sewer connections\. 4\.07 A recent survey carried out by WDB within the project area has shown that property owners are willing to connect their property to public sewer if WDB/GSL could meet part of high cost of connection\. Accordingly it has now been decided by WDB to provide sewer connections with Bank's assistance to property owners who are in a position to pay at least 1/10 of the cost estimate of such connection immediately and pay the balance by 12 to 18 equal monthly instalments\. 4\.08 There is a close linkage between WDB's annual operating deficit and operations of urban local authorities and other Government agencies\. The LAS have been constantly in default in paying mioneys due to WDB, primarily because of their own poor deteriorating financial positions\. The responsibility of operating and maintaining the local distri- bution systems particularly rural systemshavealso been gradually vested with WDB in the past, because of inadequate financial and institutional capacity of the local authorities\. By the year 1984, the outstanding dues from LAS aggregated to about Rs\. 300 million\. In order to relieve financial burden caused by the defaulty LAS, it has now been decided by GSL with the concurrence with the Bank to gradually hand over operation and maintenance responsibilities of water supply and sewerage systemsto the respective local authorities\. WDB has already commenced a technical assistance and training programme to help the LAS to take on these functions\. Further in order to provide the necessary know how to the LAS before handing over the Sri Lanka Municipal Management Project, funded by IDA, is now being implemented\. This project will not only improve financial, management and  - 34 - operating efficiency of LAS, but also relieve financial burden on WDB caused by the defaulting LAS upto now\. With this view in mind, it was decided by GSL/WDB that CMC shall operate and maintain the whole system with its available resources and make other LAS to pay for their services through agreements signed with each LA separately\. This arrangement should be most suitable for the reason that out of all LAS only CMC has sufficient resources to operate and maintain the system and further all sewer infra structure except for five pump houses are located within the CMC limits\. In order to\.assist CMC,WDB has made arrangements at its own cost to train CMC staff through a foreign contractor in operation and maintenance of sewer system\. Consumer Metering 4\.09 During a major part of 1982 and all of 1983, GSL instructed WDB for political reasons not to introduce Elat monthly rates for unmetered consumers, not to increase tariff rates and to suspend all metering programme\. Subse- quently the financial position of WD) deteriorated rapidly during this period\. ihen GSL realised that WDB was recovering lass than 10% of its expenditure from its self generated revenues a Financial Recovery Progratiune (FRP) was embarked upon including the introduction of flat monthly rates increasing metered tariff rates and an accelerated metering programme\. At the time of installation of meters there have been-difficulties due to (i) long delay in the supply of meters by the United Kingdom Overseas Administration (ODA) (ii) a reluctance on the part of local authorities to accept the concept of metering and associated tariff and (iii) technical difficulties in installing the meters- associated primarily with the inadequacy of maps and records of connections and the poor  - 35 - conditions of many connections\. The iotering work carried out on a crash programme under the First Water Supply Project (IDA credit 709-CE) did not produce desired results either\. It created public cry inainly on the accuracy of meters installed and eventual excessive bills rendered to consumers\. Out of 80,O0Ometers installed, nearly 25\.000 meters were found to be defective\. This may perhaps be attzb\.td to a) inadequate supervision of the meter installations done under a very ambitious schedule in order to complete metering programme as quickly as possible b) WDB's liberal attitude towards motering contrac- tors in order to achieve a satisfactory progress c) in all individual water connections given to consumors prior to the time of metering the aspects of metering were not considered by WDB or LAS d) a baseless notion among public that excessive bills mean defective meters and the consumers' failure to believe that excessive reading could be due to leaky internal plumbing as well and e) inefficiency and indifference shown by the meter readers when taking monthly meter readings\. The issue of excessive billing due to defective meters became so important and serious that mnb 'L to intervene in late 1985 and compelled WDB to cherge only a flat rate of Rs\. 150/\. per month from those consumers who complaint of excessive billing until such time all defective meters are repaired or replaced with new meters\. …----------------------------------------------------------- 1 The meters installed under this programme were of horizontal reading type\. 2 This lead to placing of consumer meters mostly in difficult locations making it almost - for meter reader/consumer to read meters\. Depending on position of supply main, meters sometimes were located a) below the ground water table level b) on roadside and pavement etc\. Metering still bec&me difficult in case of multi storey buildings with several individual apartments\.  - 36 - 4\.10 Though tho motor rectification programne started immediately after billing and collection commenced in January, 1984 by WDO with its available resources, the number of defective metors became very large making it difficult for WDB to handle this process alone\. In order to solve this problem seven contracts were awarded in 1985 to local contractors for the rectification/replacement of 7000 defective meters\. WDB also c-ontinued to carry out metering programme with its own resources\. This included metering of Port Authority wherein WDB has been losing an income of Rs\. 1 million per month in the absence of meters\. On appreciating the urgency of meter rectification programme IDA assisted WDB under this project by financing purchase of 9000 meters and rectification of 15,000 defective meters in the Greater Colombo area\. The details of metering progranme carried out during the implementation period are shown in annex 8\. 4\.11 At appraisal stage an assurance was obtained from WDB to carry out an ongoing programme to install and there- after effectively maintain bullc meters, to accurately m3asure flows from all treatment plants, major pumping installations, distribution reservoirs and to accurately measure bulk supplies to local authorities in the project area to be completed by June 30, 1981\. However, attempts made by WDB to install and operate the bulk meters (olectro magnetic type) procured under credit 709-CE were miserably failed\. These metors (8 Nos\.) had to be discarded subse- quently\. The efforts made by WOB to procure meters with its own funds in 1985/86 could not go well either for the contract awarded to a GSL owned business undertaking working in collaboration with a foreign company for the supply of bulk meters under WDB funding had to be made null and yoi, in 1986 mainly due to a) contractor's finan- cial incapability to fulfill the terms and conditions of the contract and b) WDN's own financial difficulties that  - 3, - existed especially in late 1985 and 1986 on account of its limited annual capital budget\. It is now proposed to procure the bulk meters under the Third Water Supply Project (IDA credit 1700-CE) and under ADB assisted Rehabilitation Project\. lIing and Collection 4\.12 Billing and collection in the Greater Colombo area commenced in July, 1981 for the CMC area and rest in January, 1982\. An accelerated programme of metering\. meter rectification and conversion of unmetered connections in the Greater Colombo &:ea combined with the implementation of improved computerised billing system contributed signifi- cally to increased billing efficlency\. Billing delays also have been reduced from over a year in 1983 to about two months at present\. WDB is at present carrying out an active consumer complaint service progranuu through establi- shing several billing and collection centers throughout the project area and a consumer awareness programue by means of more effective and frequent use of the mnass media\. These steps have resulted on improved collection of arrears and strict enforcement of Aisconnection of defaulting consumers\. The collective impact of the above measures have significantly improved revenue collection of WD\. Upto January, 1984 only comercial consumers were billed\. The performance during this period is tabulated below\. Year No\. of Consumers Revenue Billed Collections 1982 11,534 Rs\. 33\.9 m Rs\. 12\.3 m 1983 10,579 Rs\. 33\.2 m Rs\. 13\.7 m Commencing from 1st January, 1984 all consumers (including domestic consumers) in the Gceater Colombo area were billed\. The performance from 1984 to 1986 is appended\. Year No\. of Consumers Revenue Billed Collections 1984 80,717 Rs 172\.3 m Rs\. 47\.1 m 1985 87,298 Rs\. 181\.2 m Rs\.113\.9 m 1986 93,000 Rs\. 171\.5 m Rs\.150\.5 m 1 The current rate of disionnection is 150 per month compared to practically none in 1984\.  - 38 - 4\.13 A drop in the revenue in 1986 over 1985 was due to the introduction of a flat rate of Rs\. 150/\. per month to those consumers with unusually excessive or incorrect bills\. The above step which was enforced by GSL as a result of public cry and political pressure was proved to be counter productive as far as the WDB's revenue collection is concerned\. This also resulted in encoura- g-ing the consumer of above category to waste more and more water\. To do away with the flat rate collection, a crash programme for m4eter rectification is being carried out throughout the project area under IDA credit 1041-CE\. 15,000 defective meters are being rectified under this programme\. Arranagements are also being made under this credit to purchase 9,000 domestic meters for the same purpose\. The rectification of meters is antici- pated to be completed by March, 1987\. The WDB's revenue collection is expected to improve significantly thereafter\. The water production and billing in the project area during the project period is depicted in annex\. 9\. Leak Detection Programme in Greater Colombo Area 4\.14 With Bank's technical assistance under this project (IDA credit 1041-CE) WDB emploved expatriate consultants working in collaboration with local firms to implement a leak detection programme in the Greater Colombo Area\. The principal objectives of this programme were a) to deve- lop the most appropriate and cost effective leak detection methodology for the area b) to locate and quantify leakage c) to carry out leak repairs and d) to provide on-the-job training for WD8's leak detection/repair personnel\. The Bank provided financial assistance under this project (IDA credit 1041-CE) for the consultancy services and training by the consultants and for procurement of eleven vehicles  - 39 - and equipment for leak detection/repair\. Six leak detection teams and five leak repair teams were established in WDD under the close supervision of consultants\. The central area in theCb Olao Municipality with about 70 per- cent of the city population was chosen as the project area\. The consultanits recomnmnded and carried out visual day time inspection and night sounding followed by repair of leaks so detected in order to reduce unaccounted for water to about 50 percent of quantity prevailed in 1985\. After the departure of consultants in 1965 the leak detection/ repair programme is now being carried out by the WDB personnel with the know-how they have gained from the consultants The major draw backs that were found under this progrmme were a) lack of positive response and some times 'don't care' attitude shown by the consumers to repair leaks occuring in household plumbinxg and supply pipes downstream of consumers' meters b) enforced water cut in the distribution area by WDB on account of water shortage in the headworks c) lack of consumer education on the importance of leak detection/ repair programme d) lack of stringent law in WDS's Act to make it a criminal offence to tamper on the water meter as in the case of electric meters\. A summary of characteristic data of the Greater Colombo Leak Detection Study from April, 1984 to December, 1986 is presented in annex\. 10\.  - 40 - V\. FINANCIAL PZRFORMANCE Financial Covonants 5\.01 Article (IV) of the Development Crodit Agreoment sets out a number of financial covenants to be strictly followed in carrying out the operations of the WOO\. The main points of the above covenants other than mentioned in para 2\.02 can be summarised am follows\. i\. GSL shall permit WD8 to charge the users for sewerage services provided by WOB\. The revenue from sewerage chargos shall be equal to 70% of that for water in the same area\. ii\. GSL shall agree with IDA and WDB on charges to be levied from the users for sewerage services\. iii\. GSL shall permit WDB, until IDA decides otherwise, to take necessary steps including adjustment of water tariff structure or the level of such tariff to generate sufficient revenue to cover operating expenses and to produce annual rate of return of at least 8% by 31\.12\.1982 from its operation in the First Project Area (IDA credit 709-CZ)\. iv\. GSL shall allow WD8, until IDA decides other- wise to take steps including adjustment of water tariff and the level of such tariff to ensure that the revenue will be at a level so that operations outside the First Project Area, are not subsidized by revenue Erom the First Project Aroa\.  - 41 - 5\.02 The performance of level on the financial covenants enumerated as follows\. 1\. In keeping with the financial covenants of IDA credit 709-CE, WDB had taken necessary steps\. - to maintain records reflecting its operation and financial conditions adequately, - to audit its accounts annually by an indepen- dent auditing firmn and submit sulch audited accounts and other information for review by Bank, - to introduce a costingsystem and to maintain I seperate accounts for the Project Area, 2 - to fill key posltions in the finance depart- ment and to stafe this section adequately, - to maintain a close corporation between the Engineering and Finance departments, 3 - to establish a commercial accounlting system, - to establish financial control, purchase 4 and stores syste s, - to establish an internal audit system, -…---------------------------------------------------------- 1 Seperate Project Accounts System introduced was aban- doned by Nov\., 1985 when Project and Non-Project areas were consolidated into a single unit\. 2 Though the post DGM(Finance) was filled in early 1984, th performance of this section showed remarkable progress only after the Consultant DGM, Consultant AGM and Consultant Accountants were appointed from consulting firms in January, 1986\. 3 Computerised accounting has now been introduced covering all water supply and sewerage schemes in the island\. 4 Manuals prepared by the Management Consultant and USAID Consultants have helped to a great extent to achieve this\. Internal audit section operated at the WDB Head office has now been extended to Regional Support Centres under USAID re-organisation\.  - 41 - 2\. Improving \.9BD's overall financial position called for included e,' series of inter related technical, financial, operational and administrative measures\. The water tariffs ware increased by 60* in January, 1984\. A crash programne of metering, meter repair and conversion of unmetered connections in the project area combined with th- implementation of improved computerised billing system contributed to increased billing efficiency\. Billing delays too have decreased from over a year in 1983 to about two months at present\. WDB is carrying out an active consumer complaint service programme through opening up several billing and collection offices all over the project area and a consumer awareness programme through more effective and frequent use of the mass media\. These steps have resulted on improved collec- tion of arrears and strict enforcemenX of Aisconnection of defaulters\. The combined impact ot the above measures have significantly improved revenue collection of WDB\. However,the introduction of flat rate of Rs\. 150/- per month to those customers with unusually excessive or incorrect bills have proved to be counter productive as far as the WDB's revenue collection is concerned\. This move made as a result of public cry and political pressure is encouraging customers of above category to waste more and more water\. In order to do away with the flat rate collection an accelerated programme of meter rectification is being carried out throughout the project area under IDA credit 1041-CE\. 15,000 defective me ters are being rectified\. Arrangements are also being made under this credit to purchase 9,000 water meters for the above purpose\. 1 The current rate of disconnection is about 150 per month compared to practically none in 1984\.  - 4z\. 3\. The rectification of meters is anticipated to be completed by March, 1987\. The WDB's collection is expected to improve considerably thereafter\. 4\. WDB in*roduced a computerised financial management system in November, 1985 and ar improved accounting system which provides detailed revenue and cost information on a quarterly basis for each of WDB'5 major schemes\. In order to utilize new financial management and accounting system effectively, WDB has also taken steps to strengthen its staffing by appointing a consultant Finance Manager and consul- tant accountants to its finance divisio-n and a consultant Commercial Manager and an Assistant Commercial Manager to improve its commercial func- tions and operating systems and procedures\. The consultants had been recruited from local firms under Bank's technical assistance\. The cost control measures such as leak detection and meter repair are also effectively taken\. In addition, WDB is now formulating an incentive programme for operating staff, especially at the regional levels for improved billing and collection\. 5\. The cumulative effective of these steps are as follows\. - WDB's operating deficit subsidized by direct and indirect GSL grants which escalated from Rs\. 34 million in 1980 to Rs\. 141 mill4\.on in 1983 were reduced to Rs\. 127 million in 1984 and Rs\. 149 million in 1985\. - WDB is expected to eliminate its operating deficit by 1987 and will be able to meet the financial covenants under this project by 1989\.  - 44 - 5\.03 WD has still not finalised a realistic tariff for sewerag- service in the project area on account of various reasons including t a\. A flat charge of 70t of the monthly water bill for sewerage service cannot justifiably be levied from the consumers for the following reasons\. i\. 15 - 20% of domestic consumers within project area do not pay for water on account of their monthly consumption, being within 10 unit\. ii\. There are considerable number of consumers in the project area who have alternative sources of water supply for their use without depending on WD3's water supply at dll but continue to discharge household sever into WDB's sewer system\. There are some consumers including big hoteliers who depend on alternative scurces of water like tube wells for their use and limit the use of WDB's supply in order to keep their monthly water bills minimum, while continue to dispose the entire sewer lod through WDB's sewer system\. iii\. Availability of sewerage service in Dehiwela Mount Lavinia MC and Kolonnawa UC areas is limited to certain areas only\. In Colombo Municipality too Kirulapona area has been left out of sewerage system\. iv\. At present there is a resistance to pay monthly water bill among the consumers partly on account of faulty meter readings\. WDR has still not been able to generate 100% collection even from the consumers with correct monthly bills Hence enforcing sewerage tariff to pay for sewerage service at this juncture is practically impossible\. l A household is entitled to a free supply of water upto 10,000 litres per month\.  -45- v\. Consumer; with unauthorised water connections will *njoy sewerage service as wall free of charge\. b\. The Colombo Mun'icipality, where sewer system existed prior to project implementation, chsrged consumer by way of increased property assessment tax and MC By-laws allow such a tax to be levied whereas LAS in newly sewered areas namely, Dehi- wela - Mount Lavinia MC and Kolonnawa UC have no such By-laws in force\. Further even if such a By-law is passed by LAS for implementation in these areas, the revenue from such taxes will be negligible on account of a\. (iii) given above\. co The annual repayment of loan to the Bank / Saudi Fund for Development by each of three local authorities and their respfictive annual budget figures for years 1980 - 86 are indicated in annex\. 1\. The cost of annual operation and main- tenance of sewerage system in the project area is shwon in annex\. 12\. It appears that only Colombo Municipal Council has the capability to repay the loan whereas Kolonnawa UC is not even in a position to meet the annual operation and maintenance cost of the system within its UC limits\. It is therefore essential that some form of annual irant should be made by GSL towar6s repaympilts of loan in the case of Dehi- wela - Mount Lavinia MC and Kolonnawa UC\. d\. The Colombo MC bas 10 sewer pumping stations and two sea outfalls within its MC limit and has sL¶ficient resources to operate and main- tain the sewer system whereas Dehiwela - Mount Lavinia MC with 2-sewer pump stations within its jurisdic tion and Kolonnawa UC with 3 sewer GSL has recently converted the SFD loan into equity in order to ease the burden of repayment by LAS\.  pumping stations within its limits has neither resources nor trained staff to operate and main- tain the system\. Hence sewer system in DehJwela Mount Lavinia MC and Kolonnawa UC areas have to be either maintained by WD8 or Colombo MC\. rn case the Colombo MC is permitted to operate and maintain the entire sewer system, some sort of agreement has to be signed between Colombo MC and each of other local authorities in regard to payment for services rendered by Colombo MC\. a\. All property owners in Dehiwela - Mount Lavinia MC, Kolonnawa UC and a part of Colombo MC area (Mattakkuliya) have spent considerable amounts of money and constructed septic tanks for house- hold sewer disposal\. Hence conversion of septic tank to public sewerage system may be an expensive process as far as any property owner in the above area is concerned\. Further, there is no council ordinance in Dehiwela - Mount Lavinia MC and Kolonnawa UC areas to force the property owners to do away with septic tank disposal system when public sewerage system is made operative\. However, WDB has authority as per WDB Act No\. 2 of 1974 to make public sewer connections compulsory for any property owner if such a property is within 30 m (100 ft\.) from a public sewer\. Hence By-laws have to be introduced in these local authorities to make taking sewer connections compulsory\. f\. Cost of sewer connections to property varies from Rs\. 3000/- to Rs\. 30000/-\. Hence it may not be possible for a low income property owner to meet such a high cost of public sewer connection\. WOe has now made arrangements with Bank assistance to provide property connections with a small initial payment (1/10 of the cost) from the owner and to recover the balance due through 12 to 18 equal monthly instal ments\.  - 47 - 5\.04 WDB's financial capability also depends on the operation of local authorities and other government agencies\. The local authorities are constantly in default of payment due to WDB, mainly due to their own poor and deteriorating financial positions\. The responsibility of operating and maintaining local distribution syu3Mi, particularly rural systems have been gradually vested with WDB due to inadequate fiancial and institutional capability of the LAS\. These factors burden WDB's financial resources further\.By the year 1984, the outstanding dues from LAS amounted to approximately Rs\. 300 m\. With the objective vesting some of the water supply schemes again with LAS and thereby to relieve finan- cial burden caused by the defaulting LAS on WDB, it has been decided by GSL with the concurrence of the Bank to gradually hand over operation and maintanence responsibilities of water supply and sewer systems to the respective local authorities\. WDB has commenced a technical assistance and * training programme to help the local authorities to take on these functions\. Further, in order to provide necessary know how to the local authorities before such handing over the Sri Lanka Municipal Management Project funded by IDA is now being implemented\. It is anticipated that this project shall not onlyimprove financial, management and operating efficiencies of LAS, but also relieve financial burden on WDB caused by the defaulting local authorities to date\.  - 48 - Operating Results and Rate of Return 5\.05 The income and expenditure statements from 1977 to 1986 is presented in annex\. 13\. The information furnished therein could be summarised as follows\. Operating Operating Average not Rate Operating Year revenue* expenses fixed assets of ratio in Rs\.'000 in Rs\.'000 in Rs\.'000 return 1977 11,68 11,967 4,800 - - 1978 26,604 28,998 42,242 - - 1979 32,206 40,189 105,997 - - 1980 40,610 63,744 199,864 - - 1981 42\.650 112,456 326,181 - - 1982 119,488 166,278 473,672 - - 1983 220,112 205,234 637,452 2\.3% 93S 1984 148,000 179,000 3,700-,000 - - 1985 204,000 194,000 4,900,000 4X 1:05 1986 169,000 209,000 5,800,000 - - includes direct revenue through sale of water and GSL subsidies (direct and indirect) Financing Plan 5\.06 The balance sheets and funds flow statements from 1977 to 1986 is presented in annex\. 14\. The information furnished therein could be sumnarised as follows\. Total Equity Long tern Debt/Equity Yeac Assets in Rs\. Debt Ratio Remarks in Is\.'000 '000 in Rs\.'000 1917 83,083 58,224 - 1978 233,757 221,186 2,571 - 1979 406,241 317,269 82,420 1:4 1980 1,063,956 809,479 208,235 1:4 1981 2\.000,665 1,173,062 626,506 1:1\.85 1982 2\.612,743 1,630,285 811,083 1:2 1983 3,581,002 2,427,228 957,979 1:2\.57 1984 4,473,362 3,114g749 1\.281\.836 1:2\.5 1985 5,895\.477 3,825,001 1\.757,111 1:2\.2 1986 7,374,180 5,548,787 1\.486,434 1:3\.7  - 49 - Total Internal foreign Debt Internal sources cash gone- debt service finance Yoar of funds ration in service covered of total in ts\.'000 Zs\.'000 in Rs\.'000 by inter- require natl cash nents (S) Sn0ort- ton No\. of times 1977 17\.533 543 - 3 1978 170,895 5,654 - - 3 1979 185,325 2,621 - - 1 1980 636,081 13\.685 - - - 1981 802,606 51,424 - - - 1982 673,678 15,447 - - - 1983 1,005,597 47,895 30,663 1\.5 5 1984 1,152,000 deficit - deficit - 1985 1,250,000 deficit 71,000 deficit - 1986 981\.000 deficit 174\.000 deficit - 5\.07 The financial covenant of the credit agreement which requires WDB to meet all operating expenses and depreciation and earn a minimum rate of return of 8% on net fixed assets in operation of project financed by Bank could not be met mainly due to a) inadequate pricing policies prior to 1984, b) poor financial management practice and c) weak financial management\. However, it is expected to meet the financial covenants at least by 1989 after the institutional improvements that are being made by the Bank and USAID are fully realised\.  - 50 - VI\. INSTITUTIONAL PERFORNANCE Organisation and Management 6\.01 WDS the executing agency for this proje-'t, was created in 1975 out of the Department of Water Supply and Drainage\. WDB is responsible for development of all urban and rural piped water supply systetns, urban sewerage systems and rural non piped water supplies based on drilled/dug wells\. 6\.02 At the time of project appraisal WDB was operationally divided into eight regions with its head quarters at Ratmalana, near Colombo\. Each region was administered by a Regional Manager stationed in the field\. The regional offices had only limited capabilities for field investigation, design and logistical supply and nearly all functional support and decision making was centralised at head quarters\. A special unit called Project Division, under a Deputy General Manager assisted by Assistant Genersl Manager and a qualified Accountant were in existance at the time of project appraisal and this unit was responsible for the implementation of the First Water Supply Project under IDA credit 709-CE\. At the time of loan negotiation it was agreed by WDB as one of the conditions of loan to retainthis unit to implement the Second Water Supply and Seweraee Project as well\. This unit subsequently took over the operation and maintenance of the Kalatuwawa and Labugama headworks and in 1981 assumed full responsibility for operation and maintenance of the water distribution system in the five local authorities in the Towns South of Colombo\. It also took over in the same year the operation and maintenance of the water distribution and sewer collection system in Colombo Municipality area utilising the then existed Municipal Organisation\. Further when the Towns North of Colombo water supply scheme and Ambalangoda - Balapitiya water supply schemes were constructed under the First Water Supply Project and commissioned in  - 51 - 1984 and 1985 respectively, these schemes too were brought under the Project Division for operation and maintenance\. As agreed with the Bank at the time of the loan negotiation, this unit was retained to implement the Second Water Supply and Sewerage Project financed by Bank under IDA credit 1041-CE and co-financed by Saudi Fund for Development under SF0 loan 1/130\. Further\.to carry out improvements and urgent development works in the Greater Colombo area, a post of Assistant General Manager (Special Projects) was created in 1982 and brought under DGM(Project)\. The works carried out by AGM (Special Projects) were financed by Government Departments such as Ministry of Health, Dept\. of Local Government etc\. and State Organisations such'as Urban Development Authority, National Housing Development Authority etc\. This special project section was scrapped in 1985 when all works were completed\. When billing and collection was introduced on January 1, 1984, an Assistant Accountant was appointed under DGM(Project) to attend to the cotumercial activities of the Project Division\. 6\.03 Since late seventies WDB had also undertaken a fairly large construction programme outside the project area on works with the capital vote of WDB and also works for Local Government and other state organisations\. In addition to the above construction progaramme, a large number of water supply and sewerage systems have been taken over from local authorities and other state organisations and operated and maintained by WDB\. To cope with the increased responsibi- lity, WDB was re-organised\. The Planning and Design, Ground Water and Construction Sections were headed by AGMs in the lhead office\. DGHs were appointed in the head office to deal administration, finance (upgraded from AGM to 0GM in 1984), and operation and maintenance\. The Finance Section was 3ubsequently strengthen by the appointment of regional e^countants\.  - 52 - 6\.04 In order to improvo the institutional strength of WDB a Water Supply and $anitation Projet funded jointly by GSL and USAID (Project No\. 383 - 0088) is being implemented since April 1, 1985\. Th\. project is to be implemented over a period of 5 years at a cost of USS\. 19\.6 million\. The project is being implemented by a team of foreign consultants working in collaboration with two teams of consultants from local consulting firms and counterpart staff from WDB\. The basic objective of this project is to improve the operating efficiency of the WDS in all functional areas to supply potable water to consumers in a technically effective and cost effective manner by means of assisting WD8 in strengthening i a) investment, planning and programming b) financial and accounting practic6a c) operation and maintenance d) commercial operations e) water quality control and f) health education and community development effort The project aims to achieve tLe above goals through reorgani- sation of WDB, together with design and implementation of new procedures for all functional areas such as personnel, administration,operatidn and maintenance, finance, commer- cial, etc\. In addition to the basic procedural reform it is also intended to provide commodities in the operation and maintenance field, construction of three Regional Support Centres, in-country and oversoas training for WDB staff\. A new section called Rural Sanitation Unit is also being formed in WDB under this project to co-ordinate the activities of the Ministry of Health and WDB to implement health  - 53 - education and community participation at rural level area to emphasis the importance of it\. As of December, 1986, consultants addressed on following topics\. - reorganisation of WDB and filling key positions, - policies on project selection and entailing signed agreement between WDB and LAS for water supply and sewerage systems (existing and new), - pilot project on decentralisation in Matara region\. 6\.05 The organisational set up described in para 6\.02 through 6\.03 was abolished inNovember, 1985 when consultants employed under USAID project prepared and implemented a new organisation (annex\. 1B)\. As per revised organisation chart, the Chairman shall have a special comnittee for Strategy-- Planning under his purview\. The GeneralManager shall be assisted by two Additio :l General Managers\. Additional General Manager (Suppcrt Services) will in turn be assisted by Personnel and Administration, Finance and Commer- cial Divisions each headed by a DGM\. AGM(Training), AGM (Supplies and Stores) too shall come under his purview\. Additional General Manager (Operations) on the other hand shall be responsible for Planning and Design, Construction and Operation and Maintenance Sections each headed by a DGM\. Manager (Tenders and Contracts) too shall be directly under him\. A special feature in this organisational set up is that out of 6 AGMM serving under DGM (O&M), 3 AGMM shall be stationed in Matara, Kandy and Anuradhapura as AGM Regional Support Centre covering 8 regions, while AGM (Western Water) shall be responsible for operation and Maintenance in Greater Colombo, Ratnapura and Kurunegala regions\. In addition' AGM (Sewer OperatidW) and' AGM (Services) shall assist DGM (o & M ) at the Head office\.  - 54 - DGM (Planning & Design) shall have under his purview Planning, Design and Ground Water Sections each headed by AGM\. The newly created Rural Sanitation Unit too shall functiorn under him\. DGM (Construction) shall be served by three AGMM namely, AGM (Colombo Water and Sewerage), AGM (Major Schemes outside Colombo) and AGM (Rural Schemes)\. The construction activities in the regions shall be handled by Managers (Construction) under AGM (Rural Schemes)\. In addition to this, two Project Managers at DGM level have been appointed to co-ordinate the works under USAID and ADB Projects\. All other key posi tior\.k are indicated in annex\. 1B\. 6\.06 In September, 1985 Chairman WDB wss transferred to the MLGHC as Additional Secretary (Technical) and thereafter General Manager worked as Acting Chairman in addition to his normal duties for a brief period\. In January; 1986 the General Manager too was transferred to the MLGHC as Engineering Consultant\. At the same time a Chairman and a General Manager were appointed to WDB\. When DGM (Finance) resigned from his post in 1985, a Consultant DGM, a consultant AGM and two consultant Accountants were recruited from local consultancy firms on contract basis\. A post of Commercial Manager at DGM level was created and a consultant was appointed from a loca\. consultancy firm\. The accountant who was upto now handling the commercial activities of the then Project Division was made Assistant Commercial Manager\. The ser- vices of the above consultants were financed by IDA under credit 1041-CE\. These appointmentn have strengthened the finance and commercial sections considerably\. 6\.07 Under the re-organised set up, the Project Section referred to in para\. 6\.02 has now been divided into four and brought under four AGMK\. The implementation of Sri Lanka Water Supply and Sewerage Project financed by IDA  - 55 - and SFD is now being handled by an AGM\. The Operation and Maintenance Section under Project Division is now looked after by another AGM under DGM (o&M)\. Project Finance Section has now been amalgamated with the Non- Project Finance Section under WGM (Finance)\. The billing and collectionbranch under Commercial Manager at DGM level handles activities of Project Division as well as those of regions\. It is too early to tell whether or not these changes will result in improved implementation of Project\. 6\.08 From 1982 the trend has emerged within the Bank in favour of diverting some of WDB's operation and mainte- nance responsibilities of the local authorities\. On realisfng the importance of this aspect GSL/WDB has now decided to gradually nand over operation and maintenance responsibilities of water supply and sewerage systems to the respective local authorities\. WDB has already commenced a technical assistance and training programme to help the local authorities to take on these functions\. Further in order to provide the necessary know how to the local authorities before handing over the Sri Lanka Municipal Manageament Project funded by IDA is now being implemented\. This project will not only improve financial, management and operating efficiency of LAS, but relieve financial burden on WDB caused by the defauling LAS upto now\. Staff Recruitment and Training 6\.09 The recruitment of staff is done by WDB by calling for applications\. The appointments are made after obtaining approval Erom the Board and S/MLGH&C\. WDB had difficulties in recruiting professionally qualified accountants to key positions due to low remunerations paid in WD8\. This problem was solved in 1985 by recrui- ting three finance consultants through local firms on  - 56 - contract basis\. However, scarecity of senior engineers still continues\. Since early eighties especially after the civil riots of July, 1983\. five senior engineers at DGM level have left the services of the Board\. Four of them have been actively involved in the Projects since 1977\. 6\.10 The departure of senior engineers involved in the implementation of the projects specially after July, 1983 had severely affected the project implementation\. However, vacancies created by them have now been gradually filled by other engineers in the Board with lesser experience\. 6\.11 WDB has a training centre headed earlier by a Chief Engineer and now by an AGM who is responsible for the training of all categories of staff in WDB and in the sector\. The training is given not only to all categories of staff in service but, also for new recruits and to all grades of employees from skilled labour to engineer\. The employees of LAS especially those who are involved in the operation and maintenance of water supply and sewerage schemes are too trained by WDB\. This also includes training of hand pump caretakers so that communities in remote areas depending on hand well for their drinking water could maintain and attend to the running repairs of hand pump installation\. This programme is also closely associated with the health and sociological aspects of the rural water supply schemes for which sociologists have been recruited by WDB\. WDB has also carried out demonstra- tion in collaboration with Health Department on low cost latrine construction and hand pump maintenance programme under DANIDA/FINIDA assistance\. Two workshops have been put up in the Matale and Polonnaruwa districts for this purpose\.  - 57 - 6\.12 Since commencement of implementation of this project, there were many foreign training programmes funded by various foreign donor agencies in which WDB staff partici- pated and b-nefittod considerably\. A part of training components of the credit too was utilised to send WDB's staff for training abroad\. The details of foreign training given to WDB staff under this project (IDA credit 1041-CE) is presented in annex\. 15\.  - > ViI PROJECT JUSTIFICATION ProJection ObJectives 7\.01 The main objectives of the project were a) to provide a 24 hour potable water supply to Colombo city, Towns South of Colombo and Towns North of Colombo b) to improve sewerage service in Colombo Municipality area c) to provide new sewerage service to densely populated parts of Dehiwela - Mount Lavinia Municipal area and to most parts of Kolonnawa Urban Council area d) to extend consumer metering and meter rectification e) to improve billing and collection on water and sewerage services and thereby improve financial recovery f) to strengthen the institutional capabilities of WD8 g) to prepare water supply and sewerage component designs for future implementations\. Project Achievements 7\.02 The project achievements in respect of the above objectives are discussed as under\. Service levels in Greater Colombo Area 7\.03 With the commissioning of Ambatale intake, modified treatment plant at Ambatale, Kolonnawa reservoir and booster pump house, water service in Greater Colombo area is expected to improve considerably\. The quality of water supplied from Labugama and Kalatuwawa has al30 been improved consider- ably after rehabilitation of headworks under Japanese aid in early 1986\. However, supply from these sources has been reduced by at least 0\.5 mgd on account of increased retention time in the sedimentation tank and the construction of a full treatment plant facilities at Kalatuwawa and Labugama respectively\.  7\.04 The sewerage service in Colombo Municipal area has been tremendously improved since commissioning of pump houses (new and renovated) and two sea outfalls\. CMC is in the process of soliciting application for property sewer connections within Colombo Municipality including newly sewered Mattakkuliya area\. At present CMC operates and maintains sewer system with its staff under the super- vision of toreign contr4ctors who are financed by WDB\. 7\.05 Sewer system in the new area such as Dehiwela - Mount Lavinia MC, Kolonnawa UC will become operative once issues are settled between MLGH&C, WDB and LAS\. In the mean time WDB is in the process of inviting applications from property owners in these areas for property sewer connections\. 7\.06 At present it is neither possible to dertermine the se'rvicc demand of property owners for connections in the severed area, nor the degree of improvement in water service in the project area as a result of commissioning the new intake and modified treatment plant at Ambatale\. Consumer MeterinRt/Meter Rectification 7\.07 The metering programmue carried out under First Water Supply Project (IDA credit 709-CE) had to\.face high incidentrm of consumer complaints on account of many meters installed (upto3o in some areas) being defective\. The public protests on defective meters and resistance to pay for the water billed excessively buscame so strong, that made GSL to intervene and order WOD to charge only a flat rate of Rs\. 150/u per mnonth from those consuemrs who complaint of excessive billing due to defective meters until all such meters are repaired or replaced with new meters\. It is therefore still early to predict as to whether consumer complaints will cease or reduce once the meter rectification is completed by March, 1987\.  - 60 - Billing and Collection of Water and Sewer Service 7\.08 WDB's revenue on sale of water which showed low figures at the beginning of 1'84 picked up an upward increase when WDB conmmnced disconnecting defa%4ters' supply mains\. The level of revenue collection there- after remained fairly steady until GSL compelled WDB to charge a flat rate of Rs\. 150/- from those consumers who complain of excessive billing\. WDB's revenue on sale of water is expected to improve once the ceiling on billing of above mentioned category of consumers is lifted and the necessary amendments in the Board Act of 1974 are made empowrering WDB to take stern action against defaulters\. 7\.09 WDB is now in the process of : a\. Soliciting applications from property owners for sewer connections and b\. Formulating a suitable tariff structure for sewer service\. It is therefore not possible now to indicate the quantum of revenue that WDB will receive out of sewer services provided in the project area\. Institutional Development 7\.10 Strengthening of WDB's institutional, financial and managerial capability was one of the main objectives of this project\. Since late eighties WDB has undertaken a large capital investment programme in the Project Area as well as other areas throughout the Island, financed by foreign donors, to improve service le-\. islandwide\. However, WDB has failed at the beginning itself to develop the financial planning expertise to carry out a proper evaluation of the impact of such large capital investment  - 61 - programme on recurrent operation and maintenance costs\. Most of the foreign donor agencies too fail to look into this aspect when they finance such projects\. The deep well programme that is being implemented by WDB under tho assistance of FINIDA, DANIDA and Japanese Government etc\. is a classic example of such projects\. 7\.11 WDB's deficit subsidised by direct and indirect GSL grants which escalated from Rs\. 34 million in 1980 to Rs\. 141 million in 1983 were reduced to Rs\. 127 million in 1984 and Rs\. 149 million in 1985\. Preliminary figures indicates a 1986 not loss of Rs\.288-million\. Further, WDB expects to eliminat, its operating deficit by 1987 and will be able to meet the financial covenant under this project by 1989\. 7\.12 WDB is heavily dependent on foreign technical assistance and support services in the implementation of major projects with the objective of strengthening its institutional capability\. WDB, in general has benefitted immensely from training and technical assistance provided under this and other foreign aided ppojcts especially in the area of project appraisal, implementation, finance and construction management and operation and maintenance\. 7\.13 The USAID project that is being implemented at a cost of US\. 19\.6 million is directed on the institutional strengthening of WD8 through amalgamation of Project Section and Non-Project Section, consolidation of supplies and stores units with finance to form a Commercial Section, and decentralisation of control and decision making and restructuring of the organisation from one oriented towards design and construction to one which will ba mainly oriented towards operation and maintenance\. Special attention is being paid to a) Management b) Human Resources Development c) Financial Accounting Practices d) Operation and Mainte- nance d) Commercial Activities f) Investment Planning and  Programming g) Health Ed4cation and Community Development and h) Rural Sanitation\. Under this project special emphasis is also given to- water quality control, process control, operational performance monitoring, public relations, maintenance ma)agement systems, maintenance workshops, transport and communication\. WDB and USAID consultants are now in the process of setting up Regionnal Support Centre in the Matara region as a model to implement the above mentioned objectives\. Once a RSCf is established successfully in Matara region it will be extended to the Kandy and Anaradhapura regions as well\. 7\.14 The bilateral assistance to WDB through GSL is also being given by Peoples Republic of China, Denmark, U\.K\., Finland, France, Federal Republic of Germany, Japan, U\.S\.A\., Netherlands, Norway and Sweden in amounts varying from US$\. 1 million to USS\. 10 million per project, to improve water supply and sanitation service level islandwide\. 7\.15 In July, 1986 IDA approved a credit of US$ 37 million to finance the Third Sri Lanka Water Supply and Sewerage Project (IDA credit 1700-CE) which requirel WDB to meet its recurrent costs in the Project Area by a combination of increased service charges and subsidies from GSL\. 7\.16 In November, 1986 ADB approved a loan of US$ 37\.5 million to finance rehabilitation of 30 - 40 water supply schemes to serve a population of 800,000 in various parts of the island\. The project will optimize the use of existing facilities through rehabititation and provide some new facilities with minimum investment\.  - 63 - 7\.17 Man power shortage in WDB was aggra&wted by the loss of senior professional staff following civil riots of July, 1983 and the subsequent unstable political situation prevailed in the country in the wake of terro- rist activities in the North and East resulting in constraints in its execution and management capability\. This combined with WDB's change of emphasis from major construction activities to rehabilitation of existing facilities and operation and maintenance activities is meant that the senior management to spread itself much more thinly to address opeL zion and maintenance, finan- cial and commercial activities in addition to the manage- ment of capital investment prograinue\. 7\.18 The water supply and sewerage component design works undertaken and are being carried out by various consultants will provide the basis for the implementation of IDA assisted Third Sri Lanka Water Supply and Sewerage Project\. The details of works and consultants employed under the Technical Assistance Programme, is presented in Annex\. 7\.  - 64 - VIII CONCLUSION AND LESSOr5S LEARNED 8\.01 The project will be of tremendous use in improving water supply and sewerage services in Greater Colombo area, but these objectives have been achieved two and a' half (2h):\. years later than the appraisal time and at a much higher cost than the original estimate\. 8\.02 In retrospective, the original four and half years project implementation schedule was overly optimistic as demonstrated by the two and a half (2h) years delay in completion\. 8\.03 From the previous chapter it could be inferred that a detailed study of various categories of contractors available locally and abroad and preparation of a prequali- fication of such contractors list would ensure that a project is completed within the stipulated time\. 8\.04 The selection of consultants for engineering design work should be made after a detailed study of consultants' performance and experience in a country like Sri Lanka\. In the present system of appointing consultants, there is no guarantee for designs carried out by consultants and further there is no way of assessing the success of their designs until the project is completed\. 1\.i order to have some form of guarantee on the works of consultants a clause should be included in consultants' agreements for insurance cover or for delay of release of retention money until the project is completed success2ully\.  - 65 - 8\.05 The Bank's relationship with the WDB was good throughout the project execution period\. The IDA supervision mission inspected the project generally once in every three to six months (Annex\. 16) to assess the progress achieved upto the time of such visit and to detail short term actions that needed priority before the next visit\. Bank staff worked closely with WDB during such supervision missions\. The comments made by IDA staff at the end of each supervision mission have been very useful to WDB in taking appropriate steps to improve WDB's institutional, management, financial and operational capability\. 8\.06 Project financing and WDB's financial performance were the Bank's major concerns during project execution\. Covenanted rates of return were optimistic and the covenant along with the project financing plan should have been modified especially after Bank's experience with WDB on the First Water Supply Project under credit 709-CE\. The Bank continuously pressurised WDB to take appropriate measures to improve WDB's performance on institutional, management, finance, metering, billing and collection and operation and maintenance of water supply systems\. 8\.07 The procurement procedures involving Cabinet Appointed Tender Board need to be reviewed to ensure a quicker selection on responsive bids\. 8\.08 The major lesson to be learned is that projects that need financing by the Banks should be selected jointly by the Bank and GSL/WDB after carefully considering their merits in regard to priority, needs and viability\. The financial incapability shown by the Dehiwela - Mount Lavinia MC and Kolonnawa UC to meet recurrent cost of operation and maintenance and loan repayment for sewerage service amply demonstrates this point\.  - 66 - 8\. Augmentation of water supply will be of no use if no adequate measures are taken to (a) minimise the waste in the system by systematic teak detection programme and (b) install bulk meters to determine the quantity of water supplied to various zones in the system\. 8\.10 Cost over runs and design changesenountered in the course of project implementation calls for adequate detailed preparation and cost estimate before project appraisal\. 8\.11 The importance and necessity of social economic surveys in the project area to determine water supply and sewerage service demand pattern was again amply demonstrated by the apparent financial incapability shown by the Dehiwela Mount Lavinia MC and Kolonnawa UC to meet recurrent cost of operation and maintenance and loan repayment\. 8\.12 The project also illustrated the needs for greater selectively in assessing contractors' and consultants' capability based on their past experience to undertake jobs of this nature\. 8\.13 More consideration:nnthe size of civil works especially on water supply components would have had wider and better international response which would certainly have improved project implementation\. 8\.14 The importance and need of project co-ordination and- planning was not fully realised by WDB \.at the out set which resulted in delays due to land acquisttion problem, lack of access to sites, delayed approval for road excava- tion, railway and bridge crossings etc\. delayed power supply to the State,agency and related problems  - 67 - Figure 1\.1 / Se km \. 4< \ t ~~~~BAY OF 'BENGAL IULF OF MiANNAR \.6 QCuN ~ ~ ~ ~ ~ ~ ud u 790hl 0 { SAnE SRI LNA WATERl FiSP Bm S R EP E LOCATION OP THE PROJECT AREA 1GO IlaINO-H kJETAE COLO~~~~~~~~~~\.  IQURR 2 - say Of BENGAL TOWER a moos~~~~~~~~~~~~~~~~~~~~Ar RESERVSIR CHUC HILM a TRASMISSON AND ^RTREATMENT PL A CL \. s t> IR p tr : kOLL Am- rwATE T IS RAWA U / J/FROM KALATe WAWA \ I / \ ~~~~~~~~~LASUGAMA RESERVOIRS KIRILLroAP i;p i/7/ PUMPING STA TIt N IAER RESEROI4 WELLAWATTE UMI TA\T *ON , OEHIW^^ * (WAq RES E MOUNT - T \.\7IFO 4AU4 LAVINIA : \ LAIBUGAMA \ < /) ~~~~~~~~~~RESERVOIRS \. 2 t ~~~~SRI LAN KA % >\ 1 ~~SEC>ON WATER SUPPY8 5SWERAGE PROJECT \> \ ] 6~~~REATER COLOMBO AREA WATER SOURCES \ 5 9 ~~~~TRANSMISSION ANO TREATMENT fACIUtIES MORATUWA R E S \. E~~~~Fxlimno Trtr?anqtsc Second ProJect CE 1041 \5~~~~~~~C 11311 Treatmont Pleft wP -5 'b3 IBt O~~~~~~ Pumping Statione MORATUWA C3 09 < Z RZesrvoirs \\]xEM\S/ ° _\._\._ ~~~Water Main$ 5&t<\ l|\t77 = F ~~~~Service Arears *@4s \\ \> r5 > <; _ _ ~~~~~~~~~~~MuniCiPel Council { 5,,\gX \ Ce >_; ~~~~Boundorles INDOIAN OCFOAN 0,t\ MRo0xt \x\> : ~~~~~~~~~Railways \. PAllAWP\.RA] Kibmeters 0° 2 3 4 \. RESERVOIR M iles 0 3  - 69 - FIGURtE 2 2 NOTHMRN OUT FALL >, /Q>R C/ SCALE 1 50,000 INDIAN ~ ~ ~ ~ ~~~DAP HADOUR I 5 tM-Ti F ~ ~~~~~~~ --- NEW ORC MAINS / //CS-4 t / Ac j ISLANT NG PVAPSATION POLWATTE ~ ~ ~ ~ ** XSTN UM TAIN CSLLArTT SECNE- SR LN WATER OCEAN E \CFM-T I | ! C"1-5+ ) 1 /M 5 LEGEND S BAaBLAPTURtAY = EXISTERO SEWER LIE O C tSEW \; , NEW SEWERS tN COLOMBOt ^ ---- NE FORCIE MAN AREA\ tt v * NEW PUMP STATIONS >9ws~~~SO PUMPOGSTATION (1 EXISTING tP JMSTATIONS CflX 9 \t ytr r~~~~~~ EXISTING PUMP STATINS SOUTHERN w LLAWATTE SE CO NED S Il LAN KA WATE R 6UTr fALL '-SUPPLY &f SEWA RAGE ' |\ ~~PROJECT SEWERAGE WORKS IN COLOMBO MUNICIPAL-TY \. ~~~~~AREA*  - 10 - PIGURE 2 a FIGURE _E J ANGA SCALE 0'1150 ~~~~~~~~~~~~~~f: PUMPING STATION L EGEND _ \. _\.,,___ COLOMBO MUNICIPAL COUNCIL SOUNDARY *\. - - DRAINAGE BOUNDARY -@----~- ' EXISTING SEWER LINES NEW SEWER LUNES * PUMPING STATION SECOND SRI LANKA WATER SUPPLY a SEWARAGE PROJECT SEWERAGE WORKS IN - MATTAKKULI'YA WITHIN C*M*C AREA  N\. e~~~~~~~~~~~~~~s TIEXTU- C BOUNDARIES LEGEND~~SEF~AE OKSI FOCTO MAIN STTO HUPN At AON dOV SEWRAGTPRJEC \.O AKOLONNAWA URBAN COUNcI ARE a  LEGEND SEWER LINES - -- - FORCE MAINS DRAdNAGE AREA OUNDARES ( LQdRINAGE AREA NUMBERS _ PUMPING STATION INW) TO OUT FALL HEAD WORKS AT WELLAWATTA -~ ~~ - 'iVD14JV EA ly - SECOND SRI LANKA WATER SUPPLY CA a SEWERAGE PROJECT- SEWERAGE WORKS IN-DEHIWALA Mt- LAVINIA MUNICIPAL COUNCIL AREA  - 73 - SECOND SRI LANKA WATER SUPPLY a SEWARAGE PROJECT-COMPLETION REPORT CQONSTRUCTION-SCHEDULE- APPRAISAL & ACTUAL rio s\. CALMAR tAN* \."0 sN oE LAMA # ro* 19 S13 | 43 4 |15 5 I6s 9 \.955 I A\.rScA n lost I go -gas ' I, 6 , I ,, \." Tel _ 31_ _i_ $I2 ,, ,14 I jai_ 141 3 , T 3 3 4 4 MAEIN ITU TN NhhSO MAM _____ _______i_ _ _ _ _ S PmooiPillN8 IPO STAMIN Np * ~ ~ ~~ ~~~~~~~~~~~~~_ _ I , _ , "4t1"4"^ _ _ I I iS * C~~IOSAIS OUTFALLS "41"~~~~~ _ ____=| APO" AISAL ACTUAL ~~~~otiug estRieoto,ost n , l \.w S APPR OVAL assme 6100t11 a coweacy A%owA (t3YiZU _Soo a coNTACT wAAst_ ~ml=on MATS RIALS a iOJilpmeN? maNVPAC?unE M--I ~I,I\.ThIALS & E0OWPMSN? MANUPACTJU SUPPLY 4, VISIALLAIION SUPIDLY 0 INSTALLAlTION MPZA=Lf CIVIL WORKS COWS?RUOCTIU O= cviL WORKS CONSTRUCTION  THE SECOND SRI LANKA WATER SUPPLY AND SEWERAGE PROJECT\. PROJECT COMPLETION REPORT ORGANIZATION CHART OF THE NATIONAL WATER SUPPLY AND DRAINAGE BOARD-IN MAY 1980 THE MINTRY OFLOCALGOVERNMENT L HOU3NO AND CONSTRUCTION\. |THE ATIONAL VATERSUPY ANDDRANAOE BOARD \. CHAIRMAN OF THE BORD! * r- 1'* AUDITOR GENERAL MANAGER LVOR SHOS AN D = SOUTN Wm COAST tA A 9 U~~~~~IAMIISRTIN FtNANCE DEj SS TNO CE SlOUT SENIOR P\.O \.OP ECU SUPL I Q o Nm RPWS WAE SEWER\.I GrNM REIkY\. REIOM IWG CETF r;i 7Lad LI \. 1 PROJECTI~~~~~~WET EC EM AG a - a*reC G, E Manag\. CE - C EgI_ RPYtS - Rra PIed W E_upl GCW- Groun We_ DGU- Depal Gnr Mmnege\.F  * NATIONAL WATER SUPPLY a DRAINAGE B6ARD ORGANIZATION STRACTURE a_marl C LOCiS GOVT INGUUS_ j CO"STRUCTON | El $ s 0 a MA<L Fl"T\. _ T&T ot _e LEsSmIIIILS*' nuascl PUAL - i low ItX ^"L "" ~~~~~~~~~~~~~~~ V\.04*M T om F A-4-0 1 r -Aa as r\. mm\.~ ~~ I "_Trl x \. , \. ~~~~~~~~~~~~~~~~o ew 36W w $CT~~~S\. ::Izz\.- \. rizzj L~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I~~~~~~~~~~~~~~~i] 3*113~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~  SECOND SRI LANZA WATER SUPPLY AND SEWERAGE PROJECT PROJECT CaOPLETIO REPORT PROJECT ELEIENTS *ITBSE OF WORKS INPL NIED UNDER SFD LOAN 11130 COMPONENT LOCATION I AT APPRAISAL ACTUAL FUNCTION SIZE/CAPACITY SIZE/CAPACITY 1 WATER SUPPLY GREATER COLOIIBO AREA 1\. River water intake \. South bank of Kelani 305 mid (67 Imgd) capact-JIntake structure capacity To extract water from pumping station Ganga at Ambatale adja- ty intake structure\. 305 mid\. Initial pumping Kelani Ganga and convey cent to the existing Initial pumping capacity capcity 129\.6 mid it to A batale treat- intake to be 130 mld I _nt plant 2\. Rivur water main & Main from intake at Kel 1200 ms dia\. 800 m long '1200 -m dia D\.1\. pipes To convey raw water from flow distributor Kelani Ganga to Ambata- 0\.1\. or steel pipes 305 1627 m long\. 305 mId rein- Kelani Ganga intake to to treatment plant\. Id (67 ImgdI reinforced f orced concrete flow &Pubatale treatment plant rlow distributor at oncrete flow distributor distributor and to distribute the Ambatale treatment plan flow to existing & new a re treat\. ment units 3\. Settling tank Ambatale treatment tank 122 mlid (27 mgdl concrete 02 Mos\. 40 m die\. * 7 m T clarify the chemscd- _ ettling tanks 02 Mos\. ieep concrete settling ly treated raw water ;ach 40 m dia\. * 7 m deep\.tanks\.capacity of 122 mid rior to filtration\. o increase the total 27 mgd) settling tank capacity to 307 mid ('I Imgd) 4\. Rapid sand silters A-batale treatment #4odification of existing Modification of existing ro produce clear water lant 12 Nos\. filters to allow a12 Nos\. filters to filter for conveying to the ,igher rate of filtration\.204\.6 mld (44\.9 lmgd) Jreater Colombo distri- |Ipgraded capacity to be I ution system\. 305 mlid 45 lmgd) [ 5\. Chemical facilities batale treatment sncrease the chemical feedlIncrease chemical feed aid in water treat- plant fapacity to cater the Icapacity to cater expandedinent and prodoce a expanded plant capacity by plant capacity by install-disinfected non corro- installing additional xng ad l\. chlorinators, sive treated water\. 3> chlorinators\. alum pumps, alu 6 lime pumps & equkp- lime pumps, mixer and mnent\. a associated equipment " i i i~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1\. \. } ^~~~~~~~~~~~~~~~~~~~~~~~~ I I~~~~~~~~~~~~~~~~~~~~~~~~~~~l  SECOND SRI LAMA WATER SUPPLY AND SEWERACE PROJECT PROJECt CO0PLETION REPORT PROJECT BLU909!ff--\.- *ISms Or WORKS DOPLEHENTED U14= SFD LOAN 1/130 CONPOWENT LOCATION AT APPP'ISAL ACTUAL FUNCTION SIZE/CAPACITY SIZE/CAPACITY 6\. Treated Water pumping A now pumping station Extension of the oxistin Ext-nsion of existing To transfer water from stations at Asbatala treatment reinforced concrete reinforced concrete pump Ambatele t&eetmeet plant pumping station to acco- station to accomodate 4 plant to Kolonnewa modate 4\. pumps\. 3\.ps ps, -pumps\. 3-pumps of capaci- reservoir\. having capacity of 30 ml ty 30\.5 old 6\.7 Ingd) to be install od initially\. 7\. Treated water transmis- irrom Ambetale water 500 _ & 600 _ dia\. 7 k 500 & 600 _ di&\. D\.I\. To convey water from Sion main aing station to long\. D0I\. or steel pipes pipes 6782 m long\. Capaci Aabetale treatment Kolonnaw reservoir to lay below ground\. ty of transmission 360 plant to Kolonnawa Capacity of transmission old (6\.7 Imgdl reservoir\. to be 30 mid 16\.7 Imgd) 6\. lolonnaw reservoir Kolonnawa Rinforced concrete stor- Reinforced concrete stor- ITo provide storage g tank with a capacity age tank capacity 6\.3 mld capecity from which to f 11\.0 million 1\. Dimon- dimensions 44\.55 m x 23\.85supply to the existing ionsere 43 u dia\. 6 7 m x 8 a wat-r towr\. eep 9\. Boost-r pumping station Adjacent to the reser- einforced concrete pump- Relnforced concrete pump iTo transfer water from voir at Kolonnawa ng station\. To be insta- *tation to instal 4 pumps Kolonnawa reservoir to led with 4 sets ot pumps Nos\. pumps with capacityexisting\.water towers sign capacities - 7\.3 \.257 old to pump water t A' and ''\. Id (1\.6 lmgd) to be pum- tower GI 1 2 Not\. pumps d to tower 'A' & 16\.3 1apacity 16\.156 old to Id (1\.6 Imgd) to be pum- sower G2 to tower 'B' | 10\. Transmisiton mains e rm Xolonnawa reservoir 00 m and 500 _ die\. 2\.900 no 500 _m die\. 2544 po_convey water from o distribution system long 0\.1\. or stoel long 0\.1\. pipes instal- Ilonnawe reservoir to ipes to be installed ad below ground lieter tower 'Al and to elow ground I Kolonnawa distribution system\. \. \.~~~~~~~~~~~~~~~~~~~~~~~~~~~i  S5m0ND SRI L1iA WATER SUIPPLY AND SClWAGE PROJECT PIOJECT Cl4PL3tIOI REPORT *RJCT EITNS *ITES OF WORKS IHPLIETD UIOE6 SFD LOAN 1/130 CONPWI%T WOCATION | AT APPRAISAL ACtUAL FUNCTlON SIZE/CAPACITY SIZE/CAPACITY SWERAGE COLON8O 1\. Seterage collection Colombo Reconstruction of 4\.5 km Reconstruction of 4\.5 km Collction and trensmis\. system of existing sewers of existing sewers & sion of sevage (sixes varying from 300 construction of 13 km of _ dia\. to 1600 _ di-\. ' sewers sizes varying fron and cinetruction of 15\.3 700 _ to 1600 no km of sewers (sizes vary ing from 300 to 800 _ die\.) to cater for a designed population of Sewage pumping ~~~~~770\.000 eitn upn 2 * sewage pumping lModifications/improvemen Hodifications/iiprovemen-i stations (SFD i/130) ts to\.existing pumping ts to existing pumping stations stations Northern outCall Nadampitiya 324 mid Madampitiya 324 mid Harbour 121 oid Harbour 121 mid maligawatte 12 mId laligawatte 12 mid Colloction of sewage Vystwyke 39 mId Vystvyk* 39 mId frao Colombo Hunicipal- Southorn outfall Borella 104 mid Borella 104 mid ity and convey to ocean Thimbirigasyaya 104 mid Thimbirigasyaya 104 mld o\.tfa Polvatte 131 old Polwatt* 131 mld Sabalapitiya 40 mid Bambalapitiya 40 mid Wellawatte 19 mid tellavatte 19 mId S 8 Construction of a new Noev pumping station with pumping station with a 432 mId pumping capacity capacity of 432 mId\. 3\. Sewage force mains Colombo Construction of D\.1\. forc*Conutruction of D\.1\. forcoTransmission of sewage Imains of 16 km long, die, mains of 17\.466 km long\. to ocean outfalls |varying from 400 an to dia\. varying from 400 to 11500 1 1500 - 4 ocean outfalls jColombo North Construction of two rein- 2 No\. reinforced concrete Disposal of sewage !1! (SF0 1/130) jColombo South forced concrete ocean ocean outfalls 1500 m l ~~~~~~outfalls ISOO mmdia\. & di&\. 2 km 6 1\.4 km long o 2 km & 1\.4 km long respec- respectively tively  SECOND SRI LANKA WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT PROJECT ELEMENTS *ITEMS OF WORKS IKPLEMENTED UNDER SFD LOAN 1/130 COMPONENT LOCATION | AT APPRAISAL ACTUAL FUNCTION ____ _ I SIZE/CAPACITY I SIZE/CAPACITY KOLOtAWA S\. Sewage callection Kolonnawa Construction of sewers Construction of sewers - Collection bfsvwagn -- system 5\.5 km long to cater for 17\.56 km long with dia\. from Kolonnawa 'a designed population of varying fro 200 - to 49,400\. Dia\. varying 250 m from 200 _ to 250 - 6 *Sevag* pumping station Kolonnwa Construction of 3 sewage Pumping stations with Puoing sewage to Colombo (SP0 1/130) pumping stations with capacities 4\.2\. 4\.7 6 3\.7 sewage disposal system capacities of 4\.2\. 4\.7 were constructed\. - & 3\.7 mdd\. 7\. Sewage force mains Kolonnawa Construction of V\.I\. 0\.1\. force mains 1\.93 km STrnamission of sewage _ force mains I km long long with dia\. varying to Coloebo sewage dispo- with dia\. varying from from 100 -to 150 m al system\. 100 me to 150 - MOUNT IAVINIA 8\. Sewage collection Mount Lavinia Construction of sewers Construction of sewers Collection of sewage system of 20 km long with dia\. 22\.588 km long di&\. from from part of of Mount varying froa 200 - to 200 m to 600 - Lavinia 600 m to cater a popu- lation of 39\.000 9\.-Sevage pumping station Mount Lavinia Construction of 2 sewage Construction of 2 No\. Pumping sewage to South- (SFD 1/130) pumping stations with sewage pumping stations\. ern outfall capacities of 22 old & iCapacities 45 & 22 mId 45od Io 10 Sewage force main -ount Lavinia Construction of 3\.3 km Construction of 3\.4 km Transmission to South- ID\.I\. sewer force mains long D\.I\. force main dia\. *rn outfall with dia\. of 250 m to varying from 250 _ to 400 m '400 _s I_~~~~~~~~~ I -\. ~ ~ _ _- _ __\.I\.7--_\.  Annexure 3 Page 1 of 2 SECOND SRI LANKA WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT COMPLETION DATES FOR MAJOR PROJECT COMPoNENTS PROJECT C WI o1 W APRAISAL ACTUAL A\. WATER SUPPLY 1\. River intakes and transmission mains i\. Material & equip- September 1983 January 1987 ment manufacture, supply S installation ii\. Civil works March 1984 January 1987 construction 2\. Ambatale Treatment plant and pumping station i\. Material & equip- March 1984 January 1987 ment manufacture, supply & installation ii\. Civil works December, 1983 December 1985 construction 3\. Kolonnawa pumping station and reservoirs i\. Material & equip- December 1983 January 1987 ment manufacture, supply & installation ii\. Civil works June 1983 January 1987 construction B\. SEWERAGE 1\. Sewage collection system i\. Material & equip- Jure 1983 September 1987 ment supply ii\. Civil works J4a\. 1984 September 1987 construction 2\. Sewer Renovations i\. Material & equip- March 1982 September 1987 ment supply ii\. Civil works June 1983 September 1987 construction  - 81 - Annexure 3 Page 2 of 2 PROJ3C CKOIU APPRAISA ACTUAL 3\. Sewago pumping stations (under Saudi Fund) i\. Material & equip- ment supply June 1984 May 1986 ii\. Civil works construction March 1984 May 1986 4\. Ocean outfalls (financed by Saudi fund) i\. Material I equip- ment supply June 1983 December 1986 ii\. Civil works construction June 1984 December 1986  SECOMN SRI LA1EA WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REtfORT scREOLE or CONTRACTs I CONTRACT AWARD I S IGNED CONTRACT COMPLETION CONTRACT AWARD ICOtNTRACT - _ _ _ _ _ _ _ _ _ _ _ _ _ _ CONo\. C T DESCRIPTION EDATE ITO I\.D\.A\. AGREEMENT ED !ACUALLT LOCAL FOREIGN COST (DAT8\. (DAtE) 0 (DATE) 1COMPLETEDCONSR18U FUU1X U\.S a , _ __ I ___ ____ - i --- - TEk _ {DbTEIT )t7L0"_"\.,_CU1ONI6 WMCY EOUIY ANS 10 Procurement of pipes, 11 )4arJ 125 Hay 11 Sp pt 125 Jan\. 25JAd i672\.483/, J r\. f171,055\. fittings & valves for raw 1982 * '1982 11982 !1983 1981 , - 2il 161 6f 0j water pipe line & tran1- missFion!! 11 Construction of raw water \. May 117 June 25 Oct 30 June 30 Jan\. ;9058,8321jNil |Nil _ plpq\.' inz & transmission 1983 1983 1984 1986 11987 12 Procurement & installa- 22 Feb\. 121 May 10 Feb\. 30 June 131 March 1,100,00011\.Rs\. 1\.056 5464 tion of raw water intake 1982 :1'2 1985 1986 11987 i8\.940\.082/\. pump station 13 ,Construction of raw water 2j Feb\. \.21 May 17 March 'Terminated 29\.528\.4S2k\. intake pump station 1982 1982 1985 on 17 Apr\. 1I6S,439\.45 t 198S do - ;2 July 9 Aug 17 July 2 March Terminated22,117\.055Nil INil (Reawarded) 1985 \. 1985 1985 1986 -on 27 Jan\. \. \. \. I I~~~~~~~~~~~~~~~~~~~1986 -do- 20 May 10 July 30 Sept\. 31 Jan\. 31 March 25,000,000Nil Nil 1986 1986 1986 1987 1987 14 Supply i installation of 14 June 3 Oct\. 4 June 31 March 31 Jan\. Nil IPs\. 379,901\.29 of mchanical & electricall983 1983 1985 1985 1987 3,940\.090 \. equipment at Ambatale clear water pump station & Kolonn-wa booster pump i ffstation!' 15A 'Construction of Kolonnawa 26 Oct\. t 3 Dec\. '31 Oct\. TrminatedlS,S71\.754/95 Nil ,Nil 'reservoir 4 booster pump 1982 \.982 1984 on 31 Oct\. station 1983 - do - 20 Apr\. 24 Sept\. 28 Feb\. 15 July ,31 arch 10\.671,802Nil Nil 1984 1984 1985 1986 j1987 revised to 11\.036\.557l I on 13\.2\.64 158 iConstruction of Ambatale \.26 Oct\. 20 Dec\. 126 Oct\. i0 Sept\. 131 Jan\. 904 192\.90Nil Nil iclear water pump station \.1982 1982 \.1984 1985 11987 l\. I I i I I 1  SECOND SRI LANKA WATER SUPPLY AND SEWeRAGZ PROJECT PROJDCT COMPLETION EPOCtT ___________________ SoIEDE EOF CONTRACTS_ _ _ _ _ _ _ _ _ _ _ _ \.~~~~~~~~~ __ CONTRACT AWARD SIGNED CONTRACT COMPLETION CONTRACT AARD NO\.SRAC1 DESCRIPTION DA I\. TO I D\. A\. jIGREEMENT ED ACTUALLY LOCAL roSIS COST L_NO\. ( IDATE) (DAr) (DAME) COMLETED ,ONTRIBU- EUTr5 U\.1S\.* 16 Installation A construc- 30 Aug\. I 13 Dec\. 30 Aug\. 31 June 31 March 14,431,5 1U\.S$\. 2\.14S,65S\. I tion of Aataln treat- 1982 1982 1984 1987 1987 2,146,65 \.60 60 snet plant - modificatin S\. OutIme!on 103 laying-of -saer\.melns\.-! 1\. Oct\. I9 Nov\. 14 Sept\. 4 July 30 Sept\. 110,667, 9 C\.S 1\.408,529 force mains 1982 1962 1985 11986 1967 27,24,8< \.73 112 Sewr cloening eqdipmnt t 12 Aug 22 Sept\. 10 Oct 10 Oct\. 90,725\.4 U\.S\.$\. 522125la DSFD 1982 1982 a1963 8193 I 522,125/ 1/130)118 a1 101 Construction of ocean 29 June 4 July 31 Hey 31 HNy 31 Dec\. 156,714, 0 L 4,3S9,S77/ ISFD outfalls at Colowbo Morth 1983 1983 1966 1986 1986 2\.729,004 co 1/130) | Colo South 1 I \.1 102 Construction of sewag 29 July 5 19,969,715U\.S\.$ (SF0 syitem pt~~~~~~ stat ~~19 Oct\. 1 Aug\. a31 Une 30 June 9\.6,IlS\. 11\.440,474 (StrD eyet"t pumsp stastions at 1982 1982 1965 1986 1966 1t\.440\.47 1 )30) Colombo, Kolonnawa I 4 I Mount Lavinia I I I I \. \. ; \. | I :1¢~~I \.~~~~~~~__ \.I\.,\.1,,__ i *0*~ ILw t i i:- I I --l 1 ! :1 1- 1 1 \. \. ~ ~~~~ \. --  SCOIO SRI LAIA WTER SUPPLY AMI SEUMRA4G PROJECT PROJECT COMPLETION REPORT SCHEDULE OF CONTRACTS -AWARDED 6 SlGD R 1/9/6 CONtRACT AWARD SIGNED CONTRACT COMPLETION COITRACT AMARD 409RC I CONTRACTI ICOITRAC ,EStRIPTSON DATES 1 I\.D\.A\. -AGREEMENT XTZND&O ACTUALLY !LOCAL FOREISN COST NO\. (DATE) (DA'E I DATE1 |COtPLETED CONTRIBU- U 5 ! ~ ~ ________ ____ ;_ _____el_ J\.DATE\.L RS ilRREI@C 00!VXL T&C/CSA4 icro cotwutecs j 26\.6\.P6 I I 13\.6S\.96 26\.9\.86 26\.2\.87 12\.74\.500 Nil "it 141/866 *T&C1190 Supply * inetallatiqn of 23\.9\.86 i 3\.10\.86 23\.1\.687 24\.2\.07 1423\.002/ 1 \. 170\.6t0/- /06 g ors F 119,602/ T&C/CSiJ Supply of water meters 22\.9\.66 3\.10\.66 jZ12\.86 t31\.1\.87 11,062,244L b\. 205,000/\. 209/86! 621\.6 16 \.1 ! ~ ~~~~~~~~~~~~ , I I\. i I TC/PDSupply of vehicles for 26\.9\.06 3\.10\.86 26\.1\.87 117\.4\.87 88\.000/\. JY 90\.000/- 210/86 P III consultants i 12,786\.800 6C/P&q,/Supply of air condition- 26\.9\.36 3\.10\.66 30\.9\.86 7\.11\.86 115\.1\.87 213\.750/- Nil il 211/1p6 *rx for P III consultants 26\.9\.86 T&C/CS) Rectification of water 22\.9\.86 3\.10\.86 31\.3\.87 122\.3\.87 1\.S65\.864! Nil INil 225/66 meters Unit I SLSP/GJ NReinstate\.mnt of road* 24\.7\.86 i 4\.8\.86 1 28\.2\.87 t 1\.6\.87 153\.148,053; Nil Nil /RR/l damged due to trenching for laying of -pLp 'I line in Mt\. Lavinia S Colombo areas TGC/CS4 Rectification of water 22\.9\.86 3\.10\.86 31\.3\.87 1 - 22\.3\.87 1,641\. 976 Nil Nil 226/861 meters Unit 2 * T&C/CS/ Rectification of water 22\.9\.86 3\.10\.86 31\.3\.87 - 22\.3\.87 1,010,680 Nil Nil x 227186 meters Unit I 2 6 T6C/CSd Rectification of water 22\.9\.86 3\.10\.86 31\.3\.87 - 122\.3\.87 1,648,030 Nil Nil 228/86 meters Kotte I L t T&C/CSO Rectification of water 22\.9\.86 2\.10\.86 1 31\.3\.87 - 22\.3\.87 83,3N0 nil aill 229/66w mters Dehiwla \. 36I\. T6C/CS! Rectification of water 22\.9 86| j 3\.10\.866 31\.3\.87 - 22\.3\.87 I 706,980; Nil Nil 230/86 meter\. Noratuva \. *I - I - * this contract could not be funded under tis credit 41-CE n the suplier coulI not delijor the sbfor 31 3\.8 | under 1this _____ ~ ~ ~ ~  SECOND SRI LANKA WATER SUPPLY AND SANITATION PROJECT PROJECT COIPLETION REPORT ESTIMATED AND ACTUAL PRC\. CT COSTS Appraisal Cost Actual Cost Increase/Decrease Item Local Foreign Local Foreign Local Foreign Remarks Rs\. M\. US$\. M\. Rs\. M\. US\.-M\. Rs\. M\. US$\. M\. A\. WATER SUPPLY Section A CIVIL VORKS In aII cases actual cost Includes B\.T\.T\. Intake, liver water transmission and treat-ent Intake a pumping station 11\.0 0\.2 61\.0 0\.02 +44\.0 -0\.18 Transmlssion 4\.0 - 3\.1 - - 0\.9 - Treatment 17\.0 0\.2 17\.1 - * 0\.1 -0\.2 Completion certificate Lssued provision for balanc Treated water payment to be used from transmission foreign appraisal cost US$\. 0\.2 Ambatale pumping station 1\.0 0\.1 1\.0 - - -0\.1 Transmission mains26\.0 - 12\.2 - -13\.8 - C Koloanawa pumping station & reservoirS\.0 - 8\.2 - + 0\.2 - 0 n Sub Total 73\.0 0\.5 102\.6 0\.02 +29\.6 -0\.48  SECOND SRI LANKA WATER SUPPLY AND SANITATION PROJECT PROJECT COHPLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS Appraisal Cost Actual Cost Increase/Decrease Item Local Foreign Local Foreign Local Foreign Remarks Rs\. M\. USS\. Mc Rsr M\. U\. M\. Rs\. M\. US\. H\. EQUIPlENT & MATERIAL SUPPLY Intake, river water " transmission & troat- sent Intake pumping station - 1\.6 - 1\.16 - -0\.44 Transmisison maine - 0\.3 - 0\.61 - +0\.31 Treat-ent - 2\.0 - 1\.78 - -0\.22 Treated water tranamisslon Ambatale pumping station - 0\.3 - 0\.15 - -0\.15 Transmission sains - 1\.7 - 0\.54 - -0\.16 Kolounava pumping e station & reservoir - 0\.2 - 0\.15 - -0\.05 r ' Sub Total - 6\.1 - 4\.39 - -1\.71 1w  SECOND SRI LANMA WATER SUPPLY AND SANITATION PROJECT PROJECT COMPLETIONI REPORT ESTIMATED AND ACTUAL PROJECT COSTS Appraisal Cost Actual Cost Increase/Decrease Item Local Foreign Local Foreign Local Foreign Remarks Rs\. M\. USS\. M\. Rs\. M\. USS\. M\. 9\. SElURAGS CIVIL WORKS Colombo Sewage collrction system 45\.5 - 177\.7 - *132\.70 - Pumping stations (under SID loan) 34\.0 - 19\.2 - - 14\.80 - ?orc, mains 12\.0 - 42\.4 - + 30\.40 - Ocean outfalls (undor SiD losn) 5S\.0 1\.8 292\.9 - +237\.90 -l\.a * Renovation of tlxpemditre against renove sewors 2\.0 - - - - 2\.00 - tIon of severs included in colloctlon & forco mair Kolonnava' n~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ U Sevage colloction a a syston I7\.0 - 43\.3 -7+ 26\.30 - * 4 Pumping otations " (under BFD loan) 8\.0 - 23\.4 - + 15\.40 - ° Force mains 1\.0 - \. 2\.3 - + 1\.30 - - _Cont\.dA\. -  SECOND SRI LANKA WATER SUPPLY AND SANITATION PROJECT - - -- PROJECT CONFLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS Appraisal Cost Actual Cost Increase/Decrease Item Local Foreign Local Foreign Local Foreign Remarks \. Rs\. N\. US$\. M\. Rs\. M\. US$\. M\. Rs\. M\. USS M\. 1 Mount Lavinia Sevage collection system 25\.0 - 20\.50 - - 4\.5 - Pumping station $ (under SFb loan) 16\.0 - 27\.30 - + 11\.3 _ a Force mains 1\.0 - 5\.40 - + 4\.4 - Sub Total 216\.0 1\.8 654\.40 - +438\.40 -1\.80 EQUIPMENT & HATIRIAL SUPPLY Colosbo Sevage collection system 1\.4 - 9\.04 - +7\.64 Pumping stations 0 (under SID loan) - 4\.5 - 10\.99 - +6\.49 Force mains - 3\.4 - 2\.82 - -0\.58 o Ocean outfalls (under SID loan) - 7\.0 - 1\.16 -5\.82 lenovation of sewers - 1\.9 - - -1\.90  SECOND SRI LANKA WATER SUPPLY AND SANITATION PROJECT PROJECT COMPLETION REPORT ESTIMTED AND ACTUAL PROJECT COSTS Appraisal Cost Actual Cost Increase/Decrease Item -Local Foreign Local Foreign Local Foreign Remarks \._\. _\. _ R\.s M\. USS\. M\. Rs\. M\. US$\. M\. Rs\. M\. U$\. UN\. Kolounawa Sewage collection system - OS - 2\.15 +1\.65 0 Pumping stations (under SID loan) - 0\.6 _ 1\.20 - +0\.60 Force mains - 0\.1 - 0\.11 - +0\.01 Mount Lavinia Sewage collection system - 0\.8 - 0\.85 - 0\.05 Pumping &tations (under SBD loan) - 1\.2 _ 1\.48 - +0\.28 Force mains - 0\.2 - 0\.30 - +0\.10 Sub Total 21\.6 30\.12 +8\.52 * - o c  SECOND SRI LANKA WATER SUPPLY AND SANITATION PROJECT PROJECT COMPLETIOH REPOCRt ESTIMATED AND ACTUAL PROCT COSTS Appraisal Cost Actual Cost Increase/Decrease Item Local Foreign Local Foreign Local Foreign RerI \. - Rs\. M\. USS\. 4\. Rs\. M\. USS\. M\. Rs\. M\. US$\. M\. - - C\. OTmZR ITES Spare parts, vehicles & oquipment - 2\.0 ^ 1\.0 - -1\.0 angine\.ring- - Consultants 4\.0 1\.5 - 1\.9 -4\.0 +0\.4 UDB 23\.0 - 23\.6 - +0\.6 - Technical assistance 22\.0 2\.4 1 6 t\.3 -20\.4 -1\.l Training - 1\.0 - 0\.2 - -0\.8 Land acquisition 15\.0 - 1\.76 - -13\.24 - Harbour charges 29\.0 - 0\.50 - -28\.50 - Motor rectification - - 7\.8 - +7\.8 - load reinstatement after pipe laying - - 153\.0 - *153\.0 - v Sub Total 93\.0 6\.9 188\.26 4\.4 + 95\.26 -2\.5 Total 'A' to 'C' 382\.0 36\.9 945\.26 38\.93 +563\.26 +2\.03 HI fl ,n _  SECOND SRI LANKA WATER SUPPLY AND SANITATION PROJEC'[ PROJECT COHPLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS Appraisal Cost Actual Cost Increase/Decrease - Item Local Foreign Local Foreign Local Foreign Remarks Rs\. M\. US$\. M\. Rs\. M\. US$\. M\. Rs\. M\. USS\. M\. D\. CONTINGENCfIES Physical A4\.0 1\.5(E30's) - - (- 14\.0) (-1\.5) Tb\. values of KiO's & Price 146\.0 7\.0(SSR's) - (-146\.0) (-7\.0) SSn* has boon included PriCe 146\.0 -- ~~~~~~~~~~~~~in the total value of Sub Total 190\.0 8\.5 - - (-190\.0) (-6\.S civil works\. e Total 'A' to 'D' 572\.0 45\.4 945\.26 38\.93 +373\.26 -6\.47 E\. CUSTOKS DUSY 177\.0 - 247\.0 - + 70\.0 - P\. TAXIS 10\.0 - - - - 10\.0 - TOTAL 759\.0 45\.4 1201\.26 38\.93 +433\.26 -6\.47 '* S o *  - 92 - AnteSur* 6 Page 1 of 2\. SECOND SRI LAN"A WATER SUPPLY & SEWERAGE PROJZCT PROJECT COMPLETION REPORT DETAILS Or DISDURSVIENTS - ESTIMATED AND ACTUAL IDA Fiscal Estimaced cumu- Percen- Actual cumu- Percen- Year and lative disburse tage lative dis- tage Quarter ments at end of bursoinont at quarter USS\. M end of quar- ter US$\. M 1980/81 March 31 1981 0\.2 1\.0 Nil 0\.0 June 30 1981 0\.5 2\.0 0\.0244 0\.08 1981/82 Sept\. 30 1981 1\.7 6\.0 0\.0244 0\.08 Dec\. 31 1981 3\.4 11\.0 0\.0867 0\.3 March 31 1982 6\.1 20\.0 0\.170 0\.6 Jutc 30 1982 9\.1 30\.0 0\.184 0\.7 1982/83 Sept\. 30 1982 12\.0 40\.0 0\.460 1\.5 Dec\. 31 1982 14\.9 50\.0 1\.493 5\.0 Marchi 31 1983 17\.8 59\.0 3\.572 12\.0 Jutme 30 1983 20\.6 69\.0 4\.822 16\.0 1983/84 Sept\. 30 1983 22\.9 76\.0 5\.018 16\.7 Dec\. 31 1983 24\.8 83\.0 5\.828 19\.4 Marclh 31 1984 26\.1 87\.0 6\.680 22\.0 June 30 1984 27\.0 90\.0 8\.482 28\.0 1984/85 Sept\. 30 1984 28\.4 95\.0 9\.885 33\.0 Dec\. 31 1984 29\.4 98\.0 11\.035 37\.0 March 31 1985 29\.8 99\.0 12\.847 43\.0 June 30 1985 30\.0 100\.0 '4\.110 47\.0  _ 3 - f 2 1985/86 Sept\. 30 1985 Nil 15\.755 53\.0 Dec\. 31 1985 Nil 17\.021 57\.0 March 31 1986 Nil 17\.386 50\.8 June 30 1986 Nil 18\.895 63\.0 1986/87 Sept\. 30 1986 Nil 20\.552 68\.0 Jan\. 31 1987 Nil 22\.849 76\.0 March 3\. 1987 Nil 28\.49 95\.0 June 30 1987 Nil 30\.00 100\.0  SECOND SRI LANKA WATER SUPPLY & SEiERAGE PROJECT PROJECT COMPLETION REPOtT TECHNICAL ASSISTANCE PROJECTS - FUNDED FRON IDA CREDIT 1041-CE Field of Specialisation Purpose of Assignment Period Served Accountants Operation & Maintenance March 1981 to Accounting assignment March 1982 X Engineering Solid Waste Management March - June Study 1982 Managemnt Advisor Management Advisor to the Jan\. - Dec\. Chairman of NWSDB 1983 Engineering Leak Detection Study March 1984 - Oct\. 1984 Advisor Studies on improvements of Oct\. 1984 Urban & local authorities (20 days) P c 0 Engineering Technical Advisor to the 15 March 1985 w Secretary of NLGHC to date  Field of Specialisation Purpose of Assignment Period Served Engineering Project III preparation Apr\. - Dec\. Greater Colombo Water 1985 Supply Improvements Engineering Project III preparation May - June Colombo Surface Drainage 1985 Engineering Project III preparation may - Nov\. Extension of Towns North 1985 & East of Colombo 'q Economlst Project III Social impact Aug\. 19B6 W & Economic analysis of (12 dbys) surface drainage project Engineering Project III preparation Sept\. - Dec\. Project co-ordinator 1985 Engineering Project III preparation Sept\.- Oct\. Anuradhapura & Ampara Water 1985 supply schemes Economist Financial E Economic Study Nov\. - Dec\. My 1985 q4 I *x I o 0 s  Field of pecialisation Purpose of Assignment Period Servsd Management Pfrformance, improvement of Jain\. - July Urban E Local authorities 196S Engineering Large scale base mappieg usg\. 1985 - in Urban local authorities Feb\. 19Sf Engineering Colombo Sewer Cleaning ei*pt\. - Dec\. 1986 Engineering Storm drainage record June 1986 - 6 drawings April 1987 1 Engineering Technical assistance & Sept\. 1986 - Project Management of Feb\. 1987 Project III work Valuers Fixed Assets register Oct\. 1986 Preparation to date Accountants Financial accountants for Jan\. 1986 Accounts division L manage- to date ment of commercial section of NWSDB L\.a U~~~  SECOND SRI LAMA WATER SUPPLY AM SEKAGE PROJC PROJECT COMPLETION REPORT NETERING DATA DURING THE PROJECT PERIOD IN -un GREATER COLOMO AREA Year Domestic Government Comm_rci&l Tourist Shipping Industrical Institutional Total End of 1981 6,196 - 1,104 15 63 25 7\.403 End of 1982 8,793 - 2,580 26- 48 678 11\.534 End of 1983 9,884 - 4,137 33 48 - 51 10,57) End of 1984 69,356 k126 9,178 98 25 379 537 80,717 End of 1985 75\.842 1\.230 8,\.971\. 87 50 381 737 87,296 End of 1986 80,255 1,284 9,054 82 48 376 749 93,000  SECOND SRI LANlKA WATER SUPPLY AM SEVRA PRW3Cr PROJECT COWPLRYIOSI RUORt WATZR P UC0 tIO1 & SUBDIG DATA DN GRBATER COLOMBO AREA DURIMN TE PROCT P3R1D0 Item Description 1981 1982 1983 1984 1965 1986 Noe Dsripon gals gals, gals\. gals\. gals\. gaIs\. I Total water production 1\.1 Ambatale 14034 x 10' 16318 x 106 16167 x 106 15808 x 106 16131 x 10' IS636 x 1\.6 1\.2 Labugama 4396 x 106 3790 x 1V' 3660 x 106 5271 x 106 3116 x 10' 4959 a 106 1\.3 Kalatuwawa 6094 x 106 4828 x 106 6117 x 106 6510 x 106 6819 x 106 5906 x 10' Total (gals\.) 24524 x 1o6 26936 x 106 25944 x 106 27569 x 106 26136 x 10' 26585 x I0' 2 Total Billed (gals\.) 1400 x 106 2031 x 106 2694 x 106 7165 x 106 12315 x 106 163713 x 10' 3 Unaccounted (gals\.) 23124 x 10 24905 x 106 23250 x 106 19824 x 106 13821 x 106 163713 x '0 4 P eentage Accounted 52\.565 61\.66 1 as S Total revenue billed (Rs\.) 11\.685\.000/a 33\.949\.198/- 33,226\.358/\. 177\.212,000/- 131,164\.000/- 171\.461\.000/ 6 Total revenue collected(Rs\.) 2,720,000/- 12,331\.106/- 13,746,620/- 150\.497,000/- 113\.000\.000/- 150\.497\.000/\. 7 Percentage collected 22\.88% 36\. 3 41\.37t 84\.9t 62\.371 27\.717 Note s Billing collectioms from the consumers (Domestic) was comenced only in 1964\. Prior to this only the Commercial consumers were billed\. Hence the unaccounted percentages are not given for the years 1961 - 1964\.  SECOND SRI LANKA WATER SUPPLY & SVNERAG PROJFVZ PROJBCT COMPLETION REPCRT GREATER COLMO LEAK DETBCTION 8RUY StIARY OF CHARACTERISTIC DATA - DURATION APRIL 1984 TO Dec\., 19" April - Dec\. Jan\. - Dec\. Jan\. - Dec\. NO\. Description 1984 1985 1986 Total I No\. of houses inspected 3,769 4i\.740 9,095 54\.604 2 No\. of repairs inspected 1,414 15085 3\.735 20\.234 3 No\. of standposts/public bath houses inspected 226 3,707 292 4,225 4 No\. of connections inspected 1,640 18,792 4,027 24,259 e 5 Leaks un-accounted for water a\. No\. of leaks 239 2,423 363 3,025 b\. Total leak sizo M3/hr 30\.8 424\.1 68\.3 523\.2 6 Leaks accounted for water a\. No\. of leaks 817 3\.939 473 5,229 b\. Total leak size M3/hr 38\.5 824\.7 87\.6 950\.6 7 Leak notices issued to consumers 756 2,114 297 3,197 8 Defects in meter installa- tion 82 2,545 689 3\.316 9 Nom of unmetered premises Not 1,648 652 2,300 recorded 10 Illegal tappings/meter by passes 55 250 83 388 \.~~~~~~~~~~~~~~~~~~~  SCOND) SRI LASKA WAM SUPPLY AM SWZRAGE PROJCT PROWJCt cowLz3?Z0 NPORY LOAN R PAWIUSW (M5\. WILLIOUI CmOa _ 756 inIa M\. WD1I - 101 _ - In SMDI ?tD ID,% 1041 CB SME)I 116 IDM 1041 C SNEDI FM M 1641 C cAulYWJEws CAPfl ~ SL CAL WAL L uEWJ ?aL CWIIIL DnU r CAP1L Pr mL 196 7\.25 19\.29 3\.42 24\.14 54\.10 0\.96 2\.57 0\.46 3\.22 7\.21 1\.4S 3\.L 0\." 4\.03 10\.62 1967 7\.91 18\.62 4\.76 30\.63 61\.79 1\.06 2\.48 0\.64 4\.06 8\.24 1\.56 3\.72 0\.96 6\.13 12\.36 1966 6\.64 17\.00 5\.53 31\.96 64\.01 1\.15 2\.39 0\.74 4\.26 6\.54 1\.73 3\.56 1\.11 6\.39 12\.0 1969 9\.44 17\.10 6\.04 31\.44 64\.01 1\.26 2\.26 0\.81 4\.19 8\.54 1\.89 3\.42 1\.21 6\.29 12\.66 m 10\.31 * 16\.23 6\.59 30\.6vi 64\.01 1\.37 2\.16 0\.88 4\.13 8\.54 2\.06 3\.25 1\.32 6\.16 12\.6 1991- -11\.26 -15\.2 7\.19 30\.29 64\.01 1\.50 2\.04 0\.96 4\.04 8\.54 2\.25 3\.06 1\.44 6\.06 12\.0 1992 12\.29 14\.25 7\.8S 29\.63 64\.01 1\.64 1\.9 1\.05 3\.5 8\.54 2\.46 2\.85 1\.57 5\.93 12\.tO 1993 13\.42 13\.12 6\.56 26\.9 64\.01 1\.79 1\.75 1\.14 3\.65 6\.54 2\.6 2\.62 1\.72 5\.76 12\.66 1994 14\.65 11\.69 9\.37 26\.10 64\.01 1\.95 l\.59 1\.25 3\.75 9\.54 2\.93 2\.30 1\.67 S\.62 12\.66 1995 16\.00 10\.52 10\.23 27\.24 64\.01 2\.14 1\.40 1\.36 3\.64 6\.54 3\.20 2\.10 2\.05 5\.45 12\.60 1996 17\.50 9\.04 11\.18 26\.30 64\.01 2\.33 1\.21 1\.49 3\.51 8\.54 3\.50 1\.61 2\.24 5\.26 12\.60 1997 19\.11 7\.43 12\.20 25\.26 64\.01 2\.55 0\.99 1\.63 3\.37 8\.54 3\.82 1\.49 2\.44 5\.0 12\.80 1996 20\.87 5\." 13\.32 24\.16 64\.01 2\.78 0\.76 1\.78 3\.22 6\.54 4\.17 1\.13 2\.66 4\.83 12\.80 0 1999 22\.79 3\.74 14\.55 22\.93 64\.01 3\.04 0\.50 1\.94 3\.06 8\.54 4\.56 0\.75 2\.91 4\.59 12\.6 20a0 24\.41 2\.12 15\.89 21\.S 64\.01 3\.26 0\.28 2\.12 2\.68 6\.54 4\.66 0\.42 3\.18 4\.32 12\.66 2001 17\.35 20\.13 37\.4 2\.31 2\.68 5\.00 3\.47 4\.03 7\.56 2002 18\.95 18\.53 37\.48 2\.53 2\.47 5\.00 3\.79 3\.71 7\." 2003 20\.69 16\.79 37\.48 2\.76 2\.24 5\.00 4\.14 3\.36 7\.56 2004 22\.59 14\.89 37\.48 3\.01 L\." 5\.00 4\.52 2\.96 7\.50 20QS 24\.66 12\.80 37\.4 3\.29 1\.71 5\.00 4\.94 2\.56 7\.50 2100 26\.94 10\.54 37\.48 3\.S9 1\.41 5\.00 S\.39 2\.11 7\.50 2C0? 29\.42 6\.06 37\.48 3\.92 1\.07 5\.00 3\.6 1\.61 7\.56 2006 32\.12 5\.35 37\.4 4\.26 0\.71 s\.00 6\.42 1\.07 7\.54 2609 35\.16 2\.32 37\.40 4\.69 0\.31 5\.00 7\.03 6\.4S 7\.56  LOD SS RI &ANA VW3 sU mm ,g rem= PSOJUCT CWWL!WION 3MM? viii umin ramm w N\.msc YUUI COILO NIUICIPAL COUNCIL ONIVILA NV- LAVINIA NNICItPAL COUNCIL KOLUIWA O* CONWIL 1900 164\.773 16\.953 SOS) 1961 2\.1\.364 15\.307 3\.317 190 316\.1W 24\.952 6\."1 193 310\.70 25\.981 5\.514 1964 35S\.12 , 33\.526 5AM6 1955 349\.960 33\.903 6\.322 1906 445\.910 49\.699 4\.32S  - 102 - $ SECOND SRI LAIA MATZR SUPPLY AMD SVWERAGZ PROJECT pOJRcr ComLRTION REPORT GREAt COWSQO S*RAG PFROCT Iuwrmasz oir su piW1\.4G STAT lOS VWIIIIN CMC (12 MOS\.) A_ML SUDGE? OF OP sATIOIN AND MAI AC COST SALARI9S G WAGZS Designation No\. Annual salary Annual overtime "er11A1iCal Engineer 0t 48\.000/- Electrical Engin-er 01 48\.000/, Foromnn 02 48,000/- 19\.200/\. T\.cI,t:ica\. Officer (Gr II) 02 44\.000/- 19\.200/\. Terlm,ical Officer (Gr 1I1) 11 198\.000/\. 66\.000/\. Stovre Keeper (Gr X) 01 21\.600/- 6,400/\. Store Keeper (Gr 11) 01 16\.320/- 7\.200/- Hilnoe Supervisors 02 36\.24 12\.000/\. Power Attendant (Cl I,Gr 1) 13 221\.500/- 109,200/\. Asst\. Power * (Cl S\.GrSI) 24 374,400/\. 144,000/- Drivers 03 47\.880/- 25,000/- Fitters (Cl S, Gr SI) 02 31\.200/- 12,000/- Carpenters (C1 S\. Gr 1I) 02 31\.200/- 7,200/\. Mas\.%ns (Cl I\. Gr SS) 02 31\.200/- 7,200/\. Electrician (Cl S\. Gr IS) 02 31\.200;\. 12,000/J Sewer Cleaners 03 41,940/- 14\.400/\. Stnrcqs'nn 01 13,980/\. 3\.600/* \.Abourer (Gr II) 45 629,100/- 270\.000/- Unskitted Labour (Gr II) 32 422,400/\. 153\.600/- 2\.336,180/\. 890\.400/- * Rs\. 3,226\.580/- Say * Rs\. 3\.300\.000/\. 2 MATERIAL & MAINTEN4ACE COST (ANNUAL Peocurement of spares * Rs\. 650\.000/- Fuel * Rs\. 200,000/- maintieiance of vehicles * Rs\. 36,000/\. Maiutenance of buildings * Rs\. 114\.000/- TotAl * Rs\. 1\.000\.000/\. Rs\. 1\.000\.000/\. 3 Security service for 12 stittonn 4000 x 12 x 12 * Rs\. 576\.000/- (Say Rs\. 600\.000/\.) \. Rs\. 600\.000/\. 4 Electricity - Rs\.18,624\.000/- (Say Rs\.18,650,000/\.) * Rs\.18\.650\.000/\. 5 INITIAL CAPITAL COST FOR PURCHASE OF VEHICLES 01 No\. Tractor * Rs\. 300\.000/- 02 No\. Pick-ups * Rs\. 700\.000/- Rs\. 1\.000\.000/ * Rs\. 1,000,000/\.  - 103 - AP u ge 2 NOyMY ELECTRICITY BILL NO\. OF UNITS PUMPING STATION AVERAGE HP PER MONTH (KVA) 1 Maligawatte 100 52,000 500 2 Madampitiya 600 300,000 1600 3 Vyatwyke 60 31,000 250 4 Harbour 125 64,000 630 5 Borella 125 64,000 550 6 Thimbirigasyaya 50 25,000 250 7 Bambalanitiya 30 16,000 250 8 Polwatte 100 52,000 500 9 S - 8 300 152,000 630 10 Wellawatte 40 20,000 250 11 Wanathamulla 25(estd\.) 12,000 200 12 Slave Island 25( do ) 12,000 200 Total 800,000 Consider initial utilisation of 50% consumption units per month and KVA rating\. Rate per unit (KE HR) including fuel adjustment charges - Rs\. 3\.13 Charges per month on unit Rs\. 1,252,000 Charges per month max\. demand (KVA) Rs\. 300,000 Monthly Bill Rs\. 1,552,000 Annual Bill Rs\.18,624,000 (Say Rs\.18,650,000/u)  SaCOIS SRI LMA WAMR SP?\.Y AND SUIIM PSWET PNGJECT CCWPL3TIOU 63106 I1ca STATSU 1977 - 1986 I I ' I 196196 DnSCRUztPO 1977 1975 1it" 1t60 191 198 !9"3 194 195 I customer siling 6,391 24,437 131\.456 39\.099 j41,336 63\.979 77\.702 224\.003 255\.803 209\.363\. Less O OERTING ekPNSIS '\. N4t\.rL\.lo _ _ 4,076 7\.547 12,007 13\.717 10,179 9\.541 14\.246 14\.3691 Utilities 8\.606 10,973 5 1790 15,450 40\.691 66,039 79\.5S0 71\.719 6|\.404 74\.949 lepairs 6 _isttnn\. 2\.724 4\.792 9,573 6\.912 8,557 9\.50 I3 17\.194 Personne cost - ,pg n - t 9,9U3 21\.657 31\.620 13\.479 50,910 31\.166 36\.149 41\.310 -Casual _ _ 5\.177 6,026 12,067 17,631 14\.365 21it629 22\.367 2stablishm_t expenses 2,561 4,417 9\.531 I 6,643 9\.661 13\.177 20,977 111347 4\.652 5\.911 2eat rate t ether tes 159 246 1,421 1,326 3 1,233 2,170 3\.663 947 4\. 206 5\.072j ra harge - - 19 \. 3i L\.574 1,031 _- ! - Total directcost 1\.346 3,636 30\.809 062\.543 10,279 1 IU 2\.159 47\.744 166\.769 161\.232 Ainistratlon ovrb\.A s (Not of transfer to coastrue ti\. V\.I\.P\.) _ _ 16,767 16,570 7\.466 9\.569 31,152 33\.S43 i'41\.612 Total expendituroe 1,346 23\.636 30\.$09 45,756 '91\.709 134\.400 265,4 66 194332t 225\.A4\. Excess ot operating income ' I ov* r xp nditucr b foc\. ebcX *'! 9iA9 depreciation, b d debtol!j; *nd 1O A int*r*at (2\.ff5) Sol ;647 (6\.657) (50,3711 (70,421) 14p\.82) 45\.10? 61,471 (15\.662rn L"s ¢ t i § s J 0~~~~~~aa I ; S ijrs#tide 1621 5\.362 i9,380 'I7\. 9" 20\.747 p\.678 fj\.652 i4, 4 '6,326 >1499571 lrovsion for doubtful debts- I 7 - ,- _ -$ \.55, 349 30,603 Int-rest on loans 1- r r 1 9,106 t1\.684 7I2\.6,, I1,341 1frrd,Pt~jten off! I I I I 17\.7 2\.277 iture after chaerging d\.pre-1 ; ltSn, bad 4obts ndloan111t| Intcat 13,57d) 4,561) 25\.733) A\.I645) ?1\.I11), j4l02299) 146,640) '(132\.339) (15281)3 19\.720 1E Uw INt ' I I ' \. \. ,| grants (receivable by ; vt\. agalnst revenue delictL 3,47\.7 3,9 750 1;SO - 5 1541,646 127605 j 14\.01 21,78S ees In¢c_ e 225 - 69,SS 1 849 - 1\.200 4,218 4\.372 3\.266 1 7,26' f d oth r lvenu - 472 1 11 11312 1I9 "a 772 964 I 600 3,137 fait 6 lose A/c balance b/4 11,973) 14,0511 63,79) 410\.S18) 142\.371) 4114\.543) {161,S68) 125 733, ,,\.,, "01) o year adjustmnt (204) 486 326 (13\.276) 1(4\.2151 l1\.735) 113\.65) 1 9,170) 164\.19) frtit & loss A/¢ b lareJ\.5(4\.051) 37759) (?0\.S18) J42,371) 114\.543) 161,t6) 75 \.713) 16j\.601) 1(249\.097) j267,5313 t of return - |- - - rating radio - -J \.8 5 768  S80O0D SRI LMA VA13R SUPPL AM 33133M3 FOJUC IOJUCT CoPL 3TIOU Upon UUAaiCz SW" 1977 - 1986 fIn M\. )soe' Year ending 31st Dec\. 1977 1976 1979 1960 16el 1982 1983 1964 1965 1986 Assets a rixed Assets a Fixed Assts at written-down value \. 5151 93\.334 116,660 281,066 371,294 571,050 696\.655 1\.327,52g 1\.313\.627 4\.167,072 Construction work-in- progress etc\. 22,314 32\.037 137\.371 547\.084 1,220,563 1,S91,155 2\.007\.145 2\.3671\.40 3,52129 2\.352\."6 Treasury Deposit - - - - - - - O Total net fixed *assts 27\.465 125,371 256,031 626,152 1\.591\.657 2\.167,205 2,751\.960 3\.695,206 4\.695\.9S 6,659\.155 Current Assets t Stocks 6,839 24\.605 51,011 114\.926 246\.264 232\.620 167,590 199\.377 174,622 I55\.03a- Debtors 24\.422 42\.367 41,376 53\.314 44\.545 30\.S22 101\.707 251\.936 293\.002 153,519 Advance, Deposits 6 pr payments etc\. 13\.265 8\.523 41,010 55\.574 110,086 138,766 303,555 333,390 304\.623 260,3 \.09 Cash 6\.673 14,060 11,344 11\.990 7\.913 43\.630 48,560 40,915 56\.459 28615O Treasury 2\.419 16,612 5\.469 - - - 187,610 154,536 169\.015 - Total Current Assets 55,616 106,386 150,210 235\.804 408,806 445\.538 629,042 960,154 999,721 717,025 Total Assots 63,063 233\.757 406,241 %\.063\.956 2,000,665 2\.612,743 3,561,002 4,475\.362 5\.695,677 7\.376,160 Eauity and Liabilities Government Contribution - 112,090 109,775 109,775 109\.775 125,3175 165,460 16584,0 165\.460 185,480 (equivalent to assets taken overl Capital Orantn 62\.275 112\.655 218,012 742,072 1,177\.831 1\.666\.779 2\.417,480 3\.137,721 3\.8,\.202 5,965,169 Accuoulated Surplus/Deficit 14\.051) (3\.7591 IIOB518) 142\.372) l114\.544)(161\.8691 (175,732) (178\.459) (2489\.81) 1601t,U2) Total Equity 58,224 221,186 311\.269 809,47S 1,173\.062 1,630,285 2\.427,226 3\.144\.749 3\.825\.601 5\.546,767 Long-Torm LLallities a Foreign Loan$ - 2\.,85 82,347 208\.235 626\.506 602,614 948\.510 1\.154\.837 1\.609,416 1,46S\.654 Local Loans - 86 73 - - 9\.459 9\.449 15,451 15\.237 IS,237 Custom_ Advances forconstruction - - - - 110\.998 131\.162 Security Deposits - - - - - - - 5SO 1\.276 2,543 Long-Term debt - 2,571 82,420 208,235 626,506 611,063 OS7\.97%o 1\.261,U36 1,757\.111 1\.486,434 Current Liabilities 24,659 10,000 6,552 46,246 201,097 171\.375 19S,795 248\.777 1,276 340\.959 Total Equity 6 Liabilities 83,063 233\.757 406,241 1\.063,956 2,000,665 2,612,743 3,561,002 4\.675\.362 5\.695\.677 7\.376,160 Debt/Equity Ratio - 0:01 1\.4 1\.4 1\.1\.85 1\.2 1,2\.57 1\.2\.5 162\.2 1\.3173  - 106 Annexur- 15 Page 1 of 2 SECOND SRI LAunA WATER SUPPLY a SEWERAGE PROJECT PROJECT COMPLETION REPORT TRAINING OF OFFICERS- FUNDED FkM IDA CREDIT 1041-CE Category of Country Course Duration the officer visited followed Civil Engineer U\.S\.A\. Study tour at 12 weeks National Environ- mental Association Secretary 'U\.S\.A\. - do - 5 weeks Civil Engineer Manila Training of compu-3 weeks (2 Nos\.) Philippines ter techniques Technical Assistant U\.K\. Slow sand filter 10 days study at British Water International Civil Engineer U\.S\.A\. Negotiation at 2 weeks World Bank Civil Engineer Netherlands Sanitary Engineer 11 months Civil Engineer U\.K\. M\.Sc\. course in 12 months construction mana- gement at Loughbo- rough University Civil Engineer U\.K\. M\.Sc\. course in 12 months water & waste water engineering for developing countries Civil Engineer U\.K\. Engineering desi- 19 days gns & pump insta- llation Civil Engineer U\.K\. Engineering desi- 26 days gns sewerage systems  107 Annexure 15 Page 2 o?t Category of Country Courso Duration the officer visitei followed I Civil gagineer U\.K\. Engineering con- 19 days (2 Nos\.) tract;managoment Civil Engineer U\.K\. Operation & main- 7 weeks tenance of water supply & treatment plants Civil Engineer U\.K\. Work organization 12 days & supervision of water authority Accountant U\.K\. Public rinance 2½ months Institution manage- ment programme Accountants Singapore Public Utilities 3 weeks (2 Nos\.) Board Accountant Singapore Implementing & 7 weeks management of data processing Addl\. Secretary Tailand Seminar on Urban 10 days M/LGHC Development Advisors United Study Tour 1 month M/LGHC States & Canada

APPROVAL

P008773

 ICRR 10493 Report Number : ICRR10493 ICR Review Operations Evaluation Department 1\. Project Data : OEDID : OEDID: L3975 Project ID : P008773 Project Name : Financial and Enterprise Sector Adjustment Loan Country : Romania Sector : Other Non-sector Specific L/C Number : L3975 Partners involved : Export-Import Bank of Japan Prepared by : Michael R\. Lav, OEDCR Reviewed by : Laurie Effron Group Manager : Rene Vandendries, Acting Date Posted : 08/13/1999 2\. Project Objectives, Financing, Costs and Components : Objectives : (Note: These follow the revised objectives approved by the Board in June, 1997) Macroeconomic Framework and the Enterprise Sector (a) Maintain a satisfactory macroeconomic framework, liberalize most prices and trade regulations for all goods and services subject to competition; to accelerate privatization, (b) remove limits on offered and reserve prices of sale of shares at auction; (c) Detailed privatization targets for sale of SOEs at (i) auction, (ii) initial private offerings, and (iii) through the services of international privatization agents; (d) restore financial discipline and reduce losses of SOEs, (e) Adjust tariffs to ensure that utilities reduce losses, (f) reduce losses in mines, including passage of new Mining Law to enable privatization, increase price of mining products to world levels, close nonviable mines; (g) Corporatization of Regie Autonoms (RAs), to be transformed into Commercial Companies (CCs) as a first step toward privatization; and (h) liquidation or closure of 42 large loss-making CCs; In the Financial Sector : (i) Privatize the Romanian Bank for Development (RBD) and Banc Post; (j) liquidate two bankrupt private banks (Dacia Felix and Credit Bank); (k) restructure Banca Agricola; (l) improve banks' accounting systems and tax treatment to allow banks to stop accruing interest on overdue loans and reverse previously accrued unpaid interest; (m) Clarify status and activities of the Savings Bank (CEC) and cooperative banks; and (n) Implement measures to strengthen the capital market, including opening the Bucharest Stock Exchange (BSE) and establish an effective market to register and trade shares of companies privatized in the Mass Privations Program, strengthen CMVN (capital markets oversight agency )\. Financing : IBRD US$280 million, US$60 million at effectiveness, a second tranche of US$ 80 million, third tranche of US$100 million, and a floating tranche of US$40 million; Export Import Bank of Japan, US$ 50 million\. Costs : US$330 million\. The Loan was approved by the Board on January 18, 1996, made effective on February 29, 1996, and closed on April 30, 1998, 3 months late, at which time the third tranche was canceled \. 3\. Achievement of Relevant Objectives : (a) Prices and trade regulations for all goods and services subject to competition were liberalized, and export bans and quotas were removed\. However, a satisfactory macroeconomic framework was not maintained \. (b) limits and reserve prices were removed, (c) 4024 SOEs were privatized, exceeding the numerical target of 3,600\. However, this represented less than 20 percent of the capital stock of SOEs \. (d) SOE Financial discipline was not achieved (see below); (e) Tariffs were increased for 20 utilities accounting for about one -third of SOE losses\. However, the railways and most water and heating RAs continued to accumulate losses; (f) The price of mining products was raised to world levels, 70,000 employees were laid off, and mining sector losses reduced by 40 percent in real terms\. 6 loss-making mines were or are being transformed into CCs, and other reforms implemented \. (g) a start was made on corporatization of RAs; (h) concerning the largest 42 loss-making CCs, 8 were privatized, and 11 were being liquidated\. (i) RBD was privatized, Post Banc was partially privatized, (j) liquidation of the two private banks has been delayed, (k) Slow progress towards preparing Banca Agricola for privatization, (l) Banking laws have been improved, and a new chart of accounts conforming to International Accounting Standards was adopted, (m) CEC was converted into a "narrow" bank whose deposit liabilities remain 100% guaranteed by the state but whose assets are limited to holdings of Government obligations and a limited number of other low -risk assets; and (n) the BSE was opened and CMVN was strengthened \. 4\. Significant Achievements : Price and trade liberalization were significant achievements \. Substantial reforms were implemented in the financial sector, although more will need to be done (for example, to settle questions about the quality of the implementation of IAS at the banking level)\. Large numbers of SOEs were privatized, even though they represented a low proportion of capital in the sector \. 5\. Significant Shortcomings : SOEs representing only a small percentage of SOE capital were privatized \. SOE financial discipline was not restored\. Large amounts of financial support were permitted in the absence of remedial measures \. While some arrears reduction was achieved from 1996 to 1998, arrears remained very large\. Only 19 of 42 large loss-making CCs were privatized or liquidated\. The institutional framework was too weak to deliver the program \. In particular, the legal and regulatory framework and the court system were inadequate \. Liquidation of 2 private banks was delayed \. Banks' conversions to IAS were such that this raised the issue of whether conversion was done properly "in all cases"\. Most importantly, the program did not include an adequate attempt to build public support by explaining the benefits and the reasons for the reforms \. 6\. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Institutional Dev \.: Partial Modest Different terminology under the ICR and OED systems, but the same rating Sustainability : Likely Likely Even though the overall project outcome was unsatisfactory (for example, privatization fell short), the reforms which were implemented are likely to be sustained (for example, those SOEs privatized will very likely remain privatized, workers who left SOEs will not be re-employed, trade and price liberalization will likely be sustained, etc \.) Bank Performance : Satisfactory Unsatisfactory The Bank identified and appraised a project which was too complex, with far too many components and conditions \. The identification/appraisal period was too long, which made difficult implementation with changing government perspectives \. The rating on supervision is satisfactory, but this does not outweigh the other aspects of Bank performance \. Borrower Perf \.: Deficient Unsatisfactory Different terminology under the ICR and OED systems, but the rating is the same \. Quality of ICR : Satisfactory 7\. Lessons of Broad Applicability : 1\. Adjustment operations should focus on a limited number of areas of reform, should be simpler, and with fewer tranches and shorter time horizons \. 2\. The Bank should assess government ownership as very strong before proceeding with adjustment operations \. High level support within the government is a prerequisite \. 8\. Audit Recommended? Yes No 9\. Comments on Quality of ICR : The ICR contains a great deal of material and clearly explains this very complex operation \.

APPROVAL

P143367

 Document of The World Bank Report No: 75713-AFR INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVLOPMENT AND INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED SECOND GRANT IN THE AMOUNT OF USD 18\.4 MILLION TO THE AFRICAN FORUM FOR AGRICULTURAL ADVISORY SERVICES (AFAAS) FOR A SECOND MULTI-DONOR TRUST FUND PROJECT October 31, 2013 This document is being made publicly available prior to Bank consideration\. This does not imply a presumed outcome\. This document may be updated following Bank consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information\.  CURRENCY EQUIVALENTS Currency Unit = United States Dollar FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AAS Agricultural Advisory Services AEAS Agricultural Extension and Advisory Services AFAAS African Forum for Agricultural Advisory Services AFR Africa Region ASARECA Association for Strengthening Agricultural Research in East and Central Africa AU African Union AUC African Union Commission CAADP Comprehensive Africa Agriculture Development Programme CCARDESA Center for Coordination of Agricultural Research and Development for Southern Africa CF Country Forum/Fora CIDA Canadian International Development Agency CORAF/WECARD Conseil Ouest et Centre Africain pour la Recherche et la Développement Agricole/West and Central African Council for Agricultural Research and Development DPs Development Partners EC European Commission FAAP Framework for African Agricultural Productivity Food and Agricultural Organization of the United Nations FARA Forum for Agricultural Research in Africa GA General Assembly GAFSP Global Agriculture and Food Security Program GFRAS Global Forum for Rural Advisory Services IBRD International Bank for Rural Development IFAD International Fund for Agricultural Development IFPRI International Food Policy Research Institute IFRs Interim Financial Reports M&E Monitoring and Evaluation MDTF Multi Donor Trust Fund MoU Memorandum of Understanding MTR Mid-term Review NEPAD New Partnership for Africa’s Development NFP National Focal Person NPCA NEPAD Planning and Coordinating Agency PDO Project Development Objective RECs Regional Economic Communities RIAS Regional Integration Assistance Strategy RFOs Regional Farmer Organizations SDC Swiss Agency for Development and Cooperation SROs Sub Regional Organizations TF Trust Fund TOR Terms of Reference UK United Kingdom USAID United States Agency for International Development WB World Bank Regional Vice President: Makhtar Diop Country Director: Colin Bruce Sector Director: Jamal Saghir Sector Manager: Severin Kodderitzsch Task Team Leader: David Nielson  African Forum for Agricultural Advisory Services Second MDTF TABLE OF CONTENTS Page I\. STRATEGIC CONTEXT \.9 A\. Regional Context \. 9 B\. Sectoral and Institutional Context \. 11 C\. Higher Level Objectives to which the Project Contributes \. 13 II\. PROJECT DEVELOPMENT OBJECTIVES \.15 A\. PDO\. 15 Project Beneficiaries \. 15 PDO Level Results Indicators \. 16 III\. PROJECT DESCRIPTION \.16 A\. Project Components \. 16 B\. Project Financing \. 18 Lending Instrument \. 18 Project Cost and Financing \. 19 C\. Lessons Learned and Reflected in the Project Design \. 19 IV\. IMPLEMENTATION \.21 A\. Institutional and Implementation Arrangements \. 21 B\. Results Monitoring and Evaluation \. 23 C\. Sustainability\. 25 V\. KEY RISKS AND MITIGATION MEASURES \.25 A\. Risk Ratings Summary Table \. 25 B\. Overall Risk Rating Explanation \. 25 VI\. APPRAISAL SUMMARY \.27 A\. Economic and Financial Analyses \. 27 B\. Technical \. 29 C\. Financial Management \. 30 D\. Procurement \. 31 E\. Social (including Safeguards) \. 31  F\. Environment (including Safeguards) \. 32 Annex 1: Results Framework and Monitoring \.33 Annex 2: Detailed Project Description \.35 Annex 3: Implementation Arrangements \.40 Annex 5: Implementation Support Plan \.61 Tables Table 1: AFAAS Budget Estimate by Component (2012-2017) \. 19 Table 2: Risk Ratings Summary Table \. 25 Figures Figure 1: AFAAS Institutional Structure \. 21 Figure 2: AFAAS Secretariat \. 22  PAD DATA SHEET African Forum for Agricultural Advisory Services Second Multi-Donor Trust Fund PROJECT APPRAISAL DOCUMENT Africa AFTA2 Basic Information Date: October 31, 2013 Sectors: Agriculture and Rural Development Country Director: Colin Bruce Themes: Advisory Services, Agricultural Productivity Sector Manager/Director: Severin Kodderitzsch/Jamal EA Category: C – Not Required Saghir Project ID: P143367 Lending Instrument: Multi-Donor Trust Fund Team Leader(s): David J\. Nielson Joint IFC: Borrower: African Forum for Agricultural Advisory Services (AFAAS) Responsible Agency: African Forum for Agricultural Advisory Services (AFAAS) Contact: Silim Mohammed Nahdy Title: Executive Director Telephone No\.: +256-31 2 313400 Email: msnahdy@afaas-africa\.org Project Implementation Period: Start Date: October 31, 2013 End Date: December 31, 2017 Expected Effectiveness Date: October 31, 2013 Expected Closing Date: June 30, 2018 Project Financing Data(US$M) [ ] Loan [X] Grant [ ] Other [ ] Credit [ ] Guarantee For Loans/Credits/Others Total Project Cost: 18\.4 Total Bank Financing: Total Cofinancing: Financing Gap: 10\.6 Financing Source Amount(US$M) BORROWER/RECIPIENT IBRD IDA: New IDA: Recommitted MDTF: 6\.8 Others (IFAD) 1\.0 Financing Gap 10\.6 Total 18\.4 Expected Disbursements (in USD Million) Fiscal Year 2013 2014 2015 2016 2017 2018 Total Annual 2,000,000 4,000,000 3,900,000 4,100,000 4,300,000 100,000 18,400,000 Cumulative 2,000,000 6,800,000 9,700,000 14,000,000 18,300,000 18,400,000 18,400,000 Project Development Objective(s) To reform and strengthen Agricultural Advisory Services (AAS) in accordance with FAAP principles towards increasing agricultural productivity and food security\. Components Component Name Cost (USD Millions) Support to Country AAS for Engagement in CAADP Pillar Four 10\.5 AFAAS Governance, Management and Secretariat Activities 6\.5 MDTF Management and Supervision (Bank-Executed) 1\.4 Compliance Policy Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 X Natural Habitats OP/BP 4\.04 X Forests OP/BP 4\.36 X Pest Management OP 4\.09 X Physical Cultural Resources OP/BP 4\.11 X Indigenous Peoples OP/BP 4\.10 X Involuntary Resettlement OP/BP 4\.12 X Safety of Dams OP/BP 4\.37 X Projects on International Waterways OP/BP 7\.50 X Projects in Disputed Areas OP/BP 7\.60 X Legal Covenants Name Recurrent Due Date Frequency Hiring of External Auditor No 3 months after once effectiveness Hiring of an Internal Auditor No 4 months after once effectiveness Hire a Finance and Administration Manager No By June 30, 2014 once Baseline survey report No 6 months after once effectiveness Grant Award Guidelines approved by the Bank No prior to issuance of sub- once grants Description of Covenant ï‚ External auditor appointed within three (3) months of effectiveness ï‚ Internal auditor hired within four (4) months of effectiveness ï‚ Finance and Administration Manager hired by June 30, 2014Baseline survey report submitted to the World Bank within six (6) months of effectiveness ï‚ Grant Award Guidelines approved by the Bank prior to the issuance of the first sub-grant Team Composition Bank Staff Name Title Specialization Unit UPI David J\. Nielson Lead Agricultural Services Agriculture/Economics AFTA2 22937 Specialist Bremala Malli Senior Operations Officer Operations AFTA2 163465 Timothy Robertson Senior Agricultural Specialist Extension AFTA2 380463 Matt McMahon Lead Agricultural Specialist Agronomy AFTA2 20057 (Consultant) Tekola Dejene Lead Agricultural Specialist Agriculture AFTA2 65609 (Consultant) Dwede Tarpeh Operations Assistant Agriculture AFTA2 370274 Hille Frey Operations Analyst (Consultant) AFTA2 363450 Mohamed Khatouri Lead M&E Specialist Monitoring and Evaluation AFTDE 274463 Howard Bariira Centenary Senior Procurement Specialist Procurement AFTPC 321500 Edwin Moguche Financial Management Specialist Financial Management AFTMW 358864 Luis Schwarz Senior Finance Officer Disbursement CTRLA 82804 Mei Wang Senior Counsel Law 229123 Alexandra Sperling Legal Analyst Law 77120 Locations Country First Administrative Location Planned Ac Comments Division tu al Continental1 N/A N/A N/A N/A 1 The project will support the consolidation of existing Country Fora (CF) and support the emergence of new ones\. AFAAS will support already-established CF to develop and implement their strategic plans\. It will engage new countries with expressed interest to establish CF and provide similar technical support and guidance\. For these countries, AFAAS will develop criteria and procedures for identifying activities for implementation by CF with AFAAS support\. I\. STRATEGIC CONTEXT A\. Regional Context 1\. CAADP is the African Union (AU)/New Partnership for Africa’s Development (NEPAD) Planning and Coordination Agency’s (NPCA) vision and strategy for the development of African agriculture\. African leaders have signaled their commitment to achieving growth in agricultural productivity and agricultural GDP through their launch of Comprehensive Africa Agriculture Development Programme (CAADP), recognizing that growth in agriculture is crucial to achieving widely shared economic growth and poverty reduction in Africa and that growth in agricultural productivity is key to achieving agricultural growth on the continent\. The goal of CAADP is to help African countries reach and sustain a higher path of economic growth through agricultural-led development that reduces hunger and poverty and enables food and nutrition security and growth in exports\. 2\. Under CAADP, the AUC, NPCA and Africa’s Regional Economic Communities (RECs) work closely with countries to encourage and guide them through processes designed to: improve agricultural planning; make agricultural policy-making more evidence-based; scale up investments in the sector; and better coordinate all stakeholders (including development partners) around agreed plans\. The CAADP process is framed conceptually around four Pillars: (i) sustainable land and water management; (ii) development of infrastructure and improved access to markets; (iii) increased food supply, reduced hunger, and improved response to food crises; and (iv) dissemination and adoption of improved agricultural technologies and investment in agricultural research\. Lead Pillar agencies have been established to provide technical support to countries, regions, and at the continental level within each of their respective technical areas\. 3\. Pillar IV of CAADP addresses challenges of agricultural education, research and technology uptake\. The approaches advocated for these programs are articulated in the Framework for African Agricultural Productivity (FAAP)\. Developed through extensive consultation with Africa’s communities of practice in this area, the FAAP provides principles and recommendations for program and institutional design at every level – guidance intended to help these programs and institutions become more effective at helping farmers and other agricultural enterprises to improve agricultural productivity, profitability and sustainability\. Topics addressed in the FAAP include reforming agricultural institutions and services, farmer empowerment, integration of agricultural research with farmer advisory services, training and education; increasing the scale of Africa’s agricultural productivity investments, and aligned and harmonized financial support\. The FAAP emphasizes that the effectiveness of technology generation and dissemination depends on their relevance and responsiveness to farmers’ needs, and therefore provides guiding principles for the reform of agricultural advisory services (AAS2) institutions to make them more client-driven for enhanced farmer empowerment\. 4\. For AAS programs to work effectively in these ways, a paradigm shift is needed to replace the outmoded linear and top-down research-extension-farmer-framework that has failed in Africa\. Institutional arrangements to achieve this may differ from country to country and each 2 AAS in this context broadly implies Agricultural Extension and Advisory Services (AEAS)\. 9  must be encouraged to learn from its own experiences\. There is a need to start from the bottom up in developing rural knowledge systems and institutions using participatory methods\. There is also a need for substituting traditional extension systems with farmer participatory knowledge systems that are more gender-sensitive\. AAS must be established more widely and existing systems strengthened to facilitate the development of such farmer participatory knowledge systems and to promote the value addition agro-processing and marketing that can better exploit economies of scale and encompass vertical, horizontal and lateral integration from production to markets\. AFAAS can play a pivotal role in distilling the experiences of national AAS systems to generate best practice options to guide this change process\. 5\. The objective (and responsibility) of AFAAS is to bring about institutional and behavioral changes in AAS providers to make them more efficient and effective\. However, the ultimate measurement of success shall be at the level of the benefits that farmers and other value chain actors attain from access to AAS\. AFAAS will therefore have to put in place mechanisms to ensure that all its activities are traceable to the demands of the farmers and value chain actors\. This will include the establishment of explicit criteria for ensuring that the root of the needs it responds to are clearly articulated demands from farmers and value chain actors\. 6\. The Forum for Agricultural Research in Africa (FARA) has the mandate to lead Pillar IV activities on a continental basis\. FARA adequately represents agricultural research stakeholders in the CAADP roundtables and post-compact CAADP processes\. However, given that FARA’s core competencies are more research-oriented rather than AAS, stakeholders debated whether to attempt to establish this competency at FARA or delegate responsibility for this topic to a stand- alone institution dedicated to AAS\. AAS stakeholder representatives (government, farmer organizations, NGOs, academia, development partners) worked with FARA to form the African Forum for Agricultural Advisory Services (AFAAS) as a platform for sharing information, lessons, tools and approaches for efficient and effective AAS delivery and to provide a mechanism for supporting and coordinating the development of AAS within the CAADP framework\. 7\. AFAAS has been delegated as the continental3 lead on the delivery and development of AAS, formalized through a Memorandum of Understanding (MoU) signed between FARA and AFAAS in 2008\. FARA is fully committed to AFAAS and its mandate, and recognizes its importance as a strategic partner in applying FAAP principles and making agricultural research more effective\. There is consensus between stakeholders that AFAAS will collaborate with FARA, the sub-regional research organizations4 and with TEAM-Africa5 on meeting the goals of CAADP and, in particular, those of Pillar IV\. 8\. In the short-to-medium term AFAAS shall be directly accountable for delivering on the following specific objectives: 3 As continental lead, coverage includes Sub-Saharan African and North Africa\. 4 The sub-regional organizations are Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA), Conseil Ouest et Centre Africain pour la Recherche et la Développement Agricole/West and Central African Council for Agricultural Research and Development (CORAF/WECARD) and Center for Coordination of Agricultural Research and Development for Southern Africa (CCARDESA)\. 5 Tertiary Education for Agriculture Mechanism for Africa (TEAM-Africa) Initiative\. 10  (a) Ensure that CAADP Pillar IV sufficiently involves advisory services providers in its strategy, work plan and implementation, contributing to making these services more effective and relevant; (b) Ensure the availability and accessibility of appropriate and up-to-date knowledge on advisory services from a range of sources in Africa and worldwide; (c) Strengthen the capacity of country level advisory service stakeholders in determining own priorities and in improving their advisory service systems; (d) Build partnerships at national, regional and international levels between agricultural advisory service and other institutions contributing to sustained growth and transformation of agriculture; and (e) Build its own capacity to serve effectively as a continental African organization that can sustainably support national agricultural advisory services to continuously enhance their contribution to national, regional, continental and global development objectives\. B\. Sectoral and Institutional Context 9\. One of the great challenges facing African agriculture has been the failure to increase productivity on par with most developing regions over the past forty years\. Despite an almost doubling of agricultural output over this forty year period almost entirely accounted for by increases in land and labor inputs, increased total factor productivity has been marginal and has played a minor role in the growth of the sector\. On a per capita basis the value added output of agriculture has been declining or is at best static over that period6\. This type of growth does not drive poverty reduction or the elimination of hunger\. The reasons for this situation are many and complex - soil and water constraints, extremely low levels of human capital in the farm population, health of the rural population, lack of infrastructure, poorly functioning markets, etc\.)\. It is widely accepted that agricultural research, extension and education will be essential elements in helping Africa’s farm sector to address these issues and raise their productivity\. 10\. The structure of African agriculture presents a unique set of challenges to increasing productivity\. The bulk of African agriculture is small-scale, in highly diversified, rain-fed farming systems\. Such systems, which are often very complex, have received scant attention resulting in little knowledge of how they function\. Further, there is a limited flow of information from the farm to inform research, education and extension systems\. To ameliorate this situation there needs to be an integrated approach around the research, extension and education triangle with the farmer at the center\. Farmer organizations need to partner with research, education and extension organizations in a participatory system, which effectively links knowledge, innovation, science, research, education and advice\. The role of AAS is to facilitate linkages in a participatory system\. This integrated approach is well-articulated in CAADP’s FAAP\. 11\. Women farmers need particular attention in this area as they play a leading role in all aspects of crop production and commercialization\. This emphasis on female participation has to be dealt with throughout the triangle to ensure that there is adequate participation in all areas\. It is not enough to provide support to women farmers, but to ensure careers in agriculture for professional women\. According to the Food and Agricultural Organization of the United 6 Framework for African Agricultural Productivity (FAAP)\. 11 Nations (FAO), women in Sub-Saharan Africa produce up to 80% of basic foodstuffs for household consumption and sale\. In the livestock sector, women perform 50-60% of the work related to feeding and milking larger animals, as well as raising small stock\. Rural women provide most of the labor for post-harvest activities, taking responsibility for storage, handling, stocking, processing and marketing\. Beyond the farm, women play a key role in land and water management\. Due to a rise in the number of female-headed households as substantial numbers of males migrate to cities, more women are becoming functional heads of both households and farming activities\. 12\. AAS facilitates the access of farmers, their organizations and other actors involved in the value chains to knowledge and information; facilitates their interaction with partners in research, education, agribusiness, and other relevant institutions; and assists them to develop their own technical, organizational and management skills and practices\. The role of advisory services has widened to include issues in rural areas that go beyond agriculture (even in the broad sense of the term agriculture that includes livestock and fisheries)\. In designing its interventions, AAS must help farmers to become aware of, understand, and embrace technical messages and training while becoming more effective business managers of their farm enterprises, and in their linkages to market actors (financial, input providers, buyers and processors), as well as to education, public sector and government including policy dialogue\. 13\. At the governance level it should ensure that farmers are represented in all AFAAS governance structures and within the multi-stakeholder innovation platforms of Country Fora (CF)\. It should ensure that representatives of farmers and value chain actors take part in its planning, monitoring, evaluation and learning systems\. AFAAS should seek synergies with national, regional and continental Farmers’ Organizations to: (i) share information; and (ii) develop joint activities in which they can collaborate/ partner to maximize the pro-farmer impact of AAS on value chains\. 14\. Implementation of the FAAP recommendations would reverse the decline in support for AAS\. It would also result in a new approach to AAS that would represent a departure from the public-sector dominated and supply-driven technology-transfer emphasis of earlier programs to what would be more demand-driven programs aimed at building human capital of farmers – building their capacity to understand their own situations and options, to make good decisions as effective critical thinkers, to work together with other farmers in farm organizations, and to make their farming endeavors more profitable\. The FAAP, developed by FARA, provides guidance on the types of program characteristics which would make this possible\. It calls for reforms to AAS that would improve the accountability of advisory service providers to clients, put in place a demand/market-driven service provision system, decentralize service delivery and promote increased pluralism (including participation of the private sector) in the provision of services\. These reforms represent a clear departure from earlier approaches and enjoy broad support from the professional community of practice in Africa and among development partners\. A broad consensus notwithstanding, designing and putting in place such reforms is an ambitious agenda\. Prior to the launch of AFAAS no institution in Africa had either the capacity or the mandate to take on this challenge\. AFAAS does have this mandate – but needs a stable source of support to be able to succeed\. The proposed MDTF would provide this support\. 12  15\. This proposed trust fund would be the second World Bank-administered trust fund for AFAAS\. The first AFAAS MDTF became effective in September 2009 and was implemented by AFAAS with the support of FARA7\. It was designed to formally establish the AFAAS Secretariat and its legal, governance and operational structures\. Another primary activity included the development of AFAAS’ Strategic and Operational Plan (Strategic Plan) which was approved by AFAAS’ Board and endorsed by its General Assembly in April 2011\. The first AFAAS TF met its objective and closed with a satisfactory rating on June 30, 2011\. The design of the AFAAS Second MDTF is based on AFAAS’ Strategic Plan\. C\. Higher Level Objectives to which the Project Contributes 16\. The AFAAS MDTF’s higher level objectives are rooted in the CAADP framework, which states that the continent should, by 2015: (i) attain food security (in terms of both availability and affordability and ensuring access of the poor to adequate food and nutrition); (ii) improve the productivity of agriculture to attain an average annual growth rate of 6%, with particular attention to small-scale farmers and especially focusing on women; (iii) have dynamic agricultural markets between nations and regions; (iv) have integrated farmers into the market economy, including better access to markets, with Africa to become a net exporter of agricultural products;( v) achieve the more equitable distribution of wealth; (vi) be a strategic player in agricultural science and technology development; and vii) practice environmentally sound production methods and have a culture of sustainable management of the natural resource base (including biological resources for food and agriculture) to avoid their degradation\. AFAAS will contribute to these higher order objectives through improving the effectiveness of AAS across the continent – and in so doing helping farmers to be more effective in their various roles of, inter alia, production, marketing, and natural resource husbandry\. 17\. AFAAS will contribute to CAADP’s success beyond Pillar IV\. Advisory service engagements related to natural resource management and climate change, for example, relate to Pillar I (extending the area under sustainable land management) while its work in promoting market-oriented advisory services will contribute to Pillar II (improving rural infrastructure and trade-related capacities for market access)\. The rapid expansion of food security initiatives in accordance with Pillar III (increasing food supply and reducing hunger) will create obvious demands for more effective advisory services\. AFAAS’ contributions with respect to all four Pillars will be to promote lesson-learning and to add value to initiatives in agricultural advisory services through sharing of information and increased professional interactions\. 18\. AFAAS’ strategic plan is consistent with the strategies of the Bank\. Strengthening AAS is a core element of CAADP and World Bank strategies for raising agricultural productivity, increasing growth and reducing poverty in Africa and has been supported by the Bank for the last several decades along with agricultural research and education\. The Bank found that public service delivery-dominated AAS was plagued with problems, including limited funding, insufficient technologies to promote, poorly trained staff, weak linkages with research and limited farmer participation (World Bank 2007)\. 7 FARA was the official recipient of the grant and AFAAS was the beneficiary\. Funds were sub-granted from FARA to AFAAS\. 13  19\. The AFAAS strategic plan is aligned with the Bank’s regional strategy paper, Africa’s Future and the World Bank’s Support to It (March 2011) which addresses the future of the region’s agricultural development through a two pillar strategy\. The “competitiveness and employmentâ€?8 pillar has agriculture, home to the largest private sector, as one of its cornerstones for growth and poverty reduction\. The strategy highlights the weak investment climate impacting agriculture, (poor infrastructure, poor business environment and insufficient technical skills)\. 20\. AFAAS’s interventions address these bottlenecks by targeting smallholder farmers’ competitiveness at the continental level\. The strategy further identifies key instruments for the implementation of the two pillars, namely, partnerships, knowledge and finance\. AFAAS support of the establishment to AAS networks within participating countries and Africa as a whole is aligned to this aspect of the strategy, as is its development of partnerships for the dissemination of appropriate knowledge and information through pluralistic agricultural advisory service delivery mechanisms\. The networks and partnerships will play a key role in bringing together the public sector, private sector, civil society, value chain actors, development partners and farmers to foster AAS innovations\. 21\. AFAAS’ objectives are also consistent with the Africa Region’s Agriculture Strategy\. The Africa-Agriculture Strategy Report, “Africa’s Renewed Emphasis on Agriculture and the World Bank’s Support for it (November 2011), states that support to agricultural development will be framed around the CAADP program and its four pillars\. The Africa Region’s support focuses particularly on building national and regional capacities in the Pillar IV areas of agricultural technology generation, uptake and agricultural education, as well as capacity for information and communication technology\. 22\. AFAAS also contributes to the successful implementation of the Africa Region’s Regional Integration Assistance Strategy (RIAS)\. Specifically, it is aligned to the Region’s integration assistance pillars of support, particularly, that of “providing regional public goodsâ€?\. RIAS envisages the Bank’s assistance to regional public goods to focus on, inter alia, raising agricultural productivity (including research and knowledge-sharing on implications of climate change and mitigation strategies)\. AFAAS, at a continental level, will create a mechanism for sharing experiences on AAS approaches, and exchanging information on the challenges facing the provision of AAS\. The design of AFAAS has embedded the RIAS’ guiding principles of engagement, including starting small and building on success, seeking champions, and open regionalism\. The implementation modality will take into account political and economic groupings and sub-groupings in the region and will fit into structures that best help promote exchanges and learning processes\. For this, the existing structures of SROs and/or RECS will be used to create synergies and complementarities\. MDTF financing for core CAADP agencies is also in line with the RIAS’ cross-cutting theme on Strengthening Regional Strategic Planning and connections with National Development Plans\. 23\. The World Bank continues to be an influential leader in developing innovative approaches to AAS and in mobilizing support for AAS in Africa\. This is evident in the key role that the Bank played in the recent establishment of GFRAS at the global level, and in the establishment 8 The second pillar is “Vulnerability and Resilienceâ€?\. 14  of AFAAS in Africa\. It is also evident in the Bank’s current portfolio of support to AAS in Africa – a portfolio of over US$500 million in commitments\. Africa’s lead institutions (AUC, NPCA, FARA) and Development Partners (DPs) have asked the Bank to develop a multi-donor trust fund to support AFAAS and it is in this context that this proposal is prepared\. 24\. In addition to being aligned with World Bank’s strategies, it is also aligned with the European Commission’s (EC’s) Advancing African Agriculture, USAID’s Initiative to End Hunger in Africa, and the UK Government’s Commission for Africa report\. AFAAS also helps to realize the G8 goals, as well as those of the Global Agriculture and Food Security Project (GAFSP) which provides medium and long-term support to countries that have gone through a CAADP-like process\. II\. PROJECT DEVELOPMENT OBJECTIVES A\. PDO 25\. The objective of this project is to reform and strengthen Agricultural Advisory Services (AAS) in accordance with FAAP principles towards increasing agricultural productivity and food security\. Project Beneficiaries 26\. The stakeholders who are expected to benefit from the project are: Direct Beneficiaries ï‚ AAS facilitate development of farmer participatory knowledge systems and promote value addition agro-processing and marketing that can better exploit economies of scale and encompass vertical, horizontal and lateral integration from production to markets\. ï‚ AFAAS serves as a platform for sharing information, lessons, tools and approaches for efficient and effective AAS delivery and to provide a mechanism for supporting and coordinating the development of AAS within the CAADP framework\. Indirect Beneficiaries ï‚ Farmers and livestock producers (primary beneficiaries) play a crucial role in determining the kinds of advisory services to be provided and the technology options to be developed by research\. Special emphasis will be placed on female participation, since women play an important role in agricultural production and marketing\. ï‚ Farmer Organizations acting at different levels shall provide and facilitate access to services, increase bargaining power of their members, provide avenues for mobilizing and pooling resources, enable creation of linkages and partnerships with other actors, undertake capacity strengthening, and lead in lobbying and advocacy for their members\. 15  ï‚ Private sector entrepreneurs shall be expected to increase their engagement in the provision of AAS especially in the areas of promotion of production, financial services, post-harvest activities, marketing, quality assurance, information access and knowledge management\. ï‚ Agricultural Advisory Services professionals who are directly involved in delivering information, new technologies, management practices, and other innovations to agricultural value chain actors\. ï‚ Research institutes at all levels shall provide relevant available technologies and information\. They will therefore have to orient their research to: (a) respond to demands expressed by farmers and (b) address anticipated future demand, opportunities and challenges\. They shall undertake action research on the provision of AAS\. ï‚ Consumers of food eventually (as farm productivity increases) will benefit from the availability of more and better food at better prices\. PDO Level Results Indicators 27\. PDO project performance indicators are: Percentage of value chain actors utilizing improved knowledge and technologies; and percentage of various categories of value chain actors satisfied with the quality of AAS\. Intermediate indicators include among others: Number of CF established and operating in accordance with FAAP guidelines; and Number of partnerships effectively delivering gender-related reforms in AAS\. III\. PROJECT DESCRIPTION A\. Project Components Component 1: Support to Country AAS for Engagement in CAADP Pillar IV ($10\.5 million) 28\. This component will support all AAS stakeholders, both public and private, guided by the FAAP principles, in their engagement in the implementation of CAADP Pillar IV in their various countries\. This includes developing mechanisms and implementation guidelines to ensure that the process of developing and supporting CAADP Country Compacts reflects the role and importance of AAS\. This would in part be through supporting the emergence, in each member country, of a CF for AAS as well as supporting capacity building, human resource development and innovation activities in delivering AAS\. 29\. Sub-component 1\.1: Establishment and Strengthening of Country Fora\. This sub- component will support the emergence and strengthening of CF of AAS stakeholders at the country level9\. These CF will be institutional structures under which stakeholders in each 9 AFAAS’ membership includes North African and Sub-Saharan African countries\. Existing Country Fora include Benin, Malawi, Tanzania, Kenya, Uganda and Sierra Leone and they will be amongst the initial countries to be supported\. 16  country can work together to influence the reform and implementation of AAS in their respective countries and through which they will be able to meet to share information and discuss relevant issues\. They will provide stakeholders with a space within which they can identify priority areas of concern to be addressed through collaborative information sharing, joint activities and partnerships\. The general objectives of the CF are (i) to strengthen the capacity of AAS stakeholders at country level to lead advisory service development, (ii) to mobilize, reflect and learn how to improve advisory service provision within an agricultural innovation system framework, (iii) to act as the arm of the country CAADP implementing organs linking with AAS stakeholders and, (iv) to be able to utilize (within and between countries) the human capacity that is being developed for undertaking reforms in AAS\. 30\. AFAAS will work with country-level governance and management structures, and will facilitate the emergence of such governance bodies where they do not exist by setting up Interim National Steering Committees\. AFAAS will work through these committees to facilitate the institutional and organizational development of the CF\. The CF will provide a space for both public and private institutions that already exist to convene around issues relevant to AAS\. The CF will be configured in such a way that they focus on AFAAS objectives in a way that is interlocked with the structures that are designing/implementing the national CAADP compacts\. 31\. Activities that will be implemented under this sub-component will include: ï‚ Activity 1: Consolidate existing CF and support the emergence of new ones\. ï‚ Activity 2: Strengthen country-level capacity to contribute to CAADP roundtables and post-Compact implementation\. ï‚ Activity 3: Provide human resource development support\. ï‚ Activity 4: Support AAS innovation activities\. 32\. Sub-component 1\.2\. Support to Regional and Continental Collaboration in AAS\. This subcomponent will support the establishment of the infrastructure and mechanisms for enabling AAS actors to network for purposes of, among other things, sharing experiences, finding solutions to everyday problems that they face, accessing global knowledge hubs and facilitating collective innovation in AAS delivery\. The project will provide support for cross-country exchange of expertise to support reforms in AAS; identify other regional and sub-regional fora that can be used to mobilize this exchange; identify the needs for support in reforms of AAS at national level and match them with existing continental human resources\. The project will support AFAAS partnerships with national, regional, continental and international agricultural innovation systems\. It will do this through networking and forming linkages and partnerships with other organizations and initiatives that have similar mandates and interest in building AAS\. It will pursue partnerships in the context of CAADP with SROs, umbrella regional and continental organizations bringing together the various categories of actors10 in agricultural innovation\. The activities that will be undertaken under this sub-component include: ï‚ Activity 1: Develop and implement an information and communications strategy\. 10 This includes farmer organizations, non-government organizations, higher education institutions, information/ knowledge management organizations, continental advocacy organizations, and the private sector 17  ï‚ Activity 2: Support five CF or other relevant country- level institutions to become continental or regional centers of advisory service expertise and leadership on specific strategic topics\. ï‚ Activity 3: Proactive engagement in the design of CAADP Pillar IV implementation structures at continental level\. ï‚ Activity 4: Review, validate and implement Partnership Strategy\. Component 2: AFAAS Governance, Project Management and Secretariat Activities ($6\.5 million) 33\. Activities that will be implemented under this recipient-executed sub-component will include: ï‚ Activity 1: AFAAS governance and management systems\. ï‚ Activity 2: Develop and implement monitoring and evaluation system\. ï‚ Activity 3: Undertake syntheses and strategic studies\. ï‚ Activity 4: Develop and maintain database on agricultural advisory services in Africa\. Component 3\. Management and Supervision of the MDTF ($1\.44 million) 34\. This component will be executed by the World Bank\. The aim of this component is to manage, administer and supervise the MDTF\. It has been agreed with the donors contributing to the MDTF that the full cost of managing and supervising the trust fund will be financed through the proceeds of the MDTF\. 35\. The Trust Fund will support the project components up to the funding levels presented in Table 1\. The annual work planning process will articulate how resources will be allocated within the components and sub-components\. Any adjustments in the Strategic Plan will be discussed at the time of the mid-term review\. 36\. See Annex 2 for a more detailed description of the project\. B\. Project Financing Lending Instrument 37\. The AFAAS Second Multi Donor Trust (MDTF) is structured as a hybrid trust fund with both World Bank and recipient-executed components\. Funds from the MDTF will be channeled directly to AFAAS in the form of a grant to finance Components 1 and 2 of the project\. AFAAS will utilize these funds for activities that will be agreed with the Bank (as summarized below) and carried out and reported on in accordance with the World Bank guidelines and procedures\. 38\. A small portion of the overall funding will be channeled from the MDTF to the World Bank task team to manage, administer and supervise the project (Component 3)\. 18  Project Cost and Financing 39\. The total budget presented in AFAAS’ strategic plan (2012-2016) is US$17 million, and the total project cost including World Bank management of the MDTF is $18\.4 million\. Financing for this budget would come at least in part from the MDTF and may also come from other sources (such as bilateral support from development partners and contributions from FARA, SROs, regional economic communities and member countries)\. The European Commission has committed $6\.8 million to be disbursed through the MDTF and the International Fund for Agricultural Development (IFAD) has committed US$1 million in direct bilateral assistance, bringing the total committed amount to $10\.6 million, or 45\.3% of the total funding requirement\. At this stage the funding gap is about US$9\.3 million\. Additional funding is anticipated from USAID, AusAID, Canadian International Development Agency (CIDA), Swiss Agency for Development and Cooperation (SDC), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Agence Française de Développement (AFD) and others who have shown an interest in participating in the AFAAS MDTF\. Organizations such as FARA, ASARECA and CORAF have also made provisions for AFAAS, of which the specific amount will be determined during annual work program and budget preparations\. Table 1: AFAAS Budget Estimate by Component (2012-2017) Percent of total Component Cost $’000 Cost (%) Component 1: Support to Country AAS for Engagement in CAADP IV 10,500 57\.0 Four Component 2: AFAAS Governance, Management and Secretariat 6,500 36\.0 Activities 3: World Bank Management, Administration and Supervision Component 1,440 7\.0 Grand Total 18,440 100\.0 40\. There are prospects that other donors will contribute to the 5-year strategic plan under the MDTF, or, directly support AFAAS using agreed funding mechanisms\. The 5-year strategic plan will start from early 2013\. C\. Lessons Learned and Reflected in the Project Design 41\. The establishment of AFAAS is in response to lessons learned over the past several decades across Africa and across the globe\. Large and sustained investments were made in the establishment and operations of agricultural extension programs in most African countries – many with strong support from the World Bank\. Although these programs made contributions to the productivity of farms, they did not have the level of transformational impact that was desired\. Farm productivity remains desperately low across the continent\. In part, this is because the agricultural extension programs themselves had institutional characteristics that turned out to be incompatible with the effective implementation of their own missions, such as over- centralization, non-participatory and unsustainable structure, and not responsive to farmer needs\. Some of the key lessons from this experience are listed in the paragraphs immediately below\. As AFAAS was created to facilitate and lead African attempts to respond to these issues, lessons learned from AFAAS’s initial experiences are also provided below\. 42\. Stakeholders at national and local levels struggle to develop the types of institutional reforms needed to improve the effectiveness of agricultural advisory services\. 19 Communities of practice in AAS have been very isolated from each other – rarely having the opportunity to interact with colleagues within their own country and even more rarely with colleagues outside of their own countries\. This has severely limited their ability to share experiences and learn lessons from each other\. It has also meant that they do not gain the kind of perspective that would give them the ability to reflect effectively on lessons learned from their experiences\. Neither do they benefit from exposure to lessons learned by the relatively remote members of the community who have had the opportunity to study the experiences across countries (and continents)\. This being the case, technical assistance from beyond the borders of each country has been particularly important globally in the case of AAS in helping countries to think through program design and reform options\. Further, it is important to break the isolation of AAS providers and to provide opportunities for them to interact with and learn from each other\. AFAAS, inter alia, is expected to play this role\. 43\. AAS programs conceived of and designed primarily as “transfer –of-technologyâ€? links between agricultural research programs and farmers have proven to be disappointing\. It is now clear that AAS programs are more effective when conceived of as investments in human capital at the farm level\. AAS objectives, under this conception, are to improve farmers’ awareness of technological and market opportunities and risks, and to develop their ability to act on this awareness\. Under this approach, AAS also focuses on helping farmers to be more effective critical thinkers about their own farming enterprises\. AAS also helps farmers to develop the capacity to: (a) interact more effectively with input suppliers (including sources of credit); (b) interact more effectively with purchasers of their farm products; (c) manage the biological and economic aspects of their farm enterprises; and (d) work together in areas where collective action helps them to get better prices, influence agricultural research and extension programs, or accomplish other desirable outcomes where collective action helps them to achieve more than they could have achieved through individual actions\. AAS also helps to transfer technology – and when the capacity of farmers is strengthened in the ways suggested above, transfer of technology happens more effectively\. AFAAS has adopted this paradigm and proposes to be a strong advocate for it\. 44\. AAS programs that are organized as centralized ministerial-based bureaucracies primarily staffed by civil servants have not been as effective or as responsive to farmers as is needed\. The global community of practices on AAS has come to broad consensus that effective AAS should be built around several key institutional design principles: (a) farmer voice in choice of AAS providers; (b) pluralism in the provision of AAS at the local level; and (c) shared costs of AAS between national and local government as well as from farmers themselves\. These principles are also advocated by CAADP’s (AUC endorsed) Framework for African Agricultural Productivity (FAAP)\. For these reasons, AFAAS will advocate these principles as the basis for program (re)design across the continent\. 45\. Other lessons learned from experience with innovation platforms in Africa conclude that for platforms to be successful they must: (a) build on actors with convening power such as existing institutions; aim for a transparent and participatory process for setting up the platform; (b) jointly define and agree on the roles of the different platform members; and (c) incorporate farmers to take a leading role in the platform (Putting Heads Together – Agricultural Innovation Platforms in Practice, Bulletin 396 KIT Publishers)\. 20  46\. During the first period of AFAAS’s existence (with support from the first AFAAS MDTF), demand for AFAAS services was strongly evident\. Through FARA, CORAF/WECARD and ASARECA, AFAAS interacted with country teams in the formulation and peer review of agricultural and rural development plans (CAADP investment plans) in over a dozen countries\. Country Fora dedicated to improving the effectiveness of their respective AAS programs formed in nearly a dozen countries and attended AFAAS conferences (without external support)\. AFAAS became the African continent representative of the Global Forum for Rural Advisory Services (GFRAS) and assumed chairmanship of the GFRAS Board\. Since then, the demand for AFAAS’ services has grown, however, longer-term stability and a larger budget envelope are needed to ensure the continued support provided by AFAAS\. The proposed MDTF would help to provide this stability for AFAAS to carry out its proposed work program\. Further, the MDTF would help to strengthen AFAAS’s technical and administrative capacity to do so\. IV\. IMPLEMENTATION A\. Institutional and Implementation Arrangements 47\. Implementation of the project will be the responsibility of the AFAAS Secretariat\. AFAAS’ governance system is comprised of the AFAAS General Assembly (GA), the Board and the Secretariat\. The GA is the supreme AFAAS governing body\. It has two official representatives from each CF (one male and one female), two representatives drawn from continental bodies of the Farmer Organizations, and a representative from FARA\. Other stakeholders are invited to participate in the GA but have no voting rights\. The GA meets once biennially\. Its responsibilities include electing the Board, reviewing and approving overall AFAAS policies as recommended by the Board, determining the strategic orientation and priorities of AFAAS, evaluating performance of AFAAS and, reviewing and amending AFAAS’ Constitution, as needed (See Figure 1)\. Figure 1: AFAAS Institutional Structure General Assembly Board Secretariat 48\. The Board has overall governance oversight responsibility\. This includes: recommending policies for approval by the GA; setting AFAAS Secretariat priorities and defining the projects to address these priorities; recruiting the Executive Director and Project Managers; overseeing the activities of the Secretariat; approval of the annual plan of activities and corresponding budgets and, approval of the financial reports\. 21 49\. The Board is comprised of 15 members constituted as follows: Nine (9) representatives drawn from CF, with the Chairperson selected from among the CF representatives\. Her/his position as a country representative is filled by another person from the same region\. The Board also has a representative from a continental or sub-regional Farmer Organization, a representative from FARA, and three members selected on merit basis\. Women will constitute at least 30% of the Board membership\. The Board has powers to co-opt non-voting members\. It has standing committees for Finance and Administration, a Program Committee, and an Audit Committee\. It has powers to put in place Technical Working groups, Ad Hoc Committees and Task Forces to assist in its work\. 50\. The Secretariat is responsible for the day-to-day management of AFAAS\. The secretariat will: facilitate the functioning of the Board; develop the annual work plan and budget; manage and implement approved annual work plans and budgets; support National Platforms and other groups of stakeholders at country level; promote compliance with CAADP principles; link to the global community; promote networking among CF and other stakeholders; facilitate monitoring and evaluation and, mobilize resources and engage in lobbying and advocacy\. These responsibilities will entail AFAAS working with CAADP institutions and a well-functioning consortia of Development Partners\. The Secretariat will also establish functional modalities for management of the AFAAS Secretariat (including development of different strategies, operational policies, capacity building plan for the Secretariat and other AFAAS organs (see Figure 2)\. Figure 2: AFAAS Secretariat Internal Thematic Working Auditor Executive Director Groups Comms, Technical Regional Desk Procurement Finance Admin\. Planning & Programme Info & Assistant/ Officers (3) Officer Manager M&E Manager Manager KM Partner- Officer ships Admin\. & HR Finance Programme Officer M&E Officer Officer (2) Admin\. Officer Admin\. Asst/ Finance and Status of recruitment I\.T\. Asst Receptionist Accounts Assistant Recruited Year 1 Year 2 Year 3 Office Attendant/ Drivers (2) Cleaner Year 4 22  51\. The technical staff at the Secretariat will be kept lean and will be mainly tasked with management of and providing leadership for the technical activities\. In providing technical leadership, it will be supported by Thematic Working Groups11 made up of experts in the technical fields of operation\. In this regard, the AFAAS Secretariat will establish and continuously update databases of technical experts\. In order to build expertise in the technical areas within AFAAS member countries, the composition of the Thematic Working Groups will blend experts from AFAAS member countries with experts from other parts of the world\. The actual implementation of the project-wide activities will be undertaken through consultancies, commissioning partners, and out-sourcing\. 52\. Annual work planning and budgeting\. Implementation of AFAAS activities will be guided by an annual work planning and budgeting process approved by the Board\. The plan and budget will be coordinated with CAADP support institutions such as AUC, NPCA, RECs and Lead Pillar institutions\. It will also reflect the planned activities of CFs, as well as joint activities planned with key partners such as research establishments and human capacity development institutions\. This exercise will identify the sources of funding for the proposed activities and will ensure that the activities are fully funded\. A World Bank team will carry out at least two supervision missions annually to review the annual work plan and budget and assess implementation progress\. Disbursements under the project will be made on the basis of agreed annual work plans and budgets between the World Bank and AFAAS\. 53\. Operational procedures\. The project will be implemented within the broader AFAAS Constitution and Governance Manual, and more specifically by its Operational Manual (which includes Financial Management, Procurement, Audit and Human Resources management manuals)\. Most of these manuals were reviewed by the World Bank and approved by the AFAAS Board, however, further review will be done before the project becomes effective\. Project implementation will also follow World Bank guidelines and the MDTF Grant Agreement to be signed between AFAAS and the World Bank\. B\. Results Monitoring and Evaluation 54\. Monitoring Outcomes/Results\. The operational responsibility for planning and coordinating M&E activities would rest with the AFAAS Secretariat, Planning, Monitoring and Evaluation Department\. The Planning, Monitoring and Evaluation Manager and the Monitoring and Evaluation Officer will oversee this activity, and would utilize computerized project management techniques to monitor progress and link with monitoring activities that will be carried out at regional, sub-regional and country levels\. AFAAS will regularly monitor and report on the project’s physical and financial inputs and outputs\. AFAAS will be assisted by an independent short-term M&E consultant to evaluate implementation progress and the performance of governing structures\. The consultant will carry out outcome-focused impact evaluations of the project at three pre-defined milestones - baseline, mid-term and project completion\. M&E mechanisms will emphasize stakeholder participation and will be designed to facilitate rapid identification of shortcomings and facilitate corrections, where necessary\. 11 A Thematic Working Group is a community of practice made up of practitioners in the area of AAS\. 23 55\. AFAAS will complete a baseline survey and draft report within six months of project effectiveness\. AFAAS will also conduct a stakeholder workshop to review and refine the MDTF indicators and also develop the arrangements for M&E (including annual targets, data collection sources, responsibility and frequency) within the same timeframe\. Country level implementation would be monitored with the help of CF and AFAAS would develop modalities for carrying out joint M&E activities\. Information generated by AFAAS, CF, other partners and M&E consultants would be consolidated by the Secretariat and used to update the key performance indicators for the project (Annex 1)\. 56\. The Secretariat will submit to the Bank six-monthly progress reports\. These would include, inter alia: (a) up-to-date physical and financial expenditure data compared to annual and end-project targets; (b) updated indicators of project performance compared to annual and end-project targets; and (c) successes and problems encountered during the reporting period with suggested remedial actions\. 57\. In addition to the biannual implementation review that will be carried out by the World Bank Team, the project would be subjected to two major reviews to be carried out jointly by AFAAS and the Bank\. The first would be the mid-term review (MTR) of the project (about 30 months after project effectiveness) and the second around the time of project completion\. The first review, to be carried out by an independent external consultant, would include an impact assessment of the project to date, but also focus on implementation processes and recommend adjustments\. An analysis of the exit strategy and sustainability of the system will also be the focus of the assessment\. The second major review would be a comprehensive overall impact assessment including quantitative and qualitative assessment of the progress against project development objectives\. 58\. Monitoring of outputs/activities and learning\. The M&E of outputs and activities will be undertaken in a participatory manner with a view not only for the M&E results to inform management decision making but contribute to learning by stakeholders\. At the outset of the project, AFAAS will contract a consultant to develop participatory M&E guidelines, tools and processes that will build on the Results Framework to spell out the outputs and activities that will be monitored and evaluated at the CF, regional and Secretariat levels\. The consultant will also identify the capacity development needs and resource implications for implementing the M&E activities at all levels\. One of the challenges for M&E will be ensuring timely collection and processing of data from the diverse locations and institutional environments in which implementation will be taking place\. To minimize this problem, the M&E tools will to the maximum extent possible embed the use of modern information and communication technologies - including the use of mobile phones - for data collection, transmission and processing in such a way that M&E reports tailored for diverse stakeholders are available online in a timely manner\. Many national AAS face the same challenge\. Hence the positive lessons from AFAAS’ M&E approaches will be scaled up and out to national AAS M&E\. AFAAS has already developed a Framework for Lesson Learning that has elements that will be used for lesson learning alongside the M&E processes\. 24  C\. Sustainability 59\. Building sustained commitments to a shared agricultural growth and poverty reduction agenda is one of the central objectives of the CAADP framework\. Many of the principles of the CAADP process – evidence-based planning, collective ownership, political endorsement, measurable targets, inclusiveness and partnerships – are designed to build long-term support among public sector, private sector, civil society and DPs for a common vision of national and regional agricultural development priorities and projects\. Sustainability of AFAAS’ activities is linked to this core agenda of CAADP and funding will be sought from several sources both within Africa and from external sources\. Over time and as AFAAS’ capacity is further developed, it is expected that AFAAS would be increasingly funded from African sources\. V\. KEY RISKS AND MITIGATION MEASURES A\. Risk Ratings Summary Table Table 2: Risk Ratings Summary Table Stakeholder Risk Rating Implementing Agency Risk - Capacity M - Governance M Project Risk - Design M - Social and Environmental L - Program and Donor S - Delivery Monitoring and Sustainability M Overall Implementation Risk M B\. Overall Risk Rating Explanation 60\. The overall risk rating is considered Moderate\. The primary risks faced by AFAAS (and the MDTF) are threefold: (1) design and approach - no continental or even sub-regional approach to support for AAS has ever been established before; (2) financing - only partial funding for AFAAS’s five-year operational plan has been secured; and (3) capacity – AFAAS is a new institution still establishing full capacity to carry out all of its anticipated functions and plans\. Each of these three risk areas is discussed in more detail in the following paragraphs together with mitigation measures that are in place to manage these risks\. 61\. The first significant risk faced by AFAAS has to do with successfully establishing itself and its approach within the community of practitioners and institutional landscape across the African continent\. Most past national approaches to AAS have been less effective than hoped\. 25 The approaches advocated by AFAAS differ from past approaches (decentralization of funding and decision-making to local and farm-level, pluralism in service provision, cost-sharing, etc\.) and have been well-tested and successful at small scale\. As principles of program design, they reflect the accumulated learning of global experience (as documented by the Neuchâtel Initiative and GFRAS)\. AFAAS’s approach to engaging AAS at national level has been tested over the past two years and substantial interest was found in more than a dozen countries (it is anticipated that similar interest will be found in many more countries)\. Further, CAADP processes at country level provide a natural platform upon which AFAAS approaches will be demanded and can be developed at the national level\. The consultations that have informed the AFAAS operational and strategic plans have revealed very high levels of interest from stakeholders at every level (FARA, NPCA, and AUC at continental level, SROs and RECs at the sub-regional level, and many stakeholders in research and extension institutions at the country level), but the extent to which this interest can be translated into sustained ownership is largely untested\. For this reason, it is essential that country-level activities are initiated as early as possible in order to demonstrate what the emergent “advisory service communityâ€? in each country can contribute to agriculture and rural development\. This project therefore assumes focused CF capacity building from the start and significant investment for an extended period of time, from internal (country), as well as external sources, to organize, train and support AAS providers\. As indicated in the table above, the risk rating assigned to this issue of approach and program design is Moderate\. 62\. The second significant risk faced by AFAAS has to do with its funding horizon\. Initially, just under 50% of the five-year financial requirement has been secured from the EC and IFAD (of which initial funding available will more than cover CYs 2013- 2014)\. Several other development partners including, inter alia, Switzerland, USAID, and AusAID, have also indicated their interest in supporting AFAAS, but have not yet made commitments\. A budget shortfall would trigger a reduction in geographic coverage and AFAAS core staff\. As indicated in the table above, the risk rating assigned to this financing issue is Substantial\. 63\. The third significant risk associated with AFAAS is related to its capacity to effectively administer, manage and carry out its proposed work plan\. AFAAS is a very new organization and is still in the process of establishing this capacity\. This being the case, it is possible that there will be delays in putting systems and personnel in place that will be efficient and effective at carrying out AFAAS activities\. This risk is mitigated by several factors: (1) AFAAS has had two years (with support from its first MDTF) to establish these capacities, has made good progress in this regard, and has demonstrated the capability to carry out its work and to develop its administrative and managerial systems; (2) AFAAS enjoys a very close working relationship with FARA, and FARA has gone through the process of establishing similar types of capacity – FARA is already helping AFAAS to learn from FARA’s experiences and is backstopping AFAAS as it establishes capacity for itself; (3) GFRAS provides support and backstopping to AFAAS; and (4) AFAAS will have close support from a World Bank team that has helped several organizations in a similar situation to go through this process, and close supervision from the technical task team as well as from the financial management, procurement, and other operational support teams within the World Bank will be available and provided proactively and systematically\. As indicated in the table above, the risk rating assigned to this issue of institutional capacity is Moderate\. 26  64\. A further strategic risk is that AFAAS may be perceived by some donors as a “project implementation unitâ€? available to be used for undertaking short-term donor-defined tasks\. This could damage AFAAS’s mission of contributing to systemic development of advisory services and distract the attention of the staff from more strategic tasks\. For this reason it is essential that the majority of support for AFAAS’ strategy be provided as un-earmarked support and that funds are only accepted for activities outlined in its own strategic and operational plans\. 65\. With these risks and factors in mind, the overall risk rating assigned to the overall program is Moderate\. For a more detailed set of risks please see Annex 4: Operational Risk Assessment Framework (ORAF)\. VI\. APPRAISAL SUMMARY A\. Economic and Financial Analyses 66\. A full and detailed ex-ante economic and financial analysis of the likely value of investments in AFAAS is not warranted because of the difficulty of estimating in advance the specific benefits of the activities and investments to be supported under the Project\. However, it is possible to identify the types of benefits which would result from the Project\. It is also possible to infer from this, and from previous work on the rate of return to investments in agricultural research and extension, that it is quite reasonable to anticipate that the returns to the proposed investment in AFAAS would be well above typical threshold levels\. 67\. The primary objective of AFAAS as a continental agency will be to improve the effectiveness and ultimate impact of agricultural advisory programs at the national and local levels across Sub-Saharan Africa on agricultural productivity and food security\. This will be achieved through a variety of means, including, inter alia: making relevant knowledge and information more readily available to professionals working in these programs (as well as making such information more accessible by their clients); providing leadership, guidance, and technical assistance to agricultural advisory programs to assist in their reform and evolution; and to provide numerous networking opportunities (that do not currently exist) to agricultural advisors and to many other stakeholders Virtually all of the expected benefits of this will be realized in the form of improvements in farm productivity and profitability generated by these national and local level advisory services to farmers\. Such improvements will accrue as a stream of returns at the local level over a long period of time\. Most of the returns will be captured by farmers themselves, but some of the returns will be captured, inter alia, by businesses that supply inputs and services to farmers and by businesses and consumers who purchase farm outputs\. 68\. A very extensive body of empirical studies (well over 1,000 studies carried out over the past 50 years)12 has consistently documented rates of return to agricultural research and extension 12 A frequently cited meta-analysis carried out by the International Food Policy Research Institute (IFPRI) covering 293 studies on agricultural R&D published between 1953 and 1997 found returns to agricultural research and development programs to have been particularly high (see Alston et al\., 2000, “A Meta-Analysis of Rates of Return to Agricultural R&D,â€? Research Report 113, IFPRI, Washington, DC)\. A more recent update of the earlier literature surveys and meta-analyses reviewed the results of nearly 1,500 studies of the rates of return to agricultural R&D programs and also found consistently very high rates of return across many types of programs – these findings can be found in Alston, J\. (2010), “The Benefits from Agricultural Research and 27  programs that are quite high\. Virtually all programs studied are found to have rates of return above 20%, and the overwhelming majority of programs studied have been found to have had rates of return well above 40% with many far exceeding even 100%\. These returns have been generated by programs that, their high rates of return notwithstanding, suffer significant widely- agreed and acknowledged program design weaknesses as well as substantial capacity and bureaucratic challenges\. 69\. Improving the effectiveness of these programs (to perform even beyond their historically high rates of return) is precisely the focus of AFAAS\. Although AFAAS is a relatively new institution, it is well-positioned to support the improvement of the effectiveness of these programs for several reasons\. First, it possesses very clear recommendations as to the nature of the institutional evolution that would be needed to improve the effectiveness of AAS – and these have been widely agreed in a technical sense (by the professional community of practice within and outside of Africa) and have been officially endorsed by the AU as they are presented in the Framework for African Agricultural Productivity (FAAP)\. Second, AFAAS enjoys a platform of engagement with the national level programs through the CAADP process that is ongoing in two thirds of the countries across the continent (with more countries still becoming involved each month)\. In the context of the development and peer review of CAADP Investment Plans (and increasingly in the context of launching the implementation of these plans), countries have looked to CAADP to provide technical assistance in their approaches to all of their agricultural programs\. AFAAS is one of the key CAADP responses to this demand for support – and as such has an already established inroad for engaging and contributing to program design and implementation at country level\. Third, AFAAS (together with FARA and TEAM Africa) has a plan for how to go about engaging at the country level (the Pillar IV Strategy)\. The Pillar IV Strategy has been endorsed by all stakeholders and includes a practical time-bound costed plan for how AFAAS will go about its engagement with country programs\. More detail is provided in AFAAS’ own strategic and operational plan\. Taken together, these factors put AFAAS in a very good position from which to succeed in its objectives to strengthen the effectiveness of the country-level AAS\. 70\. How much impact would AFAAS need to achieve in order to justify its own budget and the investments being committed through the Project? In terms of the discussion immediately above (i\.e\., improving the effectiveness of existing agricultural R&D programs in Africa), AFAAS would need to cause improvements in the rates of return of Africa’s agricultural R&D programs (from what have typically been 20% or more) by an additional one third of one percent in order to justify AFAAS’s own budget\. In terms of impact at farm level, AFAAS would need to be able to help agricultural R&D programs to generate, within 5 years of its launch, a stream of farm-level productivity improvements equivalent to: (1) an increase of an additional $0\.01 for every $1,000\.00 of AgGDP that would have been generated without AFAAS13; or (2) an increased $0\.05 in profit annually for each smallholder farm on the Development, Innovation, and Productivity Growthâ€?, OECD Food, Agriculture and Fisheries Papers, No\. 31, OECD Publishing\. (http://dx\.doi\.org/10\.1787/5km91nfsnkwg-en)\. 13 Agricultural GDP for the continent is roughly US$320 billion (FAOSTATS-Agriculture)\. 28  Continent14\. Note that these indicative levels of improvements in AgGDP and farm level incomes would be more than enough to justify AFAAS’s budget – but that such gains would also be accompanied by gains to consumers and agribusiness, and this means that the numbers cited overstate what would need to be achieved to justify AFAAS’s budget\. Such impacts would seem to be eminently achievable under very reasonable assumptions – and the expectation would be that AFAAS would far exceed these benchmark achievements\. B\. Technical 71\. Several aspects of the proposed technical approaches to AFAAS’ work merit attention here including: (1) the technical credibility of its recommendations; (2) the efficacy of the proposed modalities for engaging with programs and practitioners at country level; and (3) the validity of the need for an information gathering and an information repository function with regard to AAS in Africa\. 72\. Technical credibility of AFAAS’ recommendations\. AFAAS’ recommendations will be based on the principles for program design articulated in the FAAP\. These have been validated through extensive consultation across Africa and with Africa’s development partners world- wide and have been endorsed by the AU\. They are very consistent with the principles developed and articulated and endorsed by communities of practice outside of Africa (such as the Neuchâtel Initiative15, among many others)\. They are also consistent with the most successful agricultural advisory programs across the continent and the world\. AFAAS is, in this sense, at the cutting edge of program design for AAS programs – and is being watched closely as a good example by similar organizations in other regions\. 73\. Efficacy of proposed modalities of engagements at country level\. In order to be successful, AFAAS will need to engage effectively with communities of practice and program leaders at the national level\. It has already established the credibility of its modality of creating Country Fora through which to promote discussion and consensus building around the principles of program design that are articulated in the FAAP\. Nearly a half dozen fora already exist, and this approach is working in practice\. In terms of engagement with national programs, it has already been noted that CAADP provides an exceptionally good foundation upon which to base such engagement\. As indicated above, AFAAS enjoys a platform of engagement with the national level programs through the CAADP process that is ongoing in two thirds of the countries across the continent (with more countries still becoming involved each month)\. In the context of the development and peer review of CAADP Investment Plans (and increasingly in the context of launching the implementation of these plans), countries have looked to CAADP to provide technical assistance in their approaches to all of their agricultural programs\. AFAAS 14 Recent estimates suggest that there are some 33 million small-holder farms on the continent (see Small Farms: Current Status and Key Trends, an Information Brief\. Nagayets, Oksana\. Information Brief prepared for The Future of Small Farms Research Workshop, Wye College, June 26-29, 2005\.)\. Note that AFAAS would likely have a positive impact on productivity and profitability on larger holdings as well – so the figure cited above overstates the impact needed on small farm incomes to justify expenditures on AFAAS\. 15 The Neuchâtel Initiative was a mostly Europe-based consortium of development practitioners that developed a widely-accepted and widely-used series of best-practice frameworks documents on the various aspects of program design for agricultural advisory services (many of these publications may be accessed at http://www\.agridea-international\.ch/?id=526)\. The Neuchâtel Initiative has evolved into the Global Forum for Rural Advisory Services (GFRAS) which has continued to support the development of such agreed approaches to agricultural development programs\. 29 is one of the key CAADP responses to this demand for support – and as such has an already established inroad for engaging and contributing to program design and implementation at country level\. Third, AFAAS (together with FARA and TEAM Africa) has a plan for how to go about engaging at the country level (the Pillar IV Strategy)\. The Pillar IV Strategy has been endorsed by all stakeholders and includes a practical time-bound costed plan for how AFAAS will go about its engagement with country programs\. More detail is provided in AFAAS’s own strategic and operational plan\. For these reasons, the proposed modalities have very strong political and technical credibility with respect to their efficacy\. 74\. The validity of the need for an information gathering and an information repository function for AAS\. In the absence of AFAAS, no systematic gathering of data about agricultural extension in Africa is taking place\. There is no repository which has information about any aspect of AAS in Africa\. This is in stark contrast to the progress made in this regard for information on agricultural research\. The lack of information about AAS impedes good policy and investment decisions and also further isolates practitioners at every level from each other and from access to information about the programs and learning that has accumulated about their profession\. This need is real – and by learning from the International Food Policy Research Institute’s (IFPRI’s) Agricultural Science and Technology Indicators, AFAAS should be able to make a very substantial contribution through establishing a first effort to provide this service\. C\. Financial Management 75\. The Bank’s financial management team conducted a financial management assessment of AFAAS, based in Kampala, Uganda\. The objective of the assessment was to determine whether: (a) the organization has adequate financial management arrangements to ensure the funds will be used for the purposes intended in an efficient and economical manner; (b) the project’s financial reports will be prepared in an accurate, reliable and timely manner; and (c) the entity’s assets will be protected\. The assessment complied with the Financial Management Manual for World Bank-Financed Investment Operations that became effective on March 1, 2010 and AFTFM Financial Management Assessment and Risk Rating Principles\. 76\. The proposed project will be implemented by AFAAS using the existing financial management arrangements which are expected to be strengthened with the recruitment of a Manager for Finance and Administration by June 30, 2014 and internal auditor within 3 months after effectiveness\. The Forum will also appoint an external auditor within 3 months after effectiveness\. It will also be required to develop a subsidiary grant agreement and MoU to be signed with Host Institutions and CFs with adequate FM provisions to ensure funds are utilized for purposes intended\. AFAAS will operate designated and project accounts in a commercial bank acceptable to the Bank and will be in charge of all financial management arrangements and reporting on the project\. The host institutions and the CFs will also operate project specific bank accounts in banks acceptable to the Bank\. The host institutions will be responsible for the funds disbursed to the CFs and submission of financial reports to AFAAS\. 77\. The overall conclusion of the assessment is that the financial management arrangements in place meet the Bank’s minimum requirements under OP/BP10\.00, and therefore are adequate to provide, with reasonable assurance, accurate and timely information on the status of the project required by IDA\. The overall Financial Management residual risk rating of the project is 30 substantial\. An action plan has also been documented to show actions that need to be undertaken to improve on the financial management arrangements of the project\. See Annex 3 for the detailed financial management assessment\. D\. Procurement 78\. Procurement for the project will be carried out in accordance with the World Bank Guidelines: Procurement of Goods, Works, and Non Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers, dated January 2011, and Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers, dated January 2011\. 79\. The AFAAS Secretariat, located in Kampala, Uganda, will be responsible for conducting procurement under the project\. AFAAS has recently hired a Procurement Officer who shall be responsible for conducting procurement \.The AFAAS manual provides for a Procurement and Awards Committee to be responsible for adjudication of contract awards and approval of key procurement stages and the manual has been revised to include a complaints handling mechanism\. Some additional procurement may be done by the Host Institutions and sub grantees but this shall be preceded by (i) an assessment of the procurement capacity of the Host Institutions and (ii) the adoption of the Grants award manual\. 80\. A procurement capacity assessment of AFAAS was conducted and the risk for procurement under the project is rated Moderate\. The main risks for procurement arise from: (i) inexperience of AFAAS in conducting procurement; (ii) lack of opportunity to apply the approved procurement manual\. The main mitigation measure that has been agreed with AFAAS is training of staff in procurement following the recently adopted procurement manual\. E\. Social (including Safeguards) 81\. Implementation of the various activities under the MDTF is not expected to have any significant negative social impacts\. Proposals for projects funding will not be allowed to involve land acquisition or resettlement\. Given the importance of women in agriculture and poverty reduction, and recognizing the different needs of women and men, AFAAS will work to integrate gender issues in all of its activities, projects and policies\. Moreover, AFAAS will systematically consider gender equality issues in policy development, the identification, formulation and implementation of its development projects; and in its administrative and financial management\. In addition, AFAAS will partner with African Women in Agricultural Research and Development (AWARD) program to strengthen leadership skills of African women in agricultural science empowering them to contribute more effectively to poverty alleviation and food security, as this latter organization expands its program into extension and advisory services\. In so doing, AFAAS will report on its progress towards integrating gender equality into its operations as a part of its regular reporting schedule\. 31  F\. Environment (including Safeguards) 82\. The project has a Category C environmental classification and therefore there is no environmental issue to be addressed under the project\. Furthermore, no Bank Safeguard policies are triggered by this project as it will not fund any category of civil works or the engineering designs or feasibility studies associated with any civil works, either for AFAAS or CF\. Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4\.01) [] [X] Natural Habitats (OP/BP 4\.04) [] [X] Pest Management (OP 4\.09) [] [X] Physical Cultural Resources (OP/BP 4\.11) [] [X] Involuntary Resettlement (OP/BP 4\.12) [] [X] Indigenous Peoples (OP/BP 4\.10) [] [X] Forests (OP/BP 4\.36) [] [X] Safety of Dams (OP/BP 4\.37) [] [X] Projects in Disputed Areas (OP/BP 7\.60) [] [X] Projects on International Waterways (OP/BP 7\.50) [] [X] 32  Annex 1: Results Framework and Monitoring African Forum for Agricultural Advisory Services (AFAAS) Second MDTF Project Development Objective (PDO): To reform and strengthen Agricultural Advisory Services (AAS) in accordance with FAAP principles towards increasing agricultural productivity and food security\. Unit Baseline Cumulative Target Values Data of Original Responsibili Frequen Source/ PDO Level Results Indicators Meas Project ty for Data Comments Core Y1 Y2 Y3 Y4 Y5 cy Methodolog ureme Start Collection y nt (2013) % of value chain actors utilizing improved knowledge and Case studies technologies FAO/IFPRI % 0 7 14 21 -28 35 Annual Reports % of various categories of value chain actors satisfied with the quality of AAS % 0 5 10 20 30 40 Annual Survey Objectives and Indicators Intermediate Results Indicators Unit Baseline Cumulative Target Values Frequen Data Source/ Responsibility Comments of Original cy Methodology for Data Meas Project Y1 Y2 Y3 Y4 Y5 Collection Core ureme Start nt (2012) Intermediate Result 1: Increased country level capacity in AAS for engagement in CAADP Pillar IV Number of Country Fora (CF) No\. 0 12 12 7 6 3 Annual AFAAS M&E Manager established M&E Number of CF established and No 0 5 10 16 22 25 Annual AFAAS operating in accordance with FAAP M&E guidelines (with capacity to articulate demands, advocate for AAS reforms, address gender equality, mobilize and manage resources and act as platform for sharing knowledge) 33 Number of AAS pro No\. 0 0 5 5 4 4 Annual AFAAS M&E Manager productivity/food security reforms M&E effectively delivered by the CF Intermediate Result 2: Increased regional and continental collaboration and partnerships in support of AAS reform Stakeholders validate partnership Yes/No - Yes - - - - Annual AFAAS M&E strategy Manager Number of partnerships formed at No\. 0 2 3 1 1 0 Annual AFAAS M&E national, regional, and international Managers levels Number of partnerships effectively No\. 0 0 1 2 1 1 Annual AFAAS delivering gender-related reforms in Survey AAS16 Intermediate Result 3: Better governance and management of AFAAS in support of AAS reform Existence of functional governance Yes/No Yes Yes Yes Yes Yes Yes Quarterly AFAAS procedures, management structures, and policies17 Increase in the amount of funds for % US$6\.7m 3 5 10 15 15 Six AFAAS supporting AAS in Africa monthy Number of advocacy initiatives No 0 1 1 2 1 2 Six AFAAS positively impacting gender reforms monthly Survey in AAS18 16 Surveys will be conducted to measure satisfaction with the reforms\. 17 To be verified by World Bank supervision missions\. 18 Surveys will be conducted to measure satisfaction with the reforms\. 34  Annex 2: Detailed Project Description African Forum for Agricultural Advisory Services (AFAAS) Second Multi-Donor Trust Fund Component 1: Support to Country AAS for Engagement in CAADP Pillar IV\. 1\. This component will support all AAS stakeholders, both public and private, guided by the FAAP principles, in their engagement in the implementation of CAADP Pillar IV in their various countries\. This includes developing mechanisms and implementation guidelines to ensure that the process of developing and supporting CAADP Country Compacts reflects the role and importance of AAS\. This would in part be through supporting the emergence, in each member country, of a CF for AAS as well as supporting capacity building, human resource development and innovation activities in delivering AAS\. 2\. Sub-component 1\.1: Establishment and Strengthening of Country Fora\. This sub- component will support the emergence of CF of AAS stakeholders at the country level\. These CF will be institutional structures under which stakeholders in each country can work together to influence the reform and implementation of AAS in their respective countries and through which they will be able to meet to share information and discuss relevant issues\. They will provide stakeholders with a space within which they can identify priority areas of concern to be addressed through collaborative information sharing, joint activities and partnerships\. The general objectives of the CF are (i) to strengthen the capacity of AAS stakeholders at country level to lead advisory service development, (ii) to mobilize, reflect and learn how to improve advisory service provision within an agricultural innovation system framework, (iii) to act as the arm of the country CAADP implementing organs linking with AAS stakeholders and, (iv) to be able to utilize (within and between countries) the human capacity that is being developed for undertaking reforms in AAS\. 3\. AFAAS will work with country-level governance and management structures, and will facilitate the emergence of such governance bodies where they do not exist by setting up Interim National Steering Committees\. AFAAS will work through these committees to facilitate the institutional and organizational development of the CF\. The CF will be configured in such a way that they focus on AFAAS objectives in a way that is interlocked with the structures that are designing/ implementing the national CAADP compacts\. 4\. Activities to be implemented under this sub-component will include: ï‚ Activity 1: Consolidate existing CF and support the emergence of new ones\. AFAAS will support already established CF19 to develop and implement their strategic plans\. It will engage new countries with expressed interest to establish CF and provide similar technical support and guidance\. For these countries, AFAAS will develop criteria and procedures for identifying activities for implementation by CF with AFAAS support\. 19 AFAAS’ membership includes North African and Sub-Saharan African countries\. Existing Country Fora include Benin, Malawi, Tanzania, Kenya, Uganda and Sierra Leone and they will be amongst the initial countries to be supported\. 35  ï‚ Activity 2: Strengthen country-level capacity to contribute to CAADP roundtables and post-Compact implementation\. AFAAS will prepare guidelines for national-level actors to help them engage in CAADP activities20; provide training for national AAS actors in their tasks outlined in these guidelines; provide coaching for CF and other national-level actors; and engage with regional partners - particularly Regional Farmer Organizations (RFOs) - both directly at national level and with the regional institutions, supporting the national roundtable processes and the development of compacts\. ï‚ Activity 3: Provide human resource development support\. AFAAS will: (i) advocate for greater investment in human resource development of advisors and farmers in all AFAAS activities; (ii) engage in appropriate national/regional platforms on advisor and farmer training; (iii) support strategic planning processes for human resource development at country level through mentoring and coaching\. ï‚ Activity 4: Support AAS innovation activities\. The AFAAS Secretariat will develop guidelines, procedures and mechanisms through which funds from AFAAS or other sources can be channeled and managed as sub-grants directly by host institutions on behalf of the CF\. Subsequently it will provide technical support to CF to put in place mechanisms for managing funds\. The process for awarding sub-grants will involve approval of the sub-grant by the AFAAS Board through its approval of AFAAS’ work plan\. The process of developing proposals by the CF will start with a workshop to review AAS challenges that need innovation and to identify innovative practices from elsewhere that could be adapted for their use\. Groups/organizations/ individuals from the CF will identify innovations that they wish to try out and/or gaps for which they could develop innovative AAS approaches\. After the workshop they will develop proposals for developing/testing their selected innovations\. The proposals developed will be presented in a national innovation marketplace to which potential sponsors will be invited so that ultimately the financing of the innovation activities is open to other sources of funding\. The CF will also select those it will support through its sub-grant\. These will be submitted to the AFAAS Secretariat for review by the Thematic Technical Working Groups\. Proposals that will be accepted for funding will be presented to the AFAAS Board for approval\. The Secretariat will then authorize the CF to issue contracts for the proposals to be implemented\. The detailed guidelines for awarding innovation grants will be prepared and submitted for Bank approval prior to the issuance of the first sub-grant\. 5\. Sub-component 1\.2\. Support to Regional and Continental Collaboration in AAS\. This subcomponent will support the establishment of the infrastructure and mechanisms for enabling AAS actors to network for purposes of, among other things, sharing experiences, finding solutions to everyday problems that they face, accessing global knowledge hubs and facilitating collective innovation in AAS delivery\. The project will provide support for cross-country exchange of expertise to support reforms in AAS; identify other regional and sub-regional fora that can be used to mobilize this exchange; identify the needs for support in reforms of AAS at national level and match them with existing continental human resources\. The project will support AFAAS partnerships with national, regional, continental and international agricultural innovation systems\. It will do this through networking and forming linkages and partnerships 20 The guidelines that will be developed in Activity 1 are for external facilitation of country processes\. 36  with other organizations and initiatives that have similar mandates and interest in building AAS\. It will pursue partnerships in the context of CAADP with SROs, umbrella regional and continental organizations bringing together the various categories of actors21 in agricultural innovation\. The activities that will be undertaken under this sub-component include: ï‚ Activity 1: Develop and implement an information and communications strategy, to enable countries (CF) to exchange information and collaborate across boundaries\. This will largely consist of developing and implementing an information and communication management strategy\. Elements of the strategy will include: (i) maintenance and updating of the AFAAS website; (ii) management of the virtual social networking platform to ensure existence of a regularly-updated database of AAS actors and organizations and virtual interactions within and between CF, thematic working groups and self-generated AAS innovation communities; (iii) design and implementation of a system for financing collaborative innovative projects for developing new AAS approaches and enhancing AAS capacity, e\.g\., through training consortia bringing together national and regional AAS actors; (iv) the collection, management and sharing of documentation; (v) two biennial symposia for continental exchange (2013 and 2015); and (vi) production of regular newsletters and strategic reports\. The project will also support peer engagements among participating countries and evidence-based policy formation at a continental level\. In this regard, AFAAS will facilitate two peer reviews per year of advisory service approaches, in collaboration with RFOs and regional research networks; present results of peer engagements in CAADP and other relevant fora; investigate and develop possible roles and procedures for AFAAS in mobilizing peer participation in major reviews, joint evaluations, and other areas as deemed necessary\. ï‚ Activity 2: Support five CF or other relevant country- level institutions to become continental or regional centers of advisory service expertise and leadership on specific strategic topics\. AFAAS will: (i) confirm choice of specific fields where expertise is needed and demanded\. These may include how advisory services should address food security, market orientation, climate change, financing advisory services, ICT developments, farmer/advisor education; (ii) develop criteria for selecting country level public or private institutions that will be developed into centers of advisory service expertise in given areas and select the countries; (iii) provide training, consultancy support, and start-up grants for developing appropriate capacities within these centers; (iv) develop training modules in these fields to be managed by national-level centers of expertise and used for human resource development in other countries, with support from regional organizations; and (v) hold events to launch the centers\. ï‚ Activity 3: Proactive engagement in the design of CAADP Pillar IV implementation structures at continental level\. AFAAS will develop a supplement to the FAAP document that deepens the AAS dimension; participate in CAADP meetings where CAADP Pillar IV facilitation guidelines are developed; collaborate with FARA and other institutions to ensure that AAS are better integrated into CAADP country programs in a manner consistent with FAAP principles for AAS; and provide information to leaders of country CAADP 21 This includes farmer organizations, non-government organizations, higher education institutions, information/ knowledge management organizations, continental advocacy organizations, and the private sector\. 37  design processes regarding the implications of CAADP Pillar IV and the FAAP for advisory services\. ï‚ Activity 4: Review, validate and implement Partnership Strategy\. This will support the development of a Partnership Strategy that covers a series of institutions that support AAS at the sub-regional, continental, and world level\. The main actors with whom AFAAS will develop partnerships are: (i) Farmer Organizations and other Value Chain Actors from input suppliers to processors; (ii) research establishments; (iii) continental and sub-regional CAADP Pillar IV organizations; (iv) policy advocates; and (v) human capacity developing institutions\. The implementation of this strategy will involve holding partnership development workshops; holding occasional partnership review workshops; and participating in events organized by partners\. The workshops will seek to identify: (i) activities and AFAAS results that can be contributed to through synergies with the partners; (ii) initiating the development of proposals for partnership projects; (iv) agreeing on resource contributions by AFAAS and the partners; (iii) identifying other potential sources of funding for the activities\. In addition, the workshops will be used for review of on-going partnership activities, lesson-learning, and charting ways of using the outputs of the partnerships to influence policy, and finally, jointly scaling out the results\. AFAAS will have a grants budget available to partners jointly implementing the partnership activities and who have a comparative implementation advantage\. Examples of grant activities include: testing, adapting and piloting of innovations and technologies (e- extension, farmer to farmer extension, farmer field schools, plant clinics, etc\.); scaling up and out innovations from research; capacity strengthening of AEAS actors; studies on climate change, gender; holding joint conferences, workshops; conducting action research in AEAS etc\. These grants will be available through partnership MoU and/or contracts\. Reciprocally, AFAAS will also expect to receive funds, through MoUs and/or contracts, from partners to implement activities for which it has a comparative advantage but for which it has no budget\. To the extent possible such contracts will include aspects of overheads and technical assistance\. Component 2: AFAAS Governance, Management and Secretariat Activities 6\. Activities that will be implemented under this recipient-executed sub-component will include: ï‚ Activity 1: AFAAS governance and management systems\. Under this component, support will be provided to the AFAAS Secretariat to strengthen its governance and administration systems (the General Assembly, the Board, and the Secretariat)\. This will include: support for AFAAS internal Units; an updating of its governance manual, operational manual, internal systems, guidelines and constitution; establishment and strengthening of a human resource, finance and procurement units; and strengthening of the information and communications unit\. The component would fund: (i) operational 38  costs22 including staff salaries of the Secretariat; (ii) office equipment; (iii) convening of and participation in regional and international fora; (iv) capacity building in financial management, procurement, accounting, and human resource management; (v) development and maintenance of an M&E system, and (vi) General Assembly and Board meeting expenses\. ï‚ Activity 2: Develop and implement monitoring and evaluation system\. The principal objective in the M&E development and maintenance is to institutionalize a results-based M&E system\. The M&E Unit at the Secretariat will develop appropriate tools and methods, in addition to commissioning specific studies to evaluate the outcomes and impacts of AFAAS interventions\. ï‚ Activity 3: Undertake syntheses and strategic studies\. This will include, but is not limited to, the following activities: (i) selection of priority areas for syntheses and strategic studies; (ii) identification of partners that can carry out syntheses and strategic studies; (iii) carrying out two synthesis studies and one strategic study per year, and (iv) presentation of findings within CAADP and related fora international, regional and national level\. ï‚ Activity 4: Develop and maintain database on AAS in Africa\. Information about agricultural advisory systems in Africa is hard to get\. There are no clear well-defined sources of information on questions of national/regional resource allocation, AAS workforce numbers, institutional policy frameworks, tools and approaches or their effectiveness and relevance23\. AFAAS will take responsibility to develop approaches for collecting and providing this type of information, and (whether through doing this work itself, or contracting it to other entities) will ensure that such information is collected and made available to interested stakeholders\. Component 3: Management and Supervision of the MDTF 7\. This component will be executed by the World Bank\. The aim of this component is to manage, administer and supervise the MDTF\. It has been agreed with the donors contributing to the MDTF that the full cost of managing and supervising the trust fund will be financed through the proceeds of the MDTF\. 8\. The Trust Fund will support the project components up to the funding levels presented in Table 1\. The annual work planning process will articulate how resources will be allocated within the components and sub-components\. Any adjustments in the Strategic Plan will be discussed at the time of the mid-term review\. 22 Operational costs include expenditures incurred by AFAAS for the implementation of the activities under the four components (office supplies, office maintenance, office equipment maintenance, communication and insurance, office administration, utilities, vehicle operation, travel, and per diem allowances of AFAAS staff when travelling for official duty)\. 23 A possible exception is agricultural education, for which IFPRI provides information on these kinds of questions\. 39  Annex 3: Implementation Arrangements African Forum for Agricultural Advisory Services (AFAAS) Second MDTF Project Institutional and Implementation Arrangements 1\. The Comprehensive Africa Agriculture Development Programme (CAADP) is an African- owned and Africa-led initiative through which interventions to transform agriculture are coordinated\. Under CAADP, the Forum for Agricultural Research in Africa (FARA) has the mandate to provide leadership on agricultural research, advisory services, and education\. FARA has delegated to AFAAS the mandate and responsibility to lead and coordinate on agricultural advisory services\. In this context, AFAAS operates under the umbrella of FARA but has its own autonomy and governance structure\. With its role in CAADP, AFAAS coordinates with FARA, as well as with both the Africa Union Commission (AUC) and the NEPAD Planning and Coordinating Agency (NPCA) in supporting CAADP processes at national, sub-regional, and continental levels\. 2\. At a broader level, AFAAS is one of the founding members of, and enjoys the technical support of, the Global Forum for Rural Advisory Services (GFRAS)\. GFRAS is a global organization that provides a space for advocacy and leadership on pluralistic and demand-driven rural advisory services within the global development agenda\. As such, GFRAS is a source of global experience and expertise which AFAAS can draw upon to support its objectives in Africa\. 3\. The AFAAS Secretariat will have Regional Desk Officers to coordinate activities in the Africa Sub-Regions – West and Central Africa, East and Central Africa, North Africa and Southern Africa\. The East and Central Africa desk Officer will be based at the AFAAS Secretariat while the other three will be hosted by appropriate institutions in the regions – preferably the headquarters of the Sub-Regional Research Organizations or the Regional Economic Communities\. 4\. The Country Fora (CF) are not part of the governance structure of AFAAS\. A CF is an umbrella organization of AAS providers in a given country that brings AAS stakeholders together to advocate for scale-up and reform of agricultural advisory services along the lines laid out in the FAAP\. In implementation, CFs would enable the AAS stakeholders to monitor the performance of the agricultural advisory system and would support measures to improve the performance of the agricultural advisory services\. The presence of a CF in a given country is a pre-requisite for AFAAS to become involved in that country\. Therefore, AFAAS will pay special attention to the formation and strengthening of CFs across the continent, keeping the CF close to its governance structure with national ownership\. 5\. Country level activities will, during the process of formation of the CF, be governed by an Interim Steering Committee which, subsequent to formation of the CF, will be reconstituted into a Steering Committee of the CF\. Each CF will develop a five-year strategy, operational plan and budget on the basis of which a detailed rolling annual work plan and budget will be developed\. The work of the ISC will be supported respectively by a National Focal Person identified and agreed by the CF stakeholders\. Once the ISC is formalized and financially stable with work programs, it will recruit a CF Coordinator\. 40 6\. A hosting arrangement will be key to the institutional development of the CF, thus the need for a Host Institution (HI)\. The HI must be a member of the CF and should be a well-established focal agricultural institution/organization\. It is AFAAS’ policy not to create new/parallel structures, therefore, the first option for coordinating and managing CF activities shall be to identify an already existing institution with appropriate management systems to host the CF and provide the coordination and management functions, which include, but not be limited to: ï‚ Providing secure workstations when needed to the Focal Point (FP) in a shared environment with other HI staff members; ï‚ Managing the project resources in compliance with the AFAAS Operational Manual i\.e\. receiving and accounting for project funds- guided by FP ï‚ Supporting institutional development of the CF, including nurturing the CF to (over time) become an independent entity; ï‚ Supporting resource mobilization and advocacy; ï‚ Providing administrative and finance support systems including accounting and banking, financial reporting and procurement services to AFAAS on behalf of CF; ï‚ Providing ICT support services including ground phone line system and extension to the offices, internet, emails, local area network for CF Focal Point and maintenance support for the same; ï‚ Access to office equipment such as photocopiers, fax machines and printers\. 7\. Furthermore, the HI will provide sub-grants, on behalf of the CFs, to beneficiaries to support AEAS innovation activities\. Examples of these activities include: testing, adapting and piloting of innovations and technologies (e-extension, farmer to farmer extension, farmer field schools, plant clinics, etc\.); scaling up and out innovations from research; capacity strengthening of AEAS actors; studies on climate change, gender; holding joint conferences, workshops; conducting action research in AEAS\. 8\. The activities in the CF work plans shall be implemented by members of the CF that have the requisite technical and managerial competencies\. These may be individuals/ AAS experts, farmer organizations, private sector companies, NGOs, public sector institutions, or consortia of any of these\. They will be identified in the process of CF interactions\. The CF will use guidelines provided by the AFAAS Secretariat to undertake due diligence for ensuring that the entities have the capacities to implement the activities\. In cases of innovation projects, the CF will have a peer review processes for selecting proposals\. In cases where suitable individuals/ organizations cannot be found to implement activities in the CF work plans, the CF (through its Host Institution) will contract local - or if necessary - international consultants to implement the activities\. See Figure 3 below on the African AAS institutional landscape\. 41  Figure 3\.1: African AAS Institutional Landscape GFRAS AUC, NPCA, Country Fora AFAAS FARA (Host Institution) Other Partner SROs/AFAAS Regional Desk AAS Organizations Officers 9\. Implementation of the project will be the responsibility of the AFAAS Secretariat\. AFAAS’ governance system is comprised of the AFAAS General Assembly (GA), the Board and the Secretariat\. The GA is the supreme AFAAS governing body\. It has two official representatives from each CF (one male and one female), two representatives drawn from continental bodies of the Farmer Organizations, and a representative from FARA\. Other stakeholders are invited to participate in the GA but have no voting rights\. The GA meets once biennially\. Its responsibilities include electing the Board, reviewing and approving overall AFAAS policies as recommended by the Board, determining the strategic orientation and priorities of AFAAS, evaluating performance of AFAAS and, reviewing and amending AFAAS’ Constitution, as needed (See Figure 4)\. Figure 3\.2: AFAAS Institutional Structure General Assembly Board Secretariat 10\. The Board has overall governance oversight responsibility\. This includes: recommending policies for approval by the GA; setting AFAAS Secretariat priorities and defining the projects to address these priorities; recruiting the Executive Director and Project Managers; overseeing the activities of the Secretariat; approval of the annual plan of activities and corresponding budgets and, approval of the financial reports\. 11\. The Board is comprised of 15 members constituted as follows: Nine (9) representatives drawn from CF, with the Chairperson selected from among the CF representatives\. Her/his 42 position as a country representative is filled by another person from the same region\. The Board also has a representative from a continental or sub-regional Farmer Organization, a representative from FARA, and three members selected on merit basis\. Women will constitute at least 30% of the Board membership\. The Board has powers to co-opt non-voting members\. It has standing committees for Finance and Administration, a Program Committee, and an Audit Committee\. It has powers to put in place Technical Working groups, Ad Hoc Committees and Task Forces to assist in its work\. 12\. The Secretariat is responsible for the day-to-day management of AFAAS\. The secretariat will: facilitate the functioning of the Board; develop the annual work plan and budget; manage and implement approved annual work plans and budgets; support National Platforms and other groups of stakeholders at country level; promote compliance with CAADP principles; link to the global community; promote networking among CF and other stakeholders; facilitate monitoring and evaluation and, mobilize resources and engage in lobbying and advocacy\. These responsibilities will entail AFAAS working with CAADP institutions and a well-functioning consortia of Development Partners\. The Secretariat will also establish functional modalities for management of the AFAAS Secretariat (including development of different strategies, operational policies, capacity building plan for the Secretariat and other AFAAS organs (see Figure 5)\. Figure 3\.3: AFAAS Secretariat Internal Thematic Working Auditor Executive Director Groups Comms, Technical Regional Desk Procurement Finance Admin\. Planning & Programme Info & Assistant/ Officers (3) Officer Manager M&E Manager Manager KM Partner- Officer ships Admin\. & HR Finance Programme Officer Admin\. Officer M&E Officer Officer Admin\. Asst/ Finance and Status of recruitment I\.T\. Asst Receptionist Accounts Assistant Recruited Year 1 Year 2 Year 3 Office Attendant/ Drivers (2) Cleaner Year 4 13\. The technical staff at the Secretariat will be kept lean and will be mainly tasked with management of and providing leadership for the technical activities\. In providing technical 43 leadership, it will be supported by Thematic Working Groups made up of experts in the technical fields of operation\. In this regard, the AFAAS Secretariat will establish and continuously update databases of technical experts\. In order to build expertise in the technical areas within AFAAS member countries, the composition of the Thematic Working Groups will blend experts from AFAAS member countries with experts from other parts of the world\. The actual implementation of the project-wide activities will be undertaken through consultancies, commissioning partners, and out-sourcing\. 14\. Annual work planning and budgeting\. Implementation of AFAAS activities will be guided by an annual work planning and budgeting process approved by the Board\. The plan and budget will be coordinated with CAADP support institutions such as AUC, NPCA, RECs and Lead Pillar institutions\. It will also reflect the planned activities of CFs, as well as joint activities planned with key partners such as research establishments and human capacity development institutions\. This exercise will identify the sources of funding for the proposed activities and will ensure that the activities are fully funded\. A World Bank team will carry out at least two supervision missions annually to review the annual work plan and budget and assess implementation progress\. Disbursements under the project will be made on the basis of agreed annual work plans and budgets between the World Bank and AFAAS\. 15\. Operational procedures\. The project will be implemented within the broader AFAAS Constitution and Governance Manual, and more specifically by its Operational Manual (which includes Financial Management, Procurement, Audit and Human Resources Management manuals)\. All of these manuals were reviewed by the World Bank and approved by the AFAAS Board, however, further review will be done before the project becomes effective\. Project implementation will also follow World Bank guidelines and the MDTF Grant Agreement to be signed between AFAAS and the World Bank\. Financial Management, Disbursements and Procurement Financial Management 16\. The Bank’s financial management team conducted a financial management assessment of AFAAS, based in Kampala, Uganda\. The objective of the assessment was to determine whether: (a) the organization has adequate financial management arrangements to ensure the funds will be used for the purposes intended in an efficient and economical manner; (b) the project’s financial reports will be prepared in an accurate, reliable and timely manner; and (c) the entity’s assets will be protected\. The assessment complied with the Financial Management Manual for World Bank-Financed Investment Operations that became effective on March 1, 2010 and AFTFM Financial Management Assessment and Risk Rating Principles\. Institutional Arrangements for Financial Management 17\. The Executive Director AFAAS will be the accounting officer for the project and will be responsible for ensuring that adequate financial management arrangements are maintained throughout the project life\. Project implementation in member countries will be through well- established host institutes selected by each Country Fora\. The host institute will be accountable for all funds disbursed to the member countries (CF)\. The institutions/ organizations will utilize 44 their existing financial management arrangements in handling the project\. Accordingly, the Bank will undertake an FM assessment to assess the adequacy of the FM arrangements, systems and controls, identify any risks and agree with the Host Institution to an action plan to mitigate the identified risks, as a subsidiary agreement will be signed between AFAAS and the host institutions detailing the financial management arrangements under the project\. Similarly, MoUs between AFAAS, the Country Fora (CF) and the selected host institution will be signed for each participating country to ensure that the project activities to be implemented are in keeping with their CF five-year strategy, operational plan, annual work plan and budget\. The subsidiary agreement template will be prepared within 6 months after effectiveness\. The subsidiary agreement and MoU templates should be cleared by the Bank to ensure that adequate FM arrangements are in place\. Criteria for selecting host institutions will include the following three mandatory requirements: a qualified experienced accountant to account for project funds; acceptable accounting policies and procedures and a member of the CF\. Other requirements that would ensure each host institution has a strong FM system include an accounting information system and internal audit function\. The host institution will have to allow AFAAS internal and external auditors access to its books of accounts and comply with financial reporting and disbursement arrangements included in the subsidiary agreement and MoU\. Table 3\.1 Risk Assessment and Mitigation Risk Mitigating Measures Condition of Risk Residu Risk incorporated into the Project Effectiveness Remarks Rating al Risk Design (Yes or No) Rating Inherent Risk M Country Being a regional project it will not L N L be affected by country issues Entity Level\. The Key governance and operational institution is in its early documents have been developed to years of operating in the guide the CF\. A Partnership The host country\. It does not have Strategy has been developed to institutes offices in member countries guide AFAAS’s actions in this targeted are S N M and will be operating regard and it defines clearly the large established through host institutes and principles\. A MoU will be entered institutes with CFs thus faces coordination into between AFAAS, the CFs and good structures\. and implementation host institutes for each challenges participating country\. Project Level\. The FM Subsidiary agreements with host arrangements at the institutions and MoUs between subsidiary grant level for S host institutions and CFs to be N S host institutions and CFs cleared by the Bank to ensure there are yet to be determined\. are adequate FM arrangements\. Overall Inherent Risk M M Control Risk M Budgeting\. Budget The budget key dates will be preparation delays by CF circulated to all CF and host N M M may be experienced\. institutions\. Accounting\. There is only AFAAS to recruit a Finance and one qualified accountant Administration Manager by June who will be in charge of the 30, 2014\. The organization has financial management of incorporated the services of the S N M the project\. finance and administrative assistant to carry out clerical accounting Delays in accountability by work\. The use of the SUN the CF and host institutes accounting system also enhances 45  may be experienced\. the performance of the accountant\. Delays in accountability to be addressed in the MoUs\. Internal Control\. There is AFAAS will recruit an internal no internal audit function in auditor within 3 months after the organization\. effectiveness\. It will rely on its other established internal controls Review of activities of the as documented in the Finance and CF presents a challenge due S Administration manual\. N S to lean staff at Secretariat\. The targeted host institutes are The CFs are made up of already established national individuals with loose institutions with reliable controls structures with weak including M&E\. internal controls\. Funds Flow\. The AFAAS will enter into agreements Secretariat will be with all hosting institutes that will disbursing funds to focal document the funds flow agricultural (host) institutes requirements\. Host institutions will in the member countries\. S have MoUs with the CFs N S This might result in delays documenting the funds flow in disbursement and arrangements\. opening of project specific bank accounts\. Financial Reporting\. Strict reporting deadlines will be Key staff are on Delays in receiving reports incorporated in the agreements board who have from the CF through the with the host institutes and MoUs experience Host Institute\. with CFs\. The host institutions will working on Financial report preparation be required to submit their donor-funded may present a challenge to quarterly reports within 30 days projects\. The CF members who are not S after the end of the quarter to N S expected finance persons\. AFAAS\. reporting formats (IFRs) Simplified financial reporting are similar to the formats will be provided to the CF first AFAAS members with training before MDTF disbursement\. Auditing\. Inadequate The audit TORs will clearly The audit ToRs coverage of the CF and host specify the audit scope\. have been institutes\. S N agreed between M the Bank and AFAAS Overall Control Risk S S Total Project FM Risk S S H = High Risk, S = Substantial Risk, M = Modest Risk, L = Low Risk 18\. In view of the above risk assessment, the overall financial management risk rating for the project is considered Substantial\. Strengths and weaknesses of the financial management system 19\. The project financial management is strengthened by the following features: 46  ï‚ AFAAS has an approved financial management manual and accounting guidelines which describe the financial management system and related internal control system and other set procedures\. ï‚ The organization has experience in executing donor-financed projects\. ï‚ Strong budget preparation processes at the Secretariat\. ï‚ The finance and accounting staff is qualified and experienced\. ï‚ The organization has well-defined governance structures; General Assembly and Board\. ï‚ The member countries’ financial management will be handled by already established host institutes\. The project financial management is challenged by the following features: ï‚ No internal audit to boost the review and the effectiveness of established systems and internal controls\. The Forum will be recruiting an internal auditor within 3 months after effectiveness to carry out the audit function\. ï‚ Reliance on only one qualified project accountant\. The Forum will be recruiting a finance and administration manager to strengthen the function\. ï‚ Monitoring effectiveness of utilization of resources disbursed to CF in member countries by the Secretariat present a challenge\. However, this will be addressed in the agreements and MoUs with the host institutions and CFs\. ï‚ Delays may be experienced in accounting and financial reporting by CF who may not have accountants\. This will be addressed in the MoUs between the host institutions and the CFs with a reporting deadline of 15 days after the end of each quarter\. ï‚ Weaknesses in the internal controls at the CF due to their loose structures\. However, this will be addressed in the agreements and MoUs with the host institutions and CFs\. Budgeting 20\. Preparation: The AFAAS Secretariat in collaboration with the Regional Desk Officers and Focal point persons in member countries will prepare annual activity based budget as guided by the cost tables\. The budgets will be approved by the AFAAS Board before execution\. Any revision and reallocation of the budget shall be approved by the Board\. 21\. Monitoring: The budget holder is responsible for monitoring budgets under their control\. The AFAAS Finance Manual sets out the detailed budgeting and budget monitoring procedures\. Budget monitoring is exercised through the monthly, quarterly and bi-annual and annual budget monitoring reports\. The management investigates expenditures exceeding the budget, nil expenditure, low expenditure or any expenditure not in the work plan\. Accounting 22\. Accounting system: The accounting software in use is the SUN System\. The system is capable of producing financial management reports which are satisfactory to the Bank\. 23\. Staffing: The Finance Department at AFAAS is headed by the Finance Officer who is assisted by a finance and administrative assistant\. The Finance Officer has the relevant qualifications, experience and capacity to handle financial reporting under the proposed project\. 47 AFAAS plans to strengthen the staffing through the recruitment of a finance and administration manager by June 30, 2014\. 24\. Basis of Accounting: AFAAS is expected to use accrual accounting\. 25\. Financial Management and Administration Manual: AFAAS has a Finance and Administration Policies Manual\. The manual is comprehensive to guide AFAAS on management of both financial and other resources\. The Manual sets out important accounting and internal control procedures that aim at enhancing accountability, transparency, good governance and enable preparation of financial statements\. 26\. Record Keeping and Maintenance: AFAAS will be responsible for maintaining the records and documents for expenditures incurred under its respective parts of the project\. The current records maintenance is adequate for project implementation\. Table 3\.2: Allocation of Grant proceeds Category Amount Financing (USD) Percentages Component 1: Support to Country AAS for Engagement in 10,500,000 100% CAADP Pillar IV Component 2: AFAAS Governance, Management and 6,500,000 100% Secretariat Activities Total 17,000,000 Financial reporting arrangements 27\. AFAAS will prepare quarterly un-audited IFRs in form and content satisfactory to the Bank, which will be submitted to the Bank within 45 days after the end of the quarter to which they relate\. IFRs from the host institutions to AFAAS will be submitted within 30 days after the end of the quarter while the CFs will be required to submit their quarterly reports within 15 days after the end of the quarter to the host institutions\. The format and content of the IFR has been agreed between the Bank and the AFAAS\. The contents of the IFR will include a section to report on the accountability of funds utilized and a section to access funds using the report-based method of disbursement\. 28\. The reporting section includes: ï‚ Statement of Sources and Uses of Funds; and ï‚ Statement of Uses of Funds by Project Activity/Component\. 29\. The disbursement section includes: ï‚ Designated Account Activity Statement; ï‚ Bank statements for both the Designated and Project Account and related bank reconciliation statements; 48  ï‚ Summary statement of Designated Account expenditures for contracts subject to prior review; and ï‚ Summary statement of Designated Account expenditures not subject to prior review\. 30\. AFAAS will also prepare the project’s annual accounts/financial statements within three months after the end of the accounting year in accordance with accounting standards acceptable to the Bank\. The financial statements will be required to be submitted to the Bank within 6 months after the end of the fiscal year\. Internal Control and accounting Arrangements Internal control procedures 31\. The internal control procedures as documented in the financial manual for AFAAS are adequate to ensure authorization, recording and custody controls\. Functional responsibilities are adequately segregated within the finance procedures; bank reconciliations are prepared monthly, periodic accountability is ensured through physical inventory of assets\. Internal Audit\. 32\. AFAAS does not have an internal audit department due to its lean staffing structure but relies on the comprehensive internal controls as documented in the Finance and Administrative Policies Manual\. The Forum should recruit an internal auditor to offer internal audit services within four months after effectiveness\. 33\. Fixed Assets Register: AFAAS has maintained a fixed assets register with all the minimum information for assets which is updated regularly\. Periodic physical inventory of assets is also conducted\. Disbursements Funds flow arrangements 34\. AFAAS will be required to open a Designated Account denominated in USD in a commercial bank acceptable to IDA\. Evidence to this effect should be submitted to the Bank ahead of project disbursement together with the signatories to the accounts in accordance with the Grant Agreement\. 35\. AFAAS will open a Project Account denominated in local currencies in a local commercial bank acceptable to IDA from which project funds will be received from the Designated Account to meet project costs payable in local currency\. The Host Institutes will be expected to open project specific bank accounts in banks acceptable to the Bank through which funds will be disbursed in US$\. Similarly, the CFs will also be required to open project specific bank accounts in commercial banks acceptable to the Bank through which advances from host institutions will be credited\. Disbursement arrangements between AFAAS and host institutions will be documented in the subsidiary agreements\. Host institutions will be expected to make payments to 49 the CFs centrally\. For cases were the CFs receive funds, they will be expected to account for initial advances before subsequent ones are given\. Financial management arrangements between the host institutions and CFs will be defined in the subsidiary agreements and MoUs\. Figure 3\.4: Flow of funds to Implementing Institutions World Bank 6\. WA for doc\. and Advance 1\. Advance to AFAAS Designated Account AFAAS (US$) 2\. Advance to HI 5\. Documentation to AFAAS Project Bank Account Host Institution for CF (Local Currency) (US$) 4\. Documentation to HI 3\. Advance to CF Country Foras (US$) Disbursement arrangements 36\. Report-based disbursements\. The initial disbursement by IDA for the project will be made after receiving a withdrawal application with a six months cash flow forecast from the project\. These withdrawal applications should be prepared within one month after project effectiveness\. 37\. Thereafter, IDA disbursements will be made into the Designated Account based on quarterly Interim Financial Reports (IFRs) which would provide actual expenditure for the preceding quarter (three months) and cash flow projections for the next two quarters (six months)\. 38\. Other methods\. In addition, whenever needed, the direct payment method of disbursement, involving direct payments to suppliers for works, goods and services upon the recipient’s request, may also be used\. The supporting documentation for direct payment should be records providing evidence for eligible expenditures (copies of receipt, supplier’s invoices, etc)\. Payments may also be made to a commercial bank for expenditures against pre-agreed special commitments using letters of credit\. Reimbursements can also be made to the Designated Account\. These payments will also be reported in quarterly IFRs\. The IDA Disbursement Letter will provide more detail with regard to the disbursement methods to be used\. 50 External Audit\. 39\. A firm of private qualified independent auditors will be appointed by the AFAAS Board to carry out the audit of the financial statements on an annual basis\. The audit firm will also be recruited on the basis of terms of reference that meets the World Bank’s requirements relating to independence, qualifications, and experience\. The TORs for the project have been agreed between AFAAS and the Bank\. 40\. The audit will be conducted in accordance with the International Standards on Auditing\. The audited financial statements together with the auditor’s report and management letter covering identified internal control and accounting system weaknesses will be submitted to the Bank and other stakeholders no later than six month after the end of the fiscal year by AFAAS\. 41\. The audit reports for the last FY 2011 were unqualified\. The management letter did not have major weaknesses or accountability issues that could affect this project’s implementation\. The following audit reports will be monitored by the Bank’s Audit Reports Compliance System\. Table 3\.3: Audit Compliance Table Implementing Agency Audit Due Date Project Specific Financial Statements and management letter to 6 months after end of each be submitted by AFAAS fiscal year Financial Management Action Plan 42\. Table 4 below shows the financial management action plan for the project\. Table 3\.4: Financial Management Action Plan Action Date due by Responsible 1\. Appoint External Auditor 3 Months after effectiveness AFAAS 2 Recruitment of Internal Auditor 3 Months after effectiveness AFAAS 3 Recruitment of Manager Finance June 30, 2014 AFAAS and Administration 4 Subsidiary agreement template to be 6 Months after effectiveness AFAAS finalized and agreed with the Bank Supervision Plan 43\. Financial Management supervision missions will be carried out twice a year at the AFAAS Secretariat and on-site visits based on the current Substantial residual risk rating of the project\. Supervision will also include desk reviews such as the review of the IFRs and audit reports\. In- depth reviews and forensic reviews may be done were deemed necessary\. The FM supervision will be an integrated part of the project’s implementation reviews\. A portion of the supervision budget will be allocated in order to increase the efficiency of controls and support to implementation\. It is also envisioned that joint supervision missions with procurement staff to strengthen Bank control and support will be conducted\. A review of the project expenditures will 51 be carried out regularly (as part of the scope of each implementation review mission) to ensure that expenditures incurred under all project parts remain eligible for the MDTF funding\. Conclusion of the assessment 44\. The overall conclusion of the assessment is that the financial management arrangements in place meet the Bank’s minimum requirements under OP/BP10\.00, and therefore are adequate to provide, with reasonable assurance, accurate and timely information on the status of the project required by IDA\. The overall Financial Management residual risk rating of the project is Substantial\. An action plan has been documented above to show actions that need to be undertaken to improve on the financial management arrangements of the project\. Procurement 45\. Procurement for the project will be carried out in accordance with the World Bank Guidelines: Procurement of Goods, Works, and Non Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers, dated January 2011, and Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers, dated January 2011\. 46\. The AFAAS Secretariat, located in Kampala, Uganda, will be responsible for conducting procurement under the project\. AFAAS shall hire a Procurement Officer to be responsible for conducting procurement and the AFAAS manual provides for a Procurement and Awards Committee to be responsible for adjudication of contract awards and approval of key procurement stages\. Procurement is to be conducted through ICB, shopping, and Direct Contracting while selection of consultants is to be carried out through ICS, CQS, QCBS, LCS, FBS and QBS\. 47\. Coordination and management activities of the CF, including procurement, will be handled by a Host Institution to be selected by the members of the CF\. The Bank will undertake a procurement assessment of each selected Host Institution to assess the adequacy of the procurement arrangements, systems and controls, identify any risks and agree with the Host Institution to an action plan to mitigate the identified risks\. 48\. Furthermore, AFAAS shall in the future provide grants to sub-grantees to promote AAS innovation activities\. The procedures for allocation of grants shall be elaborated in a Grants Award Guidelines to be prepared by AFAAS and approved by the Bank prior to the issuance of any such grants\. In this regard some minor procurement shall be conducted by sub-grantees that will benefit from grants from AFAAS\. Such procurement shall also follow the guidelines\. Procurement Plan and Packages 49\. AFAAS has prepared a Procurement Plan for the first 18 months which has been reviewed by the Bank\. The main procurements are selection of consultants to support strengthening of AAS at national and regional levels, conducting studies etc\. These will be mainly individual 52 consultants and some firms\. The goods to be procured include motor vehicles and office equipment\. The summary procurement plans are indicated below\. Table 3\.5: Goods and Non-Consulting Services Estimated Domestic Review by Expected N Procuremen Contract (Description) Cost P-Q Preference Bank Bid Opening o\. t Method ($’000s) (yes/no) (Prior/post) Date 1 1 vehicle - station wagon 60\.00 Shopping No No Post TBD 3 desk computers and 10 laptops 28\.50 Shopping No No Prior 30-Jun-13 2 for Secretariat and CF use Layout, publishing and 56\.14 Shopping No No Prior 15-Jun-13 dissemination of AFAAS 3 materials – symposia proceedings, quarterly newsletter, awareness materials, study reports Table 3\.6: Consultancy Services Expected Estimated Review by Selection Proposal No\. Description of Services Cost Bank (Prior Method submission ($’000) /Post) Date AAS stakeholder institutional analysis and proposal development in 8 countries (conducted 1 52\.00 IC Post 15-Jun-13 by national individual consultants in the initial countries ) Prepare guidelines for national level AAS actors 15-Aug-13 2 8\.00 IC Post for engagement in CAADP activities Consultancy to review guidelines on integrating 1-June-13 3 20\.05 IC Post AAS into the CAADP Processes Managing/ outsource the virtual social networking 1-June-13 4 31\.00 IC Post platform Undertake syntheses and strategic studies on topic 7-June-13 5 43\.50 IC Post issues, approaches and tools M&E Consultancy 1-June-13 6 22\.00 IC Post Legal advisory services fees 1-June-13 7 16\.00 IC Post Annual Financial Audit 15-June-13 8 20\.75 CQS Prior Procurement Risks and mitigation measures 50\. A procurement capacity assessment of AFAAS was conducted and the risk for procurement under the project is rated Moderate\. The main risks for procurement arise from: (i) inexperience of AFAAS in conducting procurement; (ii) lack of opportunity to apply the approved procurement manual; The main mitigation measures that have been agreed with AFAAS are: (i) training of staff in procurement\. 53  Table 3\.7: Procurement Risk Table Risk Factor Risk Mitigation Measure Timing Accountability for While clear system for Start following the Within 1 month Procurement accountability exists on Procurement Manual fully from Decisions in paper, it is not fully effectiveness AFAAS applied in practice Internal Manuals Internal Manual currently Conduct capacity building Within 2 months and Clarity of the not fully adhered to due for staff and disseminate from Procurement to limited staff and little procurement manual with effectiveness Process procurement emphasis on understanding and application of procurement process Procurement Cycle Inexperience of AFAAS AFAAS to use Procurement Within 6 months Management procurement leading to Consultant to conduct from delays and mis- training to orient staff in effectiveness procurement procurement Independent Insufficient oversight of Ensure that Annual Audit Annually Procurement procurement, lack of Terms of Reference include Oversight compliance with Bank appropriate coverage of fiduciary obligation, procurement aspects to meet misprocurement due to project requirements\. absence of independent oversight Table 3\.8: Procurement Thresholds to be applied Expenditure Contract Value Threshold Procurement Method Contracts Subject Category (US$) to Prior Review (US$) 1\. Works 1\.1 US$ 100,000 and above ICB All contracts 1\.2 Above US$ 100,00 and below US$ Competitive Shopping None 200,000 1\.3 Below US$ 100,000 Shopping None 2\. Goods 1\.4 US$ 100,000 and above ICB All contracts 1\.5 Above US$ 50,000 and below Competitive As specified in PP 100,000 Shopping24 1\.6 Below US$ 50,000 Shopping None 24 Shopping following advertising in newspaper of wide national circulation 54  Expenditure Contract Value Threshold Procurement Method Contracts Subject Category (US$) to Prior Review (US$) 3\. Consulting 1\.7 With firms above US$ 200,000 Quality and Cost All contracts Services25 and Based Selection Training 1\.8 With individuals above US$ 100,000 Individual All Contracts 1\.9 With firms up to US$ 200,000 Qualifications/Other None 1\.10 With Individuals up to US$ 100,000 Individual None26 4\. Non- 1\.11 US$100,000 and above ICB All contracts consulting Services 1\.12 Above US$50,000 and below US$ Competitive Shopping As specified in PP 100,000 Shopping 1\.13 Below US$ 50,000 None 5\. All types of All contracts Sole source / direct As specified in contracts contracting and terms PP27 of reference 51\. The above notwithstanding, the first 3 contracts for selection of consultants irrespective of value shall be subject to prior review\. Frequency of procurement supervision 52\. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the implementing agency recommends six-monthly supervision missions to visit the field, including at least one mission annually to carry out a post review of procurement actions\. Environmental and Social (including safeguards) 53\. Social Safeguards\. Implementation of the various activities under the MDTF is not expected to have any significant negative social impacts\. Proposals for projects funding will not be allowed to involve land acquisition or resettlement\. Given the importance of women in agriculture and poverty reduction, and recognizing the different needs of women and men, AFAAS will work to integrate gender issues in all of its activities, projects and policies\. Moreover, AFAAS will systematically consider gender equality issues in policy development, the identification, formulation and implementation of its development projects; and in its administrative and financial management\. In so doing, AFAAS will report on its progress towards integrating gender equality into its operations as a part of its regular reporting schedule\. 25 A shortlist of consultants for services estimated to cost less than US$ 200,000 equivalent per contract may consist entirely of national consultants in accordance with the provisions of paragraph 2\.7 of the Consultant Guidelines\. 26 Except for project staff financed by the project 27 Consultancy services estimated to cost below US$ 5,000 equivalent will not be subject to prior review by the Bank subject to their inclusion in the agreed Procurement Plan\. 55 54\. Environmental Safeguards\. The project has a Category C environmental classification and therefore there is no environmental issue to be addressed under the project\. Furthermore, no Bank Safeguard policies are triggered by this project as it will not fund any category of civil works or the engineering designs or feasibility studies associated with any civil works, either for AFAAS or CF\. Monitoring & Evaluation 55\. Monitoring Outcomes/Results\. The operational responsibility for planning and coordinating M&E activities would rest with the AFAAS Secretariat, Planning, Monitoring and Evaluation Department\. The Planning, Monitoring and Evaluation Manager and the Monitoring and Evaluation Officer will oversee this activity, and would utilize computerized project management techniques to monitor progress and to link with monitoring activities that will be carried out at regional, sub-regional and country levels\. AFAAS will regularly monitor and report on the project’s physical and financial inputs and outputs\. AFAAS will be assisted by an independent short-term M&E consultant to evaluate implementation progress and the performance of governing structures\. The consultant will carry out outcome-focused impact evaluations of the project at three pre-defined milestones - baseline, mid-term and project completion\. M&E mechanisms will emphasize stakeholder participation and will be designed to facilitate rapid identification of shortcomings and facilitate corrections, where necessary\. 56\. AFAAS will carry out a baseline survey that would be completed and the draft report prepared within six months of project effectiveness\. AFAAS will also conduct a stakeholder workshop to review and refine the MDTF indicators and also develop the arrangements for M&E (including annual targets, data collection sources, responsibility and frequency) within the same timeframe\. Country level implementation would be monitored with the help of CF and AFAAS would develop modalities for carrying out joint M&E activities\. Information generated by AFAAS, CF, other partners and M&E consultants would be consolidated by the Secretariat and used to update the key performance indicators for the project (Annex 1)\. 57\. The Secretariat will submit to the Bank six-monthly progress reports\. These would include, inter alia: (a) up-to-date physical and financial expenditure data compared to annual and end- project targets; (b) updated indicators of project performance compared to annual and end- project targets; and (c) successes and problems encountered during the reporting period with suggested remedial actions\. 58\. In addition to the biannual implementation review that will be carried out by the World Bank Team, the project would be subjected to two major reviews to be carried out jointly by AFAAS and the Bank\. The first would be the mid-term review (MTR) of the project (about 30 months after project effectiveness) and the second around the time of project completion\. The first review would include an impact assessment of the project to date, but also focus on implementation processes and recommend adjustments\. An analysis of the exit strategy and sustainability of the system will also be the focus of the assessment\. The second major review would be a comprehensive overall impact assessment including quantitative and qualitative assessment of the progress against project development objectives\. 56 59\. Monitoring of outputs/activities and learning\. The M&E of outputs and activities will be undertaken in a participatory manner with a view not only for the M&E results to inform management decision making but contribute to learning by stakeholders\. At the outset of the project, AFAAS will contract a consultant to develop participatory M&E guidelines, tools and processes that will build on the Results Framework to spell out the outputs and activities that will be monitored and evaluated at the CF, regional and Secretariat levels\. The consultant will also identify the capacity development needs and resource implications for implementing the M&E activities at all levels\. One of the challenges for M&E will be ensuring timely collection and processing of data from the diverse locations and institutional environments in which implementation will be taking place\. To minimize this problem, the M&E tools will, to the maximum extent possible, embed the use of modern information and communication technologies - including the use of mobile phones - for data collection, transmission and processing in such a way that M&E reports tailored for diverse stakeholders are available online in a timely manner\. Many national AAS face the same challenge\. Hence the positive lessons from AFAAS’ M&E approaches will be scaled up and out to national AAS M&E\. AFAAS has already developed a Framework for Lesson Learning that has elements that will be used for lesson learning alongside the M&E processes\. 57  Annex 4: Operational Risk Assessment Framework (ORAF) African Forum for Agricultural Advisory Services (AFAAS) Second MDTF Stage: Appraisal 1\. Project Stakeholder Risks Rating Low Description: Although creation of AFAAS was the initiative of Risk Management: The project is driven by AAS stakeholders in Africa\. As awareness about the a key group of African stakeholders, the view of a broader set of objective of the project and its activities increase across the continent, interest in and demand for stakeholders continent-wide may not necessarily be fully the program has grown quickly and is likely to continue to do so given the widespread concern for aligned, and therefore support and participation limited\. improving the effectiveness of support for farmers at field-level\. This is reflected in the CAADP Furthermore, while there has been a high level of interest among investment plans at country level\. stakeholders at every level, the extent to which this is translated Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due into sustained ownership is untested\. Risk Management: AAS is recognized as a strategic component of a new rural development institutional framework, namely CAADP, which is rooted in the AU/NPCA vision\. CAADP There is concern among farmers and development practitioners country compacts and investment plans will be developed and implemented to ensure sustained that AAS reforms are largely undertaken on a trial basis with commitment at all levels\. Moreover, AFAAS collaborates and coordinates with CAADP short time horizons and inadequate funding\. This project may implementing institutions that report to Head of States and governments and has regular fora at the lose government and donor support should this be the case, Ministerial level where issues of commitment and implementation will be addressed\. before results are seen\. Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due 3\.2 Sector Risk Rating: Low Description: Due to the complexity of African farming systems AFAAS will ensure an integrated approach where farmer organizations will partner with there is a risk of limited flow of information to inform the research, extension and education institutions in a participatory system that will link development of appropriate technologies\. knowledge, innovation, research, education and advice\. Resp: WB/AFAAS Stage: Implementation Due Date: June 2013 Status: not due 2\. Implementing Agency Risks (including fiduciary) 3\.1\. Capacity Rating: Low Description: Human Resources\. Delay in the recruitment of Risk Management: Recruitment of various positions is based on priority and availability of Secretariat staff; excessive work load on staff as a result of funding\. Recruitment will therefore be fast-tracked as funding becomes available\. In the continent-wide responsibilities may affect effectiveness of the meantime, critical positions may be supported by short-term consultancies\. AFAAS will also be institution\. able to utilize backstopping support from both FARA and the World Bank – in addition to the The Forum does not have a manager finance and administration Bank’s usual implementation support\. and internal auditor\. The manager finance and administration will be recruited by June 30, 2014 while the internal Processes and systems\. Newly recruited administration, finance auditor will be recruited within 3 months after effectiveness\. and procurement staff may not be familiar with the existing Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: not due systems and processes, and also with donor requirements\. Risk Management: Experienced staff will be recruited and proper orientation and training The FM systems of the host institutions and CFs and associated provided; appropriate technologies acquired to overcome some of the challenges in these areas\. risks are not known\. Operational staff will be backstopped by FARA, if necessary\. There will be criteria for selecting host institutions that should include mandatory requirements of having a qualified experienced accountant to account for project funds and acceptable accounting 58  policies and procedures\. Other FM arrangements to be included will be in the subsidiary agreement with the host institutions and CFs\. Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: not due 3\.2\. Governance Rating: Low Description: Potential decline in the commitment to the Risk Management: The design of the project benefited from active participation of the Secretariat, results of AFAAS at the Secretariat and Board level; weakness and both the results and outputs of project activities are substantially articulated by the Secretariat in the Governance structure of AFAAS observed\. (IA)\. The Secretariat will be responsible to monitor implementation and suggest adjustments to ensure that the objectives of the project are met\. The Bank Team will monitor situations on the ground and will inform the Board, CAADP Lead Institutions and the AU, as the case may be, to ensure commitment, ownership, and adequacy of leadership in implementation\. Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due Fraud & Corruption (sub-category of Governance risk) Rating: Low Remove Risk Description and Rating when the PAD is (i) sent to the client for negotiation Risk management measures below to be merged with those in 3\.2 above\. Description: Fraud and corruption within AFAAS may Risk Management: AFAAS will hire experienced administrative and financial management staff manifest itself, mainly due to weak internal systems and and will involve external auditors acceptable to the Bank\. Qualified procurement officer will be controls\. recruited\. The Bank team will provide ongoing implementation support, including a comprehensive review of procurement processes where fraud and corruption tend to occur mostly\. Resp: WB/AFAAS Stage: Implementation Due Date: Ongoing Not due 4\. Project Risks 4\.1\. Design Rating: Moderate Description: Technical complexity\. There is no one single Risk Management: AFAAS will document country experiences and share with those FCs and approach or strategy for AAS provision\. The approach taken by AASs that are in the process of designing interventions for information and technology transfer\. AFAAS has been well-tested at a local level, but less so at Training in different technical aspects of AAS innovations will be provided by AFAAS\. AFAAS national level\. Depending on the circumstances, different will also support learning across countries and continents in order to familiarize the African countries may require different approaches\. Therefore community of practice in AAS with the variety of circumstances that may occur and with lessons customizing service delivery to unique circumstances of each learned from past attempts to try to deal with these circumstances\. AFAAS will focus on country is complex and could be a challenge for AFAAS\. establishing/strengthening country fora as the best means for ascertaining the country context\. Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due Implementation arrangement complexity\. In most counties, Risk Management: AFAAS will prioritize its intervention by taking into account a country’s association of AAS providers does not exist\. Therefore, initially readiness to participate in the project\. For those that don’t meet the readiness criteria, special the focus will be in organizing these associations and in the activities aimed at strengthening AAS associations and forming CF will be implemented\. creation of CF\. Therefore, most interventions will be designed after the organization of the AAS and the establishment of CF\. The length of time required to create these actors will vary from Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due country to country and this could delay the design and implementation of interventions at the AAS level\. 4\.2\. Social & Environmental Rating: N/A 59 Description: No Bank Safeguard policies are triggered by Risk Management: N/A this project\. Resp: N/A Stage: N/A Due Date: N/A Status: N/A 4\.3\. Program & Donor Rating: Substantial Description: Project dependencies: Availability of additional Risk Management: A number of development partners have shown interest to supporting financial resources over and above the current EC contribution AFAAS, namely, CIDA, IFAD, SDC, USAID, Bill and Melinda Gates Foundation\. AFAAS will to the project is critical to implement AFAAS strategic plan\. In establish a Development Partner Group which will provide a platform for coordination the absence of timely commitment of donors to support the among development partners interested in supporting AFAAS project and activities\. The strategic plan of AFAAS in full, the project runs the risk of not overall objective of the Group will be to increase the effectiveness of development meeting its development objectives\. efforts to support AFAAS in implementing its strategic plan and to mobilize resources\. Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due 4\.4\. Delivery Monitoring & Sustainability Rating: Moderate Description: Project Delivery\. The existing staff complement Risk Management: Project provides for full institutional capacity building of CFs and AAS in AFAAS may not be adequate to follow up continent-wide providers, and has systems developed to ensure these country level institutions monitor delivery of the project, if the formation of CF is delayed in project delivery\. The staffing level and skill mix at AFAAS level has been set to ensure many countries delivery of project results\. Both staffing levels and skill mixes will be regularly reviewed and adjusted\. Sustainability\. Lack of ownership and shortage of funds could have negative impact on the project\. Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due Measurability\. Monitoring and evaluation system not Risk Management: AFAAS is an international organization with a Board and General adequate to assist management to assess implementation of Assembly taking full care of ownership and representing its constituencies\. AFAAS will activities operate through existing institutions, networks and partners which are funded already\. Requested funding will be used to facilitate the establishment and maintenance of CF, enabling the CF to tap into resources of national development project, facilitating networking and knowledge management\. Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due Risk Management: AFAAS will put the monitoring and Evaluation system in place in the first six months of grant effectiveness Resp: AFAAS Stage: Implementation Due Date: Ongoing Status: Not due 4\.5\. Other Resp: AFAAS Stage: Implementation 60  Annex 5: Implementation Support Plan African Forum for Agricultural Advisory Services (AFAAS) Second MDTF Strategy and approach for implementation support 1\. The detailed Implementation Support Plan (ISP) ensures timely and effective implementation of the AFAAS MDTF\. The aim is to ensure that implementation support activities provide effective protection against the MDTF’s key risks and increase the likelihood of achieving the expected results\. 2\. The ISP focuses on the key implementation risks identified in the ORAF (see Annex 4) and describes strategies and actions designed to mitigate those risks\. The ISP also includes a detailed schedule summarizing the planned MDTF implementation support missions and indicating the level of effort and resource commitment provided by the MDTF that will be needed to ensure successful implementation of the grant\. Implementation strategy (IS) 3\. The proposed IS approach entails close monitoring of the MDTF’s technical design, implementation aspects, M&E, and fiduciary issues\. 4\. Technical design: A key risk identified in the design of the MDTF is the complexity involved in customizing service delivery to each country context\. The Bank task team will include extension specialists, agronomists and agriculture economists\. The associated risks identified in the ORAF will be closely monitored by the Bank task team as part of the MDTF implementation support missions\. 5\. Implementation: Capacity constraints such as limited/ineffective associations of AAS providers at national level may constrain AFAAS’ ability to effectively respond to demands\. To mitigate possible institutional capacity constraints, special attention and support will be given to AFAAS CF establishment activities\. 6\. Supervision and MTR\.To ensure that grant resources are being used effectively in pursuit of the PDO, the World Bank (as administrator of the MDTF) will undertake biannual implementation support missions\. In addition, a mid-term review (MTR) is envisaged over the five-year implementation period\. 7\. M&E: The World Bank will monitor progress of M&E activities by carrying out biannual implementation support missions during which the performance indicators in the results framework will be reviewed to ensure completeness and accuracy of the grant’s performance\. 8\. Environmental and social safeguards: The MDTF will not finance agricultural activities and is classified as a Category C operation\. No safeguard policies will be triggered as the MDTF risks are assessed as low or negligible\. 9\. Procurement: A procurement capacity assessment of AFAAS was carried out and the risk was assessed as Moderate\. The assessment identified a need to strengthen the procurement capacity in AFAAS, conduct staff training and start using the approved Procurement Manual\. 61 AFAAS procurement is not expected to be complex or large\. Nevertheless, the AFAAS Secretariat is in close proximity to the World Bank Uganda Country Office and AFAAS staff are already in regular contact with the relevant local Bank procurement team\. Procurement will be reviewed as part of the biannual implementation support missions and post procurement reviews will be conducted annually\. Procurement-related recommendations will be discussed with AFAAS and the Bank team will follow up in between missions, particularly with respect to recommendations that would require approval of AFAAS’ Board\. 10\. Financial management (FM): Capacity assessment of AFAAS was assessed as Moderate\. The proposed project will be implemented by AFAAS using the existing financial management arrangements which are expected to be strengthened with the recruitment of a Manager for Finance and Administration in 2014, if full funding is attained\. FM supervision will be done once a year at the AFAAS Secretariat and on-site visits based on the current Moderate residual risk rating of the project\. Supervision will also include desk reviews such as the review of the IFRs and audit reports\. In-depth reviews and forensic reviews may be done were deemed necessary\. The FM supervision will be an integrated part of the project’s implementation support visits\. A review of the project expenditures will be carried out regularly (as part of the scope of each implementation support mission) to ensure that expenditures incurred under the project remain eligible for the MDTF funding\. Table 5\.1: Main focus of support to AFAAS during MDTF implementation Resource Partner Time Focus Skills Needed Estimate Role First 12 months MDTF effective and Lead Agricultural Services Specialist $205,000 operational (TTL) per year First withdrawal from Lead Agricultural Consultant Designated account Senior Agricultural Specialist Recruit technical Senior Operations Officer CAADP and FM staff Senior Finance Officer Provide training and capacity building, Financial Management Specialist including fiduciary Procurement Specialist training M&E system Regional Lawyer established and operational Initiate procurement activities Biannual implementation support visits Participate in biannual and extraordinary meetings of the AFAAS Board 62  Resource Partner Time Focus Skills Needed Estimate Role 12-48 months Bi-annual Lead Agricultural Services Specialist $211,000 implementation (TTL) per year support visits Lead Agricultural Consultant Participate in biannual Senior Agricultural Specialist and extraordinary meetings of the Senior Operations Officer AFAAS Board Senior Finance Officer MTR carried out Financial Management Specialist Procurement Specialist Regional Lawyer Table 5\.2: Skills mix required Number of Number of Trips Skills Needed Staff Weeks Comments (annually) (SWs) Lead Agricultural Services Specialist 10 4* Washington-based (TTL) Lead Agricultural Consultant 5 1 Washington-based Senior Agricultural Specialist 5 1 Washington-based Senior Operations Officer 10 2 Washington-based Financial Management Specialist 1-2 2 Country Office-based Procurement Specialist 1-2 2 Country Office-based Regional Lawyer 0\.5 0 Washington-based Senior Finance Officer 1 0 Washington-based Program Assistant 2 0 Washington-based *Trips will be combined with other missions to minimize cost\. 63

APPROVAL

P008821

 ICRR 13937 Report Number : ICRR13937 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 03/31/2014 Country : Russian Federation Project ID : P008821 Appraisal Actual Project Name : Environmental US$M ): Project Costs (US$M): 110\.10 94\.58 Management Project L/C Number : L3806 Loan/ US$M ): Loan /Credit (US$M): 110\.10 86\.47 Sector Board : Environment US$M): Cofinancing (US$M ): 75\.00 72\.20 Cofinanciers : Swiss Grant TF020217 Board Approval Date : 11/08/1994 and TF03810 Closing Date : 06/30/2001 06/30/2011 Sector (s): Other industry (67%); Central government administration (13%); Sub-national government administration (9%); Water supply (6%); Solid waste management (5%) Theme (s): Environmental policies and institutions (23% - P); Water resource management (22% - P); Pollution management and environmental health (22% - P); Other financial and private sector development (22% - P); Administrative and civil service reform (11% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Richard C\. Worden Robert Mark Lacey Christopher David IEGPS1 Nelson 2\. Project Objectives and Components: a\. Objectives: The statement of objectives in the Loan Agreement is to: “(i) strengthen and streamline federal and regional institutional structures for environmental management; (ii) improve federal and regional environmental policy formulation and implementation; (iii) upgrade federal and regional environmental management systems; and (iv) assist in the financing of economically viable high priority resource recovery/pollution abatement projects in the Russian Federation\.â€? According to the Staff Appraisal Report (SAR, Section IV, p\. 34), the Project Development Objective is to: “provide critical support to the umbrella Environmental Framework Program (Framework) to assist Russian authorities: (i) strengthen and streamline federal and regional institutional structures for environmental and natural resource management; (ii) improve federal and regional environmental policy and strategy formulation and implementation; (iii) upgrade environmental and natural resource management systems; (iv) assist in the financing of economically viable, high priority resource recovery/pollution abatement projects in the country; and (v) facilitate the flow of donor funds and resources to the environmental protection sector\.â€? This Review is based on the statement of objectives in the Loan Agreement\. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: There were five components: 1\. Institutional and Policy Strengthening Component (estimated: US$ 21\.92 million; actual US$ 21\.79 million)\. The objectives of this component were to assist Russian authorities to: (i) develop the capacity at federal and regional levels to set environmental priorities, formulate, implement and enforce environmental policies, and monitor environmental conditions; and (ii) establish the administrative, economic, legal and technical basis for reaching negotiated agreements to reduce emissions from five specific industries in demonstration regions\. The component was comprised of two subcomponents: the Policy and Regulatory Support Subcomponent, and the Environmental Epidemiology Subcomponent (summarized below)\. Both subcomponents were to be implemented by various Russian entities at both the federal and regional levels with different departments within the Ministry of Environmental Protection and Natural Resources (MEPNR) providing direct supervision and support while a Policy and Regulatory Management Committee was established by the Federal Commission on the Environment to provide overall oversight of implementation of this component\. (a) Policy and Regulatory Support Subcomponent (estimated US$15\.24 million; actual US$15\.10 million)\. The overall objective of this subcomponent was to help accelerate the reduction of environmental damages and human health impacts in the Urals and Upper Volga regions within a period of 3-5 years with a particular focus on mitigating the impact of pollution on human health\. Structurally, the EMP established a Federal Environmental Policy Unit in Moscow and two Regional Environmental Policy Units in the Urals and Upper Volga regions\. As the “integrating frameworkâ€? (SAR, p\. 34) for the entire EMP, the federal and two regional units were responsible for a number of key activities (detailed on pages 36-37 of the SAR)\. (b) Environmental Epidemiology Subcomponent (estimated US$ 6\.68 million; actual US$ 6\.69 million)\. This subcomponent was designed to provide the basis for setting environmental priorities at both the federal and regional levels\. The objective of the subcomponent was to strengthen the national and regional environmental epidemiology management systems to collect and manage data relevant to environmental health issues; identify the most urgent problems and analyze their causes; and develop policies to address such problems and monitor their impact\. This subcomponent set out seven main activities (SAR, pp\. 38-39) and established one Federal and two Regional Environmental Epidemiology Centers with the Department of Ecological Safety in MEPNR acting as the responsible entity within MEPNR to successfully implement this subcomponent\. 2\. Core Elements of the Water Quality and Water Resource Management Component (estimated: US$ 8\.79 million; actual US$ 9\.16 million)\. This component was intended to focus on developing and testing solutions to major water quality management problems in three key regions: the Upper Volga River basin, the Urals region, and the North Caucasus region\. In each region, the intent was to develop an integrated planning and regulatory reform program to improve drinking water supplies, develop a prioritized investment and action program, and address key sectoral policy issues by supporting existing regional organizations and improving the inter-agency management of regional water resources\. MEPNR delegated responsibility for day-to-day technical and administrative functions for implementation of the regional subcomponents to a Subcomponent Management Committee and Manager operating under the supervision of the Subcomponent Implementation Team under MEPNR's Department of Surface Water Protection\. These regional subcomponents were also supported by MEPRN at the federal level to disseminate the results of regional initiatives and approaches to other regions not directly participating in the EMP\. 3\. Core Elements of the Hazardous Waste Management Component (estimated: US$ 6\.86 million; actual US$ 6\.35 million)\. Prior to the launch of the EMP in 1995, the MEPNR had prepared a Concept Paper for a comprehensive, integrated program to address hazardous waste issues in the Russian Federation with three strategic objectives: (1) reduce waste production; (2) increase waste utilization; and (3) create an ecologically safe waste storage and disposition system\. As part of the larger Environmental Framework Program’s efforts to address the legacy of decades of inadequate management of hazardous wastes, the EMP was asked by MEPNR to develop and demonstrate a national data management information system and regulatory management system for industrial wastes at the regional level in two ‘oblasts’ in the Upper Volga region selected to pilot this subcomponent\. The coordinating agency was the Hazardous Waste Management Component Management Committee\. 4\. National Pollution Abatement Facility (NPAF) (estimated: US $52\.09 million; actual US $50\.00 million)\. The NPAF was created to help the Government of the Russian Federation finance a portion of the investment costs of commercially viable resource recovery and pollution abatement projects with an identifiable and secure stream of either foreign exchange or ruble-denominated earnings that could be used to repay NPAF loans as well as loans from other lenders\. The NPAF was created with the objective of becoming an effective and efficient mechanism by which funds from the Bank and other donors for individual sub-projects too small and numerous for the Bank or others to lend to directly could be ‘on-lent’ to others by providing: (i) a direct source of funds which would not otherwise be available; (ii) comfort to other foreign investors by virtue of their ability to associate their money with Bank funds; and (iii) access to a stock of well-prepared resource recovery projects with significant environmental external benefits\. The NPAF was designed to support two distinct co-financing arrangements: capitalization of the initial seed money to establish the fund, and in addition to capitalizing the NPAF, individual donors, export credit agencies, and private lenders and investors could co-finance specific sub-projects\. 5\. Center for Project Preparation and Implementation (CPPI) (estimated: US$ 4\.38 million; actual US$ 4\.88 million)\. The CPPI had already been established as a separate non-commercial legal entity under MEPNR, which was responsible for appointing its Board of Directors\. The principal role of the CPPI was to facilitate the implementation of Bank financed components of the Environmental Framework Program, as well as GEF funded Project Preparation Advances and other projects following Bank procurement, disbursement, accounting, auditing and reporting procedures and requirements\. Other important roles of the CPPI included: (i) providing overall project management and coordination; (ii) dissemination of information regarding Bank and donor financed EFP components; (iii) liaising with other funding agencies; and (iv) facilitating training activities under the EMP\. The CPPI was also responsible for all the project's financial aspects, including opening and managing a special EMP account, contract administration, contract payments, facilitating letters of credit, arranging for international financing agency disbursements, setting up and managing those accounts, arranging for audits, and preparing project completion reports\. There were 14 amendments to the Loan Agreement, none of which involved changing the development objectives or required Board approval (08/30/1995, 09/27/1996, 07/23/1997, 01/19/1998, 03/05/1999, 01/25/2000, 08/07/2002, 08/13/2003, 03/31/2004, 01/20/2006, 06/28 /2007, 05/14/2008, 08/19/2009, and 12/22/2009)\. Most of the amendments were for minor changes\. However, two were more significant: (i) the addition of the Modernization and Institutional Strengthening of the Roshydromet (Hydrometeorology and Environmental Monitoring Service of the Russian Federation) on August 13, 2003, and (ii) the addition of supporting the preparation of a Project for Elimination of Past Environmental Liabilities in the Russian Federation on August 14, 2008\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project Cost: Total project cost was estimated at US$ 194\.10 million at appraisal, but actual expenditures were US$ 166\.78 million\. Financing: The World Bank committed a loan of US$110\.10 million\. An additional US$ 75 million was expected to be raised among Russian banks and private sector investors to finance project-prepared sub-projects\. By project closure, the Bank had disbursed US$ 94\.58 million\. This encompassed the cost of implementing the five project components listed above plus the Roshydromet and Environmental Liabilities additions\. The difference of US$ 15\.52 million between the commitment at appraisal and actual disbursements by closure was mostly attributable to US$ 15\.06 million of physical and price contingencies that did not need to be disbursed\. The private sector provided US$ 63\.71 million in financial support for sub-projects, and two Swiss trust fund grants accounted for another US$8\.49 million in parallel funding to support public education programs\. Borrower Contribution: The borrower was expected to provide US $9\.80 million, but actually contributed US$ 7\.08 million to the project (72 percent)\. Dates: The project was extended 4 times for a total of ten years: twice for 2 years, once for 4\.5 years to finance construction of a closed loop waste water treatment system at the Baikalsk Pulp and Paper Mill (BPPM) in the fragile ecosystem of the Baikal Lake region, and once for 1\.5 years\. Except for the BPPM, the extensions were due mainly to implementation delays (ICR, page 15)\. The project was originally scheduled to close on June 30, 2001, but actually closed on June 30, 2011\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: Substantial\. The objectives of the project are relevant to the Bank’s Country Partnership Strategy (CPS 2012-20016) with the Russian Federation\. The CPS indicates renewed interest by the Government to address environmental management risks as part of its economic growth and diversification agenda\. More effective protection of the environment is cited as one of the four main goals of Bank assistance to the Russian Federation\. The CPS notes (page 8) that “Russia‘s environmental management suffers from poor governance and sometimes obsolete management practices\. Environmental quality and control are poor for a majority of Russians living in the country‘s population centers\. This has detrimental effects not only for those peoples‘ well-being but also a significant negative impact on Russia‘s economy\.â€? The CPS states (page 27) that “selected elements of strategic environmental and natural resource management activities would be supported through several WBG engagements at the national and sub-national levels, such as developing systems for better management of forests and decrease fire risks, strengthening of hydrometeorological capacity, and contributing towards the development of a policy and institutional framework for the environmental issues in the Arctic zone\.â€? The objectives are relevant to Government initiatives include measures to protect the Arctic environment, improve forest fire prevention and forestry management, strengthen the national capacity to deliver reliable and timely weather, water, and climate information and services, improve the procedures and information flow of cadastre and registration data, and develop the National Spatial Data Infrastructure\. The objectives were also relevant to the goals of the Bank’s previous Country Assistance and Partnership Strategies at appraisal and throughout the implementation period\. These included (i) demonstrating how to involve the private sector in projects with tangible environmental benefits; (ii) redirecting public sector involvement in the economy by strengthening the policy-making and regulatory activities of key institutions involved in environmental management and establishing a sound technical and policy framework for future environmental activities; and (iii) helping to mobilize donor funds that might not otherwise be available to support priority activities in environmental management\. b\. Relevance of Design: Substantial\. At the time the project was prepared (1992-1994), Results Frameworks, as the concept came to be developed later, were not used\. However, it is possible to follow a logical chain of cause and effect from the project’s components, activities, and funding levels to the achievement of the project’s four objectives\. The first component intended to address institutional inefficiency and redundancy by integrating the policy framework across the thematic areas covered by the project within the larger Environmental Framework Program\. The component also aimed to develop the managerial and technical capacity to set environmental priorities, develop policies and regulations to address them, and monitor their progress\. However, the project was not designed to address the unclear and competing institutional roles and responsibilities of various government agencies\. The second and third components were relevant to the second objective of “improving federal and regional environmental policy formulation and implementationâ€? by drawing upon and applying the integrated environmental assessments, policies, and priorities established under the first objective to two of the most pressing environmental risks facing the country: water quality and resource management, and hazardous waste management\. By linking policies with pressing environmental health issues, it was designed to be a pragmatic means to gain greater political and public support for the environmental restructuring reform process\. The fourth and fifth components were relevant to the fourth objective of “assisting in the financing of economically viable high priority resource recovery/pollution abatement projects in the Russian Federation\.â€? The NPAF was to become an effective and efficient mechanism to provide seed money for a ‘revolving’ loan fund managed by the CPPI to subsidize and manage the  financing of a stream of commercially viable resource recovery and pollution abatement projects\. 4\. Achievement of Objectives (Efficacy): a) Strengthen and streamline federal and regional institutional structures for environmental management: Negligible\. Outputs: The institutional structures that were in place at the start of the project were not strengthened, but rather gradually reorganized, weakened, marginalized, and abolished\. Activities associated with the Roshydromet Modernization and Institutional Strengthening (Part E) project preparation provided technical assistance and supported the incremental costs related to modernizing the Russian Federation’s hydro-meteorological, environmental protection, and monitoring capabilities\. Outcomes: The project had little impact on reducing inter-institutional redundancies and inefficiencies due to the continual institutional changes and declining interest by key institutions to utilize its outputs and convert them into meaningful outcomes (ICR, page 23)\. Environmental management remained fragmented and weakly coordinated among the more than ten government agencies having environmental responsibilities\. In fact, the institutional structures for environmental protection and management were actually weakened over time from what had been created in the former Soviet Union in 1988 (ICR, page 20)\. The modernization of Roshydromet has allowed the country to respond more effectively to weather related emergencies\. b) Improve federal and regional environmental policy formulation and implementation: modest Outputs: The project supported Regional Environmental Action Plans (REAPs) in the Urals and Upper Volga and a follow-up REAP in Rostov Oblast, all of which were formally adopted for implementation within the respective regions\. The project supported the adoption of specific environmental action plans at the national, regional and local levels\. At the national level, these covered natural resource property rights distribution, environmental education, a sustainable development strategy, and four Sector Environmental Action Plans for key pollution-intensive sectors\. At the regional and local levels, outputs were primarily in the water sector, and were related to rehabilitation and management plans of specific water bodies and resource conservation strategies\. The project contributed to regulatory and enforcement improvements by supporting the preparation of specific laws, regulations and implementation guidelines, mainly at the regional level\. These included a “care and custodyâ€? framework initiative for regulating hazardous waste in one pilot region, and regulatory initiatives for public health monitoring and impact assessment, potable water supply management, water rights and financing water-related infrastructure\. Nationally, the project provided support for legislation on state environmental control and natural resource property rights, but this legislation was not adopted\. The project supported technical assistance activities and operational expenses of the NPAF Executive Directorate for the preparation of the Natural Resources Ministry’s priorities to address past environmental damages and associated liabilities\. Outcomes: While most of the action plans were formally “acceptedâ€? by client agencies, they had very limited practical adoption and hence limited impact due to institutional instability\. Since the country ceased to use the National Environmental Action Plan (NEAP) as a priority-setting tool, the revised NEAP had little to no effective impact on environmental policy-making in the Russian Federation\. According to the ICR (page 21), The Regional Environmental Action Plans formed the basis for a broader strategic environmental protection plan and led to the establishment of a meaningful environmental priority setting process which, in turn, led to a better political recognition of the importance of environmental concerns in economic development planning in two pilot regions\. No evidence is provided to support this statement\. The project preparation for the Elimination of Past Environmental Liability did not make any significant progress, since the required administrative and institutional arrangements were not made, and consultant services were not procured prior to project closure\. Due to the low demand among the project’s principal beneficiaries to utilize project outputs, most environmental policy and institutional strengthening and development opportunities provided by the project were not fully taken advantage of by key clients\. This was largely due to major institutional restructuring and/or downsizing of environmental protection bodies with the associated loss of capacity and institutional memory\. For example, in 2000, the State Committee for Environmental Protection (SCEP) was abolished and its functions transferred to the Ministry of Natural Resources (MNR)\. The Ministry showed little interest in what was previously SCEP’s function, and suspended the Center for Project Preparation and Implementation’s (CPPI) operations in 2002\. This was because MNR did not consider CPPI as an entity directly accountable to the Ministry (ICR, page 10)\. The suspension of CPPI’s operations effectively terminated the project’s technical assistance activities\. One exception was the mandatory use of health risk assessments, which has been sustained\. Conversely, the implementation of regulations concerning hazardous waste management developed for regional application was effectively blocked by the Federal authorities\. c) Upgrade federal and regional environmental management systems: modest\. Outputs: A National Waste Management Information System was developed with the Ministry of Natural Resources (MNR)\. It provided a comprehensive database covering waste generation, disposition, facilities options and regulatory control measures as well as trans-boundary movement monitoring and ‘cradle-to-grave’ reporting\. Baseline environmental performance databases were developed for four industrial sectors\. Data bases for use at local and regional levels were developed for air and water quality, waste, and public health indicators, either directly or as part of regional action plans or decision support systems\. The development of Environmental Action Plans discussed under Objective b) above were outputs also relevant to this  objective\. Outcomes Little use was made of the databases and action plans for policy making purposes largely for the same reasons of institutional dysfunction discussed under the Outcomes heading for Objective b) above\. d) Assist in the financing of economically viable high priority resource recovery/pollution abatement projects in the Russian Federation: modest\. Outputs: The National Pollution Abatement Facility (NPAF) was established in 1995\. The core NPAF team, assisted by technical and legal consultants, was appointed under the auspices of the Center for Project Preparation and Implementation (CPPI) to manage the appraisal and supervision of investment projects, reporting to the NPAF Supervisory Board and to the Ministry of Finance (as the sub-loan lender of record)\. Outcomes: In total, from 1995 to 2009, the NPAF Executive Directorate received 599 loan applications for NFAP-vetted sub-projects\. Of these, 201 investment proposals were selected for appraisal and pre-investment studies\. Of these 201 candidate sub-projects, only 39 were approved by the NPAF Supervisory Board and received “no objectionâ€? approval by the Bank\. Of these 39 projects, only seven were fully completed\. Thus, out of nearly 600 loan applications to the NFAP, just one percent (1%) were appraised, approved, and completed\. Appraisals on the remaining investments were discontinued upon the request of applicants, partly due to their deteriorating financial positions resulting from the 1998 financial crisis in Russia\. Other contributory factors were complicated on-lending arrangements, unprepared final borrowers, difficulties with preparing feasibility studies, and ineffective financial intermediation\. Two subproject loan agreements for the Baikalsk and Pitkyaranta paper and pulp mill projects, that had been approved and signed by NPAF, were later cancelled due to concerns about financial viability and the degree of attention paid to the Bank’s safeguard policies and potential environmental impacts\. The original NPAF concept was as a revolving fund which would continue investing in pollution abatement sub-projects after project closure\. This did not occur\. The Budget Code adopted in 1998 excluded the operation of such a revolving fund\. Although a legislative waiver was granted to keep NPAF functional during project implementation (in accordance with the provisions of the Loan Agreement), once the project was closed, the revolving fund ceased to operate\. Funds from NPAF’s revolving account (in the amount of US$24 million) were transferred to the National Treasury in accordance with the Budget Code in September, 2011\. According to the ICR (page 19), “it does not appear that any institutional capacity was developed or was of interest in being developed in the Ministries involved or in the financial intermediaries\.â€? This is despite the considerable investment in time, effort and resources in preparing NPAF sub-projects and funding CPPI’s staff and operations, which reached upwards of 200 employees and involved expenditures of nearly US$5 million\. 5\. Efficiency: No economic or financial assessments were carried out, either at appraisal or at completion\. The project was characterized by numerous operational and administrative inefficiencies\. Implementation took ten years longer than foreseen, and only a part of this was due to undertaking originally unforeseen activities\. Significant delays resulted from shortcomings in CPPI’s operations and from the NFAP’s constantly changing definitions of eligible projects and loan requirements\. In the end, there was little to show for the considerable sums invested in technical assistance for CPPI and NPAF, neither of which survived the project as originally conceived institutions\. There were frequent institutional reorganizations that caused further major delays in project implementation and missed opportunities in utilizing the products it did produce\. Complex and changing Government financial management requirements added extra implementation time\. There were 14 amendments to the Loan Agreement, many of which added new components or changed existing ones\. These also contributed to the need for extensions to the closing date\. Although some of the technical assistance supported the project produced some useful products, there is no evidence that the assistance was cost-effective\. Due to the counterpart institution’s failure to make the required administrative and institutional arrangements and to complete the procurement of consultant services prior to project closure in June 2011, the project preparation for the Elimination of Past Environmental Liability (Part F) did not make any significant progress, and had little to show for having spent US$ 2\.4 million\. Efficiency is rated negligible\. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal No ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: Relevance of objectives and design is assessed as substantial\. Efficacy is rated negligible for the first project objective -- to strengthen and streamline federal and regional institutional structures for environmental management -- and modest for the other three objectives (to improve federal and regional environmental policy formulation and implementation; upgrade federal and regional environmental management systems; and assist in the financing of economically viable high priority resource recovery/pollution abatement projects)\. Efficiency is rated negligible\. Overall outcome is assessed as unsatisfactory\. a\. Outcome Rating : Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: The modest results that the project was able to generate over its 17-year lifespan stand at significant risk of being reversed as neither the institutional nor the political environment is conducive to more effective and participatory environmental protection policies or decision-making processes\. The financial sustainability of the revolving loan fund created by the NPAF has not been achieved\. a\. Risk to Development Outcome Rating : Significant 8\. Assessment of Bank Performance: a\. Quality at entry: Despite a diligent and exhaustive preparation process (the SAR contained three dozen technical annexes, nearly 200 pages long, covering every aspect of the project), project appraisal under-estimated the institutional resistance and lack of political leadership and commitment shown to the project’s objectives and outputs by the Russian Government\. Project risks were identified at appraisal and mitigation options were identified (SAR, pp\. 69-70), but many of those countermeasures proved to be inadequate to compensate for the magnitude of change in the Government’s development approach (favoring short-term economic and financial outcomes over longer term environmental protection) and the level of economic instability suffered during the financial crisis\. There was over-reliance on the political commitment of one agency (the newly established Ministry of Environmental Protection and Natural Resources) in a dynamic and rapidly evolving transitional context\. Key stakeholders (such as the economic and financial Ministries and the Legislature) were insufficiently involved in the conceptualization and design of the project\. Reporting structures and explicit agreements on the mandates of each involved agency and interagency relationships were not confirmed prior to Board approval or even effectiveness\. Rather, they were left to evolve in an ad hoc manner during implementation\. The causal chain between the planned activities and the intended outcomes was sound and logical\. However, better results might have been achieved if project activities had been focused on fewer interventions and less complex implementation structures that had far too many component and subcomponent committees reporting up to the Federal Environmental Policy Unit and the newly created Federal Commission on the Environment\. Building a coherent and streamlined national environmental management system that would be accountable and responsive to citizen concerns was widely acknowledged as inherently difficult, but the strategic importance and opportunity represented by the project’s ultimate objectives overcame those concerns\. A more realistic assessment of the political-economic context and the institutional stability and professionalism of many Russian public sector institutions at the outset might have significantly enhanced the project’s chances of achieving its development objectives\. M&E design was weak (see Section 10a below)\. at-Entry Rating : Quality -at- Moderately Unsatisfactory b\. Quality of supervision: The Bank’s project management team took appropriate and timely actions in response to constantly changing circumstances, such as the financial crisis, and Government preferences that were largely beyond its ability to control or influence\. The Bank’s supervision team adopted a flexible approach to working with Russian institutions that were being re-organized and gradually marginalized by extending the project four times, amending the Loan Agreement 14 times, and addressing unforeseen challenges through additional project components\. The supervision team’s stance taken on a number of proposed sub-projects, such as the financially inefficient zero discharge Baikalsk pulp and paper mill project proposal, was appropriate\. There were a number of fiduciary issues that arose during project implementation, but the ICR reports that these were all addressed and corrected, and that the project loan was fully paid off by September 2011\. The Bank’s supervision team slowly shifted implementation responsibilities from the Federal level down to the regional pilots in the hopes of achieving better development results, and gradually utilized more local Russian consultants and institutional staff over time in order to increase uptake and sustained impact by reducing reliance on foreign experts\. The project staff were praised by a Quality Assurance Group Supervision Assessment in 2004 for their “focus on implementation problems and development effectivenessâ€? and “sound judgmentâ€? in rejecting a number of approved subprojects\. The high number (37) and regular frequency of supervision missions and the level of management attention to the problems encountered in implementing the project attest to the adequacy of Bank oversight\. However, the Implementation Status Reports’ ratings for Implementation Progress varied considerably and lacked candor in several instances where being more forthcoming with information might have allowed Bank management to take more timely corrective steps\. For example, the moderately satisfactory rating of progress towards meeting development objectives and of implementation progress in the supervision reports of 2009 and 2010 were based on over-optimistic assessments\. They were respectively adjusted to moderately unsatisfactory and unsatisfactory in the final reports, when it was too late to take appropriate  action\. Despite weaknesses in M&E design, a considerable amount of data was generated by the project (see Section 10b below)\. Quality of Supervision Rating : Moderately Satisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: The Government was not committed to the project’s goals and objectives, and acted in concrete ways that were counter to them\. For example, it transferred and scaled down project implementation responsibilities to different Government entities on several occasions, which resulted in the project’s marginalization and ultimate location in an agency that did not want its services or outputs (the Ministry of Natural Resources)\. Most of the project’s functional utility at the Federal level was no longer present years before it closed\. The Government also did not meet its financial contribution target to the project, even though the project was extended for 10 years at the Government’s repeated requests, and included several new initiatives\. Despite consistent and widespread popular support for greater environmental protection during this entire period, there was a decline in the Government’s commitment to environmental management, while short term economic and fiscal considerations tended to dominate public policy-making\. In addition, complex and changing Government financial management requirements governing the disbursement and taxation of project funds added extra implementation time, undermining the central National Environmental Policy Unit’s and two pilot Regional Environmental Policy Units’ ability to continue funding many technical assistance contracts before they had fully delivered their planned results\. Prompt government action to address these issues would likely have improved the efficacy of those activities\. Government Performance Rating Unsatisfactory b\. Implementing Agency Performance: The Federal Environmental Commission (Commission) was responsible for high level interagency coordination on environmental issues on behalf of the Government (Council of Ministers)\. The Commission consisted of a Federal Policy Unit, which acted as the policy development and strategic planning resource, and two Regional Environmental Policy Units\. The Federal Policy Unit was responsible for preparing environmental damage and health impact assessments; implementing legal and institutional changes; integrating environmental policy initiatives across government agencies; preparing Sectoral Environmental Action Plans and updating the National Environmental Action Plan; and supporting the regional units including the National Pollution Abatement Facility (NPAF)\. The two Regional Environmental Policy Units were tasked with developing Regional Environmental Action Plans and supporting implementation of new federal policies to address environmental damage in their respective regions\. The principal factor negatively affecting project outcomes under the control of the implementing entities was the progressively diminished commitment on the Government’s part to environmental management\. Staffing of project implementing offices was inadequate and slow, and work plans for technical assistance on sub-components were limited in both substance and detail, reducing these offices and plans to largely symbolic value so that they provided little real substantive assistance\. The functioning of the NPAF component of the project was particularly hindered by a lack of Government support and actively engaged implementing partners\. Operational responsibility for the revolving loan fund was managed by the Center for Project Preparation and Implementation (CPPI)\. In 1996, two years into project implementation, the Ministry was reorganized and became the State Committee for Environmental Protection\. Then, in 2000, this Committee was abolished and its functions transferred to the Ministry of Natural Resources (MNR)\. The Ministry had little interest in the project or NPAF activities since it did not perceive them as being directly under their control\. Ultimately, the Ministry suspended the CPPI s operations, which effectively terminated the revolving fund’s operation as well as technical assistance activities\. Implementing Agency Performance Rating : Unsatisfactory Overall Borrower Performance Rating : Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The Staff Appraisal Report presented a “List of Development Objectivesâ€? in Table 4 on page 64 that was quite comprehensive, covering every category of development objective expected to be achieved by the project\. It was organized around project components and the level of proposed Government intervention (Federal and regional)\. The presence of a well-designed monitoring and evaluation system to provide early warnings of implementation delays was prominently identified in the Staff Appraisal Report (p\. 23) as “importantâ€? on the basis of three other similar Bank-assisted environmental management projects in Indonesia, Chile and Poland\. Despite that, there was no systematic or comprehensive design for M&E data collection and analysis, nor was an efficient or clear manner developed in which to feed that information back into management decision-making processes\. According to the SAR (p\. 91), emphasis was placed on gathering data on watershed, forestry, and fisheries management for a selected number of activities in protected areas and the Lake Baikal sub-region\. However, the institutional mechanisms to incorporate them into the Results Framework were not specified\. Their contribution toward achieving the project objectives was not clearly articulated or self-evident\. There was only one outcome indicator (reduction of emissions projected in NPAF subproject appraisal documents) and one intermediate outcome Indicator (amount of total investments in pollution abatement projects, including NPAF subprojects) in the M&E Framework\. These were insufficient to cover the multiple aspects and activities of a comprehensive and diversified project such as this one, representing a missed opportunity to learn lessons for future efforts at building effective, efficient and responsive national environmental management system in developing countries or transitioning economies\. No baselines were provided for either the outcome indicator or the intermediate outcome Indicator\. Since there were no comparators or any attempt made to demonstrate that project interventions and investments were responsible for the reduction of air, water, and waste discharges, attribution to the project for those results would be unclear\. b\. M&E Implementation: It is apparent from the extensive data generated by the project that was presented in Table A2\.1 Key Performance Indicators of Annex 2: Outputs by Component (pp\. 35-44) and in Table A2\.2: Environmental Benefits of [Six] Implemented NPAF Investment Projects (pp\. 44-46) as well as by the Borrower in comments summarized by the Bank in Annex 7 of the ICR (pp\. 51-56) that the project tracked a wide range of progress indicators\. At some point, therefore, an M&E system was put in place\. When or how this was done, however, is not clear from the project documents\. The supervision team also developed target values for these indicators\. c\. M&E Utilization: There was no information presented in the ICR that would indicate to what extent, if any, the data generated by the M&E system influenced or guided the project’s implementation or management decisions regarding its direction\. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: The SAR does not indicate which Bank safeguards policies would be triggered by the project\. The ICR states (page 18) that the EMP was “consistentâ€? with the Bank’s Operational Policy 4\.01 regarding policies and procedures for assessing the potential environmental impacts of Bank lending operations\. It was categorized as a “Bâ€? project for Environmental Assessmen purposes\. A Quality Assessment Group (QAG) review in 2004 rated safeguard aspects of the project as “satisfactory\.â€? However, the QAG review covered only a short assessment period in 2003-2004\. Thereafter, safeguard compliance was, according to Implementation Status Reports cited by the ICR (page 18) “on average, marginally satisfactory\.â€? No further information on safeguard compliance is provided in the ICR\. b\. Fiduciary Compliance: Little is said about fiduciary issues in the ICR\. It reports that such issues as arose during project implementation were addressed and corrected, and that the project loan was fully paid off by September 2011\. According to supervision reports, financial management and procurement were, like safeguards compliance, “marginally satisfactory\.â€? Procurement experience under the CPPI component was described as “mixed\.â€? (ICR, page 33)\. There is no discussion in the ICR of external project audits\. According to information provided subsequently by the project team, annual external audits were carried out every year in compliance with the Loan Agreement\. The audits were acceptable to the Bank\. Except for two years (2003 and 2004), the auditors' opinions were unqualified throughout\. c\. Unintended Impacts (positive or negative): None\. d\. Other: Not applicable\. 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Risk to Development Significant Significant Outcome : Bank Performance : Unsatisfactory Moderately The ICR was unduly critical of Bank for lack Unsatisfactory of support and commitment on the Government’s part to the project, and provided insufficient justification for its highly negative ratings of Bank performance\. See Section 8\. Borrower Performance : Unsatisfactory Unsatisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The following lessons are taken from the ICR with some adaptation of language: Importance of fully testing broad political commitment to project objectives beyond just the implementing agency\. The experience of this project illustrates the dangers of relying too heavily on the political commitment of just one agency (the technical implementing agency)\. The project largely failed to meet its overall objectives and expectations at the national level because it underestimated the importance of fully testing the Government’s commitment and ownership at appraisal\. All key stakeholders, including the economic and financial Ministries and the Legislature, need to be involved in the conceptualization and preparation of such a project as this one in order to maximize the possibility of achieving sustainable outcomes\. For example, there were no conditionality clauses related to putting credible interagency agreements in place to confirm the Government’s commitment and promises made during negotiations, establishing firm reporting requirements, or having explicit agreements on counterpart mandates and relationships that could be verified regularly during supervision missions\. Importance of early agreement on the linkages and coordination between project components and the implementation of technical assistance (TA) packages\. The utility and sustainability of TA was not directly related to its application to products or outputs that were needed or demanded, and that enjoyed institutional ownership of them\. When TA for the preparation of regional or sector environmental action plans is only loosely linked to direct investments supported by an on-lending program, such as that of NPAF, it results in the isolation of those TA products from the delivery of environmental investment priorities that had been identified\. In addition, it would have been prudent to have embedded TA resources within the implementing agency rather than allowing the progressive separation of those resources under the functional control of another independent entity, as was eventually the case with the CPPI\. The lesson to be learned here is that there should be a logical and institutional link between project activities and the investments that it supports so that technical assistance products are not disconnected from investment interventions\. Finding the right balance between maximizing project impacts and minimizing project complexity\. In view of the multitude of development issues which Russia was facing in the early 1990s, there was a temptation to address as many development issues in the environmental sector as possible\. The result was an operation that, even in its abridged form – including four technical assistance components and the NPAF credit line to be implemented in twelve regions -- was far too great an implementation challenge for both the Borrower and the Bank\. Arguably, better results could have been reached if project activities had been centered on fewer regions and components, and on more focused interventions within those components\. 14\. Assessment Recommended? Yes No Why? First, to carry out a more in-depth assessment and verification of the project’s achievements\. Second, to assess the openness of Russian Government authorities to further environmental management reforms\. And third, to determine the extent to which the environmental action plans and considerable data and knowledge generated by the project were being maintained and used, or had fallen into disuse, and the reasons for this\. 15\. Comments on Quality of ICR: The ICR was well-written and organized, and provided a candid evaluation of a complex and problematic project\. The “lessons learnedâ€? section was particularly well thought out and insightful and was grounded in the experience of preparing and implementing the project\. There were some shortcomings\. The M&E system developed during implementation could have benefited from a fuller discussion\. The treatment of safeguard and fiduciary compliance was inadequate\. a\.Quality of ICR Rating : Satisfactory

APPROVAL

P091949

Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: AB3065 Project Name CN-Gansu Cultural and Natural Heritage Protection and Development Region EAST ASIA AND PACIFIC Sector Other social services (57%); General transportation sector (30%); General water, sanitation and flood protection sector (10%); Solid waste management (3%) Project ID P091949 Borrower(s) PEOPLE'S REPUBLIC OF CHINA Implementing Agency Gansu Provincial Government Gansu Provincial Development and Reform Commission 319 Houlou, No\. 1 Building Zhongyang Guangchang, Chengguan District Gansu China 730030 Tel: +86 931 846 4760 Fax: +86 931 848 4190 gansupmo@126\.com Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared July 25, 2007 Date of Appraisal Authorization June 20, 2007 Date of Board Approval TBD 1\. Country and Sector Background 1\. Gansu Province, with its capital of Lanzhou and a total population of 26 million, is located in northwestern China\. The economy has traditionally been based on agricultural production, mining of the province’s abundant mineral reserves, and heavy industrial development\. Poor infrastructure and Gansu’s distance from the coast, have largely kept it isolated from the rapid development experienced by other provinces in China over the last two decades\. As a result, Gansu is the second poorest province in the country, measured by per- capita GDP\. Moreover, the province contains some of the country’s poorest communities, as listed on the Government’s national poverty register\. 2\. A major element of Gansu’s poverty alleviation and economic restructuring strategy is the development of a sustainable tourism industry\. The province has a rich endowment of cultural and natural heritage resources which offer a strong platform for economic development through tourism\. The core and unique heritage of Gansu comprises the three great cultural icons of China namely the Great Wall, the Silk Road, and the Yellow River\. Gansu’s geographic setting includes the Gobi Desert, the Qilian Mountain Range and numerous important oases, wetlands and rivers\. As a result, Gansu possesses some of the most significant cultural and natural heritage sites in China, including two UNESCO World Heritage sites (the Mogao Page 2 Grottoes and the Great Wall at Jiayuguan)\. Gansu is also included in a nomination currently being prepared for a UNESCO World Cultural Heritage Route listing of the Silk Road\. 3\. A feature of many of Gansu’s heritage sites is that they are not isolated monuments\. Many are very large (tens of square kilometers) and contain a range of cultural assets, ecosystems, and embedded communities, many of which are vulnerable because of poverty and/or ethnicity\. These communities have largely lived a subsistence existence off the land, so tourism provides a new and important opportunity for local economic development\. This type of activity is already occurring on a small scale at many sites, with local communities developing small guesthouses, restaurants, handicraft associations, and other tourist activities\. In places where this has already occurred, the improvement in income and living standards is large\. 4\. Protection and management of Gansu’s cultural heritage is the responsibility of Gansu Provincial Government (GPG) through its Gansu Provincial Cultural Relics Bureau (GCRB) under the sectoral leadership of the State Administration of Cultural Heritage (SACH)\. Cultural relics in China are managed through a process of listing at various levels of government, depending on the significance of the relic\. The level at which each relic is listed determines, by law, the requirements for conservation planning and management and responsibility for financing preservation\. State-listed relics, of which Gansu has around 60, are managed on a day- to-day basis by local governments\. 5\. Many of Gansu’s key relics are at significant risk from environmental impacts such as humidity, sand storms, flooding and erosion, and from theft and vandalism due to weak security\. Overall, the level of preservation and protection has been poor, primarily due to a lack of financing and institutional capacity, particularly at the local level\. Until recently, Gansu has not been able to prepare cultural conservation plans for its key heritage sites, which has resulted in Gansu’s inability to capture state conservation funding, except in emergency situations\. Further, institutional barriers have been significant, with authority over the relics and the heritage sites in which they are located, often in conflict or unclear\. In many cases, tourism authorities control the sites but are not responsible for the relics within the sites, which has led to over-building of tourism infrastructure around the relics, and little or no preservation of the relics themselves\. 6\. Tourism is seen by the GPG as a way to generate income to finance heritage protection and as a source of local economic development\. However, despite Gansu’s rich tourism resources, the sector currently contributes only 3% of provincial GDP\. In recent years for which data is available, Gansu attracted only 1 in every 176 of China’s international tourists, and 1 in every 113 domestic tourists\. This is largely due to limited or substandard infrastructure such as accommodation and local transportation; weak planning, management and marketing skills, and limited local business activities to support tourism\. 7\. This project does not intend to resolve all of the problems that limit heritage protection and tourism development in Gansu Province, rather, it has been designed as a barrier removal and demonstration project, which will allow the GPG to build capacity in the province, while testing methods for reducing institutional, planning, and financing barriers at key sites in the province\. Page 3 During the project preparation period, Gansu has made significant advances in resolving one of the key barriers – a lack of planning in the heritage and tourism sectors – through the commissioning of high-quality, consistent provincial, municipal and site-level tourism, development and conservation plans\. This provides, for the first time, a sustainable foundation for heritage protection and cultural tourism in the province and specifically, at the project sites\. Moreover, GPG has already started to expand this planning work to other cultural tourism sites outside the project, demonstrating that this aspect of the project design is already replicating throughout the province\. 8\. At the level of the individual sites, the project will also address some of the key physical barriers to sustainable cultural tourism development, ensuring that communities within and around the project sites as well as tourists experience direct benefits from improvements in basic infrastructure such as water and sanitation, power supply, , solid waste management and access to markets\. The project will finance conservation works and protection for key cultural and natural heritage assets including the provision of safety and security systems, effectively resolving the financial barrier to heritage preservation at the project sites\. Moreover, tourism infrastructure will be upgraded through provision of visitor facilities and exhibitions, upgrading of tourism management and planning; and strengthening of research, interpretation and presentation of the heritage\. 9\. Finally, the project will support the greater involvement in and acceptance of sustainable tourism by the community through the project’s training program and several key activities such as the Folk Culture Center at Mati Temple Scenic Area, and the Local Handicrafts Development Center at Maijishan\. The development of local entrepreneurial activities based on tourism (e\.g\., handicrafts, home stays, guiding) will be supported through technical assistance and community training in business planning, hospitality skills, marketing, and promotion\. 2\. Objectives 10\. The project development objective is to generate benefits for local communities from the development of sustainable cultural tourism in Gansu Province\. 3\. Rationale for Bank Involvement 11\. The rationale for Bank involvement in the project is strong because this project is intended to be a demonstration for Gansu and more broadly, for China\. The Bank will provide Gansu with the benefit of its extensive global and China experience in heritage protection, sustainable tourism, institutional development, and financial management\. The Bank has had a long and successful engagement in China on the protection of cultural heritage, including the Leshan Grand Buddha, the Shenyang Imperial Palace, Chongqing's Huguang Huiguan, and the historic city center of Shaoxing\. Moreover, the Bank has collaborated with SACH, Ministry of Construction (MOC) and other Chinese authorities in the dissemination of international and Chinese best practice on heritage protection and financing, and sustainable tourism development, through a pair of international conferences in China in 2000 and 2006\. In addition, the Bank has extensive experience in similar projects in other regions of the world, including Peru, Ethiopia and Morocco, which it will bring to the project, as appropriate\. Page 4 12\. The project is inherently cross-sectoral and the Bank is well-placed to support GPG as it coordinates the many actors required to ensure the success of sustainable tourism development\. In additio n, since Gansu is one of China’s poorest provinces, the level of financing that the Bank is able to provide to this sector is significant, allowing Gansu to successfully conduct the program in multiple municipalities for greatest capacity and awareness building benefit\. Even though Gansu has worked with the Bank in other sectors, this is the first project in the heritage and tourism sectors\. The province has benefited from the analytical rigor of Bank project preparation and appraisal to achieve optimal project design\. Value-added during implementation would include cost savings through procurement under Bank guidelines, and improved project management and construction quality\. 13\. Finally, as per the priorities of the central government, the Bank is well-placed to assist China in disseminating its experiences in this sector and in particular in this project, to a wider audience around the world\. As this is a new sector of focus for China, and one which holds significant potential for economic development in China’s lagging hinterland, the Bank’s assistance in dissemination of the project experience will help China attract further financing for the heritage and tourism sectors in the future\. 4\. Description 14\. The project comprises two components, the first of which is conducted at each of nine key cultural and natural heritage sites within the following six municipalities in Gansu Province: Jiuquan and Jiayuguan Municipalities in the west; Zhangye, Baiyin and Lanzhou Municipalities in central Gansu; and Tianshui Municipality in the east\. The second component, an institutional strengthening and capacity building component, will benefit the citizens, government officials and others at all nine project sites and within the municipal and provincial governments\. The two components are: Component 1 – Protection and Development of Priority Sites : The following activities would be carried out at each of the eleven project sites: 1\.1 Heritage Conservation and Presentation – preservation and conservation of key relics, research, interpretation and presentation of cultural and natural heritage assets\. 1\.2 Infrastructure, Tourism Services and Environmental Protection – investment in high priority physical infrastructure that raise local standards of living and have a high potential for promoting local economic development through tourism\. Component 2 – Institutional Strengthening and Capacity Building including project management strengthening, training of site managers, staff and local residents in heritage conservation, site management and tourism development, a province-wide study on tourism market development, and several site-specific studies and plans on tangible and intangible heritage 5\. Financing Source: ($m\.) Page 5 Borrower 19\.35 International Bank for Reconstruction and Development 38\.40 Total 57\.75 6\. Implementation 15\. Project Management \. The Gansu Provincial Leading Group (GLG), chaired by a Vice Governor of Gansu, will provide high-level guidance to the project, and coordinate on policy and institutional issues related to the project\. A Provincial Project Management Office (PPMO) under the Social Development Department of the Gansu Provincial Development and Reform Commission has been established with sufficient staff to provide overall project management\. The PPMO will be assisted by a panel of thirteen technical specialists on engineering, planning, cultural heritage and other topics\. The members of the panel are recognized experts employed by relevant Gansu Provincial Government bureaus and universities\. 16\. Municipal Leading Groups (MLGs) and Municipal Project Management Offices (MPMOs) have been set up in the six Gansu municipalities of Lanzhou, Jiuquan, Jiayuguan, Zhangye, Baiyin and Tianshui for the preparation and implementation of their projects with similar arrangements as GLG and the PPMO\. The MPMOs are located within the following municipal government agencies: Development and Reform Commission for Jiuquan Municipality; Tourism Bureau for Baiyin and Zhangye Municipality; Culture Bureau for Lanzhou Municipality, Culture, Broadcasting and Television Bureau for Jiayuguan Municipality; and Maijishan Scenic Area Administration Bureau for Tianshui Municipality\. The responsibilities of the MPMOs are to guide preparation and execution of project components within their jurisdictions, and to coordinate activities with the PPMO\. Project Implementation Units (PIUs) have also been established in the nine project scenic areas to be responsible for project implementation, construction supervision and management in their respective scenic areas\. 7\. Sustainability 17\. Gansu is strongly committed to the development of sustainable cultural tourism\. The Vice-Governor of Gansu, the Directors of the various Gansu bureaus and commissions, the Vice- Mayors of the six municipalities, and other senior provincial and city officials have actively participated in discussions with Bank missions during preparation and appraisal\. 18\. However, the proposed investments do not lend themselves to predictable, recurring revenue flows, such as from utility tariffs\. Most of the proposed subcomponents are attempts to generate cultural tourism activity from a non-existing or very low existing base\. Aside from uncertainties over the extent and timing of market acceptance of these sites as tourism destinations, macro-economic shifts that could have major impacts on domestic and foreign tourism (e\.g\. fuel prices, exchange rate fluctuations, events and policies affecting disposable incomes of domestic households) are well beyond the influence of PIUs or the Gansu Provincial Government\. Page 6 19\. The project has been designed with respect for the uncertainties of the market, with an emphasis on providing a balance between heritage protection, improvements to local community standard of living, and environmental protection on the one hand, and tourism service infrastructure on the other\. Conservative estimates of tourism demand have been used to evaluate the sustainability of the proposed investments, and operation and maintenance has been supported through the inclusion of key maintenance equipment in the project\. Marketing and information systems are also included to promote tourism in Gansu\. 20\. Furthermore, the project includes training of about one hundred local site managers and workers, and more than 4,000 community members\. Community training will include awareness-raising on the benefits and impacts of tourism, and business skills to assist local communities participate successfully in tourism\. 8\. Lessons Learned from Past Operations in the Country/Sector 21\. Over the past 15 years, the Bank has gained experience through a series of projects supporting heritage conservation in China and through a recent analysis of the cultural heritage sector entitled Management of Urban Cultural Heritage in China: A Sector Overview \. 1 The key lessons have been incorporated into the design of the project as follows: 22\. Comprehensive and Coordinated Planning \. The Sector Overview and project experience have found that planning authorities in China would benefit from more assistance in developing plans that address the impacts and trade-offs among different land use categories\. During project preparation, the team has found that local plans for heritage conservation, urban upgrading and tourism development are often done without the necessary consistency and coordination\. Many of these issues were addressed during project preparation through the screening and upgrading of all these plans for suitability and consistency\. The project will continue to provide guidance on these planning issues as it progresses\. 23\. International Standards in Heritage Site Conservation and Interpretation \. Previous EASUR projects in China have found that local officials and practitioners tend to follow conservation and interpretation practices which are outdated in China and employ lower standards than current international practice\. To encourage international practices, the project activities will emphasize use of the Principles for the Conservation of Heritage Sites in China , which is a set of guidelines for internation al best practice recently issued by China’s State Administration for Cultural Heritage and ICOMOS Chapter\. The project will also support international experts to provide guidance on conservation and interpretation activities at the project sites\. 24\. Sustainable Tourism Development \. Recent studies on heritage sites and trends in China’s tourism sector suggest that there has been a tendency toward excessive exploitation of heritage assets, and a lack of understanding of the negative impacts of tourism on the part of government bodies\. To address the issues of sustainable tourism planning, the project will make use of the lessons learned in the development of cultural heritage tourism strategies for Shaoxing 1 World Bank, 2005\. Management of Urban Cultural Heritage in China: A Sector Overview\. Working Paper No\. 2, Urban Development Working Papers, East Asia Infrastructure Department\. Washington D\.C\. Page 7 and Ningbo under the Zhejiang Urban Environment Project\. These strategies include: (1) strengthening and coordination of key agencies; (2) improving tourism market research and analysis; (3) developing appropriate levels of tourism, based on realistic visitor numbers; and (4) planning that emphasizes cooperation, rather than competition among local tourist destinations\. 25\. Community Benefits and Poverty Reduction \. Previous projects in both heritage and environmental conservation have established the importance of minimizing negative impacts and maximizing benefits for nearby communities in order to reduce poverty and engage their support for project conservation goals\. This project will focus on community benefits through: (1) provision of basic infrastructure services to communities near project sites (e\.g\. water and sanitation, road improvements etc\.); and (2) support for training in local economic activities, such as souvenir sales, restaurants, and guest houses\. 26\. Gansu Fiscal Capacity \. Gansu has participated in several World Bank projects in the past, primarily in the rural and transport sectors\. Experience on these projects has shown that implementation is often delayed due to a lack of available counterpart financing\. This project has attempted to address the problem through: (a) increasing the World Bank financing percentage of the project to 70%; (b) developing counterpart funding plans during preparation; and (c) reaching agreement with local authorities for ensuring that counterpart financing will be available at the appropriate time\. (See Financial Analysis sections for further detail\.) 9\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP 4\.01) [X] [ ] Natural Habitats ( OP / BP 4\.04) [ ] [X] Pest Management ( OP 4\.09 ) [ ] [X] Physical Cultural Resources ( OP/BP 4\.11 ) [X] [ ] Involuntary Resettlement ( OP / BP 4\.12) [X] [ ] Indigenous Peoples ( OP / BP 4\.10) [X] [ ] Forests ( OP / BP 4\.36) [ ] [X] Safety of Dams ( OP / BP 4\.37) [X] [ ] Projects in Disputed Areas ( OP / BP 7\.60) * [ ] [X] Projects on International Waterways ( OP / BP 7\.50) [ ] [X ] 10\. List of Factual Technical Documents 1\. Project Documents a\. Project Proposal 2\. Procurement Assessment Report 3\. Procurement Capacity Assessment Report 4\. Financial Management Assessment Report * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 8 5\. Consolidated Environmental Assessment/Environmental Management Plan Report (Chinese and English) 6\. Consolidated Resettlement Action Plan and Resettlement Policy Framework (Chinese and English) 7\. Consolidated Feasibility Study Report (Chinese) 8\. Indigenous Peoples Plan for Mati Temple (Chinese and English) 9\. Letters, Decrees, Policy Papers 10\. Various Reports and Studies a\. Strategic Overview Report b\. Review of Solid Waste Management Investments 11\. Contact point Contact: Mara K\. Warwick Title: Senior Urban Environment Specialist Tel: 5788+7772 / 86-10-5861-7600 Fax: 5788+7800 / 86-10-58617800 Email: mwarwick@worldbank\.org Location: Beijing, China (IBRD) 12\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop

APPROVAL

P166745

Combined Project Information Documents / Integrated Safeguards Datasheet (PID/ISDS) Appraisal Stage | Date Prepared/Updated: 23-Feb-2018 | Report No: PIDISDSA24200  BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) India P166745 National Rural Economic P104164 Transformation Project (Additional Financing to the National Rural Livelihoods Project ) Parent Project Name Region Estimated Appraisal Date Estimated Board Date National Rural Livelihoods Project SOUTH ASIA 23-Feb-2018 20-Apr-2018 Practice Area (Lead) Financing Instrument Borrower(s) Implementing Agency Agriculture Investment Project DEA National Rural Livelihood Financing Mission Proposed Development Objective(s) Parent The project development objective is to establish efficient and effective institutional platforms of theruralpoor that enable them to increase household income through sustainable livelihood enhancements and improved access to financial andselected public services\. Components Component 1\. Institutional and Human Capacity Development Component 2\. State Livelihood Support Component 3\. Innovation and Partnership Support Component 4\. Project Implementation Support: Financing (in US$, millions) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 500\.00 Total Financing 500\.00 Financing Gap 0\.00 DETAILS -NewFin3 Total World Bank Group Financing 250\.00 World Bank Lending 250\.00 Total Government Contribution 250\.00 Environmental Assessment Category Partial Assessment (B) OPS_TABLE_SAFEGUARDS_DEFERRED Decision B\. Introduction and Context Country Context 1\. India continues to be one of the world’s fastest growing large economies and has experienced a substantial decline in poverty\. The Indian economy registered gradually rising growth from 5\.5 percent in 2012-13 to 8 percent in 2015-16\. This was supported by robust private consumption, a resilient services sector, and some revival in industrial activity\. Since the 2000s, India has made remarkable progress in reducing absolute poverty\. Between 2004 and 2011, poverty declined sharply from 38\.9 to 21\.6 percent at the international poverty line ($1\.90 PPP/day)\. With over a 100 million people escaping poverty, the pace of poverty reduction in India exceeded that of the developing world as well as that of Middle Income Countries (MICs) in this period\. High economic growth, rapid rise in rural wages, greater rural-urban integration and increase in non-farm activity, especially construction, were the key drivers of poverty reduction\. Since 2011, robust economic growth may have aided further reduction in poverty\. However, trends in the construction sector and rural wages suggest that the pace of poverty reduction may have moderated\. Sectoral and Institutional Context 2\. Agriculture continues to be important for rural Indians and there are 68 percent of the rural population dependent on it for livelihoods and about 49 percent of the labor force works in the agricultural sector but paradoxically it contributes only around 10 to 11 % to National gross domestic product (GDP)\. The Government of India’s new agenda of “Doubling Farmer’s Incomeâ€?, which not only emphasizes upon productivity enhancement, intensification and diversification but also on agri- processing, Agri-logistics, resource use efficiency, agriculture marketing and sustainability could possibly transform the Indian Agriculture\. The opportunities in the agribusiness sector and local level primary value addition are growing with the changing consumer basket and increasing urbanization and demand for diversified and nutritious foods\. Small producers have the opportunity to directly participate in this value chain if they are organized and provided with appropriate infrastructure, technology and information support\. 3\. Non-farm economy, in recent times, has emerged as an important livelihoods source in rural India\. A shift away from agriculture toward nonagricultural wage employment and reduced reliance on agricultural income has become evident\. Non- farm activities contributed 65% rural income in 2016-17 (Chand, 2017)\. Diversification into non-farm interventions (both self-employment and wage employment) marks the shift from low-productivity jobs to high productivity and it is an important pathway for poverty reduction and employment generation\. Non-farm rural jobs are predominantly in manufacturing, services (including public administration, education, health, community, other personal or household services) and trade and transport (including wholesale and retail trade, hotels, restaurants, transport, storage and warehousing and communication)\. 4\. The Ministry of Rural Development, Government of India launched the National Rural Livelihood Mission in 2011 as its flagship program to enhance rural livelihoods and reduce rural poverty in the country\. The world bank supported National Rural Livelihoods Project provided intensive support to the launch and scale up of the NRLM over the last 7 years\. The National Rural Livelihood Mission (NRLM) has now been scaled up to o all 29 states of the country\. The intensive approach successfully demonstrated by NRLP in around 500 blocks is now being implemented across nearly 2500 blocks across 29 states through the NRLM program\. A total of 45 million rural women are currently part of Self-Help Groups and they have cumulatively leveraged nearly 25 billion USD of financing from commercial banks since the launch of the NRLM program in 2011\. 5\. Ministry of Rural Development has subsequently launched two critical programs that aim to leverage the National Rural Livelihood Mission and scale up efforts to enhance agriculture incomes and on-farm incomes for the rural poor namely the Mahila Kisan Sashiktikaran Program (MKSP ) and the Startup Village Entrepreneurship program \. The Mahila Kisan Sashaktikaran Pariyojana (MKSP) is launched as a sub-component of the Deendayal Antodaya Yojana-NRLM to improve the status of women in agriculture, who constitute 33% of the total agricultural labour force, and enhance economic opportunities available to them\. The program exclusively focus upon small and marginal farmers, sustainable agriculture practices and vulnerability reduction\. Community Resource Persons (CRP) are identified as best practitioners (locally named as Pashu Sakhi, Krishi Sakhi etc\.) and are instrumental in promoting farm sector livelihoods (agriculture, animal husbandry and NTFP), through community to community sharing and learning – as a “proof of conceptâ€?\. The ‘Start-up Village Entrepreneurship Programme’ (SVEP) launched by Government of India in 2014-15 aims to promote and support existing rural entrepreneurs by providing bouquet of business development services including entrepreneur capacity building, seed & growth capital along with handholding support for business development\. Currently, the programme is being implemented in 47 Blocks across 14 states with support of 5 technical support agencies\. Results from SVEP and other world bank supported programs to promote SMEs will inform the scaling up of enterprise development initiatives to be taken up under NRETP ( NRLP-AF) 6\. The Government of India has recently launched Mission Antyodaya to improve the well-being of 10 million households from 5000 economic clusters (covering around 50,000 Gram Panchayats) by addressing multiple dimensions of poverty through convergent actions under wide range of existing development schemes and following a saturation approach\. The movement of Panchayats away from poverty will be tracked through a mobile based application i\.e\. “Panchayat Darpanâ€? using a set of indicators having differential weightage scheme\. In a list of 24 indicators, 30% weightage has been provided on GP level Infrastructure development; another 30% on Human Development outcomes and rest 40% weightage has been given to livelihoods promotion\. Mission Antyodaya further accelerates economic transformation process building on the NRLP outcomes  7\. One of the central lessons learned during the last seven years of implementation of NRLM has been that while investments in building institutional platforms of rural poor households is a critical foundation for sustainable poverty reduction, it is not sufficient unless these institutions are engaged in higher level production systems and have better market interface\. Integration of core social mobilization and leveraging of financial resources have been adequately demonstrated\. The next level challenge is to leverage social capital into economic opportunities and crowd in private investments; and engage with more commercial partnerships to integrate rural households into higher-level income opportunities\. Therefore, one of the main thrusts of the NRETP (NRLP- AF) will be to develop value chains using end-to-end investments in selected commodities and facilitating access to finance to support enterprises in agriculture and allied sectors, thus contributing to productivity and profitability\. The proposed project will build on existing investments and institutional capital to bring further income increase and inclusive growth in rural areas\. C\. Proposed Development Objective(s) Original PDO 1\. To establish efficient and effective institutional platforms of the rural poor that enable them to increase household income through sustainable livelihood enhancements and improved access to financial andselected public services\. Current PDO 2\. To establish efficient and effective institutional platforms of the rural poor that enable them to increase household income through sustainable livelihood enhancements and improved access to financial andselected public services\. Key Results: 3\. The PDO indicators for the additional financing are: • 60% of SHGs# federated into Village Organizations\. • 40% of SHG members* report reduction in high cost debt • 50% of SHG members report 30% increase in asset\. • 20 % increase in income of households that have accessed technical and financial services1 D\. Project Description Project Beneficiary: 1\. The proposed NRETP (NRLP AF) intends to support 100 districts from the existing 13 NRLP States towards high end technical assistance and investment support towards deepening and scaling up of the economic transformative initiatives that were introduced as part of dedicated funds under NRLP\. 1 Define technical and financial services that will be provided/considered  Additionally, it would support to the Mission Antyodaya program that intends to further accelerate economic transformation in selected areas, building on the NRLP outcomes\. 2\. While MoRD through their own increased budget allocation would continue to saturate and bring remaining rural poor into the fold of women SHGs, the specific investments under additional financing will work with targeted households that are already part of SHGs and would focus on strengthening of existing network (higher level federations i\.e\. VO and above) of community organizations of women having potential to be mobilized into producer groups and producer organizations and transit to next generation economic initiatives like high value agriculture including market access, enterprise and skills development etc\. MoRD will directly reach out to over a million households through these initiatives\. The project will support around 50000 individual enterprises; and around 100,000 youth will be trained and placed with in formal job markets using the resources available under DDUJKY and other skilling & entrepreneurship program of the Government of India\. Project Component 3\. Component 1: Institutional and Human Capacity Development This component will continue to finance technical assistance consultancies, human resources, training and development of training material/approaches\. Financing under this component will endeavor to place skilled professionals to work with NRLM at the national, state and district levels\. As mentioned in the section on rationale, the TA will be focused on helping the National and State teams transition to a new phase of the NRLM that involves greater focus on economic initiatives such as high value agriculture and value chain development, enterprise and skills development\. Given that experiences from these initiatives are relatively nascent, the additional financing support will emphasize sourcing of technical support from agencies (Public, Private and NGOs) with the requisite technical expertise in rural enterprise development\. National, regional and international experiences and skills may be sourced for this objective\. 4\. In addition, a new sub component focused on providing technical assistance for Mission Antyodaya will be introduced\. Specifically, as part of this sub component: a\. TA will be provided for Mission Antyodaya at the national, state and district level\. b\. Support under this sub-component will be for 13 NRLP states and nearly 100 districts in those 13 states\. The 100 districts with the highest intensity of the NRLM implementation will be selected for the project\. These districts will be the districts with the highest amount of mobilization and capitalization (both the catalytic capital from NRLM and the finance from commercial banks) and the possibilities of having transformative economic potential\. Additionally, and as far as possible, the project will strive for coordinated technical or investment support with the blocks and panchayats selected under Mission Antyodaya and those under NRLP\. 5\. Component 2\. State Livelihood Support The activities to be financed under this Component will remain essentially the same but with further refinements to focus on the next generation institutional and investment support as described above in the rationale\. Sub component 2\.1 (State Rural Livelihoods Support) will remain the same but district level support will be focused on 100 districts that will be selected for project coverage under this NRETP (NRLP AF)\. Under sub component 2\.2 (Institution Building and Capacity Building) financing will be oriented towards the mobilization of the producer groups and producer organizations\. Under sub component 2\.3 (Community Investment Support) the focus would be on financing community  organizations mainly towards enterprise and skill development initiatives\. The quantum of financing under sub component 2\.4 (Special Programs) will be significantly scaled up and most of this financing will be focused on scaling up initiatives like high value agriculture including market access, enterprise and skills development etc\. that were introduced under the dedicated funds under this sub- component during the project restructuring undertaken in January 2016\. 6\. Component 3\. Innovation and Partnership Support: There is no change in the activities to be financed under this component\. The component will continue to finance pilot initiatives and technical assistance consultancies that support innovative livelihoods activities in agriculture, livestock, youth employment, among others, for rural poor households\. Learning and documentation of experiences from these initiatives will be emphasized\. 7\. Component 4\. Project Implementation Support: There is no change in the activities to be financed under this component\. This component will continue to strengthen the National Mission Management Unit for effective project management at the national level, finance the Monitoring and Evaluation activities and ICT initiatives\. Learning and documentation of experiences under the economic transformative investments and institutional strengthening programs will be emphasized\. E\. Implementation 1\. Institutional and Implementation Arrangements: The MoRD through National Rural Livelihoods Promotion Society (NRLPS)/National Mission Management Unit (NMMU) will be responsible for overall technical assistance, guideline formulations, National level partnerships, coordination, monitoring, supervision and release of funds to thirteen participating States\. At the State level, the project will be implemented by the State Rural Livelihoods Missions (SRLMs) set up under NRLM as per the agreed framework detailed out in Project Implementation Plan (PIP)\. Each participating States will carry out a diagnostic study of pro-poor agriculture value chain and potential of cluster based enterprise development based on which they will prepare their Annual Action Plan (AAP) or multi-year State Perspective and Implementation Plan (SPIP)\. \.  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) F\. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) The additional finance would cover about 100 districts in the current 13 states\. The states are spread across different agro climatic zones with varied natural and geographical features ranging from wet and humid to dry and deciduous as well as include some coastal areas\. All the states have previous experience in implementing NRETP (NRLP AF) supported livelihood activities in varied agro climatic zones\. There is also prior experience of working in different geographies and with environmental and social setting of the rural areas, which are primarily agrarian\. The expected locations influenced by additional financing are likely to be similar to those covered under the ongoing NRETP (NRLP AF), and therefore, poses no significant risks of potential cumulative and localized significant adverse environmental impacts\. Livelihood activities would continue to centre around the sustainable use of natural resources, where these are available at project locations\. NRETP (NRLP AF) NRETP (NRLP AF) The additional financing will be spread across 100 Districts in 13 high poverty states\. The states and project areas were identified based on their high incidence of rural poverty and socioeconomic backwardness as well as higher concentration of marginalized population groups such as scheduled tribes (indigenous peoples) and scheduled castes\. States like Bihar and UP have For Official Use Only substantial population of Scheduled Castes (SC) and Other Backward Castes (OBC) who are more vulnerable and marginalized compared to general population\. On the other hand, states like Jharkhand, Chhattisgarh, Odisha and parts of Rajasthan, MP, and Maharashtra are dominated by tribals\. Within these geographies, the NRETP (NRLP AF) will prioritize districts/blocks with higher levels of social mobilsation and financial capitalization, which will overlap with pockets of higher tribal and marginalized populations\. G\. Environmental and Social Safeguards Specialists on the Team Anupam Joshi, Environmental Safeguards Specialist Varun Singh, Social Safeguards Specialist SAFEGUARD POLICIES THAT MIGHT APPLY SAFEGUARD _TBL Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/BP 4\.01 Yes Natural Habitats OP/BP 4\.04 Yes Forests OP/BP 4\.36 Yes Pest Management OP 4\.09 Yes Physical Cultural Resources OP/BP 4\.11 No Feb 01, 2018 Page 8 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) Indigenous Peoples OP/BP 4\.10 Yes Involuntary Resettlement OP/BP 4\.12 No Safety of Dams OP/BP 4\.37 No Projects on International Waterways No OP/BP 7\.50 Projects in Disputed Areas OP/BP 7\.60 No KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT OPS_SAFEGUARD_SUMMARY_TBL A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: For Official Use Only The project proposes to scale-up the existing livelihoods promoted through dedicated special funds\. The livelihoods include varies use of natural resources and linked processes, such as, Agriculture, Dairy, Small ruminants, Fisheries, Non-Timber Forest Produce (lac culture, hill broom, tamarind etc\.)\. The project will also support Non-farm enterprises including small processing units and value addition\. The project has been consciously promoting special initiatives for environmental sustainability of livelihoods such as community managed sustainable agriculture, fodder cultivation and stall feeding of milch animals and goats etc\. However as the project proposes to scale-up the same interventions through additional financing, improper management of any of these livelihood activities and unawareness among the SHG members may result in negative impacts, such as: (i) indiscriminate use of chemical inputs in agriculture leading to contamination of soil, water and surroundings; (ii) degradation of common grazing lands due to increased pressure of grazing and improper pasture management practices; (iii) decreased regeneration capacity of NTFP species in forest areas; and (iv) over use of water resources, particularly ground water etc\. Most of these activities are small-scale interventions, spread over wide areas in several villages\. Further, any potential adverse environmental impact and risk from these activities can be mitigated, contained and even reversed\. Therefore, no potential large scale, significant and/or irreversible impacts are envisaged\. In addition to Environmental Assessment (OP 4\.01), the safeguard policies on Natural Habitats (OP/BP 4\.04), Forests (OP/BP 4\.36) and Pest Management (OP/BP 4\.09) have been triggered recognizing the importance of integrating sustainable management practices in forest-dependent and agriculture- based livelihoods\. The safeguard policy on Safety of Dams (OP/BP 4\.37) has not been triggered as the project funds are unlikely to be used for community-level civil works such as small dams, embankments, etc\. (Project funds would not support activities involving excavations, etc\., that may impact physical cultural resources\. Therefore, OP/BP 4\.11 is not triggered\. The key social safeguard issues and impacts associated with the NRETP (NRLP AF) are: ensuring project interventions and implementation processes are aligned with the socio-cultural context in tribal areas and respond to their development priorities; inclusion of traditionally marginalized social groups such as scheduled castes, migrant labor, and other households identified under socioeconomic census survey (SECC); promoting strategies that reduce gender gaps and advance women’s economic empowerment; and mitigation of any localized, adverse impacts from small scale infrastructure that would be coming up in project areas\. No adverse long terms impact on tribals and indigenous population are expected from this project\. OP 4\.10 is triggered as states and districts having substantial tribal population are included in Project areas\. OP\. 4\.12 (Involuntary Resettlement) is not triggered as involuntary land acquisition is not envisaged\. Small scale community level, infrastructure such as citizen service centres, training centres and custom hiring centres are expected to come up largely in pre-existing facilities\. However, some of these may require small land parcels that are expected to be leased or donated by Panchayats or local government Feb 01, 2018 Page 9 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) departments or individual donors with proper MoUs and due diligence\. Given the size of small scale infrastructure, a large portion of which is expected to be rented/leased with no or minimal construction, the risks of labor influx are not going to be significant\. Project interventions are not expected to cause any adverse livelihood impacts and restriction of access to land and resources as a result to land taking by the project\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Describe any potential indirect and/or long-term impacts due to anticipated future activities in the project area: No severe or long-term impacts are expected due to proposed livelihood activities, mainly implemented through the women Self Help Groups\. Agriculture, livestock, fisheries, non-timber forest produce and non-farm sectors are the predominant sectors in which rural poor households are involved and individual and household level investments in these sectors generally do not result in potential indirect and/or long-term impacts in the project areas\. Further, as the experience of existing Bank projects has shown, the nature of activities/works taken up by the SHGs and federations under the ongoing project is likely to remain so during the additional financing\. No adverse long term social impacts are envisaged from the AF interventions and investments\. The potential long-term positive impacts are expected to be: social, economic and financial empowerment of the poorest households, especially of Scheduled For Official Use Only Castes and Scheduled Tribes, and women\. The poorest and most excluded households would have greater access to, security and sustainability of livelihood resources, and enhanced household incomes\. The project villages would most likely see greater cohesion amongst the poorest social groups, greater capacity and assertiveness among the poor in claiming their rights and entitlements, and better participation in local government structures and processes\. Gender relations could improve as collective action gives women self-esteem and confidence to voice their needs and priorities in both the public and private spheres\. Overall, the social dynamics and rural institutional environment are expected to be much more supportive of the livelihood needs of the poorest households\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. Since this is an additional financing aiming to scale up successful interventions, no analysis of alternatives was undertaken\. However, based on implementation experience during the ongoing project, the safeguards strategy will continue to mainstream the environmental best practices into the Package of Practices (PoP) of the livelihood activities (e\.g\.: stall feeding in goatary, non-chemical pest control measures in agriculture)\. In addition, Promotion of alternate green solutions like use of renewable energy, Community Managed Sustainable Agriculture are planned during the additional financing\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. The measures taken during the ongoing project for addressing safeguard policies issues will continue throughout the implementation of the additional financing\. EMF compliance with the mandatory regulatory requirements list would apply to all the clusters in the project and appropriate capacity building support for compliance with regulations and awareness building on better environmental practices in livelihood activities would be provided\. Efforts will be made to develop and apply a sustainability index for funding potential activities through the dedicated fund\. The index will be based on the principles of resource efficiency, minimal adverse impacts and post-investment support continuation of the livelihood\. An assessment of the EMF in select states was undertaken during the ongoing project \.There is mixed experience in terms of borrower’s capacity to plan and implement the measures required for addressing safeguards issues\. Most of the states (Bihar, Madhya Pradesh, Odisha, Tamil Nadu and Rajasthan) have had previous experience in implementing livelihood projects and other states have also implemented EMF and SMF under NRETP (NRLP AF)\. States that have implemented World Bank-supported livelihood projects as well as NRETP (NRLP AF) have a higher Feb 01, 2018 Page 10 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) level of readiness and competency to implement the EMF\. Some of these states (e\.g\. Bihar) have implemented the green solutions at a considerable scale\. The above findings from these assessments are being incorporated into the updated EMF To streamline these capacities, it has been agreed with the Ministry of Rural Development that the National Mission Management Unit (NMMU) will have the Livelihood Specialists as the anchor person for EMF to support and monitor the implementation in the participating states\. Further, the State Mission Management Unit (SMMU) of the State Rural Livelihoods Missions (SRLM) would have Environmental Focal Points at the state level (Livelihood Managers), district levels and among the block level project facilitating teams to streamline the EMF requirements at all levels\. The Technical Partners on different value chains will be taken on board for integration of the best practices and regulatory requirements into the Package of Practices and Capacity Building programs\. The NRETP (NRLP AF) social management framework (SMF), including OP 4\.10 on Indigenous Peoples (Scheduled Tribes), will continue to apply to the AF\. The SMF comprises strategies for targeting and inclusion of scheduled castes and schedule tribe groups/areas, consultation and participation, gender & women’s economic empowerment, citizen’s engagement, grievance redress and safeguard screening/mitigation planning for community projects involving land/infrastructure\. The SMF addresses the issues and needs of tribal people and incorporates the key requirements of O\.P\. 4\.10 especially with respect to free, prior and informed consultations and broad community support\. The SMF includes specific provisions for informed consultations, participation and inclusion of the SC/ST and other excluded For Official Use Only households, with a special focus on tribal people\. The SMF also provides for institutional arrangements and capacity building activities of project staff, community institutions and partner agencies\. Community projects involving productive infrastructure and land donation would follow consultative, transparent and voluntary procedures\. MORD and the 13 SRLMs have implemented the SMF and its constituent strategies with varying levels of intensity and quality in the ongoing NRLP satisfactorily\. Under the NRETP (NRLP AF), the capacities and performance of the social development staff and partners would be strengthened through a range of measures\. NRETP (NRLP AF) aims to intensify interventions, financing & technical support for high value agriculture, rural value chains, skills and enterprises, producer organizations, innovative livelihood approaches, digital financial inclusion as well as productive infrastructure for post-production processes and value addition\. Technical Assistance will also be provided to convergence (Mission Antoyodaya)\. Partnerships with technical resource agencies from private and non-profit and public sector will be strengthened\. Increased investments in high value agriculture, enterprises, productive infrastructure and financing of producer organizations would need more explicit criteria for inclusive beneficiary targeting and benefit sharing as well as social safeguard screening to minimize elite capture and social exclusion\. Dedicated HR and Capacity building program on socially inclusive and gendered value chains/enterprises, social safeguard screening and risk mitigation and social sustainability will be supported to ensure satisfactory social performance of project counterparts\. To respond to these focus areas in the AF, MORD has updated the existing SMF especially with respect to social inclusion protocols, social safeguard screening mechanisms and inclusive beneficiary targeting and benefit sharing criteria for financing of producer organizations and productive infrastructure\. Additional measures on staffing, capacity building, technical assistance, knowledge programs as well as citizen engagement and grievance redressal would be implemented\. The results framework will continue to track and report on gender, inclusion, citizen’s engagement and women’s economic empowerment\. NRETP (NRLP AF) will significantly advance the gender mainstreaming and women’s economic empowerment agenda through strategies/specific interventions on women led producer organizations and enterprises, Start-up Village Entrepreneurship Program (SVEP) and upgrading of skills in selected self-employment occupations for women SHG members and youth\. Interventions on digital payments, financial inclusion/literacy, Business Correspondents (BC) and enterprise financing will lead to significant financial empowerment of rural women\. Support to Mission Antoyodaya will strengthen women’s advocacy and agency in delivery of social safety net and entitlement services for the rural poor\. Nutrition sensitive agriculture and interventions on food handling and hygiene will benefit the women disproportionately\. The results framework will continue to track and report on gender, inclusion, citizen’s engagement and women’s economic empowerment\. Client has also been organizing regular reviews and lesson learning events on the gender, social inclusion and vulnerability Feb 01, 2018 Page 11 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) reduction dimensions of the SMF\. A discrete stocktaking review was undertaken at Midterm stage of the project\. Overall the project has been performing satisfactorily on mobilsation, inclusion and financial and economic empowerment of women and marginalization communities particularly tribals and SC households\. SMF implementation and reporting would need to improve further on safeguards, GRM and benefit sharing dimensions of productive infrastructure and economic clusters\. As described above, these are the aspects that are being updated in the SMF 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. The key stakeholders in the proposed project include the SHG members, groups and federations of rural poor in the project districts, technical partners, relevant government departments etc\. The existing safeguards arrangements will continue to apply\. If required, the existing EMF document will be updated based on a short field assessment and would be disclosed in English and the local language (Hindi) on the websites of the NMMU, State Departments of Rural Development and on the Bank’s InfoShop\. The most important stakeholders of the project are the rural poor and their For Official Use Only organizations, including SHGs, federations, producer organizations and government and non-governmental organizations working on rural poverty reduction and livelihoods advancement\. The MoRD has held stakeholder consultations to inform the design and implementation of the project and address the limitations of existing rural development programs that target the poorest and most excluded groups\. The following field consultations were also held\. OPS_SAFEGUARD_DISCLOSURE_TBL B\. Disclosure Requirements (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_DISCLOSURE_TABLE Environmental Assessment/Audit/Management Plan/Other For category A projects, date of Date of receipt by the Bank Date of submission for disclosure distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure OPS_I P_DIS CLOSURE_TAB LE Indigenous Peoples Development Plan/Framework Date of receipt by the Bank Date of submission for disclosure Feb 01, 2018 Page 12 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) "In country" Disclosure OPS_ PM_D ISCLOSURE_TAB LE Pest Management Plan Was the document disclosed prior to appraisal? Date of receipt by the Bank Date of submission for disclosure "In country" Disclosure For Official Use Only OPS_COMPLIANCE_INDICATOR_TBL C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_COMP_TABLE OPS_ NH_COM P_TABLE OPS_ PM_COM P_TABLE OPS_I P_COM P_TABLE OPS_F O_COM P_TABLE OPS_ PDI_ COMP_TAB LE OPS_ALL_COMP_TABLE Feb 01, 2018 Page 13 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) CONTACT POINT World Bank Gayatri Acharya Lead Rural Development Economist Vinay Kumar Vutukuru Sr Agricultural Spec\. Borrower/Client/Recipient DEA For Official Use Only Implementing Agencies National Rural Livelihood Mission Atul Dulloo Joint Secretary and Mission Director jsrl-mord@gov\.in FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Gayatri Acharya Task Team Leader(s): Vinay Kumar Vutukuru Approved By Feb 01, 2018 Page 14 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) Safeguards Advisor: Practice Manager/Manager: Country Director: For Official Use Only Feb 01, 2018 Page 15 of 16  The World Bank National Rural Livelihoods Project - Addl\. Financing (P166745) For Official Use Only Feb 01, 2018 Page 16 of 16

APPROVAL

P147483

PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No\.: PIDA7738 Public Disclosure Copy Project Name Caribbean Regional Communications Infrastructure Prog - Dominican Rep\. (P147483) Region LATIN AMERICA AND CARIBBEAN Country Dominican Republic Sector(s) Telecommunications (50%), Information technology (50%) Theme(s) Regional integration (10%), Regulation and competition policy (30%), Infrastructure services for private sector development (60%) Lending Instrument Investment Project Financing Project ID P147483 Borrower(s) Ministerio de Hacienda Implementing Agency INDOTEL Environmental Category B-Partial Assessment Date PID Prepared/Updated 25-Jun-2014 Date PID Approved/Disclosed 25-Jun-2014 Estimated Date of Appraisal 27-May-2014 Completion Estimated Date of Board 28-Aug-2014 Public Disclosure Copy Approval Decision I\. Project Context Country Context The Dominican Republic's (DR) GDP growth averaged 5\.7 percent per year between 1991 and 2013, making the DR one of the top performers in the Latin America and Caribbean region (LCR)\. In the last decade, the Dominican economy grew on average by 4 percent per year, almost twice as fast as the LCR average\. This good performance has enabled the convergence of the DR’s GNI per capita (US$5,640 in 2013), from 52 percent to 78 percent of the regional average\. However, declining domestic demand and weak performance in richer economies contributed to slower growth since 2011 (growth fell from 7\.8 percent in 2010 to an estimated 4\.1 percent in 2013) \. Such high growth rates have however not translated into a proportional poverty reduction, and monetary poverty is higher today than in 2000\. Poverty soared from 32 percent in 2000 to almost 50 percent in 2004 following a severe banking and macroeconomic crisis, before declining gradually to 40\.9 percent by 2012 \. Also, poverty is significantly higher in rural areas where extreme poverty reached 15\.5 percent in rural areas vs\. 5\.8 percent in urban areas in 2012 and overall poverty was 46 percent in rural areas vs\. 26 percent in urban areas\. Page 1 of 7  Sustained growth needs to be complemented with an increase of social plans and social investment as a way of reducing poverty and stimulating sustainable human development\. This includes providing equal infrastructure services, such as connectivity opportunities to quality affordable Public Disclosure Copy telecommunications services both in cities and (commonly underserved and poorer) rural areas\. The government has taken steps to increase public revenues, but more needs to be done\. A tax package approved in November 2012 increased VAT rates from 16 to 18 percent, and the renegotiation of the agreement with Barrick Gold are expected to help increase public revenues by 1\.2 to 2 percentage points over the next four years, but this may be insufficient to expand fiscal space in the medium term\. A persistent primary deficit still remains due to two long-standing, structural challenges, namely the large electricity sector deficit, which absorbed 1\.8 percent of GDP in public subsidies in 2012, and a narrow tax base, which has averaged 13\.7 percent of GDP since 2000\. The Government recognizes that additional measures are needed to target public expenditure on resilient sectors, such as ICT, to diversify its economy and ensure a sustainable source of income for the country\. International support will be essential for the Dominican Republic to reach the goals of the Law on the National Development Strategy of the Dominican Republic 2030 and ensure future growth\. The Law on the National Development Strategy of the Dominican Republic 2030 (END, Law No\. 1-12), identifies the development of the ICT sector as one of the key drivers to achieve its objectives\. Access to Internet will be monitored as one of the indicators to measure progress towards achievement of the END´s objectives\. The Dominican Republic can play a key role within the CARIFORUM region in fostering growth and increasing the competitiveness of the region as a whole\. The Dominican Republic’s economy is currently the largest and most resilient in the CARIFORUM region\. The Dominican Republic’s GDP (US$ 60 billion) is almost a third of CARIFORUM’s total GDP (US$195 billion in 2011)\. This points to the potential of the Dominican Republic for playing a leading role in fostering regional growth\. The Dominican Republic’s strategies for ICT can also enhance the competitiveness of the region by strengthening the region’s ties to international markets and Public Disclosure Copy attracting foreign investment\. Sectoral and institutional Context The General Telecommunications Law in 1998 created INDOTEL, Instituto Dominicano de las Telecomunicaciones, the state’s independent regulatory authority for telecommunications, and opened the market to competition\. The ICT sector has since grown to become one of the major pillars of the country’s economy\. In 2010, the ICT sector accounted for 15% of the GDP\. The ICT sector has been playing an important role in diversifying the economy from primary industries (e\.g\. agriculture, mining) to manufacturing and services based activities\. Mobile phone subscriptions surpassed 89% in December 2013 compared to 58\.1% and 75% in 2007 and 2008, respectively\. Competition has been successful in bringing prices down and providing access, including in some of the most marginalized areas of the country\. However, the mobile phone market is currently under a restructuring process, where two of the main operators have been taken over by a foreign group of investors\. The effect that these developments will have on the telecommunications sector in the Dominican Republic is still uncertain\. INDOTEL’s Rural Broadband Network Project (2007) installed third generation mobile phone services (3G), with broadband internet access in 506 locations countrywide, covering practically all Page 2 of 7  the municipalities (96%)\. The main traditional telecommunications operators offering retail services were Codetel/Claro Dominicana, and Tricom \. In early 2014, Tricom and Orange Dominicana were being acquired by the foreign investment group Altice \. There are several cable television operators Public Disclosure Copy which would have the potential to offer fixed broadband access services if they were connected to international connectivity points at affordable prices\. Moreover, electricity transmission companies that have deployed fiber through their transmission networks for internal use, like ETED (Empresa de Transmisión Eléctrica Dominicana) and CEPM (Consorcio Energético Punta Cana-Macao) have started or plan to start offering part of these fibers, or of its capacity, on a commercial basis\. In most areas, except in the main cities, only one provider offers retail fixed broadband services, and, although an interconnection policy is in place, wholesale prices are not regulated\. However, there is still a big gap in both accessibility and prices for fixed internet between major urban centers and rural and remote areas\. For the poorest households, fixed internet connectivity prices equal 79% of the household’s earnings, and for 60% of households, connectivity prices are well above the maximum of 5% of household earnings recommended by the ITU\. In 26 municipalities (16\.8% of the existing 155) there are no fixed internet accounts registered , and only14\.4% of households have internet, with 22\.1% average in the city of Santo Domingo versus 5% in certain rural areas\. The Dominican Republic shows connectivity statistics below the regional average for Latin America indicators: 35\.5% vs\. 39\.5% of internet users; 4% vs\. 7\.5% of fixed broadband internet subscribers\. Fixed broadband is more reliable for government and corporate clients alike, especially those with decentralized units like schools or hospitals, which need to offer external online services or internal services through intranet or a private virtual network\. The National Fiber Optic Network will help the national and municipal government reach citizens with improved services, and it will help citizens interact with the government\. Submarine cable international connections exist and are not an obstacle for fixed broadband supply\. Public Disclosure Copy In March 2014 the NAP of the Caribbean (the main international broadband connectivity hub in the country) offered wholesale high speed internet at US$125 for each Mbps of symmetrical speed (i\.e\. equal speed for uploading and for downloading)\. However, in most municipalities this service is offered by a single provider, for about US$500 ; the difference in price between the NAP and the average municipality is due to national transmission (or backbone) costs; in most municipalities there is no competition in this network segment\. In the national fixed broadband market, the incumbent holds more than half of the market and there is not a strong additional player\. For the other operators in the market, the heavy upfront investment required to build a high speed fiber optic network, coupled with the low and slow return on investment expected in some of the rural and poorer areas, has discouraged them from operating beyond the more densely populated and richer areas\. CARCIP can support existing Government’s efforts in addressing the lack of supply of fixed broadband connectivity, particularly in remote and marginalized areas of the country, and contribute to achieve its goal of providing universal and affordable access to all citizens\. In the 2014-2015 Biennial Plan, INDOTEL planned a National Fiber Optic Network for $US30, 000,000, carried out through CARCIP and independent from the Universal Service Fund and the Telecommunications Development Fund (FDT or Fondo para el Desarrollo de las Telecomunicaciones)\. CARCIP can also support the government’s efforts to improve the use of ICT’s in vulnerable Page 3 of 7  communities by working on the demand side of broadband\. In the 2014-2015 Biennial Plan, INDOTEL included a set of projects to reduce the digital divide\. In addition, the Ministry of High Education, Science and Technology (MESCyT) and the Ministry of Industry and Commerce (MIC) Public Disclosure Copy are promoting entrepreneurship and ICT support programs, by organizing co-creation events (such as Hackathons), creating entrepreneurship centers in Universities (currently in nine) and promoting ICT courses\. The Presidential Office of ICT (OPTIC) in its Strategic Plan 2013-2016, identified among its objectives: 1) enhancing the use of e-government in public sector decision making; 2) creating channels for citizen participation; and 3) facilitating the use of e-services in society and the private sector\. CARCIP will align with these efforts and support an Open Innovation Hub to build ICT skills, particularly among the poor and women, and foster a culture of entrepreneurship by involving citizens in identifying and solving their own problems through ICT solutions\. II\. Proposed Development Objectives The project development objective (PDO) of the Dominican Republic CARCIP is fully consistent with the overall regional program development objective and seeks to increase access to regional broadband networks and advance the development of ICT-enabled services in the Caribbean Region\. CARCIP’s objective is expected to be achieved through: (a) targeted investments in ICT infrastructure that fill the gaps at the national and municipal level, preferably in partnership with the private sector; (b) creating an open innovation ecosystem that fosters the development of ICT skills and ICT enabled services; and (c) strengthening institutional capacity/arrangements to ensure effective program implementation and outcomes\. III\. Project Description Component Name Component 1: Regional Connectivity Infrastructure\. Comments (optional) This component will support the reduction of connectivity gaps between rural and urban, and poor Public Disclosure Copy and developed areas in the Dominican Republic, through the deployment of a National Fiber Optic Network\. This network will provide high-speed fiber optic connectivity to several municipalities in the country\. The infrastructure will contribute to increase access to more affordable high-speed connectivity in the Dominican Republic\. The fiber optic network will reach interconnection points with regional and global backbone networks, as part of CARCIP’s regional strategy\. There are two subcomponents: (A) Enabling Environment; and (B) Broadband Backbone Network\. Component Name Component 2: Open Innovation Hub Comments (optional) The main objective of the Hub is to increase impact of the investment in fixed broadband infrastructure by creating an ICT-enabled open innovation ecosystem in the Dominican Republic\. The Hub will support ICT experts, businesses and entrepreneurs for the creation of innovative solutions to fight poverty and inequality in vulnerable urban and rural communities\.The main activities under the Hub are: (i) Improve ICT skills, with a special emphasis on women and children from poorer communities; (ii) Promote the creation of an Open Innovation Ecosystem leading to ICT enabled products and services to address societal challenges; and (iii) Connect knowledge and entrepreneurs with incubators, investors and business opportunities\. Component Name Page 4 of 7  Component 3: Implementation Support\. Comments (optional) This component will provide resources for the establishment and logistic support for a core Project Public Disclosure Copy Coordination Unit (PCU) staff to administer and coordinate the project’s implementation and conduct monitoring and evaluation\. It will also support oversight arrangements and capacity building for key policy and regulatory institutions\. IV\. Financing (in USD Million) Total Project Cost: 30\.00 Total Bank Financing: 30\.00 Financing Gap: 0\.00 For Loans/Credits/Others Amount Borrower 0\.00 International Bank for Reconstruction and Development 30\.00 Total 30\.00 V\. Implementation Institutional and Implementation Arrangements As part of project preparation, the Bank performed fiduciary capacity assessments of INDOTEL’s structure, and the evaluating team highlighted as a strength that the responsibilities in each department at INDOTEL are well defined, with clear lines of communication in entity’ internal regulation and its institutional structure\. However, given the previous successful experience with the creation of a Project Coordination Unit (PCU) for the implementation of the Telecommunications Regulatory Reform Project, INDOTEL indicated its decision to create a new PCU for the implementation of this Project\. The Bank agreed and made recommendations to strengthen this PCU\. This decision will be finalized during negotiation, since a new Executive Public Disclosure Copy Director was recently appointed\. At this stage, the fiduciary aspects of the Project will be implemented by the new PCU, which will coordinate the technical, logistics and implementation aspects of the project, as well as relevant stakeholders and beneficiaries\. Given that INDOTEL’s staff currently has no experience in Bank’s procurement processes, the PCU will be strengthened with a Procurement Specialist with relevant experience in Bank’s Procurement, Consultant Guidelines, financial management and disbursement guidelines, among others\. Additional procurement staff may be needed based on the workload\. Further, its capacities may need to be strengthened by adding some more financial management experts to accommodate the additional work to be undertaken, and maintain segregation of duties in key Financial Management (FM) processes to keep a solid internal control environment\. The new PCU will interact with the current procurement and financial management structures, as defined in the Operations Manual\. Also, INDOTEL’s Board includes the Ministry of Economy, Planning and Development which ensures the participation of the different agencies involved in the implementation\. Results Monitoring and Evaluation\. The PCU will bear the primary responsibility for project monitoring and evaluation (M&E), and, as such, will establish standard formats and guidelines for data collection and reporting, and organize training sessions for project stakeholders in their use\. Many of the indicators in the results framework, or at least the main data needed to build the indicator, are already being collected on an annual basis by national level institutions, such as the Page 5 of 7  National Statistics Office (Oficina Nacional de Estadistica or ONE), or by INDOTEL itself\. This will facilitate the work of the PCU\. Monitoring and evaluation of the program will be embedded in the various components of the program to ensure results are properly monitored\. In addition, the Public Disclosure Copy CTU will be doing M&E at the regional level to ensure success of the overall CARCIP program\. A PCU coordinator and a Procurement Specialist will need to be appointed prior to negotiations, to ensure swift implementation of the Project\. Action plans have been recommended for both procurement and financial management, to mitigate the identified risks Sustainability The Dominican Republic is committed to a holistic ICT agenda which ensures the sustainability of the program\. Moreover, the holistic approach of the project covering both the supply and the demand side of the ICT sector ensures its sustainability beyond the program duration\. As demand is created through the development of a broadband ecosystem that spurs human capacity as well as ICT and non-ICT related entrepreneurship and social innovation, it is expected that supply of ICT services will be further stimulated, ensuring a self-reinforcing cycle of ICT investment and growth in the country\. CARCIP has carried out stakeholder consultations during the preparation of the project to ensure relevance of the activities proposed\. Stakeholders consulted include telecommunications operators, Public Administration (at the central and local levels), universities, private firms, and NGOs\. CARCIP will connect and leverage existing initiatives and public spaces to increase project sustainability\. The existing strong collaboration environment, including citizens as main actors, can also support sustainability of project initiatives under component 2\. VI\. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4\.01 ✖ Public Disclosure Copy Natural Habitats OP/BP 4\.04 ✖ Forests OP/BP 4\.36 ✖ Pest Management OP 4\.09 ✖ Physical Cultural Resources OP/BP 4\.11 ✖ Indigenous Peoples OP/BP 4\.10 ✖ Involuntary Resettlement OP/BP 4\.12 ✖ Safety of Dams OP/BP 4\.37 ✖ Projects on International Waterways OP/BP 7\.50 ✖ Projects in Disputed Areas OP/BP 7\.60 ✖ Comments (optional) VII\. Contact point World Bank Contact: Elena Gasol Ramos Title: Senior ICT Policy Specialist Tel: 458-2919 Email: egasolramos@worldbank\.org Page 6 of 7  Borrower/Client/Recipient Name: Ministerio de Hacienda Contact: Magin Diaz Public Disclosure Copy Title: Vice Ministro Tel: 809-687-5131 Email: mdiaz@hacienda\.gov\.do Implementing Agencies Name: INDOTEL Contact: Jorge Roques Title: Coordinador de Proyectos Tel: 18293786151 Email: jroques@indotel\.gob\.do VIII\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop Public Disclosure Copy Page 7 of 7

APPROVAL

P159969

 PROGRAM INFORMATION DOCUMENT (PID) APPRAISAL STAGE December 28, 2016 Report No\.: 112711 Operation Name Second Public Investment Reform Support Credit Region AFRICA Country Niger Sector Central government administration (50%); General energy sector (25%); Irrigation and drainage (25%) Operation ID P159969 Lending Instrument Development Policy Lending Borrower(s) THE REPUBLIC OF NIGER Implementing Agency Ministry of Finance Date PID Prepared October 12, 2016 Estimated Date of Appraisal January 24, 2017 Estimated Date of Board February 28, 2017 Approval Corporate Review Decision Following the corporate review, the decision was taken to proceed with the preparation of the operation\. Other Decision {Optional} Teams can add more if they wish or delete this row if no other decisions are added Country and Sector Background The PIRSC2 takes place in a context marked by a deteriorating global and regional environment that has impacted on Niger’s recent positive economic performance\. Niger had experienced a period of high growth between 2010 and 2014, reaching 7 percent in 2014\. Growth was mainly driven by agriculture thanks to favorable weather\. Positive developments in natural resource projects also helped generate fiscal space for public investment and address social needs\. On the political front, Niger continues to strengthen its democratic governance and renewed its executive and parliamentarian institutions following the legislative and presidential elections in 2016\. However, economic activity slowed down to 3\.5 percent in 2015 due to slower growth in agriculture, lower oil and mining outputs, security developments that impacted negatively on economic activities, and the spillovers of the economic difficulties in Nigeria\. Recent estimates also show that fiscal deficit has increased significantly as a result of increasing security spending, lower revenue from natural resources and a rapid increase in public investment, calling for efforts aimed at enhancing public investment management efficiency\. Not only does the proposed operation provide much needed resources but it also addresses key issues at the heart of Niger’s development challenges\. Niger’s overall macroeconomic performance has been mixed, but overall, the macroeconomic framework is adequate for the purpose of the proposed operation\. The medium-term economic outlook remains positive with growth expected to reach 5\.2 percent in 2016 and averaging 5\.4 percent in the outer years through 2019, benefiting from stronger agriculture growth and a recovery in the oil sector\. The fiscal deficit increased from 2\.6 to 9\.1 percent of GDP between 2013 and 2015 driven by a significant increase in public investment, additional costs incurred with security expenditures and supporting an estimated 300,00 refugees and internally displaced people\. However, fiscal consolidation is expected to preserve debt and fiscal sustainability from 2016 onwards\. The consistency of the policy framework under the IMF ECF program and the macroeconomic anchor offered by WAEMU, establish adequate conditions for the proposed operation to achieve its objectives\. With fiscal space likely to remain constrained over the medium-term, the presence of an IMF program is critical to anchor public policies and provide a framework for donors—external support accounts for over 60 percent of total financing\. However, macroeconomic risks are assessed high\. Commodity-price volatility security challenges, economic spillovers from Nigeria and climate shocks remain a major risks to Niger’s development\. Continued low prices in the oil and uranium sectors would not favor higher exports and postpone the major projects expected to generate significant revenue (the construction of the Chad pipeline in oil and the Imouraren mining project)\. Intensification of armed hostilities would continue diverting public resources to security spending which has averaged 3-4 percent of GDP over 2013-2014 and reached 5 percent of GDP in 2015\. It would also affect trade and private investment\. A continued depreciation of the Naira would result in a reduced demand for Niger’s products\. In terms of revenue, it would impact tax revenue although this could be partially offset by an increase in merchandise imports from Nigeria\. Lastly, insufficient rainfall would affect agriculture and overall growth, the impact of which could be mitigated if the irrigation program achieves its objectives as planned\. Despite declining poverty over the past decade, poverty and gender disparity remain high\. With a per capita GDP of US$895 in 2015 (constant 2011 US$), Niger is among the poorest nations in the world\. Poverty incidence declined from 53\.7 percent in 2005 to 44\.5 percent in 2014 with a more pronounced decline in urban areas, from 29\.6 percent in 2005 to 8\.7 percent in 2014\. The vast majority of Niger’s 8\.2 million poor (2014 estimate) live in rural areas where food insecurity is high\. Growth in real per capita consumption benefited everyone, except those in the poorest decile\. Between 2011 and 2014 the poorest 30 percent of the population experienced a decline in real per capita consumption of up to 10 percent, whereas the better off experienced even higher rates of consumption growth\. Niger remains at the bottom of UNDP’s human development ranking despite little improvements over the past years\. Its human development index was 0\.348 in 2015, up from 0\.326 in 2010, but still well below the sub- Saharan Africa (SSA) average of 0\.502\. Gender disparities have declined since the 1980s, but remain substantial, particularly in education and health\. Niger ranked 151st out of 152 countries in UNDP’s 2013 gender inequality index\. The PIRSC series supports the Government’s strategy in public finance management (PFM) and public investment management (PIM), irrigation and electricity which are among the key areas addressed by the Economic and Social Development Plan (Plan de Développement Economique et Social – PDES)\. The Government has as an objective to expand irrigated land significantly, thereby improving productivity and production\. Investment in irrigation as part of the 3N (Nigeriens Nourish Nigeriens) strategy, aims to reduce the risks of volatility related to rain-fed agriculture, agriculture being the main driver of output, contributing significantly to income growth of rural population and the poor\.1 Electricity is a sector which has undergone major reforms\. Significant investment is planned in the sector in order to increase access\.2 Achieving these objectives would also requires improvements in PFM and PIM\. Operation Objectives The PIRSC’s development objective is to: (i) improve the quality, reliability and accountability of the country’s PFM and PIM systems; (ii) establish the policy and regulatory framework necessary for a well-functioning public irrigation sector; and (iii) to facilitate the reform of the electricity sector\. Rationale for Bank Involvement Niger’s current PDES, which was initially in effect for the 2012-2015 period and extended to December 2016 provides the overarching framework for the government’s development agenda, which focuses on facilitating broad-based income and welfare improvements\. A World Bank-IMF Joint Staff Advisory Note commended the government on its comprehensive analysis of Niger’s development challenges, its realistic plan to achieve robust and sustainable growth, and the participatory process through which the PDES was developed\. The PDES has four pillars: (i) Strengthening the credibility and effectiveness of public institutions; (ii) Creating the conditions for sustainable and inclusive development; (iii) Reinforcing food security and supporting agricultural development; (iv) Promoting diversification and enhancing competitiveness to facilitate more robust and inclusive growth; (v) Fostering social development\. The PIRSC series supports Pillars (i), (iii) and (iv)\. The proposed operation is fully aligned with the poverty reduction strategy, the PDES\. The PIRSC series is designed to advance a number of key PDES objectives\. The Government started preparing a successor strategy to the PDES, which will cover the 2016-2018 period\. Once this strategy is finalized, the PIRSC will be reviewed and adjusted as necessary to ensure that the series remains fully aligned with the government’s priorities\. The proposed PIRSC2 follows on the first of the series of the two single-tranche budget support credits of the PIRSC to be disbursed over the 2016-2018 period\. The proposed Operation (US$50 million) follows on the US$80 million operation approved by the Bank in December 2015\. Tentative financing Source: ($m\.) BORROWER/RECIPIENT 0\.00 1 The country’s growth potential is also associated with extractive industries, mainly uranium\. Oil came on stream on 2013 and added to the growth potential for Niger\. Uranium and oil together account for about 60 percent of Niger’s merchandise exports, but contribute to less than 6 percent of GDP\. 2 Access to electricity is only 10 percent (slightly over 1\.5 million people) and is among the lowest in Sub-Saharan Africa (SSA)\. An investment plan amounting to about US$1\.4 billion is planned for 2012-2017\. International Development Association (IDA) 50\.00 Borrower/Recipient IBRD Others (specifiy) Total 50\.00 Tranches (if applicable) ($m\.) First Tranche 50\.00 Second Tranche Etc\. Total 50\.00 Institutional and Implementation Arrangements The PIRSC series will utilize an institutional framework for the coordination of economic and financial programs established by the government\. This framework includes an inter- ministerial committee in charge of the coordination of external projects and budget supports, chaired by the Minister of Economy and Finance, while day-to-day oversight and supervision of implementation of these projects is delegated to a newly-created technical committee, the head of which was appointed recently\. The technical committee regroups all entities involved in the implementation of all existing budget support programs, which will improve the coordination of reforms and the flow of information within the government\. Primary technical responsibility for the implementation of PFM reforms will rest with the Budget and Treasury Departments\. Sector- specific reforms will be implemented by the respective technical departments in the sector ministries, with overall coordination provided by the technical inter-ministerial committee\. A Results Matrix included in Annex 1 sets out the three operations of the PIRSC series and defines relevant indicators and empirical benchmarks to monitor progress during implementation and enable a thorough ex post evaluation following the end of the program in 2017\. Niger’s development partners will track progress on the reform agenda through a harmonized review process\. Risks and Risk Mitigation The overall risk rating for the proposed operation is substantial\. While the nature of fragility in Niger may point to the risk of a more negative trajectory than the current situation fully reflects, positive steps have been achieved under difficult circumstances\. Although subject to the spillovers from a regional instability and the economic crisis in Nigeria, climate change, and pressures as a migration route to Europe, Niger has nonetheless managed to complete an electoral cycle and signal a development orientation through its agriculture and energy sector policies\. Nonetheless, there are risks to be acknowledged\. The categories deemed to pose a substantial threat to the proposed operation are the government’s institutional capacity for implementation and sustainability, the fiduciary risks, the technical design of project or programs, the security and the macroeconomic risks\. All other risks are deemed moderate\. Macroeconomic risks are substantial\. These risks stem from Niger’s vulnerability to volatile commodity prices, the spillovers from the Nigeria’s economic crisis, and the region’s fragile security situation\. Commodity price shocks may put pressure on the balance of payments and constrain the fiscal envelope\. Deteriorating security situation would challenge the fiscal stability, by both diminishing public revenues, and increasing spending on security and on supporting refugees and IDPs\. Similarly, trade diversion stemming from the economic crisis in Nigeria would reduce domestic revenue\. If materializing, these risks would jeopardize the Government’s fiscal consolidation plan and result in higher than projected fiscal deficit and public debt increase\. The PIRSC series helps address these risks through its focus on promoting greater public expenditure efficiency, which will allow the Government to maximize the value of limited budgetary resources, and on budget and commitment regulations\. In addition, the continued implementation of IMF ECF programs and the macroeconomic anchor offered by Niger’s membership in the WAEMU help mitigate macroeconomic risks\. Risks involving the technical design of the program are substantial\. Although economically justified, the implementation of some of the triggers underpinning the PIRSC series may be difficult\. In particular, the triggers on electricity in the third operation related to the adoption of electricity tariffs with a cost-coverage approach could be challenging\. Equally challenging are the measures and expected results about budget credibility and efficiency, and the expansion of irrigated areas, especially given the vulnerability of the budget to exogenous shocks that may impact negatively on the target indicators\. The government’s commitment to the reform agenda is strong and based on a broad political consensus and agreement among all stakeholders\. Support to the reforms is based on the fact that the proposed measures are needed not only to deliver improved sector performance, but also to provide supply and access expansion urgently needed in Niger to the benefit of the population\. These are expected to help mitigate the risks discussed above\. Institutional capacity risks, particularly related to the implementation of new governance arrangements, are substantial\. The implementation capacity of sector ministries is generally low, and interagency coordination could be significantly improved\. However, the government has established and applied mechanisms to resolve interagency conflicts\. The Government adopted new institutional framework with the creation of an inter-ministerial committee in charge of coordinating line ministries involved in budget support operations in September 2015 to reinforce intersectional coordination\. The Government has initiated budget harmonization process\. In addition, the existing mechanism of regular consultations between Niger’s development partners active in policy areas that are covered by PIRSC2 prior actions, will reduce risks stemming from the demands of multiple international agencies on the government’s administrative capacity\. Capacity-building support in key policy areas supported by PIRSC is being delivered through a dedicated program involving the Ministry of Finance and through the World Bank’s Public Sector Capacity for Service Delivery Project (P145261), approved by the Board in March 2014\. Persisting security concerns would impact foreign investment, affect domestic production, and divert public spending from key structural and social issues\. Niger remains vulnerable to spillovers from its main trading partner Nigeria that faces security risks\. Niger’s growth prospects are also vulnerable to spillovers in neighboring Chad, as the construction of the crude oil pipeline connection will depend on security in Chad\. Overall, the current security situation is unlikely to impact the implementation of the PIRSC-supported reforms, but affect growth recovery\. In these terms, there is a risk that security spending will continue to crowd out other spending and thwart the fiscal consolidation and debt sustainability\. The space for policy based lending will improve if the security challenges improve or Niger receives more support\. Poverty and Social Impacts and Environment Aspects Poverty and Social Impacts Many of the actions supported by the PIRSC series are expected to have positive poverty reduction and welfare enhancement impacts\. Measures under each of the PIRSC’s three pillars are specifically designed to speed the pace of poverty reduction by broadening access to economic opportunity\. PFM and PIM reforms under Pillar 1 will increase the economic impact of capital investment, increasing the quality and availability of public goods and services\. The PIRSC series supports PFM reforms in health, education, rural development, water resources, transportation, and energy; these sectors have been shown to have the greatest impact on poverty reduction\. Improvements in the management of irrigation systems will increase cropping cycles, improve yield, reduce food insecurity, reduce and result in increased production, thereby contributing to reduced economic vulnerability of rural households involved in irrigation\.3 The rules of operation of IWUAs ensure that all processes involved in irrigation are inclusive, participatory and equitable, and that farmers’ right to access irrigation is secured\. Measures to strengthen the institutional framework of the electricity will establish essential conditions for expanding electricity access, creating new income opportunities and promoting broad-based growth\. A PSIA will be conducted during calendar year 2017 to assess the impact of the electricity measures to inform the government policy in the sector\. It will be supported by the NECALEP\. Some actions supported by the proposed the PIRSC series are expected to have a positive impact on gender equality\. The Arrêtés establishing IWUAs contain provisions to facilitate the presence of women in governing bodies at scheme level as well as the requirement to set up grievance mechanisms\. It is therefore expected to impact directly on gender by leading to more equity and empowerment for women\. With respect to the other two pillars, the impact on gender will not be directly linked to the prior actions\. However, their impact could benefit female- headed more propotionately given their more pronounced vulnerability\. Increased access to electricity is expected to benefit female-headed households who are more in need of new economic opportunities more proportionately\. Similarly, PFM and PIM reforms will allow public agencies to expand social services, which are critically important to women and female-headed households\. Reforms supported by the PIRSC series will strengthen Niger’s mechanisms for mitigating social risks of development projects\. Selection of investment projects following the procedures spelled out in the Decree on the management of public investment projects (Prior Action under 3 Farmers consume between 50 and 80 percent of their production\. Pillar 1) helps incorporate social risk mitigation measures\. Reforms supported under Pillar 2 will strengthen the farmers’ rights to use irrigated land\. The existing regulatory framework already provides sufficient protection of the farmers’ rights; the PIRSC-supported reforms will further clarify it, and will benefit the farmers fully\. ONAHA Decree (Prior Action 5 under Pillar 2) provides for ONAHA’s assistance to the establishment of transparent contractual arrangements between farmers’ organizations and the providers of goods and services\. This will enhance the farmers’ bargaining power and their ability to master irrigated agriculture, and will result in higher incomes and poverty reduction\. Environment Aspects The proposed operation is not likely to have significant negative effects on the Niger’s environment, forests, or other natural resources\. Niger has an institutional framework to ensure effective management and protection of the environment\. The Nigerien legislation includes a Law on Environment which states that any development or activity likely to affect the environment, including land use or land acquisition, as well as policies, plans, programs shall be subject to an environmental assessment\. In addition, the national system is very rich in terms of legal texts on the protection of the environment and natural resources (water code, forestry code, health code, etc\.)\. Environmental and Social Management is under the responsibility of the Ministry of Environment, Urban Safety and Sustainable Development, the mission of which is to develop and implement the environmental policy\. The main services involved are the Office of Environmental Assessments and Impact Studies (BEEEI) and the Directorate General for Environment and Forestry\. Support from Niger’s development partners, including the World Bank, has greatly improved the effectiveness of these units, and the BEEEI is increasingly able to engage with civil society and affected populations through special environmental hearings and impact assessment workshops\. Other national, regional and local institutions and agencies are also involved in the preparation, implementation and monitoring of environmental issues, including most prominently the Ministry of Agriculture, the Ministry of Livestock, the Ministry of Water Resources, the Ministry of Health, etc\. Specifically, Pillar 1 reforms will support increased public expenditure efficiency, including feasibility studies on environmental impact, which may have positive indirect effects on the environment\. The screening process will help ensure that projects that have potential negative environmental impact are addressed accordingly\. Implementation of Prior actions 2 and 3 follow the BEEI protocols\. With respect to Pillar 2, the “multi-year agreementâ€? between the State and ONAHA, which is one of the instruments supported by the reform, comprises the establishment of an Environmental Assessment Unit within ONAHA, whose role will be to (a) ensure actual integration of mitigation measures in new constructions, and (b) monitor impacts during operation of the schemes, possibly leading to corrective measures when they are needed\. Contact point World Bank Contact: Luc Razafimandimby Title: Senior Economist Tel: (202) 458-9539 Fax: Email: lrazafimandimby@worldbank\.org Borrower Contact: M\. Yacoubou Sani Title: Directeur General de l’Economie Tel: (227-9) 696-6613 Email: yacoubousani@yahoo\.fr For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www\.worldbank\.org/infoshop

APPROVAL

P081743

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 30496-CL PROJECT APPRAISAL DOCUMENT ONA PROPOSED PURCHASE OF CERTIFIED CARBON EMISSIONS REDUCTIONS BY THE NETHERLANDS CLEAN DEVELOPMENT MECHANISM FACILITY IN THE AMOUNT OF A MINIMUM OF C4\.15 MILLION FROM HIDROELECTRICA GUARDIA VIEJA S\.A\. FOR THE HORNITOS HYDROPOWER PROJECT December 20, 2004 Finance, Private Sector and Infrastructure Department Argentina, Chile, Paraguay and Uruguay Country Management Unit Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization  CURRENCY EQUIVALENTS (Exchange Rate Effective October 12, 2004) Currency Unit = Chilean Peso (CLP) CLP 613 = US$ 1 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CDEC Centro de Despacho Economico de Carga (Economic Load Dispatch Center) CDEC-SIC Centro de Despacho Econ6mico de Carga-Sistema Interconectado Central (Economic Load Dispatch Center-Central Interconnected System) CDM Clean Development Mechanism CER Certified Emission Reductions CNE Comision Nacional de Energfa (National Energy Commission) CONAF Corporaci6n Nacional Forestal (National Forestry Corporation) CONAMA Comision Nacional del Medio Ambiente (National Environmental Commission) COREMA Comisi6n Regional del Medio Ambiente (Regional Environmental Commission) DGA Direccion General de Agua (General Water Directorate) EIA Environmental Impact Assessment EMP Environmental Management Plan ER Emission Reductions ERPA Emission Reductions Purchase Agreement GHG Greenhouse gas HGV Hidroele'ctrica Guardia Vieja, S\.A\. IFC International Finance Corporation IRROA Internal Rate of Return on Assets IRROE Internal Rate of Return on Equity JI Joint Implementation MVP Monitoring and Verification Protocol NCDMF Netherlands Clean Development Mechanism Facility NPV Net Present Value PCF Prototype Carbon Fund ROW Right of Way SAG Servicio Agricola y Ganadero (Agriculture and Livestock Service) SEREMI Regional Ministry Office for Agriculture SIC Sistema Interconectado Central (Central Interconnected System) SING Sistema Interconectado del Norte Grande (Northern Interconnected System) UNFCCC United Nations Framework Convention on Climate Change Vice President: David de Ferranti Country Manager/Director: Axel van Trotsenburg Sector Manager/Director: Susan Goldmark/Jack Stein Task Team Leader: Philippe Durand ii  Chile Hornitos Hydropower Project TABLE OF CONTENTS Page A\. Strategic Context and Rationale \. 3 1\. Country and sector issues \. \. 3 2\. Rationale for Bank involvement \. \. 3 3\. Higher level objectives to which the project contributes \. 4 B\. Project Description \. 4 1\. Lending Instrument \. 4 2\. Project development objective and key indicators \. 4 3\. Project components \. 5 4\. Lessons learned and reflected in project design \. \. 5 5\. Alternatives considered and reasons for rejection \. 6 C\. Implementation \. 6 1\. Institutional and implementation arrangements \. 6 2\. Monitoring and evaluation of outcomes/results \. 7 3\. Sustainability \. 7 4\. Critical risks and possible controversial aspects \. 7 5\. Loan/credit conditions and covenants \. 7 D\. Appraisal summary \. 8 1\. Econormic and financial analysis \. 8 2\. Technical \. 8 3\. Fiduciary \. 12 4\. Social \. 12 5\. Environmental \. 13 6\. Safeguard policies \. 14 7\. Policy Exceptions and Readiness \. 15 Technical Annex \. 16 1\. Country and sector background \. 16 2\. World Bank Carbon Finance projects in LAC \. 21 3\. Results framework and monitoring \. 23 4\. Detailed project description \. 23 5\. Project Costs \. 27 iii  6\. Implementation arrangements \. 29 7\. Financial management and disbursement arrangements \. 33 8\. Procurement \. 34 9\. Economic and financial analysis \. 34 10\. Environmental analysis \. 41 11\. Social analysis \. 49 12\. Recommendations on Social and Environmental Aspects \. \. 52 13\. Safeguard Policy Issues \. 53 14\. Project processing \. \. 54 15\. Documents in project file \. 55 16\. Chile at a glance \. \. 56 iv  Chile Hornitos Hydropower Project PROJECT APPRAISAL DOCUMENT Latin America and the Caribbean Region Finance, Private Sector and Infrastructure Department Private Sector Development and Energy Date: December 13, 2004 Team Leader: Philippe Durand Country Director: Axel van Trotsenburg Sectors: Energy, Environment Sector Manager: Susan Goldmark Theme: Climate Change Project ID: P081743 Environmental screening category: B Lending instrument: Certified Carbon Safeguard screening category: S2 Emission Reductions (CERs) Purchase Project Financing Data: []Loan []Credit []Grant [ ] Guarantee [X] Other: CERs purchase by the Netherlands Clean Development Mechanism Facility (NCDMF) : A minimum of 1 million tCO2 equivalent from first year of project power generation until 2012, through yearly payments For Loans/Credits/Others: n/a Total Bank financing (US$m\.): 0\.0 Proposed terms: n/a Financing Plan (US$m\.) Source Local Foreign Total Others (Hidroelectrica Guardia Vieja S\.A\.) 62\.8 62\.8 Borrower: n/a Responsible agency: Hidroelectrica Guardia Vieja S\.A\. (HGV) Address: Teatinos 220, Piso 8, Santiago, Chile Contact person: Carl Weber, Gerente General Tel: 56-2-4216000 Fax: 56-2-3611548 Email: cweber@hav\.cl Estimated disbursements of CERs (Bank FY/US$m): e 1 = US$1\.2 FY 2007 2008 2009 2010 2011 2012 Annual 0\.83 0\.83 0\.83 0\.83 0\.83 0\.83 Cumulative 0\.83 1\.66 2\.49 3\.32 4\.15 4\.98 Project implementation period: Construction 2004-07; accredited operation: 2007-2012 Expected effectiveness date (Signature of Emission Reductions Purchase Agreement, ERPA): December 2004 Expected closing date (CERs purchase): December 2012 Does the project depart from the CAS in content or other significant Yes (X) No respects?l Does the project require any exceptions from Bank policies? o:Yes (X) No Have these been approved by Bank management? o:Yes o No Is approval for any policy exception sought from the Board? o Yes o: No Does the project include any critical risks rated "substantial" or "high"? o Yes (X) No Does the project meet the Regional criteria for readiness for (X):Yes o No implementation? -~~~~~~~~~~~~~~~  Project development objective To provide financial support through a market-based mechanism for private investment in projects in the Chilean power sector that reduce global greenhouse gas emissions, thereby generating CERs, under the Clean Development Mechanism of the Kyoto Protocol to the UN Framework Convention on Climate Change (UNFCCC) Project description The Hornitos hydroelectric power plant is a 55 MW capacity project costing US$ 62\.8 million, that will sell about 70% of its production to the regulated electricity market (bus-bar price) and the remaining 30% to the unregulated spot market\. The NCDMF will purchase an average of 167,000 tCO2e/year of CERs (tons of Carbon Dioxide equivalent, or tCO2e) in each of the first 6 years of the project operation, totaling E 4\.15 million in total purchases\. Which safeguard policies are triggered, if any? O\.P\. 4\.01 - Environmental Assessment O\.P\. 4\.37 - Safety of Dams O\.P\. 11\.03 - Cultural Property Significant, non-standard conditions, if any, for: Board presentation: n/a (approved by CMU Director) Loan/credit effectiveness: Carbon funding is provided under the ERPA for certified emissions reductions based on actual electricity production \. Covenants applicable to project implementation: None Task Team Members: Philippe Durand/Francisco Fermnndez-Asfn, Task Team Leaders Alexandre Kossoy/Odil Tunali Payton, Carbon Finance Deal Managers Robert O'Sullivan/Charlotte Streck, Counsels Eduardo Zolezzi, Power Sector and Financial Specialist Alvaro J\. Covarrubias, Hydropower Specialist Kirsten Oleson, Environment Specialist Mauro Fadda, Environment Specialist Pia Hevia, Social Specialist Oualitv Enhancement Review Panel: Walter Vergara, Environment Specialist Francisco Femrndez-Asfn, Financial Specialist Charles Feinstein, Energy Specialist Malcolm Cosgrove-Davies, Renewable Energy Specialist Estanislao Gacitua-Mario, Social Specialist HGV: Carl Weber, General Manager Jose Manuel Contardo, Power Sector and Financial Specialist Pablo Lois, Hornitos Project Manager 2  A\. STRATEGIC CONTEXT AND RATIONALE 1\. Country and sector issues The latest Counitry Assistance Strategy was discussed at the Board in December 2002\. It endorsed the priorities of the Lagos Administration of promoting sustainable and equitable growth and poverty reduction via a conducive macro-economic policy framework, strong public institutions, investment in human capital and social protection\. This agenda continues to see the private sector as the driver of employment creation and production, with the public sector facilitating that process and creating opportunities for private participation\. The Bank program has focused in the three main development challenges faced by the country: (i) sustaining overall economic growth and social progress; (ii) heightening inclusion; and (ii) modernizing the state\. Chile was the first country in Latin America to implement far-reaching power sector refornms, including vertical separation of sector activities and privatization of state-owned utilities, under the principles oi the 1982 General Electricity Law\. The sector has a sound legal and regulatory framework and well performing regulatory and oversight agencies\. Yet there are concerns about the decreasing investment in power generation and issues of supply diversification, especially in view of recent restrictions in gas supply from Argentina (see Technical Annex, Section 1)\. The project fully supports the CAS goal of sustaining economic growth, by demonstrating the potential of new market-based approaches to support climate-friendly technologies\. 2\. Rationale for Bank involvement The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) (not yet in force), commits industrialized countries to reduce-their carbon emissions by an average of 5\.2% below their 1990 levels in the period 2008-2012\. The Protocol provides for domestic measures as the primary source for reducing emissions, but also created two project-based mechanisms for meeting these obligations: the Clean Development Mechanism (CDM) and the Joint Implementation (JI)\. The CDM has a dual purpose\. It enables industrialized countries to cost-effectively meet some of their obligations through purchasing certified emission reductions from projects in developing countries, and it assists developing countries by supporting projects that promote sustainable development and access to international finance\. The World Bank's involvement in carbon finance ensures consistency between the Bank's policies in energy and environment, support of individual projects developed under the CDM, and contribution to the international dialogue on climate change\. The Bank also provides the ability to mobilize global experts with experience in the field, technical support for project preparation, supervision capacity, and development of linkages with other sources of expertise and funding\. The Carbon Finance Unit (CFU) of the World Bank, created to pioneer emission reductions purchase transactions through demonstrating how market-based transactions can mitigate climate change, opens up a new source of revenue for environmentally and socially responsible projects in developing countries\. The CFU supports projects that generate high quality emission reductions that are consistent with the international UNFCCC/Kyoto Protocol rules\. By mobilizing the private and public sectors via a new source of project financing, the CFU is 3  developing an important knowledge base and demonstrating how to mobilize additional resources for sustainable development that addresses global environmental concerns\. The IBRD shall acquire on behalf of the Netherlands Clean Development Mechanism Facility (NCDMF) emission reductions that have been issued by the international regulator of the CDM as Certified Emission Reductions (CERs)\. To be eligible to generate CERs, projects must demonstrate that they are additional as defined under the Kyoto Protocol, and that the CERs are measurable and verifiable following a methodology acceptable to the international regulator, who assesses it against the international UNFCCC/Kyoto Protocol rules \. The Emissions Reductions Purchase Agreement (ERPA) will define the minimum amount of CERs in metric tons of carbon dioxide equivalent (tCO2e) that the project will deliver to the IBRD as trustee of the NCDMF\. Generation and delivery of the CERs shall be carried out in accordance with a schedule set forth in the ERPA and completed on or prior to a date agreed upon between the CFU and the sponsor of the eligible project\. The Hornitos project will comply with all of the above eligibility criteria\. 3\. Higher level objectives to which the project contributes The project will assist Chile in its long-term electricity supply strategy, stimulating and accelerating the development of renewable energy applications at the grid-connected level, under private ownership and operation\. The project will contribute to the reduction of greenhouse gas (GHG) and other emissions, while responding to increasing energy demand and the need for energy diversification\. B\. PROJECT DESCRIPTION 1\. Lending instrument No World Bank Group lending is associated with the project, which is entirely financed by the project sponsor\. 2\. Project development objective and key indicators The overarching objective of the proposed project is to help mitigate global climate change by facilitating the use of market-based mechanisms sanctioned under the Kyoto Protocol through support to clean energy projects in Chile\. The NCDMF, through the Bank's CFU, will purchase carbon emission reductions as they are created through renewable energy-based electricity production under a contract analogous to a power purchase agreement (see Section B3 on Project Components and Section C2 on Implementation)\. Performance Indicators: The primary performance indicator will be the creation and purchase of CERs, measured in tons of carbon dioxide equivalent (tCO2e)\. Implicit within these CERs is the production of electricity for sale to customers in the Chilean electricity market\. CERs purchased by NCDMF will increase the stream of project revenues and improve the financial viability of the project\. Other indicators include the satisfactory construction and operation of the project, and the satisfactory implementation of the Environmental Management Plan\. 4  3\. Project components a) Run-of-River Hydroelectric Plant The Hornitos hydroelectric project consists of a 55 MW capacity run-of-river hydroelectric plant which will utilize the waters of the Juncal and Juncalillo rivers (both tributary of the Aconcagua River) and produce a net average annual generation of 270\.6 GWh\. The project includes the extension and voltage upgrade of the existing 66 kV transmission line to 220 kV (total of 10 km)\. The project is located in the 5th Region of Chile, near the city of Los Andes, about 100 km Northeast of Santiago\. The project's construction time is approximately 36 months, with completion date scheduled for mid 2007\. The construction will be financed through equity flow by Hidroelectrica Guardia Vieja (HGV), possibly with a bridge loan from HGV's parent company Minera Valparaiso, S\.A\. Box 1: Hornitos Project Details Physical Infrastructure Power plant * 1\.6 km of open channels * Capacity: 55 MW * 3 tunnels (in total 10\.5 km) * Annual Net Generation: 270\.6 GWh * Water Shaft: 550m * Design flow: 12 m3/s * 1 Pelton Vertical Turbine * Located 12 Km upstream from the * Upgrade and extension of existing 66 KV Aconcagua hydropower plant transmission system to 220 KV (10 km) Cost * Construction time: 36 months * Estimated cost: US$ 62\.8 million ______________________________________________ including 5% contingencies b) Carbon Purchases The NCDMF will purchase a minimum of 167,000 tCO2e for each of the first 6 years of project operation (2007 to 2012), for a total of 1 million tCO2e valued at E4\.15 million (US$5 million)\. In case of annual CERs in addition to 167,000 tCO2e, the NCDMF would purchase a quantity to be determined in the ERPA\. The amount of the purchase includes recovery of project preparation expenses related to project appraisal, ERPA negotiation, baseline establishment, validation, monitoring, verification and certification\. The purchases by NCDMF represent a conservative estimate of the potential CERs produced in an average year, until December 31, 2012\. In order to define the purchase amount in the ERPA, the NCDMF used the Consolidated Methodology ACM0002 developed and approved by the CDM Executive Board\. Additional CERs could be offered to purchase by either the NCDMF or other buyers beyond that date\. Through the ERPA, the NCDMF will pay for emission reductions on delivery, providing an additional Euro- denominated revenue stream for at least 6 years, thus improving the cash flow and financial internal rate of return of the project\. 5  4\. Lessons learned and reflected in the project design The project is the second of its kind in Chile\. The 25 MW Chacabuquito hydropower project (also sponsored by HGV) was the first carbon finance project in Latin America to be implemented under the Prototype Carbon Fund (PCF), administered by the Bank's CFU\. The successful implementation of the Chacabuquito project and the operational experience and practical application of the Monitoring Plan (MP) for this project since 2002 have provided direct experiences and inputs for the design and evaluation of the Hornitos project (see box on the Chacabuquito project in Technical Annex)\. The project has also benefited from the experience of, and consultations with, on-going carbon finance projects in Costa Rica, Colombia, Ecuador, Mexico and Peru\. 5\. Alternatives considered and reasons for rejection The project will replace additional generation capacity that would otherwise be procured by the Chilean electrical sector from fossil-fueled power plants (coal and natural gas-based generation)\. HGV considered alternatives in project design which were rejected because of their higher costs and/or higher environmental impacts\. C\. IMPLEMENTATION 1\. Institutional and implementation arrangements Chile ratified the Kyoto Protocol in April 2002\. The Chilean Government has confirmed its commitment to the project in a Letter of Approval by the National Commission of Environment (CONAMA) - the Chilean Designated National Authority, dated September 14, 2004, indicating its approval of this project being registered with the CDM Executive Board\. CONAMA is playing an active role in the promotion of the carbon finance market in Chile, with support from the CNE regarding energy sector projects\. The NCDMF will enter into a binding ERPA and accompanying MP with HGV\. The ERPA will include, inter-alia, the quantity, price and other delivery conditions of the CERs, and will define institutional roles and responsibilities for project implementation, as well as the monitoring and verification obligations\. The NCDMF will retain the services of a fully independent, internationally-recognized third party (the Validator) to provide: (a) Validation of the sector-wide baseline; and (b) Validation of the project design, baseline (test of additionality against the sector-wide baseline), and Monitoring Plan\. The Validator presents a Project Design Document (PDD) for Hornitos along with a description of the methodology chosen to measure the CERs and demonstrate project additionality, to the Executive Board of the CDM for approval and registry under international rules\. A separate independent entity will be retained after one year of operation of the plant to perform the Verification and Certification of the ERs, and will produce a Verification Report covering (i) the amount of verified and certified ERs generated by the project; (ii) compliance with Bank Safeguard Policies; and (iii) compliance with requirements of the UNFCCC or the Kyoto Protocol\. 6  The approach described above ensures the creation of an environmental commodity that is recognized by Chile's existing environment legislation and that will conform to the relevant international requirements\. It is understood that some of the international requirements may change, according to decisions of the Conference of the Parties to the UNFCCC\. The project will be implemented by Hidroelectrica Guardia Vieja S\.A\. (HGV), a subsidiary of Minera Valparaiso S\.A\., one of Chile's strongest economic groups\. HGV has been involved in development, ownership and operation of run-of-river hydroelectric plants since 1939, including three other plants in the Aconcagua river basin\. HGV has a lean and efficient organization of 125 employees and subcontracts services and works\. HGV is a well-managed company with demonstrated substantial experience in construction and operation of run-of-river plants, similar in design to the proposed Hornitos project\. The project will be reviewed by the World Bank during the construction and operation phases to address potential areas of implementation weaknesses, especially concerning environment and social mitigation measures contained in the Environment Management Plan (EMP), and to ensure compliance with relevant policies and procedures\. 2\. Monitoring and evaluation of outcomes/results Project performance is monitored as per a Monitoring Plan annexed to the ERPA and evaluated on the basis of generating the expected amount of ERs and subsequent issuance of CERs by the international regulator\. Monitoring the generation of ERs is implicit in the project as a function of electricity generation, with payment for electricity based on actual generation as invoiced to customers\. 3\. Sustainability The sustainability of the project is ensured by the solid experience of HGV in designing, constructing and operating similar projects, the reasonable financial prospects for the project and the strong financial position of HGV\. The project will also contribute to diversified and sustainable energy development in Chile, and it will help build experience in legal, regulatory, policy and institutional aspects of private power development based on clean energy sources\. 4\. Critical risks and possible controversial aspects Overall the project is rated as low risk\. The off-taker, country, regulatory, hydrology and social risks are all rated as negligible to low\. The baseline and technical and financial risks are rated as moderate\. A summary of risk assessment and mitigation measures is presented in the Technical Annex\. 5\. Loan/credit conditions and covenants Carbon Finance is not part of the World Bank's lending program\. The World Bank acts as Trustee of the NCDMF for payment of CERs under the ERPA\. The ERPA's broad terms are summarized in the Technical Annex\. 7  D\. APPRAISAL SUMMARY 1\. Economic and financial analysis 1\.1 Economic analysis Baseline Analysis and Additionality The World Bank's CFU, the project sponsor, the Dutch Government as the owner of the NCDMF, and the Chilean Government will submit to the CDM Executive Board a new baseline and monitoring methodology for the Chilean power sector (see summary of the methodology main features in the Technical Annex)\. Regarding project additionality, project production costs were compared to and found to be higher than both the long-run marginal cost of generation expansion of the Central Interconnected System (SIC), and the cost of alternative thermal generation\. The levelized unit generation cost of Hornitos (US$ 26\.2/MWh at 10 % discount rate) is higher than the long-run marginal cost of the SIC based on gas combined cycle plants (US$ 24\.8/MWh\.) Likewise it has been verified that given the small size of Homitos compared with the total installed capacity of the SIC (about 7,180 MW) and the requirements of new plants for the period 2003-2017, the project will not alter the least-cost expansion plan and, in general, Hornitos can be considered as a marginal displacement plant\. Tables 1 and 2 show the detailed numbers for the above mentioned comparisons\. Table 1: Generation Costs of Thermal Options (US$/MWh) Discount Combined Cycle plant Coal plant factor Gas Turbine plant factor Rate factor (%) 40% 60% 80% 40% 60% 80% 40% 60% 80% 10 32\.7 27\.4 24\.8 55\.8 44\.3 38\.5 38\.6 34\.4 32\.3 12 36\.0 29\.6 26\.4 63\.1 49\.1 42\.2 41\.1 36\.0 33\.5 14 39\.4 31\.9 28\.1 70\.7 54\.2 45\.9 43\.6 37\.7 34\.8 Table 2: Hornitos Generation Costs Homitos (Annual Cost) Hornitos Natural gas Discount generation CC plant rate Capital cost 0 & M Cost Total cost alternative (US$ million) (US$ million) (US$ million) (US$/MWh) generation cost (US$/MWh) 10% 6\.28 0\.80 7\.08 26\.2 24\.8 12% 7\.54 0\.80 8\.34 30\.9 26\.4 14% 8\.79 0\.80 9\.59 35\.5 28\.1 8  The project also complies with the criteria of "environmental additionality", as the Kyoto Protocol requires that "reductions in emissions are additional to any that would occur in the absence of the certified project activity\." Summary of ERs Calculation: Hornitos carbon emission reductions have been calculated based on the new methodology presented to the CDM Council\. ERs were estimated using a long term dispatch model of the Chilean SIC that the regulatory authority actually uses for node price estimates\. With this model, it is possible to forecast the thermal plant displacement by the Hornitos project, using actual dispatch data for the SIC as recorded by the Economic Load Dispatch Center (CDEC)\. The annual ex-post dispatch data will conclusively indicate the amount of energy displaced by Hornitos in the generation mix of the SIC\. Hornitos project's ER will be estimated as a second displacement plant after the ER generated by Chacabuquito\. The Monitoring Plan (MP) for the project will utilize data that can be obtained from CDEC, which is fully independent from the project sponsor/operator\. Table 3 shows the estimated volume of emission reductions to be produced by the Homitos project, on the basis of the new methodology, which are used in the financial analysis presented below\. Between 2007-2012 the total expected ERs would amount to 1\.37 million tCO2\. Over a ten-year period (2007-2016), the ERs would reach 2\.34 million tCO2, assuming annual ERs over 2013-2016 equal to average ERs over 2008-2012 (240,000 tCO2e/year)\. Table 3: Emission Reductions Estimates 2007 2008 2009 2010 2011 2012 Generation (GWh) 180 271 271 271 271 271 ER Estimates (KtCO2e) Annual 172 256 249 248 223 225 Cumulative 172 428 677 925 1148 1374 1\.2 Financial Project costs and financing\. The project will cost approximately US$62\.8 million including contingencies but excluding VAT and financing charges\. This cost of less than US$1,200/MW is considered reasonable for a run-of-river plant of this size and characteristics\. The detailed financial analysis (see project file) shows the project cost breakdown and projected disbursements\. The project will be financed by HGV through equity inflow and possibly a bridge loan from Minera Valparaiso S\.A\., the holding company that owns HGV\. After commissioning of the project, HGV will seek to improve the financing structure of the project\. The option that is currently under review is to issue 15-year bonds to achieve a sound 50/50 equity-debt ratio for the project\. 9  The projected financial cash flow for the Hornitos project under average hydrology is summarized in Table 4 (values shown only until 2014, though the financial analysis is made over a 30 year period)\. HGV expects to contract out 189\.4 GWh/year at an estimated node price of 27\.4 US$/MWh, and receive capacity payments of 66\.72 US$/kW-year\. These node prices estimates are consistent with both official and market forecasts\. HGV will sell the remaining generation (about 81\.2 GWh per year) in the spot market\. The spot price used for the financial projections is 18\.8 US$/MWh, which is consistent with the average operation during summer, when the project generates surplus energy and the system presents higher hydropower generation and combined cycle natural gas and efficient coal fired plants are operating at the margin\. This is a conservative estimate, as spot prices are expected to increase in the future due to uncertainties in gas supply\. Table 4: Cash Flow Projections (Thousand US$) NORMAL 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Net Energy GWh - - 180,4 270,6 270,6 270,6 270,6 270,6 270,6 270,6 Firm Power MW - - 11,6 17,3 17,3 17,3 17,3 17,3 17,3 17,3 TCO2e abatement (ERPA sales) - - 172 256 249 248 223 225 240 240 INVESTMEN (31\.403) (31\.403) - - - - - - - - REVENUE - - 6\.109 9\.150 9\.116 9\.112 8\.985 8\.997 9\.072 9\.072 SPOT ENERGY - - 1\.017 1\.526 1\.526 1\.526 1\.526 1\.526 1\.526 1\.526 CONTRACTENERGY - - 3\.459 5\.188 5\.188 5\.188 5\.188 5\.188 5\.188 5\.188 CAPACITY - - 771 1\.156 1\.156 1\.156 1\.156 1\.156 1\.156 1\.156 ER INCOME - - 862 1\.279 1\.245 1\.241 1\.114 1\.126 1\.201 1\.201 COST _ _ (1\.500) (1\.300) (1\.300) (1\.300) (1\.300) (1\.300) (1\.300) (1\.300) O&M - - (1\.000) (800) (800) (800) (800) (800) (800) (800) TOLL - - (500) (500) (500) (500) (500) (500) (500) (500) EBDITA (without - - 3\.747 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 EBDITA (with - - 4\.609 7\.850 7\.816 7\.812 7\.685 7\.697 7\.772 7\.772 DEPRECIATIO - - (6\.637) (6\.637) (6 637) (6\.637) (6\.637) (6\.637) (6\.637) (6\.637) OPERATIONAL INCOME - - (2\.890) (66) (66) (66) (66) (66) (66) (66) OPERATIONAL INCOME - - (2\.028) 1\.213 1\.179 1\.175 1\.048 1\.060 1\.135 1\.135 TAX - - - - - - - - - - TAX - - - - (62) (200) (178) (180) (193) (193) CASH FLOW (without (31\.403) (31\.403) 3\.747 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 CASH FLOW (with (31\.403) (31\.403) 4\.609 7\.850 7\.754 7\.612 7\.507 7\.517 7\.579 7\.579 Table 4 presents expected revenues from emission reductions (estimated with the new methodology over a 21 year period)\. The project is expected to substitute at the margin a mix of coal and natural gas-based electricity, with an average emission factor of 888 tCO2/GWh, which would result in ERs of 4,977 thousand tCO2e for 21 years of operation and ER revenues of US$ 24\.8 million over the same period\. The above table includes carbon revenues from the CFU transaction till 2012 and third party sales beyond that date\. The project internal rate of return on assets (IRROA), without sale of ER, is 8\.60% and it increases to 10\.01% with the sale of ER\. Net present value (NPV) without the sale of ER is US$ - 7,6 million at 10% discount rate\. NPV increases to US$ + 0,2 million when ER revenues are added\. The internal rate of return on equity (IRROE) is 11\.80% without ER sales and 14\.63% with ER sales and project financing restructuring - assuming conversion of 50% equity to debt at 6\.5%\. (See Table 5)\. Although the project's rate of return is rather on the low side, HGV's decision to invest in this project can be explained for a variety of reasons: (i) HGV's overall strategy to increase its 10  hydropower generation assets with low hydrology risk; (ii) ERs estimates are conservative and project risks are low; (iii) project assets will continue to generate energy much beyond the project financial evaluation period; (iv) some project costs are shared to some extent with HGV's other plants in the same area; (v) the project rate of return is within the range of typical rates of return for power generation projects of this type in Chile\. Table 5: Hornitos Project: Financial Analysis - Base Case Without ER income With ER income IRROA 8\.60% 10\.01% IRROE (50% debt) 11\.80% 14\.63% A sensitivity analysis has been carried out to assess the impact on the rate of return and NPV of changes in revenues from energy sales, revenues from ERs sales, hydrology and investment costs\. The rate of return sensitivity was found to be low, except to changes in ER sales and investment costs (see figure A\.8 in the Technical Annex)\. HGV's Past Financial Performance and Present Condition Historically, HGV has maintained a prudent financial and investment policy and has shown consistently profitable financial performance, as indicated in the financial statements for the last three years shown in the Technical Annex\. Net income was US$ 21\.3 million in 2002 and US$ 26\.7 million in 2003, resulting in a ratio of net income to total assets of 12\.5% and 13\.1%, respectively\. Operational results and earnings before depreciation, interest and taxes were stable during the period 2002 to 2003, largely thanks to stable contractual relations with HGV's main clients: Divisi6n Andina of Codelco Chile and Empresas Mel6n\. Account receivables also maintain an excellent standard\. The balance sheet as of December 31, 2003 shows total assets amounting to US$ 202\.9 million while total equity is US$ 181\.4 million or 89\.4 % of total assets\. There are no significant guarantees on subsidiaries affecting assets of HGV\. This solid capitalization is part of the tradition of the Matte family, principal owners of the holding company, who strongly believe in maintaining a sound equity position and minimizing debt\. (See Technical Annex for detailed numbers)\. 2\. Technical The technical design of Hornitos uses a simple layout and technologies well proven in Chile and worldwide and used in other HGV plants\. It consists of a double intake, a 178,000 m3 peak hour regulating reservoir, a system of channels (1\.6 km) and tunnels (10\.5 km), a pressure penstock (or a vertical shaft) with a head of 550 meters, a powerhouse and a high voltage transmission line\. The project also includes an upgrade of the existing 66KV transmission system to 220 KV\. HGV has a successful experience in constructing, setting up and operating similar plants\. All project facilities will be located on the North bank of the Juncal River, upstream of the existing Chacabuquito hydroelectric plant\. Canals and tunnels and the penstock (or shaft) will take a total of 12 m3/sec, of which 8 m3/s will come from the Juncal intake and 4m3/s from the 11  Juncalillo intake\. Neither Hornitos nor any of the downstream plants operated by HGV entail any construction such as high dams and dikes, or cause reservoir-like impoundments on the Aconcagua River or any of its branches\. The international road from Los Andes to Mendoza, Argentina is the main road in the entire area\. Secondary and rural roads connect settlements and camps along that highway\. There is little population in the project area, which is mostly a pre-mountain area\. The figure below shows in schematic form the main physical components of the project\. Figure 1: Schematic map of project installations i INTAKE * iS SERVOIR jG S IWAK\. VOTAGE U\.E * N V CHAMEo", TOLOSANDES *~ ~ ~ ~ ~~~~~\. aN A **n 0INTE`R`NA`TN`AL'R`CA0 of Z","" \ a , *on 0 TUNNEL SUBSTATION,\ /e l,EKM MT 3 / HORNITOS \._ / $ w } D < \. HIGH VOL;AG~~~~~~~~~~~~~~~~~~~~~~~~~~~E UNE T §1 §1 D ~ ~~~~~~~~~~~~~~~~~\. --------- N = | owow | 5 5KM ~ ~~~~~~~~LOAD CHAMBER RA 3\. Fiduciary Apart from the NCDMF financing (which in this case comes from corporate and government participants), the project does not include World Bank or IFC financing\. Payment for CERs and Flow of Funds: The schedule of payments is based on the delivery of CERs, as established in the ERPA\. HGV will make requests for payment to the CFU under the ERPA terms\. The CFU will only pay HGV upon transfer of CERs\. In the event that Hornitos fails to deliver the quantity of CERs for any given calendar year as set forth in the ERPA, the project will be required to make up for the shortfall over the course of the following calendar year or any other period agreed with NCDMF\. The involvement of the CFU will expire after the total CERs contract amount of tCO2e has been delivered\. 4\. Social Social participation in the Environment Impact Assessment (EIA) was initiated through announcements in local newspapers and followed the EIA procedures established in the Chilean law (Ley 19\.300 and Decreto Supremo 95)\. The EIA was distributed to local authorities and a workshop with about 50 participants (26 of them representing local communities) took place on August 1st, 2003\. The project will not cause any involuntary resettlement and no indigenous people will be affected\. The project does not have direct impacts on the population living near the project area 12  or the transmission line\. An ecological flow will be maintained in the river\. The project will not produce significant impacts on landscape value, because it uses tunnels and has limited infrastructure\. Employment of 1200 will be generated during the 3-year construction phase and about 15 during project operation\. During project construction and operation, minor mitigation, reparation and compensation measures will be taken to address atmospheric emissions, noise generation, river courses and transport deviations, security and emergency management measures, and cultural patrimony and landscape alterations caused by the project\. Detailed information on the social baseline, analysis, impacts and mitigation measures plan for the project is included in the Technical Annex (also see the EIA and Environment Management Plan in the WB InfoShop)\. 5\. Environmental EIA Baseline\. The EIA baseline presents a detailed analysis of all relevant environmental aspects of the project and a description of its influence area\. The EIA also reviews the legal aspects affecting the project\. Relevant aspects of the environmental baseline include a relatively limited local terrestrial and aquatic flora and fauna, with few terrestrial species under different degrees of protection, EIA Approval\. The project's EIA was approved by the regional environmental authority (COREMA) on May 3, 2004\. A' thorough ETA process was\. executed, even though it started as a simple Environmental Declaration by HGV\. During the EIA process, HGV was requested to clarify technical aspects related to environmental impacts\. All of these aspects were reviewed and addressed satisfactorily according to COREMA's requirements, including several legal aspects\. All relevant authorities, as designated by COREMA, participated formally in the EIA process, and interviews with several of those authorities confirmed that no relevant environmental arguments against the project had been raised during the EIA process\. The environmental approval resolution includes some minor additional requirements regarding mitigation, reparation and compensation measures\. Environmental Impacts\. The ETA presents a thorough analysis of the possible geophysical, ecological and social impacts of the project\. The most important impacts of the project will be generated during the construction phase (3 years): five dumps for tunnel excavation material; noise due to use of explosives for tunnel construction; some degree of water pollution associated to riverbed works (suspended material of the river ground); generation of solid waste; and minor atmospheric emissions from transport and machinery operations\. Risk of hydrocarbon spills and electromagnetic radiation are also described in the EIA\. Each of those risks and impacts are well defined and specific control and mitigation measures are planned\. Conclusion\. The B environmental rating is confirmed for the Homitos project, considering the limited sensitiveness of environmental baseline, the adequate EIA consultation and approval process and the relatively insignificant impacts of the project, for which specific and adequate protection and mitigation measures have been defined\. Detailed information on the environmental baseline, analysis, impacts and mitigation measures plan for the project is included in the Technical Annex (also see the ETA and Environment Management Plan in the W1B InfoShop)\. 13  6\. Safeguard policies Compliance with World Bank Safeguard Policies: World Bank safeguards policies that are triggered by the project include: environmental assessment; safety of dams, and cultural property\. O\.P\. 4\.01 - Environmental Assessment Risk Level: Low Site sensitivity to project implementation and operation activities can be classified as low to medium\. There are no critical natural habitats in the project's area of influence\. Water uses for agricultural purposes downstream from the project will not be affected\. Erosion risk is low, since general geomorphology of the influence area is very rocky\. The project will not generate involuntary resettlement and no indigenous people will be affected\. Specific and suitable protection, mitigation and follow up measures for protection of the few vegetal and animal species present in the project's area of influence are clearly defined in the EIA and Environment Resolution\. The project sponsor has experience in complying with World Bank Group environment policies\. Construction-related mitigation measures will be included in construction contracts\. O\.P\. 4\.37 - Safety of Dams Risk Level: Low The project contemplates the construction of a small water reservoir (178,000m3) with a 6\.5 m retaining wall\. This height is much lower than the 15\.0 m triggering limit established in OP 4\.37, so no formal dam safety plan is required\. Yet, the project sponsor has taken a number of safety measures, including: reservoir design with specialized software in compliance with safety norms and with particular attention to seismic risk; yearly maintenance plan of civil works and hydro- mechanical devices; inspections in case of extraordinary events such as earthquakes or unusual floods; and organization for definition and implementation of corrective measures as necessary\. A wall failure study was conducted considering different failure scales and reservoir levels, to assess the related impacts on downstream flows; as there are no settlements along the first 14 km downstream from the reservoir, the study showed that there would be no significant impacts in the worse case scenario of wall failure\. O\.P\. 11\.03 - Cultural property Risk level: Low Sites with potential cultural value, initially considered for material disposal sites, were excluded\. HGV has committed itself to take specific measures to protect possible archeological findings during project construction\. The EMP includes specific measures to protect archeological chance finds during project construction, including mainly the following: delimitation and vigilance of specific zones, under supervision by an archeologist; photographic file during works; report on site condition before and after works to the Council of National Monuments; dispositions to report and address archeological chance finds during excavations, including immediate suspension of works in case of archeological chance finds\. 7\. Policy Exceptions and Readiness 14  There are no policy exceptions and the final ERPA is ready to be negotiated\. 15  TECHNICAL ANNEX 1\. Country and sector background Power Sector Background: Chile has a modern and developed electric industry, a sound legal and regulatory framework and well established regulatory and oversight agencies\. It was the first country in Latin America to implement far-reaching power sector reforms, including vertical separation of sector activities and privatization, under the principles of the 1982 General Electricity Law\. Subsequently, the Chilean power sector has served as a model for sector reforms and privatizations in the LAC region\. The Chilean power sector is currently characterized by an unregulated competitive generation (with no entry restrictions), open access to transmission and distribution networks, and private participation at all levels\. Recently, in March 2004, the 1982 General Electricity Law was amended by Law No\. 19\.940 in order to strengthen market forces in the operation of the sector and to improve transmission regulation\. Sector structure: The national electrical network is divided into four systems (two large systems in the north and the center and two small systems in the south, see figure Al)\. The northern system (Sistema Interconectado del Norte Grande - SING) comprises 33% of the total installed capacity, but only 5\.6% of the population\. The majority of clients are large industrial complexes (mainly mining companies)\. The generation is almost exclusively thermal\. The central system (Sistema Interconectado Central - SIC), in which the proposed project will be located, contains 66% of installed capacity, but over 90% of total population of Chile\. The current installed capacity in the SIC reaches 7,187 MW, of which about 56% are hydro plants and 44% are thermal plants (see Table A\.1)\. Interconnection of the northern and central systems would help to balance existing excess supply in the north with the fast-growing demand in the central system\. The earliest realistic date when the interconnection of the two systems can be accomplished is 2007\. Table A\.1: Installed Power Capacity-December 2003 MW SIC SING OTHERS Total Thermoelectric 3\.138 3\.620 93 6\.852 Hydroelectric 4\.049 13 19 4\.081 Total 7\.187 3\.634 112 10\.933 Source: CNE In each of the large systems (northern and central), the load dispatch center (Centro de Despacho Economico de Carga-CDEC) is responsible for planning and coordinating load dispatch\. The Law establishes the obligation to optimize generation and thus, load dispatch reflects economic merit order for the corresponding system, based on marginal costs of each unit\. Generators receive payment for available capacity and for actual energy delivered\. They can sell power via negotiated contracts with distributors and large unregulated consumers and/or make power available to the system's spot market\. Prices to be charged by generators to distributors correspond to the weighted average of projected marginal costs of the system and are calculated by the National Energy Commission (Comisi6n Nacional de Energia -CNE) for different nodes 16  in the transmission system (node prices)\. Prices to unregulated consumers are freely negotiated\. In the spot market, prices are determined by the marginal cost of the system, i\.e\. the cost of most expensive unit dispatched, on an hourly basis\. There are no entry restrictions to the market for generators\. All current and prospective generators make their own judgments and take their own risks on amount of capacity to be installed, technology, fuels and site locations, based on their perception of clemand growth, the evolution of capital and fuel markets, and any other parameters that may influence their businesses\. Overall, installed generation capacity has kept pace with electricity demand growth, with adequate reserve margins\. Figure Al: Chile's Four Electrical Systems Sisiema InierconecLado del Norte Grande SLI(G I I Illl I' Sistema Inlerconeciado *\.,niLt Central " 1 SIC \ I 1 rx IX Sislema de A%sen xi Sistema de Mlagallanes xii Distribution and transmission are regulated\. Distribution companies have an obligation to provide service in their respective concession areas, with maximum tariffs set by the regulatory agency\. Transmission companies have to guarantee open access to their network for all generators, under regulated price\. Currently 26 generation, 5 transmission, and 36 distribution companies are operating in Chile, all of them private\. Sector Institutions (i) Kyoto-related institutions: CONAMA: (Comisi6n Nacional del Medio Ambiente) is the national institution responsible for environmental issues in general, including in the power sector\. Its responsibilities include 17  administration of the environmental impact evaluations, development of environmental norms and oversight of the compliance with these norms\. COREMA: (Comisi6n Regional del Medio Ambiente) is the regional institution, depending from CONAMA, responsible for addressing the environmental issues in each Region\. It administers the evaluation of environmental impacts of regional projects and oversees the compliance with national environmental norms\. (ii) Other institutions: CDEC: There is an economic load dispatch center (Centro de Despacho Economico de Carga) in both the SIC and SING systems, which are private, independent entities, composed of representatives of generation and transmission companies\. The CDECs ensure the optimum operation of the system, based on lowest marginal costs, and determine values of economic transactions carried out between companies\. CDEC-SIC: The CDEC-SIC operates in the Central Interconnected System\. Although HGV is not a CDEC-SIC member (as membership is obligatory only for generators with capacity above 2% of the total installed capacity in the whole SIC), all generating plants supplying electricity to the system, including Hornitos and HGV's other power plants, are under CDEC-SIC operating supervision and coordination\. CDEC-SIC will play an important role in the quantification of actual emission reductions achieved each year\. CDEC-SIC's operation and information systems enable a relatively easy, transparent and detailed quantification of actual ERs on an hourly basis, that are calculated as the emissions aVoided from the marginal unit displaced by, in this case, the Hornitos project\. ERs from the Hornitos project will be calculated after first accounting for ERs from HGV's Chacabuquito project, that is already under an ERPA with the PCF\. CNE: The sector is regulated by an autonomous agency, the Comisi6n Nacional de Energia (CNE)\. Its main responsibilities for the power sector include (i) proposing sector norms and regulations; (ii) coordinating planning, policies and norms for efficient functioning of the market; and (iii) calculating and enforcing regulated prices\. Ministry of Economy and Energy: In the area of the power sector, the Ministry of Economy and Energy is responsible for (i) setting distribution tariffs and node prices (based on CNE's calculations), (ii) resolving possible conflicts among the members of the CDECs, and (iii) awarding concessions\. SEC: The Superintendencia de Electricidad y Combustibles is responsible for supervising compliance with existing laws, regulations and technical norms related to the generation, production, storage, transport and distribution of liquid fuels, gas and electricity\. SVS: The Superintendencia de Valores y Seguros- is an independent entity, related with the government through the Ministry of Finance\. It oversees companies involved in stock market and insurance business\. 18  Figure A\.2: Power Sector Institutional Diagram Ministry of Economy CNE SEC CONAMAJ SvSJ Government strategy The sector reforms conducted in the 1 980s were successful in setting the ground for a continuous, private sector-led expansion of the generation capacity, as well as transmission and distribution networks, capable of keeping pace with fast electricity demand growth, averaging 5\.6% per year in the SIC and 9\.2% per year in the SING over 1998-2003\. Nevertheless, even after almost 20 years of successful sector performance, the regulatory system still required certain adjustments and fine-tuning, some of which are expected to be solved by Law N0 19\.940 enacted on March 13, 2004 that amended certain aspects of the General Electricity Law\. The amendments deal with the following main topics: (i) Strengthening market forces in the operation of the sector The market signals in the operation of the system are still relatively weak, particularly in the central system, where the proportion of unregulated consumers is relatively low (33% of demand in the SIC)\. The amendments put into effect the Government's strategy to foster competition with new rules that includes: (a) reducing to 500 kW the threshold for unregulated consumers; (b) improving regulation of commercialization activities, including measures to improve access to distribution networks for all generators; (c) stimulating small projects up to 9 MW of capacity, which will not require transportation fees any longer; and (d) reducing to +/- 5 % the margin of unregulated consumer's prices, around which node prices can be determined by the CNE (in order to reflect market-like conditions in accordance with the General Electricity Law)\. (ii) Im|proving transmission reulation The amendments introduced modifications to regulation and pricing of transmission in order to ensure adequate investment in transmrission and facilitate interconnection between the norther and central systems\. 19  Remaining issues after the amendment of the General Electricity Law In order to meet adequately the medium- and long-term demand for electricity, it will be essential to ensure that the power sector counts with sufficient generation capacity\. Certain concerns in this respect have been raised in the past years, in view of the decreasing trend of investment in the power sector and the relatively high demand growth rate forecasts\. The Government needs to analyze the underlying forces behind the current deceleration of the investment in generation, which seems to be caused by a mix of factors, including: (i) relatively low node prices (recently the CNE has slightly increased the node prices); and (ii) unusually high compensation requirements in case of generation outages or failure to meet demand\. In addition, the amendments of the General Electricity Law may not be sufficient to fully achieve their objectives, specially regarding increased competition because: (i) it is still too expensive to reach unregulated consumers located within the distribution networks, and (ii) the +/- 5% variation for the node prices does not reflect short term energy supply shortage costs because unregulated consumer's prices are long term prices\. The unexpected reduction in 2004 of natural gas supply from Argentina (up to about 30 percent reduction during some periods) has raised concerns about impacts on electricity costs and supply security\. The reduction in natural gas supply has mainly affected industries but it has not affected the operation of natural gas-fueled combined cycle power plants that can switch to diesel fuel, nor steam power plants that can switch to coal\. However, a permanent reduction in natural gas supply would result in higher power generation prices and provide incentives for investment in hydroelectric and coal-fired power plants\. Environment aspects Environment impacts continue to present important challenges for the power sector, as a large proportion of the electricity generated still proceeds from highly polluting coal-fired plants, even though these are being slowly displaced by more efficient and less expensive technology based on natural gas combined cycle plants\. In 2002, coal-fired plants generated 2,604 GWh in the SIC, i\.e\. 8\.1% of the total energy generated in that system\. In 2003 this figure was slightly higher with 3\.084 GWh of coal generation, i\.e\. 9\.2% of the energy generated in the SIC (see table A\.2)\. Coal based generation was even higher over the period 1997-99 due to a severe drought\. That level of electricity generation from coal-fired plants releases to the air about 3,500,000 tCO2e per year\. Other pollutants from power plants include SO2 and NOx\. This situation is unlikely to change in the near future, as coal-fired power plants are expected to be needed to meet the high demand for electricity that would grow at a rate of about 8% per year during the next decade\. 20  Table A\.2: SIC Coal-fired Energy Generation and C02e Emissions in 2002 and 2003 Plant Name Owner Op\. Date Energy Generation GWh Emission tCO2e Emission 2003 __F 2002 Factor 2003 T 2002 GUACOLDA 1 GUACOLDA 1995-96 1,219 1,098 869 1,059,478 954,264 GUACOLDA 2 GUACOLDA 1995-96 1,230 1,094 869 1,069,636 950,804 HUASCOTV AES GENER 1965 0 0 1,829 0 0 VENTANAS1 AES GENER 1977 31 3 1,043 32,508 3,581 VENTANAS2 AES GENER 1964 393 173 998 392,352 172,459 LAGVERDE AES GENER 1939-49 0 0 2,136 0 617 RENCA AES GENER 1962 0 0 1,150 0 0 BOCAMINA ENDESA 1970 211 239 910 191,836 217,321 TOTAL 3,084 2,607 _ _ 2,745,811 2,299,046 Notes: (i) Energy obtained from CDEC-SIC annual reports; (ii) Emission factor estimation from IPCCC manual and CNE node price report, in tCO2e/GWh Carbon finance in Chile CONAMA is playing an active role in the promotion of and information on the carbon finance market in Chile, with support from the CNE regarding energy sector projects\. A large portfolio of projects has been identified in several sectors, including power generation (Guardia Vieja, Colbun, isolated generation, others), transport (Transantiago), landfills (Loma Los Colorados), energy efficiency (buildings, commerces), agroprocessing (milk, etc\.) and forestry (Forestal Terranova)\. Sector issues to be addressed by the project and strategic choices The objectives of the project are to generate high quality ER and to contribute to finding market- based solutions to the environmental problems of the power sector in Chile\. Specifically, the electricity produced by the Hornitos project will replace electricity produced by thermal plants, particularly by highly polluting coal-fired plants, resulting in high quality ER of approximately 230,000 tCO2e per year\. The project is also expected to have significant demonstration effects in the power sectors of Chile and other countries\. Specifically, following up on the Chacabuquito project, it is expected that the Hornitos project will strengthen government and private sector understanding of how to take advantage of the opportunity to achieve and sell quality ER in the framework of the Kyoto Protocol and the UNFCCC\. The project is expected to generate incentives for implementation of similar projects in the future, contributing to the reduction of greenhouse gas emissions in Chile and worldwide\. 2\. World Bank Carbon Finance projects in LAC Currently, the World Bank Carbon Finance Unit (CFU) has over twenty carbon finance projects in the LAC Region that are under preparation or operation\. Most of them utilize hydro or wind power, although cogeneration, biomass, geothermal, solid waste management, and gas flaring reduction technologies are also represented\. The first carbon finance project in the LAC Region with an Emissions Reductions Purchase Agreement (ERPA) and the third such project in the Prototype Carbon Fund's (PCF) history is the Chacabuquito Hydropower project in Chile\. Chacabuquito is a 25 MW run-of-river hydro 21  power plant\. Its annual average generation of 175 GWh replaces coal and natural gas-based electricity that would otherwise produce greenhouse gas emissions\. The project entails a purchase of ERs for the PCF valued at US$6\.7 million over the next 14 years\. (see Box A\. 1)\. Brazil Plantar project is the second one that was negotiated in the LAC Region, and involves the purchase of US$5\.3 million in ERs\. The project will substitute coal as fuel in pig iron production, with high energy-content charcoal from sustainable biomass\. The project is unique in that it also involves additional forestry activities that will offset carbon\. The Costa Rica Umbrella Project for Renewable Energy Resources is under advanced preparation, and currently includes three small-scale sub-projects - two wind-farms and one hydro power plant, that will result in over US$2 million in ERs\. Colombia Jepirachi Wind Farm is a 20 MW wind project in the North East of Colombia\. It will displace 68\.3 GWh of coal and gas energy for a purchase of US$3\.5 million ERs while bringing significant economic and social benefits to local indigenous people\. Box A\.1: Experience of the Chacabuquito run-of-river Hydropower Project The 25 MW Chacabuquito project was successfully built by HGV as scheduled and within budget (US$37 millon)\. Its operation since July 2002 has been without problems\. With an average 734 tCO2e/GWh, actual carbon emission reductions until June 2004 are about in the middle of the emission factor range that had been estimated in 2001 (493 tCO2e/GWh for natural gas CC plants and 860 tCO2e/GWh for the IPCCC standard coal plant\. _ 2002 (Jul -Dec\.) 2003 2'U4 iJan\.-Jun\. Esirmated generafion tGWh) 50 160 Esiimated ERs iz ons i 60,00() 137\.600t() \.Actual generalioll (G%%'h) 96\.2 180\.7 77\.0O Actual ERs i I i ttonNi 46\.031 132\.927 8 1,072 rAerage EF i CO2e/G\\'h i 478 735 1\.052 (I) First validation for July 02 to May 03 accounted for 112,607 tCO2e, while second validation for June 03 to June 04 (to be issued) accounted for 147,423 tCO2e\. The environment and social management plan is being implemented as per its terms, in particular concerning its three main measures: maintaining an ecological flow of 2 m3/s; reforestation in the project's basin; resettlement of one household\. Colombia Rio Amoya Environmental Services Project is a recently-approved project that uses part of the carbon credit revenues from a new 80 MW run-of-river hydro plant for environment management in a protected natural area and to promote social plans for the local communities\. Mexico INELEC Umbrella of Hydro Projects includes several small run-of-river hydro plants developed by private sponsors in Mexico as a first-of-a-kind carbon finance experience in the country\. Peru Poechos 15\.4 MW hydropower plant, recently approved, will displace 60 GWh per year and reduce CO2 emissions from thermal generation by 350,400 t in 10 years\. 22  Other projects in the CFU's LAC pipeline include: hydropower projects in Ecuador; wind and hydro power plants in Honduras; geothermal and bagasse cogeneration in El Salvador; hydro and geothermal in Guatemala; wind power, gas fliring reduction and sugarcane bagasse cogeneration in Mexico; biomass and solid waste management in Brazil; bagasse cogeneration in Guyana; wind farms in Jamaica and landfill projects in Argentina\. New project ideas from the Region are being received by the CFU nearly every week\. 3\. Results framework and monitoring The project results will be measured within the framework established in the Emission Reductions Purchase Agreement (ERPA) between HGV and NCDMF/World Bank, including the Monitoring and Verification Protocol (MVP)\. 4\. Detailed project description The Hornitos Project consists of a run-of-river power plant of 55 MW of capacity that will utilize the waters of the Juncal and Juncalillo rivers, both tributary of the Aconcagua River\. The project is located in the 5th Region of Chile, near the city of Los Andes, about 100 km Northeast from Santiago\. The project's construction time is approximately 36 months and construction is expected to be completed in mid 2007\. The project Feasibility Study can be found in the project file\. All project facilities will be on the north bank of the Juncal River, upstream of the existing Chacabuquito hydroelectric plant\. The turbines will take a total of 12m3/sec of which 8m3/s is from the Juncal intake, and 4m3/s is from the Juncalillo intake\. The international road from Los Andes to Mendoza, Argentina is the main road in the entire area\. Secondary and rural roads connect settlements and camps along that highway\. Figure A\.3 shows in schematic form the main physical components of the project, and Figure A\.4 indicates the project location\. Figure A\.3: Schematic map of Hornitos project Ester- El P\.on C\. car,ga2 Cbs de AQua 23  Figure A\.4: Project's Location I s , R os Oato I-ds P\.tl - r =-- -5es ~JoraP - -- La& - SAN iJUAN ;l pianqurn ~ ~ "L\. a \. Ahal& ' A7:anrgqj~ se l T ¶ fl S r a R t l- '' L d P e l' a u A ei- m D al, ,o J a \.4 '** ( Z 2 8 3 s\a Lagur \. - -Tonn, \. al\.T-S El \. P chu t<\.RE 4 I650l DE VALPAIAIN ;nub 1\.i Caler 4 \. S I 0 ian\. Fend d\. P-4h LanC de dcl I-es _S D YI L zZ~ITO$ :i-A a lEt' d_\.A -, La Yese'a watercondiionsof th Juncl an Junclilonriersq - see Tal \.3adFgueA5 t4¶h4aM G h re(t nt 230 o C 31asa 0 tie riacabuco I-31 considerigh 20% driest and L ettest year,RIA pprp e 24tCnAj ,l\.na L\.'Mrsdmj~~ - tIDC' _TROPJ3OLITANA 'ia, 41, mfaoJ7~ ap* ?saw Ci C vai4-a qul1a~r~~ ANTIAOFal9r,s1 uecInurahla \.L\.Mtn6 ~~ j'4ouIpiadc -\.I ,aeMbs de, ace Al~~~g&i6qiiqtdo-- T upungsarto ~~ ½L-~~acuI - ~~ReFU9iofa The plant is expected to produce an annual net average of 270\.6 GWh (ranging from 230 GWh in dry year to 310 GWh in wet year)\. These estimates are based on long-tern measurements of water conditions of the Juncal and Juncalillo rivers - see Table A\.3 and Figure A\.5\. Table A\.3: Hornitos Yearly Energy Production IHydrological conditions IDry Iwet IAverage~ GWh per year (net) 230 310 271 Note: Production in dry and wet years is estimated from a 40-year data base (1 961-200 1), considering the 20% driest and wettest years, respectively 24  Figure A\.5: Hornitos Project Generation under different hydrology scenarios 45 - 40- 35 - & 3 Average\. 271 GWn I 30 - I ( - \ Dry: 205GWh [G ~~~~~~~~~~~Wet:317 GWn w hW 25 - 20 - 1 5 1 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: HGV Baseline Methodology A new methodology is being proposed for grid-connected electricity generation from renewable sources, applicable exclusively to the Chilean Electricity Sector\. This new methodology is based on the Consolidated Methodology ACM0002, which was approved by the Executive Board at its 15th Meeting, and uses the particularities of the Chilean Electricity Sector legal and regulatory framework to determine the baseline emissions, as well as to demonstrate the additionality of the proposed project activity\. Chile has an efficient and modem electricity sector regulatory framework, which has been operating for more than 20 years\. The process began in 1982 with the Energy Act (DFL N°1, 1982) and continued with the separation and privatization of the state-owned power generation, transmission and distribution assets, which ended in the 1990s\. Chile's power sector model and regulation has proven to be successful, as it has been tested under extreme conditions such as technology changes, severe droughts, fuel shortages, etc\., and the overall outcome is a strong and reliable system, relatively low prices, a competitive and efficient industry and regulatory agencies that monitor the competitiveness and technical security\. The regulatory framework was amended in recent years increasing participants' responsibilities and aiming to reduce bottlenecks in transmission\. Furthermore, the Chilean regulation has been recognized as a model around the world and followed by many countries, especially in Latin America\. The Chilean power dispatch seeks to optimize the system's operation - as generation units are being dispatched in merit order of increasing marginal costs (the principles of sector operation are set in the General Electricity Law and Regulations)\. This process ensures that run-of-river plants (such as Homitos and Chacabuquito) that have zero variable operational costs will always be dispatched\. The last in line for the dispatch will be the least efficient coal-fired plants, if dispatched, otherwise it will be a natural gas based power plant\. The emission factor of the coal 25  power plants in the SIC system ranges between 869 and 2,136 tCO2e/GWh, and that of gas power plants ranges between 360 and 880 tCO2e/GWh, where the most pollutant natural gas fired plants are open cycle technology\. The proposed methodology uses (i) simulated economic merit order dispatch data and (ii) estimated marginal node price (as established in the regulations) as a pricing signal to determine the expected future expansion of the system, as the basis to establish the baseline emissions and to demonstrate the additionality of a project in relation to future capacity additions (see figure A\.6 that shows the 2003 indicative expansion plan)\. The economic merit order dispatch data allows the determination of the electricity generation that would be dispatched in the absence of the proposed project, and thus to calculate the emissions that would occur in this situation (the baseline\.) The node price provides the best economic signal for future expansion of the system, therefore it can be used to demonstrate the additionality of a project\. Figure A\.6: Projected Installed Power Capacity and Demand in the SIC 121 m \. Desei i =i I Coai I I Inlercc neci*\.r 10 j , i Nr\.a I Gas C' , Hjj , R G e ,: e,rm,a 6 |:n er I _ Hudrc \.R , Au cl 8 l si orc\.yecied Demanr i j! 4 E 0 2 °2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: CNE node price report, October 2003\. Indicative expansion plan Baseline emissions are established using a combined margin (CM) emission factor consisting of the combination of operating margin (OM) and build margin (BM) emission factors, according to the following procedure: (1) The Operating Margin emission factor is defined as the emissions that would occur without the CDM project, and it is calculated using a dispatch data analysis\. Actual dispatch data are used to calculate the operating margin, based on the decisions of the dispatch center\. Because demand is fixed and independent of the sources of supply, in the absence of a given power plant, the power plant(s) that would generate instead is (are) the next in the merit order as determined by the dispatch center\. Therefore, the first non- dispatched energy represents the energy displaced by the CDM project\. The emissions from that displaced generation represent the baseline emissions of the operating margin and are assigned to CDM activities in afirst-builtfirst-served basis\. That is, the emissions 26  from the last power plant that would have been dispatched are assigned to the first built CDM project, the emissions from the next to last power plant that would have been dispatched to the second built project, and so on\. (2) The Build Margin emission factor for each crediting period is calculated based on the least cost power plants identified in the official 10-year power expansion plan, excluding the ones that are under construction\. The emissions are calculated using the parameters reported by the CNE (kg/KWh or TJ/GWh depending on the fuel) and the default values from the IPCCC Handbook\. (3) In order to calculate the Combined Margin, the Operating and Build Margins are weighted using factors derived from the application of the Chilean Electricity Law\. The Law states that a project with an installed capacity of less than 2% of the total Grid Capacity (at the time the Dispatch Center was created) is not required to join the Dispa,tch Center as a member (since the project is considered small enough not to affect the overall operation of the national grid\.) This threshold capacity is 62\.5 MW\. The methodology recognizes this fact and defines a weighting factor of 1\.0 for the Operating Margin and a factor of 0\.0 for the Build Margin for these projects\. For projects with an installed capacity equal to or greater than 62\.5 MW, the weighting factor for the Operating Margin is calculated as the quotient of the project generation and the generation of the set of power plants included in the Build Margin, as defined in 2 above\. The two weighting factors should add to 1\.0\. Details of the baseline methodology and calculations of the ERs can be found in the Project Design Document (PDD)\. Based on the above methodology, Table A\.4 shows the results of the baseline emissions and emission reductions calculations\. The average emission reduction factor would be around 890 tCO2e/GWh over 2007-2012\. Table A\.4: Baseline Emissions and Hornitos Emission Reductions Fuel Total Type Emissions 2007 2008 2009 2010 2011 2012 Baseline Coal 19,874,282 1,857,690 3,311,168 3,079,538 3,644,780 3,700,487 4,280,619 Diesel 440,519 67,721 98,589 68,591 86,793 51,770 67,055 Natural gas 45,086,117 4,568,526 7,020,366 7,249,377 7,534,673 8,686,555 10,026,620 Interconections 6,767,886 - 197,694 1,153,408 1,589,156 1,841,590 1,986,038 Total 72,168,804 6,493,937 10,627,817 11,550,914 12,855,402 14,280,402 16,360,332 C02e ER Coal 578,875 67,732 107,142 124,958 103,998 95,612 79,434 Diesel 441,406 73,588 97,012 67,740 85716 51,128 66,223 Natural gas 353,347 31,040 51,680 56,349 58,525 76,128 79,626 Interconections - - - - - - - Total 1,373,629 172,360 255,833 249,047 248,239 222,868 225,282 Changes in the baseline scenario may arise from (i) lower than expected demand growth; (ii) extremely favorable hydrological conditions, displacing coal-based generation with hydro-power at the margin; and (iii) early decommissioning of coal-fired thermal plants and construction of natural gas CC plants\. In all these cases, the actual C02 emissions would be lower than expected as coal-based generation might be partly or completely displaced by hydro and natural 27  gas CC plants\. The baseline scenario, however, is considered as the most likely in the foreseeable future (next decade)\. Dry hydrological conditions are not expected to have a very significant influence on ER delivery\. First, dry and wet periods are likely to be relatively balanced over the 16-year evaluation period of the project\. Second, the variation in energy production between wet and dry years is within reasonable limits\. Third, lower energy production in dry years would be partly compensated by a higher ER factor, as less efficient, more polluting thermal plants would have to be dispatched to compensate for the lower hydropower generation\. It should also be noted that the intended interconnection between the northern and the central systems (SING and SIC) should not affect the project assumptions regarding Hornitos' displacement of thermal generation, as the northern system is almost exclusively based on thermal generation, including a proportion of coal-fired thermal plants similar to the one in the SIC\. ERPA The ERPA to be signed between the Bank, on behalf of the Netherlands, and HGV, including the Monitoring Plan (MP), specifies the rules and procedures for calculation and monitoring of ERs actually produced\. The quantity and price of CERs negotiated between the two parties are based on the estimates of the baseline and monitoring methodology and will be verified by an independent validator\. Box A\.2 summarizes the broad terms of Hornitos' ERPA\. Box A\.2: Summary of Hornitos ERPA's broad terms * The NCDMF administered by the IBRD as Trustee will purchase from HGV a minimum of 1 million tCO2 equivalent of Certified Emission Reductions (CER) over 2007-2012 at a price of E 4\.15/tCO2e\. Depending on hydrology conditions and SIC actual operation, the project may deliver additional CERs\. If more than I million tons of CERs are generated prior to December 31, 2012, the NCDMF may purchase all of these at the same price and on the same terms\. * The Trustee will deduct from the annual payments for the CERs the preparation costs that were incurred but not to exceed $50,000/yr for a total maximum of $200,000\. The Trustee may also deduct up to $30,000/yr for verification, certification and supervision costs\. * Payments for the CERs will be made annually upon verification, certification and issuance of the CERs into the registry account for the Netherlands at the UNFCCC Secretariat\. * In addition, the ERPA includes various standard clauses on delivery of minimum amount of CERs in any year, events of default and remedies, transfer of title of CERs, arbitration, etc\. ER Validation\. A fully independent, internationally-recognized third party (the Validator) has been recruited to provide: (a) Validation of the new sector-wide Baseline Methodology; and (b) Validation of the project design, additionality, and Monitoring Plan\. The Validator presents a Project Design Document for Homitos along with an evaluation of the methodology chosen to measure the project CERs and to demonstrate project additionality, to the Executive Board of the CDM for approval and registry under international rules\. A separate independent entity will be 28  retained to perform the Verification and Certification of the CERs after one year of operation of the plant, and will produce a Verification Report covering (i) the amount of verified and certified ERs generated by the project; (ii) compliance with World Bank Safeguard Policies; and (iii) compliance requirements of the UNFCCC or Kyoto Protocol\. The above described approach ensures the creation of an environmental commodity that is recognized by existing environment legislation of Chile and that will conform to relevant international agreements\. It is understood that these international guidelines may change, according to decisions of the Conference of the Parties to the UNFCCC and Kyoto Protocol\. 5\. Project costs Table A\.5 summarizes estimated project costs of the Hornitos project, based on the results of the project feasibility study\. Table A\.5: Project Costs Description US$ million Water intakes and reservoir 4\.50 Aqueducts 1\.20 Tunnels 14\.00 Water chamber and minor intakes works 1\.50 Penstock 3\.30 Power house & electromechanical enuipment 13\.50 High voltage yard 2\.50 Access roads and utilities 0\.75 Transmission Line 1\.80 Upgrade of Aconcagua substation 1\.00 Telecommunications 0\.75 Engineering and Administration 10\.85 Contingencies 7\.16 TOTAL PROJECT COST 62\.81 Source: HGV 6\. Implementation arrangements Hidroelectrica Guardia Vieja (HGV): The project will be implemented by Hidroelectrica Guardia Vieja S\.A\. (HGV), a subsidiary of Minera Valparaiso S\.A\., which in turn is a private and diversified holding company controlled by Grupo Matte\. HGV will be responsible for construction and operation of the Hornitos power plant\. Minera Valparaiso, the holding company, began operations in 1906 and has become one of Chile's strongest economic groups\. This diversified organization is involved in generation and retail of energy, sea port services, forestry, pulp and paper industry, and real estate investment and development\. HGV has been involved in development, ownership and operation of run-of-river plants since 1939\. HGV has successfully built and operated the Los Quilos facility, a hydroelectric plant on the Aconcagua river, which in the 1980s was expanded from 17 to 39 MW\. In 1990s, HGV built 29  a new run-of-river plant of 72 MW (Hidroelectrica Aconcagua) on the same river, of which HGV is a major stockholder, with minority participation of the IFC\. Finally, HGV completed in July 2002 the construction of the Chacabuquito run-of-river power plant (26 MW), downstream of Los Quilos plant\. HGV has an ERPA agreement with the World Bank for the Chacabuquito plant\. HGV has a lean and efficient organization of 125 employees\. Of this total, some 20 are managerial, engineering and administrative officials reporting directly to the Board, located at headquarters in Santiago de Chile and 105 are operational staff in the hydroelectric plants\. HGV centralizes its core activities in a small group of highly qualified managers\. Engineering studies, construction, inspection, development and maintenance of major information systems, and other functions are typically outsourced\. HGV has well established guidelines on staff recruitment, promotions and training programs\. HGV has an operational manual that contains administrative procedures and internal control policy\. Financial statements are audited annually by a renowned external auditor\. The approach of HGV to planning is two fold\. First, every three years a ten year strategic plan is formulated that mainly sets long range objectives, presents new projects and devises new ways to enhance client relationship\. Secondly, in the context of the strategic plan, an annual business plan is issued, establishing short term objectives and the resources needed to achieve them, and the annual budget is prepared\. A monthly managerial report is produced for the Board including a set of commercial, operational and financial indicators with the performance of the company\. The Board and management discuss the report and decisions are made, if needed, towards compliance of objectives\. For construction and financing of new projects, the approach of the Group is to create a new independent corporation which receives institutional, technical and financial support of the parent company\. In the Group's view, this outfit will provide autonomy of the day to day management of HGV in the administration of the construction activities and will also represent a tax benefit\. The general manager of HGV will take over the same position in the new company\. In summary, HGV appears to be a well-managed company with demonstrated substantial experience in construction and operation of run-of-the-river plants, similar in design to the proposed Hornitos project\. Monitoring and evaluation of outcomes/results Project performance is monitored as per a Monitoring Plan annexed to the ERPA and evaluated on the basis of generating the expected number of ERs and subsequent confirmation of CERs by the international validator\. Monitoring the generation of ERs is implicit in the project as a function of electricity generation, with payment for electricity based on actual generation as invoiced to customers\. The primary performance indicator will be the creation and purchase of CERs, measured in tons of carbon dioxide equivalent (tCO2e)\. Implicit within these CERs is the production of electricity for sale to customers in the Chilean electricity market\. CERs purchases by NCDMF will increase the stream of project revenues and improve the financial viability of the project\. 30  Other indicators include the satisfactory construction and operation of the project, and the satisfactory implementation of the Environmental Management Plan\. Sustainability The project is expected to be sustainable for the following main reasons: mature and liberalized power sector; excellent track record and financial position of the project sponsor; independent verification of ERs estimates\. a) The power sector in Chile is mature and liberalized, with efficient regulatory agencies\. The Chilean power sector was reformed already in 1982\. It introduced privatization and unbundling of generation, transmission and distribution activities\. Since then, the sector has been performing well, even though certain adjustments and fine-tuning are still needed\. Overall, the sector and regulatory risks are minimal\. b) The project will be developed by a private entity (HGV), experienced in construction and operation of similar run-of-the-river plants on the same river\. HGV has a strong and experienced management team with a successful track record\. HGV's existing hydro- power plants are modern, well maintained and operated efficiently, according to the highest technical standards\. HGV's financial management has been prudent and profitable, as evidenced by its conservative balance sheet and stable profit record\. Financial analysis of the project confirmed its financial viability (see Annex 10)\. c) The feasibility of the technical design was confirmed and emission reductions were estimated in the baseline study, and verified by an Independent Validator\. The project will contribute to diversified and sustainable energy development in Chile, and it will help build experience in legal, regulatory, policy, and institutional aspects of private power development based on clean energy sources\. Critical risks and possible controversial aspects Overall the project is rated as low risk and no controversial aspects are foreseen, as the project will not affect local population or water use\. A summary of the risk assessment is presented in Table A\.6\. 31  Table A\.6: Risk Matrix Risk Risks Risk Mitigation Measures Rating with Mitigation Baseline risk: country The project baseline, emission reductions and energy mix does not monitoring methodology is based on experience of evolve as projected in the Chacabuquito project, using data from actual baseline study, system operation\. ERs estimates are conservative\. resulting in lower than Regarding future power generation mix, existing M expected ERs\. uncertainties in gas supply from Argentina limit the risk of early decommissioning of coal power plants\. Technical risk: project Run-of-the-river technology is conventional and M cost overruns or widely used over the world and in Chile in construction delays (as particular\. the project entails long The sponsor experience in the nearby tunnels for a total 10\.5 Chacabuquito project shows execution under km which carry schedule and as per estimated budget, including for geological risks and its tunnel component\. major works haven't The sponsor has large experience in recruiting been contracted yet) or contractors for the type of works that will be transmission line required\. failures, resulting in Line and substations construction follows standard postponed/lower CER designs and procedures\. The line is only 6 km in payments and lower length, therefore the expected failure rate is very financial rate of return low\. for the project\. Performance and HGV has extensive track record in developing and N operational risk: operating similar hydroelectric plants\. It has ample inadequate O&M, that knowledge of local conditions and sector would result in lower regulations\. Its personnel are knowledgeable and energy generation\. its financial position is strong\. Off-taker risk: project Expected future electricity demand is enough to N cannot sell its energy absorb new hydro and thermal projects as included or project has to sell in the indicative expansion plan\. Hydropower more energy than plants (in particular run-of-river plants) have expected in a priority in the merit order dispatch and therefore fluctuating spot market will displace thermal generation\. HGV already has well-defined off-takers for 60% of generation at node price and both the node price and spot market prices are expected to show a tendency to increase due to uncertainties in gas supply\. 32  Financial risk: HGV financial management has been prudent and N Financial position of profitable\. The Hornitos plant will be established HGV worsens or as an autonomous company\. The financial analysis project revenues are of the project shows an acceptable rate of return, less than expected\. with low sensitivity to key variables\. Country risk: asset or Chile is the most stable economy in LAC\. Private N income expropriation\. investments operate under a very clear legal framework, with a long track record Regulatory risk: Chile has very clear and stable market rules and N change in regulations the sector regulatory environment is well affecting project established and has been very stable since the dispatch or sales\. 1980s\. Hydrological risk: Energy production has been calculated for different N lower hydrology than hydrological conditions, weighted statistically, expected, with impact based on recorded measurements over 40 years\. on project CERs and Hydrology would not affect CERs payments, as in financial viability; case of low hydrology, the project generation water use rights for El would be lower but would substitute more carbon- Pefion stream are not intensive plants\. awarded yet by DGA\. The contribution of El Pefion stream to energy production is minimal, as its inflows mostly happen during summer, when there are excess water flows compared to plant capacity\. Social risk: public There are no controversial aspects foreseen in this N opposition to project project, which will have little impact on local populations or water use\. 0'\.erall risk rating N M: average; N: low to negligible 7\. Financial management and disbursement arrangements The project does not include World Bank Group financing, but the World Bank acts as Trustee of the NCDMF for payment of CERs under the ERPA\. Payment for CERs and Flow of Funds: The schedule of payments is based on the delivery of CERs as established in the ERPA (see estimated payments in Table A\.7)\. HGV shall make requests for payment to the NCDMF under the ERPA\. The NCDMF will only pay HGV upon transfer of CERs\. In the event that Hornitos fails to deliver the quantity of CERs for any given calendar year as set forth in the ERPA, the project will be required to make-up the shortfall over the course of the following calendar year or in another period as agreed with NCDMF\. The involvement of the NCDMF will expire after the total CERs contracted amount of tCO2e has been delivered\. 33  Table A\.7: Estimated payments by NCDMF for Certified Emission Reductions 2007 2008 2009 2010 2011 2012 ER Projections (TCO2e) Annual 111 178 178 178 178 178 Cumulative 111 289 467 644 822 1000 ER Disbursements (USD million) Annual 0,6 0,9 0,9 0,9 0,9 0,9 Cumulative 0,6 1,4 2,3 3,2 4,1 5,0 8\. Procurement The Hornitos project will be acquired by HGV following its own procurement rules since there is no Bank financing\. HGV will contract reputable firms for undertaking the project under separate subcontracts for construction of canals, tunnels, powerhouse, electrical works, electromechanical equipment, etc\. Works have started on construction of access roads to tunnels areas\. Subcontracting of other works is scheduled for the first quarter of 2005\. 9\. Economic and financial analysis Econoniic evaluation The Kyoto Protocol requires that "reductions in emissions are additional to any that would occur in the absence of the certified project activity\." This "environmental additionality" of the project is assessed against a baseline, which describes what would happen without the proposed project\. Consequently, Carbon Funds require that supported projects demonstrate environmental additionality\. A project is additional if the scenario "with the project" generates fewer greenhouse gas emissions than the baseline ("business as usual") scenario\. In a centrally planned system, the baseline scenario can be determined on the basis of the least- cost expansion as defined by a planning authority\. In Chile, however, there is no central planning for expansion of power facilities\. Generation is privately-owned and competitive\. All current and prospective generators make their own judgments and take their own risks on amount of capacity to be installed, based on their perception of demand growth, the expected evolution of capital and fuel markets, and any other parameters that may influence their businesses\. Therefore, the baseline can be determined only as the most likely scenario of capacity additions private investors would choose on the basis of demand and price projections, investment costs and expected price of fuels\. In the Chilean case, the most likely scenario is the indicative generation expansion plan prepared by the CNE based on information provided by the power generating companies\. The appropriate method to determine the environmental additionality in the context of the Chilean power sector is to compare the proposed project with this indicative likely scenario of least-cost generation capacity additions\. Three alternatives of thermal generation expansion were identified that could be compared to the Hornitos project: (i) coal-fired steam plants; (ii) gas-fueled combined-cycle (CC) plants; and (iii) gas-fueled open cycle plants\. Generation costs for these alternatives are shown in Table A\.8\. 34  The baseline study has determined that gas fueled CC plants represent the least-cost option for all discount rates between 10 and 16 % p\.a\. I'able A\.8: Generation Costs of Thermal Options (US$/MWh) Discount Conmbined Cycle plant Coal plant laalor Gas T urbine plant faclor Rate factor (%) 40%7o 60% 80% 40% 60% 80% 40% 60% 80% 10 32\.7 27\.4 24\.8 55\.8 44\.3 38\.5 38\.6 34\.4 32\.3 12 36\.0 29\.6 26\.4 6\.1 49\.1 42\.2 41\.1 36\.() 3 3\. 14 39\.4 31\.9 28\.1 70\.7 54\.2 45\.9 43\.6 37\.7 34\.8 The results of this analysis are consistent with the CNE's indicative expansion plan as shown in Table A\.9\. Table A\.9: CNE's Indicative Expansion Plan for the SIC Month Year Project Capacity (MW) July 2006 Combined Cycle Natural Gas Plant # 1(VI Region) 358\.7 July 2007 Combined Cycle Natural Gas Plant # 2(VHI Region) 385\.1 January 2009 Calabozo Geothermal Plant Stage 1 100\.0 January 2010 Calabozo Geothermal Plant Stage 1 100\.0 January 2011 Calabozo Geothermal Plant Stage 1 100\.0 Japuari 2011 Combined Cycle Natural Gas Plant # 3 (VII Region) 385\.1 October 2011 Combined Cycle Natural Gas Plant # 4 (VII Region) 381\.0 October 2012 Combined Cycle Natural Gas Plant # 5 (VII Region) 381\.0 AprI 2013 Nmitume Hydro Power Plant (Reservoir) 400\.0 October 2013 Combined Cycle Natural Gas Plant #6 (VHi Region) 379\.4 Januery 2015 Combined Cycle Natural Gas Plant # 7 (VII Region) 379\.4 Source: CNE, October 2003 In Table A\.10, Hornitos generation costs are compared to those of the least-cost thermal alternative\. The comparison shows that Hornitos costs are above those of the natural gas CC plant, which represents the least-cost expansion option in the SIC\. In other words, Homnitos is not the least-cost expansion option and therefore it is not a part of the baseline scenario\. Table A\.10: Hornitos Generation Cost Discount Hornitos Annual Cost (US$ million) Generation Cost (US$/MWh) Rate Capital O&M Total HORNITOS Combined Cycle 10% 6\.28 0\.80 7\.08 26\.2 24\.8 12% 7\.54 0\.80 8\.34 30\.9 26\.4 14% 8\.79 0\.80 9\.59 35\.5 28\.1 Notes: Horitos' economic life is estimated at 40 years; capital cost does not include financing charges\. 35  The case for environmental additionality is further established in the financial analysis, which demonstrates the impact of carbon revenues on the financial internal rate of return on equity (IRROE)\. The financial analysis shows that carbon revenues can increase the IRROE of the Hornitos project to a level attractive for the private sector\. (Detailed analysis is included in the Financial Evaluation section below)\. Financial Evaluation Project costs and financing\. The project will cost approximately US$62\.8 million including contingencies but excluding VAT and financing charges\. This cost of less than US$1,200/MW is considered reasonable for a run-of-river plant of this size and characteristics\. The project will be financed by HGV through equity inflow and a possible bridge loan from Minera Valparaiso S\.A\., the holding company that owns HGV\. After commissioning of the project, HGV will seek to improve the financing structure of the project\. The option that is being considered is to issue 15-year bonds to achieve a sound 50/50 equity-debt ratio for the project\. Project production\. Expected monthly energy production is shown in Figure A7, for average and dry hydrology scenarios\. In winter time, the project generation is reduced, since most of the precipitations in the upper part of the basin remain in the mountains as snow\. In summer time, snow melting increases the river flows and the project generation, allowing the project to sell surplus energy in the spot market\. The share of contracted energy (70%), sold at a higher price in average years compared to the spot market, has been chosen by HGV to ensure that the risk of having to buy energy in the winter to meet its contract, at high spot prices during dry years, is reasonably low\. Figure A\.7 Hornitos Energy Production under average and dry hydrology Homitos Monthly Operation in an Average Year Hornitos Monthly Operation in a Dry Year '= ' * l a ~~i 0us n9M I ________________ I-Jmnklo\. 0 ' F~~~~~~~~~j~~~~ 1 4 ~~~30 S" qF neI HfLHH HH _II __UsDwn JAN FE MAR APR MAY JLJN JL AIJG SEP OCr NOV DM JAN FEBMARAPFIMAY JUN JUL AUG SEP OCTNOVDEC Source: HGV Project cash flow\. Based on assumptions sumarized in Box A\.3, the projected financial cash flow for the Hornitos project under average hydrology is summarized in Table A\. 11 (values shown only until 2014, though the financial analysis is made over a 30 year period), including: (a) revenues from sales of energy, capacity payments and CERs sales (estimated with the new methodology over a 21 year period); (b) investment; (c) operation, maintenance and administrative expenses; and (d) estimates of accelerated depreciation based on Chilean income tax law (the project will not be levied with such tax during the first six years of operation in the scenario with no ERs income, as this scenario would yield negative operating revenues)\. HGV expects to contract out 189\.4 GWh/year at an estimated node price of 27\.4 US$/MWh, and 36  receive capacity payments of 66\.72 US$/kW-year\. These node prices estimates are consistent with both official and market forecasts\. HGV will sell the remaining generation (about 81\.2 GWh per year) in the spot market\. The spot price used for the financial projections is 18\.8 US$/MWh, which is consistent with the average operation during summer, when the project generates surplus energy and the system presents higher hydropower generation, and combined cycle natural gas and efficient coal fired plants are operating at the margin\. This is a conservative estimate, as spot prices are expected to increase in the future due to uncertainties in gas supply\. ERs revenues\. The project is expected to substitute at the margin a mix of coal and natural gas- based electricity, with an average emission factor of 888 tCO2/GWh, which would result in ERs of close to 5 million of tCO2e for 21 years of operation and ER revenues of about US$ 25 million over the same period (considering US$5/ tC02e)\. Box A\.3: Assumptions for Hornitos financial analysis * Node Price: CNE node price report, October 2003, plus 10% for energy price (Energy 27\.4 US$/MWh and Capacity 66,7 US$/MW-year) * Spot Price: 18,8 US$/MWh * Contract Energy: 70% at node price and 30% sold in the spot market * Energy generation obtained by hydrological model with an annual net average of 270\.6 GWh (net energy after discounting losses) * Firm capacity sales of 17\.3 MW per year (project firm capacity adjusted for overall demand in SIC) * System expansion based on last CNE report, October 2003 * System operation estimated with the GOL Electricity Dispatch Model used by CNE to calculate node prices\. * C02 displacement based on Operating Margin, where the most expensive marginal plant is displaced\. Average displacement rate of 900 tCO2/GWh\. * Project startup in May 2007 * Sale of 100% of emission reductions 37  Table A\.11: Financial Projection of Hornitos Project Cash Flow (Thousand US$) NORMAL HIDROLOGY 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Net Energy GWh - - 180,4 270,6 270,6 270,6 270,6 270,6 270,6 270,6 Firm PowerMW - - 11,6 17,3 17,3 17,3 17,3 17,3 17,3 17,3 TCO2e abatement (ERPA sales) - - 172 256 249 248 223 225 180 185 INVESTMENT (31\.403) (31\.403) - - - - - - - - REVENUE - - 6\.109 9\.150 9\.116 9\.112 8\.985 8\.997 8\.769 8\.796 SPOT ENERGY - - 1\.017 1\.526 1\.526 1\.526 1\.526 1\.526 1\.526 1\.526 CONTRACT ENERGY - - 3\.459 5\.188 5\.188 5\.188 5\.188 5\.188 5\.188 5\.188 CAPACITY - - 771 1\.156 1\.156 1\.156 1\.156 1\.156 1\.156 1\.156 ER INCOME - - 862 1\.279 1\.245 1\.241 1\.114 1\.126 898 925 COST - - (1\.500) (1\.300) (1\.300) (1\.300) (1\.300) (1\.300) (1\.300) (1\.300) O&M - - (1\.000) (800) (800) (800) (800) (800) (800) (800) TOLL - - (500) (500) (500) (500) (500) (500) (500) (500) EBDITA (without ER) - - 3\.747 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 EBOITA (with ER) - - 4\.609 7\.850 7\.816 7\.812 7\.685 7\.697 7\.469 7\.496 DEPRECIATION - - (6\.637) (6\.637) (6\.637) (6\.637) (6\.637) (6\.637) (6\.637) (6\.637) OPERATIONAL INCOME (wo/ER) - - (2\.890) (66) (66) (66) (66) (66) (66) (66) OPERATIONAL INCOME (w/ER) - - (2\.028) 1\.213 1\.179 1\.175 1\.048 1\.060 832 859 TAX (wo/ER) - - - - - - TAX(w/ER) - - - - (62) (200) (178) (180) (141) (146) CASH FLOW (without ER) (31\.403) (31\.403) 3\.747 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 6\.570 CASH FLOW (with ER) (31\.403) (31\.403) 4\.609 7\.850 7\.754 7\.612 7\.507 7\.517 7\.327 7\.350 Rate of return\. The project internal rate of return on assets (IRROA), without sale of ERs is 8\.60%\. It increases to 10\.01% with the sale of ERs\. Net present value (NPV) without the sale of ERs is US$ - 7\.6 million at 10% discount rate (the Chilean power sector discount rate used by the authority to calculate expansion system cost for determining node prices)\. NPV increases to US$ + 0\.2 million when ERs revenues are added\. The internal rate of return on equity (IRROE) is 11\.80% without ERs sales and 14\.63% with ERs sales, assuming project financing restructuring with conversion of 50% equity to debt at 6\.5%\. (See Table A\. 12)\. Although the project's rate of return is rather on the low side, HGV's decision to invest in this project can be explained for a variety of reasons: (i) HGV's overall strategy to increase its hydropower generation assets with low hydrology risk; (ii) ERs estimates are conservative and project risks are low; (iii) project assets will continue to generate energy much beyond the project financial evaluation period; (iv) some project costs are shared to some extent with HGV's other plants in the same area; (v) the project rate of return is within the range of typical rates of return for power generation projects of this type in Chile\. Table A\.12: Hornitos Project: Financial Analysis - Base Case Without ERs With ERs income income IRROA 8\.60% 10\.01% IRROE (50% debt) 11\.80% 14\.63% NPV at 10 % (US$MM) - 7\.6 0\.2 A sensitivity analysis has been carried out to assess the impact on the rate of return and NPV of changes in revenues from energy sales, revenues from ERs sales, hydrology and investment costs (see Figure A\.8)\. The rate of return sensitivity was found to be low, except to changes in ERs 38  sales and investment costs\. Downside and upside scenarios are shown as the sum of all negative effects (bars in black) and all positive effects (bars in grey)\. The case of limited ERs sales based on the minimum ERPA quantity of 1 million tCO2/GWh over 2007-2012, using the approved consolidated methodology, is also shown in a dark grey bar\. Figure A\.8: Sensitivity of internal rate of return IRROA Sensitivity Downside Upside 76 ERs sales (None/ERPA 201j2) 8,6l Node price -5% / +10 910,7% Hydrology Wet/Dry 9,4% 10,3% Investment costs +10% / -5° 9,0% 10,6% 6% 7% 8% 9% 10% 11% 12% IRROE Sensitivity Downside / Upside 1,8c 117,9% ! ERs sales (None/ERPA 201 ) 11,80/ Node price -5% / +10% 13,9' 16,0% Hydrology WeVDry 13,50,% 15,3% Investment costs +10% / -5 12,6 15,8% 8% 10% 12% 14% 16% 18% 20% HGV's Past Financial Performance and Present Condition Historically, HGV has maintained a prudent financial and investment policy and has consistently shown profitable financial performance, as indicated in the financial statements for the last three years shown in Tables A\.13, A\.14 and A\.15\. Net income was US$ 21\.3 million in 2002 and US$ 26\.7 million in 2003, resulting in a ratio of net income to total assets of 12\.5% and 13\.1%, respectively\. Operational results and earnings before depreciation, interest and taxes were stable during the period 2002 to 2003, largely thanks to stable contractual relations with HGV's main clients: Division Andina of Codelco Chile and Empresas Mel6n\. Account receivables also maintain an excellent standard\. 39  The balance sheet as of December 2003 shows total assets amounting to US$ 202\.9 million while total equity is US$ 181\.4 million or 89\.4 % of total assets\. There are no significant guarantees on subsidiaries affecting assets of HGV\. This solid capitalization is part of the tradition of the Matte family, principal owners of the holding company, who strongly believe in maintaining a sound equity position and minimizing debt\. Table A\.13: Consolidated Profit & Loss of HGV for 2001-2003 In US$ Thousands (eq US$ Dec 2003) 2001 2002 2003 Operating revenue 34\.678 36\.421 46\.967 Operating costs (16\.615) (14\.611) (19\.806) Operational (13\.573) (11\.474) (15\.616) Depreciation (3\.042) (3\.138) (4\.190) Operating margin 18\.063 21\.810 27\.161 Selling and administration expenses (1\.059) (918) (1\.427) EBDITA 20\.046 20\.892 25\.733 Operating Profit 17\.004 20\.892 25\.733 Financial income 2\.767 1\.256 398 Equity in earnings of related companies 18\.635 4\.549 6\.321 Other non operating income 3\.658 1\.034 934 Equity in loss of related companies 0 0 (25) Amortization of goodwill (0) (0) (5) Financial expenses (76) (57) (34) Other non operating expenses (26) (374) (713) Monetary correction (1\.118) (664) (387) Exchange difference (174) (58) 99 Non Operating Income 23\.665 5\.686 6\.588 Income before income Tax 40\.669 26\.578 32\.322 Income Tax (3\.230) (4\.141) (4\.499) Income (loss) before minority interest 37\.438 22\.437 27\.823 Minority interest (1\.189) (969) (1\.311) Amortization of negative goodwill 192 158 190 NET INCOME (LOSS) 36\.441 21\.627 26\.702 Table A\.14: Consolidated Balance Sheet of HGV for 2001-2003 In US$ Thousands (eq US$ Dec 2003) 2001 2002 2003 Current assets 54\.026 33\.528 31\.361 Property plant and equipment 84\.376 88\.768 111\.184 Other assets 50\.677 50\.368 60\.372 TOTAL ASSETS 189\.079 172\.664 202\.917 Current liabilities 8\.644 7\.990 16\.432 Long term liabilities 4\.121 4\.356 5\.104 Minority interest 10\.252 9\.475 10\.565 Shareholder's equity 166\.061 150\.842 170\.816 TOTAL LIABILITIES+SHAREHLD'S EQUITY 189\.079 172\.664 202\.917 40  Table A\.15: Consolidated Statements of Cash Flow of HGV for 2001-2003 In US$ Thousands (eq US$ Dec 2003) 2001 2002 2003 Net cash flow provided from operating activities 36\.441 21\.627 26\.702 Cash used in financing activities (458) (20) 413 Cash flow from investing activities (13\.539) (2\.903) (4\.167) Increase (decrease) in cash and cash equivalents 22\.946 7\.268 22\.956 Price-level restatement of cash and cash 1\.290 (325) (3\.899) equivalents Cash and cash equiv at the beginning of the 1\.189 969 1\.311 year Cash and cash equivalents at the end of the 47\.869 26\.615 43\.316 year 10\. Environmental Analysis: (Risk Level: Low) Environmental Category: B An EIA was completed for the Hornitos project and approved by COREMA on May 3, 2004\. It was reviewed by the environmental and social specialists of the Bank team\. 10\.1 Legal Compliance The EIA was first presented to local environmental authority (COREMA) on June 18th, 2003 and approved on May 3rd, 2004\. According to Chilean environmental law, the EIA was distributed to 16 local authorities for their participation in the assessment process\. Those authorities were selected by CONAMA for their relevance in relation to identified impacts of the project\. Water rights for HGV on rivers Juncal (8m3/s) and Juncalillo (4 m3/s) as well as ecological flows (170 I/s and 52 I/s respectively) were established by the national water authority (DGA) on October 20th, 1996, November 13th, 1984 and June 21st, 2001 through specific resolutions\. Additional water rights on El Pefi6n (1 m3/s), a tributary stream of the Juncal river, together with a proposed ecological flow of 60 l/s, are currently under review by DGA\. The forestry management plan including mitigation measures established in the EIA was approved by the national forestry authority (CONAF) on April 9 th, 2004\. Upon request, the local agriculture authority (Servicio Agricola y Ganadero, SAG) will authorize the cut of flora which is not under the category of forest\. As to mitigation measures regarding river fauna, applicable legal conditions for research fishing and potential water pollution are clearly defined (Ley 18\.892 and DS 439/92)\. The local public health office is well-informed and will permit research fishing upon request\. Any chance finds of archeological, anthropological or paleontological value during construction must be reported to the related authority and works in the finds area must stop immediately (Ley 17\.288 and DS 484/90)\. 41  Regarding mitigation measures related to resettlement of protected animal species, special permits will be given by the local agriculture authority (Ley 4\.601/29, Ley 19\.473/96 and DS 5/98)\. Special authorizations will be given by the Ministry of Public Works upon request (Ley 850/97) for crossing of electric lines over public ways as well as for access from 5 planned material disposal sites to public ways\. Transport and handling of flammable liquids and solid waste during the construction phase are subject to authorization by specific entities (DS379/85)\. Transport of employees is also regulated by specific laws applicable to the project (DS 237/93)\. Even though the civil population is not supposed to be affected by noise emissions generated during the construction phase, a specific emission norm is applied for this impact (DS 146/97)\. Pests detected or suspected in packing materials made of wood must be immediately reported to the sanitary authority (Res\. 1826/94)\. With respect to access ways to electric lines, specific entities must be consulted (Ord\. 1093/95)\. The local public health office has approved the permit request for construction of water treatment systems for liquids generated during tunnel construction, cement plant operation and power house construction (Ord\. 1156/04)\. Soil use category will be changed permanently by the Regional Ministry Office for Agriculture (SEREMI) at specific areas in the zone of influence of the project including water reservoir, power house, and substation and charging chamber\. Soil use category will be temporarily changed by SEREMI for construction facilities at Ojos de Agua, El Pefi6n and cement production\. Permits regarding possible recollection and capture of protected species were given by the SAG\. The regional authority for public works considers that no water pollution will occur during water flow in the aqueducts and tunnels\. CONAF has released permits for native forest cut, conditioned to suitable compensation measures established clearly in the approved EIA\. HGV has legally committed to concrete mitigation, compensation and follow-up measures regarding atmospheric emissions, liquid waste, solid waste, noise generation, and electromagnetic fields, even though the health authority considers that there will be no harmful effects from electromagnetic fields\. 42  10\.2 Environmental Baseline Summary Site Sensitivity Site sensitivity can be classified as low to medium\. No critical natural habitats occur\. Erosion risk is low, since the general geomorphology of the project area of influence is very rocky\. The project will not generate involuntary resettlements and no indigenous people will be affected\. Climate According to Koeppem classification, the area of influence corresponds to "mild with winter rains"\. The dry season lasts 7 to 8 months, covering late spring, summer and beginning of autumn\. The South Pacific anticyclone does not affect the zone during this period\. Marine influence from the coast penetrates the valley all the year, reducing dominating semiarid conditions\. Annual rainfall varies between 250 and 400 mm, with typical rainfall periods of 24 to 48 h\. Average rainfalls vary from 10mm in January to 170mm in June\. Typical 24h-rain does not exceed 35 mm\. Predominant winds come from S and SE, generally in coincidence with good weather\. Rains are mostly associated to mild to stormy winds from N and NW\. Average temperatures range from 11\.4°C from May to August (including few days with temperatures below 0°C) to 17\.7°C in January\. Relative air humidity varies between 45% and 60%\. Air Quality Even though there is no monitoring station in the area of influence, air quality is only influenced by local transport, principally due to traffic over local dust roads and Route CH 60, which connects the city of Los Andes with Mendoza in Argentina\. Air quality can be rated in general as very good\. Hydrology Downstream tributaries of the Aconcagua River, that are relevant to the project, and their average flows are shown in Table A\. 16\. Table A\.16: Water flows of Aconcagua River tributaries Tributary Flow (m3/s) Name August (lowest) January (highest) Juncal 2\.0 13\.0 Juncalillo 1\.8 5\.3 Ojos de Agua 0\.3 2\.3 El Pefi6n 0\.2 1\.4 Others (minor 0\.5 3\.5 streams) TOTAL 4\.8 25\.5 43  Flora Some 130 native vegetal species were identified in the area of influence of the project\. Table A\. 17 shows those species that are under some degree of protection\. Table A\.17: Flora species under protection Species Category of Protection Austrocactus spinoflorus Vulnerable Puya berteroniana Vulnerable Kageneckia augustifolia Vulnerable Alstroemeria exersens Not known Fauna Some 74 bird, 10 mammal, 6 reptile and 2 amphibious species were identified in the area of influence of the project\. Table A\. 18 shows those species that are under some degree of protection\. Table A\.18: Fauna species under protection SPECIES CATEGORY OF PROTECTION BIRDS I\. Vulthur gryphus Vulnerable Falco peregrinus Vulnerable Attagis gayi Rare MAMMALS | Thylamys elegans Rare Spalacopus cyanus Danger Pseudalopex culpaeus Not known REPITILES __ Liolaemusfuscus Out of danger Liolaemus monticola Vulnerable Liolaemus altissimus Rare Callopistes palluma Vulnerable Philodryas chamissonis Vulnerable AMPHIBIOUS Bufo chilensis _ Vulnerable Pleurodema thaul Vulnerable FISH T Salmo trutta Out of danger (introduced species) 44  10\.3 Environmental Impacts GHG Reductions As a positive global environment impact, Hornitos net generation of an average 271 GWh will avoid a minimum of 167\.000 tCO2 per year\. Water Quality and Quantity Run-of-river projects are considered benign for water quality\. No major changes in water quality are expected from the project operation\. It should be noted that ongoing agricultural practices in the valley and pollution from mines located downstream from the project are the main cause of the deterioration of water quality for the entire watershed\. Regarding the construction phase, every single potential water pollutant was identified during the EIA and specific control measures to avoid underground and river water pollution were assessed and approved by the local environmental authority\. Minimum ecological flows for every tributary affected by Homitos project are clearly defined by the local water authority and are included in the water use rights conferred to HGV, as shown in Table A\.19\. Table A\.19: Water rights and ecological flows Tributary Water Rights Ecological Flow Juncal 8 m3/s 170 [/s Juncalillo 4 m3/s 52 1/s El Pefi6n * lm3/s (under review) 60 1/s (under review) * Water use permit pending Biodiversity Impacts The project will affect natural habitats of species under protection listed in Table A\. 18, except in the case of birds which natural habitats are not afected by the project\. Suitable measures for every species under protection were considered in the EIA, including monitoring and follow up\. Construction Impacts Construction impacts include production of garbage, solid waste, liquid waste, sewage and noise\. Generation of solid waste from tunnel construction is considered the largest impact\. Every single impact was analyzed thoroughly by the environmental authority (see Table A\.20), and specific commitments were established for the sponsor as part of the EMP\. 45  Table A\.20: Potential environmental impacts of the project Environmental impact Magnitude Comments No destruction of the vegetative cover is expected Increased erosion Low therefore this impact will be very minor\. Special measures against erosion are considered for dump construction as well as for water reservoir\. Deterioration of the Low Low visual impact of project facilities\. landscape Very little impact is expected from the diesel Air emissions Low generators to be used during construction\. Measures for dust control, especially for transport of disposal materilas are defined\. Noise Generation Low Impact generated by traffic increase and use of explosives during tunnel construction works No relevant impact is expected, since biodiversity density within the project area is low and water Loss of vegetation and L will continuously flow in the affected segment of biodiversity ow the river\. Few species under some degree of protection were identified and suitable measures for recovery were defined\. Loss of agricultural area Zero The project will not cause any loss of agricultural areas\. Minimum ecological flow (MEF) of 0\.17 and 0\.052 m3/s to be maintained at all times for Lack of water for biological Low Juncal and Juncalillo rivers\. A MEF value of 0\.06 functions in the river m3/s is under review for El Pen6n tributary, which is not important for the project energy production\. 10\.4 Environmental Management Plan (see Table A\.21) Mitigation measures during the project construction phase are clearly defined for every single impact on air quality, noise, and liquid waste (including treatment)\. For solid waste generated during tunnel construction, five dumps were authorized after a thorough analysis of alternatives\. Their location, capacity and extension are clearly established in the EIA\. Specific conditions for dump accesses, signaling, dump covering with organic soil and dump closing are also part of EIA commitments\. 46  Mitigation measures will be included by HGV in the bidding documents of contractors\. Environmental indicators will be monitored by the sponsor and reported to the Bank and the third-party Validator\. The project, through HGV's agreement with the NCDMF, will have to submit environmental and social reports to the NCDMF on a semi-annual basis\. The third party responsible for emissions reductions certifications will also be charged with monitoring the implementation of environmental and social measures\. In addition, the Bank will supervise these aspects periodically\. Protection measures against vegetation cutting, burning and any unnecessary intervention on vulnerable flora will be supervised by a specialist during construction phase\. Special emphasis is given to species under some degree of protection\. A reforestation plan was approved by the forest authority\. The plan includes recovery of 2\.5 ha by planting 3,125 trees to compensate for trees cut during the construction phase\. Reforestation follow-up measures are considered as well\. Plantation and transplantation measures are considered for some species\. Rescue, relocation and habitat protection measures for reptiles, rodents and aquatic flora and fauna are defined in EIA for the construction and operation phases, with emphasis on species under protection\. Furthermore, specific measures are considered for soil, natural water courses, transport, risk and emergency control, specially regarding fires and spills\. During operation, impacts will be significantly less than during construction\. Sewage will be treated in a suitable treatment plant (2m3/day)\. Garbage will be stored adequately and disposed of systematically according to the law\. Table A\.21: Summary of the Environmental Management Plan Program/Activity Responsibility Timing/Schedule Designation of an environmental Initiated prior to auditor Sponsor construction, and continued throughout project life Organization of technical and Prior to construction environmental documentation for input into the environmental Sponsor control program Proper construction waste Identification of sites by disposal sponsor prior to bidding Sponsor/Contractor Use of sites by contractor during construction Air Emission control During Construction Sponsor/Contractor 47  Proper Liquid Waste Treatment During Construction Sponsor Noise Generation and Warning During Construction of of Use of explosives Sponsor/Contractor Tunnels Proper solid waste (including Contractor During construction soil) storage and disposal Proper Earth Material Disposal, During Construction Dump Construction and Closing Sponsor Designation and use of areas for During Construction hazardous waste confinement (oils, chemicals, etc\.); proper waste disposal including a monthly inventory of used Contractor substances, storage in metal containers, and disposal at an appropriate site Designation of off-limits During Construction boundaries of work zone (to Contractor protect any green areas) Protection of archeological sites Contractor/Sponsor During Construction Installation of Traffic Signals Sponsor Prior to Construction Flora and Fauna protection and Sponsor/Contractor During Construction and Follow Up Measures Operation Reforestation Plan (including Sponsor During Construction dumps) and Follow Up Water quality monitoring Sponsor Some testing daily, monthly, program others annually Contingency plan (including fire Sponsor Prior to operation and spills) Ecological flow maintenance Project operator Permanent and sponsor Abandonment plan Sponsor Prior to abandonment 48  11\. Social Analysis (Risk Level: Low) 11\.1 Social Sensitivity Regarding social aspects, the project will not generate involuntary resettlements\. Due to its mostly underground aqueducts, the project will not produce large impacts on landscape value\. About 1200 employments will be generated for the construction phase (3 years) and 15 employments will be generated for later operation and maintenance\. This positive social impact was not properly considered during the EIA, even though unemployment and poverty at the zone are relatively high particularly at Rio Blanco, the nearest town from the project area of influence\. 11\.2\. Social Baseline Summary Location The project will be located in the fifth region of Chile, province of Los Andes (18\.7% of regional territory), commune of Los Andes (7\.3% of regional territory)\. Area of Influence The area of influence is located on the west slopes of the Andes mountain chain, with very limited human settlements due to lack of flat land, poor soil quality and relatively extreme climate\. The local economy is based on seasonal grazing activities (livestock of about 1500 heads) and mining (CODELCO - Andina copper company)\. Soil categories correspond to categories V (poor agricultural potential) to VIII (no agricultural potential)\. Population has access to electricity and potable water\. A sewer system does not exist yet, but the government has designed a project for the town of Rio Blanco, which is scheduled for implementation in 2005\. Infrastructure facilities near the project area of influence include a police station, a station of the National Border Department, a shelter of the Department of Road Maintenance, one installation of the Public Service for Agriculture (SAG), a meteorology station, 8 to 10 residences on both sides of the Saladillo River bridge, 3 military settlements, route Ch6O (Los Andes - Mendoza), "Transandino" railway (not in operation), high voltage lines, bus stops and 3 road shelters for avalanche protection\. Use of River Water by Local Communities Agricultural use of water becomes important only downstream of the area of influence\. Natural tributaries of the Juncal River and their touristic value will not be affected by the project\. Population, Education and Poverty Levels The commune of Los Andes has a young adult population of 60,177 inhabitants (INE, 2002), corresponding to 3\.9% of regional population\. According to CASEN 2000, monthly income per household of the commune corresponds to CLP 471,607 (about US$750/month)\. Poverty and extreme poverty reach 12\.9% and 5\.9% of communal population, respectively, compared to 15% and 6% at national level\. School attendance in the commune for people over 15 years old reaches 9\.7 years\. 49  Cultural and Archaeological Patrimony No relevant vestiges of historical or palaeontological patrimony, or national monuments were found\. A sculpture of the University of Valparaiso was identified near the Juncalillo tributary\. No archaeological evidence was identified other than the remains of the disintegrated foundations of an indigenous construction (Tambo)\. Four small religious places in remembrance of deceased persons were found\. Social Responsibility of HGV HGV has been participating systematically in several social activities, improving life quality of local communities in the area of HGV projects on River Aconcagua\. The following examples can be mentioned: - Financial support for local cultural organizations such as Club de Huasos - Construction of a bus stop - Aid (gifts and financial support) to local schools on Christmas - Transportation of people from local communities for cultural and educational activities - Transportation of patients on HGV's ambulance - First Aid assistance for local community - Use of HGV's football field and swimming pool by the local community - Organization of football matches between the local community and HGV staff - Church restoration HGV has also developed a communication strategy in order to support and promote GHG reductions in the Chilean market by offering CDM project development as a service based on the experience they gained with the Chacabuquito and Homitos projects\. In this regard, HGV has been already supporting another run-of-river project in the 8th Region of Chile by Colbun S\.A\. (the 3rd largest electric provider of the SIC), called Quilleco, for which a World Bank Project Appraisal Document is currently being developed\. The sponsor has also been participating in different seminars and workshops with several public and private organizations such as SOFOFA, CORFO, CONAMA, DUOC, CORMA, among others, to share their experience with CDM projects\. 11\.3\. Social Impacts (see Table A\.22) Positive Impacts: The most important impact of the project will occur during its 3-year construction phase\. It will create about 1,200 temporary and 15 permanent jobs that will improve the local economy\. Energy generation will contribute to national development\. Use of water only becomes important downstream of the project area of influence, and the project would benefit agricultural use, due to additional regulation of water flows\. Negative Impacts: During the 3-year construction phase of the project, the temporary negative impacts of the project include alteration of grazing activities, alteration of landscape value and increase of heavy truck traffic\. No permanent negative social impacts were identified\. 50  Risks: projects risks include possibility of archaeological chance finds during construction\. damage to small religious places and possible alteration of indigenous ruins indicated above\. Road damage caused by heavy truck traffic is also considered a risk\. Table A\.22: Potential social impacts of the project: Social impact Magnitude Comments The project will generate employment (some Employment generation High (+) permanent), and several local companies will benefit\. Water use Negligible (+) No limitation in current water use\. Some additional regulation of water flows\. Cattle herding Negligible a Very lnimited, temporary impact on grazing Cattle herding Negligible ~~activities\. Archeological finds and Low Specific measures included in EMP\. religious sites 11\.4 Consultation Process The ELA report includes a section on the public consultation process, wherein the groups consulted and their comments are detailed\. The EIA report is available at the HGV offices and at the office of the project implementation unit\. Consultation was conducted during the EIA through announcements in local newspapers in accordance with the EIA System established by Chilean law (Ley 19\.300 and Decreto Supremo 95)\. A workshop attended by about 50 participants (26 of them representing local communities) took place on August 1, 2003\. From a total of 79 explanation requests and personal objections to the project made by 15 local inhabitants within the consultation phase of the EIA, 39 requests (50%) were found to be associated to social aspects\. All objections and questions posed by the audience were assessed and officially cleared by the local environmental authority (COREMA) in a thorough way, even those queries resulting from a lack of information on the project\. Arguments included legal compliance, where applicable\. Suitable mitigation, reparation and compensation measures are considered for minor impacts during construction and operation phases on life quality, particularly in relation to grazing activities during the dry season\. Special attention has been given by both CONAMA and HGV to sites with potential cultural or landscape value\. Two zones with potential archeological value, considered originally for materials disposal sites, were excluded from the area of influence and HGV has committed itself to take specific measures to protect them\. Protection of livestock from stress generated by use of explosives during tunnel construction was not considered relevant, 51  since no operation will be executed near permanent grazing zones\. Nevertheless, construction of two corrals is considered as an additional compensation measure\. Concern about generation of electromagnetic fields by electric lines and its impacts on population or animals has no solid scientific background, according to CONAMA\. In any case, radiation from lines is considered low at ground level\. No residences will be located less than 60 mt from the lines\. 11\.5\. Measures to Mitigate Negative Social Impacts and Risks Specific Measures Every single impact and risk was assessed by the local environmental and social authorities and discussed in detail with the sponsor and third parties involved\. Specific measures were defined for each case, including the following: - Suitable signaling of cultural, religious and archaeological patrimony - Immediate stopping of works in case of archaeological chance finds and informing the cultural authority - Protection and signaling of all existing religious places - Protection, signaling, creation of photography archive and permanent vigilance of existing indigenous foundations - Warning of shepherds before use of explosives - Adaptation of surface of materials disposal sites to natural topography - Closing of roadways built for project construction 12\. Recommendations on Social and Environmental Aspects The following recommendations were discussed and agreed upon with the sponsor, in addition to measures contained in the EMP: a) Social responsibility activities implemented under the project should be integrated as part of a corporate social program of HGV in order to take strategic advantage of positive impacts on local communities\. Definition and monitoring of a corporate social policy would be helpful\. b) An independent monitoring mechanism, including definition of indicators for each specific environmental commitment in the EMP, should be established for both the construction and operation phases in order to ensure fulfillment of environmental and social commitments\. If third parties are contracted for this purpose (as for the construction phase), HGV should define a suitable communication mechanism to have permanent access to environmental and social information\. c) HGV should keep updated environmental and social records generated from the above mentioned control mechanism, in order to demonstrate fulfillment of commitments not only to the World Bank, but to local communities and environment authorities, lowering risks of social origin\. Those records will help assess the efficiency and adequacy of 52  environmental and social commitments\. This assessment should be defined in terms of frequency and HGV staff involved\. d) Since the monitoring mechanism will apply to the construction phase, it should be included in the document "Especificaciones Tecnicas Generales - Especificaciones Ambientales y de Seguridad", which defines environmental responsibilities for contractors\. e) A picture archive of baseline conditions would help to avoid links between the project and previous environmental impacts\. 13\. Safeguard Policy Issues Safeguard policies triggered by the project and provisions made by the project to ensure compliance with these policies are described in the EIA (on project file) and summarized in Table A\.23\. Table A\.23: Compliance with World Bank Safeguard Policies Is Policy triggered? Main Environmental Safeguard Policy Y/N and/or Social Issues Environmental Assessment (OP Y Hydropower project\. 4\.01) Forestry (OP 4\.36) N Involuntary Resettlement (OD N 4\.30) Indigenous Peoples (OD 4\.20) N Project will have a small Safety of Dams (OP 4\.37) Y reservoir to regulate water flow downstream, with a 6\.5m high retaining wall Pest Management (OP 4\.09) N Cultural Property (OPN 11\.03) Y Possible archeological sites Natural Habitats (OP 4\.04) N Projects in Disputed Areas (OP N 7\.60) International Waterways (OP N 7\.50) 53  O\.P\. 4\.01 - Environmental Assessment Risk Level: Low Site sensitivity to project implementation and operation activities can be classified as low to medium\. There are no critical natural habitats in the project's area of influence\. Water uses for agricultural purposes downstream from the project will not be affected\. Erosion risk is low, since general geomorphology of the influence area is very rocky\. The project will not generate involuntary resettlement and no indigenous people will be affected\. Specific and suitable protection, mitigation and follow up measures for protection of the few vegetal and animal species present in the project's area of influence are clearly defined in the ETA and Environment Resolution\. The project sponsor has experience in complying with World Bank Group environment policies\. Construction-related mitigation measures will be included in construction contracts\. O\.P\. 4\.37 - Safety of Dams Risk Level: Low The project contemplates the construction of a small water reservoir (178,000m3) with a 6\.5 m retaining wall\. This height is much lower than the 15\.0 m triggering limit established in OP 4\.37, so no formal dam safety plan is required\. Yet, the project sponsor has taken a number of safety measures, including: reservoir design with specialized software in compliance with safety norms and with particular attention to seismic risk; yearly maintenance plan of civil works and hydro- mechanical devices; inspections in case of extraordinary events such as earthquakes or unusual floods; and organization for definition and implementation of corrective measures as necessary\. A wall failure study was conducted considering different failure scales and reservoir levels, to assess the related impacts on downstream flows; as there are no settlements along the first 14 km downstream from the reservoir, the study showed that there would be no significant impacts in the worse case scenario of wall failure\. O\.P\. 11\.03 - Cultural property Risk level: Low Sites with potential cultural value, initially considered for material disposal sites, were excluded\. HGV has committed itself to take specific measures to protect possible archeological findings during project construction\. The EMP includes specific measures to protect archeological chance finds during project construction, including mainly the following: delimitation and vigilance of specific zones, under supervision by an archeologist; photographic file during works; report on site condition before and after works to the Council of National Monuments; dispositions to report and address archeological chance finds during excavations, including immediate suspension of works in case of archeological chance finds\. 14\. Project processing Concept Review: October 15, 2002 ISDS to Infoshop: April 7, 2003 Letter of Intent signed: July 3, 2003 EIA to InfoShop: September 6, 2003 QER review: September 24, 2004 Appraisal departure: October 15, 2004 PAD approval by CMU: December 20, 2004 54  Signing of ERPA: January 15, 2004 (tentative) Project commissioning: Mid 2007 (tentative) First Payment for ER: Early 2008 (tentative) 15\. Documents in project file 1\. Chile - Power Sector Baseline and Monitoring Methodology 2\. Homitos Project Idea Note (PIN) 3\. Hornitos Project Concept Note (PCN) 4\. Hornitos Project Design Document (PDD) 5\. Hornitos Letter of Intent 6\. Hornitos Letter of Approval 7\. Hornitos Draft ERPA 8\. Homitos Feasibility Study 9\. Hornitos Environmental Impact Assessment (EIA) 10\. Hornitos Environmental Qualification Resolution (Resoluci6n de Calificaci6n Ambiental, RCA) 11\. Evaluaci6n Socioambiental del Proyecto de Homitos (M\. Fadda and P\. Hevia, Consultores) 12\. 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APPROVAL

P176034

The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) Combined Project Information Documents / Integrated Safeguards Datasheet (PID/ISDS) Appraisal Stage | Date Prepared/Updated: 27-Apr-2021 | Report No: PIDISDSA31623 Page 1 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) BASIC INFORMATION OPS_TABLE_BASIC_DATA A\. Basic Project Data Country Project ID Project Name Parent Project ID (if any) Argentina P176034 Matanza Riachuelo Basin P105680 Sustainable Development Project Second Additional Financing Parent Project Name Region Estimated Appraisal Date Estimated Board Date Matanza-Riachuelo Basin LATIN AMERICA AND 28-Apr-2021 31-May-2021 Sustainable Development Project CARIBBEAN Practice Area (Lead) Financing Instrument Borrower(s) Implementing Agency Environment, Natural Resources Investment Project Argentine Republic Unidad Coordinadora & the Blue Economy Financing General del Proyecto (UCGP), Ministry of Interior, Public Works and Housing Proposed Development Objective(s) Parent The overall development objective of the proposed APL program supports the Government's Integrated Basin Cleanup whilesimultaneously improving sanitary conditions along the banks of La Plata River and providing a long-term and cost-effectivesolution for safe disposal of wastewater from the Buenos Aires Metropolitan Area (AySAs concession area)\. The two stage APL programthat contributes to this objective and the allocation of works and activities under each APL has been specifically designed toensure that APL-1 can be free-standing, with no stranded assets at the end of the first stage\. The project (APL-1) development objectives contribute to the overall program development objective by (i) improving sewerageservices in the M-R River Basin and other parts of the Province and City of Buenos Aires by expanding transport and treatmentcapacity; (ii) supporting a reduction of industrial discharges to the M-R River, through the provision of industrial conversiongrants to small and medium enterprises; (iii) promoting improved decision-making for environmentally-sustainable land use anddrainage planning, and piloting urban drainage and land use investments, in the M-R River Basin; and (iv) strengthening ACUMAR#sinstitutional framework for ongoing and sustainable clean-up of the M-R River Basin\. Components Sanitation Industrial Pollution Abatement Environmental Territorial Management Institutional Strengthening and Project Management Page 2 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 265\.00 Total Financing 265\.00 of which IBRD/IDA 265\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 265\.00 Environmental Assessment Category A-Full Assessment Decision The review did authorize the team to appraise and negotiate B\. Introduction and Context 1\. This PID provides information on a proposed a second Additional Financing (AF) in the amount of US$265 million to the Argentine Republic for the Matanza-Riachuelo Basin Sustainable Development Project (P105680)\. The proposed AF will cover the financing gap for Components 1 and 4 of the project\. The AF will not modify the Project Development Objective (PDO) and intermediary results indicators and their target values, implementation arrangements, environmental assessment category, or safeguard policies triggered\. The proposed AF will modify the Results Framework (RF) by adding two new intermediary result indicators to measure gender impacts of selected project activities\. Along with this second AF, the project´s closing date will be extended from March 31, 2022 to September 30, 2024 to allow satisfactory completion of all project activities\. Country Context 2\. The coronavirus disease 2019 (COVID-19) outbreak hit Argentina at a time when its economy faced significant macroeconomic imbalances and a highly uncertain outlook\. Following a two-year recession, high inflation, and lack of access to capital markets, the strict lockdown imposed to contain the spread of the pandemic triggered the sharpest gross domestic product (GDP) monthly decline ever recorded in the seasonally adjusted series from March to April 2020\. From the third quarter onward, the Government of Argentina (GoA) gradually eased confinement measures, allowing economic activity to pick up at a higher pace than previously expected\. Indeed, GDP fell 9\.9 percent in 2020, below the 12\.5 percent decline forecasted by the authorities in the context of the Budget bill adopted in September 2020\. The implementation of a fiscal stimulus package to support families and firms—equivalent to 3\.5 percent Page 3 of 21 The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) of GDP1—coupled with an abrupt decline in revenues resulted in a central government (primary) deficit estimated at 6\.5 percent of GDP in 2020\.2 In a context of restricted market access, financing the response to the COVID-19 shock required an important monetization of the deficit\. This has exacerbated macroeconomic imbalances, notably by exerting pressures on reserves and on the persistent large gap between the official and parallel exchange rates\. However, this pressure has been receding since the last quarter of 2020\. 3\. In September 2020, the GoA managed to restructure the sovereign debt denominated in foreign currency\. The restructuring was agreed by creditors holding 99 percent of the bonds under external and domestic law\. It significantly reduced debt service obligations in the medium term, by shifting the bulk of external debt service payments to beyond 2026, creating much-needed fiscal space in the context of the recovery from the crisis\. 4\. The unprecedented economic contraction has had a severe impact on poverty and employment\. Labor market statistics point to a sharp fall in total employment (from 42\.2 to 33\.4 percent) between the first and the second quarters of 2020\.3 The partial regularization of the labor market in the third quarter led to a gradual recovery of the employment rate to 37\.4 percent\. The impact on unemployment was relatively moderate—an increase of 2\.7 percentage points (p\.p\.) in the second quarter—as an important share of workers ceased looking for jobs during the lockdown, leading to a massive fall in the activity rate from 47\.2 to 38\.4 percent\.4 The fiscal emergency measures were effective in mitigating the impact of the economic crisis on the most vulnerable\. Still, poverty and extreme poverty—at 40\.9 percent and 10\.5 percent of the population, respectively—reached their highest levels since 2016 in the first semester of 2020\. 5\. Real GDP shrunk by 9\.9 percent in 2020 and is projected to partially recover by 6\.4 percent in 2021\. Economic recovery has gradually picked up as containment measures are progressively lifted, building on the economy’s ample idle capacity\. Uncertainty as well as price and capital controls might limit investment growth, while the imperative to bring down the fiscal deficit limits the scope for demand stimulus\. However, investment in construction has been highly dynamic since end-2020\. The rebound is expected to be only partial in 2021, and the economy is not projected to reach 2019 GDP levels before 2023\. There are important downside risks to this baseline scenario, notably related to inflation, which ended 2020 at an annual rate of 36\.1 percent, almost 18 p\.p\. lower than in 2019, yet has shown some signs of acceleration in the first months of 2021\. The 2021 budget foresees a reduction in the primary deficit from an estimated 6\.5 percent of GDP in 2020 to 4\.2 percent in 2021\. 6\. Despite the early and strict lockdown measures, the health impact of COVID-19 in Argentina has been severe\. The country ranked 3rd in the region and 12th in the world in the number of confirmed cases as of March 31, 2021\.5 Although the pandemic first hit the most populated parts of the country, with the 1 Fiscal cost of the COVID-19 stimulus package is based on the latest (October 2020) report of the Budget Congressional Office (Oficina de Presupuesto del Congreso)\. The figure of 3\.5 percent of GDP refers to the overall budget outlays to finance COVID-19- related expenditures\. https://www\.opc\.gob\.ar/covid-19/impacto-financiero-del-covid-19-al-5-de-octubre-2020/\. 2 Fiscal accounts for 2020 are based on National Public Sector cash statistics, which is used as a close proxy of accrued fiscal statistics that are usually released with some delay in the future\. https://www\.economia\.gob\.ar/onp/estadisticas/\. 3 INDEC labor market statistics\. e INDEC poverty statistics\. 5 https://www\.worldometers\.info/coronavirus/\. Page 4 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) Province of Buenos Aires (PBA) and the Autonomous City of Buenos Aires (CABA) representing around 90 percent of all accumulated cases back in August 2020, it has subsequently affected other provinces that now represent 47 percent of all accumulated cases\. Since November 2020, the speed of the spread has decreased, and as of March 25, 2021, there were 3,574 patients with COVID-19 hospitalized in intensive care units (ICUs), with an occupancy rate for all diseases of 55\.7 percent at the national level\.6 However, in Neuquén and Rio Negro, ICU occupancy rates are still higher than 80 percent\.7 Sectoral and Institutional Context 7\. The Matanza-Riachuelo (M-R) River is the most contaminated waterway in Argentina\. With an area of about 2,200 km2, its basin covers areas of 14 municipalities of PBA and the southeastern part of CABA\.8 Over the last hundred years, uncontrolled discharges of domestic and industrial wastewater and solid waste have increased steadily along with the urbanization and industrialization in the basin\. Limited basic infrastructure investment, weak environmental management, and poor urban and industrial planning have resulted in the most visible environmental pollution in the country\. The current sewerage system frequently overflows as it does not have adequate capacity to manage peak flows due to rapid urbanization, allowing untreated wastewater to contaminate surface and ground water bodies, as well as drainage systems, in particular during heavy rain periods and high water levels of the La Plata River\. These events are likely to become more common in the future due to climate change\. 8\. The M-R River Basin is home to the largest concentration of urban poor in the country, and they are disproportionately affected by the environmental problems\. Of its 4\.5 million inhabitants (or about 10 percent of Argentina’s population), about 1\.7 million (or 38 percent of the basin population) are living with Unsatisfied Basic Needs (Necesidades Básicas Insatisfechas, NBI) and are directly exposed and vulnerable to the pollution problems of the basin\.9 Considered among the poorest population in the basin, about 880,000 people reside in informal settlements that are often in flood-prone areas and/or near open garbage dumps with very limited access to basic services such as water supply, sanitation, and waste management\. During flood events, the sewage overflow brings contaminated water straight into these informal settlements, posing serious health risks, especially to children and vulnerable groups\. 9\. In the 1990s, the GoA launched several initiatives to address the pollution and flood issues in the M-R River Basin\. The implementation of these initiatives was continuously postponed due to legal, economic, and political reasons\. The lack of an institution with a clear mandate and accountability for action, combined with an inadequate institutional and legal framework to coordinate the involvement of different actors, was considered as the major obstacle to implement many initiatives\. The deteriorating environmental conditions and the lack of progress on the cleanup efforts caused a group of residents in the M-R River Basin to sue the GoA, PBA, CABA, and 44 industries in 2004 for damages of pollution to their health\. In response to the worsening situation and as part of the court ruling, Autoridad de Cuenca Matanza Riachuelo (ACUMAR) was created in 2006 to help coordinate efforts among different government agencies and to regulate, control, and promote industrial activities, public services, and any 6 https://www\.argentina\.gob\.ar/salud/coronavirus-COVID-19/sala-situacion\. 7 Data from the Health Ministry, as of March 25, 2021\. 8 The 14 municipalities are Lanús, Avellaneda, Lomas de Zamora, Esteban Echeverría, La Matanza, Ezeiza, Cañuelas, Almirante Brown, Morón, Merlo, Marcos Paz, Presidente Perón, San Vicente, and General Las Heras\. 9 ACUMAR data on population residing within hydrologic boundaries of the basin\. The NBI is a method of measuring poverty which uses indicators related to people’s basic needs, namely shelter, sanitation, education, and minimum income\. Page 5 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) activity that has an environmental impact on the basin\. Its board includes representatives from the GoA, PBA, and CABA\. 10\. Responding to the complaints by neighbors in 2004, a Supreme Court ruling in 2008 required the GoA to prepare and implement an M-R River Basin Integrated Cleanup Plan (Plan Integral de Saneamiento de la Cuenca Matanza-Riachuelo, PISA)\. The plan has the objective to improve the quality of life of the basin residents; restore the basin’s air, water, and soil environment; and prevent future environmental damages\. Since then, the Supreme Court has actively supervised the implementation of PISA\. At its request, the national Ombudsman has established a permanent working group with civil society representatives to engage grassroots organizations and monitor the implementation of the ruling\. Routine hearings have been organized where petitioners have raised concerns over the GoA’s progress and accountability in implementing PISA\. All these have made the cleanup of the basin a national priority, with a top ranking on policy agendas of all concerned governments\. 11\. Since 2009, ACUMAR has been coordinating the implementation of PISA by different jurisdictions10\. Between 2010 and 2019, PISA invested over ARS 96 billion to expand drinking water and sewage networks, provided affordable housing to residents in informal settlements, improved water resource management, built necessary roads, removed waste dumps to maintain river banks, and strengthened health systems\. PISA implementation is monitored through a series of publicly available indicators\.11 12\. To help finance the implementation of PISA, the GoA requested World Bank support for the Matanza Riachuelo Basin Sustainable Development Project with a focus on managing and reducing water pollution from domestic sewage and industrial wastewater\. Domestic sewerage is estimated to contribute for about 80 percent of the organic pollution, and industrial wastewater accounts for almost all toxic discharges in the M-R River\.12 C\. Proposed Development Objective(s) 13\. PDO\. The PDOs have not change and are to: “(a) improve sewerage services in the M-R River Basin, and other parts of the PBA [Province of Buenos Aires] and the CBA [Autonomous City of Buenos Aires] by expanding transport and treatment capacity; (b) support a reduction of industrial discharges to the M-R River, through the provision of CRI [Industrial Conversion Agreements by its initials in Spanish Convenio de Reconversión Industrial] Grants; (c) promote improved decision-making for environmentally- sustainable land use and drainage planning, and to pilot urban drainage and land use investments, in the M-R River Basin; and (d) strengthen ACUMAR's [M-R River Basin Authority by its initials in Spanish Autoridad de Cuenca Matanza Riachuelo] institutional framework for the ongoing and sustainable clean- up of the M-R River Basin\.â€?13 10 Argentina, the City of Buenos Aires, the Province of Buenos Aires and 14 municipalities in the Province of Buenos Aires\. 11 Over the years, indicators have changed, and some have shown significant progress (such as those related to wastes management and drinking water connections) while others have made limited progress (such as the quality of life index and people exposed to contaminants)\. https://www\.acumar\.gob\.ar/indicadores/ 12 https://www\.acumar\.gob\.ar/ultimas-noticias/efluentes-cloacales-riachuelo/ 13 It should be noted that the datasheet and section VIII of this paper include the Program and Project Development Objectives statements from the Project Appraisal Document (PAD), which is different from the PDO used in the LoA\. As this Project Paper Page 6 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) 14\. PDO indicators\. The PDO indicators are: (a) Annual discharge of sewage adequately treated from the Riachuelo System; (b) Volume of COD (chemical oxygen demand) pollution load reduction achieved under the project; (c) Number of enterprises in the matching grants program that have reduced their discharge loads according to their PRIs (Planes de Reconversion Industrial); (d) Development of a Flood Contingency and Emergency Response Plan for the Basin; and (e) ACUMAR is fully staffed against its new organigram, operates with its own operating budget and is fully able to fulfill the functions vested in it by law\. D\. Project Description 15\. Project components\. The project has the following four components: Sanitation, Industrial Pollution Abatement, Environmental Territorial Management, and Institutional Strengthening and Project Management\. 16\. Component 1: Sanitation\. This component supports the construction of sanitation infrastructure for the collection, conveyance, treatment, and appropriate disposal of domestic wastewater within the concession area of Agua y Saneamientos Argentinos (AySA)\. As shown below, this component finances four major works contracts and their associated engineering supervision contracts\. Of these contracts, the first three contracts are supporting the development of a new mega sewerage infrastructure—the Riachuelo System—to augment AySA’s capacity to provide better coverage and quality of sanitation and wastewater treatment services in the basin and AMBA, thus decreasing sewerage discharges to the M-R River and improving the environmental conditions of the basin and the quality of life of its residents\. The four major works contracts are as follows: (a) The Left Bank Collector (LBC) (Lot 1 Contract), including 16\.2 km underground sewerage collectors, 12\.6 km of secondary collectors, and complementary works on the left bank of the M-R River to convey the sewerage from AySA’s concession area to the Riachuelo Wastewater Treatment Plant (WWTP) in Dock Sud\. (b) The Riachuelo WWTP (Lot 2 Contract)\. This contract includes a WWTP with inflow and outflow pumping stations that will receive raw sewage from the LBC (Lot 1) and provide preliminary treatment and then transfer the treated wastewater to the Riachuelo Outfall (Lot 3) for final disposal\. These works were fully appraised during preparation and were part of World Bank financing\. In 2011, at the GoA’s request, this contract was converted to a contract fully financed by the Government\. As a critical part of the Riachuelo System, the implementation of this contract has been under World Bank supervision throughout project implementation\. does not include a restructuring to reconcile the differences, the PDO statement in the Loan Agrement (LoA) is used in this paragraph\. Page 7 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) (c) The Riachuelo Outfall (Lot 3 Contract)\. This subfluvial outfall consists of a 12 km long tunnel 40 m below the riverbed of the La Plata River\. It will discharge treated sewerage from the Riachuelo WWTP into the La Plata River\. (d) The Sludge Treatment Plant of the Southwest WWTP\. This contract is not a part of the Riachuelo System\. The treatment plant will treat the sludge generated from the operations of the Southwest WWTP to reduce pollution load and the volume of sludge to be disposed from the WWTP\. 17\. Component 2: Industrial Pollution Abatement\. At design, this component provides technical and financial support to help ACUMAR improve industrial pollution monitoring and enforcement and thus promote environmental compliance\. This component includes a matching grant program to help small and medium enterprises (SMEs) reduce their pollution discharges and comply with environmental regulations\. Currently, Component 2 is supporting two works contracts and its associated supervision contract: (a) the development of a Tannery Industrial Park (TIP) and accompanying infrastructure in the Municipality of Lanus and (b) the construction of the industrial WWTP (IWWTP) for the TIP\. These investments will help manage pollution discharges from the tannery sector, a major source of industrial wastewater in the basin\. 18\. Component 3: Environmental Territorial Management\. This component supports ACUMAR to improve its decision-making capacity for environmentally sustainable territorial planning and flood management in the basin\. In addition, it finances pilot interventions to improve water and sanitation infrastructure in low-income urban areas, including (a) Drinking water infrastructure in the city of Cañuelas, benefiting nearly 12,000 residents; (b) Water and sewerage works in the city of Marcos Paz, benefiting 45,000 residents; and (c) Water, sanitation, and drainage networks for about 25,000 informal settlements in Villa 21– 24 in CABA\. 19\. Component 4: Institutional Strengthening and Project Management\. This component supports (a) ACUMAR to strengthen its institutional capacity for effective implementation of PISA and (b) the Project Implementation Unit (Unidad Coordinadora General de Proyecto, UCGP) to carry out project management activities\. E\. Implementation 20\. The implementation arrangements remain the same; the project coordinating unit (UCGP) under the Ministry of Public Works (MOP) that remains as the implementing agency of the Matanza Riachuelo Sustainable Development Project, its first AF and the proposed second AF\. Under Component 4, the UCGP has maintained its key staff throughout project implementation\. With increased capacity over the years, UCGP has managed well the implementation of all project activities and the coordination among ACUMAR, AySA and other stakeholders of the project\. 21\. Project implementation has sustained momentum after the approval of the first AF\. The progress toward achieving the PDO and implementation performance continue to be rated Moderately Page 8 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) Satisfactory\. As of March 31, 2021, the World Bank has disbursed a total of US$876\.0 million (91 percent of World Bank financing): US$707\.5 million out of the US$718\.0 million of the original loan and US$168\.4 million out of US$245 million of the first AF loan\. 22\. PDO indicators (c), (d) and (e) of the project have already been achieved satisfactorily\. With this AF’s support to Component 1 activities, PDO indicator (a) will be achieved after the operation of the Riachuelo System\. In addition, the operation of the Riachuelo System and the IWWTP under Component 2 will help reduce organic pollution loads discharged from domestic and industrial sources to the M-R River, and thus help achieve PDO indicator (b)\. These remaining works are expected to be completed within the new project timeframe\. \. F\. Project location and Salient physical characteristics relevant to the safeguard analysis (if known) The project's area of influence is quite large, with most of the proposed investments and programs to be located within the Matanza-Rriachuelo Basin (MRB), the AySA concession area and the La Plata River, all within the City and Province of Buenos Aires\. The project's area of influence involves the following (often overlapping) areas: (i) the entire MRB; (ii) the entire AySA concession area; (iii) the reaches of the Lujan River, from the mouth of the Reconquista River to its confluence with the La Plata River; (iv) the reaches of the La Plata River between the coast and the outer limit of the so-called "Parana de las Palmas Flow Corridor"; and (v) the coastal section between the coast of the La Plata River, the neighborhood access road to the river at approximately 14,000 m southeast of the boundary of the General Belgrano plant site, the Boca railroad, and the boundary between the districts of Quilmes and Berazategui\. Key considerations relating to the physical location and characteristics of the project area include the large number of poor and vulnerable communities that live in close proximity to the MRB and who are most exposed to the uncontrolled and untreated discharges; the specific water quality characteristics of the MRB and the La Plata River; and the international riparian issues relating to the La Plata River\. G\. Environmental and Social Safeguards Specialists on the Team Santiago Scialabba, Social Specialist Maria Emilia Sparks, Social Specialist Federico A\. Scodelaro, Environmental Specialist Elba Lydia Gaggero, Environmental Specialist Eleonora Beatriz Camalli, Social Specialist Alicia Josefina Gesino, Environmental Specialist Page 9 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) SAFEGUARD POLICIES THAT MIGHT APPLY SAFEGUARD _TBL Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/BP 4\.01 Yes Performance Standards for Private Sector No Activities OP/BP 4\.03 Natural Habitats OP/BP 4\.04 Yes Forests OP/BP 4\.36 No Pest Management OP 4\.09 No Physical Cultural Resources OP/BP 4\.11 Yes Indigenous Peoples OP/BP 4\.10 No Involuntary Resettlement OP/BP 4\.12 Yes Safety of Dams OP/BP 4\.37 No Projects on International Waterways Yes OP/BP 7\.50 Projects in Disputed Areas OP/BP 7\.60 No KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT OPS_SAFEGUARD_SUMMARY_TBL A\. Summary of Key Safeguard Issues 1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts: As the proposed AF will provide resources to cover the financing gap of ongoing project activities, it will not change safeguard issues and potential impacts of the project\. The safeguards review confirmed that all the contracts that would be supported by the AF, particularly the Lot 2 Contract, are an integral part of the Riachuelo System, fully assessed at appraisal of the original project and covered by its safeguard instruments, all of which have been disclosed, consulted and continually implemented in accordance with the Bank’s safeguard policies\. Overall, the environmental benefits of the project are expected to outweigh the environmental costs of the project\. Its expected benefits include: (a) improved quality of life for MRB inhabitants; (b) improved sewerage and drainage services in the MRB and other parts of the City and the Province of Buenos Aires by enabling the expansion of coverage of the sewerage network, especially in poor and marginal areas; (c) improved environmental quality of rivers and tributaries crossing the urban area and the Rio de la Plata through investments in industrial pollution control and management; and (d) improved urban living conditions associated with territorial development and flood risk management in the MRB\. The project poses potential environmental risks during both the construction and operation phases\. A summary of all Page 10 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) potential environmental impacts, risks, mitigation and management measures is presented in Annex 10 of the project's PAD (https://documentos\.bancomundial\.org/es/publication/documents- reports/documentdetail/237751468199768944/argentina-matanza-riachuelo-basin-sustainable-development- project)\. During the construction phase, the main environmental risks are associated with the management and control of temporary risks of the construction of the various large-scale, complex civil works to be carried out under component 1 (Sanitation)\. These risks include the usual potential impacts associated with large scale construction, such as dust and noise emission; handling and disposal of hazardous materials at construction sites; potential of erosion and sedimentation near sensitive water bodies; handling and disposal of tunnel’s excavation materials from underground works; large amounts of soil movement; local disruption of traffic flows; and occupational health and safety issues\. Works under component 1 do not anticipate any significant negative impact on physical cultural resources; however, the ESMPs includes (and, accordingly, related contracts include) procedures and requirements associated with chance finds\. During the operational phase, environmental risks include those associated with the potential increased contamination of the Rio de la Plata due to the operation of the sub-aquatic outfall (models developed for the outfall indicate, however, that the discharge plume is expected to be fully contained within a relatively small area of the receiving waters and thus not affecting coastal zones nor producing significant damaging effects); nuisance noise and odor associated with the wastewater treatment plant operations (although it will be located in the Dock Sud zone, in an isolated area quite far from the closest houses and urbanization); and disposal of the solid wastes generated by the treatment plant\. None of the adverse potential impacts have been assessed as irreversible and can be mitigated with well-known mitigation actions\. Environmental risks and potential impacts associated with components 2 (Industrial Pollution Abatement) and 3 (Environmental Territorial Management) are, by their nature, much less significant\. Adverse impacts will mostly be associated with small- and medium-scale construction of civil works\. The main anticipated potential adverse impacts related to activities of these components include noises; vibration; exhaust emissions from machinery; dust emission and dispersion from excavation activities; disruptions in normal urban movement (traffic and pedestrian); and safety issues\. None of these potential impacts is anticipated to be significant\. In addition, civil works involved in certain sub- projects may affect a small number of houses in informal settlements, or potentially restrict the use of private land\. To date, only one set of works has triggered the need for an ARAP as defined under the RPF\. This ARAP was approved and disclosed by the Bank on July 17, 2019\. However, the ARAP has not been implemented as there is ongoing consultation with one household regarding the sufficiency of the compensation\. This process has been delayed because of the COVID-19 pandemic and will be fully implemented before any works affecting these households begin\. Foreseen works and complementary interventions in components 2 and 3 do not anticipate any significant negative impact on physical cultural resources; however, any environmental analyses, as part of the as part of the corresponding ESMFs, specifically includes consideration of physical cultural resources: all sub-projects' ESMP and related construction contracts will include procedures and requirements related to chance find management\. Some of the identified potential impacts of project activities are of a social nature\. For the works contracts, temporary social impacts expected during the construction phase include restriction of access to some public areas, increased transit of trucks to the trenches and collector sites etc\. For large works under component 1, the proposed construction methods - mainly pipe jacking and tunneling - have been explicitly designed to avoid potential resettlement issues and minimize such social impacts\. In addition, pipe routes have been selected to be located in public areas and will not impact private property\. Regarding potential impacts of tunneling works (drilling, tunneling or other works that cause vibrations and may impact surrounding structures) there is a monitoring and mitigation plan in place\. Following a baseline of structures, regular monitoring has been performed throughout construction\. The monitoring within a year after construction will be managed by the contractor and supervision firms\. After that, the monitoring will be managed by AySA\. All complaints related to construction activities, including tunneling, have been registered and Page 11 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) managed through the GRM channels of AySA and ACUMAR\. Concerns have been raised mainly on construction impacts of the wells areas of the left bank collector of the Lot 1 contract and resolved satisfactorily\. No other concern has been raised in other areas along the alignment of the tunnels so far\. No adverse impacts or issues that were not previously identified as of potential occurrence have appeared during project implementation; risk and impacts have been successfully managed with the safeguard instruments developed for the project\. Given the complexity and the visibility of the project, the client has implemented ongoing consultation activities with a wide range of stakeholders, both during project preparation and ongoing into implementation\. These consultation activities include formal engagement with roundtables established under a court order to provide citizen engagement in the larger execution of the PISA, of which this project partially finances some key activities, consultations with the cross-border CARP with Uruguay, and ongoing receipt of public comment through various websites (www\.aysa\.com\.ar and www\.acumar\.gob\.ar)\. There have also been public meetings to discuss project implementation and gather feedback, though these have moved online due to the COVID19 pandemic since March 2020\. The client has also deployed a large communications campaign from the beginning of the preparation of the original project in 2008 to alert citizens and stakeholders to what the project is doing, all the more to allow them to then engage in and be informed for ongoing consultations\. In addition, in July 2020 the stakeholder engagement process included the creation of a Matanza-Riachuelo Basin Environmental Adequacy Network (RAAC), a multidisciplinary space made up of representatives of the public sector, civil society organizations, academic institutions and industrial leaders that also has its website (www\.raac\.com\.ar) where different stakeholders publish information on the activities financed by the project, as they key elements of the PISA\. 2\. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: As mentioned above, the long-term environmental impacts of the project are expected to be positive\. There would be some adverse but limited impacts associated with the operation of the treatment plant and subsequent discharges into the Rio de La Plata River\. The pollution loads are expected to affect a relatively small area of the Rio de La Plata River, especially given the very high dilution factors of the river\. As the project's area of influence is under intense urbanization and industrial development, the long-term success of the project will be determined, to a certain extent, by how successful governments will be able to control future growth and industrialization in highest risk areas and to regulate pollution from existing and future industries\. 3\. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts\. A variety of alternatives were considered for the sanitation component (component 1)\. These included the level of wastewater treatment, the length of the outfall, and the number and location of the wastewater treatment plants\. A summary of the description of the alternatives and the reasons for rejection of those that were not selected is presented in Annex 12 of the PAD\. In addition, during the negotiations of the original loan between the Government and the World Bank, it was agreed that prior to the construction of the proposed right bank collector (Colector Margen Derecha, CMD), the Government would carry out a prefeasibility study of alternatives through the water and sanitation utility of the Metropolitan Area of Buenos Aires (AySA)\. The prefeasibility study was carried out in 2010 and, instead of the construction of the CMD, it favored the alternative of advanced secondary treatment in four wastewater treatment plants from which effluents will be discharged into the M-R River to meet the water quality standards set by ACUMAR (“Decentralized Alternativeâ€?)\. An Expert Panel convened by the Bank reviewed the Prefeasibility Study and concluded that the decentralized alternative was a well thought-out proposal that could be supported by the Bank\. Page 12 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) An issue of major importance for the project is the choice, for the Riachuelo System, of a preliminary treatment of the wastewater coupled with the discharge of the effluent into the La Plata River through a long effective outfall (an “outfall systemâ€?)\. The decision to choose a lower over a higher level of treatment has been questioned in some stakeholder meetings\. However, the choice of this alternative is considered an effective strategy\. Discharges from the preliminary treatment plant will be further processed by the oxygenation capacity of the La Plata River into which it drains\. Choosing a higher level of treatment and a shorter outfall would not be fully justifiable (or sustainable) due to its inefficiency: it would be significantly more expensive and probably unaffordable both in terms of its capital investment as well as its operation and maintenance costs, while the alternative is equivalent, in terms of risks to humans and to the environment, to the selected alternative (preliminary treatment and long, effective outfall)\. These conclusions are based on the findings of mathematical modeling of the implications of the various alternatives on water quality of the La Plata River\. They are also consistent with the recommendation of the World Health Organization (WHO) that, from the public health standpoint of human exposure to wastewater, additional treatment higher than preliminary prior to the discharge does not reduce health risks\. That is to say, the health risk associated with a system comprised of preliminary treatment followed by a long effective outfall is identical to that from a system comprised of secondary treatment followed by a shorter effective outfall\. The WHO report refers to risk related to human exposure through bathing in the relevant zone of influence of the discharge, which is not exactly the potential risk in the case of discharge to the La Plata River; but as the main risk of effluent discharge is imposed by pathogenic organisms, the WHO exposure risk measure serves as a reasonable proxy\. For the industrial pollution component (Component 2), two alternatives were considered: (i) a high level of treatment of all industrial wastes and discharge of the effluents, except those which contain toxic matters, to the M-R river, and (ii) a lower level of treatment of all industrial wastes and discharge of the effluents, except those which contain toxic matters, to the municipal sewerage network for further processing together with domestic wastewater\. Alternative (i) was rejected since it was found, through mathematical modeling, that even after a high level of treatment, the discharge of industrial effluents to the M-R River will still render it anaerobic\. So that the only way to induce aerobic conditions in the river and recover its water quality is through Alternative (ii)\. Following that strategy and in the frame of the restructuring of the project, in 2015 the GoA prioritized the construction of a Tanneries Industrial Park (TIP) with an Industrial Wastewater Treatment Plant (IWWTP) in the Lanus Municipality, as part of component 2, that will enable treatment of 78 percent of tannery effluent in the basin\. The IWWTP will allow a proper treatment of the effluents with toxic matter as well as of the effluents with organic matter, which will be further processed with domestic wastewater\. 4\. Describe measures taken by the borrower to address safeguard policy issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. The environmental risks, impacts, and benefits of the project have been analyzed at two different levels using two closely related environmental assessment approaches\. The environmental impacts (both positive and negative) have been assessed through: i) a detailed seven volume EIA conducted for specific works proposed under component 1 (Sanitation); and, (ii) separate ESMFs prepared for activities to be carried out under component 2 (Industrial Pollution Abatement) and component 3 (Environmental Territorial Management)\. In addition to the EIA and the ESMFs, an Integrated Environmental Assessment (IEA) has been prepared which serves two purposes: first, it summarizes the main findings of the more detailed EIA reports; second, the IEA presents the overall regional context and strategic goals for the long-term recovery and management of the MRB in its entirety\. This has been a critical tool for broader consultations\. Page 13 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) At each site-specific level, a detailed EIA report was prepared for each of the major civil works that are being constructed under component 1 (for the main works of the Riachuelo System, volume IV, V and VI of the seven- volume EIA), including those corresponding to the decentralized alternative prioritized by the GoA\. Under component 2, the TIP and its IWWTP were screened applying the ESMF resulting in an EIA and its corresponding ESMPs\. The seven-volume EIA of component 1 was prepared under the general direction of the AySA Environmental Management Unit using independent environmental engineering consultants for key aspects of the analysis\. These assessments, which were coordinated with associated modeling and other technical evaluations, indicate the overall environmental viability of the proposed project activities\. The EIA provides a thorough assessment of the project’s environmental impact during the construction and operational stages for the project's main civil works\. The EIA for component 1 includes specific volumes on the general conditions and background of the project; a description of AySA’s corporate Master Plan (Plan Director); the proposed Riachuelo preliminary treatment plant; the pumping stations; the Riachuelo sub-aquatic outfall; as well as the Left Bank Collector (Colector Margen Izquierda)\. In addition, the EIA includes baseline data, legal and institutional capacity assessments, an ESMP and site-specific management measures\. The seven volume EIA was amended in 2016 to account for some changes in construction methodologies and the final engineering technical design of the left bank collector and outfall\. The Integrated Environmental Assessment was prepared under the overall guidance of ACUMAR and corresponds to a regional, basin-wide assessment of environmental risks and benefits\. The IEA describes the baseline conditions of the MRB, the legal and institutional setting and the strategic challenges and options that underpin the choice of the specific project components and investment activities\. This IEA was used to evaluate the regional strategic objectives of the project (including infrastructure works that belong to the PISA but that will not be financed through the project) and to provide a clear rationale for the project components that respond to these objectives\. The IEA also describes the structure of the project as a whole, including a detailed description of the environmental risks and benefits of the three project components and the institutional arrangements for implementing the Environmental Management Plan (EMP) for the project\. AySA is updating an EA report as part of project implementation\. A study ‘Estudio de Impacto Ambiental\. Emisario Subfluvial Planta Riachuelo\. Etapa Operativa’ is being undertaken by AySA to update the 2009 ‘Estudio de Impacto Ambiental del Plan Director de Saneamiento Obras Básicas en la Cuenca Matanza-Riachuelo, Volumen V: Emisario Subfluvial’\. The 2009 report modeled and assessed environmental impacts related to the construction and operation of the Riachuelo Outfall based on data available at that time\. The study is updating the modeling exercise to reassess the impact of the effluent discharge to the La Plata River based on 10 years of monitoring data collected by AySA\. This includes, among others, (a) water quality, hydraulic conditions, currents, and bathymetry of the La Plata River; (b) effluent quality based on actual operating and monitoring data of the newly constructed Berazategui WWTP, with similar characteristics as the Riachuelo WWTP; and (c) hydrometeorological data and related impacts on the La Plata River\. This study also considers the final locations and configurations of the elevated diffusers of the Riachuelo Outfall\. The new data will allow AySA to make a more accurate and realistic assessment of the impact of effluent discharges to the quality of water in La Plata River\. The initial findings of this study are consistent with the conclusions of the 2009 EA report\. As required by the Environmental Authority of the Province of Buenos Aires, the initial findings of the updated ESIA study were published on AYSA’s webpage in December 2020; a notification was sent by AySA to stakeholders (including pertinent government authorities and agencies, environmental NGOs and other civil society organizations, academia, among others) with the link to the study to invite them to share their comments and questions\. So far, AySA has not received any feedbacks on this study\. Once the final draft is finalized, it will be publicly disclosed and open to comments at the website of AySA (www\.aysa\.com\.ar/Que-Hacemos/Estudios-de-impacto-ambiental)\. It is important to highlight that the update is intended only to apply real-world data from the past ten years to the mathematical modeling in the study to confirm the originally assigned risks and impacts\. The final product will be published in the websites of AySA and of the World Page 14 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) Bank\. Since the beginning of the works under each component, the safeguards aspects are being managed through the implementation of the subproject-specific ESMPs\. The UCGP has systematically submitted (at least once every six months) progress reports on the implementation of the ESMPs of the works under execution, as well as of the AySA’s Social Engagement Plan, in a manner satisfactory to the Bank\. Also, systematic monitoring meetings, some of them specifically convened to discuss safeguard issues, and frequent supervision visits to works sites confirm that the social and environmental management of all subprojects have been so far implemented and monitored in full compliance with safeguards instruments\. The ESMPs are being implemented in a manner satisfactory to the Bank\. ESMPs include Occupational Health and Safety (OHS) programs which have been implemented as part of the plans\. Also, Argentinian applicable legislation on OHS requires a stand-alone OHS Plan in place, under the responsibility of a professional and the supervision of an Insurance Occupational Risks firm\. The Bank team performs a close supervision of OHS aspects, as part of the systematic review of advance reports on ESMPs, the periodic monitoring meetings, and the frequent visits to works sites\. The project has incorporated the Bank requirement on reporting and management of incidents (Environmental and Social Incident Response Toolkit, ESIRT), which was formally reflected in the third restructuring (approved by the Bank on April 29, 2019)\. So far, the project has had one serious OHS incident, which has been handled by following ESIRT requirements\. In addition, the OHS programs have been updated to include public and worker safety related to the ongoing COVID19 pandemic; all project related works and activities are being implemented under proper COVID-19 protocols, which consider current guidance on the matter of relevant organizations\. Social Assessment Process\. Given the complexity of the project, two complementary social assessments (SAs) were prepared for ACUMAR and AySA during project preparation (2008-2009)\. ACUMAR’s social assessment was a basin- wide study, describing the social base line conditions of the MRB; identifying stakeholder perceptions, positions, and influence on the project; highlighting the existing communication channels; pinpointing the overall social impacts; and assessing various social risks of the project\. AySA’s Social Assessment, on the other hand, explored the opinion of stakeholders about the proposed infrastructure works to be carried out by the company\. Both SAs were developed based on available project information and consultations with relevant stakeholders, including 45 meetings during project preparation with stakeholders including representatives of community organizations, NGOs, the industrial sector, provincial and municipal officials, professional associations and members of academia\. Stakeholders also participated in workshops and other consultation processes associated with the environmental instruments mentioned above, such as those for the presentation of the TOR’s for the seven-volume EIA and the draft EIA itself\. Based on the review of the Social Assessment carried out during the project preparation (2008-2009), AySA prepared a Communications Plan to produce clear and meaningful project information for all relevant stakeholders through publications, interviews, presentations in diverse forums, visits to the works, etc\. In 2015, AySA prepared an updated and improved Social Engagement Plan that comprises four components: i) Social participation; ii) Stakeholder Analysis; iii) Communication; and, iv) Independent Monitoring\. This new instrument received the Bank No Objection in January 2015 and is currently under implementation\. All environmental and social instruments are published in the AySA Website, as well as all the reports from public comment received through the different social engagement activities\. Also, AySA systematically submits to the Bank, twice a year, the advance reports on the implementation of its Social Engagement Plan\. Complementarily, ACUMAR launched its own Strategic Communication Plan in 2015, which established the guidelines for improved (in terms of transparency, responsiveness and openness) interaction with the public\. It has been implemented through an updated and upgraded Website (at www\.acumar\.gob\.ar), developed in modules and finalized in 2018, that includes, among Page 15 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) other aspects, Open Data and a functional Grievance Response Mechanism (GRM)\. Both ACUMAR and AySA have their own GRMs in place\. The GRMs are functioning and accessible to project-affected people through different modalities (telephone, email and institutional websites)\. During project implementation, risks associated with OP 4\.12 related impacts, linked to some projected complementary road works under the contract of Lot 3 appeared and were managed according to the RPF\. Specifically, an Abbreviated Resettlement Action Plan (ARAP) was prepared by the client and cleared by the Bank in 2019 to mitigate the impacts of an access road on three households and a firm\. The ARAP includes compensatory measures for the affected households and the firm\. However, the ARAP has not been implemented as there is ongoing consultation with one household regarding the sufficiency of the compensation\. This process has been delayed because of the COVID-19 pandemic and will be fully implemented before any works affecting these households and the firm begin\. The Borrower’s capacity to implement and achieve a successful environmental and social management as required for the project has been considerably improving during project implementation\. While, at the beginning, ACUMAR had some staff with very strong environmental and water resource management credentials, it did not have a stand-alone unit responsible for safeguards tasks under the project\. A subcomponent under component 4 was specifically designed to support any key activities identified in ACUMAR’s institutional strengthening plan and proved to be vital in the creation of needed capacities\. Today, ACUMAR has several dedicated units with specialized staff, such us the Social Participation Directorate, the Environment Directorate, the Social Policy and Management Directorate, among others, that develop all the tasks related to ACUMAR mandate and support the implementation of project activities\. For example, in 2017 ACUMAR´s social team developed its own Resettlement protocol that is materially consistent with OP 4\.12\. Furthermore, the Executive Director of ACUMAR is the General Coordinator of the Project Implementation Unit, UCGP, which allows a fluent dialogue with and an agile response from ACUMAR in connection with the project implementation\. Within AySA, standalone environmental and social units with staff appointed to carry out a variety of corporate environmental functions existed at the time of project preparation\. These units had already quite strong capacity with respect to project preparation tasks\. Further, AySA has further strengthened its team with a full range of skills necessary to carry out all the tasks related to project implementation\. Dedicated units of AySA are supporting project activities, such us the Directorates of Sustainability, Community Development, Occupational Health and Safety, among others\. The Social Communication and Community Action unit, within the Directorate of Community Development, is in charge of the implementation of the Social Engagement Plan, that is being implemented in a manner acceptable to the Bank\. In addition, AySA has developed an integrity code applicable for its staff and contractors, and a comprehensive gender equality policy that includes actions to prevent gender- based violence\. The project is in full compliance with its environmental and social safeguards instruments\. Compliance with the safeguards policies has been rated at satisfactory levels throughout project implementation\. Several field visits to works sites and meetings to specifically discuss on safeguards issues take place systematically (currently, site visits have been suspended given the pandemic restrictions, but virtual meetings continue)\. Counterpart teams at UCGP, ACUMAR and AySA, with the support of independent supervision firms for the major works, have demonstrated that they have appropriate capacity to carry out the environmental management of the works, including Occupational Health and Safety aspects, in accordance with the safeguard instruments established for the project\. Social performance of this project is also progressing well, with some room for improvement\. The different institutional social teams involved in the project (AYSA´s Social Communication and Community Action team, ACUMAR's Social Participation Team, the City of Buenos Aires Housing Institute, etc\.) have been able to work together to handle potential complex social situations, diminish or avoid conflicts and promote community participation related Page 16 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) to project´s works\. Some difficulties in the implementation of an Abbreviated Resettlement Plan in Lot 3, and challenges in the interinstitutional coordination between the agencies mentioned above for the social management of specific water, sanitation and drainage works in Villa 21-24 delayed the implementation of those works\. This challenge has been addressed through regular coordination meetings\. The implementation of the ARAP for Lot 3 is being carried out by ACUMAR and is also expected to be finalized in the short term\. 5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. As part of the project preparation process, stakeholder consultation and information disclosure has been carried out thoroughly\. Information on the project and its components has been made publicly available through stakeholder consultation and workshops\. Informal focus groups discussions have been conducted with NGOs, local government, affected people and beneficiaries at various points during preparation and appraisal\. In addition, household and individual surveys done by the economic evaluation team have been used to disseminate information and gather stakeholder perceptions\. Consultation and information disclosure have continued during project implementation\. In the case of informal settlements, the project is implementing specific communication activities and roundtables with the beneficiaries and the local community to explain the scope of the works, evaluate potential impacts and agree on specific mitigation measures\. ACUMAR and AySA are working to constantly engage with all the local communities who are directly affected by the project\. ACUMAR, for example, has established a network of approximately 300 community and environmental NGOs that are part of its broader engagement strategy relating to issues facing the MRB\. This network provides an opportunity for information disclosure not just on the project but on a wide array of development issues facing the MRB\. This engagement also socializes the variety of platforms for stakeholders to provide information, ask for more information or submit complaints\. Both ACUMAR and AySA also carry out engagement activities targeted to specific social groups\. For example, in 2021 ACUMAR is providing formal virtual training to 300 teachers on environmental and social issues of the MRB\. During project preparation, a first major consultation event was held in Buenos Aires on July 10th, 2008, for the scoping of the terms of reference for the seven-volume EIA\. A second round of formal public disclosure of the advanced draft EIA report was conducted on November 7, 2008\. Most of the identified stakeholders have taken part of these events\. The seven-volume EIA final report is published in AySA’s website (www\.aysa\.com\.ar/Que- Hacemos/Estudios-de-impacto-ambiental) and in the WB´s external website\. During project implementation, the EIA reports that were prepared by AySA for each of the different civil works prioritized by the GoA that correspond to the decentralized alternative, had a consultation meeting convened by AySA and targeted to relevant stakeholders (including government authorities and agencies, environmental NGOs and other civil society organizations, local community organizations and representatives, opinion leaders, professional associations, academia, among others)\. Another important event to highlight, is the presentation of the Final Report prepared by the Bank’s Expert Panel on the Prefeasibility Study of the Alternative to the Right Bank Collector to the Supreme Court´s Cuerpo Colegiado, which took place in October 2013\. Also, as it was mentioned above, AySA prepared a comprehensive Communication Plan to engage stakeholders, share information, and collect feedback, as part of a broader Social Engagement Plan\. Some actions in the Communication Plan had to be adjusted due to COVID- 19 restrictions\. AySA's social team acknowledged the impact of not having face to face contact with the neighbors at the worksites and therefore focused on strengthening the digital channels (mailing, twitter, webpage) to maintain engagement with the people during the pandemic\. Page 17 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) In addition, ACUMAR and other involved agencies are implementing stakeholder engagement as part of the execution of works under components 2 and 3, such us (a) the construction of the TIP and the IWWTP in the Lanus Municipality (www\.acumar\.gob\.ar/parque-curtidor/espacios-de-participacion/); and (b) the improvement of the water & sanitation and drainage infrastructure in a low income settlement in the City of Buenos Aires\. A dedicated stakeholder engagement process is under implementation in Villa 21/24, which has involved regular meetings with neighbors, community representatives and local NOGs in so called “round tablesâ€? (“mesas de trabajoâ€?)\. Representatives from ACUMAR, the City of Buenos Aires, the UCGP, the supervision firm, among others as required, receive and respond to the concerns of the community\. This close interaction has allowed an adequate implementation of the works in a very sensitive social context\. For example, based on community requests, AySA adjusted its internal technical norms in a way that will allow to reach with the provision and operation of the water supply service to more neighbors than originally planned\. In this regard, AySA has been working together with ACUMAR to ensure proper articulation of ACUMAR's stakeholder engagement strategy in order to foster participation and to bring more information to stakeholders\. During 2020 and 2021 regular meetings with neighbors could not take place due to COVID-19 related restrictions\. However, ACUMAR, the City of Buenos Aires and the UCGP stayed in virtual contact with stakeholders that are part of the “mesas de trabajo"\. Both ACUMAR and AySA have their own GRMs in place\. The GRMs are accessible to project-affected people through different modalities (telephone, email and institutional websites)\. In case of AySA, complaints can also be presented in-person at the worksites or AySA Headquarters\. In case of ACUMAR, complaints can be made at its Headquarters too\. The project has handled many concerns and complaints of different types, such as requests for information about works disturbances\. ACUMAR and AySA reported systematically to the Bank on the claims received and the way they are managed\. ACUMAR and AySA have followed their GRM procedures to address claims received in a manner satisfactory to the Bank\. OPS_SAFEGUARD_DISCLOSURE_TBL B\. Disclosure Requirements (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_DISCLOSURE_TABLE Environmental Assessment/Audit/Management Plan/Other For category A projects, date of Date of receipt by the Bank Date of submission for disclosure distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure OPS_RA_D ISCLOSURE_T ABLE Resettlement Action Plan/Framework/Policy Process Date of receipt by the Bank Date of submission for disclosure Page 18 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) "In country" Disclosure OPS_COMPLIANCE_INDICATOR_TBL C\. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) (N\.B\. The sections below appear only if corresponding safeguard policy is triggered) OPS_EA_COMP_TABLE OPS_ NH_COM P_TABLE OPS_ PCR_COM P_TABLE OPS_IR_ COMP_TAB LE OPS_ PIW_COMP_ TABLE OPS_ PDI_ COMP_TAB LE OPS_ALL_COMP_TABLE CONTACT POINT World Bank Jiang Ru Senior Environmental Specialist Maria Catalina Ramirez Senior Water Supply and Sanitation Specialist Borrower/Client/Recipient Page 19 of 21  The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) Argentine Republic Implementing Agencies Unidad Coordinadora General del Proyecto (UCGP) Daniel Larrache General Coordinator of the PIU and Executive Director of ACU dlarrache@acumar\.gov\.ar Ministry of Interior, Public Works and Housing Gerardo Otero Chief of Cabinet jefatura\.obraspublicas@gmail\.com FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Jiang Ru Task Team Leader(s): Maria Catalina Ramirez Approved By Safeguards Advisor: Angela Nyawira Khaminwa 27-Apr-2021 Practice Manager/Manager: Valerie Hickey 27-Apr-2021 Country Director: Paul Procee 27-Apr-2021 Page 20 of 21 The World Bank Matanza Riachuelo Basin (MRB) Sustainable Development Project Second Additional Financing (P176034) Page 21 of 21

APPROVAL

P172079

 The World Bank Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (P172079) Project Information Document (PID) Concept Stage | Date Prepared/Updated: 14-Jul-2020 | Report No: PIDC28315 June 17, 2020 Page 1 of 6  The World Bank Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (P172079) BASIC INFORMATION A\. Basic Project Data OPS TABLE Country Project ID Parent Project ID (if any) Project Name Mexico P172079 Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (P172079) Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) LATIN AMERICA AND Aug 17, 2020 Jan 28, 2021 Environment, Natural CARIBBEAN Resources & the Blue Economy Financing Instrument Borrower(s) Implementing Agency GEF Focal Area Investment Project Financing The United Mexican States The National Institute of Multi-focal area Ecology and Climate Change (INECC), The Mexican Fund for the Conservation of Nature (FMCN) Proposed Development Objective(s) Improve integrated landscape management in selected watersheds considering climate change\. PROJECT FINANCING DATA (US$, Millions) SUMMARY-NewFin1 Total Project Cost 13\.76 Total Financing 13\.76 of which IBRD/IDA 0\.00 Financing Gap 0\.00 DETAILS -NewFinEnh1 Non-World Bank Group Financing Trust Funds 13\.76 Global Environment Facility (GEF) 13\.76 June 17, 2020 Page 2 of 6  The World Bank Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (P172079) Environmental and Social Risk Classification Concept Review Decision Moderate Track II-The review did authorize the preparation to continue Other Decision (as needed) N/A B\. Introduction and Context Country Context 1\. The country is experiencing supply and demand shocks to the economy, that will generate impacts on firms, employment, and households\. In this context, the implementation of economic and social policies to improve the business environment, protect jobs, and support the overall economic fabric are critical\. 2\. Over the past decade, the conservation focus in Mexico has shifted towards promoting sustainable production and resource use in lands outside of protected areas, as more than half of all species are found in productive landscapes\. Focus on sustainable agroforestry management, and biodiversity enhancement linked to productive sectors are critical to improve the livelihoods of small producers in rural areas while conserving natural capital and contributing to food security, and human and animal health and well-being\. The agriculture sector continues to play an important role in Mexico’s economy and it is critical to align objectives of agricultural production and environmental conservation\. Sectoral and Institutional Context 3\. Forests represent an important natural asset, but Mexico faces significant challenges to conserve and sustainably manage them\. Even though the aggregated deforestation level has decreased to an average of 0\.2 percent over the past years, localized impacts from land use pressures persist1, and most deterioration of Mexico's ecosystems and biodiversity is due to land use and change in land cover\. According to the National Institute of Statistics and Geography (INEGI), in 2018 the economic cost of environmental degradation and natural resource depletion amounted to 4\.3 percent of the national GDP2\. Both agriculture and livestock activities are identified as the main related drivers, and cattle ranching represents a significant share of the national GHG emissions from agriculture\.3 About 80 percent of agricultural land suffers from some level of degradation caused by overgrazing, excessive pesticide use, and improper water management\. 4\. Mexico is the origin of 94 crop species that constitute 15 percent of the human diet, while it is also one of the Latin American countries with the highest deforestation rates\. A large part of its rivers is polluted, and soils eroded, and Mexico is one of the countries most affected by climate change\. Agriculture is highly vulnerable to climate change, which thereby directly affects food security and the livelihoods of rural populations\.4 To ensure sufficient and high-quality food 1 http://www\.enaredd\.gob\.mx/wp-content/uploads/2017/09/Estrategia-Nacional-REDD+-2017-2030\.pdf 2 https://seea\.un\.org/news/inegi-releases-seea-accounts-2018 3 Emissions from methane enteric fermentation represent 63\.9 % of all agricultural emissions and manure management at 17\.1 %\. 4 The World Bank Group's Mexico Country Partnership Strategy (CPS) 2020–2025, Report No\. 137429-MX\. June 17, 2020 Page 3 of 6  The World Bank Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (P172079) production for the Mexican population, it is urgent to conserve biodiversity, recover ecosystem services and adopt sustainable agricultural practices\. 5\. Mexico is the seventh producer of beef worldwide and 54 percent of the territory is devoted to livestock\. The National Institute of Ecology and Climate Change (INECC) estimates that livestock generates 10\.3 percent of the national GHG emissions\. It has also other negative environmental impacts in the country that is estimated to safeguard 10 to 12 percent of the global biodiversity\. Alignment with GEF Strategy The proposed project is aligned with the GEF-7 Focal Areas’ objectives addressed through the Food, Land Use and Restoration (FOLUR) Impact Program, for which the World Bank serves as the GEF Implementing Agency globally, as well as objectives under the Focal Areas of: i) Biodiversity; ii) Climate Change; and iii) Land Degradation\. Relationship to CPF The proposed project is aligned with the World Bank Group Country Partnership Framework (CPF) for the period FY2020–FY20255\. Objective 7 of the CPF recognizes Mexico’s efforts towards its climate change goals and a resilient, low carbon growth path and acknowledges that it is critical to increase the economic instruments and incentives and the institutional coordination to support climate change objectives\. In this context, the CPF foresees support to strengthen community and producer organizations in the management of productive landscapes, as well as overall institutional strengthening in landscape planning and management\. Moreover, the proposed project is also instrumental for achieving Objective 1 that seeks to foster financial intermediation and inclusion\. C\. Proposed Development Objective(s) Promote and increase the connectivity of cattle and agroforestry landscapes in selected watersheds\. Key Results (from PCN) The following key results are proposed for measuring achievement of the PDO: i\. Agencies with new or modified interinstitutional agreements, policy instruments or programs in place to support sustainable production that improve forest cover (Number); ii\. Farmers adopting improved agricultural technology (Number, disaggregated by gender and ethnicity); and iii\. Land area under sustainable landscape management practices (Hectares)\. 6\. At GEF Concept Stage, the project was expected to contribute to global environmental benefits measured through the following GEF indicators: i\. Area of land restored (Hectares) ii\. Area of landscapes under improved practices (excluding protected areas) (hectares) iii\. Greenhouse Gas Emissions Mitigated (metric tons of CO2e)6 iv\. Number of direct and indirect beneficiaries disaggregated by gender as co-benefit of GEF investment7 5 Report No\. 137429-MX, discussed by the Board on February 27, 2020\. 6 Estimated by application of FAO Ex-Ante Carbon Balance Tool (EX-ACT) for agriculture and forestry activities\. 7 The total population in proposed project areas in selected watersheds\. June 17, 2020 Page 4 of 6  The World Bank Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (P172079) D\. Concept Description 7\. The proposed Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (CONECTA) project aims to integrate land use planning and the use of natural resources with sustainable livestock and agroforestry production\. Legal Operational Policies Triggered? Projects on International Waterways OP 7\.50 No Projects in Disputed Areas OP 7\.60 No Summary of Screening of Environmental and Social Risks and Impacts \. Overall, the project will promote the adoption of sustainable and resilient land use practices aimed at the (i) conservation of ecosystems and biodiversity of both local and national importance; (ii) prevention of expansion of the cattle raising frontier and forest and soil degradation; (iii) control of erosive processes; (iv) increase of provision of environmental services; (v) improvement of land use planning; (vi) organization of productive activities under a landscape vision; (vii) reduction of chemical herbicides and pesticides; and (viii) contribution to reducing GHG emissions and increasing resilience to climate risks, including drought\. On the social side, the project is expected to generate positive impacts for excluded and vulnerable populations, including Indigenous Populations and Afro-Mexican population that depend of livestock activities\. These populations will benefit from more sustainable and regenerative productive practices that will improve their livelihoods through increasing productivity while contributing to conservation of biodiversity, carbon sequestration, and improvement of water quality\. \. CONTACT POINT World Bank Tuuli Johanna Bernardini, Adriana Goncalves Moreira, Ashwini Rekha Sebastian Senior Environmental Specialist Borrower/Client/Recipient The United Mexican States Fernanda Montero Director of Sustainable Financing, Secretariat of Finance an fernanda_montero@hacienda\.gob\.mx Implementing Agencies June 17, 2020 Page 5 of 6  The World Bank Connecting Watershed Health with Sustainable Livestock and Agroforestry Production (P172079) The National Institute of Ecology and Climate Change (INECC) Margarita Caso Chávez General Coordinator of Climate Change Adaptation margarita\.caso@inecc\.gob\.mx The Mexican Fund for the Conservation of Nature (FMCN) Renée González General Director renee\.gonzalez@fmcn\.org FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 473-1000 Web: http://www\.worldbank\.org/projects APPROVAL Tuuli Johanna Bernardini, Adriana Goncalves Moreira, Ashwini Rekha Task Team Leader(s): Sebastian Approved By APPROVALTBL Environmental and Social Standards Maria Do Socorro Alves Da Cunha 15-May-2020 Advisor: Practice Manager/Manager: Country Director: Jutta Ursula Kern 16-Jul-2020 June 17, 2020 Page 6 of 6

APPROVAL

P120622

 FICHA INTEGRADA DE DATOS SOBRE SALVAGUARDIAS ETAPA DE EVALUACIÓN INICIAL I\. Información básica Fecha de elaboración/actualización: Informe n\.º: AC5998 09/02/2011 1\. Información básica sobre el proyecto Número de identificación del proyecto Nombre del proyecto original: Proyecto original: P115183 de Protección Básica para Argentina País: Argentina Número de identificación del proyecto: P120622 Nombre del proyecto: Financiamiento adicional del Proyecto de Protección Básica Jefe de equipo del proyecto: Rafael P\. Rofman Fecha estimada de evaluación inicial: 1 de Fecha estimada de aprobación en el febrero de 2011 Directorio Ejecutivo: 10 de marzo de 2011 Unidad directiva: LCSHS-DPT Instrumento de financiamiento: Préstamo para una inversión específica Sector: Administración pública; otros servicios sociales (100%) Tema: Redes de seguridad social (100%) Monto del Banco Internacional de Reconstrucción y Fomento (millones de US$): 480,00 Monto de la Asociación Internacional de Fomento (millones de US$): 0,00 Monto del Fondo para el Medio Ambiente Mundial (millones de US$): 0,00 Monto del Fondo Tipo para Reducir las Emisiones de Carbono (millones de US$): 0,00 Otros montos de financiamiento, por fuente: Prestatario 0,00 0,00 Categoría ambiental: C; no se requiere Complementario [] ¿Se procesa este proyecto según la OP 8\.50 (Recuperación ante emergencias) o la OP 8\.00 (Respuesta rápida ante crisis Sí No [X] y emergencias)? 2\. Objetivos del proyecto El financiamiento adicional propuesto brindaría apoyo a los mismos objetivos de desarrollo del proyecto del préstamo original\. El objetivo de desarrollo del proyecto es aumentar la eficacia de los programas de transferencia de ingresos para los desempleados y las familias con hijos en Argentina, mediante la ampliación de la cantidad de participantes y la mejora de las características de diseño, la transparencia y la rendición de cuentas en dos programas de protección social básica\. 3\. Descripción del proyecto El proyecto de financiamiento adicional propuesto asciende a US$480 millones y tiene el objetivo de apoyar la ejecución del programa de Gobierno durante un lapso de aproximadamente dos años\. El financiamiento adicional propuesto continuará brindando apoyo a los objetivos de desarrollo del proyecto original, a través de tres componentes que se describen en el documento de evaluación inicial del proyecto, y se utilizará un mecanismo de desembolso similar\. Se brindará apoyo a las siguientes actividades, entre otras: i) Componente I: Otorgamiento de donaciones al Seguro de Capacitación y Empleo\. Mediante este componente se financiarán las donaciones a los beneficiarios del Seguro de Capacitación y Empleo (SCE), un programa de capacitación e intermediación en el mercado laboral que lleva a cabo el Ministerio de Trabajo, Empleo y Seguridad Social (MTESS)\. En este componente no se aplicarán cambios con respecto a las normas del programa o los requisitos de participación del mismo\. De acuerdo con lo previsto en el mecanismo del Préstamo 7703, el Banco proporcionará apoyo financiero para el funcionamiento y la ampliación del SCE durante los años 2010, 2011 y 2012\. A través del componente se financiarán las donaciones a todas las personas que reúnan los requisitos de participación, e incluye: i) transferencia de ingreso básico (AR$225 por mes); ii) pago de viáticos a las personas que reúnan los requisitos para participar en las actividades del SCE; iii) incentivos vinculados a la participación en las actividades del programa\. Tal como se define en el Préstamo 7703, los beneficiarios que participan en el sistema quedan habilitados para recibir las donaciones cuando reúnen los requisitos correspondientes\. Como consecuencia, las autoridades prevén otorgar cobertura a aproximadamente 160 000 participantes para fines de 2012\. ii) Componente II: Otorgamiento de donaciones de Asignaciones Familiares\. Debido a que las autoridades ampliaron la cobertura del sistema de Asignaciones Familiares (AF) a fines de 2009 mediante la promulgación del Decreto 1602/09, que dio lugar a la creación de un nuevo beneficio dentro del sistema llamado Asignación Universal por Hijo (AUH), se incluyó en el sistema a aproximadamente 3,5 millones de hijos de trabajadores informales y desempleados, con lo cual la cifra total de niños con cobertura de AF ascendió a aproximadamente 8 millones en diciembre de 2010\. A medida que prosigue la instauración del nuevo beneficio, se prevé que esta cifra continúe incrementándose\. El Préstamo 7703 otorgó financiamiento para las asignaciones por hijo dentro del sistema tradicional, y la operación de financiamiento adicional hará hincapié en brindar apoyo a los beneficiarios de la AUH\. Este componente financiará las donaciones (AR$220 por hijo) a los participantes que reúnan los requisitos correspondientes, las cuales se abonarán directamente mediante transferencias a las cuentas bancarias de los beneficiarios\. Los mecanismos de desembolso y las normas de participación serían similares a las del Préstamo 7703\. iii) Componente III: Asistencia técnica para el sistema de protección social\. El componente de asistencia técnica brindará apoyo al fortalecimiento de capacidades dentro de las unidades ejecutoras (el MTESS y la Administración Nacional de Seguridad Social [ANSES]), especialmente en lo relativo a la ejecución y el monitoreo de los programas respaldados\. El componente incluirá seis actividades: a\. diseño, aplicación y análisis de la Segunda Encuesta Nacional de Seguridad Social y Protección Social, que será realizada por la Subsecretaría de Programación Técnica y Estudios Laborales del MTESS;  b\. creación de un centro de datos alternativo para el MTESS, con el fin de garantizar la gestión eficiente y segura de los registros de los beneficiarios en el Ministerio, que estará a cargo de la Secretaría de Empleo del MTESS; c\. creación y puesta en práctica de un proceso para inscribir a los beneficiarios que reúnan los requisitos para participar en el programa de AUH\. Se prevé que estos componentes y las actividades a las que se brindará apoyo tendrán repercusiones significativas sobre el bienestar de los niños y los desempleados en el corto plazo, y crearán condiciones que permitirán lograr más mejoras en el futuro\. Los componentes I y II brindarán apoyo financiero a dos de los programas de protección social de Argentina que poseen la mayor repercusión real y potencial sobre las condiciones de vida y la acumulación de capital humano en dos poblaciones especialmente vulnerables\. Los programas de SCE y AF ofrecen protección básica a estas poblaciones a través de una estructura simple y eficiente\. Las mejoras en curso deberían aumentar la eficacia de dichos programas en el corto plazo, con lo cual se justifica el apoyo del Banco, y crearían condiciones para continuar ampliando su cobertura en el futuro\. El tercer componente proporcionará asistencia técnica para mejorar la capacidad de control de la ANSES y el MTESS\. Durante años, las autoridades y los funcionarios responsables del diseño de las políticas sociales de Argentina han enfrentado serias limitaciones debido a la falta de datos completos y confiables sobre algunos indicadores básicos\. El componente brindará apoyo a la segunda ronda de la encuesta de protección social\. 4\. Ubicación y principales características físicas del proyecto, a efectos del análisis de salvaguardias Las actividades del proyecto poseen cobertura nacional\. Para el primer componente del proyecto (SCE) hay oficinas municipales de empleo que ofrecen dicho seguro en 296 puntos, y se prevé ampliar esta cifra a 350\. Las AF (componente II) son gestionadas en su totalidad por la ANSES, y no hay servicios locales vinculados a ellas\. 5\. F\. Especialistas en salvaguardias ambientales y sociales Isabel Tomadín (LCSTR) 6\. Políticas de salvaguardia a aplicar Sí No Evaluación ambiental (OP/BP 4\.01) X Hábitats Naturales (OP/BP 4\.04) X Bosques (OP/BP 4\.36) X Control de Plagas (OP 4\.09) X Recursos Culturales Físicos (OP/BP 4\.11) X Pueblos Indígenas (OP/BP 4\.10) X Reasentamiento Involuntario (OP/BP 4\.12) X Seguridad de las Presas (OP/BP 4\.37) X Proyectos relativos a cursos de Aguas X Internacionales (OP/BP 7\.50) Proyectos en Zonas en Disputa (OP/BP 7\.60) X II\. Principales asuntos de políticas de salvaguardia y su gestión A\. Resumen de los principales asuntos de salvaguardias 1\. Describir los asuntos de salvaguardias y las repercusiones vinculadas al proyecto propuesto\. Identificar y describir cualquier impacto potencial a gran escala, de envergadura o irreversible: Al igual que en el caso del proyecto original, el proyecto de financiamiento adicional propuesto aplica la política de salvaguardia vinculada a los pueblos indígenas\. No se prevén impactos a gran escala, importantes ni irreversibles, si se tiene en cuenta que la ejecución del Plan para los Pueblos Indígenas del proyecto original fue satisfactoria\. Se aplicará la OP 4\.10 en las mismas 14 provincias enumeradas en el Marco de Planificación para los Pueblos Indígenas original\. 2\. Describir cualquier impacto potencial indirecto o a largo plazo debido a actividades futuras previstas en la zona del proyecto: No se prevén impactos negativos indirectos o a largo plazo como consecuencia de las actividades en las zonas del proyecto\. Sobre la base de la puesta en práctica del SCE, se reformularon algunas intervenciones para contemplar mejor las necesidades de los beneficiarios (incluidos los que son indígenas) y promover la integración estable y sustentable de estos trabajadores en empleos formales\. Se prevé que estos cambios aumenten la eficacia de las políticas de protección social y contribuyan a una mejora en la calidad de vida de los pobres\. En el caso de las AF, el resultado esperado se traduciría en resultados mejores en materia de desarrollo para los niños pequeños, especialmente los que provienen de familias pobres, con lo cual se contribuye a mejorar la igualdad de oportunidades del país\. 3\. Describir las alternativas de proyectos (si corresponde) que se considere contribuyan a evitar o minimizar las repercusiones negativas: En virtud de la naturaleza del Proyecto de Protección Básica, no se prevén repercusiones adversas\. Asimismo, el Gobierno está haciendo esfuerzos para garantizar que los pueblos indígenas reciban los beneficios de los servicios prestados\. El proyecto va a continuar brindando asistencia técnica para las comunidades indígenas, con el objetivo de garantizar que el abordaje cultural iniciado por el SCE sea el adecuado\. 4\. Describir las medidas adoptadas por el prestatario para resolver los asuntos de políticas de salvaguardia\. Proporcionar una evaluación de la capacidad del prestatario para planificar y ejecutar las medidas descritas: Argentina posee amplia experiencia en la gestión de las salvaguardias indígenas\. En virtud del proyecto original, se creó un Marco de Planificación para los Pueblos Indígenas detallado, y también los Planes para los Pueblos Indígenas a escala provincial, ambos actualmente en ejecución\. El equipo que tiene a su cargo la ejecución de las salvaguardias ha demostrado tener una muy buena capacidad\. Se destaca que se exigió que las provincias y municipalidades firmaran un convenio con el MTESS para participar en el SCE\. Estos convenios, en los casos en que corresponda, incluyen una cláusula relativa a la necesidad de crear y ejecutar un Plan para los Pueblos Indígenas, con el fin de garantizar que se contemplen las necesidades e intereses de esas comunidades indígenas\. De conformidad con lo previsto en el Marco de Planificación para los Pueblos Indígenas, se han elaborado 12 Planes para los Pueblos Indígenas a escala provincial, que cuentan con una elevada presencia indígena y con la participación de hombres y mujeres\. Estos planes han incorporado estrategias específicas de fomento y comunicación, con el fin de promover la adecuada comprensión del proyecto entre las comunidades indígenas involucradas\. Se han elaborado los dos Planes para los Pueblos Indígenas que estaban pendientes (Santiago del Estero y Tierra del Fuego), y se prevé que se presentarán al Banco para su examen a fines de febrero de 2011\. En particular, se llevaron a cabo las siguientes actividades: a) uso del material existente en el idioma original; b) capacitación de agentes locales para inscribir a los participantes en estas comunidades; c) campañas de promoción y comunicación; d) mecanismos para proporcionar información y responder a los reclamos en el ámbito nacional y provincial; e) capacitación para que los tutores trabajen con los participantes de estas comunidades; f) se ha empleado una modalidad específica para ofrecer los servicios en cada comunidad indígena, que tiene en cuenta el propio punto de vista de dichas comunidades\. El MTESS proporcionó los recursos financieros adicionales en los casos en que fue necesario\. Se consideró que el Gobierno debía elaborar y ejecutar los Planes para los Pueblos Indígenas (incluidos los convenios interinstitucionales necesarios), a satisfacción del Banco, donde se establecen los criterios de admisibilidad para financiar las donaciones del SCE a los residentes de esas provincias o municipalidades\. El MTESS ha contratado a expertos para asesorar en la elaboración de las evaluaciones sociales y los Planes para los Pueblos Indígenas en los casos donde sea necesario\. Estos mecanismos han garantizado que se tenga un abordaje intercultural adecuado para las poblaciones indígenas\. Asimismo, la Unidad de Coordinación Técnica del proyecto dentro del MTESS, además del personal del Banco, ha estado monitoreando el cumplimiento de los requisitos del Marco de Planificación para los Pueblos Indígenas durante la ejecución del proyecto a través de misiones periódicas\. Para el financiamiento adicional del Proyecto de Protección Básica para Argentina, la unidad ejecutora (ANSES) ya cuenta con un programa para trabajar con la población indígena, con un equipo muy competente y un programa específico, llamado Programa de Inclusión y Capacitación de la Seguridad Social para los Pueblos Indígenas “Bienestar para Nuestra Genteâ€?\. Este programa ya ha realizado consultas con varias comunidades\. Poco después de la creación de la AUH a fines de 2009, la ANSES comenzó a analizar su estructura y puesta en práctica con las comunidades indígenas\. En 2009, se debatió el programa con los miembros del Consejo de Participación Indígena (CPI) en varios encuentros regionales, y se firmó un convenio de colaboración con el Instituto Nacional de Asuntos Indígenas (INAI)\. En 2010 se realizó una consulta sobre el programa en el Encuentro Nacional de Integración y Articulación del INAI, en el que participaron representantes de 400 pueblos indígenas\. Asimismo, se mantuvieron una serie de consultas específicas con las comunidades individuales, a saber: - comunidad diaguita-calchaquí de Salta; - comunidad wichí de Salta y el Chaco; - comunidades diaguita-calchaquí de Catamarca; - comunidad mbya-guaraní de Misiones\. Se han tomado recaudos especiales para facilitar el acceso de los pueblos indígenas a todos los beneficios aplicables de la seguridad social (canales de atención alternativos, apoyo intercultural adecuado a cargo de personas capacitadas, acercamiento con unidades de servicios móviles a las comunidades)\. Se ha incluido el tema de la seguridad social en la agenda permanente del CPI y se planificaron actividades para garantizar el acceso de las poblaciones a la AUH, que se incluirán en los Planes para los Pueblos Indígenas, y abarcan: - disposiciones de campo especiales y gestión de beneficios y servicios de las zonas de las comunidades indígenas; - talleres de capacitación sobre seguridad social para los dirigentes indígenas designados por la comunidad; - capacitación sobre el uso del sitio web de la ANSES para permitirles realizar consultas y transacciones en línea, sin necesidad de acudir a las oficinas de la ANSES; - difusión de los derechos de los beneficiarios de la seguridad social en los idiomas indígenas (en forma verbal, formato digital o en cualquier otro formato adecuado); - inclusión de los asuntos y noticias de seguridad social en los programas de radio indígenas (en los idiomas indígenas) y no indígenas que se difundan en las zonas de comunidades indígenas, además de otro tipo de difusión en los medios que se considere adecuados; - convenios y medidas conjuntas con organizaciones públicas, organizaciones no gubernamentales (ONG), universidades, sindicatos, escuelas y otras organizaciones afines que puedan contribuir al proyecto\. Finalmente, en virtud de la naturaleza del proyecto, es posible que algunos grupos o comunidades tengan inquietudes sobre el proceso de ejecución, en especial con respecto a las dificultades de acceso a los servicios\. Con el fin de prevenir y resolver posibles conflictos en forma adecuada, se utilizarían los canales de resolución de conflictos habituales del MTESS y la ANSES\. Estos canales operan a través de las oficinas provinciales de las dos unidades ejecutoras\. También existen números de teléfono de llamada gratuita (0800), y direcciones de correo electrónico para solicitar información y presentar quejas\. 5\. Identificar los principales actores y describir los mecanismos de consulta y divulgación de las políticas de salvaguardia, con hincapié en las personas potencialmente afectadas\. Los principales actores de los Planes para los Pueblos Indígenas del financiamiento adicional son el CPI del INAI, los institutos indígenas provinciales y las comunidades indígenas de todo el país\. Durante el proyecto original, el prestatario llevó a cabo una evaluación social basada en el estudio preliminar del Banco, además de un proceso de consulta previo, libre y con conocimiento de causa\. El Banco examinó el proceso y resultado de la consulta y determinó que ambos se efectuaron de conformidad con los requisitos de la OP 4\.10\. Entre otras conclusiones, el Banco confirmó los siguientes puntos: i) las comunidades de pueblos indígenas proporcionaron amplio apoyo al proyecto, tal como consta en las actas firmadas por las comunidades (y archivadas en el sistema informático IRIS1); ii) las consultas se llevaron a cabo con especial hincapié en la participación de las mujeres, jóvenes y niños indígenas, fomentando el acceso de tales grupos a las oportunidades y beneficios en materia de desarrollo; iii) se aplicaron procedimientos de divulgación adecuados; prueba de ello es que el prestatario puso los informes de análisis social, al igual que los Planes para los Pueblos Indígenas y el Marco de Planificación para los Pueblos Indígenas, a disposición de las comunidades de pueblos indígenas afectadas, para lo cual los presentó en una manera, formato e idioma adecuados\. Por ejemplo, se crearon folletos en los idiomas nativos, que incluyeron toba-qom, wichí y mbya guaraní; y los videos y anuncios que se difundieron por radio se transmitieron en dos idiomas\. Se recibieron comentarios valiosos de las comunidades indígenas\. Las principales decisiones que se tomaron como consecuencia de las consultas fueron las siguientes: a) en los Planes para los Pueblos Indígenas a escala provincial se incluyeron las sugerencias de las comunidades indígenas, se colocaron folletos acerca del proyecto en sitios de fácil acceso, como escuelas, municipalidades, oficinas de empleo, organizaciones indígenas, etc\. (por más detalles, consultar los Planes para los Pueblos Indígenas a escala provincial); b) se tradujeron los folletos a los idiomas originales; c) se editaron videos en versión bilingüe para las comunidades guaraníes; d) se modificó el sistema de registro de beneficiarios para permitir la autoidentificación de los pueblos indígenas, para lo cual se requiere que los participantes nacidos en la Argentina respondan a la pregunta ¿Pertenece usted a un pueblo indígena? Esta pregunta ha estado en vigor desde el 23 de septiembre de 2009\. Al mes de diciembre de 2010, de las 472 180 personas que habían pasado por las oficinas de empleo, un total de 4609 había respondido afirmativamente (el 51% son mujeres y 1874 son beneficiarios del SCE); e) se aprobó un amplio conjunto de cursos de 1 Integrated Record Information System\. capacitación que se encuentran en ejecución, de acuerdo con los intereses manifestados por las comunidades\. A través del programa de AF ya se han efectuado consultas con las comunidades indígenas y se ha obtenido su amplio apoyo\. Con la meta de garantizar un proceso de consultas previo, libre y con conocimiento de causa, se presentó el programa ante el CPI en 2009, y se llevaron a cabo las siguientes consultas y actividades adicionales: - convenio de colaboración D\.E 055/09, celebrado con el INAI y los miembros del CPI; 2009; - consultas y actividades con la comunidad diaguita-calchaquí; Salta, 2009; - consultas con 400 dirigentes indígenas de todo el país (Encuentro Nacional de Integración y Articulación, INAI); febrero de 2010; - fortalecimiento de relaciones con la comunidad wichí (Salta); Dpto\. San Martín, mayo de 2010; - taller de seguridad social destinado a la comunidad wichí de Salta; junio de 2010; - presentación dirigida a los pueblos mapuche y tehuelche de las provincias de Neuquén, Río Negro, La Pampa y Mendoza; julio de 2010; - comunidades diaguita-calchaquí\. Calchaquíes Valle Salta\. Capacitación en seguridad social\. Inauguración de una oficina especial de pagos; agosto de 2010; - comunidades diaguita-calchaquí; Catamarca, septiembre de 2010; - comunidades mbya-guaraní; Misiones, septiembre de 2010\. Durante el Proyecto de Protección Básica para Argentina se garantizó la participación indígena en las diferentes etapas del proyecto, y se documentaron y archivaron las actividades realizadas, al igual que las actividades y consultas celebradas en las etapas iniciales de la preparación del financiamiento adicional\. No se prevén problemas en la continuidad de este aspecto durante la ejecución del financiamiento adicional\. B\. Fecha de los requisitos de divulgación Evaluación/Auditoría/Plan de Manejo Ambiental/Otros: ¿Se divulgó el documento previamente a su evaluación? Fecha de recepción en el Banco Fecha de divulgación en el país Fecha de presentación en el InfoShop Para los proyectos de la categoría A, fecha de distribución del Resumen Ejecutivo de la evaluación ambiental a los Directores Ejecutivos Plan/Marco/Proceso de Políticas de Reasentamiento: ¿Se divulgó el documento previamente a su evaluación? Fecha de recepción en el Banco Fecha de divulgación en el país Fecha de presentación en el InfoShop Plan/Marco de Planificación para Pueblos Indígenas: ¿Se divulgó el documento previamente a su evaluación? Sí  Fecha de recepción en el Banco 21/12/2010 Fecha de divulgación en el país 15/10/2010 Fecha de presentación en el InfoShop 30/12/2010 Plan para el Control de Plagas: ¿Se divulgó el documento previamente a su evaluación? Fecha de recepción en el Banco Fecha de divulgación en el país Fecha de presentación en el InfoShop * Si el proyecto aplica el Control de Plagas o los Recursos Culturales Físicos, se deberán contemplar los asuntos respectivos y divulgarse como parte de la Evaluación/Auditoría/o Plan de Manejo Ambiental\. Si no se prevé dar difusión en el país a ninguno de los documentos anteriormente mencionados, sírvase explicar el motivo: C\. Indicadores de monitoreo del cumplimiento a nivel empresarial (se completarán cuando se concluya la Ficha integrada de datos sobre salvaguardias en la asamblea para decidir el proyecto)\. OP/BP 4\.10 - Pueblos indígenas ¿Se ha elaborado un Plan/Marco de Planificación para los Pueblos Indígenas Sí por separado (si corresponde), en consulta con los pueblos indígenas afectados? En caso afirmativo, ¿revisó el plan la unidad regional responsable de las Sí salvaguardias o el Director Sectorial? Si el proyecto en su totalidad fue formulado para beneficiar a los pueblos Sí indígenas, ¿fue revisado y aprobado por la Unidad de Desarrollo Social Regional o el Director Sectorial? Política del Banco Mundial sobre Divulgación de Información ¿Se han enviado los documentos pertinentes sobre políticas de salvaguardia Sí al InfoShop del Banco Mundial? ¿Se han divulgado los documentos pertinentes en el país en un lugar público, Sí en una forma y lenguaje comprensibles y accesibles para los grupos afectados por el proyecto y las organizaciones no gubernamentales locales? Todas las políticas de salvaguardia ¿Se han elaborado satisfactoriamente responsabilidades institucionales claras Sí en materia de cronograma y presupuesto para la ejecución de las medidas vinculadas a las políticas de salvaguardia? ¿Se han incluido los costos vinculados a las medidas de políticas de Sí salvaguardia en el costo del proyecto? ¿Incluye el sistema de monitoreo y evaluación del proyecto el monitoreo de Sí los impactos y medidas sobre salvaguardias vinculados a las políticas de salvaguardias? ¿Se han acordado disposiciones de ejecución satisfactorias con el prestatario, Sí y se han documentado las mismas adecuadamente en los documentos jurídicos del proyecto? D\. Aprobaciones Firmado y presentado por: Nombre: Fecha Jefe de equipo del proyecto: Rafael P\. Rofman 25/01/2011 Especialista ambiental: Especialista en desarrollo social: Otros especialistas ambientales Glenn S\. Morgan 07/02/2011 o de desarrollo social: Aprobado por: Directora Sectorial: Helena G\. Ribe 26/01/2011 Comentarios:

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Page 5 5 9 \. \01;\01U\01‚\01c\01› ¿\01ˆ\01„\01[\01l\01[ 10\. \01Y\01Ž\01` \01‡\01œ\01x\01[\01l\01›\01T\01? ¿\01U\01p\01[\01›\01T Ms\. Trina S\. Haque \01V\01p\01Š\01ˆ\01…\01T : \03æ\03ô\03ó\03©\03Ž\03¼\03˜\03×\03? \02ï\03?\03®\03’\03§ \03”\03´\03ô\03‹\03­ \01}\01[\01U\01Ž\01…\01T : (202) 2574-1670/71 \01“\01Š\01?\01i\01[\01„\01…\01™\01T \01g\01”\01i\01W\01…\01T : thaque@worldbank\.org Location: Cairo, Egypt (IBRD) 11 \. \01‘\01†\01w ¿\01U\01p\01[\01›\01T \01‘\01`\01i\01” \01Z\01U\01ˆ\01?\01†\01x\01ˆ\01…\01T \01‰\01ˆ \01g\01”\01j\01ˆ\01†\01… : The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 \01}\01[\01U\01? : (202) 458-4500 \01k\01„\01U\01~ : (202) 522-1500 pic@worldbank\.org Email: \01V\01”\01?\01…\01T \01v\01?\01?\01ˆ dbank\.org/infoshop http://www\.worl :

APPROVAL

P152961

 ‫اسم المشروع‬ ‫مشروع إدارة المخلÙ?ات الصلبة Ù?ي القاهرة (‪)P152961‬‬ ‫الشرق Ø§Ø£Ù„ÙˆØ³Ø ÙˆØ´Ù…Ø§Ù„ اÙ?ريقيا‬ ‫المنØقة‬ ‫جمهوريةمصرالعربية‬ ‫الدولة‬ ‫إدارة المخلÙ?ات الصلبة (‪ ,)%08‬واإلدارة العامة – المياه‪ ،‬والصرÙ? الصحي والحماية من الÙ?يضانات‬ ‫القØاع أو القØاعات‬ ‫(‪)%08‬‬ ‫الموضوع‬ ‫تنمية حضارية اخرى(‪ )%05‬الصحة البيئية وادارة التلوث (‪\.)%05‬‬ ‫‪P152961‬‬ ‫رقم تعريÙ? المشروع‬ ‫وزارة المالية‬ ‫المقترض أو المقترضين‬ ‫محاÙ?ظةالقاهرة‬ ‫الوكالة المنÙ?ذة للمشروع‬ ‫أ – تقييم كامل‬ ‫Ù?ئة التصنيÙ? البيئي‬ ‫‪ 08‬ديسمبر‬ ‫تاريخ تحضير\تحديث وثيقة‬ ‫‪0802‬‬ ‫معلومات المشروع‬ ‫‪ 10‬اذار ‪0802‬‬ ‫التاريخ المتوقع لمواÙ?قة‬ ‫مجلس اإلدارة‬ ‫‌‬ ‫أ‪\.‬‬ ‫‪0800‬‬ ‫‪\.1‬‬ ‫‪\.2‬‬  28 \.3 0802 0802 \. 28 0800 08 1\.2 02 08 28 28 00 7 0\.0 7 0\.2 2 0 00 1 18 \.0 0  \.6 02 02 18 78 \.7 0\.2 28 28 \.8 22 28 02 2 \.9 12  2 0 08 0 18 08 \.15 0880 \.11 220888 08  \.12 \.13 2 07\.0 \.11 22 020888 \.10 0880 \.  ‫‪0880‬‬ ‫‪0882‬‬ ‫‪0800‬‬ ‫‪1‬‬ ‫‪72‬‬ ‫‪(Europe 2000) 0888‬‬ ‫‪0807‬‬ ‫‪\.07‬‬ ‫‪\.18‬‬ ‫‪0880‬‬ ‫‪02‬‬ ‫‪0882‬‬ ‫‪1‬‬ ‫المتعهدون هم مجموعات صغيرة من مقدمي الخدمة المتواÙ?قين من الناحية القانونية مما يمكنهم من الدخول Ù?ي مجال المخلÙ?ات الصلبة بشكل رسمي‪\.‬‬ ‫و قد كانت هذه المجموعات باألساس مكونة من مقدمي الخدمة الغير رسميين‪\.‬‬  1880888 0880888 0882 28 \.19 20288 00888 0807 702 188 02 072 7 2 00888 02 \. 00288 28 00288 28 70888 028 028 28 22 02 18 \.21 02 00288 \.22 \.23  0202 0888 \.21 \.20 \.26 \.27 0800 02 08  \.28 \.29 \. 0800 \. \. \. \.  \.30 \.36 \.37 \.38 028  \.39 ï‚ ï‚ ï‚ 2\.80 2\.00 ï‚  ‫السياسات الوقائية التي قد تنØبق‬ ‫تحددالحقا‬ ‫ً‬ ‫ال‬ ‫نعم‬ ‫سياسات‌الحماية‌التي‌حددها‌المشروع‬ ‫‪X‬‬ ‫التقييم البيئي ‪OP/BP 4\.01‬‬ ‫‪X‬‬ ‫الموائل الØبيعية ‪OP/BP 4\.04‬‬ ‫‪X‬‬ ‫الغابات ‪OP/BP 4\.36‬‬ ‫‪X‬‬ ‫إدارة اآلÙ?ات ‪OP 4\.09‬‬ ‫‪X‬‬ ‫الموارد الثقاÙ?ية المادية ‪OP/BP 4\.11‬‬ ‫‪X‬‬ ‫الشعوب األصلية ‪OP/BP 4\.10‬‬ ‫‪X‬‬ ‫إعادة التوØين غيرالØوعي ‪OP/BP 4\.12‬‬ ‫‪X‬‬ ‫سالمةالسدود ‪OP/BP 4\.37‬‬ ‫‪X‬‬ ‫المشاريع على الممرات المائية الدولية ‪OP/BP 7\.50‬‬ ‫‪X‬‬ ‫المشاريع Ù?ي المناØق المتنازع عليها ‪OP/BP 7\.60‬‬ ‫‪\.‬‬ ‫‪105\.55‬‬ ‫‪105\.55‬‬ ‫‪0\.05‬‬ ‫‪5\.55‬‬ ‫‪105\.55‬‬ ‫‪105\.55‬‬ ‫جهات‌االتصال‬ ‫البنك‌الدولي‬ ‫‪+9722 236 6541‬‬ ‫‪idajani@worldbank\.org‬‬ ‫المقترض‪‌/‬المستلم‬ ‫حكومة جمهورية مصر العربية‪ ،‬وزارة التعاون الدولي‬ ‫االسم‪:‬‬ ‫محمد همام‬ ‫‪5520223912815‬‬ ‫رقم الهاتÙ?‪:‬‬ ‫‪mhammam@mic\.gov\.eg‬‬ ‫الوكاالت‌المنÙ?ذة‌للمشروع ‌‬ ‫‪00201001421477‬‬ ‫‪abdrabu1000@yahoo\.com‬‬ ‫لمزيد‌من‌المعلومات‌الرجاء‌االتصال‌على‪‌‌‌:‬‬ ‫البنك الدولي‬ ‫شارع ‪ ،1818 H‬مدينة نيو يورك‬ ‫واشنØن‪20433 ،‬‬ ‫هاتÙ?‪(202) 458-4500 :‬‬ ‫Ù?اكس‪(202) 522-1500 :‬‬ ‫الموقع االلكتروني‪http://www\.worldbank\.org/infoshop :‬‬

APPROVAL

P050544

Document of The World Bank Report No: ICR00001141 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-70260 LE) ON A LOAN IN THE AMOUNT OF US$80\.00 MILLION TO THE LEBANESE REPUBLIC FOR A FIRST MUNICIPAL INFRASTRUCTURE PROJECT June 1, 2009 Sustainable Development Department Middle East Country Department Middle East and North Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective June 1, 2009) Currency Unit = LP LP 1,500 = US$1 FISCAL YEAR ABBREVIATIONS AND ACRONYMS Vice President: Daniela Gressani Country Director: Hedi Larbi Sector Manager: Anna M\. Bjerde Project Team Leader: Robert Maurer ICR Team Leader: Robert Maurer  Lebanon First Municipal Infrastructure Project CONTENTS Data Sheet A\. Basic Information \.i B\. Key Dates \.i C\. Ratings Summary \.i D\. Sector and Theme Codes \.ii E\. Bank Staff \.ii F\. Results Framework Analysis\.ii G\. Ratings of Project Performance in ISRs \.v H\. Restructuring \.v I\. Disbursement Graph \.vi 1\. Project Context, Development Objectives and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes\. 4 3\. Assessment of Outcomes \. \.8 4\. Assessment of Risk to Development Outcome \. 11 5\. Assessment of Bank and Borrower Performance \. 12 6\. Lessons Learned \. 14 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 16 Annex 1\. Project Costs and Financing \.17 Annex 2\. Outputs by Component \. 18 Annex 3\. Economic and Financial Analysis \.21 Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 23 Annex 5\. Beneficiary Survey Results \. 25 Annex 6\. Stakeholder Workshop Report and Results \. 37 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR \. 38 Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders \. 48 Annex 9\. List of Supporting Documents \. 50 MAP  A\. Basic Information LB - First Municipal Country: Lebanon Project Name: Infrastructure Project Project ID: P050544 L/C/TF Number(s): IBRD-70260 ICR Date: 06/23/2009 ICR Type: Core ICR LEBANESE Lending Instrument: SIL Borrower: REPUBLIC Original Total USD 80\.0M Disbursed Amount: USD 75\.4M Commitment: Environmental Category: B Implementing Agencies: Ministry of Interior and Municipalities Cofinanciers and Other External Partners: B\. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/13/1997 Effectiveness: 11/28/2000 Appraisal: 03/20/2000 Restructuring(s): Approval: 06/22/2000 Mid-term Review: 11/06/2003 Closing: 12/31/2005 12/31/2008 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Satisfactory Borrower Performance: Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Overall Borrower Performance: Satisfactory Performance: Satisfactory C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project Yes Quality at Entry None i  at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 6 6 General transportation sector 23 23 General water, sanitation and flood protection sector 45 45 Roads and highways 23 23 Sub-national government administration 3 3 Theme Code (as % of total Bank financing) Access to urban services and housing 67 67 Municipal governance and institution building 33 33 E\. Bank Staff Positions At ICR At Approval Vice President: Daniela Gressani Jean-Louis Sarbib Country Director: Hedi Larbi Inder K\. Sud Sector Manager: Anna M\. Bjerde Sonia Hammam Project Team Leader: Robert Maurer Sonia Hammam ICR Team Leader: Robert Maurer ICR Primary Author: Richard James F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To: (i) address urgent municipal works while setting the stage for gradual assumption of responsibility for municipal services at the local level\. The project would: (a) in the short term, restore selected basic municipal infrastructure to improve the living conditions; and (b) in the medium term, set the stage for the development of the municipal sector by enabling municipalities to begin addressing local infrastructure maintenance and rehabilitation needs\. Revised Project Development Objectives (as approved by original approving authority) The Project development objectives were not revised\. ii  (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : PD0-1: Repairs and upgrading of selected basic municipal infrastructure and services: Km of restored roads and retaining walls (a) Roads - 13,400 km (distribution: 9400 km on Value internal roads and (a) Roads - Roads = 3,175 km quantitative or 4000km on principal 1800km; (b) Retaining walls = Qualitative) roads) Retaining walls - 320km 257 km (b) Retaining walls - 3,800 km; Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments (incl\. % 176% achievement in roads restoration achievement) 80% achievement in retaining walls Indicator 2 : PD0-1: Improving Road safety: Number of street lighting poles Light poles = Value 210,300 (distribution: 15,083 quantitative or 136200 poles on internal 14,000 On internal Roads = Qualitative) roads and 64100 poles on 13,990 principal roads) On principal roads = 1,093 Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments (incl\. % 108% achievement achievement) Indicator 3 : Repairs and expansion of existing networks (storm water drains, potable water, sewerage) (a) Storm Drainage (a) Drainage Storm drainage = Value network - 14,000 km; (b) network - 287\.78 290 km; quantitative or Potable water - 10,000 km; (b) Potable Potable water = 28 Qualitative) km; (c) Sewerage - 3500 water - 65km; (c) km; km\. Sewerage - 55km Sewerage network = 36 km Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments 101% achievement in storm drainage network repairs and expansion (incl\. % 43% achievement in potable water repairs and expansion achievement) 65% achievement in sewerage repairs PDO-1: Improved Access to Investment Funding in Municipalities with a Indicator 4 : population smaller than 7,000 (% ratio of the total amount in US$ disbursed for project implementation)\. Value quantitative or 5% 50% 52\.33% iii  Qualitative) Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments (incl\. % achievement) PDO-2: Initiate Central Government Transfers based on well-planned priority Indicator 5 : needs: Total no\. of municipalities that have identified priority investment projects\. Value quantitative or 707 707 704 Qualitative) Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments Almost 100% of the target was achieved (99\.6%)\. The only three municipalities (incl\. % that were not able to identify priority investments were (i) Butshay, (ii) Wasat Al achievement) Laqlouq and (iii) Kafra Rimein\. Indicator 6 : PDO-2: Providing municipalities with their share of Government transfers: equivalent amount of projects implemented in municipalities\. Value quantitative or N/A $97\.39 million $86\.42 million Qualitative) Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments (incl\. % 89% target achieved achievement) (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Indicator 1 : Municipal revenues/Government transfers\. A decreasing ratio will show improved financial sustainability\. Value (quantitative 50% 30% 36\.52% or Qualitative) Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments (incl\. % 122% of the target was achieved achievement) Indicator 2 : Capacity-building at MOMRA for project implementation; technical assistance for project implementation\. (a) % of Value expenditures of (a) 42\.79% (quantitative N/A municipalities on (b) 36\.52% or Qualitative) investment; (c) 13\.92% (b) % of revenues (d) 17\.70% of municipalities iv  from ImF; (c) % of tax on drainage and sidewalks to total local revenues collected; (d) Ratio of area served by project to built total built up area\. Date achieved 11/28/2000 06/30/2008 12/31/2008 Comments (incl\. % achievement) G\. Ratings of Project Performance in ISRs Actual No\. Date ISR Archived DO IP Disbursements (USD millions) 1 06/29/2000 Satisfactory Satisfactory 0\.00 2 12/27/2000 Satisfactory Satisfactory 0\.00 3 06/14/2001 Satisfactory Satisfactory 2\.00 4 06/29/2001 Satisfactory Satisfactory 2\.00 5 12/21/2001 Satisfactory Satisfactory 3\.73 6 02/07/2002 Satisfactory Satisfactory 4\.12 7 03/05/2002 Satisfactory Satisfactory 5\.31 8 09/30/2002 Satisfactory Satisfactory 11\.17 9 03/14/2003 Satisfactory Satisfactory 20\.55 10 08/29/2003 Satisfactory Satisfactory 25\.68 11 12/09/2003 Satisfactory Satisfactory 30\.18 12 06/01/2004 Satisfactory Satisfactory 36\.31 13 09/29/2004 Satisfactory Satisfactory 43\.40 14 04/18/2005 Satisfactory Satisfactory 49\.45 15 11/29/2005 Satisfactory Satisfactory 56\.11 16 06/02/2006 Satisfactory Satisfactory 61\.18 17 01/30/2007 Satisfactory Satisfactory 65\.48 18 12/18/2007 Satisfactory Satisfactory 69\.43 19 06/25/2008 Satisfactory Satisfactory 70\.47 20 12/26/2008 Satisfactory Satisfactory 73\.29 H\. Restructuring (if any) Not Applicable v  I\. Disbursement Profile vi  1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal Sector background: Lebanon has maintained a strong tradition of local government in the country since receiving its independence in 1943\. This tradition was however interrupted by various internal conflicts, particularly during a lengthy civil war during 1975-1990 disrupting the entire municipal infrastructure\. Lebanon has since made progress toward rebuilding its political institutions\. Under the 1989 Taif Accord (National Reconciliation Accord), an agreement was reached to provide the basis for the ending of the civil war and the return to political normalcy in the country\. In the same accord, the concept of an independent municipal sector was reaffirmed endorsing administrative decentralization and strengthening of municipal powers and responsibilities\. Since the end of the civil war (in 1990), Lebanon conducted several successful elections and established a framework for locally elected bodies\. Over time, municipalities were provided control, though very gradually, over their own fiscal and investment decisions with their own sources of revenues to assume expenditure responsibilities for local services\. The municipal sector nevertheless faced many challenges that included inadequate infrastructure -- disparities between districts, with the poor districts of the North and South having limited sewerage coverage and much lower rates of access to piped water\. Roads, drainage and water networks were in a state of disrepair due to prolonged lack of expenditure on maintenance because of several years of civil strife\. The municipalities also faced difficulties raising their own revenues to meet local needs\. Because of the absence of reliable information on resident population, most municipalities were unable to count on their fair share of inter-government transfers that were legally due to them for capital projects\. The central government used a complicated formula for distribution of these transfers based on the number of registered population rather than the actual inhabitants\. In withholding these distributions, the Lebanese Treasury had accumulated an estimated $0\.5 billion at the time when this project was being designed\. The municipal sector also had limited institutional capacity at both, central and local government levels\. The Ministry of Municipal and Rural Affairs (MOMRA) - now renamed as the Ministry of Interior and Municipalities (MOIM) - and many of the municipalities were in a dire need of institutional strengthening\. With the exception of a few larger municipalities, most had weak administrative competence and many had none whatsoever\. The main reason for this was the major dislocations caused by the prolonged civil war, the hiring freeze, and the absence of locally elected authorities until June 1998\. It is against this backdrop in which the First Municipal Infrastructure Project was conceived\. 1  Recent Hostilities: While the project was in full swing performing satisfactorily, the works came to a total stop in February 2005 because of massive demonstrations in Beirut after the assassination of former Prime Minister, Rafiq Hariri\. Later, on August 14, 2006, the UN-brokered ceasefire brought an end to the thirty-days of hostilities\. An estimated one million Lebanese, out of an estimated population of four million, fled their homes during the height of hostilities\. The affected areas experienced a total disruption of basic services and suffered from lack of safe drinking water, running sewage disposal systems, and functioning social services\. According to the Government's estimates the municipalities located in the conflict- affected areas suffered wide-scale destruction\. Partial or complete destruction was reported to around 30,000 housing units, about 140 bridges, close to 210,000 m2 of roads, around 200 public and 80 private schools, and over 30 vital infrastructure facilities1/\. The damage to the municipal sector included, among others, urban roads, retaining walls, street lighting, water and sanitation and municipal buildings and was estimated at around $100 million\. The reconstruction program following the 2006 Israeli invasion and later the post conflict activities following the 2007 crisis in the Nahr El Bared Palestinian Camp resulted both in a significantly increased work load for the project team\. Despite these conditions, the project succeeded in preserving satisfactory implementation performance ratings\. It received highly satisfactory ratings by the project team which was endorsed by the Country Management Unit\. Through most of the implementation period, this project was regarded as the best in the Lebanon country portfolio in terms of achieving its Project Development Objectives\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) To address urgent municipal works while setting the stage for gradual assumption of responsibility for municipal services at the local level\. The project would: (a) in the short term, restore selected basic municipal infrastructure to improve living conditions; and (b) in the medium term, set the stage for the development of the municipal sector by enabling municipalities to begin addressing local infrastructure maintenance and rehabilitation needs\. The key performance indicators, at approval, were evidence of sustainable rehabilitation of basic municipal works, number of beneficiaries impacted, as well as evidence of use of resources for capital investment and maintenance\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised\. The project team nevertheless, fine-tuned some of the existing indicators to reflect the changed realities on the ground\. The new indicators are presented in more detail in paragraph 2\.3 below\. 1\.4 Main Beneficiaries 1Airports, seaports, sewage treatment plants, water reservoirs, power plants etc\. 2  The project was implemented at a national level excluding the four biggest self sustaining municipalities of Beirut, Tripoli, Sidon and Zahle\. The local population of 704 municipalities constitutes almost 25% of Lebanon's total population that benefited from tangible and significant improvements in their living conditions\. Most had experienced virtually no local investment in essential infrastructure for over 30 years when the civil war ended in 1990\. Specifically, the project benefited smaller municipalities with population of 7,000 or less\. The Ministry of Interior and Municipalities (MOIM) also benefited from the project by way of receiving capacity building support\. 1\.5 Original Components (as approved) The project consists of three components: (1) upgrading and rehabilitating basic municipal infrastructure, (2) capacity building and (3) support to project coordination unit\. The total project cost including contingencies is estimated at $100\.00 million, of which the Bank financed $80\.00 million and the Government financed $20 million\. Component 1: upgrading and rehabilitating basic municipal infrastructure (estimated cost: $72\.81 million; actual cost: $68\.27 million)\. The component objective stated: "carrying out a program for the rehabilitation and upgrading of essential infrastructure in all the municipalities with the exclusion of the four largest municipalities of Beirut, Tripoli, Sidon and Zahle\." Component 2: capacity building (estimated cost: $4\.86 million; actual cost: $3\.22 million)\. The component has two activities: (i) support to municipalities, and (ii) support to MOIM\. The objective of first activity stated: "developing, implementing and maintaining a program for infrastructure rehabilitation, including feasibility studies, tender document preparation, sub-project technical design and supervision and maintenance programming through the provision of consulting services to the municipalities"\. The objective of second activity stated: "strengthening capacity of MOIM to manage the project and to monitor municipal sector"\. Component 3: support to project coordination unit (estimated cost $2\.33 million; actual cost: $3\.32)\. The objective stated: "establishing and operating of the project coordination unit, including provision of equipment and consultant services"\. 1\.6 Revised Components Although overall project components remained the same, the scope of work was nevertheless slightly modified under capacity building component (component 2)\. This modification did not warrant any change in the Loan Agreement\. Only minor change was introduced in the capacity building component i\.e\.: the activity related to integration of municipal data into MOIM's monitoring system was cancelled from under the loan and was carried out under a separate reconstruction Grant that Lebanon received after civil conflict ended in 2006\. 1\.7 Other Significant Changes 3  Amendment to Loan Agreement: At the borrower's request, the Loan Agreement was amended twice\. The first amendment was made in August 2006 to reallocate Loan proceeds from one category to another to address price escalation in contracts that were affected by the closure of quarries in 2003 following heavy rainfall seasons which created shortages of construction inputs\. The second amendment was made in September 2008 to raise disbursement ratio from 78% to 100% to provide financing for additional compensation cost for civil work contractors out of unallocated amount2\. All other terms and conditions of the Loan Agreement remained in full force and effect\. Extensions of Loan Closing Date: Due to circumstances beyond the control of the project team (civil unrest, political uncertainties, hostilities and deteriorating security conditions), the project was extended three times to facilitate completion of appraised sub-projects and to focus more on the capacity building component which had received relatively limited attention until that time\. The first extension was for eighteen months from January 1, 2006 to June 30, 2007; the second was for one year from June 30, 2007 to June 30, 2008, and the third and final extension was for six months from June 30, 2008 to December 31, 2008\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry The Quality at Entry was not formally reviewed through QAE process by Quality Assurance Group (QAG)\. However in retrospect, the project is rated fully satisfactory as it addressed immediate municipal needs and helped develop institutional support at MOIM level\. The project was prepared in close consultation with, and active involvement of MOIM, the Ministry of Finance, the General Directorate of Urbanism, and active participation of 704 municipalities that reshaped the municipal sector and reoriented the strategic role of MOIM\. The project's development objective at appraisal was wholly consistent with and supportive of the overall Country Assistance Strategy for Lebanon (CAS document No\.17153) which intended to strengthen municipal capacity and implement local rehabilitation projects rather than rely on central institutions to provide needed infrastructure\. The project preparation was supported by a PHRD grant (TF022549) which allowed for a range of technical expertise to assist the Government with project preparation activities\. The Bank supported this process through several preparation missions with the right blend of specialists in all relevant areas3\. 2 As a background, the Government was not able to put forth its contribution to pay local contractors because of a shift in its priorities due to 2006 hostilities\. The Bank, as an exception, raised the disbursement ratio from 78% to 100% and allowed the use of un-allocated amount to pay the contractors\. 3 Municipal specialists, urban economists, sociologists, environment specialists, financial management and procurement specialists 4  2\.2 Implementation The project became effective on November 28th, 2000, five months after being approved by the World Bank Board on June 22, 2000\. Project Readiness: The project was implemented by MOIM with the support of the project coordination unit\. The project team carried out essential activities prior to Board presentation that reflected its readiness i\.e\.: (i) completion of demand assessment surveys of twenty municipalities; (ii) agreement on eligibility criteria for municipality participation; (iii) preparation of project implementation plan; (iv) preparation of full tender documents for the first six months of sub-projects in the pipeline; and (v) preparation of draft operations manual\. Project Implementation: Other than the times of civil unrest during 2006, the project implementation continued to be satisfactory\. The project teams successfully overcame the country's challenging environment, and the project maintained good operational performance\. Action plans and work programs were mostly fully implemented and followed through within the agreed time frame after every project supervision mission, the country portfolio performance review and the mid term review\. This achievement was repeatedly reflected in Bank's aide-memoirs and Implementation Status Reports\. Mid Term Review (MTR): The MTR was carried out in November 2003 at which time the project was found to be one of the most successful projects in the Lebanon country portfolio\. The MTR revealed that the project was contributing measurably to local employment opportunities and in living conditions of participating municipalities\. Because of the project's satisfactory status, even though a summary matrix of MTR findings were prepared, with a six month action plan, nothing major was proposed that was not already being implemented ­ most recommendations only encouraged closer monitoring of activities\. Country Portfolio Performance Review (CPPR): The Country Management Unit carried out a CPPR in Mach 2007 and confirmed project's strong focus on implementation against country's difficult environment\. The review recommended extension of project closing date to complete institutional development component and to appraise role, organization and future of Directorate General of Local Administration, MOIM\. Use of Loan Proceeds for Water and Wastewater sub-projects: Even though Bank supervision missions repeatedly emphasized the need and importance of water and wastewater sub-projects, the investment in this sub-sector was extremely modest (less than three percent)\. This was primarily because of environmental concerns and additional regulatory steps that were needed to approve these types of sub-projects\. As of closure of this project the municipal law, still under review, had not been passed which would have eased stringent environment requirements for water and wastewater projects\. In addition, there was also a mismatch between the high cost of these projects and the small per capita allocation of the loan proceeds across hundreds of municipalities\. The 5  situation was exacerbated by the limited propensity of local authorities to undertake these municipal investments in partnership with the neighbors\. Project at Risk Status: The project teams adequately highlighted three main risks to the project - high to moderate - throughout its life and suggested mitigating measures\. Risks highlighted were: (i) government's weak capacity to finance maintenance of investments; (ii) MOIM's weak capacity to carryout project management activities; and (iii) government's inability to make timely counterpart funds available, especially during 2006 civil unrest period when the government's priorities got slightly shifted to national security issues\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization The project coordination unit recruited an M&E specialist from the beginning of the project to head the M&E unit\. The unit generated key performance indicators throughout the life of the project\. Initially, during project preparation, two sets of indicators were designed including (i) outcome and (ii) output indicators\. Within first year into the project however, it became apparent that additional measures of M&E were required\. For example, due to the extremely small size of sub-projects, expecting significant increase in revenues from municipal taxes was considered unrealistic and to have an indicator measuring only this aspect was considered imprudent; similarly for sub-projects eligibility, least cost solutions were considered more acceptable than carrying out full blown economic cost-benefit analysis\. It was also noted that only a small portion of municipal expenditure was being spent on capital investment due to accumulating arrears owed to municipalities from the central government\. With this in mind, the project team fine-tuned some of the existing indicators and introduced a new set to reflect the changed realities on the ground i\.e\.: (i) cost per direct beneficiary indicator; (ii) municipal finance indicator; (iii) asset management indicator; (iv) sustainability indicator; and (v) beneficiary indicator\. Seen from the results on the ground, the revised set of indicators proved to be more relevant\. As indicated in Annex 1, almost all indicators were either fully achieved or in some cases exceeded targets\. 6  2\.4 Safeguard and Fiduciary Compliance Environment and social safeguards: Environment safeguard: Project design took into account Bank's safeguards policies and included procedures to ensure full consideration of environmental safeguards in accordance with OP 4\.01\. Guidance on procedures for environmental screening, environmental assessment, consultations disclosures, and environment management plan was clearly stated in the operation manual (chapter 7)\. Social safeguard: OP 4\.12 was not triggered since no land acquisition was anticipated to result from any sub-project\. The operation manual included a check list to be used as part of the feasibility of sub-projects, thus any that was to trigger OP 4\.12 would be detected and eliminated at project preparation stage\. Financial Management: Financial Management was carried out in accordance with the project design and the legal agreement\. The project continued to maintain satisfactory financial management arrangements in terms of human resources, computerized network and well defined segregation of duties between different departments\. The accounting software was specifically designed for the project and was used to follow-up on project accounts and to generate timely financial management reports, including Bank required Financial Monitoring Reports\. The Special Accounts were reconciled periodically with timely bank statements\. The project's chart of accounts was designed to provide the required information about various Loan categories and other financial requirements needed for the day to day activities\. Formal audits of the project were carried out on annual basis in accordance with the International Standards on Auditing\. The audits repeatedly confirmed the adequacy of accounting system and the internal controls, and the reliability of the statements of expenditure as the basis of Loan disbursements and compliance with the legal covenants\. Procurement: The procurement tasks were managed by the project preparation and procurement department which consisted of the Head of the department, the preparation and procurement Engineer, and eight appraisal/supervision individual consultants/engineers\. The procurement staff received the necessary World Bank procurement training to manage civil works contracts\. The municipalities were responsible to carryout their own procurement of civil works contracts while the PCU procurement department was responsible for monitoring these activities, including compliance\. The levels of approval of the bidding process were clearly set which included the Quaim Maqam (the Governor), the Minister, and the Technical Office of the Director General Urban and Planning\. The bidding documents used for civil work was the translated version of the Bank standard document and contained all the necessary instructions and information, 7  including environmental `good practices and mitigation appendices'\. The document was applied in all participating municipalities regardless of sub-project size\. The evaluation report prepared by the municipalities followed a standard format developed by the PCU and consisted of bid opening details, recorded minutes and a checklist of submitted documents\. The evaluation process and results were subject to the PCU approval\. 2\.5 Post-completion Operation/Next Phase Transition arrangement to post-completion operation: The results-oriented CAS that was submitted to the World Bank Board on December 15, 2005 (Report No\. 34463-LB) covering 2006-2009 period, clearly envisaged a municipal infrastructure supplemental loan in its Base-Case lending program (CAS Annex B3; page 49)\. However, an Interim Strategy became necessary after the 2006 hostilities which fundamentally changed the underlying economic and political context, rendering certain CAS assumptions and projections untenable\. On July 9, 2007 therefore, an Interim Strategy for Lebanon (Report No\. 39779-LB) was presented to the Board which did not explicitly include any plan for a follow-up operation after the completion of FMIP\. At present a Country Partnership Strategy (CPS) is being discussed internally in the Bank to discuss future strategic focus/priority for Lebanon4\. In this context, it might be useful to consider including a new/follow up project on municipal for its forthcoming CPS/CAS\. In parallel, the Government has also made requests to several donors, including the World Bank, to capitalize on the experience and lessons learned from FMIP and design a new municipal development project with a regional development approach\. In this regard, the World Bank team is already at an advance stage of discussions with the key Government counterparts with a goal to design a national municipal development project by 2010/11\. Formal request for assistance is yet to be received by the Bank\. Since 2006, the project coordination unit has been assigned additional responsibilities by the Government to coordinate an FMIP-Grant, in the amount of $30 million, to help reconstruct public infrastructure of the war affected municipalities in Lebanon\. Also, the coordination unit is adequately managing US$2million for the Nahr El Bared reconstruction financed through a PCF grant\. The existing project coordination unit is technically sound, has well trained staff, and is capable to take on additional responsibilities if the need arises\. 3\. Assessment of Outcomes Overall Rating: Satisfactory 4Chaired by the Country Director, a brainstorming CPS meeting was held on April 27, 2009 (minutes available)\. 8  3\.1 Relevance of Objectives, Design and Implementation The relevance of project development objectives (PDO) is rated high\. The PDOs are as relevant to the country's municipal development needs today as they were at appraisal\. The objectives focus on rehabilitating country infrastructure needs after thirty years of civil war and sets up a stage for the development of the municipal sector\. The project design provides municipalities with the tools and financing to enhance service delivery, encourage private investment, and promote economic growth through improved infrastructure services\. The development objectives are also squarely aligned with the Government's own priorities of improving municipal infrastructure needs and are clearly stated in its National Emergency Reconstruction Program (NERP)\. The objectives are also in line with the global priorities, as municipal projects of this nature remain an important vehicle in helping municipalities around the world in strengthening their capacity and in managing service delivery\. The project design and implementation therefore remain very relevant for the current stage of Lebanon's development\. Monitoring project performance was relatively easy because of the simple and straight forward design of the project\. 3\.2 Achievement of Project Development Objectives The achievements of PDO are rated satisfactory\. The project successfully contributed to the improvement of living conditions in communities across Lebanon\. This was reconfirmed during beneficiary assessment survey, conducted by the ICR mission\. Major achievements of PDO are summarized below: The project was successful in upgrading essential infrastructure in 704 municipalities that included construction of about 3,175 km of roads; 257 km of retaining walls; distribution of 15,083 streetlight poles; improvement of 290 km of storm drainage network; improvement of 28 km of potable water; and rehabilitation of 36 km of sewerage network\. Through workshops and hands-on training, the project familiarized municipalities with the technical, social, environmental and economic criteria for the prioritization of their project needs and encouraged them to consider operations and maintenance implications of their investment choices\. All participating municipalities are now fully aware of the processes of identification and appraisal of sub-projects, preparation of bidding documents, bid awards, as well as construction supervision\. By monitoring municipal performances, a wealth of information on actual financial and technical opportunities has now become available for the first time in the history of Lebanon which would be helpful in the design of future municipal projects\. 9  Achievement was also visible at MOIM level whose staff received specialized training on how to monitor municipal progress\. MOIM also recently completed a Local Economic Strategy Study which is expected to help stimulate economic growth in five potential cities\. Core staff of the Directorate of Local Administration and Local Councils also received training in areas related to public administration and management; computerization of accounting system for payroll; electronic information on archiving; and integration of project management information system into the Directorate's operations\. 3\.3 Efficiency The Project Appraisal Document recognized that roads, sewerage and wastewater treatment sub-projects, in particular, would yield significant external economic benefits but it would be difficult to quantify such benefits because of the small population size (7,000 or less) of targeted municipalities\. Therefore, as a proxy to the economic rate of return analyses, the sub-projects were designed and appraised based on the least-cost technical alternative which translated into a per capita allocation of about $32 equivalent over the life of the project\. No economic analysis was therefore carried out\. During 2001 through 2008, all municipalities received total transfers of US$906 million from the central government\. This translates into an average annual government support of US$113 million to all the municipalities in the country\. Taking into account the local population of 704 municipalities that constitutes about 25% of Lebanon's total population of four million (that benefited from the project) the sub-national transfers per capita allocation comes out at about US$28 per year\. Comparatively, the Bank financial support provided under the FMIP loan represents slightly more than one year of government transfers to the targeted population\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory The overall outcome of the project is rated as satisfactory on the basis of high relevance of the project, the level of achieving PDOs, efficiency of investments made, and citizens' satisfaction, as revealed during the beneficiary survey carried out during ICR mission\. Effectiveness of municipalities in sub-project identification, planning, and preparation of tender documents was noticeably significant\. To attract funding from the project, 704 out of 707 eligible municipalities identified their own priority needs and prepared their own Project Appraisal Forms that were later endorsed by the Directorate of Urban Planning and the MOIM\. Additionally, although improvements are still needed, the local budget system has become more transparent as a result of integrated system of financial reporting established at MOIM\. Building upon the achievements and the lessons learned so far, the project has positively set the stage and standards for future municipal infrastructure investments and municipal borrowing\. 10  3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The direct impact of the project on lower-income urban population and other vulnerable groups was not taken into consideration at appraisal, and no poverty analysis was conducted at the project preparation stage\. Similarly, gender issues were neither reflected at the preparation stage, nor its impact monitored during implementation\. Through sub-project implementation, the project nevertheless did assist the general population in municipalities to gain improved access to infrastructure and municipal services\. Road rehabilitation sub-projects undoubtedly improved the mobility of a large number of local citizens\. While sub-projects cannot improve the livelihood of the entire citizenry of beneficiary municipalities, they were highly appreciated by local citizens, as per the findings of the beneficiary survey and the meetings conducted with the municipal council members during ICR mission\. (b) Institutional Change/Strengthening The project's institutional development impact, which is defined in the ICR guidelines as the extent to which the project `has improved the agency's ability to make effective use of its human and financial resources' is rated as satisfactory at the municipality level\. The objective of the project to `increase the effectiveness of participating municipalities in identification, planning, preparation of tender documents, and delivery of investment sub- projects for local infrastructure' is directly linked to the institutional change and capacity strengthening\. The creation of an integrated project management information system, at the central level, strengthened the capacity of MOIM to manage the project and to monitor performance in the municipal sector\. (c) Other Unintended Outcomes and Impacts (positive or negative) An unintended benefit that stands out clearly was the employment opportunities that the project was able to generate while being implemented in different municipalities\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops A beneficiary survey was conducted by the ICR team in March 2009\. The survey aimed to identify the extent to which citizens in the participating municipalities benefited from infrastructure improvements under the project, and their satisfaction\. The survey team also evaluated sustainability of the civil works financed under the project\. The assessment included a sample survey of ten municipalities within five Districts5: (i) two municipalities in North Lebanon; (ii) two in South Lebanon; (iii) three in Mount Lebanon; (iv) one in Nabatiyeh; and (v) two in Bekaa Valley\. The beneficiary survey carried out in-depth interviews and collected performance indicators including evidence of post-project physical infrastructure (photographs) to examine before-and-after project 5 North Lebanon; South Lebanon; Mount Lebanon; Nabatiyeh; and Bekaa Valley 11  scenarios\. As per survey's findings, residents were positive about the road improvements in their municipalities and the impact they had made in improving accessibility, travel time, environment and improving economic livelihood\. Roads generally show signs of wear and tear over time however, all roads visited during this survey showed no signs of distress even though some had been completed for over five years\. Citizens in general did raise concerns about future maintenance of roads\. The survey also noticed that street light sub-projects were widely appreciated\. People interviewed appreciated the improved public safety, convenience and economic opportunities that they had experienced because of outdoor lightings\. 4\. Assessment of Risk to Development Outcome Rating: Low The likelihood that changes may occur that would be detrimental to the ultimate achievement of the project's outcome is low\. Municipalities are now signaling additional financing and technical assistance needs based on their unique socioeconomic conditions\. For example, in 1960s, Shiyeh6 city was a thriving manufacturing base operating on the periphery of Beirut's urban center\. Today, Shiyeh has completely shifted to a service economy with the growth of Beirut\. The project supported the upgrading and rehabilitation of basic infrastructure in the core of this city and now the city plans for a multi-purpose complex housing, a 1800 seat sports arena, and a 550-seat theatre for the city residents\. Most of the elected municipal leaders have shown great interest in continuing this trend and have signaled MOIM their willingness to request even larger amounts if a new World Bank project were to be made available again\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory As mentioned earlier, the Quality at Entry was not formally reviewed through the QAE process by QAG\. The project was prepared under difficult circumstances, in a country which had emerged from long civil unrest and armed conflicts and where the municipal infrastructure sector had essentially collapsed\. The project preparation was supported by a PHRD grant which allowed for a range of technical expertise to assist the Government with project preparation activities\. The Bank carried out several preparation missions which were adequately staffed with specialists needed to support project preparation in all relevant areas\. The project team 6 Shiyeh: City serves 75,000 residents and was supported by $400,000 intervention under this project\. Road resurfacing and new storm-water drainage systems helped this community recover from the past years of civil strife 12  avoided a complex model and intentionally kept the project design simple yet responsive to the country's needs in providing immediate municipal requirements\. Planning was brought to many smaller municipalities for the first time in their history\. Potential risks were rightly identified\. However, assessment of the central government's readiness to undertake key policy and institutional reforms were somewhat optimistic\. The MOIM, for example, was able to implement the improved monitoring and financial reporting system only after the project was extended\. At project preparation stage, monitoring outcome and impact indicators were set out too broadly to be measurable\. These indicators emphasized more on counting the delivery of project components rather than the achievement of outcomes and impacts\. This meant that M&E indicators were able to provide precise information about the number of light poles installed and the roads/sidewalks rehabilitated, as well as their exact unit costs, but not how much of these facilities were utilized and the degree of impact they had on the citizens\. The M&E indicators had to be fine-tuned later during implementation\. To establish baseline data, neither poverty assessment nor social impact assessments were conducted at the time of project preparation pointing to more work in this area\. Five conditions were set for project Effectiveness hinting that project could have been polished further before being presented for Board approval\. (b) Quality of Supervision Rating: Rating: Satisfactory The quality of Bank supervision is rated as Satisfactory\. The Bank supervision teams continued their hands-on approach and remained close to the clients even during difficult internal country situations which earned them praise inside the country and the Bank\. The supervision teams worked extensively with various municipalities during the first years of the operation to build a solid pipeline of investments and helped assess capacities of participating municipalities\. During later years, the supervision teams helped prepare the framework to resume sluggish disbursement rate once the country emerged from civil unrest in 2006\. The three extensions of the project were mainly attributed to the country's political and security situation and to fine-tune the institutional strengthening component\. The field presence of the Bank supervision team, during later years, was essential in maintaining a continuous dialogue with the clients especially with the changing leadership halfway through the project\. This presence was also essential in maintaining effective coordination with other partners (donors, NGOs), who looked for Bank's advice and direction\. Safeguard and fiduciary policies were also monitored closely and were addressed on a timely basis\. Procurement for example, was constantly monitored with periodic post- 13  reviews and was made part of the supervision mission activities\. The Bank teams were ever ready to provide immediate delivery of training/support to the client when needed\. The project also continued to maintain a satisfactory financial management system capable of generating quarterly reports including the Bank required Project Management Reports\. Aide Memoires were descriptive and well-written and two ISRs were archived annually\. Action plans/work programs were mostly fully implemented and followed through within the agreed time frame after each supervision mission\. The ISR appropriately reflected the situation on the ground\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory The rating of overall Bank performance is Satisfactory - being moderately satisfactory at entry and satisfactory during supervision\. It has been widely acknowledged, by the Borrower and the sectoral stake holders, that Bank's support during project supervision has made significant contribution towards setting a stage for future development of municipal sector\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory The Government's performance is rated as Satisfactory on the basis of its strong supporting role during project preparation and implementation\. Because of good dialogue maintained, the project always enjoyed support from both old and the new governments\. The only period during which the Government did not directly engage in regular strategic support was during the conflict in 2006, this however changed soon after the UN-brokered ceasefire brought an end to the hostilities\. Following the parliamentary elections in June 2005, the new Government reiterated its top priorities matching perfectly those with the development objectives of the project and reaffirmed its support to infrastructure investments, municipal sector reforms, and increased fiscal discipline\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory The implementing agency performance is rated as Satisfactory\. The project coordinating unit located in MOIM implemented the project well and went extra mile to achieve project development objectives\. It organized several workshops to introduce project to 14  over 150 municipalities and to disseminate technical information\. It established a robust database to track municipalities' progress\. The PCU succeeded in establishing good rapport with the municipalities, an element considered essential to implement over 1,000 successful sub-projects\. Its institutional capacity was proven to be adequate to handle increasing number of sub-projects and technical assistance activities\. The PCU adequately carried out required fiduciary, legal and safeguard activities (technical audits, financial audits, post-procurement reviews) and responded effectively and in a timely manner when required to take over additional responsibilities to manage FMIP Grant in parallel\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory Overall Borrower performance takes into consideration both the Government and Implementing Agency's performance during preparation and implementation\. On the basis of justification provided above, the Borrower's overall performance is rated as Satisfactory\. The Borrower complied with all covenants and agreements towards achieving development outcomes\. 6\. Lessons Learned The design and implementation experience of the project offers following considerations that might be useful in shaping future projects of this nature: (1) The FMIP experience confirms that project design needs to be kept simple and within the capacity of the staff and agencies who are responsible for its implementation\. (2) In countries where political influence is difficult to avoid, the project team was able to successfully adopt a decentralized implementation mechanism which shielded the municipalities and the implementing agency from various political interferences in the country\. (3) The project lacked clearly defined monitoring indicators\. For M&E to succeed it should focus on achieving results, particularly for the poor and should not be unduly burdensome to the municipalities\. Strong M&E can also help reduce the expense of cost-benefit analysis by providing data needed to carry out economic analyses\. (4) The project did not have any cost recovery mechanism built in its design, possibly because it was evident that full cost recovery would almost be impossible for several municipal infrastructure investments\. It would be prudent however, if consideration could be given during future project design to define realistic cost recovery system\. (5) In Lebanon, where access to finance for municipal infrastructure is limited, Municipal Development Fund (MDF) type of financial intermediary can play an 15  important role in providing financing (in grant and credit depending on the credit capacity of the municipality), and in increasing municipal capacity in the identification and implementation of municipal investments\. With proper design of MDF financial and cash flow model, revolving funds can significantly contribute to new financing that can cover MDF's own operational cost, thus ensuring sustainability\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies No issues were raised by the Borrower\. (b) Co-financiers N/A (c) Other partners and stakeholders N/A 16  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Actual/Latest Percentage of Components Estimate (USD Estimate (USD Appraisal millions) millions) 1\. Upgrading and rehabilitating backlog of essential municipal 92\.81 85\.57 92\.19% infrastructure 2\. Capacity building at MOMRA; technical assistance to municipalities for project 4\.86 3\.33 68\.51% implementation and project management, Municipal Database 3\. Project Coordination Unit 2\.33 3\.33 142\.91% Total Project Costs 100\.00 92\.23 92\.23% Total Financing Required 100\.00 92\.23 92\.23% (b) Financing Type of Co- Appraisal Actual/ Estimate Percentage of Source of Funds financing Estimate($M) ($M) Appraisal Government 20\.00 17\.52 87\.60% IBRD 80\.00 74\.71 93\.38% Total 100\.00 92\.23 92\.23% 17  Annex 2\. Outputs by Component Component 1: Upgrading and Rehabilitating Basic Municipal Infrastructure The following outputs were produced under this component: Roads: Repair: The bulk of the funds was allocated for backlog repairs of existing internal roads\. Out of 10,857 km of internal roads, 2,913 km (poor, inaccessible, non-functional, and some with life span less than 2 years) were repaired under FMIP\. Similarly, out of 4,326 km of existing principal roads, only 37 km were repaired\. This small number represents project's focus on smaller municipalities with less than 7,000 populations where principal roads were limited in number\. Upgrade: Out of 10,857 km of internal roads, 166 km of internal and 58 km of principal roads were upgraded\. Retaining Walls: Repair: Out of 2,468 km of retaining walls (concrete and/or decorative), 38 km were repaired at internal locations while out of 1,523 km of walls at principal locations seven km were restored\. Upgrade: 191 km were upgraded at internal locations; 22 km were upgraded at principal locations Drainage Network: Repair: Out of 2,499 km of drainage network, 37 km were repaired at internal locations and out of 1,654 km at principal location nine km were repaired\. Upgrade: 206 km of network were upgraded at internal locations while 38 km of network were upgraded at principal locations\. Street Poles: Repair: Out of 170,162 street light poles, 933 were repaired at internal locations while out of 75,793 street light poles, 156 were repaired at principal locations\. Upgrade: 13,057 street poles were upgraded at internal locations while 937 poles were upgraded at principal locations\. Potable Water Network: Repair: Out of 7,113 km of potable water network, 16\.4 km were repaired at internal locations, while out of 3,191 km of network 8 km were upgraded at principal locations\. Upgrade: Four km of network was upgraded at internal locations while none at principal location\. Sewage Network: Repair: Out of 2,369 km of sewage network, 15 km were repaired at internal locations while out of 1,558 km of sewage network at principal locations, none was repaired\. 18  Upgrade: No sewage network was upgraded at any internal locations while only four km of network was upgraded at principal locations 19  Output Component 1: Total Total Details of Repairs on Repairs on Repairs on Poor Average Good Total Repairs Upgrading Municipal Location Unit poor average good Condition Condition Condition Network under Under Infrastructure condition condition condition FMIP FMIP A B C D A' B' C' E=A'+B'+C' F Total length I Km 4,208 4,646 2,003 10,857 2,811 101\.37 0\.46 2,913 166 of road network P Km 961 2,372 993 4,326 21 15\.74 37 59 Total length I Km 719 606 1,143 2,468 36 1\.32 0\.03 37 190 of retaining walls P Km 278 360 885 1,523 5 1\.20 7 22 Total length I Km 632 1,434 432 2,498 36 1\.63 37 206 of drainage network P Km 390 806 458 1,654 4 4\.61 9 38 Total number I No\. 7,028 1,639 161,495 170,162 633 300\.00 933 13,057 of street light poles P No\. 2,345 611 72,837 75,793 156\.00 156 937 Total length I Km 1,855 2,760 2,498 7,113 16 16 4 of potable water network P Km 702 1,231 1,259 3,191 8 8 Total length I Km 573 1,057 739 2,369 14 1\.31 15 17 of sewerage network P Km 572 573 412 1,558 4 Poor implies inaccessible/non-functional roads, average implies life span < 2 years & good implies lifespan within 5 years; I=Internal roads; P=Principal roads 20  Output - Component 2: Capacity Building At Municipal Level: Technical Assistance/hands-on training and workshops provided to participating municipalities in analyzing feasibility of investments (sub-projects), preparation of project designs, and preparation of bidding documents\. At MOIM Level: Rapid diagnostic and need assessment study to asses Directorate General of Municipal Administration's capacity - completed; Project Management Information System (PMIS) - developed; Financial Management Information System (FMIS) - developed; Database on local government expenditures and revenues - developed; Technical Audit to provide feedback to MOIM regarding efficiency of project implementation and its impact on various levels ­ conducted; City Development Strategy Studies for ten cities ­ completed under Phase I; Local Economic Development Studies for five cities ­ completed under Phase II Output - Component 3: Support to Project Coordination Unit PCU established which grew in size into 12 core staff, seven consultants including four field appraisal engineers and three supervision engineers\. PCU office furniture, equipment and vehicles put in place PCU staff provided training 21  Annex 3\. Economic and Financial Analysis (including assumptions in the analysis) No Economic Rate of Return (ERR), Financial Rate of Return (FRR) or Net Present Value (NPV) was calculated at the time of appraisal\. Currently available data does not allow estimating a meaningful ERR, FRR or NPV for any of the components\. Given the demand-driven nature of the project, the type and size of sub-project investments were unknown at the time of appraisal\. Only sub-projects with clear community development objectives and those that met essential services criteria were selected (i\.e\. street lights, sidewalks, roads leading to schools, hospitals, dispensaries, religious buildings and roads that served the whole community)\. Although project appraisal document expected sub-projects to yield significant external economic benefits, it also recognized that it would be difficult to quantify such benefits because of the small population size of targeted municipalities\. Therefore, instead of computing an economic rate of return, sub-projects were designed and appraised on the least-cost solution which translated into a per capita allocation of about $32 equivalent over the life of the project\. During 2001 through 2008, all municipalities received total transfers of US$906 million from the central government\. This translates into an average annual government support of US$113 million to all the municipalities in the country\. Taking into account the local population of 704 municipalities that constitutes about 25% of Lebanon's total population of four million the sub-national transfers per capita allocation comes out at about US$28 per year\. In comparison, the Bank financial support provided under the FMIP loan represents slightly more than one year of government transfers to the targeted population\. For the road rehabilitation sub-component, the largest activity under the first component, benefits were estimated as improved road conditions that lower vehicle operating costs, decrease maintenance costs and benefits resulting from improved road safety\. As pointed out in the PAD, reduced vehicle operating costs, time savings for passengers and savings in road maintenance, following rehabilitation, are considered important benefits\. Following table reflects direct and indirect beneficiaries of the project\. % of direct % of indirect %of total of beneficiaries to beneficiaries to beneficiaries to Description resident population resident population resident population Mount Lebanon District Roads 15\.23% 97\.14% 112\.36% Retaining Walls 15\.74% 107\.19% 122\.93% Street Lighting 24\.52% 228\.60% 253\.11% Sewerage 12\.28% 22\.27% 34\.55% Storm Water Drains 16\.62% 116\.47% 133\.09% North Lebanon District Roads 19\.98% 120\.32% 140\.31% Retaining Walls 17\.60% 126\.64% 144\.24% Street Lighting 29\.94% 233\.31% 263\.26% Sewerage 3\.71% 10\.40% 14\.11% Storm Water Drains 21\.32% 76\.83% 98\.14% 22  Bekaa Valley District Roads 14\.81% 64\.10% 78\.91% Retaining Walls 13\.27% 69\.24% 82\.51% Street Lighting 37\.44% 66\.49% 103\.92% Sewerage 26\.67% 66\.67% 93\.33% Storm Water Drains 17\.48% 57\.93% 75\.41% South Lebanon District Roads 27\.86% 77\.27% 105\.13% Retaining Walls 30\.09% 79\.99% 110\.08% Street Lighting 28\.07% 32\.71% 60\.78% Storm Water Drains 29\.00% 74\.46% 103\.45% Nabatieh District Roads 16\.21% 90\.74% 106\.95% Retaining Walls 17\.71% 109\.33% 127\.04% Street Lighting 16\.15% 37\.68% 53\.83% Storm Water Drains 18\.97% 145\.04% 164\.02% Direct beneficiaries are the registered residents of the municipalities, while indirect residents are non- registered residents and those who pass through the municipalities using its facilities\. 23  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility Lending Sateh El-Arnaout Sr\. Municipal Specialist MNSSD Municipal Dev\. Sonia Hammam Sr\. Urban Mgmt\. Specialist MNSSD TTL Samir El-Daher Financial Advisor MNSSD Municipal Fin\. Lead Urban Specialist (now Omar Razzaz MNCA2 Municipal Dev\. Country Manager Beirut) Supervision Mohammed Benouahi Sr\. Urban Mgmt\. Specialist MNSSD TTL Stephen Karam Sr\. Urban Economist FEU TTL Robert Maurer Lead Urban Sector Specialist MNSSD TTL Imad Saleh Sr\. Procurement Specialist Procurement Lina Fares Procurement Specialist MNAPR Procurement Mona El-Chami Sr\. Financial Mgmt\. Specialist MNAFM Financial Mgmt\. Robert Bou Jaoude Sr\. Financial Mgmt\. Specialist MNAFM Financial Mgmt\. Diana Masri Financial Mgmt\. Concultant MNAFM Financial Mgmt\. Sati Arnaout Implementation Consultant MNSSD Institutional Dev\. Randa Nemer Environment Consultant MNSSD Environment Mutasem El Fadel Sr\. Environment Consultant MNSSD Environment Olivier Lavinal Inst\. & Local Administration Spec\. WBI-MS Institutional Dev\. Mouna Couzi Sr\. Program Assistant MNCLB Project Support Sophie Umechlian Program Assistant MNCLB Project Support ICR Richard James Operations Consultant MNSSD Primary Author Eileen Murray Lead Operations Officer MNSHD Peer Review Maha Armaly Sr\. Urban Finance Specialist ECSSD Peer Review (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No\. of staff weeks travel and consultant costs) Lending FY97 - 10\.64 FY98 - 241\.20 FY99 - 55\.67 FY00 61 381\.62 FY01 3 21\.50 Total: 64 710\.73 Supervision/ICR FY01 19 66\.35 24  FY02 18 90\.10 FY03 17 74\.50 FY04 14 72\.41 FY05 16 58\.72 FY06 19 68\.69 FY07 12 50\.52 FY08 9 57\.31 FY09 6 0\.00 Total: 130 538\.60 25  Annex 5\. Beneficiary Survey Results Executive Summary: In association with the PCU engineers and procurement specialists, the ICR mission conducted a Beneficiary Survey during March 2009 in ten municipalities, from across all the Districts that benefited from investments under the FMIP\. This Beneficiary Survey included quantitative as well as qualitative opinion interviews that aimed to assess the impact of investments made in roads, street lights, and retaining walls sub-projects on households and businesses\. As a baseline, the survey team used the original photographs taken of the sites during sub-project preparation\. The team also used photographs that were taken at the completion of these sites, some as early as 2005\. Finally the survey team took photographs of the same sites from exactly the same vantage point where sub-projects were executed which permitted comparisons of sub-projects results\. The Beneficiary survey focused on all the districts as follows: (i) Mount Lebanon District (ii) North Lebanon District (iii) South Lebanon District (iv) Bekaa Valley District and (v) Nabatiyeh District The sub-projects examined samples of randomly selected retaining walls, asphalt roads, water channels, streetlight poles, and sidewalks in ten municipalities: The samples were broken down as follows: (i) Amyoun Municipality (retaining walls, street light poles, and sidewalks); (ii) Batroun Municipality (roads, street lights); (iii) Bhamdoun Municipality (roads, retaining walls, street light poles); (iv) Jounieh Municipality (roads, street light poles and sidewalks); (v) Kab- Elias Municipality (retaining walls and asphalt roads); (vi) Kefraye Municipality (street light poles and roads); (vii) Majdelyoun Municipality (roads, retaining walls, sidewalks); (viii) RasEl-Maten Municipality (street light poles, sidewalks, retaining walls); (ix) Sfarey Municipality (roads and sidewalks); (x) Zibdine Municipality (retaining walls, roads) The survey team focused on business community, general citizens (beneficiaries of the infrastructure improvements) and Vice Mayor7 and his staff of Amyoun municipality, as well as the Secretary General8 and his staff of Kefraya municipality\. 7 Mr\. Ghassan Karam 8Mr\. Nizar Rohhal 26  The purpose of the meetings/interview was to evaluate the impact of several infrastructure projects among local residents/beneficiaries\. Citizens were generally very positive about the road improvements in the municipalities and appreciated the workmanship of the roads\. Lighting projects were widely embraced\. Participants raved about improved aesthetics, public safety, convenience, and economic opportunities they have experienced because of outdoor lighting\. Participants confirmed increased feeling of physical safety on the streets\. Overall Conclusions of the Beneficiary Survey: Improvements to municipal infrastructure are one of the bright spots Lebanon has seen in a generally difficult economic and political picture; The residents are well aware of the road, water and light improvements made in their areas and see tangible improvements in their lives and business as a result\. These benefits include improved circulation of traffic, reduced maintenance costs, quicker access to work, and better safety and improved municipal appearance for the lights\. Lighting projects are unanimously praised as new lights offer immediate quality of life and economic benefits at a much smaller cost than water and road investments\. The municipality of Batroun9 stood out during the survey\. The offices in this municipality were in disrepair and sewage flowing in streets\. The FMIP financing provided injection of new investment in Batroun that soon attracted EU, Italian, NGO and private sector funding\. Because of FMIP intervention, private local fertilizer company donated $100,000 to replace old wooden shop front doors; 25 new restaurants/cafes and other businesses were established\. The municipality was also able to increase property values and consequently municipal tax revenue to improve services; up to 250 new jobs were also created in the city\. 9 Betroun, a city of approximately 25,000 residents spanning an area of 6 km2, had renovated internal street of the old city and installed street lighting, sidewalks, drainage canals and retaining initiated re walls through FMIP financing of about$375,000\. 27  District: North Lebanon Casa: Amyoun Municipality: Amyoun Registered Population: 9,454 Activities: 1- Roads (Asphalt), 2- Retaining Walls Work Start Date: May 10, 2006 Work Completed: December 27, 2006 Contract Amount Original: $102,348 Contract Amount Actual: $117,481 Prior Situation May 2006 Situation at Completion December 2006 Situation as at ICR Survey April 2009 28  District: North Lebanon Casa: Batroun Municipality: Batroun Registered Population: 8,692 Activities: 1- Retaining Walls, 2- Roads (Asphalt, Stone pavement, side walk), 4- Street Lighting, 5-Channels Work Start Date: November 25, 2002 Work Completed: June24, 2004 Contract Amount Original: $240,479 Contract Amount Actual: $240,479 Prior Situation November 2002 Situation at Completion June 2004 Situation as at ICR Survey April 2009 29  District: Mount Lebanon Casa: Aley Municipality: Bhamdoun Al Dayaa Registered Population: 3,972 Activities: 1- Roads (Asphalt), 2- Retaining Walls, and 3-Water channels Work Start Date: June 5, 2006 Work Completed: December 7, 2006 Contract Amount Original: $148,357 Contract Amount Actual: $120,000 Prior Situation June 2006 Situation at Completion December 2006 Situation as at ICR Survey April 2009 30  District: Mount Lebanon Casa: Keserouan Municipality: Jounieh Registered Population: 22,314 Activities: 1- Retaining Walls, 2- Roads (Asphalt, side wakes), 3- Channels (Pipes, Main holes), 4- Street Lighting, 5- Street Markers Work Start Date: January 15, 2004 Work Completed: September20, 2004 Contract Amount Original: $172,276 Contract Amount Actual: $192,015 Prior Situation January 2004 Situation at Completion September 2004 Situation as at ICR Survey April 2009 31  District: Bakka Casa: Zahle Municipality: Kab Elias Registered Population: 15,198 Activities: 1- Roads (Asphalt), Retaining Walls Work Start Date: April 2, 2002 Work Completed: August 13, 2002 Contract Amount Original: $212,856 Contract Amount Actual: $244,782 Prior Situation April 2002 Situation at Completion August 2002 Situation as at ICR Survey April 2009 32  District: Bakka Casa: West Bekka Municipality: Kifraya Registered Population: 1,453 Activities: 1- Roads (Asphalt), 2-Channels Work Start Date: June11, 2003 Work Completed: January15, 2004 Contract Amount Original: $18,283 Contract Amount Actual: $19,745 Prior Situation June 2003 Situation at Completion January 2004 Situation as at ICR Survey April 2009 33  District: South Lebanon Casa: Saida Municipality: Majdelyoun Registered Population: 1,103 Activities: 1- Water Channels Work Start Date: August 19, 2003 Work Completed: January 06, 2004 Contract Amount Original: $30,543 Contract Amount Actual: $21,367 Prior Situation August 2003 Situation at Completion January 2004 Situation as at ICR Survey April 2009 34  District: Mount Lebanon Casa: Baabda Municipality: Ras-El-Maten Registered Population: 6,420 Activities: 1- Concrete/Decorative Retaining Walls Work Start Date: April 27, 2005 Work Completed: August 26, 2005 Contract Amount Original: $18,527 Contract Amount Actual: $18,527 Prior Situation April 2005 Situation at Completion August 2005 Situation as at ICR Survey April 2009 35  District: South Lebanon Casa: Jezzine Municipality: Sfarey Registered Population: 1,480 Activities: 1- Roads (Asphalt), 2- Retaining Walls Work Start Date: November 5, 2003 Work Completed: May 13, 2004 Contract Amount Original: $42,625 Contract Amount Actual: $38,353 Prior Situation November 2003 Situation at Completion May 2004 Situation as at ICR Survey April 2009 36  District: Nabatieh Casa: Nabatieh Municipality: Zibdine Registered Population: 1,587 Activities: 1- Retaining Walls, Work Start Date: March 14, 2003 Work Completed: July 5, 2003 Contract Amount Original: $86,622 Contract Amount Actual: $86,470 Prior Situation March 2003 Situation at Completion July 2003 Situation as at ICR Survey April 2009 37  Annex 6\. Stakeholder Workshop Report and Results As part of the Beneficiary Survey carried out during ICR mission, extensive discussions were carried out with community beneficiaries; including interviews conducted with several elected and executive municipal officials (see Annex 6)\. 38  Annex 7\. Borrower's ICR IMPLEMENTATION COMPLETION REPORT (ICR) Lebanon First Municipal Infrastructure Project (Loan 7026-LE) 39  Basic Project Data Region Middle East Project Name First Municipal Infrastructure Project Country Lebanon L/C Number 7026-LE Borrower The Lebanese Republic Sector Ministry of Interior and Municipalities (MOIM) ICR Date April 10th, 2009 Implementing The Lebanese Agency Republic Key Dates Original Revised/Actual Appraisal May 26th, 2000 May 26th, 2000 Approval June 27th, 2000 June 27th, 2000 Effectiveness October 27th, 2000 November 27th, 2000 MTR December 2002 October 2003 Closing December 31st, 2005 December 31st, 2008 Principal Performance Ratings Original Revised/Actual Outcome Satisfactory Satisfactory Sustainability Satisfactory Satisfactory Institutional Development Satisfactory Satisfactory Impact Bank Performance Satisfactory Satisfactory Borrower Performance Satisfactory Satisfactory Quality at entry Satisfactory Satisfactory Project at Risk at any time (no) (no) C\. Assessment of Development Objective and Design and Quality at Entry Original Objective The project development objective is to address urgent municipal works while setting the stage for gradual assumption of responsibility for municipal services at the local level\. The project would: (a) in the short term, restore selected basic municipal infrastructure to improve living conditions; and (b) in the medium term, set the stage for the development of the municipal sector by enabling 40  municipalities to begin addressing local infrastructure maintenance and rehabilitation needs\. Revised Objective Objectives were not revised Components Original Components Project Component I Upgrading and Rehabilitating Basic Municipal Infrastructure Carrying out a program for the rehabilitation and upgrading of essential infrastructure in all the municipalities of the Borrower (with the exclusion of the four largest municipalities of Beirut, Tripoli, Sidon and Zahle), including: (i) constructing, upgrading, rehabilitating and maintaining essential roads and sidewalks, retaining walls, pedestrian crossings, street lights, safety barriers, road signs, urgent repairs to potable water and sewerage pipes, pavement surfacing, storm water drains and drainage systems; and (ii) construction, rehabilitating, upgrading and repairing new roads, potable water sources, potable wells, water reservoirs, potable water treatment facilities, pumping facilities, small water supply and sewerage systems\. Project Component II Capacity Building 1\. Developing, implementing and maintaining a program for infrastructure rehabilitation, including feasibility studies, tender document preparation, sub- project technical design and supervision and maintenance programming, through the provision of consultant services to the municipalities\. 2\. Strengthening the capacity of MOMRA to manage the Project and monitor the municipal sector, through the provision of consultant services\. Project Component III Project Coordination Unit Establishment and operation of the PCU, including the provision of equipment and consultant services as well\. Revised Components Components were not revised Quality at Entry 41  The objectives of the Loan were in consistency with the with the objectives of the Lebanese Government priorities which was to; 1-Upgrading and rehabilitating backlog of essential municipal infrastructure\. 2-Capacity building at MOIM; technical assistance to municipalities for project implementation and project management\. 3-Strengthening MOIM's institutional capacity to support the transfer and management of municipal functions and provide logistical support to municipalities that are too small to effectively undertake municipal investments on their own by Establishment of a sound capable unit as the PCU to coordinate the implementation of the loan and similar project\. Moreover one of the indirect goals was to improve local investment decisions by establishing a clear set of technical and economic criteria for local selection of priority investment projects by Empowering municipal councils through a more predictable transfer process\. D\. Achievement of Objective and Outputs Outcome/Achievement of Objective The objectives were well achieved and the project's outcomes achieved most of its major relevant objectives and have achieved satisfactory development results with only a few shortcomings\. Output by Components For Component One; Upgrading, rehabilitating and building-up of essential municipal development infrastructure and urban development projects\. For Component Two; Provided Capacity building at MOMRA and technical assistance to municipalities development for project implementation, project management and municipal database managing\. For Component Three; Building and strengthening the Project Coordination Unit to establish an extensive experience in institutional development and urban development projects implementation capabilities\. Net Present Value/Economic Rate of Return Such assessment was not conceivable for the sub-projects, which dealt with infrastructure reconstruction after the civil war and after major reconstruction project took place in the country for 15 years\. 42  Financial Rate of Return This was not doable because of projects size\. Institutional Development Impact Institutional Development impact is defined as the extent to which a project has improved an agency's or a country's ability to make effective use of its human and financial resources\. This was achieved in Lebanon by establishing, expansion and developing of the Project Coordination Unit under the First Municipal Infrastructure Project which improved the Ministry of interior and Municipalities and Lebanon's capabilities in managing, implementing, organizing and developing potentials, qualifications and possibilities of any international or local intervention in upgrading and developing the municipal sector\. E\. Major Factors Affecting Implementation and Outcome The major factors that affected achievement of the project outcome and objectives/outputs were divided in the following categories: (a) Factors outside the control of government or implementing agency; The long term affects of the 15 years civil war were very obvious through the whole country in addition to the late 2006 war which caused major threats to the project in addition to world markets and prices increasing\. (b) Factors generally subject to government control, The hiring freeze in the Lebanese Government had hindered the evolution and development of the human resources\. Filling the vacancies by qualified personnel in the ministry in parallel with the establishment of a solid inter-governmental administrative system to assume the responsibility of managing the municipal sector, is very needed since the results of the full coordination of the PCU with the municipal bodies came out to be very fruitful\. Costs and Financing The Bank and the Lebanese government disbursed their dues accordingly and no major factors to affect the implementation and the outcome of the project\. F\. Sustainability 43  Rationale for Sustainability Rating The FMIP financed, following a demand driven approach, over 1000 rehabilitation projects\. The majority of these are small and benefiting local governments that have not made significant investments in infrastructure rehabilitation due to the inadequacy of their resources\. However, the viability of the project was questioned if maintenance along its lifetime couldn't be ensured\. In the time being, cost recovery of municipal investments is only partially carried out in Lebanon and the main outcome is visible lack of maintenance in rural areas\. The commitment of the municipality to undertake maintenance along with their involvement in all project phases promote "cost-recovery" practices, improved the collection of local taxes due, and endorsed better distribution of centrally collected taxes on the behalf of the municipalities\. This allowed them to pay for and maintain the essential services through their general revenues\. A great importance is accorded to this indicator which mirrored their capacity to maintain their locally defined projects\. It showed the following: i) Evidence of undertaking infra-structural municipal works\. ii) Evidence of collection of local due taxes\. iii) Evidence of use of percentage of local resources for maintenance\. iv) Annual amounts and distribution of IMF resources Indicative percentages, derived from the information afforded by the municipalities, allowed the tracking of the increase of the expenditures on maintenance along with the assessment of local tax collection\. Initially, the municipalities were asked to provide a detailed breakdown of revenues and expenditures\. However, due to the difficulties encountered in the itemization of the content of the municipal budgets, modifications were introduced in the sustainability report in order to simplify this task for the municipalities, and to get more consistent figures\. Consequently, global amounts of capital investment and revenues were taken into consideration\. Nonetheless, it is worth to note that, in order to have more reliable figures for forecasting future projects, and despite all the progress made in the preparation of the municipal budgets, the fiscal information supplied by the municipalities needs a thorough posterior control by the central authorities before any data processing\. On the other hand, the information provided served as a valuable input for the studies on the development of a framework of local and intergovernmental finance\. Finally, we can surely say that the sustainability rating of the project is satisfactory since the implemented projects are considered as municipal assets which is maintained and developed by municipalities\. Transition Arrangements to Regular Operation 44  No specific transitional arrangements were needed for these projects since the municipalities are fully responsible on supervising and maintaining the projects after final hand over by the PCU\. G\. Bank and Borrower's Performance Bank (a) Appraisal of commitment by government, implementing agency, and the project beneficiaries\. This was satisfactory since the government, the implementing agency and the beneficiaries received their dues when needed and on time\. (b) Appraisal of borrower/implementing agency capacity, including procurement and financial management capacity\. As the project was managed smoothly by the bank through different periods and supervision teams, a satisfactory result was attained through project's lifespan\. (c) Availability of participant incentives for project sustainability\. Satisfactory rating for participants incentive's for project sustainability can be set due to the project types and targeted sub-projects\. (d) Project design and complexity\. The project design and complexity were well designed to tackle certain needs in the Lebanese post civil war medium range needs\. (e) Recognition of project risks and key variables\. The management was well aware of certain risks and variables due to the Lebanese delicate situation and it handled the project properly\. (f) Appropriateness of the financial package and adequacy of its amount\. Even the total amount of the loan was 80 million USD, the financial package was moderate due to quantity of needed projects and the number of municipalities in need\. (g) Adequacy of the implementation plan and performance indicators\. 45  The project implementation plan was satisfactory even if modifications and developments were needed and executed through the project lifespan\. (h) Consistency with the Bank's safeguards policies\. Through the lifespan of the project the Bank's safeguard policies were put into practice\. (i) Supervision\. The PCU is keeping a close relation with the bank team supervising the project, where cooperation and assistantship prevailed over project's duration at a very good level\. (j) Overall Bank Performance\. The bank fulfilled all its obligations without delays through close monitoring and supervision of the project in a highly satisfactory approach\. Borrower (A) Preparation and Government Implementation Performance\. Even though the borrower was new on preparing such projects, implementation showed a strong evidence of a well prepared project through demonstrating satisfactory results\. (B) Implementing Agency\. The PCU under the Ministry of Interior and Municipalities was the implementing agency which performed very good under different kinds of pressures and situations\. (C) Overall Borrower Performance\. The FMIP is the best performing Bank project in Lebanon and is well on track to achieve its development objectives and related outcomes\. Implementation progress and the achievement o f the development objectives were rated satisfactory prior to the 2006 war where over 800 sub-projects have been implemented in more than 700 municipalities\. While the FMIP does not have the ambition to develop a full-fledged long- term strategy for the municipal sector, it has succeeded in setting the stage for the gradual assumption of responsibility for municipal services and for promoting sustainable management practices at the local level\. The capacity building activities have helped develop, implement and 46  maintain an infrastructure rehabilitation program, including support for preparing feasibility studies, tender documents, sub-project technical designs and supervision, and maintenance programming\. Moreover, significant progress has been shown in carrying out the complex and politically sensitive studies on strengthening the MOIM to better coordinate the municipal sector and on completing the review of the economic potential of ten cities to promote local development\. The PCU concentrates a wealth of experience in project implementation and constitutes an invaluable asset as the country prepares to surmount its new challenges\. Even though, the PCU has strong leadership, tested administrative procedures, close interaction with the municipalities, and a strong focus on quality control\. H\. Lessons Learned Listed below are some of the lessons learnt through the accumulated experience of the PCU during the project lifespan\. i- Close on-site assistance: Experience showed that backing is recommended to be provided by the Individual Consultants to the problematic municipalities that are shown to face difficulties in the preparation of their projects proposals and PAF(s)\. The technical support will certainly have a positive impact on the pace of work and will involve all the municipalities in a practical development process\. ii- Continuous follow-up of the Individual Consultants: Practical needs validated that tracking coupled with direct involvement, when necessary, of the individual consultants with the municipalities accompanied by the close monitoring in carrying out the necessary requirements will certainly affect the lengthy unjustifiable administrative cycle\. iii- Municipal & Central Database: One of the important lessons showed the needs for upgrading the municipal database at both municipal & central levels which will allow the concerned parties to track the physical conditions of the existing infra-structural networks in order to closely monitor the needs of the rural communities and avoid duplication of projects\. It is also extremely advantageous for setting the ground for the master plans\. iv- Municipal Master Plans: Experience showed that undertaking the necessary coordination with all central institutions towards improvising master plans tackling all municipal services will allow the municipal councils to have in hand a large menu of services that need to be upgraded or implemented such as: 1\. Urban & Transportation Plans in coordination with MOIM, MOPW 47  (Ministry of Public Work), & CDR (Council of Reconstruction and Development)\. 2\. Sewage Network Master Plans in parallel with "small-scale Treatment Plants" in coordination with Ministry of Environment (MOE), Ministry of Hydraulic & Electric Resources (MHER), MOIM, & CDR\. 3\. Solid Waste Master Plan in parallel with "small-scale Treatment Plants" in coordination with MOE, MOIM, & CDR\. 4\. Potable Water Master Plan in parallel with "small-scale Treatment Plants, Wells, & Reservoirs" in coordination with MHER, MOIM, & CDR\. v- Simplification of the bidding procedures: A good learnt lesson in this regard is to carry out the pre-qualification of interested bidders at central level instead of attributing this responsibility to the bidding committees of the municipal councils until municipalities demonstrate clear evidence for their technical capabilities\. The ongoing routine is shown to have many drawbacks affecting the implementation of the projects due to the lack of experience of the committee members in conducting similar tasks\. vi- Establishment of clear & defined inter-governmental financial framework: Practical experience showed that the sustainability of municipal investments depends largely on substantially improving the municipal & intergovernmental finance system\. The organization of the fiscal structure in parallel with empowering the collection of local due taxes, will allow local officials to program community investments\. The predictability of transfers from the IMF (Independent Municipal Fund), review or local tax system, and promotion of cost- recovery practices, will have great positive impact on the living conditions in rural areas\. On the other hand, continuous control over municipal budgets to track local expenditure on implementation & maintenance of public works is urged\. vii- Building capacity at the central level through a developmental administrative plan: Experience through this project showed that filling the vacancies with qualified personnel in the MOIM in parallel with the establishment of a solid inter- governmental administrative system through a developmental administrative plan will allow assuming the responsibility of managing the municipal sector\. The MOIM oversight functions over the municipal records and performance through a capable and well organised modern administrative system are of great importance for the development of the urban and rural areas\. 48  Comments made by the Implementing Agency on draft ICR Review of the Quality of the World Bank's Implementation Completion Report (ICR) Reviewer: Eng\. Walid Abou Jaoudeh FMIP Project Director The World Bank's Implementation Completion Report (ICR) of the First Municipal Infrastructure Project (FMIP) covers explicitly all aspects of the project, and, is presented in a fair manner\. In preparing the ICR, the team has used different references/resources, including: project Appraisal document, Operational Manual, Legal agreement, Mid-Term Report, Bank's Aide-memoirs, Implementation Summary Reports\. In addition, the team conducted a Beneficiary Survey in March 2009 for representatives' areas and investments which confirmed the positive impact of the project on benefiting communities\. The ICR addresses the following: A review of FMIP accomplishments towards its goals and objectives\. The report does in a fair manner document the accomplishments made by the project\. A review of the methods and procedures used for the projects\. The report addresses the effectiveness of the coordination unit and the applied procedures in achieving the project development objectives\. The Lessons learned and recommendations are fairly presented and are considered very useful in shaping future projects of the same nature\. Finally we would like to share the Bank's team in their overall outcome rating the FMIP as satisfactory\. 49  Annex 8\. Comments of Co-financiers and Other Partners/Stakeholders N/A 50  Annex 9\. List of Supporting Documents 1\. Project Appraisal Document, May 26, 2000 2\. Project Operational Manual, April 2000 3\. Back to Office Reports and Aide-Memoires 4\. Implementation Status Reports - Feb\. 2000 through March 2009 5\. Mid Term Reviews, November 2003 6\. Technical Audit Report, December 2003 7\. Country Portfolio Performance Review, March 2007 8\. Country Assistance Strategy (Report No\. 34463-LB, dated November 22, 2005) 9\. Lebanon Interim Strategy Note July 9, 2007- Report No\. 39779-LB 51  LIST OF PARTICIPATING MUNICIPALITIES Amt Actual No\. Municipality Muhafaze Caza Allocated Cost 1 AIN Bekaa Baalbak 397,000,000 249,604,000 2 AINATA Bekaa Baalbak 64,000,000 63,800,000 3 BAALBEK Bekaa Baalbak 1,937,000,000 1,199,874,300 4 BARKKA Bekaa Baalbak 49,000,000 59,807,000 5 BECHOUAT Bekaa Baalbak 47,000,000 50,017,500 6 BEDNAYEL Bekaa Baalbak 325,000,000 78,386,175 7 BOUDAY Bekaa Baalbak 247,000,000 260,000,000 8 BRITAL Bekaa Baalbak 537,000,000 285,520,000 9 BTEDAA Bekaa Baalbak 21,000,000 21,000,000 10 CHEET Bekaa Baalbak 336,000,000 285,000,000 11 CHEMSTAR Bekaa Baalbak 1,339,000,000 513,341,058 12 CHLIFFA Bekaa Baalbak 133,000,000 133,160,000 13 DEIR EL AHMAR Bekaa Baalbak 443,000,000 190,525,000 14 DOURESS Bekaa Baalbak 173,000,000 91,638,560 15 ERSAL Bekaa Baalbak 886,000,000 886,000,000 16 FAKHA Bekaa Baalbak 433,000,000 432,791,500 17 FLAOUI Bekaa Baalbak 101,000,000 111,071,500 18 HADATH BAALBEK Bekaa Baalbak 169,000,000 174,950,000 19 HAOUCH BARADA Bekaa Baalbak 42,000,000 41,947,500 20 HAOUCH TELSFIEH Bekaa Baalbak 42,000,000 43,228,000 21 HARBETA Bekaa Baalbak 271,000,000 167,854,700 22 IAAT Bekaa Baalbak 227,000,000 267,745,000 23 JABBOULET Bekaa Baalbak 50,000,000 49,975,000 24 KAA Bekaa Baalbak 334,000,000 235,843,350 25 KHREIBBET Bekaa Baalbak 71,000,000 72,930,000 26 LABOUET Bekaa Baalbak 290,000,000 297,540,000 27 MAJDALOUN Bekaa Baalbak 62,000,000 62,000,000 28 MAKNET Bekaa Baalbak 266,000,000 120,292,000 29 NABBI AATHMAN Bekaa Baalbak 145,000,000 162,228,800 30 NABBY CHIT Bekaa Baalbak 413,000,000 472,750,000 31 NAHLET Bekaa Baalbak 233,000,000 180,227,500 32 RAS BAALBEK Bekaa Baalbak 284,000,000 286,840,000 33 SAIDET Bekaa Baalbak 42,000,000 43,579,500 34 SARIIN EL TAHTA Bekaa Baalbak 88,000,000 95,105,000 35 SARINE EL FAOUKA Bekaa Baalbak 202,000,000 202,470,000 36 TAIBET Bekaa Baalbak 49,000,000 49,174,375 37 TALYA Bekaa Baalbak 58,000,000 63,525,100 38 TAMNINE EL FAOUKA Bekaa Baalbak 130,000,000 131,280,000 39 TARAYA Bekaa Baalbak 330,000,000 330,700,000 40 TEMNINE EL TAHTA Bekaa Baalbak 273,000,000 277,238,300 41 WADI FAARAT Bekaa Baalbak 54,000,000 53,675,000 42 YAMMOUNEH Bekaa Baalbak 139,000,000 125,540,700 43 YOUNIN Bekaa Baalbak 374,000,000 374,004,300 1  44 AIN ZEBDET Bekaa Baalbak 71,000,000 73,375,000 45 AITANIT Bekaa West Bekaa 100,000,000 104,365,000 46 AMICK Bekaa West Bekaa 56,000,000 56,250,000 47 ANA Bekaa West Bekaa 55,000,000 59,935,000 48 BAALOUL Bekaa West Bekaa 118,000,000 95,000,665 49 BAB MAREH Bekaa West Bekaa 26,000,000 26,319,000 50 GHAZZET Bekaa West Bekaa 246,000,000 196,500,000 51 HAOUCH EL HARIMET Bekaa West Bekaa 131,000,000 134,995,000 52 JEB JANINE Bekaa West Bekaa 466,000,000 125,680,000 53 KAMED EL LAOUZ Bekaa West Bekaa 255,000,000 225,375,000 54 KARAOUN Bekaa West Bekaa 336,000,000 272,381,000 55 KEFRAYA Bekaa West Bekaa 67,000,000 40,818,750 56 KHORBET KANAFAR Bekaa West Bekaa 184,000,000 187,240,000 57 KHYARA Bekaa West Bekaa 48,000,000 49,460,000 58 LALA Bekaa West Bekaa 194,000,000 194,000,000 59 LEBBAYA Bekaa West Bekaa 178,000,000 198,287,500 60 MACHGHARA Bekaa West Bekaa 631,000,000 557,764,920 61 MANARA Bekaa West Bekaa 122,000,000 125,770,000 62 MANSOURA Bekaa West Bekaa 105,000,000 105,550,000 63 MAREJ Bekaa West Bekaa 327,000,000 242,295,000 64 SAGHBBINE Bekaa West Bekaa 296,000,000 187,065,000 65 SEHMOUR Bekaa West Bekaa 189,000,000 136,990,500 66 SOUAIRI Bekaa West Bekaa 155,000,000 118,512,500 67 SULTAN YAACOUB Bekaa West Bekaa 147,000,000 95,060,400 68 YEHMOR Bekaa West Bekaa 131,000,000 130,737,500 69 HERMEL Bekaa West Bekaa 1,130,000,000 494,857,500 70 KASR WA FISSAN Bekaa Hermel 459,000,000 442,835,000 71 AKABBAT Bekaa Hermel 99,000,000 106,494,500 72 AIHA Bekaa Hermel 147,000,000 147,000,000 73 AIN ARAB Bekaa Rachaya 48,000,000 47,955,000 74 AIN ATTA Bekaa Rachaya 106,000,000 110,450,000 75 AIN HERCHAT Bekaa Rachaya 65,000,000 37,511,000 76 AITA EL FEKHAR Bekaa Rachaya 147,000,000 165,449,000 77 BEIT LEHIA Bekaa Rachaya 62,000,000 59,720,000 78 BEKKA Bekaa Rachaya 51,000,000 52,551,500 79 BIRET Bekaa Rachaya 159,000,000 158,973,800 80 BKYFA Bekaa Rachaya 58,000,000 57,099,250 81 DAHR EL AHMAR Bekaa Rachaya 55,000,000 56,160,000 82 DEIR EL ACHAYER Bekaa Rachaya 31,000,000 31,520,000 83 HAOUCH Bekaa Rachaya 55,000,000 57,000,000 84 HELOUET Bekaa Rachaya 29,000,000 29,000,000 85 KAOUKABA Bekaa Rachaya 36,000,000 37,260,000 86 KFARDNIS Bekaa Rachaya 65,000,000 53,010,000 87 KFARKOUK Bekaa Rachaya 101,000,000 105,625,000 88 KFARMECHKY Bekaa Rachaya 100,000,000 100,000,000 89 KHORBET ROUHA Bekaa Rachaya 159,000,000 159,800,000 90 MAJDEL EL BALHYSS Bekaa Rachaya 102,000,000 73,290,000 91 MDOUKHA Bekaa Rachaya 82,000,000 82,002,000 2  92 MHAIDTHEH Bekaa Rachaya 66,000,000 66,780,000 93 RACHAYA Bekaa Rachaya 362,000,000 216,530,000 94 RFEID Bekaa Rachaya 148,000,000 147,848,000 95 TANNOURA Bekaa Rachaya 41,000,000 41,240,000 96 YANTTA Bekaa Rachaya 107,000,000 107,330,000 97 ABBLAH Bekaa Rachaya 122,000,000 64,765,000 98 ALI EL NAHRI Bekaa Zahle 356,000,000 181,000,000 99 BAR ELIAS Bekaa Zahle 565,000,000 215,000,000 100 CHTAURA Bekaa Zahle 16,000,000 20,572,000 101 DEIR EL GHAZAL Bekaa Zahle 47,000,000 35,000,000 102 FERZOL Bekaa Zahle 215,000,000 167,000,000 103 HAOUCH MOUSSA(ANJAR) Bekaa Zahle 377,000,000 217,000,000 104 HAY EL FIKKANI Bekaa Zahle 56,000,000 56,710,000 105 JDITA Bekaa Zahle 228,000,000 208,000,000 106 KAA EL RIM Bekaa Zahle 111,000,000 112,438,500 107 KAB ELIAS- WADI EL DELM Bekaa Zahle 576,000,000 231,712,350 108 KFARZABAD Bekaa Zahle 200,000,000 141,097,925 109 KOUSSAYA Bekaa Zahle 66,000,000 30,001,290 110 MAJDEL ANJAR Bekaa Zahle 395,000,000 395,516,000 111 MEKSSEH Bekaa Zahle 57,000,000 57,220,950 112 MREIJAT Bekaa Zahle 104,000,000 70,250,000 113 NABBY AILA Bekaa Zahle 62,000,000 35,000,000 114 NIHA Bekaa Zahle 85,000,000 55,555,000 115 REIT Bekaa Zahle 88,000,000 48,100,000 116 RYAK-HAOUCH HALA Bekaa Zahle 421,000,000 306,701,000 117 SADNAYAL Bekaa Zahle 405,000,000 347,000,000 118 TAALABAYA Bekaa Zahle 324,000,000 324,000,000 119 TAANAYEL Bekaa Zahle 43,000,000 50,380,000 120 TERBOUL Bekaa Zahle 194,000,000 198,096,000 121 AGHMID Bekaa Zahle 78,000,000 84,974,000 122 AIN AANOUB Bekaa Zahle 170,000,000 158,730,000 123 AIN DARA Mount Lebanon Aley 223,000,000 182,250,000 124 AIN EL JDIDEH Mount Lebanon Aley 33,000,000 34,547,000 125 AIN EL ROUMANEH Mount Lebanon Aley 12,000,000 12,160,000 126 AIN EL SAIDET Mount Lebanon Aley 30,000,000 32,359,000 127 AIN KSOUR Mount Lebanon Aley 29,000,000 29,575,000 128 AINAB Mount Lebanon Aley 56,000,000 56,476,670 129 AITATT Mount Lebanon Aley 108,000,000 105,480,000 130 ALEY Mount Lebanon Aley 730,000,000 433,707,000 131 ARAMOUN EL GHAREB Mount Lebanon Aley 305,000,000 235,900,000 132 BASATIN Mount Lebanon Aley 53,000,000 52,770,000 133 BATTLOUN Mount Lebanon Aley 29,000,000 30,915,000 134 BAYSSOUR Mount Lebanon Aley 297,000,000 223,858,750 135 BCHAMOUN Mount Lebanon Aley 162,000,000 179,460,000 136 BDADOUN Mount Lebanon Aley 115,000,000 116,000,000 137 BEDGHAN Mount Lebanon Aley 54,000,000 58,180,000 138 BEMEKYN Mount Lebanon Aley 25,000,000 25,000,000 139 BHAMDOUN EL DAYAAT Mount Lebanon Aley 180,000,000 225,707,000 3  140 BHAMDOUN MHATTAT Mount Lebanon Aley 75,000,000 74,400,000 141 BKHECHTEIH Mount Lebanon Aley 39,000,000 39,099,000 142 BLEIBEL Mount Lebanon Aley 39,000,000 39,000,000 143 BMEHRIEH Mount Lebanon Aley 59,000,000 42,404,000 144 BOUNIET Mount Lebanon Aley 67,000,000 68,240,000 145 BSOUS Mount Lebanon Aley 131,000,000 136,275,000 146 BTATER Mount Lebanon Aley 228,000,000 227,950,000 147 CHANAY Mount Lebanon Aley 70,000,000 69,000,000 148 CHARON Mount Lebanon Aley 190,000,000 151,600,000 149 CHARTOUN Mount Lebanon Aley 102,000,000 101,560,000 150 CHEMLAN Mount Lebanon Aley 40,000,000 40,188,000 151 CHOUEIFAT Mount Lebanon Aley 730,000,000 721,927,500 152 DEIR KOUBEL Mount Lebanon Aley 89,000,000 92,230,000 153 DFOUN Mount Lebanon Aley 63,000,000 49,800,000 154 DKOUN Mount Lebanon Aley 42,000,000 42,492,500 155 GABON Mount Lebanon Aley 65,000,000 70,625,000 156 HOUMAL Mount Lebanon Aley 59,000,000 59,000,000 157 KEHALEH Mount Lebanon Aley 191,000,000 141,490,000 158 KEYFOUN Mount Lebanon Aley 58,000,000 58,000,000 159 KFARAAMEYEH Mount Lebanon Aley 50,000,000 41,750,000 160 KFARMATTA Mount Lebanon Aley 187,000,000 187,205,000 161 KMATTIEH Mount Lebanon Aley 129,000,000 34,616,000 162 MAJDEL BAANA Mount Lebanon Aley 131,000,000 103,475,000 163 MANSOURIEH - AIN MAREJ Mount Lebanon Aley 66,000,000 59,860,000 164 MECHRFEH Mount Lebanon Aley 87,000,000 98,159,000 165 MJDLAYA Mount Lebanon Aley 134,000,000 111,950,000 166 OBEIH-AIN DRAFEL Mount Lebanon Aley 173,000,000 182,516,000 167 RECHMAYA Mount Lebanon Aley 200,000,000 204,506,000 168 REMHALLA Mount Lebanon Aley 74,000,000 83,725,000 169 RMEILET Mount Lebanon Aley 61,000,000 61,785,000 170 ROUEISSET EL NEAAMAN Mount Lebanon Aley 39,000,000 40,740,000 171 SAOUFAR Mount Lebanon Aley 103,000,000 68,095,000 172 SOUK EL GHAREB Mount Lebanon Aley 101,000,000 102,850,000 173 AABADIET Mount Lebanon Aley 300,000,000 302,180,000 174 AARAYA Mount Lebanon Aley 106,000,000 90,400,000 175 ARBANIET-DLAYBEH Mount Lebanon Baabda 62,000,000 59,765,000 176 ARSOUN Mount Lebanon Baabda 54,000,000 52,354,719 177 BAABDA Mount Lebanon Baabda 271,000,000 204,620,000 178 BAALCHMEIH Mount Lebanon Baabda 100,000,000 84,984,000 179 BETCHAY-MERDACHET Mount Lebanon Baabda 24,000,000 24,000,000 180 BMARYAM Mount Lebanon Baabda 57,000,000 58,324,000 181 BOURJ EL BARAJNET Mount Lebanon Baabda 928,000,000 708,918,000 182 BSABA Mount Lebanon Baabda 30,000,000 29,250,000 183 BTEKHNEIH Mount Lebanon Baabda 73,000,000 38,518,000 184 BZEBDDINE Mount Lebanon Baabda 133,000,000 113,263,750 185 CHBANYET Mount Lebanon Baabda 104,000,000 113,985,000 186 CHIAH Mount Lebanon Baabda 777,000,000 662,545,000 187 CHOUIT Mount Lebanon Baabda 78,000,000 87,547,500 4  188 DEIR EL HARREF Mount Lebanon Baabda 30,000,000 30,000,000 189 FALOUGHA Mount Lebanon Baabda 128,000,000 75,940,000 190 FURN EL CHEBBAK Mount Lebanon Baabda 641,000,000 369,092,000 191 GHBAIRY Mount Lebanon Baabda 1,185,000,000 505,610,000 192 HADATH Mount Lebanon Baabda 547,000,000 251,590,000 193 HAMMANA Mount Lebanon Baabda 489,000,000 432,390,000 194 HARET HREYK Mount Lebanon Baabda 626,000,000 665,029,000 195 HASBAYA (METN) Mount Lebanon Baabda 39,000,000 38,716,000 196 HAZMIEH Mount Lebanon Baabda 141,000,000 115,400,000 197 JOUAR EL HAOUZ Mount Lebanon Baabda 44,000,000 37,150,000 198 JOURET ARSOUN Mount Lebanon Baabda 11,000,000 11,000,000 199 KALAA Mount Lebanon Baabda 26,000,000 26,100,000 200 KERAYEH Mount Lebanon Baabda 51,000,000 39,750,000 201 KFAR SELOUAN Mount Lebanon Baabda 156,000,000 124,160,000 202 KFARCHIMA Mount Lebanon Baabda 248,000,000 216,270,000 203 KHRAYBET Mount Lebanon Baabda 32,000,000 42,030,000 204 KNEISSET Mount Lebanon Baabda 15,000,000 15,030,000 205 KOBBAY Mount Lebanon Baabda 101,000,000 98,946,350 206 KORNAYEL Mount Lebanon Baabda 159,000,000 157,416,050 207 KORTADDA Mount Lebanon Baabda 17,000,000 17,010,000 208 KSAYBET Mount Lebanon Baabda 44,000,000 44,320,000 209 RAS EL HAREF Mount Lebanon Baabda 58,000,000 58,350,000 210 RAS EL METN Mount Lebanon Baabda 264,000,000 236,218,000 211 ROUAISSET EL BALLOUT Mount Lebanon Baabda 60,000,000 63,918,000 212 SLIMA Mount Lebanon Baabda 176,000,000 177,690,000 TAHOUITAT GHADIR-LAYLAKET- 213 MRAI Mount Lebanon Baabda 282,000,000 183,220,000 214 TARCHICH Mount Lebanon Baabda 96,000,000 96,420,000 215 WADI CHAHROUR EL OULYA Mount Lebanon Baabda 148,000,000 160,856,000 216 WADI CHAHROUR EL SOUFLA Mount Lebanon Baabda 121,000,000 147,060,500 217 AAINBAL Mount Lebanon Baabda 91,000,000 97,402,000 218 AAMICK Mount Lebanon Chouf 26,000,000 26,415,000 219 AANOUT Mount Lebanon Chouf 154,000,000 181,359,000 220 AATRIN Mount Lebanon Chouf 60,000,000 60,000,000 221 AIN KONNY Mount Lebanon Chouf 65,000,000 66,620,000 222 AIN WA ZEIN Mount Lebanon Chouf 59,000,000 63,555,000 223 AIN ZHALTA Mount Lebanon Chouf 184,000,000 189,483,000 224 AMATOUR Mount Lebanon Chouf 142,000,000 141,985,000 225 BAAKLINE Mount Lebanon Chouf 447,000,000 499,626,400 226 BAASSIR Mount Lebanon Chouf 96,000,000 83,390,000 227 BAATHARAN Mount Lebanon Chouf 111,000,000 115,200,000 228 BARJA Mount Lebanon Chouf 793,000,000 798,178,000 229 BAROUK EL FREYDYSS Mount Lebanon Chouf 298,000,000 299,920,000 230 BATER Mount Lebanon Chouf 103,000,000 104,200,000 231 BATLOUN Mount Lebanon Chouf 95,000,000 97,169,000 232 BATMEH Mount Lebanon Chouf 67,000,000 66,700,000 233 BECHTEFFINE Mount Lebanon Chouf 87,000,000 92,553,980 234 BEIT EL DIN Mount Lebanon Chouf 93,000,000 115,690,000 235 BIRET Mount Lebanon Chouf 84,000,000 83,922,000 5  236 BRIH Mount Lebanon Chouf 145,000,000 152,650,000 237 BSABA (CHOUF) Mount Lebanon Chouf 86,000,000 86,160,000 238 CHEHIM Mount Lebanon Chouf 650,000,000 229,520,000 239 DAHR EL MGHARAT Mount Lebanon Chouf 23,000,000 26,410,000 240 DALHOUN Mount Lebanon Chouf 83,000,000 90,567,000 241 DAMOUR Mount Lebanon Chouf 515,000,000 571,015,000 242 DARAYA (CHOUF) Mount Lebanon Chouf 151,000,000 169,120,000 243 DEBBIEH Mount Lebanon Chouf 84,000,000 76,657,000 244 DEIR DOURIT Mount Lebanon Chouf 93,000,000 67,050,000 245 DEIR EL QUAMAR Mount Lebanon Chouf 614,000,000 665,855,590 246 DEIR KOUCHET Mount Lebanon Chouf 29,000,000 30,850,000 247 DMIT Mount Lebanon Chouf 64,000,000 63,910,000 248 EL JYEH Mount Lebanon Chouf 237,000,000 207,750,000 249 FAOURAT Mount Lebanon Chouf 49,000,000 49,845,000 250 GHRIFFEH Mount Lebanon Chouf 220,000,000 243,782,700 251 HARET JENDEL Mount Lebanon Chouf 26,000,000 26,250,000 252 HASSROUT Mount Lebanon Chouf 61,000,000 64,737,500 253 JADRA Mount Lebanon Chouf 19,000,000 20,940,000 254 JAHLIEH Mount Lebanon Chouf 148,000,000 149,261,250 255 JBAA (CHOUF) Mount Lebanon Chouf 60,000,000 64,705,000 256 JDEIDET EL CHOUF Mount Lebanon Chouf 37,000,000 38,438,500 257 JOUN Mount Lebanon Chouf 151,000,000 154,336,500 258 KAHLOUNIEH Mount Lebanon Chouf 57,000,000 54,409,000 259 KETERMAYA Mount Lebanon Chouf 321,000,000 358,771,000 260 KFAR NABRAKH Mount Lebanon Chouf 218,000,000 202,400,000 261 KFARHYM Mount Lebanon Chouf 128,000,000 151,475,000 262 KFARKATRA Mount Lebanon Chouf 122,000,000 135,282,000 263 KFARNICE Mount Lebanon Chouf 53,000,000 53,455,500 264 KHRAYBEH Mount Lebanon Chouf 93,000,000 92,756,000 265 KNEISSEH Mount Lebanon Chouf 35,000,000 33,183,000 266 MAASSER BEIT EL DIN Mount Lebanon Chouf 52,000,000 55,714,500 267 MAASSER EL CHOUF Mount Lebanon Chouf 167,000,000 166,302,000 268 MAZBOUD Mount Lebanon Chouf 142,000,000 140,560,000 269 MAZRAAT EL DAHR Mount Lebanon Chouf 73,000,000 64,120,000 270 MAZRAET EL CHOUF Mount Lebanon Chouf 257,000,000 205,141,000 271 MECHREFF Mount Lebanon Chouf 23,000,000 24,000,000 272 MEJDEL MEOUCH Mount Lebanon Chouf 112,000,000 112,605,000 273 MEROSTY Mount Lebanon Chouf 85,000,000 88,540,000 274 MGHAYRIEH Mount Lebanon Chouf 124,000,000 87,255,000 275 MOUKHTARA Mount Lebanon Chouf 113,000,000 111,795,000 276 MTELLET Mount Lebanon Chouf 72,000,000 71,825,000 277 NAAMEH Mount Lebanon Chouf 112,000,000 70,543,000 278 NIHA Mount Lebanon Chouf 196,000,000 196,001,507 279 RMEILET Mount Lebanon Chouf 113,000,000 143,439,225 280 SEBLIN Mount Lebanon Chouf 49,000,000 53,480,000 281 SEMKANIEH Mount Lebanon Chouf 49,000,000 51,905,000 282 SERJBAL Mount Lebanon Chouf 47,000,000 50,995,000 283 WADI EL SITT Mount Lebanon Chouf 63,000,000 69,415,500 6  284 WARDANIEH Mount Lebanon Chouf 124,000,000 134,700,000 285 WARHANIEH Mount Lebanon Chouf 68,000,000 68,197,500 286 ZAAROURIEH Mount Lebanon Chouf 114,000,000 141,525,000 287 AAKOURAT Mount Lebanon Chouf 216,000,000 226,240,000 288 AANNAYA WA KFARBAAL Mount Lebanon Chouf 16,000,000 18,030,000 289 AMCHIT Mount Lebanon Chouf 263,000,000 234,670,000 290 BEJJEH Mount Lebanon Jbeil 64,000,000 70,000,000 291 BLATT Mount Lebanon Jbeil 95,000,000 95,000,000 292 EDDEH Mount Lebanon Jbeil 23,000,000 12,173,000 293 EHMEJ Mount Lebanon Jbeil 143,000,000 27,562,500 294 FETRY Mount Lebanon Jbeil 37,000,000 36,987,500 295 FIDDAR Mount Lebanon Jbeil 42,000,000 41,900,000 296 HALAT Mount Lebanon Jbeil 151,000,000 162,600,000 297 JAJJ Mount Lebanon Jbeil 137,000,000 148,542,000 298 JBEIL Mount Lebanon Jbeil 492,000,000 540,756,250 299 KARTABA Mount Lebanon Jbeil 362,000,000 301,544,500 300 LAKLOUK Mount Lebanon Jbeil 52,000,000 52,505,000 301 LASSA WA AIN GHOUEIBET Mount Lebanon Jbeil 212,000,000 197,200,000 302 MAYFOUK-KETTARA Mount Lebanon Jbeil 126,000,000 96,997,000 303 MEGHAIREH Mount Lebanon Jbeil 62,000,000 63,950,000 304 MOUNSSEF Mount Lebanon Jbeil 48,000,000 52,740,000 305 NAHR IBRAHIM Mount Lebanon Jbeil 94,000,000 100,092,500 306 TERTEJ Mount Lebanon Jbeil 118,000,000 127,600,000 307 ACHKOUT Mount Lebanon Jbeil 138,000,000 123,380,000 308 ADDRA WA AADER Mount Lebanon Jbeil 33,000,000 32,160,000 309 AIN EL RIHANEH Mount Lebanon Jbeil 27,000,000 26,995,000 310 AINTOURA Mount Lebanon Keserwan 79,000,000 78,651,500 311 AJALTOUN Mount Lebanon Keserwan 142,000,000 27,360,000 312 AKKAYBEH Mount Lebanon Keserwan 117,000,000 88,562,500 313 ARAMOUN Mount Lebanon Keserwan 43,000,000 30,200,000 314 BALLOUNEH Mount Lebanon Keserwan 63,000,000 64,288,000 315 BOUAR Mount Lebanon Keserwan 108,000,000 100,595,000 316 CHNANIR Mount Lebanon Keserwan 45,000,000 46,950,000 317 DAROUN-HARISSA Mount Lebanon Keserwan 156,000,000 101,375,000 318 DARRAYA Mount Lebanon Keserwan 55,000,000 55,685,500 319 DLEBTA Mount Lebanon Keserwan 77,000,000 76,998,000 320 FARAYA Mount Lebanon Keserwan 115,000,000 122,432,500 321 FEYTROUN Mount Lebanon Keserwan 74,000,000 72,740,000 322 GHAZIR Mount Lebanon Keserwan 311,000,000 310,619,500 323 GHBALEH Mount Lebanon Keserwan 80,000,000 81,695,000 324 GHINIEH Mount Lebanon Keserwan 42,000,000 41,998,000 325 GHOSTA Mount Lebanon Keserwan 173,000,000 176,575,000 326 HIATTA Mount Lebanon Keserwan 26,000,000 28,195,000 327 HRAJEL Mount Lebanon Keserwan 268,000,000 276,470,500 328 HSSAYN Mount Lebanon Keserwan 20,000,000 19,878,600 329 JDEIDET HARHARAYA-QUATINE Mount Lebanon Keserwan 45,000,000 35,540,000 330 JEITA Mount Lebanon Keserwan 64,000,000 66,925,000 331 JOUNIEH - HARET SAKHR Mount Lebanon Keserwan 886,000,000 324,252,500 7  332 JOURET BEDRAN Mount Lebanon Keserwan 20,000,000 19,990,000 333 JOURET EL TOURMOSS Mount Lebanon Keserwan 28,000,000 26,860,000 334 KFARZEBIAN Mount Lebanon Keserwan 250,000,000 197,495,000 335 KFOUR Mount Lebanon Keserwan 73,000,000 77,265,500 336 KLEIAAT Mount Lebanon Keserwan 107,000,000 73,135,500 337 MAYROUBA Mount Lebanon Keserwan 101,000,000 100,412,500 338 RAACHYN Mount Lebanon Keserwan 74,000,000 43,180,000 339 REYFOUN Mount Lebanon Keserwan 66,000,000 68,250,000 340 SAFRA Mount Lebanon Keserwan 71,000,000 71,416,500 341 SHAILEH Mount Lebanon Keserwan 39,000,000 11,199,910 342 TABARJA-ADMA -KFARYASSYN Mount Lebanon Keserwan 115,000,000 120,732,500 343 YAHCHOUCH Mount Lebanon Keserwan 127,000,000 127,488,500 344 ZOUK MIKAEL Mount Lebanon Keserwan 401,000,000 402,612,500 345 ZOUK MOSBEH Mount Lebanon Keserwan 241,000,000 193,683,625 AIN EL SAFSAF-MAR MIKHAEL- 346 BNAB Mount Lebanon Keserwan 47,000,000 47,105,000 347 AINTOURAH Mount Lebanon Keserwan 190,000,000 193,645,000 348 AIROUN Mount Lebanon Keserwan 51,000,000 50,517,500 349 ANTELIAS-NACCACHE Mount Lebanon Keserwan 383,000,000 333,000,000 350 BAABDAT Mount Lebanon Maten 181,000,000 200,095,000 351 BEIT CHEBAB Mount Lebanon Maten 354,000,000 354,672,750 BEIT EL CHEAAR-MAZRAAT EL 352 HADIRA Mount Lebanon Maten 50,000,000 49,500,000 353 BEIT MERY-AIN SAADE Mount Lebanon Maten 362,000,000 372,365,000 354 BESKENTA Mount Lebanon Maten 389,000,000 279,960,000 355 BIAKOUT Mount Lebanon Maten 65,000,000 66,200,000 356 BIKFAYA-MHAIDTHEH Mount Lebanon Maten 343,000,000 346,110,000 357 BOLONIA-WATA EL MROUJ Mount Lebanon Maten 49,000,000 49,000,000 358 BOURJ HAMMOUD Mount Lebanon Maten 2,201,000,000 2,249,420,000 359 BROUMANA Mount Lebanon Maten 237,000,000 185,561,500 360 BSALIM-MEZHER-MAJZOUB Mount Lebanon Maten 121,000,000 120,420,000 361 BTEGHRINE Mount Lebanon Maten 182,000,000 182,590,000 362 CHOUEIR-AIN EL SINDIANEH Mount Lebanon Maten 281,000,000 287,503,000 363 DAHR EL SOUAN Mount Lebanon Maten 63,000,000 63,282,500 DBAYEH-ZOUK EL KHARRAB- 364 AOUKAR Mount Lebanon Maten 299,000,000 278,750,000 365 DEKOUANEH Mount Lebanon Maten 320,000,000 270,000,000 366 DOUAR Mount Lebanon Maten 54,000,000 54,790,000 367 FANAR Mount Lebanon Maten 166,000,000 182,365,000 368 JAL EL DIB-BEKENNAYA Mount Lebanon Maten 348,000,000 352,282,500 369 JDEIDEH-BAOUCHRIEH-EL SID Mount Lebanon Maten 962,000,000 972,930,500 370 KAAKOUR Mount Lebanon Maten 69,000,000 59,000,000 371 KFARAAKAB Mount Lebanon Maten 69,000,000 69,000,000 372 KFERTAY Mount Lebanon Maten 45,000,000 45,062,500 373 KHENCHARA-JOUAR Mount Lebanon Maten 182,000,000 164,720,000 KORNET CHEHWANE-BEIT EL 374 KIKKO- Mount Lebanon Maten 133,000,000 98,850,000 375 MAJDAL TARCHICH Mount Lebanon Maten 22,000,000 21,949,500 MANSOURIEH-MKALLES- 376 DEYCHOUNIEH Mount Lebanon Maten 393,000,000 392,998,500 8  377 MAR CHAAYA-MAZKE Mount Lebanon Maten 27,000,000 27,000,000 378 MAR MOUSSA-DOUAR Mount Lebanon Maten 45,000,000 48,020,000 379 MARJABA Mount Lebanon Maten 36,000,000 36,000,000 380 MAZRAAT YACHOUH Mount Lebanon Maten 150,000,000 118,080,000 381 MROUJ Mount Lebanon Maten 82,000,000 68,980,000 382 MTEIN-MCHIKHA Mount Lebanon Maten 221,000,000 222,727,500 383 NABEIH Mount Lebanon Maten 157,000,000 136,221,000 384 RABIEH Mount Lebanon Maten 156,000,000 155,688,750 385 ROUMIEH Mount Lebanon Maten 120,000,000 139,920,000 386 SAKIET EL MISK-BHERSAF Mount Lebanon Maten 133,000,000 133,260,000 387 SIN EL FIL Mount Lebanon Maten 630,000,000 537,080,000 388 ZALKA-AMARET CHALHOUB Mount Lebanon Maten 474,000,000 246,026,900 389 ZARAAOUN Mount Lebanon Maten 63,000,000 62,850,000 390 ZEKRIT Mount Lebanon Maten 63,000,000 63,000,000 391 AIN EBBEL Mount Lebanon Maten 273,000,000 298,427,500 392 AINATA (BINT JBEIL) Mount Lebanon Maten 316,000,000 318,081,250 393 AITA EL CHAAB Mount Lebanon Maten 320,000,000 257,000,000 394 AITAROUN Nabatieh Bint Jbeil 528,000,000 378,781,250 395 BEIT LIFF Nabatieh Bint Jbeil 211,000,000 130,350,000 396 BERAACHIT Nabatieh Bint Jbeil 306,000,000 224,075,000 397 BINT JBEIL Nabatieh Bint Jbeil 1,091,000,000 1,293,895,650 398 CHAKRA WA DOUBIEH Nabatieh Bint Jbeil 374,000,000 257,000,000 399 DEBBEL Nabatieh Bint Jbeil 153,000,000 168,600,000 400 DEIR ENTTAR Nabatieh Bint Jbeil 171,000,000 142,860,000 401 HARYSS Nabatieh Bint Jbeil 213,000,000 214,988,600 402 HEDATHA Nabatieh Bint Jbeil 102,000,000 102,679,120 403 KAFRA Nabatieh Bint Jbeil 243,000,000 145,331,000 404 KFAR DOUNINE Nabatieh Bint Jbeil 170,000,000 187,507,500 405 KHORBET SELEM Nabatieh Bint Jbeil 268,000,000 272,500,000 406 RMEICH Nabatieh Bint Jbeil 239,000,000 216,495,000 407 SAFFAD EL BATTIKH Nabatieh Bint Jbeil 60,000,000 66,430,000 408 SOULTANIET Nabatieh Bint Jbeil 132,000,000 146,087,500 409 TAIRRY Nabatieh Bint Jbeil 146,000,000 158,662,500 410 TEBNINE Nabatieh Bint Jbeil 364,000,000 278,810,000 411 YARON Nabatieh Bint Jbeil 232,000,000 251,555,000 412 YATTER Nabatieh Bint Jbeil 236,000,000 192,025,000 413 AIN KANNYA Nabatieh Bint Jbeil 95,000,000 75,262,500 414 CHEBAA Nabatieh Bint Jbeil 664,000,000 474,178,000 415 CHOUAYA Nabatieh Hasbaya 89,000,000 30,670,000 416 FERDISS Nabatieh Hasbaya 33,000,000 32,898,475 417 HASBAYA Nabatieh Hasbaya 481,000,000 177,561,000 418 HBARIET Nabatieh Hasbaya 160,000,000 159,992,000 419 KAOUKABA(HASBAYA) Nabatieh Hasbaya 85,000,000 49,440,000 420 KFAR HEMAM Nabatieh Hasbaya 79,000,000 79,551,900 421 KFARCHOUBA Nabatieh Hasbaya 279,000,000 281,707,500 422 KFIR Nabatieh Hasbaya 141,000,000 142,600,000 423 MARI Nabatieh Hasbaya 55,000,000 50,847,535 424 MARJ EL ZHOUR Nabatieh Hasbaya 53,000,000 58,000,000 9  425 MYMESS Nabatieh Hasbaya 91,000,000 66,750,000 426 RACHAYA EL FEKHAR Nabatieh Hasbaya 124,000,000 124,438,035 427 ADAISSET Nabatieh Hasbaya 237,000,000 262,097,000 428 BOURJ EL MOULOUK Nabatieh Hasbaya 69,000,000 72,110,000 429 DEBBINE Nabatieh Hasbaya 118,000,000 87,400,000 430 DEIR MIMASS Nabatieh Marjeiyoun 160,000,000 111,350,000 431 EBBEL EL SEKI Nabatieh Marjeiyoun 160,000,000 121,560,000 432 HAOULA Nabatieh Marjeiyoun 337,000,000 207,974,000 433 JDEIDET MARJEYOUN Nabatieh Marjeiyoun 410,000,000 423,155,000 434 KABRIKHA Nabatieh Marjeiyoun 164,000,000 157,155,000 435 KFARKELA Nabatieh Marjeiyoun 334,000,000 257,850,000 436 KHYAM Nabatieh Marjeiyoun 878,000,000 144,586,000 437 KLAIAAT Nabatieh Marjeiyoun 215,000,000 234,455,500 438 MAIS EL JABAL Nabatieh Marjeiyoun 640,000,000 422,450,000 439 TAIBET Nabatieh Marjeiyoun 482,000,000 392,042,500 440 WAZZANI Nabatieh Marjeiyoun 23,000,000 22,978,500 441 AIN KANA Nabatieh Marjeiyoun 199,000,000 199,025,000 442 ANSSAR Nabatieh Marjeiyoun 319,000,000 338,739,000 443 ARAB SALIM Nabatieh Marjeiyoun 268,000,000 222,370,000 444 CHARKIET Nabatieh Nabatieh 138,000,000 104,560,000 445 DEIR EL ZAHRANI Nabatieh Nabatieh 213,000,000 240,871,000 446 DOUAIR Nabatieh Nabatieh 290,000,000 295,230,000 447 HABBOUCH Nabatieh Nabatieh 338,000,000 339,000,000 448 HAROUF Nabatieh Nabatieh 294,000,000 298,711,650 449 HOUMYN EL FAOUKA Nabatieh Nabatieh 159,000,000 136,950,000 450 HOUMYN EL TAHTA Nabatieh Nabatieh 141,000,000 140,341,137 451 JARJOUH Nabatieh Nabatieh 146,000,000 104,600,000 452 JBAA(NABATIIEH) Nabatieh Nabatieh 252,000,000 252,000,000 453 JEBCHIT Nabatieh Nabatieh 349,000,000 276,100,000 454 KAAKAEIT AL JISR Nabatieh Nabatieh 189,000,000 78,095,000 455 KFAR SYR Nabatieh Nabatieh 205,000,000 149,270,000 456 KFAR TEBNIT Nabatieh Nabatieh 277,000,000 278,163,302 457 KFARFILA Nabatieh Nabatieh 81,000,000 80,984,000 458 KFOUR Nabatieh Nabatieh 164,000,000 155,503,375 459 KSSAIBET Nabatieh Nabatieh 170,000,000 129,250,000 460 MAIFDOUN Nabatieh Nabatieh 189,000,000 131,544,000 461 NABATIEH FAOUKA Nabatieh Nabatieh 303,000,000 216,204,000 462 NABATIEH TAHTA Nabatieh Nabatieh 1,232,000,000 863,661,500 463 NMEIRIEH Nabatieh Nabatieh 176,000,000 119,076,000 464 ROUMINE Nabatieh Nabatieh 83,000,000 64,294,400 465 SARBA(NABATIEH) Nabatieh Nabatieh 94,000,000 95,675,500 466 SIR EL GHARBIET Nabatieh Nabatieh 163,000,000 100,540,000 467 ZAOUTAR EL CHARKIET Nabatieh Nabatieh 121,000,000 122,119,000 468 ZAOUTAR EL GHARBIET Nabatieh Nabatieh 83,000,000 53,000,000 469 ZEBDINE Nabatieh Nabatieh 130,000,000 134,508,000 470 ZEFTA Nabatieh Nabatieh 106,000,000 79,425,000 471 AABOUDIET Nabatieh Nabatieh 103,000,000 113,662,500 472 AAIDAMOUN-CHYKHLAR Nabatieh Nabatieh 141,000,000 115,975,000 10  473 AANDKIT Nabatieh Nabatieh 219,000,000 238,819,000 474 AKKAR EL ATTIKA North Lebanon Akkar 408,000,000 407,124,000 475 AYAT North Lebanon Akkar 96,000,000 95,247,000 476 BEBNINE North Lebanon Akkar 707,000,000 327,974,000 477 BEIT MLAT North Lebanon Akkar 154,000,000 153,833,500 478 BERKAYEL North Lebanon Akkar 453,000,000 285,292,500 479 BEZBINA North Lebanon Akkar 130,000,000 105,888,680 480 BINNO-KBOULA North Lebanon Akkar 244,000,000 280,321,000 481 BIREH North Lebanon Akkar 296,000,000 211,271,000 482 BKORZOLLA North Lebanon Akkar 183,000,000 182,995,769 483 BOURJ North Lebanon Akkar 84,000,000 83,565,000 484 BOURJ EL ARAB North Lebanon Akkar 41,000,000 41,000,000 485 BZAL North Lebanon Akkar 63,000,000 59,857,000 486 CHARBELLA North Lebanon Akkar 46,000,000 45,421,000 487 CHEDDRA North Lebanon Akkar 198,000,000 179,130,000 488 CHEIKH MOHAMMED North Lebanon Akkar 114,000,000 81,615,000 489 CHEIKH TABA North Lebanon Akkar 114,000,000 117,701,250 490 DEIR JANINE North Lebanon Akkar 46,000,000 46,000,000 491 FNAIDEK North Lebanon Akkar 406,000,000 366,025,000 492 GEBRAYEL North Lebanon Akkar 117,000,000 94,350,000 493 HAKKOUR North Lebanon Akkar 97,000,000 75,400,000 494 HALBA North Lebanon Akkar 418,000,000 392,552,000 495 HAYSSAT North Lebanon Akkar 89,000,000 102,600,000 496 HMAIRAT North Lebanon Akkar 35,000,000 25,389,500 497 JDEIDDET (EL JOUMET) North Lebanon Akkar 139,000,000 138,990,600 498 JDEIDET EL KATIH North Lebanon Akkar 101,000,000 102,045,000 KARM ASSFOUR-MAZRAAT 499 NEHRIET-BEIT GHATTAS North Lebanon Akkar 69,000,000 47,840,000 500 KOBBAYAT North Lebanon Akkar 539,000,000 495,757,250 501 KOUCHA North Lebanon Akkar 54,000,000 54,774,000 502 MACHHA North Lebanon Akkar 154,000,000 120,101,000 503 MAZRAAT BALDET North Lebanon Akkar 60,000,000 60,000,000 504 MECHMECH North Lebanon Akkar 448,000,000 413,912,500 505 MECHTY HOSN North Lebanon Akkar 154,000,000 150,028,400 506 MEJDLA North Lebanon Akkar 84,000,000 84,210,000 507 MENIARAT North Lebanon Akkar 282,000,000 170,304,500 508 NFAISSEH North Lebanon Akkar 38,000,000 38,877,000 509 RAHBET North Lebanon Akkar 382,000,000 359,400,000 510 SAFINAT DRAIB North Lebanon Akkar 23,000,000 23,250,000 511 SAISSOUK North Lebanon Akkar 41,000,000 41,442,000 512 TALAABBAS EL GHARBY North Lebanon Akkar 127,000,000 78,170,000 513 TAL MEAAYAN North Lebanon Akkar 71,000,000 70,300,000 514 TEKRIT North Lebanon Akkar 234,000,000 233,669,000 515 TELBIRET North Lebanon Akkar 92,000,000 91,541,000 516 TLEIL North Lebanon Akkar 72,000,000 61,455,000 517 ZAOUARIB North Lebanon Akkar 45,000,000 46,185,000 518 ZOUK EL HOUSSAYNAT North Lebanon Akkar 87,000,000 86,876,500 519 ABBRINE North Lebanon Akkar 107,000,000 110,835,000 520 BATROUN North Lebanon Akkar 563,000,000 159,960,000 11  521 BCHEAALET North Lebanon Batroun 85,000,000 85,000,000 522 BKESMAYA North Lebanon Batroun 49,000,000 54,810,000 523 CHEKKA North Lebanon Batroun 266,000,000 247,842,000 524 DOUMA North Lebanon Batroun 192,000,000 191,875,000 525 EDDEH North Lebanon Batroun 36,000,000 46,345,000 526 EJDEBBRA North Lebanon Batroun 19,000,000 19,066,000 527 HAMAT North Lebanon Batroun 131,000,000 119,285,000 528 HARDIN-BEIT KASSAB North Lebanon Batroun 139,000,000 92,150,000 529 HERRY North Lebanon Batroun 43,000,000 43,090,000 530 KEBA North Lebanon Batroun 50,000,000 19,088,000 531 KFAR ABIDA North Lebanon Batroun 74,000,000 46,752,000 532 KFAR HALDA North Lebanon Batroun 60,000,000 39,120,000 533 KFOUR EL ARABY North Lebanon Batroun 97,000,000 101,265,000 534 RAS NEHACH North Lebanon Batroun 81,000,000 66,760,000 535 SELAATA North Lebanon Batroun 19,000,000 26,400,000 536 TANNOURINE North Lebanon Batroun 617,000,000 420,060,000 537 ZAN North Lebanon Batroun 43,000,000 43,255,000 538 BARHALYOUN North Lebanon Batroun 75,000,000 44,225,000 539 BAZAAOUN North Lebanon Batroun 163,000,000 100,750,000 540 BECHARE North Lebanon Batroun 826,000,000 823,221,000 541 BKAAKAFRA North Lebanon Bchari 186,000,000 127,870,000 542 BKARKACHA North Lebanon Bchari 150,000,000 7,450,362 543 HADATH EL JEBBET North Lebanon Bchari 140,000,000 141,114,500 544 HADCHIT North Lebanon Bchari 281,000,000 286,719,500 545 HASROUN North Lebanon Bchari 245,000,000 188,270,000 546 KANAT North Lebanon Bchari 90,000,000 91,617,000 547 TORZA North Lebanon Bchari 112,000,000 120,355,000 548 AAFSADIK North Lebanon Bchari 53,000,000 54,347,500 549 AIN AAKRINE North Lebanon Bchari 57,000,000 56,100,000 550 AMIOUN North Lebanon Bchari 404,000,000 191,315,000 551 ANFEH North Lebanon Koura 273,000,000 220,980,000 552 BARSSA North Lebanon Koura 70,000,000 49,487,500 553 BECHMEZZINE North Lebanon Koura 121,000,000 97,455,000 554 BEDNAYEL North Lebanon Koura 24,000,000 25,155,000 555 BETRAM North Lebanon Koura 113,000,000 94,550,000 556 BKEFTINE North Lebanon Koura 24,000,000 23,813,000 557 BSORMA North Lebanon Koura 79,000,000 83,645,000 558 BTOURATEJ North Lebanon Koura 48,000,000 21,440,000 559 BZIZA North Lebanon Koura 58,000,000 36,400,000 560 DAR BAACHTAR North Lebanon Koura 132,000,000 88,787,500 561 DARCHMEZINE North Lebanon Koura 21,000,000 20,989,000 562 DEDDEH North Lebanon Koura 223,000,000 173,915,000 563 EJD AABRINE North Lebanon Koura 47,000,000 48,009,000 564 FYAA North Lebanon Koura 86,000,000 87,709,500 565 KAFTOUN North Lebanon Koura 25,000,000 25,011,500 566 KFAR SARROUNE North Lebanon Koura 43,000,000 43,335,000 567 KFARAAKA North Lebanon Koura 209,000,000 161,562,500 568 KFARHATA North Lebanon Koura 58,000,000 56,844,000 12  569 KFARHAZIR North Lebanon Koura 138,000,000 118,335,000 570 KFARKAHEL North Lebanon Koura 40,000,000 26,715,000 571 KEFRAYA North Lebanon Koura 72,000,000 72,000,000 572 KOLHAT North Lebanon Koura 66,000,000 66,000,000 573 KOUSBA North Lebanon Koura 266,000,000 266,000,000 574 MEJDEL-ZAKROUK-WATA FARES North Lebanon Koura 38,000,000 38,000,000 575 PETROMINE North Lebanon Koura 70,000,000 70,000,000 576 RAS MESKA North Lebanon Koura 61,000,000 43,025,000 577 RECHDEBBINE North Lebanon Koura 49,000,000 49,000,000 578 AASSOUN North Lebanon Koura 117,000,000 117,000,000 579 BADDAOUI North Lebanon Koura 419,000,000 311,975,000 580 BAKHOUN North Lebanon Koura 415,000,000 415,000,000 581 BEIT EL FAKSS North Lebanon Monieh Donieh 105,000,000 78,645,000 BHANIN-RIHANET-MAZRAAT 582 ARTOUSA North Lebanon Monieh Donieh 271,000,000 192,865,000 583 BKAASAFRINE North Lebanon Monieh Donieh 194,000,000 194,000,000 584 BKARSOUNET-QUATTINE North Lebanon Monieh Donieh 258,000,000 258,000,000 585 DEIR AAMMAR North Lebanon Monieh Donieh 313,000,000 313,000,000 586 DEIR NBOUH North Lebanon Monieh Donieh 54,000,000 54,000,000 587 KARAM EL MEHR North Lebanon Monieh Donieh 79,000,000 78,457,500 588 KFARCHELLAN North Lebanon Monieh Donieh 37,000,000 37,000,000 589 KFARHABOU North Lebanon Monieh Donieh 165,000,000 165,000,000 590 MOUNIEH North Lebanon Monieh Donieh 1,582,000,000 1,582,000,000 591 MRAH SRAJ North Lebanon Monieh Donieh 57,000,000 57,000,000 592 NEMREIN -BAKKOUZA North Lebanon Monieh Donieh 115,000,000 115,000,000 593 SFAIRET North Lebanon Monieh Donieh 321,000,000 321,000,000 594 SIR North Lebanon Monieh Donieh 391,000,000 391,000,000 595 TARAN North Lebanon Monieh Donieh 116,000,000 116,000,000 596 KALAMOUN North Lebanon Monieh Donieh 247,000,000 223,670,000 597 MINA North Lebanon Monieh Donieh 2,056,000,000 1,862,800,000 598 AALMA North Lebanon Tripoli 123,000,000 85,250,000 599 AARABAT KOSHAYA North Lebanon Tripoli 44,000,000 44,000,000 600 AARJESS North Lebanon Tripoli 41,000,000 41,000,000 601 AINTOURINE North Lebanon Zgharta 59,000,000 58,950,200 602 AITO North Lebanon Zgharta 58,000,000 58,000,000 603 BASLOUKIT North Lebanon Zgharta 37,000,000 36,884,750 604 BNECHAAY North Lebanon Zgharta 65,000,000 65,000,000 605 BOUHAIRA North Lebanon Zgharta 49,000,000 49,000,000 606 DARAYA-BECHNINE North Lebanon Zgharta 75,000,000 52,840,000 607 ERDEH North Lebanon Zgharta 198,000,000 157,520,000 608 KAFARD LAKOUS North Lebanon Zgharta 63,000,000 60,000,000 609 KARM SEDDET North Lebanon Zgharta 57,000,000 56,500,000 610 KFARFOU North Lebanon Zgharta 30,000,000 30,000,000 611 KFARHATA North Lebanon Zgharta 61,000,000 60,975,000 612 KFARSGHAB-EL MERH North Lebanon Zgharta 172,000,000 148,125,000 613 KFARYACHIT-BESBAAL North Lebanon Zgharta 39,000,000 39,000,000 614 KFARZINA North Lebanon Zgharta 52,000,000 52,000,000 615 KOREH BACH North Lebanon Zgharta 45,000,000 45,000,000 616 MAZRAAT EL TOUFFAH North Lebanon Zgharta 76,000,000 71,050,000 13  617 MEJDLAYA North Lebanon Zgharta 62,000,000 36,700,000 618 MERYATTA North Lebanon Zgharta 110,000,000 110,000,000 619 MEZIARAT North Lebanon Zgharta 195,000,000 195,000,000 620 RACHAAIN North Lebanon Zgharta 173,000,000 173,000,000 621 RASKYFA North Lebanon Zgharta 40,000,000 40,000,000 622 SEBAAL North Lebanon Zgharta 182,000,000 131,940,000 623 SERAAL North Lebanon Zgharta 79,000,000 64,425,000 624 TOULA-ASLOUT North Lebanon Zgharta 68,000,000 46,835,000 625 YAAL North Lebanon Zgharta 50,000,000 49,688,000 626 ZGHORTA-EHDEN North Lebanon Zgharta 1,249,000,000 757,830,500 627 AICHIET North Lebanon Zgharta 126,000,000 126,000,000 628 ARAMTA North Lebanon Zgharta 139,000,000 139,000,000 629 ARAY (JEZZINE) North Lebanon Zgharta 49,000,000 49,000,000 630 AZOUR North Lebanon Zgharta 56,000,000 55,523,500 631 BENOUATI South Lebanon Jezzine 42,000,000 42,000,000 632 BKASSINE South Lebanon Jezzine 184,000,000 184,000,000 633 BTEDDINE ALLOKOUCH South Lebanon Jezzine 45,000,000 45,000,000 634 HAYTTOURAT South Lebanon Jezzine 50,000,000 50,000,000 635 HOMSIET South Lebanon Jezzine 16,000,000 14,922,000 636 JERNAYA South Lebanon Jezzine 82,000,000 82,000,000 637 JEZZINE South Lebanon Jezzine 555,000,000 555,000,000 638 KAYTOULI South Lebanon Jezzine 183,000,000 183,000,000 639 KERKHA South Lebanon Jezzine 29,000,000 29,000,000 640 KFARFALOUSS South Lebanon Jezzine 30,000,000 30,000,000 641 KFARHOUNAT South Lebanon Jezzine 224,000,000 164,875,000 642 LEBAA South Lebanon Jezzine 57,000,000 57,000,000 643 LOUAIZET South Lebanon Jezzine 59,000,000 58,916,500 644 MACHMOUCHET South Lebanon Jezzine 24,000,000 24,000,000 645 MAKNOUNIET South Lebanon Jezzine 44,000,000 44,000,000 646 MLYKH South Lebanon Jezzine 102,000,000 102,000,000 647 RIHAN South Lebanon Jezzine 180,000,000 130,020,000 648 ROUM South Lebanon Jezzine 111,000,000 111,000,000 649 SABAH South Lebanon Jezzine 34,000,000 34,000,000 650 SAIDOUN South Lebanon Jezzine 36,000,000 36,000,000 651 SEJOUD South Lebanon Jezzine 49,000,000 49,000,000 652 SFARIEH South Lebanon Jezzine 51,000,000 51,000,000 653 SNIEH South Lebanon Jezzine 36,000,000 29,120,000 654 WADI JEZZINE South Lebanon Jezzine 48,000,000 48,000,000 655 ZHALTAT South Lebanon Jezzine 33,000,000 32,716,000 656 ABBRA South Lebanon Jezzine 75,000,000 75,000,000 657 ADLOUN South Lebanon Jezzine 300,000,000 61,900,000 658 ADOUSSIET South Lebanon Saida 42,000,000 42,000,000 659 AIN DELB South Lebanon Saida 85,000,000 85,000,000 660 ANKOUN South Lebanon Saida 148,000,000 140,000,000 661 ARZI South Lebanon Saida 108,000,000 90,642,500 662 BABLIET South Lebanon Saida 176,000,000 159,000,250 663 BERTY South Lebanon Saida 64,000,000 60,000,000 664 BKASTTA South Lebanon Saida 20,000,000 19,800,000 14  665 BRAMIET South Lebanon Saida 56,000,000 56,000,000 666 DARB SYM South Lebanon Saida 126,000,000 125,990,920 667 GHAZIEH South Lebanon Saida 423,000,000 423,000,000 668 GHESSANIET South Lebanon Saida 95,000,000 78,900,000 669 HARET SAIDA South Lebanon Saida 144,000,000 107,780,000 670 HLALIEH South Lebanon Saida 60,000,000 59,149,000 671 KERAYET South Lebanon Saida 97,000,000 61,000,000 672 KFARHETTI South Lebanon Saida 153,000,000 150,793,000 673 KFARMELKI South Lebanon Saida 173,000,000 172,010,000 674 KHRAYEB South Lebanon Saida 227,000,000 221,757,000 675 MAGHDOUCHE South Lebanon Saida 281,000,000 270,870,000 676 MAROUNIET South Lebanon Saida 189,000,000 61,150,000 677 MEAAMRIEH South Lebanon Saida 66,000,000 66,000,000 678 MEJDALIOUN South Lebanon Saida 41,000,000 35,050,000 679 MIEH MIEH South Lebanon Saida 146,000,000 146,000,000 680 SAKSAKIEH South Lebanon Saida 241,000,000 219,000,000 681 SALHIEH South Lebanon Saida 47,000,000 47,000,000 682 SARAFAND South Lebanon Saida 394,000,000 326,304,500 683 TEFAHTA South Lebanon Saida 189,000,000 188,308,450 684 ZRARIEH South Lebanon Saida 318,000,000 266,925,000 685 ABBASSIET South Lebanon Saida 249,000,000 185,035,000 686 AIN BAAL South Lebanon Saida 180,000,000 180,000,000 687 AITIT South Lebanon Saida 135,000,000 86,783,750 688 ALMA EL CHAAB South Lebanon Sour - Tyr 117,000,000 117,000,000 689 BATOULIEH South Lebanon Sour - Tyr 77,000,000 77,000,000 690 BAZOURIET South Lebanon Sour - Tyr 252,000,000 232,500,000 691 BOURJ CHMALY South Lebanon Sour - Tyr 248,000,000 248,000,000 692 CHAHOUR South Lebanon Sour - Tyr 304,000,000 230,014,000 693 CHHABIET South Lebanon Sour - Tyr 283,000,000 183,073,750 694 DEIR KANOUN EL NAHR South Lebanon Sour - Tyr 191,000,000 95,085,000 695 JOUAYA South Lebanon Sour - Tyr 609,000,000 609,000,000 696 KANA South Lebanon Sour - Tyr 394,000,000 344,000,000 697 KLAILET South Lebanon Sour - Tyr 174,000,000 174,000,000 698 MAARAKET South Lebanon Sour - Tyr 356,000,000 356,000,000 699 MAAROUB South Lebanon Sour - Tyr 135,000,000 135,000,000 700 NAKKOURA South Lebanon Sour - Tyr 141,000,000 141,000,000 701 SOUR South Lebanon Sour - Tyr 1,823,000,000 1,448,841,000 702 SRYFA South Lebanon Sour - Tyr 306,000,000 289,360,000 703 TAIR FELSSIEH South Lebanon Sour - Tyr 136,000,000 136,000,000 704 YARINE South Lebanon Sour - Tyr 130,000,000 130,000,000 15  16

APPROVAL

P004237

CIRCULATING COPY Lj4i tjf Y TO BE RETURNED TO REPORTS DESK' DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Not For Public Use Report No\. P-1391-MA REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO MALAYSIA FOR THE WESTERN JOHORE AGRICULTURAL DEVELOPMENT PROJECT March 14, 1974 This report was prepared for official use only by the Bank Group\. It may not be pubLished, quoted or cited without Bank Group authorization\. The Bank Group does not accept responsibility for the accuracy or completeness of the report\. CURRENCY EQUIVALENTS Ourrency Unit = Malaysian Dollar (M$) US$1 = M$ 2\.33 1/ M$ 1 - US$o\.43 M$ 1,000 US$429 M$ 1,000,000 = US$429,185 FISCAL YEAR January 1 to December 31 1/ Rate used in the Appraisal Report\. Since June 21, 1973, the Malaysian dollar has floated, at approximately this rate, in relation to the US dollar; the previous rate was M$2\.54 = US$1\.00\. REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PRDPOSED LOAN TO MALAYSIA FOR THE WESTERN JOHORE AGRICULTURAL DEVELOPMENT PROJECT 1\. I submit the following report and recommendation on a pro- posed loan to Malaysia for the equivalent of US$45\.0 million to help finance the Western Johore Agricultural Development Project\. The loan would have a term of 25 years, including 6 years of grace, with interest at 7-1/4 percent per annum\. PART I - THE ECONOMY 2\. The latest economic report (No\. 217-MA) was circulated to the Executive Directors in August, 1973\. An annual economic mission visited Malaysia in January/February 1974, and its report will be circ- ulated in due course\. Country data for Malaysia are included as Annex I\. 3\. With a per capita GNP of about US$400 (1971), Malaysia is one of the most prosperous developing countries in Southeast Asia\. The economy has maintained fairly high rates of real growth, the GNP growing at an average of about 6 percent a year during the last decade, with an increase to 6\.5 percent forecast for the first half of the 1970's\. Exports, which account for over 40 percent of GNP, have been growing at 4 to 5 percent a year\. The country's balance of payments position is sound\. There are few foreign exchange controls and external reserves are equal to eight months' imports\. 4\. Malaysia has significantly diversified its exports in the last few years\. Whereas in 1961 nearly 50 percent of merchandise export earnings was derived from rubber, in the last few years only about one-third originated from this source\. Timber and palm oil exports have risen sub- stantially, in 1973 representing an estimated 14 percent of merchandise exports\. This trend is expected to continue\. 5\. It is too early to forecast with any precision how the world- wide energy problems will affect the Malaysian economy, but it is unlikely that Malaysia will suffer a shortage\. In 1973 Malaysia's production of crude petroleum was about 100,000 barrels per day, or 4\.5 million long tons during the year, and in about four years is expected to increase five- fold\. In 1973 Malaysia was still a net importer of petroleum products, at a not cost of about US$40 million; however, based on present production and consumption trends, Malaysia is expected to become a net exporter of petroleum by 1977\. Substantial reserves of natural gas have been found which in the next few years will become an important foreign exchange earner\. Malaysia's hydroelectric potential is fairly large and detailed investigations of known possible sites are being accelerated\. - 2 - 6\. Agriculture has accounted for about 30 percent of the country's GDP and about 50 percent of employment but the manufacturing sector is making an increasingly important contribution\. During the Second Malaysia Plan (SMP) period (1971-75), agricultural growth is expected to average about 8\.5 percent, while the projected growth rate for the manufacturing sector is 14 percent\. The manufacturing sector now accounts for 15 percent of GDP, about 22 percent of merchandise exports, and employs 10 percent of the working population\. 7\. Although Malaysia achieved satisfactory rates of growth of production during the 1960's, a decline of 20 percent in the terms of trade reduced real income growth from 6 to about 4\.5 percent per annum, resulting in a less than 2 percent increase in per capita income\. This trend continued into the early years of the present decade\. However, during 1973 a boom in export prices improved the terms of trade, boosting real GNP by about 10 percent, and leading to a real per capita income growth of 7 to 8 percent\. 8\. Population growth rates will remain high for some time, around 2\.7 percent per annum, accompanied by a growth in the labor force of about 3\.3 percent per annum, but Malaysia's physical resources and employment potential are great\. The Second Malaysia Plan (SMP) projects an average annual increase in employment of 3\.4 percent accompanied by a reduction in underemployment\. In the longer term, over the next two decades, Malaysia expects to reduce the unemployment rate from 7\.5 to 4 percent\. During this period, the agricultural share of the labor force in Peninsular Malaysia is expected to drop by almost 20 percent to 33 percent, and the employment share in manufacturing is expected to more than double, rising to 24 percent\. 9\. During the last several years the Government's long-term planning has concentrated on the problem of reducing the economic disparity between the Malays, who account for a little over half the population, and non-Malays, who are predominantly Chiinese\. Over the next 20 years the New Economic Policy, as it is called, aims to eradicate poverty and to restructure society so that the present identification of race with economic activity will eventually be eliminated\. The basic outlines of the policy are sound and allow for continued growth for each of the principal ethnic groups while at the same time enlarging economic opp- ortunities for Malays\. The SMP seeks to support these two objectives by encouraging economic growth\. 3 10\. The SMP also reflects the Government's choice of a more vigorous role for the public sector in the couitry's development effort The revised plan proposes an allocation of US$4 billion for publIc development expenditures, twice the level under the first plan\. The public sector's planning and implementation capacity has been expanded, although several planning and operating agencies still suffer from substantial manpower shortages\. The improvement in the Government's capacity to prepare and execute projects resulted in expanditures during the first three years of the plan period that were already two-thirds of the original plan allocation\. The revised plan levels anticipate a further strengthenIng of project identification and implementation in the public sector\. Host of the Increased allocation is earmarked to support the New Economic Policy, including among other items (i) the expansion of the land settlement programs to provide employment opportunities, (ii) increased support to the manufacturing sector to diversify the economy and to provide increazed employment in higher income jobs, and (iii) the provision of training and education to upgrade the job opportunities of the low-income groups\. 11\. During the first three years of the Second Malaysia Plan, 1971-73, total public sector development expenditures amounted to about US2\.2 billion, of which 50 percent was financed by net domestic borrow- ing and 16 percent by net foreign borrowing\. The balance was financed largely by current surpluses\. The Bank has provided slightly less than 40 percent of the foreign loan commitments; and bilateral aid mainly from the United Kingdom, other Commonwealth countries, Germany, Japan, and loans from the Asian Development Bank, provided the rest\. Domestic financing resources for the remaining two years of the SaP is considered adequate\. Government revenues are satisfactory, accounting in 1972 for 22 percent of GNP\. In addition, the Government can readily borrow substantial amounts from domestic resources, notably from the Government Snployees' Provident Fund\. The estimated external net inflow require- ments of public medium- and long-term loans will amount to about US$190 million\. New foreign loan commitments are expected to come from the same sources with a significant increase in Japanese lending\. New commitments from the Bank are expected to remain at about 40 percent of the total\. This level of foreign borrowing is well within Malaysia's debt-servicing capacity\. Debt service obligations at present are about 3\.5 percent of exports of goods and non-factor services and are estimated not to exceed 8 percent during the late 1970's\. The current Bank share of Malaysia's debt service payments is 22 percent and is expected to increase to about 25 percent by the end of 1978\. PART II - BANK GROUP OPERATIONS IN MALAYSIA 12\. The Bank has made 24 loans to Malaysia for projects in edunation, population, agriculture, forestry, industrial finance, power, water supply, telecommunications, ports, railways, roads and urban trans- port\. Although in a few cases disbursements were slow, the execution of these projects has generally been satisfactory\. As of January 31, 1974, the loans to Malaysia held by the Bank amounted to US$350\.9 million\. In addition, the Bank mrde a loan in 1965 to the Public Utilities Board, Singapore (Loan h05-MA), guaranteed by Malaysia, to finance the Johore River Water Project\. The amount held by the Bank under that loan is US$5\.2 iillion\. Seven loans have been fully disbursed\. Annex II contains a summacy statement of Bank loans and IFC investments as of January 31, 1974, and notes on the execution of ongoing projects\. 13\. Bank assistance to Malaysia is intended to support the Govern- ment's efforts within the framework of the New Fconomic Policy to redress imbalances in rural and urban incomes, to create employment for the urban unemployed and to reduce rural underemployment\. Since Malaysia's land development and rural development programs provide the most effective Government instvment for tackling the issues of unemployment and income imbalance, the Bank will continue to give financial support to these pro- gram\. So far, the Bank has made three loans for land settlement projects in the Jengka Triangle area, where about 100,000 acres of land are being developed and about 10,000 smallholders are being settled, and one loan for land settlement in the State of Johore, where about 4,500 families will be settled\. The Bank has also made two loans for irrigation, one for the Muda Irrigation Project (Loan 434-14A) and another for the Kemubu Irrigation Project (Loan 500-MA), both projects assisting low-income rice growers\. In addition, the Bank will continue to assist Malaysia in the critical fields of education to increase educational opportunities for the rural poor with one loan in this fiscal year\. Also, the Bank will continue to assist in the financing of infrastructure development that will improve conditions in the urban areas and help support manufacturing\. The Bank has helped the Government to prepare projects either in the course of its lending operations or by acting az Executing Agency for UNDP-financed studles\. The Bank has also helped strengthen public agencies responsible for carrying out imoOrtant parts of Malaysia's investment program\. We will continue this policy which will be reflected in the loans to be presented to the Executive Directors in the next year or so\. These loans would be for projects involving agri- cultural development, agricultural credit, agricultural research, education, public utilities and infrastructure development\. In agriculture, where the foreign exchange content of projects is often small, the Bank will con- tinue to cover a portion of local costs\. 14\. IFC has been active in Malaysia since 1963 and has made five investments totalling US$8\.7 million (Annex II)\. The total commitments under these investments held by IFC as of January 31, 1974 amounted to US$b\.5 million\. The Corporation has under preliminary consideration a wood processing and a pulp and paper project\. PART III - AGRICULTURE IN MALAYSIA General 15\. The agricultural sector holds a pre-eminent position in the Malaysian economy\. In 1972 it generated around 30 percent of gross domestic product, provided employment for over 50 percent of the econ- omically active population, and accounted for about 60 percent of Malaysia's foreign exchange earnings\. Expansion of rubber exports in the 1960's, in the face of declining prices, was achieved by large gains in productivity\. At the same time, crop diversification, mainly to oil palm, was vigorously encouraged and has resulted in Malaysia becoming the world's largest producer of palm oil\. Rice production has been increased by half through the provision of irrigation, and Malaysia is now nearing self-sufficiency\. Malaysia is second only to Taiwan as an exporter of pineapple but is finding it increasingly difficult to maintain her share of the market\. Other major crops, such as coconut, coffee, fruits and vegetables, are grown mainly for internal consumption\. 16\. The agricultural population includes some of the most economically depressed sections of the Malaysian community\. Those engaged in fishing and padi production are at or near the bottom of the income ladder\. khereas the average GNP per head for Malaysia in 1971 was about M$950, the GNP per head for agriculture was only about half of that\. Few data are available on the size distribution of rural incomes between types of activity, but it would appear that the smaller padi and rubber producers in particular have incomes of only about M$200 to M$250 per capita\. 17\. The main thrust of agricultural policy is, on the one hand, to resettle landless rural unemployed and marginal smallholders on viable holdings planted with oilpalm, rubber and other crops and, on the other hand, to raise the incomes of existing potentially viable smallholdings by providing infrastructure and agricultural services\. As mentioned in paragraph 13, the Bank is helping to finance four land settlement projects which are proceeding very satisfactorily\. In support of the Government's second objective, the Bank has also helped to finance two irrigation projects to increase padi production\. Disbursements have been completed and agricultural production increases exceed estimates made at appraisal\. A major study, undertaken by the FAO/IBRD Cooperative Program, is presently analyzing the impact of the projects on the local economy and income levels\. A problem is still the prevalence of absentee landlords\. The results of the study, expected by mid-1974, should assist the Government in tackling the land tenure problem in the areas\. 18\. Over the last ten years Government has substantially streng- thened and restructured the institutions dealing with agriculture\. The major institution responsible for land settlement is the Federal Land Development Authority (FELDA) which is currently engaged in a program of developing about 100,000 acres of land and settling some 8,000 to 10,000 families annually\. Other land settlement programs are being undertaken by the individual states and by the Rubber Smallholders Development Authority (RISDA) which, in addition, is responsible for replanting assist- ance to rubber smallholders\. Agricultural research has recently been - 6 - consolidated in the Malaysian Agricultural Research and Development Institute (MARDI) and the Bank is considering helping to finance a comprehensive research program covering most of the existing small- holders' crops\. Farmers Organizations (FO's) are presently being est- ablished in all smallholder areas throughout Malaysia and the Govern- ment's aim is that all extension services previously undertaken by the Department of Agriculture will be channelled through these organizations\. A Farmers Organization Authority (FOA) was recently created to super- vise the management of the FO's\. All the FO's are Government-financed and the finance is channelled through the FOA\. The main source of rural credit is the Bank Pertanian Malaysia (BPM) with loan processing and disbursements being handled by the FO's for a small fee\. This system has worked well in the two Bank-assisted irrigation projects\. The proposed project would be the first project to assist existing tree crop small- holders on a large scale and would use the above discussed agricultural institutions in order to maximize the benefits from the infrastructural investments\. PART IV - THE PROJECT Western Johore Agricultural Development Program 19\. The Government of Malaysia has prepared an agricultural devel- opment program for the western part of the State of Johore in Peninsular Malaysia\. The program is aimed mainly at raising the income levels of the eisting smallholders, who belong to the lowest 25 percent income group in Malaysia\. The program covers a gross area of 930,000 acres and consists of the improvement of drainage facilities and the development of agri- cultural resources through changes in cropping patterns to suit soils, the introduction of better agronomic techniques and the provision of agri- cultural supporting services\. The proposed project forms the first phase of the Western Johore Agricultural Development Program\. It covers about 330,000 acres (see Map) of land in the southern part of the region with a population of 200,000\. Of the total area, about 137,000 acres is undeveloped; the rest has rudimentary drainage facilities and some parts are subject to salt water intrusion\. 20\. The project was appraised in July/August 1973 and negotiations were held in February 1974\. The Malaysian delegation was led by Mr\. Abdullah bin Salleh, Secretary-General of the Ministry of Agriculture and Fisheries\. A loan and project summary is included as Annex III\. The Appraisal Report, No\. 314a-MA dated February 28, 1974, is being distributed separately to the Executive Directors\. Project Description 21\. The proposed project consists of: (a) the construction of 29 miles of coastal embankments; (b) construction and improvement of about 250 miles of main and lateral drains; (c) construction and improvement of on-farm feeder drains and roads; (d) improvement of 36 miles of river channels; (e) construction of project headquarters and eight new Agri- - 7 - cultural Development Centers to house agricultural supporting services; (f) development of processing facilities; and (g) a feasibility study for the second phase of the Western Johore Agricultural Development Pro- gram\. The project works would take about five years to construct\. Agricultural Development Program 22\. To fully realize the benefits of the proposed investments, an extensive agricultural development program has been prepared and forms part of the project\. The program will continue throughout the 30-year development period foreseen for the project area\. Agricultural develop- ment would not only increase yields by more sustained extension work and the introduction of new agronomic techniques, but would change the cropping pattern by growing crops best suited to specific soils in the area\. Rubber, now the major crop, would be gradually replaced by oil palm, 60,000 acres of cash crops would be grown on existing undeveloped peat soils and coconut areas would be interplanted with bananas, coffee and cocoa\. The existing pineapple industry would also be modernized through research and development\. 23\. There are 30,000 farm families (average size of six persons) in the area, who mostly own their holdings\. The average farm size is about 10 acres\. Over 60 percent of the population are Malays\. The project would introduce modern farming techniques and raise the smallholders' incomes\. The local chiefs and village heads command considerable respect among the people in the area and the modern agricultural institutions would work through them to disseminate new technologies and encourage changes in cropping patterns\. The sociological aspects of these innovations were con- sidered during project appraisal and the proposed project organization was designed to harmonize with the social structure of the area\. ProJect (bsts and Financin& 24\. Total cost of the project is estimated to be about US$100 million (net of taxes) with a foreign exchange component of US$45 million or 45 percent of the total cost\. The proposed Bank loan of US$6 million would finance the estimated foreign exchange cost of the project\. The balance of the project costs (US$55 million) would be financed by the Government\. 25\. Project beneficiaries would be expected to pay for the cost of operation and maintenance of drainage works\. In line with Government's policy, they would not be required to pay directly for the capital costs of the project\. This is justifiable because: (a) the project works con- sist mainly of drains and an embankment to reduce sea water intrusion and flooding and unlike irrigation projects it would be difficult to relate farm charges directly to services renderedj (b) incomes in the area, even after full development, would remain below the projected average rural incomes; and (c) additional revenue accruing to the Government as a result of the project, especially through increases in export taxes and land taxes, as well as reduction in pineapple subsidies, would be sufficient to cover the Government's investment costs and incremental expenditures incurred for agricultural extension services throughout the life of the project (excluding interest)\. It is estimated that incremental revenues to the Government would exceed cumulative expenditures by about US$6\.h million (M$15 million) at the end of the project's development period\. Indirect growth effects of the project on the economy would yield addition- al revenues\. Procurement and Disbursement 26\. Contracts amounting to US$35\.4 million (net of contingencies) for civil works and US$4\.6 million for equipment would be awarded on the basis of international competitive bidding and in accordance with the Bank's guidelines\. About 60 percent of these contracts are expected to be won by foreign bidders\. In evaluating bids, local equipment manufacturers would be allowed a margin of preference of 15 percent or the actual customs duties, whichever is lower\. Contracts amounting to US$3\.1 million for agricultural processing plants and buildings, which are individually small and scattered, would be awarded after locally advertised bidding\. 27\. Feeder drains (total cost US$6\.2 million), which also are individually small and scattered in space and time, would be carried out by the Drainage and Irrigation Department (DID) of the Ministry of Agri- culture through rural works contracts with village chiefs at fixed unit rates determined annually by the Government as is now done for the main- tenance of existing schemes\. Apart from the fact that these minor works would not interest international contractors, the use of local institutions would save the cost of land acquisition for such drains, as farmers would donate the land required along their lot boundary, This saving would be of the order of US$2 million\. Furthermore, these contracts would provide work for and benefit the local rural population whilst the project is still in the development stage\. 28\. Disbursements would be made against: (a) 50 percent of civil works expenditures; (b) 100 percent of the c\.i\.f\. cost of imported vehicles and equipment; (c) 100 percent of the ex-factory cost of locally produced vehicles and equipment procured after international competitive bidding; and (d) 70 percent of imported but locally procured vehicles and equipment\. Disbursements are expected to be completed by June 30, 1980\. Organization and Management 29\. The Government would establish, within the Ministry of Agri- culture and Fisheries, a Western Johore Agricultural Development Division to be responsible for the overall implementation of the project, including construction and agricultural development, and to coordinate the activities of the various organizations and agencies involved\. The Division would be headed by a Project Director who would have full responsibility and authority for making day-to-day decisions\. In general policy matters, the Project Director and the Division would be guided by a Steering Committee - 9 - of senior Federal and State officials\. The establishment of the Division and the appointment of the Project Director would be conditions of loan effectiveness\. 30\. Several existing organizations would act as executing agents of the Division in various aspects of project implementation\. These agents would be administratively responsible to the Project Director but would receive technical direction from their own headquarters\. The Drainage and Irrigation Department of the Ministry of Agriculture would be responsible for the construction of embankments, the improvement of drainage facilities and feeder roads and would also be responsible for maintaining and operating the drainage works\. 31\. To spearhead the Agricultural Development Program, eight Farmers Organizations (para 18) would be established in the project area in addition to two now existing, and these would be located in Agricult- ural Development Centers strategically located throughout the area\. The professional staff of the Farmers' Organizations would be responsible for providing the necessary agricultural supporting services and promoting changes in cropping patterns and introducing new agronomic techniques, and for assistance in processing, marketing and transportation of(rops where required\. In all these activities, the Farmers' Organizations would be supported by various specialized agencies such as the Department of Agriculture of the Ministry of Agriculture, the Rubber Industry Smallholders' Development Authority, the Malaysian Agricultural Research and Development Institute and the Malaysian Pineapple Industry Board, all of which would work from the Agricultural Development Centers\. The Bank Pertanian Malaysia would provide the agricultural credit required by the farmers at local credit centers in the Agricultural Development Centers\. Benefits and Justification 32\. The proposed project would contribute significantly towards achieving the Government's income distribution and employment objectives\. It will mainly benefit a group of smallholders belonging to the lowest 25 percent of the income groups in Malaysia\. Wile the current average income per farm fatly in the project area is about M$2,100 (US$900), it is anticipated that the implementation of the project would achieve an increase in income level to about M$3,700 (US$1,600) by 1983 and M$4,800 (US$2,100) by the year 1993\. 33\. It is estimated that the project would result in the creation of about 12,000 new jobs by 1983 and about 24,000 by the year 2003\. Under-employment, which is substantial in the area, is expected to be con- siderably reduced\. 34\. The project will have a positive environmental impact\. By draining the peat swamps, the project will contribute to the eradication of malaria, currently the most serious health problem in the area\. - 10 - 35\. Since the project was appraised in July/August of last year there have been considerable cost increases in Malaysia, particul- arly as a result of the recent oil price increases\. To allow for these and expected further increases during the implementation period of the project, the project costs were revised to tak into account all the immediately foreseeable effects of the energy crisis\. Also, the projected prices of the crops to be produced in the project area were revised upward in the light of our latest estimate of long-term trends\. The economic rate of return of the project is now estimated at 15 percent\. Wile it was not possible to analyze in detail the effects of the energy shortages on international demand and the consequent possible indirect effects on Malaysia's economy, we are confident that the proposed loan remains fully justified\. PART V - LEGAL INSTRUMENTS AND AUTHORITY 36\. The draft Loan Agreement between Malaysia and the Bank, the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement and the text of a resolution approving the pro- posed loan are being distributed to the Executive Directors separately\. The draft Loan Agreement conforms to the pattern normally used by the Bank for agricultural development projects\. 37\. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank\. PART VI - RECOMMENDATION 38\. I recommend that the Executive Directors approve the proposed loan\. Robert S\. McNamara President Washington, D\.C\. March 14, 1974\.  1 of COUNTRY DATA - IL IAYSIA AREA POPULATION DENSITY 332,633 km2 111on (2\.d-1971) 31 Per m Za 139 Per kei2of arable Lan,,! SOCIAL INDICA ORS Reference Countriee Sri Lanka Taiwan Austra\.LIE GNP PER CAPITA US$ (ATLAS BASIS) L 380 110 390 2,820 DEMOGRAPHIC Cruldebirth rate (per thousand) tie 32! 31 28 21 Crude death rate (per thousand) 10s' 4' 3 6 Infant mortality rate (per thousand live births) 751;y O3S/ i 6Y 19- Life expectancy at birth (years) 57 63 68 72 Grons reproduction rate Z2 2\.8 2\.3 2\.2 I\.L Population growth rate y2\. 3\.1 2\.1 2\.9 2\.0 Population growth rate - urban 2\. \. 23 Age struct,ire (percent) 0-1h a 15-6; 51\. 6 65 and over 'Y556 Deoondency ratio /3 Yb4 1iA 0\.9LI 1roan population as percent of total 27a ;y 2 61$' 33-1 Family planning: N<\. of acceptors cumulative (thous\.) 22 1iO 979 No\. of users (% of married women) 8 EMPIDYMENT Total labor force (thousands) 2,296! 3 2082/ 3,773 h,613 8,111 Percentage employed in agriculture 56! ' !1 9 P,rcentage unemployed 6\. !Y'; 7 1 1\.0 INCOME DISTRIBUTION Percent of national income received by highest 5% Percent of national income received by highest 20% Percent of national income received by lowest 20% Percent of national income received by lowest 40% DISTRIBUTION OF LAND OWNERSHIP % owned by top 10 of owners % ownod by smallest 10% of owners HEALTH AND NUTRITION Population per physician 6,500& 1,1 3 7032/ 0$' 850L' Population per nursing person ;Y 1:4 41170 1 Population per hospital bed d/ Per capita calorie supply as % of requirements 10A i 2/8';$' 2 102 111L 122 Per capita protein supply, total (grams per day)6 51 k ;$' h9 6W\. 106 Of which, animal and pulse 22';S/ 20/! 16 31 71 Death rate 1-L years /7 5\.51\. 3\.3 0\.9$ EDUCATION AIOuted /8 primary school enrollment ratio s!P/ 90 1108/;E! 98 107SVRP Adjusted 7 secondary school enrollment ratio 12-ai$2 292 40 77$0 Years of ;hooling provided, first and second level 11 11 12 12 14 Vocational enrollment as % of sec\. school enrollment 8!: 31/ 16 1 Adult literacy rate % iwiy 775/ 873 HOUSING Average No\. of persons per room (urban) 1\.92/ 0\.7o / Percent of occupied units without piped water 6\. \. 762 Access to electricity (as % of total population) 7 9W Percent of rural population connected to electricity CONSUMPTION eivers per 1000 population 37 1j/ 1A$ 103$ 211 Passenger cars per 1000 population 18W, 24 7$' W, 310 Electric power consumption (kwh p\.c\.) 26W jiW'$ 61$' 823 1,162 Newsprint consumption p\.c\. kg per year o\.5 3\.7 1\.8 1\.7$' 38\.7 Notes: Figures refer either to the latest periods or to ancoant of enviromental temperature, the latest years\. Latest periods refer in principle to dietribution by age and a of national populatione\. the years 1956-60 or 1966-70; the latest years in prin- /6 Protein standards (reqairements) for all countries as etab- ciple to 1960 and 1970\. Only significantly different lished by USDA Economic Reeearch Service provide for a minim= periods or years are footnoted separately\. allowance of 60 grame of total protein per day, and 20 vane of /1 The Per Capita ONP estimates for years other than 1960 animal and pulse protein, of which 10 grame ehoald he animal is at market prices, calculated by the same conversion protein\. These stadards are soewhat lower than those of 78 teohnique as the 1972 World Bank Atlas\. grains of total protein and 23 grams of animal protein as an /2 Average number of daughters per woman or reproductive average for the world, prposed by PAD in the Third World Pood age\.Suey /3 Population growth rates are for the decades ending in /7 Somestudies have suggested that crude death rates of children 1960 and 1970\. ages I through 4 may be used as a first approximation indx of /L Ratio of under 15 and 65 and over age brackets to malnutrition\. those in labor force bracket of ages 15 through 61\. /8 Percentage erolled of sorreaponding population of scho age /5 FAO reference standards represent physiological re- as defined for each eountry\. qairements for normal activity and health, taking /Peiinsular Malaysia only\. U n ,ployed registered for work as percentage of labor for: e\. b/ 19r7 IkelerationT of Malaysia\. c/ 1967 0 A1971 d/ 1969 G/onresrunent hospitals oiay\. e/ 1965-70 n/ 1961-63 fl Ratis of population 0-1i and 65 and over to total 3/ 1934-66 labor force\. 2/1955 \.66 1963 1962 U\.nad-1 2\.1962\. 2\. 1960 not available ANNEX I Page 2 of 3 pages ECONOMIC INDICATORS GROSS NATIONAL PRODUCT IN 1972 (Provisional) ANNUAL RATE OF GROWTH (%, constant prices) US$ M1n\. % 1960 -65 1965 -70 1972 GNP at Market Prices 4,678 100\.0 6\.9 5\.6 5\.2 Gross Domestic Investment 960 18\.3 9\.4 7\.7 11\.1 Gross National Saving 732 16\.5 11\.8 7\.9 13\.1 Current Account Balance -228 -1\.8 Exports of Goods, NFS 1,816 03\.0 !\.1 6\.5 2\.4 Imports of Goods, NFS 1,886 L1\.4 3\.3 5\.7 -0\.5 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1970 1/ Value Added Labor Force- V\. A\. Per Worker US$ Nln\. % M1n\. %_ US $ 7 Agriculture 823 29\.7 1\.5 46\.9 549 54\.4 Industry 760 27\.5 0\.5 15\.6 1,520 1h9\.5 Services 1,184 42\.8 1\.0 31\.3 1,184 116\.4 Unallocated 0\.2 6\.2 Total/Average 2,767 100\.0 3\.2 100\.0 1,017 100\.0 GOVERNMENT FINANCE General Government Central Government (M$ Mln\.) % of GDP Ml\.) % of GDP 1972 1972 1970-72 1972 1972 1970- 72 Current Receipts 3,482 26\.4 25\.1 2,920 22\.1 20\.8 Current Expenditure 3,529 26\.7 23\.4 3,068 23\.2 20\.5 Current Surplus -77 -77-T 77 74T Capital Expenditures 1,498 11\.4 9\.8 1,223 a! 9\.3 8\.1 External Assistance (net) 381 2\.9 2\.1 372 2\.8 2\.0 Jan\. Jan\. MONEY, CREDIT and PRICES 1969 1970 1971 1972 1972 1973 T(Million -outstanding end periodT- Money and Quasi Money 3,724 4,130 4,666 5,771 4,793 5,996 Bank credit to Public Sector 909 833 1,0h5 1,156 1,071 1,077 Bank Credit to Private Sector 1,841 2,246 2,572 3,044 2,641 3,229 (Percentages or Index Numibers) Money and Quasi Money as % of GDP 33\.1 35\.0 37\.6 43\.7 General Price Index (1967 3 100) 99\.4 101\.3 102\.9 107\.8 Annual percentage changes in: General Price Index C0\.4 1\.9 1\.6 4\.8 Bank credit to Public Sector 6\.4 -8\.4 25\.5 1,\.6 43\.1 0\.6 Bank credit to Private Sector 9\.0 21\.9 14\.6 18\.4 12\.4 22\.3 NOTE: All conversions to dollars in this table are at the average exchange rate prevailing during the period covered\. a! includes M$422 of net Government lending\. GenPeninsular Malaysia only\. not available not applicable ANNEX I TRADE PAYMNTS AND CAPITAL FLOWS Page 3 of' 3 pages BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1970-72) 1970 1971 1972a/ US $ M1n % (Millions US $) Rubber 500 29\.8 Tin 318 18\.9 Exports of Goods, NFS 1,772 1,717 \. 1,811 Timber 287 17,1 Imports of Goods, NFS 1,601 1,646 1,846 Palm Oil 113 6\.7 Resource Cap (deficit = -) 7 -73 Petroleum 90 5\.4 22\.1 Interest Payments (net) -21 -23 26 All other commodities 2d Workers' Remittances *, Total 0,8O 100,0 Other Factor Payments (net) -9 -51 -8h Net Transfcrs -60 -55 -56 EXTERNAL DEBT, DECEMBER 31, 1972 Balance on Current Account TI -S -201 US -M1nI Direct Foreign Investment 52 52 64 Net M'LT Borrowing Public Debt, incl\. guaranteed 209\.0 Disburcements 42 145 210 Non-Guaranteed Private Debt A\.mortf-ation 43 21 26 Total outstanding & Disbursed Subtotal -1 12T Capital Grants 13 15 14 DEBT SERVICE RATIO for 197? Other Capital (net) -73 -77 -15 Cther ite:ns n\.e\.i -QL -6 jL2L IncreasE in Reserves (+) 40 61 54 Public Debt, incl\. guaranteed 3\.5 Non-Guaranteed Private Debt * Gross Reserves (end year) 846 907 1,029 Total outstanding & Disbursed Not Resarvns (end year) 819 902 1,027 IBRD/IDA LADING, December\. 1973 (Million US): Fuel and Related Materials IBRD IDA Exports of Goods, NFS 1,772 1,717 1,811 Outstanding & Disbursed 181\.0 of which: Petroleum 117 162 111 Undisbursed 16 \. o Outstanding incl\. UndiBbursed 350\.9 Imparts of Goods, NFS 1,601 1,646 1,846 of which: Petroleum 167 185 138 RATE OF EKCHANGE Through 1971 US$1\.00 = M$3\.06 M$ 1\.00 = US$0\.33 From 1972 through February 13, 1973 US$1\.00 = M$2\.82 M $1\.00 - USo\.35 From February 13 - June 21\. 1973 US$1\.00 - M$2\.54 MS 1\.00 = US$0\.39 Omrrent,y floating - as of January 1974 US$1\.00 = M$2\.45 M$ 1\.00 = US$0\.41 Echange rates used: US$1\.00 = M$2\.82 Ratio of Debt Service to Eports of Goods and Non-Factor Services\. \. not available not applicable  ANNEX II Pa- e 1 of 6 paE THE STATUS OF BANK GROUP OPERATICS IJ MALAYSIA A\. STATEMENT OF BANK LOANS (as at Jnuari 31, 197L) US$ Million Loan Amount (Less Cancellations) Nurmber Year Borrower Purpose Bank Undisbursed Seven loans fully disbursed 174\.6 533 1968 Government of Malaysia land Settlement 14\.0 1\.7 561 1968 Government of Malaysia Water Supply 3\.6 0\.4 579 1969 National Electricity Electric Power 8\.5 0\.1 Board 599 1969 Government of Malaysia Education 8\.8 6\.4 672 1970 Government of Malaysia land Settlement 13\.0 6\.2 673 1970 Government of Malaysia Forestry 8\.5 0\.6 700 1970 National Electricity Electric Power 20\.0 14\.3 Board 753 1971 Government of Malaysia Telecommuni- 18\.7 18\.7 cations 774 1971 Sabah Ports Authority Ports 16\.1 15\.5 799 1972 Malayan Railway Railroad 16\.0 14\.1 Administration 810 1972 Government of Malaysia ducation 15\.5 15\.5 851 1972 Government of Malaysia Urban Transport 16\.0 14\.3 880 1973 Government of Malaysia Population 5\.0 5\.0 885 1973 Government of Malaysia land Settlement 25\.0 24\.3 908 1973 Government of Malaysia Water Supply 13\.5 13\.5 931 1973 Government of Malaysia Highway 19\.5 19*5 Total 396\.3 of which has been repaid - 2 Total now outstanding b/ 359\.1 Amount sold 17\.5 of which has been repaid 9\.3 8\.2 Total now held by Bank a 350\.9 Total undisbursed 169\.9 a/ In addition, Malaysia is Guarantor for Loan 405-MA of February 26, 1965 to the Public Utilities Board in Singapore (amount being held by the Bank at January 31, 1976, 1974 - US$5\.2 million)\. b/ Loan 967, Land Settlement, US$40\.0 million, fas signed on February 27, 1974, but is not yet effective\. c/ Prior to exchange adjustments\. ANNEX II Page 2 of 6 pages B\. STATENT OF IFC INVESTMNTS (as at January 31, 1974) Type of Amount in US$ million Year Business Loan Equity Total 1963 Malaysian Industrial Industrial Finance - 1\.94 1\.94 Development Finance Ltd\. (MIDF) 1966 Tasek Cement Ltd\. Cement 1\.28 0\.28 1\.56 1967 Malayawata Steel Ltd\. Steel 2\.45 1\.01 3\.46 1969 Malayawata Steel Ltd\. Steel - 0\.23 0\.23 1969 India-Malaysia Textiles Ltd\. Textiles 1\.25 0\.25 1\.50 Total gross commitments L 797 3\.71 7767 less cancellations, terminations, repayments and sales 3\.03 1118 4\.21 Total commitments now held by IFC 1\.95 2\.53 4\.48 Total undisbursed - - - ANNEX II Page 3 of 6 pages C\. PROJECTS IN EXECUTION - Loan No\. 533 Jengka Triangle Project; US$14\.0 Million Loan of April 17, 1968; Closing Date: December 31, 1975 Loan No\. 672 Second Jengka Triangle Land Settlement Project; US$13\.0 Million Loan of May 20, 1970; Closing Date: May 31, 1977 Loan No\. 885 Third Jengka Triangle Land Settlement Project; US$25\.0 Million Loan of March 30, 1973; Closing Date: December 31, 1981 The projecta consist of the clearing of forest, the planting of 62,000 acres of oil palms and 35,000 acres of rubber and the settlement of 10,000 families in the Jengka Triangle (State of Pahang)\. The Federal Land Develop- ment Authority (FELDA), responsible for the execution of the project, operates efficiently and its standard of planting and maintenance is high\. The first project (533-MA) has been completed\. Cost overruns are estimated to have been about US$5 million or 20 percent of appraisal cost estimates, of which about US$3 million is due to the US$ devaluation\. The Second Jengka Project (672-MA) is also mostly completed\. But, due to timber shortages, the housing program is somewhat behind schedule\. Cost overruns are estimated at about US$3\.5 million or 10 percent of appraisal cost estimates\. of which about US$3 million is due to the US dollar devaluation\. In terms of economic viability, improved prospects for palm oil and rubber prices have fully compensated for cost overruns on both projects\. The Third Jengka project is proceeding satisfactorily and is somewhat ahead of schedule\. Loan No\. 673 Jengka Forestry Project; US$8\.5 Million Loan of May 20, 1970; Closing Date: June 30, 1974 Implementation of the project, consisting of a highly complex integrated forestry products industry established in the Jengka Triangle, suffered because of management and technical problems, which were both traced to the lack of previous experience of this kind in Malaysia\. How- ever, corrective steps were taken and performance, both managerial and financial, has since been satisfactory\. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them\. They should be read in this sense, and with the understanding that they do not purport to present a balanced evalua- tion of strengths and weaknesses in project execution\. ANNEX II Page 4 of 6 pages Loan No\. 579 Fourth Power Project; US$8\.5 Million Loan of January 9, 1969, Closing Date: March 31, 1974 Loan No\. 700 Fifth Power Project; US$20\.0 Million Loan of July 16, 1970; Closing Date: January 31, 1975 Implementation of the projects consisting of extensions to existing thermal plants of the National Electricity Board system were delayed because of manufacturers' delays, particularly in supplying structural steels and turbo-alternators\. Loan No\. 579 will be disbursed by the present Closing Date which was extended from March 31, 1973\. The Closing Date for Loan No\. 700 will have to be extended, Loan No\. 753 Second Telecommunications Project; LS$18\.7 Million Loan of June 21, 1971; Closing Date: June 30, 1976 The project includes facilities and equipment to improve the domestic and international telecommunications systems\. Implementation has been delayed but better progress is now being made and there are reasonable prospects that the project will be completed on schedule\. Orders placed exceed US$10 million and application for reimbursemat amounting to about US$4 million are expected to be received shortly\. Loan No\. 561 Kuala Lumpur Water Supply Project; US$3\.6 Million Loan of September 27, 1968; Closing Date: September 1, 1974 Loan No\. 908 Second Kuala Lumpur Water Supply Project; US$13\.5 Million Loan of June 14, 1973; Closing Date: June 30, 1978 The projects consist of the improvement and expansion of water supply facilities in the Kuala Lumpur area\. Implementation of the first project had been delayed because the main civil works contract had to be retendered following the death of the main contractor and the liquidation of his firm\. Costs were within the original estimates and work has been completed\. However, the Closing Date had to be postponed for a second time to September 1, 1974 to allow for the payment of retention monies\. The original Closing Date was September 1, 1972\. Tenders for certain parts of the second project have been awarded and site investigations for the proposed dam are in progress\. Loan No\. 599 Education Project; US$8\.8 Million Loan of May 23, 1969; Closing Date: December 31, 1974 The project will provide in 21 new schools about 11,000 student places, of which about 2,500 will be in Sabah and Sarawak for secondary education and teachers training and about 8,500, mainly in Peninsular Malaysia, for vocational, technical and agricultural education\. Project implementation generally is about six months behind schedule, due to some siting problems and to staff shortages in the Pablic Works Department which delayed preparatory design processes, but is now progressing well\. All but one of the 21 project institutions should be completed by end 1974\. ANNEX II Page 5 of 6 pages A start on the construction of the remaining project item, one of the three agricultural schools in Peninsular Malaysia, was considerably delayed by difficulties in obtaining a suitable site\. Although the site is now acquired and construction has already begun, the Closing Date will require postponement\. Loan No\. 810 Second Education Project; US$15\.5 Million Loan of April 5, 1972; Closing Date: December 31, 1977 Under this project the expansion of technical and vocational education in Malaysia, started under the first project, will be continued by the construction of 8 schools, providing 4,700 student places, and by the establishment at the University of Penang of science schools providing about 2,600 student places\. The project includes also the establishment of an educational center which will provide a curricula improvement course for teachers and the provision of educational television which is expected to serve some 500,000 primary and secondary students\. Progress is generally satisfactory\. Loan No\. 774 Sabah Ports Project; US$16\.1 Million Loan of June 30, 1971; Closing Date: June 30, 1975 The project consists of the construction of new ports at Kota Kinabalu and Sandakan in the State of Sabah\. All civil works contracts have been awarded but construction is behind schedule, initially due to mobilization delays caused by the seamen's strike in Japan and the staffing difficulties arising as a result of the project manager's death and more recently due to difficulties in the supply of raw materials\. Loan No\. 799 Railway Project; US$16\.0 Million Loan of February 11, 1972; Closing Date: December 31, 1975 The project includes mainly equipment and works for a dieselization program of the Malayan Railways (MR)\. Implementation is behind schedule by about one year because of the Railways' management problems and its initial unfamiliarity with the Bank's procurement procedures\. The Bank has proposed that MR hire consultants to help MR in improving its manage- ment\. Loan No\. 851 Kuala Lumpur Urban Transport Project; US$16\.0 Million Loan of July 20, 1972; Closing Date: April 30, 1977 The project is designed to improve access to Kuala Lumpur from the adjacent town of Petaling Jaya\. Project implementation is satisfactory\. ANNEX II Page 6 of 6 pages Loan No\. 880 Population Project; US$5\.0 Million Loan of February 9, 1973; Closing Date: September 30, 1978 The project is designed to assist Malaysia in achieving low birth and population growth rates and thus to contribute to an increase in per capita income growth and in the long run to ease the unemployment problem\. The United Nations Fund for Population Activities (UNFPA) is providing US$4\.3 million in the form of a grant to finance certain components of the project\. Progress is satisfactory after initial difficulties in coordinating activities of the Government agencies involved, which has delayed loan disbursement\. Loan No\. 931 Second Highway Project; US$19\.5 Million Loan of August 22, 1973; Closing Date: March 31, 1977 The project consists of construction and improvement of Peninsular Malaysia's main north-south highway and also includes various studies\. Project implementation is proceeding satisfactorily\. Loan No\. 967 Johore Land Settlement Project; US$40\.0 Million Loan of February 27, 1974; Closing Date: June 30, 1980 This loan is not yet effective\. ANNEX III Page 1 of 3 pages MALAYSIA WESTERN JOHORE AGRICULTURAL DEVELOPMENT PROJECT Loan and Project Summary Borrower: Malaysia Amount: US$45\.0 million equivalent Terms: Amortization in 25 years including a 6-year grace period at 7-1/4 percent per annum\. Project Description: The project covers 330,000 acres of land in the western part of the State of Johore\. It will provide for improved drainage facilities as well as an extensive agricultural development program for improving cropping patterns and agronomic techniques\. The project includes: (a) construction of 29 miles of coastal embankments; construction and improvement of 250 miles of main and lateral drains; construction of on-farm feeder drains and roads; and improvement of 36 miles of river channels; (b) construction of a project headquarters and eight new Agricultural Development Centers to house the Farmers' Organizations and all extension services; (c) construction of processing facilities for certain crops such as cocoa, tapioca, coffee, and groundnuts; and (d) a feasibility study for the second phase of the Western Johore Agricultural Development Program\. ANNEX III Page 2 of 3 pages US$ Million Estimated Costs: Local Foreign Total Coastal Embankments 1\.1 1\.0 2\.1 Drains 16\.3 10\.3 26\.6 Dams and Reservoirs 1\.6 2\.6 4\.2 Buildings and Processing Plants 6\.6 6\.7 13\.3 Roads 3\.0 2\.5 5\.5 Equipment - 4\.8 4\.8 Engineering and Supervision 3\.8 0\.4 4\.2 Cost of Replanting 3\.7 - 3\.7 Operational Costs during Implementation 4\.0 0\.7 4\.7 Sub-total 40\.1 29\.0 69\.1 Contingencies Physical 4\.3 4\.2 8\.5 Price 10\.6 11\.8 22\.4 Total Project 55\.0 45\.0 100\.0 Financing Plan Bank Loan 45\.0 Government Contribution 55\.0 Total 100\.0 Estimated Disbursements: US$ Million Bank FY Year 1975 1976 1977 1978 1979 1980 Annual 2\.0 9\.0 12\.0 12\.0 8\.0 2\.0 Cumulative 2\.0 11\.0 23\.0 35\.0 43\.0 45\.0 ANNEX III Page 3 of 3 pages Procurement Arrangements: Contracts estimated, net of contingencies, at US$35\.4 for civil works, and US$4\.6 million for equipment would be awarded on the basis of international competitive bidding; in evaluating bids, local equipment manufacturers would be allowed a margin of -preference of 15 percent or the actual customs duty, which- ever is lower\. Contracts, for processing plants, buildings and feeder drains, estimated at US$9\.3 million, each individual contract being small and scattered in time and space, would be awarded after locally advertised bidding or, in the case of feeder drains, through rural works contracts with local villagers on the basis of a unit price fixed annually by the Government\. Rate of Return: The economic rate of return has been calculated at about 15 percent\. Appraisal Report: Report No\. 314a-MA, dated February 28, 1974\.  耳：

APPROVAL

P085071

 ICRR 13874 Report Number : ICRR13874 IEG ICR Review Independent Evaluation Group 1\. Project Data: Date Posted : 06/28/2012 Country : Vietnam Project ID : P085071 Appraisal Actual Project Name : Customs US$M ): Project Costs (US$M): 77\.7 3\.00 Modernization Project L/C Number : C4123 Loan/ US$M ): Loan /Credit (US$M): 65\.9 2\.20 Sector Board : Economic Policy US$M): Cofinancing (US$M ): Cofinanciers : Board Approval Date : 11/10/2005 Closing Date : 06/30/2011 07/01/2011 Sector (s): General public administration sector (75%); Central government administration (12%); Vocational training (11%); Law and justice (1%); General industry and trade sector (1%) Theme (s): Trade facilitation and market access (29% - P); Administrative and civil service reform (29% - P); Infrastructure services for private sector development (14% - S); Law reform (14% - S); Other public sector governance (14% - S) Prepared by : Reviewed by : ICR Review Group : Coordinator : Brian Ames Kris Hallberg Ismail Arslan IEGPS2 2\. Project Objectives and Components: a\. Objectives: According to the Project Appraisal Document (PAD) of Vietnam Customs Modernization Project (VCMP), the Project Development Objective (PDO) is to facilitate trade, increase revenue collection, improve the production of foreign trade statistics, and enhance community protection and national security by improving the effectiveness, efficiency, accountability and transparency of the Customs Administration \. In addition, the project would be a key factor in facilitating Vietnam's ac cession to the WTO and securing the gains from greater integration in to the world trading system (PAD, p\. 3 and Annex 3)\. According to the DCA, the objective of the Project is to assist the Borrower to improve the effectiveness, efficiency, accountability and transparency of the Customs Administration in order to enhance its capacity for trade facilitation, revenue collection,production of foreign trade statistics, community protection and national security, and to facilitate Vietnam's international economic integration (DCA, p\. 12)\. Both statements of objectives are nearly identical \. The ICR is therefore evaluated on the basis of the statement in the DCA, which is the legal basis for the project \. b\.Were the project objectives/key associated outcome targets revised during implementation? No c\. Components: The VCMP consisted of four main components :  1\. Customs Systems and Procurement (appraisal $4\.2 million; actual $0\.0 million): This involved the introduction of a range of modern systems and procedures designed to improve the efficiency, transparency, and compliance with customs administration \. It included the development of : (i) a: modern, transparent, and accessible legal framework; (ii) modern procedures, such as risk management and post clearance audit; and (iii) harmonized and simplified business processes based on international standards \. The component also aimed to improve the level of compliance through a more dynamic and effective enforcement system \. 2\. Organizational Restructuring and Management (appraisal $26\.8 million; actual $2\.2 million): This involved support for the rationalization of the organizational structure of the Customs Administration \. It included restructuring of the headquarters /regional/branch offices, enhancing resource management capacity, improving capacity of the Customs Training Academy, and launching a comprehensive integrity /anti-corruption action program\. This component also included the acquisition of non -intrusive detection equipment and the refurbishment of existing facilities to accommodate new internet and communications (ICT) equipment\. 3\. Information and Communication Technolog y (appraisal $41\.4 million; actual $0\.0 million): This component was designed to provide the General Department of Vietnam Customs (GDVC) with a modern ICT environment and physical infrastructure, including (i) a comprehensive and modern Customs Information System, (ii) the hardware and infrastructure necessary to rollout the new system, (iii) appropriate telecommunications equipment and infrastructure, (iv) rollout and training of customs officials at all levels, and (v) increased capacity to manage the new system and ICT infrastructure \. 4\. Project Management Support (appraisal $4\.6 million and actual $0\.8 million): This involved support to the Project Management Unit (PMU) and project-related coordination bodies during all stages of project implementation\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The VCMP was a Specific Investment Loan (SIL) financed by an IDA credit in the amount of US$ 71\.61 million and a government counterpart contribution equivalent to US$ 11\.8 million\. It was appraised on April 20, 2005, approved by the Bank Board on November 10, 2005, became effective on July 31, 2006, had a mid-term review in September 2010\. At the borrower's request in December 2010, the VCMP was terminated and remaining IDA credit SDR 44 million was cancelled\. The operation was closed on June 30, 2011\. Total disbursement from IDA credit was $2\.2 million and $0\.8 million from the government's counterpart fund (ICR page 31)\. 3\. Relevance of Objectives & Design: a\. Relevance of Objectives: The overall and intermediate objectives of the project were consistent with both the government ’s and the Bank’ s current strategies for the country \. The government’s wide-ranging reform program rests on three main pillars : (i) furthering the transition to a market economy; (ii) socially equitable and environmentally sustainable growth; and (iii) building modern governance\. The transition to a market economy was linked to the country ’s integration with the world economy and entailed trade liberalization and an increased role of the private sector in economic activity\. Moreover, Customs Administration reform received high priority in the authorities Master Plan for Public Administration Reform which was at the center of their program \. Similarly, the VCMP is consistent with the Bank ’ s support to the country’s Comprehensive Poverty Reduction and Growth Strategy (CPRGS), particularly with regard to the aim of assisting Vietnam ’s integration into the global market, including through accession to the World Trade Organization\. The organizing principles of the Bank ’s CAS are in line with the three pillars and broad objectives of the government ’s CPRGS\. Moreover, the project contributes to two of the main pillars of the CPRGS, namely completing the transition to a market economy and building modern governance \. Finally, the CAS update explicitly included assistance to strengthen the Vietnam customs administration \. The relevance of objectives rating was high\. b\. Relevance of Design: The design of the VCMP was consistent with its PDOs \. The project included an institutional development dimension and a procurement of key equipment and infrastructure dimension that together would have in  principle ensured the well-functioning of a modern customs administration \. The design of the VCMP had the full “buy-inâ€? of the GDVC’s upper management which had been exposed to international best practices through a series of study tours and training \. The design also benefited from the lessons learned from the accumulated experience of the Bank\. In addition, attention was placed on reviewing a number of previous reform activities undertaken in the GDVC to ensure that previous mistakes were not repeated, such as the need to not be over reliant on complex technologies that were beyond the technical competence of the GDVC \. The project’s Results Framework provided a clear statement of the overall and intermediate objectives and causal link to the expected intermediate and final outcomes \. However, as will be discussed further below, the Results Framework did not include PDO and intermediate outcome indicators for each of the overall and individual objectives\. Moreover, the project design was excessively ambitious in terms of its scope as well as the sequencing and timing of procurement which was expected to do what would normally take 7 years in 4 ½ years\. The project design was also overly complex and demanding with regard to the GDVC ’s internal capacity for coordination and procurement\. This resulted in a continuous set of delays that impeded the procurement and acquisition of critical equipment and infrastructure and thereby prevented the bulk of the project funds from being disbursed (less than 3% of the total commitment was disbursed at the time of cancellation )\. Neither the PAD nor the ICR identified any unintended (positive or negative) effects, but none were likely to occur \. The relevance of design was Modest \. 4\. Achievement of Objectives (Efficacy): The ICR did not provide an extensive assessment of the achievement of the project ’s five overall objectives (i\.e\., facilitate trade, increase revenue collection, improve the production of foreign trade statistics, enhance community protection and national security, and ) nor of its four specific objectives (i\.e\., improve the effectiveness, efficiency, accountability, and transparency of customs administration )\. Rather, it provided only cursory statements that: (a) the six PDO indicators showed that the system level targets were exceeded in all cases by the end of the project, although it was not possible to fully attribute the impact of project versus non-project factors; and (b) that the high level PDOs were supported by partial completion of only two of the three components\. Moreover, the ICR did not rate each of the overall and specific objectives \. In addition and importantly, the ICR states that its “evaluation of the project outcomes is therefore prepared in the context of a restructured project at closure â€?\. However, since the project’s overall and intermediate objectives were not revised nor its components formally cancelled, the ICR should have assessed the achievement of objectives on the basis of the original project \. Finally, as the ICR indicated, it is not possible to fully attribute the specific impact of the project outputs from non -project related factors given the GDVC ’s extensive non-project financed parallel modernization program\. The following assessment of achievement of the project ’s five overall objectives and four intermediate objectives has been derived to the extent possible from the information provided in the ICR\. Overall Objectives Overall Objective 1: Facilitate Trade : The targeted outcomes were broadly achieved \. There was a significant improvement in client’s perceptions of custom’s performance (PDO Indicator 1) from the baseline of 33\.9% favorable impressions to over 53% at the end of the project period \. Similarly, the import clearance times for commercial shipments at the ports (PDO indicator 4) was reduced by 75%, exceeding the target of 25% (note: the ICR did not indicate whether the target of a 45% reduction at the airport was achieved )\. And the percentage of consignments subject to physical inspection was reduced by 51% at the ports, but only by 13% at one land border (targets were at least 50% reduction)\. The intermediate indicators for improved customs systems and procedures, the development of a customs brokerage industry with DTI capacity, and the introduction of risk management and post-clearance audits were also met\. However, the intermediate indicator regarding the implementation of simplified procedures with reduced documentation requirements was not fully met on account of the cancellation of the ICT component \. Efficacy in achieving the first objective is rated substantial \. Overall Objective 2: Increase Revenue Collection : The targeted outcomes were broadly achieved \. Total revenue collection cost over revenue collected (PDO indicator 2) decreased by 22% (target was 20%) and revenue generated and/or infringements detected as a result of customs ’ interventions pre- or post-clearance increased by 194% (target was 50%)\. Efficacy in achieving the second objective is rated substantial \. Overall Objective 3: Improve the Production of Trade Statistics : The project’s results framework did not include any PDO indicators for this objective \. Nevertheless, it appears the objective was not achieved \. This is because component three regarding improved information collection and management was not implemented, as the authorities lost confidence in completing the infrastructure investments within an acceptable timeframe employing the Bank’s procurement policies and the decision that its needs would be better served under a bilateral cooperation agreement with a regional Customs partner \. However, as the ICR rightly indicated, the extensive BPR and bidding document preparation activities contributed to the government ’s eventual procurement of an appropriate ICT system, albeit funded outside of the project \. Efficacy in achieving the third objective is rated negligible \. Overall Objective 4: Enhance Community Protection and National Security : The project‘s results framework did not include any PDO indicators for this objective \. Moreover, the ICR did not discuss whether and /or how the objective was achieved\. A case could be made, however, that this objective was partially achieved through the improved\. Efficacy in achieving the fourth objective is rated negligible \. Overall Objective 5: Facilitate Vietnam ’s Integration into the World Trading System : The project’s results framework did not include any PDO indicators for this objective \. However, the ICR argues that the implementation of the project reflected the government ’s determination for customs reform and modernization, which were prerequisites for accession to the WTO \. Moreover, the government’s goal of joining the WTO was attained\. Efficacy in achieving the fifth objective is rated as modest \. Specific Objectives Specific Objective 1: Improve the Effectiveness of Customs Administration : The targeted outcomes were broadly achieved\. The client’s perceptions of Custom’s performance (PDO indicator 1) showed significant improvement, increasing from a 33\.9% satisfaction rate (baseline) to a rate of 53\.5% at the end of the project period\. The intermediate indicator regarding improved customs systems and procedures was also met, as the customs law and regulations were implemented and the recommendations for changes in the laws and regulations were approved for gradual implementation \. Efficacy in achieving the first specific objective is rated substanti al\. Specific Objective 2: Improve the Efficiency of Customs Administration : The targeted outcomes were broadly achieved\. The ratio of revenue collection cost to revenue collected declined by 22% (target was 20%), declarations per number of staff increased by 35% (target was 25%), and the mean import clearance time for commercial shipments was reduced by 75% at the ports relative to the target of 45% (note: the ICR did not indicate whether the target of a 45% reduction at the airport was achieved )\. The percentage of consignment subject to physical inspections was reduced by 51% at the ports (target was 50%), but only by 13% at one land border (target was 50%)\. Moreover, the intermediate indicator regarding the implementation of simplified procedures with reduced documentation requirements was only partially achieved due to the cancellation of the ICT component\. Efficacy in achieving the second specific objective is rated modest \. Specific Objective 3: Improve the Accountability of Customs Administration : There were no PDO indicators regarding this objective\. However, there was good progress towards this objective owing to the delivery of the technical assistance components under the project \. This was manifested in the achievement of the targeted intermediate outcome indicator regarding the introduction of risk management (RM) and post-clearance audits (PCA) was met as the legal basis for RM and PCAs was introduced, the corresponding organizational structure was established, and RM criteria for risk assessment and selectivity was developed and applied \. Efficacy in achieving the third specific objective is rated modest \. Specific Objective 4: Improve the Transparency of Customs Administration : There were no PDO indicators regarding this objective\. However, there was good progress towards this objective as the intermediate objective indicator regarding the timely development of easily accessible legislation to support modernization was met as the Customs law and regulations were published on the GDVC ’s website\.  Efficacy in achieving the fourth specific objective is rated modest \. 5\. Efficiency: The assessment of the efficiency of the VCMP is complicated by the fact that disbursement levels under the project were minimal due to the extended delays in the procurement processes which led to the termination of the entire project and the cancellation of the remaining physical subcomponents under Components 2 and 3\. On the one hand, the modest project expenditures (US$2\.2 million or 3\.1% of the credit proceeds) were highly efficient in contributing to the institutional reforms undertaken by the GDVC \. The project’s expenditures were used principally for technical assistance and, as demonstrated by the key performance indicators, the system level targets were exceeded in all cases at the end of the project \. On the other hand, the project was highly inefficient in the utilization of scarce concessional development assistance, as over 97% of the credit proceeds laid idle over the five-year project period\. This raises the question of the opportunity costs and foregone benefits of not redirecting these idle resources to the country ’s other critical development priorities \. Efficiency in achieving project ’s five overall objectives and four specific objectives is rated modest \. ERR )/Financial Rate of Return (FRR) a\. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 156% 100% ICR estimate No * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome: The moderately unsatisfactory rating reflects the “highâ€? relevance of the programs’ objectives, the “modestâ€? relevance of the programs’ design, the “negligibleâ€? and “modestâ€? achievements of most of the overall and specific objectives, and the “modestâ€? efficiency in achieving the project ’s objectives\. a\. Outcome Rating : Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating: The risk that the development outcomes overall will not be maintained is moderate \. As noted above, although the VCMP was not able to disburse the bulk of its resources to support the procurement of ICT equipment and infrastructure, the project was successful in strengthening the efficiency and operations of the GDVC\. The government decided not to implement the project ’s investment subcomponents under Components 2 and 3 and instead secured and implemented a similar ICT system to that envisaged under the project from a bilateral financial sources, draw on an existing and proven system in use within the region \. Moreover, the GDVC remains committed to further efficiency improvements as noted in its Customs Reform Strategy 2011-20\. As a result, the risk to sustaining the development outcome is moderate \. a\. Risk to Development Outcome Rating : Moderate 8\. Assessment of Bank Performance: a\. Quality at entry: The Bank’s performance regarding quality at entry was moderately unsatisfactory \. The program design benefited from previous lessons learned from accumulated Bank experience \. To make sure that previous mistakes were not repeated, the Bank also took in to account the GDVC ’s experience with previous reform efforts\. Moreover, the project was fully aligned with the Government ’s Social and Economic Development  Strategy 2011-2020, as well as the Bank’s Country Assistance Strategy \. Quality at entry was impeded, however, by several offsetting factors \. First, the project design did not take into account the organic relationship between the tasks of the project and, hence, delays regarding the initial tasks impeded progress on the subsequent tasks \. Second, the project was overly comprehensive and complex and did not anticipate the difficulties likely to be experienced during implementation \. Third, the project appraisal failed to ensure that a realistic implementation plan and timetable was adopted at the onset (i\.e\., the project was expected to be implemented over a five -year period despite the fact that the average time for implementing investment projects in Vietnam averaged 7 years)\. Fourth, the credit agreement included a large number of poorly conceived covenants which resulted in delays in project implementation \. Fifth, the Bank failed to take into full account the internal coordination challenges facing the GDVC regarding consensus making, which impeded implementation \. Sixth, the project failed to include measures to strengthen procurement capabilities, which resulted in the investment components of the project not being implemented\. Seventh, the difficulties in selecting and retaining highly qualified consultants due to the limited size of the customs consulting market was not taken into account \. Finally, as will be discussed further below, the projects M&E framework was poorly designed \. at -Entry Rating : Quality -at- Moderately Unsatisfactory b\. Quality of supervision: The quality of supervision was moderately unsatisfactory \. There was good continuity in task team membership and leadership throughout the project period \. The ICR also rightly recognized the Bank ’s considerable efforts and flexibility in responding to the various changes faced in project implementation \. However, it is unfortunate that supervision mission frequency during the first three years of project implementation was limited to once each year at 8-12 months intervals\. This is noteworthy not only because of the delays and problems experienced during the initial period of project implementation, but also because the authorities (PMU) had specifically requested that the Bank increase such frequency so they could better benefit from Bank expertise\. It is also surprising that the project ’s Implementation Supervision Reports seldom discussed, let alone flagged, the delays in implementation and problems with procurement as critical issues\. As a result, it was only after staff classified the credit as a “Problem Projectâ€? in 2009 that Bank Management became more involved\. At that point, it was too late in the process to address the authorities concern over the ICT infrastructure \. Moreover, rather than occurring as planned in 2008, the Mid-Term Review was only mounted in September 2010 on the eve of the projects planned completion date \. The deferred mid-term review was a missed opportunity to take stock of the situation mid -way through the project and to try to restructure it accordingly \. Quality of Supervision Rating : Moderately Unsatisfactory Overall Bank Performance Rating : Moderately Unsatisfactory 9\. Assessment of Borrower Performance: a\. Government Performance: Although the authorities demonstrated full ownership and strong commitment to the project, the supervisory agency (i\.e\., the Ministry of Finance) did not have sufficient experience in managing the implementation of large ODA-funded investment projects, such as the VCMP \. This severely impeded project ’s implementation as efforts to be responsive to capacity issues were unsuccessful \. The authorities also lacked capacity in project monitoring and evaluation \. Quarterly progress reports were prepared through the government ’s AMT project monitoring system for ODA-funded projects, but the quality of data was uneven and the reporting of delays in implementation did not result in any corrective action \. In fact, it was only with the reclassification to a “Problem Projectâ€? that the authorities began to focus their attention on this matter \. Government Performance Rating Moderately Unsatisfactory b\. Implementing Agency Performance: As the implementing agency, the GDVC lacked experience in implementing large projects as well as in following the Bank’s procurement processes\. As a result of a lack of sufficient oversight and proactivity, the GDVC task forces did not promptly review the project ’s terms of references, draft reports, and bidding documents, thereby contributing to the implementation delays \. Although delays during the early phases of projects are quite common in Vietnam, the implementation delays experienced in the VCMP were throughout the entire project period\. The ICR does, however, give credit to the staff of the project management unit for their efforts to adhere to the government ’s commitments under the Development Credit Agreement \. However, the poor coordination mechanisms between the PMU and the functional departments of the GDVC severely undermined the decision making and implementation process \. Implementing Agency Performance Rating : Moderately Unsatisfactory Overall Borrower Performance Rating : Moderately Unsatisfactory 10\. M&E Design, Implementation, & Utilization: a\. M&E Design: The VCMP was monitored statutorily under the Government ’s ODA-funded project process monitoring and reporting system entitled the Aligned Monitoring Tool (AMT)\. As noted above, the quality of data and information presented in the AMT’s quarterly progress reports was uneven and there is scope for further improvement \. The project’s Results Framework included 6 outcome indicators for the program development objective and a total of 16 results indicators for the four individual objectives \. Baseline data for the system level indicators were derived from surveys that had been carried out in 2004 and 2005\. Quantitative end-of-project targets were well specified for most of the outcome indicators (the exception being the target for the indicator on client perception of customs’ performance) which was to have “significant improvementsâ€?\. However, there not specific performance indicators (neither PDO indicators or intermediate indicators ) for each of the overall and specific objectives, which severely impeded the ability to monitor the results outcome of the project \. In addition, the intermediate indicators were more process- and output-oriented than quantifiable monitoring indicators \. b\. M&E Implementation: In addition to the baseline surveys, a further survey was conducted in 2010 which allowed the GDVC to assess progress in implementation of the VCMP\. The ICR, however, did not evaluate the extent to which the M&E system was implemented, but rather was focused on whether the results were satisfactory or less than satisfactory\. As a result, it is not at all clear whether the M&E system was effectively implemented, but given the problems in design, this is not likely to have been the case \. c\. M&E Utilization: As pointed out in the ICR, the experience with the VCMP M&E Framework resulted in the GDVC adopting a performance indicator methodology as a key monitoring tool for its modernization program going forward \. This is in parallel to the GDVC’s continued use of the AMT to monitor and report on ODA -financed projects\. It is unclear, however, whether the information flagged in the AMTs regarding delays in program implementation were reviewed and acted upon by the monitoring bodies \. Hence, this is an area that requires further strengthening so that the experiences in program implementation can be acted upon early during the project cycle , as well as fed into the design of other projects \. M&E Quality Rating : Modest 11\. Other Issues a\. Safeguards: The ICR noted that the project was not expected to and did not mention any safeguard issues other than fiduciary compliance with the Bank ’s Procurement and Financial Management Guidelines \. As indicated in the PAD, there is no settlement or displacement of communities and indigenous people that would be encountered in the project\. b\. Fiduciary Compliance: The PMU established under the project was to have its staff trained regarding the Bank ’s fiduciary requirements and instruments, including the need for annual financial audits \. The PMU recruited both financial management and procurement staff\. Since the project was designed with a high content of complex information system procurement, PMU capacity was augmented through the use of both short -term experts and long-term advisers\. When the Government considered the possibility to finance the ICT software and equipment component of the project through direct contracting, Bank staff indicated that the terms of the DCA would not permit sole source procurement nor would restructuring the project to include co -financing with a donor (which permitted tied procurement) be acceptable to the Bank \. In the end, the authorities opted to pursue procurement of their infrastructure needs outside the VCMP \. c\. Unintended Impacts (positive or negative): The ICR did not mention any unintended impacts nor do there appear to be any apparent unintended impacts \. d\. Other: N/A 12\. 12\. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Unsatisfactory Unsatisfactory Risk to Development High Moderate Although the project’s investment Outcome : components were not implemented, it was successful in strengthening capacity\. Moreover, the government did procure the investment components, albeit outside of the project\. As a result, the risk to development outcome is moderate\. Bank Performance : Moderately Moderately Unsatisfactory Unsatisfactory Borrower Performance : Moderately Moderately Unsatisfactory Unsatisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons: The three main lessons learned from the implementation of the VCMP are : 1\. Project ownership by the beneficiary is important \. The GDVC chose to cancel the project and adopt a different financing path to the meet its ICT requirements \. In part, this was on account of uneasiness over continual delays in implementing the VCMP due to institutional capacity constraints in managing large projects and meeting the Bank’s procurement requirements\. It is important to take into account the beneficiary ’s point of view and capacity during the design stage of the project \. The Bank should redouble its efforts to assess the institutional capacity of the beneficiary institution as well as seek greater buy -in for complex reforms\. 2\.A realistic, detailed implementation plan is critical for successful project implementation \. The VCMP was prepared relatively quickly, its project implementation arrangements were not fully adequate, and its implementation schedule was overoptimistic without clear sequencing or margin for delay \. This posed serious problems during the project implementation stage as the PMU was unable to align its procurement process with the planned timetable\. An ambitious yet realistic and achievable implementation plan is key to successful project implementation\. The VCMP should develop more realistic detailed implantation schedules, including by using project critical path planning software applications \. 3\. Close and more frequent supervision is necessary during the early stages of a project \. VCMP supervision missions were one per year at 8-12 month intervals and the mid-Project Review mission did not occur until the eve of the project closing date \. As a result, the problems regarding delays in procurement were not adequately monitored nor escalated for management ’s attention early on\. Close supervision during the early stages of a project allows for careful review of key tasks and sufficient time to make changes as necessary \. The Bank should have more frequent supervision missions, particularly during the early stages of project implementation\. 14\. Assessment Recommended? Yes No 15\. Comments on Quality of ICR: The ICR was comprehensive and its tone candid \. It underscored the importance of beneficiary ownership and buy-in to the reform program, as well as the alignment of the CAS and VCMP to the country ’s CPRGS and medium-term SEDS (2011-2020) priorities\. But it also underscored the weaknesses in the quality at entry, supervision, and the M&E system and highlighted the mistakes that Bank staff made in underestimating the importance of the Beneficiary’s institutional capacity to manage a large project and to meet the Bank ’s procurement requirements\. However, the ICR should have evaluated the investment project as originally designed and not on the basis of a de facto technical assistance project \. It was also incorrect to say that components of the VCMP, as well as the credit, had been cancelled as there were no formal changes to the project\. The ICR also failed to evaluate and rate the achievement of the project ’s five overall and four specific objectives and elected to assess and rate the project ’s components instead\. a\.Quality of ICR Rating : Satisfactory

APPROVAL

P009586

R E S T R I C T E D rIL C rY R e p o r t N o\. A\.S\. 32-b I His Uocumenit was prepared for internal use in the Bank\. in making | it available to others, the Bank assumes no responsibility to them for | the accuracy or completeness of the information contained herein\. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INDIA SECOND LOAN ADMINISTRATION REPORT August 12, 1955 Depart\.snent of Operat\.n Asia and Middle East  CURRENCY CONVERSION Rs\. 1 $ US 0\.21 $ US 1 Rs\. 4\.761 Rs\. 1 million - $ US 210,000  SECOND LOAN AD1MIS 'RATION REPORT TABLE OF CONTENTS Paragraphs BASIC STATISTICS MAP - LOCATION OF PROJECTS INTRODUCTION \. \., 1 - 2 RELATIONS M-TH fLiE BORROWER \. \. \. \. 3 - 11 PART I - LOAN OF $3h MILLION FOR RAIIXJAY REHABILITATION A\. The Loan \. \. *\. \. \. 12 B, Progress of the Project t\. 13 - 17 C\. Effects of the Loan \. 18 PART II - LOAN OF $10 iLLION FOR AGRICULTURAL MACHINERY PROJECT A\. The Loan\. \. \. 19 B\. Progress of the Project \. 20 -21 C\. Effet-ts of tht Ta \. \. \.Loa- 2 PART III - LOAN OF $18\.5 MI*LLION FOR BOKARO-KONAR PROJECTS A\. Th> \.eLnn \. v\.23 B\. Progress of the Project \. \. 24 -29 C\. Effects of tAhe Loan\. \. \. \. \.,3°0-31 PART IV - LOAN OF $31\.5 MILION FOR\. EXPANSION OF IRON AND STEEL P ODUGCTIVE CA PACITY A* The Loan \.ee\. 32 33 C\. Progress of the Project \. \. 35 - 37 PATRT V TnLAl\f OF f15 ILLITTOTIN FOR ECTr-TIC Pnl0^^9 TE EV\.TEPlOvIrT, FLOOD CONT2ROL AIS IRRIGATION A\. lixe LtJO4U*** - \. *\. \. *-**\.**\.*** *\. 38 B* The Project \. \. 39 C\. rrogrtlo± O Projec \. \. o4 J-L40 PART VI _ LOAN OF $16\.2 MILLION FOR ELECTRIC POVY-ER DEVELOPiENT A\. \. jiltS \.LAJfl\. \. \. *@ \. *\. \. \. \. \. \. \. \. \. \. \. *9 * *\. * * * *@ * \. 14\. B\. The Project \. \. \. \. \. h48 u\. rrogreS oI then Project \. \.4*\.*\. \. \. \. LY PART VII LOAN OF $10\.0 MILLION FOR INDUSTRIAL CREDIT AND -m\.YvrO I MTi\.ANTI A* The Loan \. \. \. \. *9\. \.9* \. \. 50 B\. Tne Project \. \. \. 51 - 5 PART VIII - POLIT,CAL CONDITIONS \. 56 - 59 DlA v5rm olrT8 li\.TC A f~ T~T T\.T'A A ATf'T ; T C' FTrTTA rrTlTThT 60 - 6 ARTI- _CDbUSUs\.s D AiRU rislssw \. \. \. \. \. \. \. \. Ou -00 , s  INDIA r3ASIC STAt1ISTICS Area 1\.27 million square miles\. Population (1951 census) 357 million (plus an estimated 5 million for areas not covered by the census)\. National Income (1952/53; net domestic product at factor cost)\. Total Rs\. 98\.7 billion\. Per capita Rs\. 265 (US $54)\. Principal Crops (million tons, except otherwise stated) (Preliminary 1949/50 1953/5L 1954/55 Rice 23\.2 27\.1 24\.0 Wheat 6\.3 7\.8 8\.0 Coarse grains 16\.5 21\.3 20\.8 Oilseeds 5\.2 5\.6 5\.9 Sugar cane 4,9 _ 5\.2 Cotton (bales of 392 lbs\.) 2-A 3\.9 4\.3 Jute (bales of 400 lbs\.)3\.3 3\.1 3\.2 Industrial Production (Index - 1946 - 100) 1950 1951 1952 1953 1954 105 117 129 135 \.146 External Trade (Rs\. billion) 47\.L17J'J \.L 7J-\.L -L77)J L7,i4\. L 197 '' r952 '77 1954 EAJO;-tS 6~~~~\.01 7\.33?\. J \.77 , J\.32 ,\.6 Imports 6\.09 9\.55 6\.60 5\.66 5\.86 Trade Deficit 0\.08 2\.22 0\.83 0\.34 0\.24 Balance of Payments (Rs\. million) Mercnandise (net) -ii29 -935 -356 -950 Current invisibles (net) 540 833 746 790 Foreign grants & loans 394 645 178 160 Private capita1L, 1 errors & "missions-' -309 -453 -70 140 Surplus or deficit v/ -504 90 498 140 * Preliminary\. / Including unrecorded transactions with the Middle East and debt trans- action with aurma\. / Representing movement of official foreign balances (including indebtedness to flAF)\.  Gold and Foreiwn Exchanae Assets of Reserve Bank Milion of US$ equ\.iD; eend of Deember 19t Anril 1950 1951 1952 1953 1954 1955 Gold 247 247 247 247 247 247 Foreg-n Exch'aJge 1753 J141 I\. 1£40 I 4 1S35 4\. 1522 'J~LLI 04 '\.JV~± WL~I 4JUL~~ \1~0\. JJLL\.L\.L\.IUJ\.I/44 I 20 r4, Central G-over\.wIe\.t Budget (R,s-\.1I Jllo\. - -) (Revised) (Budget) I n^e-i/I In /r 2/J I n953/v IC In I/v r I95v/,6C \.L7g]-WJ\.1I C\. ± JI) -L4\.7J/ )L4 - ±7\.J4/ _J) L7-,' Expenrliture 3873 3962 4075 4561 4989 Re-ver-ue 5154 4160J 45]\. L Surplu9 (y-) or ueLiJic (-) $1281 /389 /85 - 50 - 84 Ca-pital Expenditure not met from revenue 712 391 242 1785 2230 Loans and Advances (net) 602 854 1245 2245 3046 Unfunded debt and other accounts (net) f130 f114 f980 /876 f1492 Permanent Debt (net) /278 -386 /1126 Deficit on capital account 951 853 893 2028 3096 Overall surplus (/) or deficit (-) 330 -464 -808 2078 3180 Issue of Treasury Bills (net) -322 -171 /194 /2200 /3400 Drawing from cash balances -8 $635 $613 -122 -220 Central Government Denosits with Reserve Bank (Rs\. Billion; end of December) 1st April 1950 1951 1952 1953 1954 19S55 1\.65 2\.10 1\.75 1\.10 0\.55 0\.65 Mo"ne\.v Supply (Rs\. Billion; end of December) 1st\. Apnril 1950 1951 1952 1953 L9% 1955- 18\.3 17\.7 16\.8 17\.1 18\.4 19\.8 March Price Indices (1948 - 100) 1950 1951 1 1952193 1954 1955 Wholesale Prices 109 120 105 107 105 95 C )ost of "v\.r ka1- 103 10 I 108 104 'j6 India)  A' / ( ( J A M M U AND T I B E T ) \ ~~~~~~K A S H M I R \I PROJECr I / > ~~~*~ * 14A6/CULTURAL 1MACH/NERY PANCHEr HILL DAM A\ Y8J0AS!; FOKARO I \.2 1YK ~~~~~~~~~~~~POWER PLANT- \.,)EAST PUNJAB / \ I / ( \ I 8 ) u SAI\.T\.O\.Y DA\. | <t K \t r? a~~C/ODELH\ \ 4 ( +~ r (~~~~~~~~AGRA # ~- R A J A S T A N_ RAJASTAN K ¼~~~~~~~~~~~~T I\. L 1\. {~~7' ~~Pj fADESH SNL7~ IKUTCH X I "-R N \.< 1 I I I V 442 t tt \. R-S s ,g,,>I |IRV 5 o MADHYA PRADESH J" I / , / \ rEEL PLANr N | 80Mi r/ \, HYDERABAD \ PLAIVI -) (X~AGAPATAM POvrEP PI ANT ANOHRJ I X ( _e? ~~~~~~A N D H R A I I\I)M Y S ORE) EMADRAS I \2CO:ORG~ I /INDIA |\ M A D R A S \~ LOCATION OF PROJECTS I _ 0 100 200 300 TRAVANCONHEC; COGHINf MILES COLOMBO\ ' )| FEBRUARY, 1955  INDIA SECOND LOAN ADMINISTRATION REPORT INTRODUCTION 1\. Up to March 31, 1955 seven loans had been made to India, or to pri- vate companies in India with the guarantee of the Government of India\. They were: 17 IN $32,800,000 / 15 year 4% loan of August 18, 1949 for railway rehabilitation; 19 IN $ 7,203,813 gJ 7 year 32-% loan of September 29, 1949 tor agricultural machinery; 23 IN $17,810,000 2 20 year 4% loan of April 18, 1950 for electric power development; 71 IN $31,500,000 / 15 year 4-3/4% loan of December 18, 1952 for expansion of iron and steel production facilities; 72 IN $10,500,000 / 20 year 4-7/8% of January 23, 1953 for electric nower develonment\. flood control and irrigation; 106 IN $16,2O0,0tO 20 year 4-3/4% of November 19, 1954 for eleetric power development; 109 TN 10,000,0 r00 7/ 15 tran- I4-5/1% ^bof Mare 14, I1955 fr,-e% industrial credit and development\. $126,013,813 Total loans made up to March 31, 1955\. Details of the first three loans, and the projects which they finance, were given in a previous Loan Administration Report No\. Loan 162b of August 8, 1952\. This report is a continuation of that report and covers the period April, 1952 to March, 1955\. l/ Reduced at reauest of Borrower from $34 million as a result of $1\.2 cancellation on May 16, 1950\. 2/ Reduced at- reauest of Borrower from $10 million as result of cancel- lations of $1\.5 million on July 27, 1951, $1\.0 million on August 25, 1952 and $296\.187 on January 1\. 1954\. 3/ Reduced at request of Borrower from $18,500,000 as a result of $6900n00 cannnll4tion on Fehruary 25; 1955= A! Borrower is Indian Iron and Steel Company, Limited\. </ F?oA,Reduced at- request of &O* oruer from 4-1Q\.5 mill4ion as res'qt a- f $9 million cancellation on February 4, 1954\. ay/ The1,11- borrowers are T\.he Tata yJdro-\.Electric P\.ower Supply Co\., t\. Th4 el- Andhra Valley Power Supply Company, Ltd\., and The Tata Power Company, Ltd\. Tne Loan is not yet eflective\. 2/ The Borrower is The Industrial Credit and Investment Corporation of India, Ltd\. The Loan is not yet effective\.  -2- 2\. Of the total of $126,013,813 an amount of $56,112,315 had been dis- bursed by March 31\. 1955\. Repayments of principal by the borrower totalled $14,099,283\. RELATIONS WITH THE BORROWER 3\. In addition to visits during the period by individual staff members t,-v ,\.n,, 4 no abriA _\.a 4 nnr\.AnA+ A 4 \.n : A_ 4 a,,, - \. ,\. \.rmV VAzssXva w-F9aso;s sv vao 0C7a\. a>; av o,\.nn\. nwa\. aIVmaFBV there were several missions to India for special purposes\. 4\. A mission went in May, 1952 to study the charter and organization of tLiu \.IU ldustur'La L Finance Corporation k\.LruJ anU to make reco± 1une,udations on any changes that might be necessary to make possible the proposed expansion of its operations\.', I hi8 i ed o the opening of negotiationLs for a loan1 o± so million to the IFC which were concluded in August, 1952\. The signing of a loan was, however, deferred until certain measures concerning the strueture and powers of the IFC had been adopted\. These measures, made on the Bank's suggestion, were incorporated in legislation amending the IFC Act\. However, as a result of the debate in Parliament on the IFC Amendment Bill, the Govern- ment decided that a fiuller inquiry into the operations of IFC; was needed; and subsequently it withdrew the loan application\. 5\. A mission had visited India in late 1951 to examine the economic and financial position\. This mission recommended, amongst other things,that the Bank consider a second loan for projects forming part of the first phase of the unified scheme for the development of the Damodar Valley\. A Bank engineer was sent in June, 1952 to make a technical investigation, and on the basis of his report, negotiations for a second loan were concluded in December, 1952\. 6\. Also in June, 1952 a mission headed by Mr\. George D\. Woods, Chairman of the First Boston Corporation, Now York, went to India to study the iron and steel situation, to give the Indian Government advice on a plan to be followed for the exnansion of Iron and steel production\. and to discuss with the Government the extent to which Bank financing of an expansion program might he rAneqrerd Th- e r3i4 ouqsionct resultedl in negotiations for a loan to the Indian Iron and Steel Company, Ltd\., (IISCO) in November, 1952\. 7\. In February, 1953 a Bank engineer went to India as a member of a coamm,i-tee to ir,ves aa4ge + 4 posi4b4\.littes of i--thr exp\.so4n o-f i-ro andl steel capacity\. 8\. In September, 1953 a mission spent one month in India to reassess the - \.4\.I … \.N-4n04 an po+4oan a,'a --- +k- p ----n-n SS +,oW'rn\. coun \.tr,y-s ecor\.omic sind fir\.cial J\. i \. exr\. the prores -5- +he Five= Year Plan and discuss questions relating to Bank operations\. Additional data may be found in the following reports previously circulated to tne Executive Directors; AS 4 - Industrial Finance Corporation of India, December 30, 1952\.  -3- 9\. I\.Y FebruO\.-, 1954, M"* Lio-ge D\. avJLJUs, MSL R\.H\. Craft V\.ve Vice-President of the American Securities Corporation, and the Assistant- Direcvor (as±a aXU rUUULUe Ev VUptLr1,MUL1IJ Were "i \.111IrU\.L UU ePle ULth possibilities of setting up a privately owned industrial bank or corporation\. As interest and support for the proposal was widespread, a Steering Com- mittee of five prominent Indian businessmen was set up to promote it\. In January, 1955, a corporation was registered under the name of The Industrial Credit and Investment Corporation of India Ltd\. (ICICI)\. The Bank made a loan to the Corporation on March 14, 1955\. 10\. In June, 1952, the Bombay Government agreed to grant a license to the Tata group of power companies to build a thermal power plant near Bombay\. In February, 1953, a loan application from Tatas was made through the Govern- ment of India to finance a two unit plant, each with a capacity of 50,000 kw\. Discussions with the Bank reached an advanced stage when the Bombay Govern- ment decided to license the installation of only one unit\. This decision was apparently taken in view of the plans for a large hydro-electric plant at Koyna, 140 miles south of Bombay; the Bombay Government was uncertain that more than 50,000 kw would be necessary before power from Koyna became avail- able\. As the Tata's load forecasts indicated that both units would be neces- sary, the Bank was asked to arrange a comprehensive survey of the power needs of the Bombay area and to consider the Koyna project for a loan\. This survey was carried out in February and March, 1954\. The Bank's report showed that not only would two units be needed at Trombay, but also that, to meet the growing demand, it would be necessary for work on the Koyna project to start as soon as possible\. In September, 1954, the Government of Bombay granted a license to Tatas to install the second unit\. Negotiations started in October\. 1954 and resulted in a loan to the Tata groun of rower companies made on November 19, 1954\. 11\. In October and November, 1954 the Vice-President of the Bank and two staff memynbersa virsi4+_A TInA4ia Aiiriir thea rof a ta \.i,r t\.hrougiih Soith and South East Asia\.  Bank-financed locomotive  -4- LQAN OF $34 MILLION FOR RAILWAY\. REHAsI3LITATION A\. The Loan 12, An amount of $1\.2 million of this loan was cancelled in May, 1950\. The balance of $32\.8 million has been fully disbursed\. The Bank sold with its guarantee $2,684,255 of the 1952/54 maturities of the loan, which have all since been redeemed\. Up to March 31, 1955 it had also sold without its guarantee $5,614,281 of the 1954/57 maturities, of which p!)3,539,234 were still outstanding\. Total principal repayments by the Borrower to the Bank amounted to $4,498,981 and on maturities sold 44,759,302, making a total of $9,258,283\. Payments of principal, interest and loan charges were made when due\. B\. ProRress of the Project 13\. The Bank's loan was used towards the purchase from the USA and Canada of 418 locomotives, 26 boilers and spare parts which were distributed among the mix group svstems eomprisino the Tndinn Railwava 14; The Indinn Railwavs are implementing a rehabilitation program, which forms part of India's Five-Year Plan (1951/52 - 1955/56)\. Considerable pro- gress has been made with this program\. It calls f'or the prchase dulring the Plan period of 1,797 locomotives - 607 from India and 1,190 from abroad - aLLy\. l\. 5,7 wa - Js =J 3717 from TL A-\. '-d lil,\. L\.fr abroad\. For this stock, orders either have been placed or are expected to be placed before the end of the Five-Year Plan period\. Dr inLg the f1'rst fou- years of utLi Plan, 954 locomotives and 41,402 wagons were delivered\. 15\. It was to be expected that the rate of deliveries would increase year by year throughout the Plan period and it seems likely that by the end of the period the Railways will have achieved substantially the targets set them\. However, since industrial and agricultural production has progressed faster than the railway rehabilitation program, difficulties have been experienced in moving all tne traffic offered\. As nas been indicated, the prime cause for this has been the slow rate of replacement of rolling stock; in ad- dition, the existing limitations of track have aggravated this situation\. However, there has been some improvement as is evidenced by the removal of various restrictions\. Further improvement can be expected as the rehabili- tation program gathers momentum\. 16\. The financial state of the Railway shows that there has been a steady growth in gross traffic receipts over the past five years (disregarding an unusual situation iii 1951/52, the year of the Korean boom and of heavy food imports requiring movement by rail)\. The Railways expect that gross traffic  -5- receipts will continue to rise as industrial production increases and that operating ratios will imnrove\.- The followine table gives the npertinent fin- ancial figures over a five year period:' In Million Rupees Revised Budget Actual Actual Actual Estimate Estimate 1951/52~~~J 1553 93/4 7194/5 19,,/56 Gross Trasfic Receiptvs -9u8 2 27u5\.6 2742\.9 2828\.0 2925\.0 Ordinary Working Expenses 194U\.4 1679\.6 ZU14\./7 U2\.6b Ub6)\.9 Net Revenue 617\.5 471\.8 369\.2 415\.3 432\.1 Operating Ratio 77\.0% 80\.6% 84\.4% 82\.4% 82r7% Ratio of Net Revenue to Capital 7\.3% 5\.5% 4\.2% 4\.6% 4\.5% at Charge 17\. The 1955/56 budget estimates incorporate changes covered by the revised five-year financial convention agreed at the end of 1954\. The major changes are that (a) the Railways will pay a dividend on capital-at-charge at 4% annually subject to the following: (i) on the element of overcapitalization that has crept in due to the haphosard growth of the capital structure of the Railways, railway revenues will pay interest at the rate charged to commercial departments; and (ii) a moratorium will be granted in respect of the dividend payable on the capital invested on new lines during the construction period and up to the end of the fifth year of their being opened for traffic\. (b) The annual contribution to the Depreniation Reserve Fund would be increased from Rs\. 300 million to Rs\. 350 million\. C\. Effects of the Loan 18\. Although the effects of the Bank loan cannot be measured precisely, there is no doubt tit the locomotives ,A,4ch it \.'cwasdceh a majo- contribution ^ the continued improvement of railway operations\. Freight Ul_ \.Ar - =szI - -\.: _ A A J clined compared with the previous year, but the percentage of wagon miles loaded increased, suggesting an intensificuaion of eqquiLpmenrt use\. This has been achieved by the application of new methods such as the rationalization of transhipment at junctions and the introduction of express goods trains\.  1952/S3 1535 Total train miles 179\.8 m\. 182\.4 m\. Wagon miles - total 2962\.8 m\. 2960\.6 m, Wagon miles - loaded 2091\.7 mn, (70\.6%)2106\.6 m\. (71\.2%) Total car loadings 7\.019\.667 6\.802\.083 Broad gauge 4,393,815 4,279,909 Meter gauge 2,625,852 2,522,174 PART II LOAN OF $10 KMLLION FOR AGRICULTURAL MACHINERY PROJECT A\. The Loan 19\. The amount of this loan has been reduced by $1,500,000 on July 27, 1951d~ * h>, SJ\. '#OOt '\.J Or4 tAw V 25 * 195 vd *JJ \.J\.*\. 8 0:: \.t I V Ja a,40r 1J \. 1ZL \.Q The balance of $7,203,813 has been fully disbursed\. The Bank sold with its guar-- tee d,9500 of nrr -t,hei ir 1,/54 matur'tie -of j6u- loan,- w\.uh _,e '1 -i O4LAV 4-,5I7J,U'\.JVV V4\. L\.L1V \.L7Jr4\./1+ LUIrAIU \.Lt7 04\. bOLALt 4\.VL4UW WlLLU11 LJL\.Vt M-L\.L been paid off\. As of March 31, 1955 it had also sold without its guarantee _74;Ipo-l\. o ULI -L714 anaU J\.1956 ma1uTrliJ\.5es, 01 Wni3Ch $1wu9\.L)U01 01 Tine '1)0 maturities were still outstanding, Total principal repayments by the Bor- rower to the Bank amounT-ed to $966,000 and on maturit3ies sola $3,875,000 making a total of $4,841,000\. Payments of principal, interest and loan charges were made wnen due\. B\. Progress of the Project 20\. In the initial years of the project the Bank was mainly interested in the mechanical aspects of the project and in the ability of the Central Trac- tor Organization (CTO) to do the task of clearing the revised target of 1\.6 million acres envisaged for the seven-year program\. For this purpose a Bank engineer visited the project three times, once in 1952 and twice in 1953, to look into such matters as the operational planning, the maintenance of trac- tors and the adequacy of spare parts\. Towards the end of 1954 it was clear that the operational efficiency of the CTO had greatly improved and that most of the problems which had been impeding the progress of the project in the earlier years had been solved\. It was also clear that in the remaining years of the project more attention ought to be paid to other aspects of the proj- ect, such as the extent to which crop vields have increased, the possibilities of checking erosion, etc\. In August, 1954 the Bank suggested the sending of a mission to make an a sRosment sf the tronipett with a slAw to helping thA Government in assessing the value of the project to India\.  _ z n_xs_r1rdr_s w\.a -_Ns\._n _ w :E\.r\. v_v:~~~~~~~~~~~~~ h: ~-~\. Kans Grass before reclamation  - 7 - 21\. The Mission visited the project in November, 1954 and concluded (a) that the project was technically and financially sound and will substantially reach its objectives; (b) that the tractor fleet of 280 medium ad heavy tractors (all except 12 were financed by the Bank loan) was in good sound mechanical condition and maintenance of equipment was efficient; (c) that deep plovwing, when done at the correct time, -was an ef- fective means of destroying kans grass; (d) that CTM had provided a first-class piece of land reclamation but to obtain -full benefits it would have to be followed by improved farming metlhods\. These will also be necessary to combat soil erosion which presents an urgent problem! (e) that additional agricultural statistics were needed for a full appraisal of the effects of reclamation\. C\. Effects of the Loan 22\. The effects of the loan cannot be accurately stated because of the in- ardleuacy of stat+istic;i hibu+\. actcoring to theA 'Isio-,n" the folloinna hnnPfitsQ will be derived: (a) new farms created out of wilderness and some 5,000 families (b)- ni\.inl r gross incom\.es from old farmn incre-sed about Rs\. 50 illion; (c) a net cumulative increase in foodgrain production of the order" of 'rYmnn rnna to Jry +1p '\.A o'f +Ihe 7--year an J' After the project is completed the reclaimed land will yield nu 11JUs\.y d dt\.UVio\.l 260, JJJ tonsl oI foodgrains; (d) valuable skilled personnel trained in large scale land recla- matioVnI V-l-LYrk\.  75~~~~~~~~~ N~~~~~~~~~~~~~~~~~~~~ Boikar Tht rmni PlAnt  PART III LOAN OF $18,5 MILLION FOR BOKARO-KONAR PROJECTS A\. The Loan 23\. The amount of this loan was reduced by $690,000 on February 25, 1955\. On March 31, 1955 the undisbursed amount of the loan amounted to $1l,791,184\. The Bank had sold without its guarantee $1,105,000 out of the 1955/57 matLirities of the loan and these were still outstanding\. Payments of interest and loan charges were made when due\. B\. Progress of the Project 24\. Bokaro Thermal Plant - The Bokaro plant has been completed\. The first of the three 50,000 kwh units was ready to go into service on February 22, 1953, the second on August 7, and the third on October 22, 1953\. Although the total capacity of 150,000 kw is nowr available, the maximum load on the station had reached about 44\.,500 by March, 1955\. The load has grown slowly partly because of the late delivery of substation transformers and switchgear and partly because major consumers were not ready to take power when it be- came available\. 25\. Coal Handling - The aerial ropeway, running between the DVC leased mine at Bermo and the Bokaro power plant, is in operation and has replaced rail transzortation, DVC has had the services of an expert to study whether it would be more economical to continue mining manually or switch to machinerv\. The auestion of mechanized mining is being kept in abeyance for the time being and it will be taken up as soon as it is definitely known whether a National Coal Washerv, from which the entire coal reauirements of Bokaro could be obtained, will be established\. 26\. Konar Dam - The main part of the Konar Dam has been completed\. The Crest and sliit-e gates shomld be in-stalled hv the middle of 19q5\. The rate of progress in constructing the dam has been sufficient to meet the cooling water reniirements of the Bokaro plant\. 27\. Transmission Systen - Constrncetion of the transmission lines and sib - stations is behind schedule\. The DVC has stated that the delivery of some +\.rans\.:miqon +towrs bhing manufanc+trPed in Tnrlia ha\.s bhenn vrpyr sOlorw The- lines and substations are now about 65% complete\. The 132 k\.v\. transmission Syirf,-+om ishcb4-ngr 6e + +Pn AanA+A rlavr! P n+\.nr d n lmn r A-AA iJa scheduled for completion before the end of 1957\. 28\. Cost Estimates - The total cost estimates in November, 1954 for Bokaro, which Rs\. 308 million had been spent up to the end of March 1955\.  9 29\. Management and Organization - (For convenience, problems of management and organization which are common to both DVC loans are described here\.) All the maior pronects have been Anaineered ho foreign consultina firm<\. The Bokaro plant and the Konar Dam were constructed by foreign and domestic con- tractors; but nowr naior works are for the most p-rt beinr carr±ed out by Dr\.- To strengthen its staff, DVC has obtained through the U\.S\. Technical Assis- + Fl flfltC9 fcu ,,\.nw\.'AUW WaC a,'na\.A Wo ItA 1\., 4\.a\.,,\. \. a VLA%+ =\. A UM%WnI,fh Wa C baW a -W" -\.A n DVC expired in July, 1953 and from that date to April, 1954, temporary ap- pointUments were made\.ThLL's LrsU\.tLUdU ±UUV\.LIJ-L\.L LLL UnU1 UMeli iLn UPti-LULL efficiency, as many important problems were deferred for consideration by the 1- N\. \.L \. Ml 1 1\. L\.- -13 \. A\.L\. -- \.J ---' nLew b\.oard or, 'tL's appointment\. IL1W DamL hiasL reeoxU1MUMaU UWEo orgUa"ZeLUJ\.0Ioal changes\. First, the DVC should obtain the services of a Chief Construction Engilneer w±lth experienee of heavy earth moving and concreting equI-ent on large-scale projects who can assist, and in due course be capable of replacing, the present Chief Engineer\. Second, steps should now be taken by vvC to separate the responsibilities of construction of projects from the responsi- bilities of operating the expanding DVC power system\. The DVC has accepted in principle that it is desirable to make this second change, but claims that as long as construction and operation are both in progress simultaneously, it Is not easy to have two entirely separate Departments\. Both matters are being taken up by the Bank with the DVC\. C\. Effects of the Loan 30\. Power from the DVC system first became available to industries in 1950 when surplus power from the Sindri Fertilizer Factory was purchased and dis- tributed by DVC\. Today there are contracts for the sale of power by DVC, mainly from the Bokaro plant, for about 113,200 kw with additional firm com- mitments of 131,500 kw and notified requests of 112,900 kw\. The system is now serving a large number of small towns in Bihar and West Bengal\. It also serves the Tata Iron and Steel Co\., Ltd\., the Indian Iron and Steel Co\., Ltd\., the ChitaranJan Locomotive Works, and other factories in the area\. Power is being sold at 0\.7 annas per kwh (less than 1 US cent)\. The Bank has observed that many small new industries have sprung un in recent vears in the DFmodar Valley, and several expansion schemes of existing industries have been started\. The availability of nlentiful and chean power relative to the rest of India has undoubtedly been one of the reasons for this growth\. 31\. The DVC has set a high standard for housing and welfare, not only for the many thori usandsf wo rr -s + h y\.-4e v\. -n4a=^+a ht\.+ ao Cn ^ -P +,\.^aa persons displaced as a result of the creation of reservoirs\. PART IV LOAN OF $31\.5 MlLLION FOR EXPANSION OF IRON i fe c$Tf'T M^n -TT'rfl%M T AnAl-elm V I / le 1I 6 1EL 32\. The fo-urth Bank loan for a project in India was made on December 18, 1952 to the Indian Iron and Steel Company, Limited, (IISCO) for an expansion Additional data may be found in the following report previously cir- culated to the Executive Directors: P-43, President's Report and Recommendations, December 11, 1952\.  - 10 - of its plant\. The plant was previously owned by two companies - The Indian Iron &nAd Steel CmpayM&& LJt4edv nAT S+eel S G-orpra+ionr\. o r (SGOB), which were physically integrated but were financially and legally separate -A\.t\. T m\. J eL Jrge\.r J\.L U0u4 t\. % j9cmrLe wa\.8 sffcte b,yA a\.J C& ver\.-er\. o nance issued in October, 1952, which was subsequently replaced by an Act of arliaer,t01 of Dnecembuuer 29,7J 192 TheW meurger acutoua\.L '1,- 'oL paew or\.L Decembe,UU 31, 1952\. 33\. In addition to the Government guarantee the loan is secured by a \.first fixed mortgage on the Borrower's immovable property and by a first floating charge l/ on tke remainder of its assets; this security is constituted by a Trust Deed with Baring Brothers & Co\., Ltd\., of London as Trustees\. The rate of interest on the loan is 4-3/4%, including the 1% statutory commission\. Equal semi-annual payments of principal and interest are due to begin on April 15, 1959 and will retire the loan by maturity on October 15, 1967\. The loan became effective on October 29, 1954\. On March 31, 1955 no disbursements had been made\. B\. The Project 34\. The loan was made to increase the company's blast furnace capacity from 640,000 tons to 1,400,000 tons of iron a year, and its finished steel capacity from 350,000 tons to 700,000 tons a year\. 34a\. The program included the expansion of the facilities at Burnpur, the modernization of IISCO's iron plant at Kulti, a few miles from Burnpur, and the expansion and mechanization of IISCO's operations at its iron mines at Gua\. At Burnpur twro new batteries of 78 coke ovens each will be installed and an obsolete 40-oven battery will be removed; two new blast furnaces, each with a daily outDut of 1200 tons of iron, wvill be installed\. Steel making facilities will be increased by the addition of a third 25-ton Besseraer converter and a new duplex melting shop with two 240-ton tilting furnaces\. The finishing departrients in the rolling mills will be extanded for the additional tonnage\. As there has been a change in the foundry iron supply situation in recent months, the auestion of wvhether to modernize the Kulti blast funaces is being reexamined\. C\. Progress of the Project 35\. A number of factors delayed the declaration of effectiveness of the loan\. The execution of the Trust Deed took longer than expected becausd of certain legal problems\. Then the decision of the Government on steel reten- tion Drices based on recommendations of the Tariff Commission was not knotn until Mlarch, 1954\. This factor made the company reluctant to proceed with its exnansion orogram or accent tenders for eauipment\. In theameantime- there were serious labor difficulties at the works caused by a split of labor into two rival grouns with certain trade unions with a rninoritv following attemot- ing to secure control of labor\. Matters got progressively wNorse until 1/ This mortgage and charge rank nari passU in point of security with a mortgage and chnrge prevrosimi1 ncinstijtaed hy- a Trust nDeri in 1Q937\. The holders of the debentures under the 1937 Trust Deed have the option to be repaid at nnr on December 31, 1961= To +he extent t6 wMhich they rail to exercise this option, the Borrower, under the provisions of the Loan Agree- ment, ,must accele-ate amortization of t-he loan to +the Bank\.  - 11 - August 24, 1953 when the Company was compelled to declare a lock-out in face of the threat of a general strike\. The lock-out continued until September 18, 1953 after which production gradually reverted to normal\. 36\. In view of the delays, the company asked for an extension of the closing date of the loan and for a postponement in the start of amortization\. The reasons for this were (i) that the Borrower felt it would be impossible in view of the delay in beginning the project to complete it by the date stipulated in the Loan Agreement; (ii) that considerable loss of production during 1953 owing to the labor difficulties and the delav in starting the project made the Borrower doubtful whether it could make repayments as scheduled in the Loan Agreement\. The Government of India sunnorted the Borrowerts request, and it was finally agreed that the loan should be de- clared effective as soon as pnssible and that thereafter the Bank should ex- amine the position\. In December, 1954 the Company informed the Bank that some time woul' elrl b1nore 1, i * %ntrmatAn e' ud be mana avail4Mhleq to justifv a postponement of the schedule of repayments, and it wished to defer any al,proach to the Bank or\. the mat+er ut+il +h\. \.re,visA p4ir\.c4plea foer fiv4i steel retention prices after March 31, 1955 were decided by the Government\. 37\. Only minor preliminary works were begun before the effective date\. By thUe erA of u ,acup 95 orduers amontring lo about °\. ilon°oekevns U4L1~ iLAA \.L 11\.±b L, 7\.L7j) uJ V JIUI~4~~ ~ULJ tq Wu 4 III L\.I\.- L \.- L UJ \.Jl J~ blast furnaces and equipment, and the boiler plant had been placed\. nMATm Tr r-\.tixuL 'UOAN OFF 19\.5 MeILLION FOR EtLEC-1lt~IN P0'WMA DUM'E-LOP PEJ 1N FLOOD CONrROL AND IRRIGATION 1/ A\. The Loan 38\. The fifth Bank loan of $19\.5 iilLon was zade on January 23, 1953 to the Government of India for further electric power de- velopment, flood control and irrigation in the Damodar Valley\. The amount of the loan was reduced to $10\.5 million on February 4, 1954 at the request of the Borrower\. The loan became effective on March 22, 1954\. It carries an interest rate of 4-7/8%, including the 1% statutory commission\. Equal semi-annual payments of principal and interest are due to begin on July 15, 1956 and will retire the loan on July 15, 1977\. On March 31, 1955 disburse- ments under the loan amounted to $89,686\. B\. The Project 39\. Part of the first phase of the unified scheme for the development of the Damodar Valley consisting of the Bokaro thermal plant, the Konar storage l/ Addditional data may be found in the following reports previously cir- culated to the Exeeutive Direntors: P-L5\. President's Renort and Recommendations, January 6, 1953; TO 2(b), Report on Projects sub- mitted hy the Tndian anvernment for a Second Loan in Connection with the DVC, January 16, 1953\.  I_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I Concreting plant at Maithon Dam  = 12 = dam and transmission system, is now virtually complete (see Part III of this report)\. This iurther loan f-in*ane-es- bhe remainder of Ll fst phase, covers two multi-purpose dams, each with a hydro-electric plant, at Maithon (kw 60,000) and Panchet Hill (kw 4u00Uw)1j, and a diversion barrage on the Damodar river at Durgapur with a system of irrigation canals\. C\. Progress of the ProJect 40\. In the original list of goods agreed upon when the loan was signed, an amount of approximately $9 million represented the value of purcnases which were to have been paid for in sterling\. On February 4, 1954 the Govern- ment of India decided to cancel $9 million of the loan\. 41\. The loan was not declared effective until March 22, 1954 owing to delay in issuing the necessary notification authorizing DVC to operate in an area outside the Valley in respect of irrigation, and because of problems in connection with the legal opinion\. 42\. The Maithon Project, while behind schedule, is now progressing satis- factorily and is due to be completed in the middle of 1957\. Shortage of spare parts for construction equipment and inexperienced repair work has been primarily responsible for the slow progress\. Frequent labor strikes have also contributed to the slow progress\. 43\. The Panchet Hill Prolect is now progressing practicallv on schedule but the completion of the project may be delayed because the date of transfer of the construction eouinment to come from Maithon mav be later than esti- mated\. 44\. The Durgapur Barrage is progressing on schedule and should be com- nle+tA hd r +\.hb m4Srllv nf' lqziri 'Th r, g nnl -urEom mhmrld bh finallyr comnletedA in 1958\. The DVC and the Government of West Bengal are negntiating about +he es+ablis4alnmenvt4- ofrn+ni *t+er a vdA +1t,h proced iirato 4ue in +v4 htiii\.4nC water\. 45\. The total cost estimates in November, 1954 for Maithon, Panchet Hill a n(\., D ugapur4 _1arrg And irrisin cana"Ls are 'a lnt m411- drY7 of which Rs\. 256 million had been spent up to the end of March 1955\. 46\. The DVC, up to March 31, 1955, had used the loan only to the extent of $89,686, and has met expenditur s fUr bhe -proJect from direc-tU allocations from the Government\. According to DVC, difficulties in obtaining proofs of payment from local agents for imported equipment are the reasons for the de- lay in using the loan\. The Bank has made representations on the'matter to the Government wnich has promised to take appropriate action\. It is expected that drawings on the Loan will begin shortly\. 1/ The DVC is considering the simultaneous installation of a second k\.w\. 40,000 unit at Panchet Hill\.  - 13 - PART VI LOAN OF $16\.2 MILLION FOR ELECTRIC POWER DEVELOPMENT / A\. The Loan 47\. The sixth Bank loan ot 4l6\.2 mtillionr was made on November 19, 1954 to The Tata Hydro-Electric Power Supply Company, Ltd\., The Andhra Valley Power Supply Company, Ltd\., and The Tata Power Company, Ltd\., who are jointly and severally liable\. The loan is guaranteed by the Government of India\. It is secured by a first mortgage and first floating charge in respect of the properties included in the project\. This security is constituted by a Trust Deed with Baring Brothers & Co\., Ltd\., of London as Trustees\. It carries an interest rate of 4-3/4% including the 1% com- mission\. Equal semi-annual payments of principal and interest are due to begin on October 15, 1958 and will retire the loan on October 15, 1974\. The National City Bank of New York is participating in the loan to the extent ef $1\.36L4O00\. representing the first four maturities\. The loan has not vet become effective\. B\. The Project 48\. The loan will be used for the purchase of imported material and equip- ment, an\.d for serviees needed for th eontrutn of: a thermal statin wthr an installed maximum capacity of 125,000 kw located at Trombay in Bombay har- bouri; condenser cooling waer I 14pipe LewoIrk a+ Ty\.ron'ar\. a asubsa+io+4n a +hea Trombay plant; an overhead transmission line connecting the Trombay substation to +he exis+ng hi,h +eone4^r 14li\.s p\. +he Borrowers; an --o--a+-t -1lr\.y a receiving station to be located at Carnac Bridge in Bombay; and overhead trans\.- mission 4 4- d ,der\.gr\.oUA tr\.a\.ssior, cab be4we\. 4\.he ther station and the Carnac Bridge receiving station\. As a result of international biddinug, it is estimiateu thaLtu mosu of tUh iuporuu equi-pMLLe will come frou Germany ($6\.2 million), USA ($7 million), and UK ($2\.9 million)\. An amount 01 wQ\.L m\.i±\.L\.U1 Ls \.LUc\.LUUedU \.illtu iHE amo-u Unt o Lfd t lan for interest anU oji-r charges\. Disbursements will be made for expenditures on the project after January i, 1954\. C\. Progress of the Project 49-\. Contracts for tne boilers and turbines nave already been let to two German firms, and orders for a major portion of the remaining equipment have also been placed\. work rirst started on tne project in September, 1953 and is on schedule\. The first unit of Trombay should be ready for operation in October, 1956, and the second in April, 1957\. The construction of the project is being supervised by EBASCO Services, Inc\. who maintain a staff of engineers at the site\. Additional data may be found in the following report previously cir- culated to the Executive Directors: P-77, Presidentts Report and Recommenda- tions, December 10, 1954\.  PART VII LOAN OF $0lo\.o MILLION FOR IIDUSTRIAL CREDIT AliD INVESTuDEiT i A\. The Loan 50\. On March _4 1955\. the Bank aereed to lend the eauivalent in various currencies of $10 million to the Industrial Credit and Investaent Corporation of India Limited (ITIGI)\. ThA lnan is miarantned A riv the (Inrvnmmnt of TnAia- It carries an interest rate of 4-5/8% including the 1% commission\. Interest i8 payable hal\.-\.-yearyt on 1st Janutiny aned 1st Jnlt7r n eac yeray- The -na is repayable according to an amortization schedule, the first payment being di- le on is c +\. \.T_ n 1 o r n -flAA d P:-- _ A _ A 4- o_ 1-A4- T-1- 'In4noJ MU- -11 -- A - J \. \. - - ' JL\.vLAAO\. UcV s *u w u -LO 7 v UJ\.Y i\.'J7\. JA\.L ' ui L : not yet effective\. B\. The Project 51\. The purpose of the ICICI is to provide finance to private industrial en terprises vr TvdA;_ + ,_ rnA -^- m-+ -h_ - " * +A capital in such enterprises, to encourage the expansion of investment markets --A to- ass, S 4 priYt enterpris -\.--i:n z,ger-al C t c-\. ', d O\.LL'% L\. ; U LO jL \.V~\. LI 11 u'J -" L i~ JLJ "IL4 LLCIdL1~J 4\.L6J\. LU l4iU Ld\.L C" LI administrative advice\. 52\. 'The initial paid-up share capital of the ICICI is Rs\. 50 million ($10\.5 been subscribed as follows: Millions Rs\. By private placement: a) in ildia 20 b) In U\.K\. 10 c) In u\.S\.A\. > By public issue in India 15 Total 50 The public issixe was made in February, 1955 and was oversubscribed\. Support was widespread; out of the total oI- nearly 2,000 applications a hign proportion was for small amounts\. 53\. The Bankts loan of $10 million will be used for the purchase of a portion of the imported material and equipment, and for services, needed for the carryi3ng out of projects financed by the ICICI\. 54\. The Government entered into an agreement with the ICICI to make, out of the counterpart funds generated by U\.S\. aid grants, a 30-year interest- free advannce of Rs\. 75 million\. The advance will be repayable in fifteen equal annual installments beginning in the sixteenth year\. The advance was paid by the GoverrLment to ICICI on Ma\.rch 10\. / Additional data may be found in the following report previously cir- culated to the Executive Directors: P-77, President's Report and Recommenda- tions, December 10, 1954\.  - 15 - 55\. The ICICI established its head office in Bombay and opened for business on March 1, 1955\. Mr\. P\.S\. Beale, who resigned as Chief Cashier of the Bank of England, was appointed as General Manager\. PART VIII POLITICAL CONDITIONS q6\. A new President of the Congress Party, Mr\. U\.N\. Dhebar, formerly Chief Minister of Saurashtra, was elected on December 10, 1954\. Prime Mini\.s±tr Wehri- who previmously had fhii; nneot\. relinquished it hAevrnne he felt that his other responsibilities left too little time to devote himself to nartv mAttsrR\. The Gonress Part+V still dominnates through suneritor organi- zation but party membership has declined\. Although there is no well organized onnmoitionn the mwmmiini-t Partv emergred frnom the t,enernl eAe-tHnnr, in 1952 as the second largest\. Since then, the Communist Party has made electoral aains in Sta+;e elections, ner'e,nn1 in Tr\.ntnra- thin- Mnrl-rae Pepsu andi West Bengal, but it suffered a notable reverse in the Andhra elections in Februhary, 1Q9 where 1),ji remmlvnist candidateQ wnere defeAr+ anA wnn Anlv 15 seats in the State Assembly of 196 seats\. 57\. The Congress Party believes that the best method of attaining the ob- 4octni4rr, sae+ ou in +-'ha T4- cr-+A-i Plrinciples of +he !nrt+A+ni+-i,-rn -\.nmen1r +\.he abolition of poverty, the raising of living standards, and the promotion of eqvit 4 n 4,r arious we+4rvi rs of +h \.e pp'+4 \.,r is to- oAropt the4 idal of a Welfare State and to work for a socialistic pattern of society\. The prac- V\.S\. LJ ,VV1CL U L\.L% Uvp VjJs\. U4J6VW 4 \. V v &i A\. WI \.L v4 4 s g VU LU- Plan\. The Congress Party's approach to economic problems is still as enunci- ad 4- 4- wh,e T-d-D4n1- Polic P\.esol L4nof148\. TnnL 'r- 4 case of- : u like coal, iron and steel, aircraft manufacture, ship-building, and telecom- mur\.icatior\.s~ ~ ~~~~~LLt eUiUmer an4dc r >e S e stob exclusi-vely respor,sile\.UL for the establishment of new industries, except where it feels that the par- ticipation of privrate entarprise is nedxcL-y in tLe public interest; in tUe event that some private participation is necessary it will be subject to control and regulation by the Central Government\. 78\. A bill for an amendment, of Article 31 and 31A of uhe zAtubiOn covering the right to property is now being discussed by both Houses of Farliament\. Tne purpose of the amendment is to make it quite clear that in certain important fields any action taken under a law for the acquisition of property would not be justiciable\. It would mean, for example, that Parliament and the State Legislatures would be the supreme authorities to determine the quantum of compensation in the event of acquisition by the State\. The amendment would affect any impending legislation, such as contemplated reforms in company law to provide for tne progressive elimination of tne managing agency system, or laws providing for temporary management by the State of an undertaking in the public interest or in order to secure better management\. 599 Externally India maintains a policy of "non-alignment"\. Although there has been some improvement in relations with Pakistan several major issues such as the Kashmir dispute, the sharing of the Indus Basin waters,  - 16 - anA the dipoi+o Of S %rotAaem t \.se+tled\. T tJJ o+her countries with which India has difficulties are Portugal and South Africa, \.44, ~ 44\.-\.4 - f 45\.,\.-\.4 4\. T\.A - - A 4 A\.A- 4\.- 4-1- thIe f\.8\.L OU \.JVVI A VJ 4JLAro99 e -FOS LLJsion\.s iL n IrndiJ\., OCLJAA tiLJe OQ\.VU(rAU due UV 1J;e rqcial policies of the Union Government\. The disposition of all the French se 4 I_T4 \._ _ __ _ ^nJ L_ n_%1_ = _ _ ] - n __-= A 4 ova:lements -t- "a 1has XA\.ut:een --"UtLU\.Ly DOUU\.t:Uq L17 _LW5U (;UU LCU-geV;:s, _U11u_L- cherry, being formally handed over to India early in 1954\. PART IX ECONOMIC AND FINANCIAL SITUATION 2/ 60, Since the first Five-Year Plan went into operation in 1951/52, there has been a remarkable expansion in India's economy, and this expansion has been achieved against a background of economic and monetary stability\. Agri- cultural and industrial production have increased, food controls have been practically abolished, and wholesale prices have come down\. Continued un- employment is, however, a cause for concern\. 61\. Production of foodgrains increased nearly 20% between 1949/50 and 1954/55 to about 64 million tons\. Nearly half the improvement was due to favorable monsoons, the balance being due to basic improvements, such as the addition of seven million acres of newly irrigated land and better farming methods\. 62\. The index for industrial production (1946 = 100) rose steadily from 117 in 1951 to 142 in 1954\. Major advances have been recorded since 1951 with items such as cotton textiles, ammonium sulphate, cement, steel, diesel enines\. bicycles, sewing machines, hurricane lanterns, paper, sulphuric acid, ard super-phosphates\. The output of mill-made cotton cloth at 5\.0 billion vards in 195L actuallv exeeeded the Five-Year Plan target of L\.7 billion yards by 1956\. 63\. The improvement in domestic production resulted in a balance of pay- ments surilusl 4n 1952/53 and in 1Q95//\.o officia1 fpreigm\.-chnnaP_ hrolding increased by Rs\. 150 and by Rs\. 320 million during these two years respec- +ATelv- The main faot+v,r wjas a Arops in imnev\.r+_ of' foodmMarinn- raw cotton and raw Jute\. At the same time, there was a relatively smaller drop in export pro b In 15 5i imports of steel, vehicles and fertilizers were partly offset by the higher value of tea ex-orts\. But the foreitln\. ex\.chasn\.ge h\.o_1dJi\.aS of th\.e Re-serve- B&-nk telby Rs\. 230 million, mainly because of a further repayment of the dollar equiv- \.le,4\. of4' RD\. 1172 411i4o- +- +h,\. Te A +\.Aa ai",-uii *4+h +het A-la" areg has been maintained since the end of 1952\. l/ For further information see Report No\. AS-26b, "Current Economic rositlon and Pros5pectS of India, dUatedU Novemetr 9,p 154\.  - 17 - 64\. The revised budget estimate for 1954/55 indicated an overall deficit of Rs\. 2,078 million to be met by the issue of Treasury bills, This esti- mate provided for a large increase in capital expenditure and in loans and advance to the States\. The actual deficit, however, is likely to be smaller anrL as in nrevious vears- exnonses shouild be lower than budget aDoroDri- 7 __ _ _ a - - -y __ __ --- --- , , - , - I ations\. The budget for 1955/56 provides for an overall deficit of Rs\. 3,180 million to he met again by the issue of Treasury bills\. 65\. The deflationary policy of the Governrnent in the early years of the Plan is reflected in the decline in money supply\. IWTith the Plan getting into full swu\.ing during the last two vearsj money supnlv has been rising moderately since the end of 1953, but is still below the pre-Jorean level\. The wholesale nrirce incide- (i14R = 100) strond at 95( in Mareh; 1955; having' fallen from a peak of 120 in 1951\. Apart from external factors, the steady increase in 'hietAr5 rypl+p\.r +\.1the eiisinf'1Atonqrv ponlicv foilIvind hewgPen 19 m and 1953 have been the cause of this fall in prices\. The cost-of-living in- dex remained relatively stwble from 1951 to 1953 and showed a smallecline in 1954\. The recent fall in agricultural prices has been attributed mainly to ai^er-4 \.proA 4\. A4 t P: %_4r, the vztn el-m1r- ~LI\.o_ D U ULAUR, 11LU, CLk'A V~ A\.~l~ nation of controls over foodgrains\. 66r The target for expenditure in the public sector in the Five-Year Plan (191/6)is nWo- Rs\. '22,9 millio (4 7 million)\. 7rO\.e i-,A rp lre sus are d\.l\.( ~Jj \. ~ ~ 'L3 J\.1'd UJ\.J\.J4L'J&& I¶,L44, I-C\.'\. LU&J\.L\. L /*\.~L ~ L J\.i~S~ ~~ being spent on Transport and Communications (23%), Agriculture and Community Development (18-") t-14 Services (- -arAd TA \. ,-,+,A (-), nd A ' ti- Purpose Schemes (12%)\. To achieve the expenditure targets for the Five-Year AnLC1, it DVWilL Ube n=ecssary w DPC;IU AbUU Rs\. v \.f UUL_ X U1±-X Wi; L\."ULI * \. 67\. e ~ ±L~ Ap uuni t er e ru±ela-ases o\. i s eWr\.rig balanices ai IB±n loans, rInuia nias utilized during the first four years of the Plan nearly Rs\. 1\.*5 billion ($315 million) in foreign aid, a large part of wnich was a $190 million ioan from the U\.S\.A\. to cover foodgrain shortages in 1951 and 1952\. Additional aid has been given by the United States under the Technical Cooperation Pro- gram, and by Canada, Australia and New Zealand under the aegis of the Colombo Plan\. 68\. The second Five-lear r-ar is being considered by the Government\. It is expected that more emphasis will be given to industry, particularly such heavy industries as steel and chemical fertilizers\. At the same time, the Planning Commission is seeking means to incorporate some labor intensive projects to reduce urban unemployment\.  OA I)u\.- \ " < B I H A R B E N G A L N~~~~~~~~~~~~~~IDH AJAY ODARMA BAPiH-ARRI \.E\. 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APPROVAL

P086629

Page 1 Integrated Safeguards Data Sheet (ISDS) Section I – Basic Information Date ISDS Prepared/Updated: February 17, 2005 Report No\.:31755 A\. Basic Project Data A\.1\. Project Statistics Country: China Project ID: P086629 Project: CN - Heilongjiang Dairy Project TTL: Mohamed N\. Benali Total project cost (by component): Dairy Production Development : US$143\.9 million Breed Improvement : US$7\.3 million Climate Change Mitigation : US$9\.1 million Project Management and Implementation : US$0\.9 million Appraisal Date: March 11, 2005 Loan/Credit amount($m): IBRD: 100 Board Date: June 28, 2005 Other financing amounts by source: Borrower :US$19\.9 million Italy: Dev\. Coop\. Dept\. :US$5\.5 million Private Sector Sub-Borrowers :US$22\.0 million Local Farmers/Beneficiaries :US$29\.3 million ($m\.) Managing Unit: EASRD Sector: Animal production (75%);Agricultural extension and research (15%);Crops (10%) Lending Instruments: Specific Investment Loan Is this project processed under OP 8\.50 (Emergency recovery? Yes? [ ] No? [X ] Environmental Category: B A\.2\. Project Objectives: The first objective of the project would be to increase the income of existing and new dairy households in selected areas of Heilongjiang province\. Progress towards the achievement of this objective would be measured by monitoring increases in the productivity of the dairy farmers’ cattle and adoption of the system (DHI) to improve the genetic potential and management of the Heilongjiang dairy herd\. The second objective would be to demonstrate innovative technologies to reduce greenhouse gas (GHG) emissions and increase carbon sequestration\. This would contribute to the global objective of improving the sustainability and impact of livestock production on the local and global environments\. Progress towards the attainment of this outcome would be measured by monitoring the manner with which animal manure and crop residues are stored and treated and the area of improved permanent pastures ( carbon sequestration)\. A\.3\. Project Description : Page 2 The proposed project would have four components: (i) dairy production, (ii) breed improvement, (iii) climate change mitigation and (iv) project management, monitoring and evaluation\. (i) Component 1: Dairy production development (Estimated cost: US$143\.9 million)\. The purpose of this component is to increase smallholder dairy production in the project area through investments in improved on-farm dairy production and management, the construction of milking stations, dairy parks, dairy demonstration farms and by building the capacity of provincial and local institutions to provide training to dairy farmers and to facilitate the development of dairy farmers associations\. The component will target over 10,000 existing small and medium size farmers willing and financially able to increase their herd, as well as (generally poorer) new households interested in engaging in dairy production\. This component has six sub-components: Household dairy farms (US$ 53\.8 million) Milking and collection stations (US$ 3\.6 million) Dairy parks (US$ 64\.7 million) Demonstration farms (US$ 18\.0 million) Farmer associations (US$ 0\.3 million) Training and technology transfer (US$ 3\.5 million) (ii) Component 2: Breed improvement (Estimated cost: US$ 7\.3 million)\. The aim of this component is to improve the genetic base of the Heilongjiang dairy stock, the efficiency of milk production and milk quality\. This would be achieved by establishing a comprehensive Dairy Herd Improvement Program (DHIP), including the recording of milk and livestock management data, bull breeding and progeny testing\. By the end of the proposed project, it is anticipated that the Heilongjiang DHIP would cover about 150,000 dairy cows\. (iii) Component 3: Climate change mitigation (Estimated cost: US$ 9\.1 million)\. The aim of this component is to demonstrate and pilot innovative technologies to increase carbon sequestration and mitigate/reduce greenhouse gas emissions resulting from the expansion of livestock production in Heilongjiang\. This would include innovative technologies in (i) pasture improvement for the purpose of increasing fodder production, carbon sequestration and combating desertification; (ii) treatment of crop residues to improve their quality and usage in animal feeding, decrease methane emissions and reduce on-field burning of residues; (iii) treatment of animal manure to reduce methane emissions and convert it into a salable fertilizer; and (iv) assessing climate change experimental technologies through the implementation of research programs\. (iv) Component 4: Project management, monitoring and evaluation (Estimated cost: US$ 0\.9 million)\. The proposed Project will be managed by the existing World Bank provincial project management office (PPMO) within the Heilongjiang Development and Reform Commission (HDRC) and PMOs established at county level\. The PPMO would be responsible for all aspects of project administration, including program management, procurement, financial management, and monitoring and evaluation\. The PPMO would receive policy guidance from a Project Leading Group (PLG), and from a Technical Working Group as regards technical issues and coo rdination\. The Project would also help Page 3 build the capacity of the Heilongjiang Environment Protection Bureau (HEPB) to monitor project environmental impacts\. A\.4\. Project Location and salient physical characteristics relevant to the safeguard analysis: The scope of the proposed HDP includes a project area that covers 120,000 sq\. km with a total population of 20 million people that are supported by 2\.67 million ha of cultivated land\. The Project would encompass about 32 counties that extend from the eastern zone city of Qiqihar, north to Heihe and through to the central zone centered on Harbin city to the western zone areas around the cities of Jiamusi and Mudanjiang\. The project has been designed to emphasize the proportional inclusion of different social groups for balanced social growth, including the poor, women, and minorities (Ref\. Section D-4 of the PAD)\. While the Project counties/villages are known, the specific location of project sites for the demonstration farms, dairy parks and milking stations will be determined progressively during project implementation\. Each of the demonstration farms, dairy parks and milking stations would be the subject of an EIA that would be reviewed, approved and monitored by the Heilongjiang EPA, which is receiving some capacity support under the Project\. B\. Check Environmental Category A [ ], B [X], C [ ], FI [ ] Comments: C\. Safeguard Policies Triggered Yes No Environmental Assessment ( OP / BP / GP 4\.01) [ X] [ ] Natural Habitats ( OP / BP 4\.04) [ ] [X ] Pest Management (OP 4\.09) [ ] [ X] Cultural Property (draft OP 4\.11 - OPN 11\.03 -) [ ] [ X] Involuntary Resettlement ( OP / BP 4\.12) [X ] [ ] Indigenous Peoples ( OD 4\.20 ) [ ] [X ] Forests ( OP / BP 4\.36) [ ] [ X] Safety of Dams ( OP / BP 4\.37) [ ] [ X] Projects in Disputed Areas ( OP / BP / GP 7\.60) * [ ] [ X] Projects on International Waterways ( OP / BP /GP 7\.50) [ ] [ X] Section II – Key Safeguard Issues and Their Management D\. Summary of Key Safeguard Issues \. D\.1\. Describe any safeguard issues and impacts associated with the proposed project\. Identify and describe any potential large scale, significant and/or irreversible impacts\. The HDP is classified as an environmental Category B and a safeguards policy S 2 project in accordance with World Bank environmental assessment procedures\. A draft environmental impact assessment has been prepared\. The document includes a description of the project, a description of possible activities that the project might finance, potential environmental issues for each type of activity the project could finance, * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 4 a description of the guidelines the PPMO and HEPB would follow in evaluating the impacts of each sub-project, a description of the World Bank and PRC safeguards and EIA systems, and sample forms to be used in environmental monitoring\. The document has been reviewed and cleared by the project environment specialist\. The EIA report has been translated into Chinese and made available locally disclosed\. The report has also been discussed with the staff of Heilongjiang Environmental Protection Bureau, whose recommendations have been incorporated in the manual\. The EIA report has been sent to the Bank’s info-shop for disclosure to the public\. The project would not finance any major infrastructure, and sub-projects are unlikely to involve the acquisition of land through eminent domain\. Environmental regulations prohibit the construction of Dairy Parks close to water courses and drainage systems and proposals to either spread effluent on under-fertilized pastureland or compost it to produce bio-fertilizers significantly reduce any environmental threat\. The project will not finance activities that would significantly convert or degrade any protected areas, known natural habitats, or established or proposed critical natural habitats as defined under the policy\. The project area includes four or five minority groups in relatively significant numbers\. None would be specifically disadvantaged by the Project, which has proactively included minority villages in the Project\. The PPMO, in consultation with provincial archeological authorities, ascertained that project activities would not adversely affect sites having archeological, historical, religious or unique cultural values\. Nevertheless, an appropriate clause would be included in all construction contracts regarding the procedures to be followed in the event of chance finds of culturally significant sites\. The project would not directly finance purchases of agro-chemicals, medicines or vaccines, although, farmers are able, of course, to purchase them in the market or through farmer groups\. The use and storage of antibiotics in the project area is managed by the veterinary service and dairy factories test systematically for the presence of antibiotics in milk\. The risk of animal disease is offset by an extensive local disease management program and movement control on all farm animals, which have a unique animal health identity number\. Training would be provided for farmers under the project in appropriate application techniques and timing for fertilizers, pesticides and medicaments, as well as handling of residues\. This would be expected to contribute to reducing the negative impact of increased input use\. D\.2 Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area\. It is hoped that project activities would have an impact on alleviating poverty of project beneficiaries in the selected areas/counties where project activities would be implemented\. This would have the long term impact of improving the livelihood of project beneficiaries and improve economic growth in the project area\. Since all the demonstration farms, dairy parks and milking stations will have specific means (manure pits or composters, effluent treatment, etc\.) to reduce pollution/GHG and increase carbon sequestration, no significant adverse environmental impacts are anticipated\. D\.4\. Describe measures taken by the Borrower to address safeguard issues\. Provide an assessment of borrower capacity to plan and implement the measures described\. Page 5 Involuntary Resettlement (OP 4\.12)\. The PPMO hired a resettlement specialist to investigate land acquisition issues for the project\. His report confirmed the PPMO’s affirmation that the project will not involve any significant involuntary land or productive assets acquisition\. However, in the event that small land parcels are affected by project acquisition or rental, a Resettlement Policy Framework (RPF) for the various project sub- components (see Annex 10 [C] of the PAD) will be implemented and the following guiding principles regarding land acquisition or rental by project components have been agreed upon: i\. All efforts will be made to avoid or minimize the taking of farmland for project use\. ii\. If land is rented for project use, all efforts will be made to avoid renting of farmland\. iii\. If the use or rent of farmland or productive assets is unavoidable, then the PPMO will proceed to compensate for losses according to the guidance of both the World Bank’s OP 4\.12 on Involuntary Resettlement and relevant Chinese laws and regulations, including the People’s Republic of China’s Land Management Law and applicable provincial regulations\. Cultural Property (OP 4\.11)\. Although unlikely, some civil construction works might conceivably affect cultural property sites\. The PPMO, in collaboration with the Provincial Cultural Relics Bureau, thus: i\. Confirmed that there are no sites in the project area (milking stations, dairy parks or demonstration farms) that are under the protection of cultural relics protection units above the county level nor does any project sub-component site affect any historical and cultural sites recognized by any local relics bureaus\. ii\. Explicitly pledged that if any culturally or historically significant finds are encountered during project implementation China’s laws on protection of cultural relics and the World Bank’s OP 4\.11 will be invoked, leading to the immediate cessation of work, followed by an initial survey of the site, its later excavation, and comprehensive protection of the site\. iii\. Agreed that all project civil works construction contracts will include a provision stating that if cultural relics are found work will immediately cease and a report to the local cultural relics bureau will be made for the purpose of relics preservation\. Indigenous Peoples (OD 4\.20)\. Indigenous Peoples (Koreans, Manchus, Mongols, and Daur, among others) live in the project areas, overall comprising about 5% of the project’s potentially affected people\. A minority nationalities expert was engaged by the PPMO to explore the likely indigenous dimensions of the project\. This report indicated that: a) no special cultural tailoring of the project was necessary to ensure that minority nationalities participate fully and appropriately in the project, b) no negative effects were foreseen affecting any minority nationality, and c) the province’s most numerous minorities were adequately included in the project with the sole exception of the Daur nationality\. To rectify this omission, the project added two Daur villages to host project sub-components\. With this inclusion, no Indigenous Peoples Development Plan was deemed necessary or useful\. Page 6 D\.5\. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people\. The key stakeholders of the project are: (i) its potential beneficiary households and public institutions; (ii) private sector enterprises and investors in the demo farms, dairy parks and milking stations; and (iii) village and county governments\. The Borrower conducted an initial consultation with village and county governments to gage their interest in participating in the project and in taking the necessary measures to protect the environment\. A second consultation took place during project preparation\. A New Zealand team visited eight villages and interviewed about 300 randomly selected villagers\. The purpose of the survey was to establish baseline data about rural HHs and to provide indicators and measurements to evaluate the impact of the Project\. During pre- appraisal the Borrower’s staff and the Bank TT visited other project sites and conducted focus groups/interviews on two occasions to verify the interest of stakeholders in the project and inform them of its activities\. Prior to appraisal the Borrower hired two local consultants to further verify the applicability of resettlement, indigenous groups and cultural safeguards\. The results of these consultations is explained in Section D- 4 above\. On December 20, 2004, the Borrower also translated the EIA and the RPF reports and made them available to the public in public display boards in project counties in Heilongjiang province and on the internet at www\.hljdpc\.gov\.cn\. Page 7 F\. Disclosure Requirements Date Environmental Assessment/Management Plan/Other: Date of receipt by the Bank 11/24/2004 Date of “in-country” disclosure 12/20/2004 Date of submission to InfoShop 12/07/2004 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors Not Applicable Resettlement PolicyFramework: Date of receipt by the Bank 12/03/2004 Date of “in-country” disclosure 12/20/2004 Date of submission to InfoShop 02/17/2005 Indigenous Peoples Development Plan/Framework: Date of receipt by the Bank Not Applicable Date of “in-country” disclosure Not Applicable Date of submission to InfoShop Not Applicable Pest Management Plan: Date of receipt by the Bank Not Applicable Date of “in-country” disclosure Not Applicable Date of submission to InfoShop Not Applicable Dam Safety Management Plan: Date of receipt by the Bank Not Applicable Date of “in-country” disclosure Not Applicable Date of submission to InfoShop Not Applicable If in-country disclosure of any of the above documents is not expected, please explain why\. In-country disclosure occurred on December 20, 2004 Section III – Compliance Monitoring Indicators at the Corporate Level (To be filled in when the ISDS is finalized by the project decision meeting) OP/BP 4\.01 - Environment Assessment: Yes No Does the project require a stand-alone EA (including EMP) report? X If yes, then did the Regional Environment Unit review and approve the EA report? X Are the cost and the accountabilities for the EMP incorporated in the credit/loan? X OP/BP 4\.04 - Natural Habitats: Yes No Would the project result in any significant conversion or degradation of critical natural habitats? X If the project would result in significant conversion or degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? X OP 4\.09 - Pest Management: Yes No Does the EA adequately address the pest management issues? X Is a separate PMP required? X If yes, are PMP requirements included in project design? X Page 8 Draft OP 4\.11 (OPN 11\.03) - Cultural Property: Yes No Does the EA include adequate measures? X Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on physical cultural resources? X OD 4\.20 - Indigenous Peoples: Yes No Has a separate indigenous people development plan been prepared in consultation with the Indigenous People? X If yes, then did the Regional Social Development Unit review and approve the plan? X If the whole project is designed to benefit IP, has the design been reviewed and approved by the Regional Social Development Unit? X OP/BP 4\.12 - Involuntary Resettlement: Yes No Has a resettlement action plan, policy framework or policy process been prepared? X If yes, then did the Regional Social Development Unit review and approve the plan / policy framework / policy process? X OP/BP 4\.36 – Forests: Yes No Has the sector-wide analysis of policy and institutional issues and constraints been carried out? X Does the project design include satisfactory measures to overcome these constraints? X Does the project finance commercial harvesting, and if so, does it include provisions for certification system? X OP/BP 4\.37 - Safety of Dams: Yes No Have dam safety plans been prepared? X Have the TORs as well as composition for the independent Panel of Experts (POE) been reviewed and approved by the Bank? X Has an Emergency Preparedness Plan (EPP) been prepared and arrangements been made for public awareness and training? X OP 7\.50 - Projects on International Waterways: Yes No Have the other riparians been notified of the project? X If the project falls under one of the exceptions to the notification requirement, then has this been cleared with the Legal Department, and the memo to the RVP prepared and sent? X What are the reasons for the exception? X Please explain: X Has the RVP approved such an exception? X OP 7\.60 - Projects in Disputed Areas : Yes No Has the memo conveying all pertinent information on the international aspects of the project, including the procedures to be followed, and the recommendations for dealing with the issue, been prepared, cleared with the Legal Department and sent to the RVP? X Does the PAD/MOP include the standard disclaimer referred to in the OP? BP 17\.50 - Public Disclosure: Yes No Have relevant safeguard policies documents been sent to the World X Page 9 Bank's Infoshop? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project- affected groups and local NGOs? ? All Safeguard Policies: Yes No Have satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of the safeguard measures? X Have safeguard measures costs been included in project cost? X Will the safeguard measures costs be funded as part of project implementation? X Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures? X Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents? X Signed and submitted by: Name Date Task Team Leader: Mohamed N\. Benali 02/17/2005 Project Safeguards Specialist 1: Andres Liebenthal (environment) 01/14/2005 Project Safeguards Specialist 2: Gregory Guldin (Social/Safeguards) 01/14/2005 Project Safeguards Specialist 3: Approved by: Name Date Regional Safeguards Coordinator: Comments: Sector Manager: Rahul Raturi Comments:

APPROVAL

P102031

Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) Report Number : ICRR0020002 1\. Project Data Project ID Project Name P102031 Bus Environment Enhancement Country Practice Area(Lead) Mauritania Trade & Competitiveness L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IDA-44480 30-Nov-2013 7,000,000\.00 Bank Approval Date Closing Date (Actual) 22-May-2008 30-Nov-2014 IBRD/IDA (USD) Grants (USD) Original Commitment 5,000,000\.00 0\.00 Revised Commitment 4,606,241\.83 0\.00 Actual 4,410,172\.79 0\.00 Sector(s) Central government administration(48%):General energy sector(22%):Law and justice(20%):Banking(10%) Theme(s) Regulation and competition policy(40%):Other Private Sector Development(10%):Legal institutions for a market economy(20%):International financial standards and systems(20%):Other Financial Sector Development(10%) Prepared by Reviewed by ICR Review Coordinator Group Katharina Ferl Chad Leechor Christopher David Nelson IEGFP (Unit 3) 2\. Project Objectives and Components a\. Objectives According to the Financing Agreement (p\. 5) of July 1, 2008, the objective of the project was "to enhance the business climate through improvement in the Recipient’s financial, legal and judicial sectors, and the regulatory environment for business, and the support of measures to restructure selected Public Enterprises"\. This will be referred to as the original objective\. On May 22, 2013 the project was restructured\. According to the amended Financing Agreement (p\.4) of August, 7, 2013 the revised objective was "to enhance the business climate for financial institutions and other targeted private sector enterprises in the Recipient's territory"\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) Both the original and revised objectives will serve as basis for this validation\. b\. Were the project objectives/key associated outcome targets revised during implementation? Yes Did the Board approve the revised objectives/key associated outcome targets? Yes Date of Board Approval 22-May-2013 c\. Components The project included three components: 1\. Improving the Business Climate to Foster Private Sector Development (cost estimate at appraisal US$3\.0 million; actual cost US$3\.1 million or 103% of appraisal estimate): This component was to finance technical assistance, equipment, and capacity building for strengthening the financial sector, improving the legal and judicial framework for business and financial activities, and streamline the regulatory environment for business\. 2\. Building Public-Private Partnerships and Productivity Enhancement (cost estimate at appraisal US$1\.5 million; actual cost US$1\.1 million or 73% of appraisal estimate): This component was to finance technical assistance to improve corporate governance in public enterprises and enhancing the long-term electricity-sector planning functions\. Activities such as performing operational and financial audits, developing action or restructuring plans, designing performance contracts and an M&E performance system were included in this component\. 3\. Support for Project Implementation (cost estimate at appraisal US$0\.5 million; actual cost US$0\.8 million, 160% of appraisal estimate): This component was to finance technical assistance to the Dèlègation Gènèrale à la Promotion de l ’Investissèment Privè (DGPIP) in different areas including strengthening financial management according to international accounting standards, procurement of goods and consultant services, annual reporting to the International Development Association (IDA), monitoring and evaluation (M&E), audit or project resources, and public information\. At the restructuring, some of the activities were dropped from Component 1 and new ones were added\. Among them: • Public enterprise reform and judiciary capacity building were dropped; • New activities: a) improving data reporting with a secure communication line between banks and the Central Bank of Mauritania (BCM); b) modernizing the BCM credit bureau; c) developing a procedure manual for on/off site supervision and insurance chart accounts; and d) supporting the update for commercial law and implementing decrees\. d\. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost: The project was estimated to cost US$ 7 million\. Actual project cost was US$5 million\. Financing: The project was financed by a US$ 5 million IDA credit of which US$4\.5 million was disbursed\. Borrower Contribution: The borrower was to contribute US$ 2 million to cover the cost of project implementation\. Actual contribution was US$0\.5 million\. Dates: The project was approved on 05/22/2008 and scheduled to close on 11/30/2013\. The actual closing date was 11/30/2014, one year after the scheduled date\. On May 22, 2013 the project was restructured as follows: i) the closing date was extended by 12 months to November 30, 2014 to make up for the one year suspension of project implementation following the coup d’ ètat; ii) the project development objective (PDO) was  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) revised to “to enhance the business climate for financial institutions and other targeted private sector enterprises in the Recipient's territory”; iii) activities for public enterprise reform and judiciary capacity building were dropped; iv) activities that were added included: a) improving data reporting with a secure communication line between banks and the Central Bank of Mauritania (BCM); b) modernizing the BCM credit bureau; c) developing a procedure manual for on/off site supervision and insurance chart accounts; and d) supporting the update for the commercial law and the implementing decrees; and v) the Results Framework was adapted to reflect the new PDO and activities\. 3\. Relevance of Objectives & Design a\. Relevance of Objectives Relevance of Original Objectives: Modest At the time of project preparation, Mauritania’s private and financial sectors faced many growth constraints including limited access to (and high cost of) finance, weak legal, regulatory and judicial framework, poor regulatory environment for businesses, and inadequate infrastructure\. The Government showed strong interest in the objective during project preparation, especially with respect to the governance of public enterprises\. However, the ownership became uneven and weakened over time\. By the time of project closing, it was clear that many of the original objectives, including public enterprise, legal and judicial sector reforms, were no longer compatible with government priorities\. The original objectives, however, were in line with two of the three pillars of the Bank’s Country Partnership Strategy current at the time of closing (2014-2017) including: i) growth and diversification; and ii) economic governance and service delivery\. Relevance of Revised Objectives: Modest During the restructuring in May 2013, the objectives of the project was revised to “enhance the business climate for financial institutions and other targeted private sector enterprises in Mauritania”\. The revised objectives no longer included the legal and judiciary sectors, which were still needed\. Nonetheless, they remained aligned with the Bank’s Country Partnership Strategy (2014-2017)\. The ICR (p\. 2) states that the new objectives were consistent with the government’s new priority to focus on investment climate reforms to enhance private and financial sector development\. However, no evidence of the government’s new priorities was provided\. In compliance with IEG policy, the rating is downgraded to modest in the absence of necessary evidence\. Rating Revised Rating Modest Modest b\. Relevance of Design Relevance of Original Design: Modest The original PDO was broad and complex, including improvements in the business climate, which implies a large agenda that a small project such as this could not have been expected to accomplish\. To make a difference in the overall business climate, the project would need to address, among other things, infrastructure and utilities, finance and taxation, corporate governance and corruption, etc\. Component 1 was particularly ambitious, including three sub-components that tackled broad areas such as strengthening the financial sector and improving access to finance, improving the legal and judicial framework for business and financial activities, and streamlining the regulatory environment for businesses\. The causal relationships between planned interventions and the development objectives, as well as underlying assumptions about how some program actions would lead to intended outcomes, were not clearly spelled out\. It is difficult to establish the links between interventions,  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) outputs, intermediate outcomes and expected results\. External factors, including unstable political and economic environment, were not adequately dealt with\. Relevance of Original Design: Modest The revised objective was simplified in scope but still ambitious\. It concentrated on enhancing the business climate for financial institutions\. The ICR (p\.8) states that the revised activities were streamlined and where necessary new measures were added\. The activities which did not contribute to the government’s new priorities were dropped\. The revised results framework was clearer, as were the relationships between interventions and development objectives\. However, the outcomes envisaged of the substantially compressed program of assistance represented an insignificant part of the overall business climate\. Even if the expected outcomes were to be realized, the objectives of improving the business climate for financial institutions would still not be achieved\. Rating Revised Rating Modest Modest 4\. Achievement of Objectives (Efficacy) PHEFFICACYTBL Objective 1 Objective Enhance the business climate through improvement in the Recipient’s financial, legal and judicial sectors, and the regulatory environment for business, and the support of measures to restructure selected Public Enterprises Rationale Outputs: • Banking and microfinance laws and regulations were adopted to strengthen the financial sector\. • An accounting framework for banks was developed\. • Several new banks, among them two foreign banks, received licenses from the Central Bank of Mauritania, enhancing competition in the financial sector\. • Independent external audits became mandatory for all banks in operation\. • No progress was made towards providing information to the government in regards to the management of key public enterprises\. No performance contracts were signed, not achieving the target of at least five key public enterprises\. Outcomes: • New regulations on starting a business reduced the cost of doing business which was estimated to have decreased from 56% of Gross National Income (GNI) per capita in 2008 to 48% in 2012\. However, the target of 35% was not achieved\. • Improvement of the financial environment was measured through a decrease in the share of non-performing loans\. However, as the ICR points out (page 24, para 85), this improvement was not attributable to the project\. • Improvement in the judicial framework and transparency was measured through the number of commercial and financial court decisions that were published on the government’s web page\. However, the target for this PDO indicator of an 80% increase was not achieved\. • The regulatory changes did not have any impact on tax revenue\. The percentage of tax on gross revenue decreased from 107% in 2008 to 68% in 2012, not achieving the target of 60%\. • The number of procedures required to establish a business was reduced from 11 in 2008 to 9 in 2012, not achieving the PDO indicator target of five procedures\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) While improvements in the indicators were observed, some were not attributable to the project and none of the targets were met\. The achievement of this objective is rated Modest\. Rating Modest Revised Objective Enhance the business climate for financial institutions and other targeted private sector enterprises in the Recipient's territory Revised Rationale Outputs: • Reforms were implemented to improve the business climate and make starting a business easier\. A One-Stop-Shop for enterprise creation was established, achieving the output target\. • Capacity within the Central Bank was built\. 83 staff received training on banking supervision, accounting, and information system management\. The number of supervisors doubled from 15 to 30\. • The information system was upgraded to support real-time data transmission\. • The commercial registry was computerized and operational, achieving the output target\. Outcomes: • The project reached 214 direct beneficiaries, surpassing the target of 100\. • 37% of project beneficiaries was female, surpassing the target of 5%\. The ICR, however, does not define who these beneficiaries were and what benefits they received\. • The number of procedures required to establish a business was reduced from 11 procedures in 2008 to 5 procedures in 2015, achieving the target\. • The number of days it took to start a business decreased from 65 days in 2008 to 19 days in 2014, surpassing the target of 30 days\. • The reforms also had a positive impact on the costs of starting a business which was 56% of GNI per capita in 2008 and decreased to 19\.8% per capita in 2014, surpassing the target of 35%\. • Reforms to reduce procedures and costs to register a business resulted in estimated cost savings of US$ 900,000 during the first year after the reform had been implemented, potentially saving an additional US$2\.5 million over the next three years\. • 5,643 new businesses registered in 2014\. • The percentage of credits reported to the credit registry increased from 30% in 2013 to 100% in 2015, surpassing the target of the PDO indicator of 50%\. The achievement of revised objectives is rated Substantial\. Revised Rating Substantial 5\. Efficiency  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) Neither the PAD nor the ICR includes a traditional cost-benefit analysis\. The PAD (p\. 22) states that due to this project’s character, a quantitative economic and financial analysis was not an appropriate tool to assess the benefits and that the ultimate economic and financial benefits will be shown through the pace and depth of the reforms supported by this project\. Available information indicates many inefficiencies in the use of project resources: • Delays and difficulties in the recruitment of project coordinators; • Frequent changes and disruption in the organization for project management, including the use of an unrelated management unit in 2011; • Frequent turnovers of project coordinators (four in six years); • Introduction by the government of lengthy review procedures for procurement; • Substantial delays in the disbursement of credit and partial cancelation; • Inability to restructure the project on a timely basis; • One-year delay of the closing date\. On balance, efficiency is rated Modest\. Efficiency Rating Modest a\. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 0 Appraisal 0 Not Applicable 0 ICR Estimate 0 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated\. 6\. Outcome Before restructuring, the project objective was of modest relevance and the design was also of modest relevance\. The achievement of the objective was also modest, as was the efficiency in the use of project resources\. The outcome is therefore rated Unsatisfactory\. After the restructuring, the revised project objective and design remained modest\. The achievement of the revised objective was substantial\. Efficiency remained modest\. The outcome is rated Moderately Unsatisfactory\. The overall outcome rating is to be given by the weighted average of the two ratings, according to the ICR guidelines Appendix B\. At the time of restructuring, US$1\.90 million had been disbursed, which was 42\.2% of the total disbursement (US$4\.5 million)\. After the restructuring, an additional US$2\.6 million was disbursed, which was 57\.7% of total disbursement\. A numeric value on the 6-point scale is assigned for the two outcome ratings: 2 points for Unsatisfactory and 3 points for Moderately Unsatisfactory\. The weighted average of these two numerical ratings (with the weights being the shares of disbursement) is 2\.5 which indicates an overall rating of Moderately Unsatisfactory\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) a\. Outcome Rating Moderately Unsatisfactory 7\. Rationale for Risk to Development Outcome Rating The continuation of the reform process requires strong technical skills and further capacity building in new institutions such as the DGPSP and Guichet Unique, which only became fully operational at project closing\. Their capacity and financial sustainability remains to be seen\. Also, the Minister of Development and Economic Affairs, who played a key role in the investment climate reform, will leave office shortly\. The extent to which the new Minister will support the reform process is unclear\. Nonetheless, the government has renewed its commitment to upgrading the investment climate by continuing with new reforms\. It has also become more engaged and supportive of the private sector\. The risk to development outcome is rated Moderate\. a\. Risk to Development Outcome Rating Modest 8\. Assessment of Bank Performance a\. Quality-at-Entry In the preparation, the project team drew on a variety of studies including the financial sector assessment program, the investment climate assessment, the enterprise survey, and “Doing Business’ reports\. It also made use of a project preparation facility in November 2006, resulting in the drafting of a banking law, a feasibility study on a refinancing mechanism for microfinance institutions and a review of performance contracts for public enterprises\. The Bank identified relevant risk factors including the government’s uncertain commitment to implementing reforms or maintaining existing policies, but the mitigation efforts were not sufficient\. In addition, the project was overly complex, included a large number of challenging activities, and tried to address too many issues despite the government’s weak implementing capacity\. The original results framework had many shortcomings\. At the point of entry, the project was not well prepared to achieve the results envisaged\. Quality-at-Entry Rating Moderately Unsatisfactory b\. Quality of supervision Throughout the project, the Bank conducted two supervision missions per year\. According to the ICR (p\. 23), issues that arose during project implementation were addressed in a timely manner\. The ICR also states that even though it was highlighted in several supervision reports that the project needed to be restructured, the Bank team did not succeed in reaching agreement with the government until the midterm review\. This left little time for the implementation of activities after the restructuring of the project\. However, with continuous turmoil in the organization of project management and clear signals of unsatisfactory progress in the supervision reports, it is not convincing that the problems were adequately resolved\. In addition, given the country’s limited experience and capacity, deeper implementation support and better communications the government could have led to better results\.  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) Quality of Supervision Rating Moderately Unsatisfactory Overall Bank Performance Rating Moderately Unsatisfactory 9\. Assessment of Borrower Performance a\. Government Performance Project implementation was challenging due to the unstable political environment, as reflected in the coup d'état of 2008 which led to a one year delay\. According to the ICR (p\. 24), the government did not agree to restructure the project and was not fully committed to the program of reforms\. Even though the government showed interest in public enterprise governance during the project preparation, little progress was made on this component until it was cancelled at the restructuring\. The government's inability to ensure the continuity of project management, both in terms of organization and leadership, also contributed to the poor results\. In the six years of the project's life, the project management unit was disbanded and revamped four times\. In addition, the government introduced new and lengthy review procedures, which required a committee to approve all procurements, resulting in needless delays\. Government Performance Rating Unsatisfactory b\. Implementing Agency Performance Many groups, including an unrelated project unit, were involved in managing this project due to the changes made by the government\. All told, four organizations and four project coordinators were involved in the six years of project implementation\. None had the benefits of learning from the experience\. As a result, the performance suffered from the disruption and discontinuity\. Implementing Agency Performance Rating Unsatisfactory Overall Borrower Performance Rating Unsatisfactory 10\. M&E Design, Implementation, & Utilization a\. M&E Design The original project development objective was broad and complex\. The results framework in the PAD (p\. 51) included three PDO indicators and 11 intermediate outcome indicators\. However, some of the indicators (including the size of non-performing loans) were not related to project activities\. In addition, the indicators taken together were not sufficient to measure this broad PDO, giving only partial indications\. The selected indicators were measurable, had a baseline and set targets\. It is not clear if the responsibility for data collection was well defined, but there was no M&E specialist until shortly before the project closed\. b\. M&E Implementation During the restructuring, the design of the results framework was modified\. Two of the three PDO indicators were dropped and one new PDO indicator was added\. Also, three intermediate outcome indicators were replaced by three new ones\. However, the new indicators remained  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) too limited to measure the progress of the new PDO\. Data collection was quite simple since most of the data came from the annual “Doing Business” report\. c\. M&E Utilization According to the ICR (p\. 11), M&E data was used to inform decision making including the decision to restructure the project M&E Quality Rating Modest 11\. Other Issues a\. Safeguards The project was classified as Category C and did not trigger any safeguards policies\. b\. Fiduciary Compliance Financial Management The ICR (p\.12) states that financial monitoring reports and audit reports were adequate and submitted on time\. Also, audit opinions were unqualified most of the time\. Procurement Other than implementation delays, no compliance issues were reported\. c\. Unintended impacts (Positive or Negative) N/A\. d\. Other --- 12\. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Moderately Unsatisfactory Moderately Unsatisfactory --- Risk to Development Outcome Modest Modest --- Bank Performance Moderately Unsatisfactory Moderately Unsatisfactory --- Borrower Performance Moderately Unsatisfactory Unsatisfactory The government showed little  Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review Bus Environment Enhancement (P102031) commitment and support for the project\. Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006\. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate\. 13\. Lessons The ICR (p\. 24) includes several lessons including: • Establishing a good project implementing unit (PIU), which has the government's support, is critical for successful implementation\. In this project, however, the government did not want to create a new PIU\. Nonetheless, the two agencies selected by the government to manage the project were dissolved and the PIU that was eventually created had difficulty in recruiting a well-qualified PIU coordinator\. This led to significant delays in project implementation\. • Selecting indicators that are externally validated and consistent is essential for monitoring progress towards the project’s objectives\. However, it is imperative that the project is capable of contributing to the outcomes measured by these indicators\. This project relied on good indicators from the “Doing Business” report\. But there was a disconnect between these indicators and the activities supported by the project\. 14\. Assessment Recommended? No 15\. Comments on Quality of ICR The ICR provides a good analysis of the project\. It is concise, internally consistent and candid\. It could, however, have provided more information in some areas such as how the Bank tried to resolve the turmoil surrounding project management, how the Bank tried to restructure the project and why the efforts failed\. Overall, the quality of the ICR is rated substantial\. a\. Quality of ICR Rating Substantial

APPROVAL

P125447

Document of The World Bank Report No: ICR00004072 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-12721) ON A GRANT UNDER THE BANGLADESH CLIMATE CHANGE RESILIENCE FUND (BCCRF) IN THE AMOUNT OF US$13 MILLION EQUIVALENT TO THE PEOPLE’S REPUBLIC OF BANGLADESH FOR A COMMUNITY CLIMATE CHANGE PROJECT August 22, 2017 Environment and Natural Resources Global Practice South Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective May 17, 2017) Currency Unit = Bangladesh Taka (BDT) BDT 1\.00 = US$0\.01 US$1\.00 = BDT 80\.70 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS AF Additional Financing ATOM Activity to Output Monitoring BCCRF Bangladesh Climate Change Resilience Fund BCCSAP Bangladesh Climate Change Strategy and Action Plan CAS Country Assistance Strategy CCAG Climate Change Adaptation Group CCCP Community Climate Change Project CM Community Mechanism CPF Country Partnership Framework CRI Climate Resilience Index GIS Geographical Information System GRM Grievance Redress Mechanism ICR Implementation Completion and Results Report IGA Income-Generating Activity ISR Implementation Status and Results Report M&E Monitoring and Evaluation MoEF Ministry of Environment and Forests MTR Midterm Review NGO Nongovernmental Organization PAD Project Appraisal Document PCN Project Concept Note PDO Project Development Objective PKSF Palli Karma-Sahayak Foundation PIP Project Implementing Partner PMU Project Management Unit PPR Public Procurement Rules RBM Results-Based Monitoring RF Results Framework RWH Rainwater Harvesting SEP Sustainable Enterprise Project TRC Technical Review Committee Senior Global Practice Director: Karin Erika Kemper Practice Manager: Kseniya Lvovsky Project Team Leader: Nadia Sharmin ICR Team Leader: Shahpar Selim  BPANGLDESH Community Climate Change Project CONTENTS Data Sheet A\. Basic Information B\. Key Dates C\. Ratings Summary D\. Sector and Theme Codes E\. Bank Staff F\. Results Framework Analysis G\. Ratings of Project Performance in ISRs H\. Restructuring I\. Disbursement Graph 1\. Project Context, Development Objectives, and Design \. 1 2\. Key Factors Affecting Implementation and Outcomes \. 4 3\. Assessment of Outcomes \. 12 4\. Assessment of Risk to Development Outcome\. 17 5\. Assessment of World Bank and Borrower Performance \. 17 6\. Lessons Learned \. 19 7\. Comments on Issues Raised by Grantee/Implementing Agencies/Donors \. 20 Annex 1\. Project Costs and Financing \. 21 Annex 2\. Outputs by Component \. 23 Annex 3\. Economic and Financial Analysis \. 27 Annex 4\. Grant Preparation and Implementation Support/Supervision Processes \. 30 Annex 5\. Beneficiary Survey Results \. 31 Annex 6\. Stakeholder Workshop Report and Results\. 32 Annex 7\. Summary of Grantee's ICR and/or Comments on Draft ICR \. 34 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 39 Annex 9\. List of Supporting Documents \. 40 MAP \. 41  BANGLADESH COMMUNITY CLIMATE CHANGE PROJECT DATA SHEET A\. Basic Information Community Climate Country: Bangladesh Project Name: Change Project Project ID: P125447 L/C/TF Number(s): TF-12721 ICR Date: 05/17/2017 ICR Type: Core ICR MINISTRY OF Lending Instrument: Specific Investment Loan Grantee: ENVIRONMENT AND FORESTS Original Total US$13\.00 million Disbursed Amount: US$12\.98 million Commitment: Revised Amount: US$13\.00 million Environmental Category: B Implementing Agencies: Palli Karma-Sahayak Foundation (PKSF) Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 07/27/2011 Effectiveness: 12/12/2012 Appraisal: 02/13/2012 Restructuring(s): Approval: 02/13/2012 Mid-term Review: 04/15/2015 05/18/2015 Closing: 12/31/2016 12/31/2016 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Grantee Performance: Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: i C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Supervision No None time (Yes/No): (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Major Sector/Sector Social Protection Social Protection 42 42 Water, Sanitation and Waste Management Other Water Supply, Sanitation and Waste Management 58 58 Major Theme/Theme/Sub Theme Environment and Natural Resource Management Water Resource Management 34 34 Water Institutions, Policies and Reform 34 34 Finance Finance for Development 8 8 Disaster Risk Finance 8 8 Urban and Rural Development Disaster Risk Management 8 8 Disaster Preparedness 8 8 Disaster Response and Recovery 8 8 Disaster Risk Reduction 8 8 Rural Development 33 33 Land Administration and Management 33 33 E\. Bank Staff Positions At ICR At Approval Vice President: Country Director: Qimiao Fan Ellen A\. Goldstein Practice Manager/Manager: Kseniya Lvovsky Herbert Acquay Project Team Leader: Nadia Sharmin ICR Team Leader: Shahpar Selim ICR Primary Author: Shahpar Selim ii F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To enhance the capacity of selected communities to increase their resilience to the impacts of climate change Revised Project Development Objectives (as approved by original approving authority) Not applicable\. (a) PDO Indicator(s)1 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Community mechanisms established and functioning in selected communities to Indicator 1 respond effectively to specific climate risk 5% 70% No change 78% Date Achieved October 2016 ACHIEVED: 112% A community mechanism (CM) was deemed functional when a group (a group making up a CM) collaborated to produce adaptation action plans and investment plans to effectively address climate risks specific to that group\. The CM is judged continuously Comments functional when the group continued to meet its bimonthly meeting targets to discuss (including % climate risks on its livelihoods and troubleshoot challenges faced by the group\. achievement) In total, 1,724 CMs were formed in 32 communities (about 78% of the communities as against a target 70% or 29 communities)\. As such, 112% of the target was met\. PDO indicator 1 captures the outcome of community capacity building and increased resilience\. The indicator is linked to intermediate outcome indicators 1\.1, 1\.2, and 1\.3\. Communities to have applied sustainable adaptation practices to address specific Indicator 2 climate change risk 5% 70% No change 84% Date Achieved October 2016 ACHIEVED: 122% Comments Adaptation practices refer to subprojects designed and implemented to address specific (including % climate risks, such as goat rearing in slatted houses, crab fattening, and plinth raising to achievement) protect households and community grounds\. Please see annex 2 for details\. 1 Data sources include the Activity to Output Monitoring (ATOM) reports which recorded monthly, quarterly, and cumulative progress of individual PIPs, the third party final evaluation at project closing, and supervision reportage (including field level verification) by the PMU and the World Bank team\. iii  An adaptation practice is judged as sustainable through quality of work, benefits accrued, recording of lessons learned by communities and the PIPs, and demonstrated sustainability in earlier interventions/subprojects\. The target was met in communities under 34 PIPs (or 84%) from the target of 29 PIPs (or 70%)\. Therefore, the target was achieved 122% (adjusting for a baseline of 5%)\. PDO indicator 2 captures the outcome of resilience building\. The indicator is linked to intermediate outcome indicators 1\.1, 1\.3 and 2\.4\. Sub-grants implemented in the selected communities are assessed to have achieved the Indicator 3 targeted objectives 0 75% No change 85% Date Achieved October 2016 ACHIEVED: 113% 35 subprojects or 85% of 41 subprojects were assessed by the Palli Karma-Sahayak Comments Foundation (PKSF) as successful in this respect\. Success was measured against (including % reaching the targets set for each subproject (details in annex 2)\. As such, the target of achievement) this indicator was achieved 113%\. PDO indicator 3 captures the outcome of resilience building\. The indicator is linked to intermediate outcome indicators 2\.1, 2\.3, 2\.2, 2\.5, 3\.1 and 3\.2\. (b) Intermediate Outcome Indicator(s)2 Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Intermediate Community Climate Change Fund: A functional financing mechanism for community- Result based adaptation subprojects established (Component 1): Indicator 1\.1 Number of community-based adaptation sub-grants awarded 0 40 40 41 Date Achieved October 2016 ACHIEVED: 103% Comments Functional financing mechanism refers to the PKSF’s capacity to solicit, evaluate, and (including % award sub-grants to project implementing partners (PIPs) and to supervise achievement) implementation of these sub-grants\. At project closing, a total of 41 sub-grants were awarded, at 103% of the original target\. % of PIPs with awarded sub-projects found fully compliant with policies and Indicator 1\.2 procedures agreed under CCCP 80% No change 95% Date Achieved October 2016 2 Data source is same as before\. iv  Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years ACHIEVED: 119% The policies and procedures were laid out in the Operational Manual and other Comments guidelines prepared by the project (see indicator 2\.3 below for details)\. As 39 out of 41 (including % PIPs (95%) were found in compliance, the target of this indicator was achieved by achievement) 119%\. Those PIPs that were found to be noncompliant were given additional supervision to ensure they became compliant\. One of the positive aspects of the results- based monitoring (RBM) approach was that problems could be spotted early on and time given to correct them\. Sub-grants have been disbursed to the NGOs in a timely manner Indicator 1\.3 0 80% No change 80% Date Achieved October 2016 ACHIEVED: 100% Sub-grants for 33 of 41 (80%) PIPs were disbursed on time, achieving 100% of the target\. Comments ‘Timely’ refers to the fact that the quarterly and monthly disbursement targets agreed (including % between the PKSF and a PIP were met as a result of the PIP’s timely completion of achievement) quality tasks within the stipulated time\. If any PIP failed to complete their tasks within the time frame and with the quality expected of them, the payment was not disbursed (as agreed with them initially) until corrective measures were taken\. Knowledge management, Monitoring and Evaluation, and Capacity Building: Intermediate Systematic process of sharing lessons and incorporation of best practices into the design Result and implementation of interventions is operationalized\. A robust M&E system to ensure (Component 2): effective monitoring of subproject outcomes at the community and project levels operationalized PIPs with awarded subprojects have identified a list of lessons learned during annual Indicator 2\.1 workshops for use in their adaptation initiatives 0 80% No change 85% Date Achieved October 2016 Comments ACHIEVED: 107% (including % 35 of 41 PIPs (85%) identified and shared lessons learned during annual workshops\. achievement) The target was achieved at 107%\. Indicator 2\.2 Percent of PIPs report best practices to PKSF and other stakeholders 0 80% No change 89% Date Achieved October 2016 Comments (including % ACHIEVED: 111% achievement) v  Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years 36 of 41 PIPs (89%) reported best practices to the PKSF\. These lessons learned were entered into the PKSF website and stored in the PKSF climate change library\. The target was achieved at 111%\. Indicator 2\.3 Toolkit & guidelines prepared for community-based climate change adaptation 0 3 No change 6 Date Achieved October 2016 ACHIEVED: 200% Six toolkits and guidelines were prepared (200% of the target)\. These helped PIPs Comments implement and streamline operations, including the Operation Manual; Implementation (including % Manual; Activity Implementation Guideline; Procurement Guideline; Financial and achievement) Accounts Management Guideline; and Monitoring Manual, including (a) baseline questionnaire, (b) beneficiary profile format, and (c) community profile format\. These guidelines were used extensively and daily by the PKSF and the PIPs for project management\. Indicator 2\.4 Number of inter-community visits 0 20 No change 22 Date Achieved October 2016 ACHIEVED: 110% 22 intercommunity visits were undertaken (110% of the target)\. These visits allowed cross-learning between communities and individuals working on adaptation initiatives\. Intercommunity visits (by 594 persons from the PIPs, the communities, and the PKSF) Comments were very helpful to the project in quickly conveying to communities what the possible (including % options were and how to construct and maintain an intervention (for example, plinth achievement) raising or pond excavation)\. Community visits were especially useful in the case of sanitary latrines and goat rearing\. Once the initiative was demonstrated, the communities grasped the solution much more quickly\. The PKSF believes this also reduced errors in construction\. It also helped motivate communities to participate as a collective group and keep up with maintenance\. This contributed toward the PDO by building a community knowledge base\. Subproject has conducted a baseline study, vulnerability and risk assessment and Indicator 2\.5 investment plan 0 80% No change 87% Date Achieved October 2016 ACHIEVED: 108% Comments All 41 PIPs completed vulnerability and risk assessments as well as baseline profiles of (including % each beneficiary as a basis for their investment plans (also through community achievement) mechanisms and investment plans that were made)\. 87% were judged to be of good quality by the PKSF\. The target was achieved at 108%\. vi  Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years 11 subprojects or PIPs conducted detailed baseline studies as part of the results-based monitoring (RBM)\. Intermediate A Project Management Unit (PMU) established to administer project funds and to Result monitor implementation performance of activities (Component 3): Indicator 3\.1 PMU has the required staff, equipment, office space & manuals Core staff: 12 Core staff: 14 Office equipment: Office equipment: 0 No change 80% 80% Office space: 80% Office space: 80% Date Achieved October 2016 ACHIEVED: 125% Comments (including % The target with regard to recruitment of office staff for the PMU was fully met with 14 achievement) staff (target achieved at 125%)\. Targets with regard to equipment and office space were met as per the established equipment list and planned office space\. PKSF produces regular Activity (quarterly), Progress (bi-annually, annually) and Indicator 3\.2 Impact evaluation reports (MTR and Project Completion); Third Party Outcome monitoring (Annual) Activity (2) Activity Report (4) Progress (1) Communique (3) 0 No change Impact evaluation Brochure for all 41 (1) PIPs Date Achieved October 2016 ACHIEVED: 100% The target was met 100%\. All reports were produced on time\. Details are as follows: Year 1: Inception Report (Brochure), Activity Report (1) (February 6, 2013); Activity Report (2) (April 7, 2013); Activity Report (3) (July 29, 2013); Half-Yearly Progress Report October 2012–March 2013 (April 25, 2013) Year 2: Activity Report (1) (October 21, 2013); Activity Report (2) (January 13, 2014); Comments Activity Report (3) (April 24, 2014); Activity Report (4) (July 24, 2014); Progress (including % Report (1) (December 31, 2013); Half-Yearly Progress Report (May 29, 2014) achievement) Year 3: Activity Report (1) (November 3, 2014); Activity Report (2) (January 22, 2015); Activity Report (3) (June 24, 2015); Activity Report (4) (September 27, 2015); Progress Report includes narrative report of 11 NGOs and narrative report of 27 NGOs\. Activity Report (1) (August 8, 2015); Activity Report (2) (February 18, 2016); Activity Report (3) (August 17, 2016); Activity Report (4) (September 27, 2016); Progress Report includes narrative report of all 41 PIPs; Lessons Learned Report; Environment and Social Impact Report; Baseline Report and RBM Report vii G\. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No\. DO IP Archived (US$, millions) 1 06/17/2013 Satisfactory Satisfactory 2\.16 2 11/17/2013 Moderately Satisfactory Satisfactory 2\.30 3 06/09/2014 Moderately Satisfactory Satisfactory 3\.08 4 01/07/2015 Moderately Satisfactory Satisfactory 5\.35 5 07/30/2015 Moderately Satisfactory Satisfactory 9\.98 6 03/22/2016 Satisfactory Satisfactory 10\.94 7 10/14/2016 Satisfactory Satisfactory 12\.53 H\. Restructuring (if any) Not Applicable I\. Disbursement Profile viii 1\. Project Context, Development Objectives, and Design 1\.1 Context at Appraisal Country Context 1\. The sixth Climate Change Vulnerability Index, released by the global risks advisory firm ‘Maplecroft’, rated Bangladesh as the country most at risk from climate shocks due to extreme levels of poverty and a high dependency on agriculture\. In addition, two key reports—the Intergovernmental Panel on Climate Change's ‘Fifth Assessment Report’ and the World Bank’s ‘Turn Down the Heat’—revealed long-term implications for Bangladesh and its people from probable catastrophic impacts of climate change\. Bangladesh consists of mostly low-lying land (only about 10 percent of the country is 1 meter above mean sea level) and is home to the world’s largest river delta, comprising the Ganga, Meghna, and the Brahmaputra Rivers\. One-third of the land is under tidal excursions\. Due to its unique geographic, socioeconomic, population density, and physical characteristics, the country is extremely vulnerable to the impacts of climate change\. Most Bangladeshis rely on agriculture, forestry, and fisheries for their livelihoods\. Salt water intrusion, sea level rise, cyclonic storm surge, extreme flood events, and severe droughts can damage and even destroy livelihood options for the people in the most climate-vulnerable zones of Bangladesh\. This vulnerability profile provides the context and rationale for climate-resilient development being the top priority for the Government of Bangladesh\. The Government’s strategy is to make livelihoods of the poorest/vulnerable populations climate resilient, so that the national economy is insulated from climate change as much as possible\. 2\. The chief national strategy document—‘Bangladesh Climate Change Strategy and Action Plan’ (BCCSAP) 2009—includes a ten-year program to build country capacity and resilience to meet climate change challenges over the next few decades\. It also provides an action plan for integrating climate change issues into sustainable development\. The BCCSAP was put into practice through the Bangladesh Climate Change Resilience Fund (BCCRF), which was a multi- donor trust fund (set up in 2010) hosted by the Ministry of Environment and Forests (MoEF)\. The fund has supported investment projects and analytical research in line with the BCCSAP core principles and pillars\. Rationale for World Bank Involvement 3\. The World Bank has been supporting the Government in building Bangladesh’s climate resilience by investing over US$1 billion on coastal infrastructure and cyclone shelters in the past decade\. This has been reflected in the World Bank’s Country Assistance Strategies (CAS) over the years\.3 The World Bank was also the trustee of the BCCRF and was designated as the sole agency responsible for managing the implementation of activities supported by the BCCRF\. The World Bank had accessed BCCRF financing for building cyclone shelters and solar irrigation pumps, promoting afforestation, and undertaking significant analytical work on climate resilience\. 4\. In addition to substantial investments in critical infrastructure, preparedness, and response, the World Bank recognizes the need for inclusive development and the acute threat of climate 3 The project remains strongly consistent with the World Bank’s current Country Partnership Framework (2016– 2020) objectives under Focus Area 3: Climate and Environment Management, as detailed in section 3\. 1 change to the livelihoods of the most climate-vulnerable people\. The World Bank supported the Palli Karma-Sahayak Foundation (PKSF) to prepare and implement this project as it contributes to two CAS (2011–2014) outcomes: (a) strengthened water resources management and coastal protection and (b) enhanced disaster preparedness\. The Community Climate Change Project (CCCP) was a stand-alone project, financed fully from BCCRF funds through its off-budget window\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 5\. The PDO was to enhance the capacity of selected communities to increase their resilience to the impacts of climate change\. 6\. The three PDO-level indicators are as follows: • Indicator 1: Community mechanisms established and functioning in selected communities to respond effectively to specific climate risk • Indicator 2: Communities to have applied sustainable adaptation practices to address specific climate change risk • Indicator 3: Sub-grants implemented in the selected communities are assessed to have achieved the targeted objectives 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 7\. The PDO or the indicators related to the PDO were not changed during implementation\. 1\.4 Main Beneficiaries 8\. According to the Project Appraisal Document (PAD), the primary beneficiaries of the project were to be poor and ultra-poor communities in saline-affected, flood-affected, and rainfall- scarce zones of the country, as determined by geographical information systems mapping\. The final beneficiaries were selected once the project was effective and the subproject proposals were approved by the PKSF\. Secondary benefits, which were to enhance capacity to plan and implement effective community-driven climate change adaptation projects, were to accrue to the PKSF and participating nongovernmental organizations (NGOs)\. 1\.5 Original Components (as approved) 9\. Component 1: Community Climate Change Fund (US$10\.40 million, revised US$10\.79 million)\. This was the largest component in the CCCP and was designed to establish a fund to finance community-based climate change adaptation projects to be implemented with the assistance of NGOs (subsequently named project implementation partners [PIPs])\. The fund would be managed by the PKSF through a separate Project Management Unit (PMU), to be set up and supported (including staffing, equipment, and operation costs) under Component 3\. The PKSF was to call for Project Concept Notes (PCNs) from eligible NGOs and set criteria for submission 2 eligibility\. The subproject proposals were to address at least one of the six BCCSAP thematic areas\.4 Please see annex 2 for details on the activities supported through the subprojects\. 10\. Component 2: Knowledge Management, Monitoring and Evaluation, and Capacity Building (US$0\.44 million, revised US$0\.55 million)\. This component aimed at sharing best practice lessons between communities, among the participating PIPs, as well as within the wider NGO community nationally, regionally, and globally\. It also supported a structured learning process through cross-peer visits in different vulnerable zones\. Knowledge creation and management was also to be achieved through the preparation of toolkits and guidelines for the PIPs\. It would thus build the capacity of NGOs to prepare eligible community-based climate change adaptation project proposals\. The PMU would operationalize a monitoring and evaluation (M&E) system to ensure effective financial and activity monitoring during project implementation as well as enable an independent evaluation at project completion\. 11\. Component 3: Project Management (US$1\.66 million)\. This component was to establish the PMU within the PKSF and hire/train staff to manage funds and monitor the implementation of subprojects; finance the PMU’s operating costs, procurement, and other expenses related to the administration of project funds; build the technical capacity of the PKSF to appraise climate change adaptation subproject proposals submitted by NGOs; and operationalize the procedures for fund management\. 1\.6 Revised Components 12\. None of the components were revised during implementation\. 1\.7 Other Significant Changes 13\. The BCCRF had allocated 10 percent of its total funds to its NGO window that financed the CCCP\. With US$130 million paid in as capital contribution, this translated to US$13 million available for the CCCP\. The original CCCP financing was US$12\.5 million, leaving US$0\.5 million unbudgeted under the BCCRF’s NGO window\. Based on recommendations of the project’s midterm review (MTR) carried out in (June 2015), an additional financing (AF) of US$500,000 was processed by the World Bank in (August, 2015)\. At both the MTR and the AF, it was confirmed that project implementation was on track to meet its PDO\. 14\. As the AF was approved at a later stage of project implementation, it was agreed that it would be used only to support the 11 best performing PIPs and not to support any new PIP proposals\. This allowed for all activities to be completed by December 2016, as per the BCCRF agreement\. 4 The BCCSAP pillars are as follows: (a) Food security, social protection, and health; (b) Comprehensive disaster management; (c) Infrastructure; (d) Research and knowledge management; (e) Mitigation and low carbon development; and (f) Capacity building and institutional strengthening\. The CCCP directly supports all the pillars except (e)\. 3 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design, and Quality at Entry Project Preparation 15\. The analytical basis and lessons learned that underpinned the project design were sound\. The project design was based on comprehensive analyses of similar projects undertaken by NGOs at the community level and studies, based on the geographical information system (GIS), of climate change impacts in Bangladesh, with regard to both affected geographical areas and consequences for people’s livelihoods, in particular how the poorest parts of the population were affected\. These background studies focused on adaptation, and not mitigation\. The selection of project area and type of interventions to be pursued were thus based on these studies\. 16\. The PDO of the project was to enhance community capacity to increase their resilience to climate change\. The definition and understanding of the term ‘resilience’ can be very broad and can capture economic resilience, social resilience, or environmental resilience to cope with climate hazards such as floods, droughts, or salinity intrusion\. The definition of ‘resilience’ in the PDO has been kept broad to capture the complexities and different aspects of resilience in the context of climate resilience\. The three PDO-level indicators directly reflect the essential functions required at the community level for building climate resilience and maintaining a community’s identity and structure in the face of a climate hazard, while also learning and adapting\. 17\. The project design was highly influenced by this broad definition and is reflected in the component design and the justification of activity sequencing\. As an innovative learning project based on the World Bank’s experience in community mechanisms in Bangladesh and regionally, as well as the PKSF’s experience in microcredit financing, the CCCP was designed to specifically address climate resilience and that too in a manner tailor-made to different climate risk zones\. Project design as a result was flexible and the subprojects that were to be funded were only indicative at appraisal\. During implementation, proposed project interventions (subprojects) were required to explicitly demonstrate their links to attaining the PDO\. 18\. The most important design feature of the project was to establish the Community Climate Change Fund to channel funding to the selected PIPs who would then implement the selected subprojects that met the selection criteria at the field level\. Fundamental to this were to (a) understand climate change impacts at the community level; (b) formulate subprojects that would support the achievement of the PDO (as well as the BCCSAP pillars and the World Bank CAS 2011–2014); and (c) set up an organizational and implementation mechanism (involving the World Bank, the PKSF, the selected PIPs, and the communities) that would ensure successful delivery of the outcomes\. 19\. Project preparation properly assessed risks associated with technical design, PKSF governance and capacity, safeguards, delivery and monitoring, and program and donors\. It specifically highlighted that, as a microcredit organization, the PKSF had no experience of implementing a grant mechanism and monitoring the impact of subprojects\. Appropriate measures were also identified and integrated into project design to mitigate the identified risks: (a) ensuring high-quality technical staff at the PMU and PIP levels, (b) ensuring a transparent and credible 4 screening method for the selection of PIPs and subprojects, (c) ensuring adequate resources and time for training of the PMU and PIP staff on a wide range of topics (including understanding of climate resilience in the community context, fiduciary and safeguards requirements, and, more importantly, M&E), (d) flexibility in project management to incorporate lessons emerging from one area to be applied in another area if appropriate, (e) strict supervision on safeguards, and (f) enhanced supervision arrangements for slow-performing PIPs\. 20\. For example, to address the PKSF’s capacity issues, a PMU was set up with high-quality staff members, including a project coordinator, dedicated project officers for each climate zone (who were selected based on their multidisciplinary backgrounds related to livelihoods in climate vulnerable areas), accounts and procurement staff, an M&E specialist, and secretarial staff\. The PMU had adequate resources to conduct training for the PIPs on diverse project management- related topics\. A Technical Review Committee (TRC) was created to support the PMU to review subproject proposals\. Also, the PMU was integrated into the PKSF’s own management structure, which contributed toward good governance of the project\. 21\. Project preparation provided limited guidance on the design of climate-resilient sub projects\. However, the project design had provisions for the development of guidelines and toolkits for the PIPs and the beneficiaries as implementation evolved\. During implementation, these measures mitigated the lack of design guidance at preparation as well as risks associated with PKSF capacity\. Such mechanisms included PIP screening (with qualifying criteria that were to be widely disseminated to ensure transparency and credibility), subproject selection (with criteria on supporting the BCCSAP and the World Bank CAS 2011–2014, technical soundness, and beneficiary demand), fund management (including special training on fiduciary requirements of the World Bank for the PKSF as well as for each individual PIP, plus arrangements for fund tracking against subproject targets, arrangements for cross-vetting of PIP expenditures by the PKSF, and finally, auditing), subproject implementation (starting from the setting up of the community groups to subproject completion), cross-peer learning, M&E, and rounds of training on project management and results monitoring (including safeguards aspects), which demonstrated the pragmatism of the design against perceived risks\. 22\. The project design was also mindful of its innovative nature and sought to capture the learnings (what worked and what did not) in a transparent and candid way\. The various knowledge sharing and dissemination activities planned for were adequate and discernibly helped PIPs learn from each other’s successes and mistakes during implementation\. 23\. The project design was approved by the BCCRF Governing Council\. From the beginning, the BCCRF donors were kept abreast of project design\. It was agreed that yearly updates from the project would be provided to the donors, as well as briefings at the end of every project supervision mission\. This contributed toward mitigation of risks associated with donor priorities\. 24\. Due to its innovative nature, the project had two design shortcomings\. The first is related to its Results Framework (RF), which had required a substantial amount of refinements and further development during project implementation to serve its purpose\. For example, the RF made a reference to community mechanisms that should ‘respond effectively to specific climate risks’ but provided no guidance on how to identify the risks or how to establish the community mechanisms to address the specific risks\. This gap in the design was addressed successfully during 5 implementation and is discussed in the next section of this Implementation Completion and Results Report (ICRR)\. 25\. The second design shortcoming is that project preparation has chosen not to carry out economic and financial analyses\. This was justified given that the details of the subprojects were not known\. However, this has led to limited efforts of the project to evaluate financial performance of subprojects\. This is further discussed in section 3\.3\. 26\. Quality at entry\. In summary, it can be said that the project was well designed for an innovative learning project (with two shortcomings discussed earlier) with a capable organization selected for its implementation\. 2\.2 Implementation 27\. Project implementation was completed satisfactorily and without major delays, as judged by the achievement of targets and Implementation Status and Results Report (ISR) ratings\. This was a result of a number of adjustments that were made early in the implementation phase by the project, in response to field conditions and design shortcomings: (a) the community climate adaptation approach was sharpened theoretically and operationally in Component 1, (b) results capturing and dissemination were strengthened to address weaknesses in Component 2, and (c) PMU performance was kept consistent by maintaining high-quality staff and field presence in Component 3\. 28\. The recommendations in the MTR were further instrumental in achieving project results by proposing a number of actions/improvements\. Notably (a) specific guidelines for each PDO indicator (and project component), (b) improving guidelines for the PIPs, (c) clarifying exit strategies for the PIPs, (d) conducting more learning exchanges between the community action groups, (e) increased monitoring of specific interventions to ensure site specific suitability of technological interventions, (f) better assessments of how these technologies performed, and (g) adequate record keeping and reporting by PIPs to PKSF\. As noted in the post MTR Aide Memoires, the PKSF increased its supervision efforts (especially on slow performing PIPs)\. 29\. Implementation encountered challenges in two areas due to design weaknesses: (a) how to clearly define climate adaptation subprojects (as distinct from other projects) and (b) how to tailor the M&E system to specifically capture adaptation measures\. These challenges were addressed early on due to timely action by the World Bank and PKSF (guidance notes prepared and disseminated through training) and did not significantly hamper the implementation speed once the PIPs were onboard\. 30\. Selection criteria (of PIPs and subprojects) were key factors in implementation\. This was one of the keys to the success of the project\. The NGOs that became PIPs were selected after a systematic screening of the NGO itself as well as of the subproject proposals they submitted for approval\. The screening criteria were developed by the PKSF and the World Bank after several rounds of technical discussions\. The criteria included experience of the NGOs in relevant geographical areas, their yearly disbursements, their manpower capacities, etc\., which was done in a transparent manner, keeping in mind issues of governance and credibility\. The subprojects that were finally selected were based on suggestions from the communities themselves on what 6 had worked in the past and what they were interested in pursuing\. The balance between the desirable and the achievable was key in selecting the right partners and activities\. 31\. Understanding climate risks and elaborating the RF in a learning project were critical\. Section 2\.1 highlighted two design shortcomings\. To assist the PIP screening, it was recognized that a climate vulnerability assessment that would put the new and different adaptation measures front and center against the climate threats that each community faced was needed\. The World Bank and the PKSF together prepared a guidance note that linked climate change threat factors (floods, drought, salinity) to risks/opportunities faced by the different groups of people (for example, farmers, the landless, all community members, and so on)\. By directly linking threats to risks/opportunities, it was likely to arrive at a list of possible adaptation response measures (for example, planting of short duration crop varieties by farm laborers in the area due to floods)\. This assessment helped not only in identifying suitable subproject ideas for funding, but it also helped the PIPs keep focus on climate adaptation (as opposed to more traditional microcredit livelihood work)\. 32\. As mentioned earlier, the RF of the project was refined at the implementation stage\. Remedial action was taken by the project through the preparation of a guidance note titled, ‘Explanations and clarifications on how to identify climate risks and vulnerability at the community level, how to organize adaptation interventions, and how to monitor and evaluate implementation in line with PDO level indicators’\. This document served as a practical guide that clarified to the PIPs how to translate the project RF better to everyday monitoring—especially the linkages between the PDO, PDO-level results indicators, and intermediate results indicators\. The project also adopted the PKSF’s own Result-Based Monitoring (RBM) Framework and adapted it to suit the CCCP (details in section 2\.3)\. The explanatory note, supporting supervision, trainings, and the RBM Framework together addressed a significant gap in the project design\. This also represents a lesson learned for future projects where final activities are not defined in the PAD and where the project implementation is through many partners with varying understandings of a concept such as climate resilience as well as different capacities for M&E\. 33\. Lessons learned were well distilled and disseminated\. The project involved many community groups and PIPs that generated a rich storehouse of data and information on climate resilience\. The CCCP has now prepared a considerable amount of knowledge products, and in addition, each PIP participated in yearly lessons learned meetings to candidly discuss and record their problems and achievements\. Over time, the numerous learning products combined with seminars, workshops, and field visits contributed significantly to capacity building of all concerned\. This was evident at the brainstorming workshop on ‘Pathway to Build Climate Resilient Bangladesh’ (March, 2016) for the PIPs\. The workshop had intensive group discussions and presentations, during which the participants were highly encouraged to share their knowledge and ideas and exchange views\. RBM findings and lessons learned so far were shared among the PIPs by the project\. Based on discussions, the workshop developed the next PMU work plan\. The workshop also included discussions on increasing intervention sustainability, and better dissemination of lessons learnt (beyond the fellow PIPs)\. However, the inter-community field visits were perhaps the most important way lessons were taken up by other PIPs (for example in the case of plinth raising and poultry raising)\. 7 34\. Adequate resources were allocated for technical and operational supervision and support in a highly dispersed project involving diverse community activities\. The project set up a PMU with 14 employees: a project manager and a deputy manager, three program officers, an M&E officer, three accounts officers, and technical staff for training, environment and natural resources, social development, engineering, communication, and management information system\. While this is a good indicator of the implementing agency’s commitment to the project, it is also commendable that they had sufficient staff to cover the scale of the project (41 PIPs and numerous communities)\. Field presence in the remote areas was critical in following M&E requirements and fiduciary oversight, especially when slow-performing PIPs were identified or when technical issues arose\. For example, the PKSF prepared an Activity Implementation Guideline that contained drawings and instructions on how to build, in a climate-resilient way, some of the most sought-after investments, such as plinth raising for homesteads and community grounds, construction of tube wells, other water management installations, sanitary latrines, and sheds for goats, poultry, and ducks\. The project also organized ‘mini technical workshops’ at the field level to demonstrate solutions to construction problems (for example, for the desalination plants and the cook stoves) for the PIPs and communities when such a need was identified\. High-quality technical guidance from the PMU at the right time and the availability of considerable project resources were a positive factor contributing considerably to satisfactory implementation\. It should also be mentioned that the PMU had right balance of technical expertise as all the technical guidelines were prepared by the PMU and endorsed by the relevant government agency\. No additional consultancy support was necessary for the preparation of these guidelines\. Eventually, that resulted in budget savings from components 2 and 3, which were then allocated towards field level activities\. 35\. Engaging donors was important in reporting results and creating visibility\. As agreed during project preparation, BCCRF donors were briefed regularly at the end of each implementation supervision mission\. Resource materials showing gradual target attainments were also shared with the donors regularly\. The project also hosted several field visits by donors as part of their annual reviews, as well as a head of agency visit from the UK Government’s Department for International Development (DFID) to the project sites in Satkhira\. DFID expressed their satisfaction after the head of agency visit by communicating via email to the World Bank\. This helped communicate the lessons being learned in a learning project and ensure donor objective alignment throughout implementation\. 2\.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization 36\. M&E design\. The RF in the PAD was designed keeping in mind that the final activities would be chosen after project effectiveness\. The guidance on what certain terms meant (‘established and functioning’, ‘effective response’, ‘climate risks’ for example) were not as clear as they could have been, especially since the RF had to be operational at the level of PIPs whose M&E capacities and understanding varied\. However, the three-tiered monitoring system put in place was adequate (that is, each PIP had a dedicated subproject monitoring officer reporting to the chief executive or to a senior official not directly entrusted with implementation of the subproject, the PKSF had its own M&E unit, and the project was subject to external audits (as is the norm from the government) and M&E from independent evaluators at project closing)\. 8 37\. As noted earlier in section 2\.2, remedial actions on the project’s RF was a key factor for smooth implementation of the project\. Relying on the PKSF’s own RBM Framework, a climate resilience index (CRI) was developed to measure the achieved resilience\. The CRI development exercise refined terms such as ‘climate resilience’ and translated theoretical concepts into practical and measurable indicators\. Four indicators were set to measure resilience\. Each of the indicators was weighted based on their significance in the context of minimizing risks, budget allocation, and community needs\.5 The RBM measured achievements against these weightages\. The RBM was to monitor and report on project activities and eventually evaluate outputs, outcomes, and impacts in relation to indicators specified in the RF\. The RBM was also a management tool that helped the project adjust course during the implementation phase to ensure that the desired results (for example, objectives) described in a plan are achieved\. The RBM system as tailor-made for the CCCP is shown in figure 1\. To complement the RF, therefore, the project developed a total of four detailed RFs\. A ‘mother RF’ was developed to measure the CRI, which was supplemented by three other RFs for three distinct risk zones, that is, flood, salinity, and drought\. In addition, 41 PIPs developed their own RFs to measure outcome and impact of their interventions\. The use of the RBM was instrumental in refining the project’s RF to the credit of the project and its innovation in capturing terms such as ‘resilience’ in practical terms\. 5 First, three risks zones, that is, flood, salinity, and drought, were weighted based on their impacts on community and budgetary allocation\. Salinity received the highest score which is 45 percent, followed by flood (30 percent) and drought (25 percent)\. Second, four indicators were set to measure the resilience\. These are (a) resilient households established, meaning households are protected from climate change variability and related shocks mainly in char lands and coastal areas by raising plinths above the flood level and reconstructing houses; (b) reduction of disease incidence as to improving health and well-being of the community by securing water and sanitation systems and raising awareness; (c) food security with regard to food availability and increased nutrition status by providing alternative support to income generation; and (d) ensured available water for drinking and irrigation for vegetable growing\. Third, each of the indicators was weighted based on their significance in the context of minimizing risks, budget allocation, and community needs\. It was found that weightage of an indicator varies in different risk zones\. For example, the indicator ‘resilient households established’ gets 50 percent weight for flood and 30 percent for salinity whereas this indicator is not considered in the drought zone\. Reduction of waterborne diseases is a common indicator for all three risk zones, which is weighted 20 percent for flood, 40 percent for salinity, and 20 percent for drought zones\. Food security is the other common indicator that is weighted 30 percent for all three risk zones\. ‘Ensured available water’ is the only indicator that is set for the drought risk zone and weighted 50 percent\. The weightage has been distributed considering severity of impacts, proposed interventions, and budget allocation\. 9  Figure 1\. CCCP RBM System OUTPUT OUTCOME IMPACT Activity to Output Monitoring Resilience-Related Outcome Assessment Sheet Questionnaire to Calculate the (ATOM) CRI ATOM monitors monthly, Project participants were ranked • Food security quarterly, and cumulative in one of five different conditions, • Protected household progress of individual PIPs and that is, from ‘non-resilient’ to • Reduction of disease progress is remotely monitored ‘completely resilient’\. The by the PMU scoring categories have been • Community mechanism made specific to each risk zone\. • Household’s livelihood • Protected household • Access to safe drinking water and sanitation • Community mechanism 38\. M&E implementation\. Figure 1 shows the RBM system adopted by the PKSF during project implementation\. Following this system, two RBM reports were created—one in March 2015 (11 PIPs were covered and the household sample size was 84) and one in June 2016 (11 PIPs but with a larger sample size of 300 households)\. Eleven PIPs were selected as being representative of the three climate risk areas\. Given the remoteness of the areas and the dispersed households and communities, getting a more inclusive sample size was desirable but not practicable\. ATOM data quality (gathered by PIPS) was adequate but the data aggregation and analysis could have been improved at the PKSF end (for economic efficiency calculations at project closing and for future reference)\. Training of PKSF and PIP staff in M&E helped considerably; however, a lesson learned is that attention must be given to designing an M&E system, when it requires considerable time, resources, and capacity on the part of implementers (PIPs and the PKSF in this case) to do it full justice\. 39\. M&E utilization\. The project used the ATOM data to continuously measure progress through tracking utilization of funds in relation to budgets allocated to each PIP\. This proved to be an important tool in ensuring steady progress and that corrective measures were taken early on when needed\. In addition, in keeping with the theme of a learning project, PIPs also candidly shared their experiences, which helped other PIPs make design changes when needed\. GIS-based monitoring has proved highly effective by the CCCP\. For example, according to the Department of Public Health and Engineering, distance of a tube well and a latrine should be at least 30 ft\. With Google Earth, the PMU could easily monitor whether these types of infrastructures are rightly placed or not\. 10 2\.4 Safeguard and Fiduciary Compliance 40\. Financial management\. A robust financial management assessment of the PKSF was carried out during preparation phase of the CCCP in accordance with OP/BP 10\.02, to identify financial management risks and mitigation measures with the view to designing an appropriate financial management arrangement\. Financial management risk was rated Substantial and appropriate mitigating measures were incorporated into project design\. Financial management performance of the project remained Satisfactory for the most part of the project life, and there are no pending issues as agreed on the financial management action plan\. The financial reports were submitted to the World Bank on time and with acceptable quality\. Financial statements were audited by private audit firms on an annual basis with unqualified opinion for all the audits\. The audit of the financial statements for July–December 2016 was carried out by a private audit firm and was submitted to the World Bank before June 30, 2017\. There are no pending material audit observations on the previous audit reports\. 41\. Procurement performance\. There was significant improvement of capacity in managing procurements at the PMU and PIP levels compared to the initial stage of project implementation\. The PMU has successfully developed and disseminated simplified procurement documents and instructions for the PIPs\. The PMU also provided continuous hands-on support and training to the PIPs in executing day-to-day procurement activities\. As a result of these interventions, procurement activities at the field level gained momentum during the midterm of the project, and all procurements were completed within the project duration\. PIPs also expressed that for the first time they followed the public procurement rules (PPR) for their procurements, and the training sessions and hands-on support provided by the PMU were very helpful\. 42\. Environmental safeguards\. There were no deviations from the applicable World Bank safeguard policies—Environmental Assessment (OP/BP 4\.01)\. The project was rated Category B for environmental safeguards\. Visits to project sites during the implementation found that the environmental management measures had been complied with and a system of community monitoring and reporting had been introduced and followed\. Environmental enhancement parameters had been considered in the design of sanitary latrines, cluster-based raised plinths, and other activities\. The CCCP played a strong role in awareness building to ensure safe drinking water conservation in the drought and saline prone areas\. The CCCP PMU organized a number of awareness-building workshops to train the communities in maintaining project interventions in an environmentally sustainable manner\. 43\. Social safeguards\. There were no deviations from the applicable World Bank safeguard policies—Indigenous Peoples (OP/BP 4\.10) and Involuntary Resettlement (OP/BP 4\.12)\. No land acquisition was permitted or required in implementing schemes for income-generating activities (IGAs) and community level sub-schemes under this project\. It was also highly unlikely to affect the small ethnic communities negatively\. However, OP 4\.10 was triggered to ensure positive impacts for the communities\. Over the project period, the PKSF submitted quarterly reports to the World Bank\. In these reports, no adverse social impacts were recorded\. For example, according to the report (April–June 2016), 2\.04 percent of the project’s beneficiaries were from small ethnic community groups (2,668 people in total)\. Given that the total population belonging to small ethnic groups is only between 1\.5 and 3 million in the country (less than 2 percent), it can be said that the inclusion of these communities in accessing the project benefits was very good\. The project also 11 established a functional grievance redress mechanism (GRM)\. The GRM received 42 written complaints and 234 verbal complaints\. These complaints were resolved by the community in the presence of local government representatives and relevant NGO focal persons\. The project worked very well in gender mainstreaming as 92\.32 percent of beneficiaries of the project were women\. 2\.5 Post-completion Operation/Next Phase 44\. Following the successful implementation of the CCCP, the PKSF requested World Bank support for expanding the intervention beyond climate change and to enable the use of microenterprises as a tool to make IGAs environmentally sustainable\. In response to the request, the Sustainable Enterprise Project (SEP) is being prepared and seeks to expand support to integrating environmental sustainability in microenterprise development as a means of strengthening resilience and livelihoods\. The concept of the proposed SEP builds on the needs of the local communities to move toward resilient livelihoods, from climate, environmental, and economic perspectives\. The key lessons learned from the CCCP relevant to the SEP are as follows: • Selection process for PIPs was highly commendable and transparent and did not receive any unsolvable complaint\. The NGOs disqualified at the second stage were notified after final approval of proposals\. Agreements with successful PIPs were signed in three batches\. • The NGOs that became PIPs were selected based on their experience in the relevant geographic areas, their yearly disbursements, their manpower capacities, and so on\. This approach was successful, as given the training that the NGOs needed, they could ultimately deliver the supervised activities\. • The competitively selected NGOs helped introduce innovative adaptation practices in new locations, drawing on indigenous knowledge and with technical support from the project\. Such approaches provided new opportunities for women to enter the workforce and had wide demonstration effects beyond the targeted beneficiaries\. • Sustainability solutions depend on networks at the field level with larger demonstration effect and awareness building\. Collectively, these changes exemplified the capacity of local communities to become more financially self-reliant and resilient to extreme weather and climate risks\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design, and Implementation 45\. Relevance of objectives\. The objectives of the project are highly relevant, timely, and appropriate to Bangladesh’s current needs and are consistent with Government commitment to climate change mitigation and adaptation, both at the time of appraisal and at project closure\. At appraisal, the CCCP aimed at contributing to achieving two CAS (2011–2014) outcomes—(a) strengthened water resources management and coastal protection (b) and enhanced disaster preparedness\. The PDO remained highly relevant to the World Bank’s CAS (2011–2014)\. The project remains strongly consistent with the World Bank’s current Country Partnership Framework 12 (2016–2020) objectives under Focus Area 3: Climate and Environment Management\. Overall, by targeting the most vulnerable and poorest communities, the project contributed to the World Bank’s strategic goals of ending extreme poverty and shared prosperity\. Thus, the relevance of objectives is rated High\. 46\. Relevance of design\. The relevance of design is rated High\. The project components were appropriate and well designed and collectively contributed toward meeting the PDO\. As identified earlier, the RF design in the PAD needed substantial refinement; however, the logical chain between components, their inputs, activities, outputs to achieve intermediate outcome targets, and the PDO was sound\. The PDO was covered by sufficient and relevant indicators to measure its achievement in the RF, but they were extended through the CRI and RBM\. 47\. The project design drew upon Bangladesh’s extensive experience in working with civil society and local communities in designing a credible and functioning financing mechanism and a community mechanism to help selected communities increase their resilience to climate change\. The financing mechanism design (through the design of the PIP screening, subproject screening, and fund reimbursement mechanism) effectively harnessed the right mixture of PIPs with relevant field experience from the three climate risk zones\. This has effectively helped achieve the PDO\. 48\. The World Bank’s implementation assistance was responsive and relevant to project design and intended objectives, including achieving BCCSAP goals and CAS objectives\. The project was responsive to changing needs and challenges and adjusted itself to ensure that it stayed focused on achieving the PDO\. 3\.2 Achievement of Project Development Objectives 49\. The achievement of project objectives is rated Satisfactory\. The project achieved its PDO to enhance the capacity of selected communities to increase their resilience to the impacts of climate change\. All project targets that were set in the RF were either fulfilled or exceeded by project closure, as presented in the Results Framework Analysis section in the Data Sheet\. The data here have been validated by the PKSF and are also in line with the findings of the independent third party evaluators at project closing\.6 50\. The project had the following three PDO indicators: (a) Community mechanisms established and functioning in selected communities to respond effectively to specific climate risks (b) Communities to have applied sustainable adaptation practices to address specific climate change risk (c) Sub-grants implemented in the selected communities are assessed to have achieved the targeted objectives 51\. PDO indicator 1 captures the outcome of capacity building at the community level, and increased resilience\. CCCP interventions were unique because of the technical capacity building 6 ATOM’s monthly data quality is adequate and is the basis for project results reporting\. 13 of the beneficiaries on how to ‘do it better’\. Technical input covered livestock health, homestead maintenance, agricultural advisory, maintenance demonstration etc\. In the flood areas, a total of 8,539 participants received technical training, while in the drought areas it was 10,024 participants\. At project closing about 96 percent beneficiaries expressed their satisfaction at the quality of training, as per the final evaluation report\. 52\. According to the CRI data, almost 6,000 families in the saline areas are now protected from storm surges\. The number is around 7,000 in the flood affected areas\. These families have been trained to grow vegetables all year round on their raised and protected homesteads\. About 15,000 families in all three areas are now capable of rearing goats, rearing poultry, fattening crabs and producing vegetables\. About 10,000 families no longer drink unsafe water thanks to the project in the saline areas\. Deep tube wells have also been installed for 5,000 families in the flood areas, and 18,000 families in the drought areas now have access to shallow tube wells under the project\. 11,415 beneficiaries are now familiar with climate change and have a technically better understanding of resilience in the saline areas, according to the final evaluation report for the project\. (further details in annex 2)\. A factor behind successful uptake is that the communities themselves were instrumental in identifying which interventions they needed\. While 80 percent of the beneficiaries were already involved in similar activities (and this in fact contributes positively toward project sustainability), what set apart the CCCP was that the options that were finally chosen were done through group discussions at the CCAG level, where they evaluated what design options had not worked in the past or what options might work better and be more sustainable and manageable\. 53\. The CCCP has significant demonstration effects at the community level\. The activities that have been implemented by other people being influenced by the CCCP participants include raising homestead plinths, constructing slatted house, producing vermi-compost, installing improved cooking stoves, building sanitary latrines, undertaking poultry and duck rearing, starting crab fattening activities, and cultivating drought and salinity resistant crops\. 54\. PDO indicator 2 captures the outcome of resilience building\. An adaptation measure is defined as applied based on uptake and outcome data as reported by PKSF and the final evaluation by the external evaluators\. The target of adaptation practices being taken up by communities was met in 34 (or in 84 percent) of the communities as against a target of 29 communities (or 70 percent)\. This means the target was overachieved by 122 percent (adjusting for a baseline of 5%)\. The external evaluation found that the slatted housing for goats was the most popular activity with 17,155 or 45 percent of the households having adopted this practice\. However, there is a significant difference in adoption between the three risks zones (26 percent in the saline zone, 72 percent in the flood zone, and 79 percent in the drought zone)\. Household plinth raising was adopted by 32 percent beneficiaries in flood and salinity zones\. This is an indigenous practice but an improved design was introduced by the project to cope with the additional stress caused by climate change\. 55\. PDO indicator 3 captures the outcome of resilience building\. Success in implementing sub- grants was measured against targets against each subproject\. 35 out of 41 PIPs were judged by PKSF as being successful in implementing their subprojects in time\. 14 3\.3 Efficiency 56\. The overall efficiency of the project is rated as Substantial\. This rating is based on the significant increases in monthly household incomes from the IGAs promoted by the project\. An end-of-project household survey 7 indicated that there was an average increase of household income of BDT 2,110 per month during the project period (increased to BDT 5,683 per month from the average baseline income of BDT 3,573 per month in the sampled households)\. Of that amount, the average contribution to family monthly income from the CCCP-assisted IGAs was found to be BDT 1,351 per month, which is a contribution of 64 percent\. Among the CCCP direct beneficiaries, 77 percent have taken up IGAs\. The survey also shows that slatted houses for goat and sheep rearing, which is practiced by 60 percent of the beneficiaries, led on average to an incremental monthly income of BDT 1,718 per month due to a reduction in diseases and higher productivity\. Crab fattening, which can be practiced in saline areas only, led to an additional income of as much as BDT 5,500 per month (annex 3)\. While no quantitative analysis of the counterfactual scenario has been carried out, it is believed that a key factor leading to these incremental incomes was the transfer of knowledge on these IGAs, which the beneficiary households would unlikely have been able to obtain without the project\. The said household survey also found a significant reduction in the incidence of diseases, including notably diarrhea, the prevalence of which decreased from 42 percent to 16 percent among beneficiary households (annex 3)\. Again, while other factors contributing to this outcome have not been analyzed, given the known causation between the lack of safe drinking water and sanitation and diarrhea, the project’s contribution is believed to be significant\. 57\. Cost-effectiveness was considered in the appraisal of subproject proposals during project implementation\. The PKSF evaluated proposed subproject budgets against costs in similar PKSF microcredit projects\.8 Design alternatives, including costing, were also considered by the project at the level of CCAGs\. The subproject proposals were formulated by NGOs based on suggestions by future beneficiaries who already had experience in similar interventions and had informed preferences on what design alternatives would have a higher chance of being sustainable and increasing resilience\. Nevertheless, in certain subprojects, costs were much higher than what was common practice\. For example, latrines financed by the CCCP typically cost BDT 1\.4–1\.5 million, whereas the Government’s approved standard cost for a sanitary latrine is much lower at about BDT 100,000–200,000\. The cost difference arises from the quality of the materials chosen\. For example, the project opted for rust-proof materials in saline areas, which will contribute to the sustainability of this type of investment\. 58\. At project appraisal, neither an economic nor a financial analysis was carried out with the justification that the subproject had not yet been determined\. While an economic cost-benefit analysis would indeed have required too many assumptions to be useful, financial analyses (from the point of view of adopting households) of the main likely IGAs would have been beneficial\. First, they would have allowed estimation of net incomes and determination of key variables affecting net incomes, including recurrent costs and additional labor and time requirements, which in turn would have contributed to the design and targeting of the sustainable subprojects\. Second, 7 440 households were sampled and surveyed through questionnaires\. In addition, there were case studies and informal group discussions\. The baseline data are from the first RBM report\. 8 For example, livestock prices in similar areas as part of their microcredit projects\. 15 this analysis would have established a formal method that could have been used for subproject appraisal, including of financial sustainability\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory 59\. The project has been rated Moderately Satisfactory or Satisfactory throughout its implementation in all aspects, overall rating, and rating in relation to fiduciary aspects\. The trend has been steady in improving its performance\. The final external evaluation and the RF with final achievements (details in annex 2) indicate that the project has met or surpassed the targets set in the PAD RF for all indicators\. The achievements shown with regard to the development objective has been explained earlier and they also support a satisfactory rating\. The overall outcome is rated Satisfactory based on the assessment described in the earlier sections: relevance of PDO (High); relevance of design (High); achievement of PDO (Satisfactory); and efficiency (Substantial)\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 60\. Poverty impact\. The overarching theme is building climate resilience at the community level\. The IGAs have demonstrated a direct contribution to poverty alleviation in the sample survey done at project closing\. Earlier discussion on efficiency covers issues related to income data\. 61\. Gender aspect\. The project had the poor and ultra-poor as its target group with no specific gender focus\. However, as in so many other projects reaching out to the poorest, it turns out that women are the ones who become most engaged and are the most benefitted\. About 92 percent of beneficiaries are women\. The CCCP has several such success stories of women beneficiaries who have increased their income, especially in the flood affected haor areas\.9 Discussions with the PIPs reveal that access to water (for drinking and other purposes) has increased through the rainwater harvesting (RWH) and pond maintenance activities, which greatly supports women because traditionally it is always them who collect water for the households\. 62\. Most of the IGAs have been pursued by women and it is noteworthy that as soon as it has been demonstrated that they work, neighboring women have picked them up on their own initiative\. This is of course limited to activities that do not require significant cash investments, such as vegetable gardening on raised homesteads or production of vermi-compost to support the vegetable garden\. (b) Institutional Change/Strengthening 63\. One of the most important outcomes of the CCCP has been the formation of community mechanisms and their continued functioning\. As noted earlier, about 98 percent of project beneficiaries are participating in the CCAGs formed by the 41 PIPs\. They are meeting twice a 9 Source: PKSF (2016)\. Pathways to Resilience: CCCP Experiences\. 16 month and are contributing financially as a condition to participate in community activities\. The final evaluation team also noted that several CCAGs have formulated their own sustainability plans\. (c) Other Unintended Outcomes and Impacts (positive or negative) 64\. The demonstration effect among non-CCCP communities was not foreseen but is an unintended positive outcome\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 65\. Not applicable\. 4\. Assessment of Risk to Development Outcome Rating: Moderate 66\. The risk that the community-level initiatives will not be sustainable is Moderate\. IGAs are extremely likely to continue\. Livelihood activities depending on group management and maintenance are a different story\. Pond Management Committees, Pond Sand Filter Management Committees, and Deep Tube Well Management Committees have been set up in project areas by the PIPs\. Some have opened bank accounts for future maintenance expenditures\. These committees are tasked with raising funds from the users for lifetime repairs\. The committees have been informally linked up with the local government Union Parishads\. However, past project experience shows that similar management committees do not always manage to complete their repair tasks on time or to effectively seek and receive support from the local government, and this remains a risk\. 67\. Discussions with PIPs suggested that the people in coastal areas drink pure rainwater during the monsoon and at that time, the pond sand filters remain unused\. As a consequence, it becomes nonfunctional for the next dry season\. However, if the management committee is active and raises funds for maintenance, then the pond sand filters will continue providing benefits\. The risk of gradual demise is probably highest with regard to the CCAGs, but the fact that most of them are linked together in savings groups is a very strong incentive for them to stay together\. 5\. Assessment of World Bank and Borrower Performance 5\.1 World Bank Performance (a) World Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 68\. World Bank performance is rated Moderately Satisfactory\. As discussed earlier, project preparation had two design shortcomings\. This has resulted in a lower rating for World Bank performance in ensuring quality at entry\. 17 (b) Quality of Supervision Rating: Satisfactory 69\. World Bank performance is rated Satisfactory\. During the implementation period, supervision missions were undertaken about every six months and agreed-upon follow-up actions were recorded in the Aide Memoires and duly implemented\. The World Bank submitted extensive comments on the project proposals submitted by the PKSF by PIPs for ‘no objection’\. World Bank staff participated in workshops organized by the project and visited some of the subprojects in the field\. At the early stage of project implementation, the World Bank team quickly identified the design gaps and contributed to the conceptual development of the project clarifying what characterizes a climate adaptation project from a more traditional livelihood project in a poor rural context (for example, the CRI and RBM)\. International expertise on climate adaptation and community development was also mobilized to support project implementation\. Finally, safeguards and fiduciary supervision performance was also Satisfactory\. (c) Justification of Rating for Overall World Bank Performance Rating: Satisfactory 70\. The overall rating of World Bank performance is based on ratings for quality at entry and during supervision, considering the overall satisfactory outcome rating\. Although it was a learning project, the World Bank team remained vigilant in project monitoring and took measures to adjust implementation design to address the learning elements\. The measures taken were justified and supported the project in achieving its PDO\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory 71\. The project was critically needed in Bangladesh, and the Government considered the project to be of high importance\. The Government demonstrated strong commitment to the project and consequently, the project started disbursing shortly after signing\. The MoEF provided clearance to the AF as part of the Management Committee and hosted wrap-up meetings at the end of each implementation support mission\. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 72\. Implementing agency performance is rated Satisfactory\. The PMU has been actively involved in appraising the proposals, preparing all technical documents as required and guiding the PIPs during field implementation\. Although certain procedures had to be modified to meet World Bank standards with regard to both financial management and procurement, this was done relatively quickly\. The PKSF’s role in adapting the RBM to suit the CCCP was a key factor behind smooth project implementation supervision\. The PKSF and the PMU also developed, at the very early stage of the project, a number of guidelines for these functions as well as for environmental and social safeguards, which further helped in ensuring smooth project implementation\. A GRM was put in place but was used sparingly owing to good preparations\. The PMU staff were quick to respond to senior management and World Bank guidance (for example, on increasing supervision 18 of slow-performing PIPs in mid-2015) and spent a considerable time of their person-months in the field conducting site visits, monitoring progress, problem shooting, and finding solutions with the communities and the PIPs (for example, the PKSF organized seminars on desalination plants with relevant PIPs to facilitate a better understanding of the desalinization technology and to find the best design option, which was finally adapted by the project)\. There were no legal issues, staff changes were not a hindrance to implementation, and the same project director continued for most of the project’s lifetime\. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 73\. Given that the performance of the implementing agency has been rated Satisfactory consistently, there were no delays from the Government on financing, and all project targets were met and or surpassed, the borrower’s overall performance is rated Satisfactory\. 6\. Lessons Learned 74\. As an innovative project, the CCCP has now yielded a rich storehouse of knowledge on the technical side of subprojects\. These lessons are available in detail with the PKSF (soon to be uploaded on the CCCP website) and contribute significantly to the knowledge available on climate-resilient livelihoods\. The project’s implementation generated a number of overarching lessons, among which the ICR team shares the following most significant ones\. • IGAs merging innovations and indigenous knowledge received the most amount of traction\. Beneficiaries were also interested in receiving project interventions once their basic life needs were met (for example, shelter, and basic income)\. Only when these two conditions have been met can they start thinking ‘out of the box’\. Once there, communities and households are very receptive to new initiatives and good ideas are replicated by neighbors\. • Community contribution is a key factor behind continued engagement and project sustainability beyond closing\. The fact that both PIPs and communities contributed their own resources to their respective projects and activities was a significant factor behind project success\. This also proved to be an essential factor in securing ownership and thus success of the project\. • Awareness building is more important than was initially thought\. People’s concept of climate risks and increasing vulnerability has to be assessed as part of project interventions\. For example, before the NGOs got there, for many beneficiaries, climate consequences were not laid out in terms of increasing damages/risks to their livelihoods\. Without this conceptual linkage, their participation would not have been as complete as it has been\. Building climate resilience in highly vulnerable and poor communities depends on the communities first understanding that instead of responding to almost yearly disasters, they need to respond to permanently new and different climatic conditions\. This shift in mind-set is important as a base for discussing and finding new climate-resilient activities\. Based on an improved 19  understanding of the climate challenge, new and more climate-resilient initiatives become more easily accepted and can spread fast as demonstrated in this project\. • Stringent supervision has no substitute and must acknowledge field-level complexities\. It was found during field supervisions that there were incidents of rusting in the corrugated iron sheets used for the sanitary latrines in the salinity-prone areas\. The type of metal sheet was changed and the problem was solved\. This led the PKSF to introduce a new guarantee condition (defect liability period clause) with contractors to ensure that they used high-quality material\. • M&E needs careful attention at the design and the implementation stage\. This lesson might be an old worn one but is no less significant when the exact project beneficiaries and activities are to be finalized after project effectiveness\. It is recommended that project design allows an RF and baseline refinement, and adequate resources must be allocated for M&E training and date collection when a project involves so many different partners with varying capacities\. 7\. Comments on Issues Raised by Grantee/Implementing Agencies/Donors (a) Grantee/Implementing Agencies 75\. No specific issues were raised\. (b) Cofinanciers/Donors 76\. BCCRF donors visited the project in the field on a few occasions and expressed their satisfaction with progress\. They were briefed regularly at the end of every implementation supervision mission\. All copies of Aide Memoires were shared with them as well\. (c) Other Partners and Stakeholders 77\. No specific issues were raised\. 20 Annex 1\. Project Costs and Financing (a) Project Cost by Component (in US$ Million Equivalent) Appraisal Estimate Actual/Latest Estimate Percentage of Components (US$, millions) (US$, millions) Appraisal Component 1\. Community Climate 10\.40 11\.04 106\.15 Change Fund Component 2\. Knowledge Management, 0\.44 0\.45 Monitoring and Evaluation, and 102\.27 Capacity Building Component 3\. Project Management 1\.66 1\.51 90\.96 Total Baseline Cost 12\.50 13\.00 Physical Contingencies 0\.00 0\.00 0\.00 Price Contingencies 0\.00 0\.00 0\.00 Total Project Costs 12\.50 13\.00 — Total Financing Required 12\.50 13\.00 — (b) Financing Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Cofinancing Appraisal (US$, millions) (US$, millions) Trust Funds 0\.00 0\.00 Bangladesh MDTF for Climate Change (Bangladesh Climate Change Resilience 12\.50 13\.0 104 Fund) 21 Annex 2\. Outputs by Component 1\. Subproject screening\. By December 2012, a total of 498 PCNs were received\. The PKSF screened all the 498 PCNs based on required criteria and prepared a short list of 150 NGOs\. A TRC was formed\. After the preliminary screening of PCNs, PKSF officials visited all short-listed PIPs to verify their field existence\. A workshop was organized for short-listed NGOs to help them submit detailed and high-quality subproject proposals\. The PKSF’s internal team evaluated the detailed project proposals with support from the TRC (which was comprised of international experts), obtained fiduciary and technical clearance from the World Bank and approval from the PKSF Governing Body\. In this process, a total of 41 sub-grants were finally awarded over about two years (in three phases starting from July 2013 until October 2014)\. Fund disbursement to the PIPs was done according to the Operations Manual developed for the project, as well as fiduciary requirements of the World Bank\. The PKSF signed contracts with each PIP, and based on receipt and review of each PIP’s yearly action plan (with costed indicative budget), the PKSF transferred the grant funds\. Each PIP received a 35 percent advance (which was adjusted during the second last quarter before project closing) and received the rest of the designated funds on a reimbursement basis\. Before processing the reimbursement, the PKSF reviewed their action plans every quarter and did field checks (cross-checking vouchers)\. Their findings were then reviewed by the PKSF’s audit department, and then the funds were reimbursed to the PIPs\. 2\. Subprojects implemented\. Major field-level adaptation activities carried out by the PIPs included raising plinths, courtyards, and community grounds above the flood level (including earth filling and turfing to make them resilient to future flood events); installation of shallow and deep tube wells considering local climate risks and water tables; pond and canal re-excavation to ensure water supply for drinking, irrigation, and domestic purposes; installation of water purification systems for safe drinking water in highly saline areas (pond sand filters and desalination plants); RWHs for individuals and communities; installation of sanitary latrines; installation of improved cook stoves; demonstration of climate-resilient crops; and providing technical support and training support to beneficiaries on IGAs (for example, goat rearing, crab fattening, and vermi-composting)\. Table 2\.1\. Project Budget and Benefits at the Outcome Level in the Three Climate Zones in Component 1 Saline Area Flood Area Drought Area CCCP 3,590,688 4,326,525 2,467,700 contribution in US$ (Total: 10,384,925) Protected 5,759 families are now protected 7,037 families are now house from storm surges and can protected from floods and produce vegetables round the can produce vegetables year\. round the year\. 26 community grounds will provide shelter to 5,000 people during floods Livelihood 3,475 families are now capable 6,029 families are now 5,811 families are now (space wise and technically) of capable (space wise and capable (space wise and rearing more than 35,000 goats technically) of rearing technically) of rearing more and sheep in slatted houses\. more than 70,000 goats and than 60,000 goats and sheep sheep in slatted houses\. in slatted houses\. 23  Saline Area Flood Area Drought Area 5,815 families are now capable 1,187 families are now (space wise and technically) of capable (space wise and 1,930 families are now rearing more than 100,000 birds technically) of rearing capable (space wise and in poultry sheds\. more than 20,000 birds in technically) of rearing more 643 families are now capable poultry sheds\. than 40,000 birds in poultry (technically) of fattening crabs\. 650 families are now sheds\. 720 families are now capable of capable of producing 277 families are now producing vegetables and crops vegetables and crops with capable of producing with organic fertilizers\. organic fertilizers\. vegetables and crops with organic fertilizers\. Water At least 10,000 families have At least 5,000 families At least 18,000 families access to safe drinking water have access to safe have access to safe drinking through deep tube wells\. drinking water through water through shallow tube A total of 403 tube-well deep tube wells\. wells\. platforms with soak wells No less than 10,000 A total of 1,647 tube-well working for recycling used water, families have access to safe platforms with soak wells aquifer recharge, and irrigation drinking water through working for recycling used for homestead gardening\. shallow tube wells\. water, aquifer recharge, and 82 pond sand filters serve sweet A total of 3,113 platforms irrigation for homestead water to 4,000 families\. protect tube wells from gardening\. 83 ponds and canals serve intrusion of polluted water\. Re-excavated ponds provide adjacent communities\. 2 of the 1,350 families with water canals help 300 farmers in for household uses and agricultural cultivation during the small-scale irrigation\. dry season\. 2 deep tube wells allow 195 RHW systems are capable to farmers to irrigate a total of reserve at least 2\.0 million liters 65 acres of land round the of rainwater in a season, which year\. can serve 2,500 families during the dry season\. The desalination plants produced 150,000 liters of pure drinking water a day that can serve at least 15,000 families\. Health, At least 10,000 members are now At least 9,000 members are At least 12,000 project education, and using sanitary latrines and are now using sanitary latrines participants are now using sanitation knowledgeable about hygiene and are knowledgeable sanitary latrines and are practices\. about hygiene practices\. knowledgeable about Two community latrines are used 29 community latrines are hygiene practices\. by around 100 people daily\. used by around 3,000 Approximately 240,000 Approximately 400,000 poultry people daily\. poultry and livestock and livestock vaccinated over the Health camps served no vaccinated over the project project period\. less than 20,000 patients period\. Approximately 6,000 people are over the project period Approximately 35,000 no more exposed to indoor air Approximately 200,000 people are no more exposed pollution due to the installation poultry and livestock to indoor air pollution due to of improved cooking stoves\. vaccinated over the project the installation of improved period\. cooking stoves\. Approximately 17,000 people are no more exposed to indoor air pollution due to the 24  Saline Area Flood Area Drought Area installation of improved cooking stoves\. At least 1,225 families and 4,500 children are now able to work and read at night due to installation of the solar home systems\. Capacity A total of 11,415 project A total of 8,539 project Training completed for 402 building participants are now familiar participants have now got batches that covered with climate change and have a different trainings\. different IGAs and climate technically relatively better Now PIP staff and project change issues\. A total of understanding of different participants technical 10,024 project participants adaptation options\. know-how are better to got different trainings\. Now PIP staff and project manage different Now PIP staff and project participants technical know-how adaptation activities of participants technical know- are better to manage different different climatic risk how are better to manage adaptation activities of different zones\. different adaptation climatic risk zones\. activities of different climatic risk zones\. Agricultural Minimum 250 farmers are At least 250 farmers are 50 farmers are producing and special cultivating salinity-tolerant crops producing flood-tolerant drought-resilient fodders\. interventions round the year and 50 households crops round the year\. At least 690 farmers are rear Koyel birds, an alternative practicing salinity-tolerant IGA that has significantly crops round the year and improved livelihoods in the 200 households are rearing salinity-prone areas\. cows in an improved method\. Community All project participants are All project participants are All projects participants are mechanism actively involved with 616 actively involved with 629 actively involved with 479 CCAGs and 649 activity CCAGs and 1,413 activity CCAGs and 1,329 activity maintenance committees\. maintenance committees\. maintenance committees\. A total of BDT 20\.291 million A total of BDT 26\.878 A total of BDT\.14\.274 was invested by communities to million was invested by million was invested by implement project activities\. communities to implement communities to implement A total of 14,000 meetings were project activities\. project activities\. held by the CCAGs\. A total of 15,000 meetings A total of 11,000 meetings were held by the CCAGs\. were held by the CCAGs\. Crab Fattening Case Study 3\. A CCCP beneficiary received 120 yards of nylon net, 120 yards of bamboo fencing (locally called ‘Pata’), and technical training on the crab culture\. He stocked crab fingerling (each weighing over 100 g) at the cost of BDT 175–200 per kg and provided crab feed for 15 days\. The cost and return to the beneficiary is shown in table 2\.2\. Table 2\.2\. Crab Fattening Profits Bangla Month Production Cycle Cost (BDT) Gross Return (BDT) Gross Profit (BDT) 1st 1,200 2,800 1,600 Poush 2nd 800 1,800 1,000 1st 900 2,300 1,400 Magh 2nd 1,000 2,500 1,500 Falgun 1st 1,050 1,600 550 25 Crab Culture Case Study 4\. A CCCP beneficiary stocked 10 kg small crab (10–12 per kg) at the price of BDT 90–120 per kg in a saline pond adjacent to his house for 120 days\. He fed the crabs with tilapia and silver carp fish at the rate of 5 kg per day\. He sold crabs (more than 200 g size) at BDT 500 per kg for male and BDT 1,000–1,400 per kg for female crabs\. On average with an investment of BDT 1,000, he got a return of BDT 6,000 per production cycle of 120 days\. Duck Rearing Case Study 5\. Diglarkanda is a poverty-stricken village of Noril Union of Haluaghat Upazila under Mymensingh District\. The area remains inundated for five to six months every year\. The beneficiary, Manikjan, is the mother of four children, with a day laborer husband\. They have no cultivable land and are often in debt\. During lean periods, her husband is away from home in search of employment\. After joining a CCCP CCAG, Manikanjan started duck farming with 40 Kagi Campbell ducks\. She received duck rearing training from the CCCP\. At project closing, she had 100 ducks\. She now sells 50 to 60 eggs at over BDT 500 daily\. After covering the production expenses, she earns a net profit of BDT 50–60\. With abundant natural feed, Manikjan is now planning to expand her duck farm size further\. Since starting duck rearing, all four of her children go to school\. Manikjan expects that her husband will not have to migrate as a day laborer during the lean period\. Her family is no longer dependent only on her husband\. She is now confident of coming out of the poverty cycle\. 26 Annex 3\. Economic and Financial Analysis 1\. Household income increases\. According to the household survey in the final project evaluation report, a significant difference in economic return from the IGAs was observed\. Monthly income had risen due to the CCCP’s IGA interventions in all three project regions, with the highest impact being felt in the draught-prone areas (see table 3\.1)\. Table 3\.1\. Comparison of Monthly Income Increases in the Different Project Areas Project Location/Income Flood (n = 164) Salinity (n = l31) Draught (n = 145) All Areas (n = 440) Source Mean/ Mean/ Mean/ Mean/ SD/Range SD/Range SD/Range SD/Range Median Median Median Median From main occupation (for example, day labor 5,388\.7 3,692\.55 6,386 3,470 5,411 3,924 5,683 3,727 and farming—non-CCCP income) CCCP-assisted IGAs 1,353 1,975 1,287 2,333 1,417 1,857 1,351 2,064 Others (for example, 100 to 100 to 100 to homestead gardening and 1,350 2,175 1,852 1,500 1,500 25,000 10,000 25,000 farming) Source: Household survey 2016\. Note: n = sample size\. 2\. According to final project data, about 72 percent of the direct beneficiaries had undertaken different types of climate-resilient IGAs\. A majority (60 percent) of the beneficiaries are involved with goat rearing, while 32 percent are involved with poultry rearing, and 20 percent are cultivating vegetables\. Table 3\.2 presents income data from the final evaluation report\. Crab culture has the highest return (in saline areas only) while goat rearing was found most appropriate for all areas\. It was observed by the PKSF that incidence of different goat diseases (for example, peste des petits ruminants, Goat Pox, and Pneumonia) reduced from 20 percent to 6\.5 percent in the CCCP working areas\. As the goats became healthier and more productive, goat population of the areas increased by over 50 percent\. Table 3\.2\. Comparison of IGAs in Terms of Average Investment and Return Duck/Poultry Slatted house for Average Crab Culture Vermi-compost Pigeon Goat/Sheep Rearing Total capital required for the IGA 6,500 7,360 9,400 6,224 (BDT) Funding from the CCCP (BDT) 5,638 5,998 9,000 5,679 Own investment (BDT) 430 1,140 500 750 Monthly income (BDT) 712 1,718 5,250 990 Source: Household survey 2016\. 27 3\. Cost calculations available with the PKSF suggest that one slatted house (costing about BDT 6,500 on average, which is US$81, which covers the slatted house, capacity building, and vaccinations) can on average hold eight goats (which would cost about US$600 from beneficiary contributions that they got through microcredit10)\. At the end of year 1, 8 goats on average will produce 8 kids each, totaling 64 goats\. Assuming 10 percent mortality (which is a reduction from about 80 percent mortality), this would mean that the household would have 57 goats\. At the end of year 2, when the goats are mature (weighing 5 kilos each minimum), these can be sold at the market (BDT 700 per kg price estimate), generating about BDT 199,50011 (US$2,493) in income in year 2, against an investment cost of US$681\. Now, with a very rough and generous estimation of running costs over these two years (time, labor, opportunity costs of goat shed land, vaccination, fodder, trips to the market, and so on based on similar activities by the PKSF) of about BDT 174,500, an average householder is earning BDT 25,000 (US$312) in year 2\. A total of 15,315 people (mostly women) have reared goats under this project, and thereby it can be estimated that the total additional income from goat selling is BDT 372,875,00012 (US$4\.78million)\. Given that the CCCP total cost is US$13 million, just from the goat plinth raising IGA, a rough calculation of about 35 percent return can be made\. This is, of course, if each beneficiary continues with the goat rearing practice in year 3 and based on the rough estimations made\. The PKSF has case studies of income impacts due to IGAs, and some are presented in annex 2\. 4\. Food security\. About 68 percent of surveyed beneficiary households reported that production and income from agriculture had increased\. Production and consumption of eggs and meat increased owing to backyard poultry and duck farming\. In many cases, this has been an unintended positive consequence of more secure homesteads (see the next paragraph)\. Vegetable production on homesteads has significantly improved diversity in the diet as well as food availability for beneficiary households\. Access to increased quantities of more varied food is a good indicator of increased food security\. 5\. Improved homesteads (flood and saline zones)\. About 46 percent of the beneficiaries made physical changes to their houses after joining the project\. About 77 percent raised their homesteads through earth filling\. About 87 percent beneficiaries took up homestead tree plantation\. The CCCP found that raising plinths in the low-lying char lands and coastal areas is a very effective adaptation activity\. The project raised cluster-based homesteads instead of single houses\. As per the guideline of the CCCP, a cluster must have at least four households because raising a large space is more sustainable than a smaller one\. In addition, cluster-based raised homesteads work as flood shelters during floods\. The participants get multiple opportunities from this single intervention\. They can grow vegetables round the year, which they could not do earlier\. They prepare seedbeds on the raised plinth during floods so that they can transplant immediately after receding of flood water\. Their poultry and livestock are safe from floods, which they used to sell at a relatively cheap price during floods\. It is important to note that other flood-affected people from surrounding areas now take shelter on the cluster-based raised plinths\. In addition, conversations with the PIPs reveal that cluster dwellers are able to establish a social network within the cluster and can exchange daily necessary commodities during emergency periods that they could not do before; beneficiaries planted fruit and other trees by themselves on a cluster-based 10 Microcredits were not offered in the project\. 11 Breakdown: 57 goats × 5 kg × BDT 700 per kg = BDT 199,500\. 12 Breakdown: 15,315 beneficiaries × BDT 25,000 = BDT 382,875,000\. 28 raised plinth that helped meet nutrition needs, earn extra money, and protect the homestead from soil erosion; having a secure home enables the dwellers, especially women, to engage in income- earning activities such as poultry, cattle rearing, and vegetable cultivation (not necessarily as part of the project)\. The clusters of houses with raised plinths have served as flood shelters for people and livestock during the floods of 2015 and 2016, saving not only the people but also their livestock and thereby increasing their ability to get back to normal living conditions very soon after the flood was receded\. During the ICR field visits, beneficiaries mentioned the importance of receiving technical guidance on how to do something better, over the grant received\. They also mentioned increased feelings of security, economic independence, and a sense of hope\. These aspects cannot be monetized\. 6\. Access to clean safe water, health, and hygiene\. No data are available on the health impacts of the CCCP’s safe drinking water and sanitary latrine interventions\. However, the household survey shows that the project has installed about 1,941 RWH systems at the household level and over 12 community RWH systems\. All together these RWH systems have the capacity of 1\.2 million liters of storage of rainwater\. Only 9 percent of beneficiary households had access to sanitary latrine at the beginning of the project, but owing to project interventions, access to sanitary latrines has been increased to 51 percent\. As a result, there has been a significant reduction of disease incidences compared to the baseline survey and an example is the prevalence of diarrhea that has been reduced from 42 percent at the beginning of the project to 16 percent\. Although solid data demonstrating improved health and hygienic conditions are not available, interviews, in particular with women, clearly demonstrate the positive effects of the project with regard to environmental health\. 7\. Knowledge generation\. A dedicated web page, several publications, seminars and workshops, exposure visits, and reports produced by the PKSF and PIPs have largely contributed to building a knowledge base, which is available to all, nationally as well as internationally\. Different tools and guidelines produced by the project as well as reports from seminars and workshops are important reference material for future project planning and implementation for government and nongovernment organizations alike\. The CCCP also adopted a GIS-based data management and monitoring system\. GPS coordinates of each subproject activity and its households were incorporated with the CCCP community investment plan\. Maps for each unit of activities were produced to understand the spatial distribution of all activities under the CCCP\. A Keyhole Markup Language (KML) file of the database was produced to link it with Google Earth\. Each activity is linked with Google Earth and is accessible to all\. The KML file has been uploaded on the PKSF website (www\.pksf-cccp\.bd\.org)\. The benefits of these achievements have not been monetized\. 29 Annex 4\. Grant Preparation and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending/Grant Preparation Burhanuddin Ahmed Consultant GHNDR Financial Management Md\. Akhtaruzzaman Consultant GSU06 Social Safeguards Teen Kari Barua Consultant GSU06 Social Safeguards Angie Harney Program Assistant SACBD Program Assistance Marghoob Bin Hussein Senior Procurement Specialist OPSPF Procurement Sr Natural Resources Management Yuka Makino GSU18 TTL Specialist GWASS - Khawaja M\. Minnatullah Sr Water & Sanitation Specialist Adviser HIS Jose Ramon R\. Pascual IV Senior Counsel LEGCF Legal Nadia Sharmin Senior Environmental Specialist GSU18 TTL Chau-Ching Shen Senior Finance Officer WFALN Financial Management Supervision/ICR Shahpar Selim Environmental Specialist ICRR TTL (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$, thousands (including Travel No\. of Staff Weeks and Consultant Costs) Lending Total: 0\.00 Supervision/ICR Total: 0\.00 Note: the project was 100% trust funded, including supervision costs 30 Annex 5\. Beneficiary Survey Results Not applicable 31 Annex 6\. Stakeholder Workshop Report and Results Findings from Lessons Learned and Way Forward Workshop (September 2016) Overall Lessons Learned 1\. Based on the presentation of all the 41 projects and the discussion with the 18 PIPs, it has become clear that building climate resilience in highly vulnerable and poor communities depends on the communities’ first understanding that instead of responding to almost yearly disasters, they need to respond to permanently new and different climatic conditions\. This shift in mind-set is important as a base for discussing and finding new climate-resilient activities\. Second, building resilience depends on diversifying the income base and thereby the livelihood base\. It is further important to improve what is already being done so that it responds better to the new climatic conditions\. For example, plinth raising must take account of the increasing flood levels and not be based on historic flood data only\. Based on an improved understanding of the climate challenge, new and more climate-resilient initiatives become more easily accepted and can spread fast as demonstrated in this project\. 2\. Two of the most popular initiatives have proven to be plinth raising and construction of slatted goat sheds\. It is also important to improve the livelihood conditions at the community level and such improvements must consider the climate factor\. Two of the most appreciated initiatives at the community level are latrines and water supply\. Latrines have been designed to be resilient to rust in saline areas; and they are being built on sites that are not flooded and inundated\. RWH and desalinization plants are very important in salinity areas, and in flood-prone areas, tube wells are installed on raised concrete platforms to avoid unhygienic conditions around them\. To capture these lessons, the PMU is preparing a booklet summarizing the experience of each of the 41 sub- grants\. Vertical and horizontal upscaling of already proven technologies facilitated exchange visits, crab fattening as a new and popular alternative IGA in the salinity risk zone, and combining production of vermi-compost with homestead gardening\. Preference of Activities 3\. It was clear from the workshop that responding to the climate challenge is different in different risk zones and dependent on the socioeconomic condition of each community\. For example, in flood-prone areas, plinth raising is the number one priority\. It is difficult for communities or households to focus on other things before they are assured of their homesteads not being destroyed by floods\. However, once this is secured, they are quick to take the next step, for example, taking up vegetable production on the raised plinths under their own initiative\. In the salinity zone, access to fresh water is a high priority and slatted sheds for goats and ducks are very popular as IGAs\. In the drought zone, introduction of drought-resistant varieties of crops combined with adjustments in the cropping pattern and introduction of slatted sheds for goats are high- priority activities\. Sustainability 4\. The key to sustainability is that communities and individuals (households) are able and willing to maintain structures and practices that have been implemented\. At the individual level, activities that have a clear economic added value are easily sustained\. Their value is further proven 32 by the fact that in many cases those activities have a strong footprint of demonstration effect\. The households that are not beneficiaries of the project decide to do the same thing\. Clearly, this happens mostly with activities that do not require substantive capital investments, such as growing vegetables on raised plinths or construction of raised and slatted sheds for goats and ducks\. The latter improves the hygienic conditions and reduces sickness and death considerably\. In one case, the increased number of goats in a community has even triggered a market in fodder for goats, a positive economic spin-off not anticipated\. Production of vermi-compost is another example of an activity that has ‘taken off’ based on its inherent economic benefit\. 5\. With regard to community-based activities, sustainability requires a functioning community mechanism that is able to take responsibility for maintenance of shared investments or for maintaining ties with a service provider, such as a veterinary service that can be called upon to visit the community at agreed times to vaccinate livestock\. The PIPs have assisted communities in establishing such contacts with upazila and Union Parishads that are regularly informed of project activities and ready to provide agreed-upon services upon request and for a fee\. In one case, a community decided to construct five-foot bridges with its own resources to facilitate its communication with other communities\. However, community-based activities require a solid, functioning community mechanism, and being aware of this, some PIPs will continue to support communities in this respect\. 33 Annex 7\. Summary of Grantee's ICR and/or Comments on Draft ICR Summary of the PKSF’s project completion review: 1\. The CCCP is an adaptation project that aims at enhancing the capacity of selected communities to increase their resilience to the adverse impacts of climate change\. Originated from the BCCRF, the CCCP is mandated to channel 10 percent of the multi-donor trust fund through NGOs for community-level climate actions\. The CCCP introduced a new and innovative approach to finance community-based adaptation interventions in selected climate-vulnerable areas by building the institutional capacity of the PKSF to administer a climate change adaptation fund\. The PKSF received a total of US$13 million under two separate agreements signed with the BCCRF for implementation of the CCCP\. The project had also received contribution from the PIPs and from community people directly involved with the project\. Community contribution was 6\.69 percent, which has made the project unique\. The CCCP is being implemented in 36 upazilas (sub- district) under 15 districts of Bangladesh\. The project focuses on three climate risks that are prevalent in Bangladesh: salinity, drought, and flood\. A total of 41 PIPs are implementing 41 subprojects under the CCCP\. Relevance of the PDO 2\. The CCCP is an attempt to support the implementation of the BCCSAP 2009 developed by the Government of Bangladesh\. Furthermore, the CCCP supports one of the four strategic objectives of the World Bank’s CAS for Bangladesh (2011–2014), specifically strategic objective 2: ‘Reduce environmental degradation and vulnerability to climate change and natural disasters’\. Participation 3\. Beneficiaries of the CCCP are the poor and extreme poor population of the country who are the most vulnerable due to the adverse impacts of climate change\. Beneficiaries of the project were selected through following a rigorous interactive process at the grassroots level\. The number of direct beneficiaries under the CCCP is about 43,189 and community beneficiaries are about 94,415\. About 93 percent of the project direct beneficiaries are female\. The CCCP through the PIPs has been able to form 1,724 functional community groups, also called CCAGs, to respond effectively to climate risks\. Community groups are functional as they are holding regular meetings, managing activities undertaken by the CCCP\. Efficiency 4\. The project has achieved all the target values against the indicator set for the Results Framework and Monitoring developed for the CCCP by the World Bank\. About 97 percent of the beneficiaries surveyed during the final evaluation have admitted that they have got expected results from intervention of the project\. 5\. The CCCP aims to increase the resilience of the climate-vulnerable communities through establishment of an effective grant financing mechanism to channel funds to eligible NGOs\. The PKSF is found successful to meet the intermediate results indicators for Component 1 (to award 34 40 sub-grants)\. As of June 2016, The PKSF has been able to disburse BDT 763\.4 million, which is about 92 percent of the target\.13 6\. The CCCP was found successful in promoting sustainable adaptation practices to address specific climatic risks in three risk zones\. Selected adaptation practices are well accepted and being practiced at community and household levels\. All the beneficiaries were found to have applied at least one adaptation practice identified by the CCCP\. Though the CCCP could not reach the target for the initial three years of project implementation, it has successfully overcome and achieved its stated target mentioned in the PAD’s Results Framework and Monitoring for adoption of sustainable practices\. It seems that adoption and practice of sustainable adaptation practices by the targeted beneficiaries of the CCCP has gained momentum in year 4 (2016)\. Among 41 PIPs, communities of 34 PIPs applied sustainable adaptation practices to address the specific climate change risk\. The remaining 7 PIPs are in the process of applying sustainable adaptation practices\. Adoption of slatted housing for goats was found highest in all three climate risk zones; 15,315 households under the project were supported\. Household plinth raising was adopted by 32 percent of beneficiaries in flood and salinity zones\. 7\. The CCCP can be termed as an umbrella project; all the subprojects under the CCCP have specific objectives to achieve, contributing toward the CCCP objectives\. The CCCP M&E data analysis revealed that 35 subprojects under implementation in the selected communities are on track to achieve the targeted objectives\. It has achieved 86 percent against the set target of 75 percent mentioned in the Results Framework and Monitoring of the PAD (as of June 2016)\. 8\. The CCCP substantially contributed to knowledge management through documentation, publication, and dissemination\. It has developed nine different manuals for proper execution of the project\. These guidelines helped the PIPs implement the subprojects at the field level\. The project has its own website\. It also used virtual reporting systems for all PIPs through use of ATOM\. 9\. A PMU was established to administer project funds and to monitor implementation performance of activities by the CCCP\. The PMU has a total of 14 staff headed by a project coordinator\. The PMU team has provided the technical support to the PKSF to manage the CCCP and monitor the implementation of subprojects\. Despite limited human resources, the CCCP PMU delivered all the activities planned in the project\. The small team has acted as planner, implementer, trainer, and many other roles for the success of the project\. Effectiveness and Impacts 10\. The CCCP has taken an innovative strategy for increasing household income through promotion of different IGAs by the project beneficiaries\. The project was successful in the promotion of technologies to protect productive assets of its beneficiaries that has contributed toward increased income and livelihood activities\. About 72 percent of the direct beneficiaries had undertaken different types of IGAs\. Majority (60 percent) of them are involved with goat rearing; 13 The review was done in June 2016, and the final disbursement numbers are higher, as reported earlier in the ICRR\. 35 while 32 percent are involved with poultry rearing, 20 percent are cultivating vegetables\. On average, the CCCP beneficiaries have earned BDT 9,000 from the IGAs they were implementing during the project period\. Monthly average income from IGAs is BDT 791\. Thus, the IGAs promoted by the CCCP are contributing toward poverty reduction\. The CCCP was also found successful in the promotion of nonconventional IGAs such as fodder production\. Beneficiaries practicing the IGAs with improved technologies were found to have successfully increased their family incomes\. 11\. The food security status of the beneficiary households improved after participation with the CCCP\. It is observed that availability of food increased due to increased production of crops, livestock, and fish\. Production and consumption of vegetable increased from homestead gardens\. Consumption of eggs and meat increased from backyard poultry and duck farming\. About 68 percent of the respondent households opined that production and income from agriculture has increased after involvement with the CCCP\. This can be termed as a significant impact of the project on food security\. 12\. About 46 percent of the beneficiaries made physical changes of their houses after joining the CCCP initiatives\. Among them, 77 percent raised their homesteads through earth filling\. Tree plantation was also observed as a significant change of homesteads (87 percent)\. Plinth raising has created the opportunity for the beneficiaries to produce vegetable and to rear livestock\. These clusters of houses with raised plinths served as flood shelters during the floods of 2015 and 2016\. The people of the areas have also saved their livestock using the raised plinths\. 13\. Considering the local context, the CCCP has taken up different water-related interventions\. The project has identified different and appropriate technologies for different climate risk zones\. All these water-related interventions significantly increased the availability of safe drinking water\. The CCCP has achieved its stated target (70 percent) to ensure safe drinking water\. 14\. This is difficult to ensure safe drinking water for all in the saline-prone coastal areas as in most of the areas tube-well water is not suitable for drinking or cooking\. The CCCP has implemented different alternative options in coastal areas\. These are pond sand filters, RWH at household and community levels, and desalination plants to improve drinking water availability\. It is estimated that the project has installed about 1,941 RWH systems at the household level and over 12 community RWH systems\. All together, these RWH systems have the capacity of 1\.2 million liters storage of rainwater\. However, it is found that rainwater alone is not sufficient for ensuring safe drinking water\. 15\. The CCCP has successfully promoted good practices for health and hygiene among the beneficiaries\. Only 9 percent of households had access to sanitary latrine at the beginning of the project\. Due to intervention of the CCCP, access to sanitary latrine has been increased to 51 percent\. The project provided 6,615 sanitary latrines currently used by around 21,000 families\. 16\. The CCCP has implemented various interventions to improve environmental health\. Use of safe drinking water, sanitary latrine, and improved cooking stoves are contributing toward improved environmental health for the project beneficiaries\. Significant reduction of disease incidence compared to the baseline survey was found for diarrhea\. Prevalence of diarrhea was 42 percent at the beginning of the project and has reduced to 16 percent\. About 13,000 households in 36 all risk zones were given improved cooking stoves through the CCCP\. This intervention is supposed to reduce indoor air pollution, thus saving women and children from respiratory diseases\. 17\. The CCCP has enormously contributed to knowledge generation on adaptation to climate change\. A dedicated web page, publications, seminar and workshops, exposure visits, and reports produced by PIPs have largely contributed to generating knowledge on climate change\. Different tools and guidelines produced would also be very useful in future project implementation by government and nongovernment organizations\. Sustainability 18\. The CCCP is a community-based project\. The project has promoted adaptation activities that have been proved sustainable and are already being practiced by community\. The project has been implemented through capable NGOs that have long been involved in the project areas\. Most of the PIPs are financially sustainable and have large microcredit programs\. It can be assumed that sustainability of adaptation actions at the beneficiary level would sustain as there is financial contribution from the beneficiaries for all the activities\. Particularly, the IGAs would sustain as these are producing economic returns\. However, the CCCP has developed an exit strategy through a workshop held during June 22–23, 2016\. Different activities have been suggested and agreed upon to ensure sustainability of the CCAGs\. They include preparation and implementation of an adaptation plan for action, integrating CCAGs with microcredit programs to have access to seasonal loans, and so on\. Recommendations 19\. The evaluation team proposed the following recommendations based on the findings of the evaluation study: • The PKSF should consider new projects to cover more climate-vulnerable areas and continue its efforts to establish itself as a National Implementing Entity of Green Climate Fund under the United Nations Framework Convention on Climate Change\. The PKSF may also try other sources of funds including Bangladesh Climate Change Trust Fund and multilateral development banks such as the World Bank and Asian Development Bank\. • In future projects, promotion of local/indigenous practices as well as new improved technologies should be considered\. Adaptation activities might be considered based on different sectors, such as livelihood, agriculture, water, energy, health, and so on\. Good practices for adaptation for specific sectors might be promoted through funding of innovative projects in different climate-vulnerable areas of Bangladesh\. • Future projects by the PKSF should consider promotion of solar home systems\. • In future project interventions, awareness raising and capacity building might be given due attention\. 37  • The PKSF should consider linking the community groups to Government agencies, so that they can tap resources as well as establish networks for their development\. • In future projects, the PKSF may also consider other agriculture-related adaptation options such as water saving technology, as well as other management practices\. Community seed banks and other similar risk reduction options might be introduced in future projects\. • In future projects, the PKSF may consider market linkage for the beneficiaries to have stable incomes from their IGAs\. • The PKSF should consider long-term projects for climate change\. 20\. The evaluators consider the project implemented by the PKSF has achieved its stated objectives, but the achievements shall not last long if there is no further effort to sustain this\. It is expected that the global community as well as the Government of Bangladesh, being the initiator of the CCCP, would be able to contribute to developing resilient communities through a continuous fund flow\. Comments from the PKSF on the Draft ICR: 21\. Following are the PKSF’s comments on the ICR: (a) The ICRR as a whole looks acceptable to the PKSF\. It has comprehensively detailed the key factors affecting the implementation and the outcomes of the CCCP, assessed the outcomes and impacts of the Project and also assessed the World Bank’s and the PKSF’s performances\. It has duly recognized the PKSF’s innovation of capturing community-based economic, social and environmental resilience against the environmental hazards\. It is also recognized the PKSF’s role in adapting the Results- Based Monitoring (RBM) system to suit the CCCP, which was a key factor behind the smooth project implementation supervision\. (b) The PKSF, however, differs on the Overall Outcome Rating in the ICRR for the CCCP as “Satisfactory”\. The Results Framework Analysis of the ICRR shows that the CCCP achieved scores ranging from 100-200% (average 117) on 13 different outcome indicators\. It exceeded its target on almost all indicators\. Therefore, we expect that the outcome rating of the CCCP would be “Highly Satisfactory”\. 22\. We thank you for your cooperation in successfully implementing the CCCP and request you to review the Overall Outcome Rating in the ICRR\. 38 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders 23\. The draft ICR findings were presented to the BCCRF donors during a briefing meeting\. The ICR mission Aide Memoire was also shared with them\. They did not send any comments\. 39 Annex 9\. List of Supporting Documents 1\. Project Appraisal Document 2\. Aide Memoires and ISRs 3\. Management Letters after implementation of support missions 4\. Bangladesh Country Partnership Strategy FY2011–2014 (extended to FY2015) 5\. Bangladesh Country Partnership Framework FY2016–2020 6\. Financial Management Manual 7\. Environmental and Social Management Framework 8\. The PKSF’s Project Completion Report 9\. BCCRF Implementation Manual and Grant Agreement 40 MAP CCCP: Drought Area Interventions Source: Cartography Unit, World Bank 41  CCCP: Flood Area Interventions Source: Cartography Unit, World Bank 42  CCCP: Saline Area Interventions Source: Cartography Unit, World Bank 43

APPROVAL

P117320

Page 1 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Project Name Region MIDDLE EAST AND NORTH AFRICA Sector Other social services (100%) Project ID P117320 Recipient(s) The Palestine Liberation Organization (PLO) for the benefit of the Palestinian Authority (PA) Implementing Agencies The Ministries of Finance and Social Affairs Ministry of Finance (MOF) Ramallah West Bank and Gaza Tel: (970-2) 297-8846 Ministry of Social Affairs (MOSA) Ramallah – Al-berih – Al-Mobaaden Street West Bank and Gaza Tel: (970-2) 240-5641; Fax: (970-2) 240-5642 Email: info@mosa\.gov\.ps Environment Category [ ] A [ ] B [X] C [ ] FI [ ] TBD (to be determined) Date PID Prepared March 5, 2010 Date of Appraisal Authorization November 2, 2009 Date of RVP Approval March 19, 2010 53928 Page 2 2 Country and Sector Background 1\. The fragile political and security context in the West Bank and Gaza (WBG), with a notable downturn from the beginning of 2006, continues to affect social and economic conditions, and to weaken institutional resilience at the central and local levels\. This continues to be exacerbated by a crippling fiscal crisis caused by a sharp reduction in financial resources, intensified restrictions on the movement of people and goods, the fragmentation of the Palestinian territorial landscape (particularly by the continuing construction of the Separation Barrier and expansion of settlement activity within the West Bank), the isolation of Gaza, bitter internal political divisions and factional infighting\. Social and economic conditions continue to deteriorate, especially in Gaza, which virtually has been closed off from the outside world since June 2007\. With the population growing at approximately 4% per year, and with unemployment and poverty rising, the Palestinian social safety net mechanisms will remain under constant and increasing stress\. 2\. The official poverty rate in Gaza rose from 47\.9% in 2006 to 51\.8% in 2007\. There are no figures available for 2008 and 2009, but given the continued closure of Gaza, poverty figures are likely to be on the rise\. In the West Bank, poverty slightly declined, falling from 22% in 2006 to about 19\.1% in 2007\. The percentage of Gazans in deep poverty also continued to rise, increasing from 33\.2% in 2006 to 35% in 2007\. These rates reflect actual consumption\. If remittances and food aid are excluded and poverty is based only on household income, the poverty rate in Gaza and the West Bank would soar to 79\.4% and 45\.7%, respectively, and the deep poverty rates would increase to 69\.9% and 34\.1%\. This illustrates the high levels of aid dependency in the WBG, especially when taking into account the fact that the wage bill is mainly financed with foreign aid\. 3\. High poverty rates coupled with the global economic and food prices crisis have taken a heavy toll on living conditions in WBG\. The consumer price index (CPI) for food rose by 28% in Gaza and 21\.4% in the West Bank between June 2007 and June 2008\. However, in 2009 the growth stopped and between September 2008 and September 2009, the food price index (FPI) only rose by 0\.98%\. In 2007 and 2008, the increase was nearly double in Gaza compared to the West Bank (16\.27% vs\. 8\.89%) – which reflects the higher costs imposed by the closure restrictions\. 4\. A 2009 joint FAO and WFP survey 1 found that, despite large aid inflows, food insecurity is on the rise in WBG\. Overall, this study found that food insecurity affects 25% of households in the West Bank and 61% in Gaza\. Households with a high proportion of women and children are likely to be more food insecure\. Approximately 56% of income earned in Gaza is spent on food, while in the West Bank the figure is around 49%\. Further, according to the survey, food insecurity in both the West Bank and Gaza is a result of high food prices, livelihoods deterioration/destruction and erosion of coping mechanisms\. In Gaza, import and export restrictions, and increased restricted access to agricultural and fishing areas further undermine the food system, artificially sustained by large-scale emergency food aid\. 1 FAO & WFP - Socio-Economic and Food Security (SEFSec) – Survey Report 1 – West Bank –August 2009, and Survey Report 2 – Gaza Strip – November 2009 (data collected by the PCBS)\. Page 3 3 5\. Gaza has been isolated by a strict closure policy by the Government of Israel (GOI), crippling the local economy and leading to a deterioration of public infrastructure, services which in turn, have resulted in the higher levels of poverty and unemployment\. Under the closure, only basic foodstuffs and other necessities are allowed to enter Gaza and there are no exports\. The lack of spare parts and materials necessary for maintenance of infrastructure have severely impacted the ability to deliver social services – the poor in Gaza are the most affected by this as they have limited ability to seek alternative more costly services\. This further impoverished Gaza population has become ever so helpless as they are mostly dependent on international aid\. 6\. Average daily wages have not increased as quickly as consumer prices which has had implications on the Palestinians’ purchasing power and living standards\. The hazard of global food price increases is higher due to the added transaction costs of importing food into the domestic market\. All staple foods, such as cereals and pulses, are imported\. The high import dependency for staple foods is compounded by high transportation costs, and the fact that the most economical transport routes are often closed due to Israeli closure restrictions\. Most complementary food commodities are of domestic origin\. Local production of food has been hit by a major climatic shock in recent months (low rain precipitation and irregular distribution of rainfall)\. Although over the past few years consumption levels have remained strong, price increases could threaten the resilience of poorer households\. 7\. In order to cope with the food price increases, 49% of households in the West Bank and 53% of those in Gaza purchase food on credit\. This coping mechanism is nearing exhaustion, and is no longer available to those without a reliable income\. Palestinians have reduced the quantity and the quality of food they consume\. In some households, adults are eating less in order to feed their children\. The consumption of fresh food and vegetables has decreased and currently many Palestinians do not consume fresh, red meat\. The lack of protein and vitamins has increased the prevalence of anemia and other nutrient deficiencies and will likely have long- term health consequences, especially for children\. Objectives 7\. The objectives of the Project are to: (i) mitigate the impact of the continued socio- economic crisis on a subset of the poorest and most vulnerable households; and to (ii) strengthen the institutional capacity of the Ministry of Social Affairs (MOSA) to manage cash transfer programs\. Rationale for Additional Financing 8\. The proceeds from the US$5 million Food Price Crisis Response Trust Fund (FPCR-TF) Additional Financing (AF) have been disbursed\. The negative effects of the food crisis are still very visible and affect a high percentage of the population, particularly in Gaza\. Therefore, this requested funding is urgently needed\. Funds are likely to be disbursed quickly as there are no cash shortages in Gaza\. The Palestinian Authority (PA) is keen on using the Bank’s global Page 4 4 knowledge and financial support to capitalize on and scale up its innovative safety net/coping mechanisms to respond to the food and fuel crisis while readying itself for other crisis situations\. 9\. The proposed FPCR TF AF grant would be used to provide cash benefits to five times the number of poor households (25,000) which received benefits under the original Social Safety Net Reform Project (SSNRP) (5,000) (including these 5,000 households as beneficiaries of the proposed one-time payment) and would allow the Bank to assess the robustness of the Palestinian National Cash Transfer Program (PNCTP) and its ability to be scaled up in crisis situations to channel larger amounts of funds to poor households\. 10\. Cash benefits are relatively easier to administer than other types of benefits, and given their fungible nature, are increasingly important in addressing deep poverty levels\. Providing this additional one-time cash benefit to somewhat offset the impact of the 2008 food and fuel crisis sends the signal to all concerned (e\.g\., donors, Government, poor households, banks, etc\.) that this remains an unusual situation that requires immediate action\. Further, this AF will send a signal to the PA that the Bank is committed to supporting the poorest, and would give the PA a further incentive to complete the reform of its cash assistance programs, including exploring options for ensuring the sustainability of these programs in light of the pressing and competing funding demands on the PA’s budget\. The MOSA/PA continues to demonstrate to the international community its capacity to translate its plans into concrete actions and to manage effectively well targeted large-scale cash assistance schemes\. Description 11\. The proposed AF would be provided by the FPCR TF administered by the Bank\. The support would consist of providing a one-time cash payment of US$135 to approximately 25,000 of the poorest households negatively affected by the recent food and fuel crisis\. The beneficiary households would be those with the lowest poverty levels that received a cash payment of US$200 in 2009 under the previous AF grant from the FPCR TF, as these are the households in the MOSA’s poverty targeting database created with support from the ongoing SSNRP\. These households were identified using a proxy means test (PMT) formula and their eligibility was confirmed by a review carried out in 2008 and 2009\. 12\. This proposed FPCR TF AF reiterates the Bank’s commitment to supporting the reforms of the PA’s social safety net, which include, among other things, a well-targeted cash assistance program that can be scaled up during crisis situations to assist poor households\. This places the PA in the forefront in terms of demonstrating its commitment and ability to provide timely and tangible support to the poorest and most vulnerable households in West Bank and Gaza (WBG)\. 13\. This proposed AF from the FPCR TF will only be used to pay cash benefits to poor households, through the first component of the scaled-up SSNRP\. Page 5 5 14\. Financing Source US$ million Recipient (PLO/PA) 0\.00 Food Price Crisis Response Trust Fund –FPCR TF (administered by the Bank) 3\.40 Total 3\.40 Implementation 15\. Implementation arrangements\. These will remain the same as for the original, on-going SSNRP (TF53793) and the SSNRP AF (TF92099) and the first AF from the FPCR TF\. The MOF will be responsible for ensuring that poor households receive timely and accurate payments\. The MOSA will continue to oversee social safety net reforms and lead the dialogue with other donors\. The MOSA will continue to be responsible for all technical aspects of the program, including: championing the reform; managing the poverty targeting database; identifying eligible beneficiaries; and providing them with vouchers to receive funds through the Bank of Palestine\. The same project management team that was responsible for managing the previous FCPR AF is still in place\. For this proposed AF, the beneficiary households have already been selected and their eligibility has been confirmed\. 16\. The SSNRP Operations Manual (OM) was revised in March 2008 to reflect the restructured project design in connection with the AF of US$10\.0 million (TF92099)\. It was revised again in October 2008 to take into account the implementation modalities for the FPCR TF AF (TF93330)\. The OM has been revised for the proposed second AF from the FPCR TF and the finalization and adoption of the revised OM is a condition of effectiveness\. Any modifications to the OM are subject to the Bank’s prior approval\. 17\. Disbursement arrangements \. Twenty-five thousand (25,000) poor households are expected to receive a US$135 payment in one installment\. The Bank will need to disburse US$3\.4 million in one installment to the DA\. Prior to disbursement, assurances will be sought that the final audit for the first FPCR AF was received by the Bank and that the action plan to address findings, if any, has been agreed upon\. For this proposed AF, the beneficiary households will be the same as those that received in 2009 a payment of US$200 under the 2008 FPCR TF AF (TF93330)\. The MOF internal auditor will check the list of proposed beneficiary households and confirm eligibility and advise the MOF Treasury Department in West Bank to transfer the funds from the DA to the Bank of Palestine\. This bank in turn will transfer funds to its 16 bank branches in the WBG\. The MOF in Ramallah will maintain custody of the supporting documentation\. Sustainability 18\. The Project is not likely to be sustainable without donor funding\. One of the options would be to use the leverage of the budget support discussions to ensure that the PA is allocating in its budget some funds for cash benefits programs\. Discussions are on-going as part of the Page 6 6 revision of the PA's cash transfer strategy to provide simulations on the cost implications of the PNCTP, taking into account payment levels, projected numbers of poor households living below the poverty line, donor inflows, and PA internal resources\. As part of the Bank's on-going DPG, discussions related to the long-term sustainability of the PNCTP will continue\. Lessons Learned from Past Operations in the Country/Sector 19\. Lessons learned from previous Bank operations relevant to this project are, the importance of: (i) taking into account implementation capacity in designing the project; and (ii) keeping project design simple while concentrating on development objectives, outcomes, and implementation with the least complex institutional arrangements\. With respect to the technical aspects of the project design, the MOSA targeting database draws on experience of countries that have successfully implemented a PMT targeting mechanism, including Armenia, Brazil, Chile, Columbia, Georgia, Mexico, Sri-Lanka, Turkey and others\. Their experience shows that this mechanism: (i) is suitable for countries with a relatively large informal sector and seasonality of incomes and where income is not an accurate indicator of household welfare; and (ii) is an effective targeting mechanism if implemented correctly\. Well-designed implementation arrangements appear crucially important for the effective performance of the PMT mechanism\. Safeguard Policies (including public consultation) 20\. No land acquisition is envisaged under the Project\. Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP 4\.01) [ ] [X] Natural Habitats ( OP / BP 4\.04) [ ] [X] Pest Management ( OP 4\.09 ) [ ] [X] Cultural Property ( OPN 11\.03 , being revised as OP 4\.11) [ ] [X] Involuntary Resettlement ( OP / BP 4\.12) [ ] [X] Indigenous Peoples ( OP / BP 4\.10) [ ] [X] Forests ( OP / BP 4\.36) [ ] [X] Safety of Dams ( OP / BP 4\.37) [ ] [X] Projects in Disputed Areas ( OP / BP 7\.60) * [ ] [X] Projects on International Waterways ( OP / BP 7\.50) [ ] [X] 21\. List of Factual Technical Documents Eligibility Review of Households for the SSNRP in the West Bank and Gaza Strip – EMCC – March 2009\. Es-post review of the social Safety Net Reform Project, Engineering, Management, Consulting Center (EMCC) August, 2008\. * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas\. Page 7 7 European Commission – Palestine – Targeting of Welfare Benefits to the Poor: Developing a Proxy Means Test Formula for the Occupied Palestinian Territory: Simulation and Analysis - Ibrahim Hejoj, Ph\.D\. and Adnan Badran\. Draft dated June 15, 2009\. Impact Evaluation – Additional Financing for Food Crisis Project – Inception Report – EMCC – October 11, 2009\. Interim Strategy for West Bank and Gaza for the period FY08-FY10 and Request for Replenishment for the Trust Fund for Gaza and West Bank - The World Bank, March 2008\. Investing in Palestinian Economic Reform and Development, Report for the Pledging Conference, Paris, December 17, 2007\. Joint Rapid Food Security Survey in the Occupied Palestinian Territory, May 2008 – FAO, UNRWA, WFP\. Mécanisme "Palestino Européen de Gestion et d'Aide Socio -Economique " PEGASE; Palestinian-European, Socio-Economic Management and Assistance Mechanism, European Commission, EuropeAid Co-operation Office, Brussels, January 2008\. Palestinian Central Bureau of Statistics (PCBS) Web Site\. Palestinian Economic Prospects: Aid, Access and Reform, Economic Monitoring Report to the Ad Hoc Liaison Committee, The World Bank, September 2008\. Poverty in the Occupied Palestinian Territory – 2007 – Briefing Paper – UNRWA\. Project Appraisal Document, Social Safety Net Reform Project (SSNRP) , April 26, 2004\. Project Paper for Proposed Additional Financing (Grant) from the Trust Fund for Gaza and West Bank for the SSNRP – March 27, 2008\. Project Paper on an Emergency Additional Financing Grant under the Global Food Crisis Response Program for the Social Safety Net Reform Project (SSNRP) – October 31, 2008\. Request for replenishment of the Trust Fund for Gaza and West Bank and Emergency Project Paper – Gaza Emergency Response – Additional Finance Program\. The World Bank – Report No\. 48449 GZ – May 13, 2009\. Safety Nets Study , World Food Program, Occupied Palestinian Territory, June-July 2008\. Socio-Economic and Food Security (SEFSec) – Survey Report 1 – West Bank –August 2009, and Survey Report 2 – Gaza Strip – November 2009 - FAO and WFP\. Page 8 8 Temporary International Mechanism Financial and Operational Review Jun – Dec 2006 & Jan – Aug 2007 , European Commission Delegation West Bank and Gaza\. The Household Expenditures and Consumption Survey – 2007 – Press Conference on the Main Findings – PCBS - June 2008 \. The Palestinian National Program for Social Protection - Cash Transfer Strategy – MOSA – June 2009\. Trust Fund for Gaza and West Bank - Request for Replenishment & Proposed Moratorium on Service Charges and Commitment Fees , The World Bank, Memorandum of the President, November 2006\. Trust Fund for Gaza and West Bank - Status Report , The World Bank, Report No\. 38026-WBG, December 2006\. Two Years After London: Restarting Economic Recovery (Economic Monitoring Report to the Ad Hoc Liaison Committee), The World Bank, September 24, 2007 22\. Contact point Contact: Samira Ahmed Hillis Title: Senior Operations Officer Location: Gaza, West Bank and Gaza (IBRD) Tel: +972 8 2833301 Fax: +972 8 2824296 Email: shillis@worldbank\.org 23\. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D\.C\. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank\.org Web: http://www\.worldbank\.org/infoshop

APPROVAL

P113027

Document of The World Bank Report No: ICR00002814 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-45930) ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 26,7 MILLION (US$ 40\.00 MILLION EQUIVALENT) TO THE REPUBLIC OF CAMEROON FOR A COMMUNITY DEVELOPMENT PROGRAM SUPPORT PROJECT-PHASE II June 25, 2014 Agriculture, Rural Development, Irrigation Unit (AFTAI) Sustainable Development Department Country Department AFCC1 Africa Region  CURRENCY EQUIVALENTS (Exchange Rate Effective May 2, 2014) Currency Unit = CFA Franc (CFAF) US$ 1\.00 = CFAF 473 FISCAL YEAR January 1-December 31 ABBREVIATIONS AND ACRONYMS AFD Agence Française de Développement (French Development Agency ) AFTAR Agricultural and Rural Development Unit AIP Annual Investment Plan ANAFOR Agence National des Forêts (National Forest Agency) APL Adaptable Program Loan ARMP Agence de Régulation des Marchés Publics (Procurement Regulatory Agency) CAS Country Assistance Strategy CCPM Commission Communal de Passation des Marchés (Communal Procurement Management Committee) CDP Communal Development Plan CEFAM Centre de Formation de l’Administration Municipale (Local Government Training Center) CFAF CFA Franc COGE Comité de Gestion Environnmentale (Environmental Management Committee) COMES Conseil Municipal Elargi aux Sectoriels (Municipal Council Expanded to Sector) COPIL Comité de Pilotage au niveau Communal (Communal Steering Committee) CSE Comité de Suivi-Evaluation (Monitoring and Evaluation Committee) C2D Contrat Désengagement Désendettement (Disengagement Indebted Contract) DPP Development Action Plan for Pygmies ECAM II Enquête Camerounaise des Ménages (Household Survey II) ESMF Environmental and Social Management Framework FEICOM Fonds Spécial d’Equipement et d’Intervention Intercommunale (Special Fund for Council Management) GDP Gross Domestic Product GESP Growth and Employment Strategy Paper GPS Global Positioning System GOC Government of Cameroon ICR Implementation Completion and Results Report IDA International Development Association KfW Kreditanstalt für Wiederaufbau (German Cooperation Bank) LSP Local Service Provider M&E Monitoring and Evaluation MINMAP Ministry of Public Procurement Markets MINAS Ministry of Social Affairs MINATD Ministry of Territorial Administration and Decentralization MINEP Ministry of Environment and Nature Protection MINEPAT Ministry of Economy, Planning and Regional Development MP Micro-project MTEF Medium Term Expenditure Framework MTR Mid-Term Review NCU National Coordination Unit NGO Non-Governmental Organization NIS National Institute of Statistics O&M Operations and Maintenance PAD Project Appraisal Document PCU Project Coordination Unit PDO Project Development Objective PIU Project Implementation Unit PNDP Programme National de Développement Participatif (National Community Development Program) PPR Procurement Post Review PRO-ADP Pro logiciel d’Appui au Développement Participatif (Support Software for Participatory Development) PRSP Poverty Reduction Strategy Paper PIB Public Investment Budget RCU Regional Coordination Unit SDE Services Déconcentrés de l’Etat (Devolved State Services) TSP Technical Service Provider TTL Task Team Leader Vice President: Makhtar Diop Country Director: Gregor Binkert Sector Manager: Severin L\. Kodderitzsch Project Team Leader: Amadou Nchare ICR Team Leader: Amadou Nchare  REPUBLIC OF CAMEROON COMMUNITY DEVELOPMENT PROGRAM SUPPORT PROJECT-PHASE II CONTENTS A\. Basic Information\. vi  B\. Key Dates \. vi  C\. Ratings Summary \. vi  D\. Sector and Theme Codes \. vii  E\. Bank Staff \. vii  F\. Results Framework Analysis \. viii  G\. Ratings of Project Performance in ISRs \. xii  H\. Restructuring (if any) \. xii  I\. Disbursement Profile \. xiii 1\. Project Context, Development Objectives and Design \. 1  1\.1 Context at Appraisal \. 1  1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) \. 2  1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification \. 4  1\.4 Main Beneficiaries \. 7  1\.5  Original Components (as approved) \. 7  1\.6  Revised Components \. 10  1\.7 Other Significant Changes \. 10  2\. Key Factors Affecting Implementation and Outcomes \. 11  2\.1 Project Preparation, Design and Quality at Entry \. 11  2\.2 Implementation \. 12  2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization \. 14  2\.4 Safeguard and Fiduciary Compliance \. 15  3\. Assessment of Outcomes \. 19  3\.1 Relevance of Objectives, Design and Implementation \. 19  3\.2 Achievement of Project Development Objectives \. 19  3\.3 Efficiency \. 23  3\.4 Justification of Overall Outcome Rating \. 24  3\.5 Overarching Themes, Other Outcomes and Impacts \. 25  3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops \. 27  4\. Assessment of Risk to Development Outcome\. 28  5\. Assessment of Bank and Borrower Performance \. 28  5\.1 Bank Performance \. 28  5\.2 Borrower Performance \. 31  6\. Lessons Learned \. 32  7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners \. 33  Annex 1\. Project Costs and Financing \. 35  Annex 2\. Outputs by Component \. 36  Annex 3\. Economic and Financial Analysis \. 40   Annex 4\. Bank Lending and Implementation Support/Supervision Processes \. 42  Annex 5\. Beneficiary Survey Results \. 44  Annex 6\. Stakeholder Workshop Report and Results\. 46  Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR (French version) \. 47  Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders \. 62  Annex 9\. List of Supporting Documents \. 63 MAP \. 65 TABLES Table 1: Outcome Indicator at Appraisal \. 3  Table 2: Revised Baseline and Target Values of Performance Indicators\. 6  Table 3: Major Issues, Date, Action Taken and Results Obtained \. 13  Table 4: Initial Allocation and Actual Expenditures \. 16  Table 5: Results Achieved for Component 1 Key Performance Indicators \. 36  Table 6: Physical Realization of PNDP II by Sector \. 37  Table 7: Results Achieved for Component 2 Key Performance Indicators \. 38  Table 8: Results Achieved for Component 3 Key Performance Indicators \. 39  Table 9: Comparison of Unit Costs of Social Infrastructures between PNDP II, Government Departments, and FEICOM \. 41  A\. Basic Information CM-Community Development Program Country: Cameroon Project Name: Support Project Phase- II Project ID: P113027 L/C/TF Number(s): IDA-45930 ICR Date: 05/05/2014 ICR Type: Core ICR REPUBLIC OF Lending Instrument: APL Borrower: CAMEROON Original Total XDR 26\.70M Disbursed Amount: XDR 26\.70M Commitment: Revised Amount: XDR 26\.70M Environmental Category: B Implementing Agencies: PNDP Cofinanciers and Other External Partners: B\. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 12/17/2008 Effectiveness: 01/29/2010 Appraisal: 03/25/2009 Restructuring(s): 10/30/2013 Approval: 06/18/2009 Mid-term Review: 01/29/2012 12/28/2011 Closing: 11/30/2013 11/30/2013 C\. Ratings Summary C\.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Substantial Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory C\.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Moderately Satisfactory Performance: Performance: C\.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D\. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General education sector 12 12 Health 12 12 Other social services 12 12 Sub-national government administration 52 52 Water supply 12 12 Theme Code (as % of total Bank financing) Improving labor markets 15 15 Municipal governance and institution building 35 35 Other environment and natural resources management 23 23 Participation and civic engagement 5 5 Rural services and infrastructure 22 22 E\. Bank Staff Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Gregor Binkert Mary A\. Barton-Dock Sector Manager: Severin L\. Kodderitzsch Karen Mcconnell Brooks Project Team Leader: Amadou Nchare Ousmane Seck ICR Team Leader: Amadou Nchare ICR Primary Author: Amadou Nchare Jonas Mbwangue F\. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project Development Objective is to improve delivery of priority basic services (in targeted communes) and extend the ongoing process of decentralization to new regions\. The main beneficiaries will be the communes and communities supported during PNDP I (155) plus 167 non-covered communes, of which 110 are in the five new regions\. Revised Project Development Objectives (as approved by original approving authority) Not applicable\. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Eligible communes which have implemented subprojects have increased the rate of coverage of basic social services by at least 5 percent in at least one of the Indicator 1: following four sectors: health, education, potable water, and sanitation (number, %) Value 147 (50% 133 (45% quantitative or 0 communes) communes) Qualitative) Date achieved 02/12/2012 06/19/2009 11/30/2013 Partly achieved\. 133 communes out of 147 that have implemented subprojects Comments have improved their coverage of basic social services by at least 5 percent in the (incl\. % sectors of health, education, water supply, and sanitation (achievement rate: 90 achievement) percent)\. Indicator 2: Students in Project area with improved access to education facilities (number) Value quantitative or 0 30,000 20,100 44,340 Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. 44,340 students have better access to school facilities (incl\. % (achievement rate: 221 percent)\. achievement) Indicator 3: People in Project area with improved access to health care facilities (number) Value quantitative or 0 130,000 102,000 428,925 Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. 428,925 people have better access to health facilities (incl\. % (achievement rate: 420 percent)\. achievement) Indicator 4: People with access to an improved water source (number) Value 0 120,000 70,000 437,100 quantitative or Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. 437,100 people have access to improved water points (incl\. % (achievement rate: 624 percent)\. achievement) Households in Project area with better road access to markets and social services Indicator 5: (number) Value quantitative or 0 400,000 193,000 211,682 Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. 211,682 households have better road access to markets (incl\. % and social services (achievement rate: 110 percent)\. achievement) Eligible communes (99) in the five new regions that have prepared CDPs of a Indicator 6: quality acceptable to the Association (%) Value quantitative or 0 90% 100% Qualitative) Date achieved 02/12/2012 06/19/2009 11/30/2013 Comments Achieved\. All eligible communes in the new regions have prepared CDPs of a (incl\. % quality acceptable to the Association (achievement rate: 100 percent)\. achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Communes benefiting from the Project grant (number) – disaggregated by new Indicator 1: and old Value 325, of which 170 (quantitative 0 170 197 new or Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. 197 communes have benefited from the Project grant\. (incl\. % These include 178 new communes and 19 old communes (achievement rate: 116 achievement) percent)\. Indicator 2: New CDPs implemented (number) Value (quantitative 0 140 197 or Qualitative) Date achieved 06/19/2009 06/19/2009 11/30/2013 Comments Achieved and exceeded\. 197 new CDPs have been implemented (achievement (incl\. % rate: 141 percent)\. achievement) Indicator 3: Communes supported by the Project that have reflected priority investments in  the communal development plans and budgets (number) Value (quantitative 0 325; 100% 170 178 or Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. 178 communes supported by the Project have reflected (incl\. % priority investments in the communal development plans and budgets achievement) (achievement rate: 105 percent)\. Subprojects that have implemented the required environmental and social risk Indicator 4: mitigation measures and are functional (%) Value (quantitative 0 100% 100% or Qualitative) Date achieved 02/12/2012 06/19/2009 11/30/2013 Comments Achieved\. All subprojects implemented have integrated required social and (incl\. % environmental measures (achievement rate: 100 percent)\. achievement) Improved community water points constructed in rural areas served by the Indicator 5: Project (number) Value (quantitative 0 600 338 1457 or Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. The high rate of achievement reflects rural populations’ (incl\. % high demand for water points (achievement rate: 431 percent)\. achievement) Indicator 6: Classrooms built and/or rehabilitated (number) Value (quantitative 0 470 238 739 or Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded\. The high rate of achievement reflects rural populations’ (incl\. % high demand for classrooms (achievement rate: 310 percent)\. achievement) Indicator 7: Health facilities constructed, renovated or equipped (number) Value (quantitative 0 60 44 28 or Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments (incl\. % Partly achieved (achievement rate: 64 percent)\. achievement) Indicator 8 : Roads rehabilitated, rural (km) Value (quantitative 0 400 241 306 or Qualitative) Date achieved 02/12/2012 06/19/2009 02/12/2012 11/30/2013 Comments Achieved and exceeded (achievement rate: 127 percent)\. (incl\. % achievement) Indicator 9 : Land use and management plans prepared for communes (number) Value (quantitative 0 100 91 or Qualitative) Date achieved 06/19/2009 06/19/2009 11/30/2013 Comments Partly achieved\. 91 land use and management plans were prepared (achievement (incl\. % rate: 91 percent)\. achievement) Communes with a public information and citizen control mechanism of grant Indicator 10 : management in place and operational (number) Value (quantitative 0 195 10 or Qualitative) Date achieved 06/19/2009 06/19/2009 11/30/2013 Not achieved\. The pilot citizen control mechanism was implemented in 10 Comments communes (achievement rate: 5 percent)\. This pilot allowed communes to better (incl\. % understand the perception of their populations on the services provided and to achievement) consider improvements\. A computer application was developed and put online\. The pilot operation will be extended to other communes\. External financial audit reports are produced on time and without any major Indicator 11 : reservations (%) Value (quantitative 0 100% 100% or Qualitative) Date achieved 02/12/2012 06/19/2009 11/30/2013 Comments Achieved\. All external financial audit reports were produced on time and without (incl\. % any major reservations (achievement rate: 100 percent) achievement) At least one technical and financial audit on the use of the grant and the quality Indicator 12 : of achievements is carried out randomly each year (Yes/No) Value (quantitative No Yes Yes or Qualitative) Date achieved 06/19/2009 06/19/2009 11/30/2013 Comments Achieved\. Technical and financial audits on the use of the grant and the quality (incl\. % of achievements were carried out by an independent consultant (achievement achievement) rate: 100 percent)\. A database on the quality of technical service providers (TSPs) is put in place Indicator 13 : and made available for public access (Yes/No) Value (quantitative No Yes Yes or Qualitative) Date achieved 02/12/2012 06/19/2009 11/30/2013 Comments Achieved\. A database on the quality of TSPs was put in place and made available (incl\. % for public access (achievement rate: 100 percent)\. achievement)  Biannual monitoring and evaluation reports produced within the agreed Indicator 14 : timeframes (Yes / No) Value (quantitative No Yes Yes or Qualitative) Date achieved 06/19/2009 06/19/2009 11/30/2013 Comments Achieved\. Biannual monitoring and evaluation reports were produced within the (incl\. % agreed timeframes (achievement rate: 100 percent)\. achievement) G\. Ratings of Project Performance in ISRs Actual Date ISR No\. DO IP Disbursements Archived (USD millions) 1 11/11/2009 Satisfactory Satisfactory 0\.00 2 06/28/2010 Satisfactory Satisfactory 4\.53 Moderately 3 12/18/2010 Moderately Satisfactory 9\.67 Unsatisfactory 4 02/08/2011 Moderately Satisfactory Moderately Satisfactory 9\.67 5 08/01/2011 Satisfactory Satisfactory 16\.75 6 02/24/2012 Satisfactory Satisfactory 22\.37 7 11/06/2012 Satisfactory Satisfactory 28\.27 8 05/27/2013 Satisfactory Satisfactory 41\.03 9 12/29/2013 Satisfactory Satisfactory 41\.17 H\. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions The reallocation of the Credit was necessary to reallocate funds among categories to take into account the stronger than expected absorption of funds by Category 2\.This reallocation enabled an increase in resources 10/30/2013 S S 41\.17 allocated to Category 2 of the financing agreement to finance the installments of grants (allocations) to 54 communes in the Northwest, Littoral, South West, Adamaoua, and Far North regions, and the update of the  ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions communal development plans for 10 former communes of PNDP I\. I\. Disbursement Profile 1\. Project Context, Development Objectives and Design 1\.1 Context at Appraisal (a) Local Development and Decentralization in Cameroon 1\. For more than a decade, the Government of Cameroon (GOC) has emphasized that rural development in the country depends primarily on local (i\.e\., provincial and commune) services and investments\. Decentralization of government administration is crucial to providing these services and facilitating the financing of local priorities\. 2\. In a bid to promote local development and implement the decentralization agenda, the government adopted community-based approaches, using a participatory procedure to get beneficiaries actively involved in identifying their own development priorities and in planning interventions over the long term\. Therefore, on February 20, 2004, the GOC in collaboration with the World Bank and other development partners prepared the Community Development Program (PNDP Programme National de Développement Participatif), implemented using an Adaptable Program Loan (APL) instrument with three four-year phases\. The program’s long-term vision is that rural communes will collaborate with communities in the planning and control of local development by: (i) identifying and managing infrastructure and service needs; (ii) managing the resources needed to establish and maintain community infrastructures; and (iii) promoting good governance\. The first phase of the program closed on November 30, 2009\. Therefore, this ICR pertains to the second four-year phase of the APL\. (b) Poverty and Rural Situation 3\. Despite significant progress in fighting poverty between 1996 and 2008, poverty still affects a large share of Cameroon's population, and poverty remains a major concern for the Cameroonian authorities\. 4\. In 2004, Cameroon’s GDP achieved a growth rate of 3\.7 percent, which corresponded to an increase of about 1\.0 percent in per capita income given the population growth rate of 2\.7 percent\. Thus, the GDP growth rate of 2\.0 percent in 2005 resulted in negative per capita income growth\. In 2006, the situation turned slightly positive again, as the real GDP growth rate rose to 3\.5 percent, partly because of strong oil exports\. In 2008, the GDP growth rate reached 3\.9 percent, up from 3\.5 percent in 2007\. However, overall economic growth has not contributed significantly to reducing poverty in monetary terms in recent years\. The GOC’s “second-generation” strategy to fight poverty aims to find means other than economic growth, such as provision of improved services, to ensure a more equitable distribution of earned revenues and more significant poverty reduction\. (c) Government Objectives and Strategies in the Sector 5\. The government’s ownership of and commitment to the PNDP is evidenced by the fact that it was presented in the Poverty Reduction Strategy Paper (PRSP) as one of the main instruments of the GOC’s decentralization and local development strategy\. As mentioned, the GOC has demonstrated its political will by forcefully implementing the decentralization agenda and by pursuing substantial poverty reduction in rural areas throughout the country\. To promote local development, it has adopted community-based 1 approaches, using a participatory procedure to get beneficiaries actively involved in identifying their own development priorities and in planning interventions over the long term\. This process has resulted in local or communal development plans (CDPs) that specify priorities among subprojects to be implemented\. 6\. The CDP is a powerful tool for selecting priority investments and forming a global and shared vision on local development at the communal and community level\. The GOC’s decree of November 2008, which created and organized Cameroon’s 10 regions, confirmed its commitment to use CDPs to improve implementation of its decentralization agenda\. (d) Rationale for Bank Assistance 7\. The Community Development Program Support Project is the World Bank’s key instrument to support the GOC’s efforts to promote local development and decentralization\. The design of PNDP in three four-year phases demonstrates the Bank’s long-term support to the government’s agenda for local development and decentralization\. The World Bank’s Country Assistance Strategy (CAS) is aligned with the government’s Poverty Reduction Strategy Paper (PRSP) and with its goal of poverty reduction through delivery of basic services, private sector-led growth, and improved local governance\. PNDP I (the first phase) achieved its objectives and all triggers for the second phase were essentially achieved, thus allowing the Bank to move to the next stage\. 8\. PNDP I covered communes in five of Cameroon’s 10 regions, and it was planned that PNDP II would scale up the approach to cover the remaining five regions\. The success of PNDP I led to high demand from the communes in all regions for the government to move to the second phase to allow them to benefit from the Project’s social, economic, and environmental impacts\. 9\. Justification for the World Bank’s participation in the second phase of PNDP was based on the same reasons observed at the predecessor project’s appraisal, that is: (i) the Bank has extensive multisectoral experience in Cameroon, allowing it to participate in efforts to harmonize support for community action plans; (ii) the Bank has acquired broad experience with community-driven development projects in Africa and is thus in a good position to draw lessons from similar development efforts; and (iii) PNDP II seeks to address the government’s long-standing decentralization agenda, facilitating development or improving the operational framework and capacity of communes to effectively manage their own development\. 1\.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 10\. The original Project Development Objective (PDO) was to improve the delivery of specified basic social services (health, education, water and sanitation) in targeted communes and to extend the ongoing process in support of decentralization to new regions\. The main beneficiaries were the communes and communities supported during PNDP I (155) plus 167 non-covered communes, of which 110 were in the five remaining regions\. 11\. The original outcome indicators were the following: 2 For service delivery: At least 5 percent increase in the rate of coverage of basic social services in one of the following four sectors for eligible communes (147) having implemented subprojects: health, education, water, and better road access to markets and social services (number) (as measured in the number of users over the baseline situation): ï‚ Students in Project area with improved access to education facilities (number); ï‚ People in Project area with improved access to health care facilities (number); ï‚ People with access to an improved water source (number); ï‚ Households in Project area with better road access to markets and social services (number)\. For scaling-up of the program: Eligible communes (number) in the five new regions that have prepared CDPs of a quality acceptable to the Association (%)\. Table 1: Outcome Indicator at Appraisal Outcome Indicators Target Values at the End of the Project Eligible communes (147) which have implemented subprojects (295) have increased the rate of coverage of 147 basic social services by at least 5 percent in at least one 50% of communes of the following four sectors: health, education, water, and sanitation (number, %) Students in Project area with improved access to 30,000 education facilities (number) People in Project area with improved access to health 130,000 care facilities (number) People with access to an improved water source 120,000 (number) Households in Project area with better road access to 400,000 markets and social services (number) Eligible communes (99) in the new five regions that have prepared CDPs of a quality acceptable to the 90% Association (%) Source: Project Appraisal Document (PAD), pages 32 and 36\. Key Performance Indicators 12\. The main indicators for Project outputs (for details, see Outputs by Component in Annex 2) used to evaluate Project achievements included: ï‚ Communes benefiting from the Project grant (number) – disaggregated by new and old; new CDPs implemented (number); ï‚ Communes supported by the Project that have reflected priority investments in the CDPs and budgets (%); ï‚ Subprojects that have implemented the required environmental and social risk mitigation measures and are functional (%); ï‚ Improved community water points constructed in rural areas served by the Project (number); ï‚ Classrooms built and/or rehabilitated (number); ï‚ Health facilities constructed, renovated, or equipped (number); ï‚ Roads rehabilitated, rural (km); ï‚ Land use management plans prepared (number); 3  ï‚ Communes with a public information and citizen control mechanism of grant management in place and operational (number); ï‚ External financial audit reports are produced on time and without any major reservations (%); ï‚ At least one technical and financial audit on the use of the grant and the quality of achievements is carried out randomly each year (Yes/No); ï‚ A systematic evaluation system (scorecards) for the beneficiaries on the quality of procurements is put in place (Yes/No); ï‚ A database on the quality of technical service providers (TSPs) is put in place and is made available for public access (Yes/No); ï‚ Biannual monitoring/evaluation reports are produced within the agreed time frames (Yes/No)\. 13\. In addition to the PDO and key performance indicators, four triggers were identified for phase 3 of the PNDP: ï‚ The draft laws and decrees on decentralization prepared during the first phase of the Project will have been adopted and promulgated to pave the way for improved intergovernmental fiscal transfers\. These are the law on local taxes, the law on the financial regime of communes, and the decree on the organizational chart and staffing of communes; ï‚ At least 90 percent (292) of communes supported by the Project will have reflected priority investments in their CDPs and budgets; ï‚ At least 80 percent (260) of the beneficiary communes will be satisfied with service delivery (as measured by monitoring scorecards and independent technical audits); and ï‚ The ‘‘Decentralization Charter” will be approved by the GOC\. 1\.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification 14\. The PDO and key indicators were not revised\. However, during Project implementation, baseline values were set to zero and target values for related indicators were accordingly amended in accordance with the PAD’s guidelines (see footnotes No\. 5 and 6 on the arrangements for results monitoring, pages 36-37 of the PAD)\. In fact, given that the PNDP is a three-phase APL, the implementation progress of the Project was initially evaluated based on indicators with baselines reflecting the achievements of the first phase of the Project (PNDP I), while the results obtained reflect the cumulative progress of both Phase I and II\. This presentation of the baselines and target values did not facilitate the identification of PNDP II’s achievements\. Faced with this situation, the Africa Regional Core Operational Services Department (AFTOS) unit advised the task team to set all baseline values to zero and subtract the achievements of the first phase from the initial target values of the performance indicators of the second phase\. Therefore, all baseline values of the indicators have been set to zero and the target values for some indicators have been modified to reflect only the achievements of the second phase\. These indicators are: Students in Project area with improved access to education facilities; People in Project area with improved access to health care facilities; People with access to an improved water source; Households in Project area with better road access to markets and social services; Improved community water points constructed in rural areas served by the Project; Classrooms built and/or rehabilitated; Health facilities 4 constructed, renovated, or equipped; and Roads rehabilitated, rural\. From July 22, 2011, the Project reported a zero baseline value and a net progress value based on progress made under PNDP II\. Thus, from Implementation Status and Results Report (ISR) No\. 6 to this ICR, all baseline values used are equal to zero to take into account only the results associated with PNDP II\. Table 2 shows the revised baseline and target values of performance indicators\. For this ICR, PNDP II results were compared against the revised targets of the performance indicators\. 5  Table 2: Revised Baseline and Target Values of Performance Indicators of PNDPII Original (from PAD) Revised Difference Baseline Target between Value Values PDO Outcome Indicators Baseline Target target and Value value baseline values Eligible communes which have implemented subprojects have increased the rate of coverage The PDO is to improve of basic social services by at least 5 percent in 147 (50% 147 (50% 0 147 (50% 30 delivery of priority basic at least one of the following four sectors: communes) communes) communes) services (in targeted health, education, potable water, and sanitation communes) and extend (number %) the ongoing process of Students in Project area with improved access decentralization to new 9,900 30,000 20,100 0 20,100 to education facilities (number) regions\. The main beneficiaries will be the People in Project area with improved access to 0 communes and 28,000 130,000 102,000 health care facilities (number) communities supported 102,000 during PNDP I (155) plus People with access to an improved water 0 70,000 167 non-covered 50,000 120,000 70,000 source (number) communes, of which 110 Households in Project area with better road 0 193,000 are in the five new 207,000 400,000 193,000 access to markets and social services (number) regions\. Eligible communes in the new five regions that 0 have prepared CDPs of a quality acceptable to 0% 90% 90% 90% the Association Intermediate Results Results Indicators for Each Component 325, of 0 170 Communes benefiting from the Project grant 155 which 170 170 (number) – disaggregated by new and old are new New CDPs implemented (number) 0 140 140 0 140 Communes supported by the Project that have 155 ; reflected priority investments in the CDPs and 325; 100% 170 ; 100% 0 170; 100% 100% budgets (number, %) 1\. Local Development Subprojects that have implemented the Support required environmental and social risk 80 100% 100% 0 100% mitigation measures and are functional (%) Improved community water points constructed 262 600 338 in rural areas served by the Project (number) 0 338 Classrooms built and/or rehabilitated (number) 232 470 238 0 238 Health facilities constructed, renovated or 0 44 16 60 44 equipped (number) Roads rehabilitated, rural (km) 159 400 241 0 241 Land use and management plans prepared for 0 100 0 100 100 communes (number) 2\. Decentralization Communes with a public information and support for communes citizen control mechanism of grant - 195 195 0 195 management in place and operational (number) External financial audit reports are produced on time and without any major reservations 100% 100% 100 0 100% (%) At least one technical and financial audit on the use of the grant and the quality of 0 Yes 3\. Coordination, Yes Yes Yes achievements is carried out randomly each management, M&E and year communication A database on the quality of TSP is put in place and made available for public access Yes Yes Yes 0 Yes (Yes/No) Biannual M&E reports produced within the Yes Yes Yes agreed timeframes (Yes / No) 0 Yes 6 1\.4 Main Beneficiaries 15\. The main beneficiaries were the communes and communities supported during PNDP I (155) plus 170 new communes\. In these communes, the Project interventions contributed to empower rural communities in planning, implementing, and overseeing priority activities defined in their development plans\. Efforts were made to directly target vulnerable groups, including women and indigenous communities (Pygmies)\. The targeted populations benefited from improved basic social services (education, health, water, and sanitation), and improved rural infrastructure (rural roads, bridges, rural markets, storage facilities, and rural community centers)\. In addition to providing assistance to communities for the development of local or CDPs, the Project contributed financial resources to finance activities or subprojects contained in these plans\. Local plans were developed through broad consultations between community stakeholders in accordance with sectoral priorities set at the national level\. Local service providers (LSPs) were hired by the Project to provide technical support to communities in preparing development plans and subprojects\. The process involved the participation of NGOs, decentralized technical ministries, and communal staff\. Communal agents benefitted from capacity strengthening under the Project, which helped them play a more active role in the local development processes by improving the recovery of local taxes and overall budget preparation and execution\. 1\.5 Original Components 16\. The three main components of the Project were described as follows at appraisal: Component 1: Local Development Support: Appraisal: US$65\.57 million (IDA- US$25\.63 million; Government-US$32\.94 million; Beneficiaries-US$7\.00 million) Actual: US$68\.69 (IDA-US$26\.75 million; Government-US$36\.62 million; Beneficiaries-US$5\.32 million)\. 17\. Component 1 aimed to help improve the socioeconomic conditions, increase the productivity of the natural resource base, and increase the incomes of the population in the communes supported by the Project\. Achieving these goals required putting in place various infrastructures and socioeconomic investments\. This component channeled grants to communes to co-finance their proposed investments (subprojects): either a CDP preparation activity or a CDP-subproject\. 18\. PNDP II focused on communes\. In contrast to PNDP I, under which communities as well as communes prepared development plans, under PNDP II the CDP was the sole local planning tool, and the priorities of grassroots community organizations were taken into account in this document\. Multidisciplinary teams composed of representatives of seven decentralized units of technical ministries or LSPs helped communes prepare the plans, using a participatory approach\. The decentralized service units of the sectoral ministries ensured that the CDPs and their subprojects complied with national standards and policies\. The municipal council in each commune examined and approved the CDP, and then transmitted the plan to the Divisional Officer (a representative of the ministry supervising the communes) for administrative validation\. 7 19\. To ensure equity, Project authorities allocated funds to communes annually, using criteria agreed upon beforehand\. The annual allocation was determined in accordance with the following factors: the demographics of the population, the poverty level of the commune (administrative account, Household Survey-ECAM-II, 2007), the existing local fiscal system and the financing plan of the decentralized administration, and the size of the commune\. The allocation covered the following: (a) expenditures for CDP preparation activities: (i) LSP contracts and the travel expenses of multidisciplinary sectoral teams for the preparation of the CDP; (ii) technical and environmental studies related to the design of feasibility studies for CDP subprojects (about 4 percent of the estimated micro-project (MP) grants based on lessons learnt from PNDP I); (iii) payment of salaries of select commune support staff on a gradually declining scale; and (iv) partial payment for those meetings of the municipal council that examine and approve development plans and subprojects, and for the sessions of the commune procurement commissions (for a maximum period of two years); and (b) expenditures for implementation of CDP-subprojects, including quality control (about 1 percent of the MP grants)\. The commune was notified of its allocated amount well ahead of time to allow it to be integrated into its budget\. Depending on the allocation for the implementation of the CDP-subprojects, the commune executive board prepared an annual investment plan in accordance with the investment priorities of the commune (including the priority subprojects to be financed under the grants)\. 20\. The allocation to communes was released in three steps\. The first payment covered 100 percent of (a) as described above, while the second and third payments covered 60 percent and 40 percent of (b), respectively\. Provision of the third payment was subject to approval of the participatory monitoring of subprojects’ implementation progress\. The conditions for providing the grants and the eligibility criteria for subprojects were described in detail in the Project Implementation Manual\. 21\. PNDP II strived to make the funds transfer flow to communes easier than was the case under PNDP I\. The funds were henceforth transferred from the Project’s Designated Account directly to a commune’s account, opened at a local bank for this purpose\. This account was operated jointly by the mayor of the commune, the “Receveur Municipal,” and the PNDP regional coordinator, requiring the signatures of all three\. To ensure adequate financial management and disbursement arrangements were in place for the communes, the commune designated/recruited a local accountant to maintain adequate books of accounts and prepare reports needed to monitor the commune’s activities\. Transfers of the funds to a commune were not made until said accountant was identified and trained\. The commune’s budget summary, the technical and financial Project execution reports, and the expenditure statements on the communal joint account were posted on the commune’s information board and made available to the public for transparency and good governance at the local level\. Component 2: Support to Communes within the decentralization framework: Appraisal: US$18\.83 million (IDA- US$7\.51 million; Government - US$12\.05 million)\. Actual: US$16\.43 million (IDA- US$6\.50 million; Government - US$9\.93 million)\. 22\. This component aimed to strengthen institutional capacities in support of the decentralization process\. It also provided assistance for the implementation of capacity- building activities for communes and other local stakeholders, such as LSPs and 8 multidisciplinary teams of the sectoral ministries, to enable them to assume an effective role as promoters of local development\. The component was divided into two sub- components: Subcomponent 2\.1: Institutional support to the decentralization process: Appraisal: US$8\.78million (IDA- US$3\.37 million; Government- US$5\.41 million)\. 23\. This subcomponent made it possible to: (a) improve the legal and regulatory framework through specific studies and activities and improve implementation of the Project at the commune and intercommunal levels; (b) help build the case for decentralization (e\.g\., by using M&E data on land use planning proactively to inform the public about the benefits of decentralization); and (c) improve budget management to increase performance of local tax collection for a sustained decentralization funding mechanism\. 24\. The Project supported specific studies and the preparation of draft decrees for the decentralization laws mentioned previously (paragraph 3) and finalization of the Decentralization Charter\. It also financed workshops for finalization of the decrees, including relevant consultancy services for the workshops, and dissemination of the enacted laws and decrees\. Furthermore, the subcomponent financed the acquisition of small cartography equipment and consultant services required for mapping of communes\. The Project also financed study tours on decentralization and local development for the Technical Secretariat of the Inter-Ministerial Committee on Local Services and the Mayors’ Association\. Finally, it assisted the Ministry of Territorial Administration and Decentralization (MINATD) to develop and deploy financial and accounting management software for communes\. Subcomponent 2\.2: Capacity-building: Appraisal: US$10\.78 million (IDA- US$4\.14 million; Government – US$6\.64 million)\. 25\. Strengthening the operational capacities of communes\. Under this subcomponent, several capacity-building activities for the communes were carried out, such as: (a) financing of the development of an operations manual or guidelines for communes to improve their fiduciary management capacities (including procurement and financial control and reporting and the associated risk-mitigation measures); (b) organization of training workshops and study tours for cross-learning and sharing of good practices, through paired visits between high- and low-performing communes and study tours to neighboring countries for elected local representatives, communal procurement commissions, and community-based organizations; and (c) promotion of nationwide competitions for local governments on best practices on CDPs and on enhancing good governance and transparency\. 26\. Capacity building for local stakeholders\. This activity aimed at strengthening and enhancing the skills of the participants other than those of the communal institutions – that is, LSPs, multidisciplinary teams, and TSPs – to enable them to support communes efficiently in the local development process\. Workshops were organized to inform all stakeholders about the objectives and strategy of the Project and to equip ordinary citizens to participate in planning, implementing, and monitoring local development actions\. To facilitate such capacity building, the Project financed technical assistance for training of LSPs and multidisciplinary teams to improve their quality of service\. Furthermore, the Project promoted cooperation among the Project Coordination Units, 9 the decentralized offices of the Ministry of Environment and Nature Protection (MINEP), and other relevant sector ministries, and helped organize an environmental training program for members of municipal councils, divisional administrative staff, and Project staff\. 27\. The Project funded: (a) acquisition of computer equipment for communes; (b) training of communal development and finance staff; (c) publication and dissemination of a participatory planning guide, as well as a guide for procurement procedures; (d) environmental training for members of municipal councils, divisional administrative staff, and Project staff; and (e) nine study tours and training on decentralization and local development for LSPs, multidisciplinary teams, TSPs, and local stakeholders other than commune authorities\. Component 3: Coordination, management, communication, monitoring and evaluation: Appraisal: US$17\.87 million (IDA US$6\.86 million; Government - US$11\.01 million)\. Actual: US$14\.60 million (IDA US$8\.40 million; Government - US$6\.20 million)\. 28\. This component aimed to facilitate: (a) administrative, technical, and financial management of the program; (b) coordination among all institutional partners to ensure efficient support to communes for local development; (c) effective contractual arrangements with communes, sectoral ministries, and TSP/private-sector operators, NGOs (TSPs), including acquisition of the equipment necessary for implementing the program; (d) M&E of the performance and the financial, environmental, and social impacts of the program (including developing monitoring scorecards to assess beneficiaries’ satisfaction with the services provided by communes); and (e) development of communication activities to publicize and disseminate Project implementation tools and local development potential and practices\. 29\. The integrated financial management software was upgraded with additional tools to enable permanent access to accounting system information in the regions for analysis and to ensure timely synchronized consolidation of accounts\. 30\. Under this component, the Project financed: (a) rehabilitation of office spaces; (b) purchase of office equipment and vehicles; (c) training of the staff of the Project’s National Coordination Unit (NCU) and the Regional Coordination Units (RCUs); (d) consultant services, including for preparation and publication of manuals and establishment of an electronic library; and (e) monitoring of the implementation of environmental and social mitigation measures\. It also helped pay for meetings of the program’s statutory supervisory and coordination organs and for the operating costs of the NCU and RCUs\. 1\.6 Revised Components 31\. The Project components were not revised\. 1\.7 Other Significant Changes 32\. No changes were made to the Project design\. The only change that occurred during implementation was the reallocation of funds\. The reallocation of the Credit was necessary to reallocate funds among categories to take into account the stronger than expected absorption of funds by Category 2 (Goods and services for CDP Preparation 10 Grants)\. Indeed, this reallocation of funds was agreed with the GOC during the Mid- Term Review (MTR) of the Project to account for changes in the costs of some goods and services\. This reallocation enabled an increase in resources allocated to Category 2 of the financing agreement to finance the installments of grants (allocations) to 54 communes in the Northwest, Littoral, South West, Adamaoua, and Far North regions, and the update of CDPs for 10 communes included in PNDP I\. The approval for level II was granted on October 30, 2013\. The reallocation of funds was approved by the Country Director\. 2\. Key Factors Affecting Implementation and Outcomes 2\.1 Project Preparation, Design and Quality at Entry 33\. The design of PNDP as a three-phase program demonstrated the Bank’s long-term support to the GOC’s Poverty Reduction Strategy\. The World Bank’s CAS is aligned with the GOC’s PRSP and with its goal of poverty reduction through delivery of basic services, private sector-led growth, and improved local governance\. 34\. The Project design drew on lessons from the previous phase of this program and on similar ongoing and past operations in other countries in the region\. In particular, the experiences gained from the ongoing experience in Burkina Faso and Mali and from a very similar project in Niger (completed in June 2008, and on which an intensive learning ICR was prepared) provided guidance for preparation and pre-appraisal of this Project\. The MTR and the ICR of PNDP I concluded that the involvement of government authorities and sectoral ministries does not by itself improve the quality of services\. For a program like PNDP to be truly effective, it must be accompanied by an improved legal and regulatory framework for decentralization, including a clear definition of the responsibilities of each participant (administration, communes, civil society, the Program Management Unit) and adequate resources to help municipalities prepare technical records, manage contracts, and monitor and control investment and other activities\. 35\. Moreover, the relevance of the Project design was recognized by the French Development Agency (AFD), which agreed to finance agricultural activities identified in the CDPs developed through funding from the World Bank and to use the Bank instrument to finance local development\. 36\. During Project preparation, six main risks were identified for PNDP II, including: (i) delays in completing the legal framework of decentralization, including laws and decrees for: (a) local taxes and the financial regime of communes; (b) guidance and supervision arrangements; (c) a Charter of Decentralization; and (d) the organizational chart and staffing of communes; (ii) delays in budget preparation, poor commune budget execution, and delays in procurement; (iii) poor financial capacity in rural communes; (iv) poor quality of contracts and service delivery to communes; (v) corruption in subproject implementation and hiring of local providers; and (vi) the potential reluctance of MINEP in Yaoundé to delegate authority for the approval of: (a) MP environmental impact assessments; and (b) environmental and social screening results to MINEP representatives at the regional and/or the divisional levels\. 37\. To mitigate these risks, the Project Coordination Unit (PCU) successfully implemented the following actions: 11  (i) Encouraged creativity in decentralization practices through nationwide competition for local governance on best practices; developed publicity material for decentralization, for instance, by using M&E data to inform the public about the benefits of decentralization and ensuring that the data from M&E were used even outside the Project; made decentralization a nationwide issue as the basis for improved service delivery; (ii) Provided support to communes to improve budget planning, execution, and control; applied simplified procedures for procurement; (iii) Increased staffing and training in communes to improve collection of local taxes, mobilize other resources, and improve budgeting; (iv) Clarified the responsibilities of different participants supporting communes; focused the CDPs and included sectoral policies in them; and developed sustainable and effective capacity in communes to enable them fulfill their duties; (v) Conducted periodic technical and financial audits of subproject implementation on a sample basis; built accountability mechanisms between stakeholders (budget publication); and (vi) Convinced MINEP that the screening of subprojects for potential adverse localized environmental and social impacts could be carried out at the regional/divisional levels; financed environmental impact studies for subprojects and relevant environmental training for all stakeholders at the national, regional, and communal levels; and supported the appointment of regional environmental focal points and development agents at the communal level\. 38\. The design of PNDP II followed the same participatory process used in PNDP I\. Both the components and activities of PNDP II were developed on the basis of recommendations from beneficiaries and environmental and impact studies, as well as results from audit reports and feedback from partners\. Participatory consultations were held in all 10 regions with the strong involvement of municipalities, NGOs, and sectoral ministries\. These consultations were followed by validation workshops in each region to identify the priorities and specific needs of municipalities\. The draft PAD was also validated in a national workshop involving all stakeholders before its approval by the government\. This participatory approach is also reflected in the Project’s Implementation Steering Committees at the municipal, regional, and national levels\. 2\.2 Implementation 39\. The three main factors that influenced Project implementation were: the accelerated preparation of municipal development plans, the Project’s MTR, and the reallocation of funds\. Table 3 summarizes the majors issues, their date of occurrence, actions taken, and the results obtained\. 12  Table 3: Major Issues, Date, Action Taken and Results Obtained Date Major Issues Actions Taken/Results Obtained 12/18/2010 Poor performance of the Project\. Given that MPs that should be financed by The implementation progress was the Project should be removed from the rated moderately unsatisfactory priority needs of populations identified in (MU)\. Indeed, in December 18, CDPs, the Bank team decided to change the 2010, the Bank team found that the original preparation schedule and to progress status of the Project was accompany the Project team in the MU and that the disbursement rate preparation of the remaining 90 CDPs\. was low (15\.74 percent for the IDA Thus, in November 2011, 68 new CDPs credit)\. The main reason for the were developed\. The financing of MPs poor performance of the Project was resulting from these new CDPs allowed for the delay in the preparation of a gradual increase in the disbursement rate CDPs\. to 52\.19 percent for IDA funds in January 2012\. 12/28/2011- MTR of the Project\. During the MTR, the issues limiting the 01/13/2012, Project’s performance were identified and recommendations made to accelerate Project implementation\. 10/30/2013 Insufficient funds in Category 2 The reallocation of credit was approved by (Goods and services for CDP the Country Director on October 30, 2013\. Preparation Grants)\. Indeed, this reallocation of credit allowed the Bank to not only cover the category overdraws proactively authorized by the task team during the supervision mission, but also and especially to significantly improve the Project’s disbursement rate\. As of November 30, 2013, the closing date of the Project, the disbursement rate of IDA credit stood at 100 percent (according to Client Connection data of November 30, 2013, 26\.70 million were disbursed out of SDR 26\.70 million allocated)\. 40\. Moreover, multiple constraints/risks were encountered in the implementation of the program, including: (i) delays in mobilizing communes’ contributions for implementation of their MPs, thus slowing their start; and (ii) LSPs’ poor knowledge of the socioeconomic environment of the MP sites\. To mitigate these risks, the Project: (i) conducted resource mobilization advocacy and outreach campaigns; and (ii) provided all communes with special software (PRO-ADP or “Prologiciel d’Appui au Developpement Participatif”) to collect and store communes’ socioeconomic data\. 41\. Furthermore, another constraint encountered in implementation was the lack of an effective grievance redress mechanism (GRM) in the PAD\. Indeed, during implementation, the Project experienced considerable delays in the treatment of six complaints filed by beneficiaries\. Without an inclusive and open GRM, the uptake, tracking, follow-up, treatment, and feedback relied heavily on the willingness and responsiveness of the Project team\. 13 2\.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization (a) Monitoring and Evaluation Design 42\. The Project’s M&E was designed to capture the inputs, outputs, and outcomes of increased access to basic social services as well as the Project’s institutional impacts\. Outcome and key performance indicators were clearly defined\. Program M&E was implemented at municipal, regional, and national levels\. At the municipal level, a steering committee comprising representatives of the municipality executive and sectoral ministries was established to monitor the elaboration of the CDP process\. At the end of the CDP process, the committee was transformed into a body to monitor and evaluate CDP implementation\. A municipal officer provided by the program followed the implementation of the commune’s Annual Investment Plan (AIP)\. This participatory M&E mechanism was developed by the Project at the local level\. 43\. Furthermore, the definition of the first PDO indicator (“Eligible communes (147) which have implemented subprojects (295) have increased the rate of coverage of basic social services by at least 5 percent in at least one of the following four sectors: health, education, water and sanitation (number, %)”) created confusion and led to different interpretations\. To enable the different Project M&E actors to have the same understanding, the Bank team explained this indicator to them and the proper methodology for gathering information for this indicator\. (b) Monitoring and Evaluation Implementation 44\. Using GPS and the PRO-ADP software, the necessary information concerning priority sectors and the preferences of the population to be supported was collected by a LSP\. These data were used to establish baseline of the CDP’s subsectors and a map was produced to highlight priority infrastructures\. The software identified the state of communes’ needs by sector\. These data were also available online in the form of electronic maps (e-MAP)\. Municipal agents updated these data annually by evaluating the AIP of year (n) to plan investments for year (n +1)\. The AIP itself is from the three- year Medium Term Expenditure Framework (MTEF)\. Municipal officials sent information consolidated at both regional and national levels\. 45\. Furthermore, the National Institute of Statistics (NIS) conducted an impact assessment of the Project in 2013\. This study helped to gather reliable data on the Project’s overall performance and impacts\. (c) Monitoring and Evaluation Utilization 46\. The data from the M&E system were used by the municipalities themselves, as well as by the PCU, MINEPAT, other sectoral ministries, and development partners\. The municipalities used these data to update their CDPs and priority investments, while the PCU used the M&E system not only to assess progress towards the achievement of the PDO, but also to warn regions regarding delays in the implementation of activities and detection of problems in procurement activities and to make necessary corrective measures\. The PCU also informed MINEPAT on the state of the Project and of decisions to be taken to address problems identified\. Other sectors and development partners were informed of Project achievements and ongoing investments in their sectors\. Information from the M&E system was also shared with the general public through the Project website and a synthesis published in the widely disseminated Project newspaper, “Echo du PNDP\.” 14 47\. The M&E system established will be used beyond the duration of IDA's funding\. Indeed, the program has received parallel funding from the AFD for agricultural activities identified in CDPs\. 2\.4 Safeguard and Fiduciary Compliance 48\. The results of the evaluation of the PNDP II’s socio-environmental performance carried out in 2014 by an independent consultant demonstrated that the Project’s environmental and social management was satisfactory\. Four operational policies were triggered, including the Environmental Assessment (OP 4\.01), Indigenous People (OP 4\.10), the Involuntary Resettlement (OP 4\.12), and International Waters (OP 7\.50)\. All communal and communities’ MPs were systematically subjected to a socio- environmental screening, which led to appropriate environmental measures that were incorporated into the technical and financial documents of the concerned subprojects\. Subproject sites were carefully selected and sensitive areas and titled land were avoided\. All LSPs and Project consultants were trained in the use of the safeguards screening forms\. Neither involuntary resettlement nor intervention on international waters was recorded during implementation\. 49\. The OP 4\.01 Environmental Assessment Safeguard was triggered due to the construction of small infrastructures (water points, markets, classrooms, health care centers, rural roads, rural electrification, latrines), as well as the generation of medical waste at health care centers\. The Project’s environmental category was rated as B\. To assess, mitigate, and monitor potential adverse environmental and social impacts, the borrower prepared an Environmental and Social Management Framework (ESMF)\. The ESMF outlines the institutional responsibilities for implementing the environmental and social management process for subprojects as well as the provision of relevant environmental training plans to ensure its effective implementation (for details, please refer to Annex 10 of the PAD)\. A medical waste management plan for health care centers was included in the ESMF\. The ESMF was disclosed in Cameroon and at the Bank’s Infoshop prior to appraisal\. 50\. The Project triggered OP 4\.10 Indigenous Peoples, which led to implementation of the Development Action Plan for Pygmies (DPP)\. PNDP II focused on rural areas and thus affected the Pygmy population, an ethnic minority in the country\. To take the Pygmy population into consideration under the program, a Development Action Plan for Pygmies (DPP) was formulated and published in 2003\. The DPP was worked out and finalized during appraisal to ensure that the dignity, rights, and culture of the Cameroonian Pygmies would be respected and that they would benefit from the Project\. During implementation, more than 800 million CFAF was allocated to 31 communes in the Central, East, and South regions to finance actions in favor of the Pygmy population\. 51\. The Project support allowed: (i) production of additional official documents for Pygmies (673 birth certificates, 415 National Identity Cards, 17 marriage certificates, etc\.); (ii) establishment of small Pygmy-led agricultural farms at Bandevouri and Lokoundjé; and (iii) recognition of land rights to 15 Pygmy villages in the municipalities of Niete and Lokoundjé\. The program also identified and funded the training of 15 15 Pygmy children in education and health careers, including: (i) eight caregivers (one year training), of whom six graduated in August 2013; (ii) one nurse graduate at the state nursing school (three years); (iii) two student teachers of technical education (three years); and (iv) four student teachers of general education (three years)\. 52\. In summary, Project support empowered the Pygmy population by promoting the legal existence of Pygmies and their citizenship rights, increasing their capacity to participate in local political processes and governance, and thereby encouraging their social inclusion in national activities\. 53\. Fiduciary compliance\. Special tools were developed to enable the effective implementation of procurement policies and procedures under the Project\. Annual procurement plans were prepared regularly and submitted for World Bank approval\. Key stakeholders, including grassroots communities, municipal committees, and procurement staff, received training in the approved procurement policies and procedures\. However, the procurement post review (PPR) conducted by the Bank identified some shortcomings in the Borrower’s procurement processes, including: (i) some procurement complaints were not handled in a timely manner by the Project Implementation Unit (PIU); (ii) assistant accountants were recruited without the World Bank’s involvement and its non- objection, if applicable; (iii) contractual deadlines for paying providers were sometimes not respected by the PIU; and (iv) the execution of some procurement activities directly managed by the PIU experienced important delays\. 54\. With regard to financial management, Table 4 shows that at the time of Project closing, the disbursement rate stood at 100 percent for IDA credit\. Throughout implementation, the Project was subject to annual technical and financial audits\. No major irregularities were noted\. Table 4: Initial Allocation and Actual Expenditures Type Category of Amount Actual Balance Disbursement Expenditures Allocated Expenses (XDR) rate (%) (XDR) (XDR) (a-b) ((b/a)*100) (a) (b) Totals 26,700,000\.00 26,699,990\.33 9\.67 100 1 Goods, minor 9,600,000\.00 8,389,154\.19 1,2010,845\.81 works, training, operating costs and services for the Project 2 (2) Goods and 5,500,000\.00 7,813,647\.45 -2,313,647\.45 services for CDP Preparation Grants 3 (3) Goods, works 11,600,000\.00 10,583,458\.98 1,016,541\.02 and services for CDP Subproject Grants DA-A Designated Account 0\.00 -91,641\.79 91,641\.79 DA-B Designated Account 0\.00 5,371\.50 -5,371\.50 Source: Client Connection, May 22, 2014\. 16 55\. Despite the high rate of disbursement, the risk of ineligible expenditure is important\. In spite of the task team effort to alert the PIU on the Project’s closure process, some activities were not delivered even after the grace period\. About US$2 million remained in the communes’ bank accounts at the end of March 2014\. Per disbursement rules, these outstanding balance needs to be refunded to allow proper closure of the Project’s Designated Account\. As of today, there is a misunderstanding with the PIU on the refunding process, a situation that could lead the Bank to declare ineligible the US$2 million\. 56\. Governance problem\. Some cases of fraud were reported during the Project implementation\. The outstanding case is one reported by a service provider to Integrity Vice Presidency (INT)\. As of the closing date, no feedback had been received from INT on this case\. 57\. Moreover, the GOC has obtained parallel financing for the PNDP from other partners like KfW (the German Cooperation Bank) and AFD\. To ensure and enhance synergy and efficiency, only investments not supported by other projects (or development partners) were eligible for IDA financing\. Therefore, the results presented in this ICR are only those obtained with IDA funds\. Coordination of interventions of technical and financial partners materialized through supervision missions of the Project, to which the AFD and KfW were regularly invited\. 2\.5 Post-completion Operation/Next Phase 58\. PNDP mobilized additional financial resources from the AFD to continue to support communes in the implementation of their CDPs\. With regard to MPs financed by the IDA resources (water, health centers, schools, warehouses, rural markets, electricity, etc\.), PNDP helped the beneficiary communities in setting up management committees to ensure self-maintenance of these infrastructures\. Moreover, a mechanism for collection of savings at each beneficiary household was established to ensure the sustainability of infrastructure financed by the Project\. But some management committees for social infrastructure did not work well in the Central, South, and North regions, where people are accustomed to free public services\. 59\. Given the institutional challenges of the decentralization reforms and the gradual approach needed to capitalize on Project implementation experience, the GOC formulated the Community Development Program to be implemented using an APL instrument in three four-year phases\. 60\. Phase I’s successful implementation defined the approach and methods and allowed for their implementation in five of Cameroon’s 10 regions\. In this phase, the Project funded studies supervised by MINATD, which led to laws and regulations on the decentralization process, including: Law 2009/011 of July 10, 2009, on financial regime of decentralized territorial entities; (ii) Law 2009/019 of December 15, 2009, on the local tax system; and (iii) Ministerial Order No\.00136/A/MINATD/DCTD of August 24, 2009, which made enforceable standard tables of municipal jobs and the organizational chart of communes\. The Project also supported the development of several planning tools, including: (i) the first methodological guide for regional and communal planning; (ii) the guide for stakeholders involved in the process and implementation of contracts financed by PNDP in the communes; and (iii) the methodological guide for the preparation of land 17 use and management plans for communes\. Finally, 151 CDPs were prepared during this phase\. 61\. In PNDP II, local development responsibilities were gradually transferred from Project entities to communes, where community investment decisions are made based on priorities identified in the CDP\. Phase II covered all 10 regions, but not all district communes of Cameroon – 31 district communes were not taken into account in the Project\. During this phase, PNDP supported the recruitment of 262 financial agents, responsible for tracking fiscal assets, and 259 development agents, responsible for M&E for communes\. These staff are operational and their personal contribution to the improvement of communal management is already noticeable and appreciated by 91 percent of mayors surveyed\. Moreover, 178 new CDPs were prepared by the municipalities, revealing significant needs in basic social services (health, education, water, and sanitation), productive infrastructures, and capacity building\. 62\. The level of achievement of trigger indicators needed for the third phase is encouraging\. Of the four trigger indicators, three have already been fully met, including: (i) Draft laws and decrees on decentralization prepared during the first phase of the Project were adopted and promulgated: (a) Law No\. 2009 of December 15, 2009, on local taxation and its decree; (b) Law No\. 011 of July 10, 2009, on the financial regime of communes; and (c) Rule No\. 00136/A/MINATD/DCTD of August 24, 2009, making enforceable standard tables of municipal employment; (ii) At least 90 percent of communes supported by the Project reflected priority investments in their CDP and budget\. At this stage, all new 178 communes with a CDP also have an AIP; and (iii) About 93 percent of beneficiaries are satisfied with PNDP services (CDPs, provision of communal agents, funding of MPs, capacity enhancement, and supply of equipment to communes)\. 63\. With regard to the fourth trigger indicator (preparation and approval by the government of the Charter on Decentralization), the draft charter was prepared and is awaiting government approval\. Given the Project’s positive track record, the GOC requested (by Letter No\. 003356/MINEPAT/CAB of August 13, 2013) IDA funds to finance the third phase of the program (APL3)\. The third phase will be built on the success and lessons learned from the implementation of Phases I and II\. It will consolidate what has been achieved and prepare an exit strategy\. Meanwhile, the government has initiated discussions to transform the PNDP into a National Participatory Development Agency to ensure its sustainability\. 64\. Considering the diversity of actors involved in local development, PNDP recognizes that the opportunities and local challenges are as varied as the actors themselves\. The first step toward the design of a third phase is to capitalize on its eight years of experience to meet the many needs of beneficiaries, summarized as follows: (i) development of the local economy of communes to help them mobilize fiscal resources to meet their equipment, public or community infrastructure, and public service needs; (ii) support for the government in the formulation of local development policies that will guide sectoral programs on the priorities expressed by the population; and (iii) development of a more diversified economic base for rural communities and an increased stock of basic infrastructure (water and sanitation, education, health, rural electrification infrastructure)\. In the new funding agreement with AFD, PNDP has integrated a new 18 component on agriculture that will benefit municipalities that have integrated agricultural activities in their MTEF\. 3\. Assessment of Outcomes 3\.1 Relevance of Objectives, Design and Implementation Rating: High 65\. The Project objectives, design, and implementation are highly relevant to Cameroon’s development priorities\. Indeed, the PDO and components remain consistent with the GOC’s Growth and Employment Strategy Paper (GESP) and the Bank’s CAS\. By realizing socioeconomic infrastructures through local planning, PNDP II substantially improved communities’ access to basic social services\. Throughout the planning process, all communes developed their CDPs, an innovative planning tool that addresses the potential of communes in all 28 sectors identified by the GESP\. 66\. PNDP II activities also supported the GOC’s decentralization strategy\. They contributed to strengthening the capacities of the different actors of decentralization in Cameroon (mayors, municipal councils, LSPs, decentralized state services’ staff, and local communities) and to establishing a mechanism for decentralized funding through the allocation of funds to municipalities to finance their development activities\. 67\. For successful implementation of the program, two structural participatory models were developed, consisting of: (i) a diagnosis, including an institutional and landscaping management diagnosis; and (ii) strategic planning, resource mobilization, and activity implementation\. In addition, incremental funding resources were provided for capacity building of municipal councils on project planning, management, procurement, and participative M&E\. 68\. Overall, the approach of the PNDP II has been recognized and adopted by the GOC\. To ensure the effectiveness of public investment in rural areas, Circular No\. 002 CAB/PR of July 9, 2012 of the President of the Republic of Cameroon, which relates to the preparation of the state budget, included CDPs among the main instruments that should guide the preparation of the Public Investment Budget (PIB) of the state for fiscal years 2013 and 2014\. 69\. Moreover, given the satisfactory results obtained by the Project in supporting local development and decentralization, the government initiated, by Decision No\. 022/SG/PM of March 28, 2014, a reflection to convert the PNDP into a National Participatory Development Agency\. 3\.2 Achievement of Project Development Objectives Rating: Satisfactory 70\. The achievement of the PDO is rated “Satisfactory\.” Indeed, according to the M&E data and the results of the independent impact assessment carried out at the end of the Project by the NIS, almost all outcome and intermediate outcome indicators were substantially achieved\. The only exception was the intermediate outcome indicator on the number of communes with public information and citizen control mechanism for grants\. 19 71\. The level of achievement of the outcome indicators can be summarized as follows: •Indicator 1: Eligible communes which have implemented subprojects have increased the rate of coverage of basic social services by at least 5 percent in at least one of the following four sectors: health, education, water, and sanitation\. Objective: 50 percent of eligible communes (147) which have implemented subprojects have improved their coverage of basic social services by at least 5 percent in one of the four following areas: health, education, water supply, and sanitation\. Achievement: 45 percent of communes (133) which have implemented subprojects improved their coverage of basic social services by at least 5 percent in one of the sectors of health, education, water supply, and sanitation (achievement rate: 90 percent)\. • Indicator 2: Access to education facilities\. Objective: the number of students with better access to educational facilities in the Project area will be 20,100 at the end of the Project\. Achievement: 44,340 students have better access to school facilities (achievement rate: 221 percent); • Indicator 3: Access to health care facilities\. Objective: the number of people with better access to health care facilities will be 102,000 at the end of the Project\. Achievement: 428,925 people have better access to health care facilities (achievement rate: 420 percent)\. •Indicator 4: Access to improved water source\. Objective: the number of people with access to improved water source will be 70,000 at the end of the Project\. Achievement: 437,100 people have better access to improved water points (achievement rate: 624 percent)\. • Indicator 5: Access to roads and social services\. Objective: the number of households with better road access to markets and social services in the Project area will be 193,000 at the end of the Project\. Achievement: 211,682 households have better road access to markets and social services (achievement rate: 110 percent)\. • Indicator 6: Preparation of CDPs by eligible communes in the new regions\. Objective: eligible communes (99) in the new regions have prepared a CDP of quality acceptable to the Association\. Achievement: 100 percent of eligible communes in the new regions prepared CDPs of a quality acceptable to the Association (achievement rate: 100 percent)\. 20 72\. The results of the impact assessment of the Project carried out by the NIS (2013)1 at the end of the Project indicate that: • In the area of water and sanitation, the Project improved the living conditions of 437,100 people through the construction of 1,457 water points\. This intervention helped to reduce the prevalence of waterborne diseases; • In the education sector, the Project improved the conditions for education of 44,340 students through the construction of 739 classrooms and the provision of 13,710 benches\. Moreover, the rate of success of students in examinations in schools of beneficiary villages rose by 2\.76 percent, to 82\.4 percent versus 79\.8 percent for non- beneficiary villages; • In the field of health, access to health care improved for 428,925 people through the construction and equipment of 28 health care centers\. About 41 percent of households in beneficiary villages are now within 500 m of the nearest health center and 93 percent of beneficiary villages are within 5 km of the first health center versus 87 percent of non-beneficiary villages; • In the transport sector, 18 villages comprising 25,873 households benefited from better transport conditions and travel through the construction or rehabilitation of 306 km of road and the construction of five culverts\. The direct impact of the construction of rural roads in the communes was the reduction of transportation costs\. Overall, these costs decreased from 400 CFAF to 200 CFAF per km by motorcycle in the Littoral region and from 200 CFAF to 100 CFAF per km by car in the centre region, based on the NIS (2013) survey results\. 73\. The impacts described above are similar to those reported by Wong (2012) on improving access to basic services, especially in health, education, and drinking water, in a study of the impacts of World Bank community-driven development programs\. 74\. Regarding support for decentralization, the actions of PNDP II strengthened the technical and operational capacities of communes so that they can effectively promote local development\. Indeed, the Project supported: (i) Deployment of the financial and accounting management software (SIM_ba) in 53 communes\. Based on the results of the first wave of implementation, a deployment plan was prepared and will be implemented in other communes; 1 This retrospective impact evaluation was performed at the end of the project by the NIS (2013) to measure the Project's impact on the beneficiaries’ living conditions\. The sampling strategy used in the evaluation was both probabilistic and non-probabilistic\. The probabilistic aspect was based on a stratified three-stage sampling: (i) the sampling unit of the first degree or primary unit was communes in which the PNDP operated since the launch of its second phase\. The set of all communes identified at the time of the evaluation formed the sampling frame of the first degree (178 communes) in 10 regions of Cameroon; (ii) at the second degree, there were two types of statistical units: the subprojects of the communes drawn in the first degree and the villages of said communes; (iii) at the third degree, the statistical unit was households in villages selected at the second degree\. The total sample size used for the evaluation consisted of 50 communes, 83 subprojects, 133 villages, and 1,405 households distributed in 10 regions of Cameroon\. The Project's impacts on the beneficiaries’ living conditions vis-à-vis education, health, water, and sanitation were analyzed using the method of statistical matching (exact matching)\. 21  (ii) Training of 1,720 members of municipal procurement committees; (iii) Training of the decentralized state services’ staff, municipal staff, and LSPs on the inclusion of social and environmental aspects in the preparation and implementation of CDPs and subprojects; (iv) Preparation of 91 land use and management plans for communes; (v) Production of additional official documents to Pygmies (673 birth certificates, 415 National Identity Cards, 17 marriage certificates, etc\.), which allowed them to become full citizens in Cameroon; (vi) The equipment of 329 municipalities with computers and GPS and of 209 communes with motorcycles, which improved data collection and working conditions in communes; (vii) Establishment of a mechanism for decentralized funding through the allocation of funds to municipalities to finance their development activities; (viii) Organization in April 2013 of a sub-regional seminar to exchange experiences on decentralization; (ix) Development and production of 325 CDPs, used by mayors to prepare AIPs that reflect the priority needs of communities\. The Minister of Economy, Planning, and Regional Development (MINEPAT) stated in the PNDP newspaper (“Echos du PNDP,” No\. 2) that: “The PNDP's experience in planning has been spreading in Cameroon as evidenced by the numerous requests expressed by some urban communes to benefit from this important planning tool;” (x) Recruitment of communal agents to enable local government to have access to qualified personnel\. A total of 521 municipal employees, including 259 technicians and 262 financial officers, are currently stationed\. These staff are responsible for tracking fiscal assets and for M&E at the communal level\. Their personal contribution to the improvement of communal management is already noticeable\. The data collected show that the contribution of these staff is particularly visible in the improvement of tax revenues, budget execution, archiving, and monitoring the implementation of CDPs and MPs, as well as in the collection of communes’ socioeconomic data\. The payroll of these new staff was supported by the Project during the first two years and later by communes themselves\. According to the performance assessment of these communal staff, most communes concluded that their provision was a pertinent response to the recurrent lack of qualified human resources in numerous rural communes\. 91 percent of these staff had at least two years of experiences in community development-related issues, including local planning, project management, civil and rural engineering, accounting and management, banking, and insurance\. Moreover, 91 percent of mayors interviewed were satisfied with the work done by communal staff made available by the Project\. 2 Financial officers favored the 2 A survey of beneficiaries' satisfaction with services provided by the Project was conducted in July 2013 in the Project intervention zones by an independent consultant\. On the methodological level, the study involved a sample survey with a representative sample of each statistical unit identified as beneficiaries of the Project (communes, state decentralized services, service providers, grassroots communities, and Project staff)\. In each statistical unit, a sample was randomly selected\. Thus, the total sample consisted of 66 municipalities, state decentralized services who work in the areas covered by the Project (education, health, water, and sanitation) in 30 selected departments, 198 communities distributed throughout the national territory, and project staff present in the survey areas\. A survey guide was developed for each representative sample of beneficiaries\. Conversational interviews and focus group discussion techniques 22  increase in tax revenues of communes\. Indeed, municipalities have broadened their tax base and increased the level of tax collection\. Overall, the performance of technical officers and financial officers was rated satisfactory\. Specifically: (a) In the municipality of Mfou, the financial officer helped to increase the fiscal revenue by 300 percent, from 100 million CFAF in 2008 (without the financial officer) to 300 million CFAF in 2013 (with the presence of the financial officer)\. (b) In the municipality of Figuil, the financial officer helped to increase the fiscal revenue by 245 percent, from 162 million CFAF in 2010 (without the financial officer) to 397 million CFAF in 2013 (with the presence of the financial officer)\. (c) In the municipality of Moyuka, the financial officer helped to increase the fiscal revenue by 150 percent, from 340 million CFAF in 2010 (without the financial officer) to 510 million CFAF in 2013 (with the presence of financial officer)\. The contribution of the technical officer is particularly visible in the improvement of M&E, the implementation of CPDs, and in the collection of social infrastructure data\. 3\.3 Efficiency Rating: Satisfactory 75\. As stated in the PAD, the PNDP II did not lend itself readily to ex ante cost- benefit analysis because: (i) all investments were demand-driven and their nature could not be known beforehand; and (ii) most eligible subprojects would be nonproductive, making the benefits difficult to quantify and value\. Nonproductive subprojects aim to deliver basic social services in sector such as education (and capacity development), health, water and sanitation, and leisure and culture\. Quantifying and valuing economic benefits in social sectors is generally a difficult task\. Therefore, the ex ante economic analysis was not done at Project appraisal\. 76\. For the same reasons that existed during appraisal, no economic or financial analysis for the whole Project was done at completion\. Also, because the appraisal mission did not attempt to prepare new financial analyses based on the MP investments observed under PNDP I, there was no basis for the ICR mission to repeat the computations for comparison\. 77\. Given the difficulties in quantifying the Project’s benefits, a cost-efficiency analysis was performed\. Indeed, cost efficiency can be analyzed in terms of the unit cost of PNDP II infrastructure constructed versus the unit cost of similar infrastructure created by other approaches and agencies in Cameroon\. Furthermore, subprojects were screened against a set of technical and economic criteria to ensure soundness with sectoral norms and cost efficiency\. 78\. The technical and financial audit of the Project, carried out on a random sample of 30 percent of communes by an independent auditor for the fiscal years 2010, 2011, and were used by the consultant to gather information on beneficiaries’ perceptions regarding services delivery by the Project\. Moreover, descriptive statistics were used in the data analysis\. 23 2012, revealed that the Project was cost effective\. It generated cost efficiencies, with savings on unit costs that were channeled into additional community infrastructure initiatives\. Indeed, the average unit costs of constructing the social infrastructure subprojects were lower than those charged by government departments\. For example, the average Project cost of building a classroom with standard dimensions amounted to 7,213,829 CFAF versus 9,000,000 CFAF by state services and 11,165,000 CFAF by FEICOM (Fonds Spécial d’Equipement et d’Intervention Intercommunale)\. In addition, the audit found that overall, socioeconomic infrastructures were built according to sectoral standards and the Project’s financial resources were used effectively and efficiently\. The prices of various goods and services provided as part of the implementation of subprojects were generally determined by competition through tendering\. 3\.4 Justification of Overall Outcome Rating Rating: Satisfactory 79\. The overall outcome of the Project is rated “Satisfactory\.” According to the results of both impact and beneficiaries’ satisfaction assessment studies, the Project’s performance was very encouraging and its PDO remains relevant\. Access of populations to basic socioeconomic services is still one of the priorities of the GESP\. One of the Project innovations shared by all stakeholders was the preparation of CDPs, which reflect the priority needs expressed by communities and their populations\. Indeed, CDPs are the main planning tools now guiding the development of both the MTEFs and AIPs of Cameroon’s communes\. In recognition of this high level of achievement, the President of the Republic, in Circular No\. 002 CAB/PR of July 9, 2012 included CDPs among the main instruments that should guide the preparation of the PIB of the state for fiscal years 2013 and 2014\. 80\. Almost all PDO indicators were substantially achieved and sometimes largely exceeded\. Furthermore, PNDP II made significant progress towards the completion of the four APL triggers agreed between the GOC and the World Bank to move to the third phase\. In fact, three of the four triggers have been met, including: (i) draft laws and decrees on decentralization prepared during the first phase of the Project will have been adopted and promulgated to pave the way for the improved intergovernmental fiscal transfer; (ii) at least 90 percent of communes supported by the Project (292) will have reflected priority investments in their CDPs and budgets; and (iii) at least 80 percent (260) of the beneficiary communes were satisfied with service delivery\. Regarding the trigger on the preparation and approval by the GOC of the Charter on Decentralization, the draft Charter was prepared and is awaiting government approval\. 81\. The Project efficiently used resources to achieve its results and goals\. As of November 30, 2013, the level of disbursement was satisfactory\. The disbursement rate was 100 percent for IDA funding (about SDR 26\.70 million out of SDR 26\.70 million allocated)\. Throughout implementation, the Project was subject to annual technical and financial audits\. No major irregularities were noted\. 82\. As noted above, the Project had a significant impact on improving the living conditions of rural populations by facilitating access to basic social services in rural areas\. 24 83\. Based on the relevance of the Project’s objectives, the substantial achievement of the PDO (efficacy), and the efficiency of Project-supported interventions, the overall outcome rating for the Project is Satisfactory\. 3\.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 84\. Poverty Impacts: According to the results of both the impact and beneficiaries’ satisfaction assessment studies, PNDP II activities contributed to job creation and the fight against poverty in Cameroon\. Indeed, PNDP II contributed to local empowerment\. The Project promoted the legal existence of Pygmies and their citizenship rights, increased their capacity to participate in local political processes and governance, and therefore encouraged their social inclusion in national activities\. Moreover, during implementation, communities were actively involved in the identification, planning, selection, and control of priority investments financed by the Project\. The participation of rural populations allowed good targeting of the priority needs of grassroots communities, and therefore improved resource allocation\. In addition, the Project has contributed to the creation of jobs in rural areas by using LSPs and local contractors in the construction of some small-scale socioeconomic infrastructures\. Moreover, the Project has created 521 direct jobs for municipal officials in communes covered\. Furthermore, the participatory process used in the villages was a catalyst to grassroots local savings mobilization of about 2,363,317,444 CFAF (out of 3,139,304,253 CFAF planned), used as beneficiary contributions for implementation of MPs\. Finally, the Project facilitated access to basic social services (health, education, water, and sanitation) at the local level; these non- monetary aspects are very important in the fight against poverty and in promotion of human development in rural areas\. 85\. Gender Aspects: Although there were no gender-specific indicators in the Project’s M&E systems, the Project benefited all segments of the population – men, women, and youth\. Most MPs worked in favor of rural women\. In beneficiary households of water and electricity MPs, women’s time spent in search of firewood and water drastically reduced, and many women now use the extra time to increase their farm productivity\. In addition, access to water and modern energy paved the way for the development of small agricultural processing activities led by women\. In the majority of beneficiary communes, rural women dominate the activities of agricultural production, processing, and marketing\. They are therefore the first recipients of MPs that improve rural roads, agricultural markets, and warehouses\. 86\. With regard to the personnel provided by the Project to communes, an effort was made to recruit female staff\. Out of the 259 communal development agents (technicians) recruited, 21 percent of them were women\. Also, all 30 social workers transferred to the 30 communes involved in the implementation of the DPP by the Ministry of Social Affairs (MINAS) were women\. 87\. In most communes surveyed, women also participated in decision-making bodies and in the control of the local savings for maintenance of equipment and infrastructures\. Thanks to the sensitization campaign carried out by the Project and the training of communes on gender issues, women now occupy positions of President and Treasurer in both steering management committees, showing their leadership in the governance of 25 MPs\. Because of the dynamism of these women, all of the management committees of MPs have established savings and credit schemes\. During the closing supervision mission, communities were advised to use the savings mobilized for the maintenance of infrastructure and equipment as an opportunity to provide small amounts of credit to women wishing to carry out income-generating activities\. 88\. Social Development: Education, health, and water access are the core areas of the social services promoted by PNDP\. The implementation of MPs in the education sector improved school enrollment in beneficiary communities\. For example, in the East region, the enrollment rate improved 15\.26 percent in beneficiary households\. Moreover, the intervention of PNDP II in the water sector improved the living conditions of 437,100 people through the construction of 1,457 water points\. 89\. Achievements of the program in the field of health increased the number of births attended by skilled health personnel, from 15 deliveries per month before the Project to 17 deliveries per month afterwards\. The PNDP also helped bring health facilities nearer to households\. Almost 41 percent of households in beneficiary villages are within 500 m of the nearest clinic, and 93 percent of these households are less than 5 km from the nearest clinic\. In contrast, only 27\.5 percent of households in non-beneficiary villages are within 500 m of the first health facility and 87 percent of them are less than 5 km from the first health center\. (b) Institutional Change/Strengthening 90\. The Project strengthened organizational systems at all levels (local, regional, and national) to ensure the sustainability of its investments\. At the municipal level, three types of committees including Project piloting (COPIL), monitoring-evaluation (CSE), and management (COGE) were respectively established to: (i) support the elaboration of CDPs; (ii) ensure the quality of CDPs and evaluate their rate of achievement; and (iii) ensure the maintenance of infrastructure and equipment financed by the Project\. The Project promoted the establishment of Communal Procurement Management Committees (CCPM) in all communes to ensure good governance of communal contracts\. Each municipality also established a Municipal Council Extended to Sector (COMES) that approves CDPs, priority investment plans, and budget allocations\. At both the regional and national level, the Project organized knowledge-sharing and capacity-building forums to enhance the capacity of mayors in managing communal contracts and fiscal revenues\. 91\. Moreover, the GOC initiated discussions to transform the PNDP into a National Participatory Development Agency to ensure its sustainability\. The draft decree was prepared and submitted to the government for approval\. If the text is approved by the government, the PNDP will become a public administrative authority with greater financial autonomy and an independent managerial system\. (c) Other Unintended Outcomes and Impacts (positive or negative) 92\. Other impacts are noticeable in some municipalities that use CDPs as a tool for development\. For example, the Commune of Bangangte mobilized foreign direct investment totaling 300 million CFAF to finance its city sanitation and electrical network expansion projects\. The same commune received from FEICOM an award prize of 50 26 million CFAF for the best project submitted for funding activities extracted from its MTEF\. Other communes are integrating in their AIPs innovative projects that will promote local economic development, taking into account their comparative advantage in terms of natural resources\. Samples of projects include communal agricultural mechanization parks (Commune of Batouri), a communal agricultural initiative (Commune of Dibombari), and a communal timber park (Commune of Dimako)\. 93\. The establishment of management committees for the maintenance of water infrastructure was a catalyst for the development of savings and credit unions in beneficiary villages\. In total, more than 1,700 savings and credit unions are operational and women are playing a greater role in their management than before the Project\. The combination of these savings funds may result in a microfinance institution self-managed by recipient villages\. 94\. One aspect that should be further improved by the Project is the governance of communal contracts\. Indeed, with the arrival of the Ministry of Public Contracts (MINMAP), the CCPMs established by the PNDP disappeared to make room for departmental and regional commissions, managed by Divisional Officers and the regions’ governors\. Many mayors deplore their lack of involvement in these committees, which oversee their contracts\. During the PNDP II closing mission, the Bank recommended that the PNDP initiate a dialogue with MINMAP to address this critical issue\. 95\. Moreover, the GOC obtained parallel financing for the PNDP from other partners such as AFD and KfW\. AFD provided 14\.95 billion CFAF, intended to finance only agricultural activities identified as priority needs of populations in their CDPs\. Currently, a study is underway to identify the crops and agricultural investment that will benefit from this funding\. Furthermore, KfW’s funding, 3 billion CFAF, was used to finance only the activities of communes located in Cameroon’s extreme North region\. KfW’s funding was closed\. 3\.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 96\. The balance of services offered by the PNDP II, as perceived by respondent beneficiaries, is encouraging and is characterized by: (i) Excellent coverage of program interventions at the national level\. In addition to the supply of equipment to communes, some of which is still being acquired (including motorcycles and completed computers), almost all targeted communes received four other services offered by the PNDP II, including: (a) development of their CDPs (100 percent); (b) funding and implementation of their MPs (94 percent); (c) provision of communal agents (77 percent); and (d) training/capacity building of their staff (96 percent)\. (ii) Strong ownership by communes of the CDP development process\. Today, nearly three out of four target communes have a CDP aligned to the GESP, and the CDPs is being updated to align them to the GESP with the support of the program in all communes that have a former CDP\. (iii) A satisfactory level of budget absorption\. The level of consumption of global resource allocations to municipalities in PNDP II is 100 percent for IDA resources\. In addition, IDA resources allocated for funding and implementation of MPs, 27  totaling 8\.7 billion CFAF (or about 57 percent of budget funds for this activity) are fully consumed\. (iv) Strong ownership by communes of planning and management mechanisms\. Thanks to the capacity enhancement/training program, 53 communes benefited from the installation of the SIM_ba software to improve their accounting\. The pilot introduction of a mechanism for citizen control of public action in 10 municipalities (one per region) is being duplicated in other municipalities\. In addition, a database of service providers is available in all target communes and is generally available to the public\. (v) The different categories of beneficiaries (communes, service providers, sectoral ministries and population) appear generally satisfied with the support received from the program\. Overall, 93 percent of beneficiary communes are satisfied with the program’s services\. 4\. Assessment of Risk to Development Outcome Rating: Significant 97\. Each social infrastructure built with IDA funds has a management committee responsible for operations and maintenance (O&M)\. These committees work well in seven regions and support the recurring costs of maintenance and repair of the infrastructure built\. In these regions, the likelihood that the stream of benefits will be sustained is high\. In Central, South, and North regions, the management committees of community infrastructure do not work well as their capacity for collective action is weak\. Indeed, communities in these areas have grown accustomed to receiving free benefits from state services and are reluctant to contribute to the maintenance cost of infrastructure\. In these areas, the risk of losing these infrastructures is high because it only takes one small glitch for these infrastructures to be abandoned, despite the contribution of the communities to the investment costs and to the control of investment choices\. 98\. Following the municipal elections held in September 2013, significant overturn in the municipal executives in all 10 regions of Cameroon was witnessed\. Approximately 80 percent of municipal executive members are new and have not yet mastered the participatory development approach and procedures for Project implementation\. The low capacity of these new mayors and municipal councilors could have a negative impact on the short-, medium-, and long-term sustainability of the Project benefits in the municipalities concerned\. 99\. Moreover, given the high rate of replacement of mayors and members of municipal councils in every municipal election, there is a substantial risk that the development outcome in terms of organizational setup, budget, political will, and environment will not be maintained\. 5\. Assessment of Bank and Borrower Performance 5\.1 Bank Performance 28 (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 100\. During PNDP II, the Project maintained its support to communes from PNDP I, targeted new eligible communes (110), and reached at least one community per commune\. The Project completed key institutional reforms on decentralization and local development\. Communes were targeted as the main beneficiaries of PNDP II services since local development responsibilities were transferred to them\. To ensure quality at entry, the main components and their related activities were selected based on lessons learned from PNDP I and the priority needs expressed by communes, as highlighted in the various assessment studies, including beneficiaries’ satisfaction, environmental, external audit, and impact evaluations\. 101\. Lessons taken into consideration and reflected in the Project design included the need to: (i) continuously involve the public sector; (ii) ensure the quality of MPs; (iii) focus on CDPs as a tool for planning, budgeting, and programming; (iv) streamline funds transfers by directly channeling funds to the bank accounts of eligible communes; (iv) develop local procurement capacity; and (v) enhance environmental management capacity\. 102\. Actions undertaken for Project readiness included the: (i) Establishment of a favorable environment for a better coordination mechanism characterized by: (a) regular dialogue/consultation workshop with partners on decentralization issues; (b) oversight of the steering committee of decentralization led by the MINATD; (c) periodic meetings with MINEPAT, MINEP, communes, TSPs, the Project team, and joint supervision missions\. (ii) Amendment of the new operational framework, which integrated the expansion of the Project’s geographic coverage\. (iii) Update of the Project Implementation Manual, M&E manual, and financial management manual\. (iv) Recruitment of two accountants in the new NCU, one accountant in each RCU, and one internal auditor\. (v) Recruitment of regional environmental focal points within each RCU\. (b) Quality of Supervision Rating: Satisfactory 103\. Following the implementation of the IDA Credit in January 2010, four joint supervision missions were organized\. These supervision missions were held respectively from May 10-19, 2010; October 14-15, 2010; December 28, 2011 to January 13, 2012 (MTR); and from December 9-23, 2013 (closing the Project)\. These supervision missions were effectively complemented by semi-monthly meetings held regularly to monitor the Project’s implementation progress\. Therefore, the Bank team did not need more supervision missions\. 104\. The first two missions were considered as capacity enhancement supervision\. Emphasis was placed on the analysis of the main lessons learned from the implementation of the first phase, monitoring the implementation of recommendations of the last supervision mission, implementation of the financing strategy, and the state of 29 implementation of PNDP II\. Throughout these missions, new orientations and guidelines were given to the Project team on aspects related to the: (i) development and financing of CDPs; (ii) O&M of Project infrastructures and equipment; (iii) mechanisms for fund transfers to communes; (iv) support for procurement of communal goods and services, financial management, internal audits, and environmental aspects; as well as (v) implementation of the DPP; and (vi) coordination of PNDP donors\. 105\. Through the implementation of recommendations from the two previous supervision missions, the MTR concluded that the overall status of the Project was satisfactory\. In fact, at MTR, the Project had achieved the following results: (i) all 68 CDPs of PNDP I and 34 new CDPs out of 110 originally planned in four new areas were developed; (ii) of the 20 Project indicators, 17 were informed by mid-term; and (iii) Project performance was enhanced by the implementation of MPs inherited from the first phase\. The MTR noted that the whole implementation process of PNDP II was progressing satisfactorily and suggested that the results of the program would be achieved by the initial anticipated closing date of November 30, 2013\. 106\. After the MTR, several technical meetings to monitor the progress of Project implementation were held periodically between the PCU and the Bank team under the initiative of the Task Team Leader (TTL)\. Throughout these meetings, critical issues that could limit the Project’s success were fully investigated by the mission, partners, and the government\. These included the: (i) reallocation of IDA credit; (ii) completion of the Project’s impacts; (iii) collaboration between the Project and the administrative authorities; (iv) blockages between certain mayors and communal treasurers regarding the implementation of MPs; (v) implementation of Project activities in the Bakassi Peninsula; (vi) relationship between the IDA Credit and the second generation C2D (AFD) funds under investigation; (vii) finalization of the remaining CDPs by the end of March 2012; and (viii) involvement of the decentralized services sector in program implementation\. Solving these various problems was instrumental to the achievement of the Project’s objectives\. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 107\. From the preparation of PNDP II until its implementation, the Bank’s leadership was instrumental to the achievement of the Project’s satisfactory performance\. With regard to the design, both PDO outcome indicators and the choice of beneficiaries, components, and their related activities were identified based on the needs expressed by all stakeholders using a participatory approach\. The Project design also reflected lessons learned from the PNDP I and is aligned to both the GOC’s GESP and the Bank’s CAS\. 108\. Each supervision mission was an opportunity not only to advocate at the highest level of government decision making (Prime Ministry, MINPAT, MINTAD, MINFI and MINEP) for addressing the constraints hindering proper execution of the Project, but also to enhance the ownership process of participatory local development by the beneficiary communes\. At the end of each mission, a debriefing was presented to key decision makers from the government\. These advocacy efforts accelerated the adoption and promulgation of texts on decentralization and facilitated the mobilization of government counterpart funding, as well as the direct transfer of funds to eligible communes to finance their MPs\. 30 109\. Technical meetings chaired by the Bank’s TTL were regularly held between the Project team, partners, the government, and municipalities to monitor the state of the Project\. These were especially effective for researching corrective measures to address critical aspects such as: (i) Project coordination, (ii) improvement of the planning, budgeting, and programming process for communes’ priority investments and of the quality of MPs; (iii) compliance with the Bank’s fiduciary and procurement procedures; and (iv) inclusion of environmental measures in MPs\. 5\.2 Borrower Performance (a) Government Performance Rating: Satisfactory 110\. For the GOC, PNDP is a success story in terms of local development in Cameroon\. Its success is evidenced by the satisfaction of beneficiaries with regard to the quality of available basic social infrastructure and the impact of achievements on the living conditions of people and communes\. The Project’s positive results have reassured both the GOC and development partners\. Indeed, in its initial launch phase in 2004 with Bank resources, including IDA funds and state counterpart funds, MINEPAT, which oversees PNDP, advocated for an increase of PNDP resources in 2006 by mobilizing additional parallel financing from KfW and the C2D funds (AFD)\. 111\. In PNDP II, MINEPAT requested the Bank to double its funding and AFD to triple the C2D funds\. Motivated by the good performance of PNDP, MINEPAT also raised counterpart funds from the state budget so that the total amount mobilized by PNDP (11,074,315,900 CFAF) exceeded the amount originally planned (10,153,069,317 CFAF), achieving a mobilization rate of 109 percent\. Thanks to the political will of the state, MINATD also facilitated the adoption and promulgation of texts on decentralization\. Since 2012, the President of the Republic has, in its circular related to the guidelines on the preparation of the budget, instructed the government to use, among other planning documents, the CDP in the selection of projects to be retained as PIB\. This is a great recognition of the importance of CDPs as the main planning tool for communes\. 112\. In the day-to-day implementation process, sectoral ministers were involved in all institutional frameworks established by the Project and in all supervision missions and technical meetings\. One illustrative example is the transfer of 30 social work officers in 30 selected communes by MINAS to help implement the DPP\. Other examples are the agreements signed between the Project and ANAFOR, FEICOM, CEFAM, ARMP, and MINMAP for reforestation, infrastructure development, and capacity building in procurement governance and management\. 113\. However, it should be noted that the counterpart funds were generally provided by the GOC with considerable delays\. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 114\. Given the Project’s results, the implementation of Project activities by the PIU was effective\. However, the PPR conducted by the Bank identified some weaknesses, including: (i) some procurement complaints were not handled in a timely manner by the 31 PIU; (ii) assistant accountants were recruited without involvement of the World Bank and its non-objection if applicable; (iii) contractual deadlines for paying service providers were sometimes not respected by the PIU; and (iv) the execution of some procurement activities directly managed by the PIU experienced significant delays\. 115\. Moreover, during the life of the Project, some cases of fraud were reported\. The outstanding case is the one reported by a service provider to INT\. As of the closing date, no feedback had been received from INT on this case\. Therefore, the implementing agency performance is rated “Moderately Satisfactory\.” (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 116\. The government has fulfilled all its obligations, including: (i) allocating counterpart funds; (ii) mobilizing additional resources from other development partners; and (iii) adopting legal texts of decentralization\. In addition, the President of the Republic has recognized the important role of PNDP in poverty alleviation and wealth creation and instructed all sectoral ministries to use CDPs in preparation of the PIB\. As an illustration, in March 2014, MINEPAT organized consultative workshops in the 10 regions to identify the needs of communes to be integrated in the PIB\. These needs will be extracted from the CDPs in each region and then consolidated at the national level to give rise to the 2014 budgetary allocation on decentralization\. However, it should be noted that the counterpart funds were generally provided by the GOC with considerable delays\. 117\. On the operational side, the level of investment of PNDP II was satisfactory according to the perception of beneficiary communes and the main target values of the Results Framework were achieved\. Communal agents transferred to communes by PNDP generally improved management and collection of communal fiscal revenue\. Management committees were established in all beneficiary villages for the maintenance and sustainability of infrastructure and equipment provided by the Project\. A savings scheme system involving rural women in management was widespread in these management committees\. 6\. Lessons Learned 118\. Several lessons were learned during PNDP II, including: 119\. The CDP can be considered as a reference tool for planning and dialogue to support local development, but its level of ownership by line ministries remains weak\. Indeed, participatory planning has identified sectoral priorities for local development but these need to be better taken into account in the PIB to consolidate and sustain the financing of local development\. In addition, the level of coordination of support to local development is still insufficient\. 120\. Funding and implementation of multisectoral development priorities can improve access to basic social services, but mobilization of beneficiaries' contributions remains insufficient and the demand for economic investments very important\. The impact study showed that the Project improved access to basic social services in different sectors (education, health, water, sanitation, and transport) and 32 generated many temporary and permanent jobs\. However, households’ access to basic social services provided by the Project may still be limited by their low incomes\. 121\. The funding allocation system improves resource management by municipalities\. Indeed, given the competition in the procurement process, mayors were able to achieve a greater number of MPs for their populations within their allocations\. 122\. The citizen control mechanism improves communes’ governance\. The pilot citizen control mechanism implemented in 10 communes allowed the communes to better understand their populations’ perceptions of the services provided and to consider improvements\. This operation is considered an effective tool of governance through which significant changes can be capitalized in communes\. A computer application was developed and put online\. The pilot operation will be extended to other communes\. 123\. Governance remains an important challenge for the promotion of local development in Cameroon\. Despite IDA procedures, the participatory approach, and the capacity building of stakeholders, the Project failed to prevent governance issues that were raised during Project implementation\. The Project focused on access to basic social services and placed little effort on the prevention, treatment, and management of complaints\. 124\. Decentralization is a very long-term process, exceeding Project deadlines despite the use of an APL\. This justified the limited objectives that the program set for decentralization in PNDP II\. Although Phases I and II helped to define the legislative and regulatory framework for decentralization by supporting the preparation of several draft laws and decrees, a lot still needs to be done to stimulate sustainable local development\. Indeed, the transfers of responsibilities and resources to the municipalities are not yet being done optimally\. 7\. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 125\. The Ministry of Economy, Planning and Regional Development noted the impressive involvement of the population in the identification and implementation of solutions for local development on the ground\. This commitment was translated through citizens’ effective participation in the planning process and their contribution in building and maintaining their infrastructure\. Increasing citizen control in the management of their communes or communities may ultimately strengthen the process of decentralization and its appropriation by the population\. 126\. PNDP’s experience in local planning is spreading in Cameroon\. As attested by the numerous requests expressed by some urban communes that also want PNDP assistance in this process\. The opportunity presented by the transition to PNDP III could lead the government to reconsider PNDP’s scope, which is currently limited to rural communes\. The government has engaged in discussions in this direction\. 33 (b) Cofinanciers (Embassy of France in Cameroon/French Development Agency) 127\. PNDP represents two major financial commitments of AFD through the first and second C2D\. The first funding covered an amount of 13 billion CFAF\. France decided to support a second phase based on the strong success of the first funding\. The assistance granted by AFD through the second C2D amounted to 14\.95 billion CFAF\. Field observations suggest that money is being well spent, evidenced by the close relationship with the rural population\. The funded MPs are well prepared and meet the needs of rural populations\. 128\. Local development is an essential intervention of the French cooperation axis\. If PNDP is today a model for local development programs/development of territories, it is because of its importance (financial volume and national coverage), but also because of its achievements (number of CDPs prepared, investment infrastructures, MPs in service, personnel trained and deployed in the rural communes, etc\.)\. Its impacts on the population, particularly in terms of improving living conditions, are effective\. (c) Other partners and stakeholders 129\. PNDP helped to improve living conditions in Cameroon\. Two years ago, a convention was signed between my municipality and the PNDP for the provision of potable water infrastructure, including a tank of 20 m3\. This helped to improve our living conditions\. We have also benefited from the construction of two classrooms and the recruitment of communal agents\. It is a great gesture for our population\. The work done by PNDP facilitates teaching and learning activities in our schools\. Our area is known for its rainy nature; we were uncomfortable and our pupils were regularly sick\. The new classrooms are a gift from PNDP now and for the future\. 34  Annex 1\. Project Costs and Financing (a) Project Cost by Component (in USD million equivalents) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD millions) Appraisal (USD millions) Component 1: Local development 62\.81 68\.69 109% support Component 2: Decentralization 18\.83 16\.43 87% support for communes Component 3: Coordination, management, and monitoring and 17\.14 14\.60 85% evaluation Total Baseline Cost 98\.78 99\.72 101% Physical Contingencies 0\.00 0\.00 0\.00 Price Contingencies 4\.22 0\.00 0\.00 Total Project Costs 103\.00 99\.72 97% Front-end fee PPF 0\.00 0\.00 0\.00 Front-end fee IBRD 0\.00 0\.00 0\.00 Total Financing Required 103\.00 99\.72 97% (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 56\.00 53\.12 95% Local Communities 7\.00 5\.32 76% International Development 40\.00 41\.28 103% Association (IDA) Total 103\.00 99\.72 97% 35  Annex 2\. Outputs by Component Component 1: Local Development Support 1\. Objective of Component 1: This component aims to help improve the socioeconomic conditions, increase the productivity of the natural resource base, and increase the incomes of the population in the communes supported by the Project\. Achieving these goals requires putting in place various infrastructures and socioeconomic investments\. This component will channel grants to communes to co-finance their proposed investments (subprojects): either a CDP preparation activity or a CDP- Subproject\. 2\. Output of Component 1: This component is rated Satisfactory (S)\. Except for the output related to the number of health facilities to be constructed, almost intermediate outcome relating to this component were achieved or exceeded (Table 5)\. Table 5: Results Achieved for Component 1 Key Performance Indicators Component 1 Indicators Target Achievement Achievement Remarks against Target (%) Achieved and exceeded\. Communes benefiting These include from the Project grant 170 197 116 178 new (number) – disaggregated communes by new and old and 19 old communes New CDPs implemented Achieved and 140 197 141 (number) exceeded\. Communes supported by the Project that have reflected priority 170 (100%) 170 (100%) 100% Achieved\. investments in their CDPs and budgets (number, %) Subprojects that have implemented the required environmental and social 100% 100% 100% Achieved\. risk mitigation measures and are functional (%) Achieved and exceeded\. This high rate Improved community of water points constructed in 338 1437 431% achievement rural areas served by the reflects the Project (number) high demand of rural populations\. Classrooms built and/or Achieved and 238 739 311% rehabilitated (number) exceeded\. Health facilities constructed, renovated or 44 28 64% equipped (number) Roads rehabilitated, rural Achieved and 241 306\.14 127% (km) exceeded\. 36 3\. Table 6 summarizes the physical achievements of PNDP II by sector\. Table 6: Physical Realization of PNDP II by Sector Sectors Goods and services delivered Quantities Education Classrooms (number) 739 Desks (number) 13,710 Health Health centers constructed or rehabilitated (number) 28 Water and sanitation Wells (number) 442 Drillings (number) 419 Toilets (number) 524 Construction of water sources 596 (number) Transportation Rural roads constructed or rehabilitated (km) 306 Development infrastructure Market stands (number) 368 Storage facilities (number) 15 Market shelters (number) 26 Source: PNDP II’s impact evaluation (2013)\. Component 2: Decentralization Support for Communes 4\. Objective of Component 2: This component aims to strengthen institutional capacities in support of the decentralization process\. It will also provide assistance for the implementation of capacity-building activities for communes and other local stakeholders, such as LSPs, multidisciplinary teams of the sectoral ministries, and Technical Service Providers (TSPs), to enable them to assume an effective role as promoters of local development\. It will be implemented through two subcomponents including: (i) Institutional support to the decentralization process; and (ii) Capacity building\. The Project will also fund: (a) acquisition of computer equipment for communes; (b) training of communal development and finance staff; (c) publication and dissemination of a participatory planning guide, as well as a guide for procurement procedures; (d) environmental training for members of municipal councils, divisional administrative staff, and Project staff; and (e) study tours and training on decentralization and local development for LSPs, multidisciplinary teams, TSPs, and local stakeholders other than commune authorities\. 5\. Ouputs of Component 2: Regarding the preparation of land use and management plans, the process for preparing CDPs involves a mapping exercise to ensure that land use plans are integrated into CDPs\. Indeed, 91 out of 100 land use and management plans were prepared (91 percent)\. With respect to capacity building, significant activities were completed\. In the 10 regions, mayors were trained on decentralization\. Four regional workshops were organized to disseminate the guide on regional and local planning dissemination\. Trainings on procurement were implemented to benefit regional procurement commissions, and staffs of several ministries (land, social, and environment) and mayors were trained in environmental and social safeguards\. In total, 521 municipal officials were recruited by the Project to strengthen the capacity of communes (two staff for each commune)\. These staff are responsible for: (i) tracking fiscal assets; and (ii) M&E at the communal level\. These staff are operational and their personal contribution to the improvement of communal management is already noticeable\. The data collected 37 on the ground show that the contribution of these staff is particularly visible in the improvement of tax revenues, budget execution, archiving, monitoring the implementation of the CDPs, and the collection of social infrastructure data\. Moreover, 91 percent of mayors interviewed are satisfied with the work done by communal staff made available by the Project\. The payroll of these new staff was supported by the Project during the first two years and later by communes themselves\. The citizen control mechanism was prudently tested in 10 communes\. The pilot citizen control allowed communes to better understand their populations’ perceptions of the services provided and to consider improvements\. This operation is considered an effective tool of governance through which significant changes can be capitalized in communes\. A computer application was developed and put online\. The pilot operation will be extended to other communes\. Table 7: Results Achieved for Component 2 Key Performance Indicators Component 2 Target Achievement Achievement Remarks Indicators against Target (%) Land use and management plans 91 100 91 Partly achieved\. prepared for communes (number) Not achieved\. The pilot citizen control was implemented in 10 communes\. This pilot citizen Communes with a allowed the communes to public information and better understand the citizen control perception of their mechanism of grant 10 195 5% populations on the services management in place provided and to consider and operational improvements\. A computer (number) application was developed and put online\. The pilot operation will be extended to other communes\. Component 3: Coordination, Management, Monitoring and Evaluation, and Communication 6\. Objective of Component 3: This component facilitates: (a) administrative, technical, and financial management of the program; (b) coordination among all institutional partners to ensure efficient support to communes for local development; (c) effective contractual arrangements with communes, sectoral ministries, TSP/private- sector operators, and NGOs (TSPs), including acquisition of the equipment necessary for implementing the program; (d) M&E of the performance and the financial, environmental, and social impacts of the program (including developing monitoring scorecards to assess beneficiaries’ satisfaction with services provided by communes); and (e) development of communication activities to publicize and disseminate Project implementation tools and local development potential and practices\. The integrated financial management software will be upgraded with additional tools to enable permanent access to accounting system 38 information in the regions for analysis and ensure timely synchronized consolidation of accounts\. 7\. Output of Component 3: Four intermediate outcome indicators relating to this component were achieved\. Furthermore: (i) external financial audit reports are produced on time and without any major reservations; (ii) a database on the quality of TSPs is in place and available for public access; and (iii) biannual M&E reports are produced within the agreed time frames\. M&E work is performed at all levels (national, regional, local), and the financial management software was upgraded\. The financial management function was rated Moderately Satisfactory (MS)\. Interim Financial Reports are submitted in a timely manner and judged acceptable and are now prepared regularly, but: (i) external auditor recommendations on internal control have not been implemented fully; and (ii) delays have been experienced in the financial reporting process between communes, the Regional Coordination Units, and the Project Coordination Unit\. The procurement function was rated Moderately Satisfactory (MS)\. Indeed, some procurement complaints were not handled in a timely manner by the Project\. The execution of activities directly managed by the National Coordination Unit has fallen behind schedule\. Table 8: Results Achieved for Component 3 Key Performance Indicators Component 3 Indicators Target Achievem Achievement Remark ent against Target (%) External financial audit reports are produced on time and 100 100% 100 Achieved without any major reservations (%) At least one technical and financial audit on the use of the grant and the quality of No Yes 100 Achieved achievements is carried out randomly each year A database on the quality of TSPs is put in place and made No Yes 100 Achieved available for public access (Yes/No) Biannual M&E reports produced within the agreed No Yes 100 Achieved timeframes (Yes / No) 39  Annex 3\. Economic and Financial Analysis Cost Efficiency Analysis of Social Infrastructures 1\. As stated in the Project Appraisal Document, the PNDP II did not lend itself readily to ex ante cost-benefit analysis because: (i) all investments were demand-driven and their nature could not be known beforehand; (ii) most eligible subprojects would be nonproductive, making the benefits difficult to quantify and value\. Nonproductive subprojects aim to deliver basic social services in sectors such as education (and capacity development), health, water and sanitation, and leisure and culture\. Quantifying and valuing economic benefits in social sectors is generally a difficult task\. Therefore, the ex ante economic analysis was not done at Project appraisal\. 2\. For the same reasons that existed during appraisal, no economic or financial analysis for the whole Project was done at completion\. Also, because the appraisal mission did not attempt to prepare new financial analyses based on the MP investments observed under PNDP I, there was no basis for the ICR mission to repeat the computations for comparison\. 3\. Given the difficulties in quantifying the benefits of the Project, a cost-efficiency analysis was performed\. Indeed, cost efficiency can be analyzed in terms of the unit cost of PNDP II infrastructure constructed versus the unit cost of similar infrastructure created by other approaches and agencies in Cameroon\. Furthermore, subprojects were screened against a set of technical and economic criteria to ensure soundness with sectoral norms and cost efficiency\. 4\. The technical and financial audit of the Project, carried out on a random sample of 30 percent of communes by an independent auditor for fiscal years 2010, 2011, and 2012, revealed that the Project was cost effective\. It improved cost efficiency, with savings on unit costs that were channeled into additional community infrastructure initiatives\. Indeed, the Project’s average unit costs of constructing social infrastructure subprojects were lower than those charged by government departments\. For example, the average Project cost of building a classroom using standard dimensions amounted to 7,213,829 CFAF versus 9,000,000 CFAF using state services and 11,165,000 CFAF using FEICOM (Fonds Spécial d’Equipement et d’Intervention Intercommunale)\. In addition, the audit found that overall, socioeconomic infrastructures were built according to sectoral standards\. Table 9 compares the unit costs of social infrastructures associated with PNDP II, government departments, and FEICOM 40 Table 9: Comparison of Unit Costs of Social Infrastructures between PNDP II, Government Departments, and FEICOM Social infrastructure Unit costs of social infrastructures (CFAF) PNDP II Government FEICOM Departments Classroom 7,213,829 9,000,000 11,165,000 Cost difference with PNDP II - 25 55 (%)(a) Drilling 7,426,665 9,500,000 10,500,000 Cost difference with PNDP II - 28 41 (%) (a) Well 4,364,489 8,000,000 7,500,000 Cost difference with PNDP II - 83 72 (%) (a) Source: PNDP II Technical and Financial Audit (2013)\. (a) Note: Cost difference with PNDP II (%)=((Government or FEICOM unit cost - PNDP II unit cost)/PNDP II unit cost)*100) 5\. Table 9 shows that the unit costs for classrooms constructed by government departments and FEICOM were 25-55 percent higher than those built through the CDP approach in the PNDP II\. 41  Annex 4\. Bank Lending and Implementation Support/Supervision Processes (a) Task Team Members Responsibility/ Names Title Unit Specialty Lending Ousmane Seck Senior Rural Development Specialist AFTAR Team Leader#1 Edeltraut Gilgan-Hunt Environmental Specialist AFTEN Senior Natural Resources Mgmt\. Emmanuel Y\. Nikiema AFTN1 Specialist Lucienne M\. M'Baipor Senior Social Development Specialist AFTCS Emeran Serge M\. Menang Environmental Specialist AFTN1 Evouna Kouami Hounsinou Messan Procurement Specialist AFTPC Fridolin Ondobo Financial Management Specialist AFTFM Nathalie Munzberg Senior Counsel LEGAF A\. Oury Diallo M&E Specialist FAO-CP G\. Baltissen Decentralization Specialist Consultant Aissatou Diallo Senior Financial Officer LOAG Germaine Mafougong Program Assistant AFTAR Marie-Claudine Fundi Language Program Assistant AFTAR Rural Development Consultant, Turto Turtiainen Consultant Financial Analyst Supervision/ICR Ousmane Seck Senior Rural Development Specialist AFTAR Team Leader#1 Helene Simone Ndjebet Yaka Operation Analyst AFCC1 Bernadette DjapaNyanjo Procurement Assistant AFCC1 Jeanne d'Arc Edima Team Assistant AFCC1 Marie-Claudine Fundi Language Program Assistant AFTA1 Sekou Keita Consultant AFTME Lucienne M\. M'Baipor Senior Social Development Specialist AFTCS Emeran Serge M\. Menang Senior Environmental Specialist AFTN1 Evouna Kouami Hounsinou Messan Senior Procurement Specialist AFTPW Senior Natural Resources Mgmt\. Emmanuel Y\. Nikiema AFTN1 Specialist Amadou Nchare Agricultural Economist AFTA2 Team Leader#3 Manievel Sene Senior Rural Development Specialist AFTA2 Team Leader #2 Enagnon Ernest Eric Adda Financial Management Specialist AFTMW Mountaga Ndiaye ET Consultant AFTPW Helene Pieume Public Information Associate AFRSC 42 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD thousands (including Stage of Project Cycle No\. of staff weeks travel and consultant costs) Lending FY09 14\.78 53,750\.71 Total: 14\.78 53,750\.71 Supervision/ICR FY10 16\.97 82,431\.92 FY11 33\.29 69,551\.50 FY12 35\.45 67,110\.02 FY13 29\.09 44,267\.63 FY14 21\.70 37,007\.23 Total: 136\.50 300,438\.30 43  Annex 5\. Beneficiary Survey Results Beneficiaries’ Assessment of Services Provided by PNDP II (Summary Note) 1\. In January 2010, PNDP, a multi-donor program that supports the efforts of the Government of Cameroon (GOC) in the decentralization process, particularly in the financing of the development of Communal Development Plans (CDPs), micro-projects (MPs), basic infrastructure, and institutional strengthening of communes, entered its second phase\. After four years of intervention during which PNDP expanded its operations in all regions of Cameroon, the National Coordination Unit (NCU) commissioned a study on beneficiaries’ evaluation of the services provided\. Results from this study will guide the third phase of the Project\. The purpose of this study was to determine the level of beneficiaries’ satisfaction with the activities of the program\. More specifically, the study’s specific objectives were to: (i) rate the overall assessment of the beneficiaries on the implementation of the program; (ii) obtain the opinion of communes and other beneficiaries on the implementation of activities; (iii) determine the percentage of beneficiary communes and other beneficiaries who are satisfied with services provided by the program; (iv) analyze the constraints faced by beneficiaries in the implementation of the program (procedure, condition of funding, timely implementation, nature of the achievements, areas of intervention, etc\.); and (v) identify beneficiaries’ expectations in terms of improving the implementation of the PNDP\. 2\. Accordingly, this report presents the results of the survey administered to the recipients of services provided by PNDP II\. The survey was conducted using a representative sample of 66 beneficiary communes spread over the national territory\. Twenty percent of the communes were randomly selected from among the 329 communes covered by PNDP II, using a stratified sample methodology\. The representativeness of each type of MP (education, health, water and sanitation, transportation, electrification, etc\.) was taken into account, as well as their degree of implementation (not started, in progress, completed)\. The regional distribution was proportional to the number of beneficiaries per commune area\. Data were collected mainly through interviews with the main beneficiaries of the program, namely: (i) executive councils; (ii) devolved state services; (iii) service providers; (iv) communities; and (v ) PNDP staff\. 3\. Respondents’ perceptions of the outcome of services offered by PNDP II are encouraging and indicate: (iv) Excellent coverage of program interventions at the national level\. In addition to the supply of equipment to the communes, some of which is still being acquired (including motorcycles and complete computers), almost all targeted communes received the other four services offered by PNDP II\. Indeed, all targeted communes (100 percent) benefited from the support of the program to develop their CDPs; 94 percent received funding for the implementation of their MPs; 77 percent were provided with communal staff; and 96 percent received training/capacity building of their staff\. 44  (ii) Strong ownership of CDPs\. Today, nearly three out of four targeted communes have a CDP aligned to the GESP, and CDPsis being updated with the support of the program in all those that have none now\. (iii) A satisfactory level of consumption of allowances\. The level of consumption by PNDP II of the global allocations to communes was 100 percent under IDA resources\. (iv) Strong ownership of the planning mechanism and management by targeted communes\. Indeed, thanks to PNDP II, 53 communes received the software SIM_ba to improve their accounting\. The pilot introduction of a mechanism for citizen control of public action in 10 municipalities (one per region) already resonates with other communes\. In addition, a database of service providers is available in all targets communes and is generally available to the public\. 4\. The different categories of beneficiaries (communes, providers, devolved state services, populations) appear generally satisfied with the support received from the program\. Overall, 93 percent of beneficiary communes are satisfied with the program’s actions (supporting the development of CDPs, provision of municipal officials, funding and implementation of MPs, training/capacity building, provision of equipment)\. Indeed, 91 percent of beneficiary communes declared their satisfaction with the support for the development of CDPs\. The provision of municipal employees was rated favorably in 93 percent of communes covered\. The majority (94 percent) of communes were satisfied by the funding given to them to implement their MPs, and with the provision of equipment to improve their accounting system, while 95 percent were satisfied with the training and capacity-building programs received from PNDP\. Most (96 percent) of the devolved state services beneficiaries were also satisfied with PNDP\. Similarly, service providers were generally very satisfied with the PNDP\. Overall, 92 percent of beneficiary communes were satisfied with PNDP support\. 5\. However, multiple constraints were encountered in the implementation of the program\. These include: (i) delays in mobilizing the communes’ contribution for the implementation of MPs, thus slowing their start; (ii) LSPs’ limited financial resources, which lengthened the delivery of public orders; (iii ) insufficient monitoring of the work of service providers by communes; and (iv) providers’ poor knowledge of the socioeconomic environment of the sites\. 6\. Given the diversity of actors involved in local development, PNDP must recognize that opportunities and local challenges are as varied as the actors themselves\. Also, PNDP must capitalize on its eight years of experience to meet the multifaceted needs of beneficiaries, which are as follows: (i) Development of communes’ local economies to help mobilize additional fiscal resources to meet their needs in terms of public or community infrastructure and public services; (ii) Development of a more diversified economic base for rural communities and an increased stock of basic infrastructure (water and sanitation, education, health, and rural electrification infrastructure)\. 45 Annex 6\. Stakeholder Workshop Report and Results (Not Applicable) 46 Annex 7\. Summary of Borrower's ICR and/or Comments on Draft ICR (French version) Rapport d’achèvement du Gouvernement 1\. Description du Projet, Contexte et Objectif de développement 1\. Depuis plus d’une décennie, le Gouvernement camerounais n’a cessé de déclarer que le développement rural reposait principalement sur les services et les investissements des collectivités locales (c\.à\.d\. régionales et communales)\. La décentralisation de la structure administrative est donc importante pour fournir de tels services et faciliter le financement des projets et activités au niveau des collectivités\. 2\. Selon l’Article 1 de la Constitution de 1996, « La République du Cameroun est un état unitaire décentralisé\. La décentralisation de l’administration au niveau des collectivités locales est représentée par les régions et les municipalités\. » Quoique longtemps retardé, le Gouvernement a démontré son engagement à la mise en œuvre de la décentralisation administrative sur toute l’étendue du territoire\. En juillet 2004, une loi- cadre sur la décentralisation fût votée, posant les fondements réglementaires régissant les communes et les régions\. En novembre 2008, le Gouvernement a fait voter la loi portant sur l’organisation et le fonctionnement d’une administration décentralisée en « régions, préfectures et sous-préfectures\. »\. Un plan d’action (2005-2009) fût élaboré\. De plus, un plan comptable propre aux communes, fut adopté et disséminé en 2006\. Des mesures pour le renforcement des capacités des maires et cadres municipaux furent adoptées au Colloque National des Maires sur les franges des Afri-cités de 2004\. 3\. En 2007, le Gouvernement est parvenu à organiser les élections municipales et en janvier 2008, a adopté les lois qui créent le comité des services locaux et le comité interministériel de la décentralisation\. Une série de lois importantes visant à améliorer le cadre légal et réglementaire sur la décentralisation ont été élaborées, quoique n’étant pas encore adoptées et promulguées\. Elles comportent les lois sur la taxation locale et le régime financier des communes et le décret sur la chartre organisationnelle et le recrutement du personnel des communes\. La mise en œuvre de ces instruments légaux sera accompagnée d’un transfert financier des ressources et des personnels d’appui aux communes afin qu’elles puissent formuler et évaluer la mise en œuvre des microprojets de développement local\. La Situation et la pauvreté du monde rural 4\. En dépit des progrès enregistrés dans la lutte contre la pauvreté entre 2006 et 2008, la pauvreté touche encore une grande partie de la population camerounaise et demeure un souci majeur pour les autorités camerounaises\. Selon l’enquête Camerounaise des Ménages III (ECAM III, 2007), plus de 52\.1% des Camerounais en zone rurale vivaient dans la pauvreté en 2001\. Ce chiffre a atteint 55% en 2007 reflétant une détérioration des conditions de vie des populations des zones rurales\. Par conséquent, le monde rural doit être le point focal des efforts pour lutter contre la pauvreté\. L’augmentation croissante des prix des denrées alimentaires mondiales va certainement réduire la sécurité alimentaire du Cameroun et avoir des conséquences néfastes comme : la baisse du pouvoir d’achat et le manque d’accès aux denrées bon marché pour les groupes vulnérables au vu de l’incidence élevé de la pauvreté en milieu rural dans le pays\. 47 5\. Selon la revue du Gouvernement sur les programmes de réduction de la pauvreté en 2006, la croissance sur le plan macroéconomique peut être rapidement refléter sur la pauvreté, si mesuré en termes monétaires (les autres unités de mesures de la pauvreté incluent le logement, la nutrition, et les services sociaux)\. Dans ce cadre ci, cet indicateur doit être utilisé pour d’abord mesurer le revenu par habitant (parce que la population est croissante), et ensuite, démontrer l’effet relatif de la croissance sur ce type de pauvreté\. Par exemple en 2004, le taux de croissance de 3\.7% du produit national brut correspondait à une augmentation de 1\.0% du revenu par habitant, parce que la population avait augmenté à un taux de 2\.7%\. Par conséquent, le taux de 2\.0% du PNB en 2005 a fortement diminué le revenu par habitant\. En 2006, la situation était sensiblement positive car le taux de croissance du PNB est passé à 3\.5%, ceci, en partie grâce aux bons résultats enregistrés des exportations pétrolières\. En 2008, le taux de croissance du PNB est de 3\.9% ; Soit une hausse par rapport à 2007 (3\.5%)\. Cependant, la croissance économique d’une vue globale n’a pas considérablement contribué à la réduction de la pauvreté en termes monétaires ces dernières années\. La stratégie de « deuxième génération » du gouvernement pour combattre la pauvreté a pour objectif d’identifier d’autres moyens en dehors de la croissance économique, tels que l’amélioration des services, pour assurer une distribution équitable des revenus et une diminution significative de la pauvreté\. Objectif de développement 6\. L’objectif de développement du PNDP-II est resté le même que celui du PNDP I qui est d’appuyer le Gouvernement du Cameroun dans la mise en place d’un mécanisme efficace de transfert des ressources aux collectivités afin d’améliorer l’accès aux services sociaux de base (Santé, éducation, eau et assainissement) dans les communes cibles et d’étendre l’appui au processus de décentralisation en cours dans les nouvelles régions\. 7\. Au regard du niveau persistant de pauvreté en milieu rural matérialisée par les besoins en services sociaux de base et l’absence d’emploi stable et à la lumière des avancées significatives réalisées dans le processus de décentralisation, notamment le transfert progressif des compétences aux communes, cet objectif est resté pertinent tout au long de la deuxième phase et pourra à la troisième, connaître une consolidation avec un accent mis sur le développement de l’économie locale\. En outre, les résultats de l’audit technico-financier des allocations aux communes, de l’évaluation par les bénéficiaires, menés par des consultants indépendants ainsi que ceux de l’évaluation d’impact conduite par l’Institut National de la Statistique (INS), ont démontré que l’objectif du programme est pertinent\. Le montage du projet axé sur trois composantes a permis de : (i) tester à travers le système d’allocation budgétaire un mécanisme de transfert des fonds publics à 329 communes dans les 10 régions du Cameroun ; (ii) appuyer les réformes institutionnelles nécessaires à la mise en œuvre du processus de décentralisation ; (iii) positionner le Plan Communal de Développement comme un outil important de la programmation des investissements au niveau local\. 8\. La responsabilisation de la commune à travers son organe délibérant assisté par les sectoriels a assuré une coordination et une harmonisation des actions du Programme avec les différentes stratégies sectorielles\. Cette synergie d’action a ainsi permis de limiter les risques de duplication et de gaspillage des ressources\. 48 Changement majeur survenu lors de la mise en œuvre 9\. A la revue à mi-parcours, le changement majeur a été celui apporté à la forme du Cadre de résultats\. En effet, le cadre de résultat initial avait présentait une situation de référence qui correspondait aux valeurs atteintes par le Programme à la fin de sa première phase\. Il a été convenu avec les partenaires de ramener les valeurs de la situation de référence à Zéro et d’ajuster les valeurs cibles en conséquence\. 2\. Eléments clés ayant affecté l’exécution d Programme et l’atteinte des résultats 10\. La qualité encore perfectible des microprojets\. Dans le cadre de la phase 2 plusieurs mesures visant à améliorer la qualité des microprojets ont été prises notamment (i) l’élaboration des plans type par secteur ; (ii) la réalisation de l’étude de faisabilité des microprojets par les ingénieurs, (iii) l’adjonction d’un contrôleur à chaque microprojet et (iv) le recrutement au sein des unités de mise en œuvre du Programme d’un ingénieur chargé des infrastructures\. Malgré toutes ces dispositions, la qualité des microprojets réalisés dans le cadre du PNDP reste encore perfectible\. La question mérite d’être approfondie en vue des interventions futures\. 11\. La nécessité de promouvoir les activités de développement économique\. Le processus d’identification des microprojets procède d’une démarche participative et démocratique\. Cependant, avec la précarité du cadre de vie des populations en milieu rural, les microprojets socio-collectifs l’emportent très aisément sur les microprojets de développement économique lors du choix démocratique\. Dans un tel contexte, le faible niveau de revenu des ménages rend dans certains cas difficilement accessibles les différents services sociaux de base mis à leurs dispositions par le PNDP\. Ce qui justifie davantage la nécessité d’encourager des activités pouvant permettre de relever le niveau de revenu des ménages et l’assiette fiscale\. Il apparaît donc indispensable d’envisager plusieurs guichets de financement des microprojets des communes, dont l’un pour les microprojets sociaux et l’autre pour les microprojets économiques\. 12\. La reconnaissance du PCD à améliorer\. Malgré la prise de conscience de plus en plus forte de l’importance des PCD, certains acteurs ne reconnaissent toujours pas en ce document, le canal idéal de financement du développement au niveau local\. Avec pour conséquence des doublons et des actions non pertinentes sur le terrain\. Le PCD devrait revêtir un caractère obligatoire et s’imposer à tous\. Un texte pourrait servir à lui attribuer ce caractère impératif\. 13\. La nécessité de clarifier la notion de maître d’ouvrage avec l’arrivée du MINMAP\. La logique du processus de décentralisation voudrait que les maires, moyennant un accompagnement adéquat soient de plus en plus responsabilisés quant à leurs rôles de maîtrise d’ouvrage\. Or dans le contexte actuel, cette maîtrise d’ouvrage se trouve partagée entre plusieurs acteurs (Maire, MINMAP, sectoriels)\. Il importe donc de clarifier davantage le rôle de chaque acteur\. Mécanisme de suivi évaluation 14\. Le système de suivi et d’évaluation du PNDP II est destiné à consolider et à améliorer le système utilisé pendant la première phase du programme\. Il sera organisé à trois niveaux : communal, régional, et national\. 49 15\. Le niveau de la commune sera le niveau opérationnel du système\. Les agents de développement des communes seront formés à faire le suivi de la mise en œuvre des PDC et à faire la collecte et la transmission des données au niveau régional\. Ces données vont servir de feedback aux communes sur la mise en œuvre du PNDP et des indicateurs de suivi sur l’environnement, afin de déterminer l’efficacité des mesures d’allègements environnementaux des microprojets et évaluer si les microprojets implantés ont été mis en œuvre dans un cadre environnemental et social durable\. Les données collectées au niveau des communes seront consolidées au niveau régional par l’officier régional chargé du suivi et de l’évaluation du projet\. Les données ainsi collectées seront consolidées et analysées dans chaque région et seront par la suite transmises au spécialiste du suivi et de l’évaluation au niveau central\. 16\. Les rapports de suivi et d’évaluation, comprenant les résultats de suivi sur l’environnement, seront publiés trimestriellement au niveau régional et des communes, et tous les 6 mois au niveau central\. Les rapports semi annuels seront mis à la disposition des ministères sectoriels et des partenaires de développement\. De plus, les ministères sectoriels seront étroitement associés aux missions de suivi et de supervision internes et externes, à travers lesquelles ils vont s’assurer que les activités entreprises sont en accord avec les normes et politiques nationales\. Le projet va aussi lancer des études spécifiques et des évaluations d’impact indépendantes si cela est nécessaire ou au plus tard à mi- parcours du projet\. 17\. Suivi de l’environnement\. Au niveau du projet, le système de suivi et d’évaluation du PNDP va intégrer les indicateurs environnementaux de suivi afin de déterminer (a) l’efficacité des mesures d’atténuation environnementale, lors de la mise en œuvre des microprojets, et (b) la durabilité sociale et environnementale des microprojets en exécution\. 18\. Au niveau des microprojets, les indicateurs de suivi sur l’environnement vont mettre l’accent sur (a) le nombre de microprojets entrepris d’une manière durable sur le plan social et environnemental; (b) le nombre des centres de santé qui auront adoptés des mesures de gestion des déchets; (c) le nombre de microprojets basés dans les marchés qui auront adoptés des mesures de gestion des déchets; (d) le nombre de femmes participant à la formulation des microprojets; et (e) le nombre de femmes qui gèrent des points d’eau afin de déterminer si les critères de genre et les mesures d’atténuation sont incorporés dans la formulation et la mise en œuvre des microprojets\. 19\. Comme il a été mentionné plus haut, les résultats de suivi sur l’environnement seront inclus dans les rapports de progrès trimestriels du PNDP afin d’informer le personnel, des éventuels manquements qui pourraient apparaître\. A mi-parcours et à la fin du PNDP II, les audits sur l’environnement seront menés afin de mesurer l’impact social et environnemental des microprojets financés par le PNDP II\. Troisième phase 20\. La 3ème phase sera la phase de consolidation\. A ce titre, elle contribuera à financer les priorités identifiées lors des phases précédentes avec un accent sur : (i) la consolidation de la couverture nationale du Programme à travers la prise en compte des communes d’arrondissement dont la plupart sont constituées à plus 60 % des zones 50 rurales; (ii) l'appui institutionnel et le renforcement des capacités des communes, visant à développer un mécanisme d’auto financement du développement local\. A\. Objectif de développement du Programme 21\. L’objectif de développement de la troisième phase sera d’améliorer l’accès aux services sociaux de base (santé, éducation, eau et assainissement, voies d’accès de meilleure qualité) et développer les opportunités de l’économie locale afin d’accroître le revenu des populations à travers la consolidation des acquis en matière de décentralisation dans les communes couvertes\. B\. Zone d’intervention et bénéficiaires 22\. La zone d’intervention du projet d’appui va couvrir les 10 régions du PNDP II et va s’étendre aux communes d’arrondissement non encore couvertes\. Le plan de couverture sera élaboré sur la base de critères définis en collaboration avec les maires, les services administratifs du Gouvernement, la société civile, et les partenaires de développement\. Les principaux bénéficiaires sont les populations des 329 communes ayant participé au PNDP II et celles des 31 communes d’arrondissement\. C\. Principale innovation 23\. La principale innovation concerne la première composante qui a pour but d’améliorer les conditions socio-économiques, d’accroître la productivité des ressources naturelles de base, et d’augmenter les revenus des populations dans les communes cibles du Programme\. A ce titre, le financement des microprojets se fera en deux volets : - (i) un volet pour les équipements et infrastructures socio-collectifs, pour lequel chaque commune aura une allocation prédéfinie en fonction des critères préalablement négociés ; - (ii) un deuxième volet sur la valorisation de ressources naturelles permettant de dynamiser l’économie locale, pour lequel un guichet sera ouvert à toutes les communes sur une base compétitive\. Le budget de chaque volet sera défini pendant la formulation du projet\. Pour ce volet, il ne s’agira pas du financement direct des activités génératrices de revenu auprès des opérateurs économiques ou des organisations professionnelles (GIC, GIE, OP, etc\.), mais d’aider les communes à mettre en place un environnement favorable au développement des activités économiques qui méritent un levier structurant en amont\. 3\. Evaluation des résultats atteints 24\. Le niveau de réalisation des objectifs est surtout mesuré grâce à des indicateurs de performance contenus dans le cadre des résultats du Programme et des indicateurs déclencheurs\. A ce sujet, il est important de souligner que le crédit IDA qui finance le PNDP est un Prêt Programme Evolutif (APL) de trois phases, pouvant se dérouler simultanément à condition que les critères de déclenchement préalablement définis au début de chaque phase soient atteints\. Niveau de réalisation des indicateurs déclencheurs de la troisième phase\. Sur les quatre indicateurs déclencheurs, trois ont été entièrement atteints, notamment : (i) les projets de lois et décrets sur la décentralisation préparés pendant la première phase du projet ont été adoptés et promulgués\. Il s’agit de (a) la loi 2009/019 du 15 décembre 2009 portant fiscalité locale des CTD et des Décrets sur les comités des impôts locaux ; (b) la loi 2009/011 du 10 juillet 2009, portant régime financier des Collectivités 51 Territoriales Décentralisées(CTD) et (c) l’Arrêté n°00136/A/MINATD/DCTD du 24 août 2009, rendant exécutoires les tableaux types des emplois communaux ; (ii) Au moins 90% des communes appuyées par le projet ont reflété les investissements prioritaires dans les plans communaux de développement et le budget\. Au stade actuel, toutes les 178 nouvelles communes qui ont élaboré un PCD contenant un plan d’investissement annuel (PIA) représentant la partie investissement du budget de la commune\. Ce qui correspond à un taux de 100%\. (iii) Du niveau de satisfaction des bénéficiaires qui était fixé à 80%\. L’évaluation par les bénéficiaires montre que 93% des Communes bénéficiaires sont satisfaites des actions du Programme (appui à l’élaboration des PCD, mise à disposition des agents communaux, financement et mise en œuvre des Micro-Projets, formation/renforcement des capacités, fourniture d’équipements)\. (iv) De la préparation et de l’approbation par le Gouvernement de la Charte sur la Décentralisation\. Le projet de la Charte a été préparé et est en cours d’approbation par le Gouvernement\. Globalement le niveau de réalisation des déclencheurs est satisfaisant\. Indicateurs de performance Les performances du Programme, tels que mesurées par le cadre des résultats joint en annexe 1, sont globalement satisfaisantes\. S’agissant de l’objectif de développement, le pourcentage de communes ayant amélioré l’accès aux services sociaux de base d’au moins 5% dans l’un des secteurs : éducation, santé, eau-assainissement et transport, se situe à 80,3% selon l’évaluation indépendante réalisée par l’INS\. En effet, au cours de la deuxième phase, le Programme a couvert 329 communes et financé 1 864 microprojets (816 sur IDA) dont 939 sont achevés et fonctionnels (763 sur IDA)\. Dans le secteur « Eau et assainissement », le PNDP a amélioré les conditions de vie de 737 100 personnes à travers la construction de 1 457 points d’eau et 524 latrines\. Cette intervention du PNDP dans le domaine de l’hydraulique a ainsi permis d’amoindrir la fréquence d’apparition des maladies hydriques\. En effet, dans les localités où le PNDP a intervenu, la prévalence des maladies d’origine hydrique est passée de 61,8% à 9,2%\. Dans le secteur de l’éducation, le PNDP a amélioré les conditions d’éducation de 44 340 personnes à travers la construction et l’équipement de 739 salles de classe et 13 710 tables-bancs\. Avec ces réalisations, les effectifs des élèves dans les écoles ayant bénéficié des apports du PNDP se sont accru de 6 points et le taux d’admission dans ces écoles s’est accru de 2,76%\. Les taux d’admission dans les villages bénéficiaires des microprojets d’éducation est de 82,4% contre 79,8% pour les villages non bénéficiaires\. Dans le domaine de l’électrification, PNDP a amélioré les conditions de vie de plus de 40 000 ménages à travers l’extension du réseau électrique sur 40,37 Km dont 12,46 de moyenne tension et 27,91 de basse tension\. Dans le domaine de la santé, l’accès aux soins de meilleure qualité a été amélioré pour 428 925 personnes à travers la construction et l’équipement de 28 Centres de santé\. Comme impact de ces interventions, près de 41% de ménages vivant dans les villages bénéficiaires de microprojets sont à 500 m de la première formation sanitaire, et 93% de ces villages sont à moins de 5 km de la première formation sanitaire\. Au contraire, seuls 27,5% des ménages des villages non bénéficiaires sont à moins de 500 m de la première formation sanitaire et 87% d’entre eux sont à moins de 5 km de la première formation sanitaire\. 52 Dans le domaine des transports, 18 villages constitués de 25 873 ménages ont été désenclavés à travers la l’aménagement ou la réhabilitation de 306,4 Km de route et la construction de 5 ponceaux, 2 radiers et 3 dalots\. L’impact direct de l’aménagement des pistes rurales dans les communes a été la réduction des coûts de transport\. Globalement, ces coûts sont passés de 400 FCFA à 175 FCFA au km et à moto, et de 200 FCFA à 105 FCFA au km et en voiture Dans le domaine des infrastructures marchandes, le PNDP a contribué à développer l’économie locale à travers la construction de 26 hangars et 368 comptoirs, 144 boutiques, 15 magasins de stockage dans les marchés\. En vue de renforcer les capacités d’intervention des communes, le Programme a accompagné les communes pour combler les postes d’agents communaux encore vacants\. Au total, 521 agents communaux dont 259 agents techniques et 262 agents financiers sont actuellement en poste\. Ces personnels des communes sont opérationnels et leur contribution à l’amélioration de la gestion dans les communes concernées est déjà perceptible\. Des données collectées sur le terrain en rapport avec la présence de ces agents, il ressort que la contribution de ces agents dans les communes est particulièrement visible dans l’amélioration des recettes, le taux d’exécution budgétaire, l’archivage, le suivi de la mise en œuvre des PCD, le suivi et la redynamisation des comités de gestion des microprojets, la collecte des données sur les infrastructures socio- collectives\. Quatre-vingt-onze pour cent des exécutifs municipaux interrogés affirment que le recrutement des agents avec l’appui du PNDP a permis de résoudre au moins partiellement le problème de ressources humaines dans leurs communes\. Les agents recrutés ont un niveau assez élevé sur le plan académique et professionnel\. En effet avant leur recrutement, plus de 90% des agents techniques justifiaient d’un niveau au moins égal à BAC+3 et d’au moins 2 années d’expériences professionnelles dans des domaines plus ou moins connexes au développement communautaire\. Les agents financiers recrutés quant à eux justifient à près de 73% d’un niveau d’étude supérieur ou égale à BAC+2 avec une prédominance des agents spécialisés dans la comptabilité et gestion, les sciences économiques et les sciences juridiques\. S’agissant de leur implication dans les communes, l’ensemble des agents communaux s’attèlent à bien exécuter les missions qui leurs ont été assignées comme en témoigne l’appréciation de leurs rendement par les exécutifs municipaux\. En effet, 71% des exécutifs interrogés jugent au moins bonne la performance de leurs agents techniques, tandis que 67% jugent au moins bonne la performance de leurs agents financiers\. Par ailleurs, de l’avis des exécutifs municipaux, la présence des agents communaux auraient ainsi permis d’améliorer la gestion et le fonctionnement des Communes\. En effet, dans 50% des cas les agents de développement auraient permis d’améliorer le niveau d’exécution du budget des communes grâce à leur implication dans le suivi régulier de l’exécution des activités et projets programmés, leur appui-conseil pour l’élaboration d’un budget plus réaliste et leurs implications dans les activités de recherche de financement\. L’importance de la présence des agents est tout aussi perceptible au niveau de la qualité du suivi de l’exécution et de l’entretien des ouvrages des communes\. En effet, près de 85% des agents de développement auraient ainsi permis aux communes d’améliorer la qualité du suivi de l’exécution des ouvrages grâce à leurs descentes régulières sur le terrain pour le suivi-contrôle de l’exécution des travaux\. Tandis que, 75% auraient permis d’améliorer la qualité du suivi de l’entretien et de la maintenance des ouvrages communaux grâce à la mobilisation courante des membres des COGES et la recherche des solutions endogènes\. 53 Pour les agents financiers, l’impact de leur présence est perceptible dans les communes, notamment à travers l’amélioration de la gestion comptable et la gestion financière\. En effet, près de 66% de communes déclarent une amélioration de leur gestion comptable grâce au concours de leurs agents financiers\. De plus, les différents documents comptables sont désormais produits dans les délais recommandés dans près de 72% de communes et un système d’archivage des documents a été mis en place dans 80% de communes dotées en agents financiers\. En ce qui concerne l’amélioration de la gestion financière, 64% de communes ont connu une amélioration de leurs recettes\. En ce qui concerne l’appui à la décentralisation, les actions du PNDP II ont visé essentiellement le renforcement des capacités opérationnelles des communes, afin qu’elles puissent promouvoir efficacement le développement local\. A ce titre le Programme a appuyé : (i) La mise en application du nouveau plan comptable sectoriel des communes à travers le déploiement à titre pilote du logiciel Sim_ba dans 53 communes\. Sur la base de l’évaluation de cette première vague de mise en œuvre, un plan de déploiement a été préparé et sera mis en œuvre dans 100 nouvelles communes en 2014 ; (ii) La formation de 889 membres des commissions communales de passation des marchés\. Avec l’avènement du MINMAP, le Programme a redéfini les cibles pour les formations qui ont été dispensées en collaboration avec l’ARMP sur le Code des marchés publics camerounais et sur les Directives simplifiées de la Banque mondiale consignées dans le Guide élaboré à cet effet à l’intention des acteurs intervenant dans le processus de la passation des marchés et de l’exécution des contrats par les maîtres d’ouvrage\. A ce jour toutes les commissions régionales et départementales de passation des marchés ont déjà été formées à l’Extrême-nord, au Nord-ouest et au Sud-ouest\. (iii)La formation de tous les délégués régionaux et départementaux, ainsi que le personnel communal sur la prise en compte des aspects socio-environnementaux dans l’élaboration des PCD et des microprojets\. (iv)Le recrutement de 513 agents communaux (dont 257 financiers et 256 techniques)\. Ces agents ont contribué à renforcer les capacités des communes dans la mise en œuvre de leurs PCD et ainsi que dans la gestion communale\. (v) La fourniture des équipements\. Les 329 communes ont été équipées en ordinateurs et en GPS, leur permettant entre autres de collecter les données et d’améliorer les conditions de travail du personnel communal\. Les motos ont été acquises et distribuées pour 209 communes\. Pour les 120 communes ne disposant pas encore de ce matériel, une commande est en cours sur financement C2D ; Aspects socio-environnementaux Selon les conclusions de l’évaluation socio-environnementale réalisée en 2013 pour la phase, la prise en compte des aspects socio – environnementaux dans le dispositif institutionnel et structurel s’est renforcée depuis 3 ans au niveau de toutes les instances\. Tous les microprojets financés ont fait l’objet d’un screening socio-environnemental, donnant lieu à des mesures environnementales appropriées qui ont été intégrées dans le montage technique et financier du microprojet concerné\. Les sites d’implantation des microprojets ont été retenus avec le plus grand soin, évitant les zones sensibles et les terrains titrés\. Des actes de donation des sites ont été fournis\. Par ailleurs, au cours de la phase 2, la qualité du PCD s’est améliorée à la faveur de l’approche sectorielle et la prise en compte systématique des compétences transférées aux communes, y compris celles du décret n°2012/0882/PM du 27 mars 2012 en matière 54 d’environnement\. Outre la consolidation des acquis du PGDT clôturé en mars 2012, le Programme a travaillé avec le partenaire GIZ à l’intégration des aspects changements climatiques dans le PCD\. De même, à la faveur des fonds du C2D, le Programme a bénéficié d’un financement de 3 millions Euros pour la mise en œuvre d’environ 05 projets communaux/intercommunaux REDD, représentatifs des 05 zones agro écologiques du Cameroun, en appui à la stratégie nationale pilotée par le MINEPDED\. L’étude de faisabilité vient d’être bouclée et l’opération va démarrer dans les prochains jours\. Compte tenu du fait que le temps imparti à la mise en œuvre du projet est insuffisante pour garantir la certification des crédits carbones, le Programme compte solliciter d’autres bailleurs pour la mobilisation des ressources additionnelles\. Pour ce qui est de la mise en œuvre du Plan de Développement des Peuples Pygmées (PDPP), il avait été convenu que le dispositif de mise en œuvre s’appuie sur le personnel du MINAS au niveau communal\. Une convention entre le MINEPAT et le MINAS a été signée à cet effet en 2012 et par décision n° 002/B du 09 avril 2013, le Ministre des Affaires Sociales a désigné, à titre spécial, 31 Chefs Service d’Action sociale pour mettre en œuvre l’opération dans les 31 communes bénéficiaires des 03 régions de l’Est, du Centre et du Sud\. Ceux-ci ont été formés en juillet 2013\. Parallèlement à la mise en place de ce dispositif, les activités du PDPP se sont poursuivies et ont abouti à la production des pièces officielles supplémentaires (673 actes de naissances, 415 CNI, 17 actes de mariage, etc\.), la mise en place de 1,1 ha de champ de banane-plantain et manioc à Bandévouri et de 1 ha de banane-plantain dans la commune de Lokoundjé, la reconnaissance des droits d’usufruits pour 15 villages pygmées dans les communes de Niété et de Lokoundjé, etc\. Le Programme a également identifié et subventionné la formation de 15 enfants pygmées aux métiers de l’éducation et de la santé\. Il s’agit de : (i) 08 aides-soignants (1 an de formation) parmi lesquels 6 sont diplômés depuis août 2013 et leur dossier d’intégration à la Fonction Publique est en cours ; (ii) 01 Infirmier diplômé d’Etat (3 ans), (iii) 02 élèves instituteurs de l’enseignement techniques (3 ans) et (iv) 04 élèves instituteurs de l’enseignement général (3 ans)\. Aspects fiduciaires Le financement de la 2ème phase met en action outre les fonds IDA, Etat BIP /BFP et la contribution des bénéficiaires, les fonds C2D de la coopération française et ceux de la convention séparée de la coopération allemande\. En dehors des fonds C2D dont le 1er déblocage a été effectif en décembre 2012, les autres financements sont pris en compte à partir de fin mars 2010, date de dépôt initial du crédit IDA\. Pour ce qui est des fonds KFW, il s’agit du reliquat de la convention séparée à fin mars 2010\. La contribution au financement et la mobilisation y relative s’établissent ainsi qu’il suit par source de financement et globalement en francs CFA : 55 Tableau n°1 : Sources de financement du PNDP II Sources de  Taux de  Prévus Mobilisés financement  Mobilisation IDA II 19 560 000 000            20 193 571 303            103% ETAT BIP/BFP 10 153 069 317            11 074 315 900            109% ETAT C2D II 37 894 635 892            11 814 000 000            31% KFW 3 772 000 000              3 049 246 191              81% BENEFICIAIRES 3 139 304 253              2 363 317 444              75% TOTAL 74 519 009 462            48 494 450 838            65% Les trois catégories de dépenses prévues dans la phase 2 du Programme sont : - Catégorie 1 : Biens, petits travaux, fonctionnement - Catégorie 2 : Biens et services pour la préparation des PDC - Catégorie 3 : Biens, travaux et services destinés aux Microprojets Ces dépenses s’analysent ainsi qu’il suit : Tableau n°2 : Niveau de décaissement des fonds par source de financement ETATBIP ETAT BENEFI IDA II /BFP C2D II KFW CIAIRES TOTAL MONTANT 19 560 10 153 37 894 3 772 000 3 139 304 74 519 FINANCEM 000 000 069 317 635 892 000 253 009 462 ENTS DECAISSE MENTS - 6 176 406 7 614 514 5 762 213 436 947 19 990 Catégorie 1 998 381 238 543 082 160 5 764 504 360 773 2 476 814 8 602 092 Catégorie 2 010 272 996 278 7 790 408 766 287 1 149 029 2 421 257 2 363 317 14 490 Catégorie 3 456 724 800 176 444 300 600 19 731 8 741 575 9 388 058 2 858 204 2 363 317 43 082 TOTAL 319 464 377 034 719 444 475 038 TAUX DE DECAISSE 101% 86% 25% 76% 75% 58% MENT S’agissant en particulier du financement IDA ( Crédit N° 4593 CM ), l’on peut relever qu’il a été complètement décaissé ; avec en prime un niveau de mobilisation de francs CFA de 20 193 571 303 nettement supérieur au montant du crédit évalué à 19 560 000 000 suivant le cours de référence fixé par l’accord de crédit susvisé à 489 francs CFA pour un dollar Us\. 56 Tableau n°3 : Soldes des comptes bancaires communaux sur financement IDA Soldes Reste à payer sur activités réceptionnées avant issus le 30 novembre 2013 Monta Mont des Solde nts ants Relev Ré Agent hors Reçus Décais és Etud Frai gio s engag au sés au banca es de CC PDP s n PCD com MP emen 30/11/2 30/11/ ires faisa PM P Banc muna t 013 2013 au bilité aires ux 30/11/ 2013 1 287 924 360 41 3 234 73 621 090 845 031 6 000 1 275 893 899 746 AD 884 886 906 966 000 000 048 333 559 2 897 1 814 1 063 137 15 16 57 8 716 111 892 235 424 174 812 260 724 608 267 577 CE 123 094 158 348 572 000 189 477 409 163 1 741 1 106 709 14 168 4 412 106 322 715 717 829 3 090 784 634 131 248 ES 097 339 553 450 000 315 371 287 130 468 204 263 119 45 7 21 007 589 418 410 416 636 69 118 837 EN 617 314 303 001 000 147 254 901 1 223 892 582 56 456 68 647 031 228 978 686 563 LT 668 941 792 918 469 405 278 196 82 N 944 912 82 032 032 O 944 172 772 772 1 304 1 052 512 15 86 395 14 N 329 164 228 017 934 534 741 W 790 202 748 617 569 747 815 1 464 1 114 510 112 54 2 334 O 154 308 956 629 519 3 913 340 739 2 814 U 449 400 000 113 475 274 000 851 287 1 670 830 956 108 23 138 9 324 350 342 340 051 786 666 1 632 206 525 066 168 SU 223 774 805 146 451 700 481 829 125 073 1 517 1 164 473 13 24 2 387 34 S 886 169 124 822 681 9 588 975 557 498 W 695 878 138 384 802 979 000 027 946 13 854 9 299 5 514 547 328 35 5 364 34 3 331 866 To 149 558 00 028 871 839 759 315 714 297 000 229 tal 490 0 175 575 237 953 000 985 872 502 051 Au 30 novembre 2013, la situation des soldes des comptes joints abritant les subventions accordées par l’Etat du Cameroun aux communes sur Crédit IDA indiquait, comme le 57 montre le tableau ci-dessous, qu’un montant total de 5 514 028 175 FCFA était encore disponible dans les comptes joints au\. Ce montant se compose de 4 647 799 124 FCFA destinés aux règlements des prestations réceptionnées avant le 30 novembre 2013 et de 866 229 051 FCFA qui correspondent au solde des différents comptes joints en rapport avec les activités non encore achevées au 30 novembre 2013 et dont plusieurs à date sont déjà achevées\. Il importe de préciser également que ces comptes contiennent outre les contributions des bénéficiaires pour le cofinancement de leurs microprojets mais également les retenues de garanties des prestataires\. Principaux impacts Les principaux impacts des réalisations physiques du PNDP tels qu’ils ressortent dans les rapports des évaluations indépendantes réalisées par les consultants et l’Institut National de la Statistique se résument ainsi qu’il suit : a\. Selon l’évaluation par les bénéficiaires des services fournis par la phase II du Programme, les résultats se présentent comme suit : i\. une excellente couverture des interventions du Programme au niveau national : En effet, toutes les Communes cibles, sans exception (soit 100%), ont bénéficié de l’appui du Programme ; ii\. une bonne appropriation du processus de planification au niveau local : les 178 communes cibles de la phase 2 disposent actuellement d’un PCD élaboré suivant les dispositions du Guide de planification élaboré par le MINEPAT et ses partenaires et arrimé au Document de Stratégie pour la Croissance et l’Emploi (DSCE)\. Les 151 communes couvertes lors de la 1ère phase, disposant d’un PCD arrimé au DSRP, sont en cours d’actualisation\. Ce document qui est devenu un document de référence dans la programmation des investissements publics au niveau communal, a permis à certains exécutifs municipaux à négocier des partenariats avec certains organismes publics et privés tant à l’intérieur qu’à l’extérieur du pays\. Par ailleurs, depuis 2012 les circulaires du Chef de l’Etat relatives à la préparation du budget d’investissement public instruisent de se référer au PCD ; iii\. un niveau satisfaisant de consommation des allocations : la dotation de fonds IDA alloués au financement des subventions aux communes, qui s’élevait à 8,7 milliards de FCFA, est à ce jour consommée à 100% ; iv\. Les différentes catégories de bénéficiaires (Communes, Prestataires, Services Déconcentrés de l’Etat (SDE), Populations) apparaissent globalement satisfaites des appuis reçus du Programme\. En ce qui concerne les Services Déconcentrés de l’Etat (SDE), 96% sont globalement satisfaits du PNDP\. De même, les prestataires de services sont dans l’ensemble très satisfaits du PNDP\. Quant aux communautés bénéficiaires des microprojets, 92% en sont satisfaites en raison de leur implication dans l’identification et la gestion\. 58 b\. L’audit technico-financier de l’utilisation des allocations par les communes pour le compte des exercices 2010 et 2011 de la phase II du Programme a relevé que les fonds du PNDP alloués aux Communes ont été utilisés conformément aux accords de financement\. Aucun cas de fraude et de corruption n’a été décelé\. De manière spécifique l’audit relève que : i\. Les exécutifs communaux sont dans l’ensemble unanimes sur l’apport positif des Agents Communaux recrutés par le programme et comptent renouveler leurs contrats\. Une formation continue de ces agents est toutefois nécessaire ; ii\. L’archivage s’est considérablement amélioré au niveau des communes\. iii\. Les travaux des microprojets sont bien exécutés en dépit de quelques cas isolés de malfaçons relevés dans certains microprojets\. Tous les microprojets réceptionnés sont mis en exploitation au profit de la population bénéficiaire\. iv\. L’adhésion des maires a facilité la mise en œuvre des activités du programme\. Toutefois, une plus grande implication du Secrétaire Général de la Commune dans le processus contribuerait à de meilleurs résultats\. v\. Les acquisitions des biens et services financées par cette allocation ont fait l’objet des marchés passés conformément aux dispositions des accords de financements applicables fondés sur les procédures simplifiées de passation des marchés de la Banque Mondiale ; toutes ces opérations ont été totalement enregistrées dans les livres comptables des communes ; vi\. Les ressources du programme ont été utilisées dans un souci d’efficience\. 4\. Evaluation de la performance de la Banque mondiale Les partenaires techniques et financiers ont apporté un appui dans la mise en œuvre du PNDP II\. S’agissant de la Banque mondiale, les Chargés de projets qui se sont sucédées lors du PNDP II ont apporté une assistance technique considérable\. Ils ont participé, à la définition d’une méthodologie d’élaboration des Plans Communaux de Développement (PCD) arrimé à la Stratégie du Gouvernement pour la Croissance et l’Emploi\. Par ailleurs, l’équipe de la Banque a contribué efficacement à doter toutes les 178 nouvelles communes d’un PCD avant la revue à mi-parcours\. En ce qui concerne l’AFD, en collaboration avec le STADE-C2D, elle a facilité la gestion des fonds C2D en contribuant à l’harmonisation du manuel des procédures notamment dans le domaine de passation des marchés à celles arrêtée avec la Banque mondiale\. Cette harmonisation a permis le décaissement rapide des ressources allouées au Programme au titre du deuxième C2D\. 5\. Leçons apprises Planification Locale\. A travers une démarche pédagogique visant l’apprentissage du processus aux Communes qu’il encadre, le PNDP a accompagné jusqu’à date 329 communes dans l’élaboration de leurs Plans Communal de Développement\. Ce document qui favorise la participation de tous les acteurs au niveau local, définit la vision à long terme de développement social, économique, environnemental et culturel de la Commune\. De par son organisation en secteur, le PCD est un outil idéal pour l’identification des 59 besoins sectoriels à consolider dans le cadre de l’élaboration du Budget d’Investissement Public\. Ainsi, l’élaboration des Plans d’Actions Prioritaires (PAP) de chaque ministère pourrait s’inspirer de ces PCD sous la coordination du MINEPAT\. Base de données nationale sur les communes\. Au cours de la mise en œuvre de sa deuxième phase, le PNDP a conçu une base de données évolutive qui contient toutes les données des infrastructures socio-collectives et marchandes des communes\. Une interface connexe à cette base de données permet de produire des cartes thématiques qui facilitent la planification et l’aménagement au niveau local\. Un mécanisme a été mis en place en vue de s’assurer de la mise à jour continue de cette base de données dans chaque commune\. Ce mécanisme implique les délégués départementaux et régionaux du MINEPAT et permettra à terme de disposer en temps réel des informations précises sur chaque commune\. Contrôle Citoyen\. Le PNDP a réalisé une expérience pilote de contrôle citoyen à travers la méthode du «Scorecard» dans 10 communes\. Cette expérience a permis aux populations de donner un avis sur les services fournis par leurs collectivités et d’envisager des améliorations\. Cette opération a fait ses preuves comme un outil de gouvernance efficace à travers lequel des changements considérables peuvent être capitalisés dans la commune\. Afin de pérenniser ce mécanisme, il est envisagé de rattacher son opérationnalisation à une structure pérenne et de réfléchir sur le financement de sa mise en œuvre\. Instance de coordination au niveau local\. Au cours de la deuxième phase du PNDP, le Conseil Municipal Elargi aux Sectoriels (COMES) a été l’instance de mise en cohérence des actions de développement avec les politiques sectorielles dans le cadre du PNDP\. Il est donc important que cette instance soit consolidée et valorisée dans chaque commune afin d’éviter des doublons et garantir la synergie et l’adéquation des actions de développement au niveau communal\. Cette instance devrait entre autres avoir pour missions, la coordination des actions au niveau communal (BIP, ONG, projets/programmes, etc\.), la synergie des interventions de tous les acteurs et la promotion de l’intercommunalité\. La participation des sectoriels à cette instance pourrait être supportée entre autres par la Dotation Générale de la Décentralisation dédiée au fonctionnement\. Gestion des allocations budgétaires par les communes\. Au cours de la 2ème phase, le PNDP a procédé au financement des communes sur la base des allocations\. Ce système a permis de renforcer les capacités des maires en maîtrise d’ouvrage, les disposant ainsi à exercer les compétences qui leur sont progressivement transférées par l’Etat central\. Il a également permis une plus grande efficience dans la gestion de ces ressources\. En effet, avec le jeu de la concurrence au cours du processus de passation des marchés, les maires ont été en mesure de réaliser un plus grand nombre de microprojets et faire profiter un maximum de populations\. La capitalisation des acquis du PNDP\. Avec l’expérience satisfaisante des phases 1 et 2 de la mise en œuvre du PNDP, on note tout de même que l’appropriation des enjeux et des mécanismes de maîtrise d’ouvrage demeure assez lente au niveau des communes\. Cet état de chose inhérent à toute mutation sociale, devrait pousser à réfléchir sur un moyen d’accompagner le processus de décentralisation, afin d’en assurer le succès\. A cet effet, les résultats et expériences du PNDP pourraient être capitalisés dans le cadre d’une 60 agence de développement local qui s’occuperait de l’appui à la Maîtrise d’ouvrage, étant entendu que la configuration actuelle des structures d’accompagnement des communes est déjà dotée d’organismes dédiés au financement des communes\. 61 Annex 8\. Comments of Cofinanciers and Other Partners/Stakeholders (No comments have been received) 62  Annex 9\. List of Supporting Documents Institut National de la Statistique\. 2014\. Evaluation de l’impact de la deuxième phase du Programme National de Développement Participatif\. Rapport final, Janvier 2014\. MINEPAT\.2010\. Document de Stratégie pour la croissance et l’emploi\. Août 2009\. PNDP\. 2013\. Evaluation par les bénéficiaires des services fournis par le PNDP II\. Rapport final, Juillet 2013\. PNDP\. 2013\. Evaluation de la maintenance des ouvrages, de la fonctionnalité des comités de gestion ainsi que la capitalisation des bonnes pratiques dans le cadre du PNDP II\. Rapport final, Août 2013\. PNDP\. 2013\. Evaluation de la performance socio-environnementale du Programme National de Développement Participatif-phase II (PNDP II), Rapport final, Janvier 2014\. PNDP\. 2013\. Magazine d’information du Programme National de Développement Participatif\. Vol#001 Juillet-Aout-Septembre 2013\. PNDP\. 2013\. Magazine d’information du Programme National de Développement Participatif\. Vol#002 Octobre-Novembre-Décembre 2013\. PNDP\.2013\. Audit technique et financier de la mise en œuvre du programme national de développement participatif (PNDP), dans sa deuxième phase, exercices 2010, 2011 Rapport final, juillet 2013\. PNDP\. 2013\. Audit technique et financier de la mise en œuvre du programme national de développement participatif (PNDP), dans sa deuxième phase, exercice 2012\. Rapports finaux, Décembre 2013\. PNDP\. 2014\. Rapport d’achèvement du Gouvernement relatif à la mise en œuvre de la deuxième phase du PNDP\. Mars 2014\. PNDP\. 2014\. Evaluation de la performance socio-environnementale du PNDP II\. Rapport final, Janvier 2014\. Wong Susan\. 2012\. What have been the impacts of World Bank Community-Driven Development Programs? CDD Impact Evaluation Review and Operational & Research Implications\. Social Development Department, Sustainable Development Network, Washington, DC: World Bank\. World Bank\. 2009\. Project Appraisal Document (PAD)\. Mai 2009\. World Bank\. 2010\. Country Assistance Strategy for the republic of Cameroon (CAS)\. February 2010\. World Bank\. 2010\. Aide-Mémoire Mission de Supervision-PNDP II\. Mai 10-19, 2010\. 63 World Bank\. 2010\. Aide-Mémoire Mission de Supervision-PNDP II\. Octobre 14-15, 2010\. World Bank\. 2010\. Aide-Mémoire Mission de Supervision\. Mai 10-19, 2010\. World Bank\. 2012\. Aide-Mémoire Mid-Term Review, PNDP II\. Janvier 13, 2012\. World Bank\. 2013\. Aide-Mémoire Mission de Clôture du PNDP II\. Décembre 23, 2013\. 64 65

APPROVAL

P008475

Document of The World Bank FOR OFFICIAL USE ONLY L v 39R0 ~ H Report No\. 7456-HU STAFF APPRAISAL REPORT HUNGARY THIRD INDUSTRIAL RESTRUCTURING PROJECT JANUARY 13, 1989 Industry and Energy Operations Division Country Department 1V Europe, Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  CURK\.FNCY ECUIVAIENTS Currency Unit - Forint (Ft\.) AVERAGE EXCHANGE RATES (Forints per US$) 1983 1984 1985 1986 19P7 ICA (02L\.) US$1\.00 - Ft\. 42\.7 48\.0 50\.1 45\.8 47\.0 52\.O WEIGHTS AND MEASURES Metric System ABBREVIATIONS CIF - Cost, Insurance and Freight CMEA - Council of Mutual Economic Assistance CSO - Central Statistics Office EF - Employment Fund GATT - General Agreement on Tariffs and Trade GDP - Gross Domestic Product ICB - International Competitive Bidding ISAL - Industrial Sector Adjustment Loan ITCB - International Training Center for Bankers KIOSZ - Association of Proprietorships MOI - Ministry of Industry NBH - National Bank of Hungary NPO - National Planning Office OKISZ - Association of Cooperatives R & D - Research and Development RPO - Restructuring Program Office SDI - State Development Institute VOSZ - Association of Small Business WLO - Wages and Labor Office FISCAL YEAR January 1 - December 31  FOR OFFICUIL USE ONLY STAFF APPRAISAL REPORT HUNGARY THIRD INDUSTRIAL RESTRUCTURING PROJECT TABLE OF CONTENTS LOAN AND PROJECT SUMMARY \. i-iii I\. IND'RODUCTION \. 1 II\. THE TINDUSTRIAL SECTOR \. 2 A\. The Economic Environment \. \. 2 B\. Sector Performance, Exports, Constraints and Strategy\. 3 C\. The Industrial Restructuring Program\. 7 D\. Employment Impact of Restructuring and Government Measures\. 9 E\. The Bank Group's Industrial Assistance Strategy \.14 F\. Progress under Previous Re'\.ated Bank Operations \.15 III\. THE SMALL B'TSINESS SECTOR \.16 A\. Background and Structure \.16 B\. Recent Performance \. 17 C\. Institutional Framework \. \. 18 D\. Development Constraints \. \. 18 IV\. INDUSTRIAL FINANCING \. 21 A\. Overview of Financial Sector Reform \. \. 21 B\. The Banking Systen\. and Credit Policies \. 22 C\. Industrial Investment Financing \. 24 D\. Export Credit and insurance \. 25 E\. Small Business Financing \. 26 F\. The Financial Intermediaries Involved in the Project \. \. 26 V\. THE PROJECT \.28 A\. Project Objectives and Scope \. \. 28 B\. Rationale for Bank Involvement \. \. 28 C\. Project Description \. \. 30 1\. Export-oriented Enterprise Restructuring \. \. 30 2\. Small Business Development \. \. \. 33 3\. Regional Employment Creation \. \. \. 35 4\. Technical Assistance: \. \. 37 (a) Small Business Credit Training \. 37 (b) Restructuring Studies \. 38 (c) Small Business Sector Study \. \. \. 38 (d) Employment Creation and Services \. 39 D\. Project Cost and Financing \. 40 This report is based on the findings of appraisal and post-appraisal missions which visited Hungary in May/June anl August/September 1988\. The missions comprised Messrs\. 0\. de Bruyn Kops (:ask manager), A\. Deshpande, H\. Herat, M\. Pherwani, and Y\. Sumi (staff), and consultants\. This document has a restricted distribution and may be used by recipients only in the performance of their official duties\. Its contents may not otherwise be disclosed without World Bank authorization\.  STAFF APPRAISAL REPORT HUNGARY THIRD INDUSTRIAL RESTRUCTURING PROJECT TABLE OF CONTENTS (CONTINUED) l)b\. VI\. PROJECT IMPLEMENTATION AND ONLENDING ARRANGEMENTS \. \. 43 A\. Project Implementation Organization \. 43 B\. Onlending Arrangements \. 43 C\. Main Loan Features \. 44 D\. Procurement \. 48 E\. Reporting and Auditing \. 48 F\. Supervision Plan \. 49 C\. Status of Project Preparation \. 49 VII\. PROJECT BENEFITS AND RISKS \. \. 50 A\. Project Benefits \. 50 B\. Environmental Impact \. 51 C\. Main Risks \. 52 VIII\. AGREEMENTS AND RECOMMENDATION \. 53 ANNEXES 1 Selected Documents Available in the Project File \. \. 55 2-1 GDP of Industrial Sector by Branch \. 56 2-2 Gross Output of Socialized Industrial Sector by Branch \. \. 57 2-3 Gross Fixed Investment of Socialized Industrial Sector by Branch \. 58 2-4 Trade Structure of Industrial Sector \. 59 2-5 Analysis of Industrial Non-Ruble Trade Performance \. \. 60 2-6 Recent Industrial Non-Ruble Trade Performance \. 61 2-7 Operations of the Investment Promotion Aspects of the Regional Development Fund and the Employment Fund \. 62 2-8 Eligibility Criteria of Investment Promotion Program for Job Creation \. 67 3-1 Structure and Performance of the Small Business Sector \. \. 69 4-1 Summary Financial Statements of the Participating Banks \. \. 75 4-2 Interest Rate Structure \. 77 5-1 Pipeline of Potential Export Investment Subprojects \. \. 78 5-2 Terms of Reference for Small Business Credit Training \. \. 79 5-3 Terms of Reference for Engineering Subsector Study \. \. 82 5-4 Terms of Reference for Small Business Sector Study \. \. 89 5-5 Terms of Reference for Strengthening of Appraisal Skills for Job Creating Investment Promotion \. 91 5-6 Terms of Reference for Borsod Regional Plan \. 94 5-7 Project Support for Employment and Retraining Services \. \. 97 6-1 Estimated Disbursement Schedule for Bank Loan \. 100 MAP IBRD - 21148R  HUNGARY \. \. THIRD INDUSTRIAL RESTRUCTURING PROJECT LOAN AND PROJECT SUMKARY Borrower: National Bank of Hungary (NBH)\. Guarantor: Hungarian People's Republic\. Beneficiaries: Direct and indirect industrial exporters; swrll business firms; firms in regions affected by emergir\.g unemploy- ment; commercial banks; G(-vernment agencies and county councils\. Amount: US$140 million equivalent\. Terms: Fifteen years, including a five-year grdce period, at the Bank's standard variable interest rate\. Onlending Terms: NBH will onlend US$135\.7 million equivalent in Forints to the participating banks (including the unallocated part of the Bank loan), and US$4\.15 million equivalent in Forints to the Government for technical assistance, at maturities not exceeding 15 years including five years of grace, at its prevailing refinancing rate or at the prevailing Bank rate plus a mark-up of 20 percent, whichevor is higher\. Participating banks will onlend to beneficiaries in Forints for periods not exceeding 12 years, including three years of grace, at rates determined pursuant to their lending policy statements agreed with the Bank, which would allow adequate spread, be positive in real terms, and not include a subsidy\. The remaining US$0\.15 million will be used by NBH for technical assistance\. NBH will bear the ±oreign exchange risk\. Project Objectives: To support the restructuring of the industrial sector in order to enhance its international competitiveness, the project aims to help: (i) redirect the product/market mix of the sector to competitive areas suitable for convertible currency exports, (ii) improve enterprise management practices and capabilities, (iii) stimulate the establishment and growth of small businesses, including the private sector, (iv) alleviate the adverse employment impact of industrial restructuring, and (v) strengthen the institutional capabilities in support of industrial restructuring\. Proiect Description: The project includes three enterprise credit components to support enterprise investments for:  ii (a) increased direct- and indirect exports to convertible currency markets related to the implementation of enterprise restructuring programs; (b) growth of entrepreneurs and small businesses; and (c) efficient employment creation in regions affected by emerging unemployment due to industrial restructuring\. The project also includes technical assistance to strengthen the participating banks in the area of small busines credit, to prepare enterp;ise and subsector restructuring programs, to improve the analytical framework for the small business sector, and to help improve the Government measures for addressing unemploy- ment, including limited investment support for develop- ment of employment and retraining services\. Project Benefits: The project would help to strengthen the ongoing restruc- turing efforts in the industrial sector, and lead to increased exports to convertible currency markets in support of the country's trade balance\. It would help balance the structure of the sector by promoting the establishment and growth of small, including private, firms which would also stimulate domestic competition, innovation and employment creation\. The project would further help accelerate enterprise restructuring and assistance to dislocated workers through its support for employment creation and development of suitable employment and retraining services in regions severely affected by restructuring\. Project Risks: The main risk is the uncertainty perceived by enterprise and small business managers about Hungary's future macro- economic situation and possible further changes in the industrial policy framework, whiich may affect the incentives for Pnterprise restructuring and small business development, and the level of credit demand under the project\. This risk is reduced by the strong support that the new Government and political leadership give to the economic reform and by the policy actions agreed to by the Government with the IMF, and with the Bank under the recent Industrial Sector Adjustment Loan\. These actions are aimed at creating a stable business environment, conducive to restructuring and development of entrepreneurship\. Another risk concerns the capacity of the participating banks to promote and appraise restructuring and small business investments\. The project addresses this risk with technical assistance measures and project coordination and supervision arrangewents\.  iii Project Cost: Local Foreign Total ----- (US$ million)---- Enterprise I\.nj'vestment Export-oriented 135\.0 110\.0 245\.0 Small Business 15\.0 10\.0 25\.0 Emplcyment Creation 45\.0 15\.0 60\.0 Technical Assistance Small Business Credit Training 0\.1 0\.2 0\.3 Restructuring Studies: - Subsector 0\.2 0\.8 1\.0 - Enterprise 0\.2 0\.7 0\.9 Small Business Sector Study 0\.1 0\.1 0\.2 Employment: - Regional Plan and Appraisal Skills 0\.1 0\.3 0\.4 - Employment Services 0\.1 0\.5 0\.6 - Retraining Center 7Q 2\.4 9\.4 Total 202\.8 140\.0 342\.8 Financing Plan: IBRD - 140\.0 140\.0 Domestic Loans 87\.5 - 87\.5 Sub-borrowers' Contribution 98\.8 - 98\.8 Government Contribution 16\.5 - 16\.5 Total 202\.8 140\.0 342\.8 Estimated IBRD FY 1989 1990 1991 1992 1993 1994 1995 Disbursements: ------------- (US$ million) -------------- A\.nnual 3\.0 12\.4 32\.2 36\.4 33\.6 15\.4 7\.0 Cumulative 3\.0 15\.6\. 47\.6 84\.0 117\.6 133\.0 140\.0 IBRD - 21148R  STA9'0 APPRAISAL REPORT HUNGARY THIRD INDUSTRIAL RESTRUCTURING PROJECT I\. INTRODUCTION 1\.01 Industrial restructurirg is the centerpiece of Hungary's medium-term structural adjustment program, and is accordingly one of the primary objectives of the Seventh Five-Year Plan (1986-90)\. The industrial restructuring program for 1986-90 is based on a medium-term strategy developed jointly with the Bank\. The strategy combines reforms of the entire economic management system, especially industrial sector policy, with support for specific restructuring investments\. The industrial policy reform program aims to increase reliance on competitiv\. market mechanisms and signals in order to promote efficiency, innovation, and financial discipline at the enterprise level\. Simultaneously, the investment program is intended to help restructure the potentially competitive parts of the industrial sector\. 1\.02 The original industrial policy reform program (1986-90), as reflected in a Letter of Industrial Policy Intent of May 1986, provided the framework for the Bank's lending for two industrial restructuring projects in Hungary during 1986-87 (Loans 2700-HU and 2834-HU)\. The earlier two projects were of a hybrid nature, involving measures at both the industrial sector policy level and the investment level\. In 1987, the Government adopted a medium-term Economic Stabilization and Structural Reform Program supported by an IMF Standby Arrangement which was approved on May 16, 1988, and a Bank financed Industrial Sector Adjustment Loan (ISAL, Loan 2965-HU) approved on June 21, 1988\. The proposed Project would complement the Bank's support under the ISAL, and help accelerate the managerial, technological, and financial restructuring of Hungarian industrial enterprises\. The Project also contains two novel features in the Bank's assistance program for Hungary in line with the country's drive for reform toward a market economy\. These are (i) the support for small businass and entrepreneurial development including in the private sector; and (ii) development of measures for efficient employment creation and of new employment services as a means of alleviating the social costs of restructuring\. The Project is supported by a Bank loan of US$140 million to the National Bank of Hungary (NBH), which would cover about 41X of the estimated financing required\. The remaining financing will be provided by the local participating banks, the beneficiary enterprises, and the Government\. 1\.03 The proposed Project was appraised during missions in May/June and August/September 1988, which involved members of the Industry and Energy Divisions of both the Europe and Technical Departments of the EMENA Region, and of the Trade, Finance, and Industry Division of the Technical Department of the Latin America and Caribbean Region, as well as several consultants\. Additional documents concerning the sector and the Project are listed in Annex 1 and are available in the Project File\.  - 2 - II\. THE INDUSTRIAL SECTOR A\. The Economic Environment !/ 2\.01 The Hungarian economic environment has not been conducive to industrial restructuring in the last decade\. Following an economic crisis in the late 1970s und early 1980s, the Hungarian economy had stabilized by the end of 1984\. The current account was in surplus, as was the Central Government budget\. In 1985, the Government initiated a vigorous renewal of the economic reform program, which had begun in 1968, and introduced reforms to promote decentralization and reliance on market-based signals to guide economic actions (para 2\.16j\. The macroeconomic environment in which the reforms were implemented was not supportive, however\. An expansionary demand management policy in 1985- 86 led to increased Government expenditures and fiscal deficits, caused in large part by the increase in State financial support to enterprises, which reduced their financial discipline and their incentives to respond to the reforms\. The initial supply response of the economy to the renewal of reforms was poor\. Consequently, economic performance deteriorated: real GDP declined by 0\.3% in 1985 and grew by only 1\.5% in 1986\. Further, the falling nonruble exports, growing nonruble imports, and declining terms of trade led to worsening trade and current account deficits, which were financed by higher foreign debt\. By the end of 1986, the current account deficit and the fiscal deficit were 6\.0% and 4\.3% of GDP respectively\. 2\.02 To address the serious economic situation, the Government in mid- 1987 took corrective measures - agreed with the Bank in the context of the Second Industrial Restructuring Project (para 2\.41) - to reduce the budget deficit, tighten financial support to enterprises, and reduce domestic demand\. These measures were effective in reversing the deterioration in internal and external balances, but had less impact than expected due to the continued increase in household consumption\. Despite strong domestic demand, nonruble exports showed good performance in 1987, and increased by 5\.0%\. The active exchange rate policy -\.nitiated in 1986, coupled with a 1987 change in the domestic pricing system that increased the relative profitability of nonruble exports, contributed to the turnaround in export performance\. The supply side of the economy also improved as GDP growth accelerated to 2\.9% in 1987\. These positive trends have continued in 1988\. Despite these improvements, foreign indebtedness further increased, largely due to continued valuation losses\. 2\.03 In order to strengthen and sustain the turnaround in economic performance in 1987, the Government developed a medium-term Economic Stabilization and Structural Reform Program for the period 1988-90, the main goals of which are to stop the growth of external debt by 1990 and accelerate the restructuring of the economy\. The main instruments for achieving the objectives of the program are continued progress in systemic reforms coupled with a reduction of the budget deficit, ceilings on the growth of credit, a strict t/ Further details are given in: Hungary - Stabilization and Economic Reform (Report No\. 7128-HU, dated May 31, 1988)\.  - 3 - limit on nominal wage increases, an active exchange rate policy, and an active irterest rate policy to raise household and enterprise savings rates\. The Government reached agreement on the main features of the program with the IMF under a Standby Arrangement, and with the Bank under the ISAL (para 1\.02)\. Medium-term economic forecasts indicate that, subject to the risks from the uncertain speed of adjustment to the stabilization and reform measures and from uncertainty in the international economic environment, the authorities' goals can be met through a vigorous and consistent impleiaentation of the program\. B\. Sector Performance\. Exports\. Constraints and Strategy 2\.04 Structure and Output Performance\. The industrial sector increasingly has been the lepding sector of the Hungarian economy during the postwar period\. The sector grew rapidly until the mid-1970s due to an emphasis on heavy industries in the 1950s and a subsequent strategy to diversify the irndustrial base in the 1960s and 1970s, leading to higher growth in the chemical and engineering industries\. Since the mid-1970s, the growth of the sector has slowed down considerably\. Annual growth rates of about 7% in the period 1960-75 were reduced to 4\.1% during 1975-80, and 2\.4% during 1980-87\. The share of the industrial sector in GDP increased steadily from 18% in 1950 to 31% in 1980, and stabilized in the 1980s\. In 1987 the sector represented about 33% of GDP, 31% of employment, 35% of gross fixed investment, and 85% of total exports\. Sector performance improved in 1987 with an output growth of 3\.7%, which reversed a stagnation during 1985-86\. Output in 1988 estimated to have groJn by 0\.5% - 1\.0%\. The subsectoral composition of the socialized industrial sector is shown in Table 2\.1\. Table 2\.1 Selected Data on the Socialized Industrial Sector\. 1987 (Ft billion and % shares) GDP Investment Non-Ruble ExRort Amount a/ Z Amount a/ % Amount J/ % Mining 56\.6 14\.8 18\.0 21\.3 1\.3 ]J 0\.6 Electric Energy 36\.8 9\.6 14\.8 17\.5 0\.0 ]/ 0\.0 Metallurgy 12\.4 3\.2 3\.5 4\.2 22\.3 10\.8 Engineering 128\.2 33\.5 13\.9 16\.5 50\.3 24\.5 Building Materials 17\.3 4\.6 2\.5 3\.0 3\.4 a/ 1\.7 Chemical Industry 56\.9 14\.9 15\.8 18\.8 49\.9 24\.3 Light Industry 52\.8 13\.8 5\.8 6\.9 34\.1 16\.6 Food Processing 15\.2 4\.0 9\.6 11\.4 39\.2 19\.1 Others 6\.4 1\.7 0\.4 0\.5 5\.1 2\.5 Total 382\.6 100\.0 84\.4 100\.0 205\.6 100\.0 Sources: a/ k/ Central Office of Statistics (a) and Ministry of Industry (b)\. g/ Statistical Yearbook of Foreign Trade, 1987 ed\.  -4- 2\.05 The sector can be divided into the mining and electric energy subsectors, which together represented about 24% of industrial value added in 1987, and the manufacturing subsectors whi\.'! account for the balance\. The overall structure of the sector has been relatively stable over the last decade\. At the subsectoral level, the shares of engineering and chemical industries increased gradually, while the mining, metallurgy and light industries showed a downward trend\. Among the manufacturing industries, engineering industries account for the largest share, representing one-third of industrial value added, followed by chemical and light industries, each of which account for 14-15%\. Among the engineering industries, transport equipment and general machinery occupy leading positions, while technology-intensive branches - electronic equipment and precision instruments - are emerging as new growth areas\. In terms of investment, mining is the leading subsector, followed by chemical, electric energy, and engineering industries\. Regarding employment, the engineering (32%) and the light industries (23%) are most important, followed by the food processing industry (14%), while the chemical industry contributes a much smaller share (8%)\. Changes in the industrial structure in the period 1975-87 are shown in Annexes 2-1\. 2-2 and 2-3\. 2\.06 Industry is dominated by large, in many cases vertically-integrated, state enterprises, which makes the sector highly concentrated and contributed to a lack of domestic competition\. Small, including private, firms have shown dynamic growth since the early 1980s, but their share is still very limited by international standards (see chapter III)\. 2\.07 Export Performance\. Industrial exports in 1987 were divided equally among convertible currency markets and Council of Mutual Economic Assistance (CMEA) markets\. The subsectoral composition of i-\.dustrial exports to the conm -rtible currency markets is quite different from exports to the CMEA markets\. While the exports to convertible currency markets are relatively evenly distributed among engineering products (24%), chemical products (24%), processed food (19%), light industry products (17%) and metals (11%), exports to the CMEA markets are heavily concentrated in engineering products (63%), mainly transport equipment and general machinery (see Annex 2-4)\. Regarding trade balances by industrial branches, the engineering industries show moderate to large trade surpluses with CMEA countries while they are in a substantial trade deficit with convertible currency markets\. The chemical industry is in deficit in both the convertible currency and CMEA trade\. Meanwhile, the food processing industry is in surplus in both the convertible currency and CMEA trade, although the subsector is largely judged to be uncompetitive (para 2\.12)\. Further details of trade balances by product groups are shown in Annex 2-5\. 2\.08 Industrial exports to convertible currency markets improved in 1987 with an estimated 5% growth in volume, reversing their decline in 1985-86 (see Annex 2-6)\. The turnaround in 1987 was caused by strong upturns in the engineering industry (especially general machinery and precision instruments), the chemical industry (especially plastic and other synthetic material products), light industry, and the food processing industry\. It benefitted from support ive measures by the Government to make convertible currency exports more attractive (see below)\. In 1988, the favorable export trend continued\. In the first six months, the dollar value of industrial exports to convertible currency markets  was about 20% higher than the corresponding period in 1987\. Metallurgy products showed a particularly high growth rate (30%), followed by processed food\. The export growth of engirneering products has remained moderate\. The rapid growth of industrial exports appears to be largely due to a recovery of international prices of intermediate goods v-uch as aluminium, steel and polyethylene\. At the same time, th- tighter domestic demand management policies also contributed to export growth\. 2\.09 Export Promotion Policy\. To create a favorable environment for convertible currency exports, the Government has been engaged in an active exchange rate policy since 1985, by which the real effective exchange rate has been depreciated by about 5% per year\. During 1985-86 however, the policy was unable to o-ercome the worsening of the non-Ruble terms of trade\. The situation ameliorated in 1987 as the export prices of intermediate goods improved\. To promote exports and competition in trading activities, the Government has increasingly decentralized trade and introduced from the beginning of 1988, an automatic granting of trade rights, subject to enterprises meeting specified criteria with respect to traded items and skills of enterprise personnel\. As a result, during the first six mo\.ths of 1988 about 600 legal entities and 110 private individuals applied for export rights, of which most were registered\. Further export promotion measures include a system of automatic duty drawback for exporters, a duty free zone, a trade policy fund at the Ministry of Trade for export promotion activities, and a 5% profit tax rebate as well as a grant facility for newly established trading houses\. 2\.10 Export Investment Promotion Program\. Since 1975 the Government hbs provided enterprises with a set of incentives for export-oriented investments to promote exports to convertible currency markets\. Any investment project that exports at least 60-70 percent of its output and can pay back the total cos,\. of investment from net convertible currency receipts within five years from the start of investment was eligible for exemption from accumulated assets tax, profit tax rebate of half of interest payments, extended maturity of credit (up to 12 years) and state equity allocation\. In 1988, the exemption of accumulated assets tax has been replaced by a 50% rebate on the value added tax (VAT) on export-oriented investment goods, which in 1989 would be extended to a full exemption of VAT on such investment goods\. (By comparison, the rebate on VAT for other investment goods amounted to 20% in 1988, while further increases in rebate of 20% per year wr ld be realized during 1989-92\.) 2\.11 The eligibi\. y criteria for participation in the program, particularly the relatively high export content and short pay-back period are fairly stringent and may exclude some profitable projects, especially large scale, capital intensive ventures\. Nevertheless results have been quite substantial\. In 1986 and 1987, the increases in convertible currency exports as a result of the program, are estimated to be about US$210 million and US$230 million respectively, which is substantial in relation to the size of the country's total convertible currency exports, i\.e\. US$4\.1 billion in 1986 and US$5\.1 billion in 1987\. 2\.12 Competitiveness\. A study on the policies, performance and constraints affecting the industrial sector, carried out jointly by the  - 6 - Government and the Bank,!/ analyzed the international competitiveness of Hungarian industry\. The analysis indicated that nearly three-quarters of the sector is potentially competitive as measured by a domestic rasource cost (DRC) below 1\.1\. Most of the processing industries demonstrated potential competitiveness, including machinery, engineering and light manufacturing, while food processing and ferrous metallurgy were largely in the uncompetitive segments\. The study also concluded, however, that productivity growth in the manufacturing subsectors, especially in capital productivity, was below international norms\. Two of the poorly parforming subsectors, coal mining and ferrous metallurgy, have been a drain on the economy\. The author'ties have recognized the need for restructuring these subsectors, and a restructuring plan for metallurgy that will eliminate the need for Government subsidies after 1990 has been prepared and implementation has started\. Concerning coal mining, the authorities have started with closure of a few unprofitable pits and are developing a restructuring program for the subsector which will be finalized by early 1989 ir\. the context of the second tranche release for the Industrial Sector Adjustment Loan (ISAL, para 1\.02)\. The Project would include support for measures to alleviate the adverse employment impact of restructuring in these two industries (paras 2\.20 and 5\.26)\. 2\.13 DeveloRment Constraints\. Improvement of sector performance is hampered by a number of constraints which fall into two broad categories: the policy and institutional environment in which enterprises operate, and constraints at the enterprise level\. At the Dolicv level, the economic reforms which were initiated in 1968 and reinvigorated in 1985 replaced the physical planning system with a new system of economic management, linked to markets\. While this important achievement improved the environment for economic efficiency in industry, some strategic issues remain which adversely affect the performance and restructuring of industry\. Broadly, these are: (i) limited domestic and international competition, (ii) limited resource mobility, and (iii) lack of financial discipline and weak autonomy of enterprises\. Within the overall economic stabilization and reform program, these three strategic issues are being addressed in a comprehensive industrial policy reform program which is summarized below (para 2\.16)\. The policy environment and investment orientation have also favored large state enterprises and reinforced the high degree of concentration of the sector\. In this respect, the development of small and medium-sized firms has been hampered by the biased policy framework (para 3\.11)\. 2\.14 At the enterprise level, constraints toward improved performance include: (i) insufficient market orientation caused by a number of factors, including the lack of domestic competition, orientation of many enterprises toward the less demanding domestic and CMEA markets and limited exposure to foreign markets, and reliance on external trade organizations which insulated enterprises from their clients and suppliers; (ii) underdeveloped corporate management skills, particularly in the areas of strategic planning, marketing, product development, and financial management; (iii) inadequate organization structures, lines of authority, and management information and accounting systems, particularly for cost control and budgeting; (iv) obsolete technology 2/ Hungary - Industrial Policy\. Performance and Prospects for Adiustment (Report No\. 6124-HU, dated September 30, 1986)\.  - 7 - and aging production facilities, which has been largely caused by constraints on foreign exchange availability and inadequate R&D efforts; (v) proliferation of products manufactured by enterprises including a large number of low volume and unprofitable activities, which contributes to high levels of vertical integration and the lack of specialized component manufacture; and (vi) lack of sufficient quality inputs for production due to the underdeveloped feeder industries for supply of parts and components, and restrictions on foreign exchange availability that severely constrained alternative imports of necessary inputs\. 2\.15 DeveloRment Strategv\. The medium-term strategy for restructuring of the sector, developed jointly by the Government and the Bank under the previous industrial restructuring projects (para 2\.41), combines the industrial policy reform prograir and a program of specific restructuring measures, including investments\. The strategy aims to change the structure of industrial production by emphasizing activities where Hungary has a dynamic comparative advantage and potential for convertible currency exports; and to improve the productivity and competitiveness of existing production facilities through technology upgrading, production rationalization, and organizational and managerial improvements\. The industrial policy reform program would create the necessary incentives to encourage restructuring and enhance efficiency, while the specific measures would facilitate an adequate supply response to the policy reforms\. The Project has been designed to support the above restructuring strategy and is intended to help stimulate the restructuring at enterprisee level to make the sector more competitive\. C\. The Industrial Restructuring Program 2\.16 The industrial restructuring program was refleciced in a Letter of Industrial Policy Intent of May 1986, and provided the framework for the Bank's lending for two industrial restructuring projec'-s in Hungary during 1986-87\. Both the original letter, and an updated letter in connection with the second project, expressed the Government's commitment to: (i) implement a comprehensive program of reform covering eleven policy areas; and (ii) maintain a supportive macro-economic policy environment\. The program has been reviewed semi-annually during the last two years\. The matrix of policy actions which summarizes the program has been updated and elaborated as further steps needed in the reform were identified\. The program for 1988-90 was developed further in the context of the recent ISAL, and is elaborated in the President's Report of that Loan (Report No\. P-4796-HU, dated May 27, 1988)\. The matrix of policy actions covers eleven areas which are central to the basic objectives of the program to reform the Hungarian economic system\. These areas are: entry of enterprises; liquidation; international trade; pricing; taxation; wage differentiation and worker mobility; capital market development; the banking system; the enterprise management system; direct foreign investment; and technology development\. Since 1985, measures have been implemented in line with the agreements and timing reflected in the policy matrix\. 2\.17 The main emphasis of the reform program for 1988-90 is on those areas which are most likely to have an immediate impact on the country's macro-economic problems, and on the realization of the main objectives of the reform program  - 8 - in the industrial sector (financial discipline, enhancement of competition, and resource mobility)\. Therefore, the greatest attention is given to: (i) further reduction in budgetary support to inefficient enterprises and subsectors, and stringent application of the liquidation framework; (ii) import liberalization and strengthened incentives for convertible currency exports; (iii) facilitation of entry of new enterprises and private entrepreneurship; (iv) further reform of taxation, pricing, and wage systems; and (v) reduction in producer and consumer subsidies\. 2\.18 The ISAL was designed to support the accelerated implementation of the above priority areas, and provides the sector policy framework for the proposed Project\. Agreements reached under the ISAL, include those related to the macro-economic program in line with agreement reached with the IMF under the Standby Arrangement (para 2\.03), as well as introduction of the following main measures related to the industrial policy reform program: (i) Entry of enterprises\. The new Law of Association enacted on January 1, 1989, enables individuals to form limited liability and joint-stock companies, and authorize private individuals to hold shares in such companies\. The employment limit of companies with private shareholders has been set at 500, which represents an important increase from the employment limit on private firms of 30 persons prior to 1989\. To further improve the opportunities for small businesses, a unified company profit tax system has been introduced in January, 1989 (see iv below)\. (ii) Liquidation\. The Government has eliminated its assistance to loss making/inefficient enterprises outside the liquidation and refloatation framework, and its guarantees of loans and bonds for the refloatation organization\. This commitment has been complemented by limiting the budgetary allocation to the refloatation organization, and implementing action plans to resolve the problems of chronic loss-making enterprises and crisis subsectors (coal and metallurgy), including bankruptcy procedures\. Measures introduced in January 1989, will further tighten the liquidation framework\. (iii) International Trade\. The Government has taken steps to increase the relative profitability of convertible currency exports as compared to CMEA exports, and has liberalized access to foreign trading rights\. Reductions in tariffs would be made as agreed with GATT\. Procedures for import licensing are being streamlined to improve access of exporters to imported inputs\. To improve access to imports by enterprises and increase competition in the local market, the government has initiated in 1989 a program which would liberalize imports over a three-year period (1988-91)\. In 1989, the program would eliminate import licensing requirements for 35-40% of the import bill, which share would reach 80% in 1991\. Access to imports by small, including private, firms also has been facilitated in 1989\. (iv) Pricing\. Wage\. Tax and Enterprise Management Reform\. The requirement for all firms to report price increases in advance has been discontinued from April 1988\. Thereafter some 53% of consumer goods have been removed from price controls, which will be increased to 62% in 1989, and to about 70% in 1990\. Of producer prices, 57% are now without control\. Further deregulation of pricing is taking place during 1989-90, including abolishment of mandatory price  - 9 - calculation requirements by private firms and of the import pricing rule\. The mandatory upper limits on wage scales have been abolished, and from January 1989, enterprises are free to determine individual earnings subject to an overall ceiling on their wage bill related to performance\. Further streamlining of enterprise taxation, including for small business firms, took place through the introduction of a unified company profit tax law in January 1989, in conjunction with the new Law of Association\. The system of autonomous enterprise management, based on elected enterprise councils and assemblies, will be extended\. (v) Capital Markets and Banking System\. The Government has enabled introduction of 'capital tickets' (non-voting profit sharing instruments) by enterprises to their employees\. The enterprise and household bond markets have been integrated\. New accounting and auditing regulations to make enterprise accounts more transparent and in conformity with international standards, and expanded financial disclosure requirements have been issued\. From January 1989, enterprises are permitted to open current accounts with more than one bank, and the Government has initiated the full integration of banking services for households and enterprises to be completed by 1990\. (vii) Technology Development and Direct Foreign Investment\. Technology development is one of the major objectives of the program\. The Government will concentrate R&D resources to selected priority areas, streamline the procedures for approval of licenses, and continue to make R&D by enterprises more market- oriented\. Measures for improving the accounting treatment of intellectual property have been introduced\. To promote foreign investment a separate Foreign Investment law has been introduced in January 1989, and the Government is intensifying promotional campaigns to attract foreign capital and is entering into investment protection agreements with a rumber of countries\. 2\.19 In addition to the industrial policy reform program summarized above, the Government's industrial restructuring strategy includes support for the development and implementation of restructuring programs for enterprises that have the potential to be competitive internationally\. The Project 'ould support the restructuring strategy by measures to accelerate the realization of the objectives of the industry-wide reforms at the enterprise level, including through reorientation of product/market strategies with focus on more competitive areas and convertible currency exports; strengthening of structure, organization and management capabilities; upgrading of technology and production facilities; and stimulating small business development\. It would also help to address the adverse impact of restructuring on employment\. D\. Employment Impact of Restructuring and Government Measures 2\.20 Employment Impact of Restructuring\. There will be social costs to the implementation of the restructuring program\. The most significant will be the appearance of open unemployment\. The right to a job is embodied in the Hungarian constitution and the pressure to maintain full employment has a pervasive influence\. As a consequence, hidden unemployment is an important feature of the economy as enterprises have been very reluctant to make employees redundant even where there is obvious overstaffing\. At the same time, wage policies, which have depressed wage levels, have stimulated demand for labor\.  - 10 - 2\.21 As a result, there is little evidence currently of job shortages in most areas of Hungary\. For the country as a whcle, statistics at employment offices indicate that by mid-1988 there were nearly five vacancies fcr every person looking for a job\. Some areas however are much less well off\. In Szabolcs county in the north east of Hungary, for example\., the number of unemployed is in excess of the number of vacancies\. These regional disparities are exacerbated by low levels of geographic iabor mobility, partly caused by the difficulty in finding housing in the more prosperous areas such as Budapest\. Moreover, although the overall job balance app:ars positive, there are indications of a mismatch between the skills required for vacant jobs and the skills of those available for work\. In this respect, job opportunities are most difficult to find for unskilled workers\. 2\.22 The overall employment picture is expected to change fairly substantially in the near future, as the Government's restructuring program is likely to force enterprises to become more efficient\. Given the extent of underemployment, this could lead to important labor redundancies in the industrial sector\. The redundancy problem is likely to be exacerbated by trends in labor supply\. While in the past several years the Hungarian labor force has fallen, it is projected to increase in the medium term mainly as the result of a steep rise in the number of school leavers over the next few years\. 2\.23 In the near term, jobs are most evidently at risk in two industries which are undergoing restructuring, steel and coal mining\. In steel, the Government has decided to reduce overall output from 3\.4 to 2\.6 million tons and to change the composition of output\. Over the next three to four years and allowing for early retirement, the total number of workers likely to be made redundant is in the rang\. of 6-7,000\. In coal mining, allowing for some reemployment of skilled workers (particularly those employed at the coal face), the Government es;imates that some 5,000 jobs are at risk\. Therefore the total job losses that are likely to occur in these two most affected industries in the next two to three years is in the range of 11-12,000\. The great majority of these will occur in the north of Hungary, which is currently the least prosperous part of the country\. 2\.24 In the longer term, potential job losses through redundancy of 150- 200,000 are commonly quoted in official circles\. Though there is little direct evidence to support these estimates, the prevalence of underemployment tbroughout the industrial sector is such that labor redundancies of important magnitude are not unrealistic\. The extent to which the Government and individual enterprises will be prepared to accelerate the industrial restructuring program depends critically on there being measures in place to ease the process and to stimulate new employment in those areas which are most adversely affected\. 2\.25 To address the emerging employment problems, the Government currently employs two sets of policy measures\. First, the Government provides financial support to job-creating investment projects in particular tegions through the Regional Development Fund which started operations in early 1987, and the Employment Fund which became operational at the beginning of 1988\. Second, it iias started to develop, as part of the Employmer\.t Fund, a range of employment  - 11 - services and retraining measures to assist displaced workers to find new employment\. Each of these measuiis is briefly discussed below\. 2\.26 Promotion Gf Job Creating Investment\. Tnie two Funds referred to above provide financial support (using various instruments) towards the fixed investment cost of projects which create new jobs\. In both cases support is discretionary and is meant so be limited to 30% of fixed capital costs and with a maximum support cost per job of FtlO0,000 (about US$1,900)\. Assistance under the two measures is planned to increase over the next few years\. In 1989 approvals are likely to be in the order of Ft2\.0-2\.5 billion (about US$38-48 million)\. Though similar in objectives, the two Funds differ as to the areas to which they apply and the way they are administered\. 2\.27 The Regi2pal Development Fund applies to seven of Hungary's 19 counties\. While these include areas affected by restructuring, the Fund is principally aimed at the so-called backward areas which have long been depressed\. The Regional Fund is the responsibil'ty of the National Planning Office (NPO)\. About 20% )f disbursements iz administered centrally by the State DeveLopment Institute (SDI), while the balance is administered locally by the seven county councils\. The portion of the Fund which is administered locally is allocated between the counties on the basis of an assessment of the need of the areas\. Wjithin the ,ounties, officials appraise applications for support and final decisions are made locally by a committee comprising representatives of a range of organizations, including commercial banks\. 2\.28 The Employment Fund is the respornsibility of the Wages and Labor Office (WLO) and while county councils assess proposals and express a view on them, appraisals are undertaken centrally and final decisions made by an inter- departmental committee\. Projects from any of the 19 counties may apply for assistance but preference is given to those from areas affected by restructuring and from backward areas\. As a consequence disbursements are much more evenly distributed than is the case with the Regional Fund, though over a quarter has been allocated to Borsod County in the north of Hungary, the area likely to be most adversely affected by industrial restructuring in the short term\. Further details on the operation of the two measures are given in Annex 2-7\. 2\.29 While thare is an important need to stimulate new employment opportuaiLies in a number of areas of Hungary, there is a concern that as they had been constituted and operated the two Funds failed to address this need for a number of reasons\. First, in comparison with many otter countries which are seeking to promote new economic activity in depressed areas the measures in force in Hungary disperse aid over a very wide geographic area\. 'Fcond, the limit on support per new job created is low and, combined with the \.ficulty on the part of many enterprises in getting access to foreign exchange, lis has promoted the development of very labor intensive activities with limited technological content\. While these absorb surplus labor in the short run, many projects are marginal in business terms, and will do little to support the growth of a new economic base for long term self-sustaining development in the affected areas\. 2\.30 Third, there is considerable doubt as to whether, as they are currently administered, the two schemes support those projects which would not have proceeded without assistance\. Project appraisal skills, especially within  - 12 - the county councils, are poorly developed and the eligibility criteria and the rules which govern the terms on which assistance is provided are frequently breached\. Further, monitoring procedures to ensure that enterprises which have received assistance are fulfilling their obligations, are limited\. Fourth, the two Funds would be more effective if they were part of a package of economic development measures applied in each affected area\. The lack of soft infrastructure assistance, including business and technical advice, enterprise training or industry-specific promotion initiatives, has reduced both the number and quality of applications for support from the two schemes\. Fifth, under both measures the bulk of the funds have been used to support projects of large enterprises, and virtually no assistalce has been extended to small firms\. This has tended to p;omote the further growth of branch manufacturing plants in assisted areas, carrying out only production operations and offering a narrow range of manual jobs\. This limits the development of an indigenous economic base in these areas\. 2\.31 These concerns and a series of proposals to improve the operation of the two schemes have been discussed and reviewed with the Government\. On this basis, the Government has decided to merge the employment promotion aspects of the two schemes into a sing\. program with a single set of application and appraisal procedures\. The implementation of these adjustments has started on January 1, 1989, and a new revised program will be fully operational in January 1990\. The main features of the adjustments are as follows: (i) Program assistance will be narrowed geographically and focussed on those regions which are most in need, with allocation of funds to affected areas based on economic indicators\. During 1989, program support will be focused on four counties which are facing highest employment problems, namely Borsod, Komarom, Nograd and Szaboles counties\. By June 1989, the NPO will finalize a detailed set of economic criteria on the basis of which regions will be selected for program support from 1990; (ii) On January 1, 1989, the application of the two schemes has been unified in terms of the eligibility criteria for program support\. As part of these criteria, the limit of support cost per job has been raised to Ft500,000 (US$9,600)\. Details of the eligibility criteria are shown in Annex 2-8; (iii) From January 1, 1989, the county councils are responsible for appraisal and approval of State support funds for: (a) investment projects which involve maximum State program support of Ft5 million or maximum investment of FtlO million, and (b) investment projects related to the establishment of new small firms with employment up to 30 persons\. Other investment projects will be dealt with by the SDI which will also monitor the appraisal work of the councils to ensure that they adhere to eligibility rules and to ensure consistency in approach; (iv) Appraisal of investment projects by the county councils and the SDI will be carried out by teams of specialists with appropriate training\. Appraisal teams at the SDI and the four counties mentioned above are being strengthened to carry out business-like evaluations of investment projects and will be operational by March 31, 1989;  - 13 - (v) The earlier range of support instruments will be reduced to a single instrument, a grant; (vi) County councils which are eligible for support under the program will formulate overall economic development strategies and programs with focus on efficient employment creation, which seek to build on the comparative advantages of each affected area; and (vii) The small business sector will be given special "r-euragement, including through the design and implementation of speciaL programs in assisted regions\. 2\.32 The Hungarian Government has u Jertaken to carry out the above adjustments to its investment promotion program for regional employment creation to be fully effective by January 1, 1990\. ln support of the program, the Project includes a separate credit facility for \.i-1 creating investments (para 5\.26), and technical assistance for strengthening of investment appraisal skills and for the preparation of a regional development plan for Borsod county (para 5\.38)\. 2\.33 Employment and Retraining Services\. Apart from its support elements for job creation, the Employment Fund (EF) is the main labor adjustment program to mitigate the labor dislocations created by restructuring\. The EF includes several benefit programs: extended notice of unemployment, unemployment allowance, retrain,ng allowances, early retirement, public service employment, support for individuals wishing to start new businesses and other support within the jurisdiction of the WLO\. It obtains its resources from the State Budget based on an annual plan developed by the Wages and Labor Office (WLO) and approved by the Council for Wages and Labor\. 2\.34 These employment and retraining programs are new and, while they address some of the problems of dislocation, they need to be refined if they are to be cost effective and serve increasing numbers of workers\. Based on a review of the operations of the EF, the Bank has made recommendations for actions to strengthen the operation of the EF, as well as related employment services, retraining programs, and special services to enterprises/communities which may experience large scale layoffs\. 2\.35 The Bank's review indicated that the current operations of the EF can be strengthened in four areas\. First, the administration and operation of the Fund should be adjusted to maximize the benefit programs for individual workers as well as for the country as a whole\. Information needs to be collected on how the funds are utilized and more precise methodologies need to be developed to allocate funds by region, client, category of benefit, sector, and size of enterprise\. Second, employment services for displaced and new workers should be expanded\. A national network of employment offices has been established recently, which primary role is to administer the EF benefit program and operate the employment exchange\. This role needs to be broadened to ensure that displaced workers are returned to active employment as soon as possible and in the most cost-effective manner\. Third, expertise should be developed within Hungary to provide enterprises and communities experiencing major layoffs with quick and highly focused in-plant employment services\. In other countries, this has been proven to be one of the most effective ways of redeploying workers with  - 14 - the least disruption\. Fourth, the current retraining services are insufficient to deal with increased needs with regard to the number of clients to be served or the type of services required\. To address these shortcomings, a system of adult training should be developed by WLO in cooperation with county councils, including the establishment of adult retraining centers in counties experiencing major worker dislocation\. Such centers should provide training in basic (academic) education, skills training, customized training to support new business investment, and training and assistance for small business development\. Details on the current operation of the labor adjustment programs of the EF and of proposals for its further development are contained in the Project File\. 2\.36 The Government is in agreement with the thrust of the above proposed adjustments to the current labor adjustment program\. Further detailed analysis and field testing of new employment and retraining services in Hungary will be required before a comprehensive program for the country can be esta1lished\. To assist the WLO in the initial phase of enhancing and strengthening the program, the Project includes a program of technical assistance and limited investment support (para 5\.39)\. At the same time, the Bank has initiated, jointly with the Hungarian authorities, a comprehensive human resources review, to be completed in 1989, which will examine in more detail aspects of marpower and labor market, training and retraining, and higher education and profeasional training\. The results of that review would also be used for further devalopment of the labor adjustment program\. E\. The Bank Group's Industrial Assistance Strategy 2\.37 Since it started lending to Hungary in 1983, the Bank's strategy for assistance has focused on supporting Hungary's program of structural adjustment in the economy, to make it more efficient, flexible, market responsive and competitive in external markets, particularly in the convertible currency area\. Until the mid-1980s, Bank involvement in the industrial sector took the form of investment projects in support of export development, energy conservation, and development of the fine chemicals industry\. From 1985, the industrial policy reforms, which were designed in close collaboration with the Bank, have been the cornerstone of the Bank's lending to Hungary\. The main vehicle of Bank support to the reform has been the two industrial restructuring projects, with a "hybrid" design which combined subsector and enterprise restructuring with support to the policy changes\. As the economy deteriorated during 1985-86, the Bank advised the Government to accelerate the reform process while further strengthening the macroeconomic and sector policy content of lending operations\. The recent ISAL with its explicit coupling of the economic stabilization and structural reform objectives is an evolution of this process\. 2\.38 There is a strong complementarity between adjustment lending and investment lending in Hungary\. Systemic reform supported by adjustment operations will provide the necessary supportive policy and institutional environment and increase the likelihood of success of the investment operations\. As such, the proposed Project would complement the Bank's assistance in support of the policy reform program under the ISAL\. It also has been designed to provide continuity and build on the first and second restructuring loans, and would help to accelerate the technological, managerial, physical and financial  - 15 - restructuring of Hungarian industrial enterprises\. The Bank's involvement in the restructuring projects has evolved with each operation\. While in the earlier projects a large share of loan proceeds were earmarked for preappraised restructuring invest\.4ents in selected priority subsectors, this Project will move further toward industry-wide restructuring support and devolve decision making and resource allocation authority to the banking system\. The Project also extends the Bank's assistance to two new priority areas, namely (i) the development of the small, including private, business sector, and (ii) development of measures for efficient employment creation and for new employment and retraining services\. 2\.39 Since Hungary's joining IFC in 1985, IFC's main focus of activities has been the promotion of direct foreign investment, introductLon of modern technical know-how and management systems, and improving competitiveness of selected industries through joint venturas, development of capital markets, and, in collaboration with the Bank, advice on reforms related to the financial system and on the Law of Association\. IFC participated in the establishment of a private joint venture bank and in financing three industrial ventures\. IFC is actively considering support to several new joint ventures and a program to assist cooperatives and private sector enterprises in Hungary, either directly or through a 'package' approach using a financial intermediary, and is exploring the provision of equity financing to small scale private enterprises\. The roles of the Bank and IFC in Hungary have been complementary and, with regard tc the financial system, collaborative\. Regarding the involvement of the two institutions in the cooperative and private sectors, the Bank would continue to focus on support for policy reforms to provide a stable environment for restructuring and small business development, support for institution building (particularly within the banks), and combined financial/technical assistance to firms through lines of credit\. IFC would focus on larger, preappraised, investments either directly or through the 'package' approach\. IFC would provide financing facilities for appropriate financial and industrial enterprises, and continue expanding its financial sector investments, including contractual savings (eg\. life insurance) and leasing businesses\. IFC would continue to collaborate with the Bank in providing further technical assistance in the financial sector\. F\. Progress under Previous Related Bank Operations 2\.40 The Industrial Export and Restructuring Project (Loan 2397-HU), for which a US$110 million Bank loan was approved in March 1984, included support for 15 preappraised export-oriented and material saving/background subprojects, two credit line components to finance similar subprojects meeting agreed eligibility criteria, and technical assistance to carry out subsector studies and for institutional strengthening of NBH\. The Bank loan is now fully committed, and implementation of the project has been satisfactory\. 2\.41 The first Industrial Restructuring Project (Loan 2700-HU), for which a US$100 million Bank loan was approved in May 1986, included specific measures in support of the policy reforms, as well as of the restructuring of the plastics processing subsector which served as a model for restructuring of promising subsectors\. Implementation of the project is well underway\. The Second  - 16 - Industrial Restructuring Project (Loan 2834-HU), for which a US$150 million Bank loan was approved in June 1987, supported a deepening of the policy reforms, as well as the restructuring of several subsectors (rubber processing, and agricultural and food machinery manufacture), and a pilot component for development of feeder industries\. The initial enterprise response to the subsector and feeder industry credit line components has been on the slow side, but is now accelerating\. Other project components are advancing satisfactorily\. Coordination arrangements for the two projects have been strengthened with the full establishment of the Restructuring Program Office (RPO)\. An early review of the implementation of the two industrial restructuring projects indicates the need to improve the understanding and application of the restructuring concept by the enterprises, the commercial banks, RPO, and the Ministry of Industry\. Steps have been taken to strengthen the RPO with related technical assistance in order to provide assistance to the enterprises and commercial banks in this respect\. The experience with the two projects has also underlined the need for well functioning project coordination arrangements in Hungary for these multi-component projects in order to reduce supervision input by Bank staff\. 2\.42 The Industrial Secto-: Adjustment Loan (ISAL, Loan 2965-HU), supported by a US$200 million Bank loan, was approved on June 21, 1988\. Disbursement of the first US$100 million tranche has taken place, and good progress has been made by the Government to meet the conditions for the second tranche release for which a review is expected to be completed in February 1989 (para 2\.18)\. III\. THE SMALL BUSINESS SECTOR A\. Background and Structure 3\.01 In post-war Hungary much emphasis was placed on promoting heavy industry and on development of enterprise activities in a concentrated fashion\. Private sector business activities were heavily discriminated against\. As a result, the industrial sector became dominated by large firms, and small business activities were insignificant\. During the 1980s, the policy environment for small business became steadily more positive\. In line with the evolving legitimacy of the private sector in Hungary, the authorities introduced regulations during 1981-82, which moderated the controls on employment limits and registration of small private sector businesses\. The supply response of the small business sector has been considerable\. While the sector's share of total output and employment (an estimated 7% and 5% respectively) remain modest, it has become the economy's most dynamic sector\. During 1982-1987, in the context of liberalization but also of continuing policy discrimination in many areas and in the absence of a supportive framework (e\.g\., no institutional credit, training, and extension of physical infractructure facilities), the small business sector has outperformed the overall economy and the industrial sector in increases in employment, output and productivity\. A major step in the creation of opportunities for small firms has been the introduction in January 1989, of a greatly revised association (company law) framework and a simplified and unified company profit taxation system, the common principle of both being neutrality in treatment of enterprises of different ownership sectors (public,  - 17 - cooperative and private) and scale (large and small)\. The dynamic performance of the sector, as well as the further policy measures by the Government to enhance the role of small, including private, firms, provides a good basis for Bank support to the sector\. Details on the structure and performance of the sector, which are summarized below, are given in Annex 3-1\. 3\.02 Prior to the new association framework introduced in 1989, the small business sector in Hungary included (i) proprietorships which have been permitted up to 30 employees, (ii) partnerships with up to 30 members and 30 additional employees, and (iii) small cooperatives, which prior to January 1988, were permitted up to 100 members plus 25% additional workers, and which since then have been permitted to have an unlimited number of non-member employees\. In proprietorships and partnerships the owners and partners have unlimited liability\. The small cooperative is a limited liability framework and has provided a fairly simple registration requirement for private individuals who wis;i to undertake for-profit ventures\. Sectoral level laws and regulations distinguish between the rights and obligations of legal and non-legal entities\. The impact of the distinction in practice has been to differentially allocate rights and obligations between the socialist (cooperatives and state enterprises) private (proprietorships and partnerships) sectors\. 3\.03 The Hungarian small business sector, excluding agriculture, comprises: (i) 185,000 proprietorships (referred to variously as entrepreneurs, private traders, private industries and craftsmen); (ii) 11,000 partnerships (GMK's and civil law associations); and (iii) 2,500 small cooperatives\. These include, in the industry and related services sector: 32,000 full-time proprietorships employing 52,000 people; 3,400 partfnerships employing 21,000 people; and 900 small cooperatives employing 45,000 people\. 3\.04 Information sources on the small business sector in Hungary are few\. The growing importance of the sector has not been accompanied by provisions for data gathering and publication which would permit the adequate monitoring and analysis of the sector's development\. The Project provides for the carrying out of a comprehensive study of the structure, performance and developments constraints of the sector (para 5\.37)\. B\. Recent Performance 3\.05 Hungary's small business sector has experienced rapid growth in recent years in terms of units and employment\. Over 1984-1987, proprietorship units increased at an annual rate of 5%, partnerships at a rate of 32%, and small cooperatives at a rate of 75%\. Small business employment increased over 1984-1987 by 90-95,000, compared with an estimated net loss of some 100,000 jobs in the economy as a whole\. Reported output in the small business sector expanded at an annual rate of 50% in current prices in the 1985-1987 period (compared with inflation rates over the same period cE 5\.3 - 9\.5%)\. 3\.06 The fastest growing small business sectors have been transport, retail, personal services and construction\. The small industry sector is also growing rapidly and is outperforming large scale industry in output and employment increases\. The annual growth rate of gross output over 1985-1987 for  - 18 - small industry was 28% in current prices, as compared to growth in the socialized industrial sector of 3\.2% during that period\. 3\.07 The most rapidly growing group, in terms of new units, employment and output, has been the small cooperatives\. In the small industry sector cooperatives, output per employee during 1985-1987 expanded at an average annual rate of 22% in current prices, compared with 12% for large cooperatives\. Further, employees in small cooperatives earned 43% more than employees in large cooperatives in 1986, and the pre-tax profits of small cooperatives averaged 20% of revenue as compared with 13% for the larger ones\. The most rapidly growing industrial branch for the small cooperatives has been engineering, which accounts for 59% of small cooperative industrial gross output, and 40% of total cooperative sector output in the engineering branch\. 3\.08 Within Hungary's small business sector, small cooperatives and partnerships are more advanced than proprietorships\. The small cooperatives and partnerships, as cempared with the proprietorships, are generally (i) more recently established; (ii) larger in terms of number of employees; (iii) more export oriented; (iv) equipped with more modern technology, especially the small cooperatives; (v) staffed with a younger and more educated labor force; and (v) more productive in terms of output levels per worker\. C\. Institutional Framework 3\.09 The small business sector, not including small traders, is represented by four umbrella type organizations\. KIOSZ is the organization which represents proprietorships\. Membership has been obligatory for all craftsmen\. OKISZ represents large and small cooperatives\. It is an obligatory membership organization\. The Chamber of Commerce, while it has tended to represent the state enterprises, has had a small technical division which has represented the views of partnerships and others in the small business sector\. These three organizations are relatively well financed and participate in the development of new laws and regulations through regular consultations with state authorities\. Both KIOSZ and OKISZ provide services to members in training, information, technology access, finance and marketing\. The fourth organization, the Association of Small Businesses (VOSZ), established in February 1988, is an independent, voluntary membership organization for small firms in the manufacturing, service and commercial sectors\. VOSZ has made representations to official bodies on the new Association Law and the new taxation system, and has actively solicited information from its members on likely demand for credits under the Project\. D\. Development Constraints 3\.10 The small business sector has confronted constraints in a number of areas: the policy and regulatory framework, access to technology, financial, and supporting services\. Thiese constraints are in many ways historical and are related to the relatively recent official acceptance of the sector's legitimacy\. On the other hand, the strength of the sector is also related in good measure  - 19 - to the entrepreneurship and business skills which were developed over the long period in which the sector was tightly restricted\. 3\.11 Policy and Regulatory Framework\. The major problem identified by small business managers has been the lack of policy stability\. While small businesses have been operating in an environment which has grown steadily more positive since 1982, the extensiveness and rapidity of the legal and regulatory changes present uncertainties to businesses in making decisions\. The introduction of changes through the issuing of regulatory decrees, rather than through laws, has tended to temper tie confidence of the entrepreneurs as they are aware of the facility with which further regulatory changes can be made\. 3\.12 Small businesses in Hungary have been discriminated against in a number of areas: (i) special taxes on private ventures (the entrepreneurial and countervalue taxes); (ii) skill-based licensing requirements for entry; (iii) restrictions on the legal forms of business organization available to private individuals not associated with the socialist sector including the absence of limited liability frameworks; (iv) limitations on the raising of capital, with only individuals directly working in a venture being permitted to invest capital; (v) profile restrictions, especially in importing and exporting, and in domestic wholesale and distribution activities; and (vi) limitations on the number of employees\. 3\.13 The most important areas of policy discrimination are being addressed in the context of the ISAL, which will help create a more appropriate framework for the establishment and growth of small businesses (para 2\.16)\. The most significant reforms will be achieved by the introduction in January 1989, of a new Association Law and a unified and simplified company profit taxation system\. The new Association Law (i) allows private individuals to form limited liability companies without participation of a legal entity; (ii) permits individuals to form or invest capital in companies (including deposit partnerships and limited liability companies) in which they are not directly engaged; (iii) increases the employment level of private companies (including partnerships and limited liability companies) to 500; and (iv) removes registration authority from local and state authorities and assigns it to the registration courts, which will register firms based on their meeting standard minimum requirements rather than the granting of concessions\. Proprietorships, which are considered individuals, and small zooperatives, which are under the cooperative law, are not covered by the new Association Law\. A separate law to be enacted by mid-1989 will deal with the transformation of state enterprises and cooperatives in other company forms\. The revised taxation system introduced in January 1989, is intended to be neutral as to sector and scale and has eliminated the special taxes on private ventures\. The tax on profits, for all forms of companies (both legal and non-legal) will be a uniform 50X except for ventures with profits of less than Ft3 million, which will pay 40X\. (Proprietorship may choose to be taxed under the Personal Income Tax, or the Company Profit Tax)\. 3\.14 In the area of international trade, the small business sector (particularly proprietorships and partnerships) has faced severe restrictions on access to imports\. This has created a major obstacle to the availability of foreign technology and operating inputs from convertible currency sources\. Small private firms, as non-legal entities, were not permitted to import directly  - 20 - except as private individuals subject to the higher tourist rates of import duties and wiLhin the limited foreign currency allocation of about US$600 for three years per individual\. In the context of the reform of the regulations on foreign trade from January 1989, the import regime is made more neutral by types and sizes of firms\. In this respect, imports related to own production of small firms would be facilitated\. Also, small limited liability companies would be eligible to act as export/import agents for other firms subject to meeting certain skill requirements\. In the medium term, the unification of custom tariff rates is also contemplated\. 3\.15 In the area of domestic trade, the Government is taking significant measures to encourage the entry of new firms and greater competition\. During the first quarter of 1989, a new law of domestic trade will be presented to Parliament for approval\. In wholesaling and distribution under the new Law, private limited liability companies will be eligible for registration as wholesale traders and the list of products which cannot be traded except with special Ministry of Trade permission will be reduced\. In related changes in retail trade, private traders will be permitted to have more than one shop thus opening up the possibility for private enterprises to have small retail chains or groups, and skill-based entry restrictions for private traders will be relaxed through the simplication of licensing requirements and procedures\. 3\.16 As indicated above, there has been considerable progress toward a more competitive framework over the 1986-88 period and the pace and direction of the changes should help to promote the accelerated development of the small business sector\. It is the ir,tention of the Government to monitor carefully the implementation of the new Association law and its impact on the small business sector, including any remaining constraints to the entry and competition of small firms\. In this respect, certain aspects of the new Law and related regulations have been identified which may discriminate against small firms and which need careful monitoring\. These include: (i) skill-based registration requirements in a wide number of small industry areas which in practice can operate as bureaucratic restrictions on entry; (ii) the relatively high minimum capital requirements for limited liability companies of about Ftl million (about US$19,000) of which 50% should be paid in at registration, which may restrict entry of small firms; (iii) the discrimination against one-man limited liability companies compared to other limited liability companies, including regarding the minimum initial paid-up capital (100% versus 50%), and the mandatory appointment of an external auditor irrespective of size; (iv) skill requirements related to the granting and maintenance of foreign trading permits and rights of companies, which are barriers to the access of small firms to convertible currency exports and imports; and (v) the continued distinction in the Law of Association between legal and non-legal entities which may provide an opportunity for continued discrimination against small (non-legal) firms\. Progress in these areas will be monitored in the course of Project supervision and as part of the general policy dialogue between the Bank and the Hungarian Government\. 3\.17 Financial Constraints\. Small businesses have been financed by their owners from their own or informal sources\. Equity financing has come almost exclusively from private resources of owner/operators\. There have been no significant flows of formal sector credit to small businesses\. At the end of 1987, it was estimated that there were less than 300 commercial term credits  - 21 - outstanding to the 165,000 non-retail sector proprietorships, partnerships and small cooperatives\. From early 1988, commercial banks have begun to develop services to the small business sector and these are expected to expand rapidly as the banks move into what has been a largely untapped market\. Technical assistance supported by the Project will strengthen the small business financial services capabilities of the banks (para 5\.33)\. 3\.18 Inadequacy of Supporting Services\. Hungary does not have an adequate supporting network of accountants, lawyers, bankers and other professionals experienced in providing services to small businesses\. Nor does it have firms or institutions that provide financial, technical assistance, training and infrastructure geared to the needs of small businesses\. Within the private business sector and the financial sector, ventures are currently being developed to provide these services\. 3\.19 The further development of the small business sector in Hungary will contribute significantly to the restructuring of the industrial sector and economy as a whole, assisting to make it more flexible and competitive, and, by responding to the demonstrated dynamism and innovative capabilities of the small business sector, will contribute to growth in output and employment\. The Project includes a credit component in support of further growth of this dynamic part of the economy\. IV\. INDUSTRIAL FINANCING A\. Overview of Financial Sector Reform 4\.01 The reform of the financial sector entered the implementation phase from January 1, 1987, in line with agreements reached by the Government with the Bank under the previous industrial restructuring projects\. From that date, credit functions of the National Bank of Hungary (NBH) were separated from its central banking functions and entrusted to three competitive, full-service commercial banks set up for the purpose (Budapest Bank, Commercial and Credit Bank, and Hungarian Credit Bank)\. During the initial six months of operation until July 1, 1987, enterprises were not allowed to change their banks to provide time to the banks to get their operations established\. From then on, enterprises can have their current account in any one bank of their choice\. As a further step to promote competition among the banks, enterprises are permitted to open current accounts with more than one commercial bank of their choice from January 1, 1989\. 4\.02 The major change in the structure of the financial system in 1989 is the integration of banking services for the enterprise and the household sectors\. Until January 1989, individuals were not permitted to have acce'ints in commercial banks, but only in the National Savings Bank, the Post Oft i Savings Bank and the savings cooperatives\. From January 1, 1989, individuals are permitted to open accounts in all commercial banks\. Simultaneously, the National Savings Bank (NSB) is permitted to deal with the enterprise sector\. Interest rates in the enterprise and household sector are being harmonized from January 1989\. Also, as part of the decentralization of foreign exchange  - 22 - operations, from March 1989, the commercial banks would be able to buy foreign exchange from NBH on behalf of their clients\. 4\.03 The establishment of the two-tier banking system has required the setting up of mechanisms for implementation of the monetary program of the Government and the management of the credit policy through indirect instruments instead of direct credit allocation\. The instruments for such monetary program management (reserve requirements, refinancing and rediscounting mechanisms) were created with the two-tier system, although their operation has sometimes been difficult in an economic situation which requires contraction of credit (para 2\.03)\. The second group of measures necessitated by the creation of independent banks, was a system for prudential regulation of banks\. A new organization - The State Bank Supervision Board - was set up for the purpose in the Ministry of Finance, and has carried out the first complete review of the loan portfolios of the three major commercial banks as agreed under the Second Industrial Restructuring Project\. B\. The Banking System and Credit Policies 4\.04 The Hungarian financial system now consists of four basic types of institutions as shown in Table 4\.1\. Table 4\.1 Institutions in the Financial system 1/ Domestic Commercial Banks Specialized Financial Institutions 1\. Budapest Bank (BB) 1\. Construction Industry Bank 2\. Commercial and Credit 2\. Industrial Dev\. Bank (IDB) Bank (CCB) 3\. Innofinance 3\. Hungarian Credit 4\. Investbank Bank (HCB) 5\. Small Ventures Bank (SVB) 4\. Agrobank 5\. Foreign Trade Bank (FTB) 6\. Gen\. Bank for Venture Finance (GBVF) 7\. Gen\. Banking and Trust Company (GBTC) 8\. Interbank Savings Banks Joint Venture Banks 1\. National Savings Bank (NSB) 1\. Central European International Bank (CEIB) 2\. Post Office Savings Bank\./ 2\. Citibank Budapest 3\. Savings Cooperatives (260) 3\. Unicbank 1/ Not including subsidiaries of banks and Hungarian banks abroad\. 2\. Has been licensed as full-service commercial bank\. 4\.05 The largest segment are the commercial banks\. They hold about 53% of the total assets of the financial system (except the central bank) and dealt, until January 1, 1989, only with state enterprises, local councils, large  - 23 - cooperatives and other entities in the socialist sector of the economy\. A few of the banks are setting up capabilities to service the small business sector (para 4\.15)\. The second largest group of institutions consists of the savings banks\. A major new institution - the Post Office Savings Bank - has been formed from July 1, 1988\. This group accounts for about 39% of the assets ef the financial, system\. 4\.06 The most diverse group consists of the five specialized financial institutions which are an evolution of the innovation funds set up in the early 1980s, and later transformed into Innovation Banks\. These are full-fledged financial institutions except that they are not permitted to operate current accounts of their borrowers\. They have pioneered and developed a number of financial services in Hungary, such as leasing, hire purchase, real estate development financing and quasi-equity profit-sharing participation instruments\. They deal mostly with small cooperatives, small state enterprises and private entrepreneurs\. This group accounts for 3% of the assets of the financial system\. Three banks among this group (Agrobank, General Bank for Venture Financing, and Interbank) received licenses to become full-service commercial banks from January 1, 1989\. Finally, the foreign joint venture banks account for about 5% of the total assets of the financial system\. They are involved in trade finance and leasing activities for small enterprises, cooperatives and private sector ventures\. 4\.07 Since the three large commercial banks (BB, CCB, and HCB) hold the major share (about 47%) of the assets of the financial system outside NBH, their financial performance in the initial year (1987) was critically important to the development of a genuine two-tier banking system\. In this respect, the three banks have completed the first year very successfully with high profits, enabling them to bring down their combined debt/equity ratio from 25:1 to 13\.9:1, which results in much more appropriate financial structures for the banks\. Table 4\.2 shows a comparison for the three major commercial banks of selected financial ratios at year-end with projections made at the commencement of the year\. Dividend pay-out ratios have been kept at acceptable levels and the remaining earnings have been fully capitalized\. 4\.08 As agreed with the Bank, a detailed portfolio review was carried out by each bank during which all loans were classified according to criteria acceptable to the Bank\. Following the review, the banks were required to set aside a total of FtlO\.38 billion as provisions for substandard loans\. 4\.09 NBH issues credit policy guidelines approved by the Council of Ministers each year, for the implementation of the Government's monetary program\. Until 1987, these credit policy guidelines were the main instrument of credit control\. Their character has changed over the past few years with the progressive liberalization of the economic management system\. Fewer quantitative restrictions are now laid down\. The only two target numbers now being used are the planned deposit growth rate and the permissible expansion in net long term credit for investment purposes\.  - 24 - Table 4\.2 Selected Financial Ratios for Three Maior Commercial Banksl/ (Ratios as of December 31, 1987) Proiected Actual 0oerations Growth of assets 10\.0% 12\.2% Growth of share capital 12\.1% 63\.2% Profitability Return on total assets 2\.2% 3\.3% keturn on year-end equity 47\.4% 46\.0% Structure Year-end equity/debt 4\.8% 7\.6% Year-end equity/assets 4\.6% 7\.2% Loan provisions/assets 2\.0% 2\.3% 1/ Budapest Bank, Commercial and Crediu Bank, and Hungarian Credit Bank\. 4\.10 During the last quarter of 1986 and the first quarter of 1987, credit policy was fairly unrestrictive to facilitate the introductory period of the banking reform\. From the second half of 1987, more restrictive policies were implemented as required by the economic stabilization program\. In the fourth quarter of 1987, a 3% decline in credit outstanding was achieved by raising the refinance rate by two percentage points for working capital credit, and reducing the refinance limits for working capital credit also\. During 1989-90 the stabilization program will continue to require a restrictive monetary policy and tight restraints on credit expansion\. During 1988, net long term credit for investment purposes was targeted to expand by only Ft 10 billion, which implies a reduction in investment credit in real terms\. 4\.11 The Bank has been providing support for the development of the new two-tier banking system in Hungary through technical assistance and support for financial systems development\. Under the first industrial restructuring project, assistance was provided for office automation and MIS systems for NBH\. The second restructuring project includes support for the design and initial establishment of a banking clearing center, while assistance is provided to the participating financial institutions for the development of their policies and operating procedures, including for appraisal of subloan applications\. The proposed Project would extend assistance to the participating banks for small business credit training (para 5\.33)\. The Bank is also assisting the Government to prepare a separate financial system modernization project, which would support further developments in the Hungarian financial system and capital markets, including assistance to the participating institutions for their institutional development including automation of operations\. That operation would also support the establishment of the International Training Center for Bankers (ITCB) in Hungary, for which the joint venture formation agreements between the Hungarian banks and the Centre Internationale de Formation de la Profession Bancaire of France were signed in October 1988\. The center will start operations in February 1989\.  - 25 - C\. Industrial Investment Financing 4\.12 Industrial investment lending policies of the banks are all contained within the envelope of credit policy guidelines issued annually by NBH, in pursuance of fiscal and monetary policy targets set by the Government each year\. Given the need for the Government to follow contractionary monetary policies in the coming years (para 2\.03), it is unlikely that the banks will have unrestricted access to long term refinancing during the period, and their investment lending policies are likely to be more conservative as a result\. Lending policies followed by the banks differ markedly according to the origin of the institutions\. The three large commercial banks have inherited their project appraisal and credit management methodology from the period when credit functions were carried out by NBH itself, and very little credit was extended outside the socialist sector of the economy\. Consequently they need to strengthen their capacity for risk analysis and loan follow-up\. On the other hand, most of the specialized financial institutions always dealt with new ventures, participated in risks and have as a result, a much more market oriented outlook and flexible operating methods\. D\. ExROrt Credit and Insurance 4\.13 Hungary has had an active export credit and insurance program since the late 1970s\. The official exRort credit system is designed to cover mostly supplier credits to meet post-shipment financing needs\. Financial support can be short-, medium-, or long-term\. Mixed credits are only used sparingly\. Official export credit amounted to about Ft4\.4 billion (US$95 million) in 1987, dowrn from a peak of Ft7\.6 billion (US$166 million) in 1985\. While official credits declined as a percentage of total convertible currency exports, they increased their coverage of exports to developing countries\. Three different Government entities administer export credits: Ministry of Trade, Ministry of Finance, and the National Bank of Hungary (NBH)\. The participation of the commercial banks (mainly Foreign Trade bank and Hungarian Credit Bank) is limited; they act mainly as a conduit for funds and information between the Government and the exporters\. ExRort credit insurance is offered by the Hungaria Insurance Company\. It offers political risk and exchange rate insurance on behalf of the Government, and commercial risk on its own behalf\. Transactions which can be insured include exports of goods and services, consignment stocks held abroad, lines of credit, holding of construction equipment, and overseas investment\. 4\.14 While the overall export credit and insurance system is largely competitive with such systems in other countries, a review by the Bank revealed a number of areas where improvement is required to stimulate Hungarian exports\. Based on the review, the Government is taking steps to address the current shortcomings of the system\. In this respect, it has undertaken to strengthen the system in 1989, including (i) establishment of a general system for pre- shipment financing and a system of buyer's credit; (ii) promotion of access to export financing by small (including private) firms; (iii) broadening of the commercial risk coverage of export credit insurance; and (iv) execution of a review and analysis of the system's performance to assess its competitiveness and effectiveness\. The institutional framework for the system will also be  - 20 - streamlined with the establishment of a new and independent export credit agency\. A feasibility study for establishment of such agency will be undertaken in 1989, which establishment is foreseen by June 1990\. The involvement of commercial banks in the system is also expected to be increased with decentralization of foreign exchange operations of the banks starting in March 1989\. E\. Small Business Financing 4\.15 Small business firms in Hungary have traditionally been required to be self-f!nancing, a practice which has been exacerbated, until recently, by policy and institutional restrictions (para 3\.17)\. Prior to 1988, the banks had no staff, systems or procedures oriented to small businesses\. During the first half of 1988, several financial institutions have undertaken initiatives to develop capabilities in the field of small business lending other than the personal lending which has been carried out by the National Savings Bank\. A number of them have opened small business departments with segregated and specialized branches, staff, accounts and procedures\. The initial efforts, however, have concentrated on raising deposits from the sector rather than providing either working capital or term credits\. As of June 1988, the banks had raised about five forints in deposits for every forint extended in credits to the sector\. 4\.16 The limited portfolios of the commercial banks in the small business sector result from (i) previous restrictions on commercial bank lending to private firms (proprietorships were considered part of the household sector and thus were dealt with by the National Savings Bank); and (ii) the banks' perception of the sector's poor creditworthiness, low liquidity and inadequate collateral\. Available data does not support this perception, however\. At the end of 1987, a group of 933 small cooperatives, for which information was provided by the banks, had Ft34 million in term debt compared with Ftl,884 million in net fixed assets; and Ft860 of short term credit compared with Ft4,395 million in current accounts and short term deposits\. This indicates the existence of a largely untapped credit market for the banks\. 4\.17 The participating banks have relatively weak capacitie3 for financing small businesses, and most do not have written guidelines and procedures for applications and appraisals of small business loans\. Management and staff are inexperienced in small business lending and have little first-hand knowledge of the sector\. To strengthen the policies and procedures of the banks for small business financing the proposed Project includes technical assistance and training (para 5\.33)\. F\. The Financial Intermediaries Involved in the Project 4\.18 The fourteen financial intermediaries involved in the onlending of the Bank loan can be divided into four groups according to function and institutional characteristics\. These are: (i) seven of the domestic commercial banks (BB, CCB, HCB, Agrobank, GBVF, GBTC and Interbank); (ii) one joint venture bank (Unicbank); (iii) the Post Office Savings Bank which has been licensed as full-service commercial bank; and (iv) five specialized financial institutions (Construction Industry Bank, IDB, Innofinance, Investbank and SVB)\. The  - 27 - institutional, operational, and financial aspects of the participating banks have been examined by the Bank\. On the basis of this review, the banks are considered to be satisfactory intermediaries for onlending the proceeds of the Bank loan\. Summary balance sheets, income statements and significant financial indicators of the participating banks are presented in Annex 4-1\. The overall performance of the participating banks will be monitored closely to determine their continued capability to act as viable intermediaries\. NBH has agreed that it will monitor continued compliance of the participating banks with the agreed criteria for their participation in onlending of the Bank loan, including maintenance of satisfactory policies, procedures, staffing and financial situation\. 4\.19 The capacities of the various banks to appraise subprojects and sponsoring enterprises satisfactorily differ\. In this respect, as noted above the major commercial banks traditionally dealt with the larger state enterprises and built up banking capacities accordingly, while the specialized financial institutions have been involved with smaller ventures (para 4\.12)\. Also, banking supervision and prudential requirements in Hungary for banks with commercial banking license are more stringent than for the specialized financial institutions (para 4\.03), including monthly monitoring of portfolio quality, level of provisions and liquidity\. Therefore, it was agreed that the nine participating banks which have been registered as full-service commercial banks - namely the Hungarian Credit Bank, Commercial Credit Bank, Budapest Bank, General Banking and Trust Comptay, Unicbank, General Bank for Venture Financing, Interbank, Agrobank, and Post Office Savings Bank - would be eligible to participate in onlending of World Bank funds to all beneficiaries which satisfy the relevant eligibility criteria\. The five other participating banks which are registered as specialized financial institutions - namely Industrial Development Bank, Innofinance, Investbank, Small Venture Bank, and Construction Industry Bank - would be eligible to participate in onlending to beneficiaries with a value of total assets of not more than US$20 million equivalent in each case prior to the subproject proposed for financing, and involving subloans with a value of not more than US$2 million equivalent in each case\. 4\.20 In line with agreements reached under the second restructuring project, the participating banks would set their interest rates on the basis of the following principles which are contained in the policy statement of each of the banks: (i) the rates would include an adequate spread to cover the bank's operating costs including adequate provisions for doubtful debts; (ii) the rates would be positive in real terms; and (iii) the rates would not subsidize any category of borrowers\. This is in line with the arrangements under the recent banking reform, which allow the banks to set their own deposit and lending rates\. In this respect, the lending rate structure in Hungary has been satisfactory in the past\. Also, NBH's rediscount rate, currently 14%, which would determine the final lending rate, is positive in relation to anticipated domestic inflation in Hungary\. (In 1488, lending rates temporarily have been negative in real terms due to the relatively high domestic inflation of about 16% as a result of the introduction of the VAT in January 1988 which led to price adjustments throughout the economy)\. Annex 4-2 provides an overview of recent interest rates in Hungary\. At negotiations, it was agreed that the participating banks maintain interest rates in accordance with the above principles\. The Bank would periodically review these interest rates to ensure that they continue to adhere to the above principles, and to safeguard the profitability of the banks\.  - 28 - V\. THE PROJECT A\. Project Obiectives and Scoge 5\.01 To support the restructuring of the industrial sector in order to enhance its international competitiveness, the Project aims to help: (i) redirect the product/market mix of the sector to more competitive areas suitable for convertible currency exports; (ii) improve enterprise management practices and capabilities; (iii) stimulate the establislment and growth of small business firms including the private sector; (iv) alleviate the employment impact of industrial restructuring; and (v) strengthen the institutional capabilities in support of industrial restructuring with emphasis on the banking system\. The proposed Project would complement the recent Industrial Sector Adjustment Loan (ISAL), provide continuity and build on the first and second industrial restructuring projects (para 2\.41), and provide assistance in the development of two new areas closely related with the restructuring program, namely the support for development of small firms and for addressing the adverse employment impact of restructuring\. 5\.02 The Project, supported by a US$140 million Bank loan, includes three credit components to be onlent through several eligible participating banks to support enterprise investments for: (a) increased direct and indirect exports to convertible currency markets related to the implementation of enterprise restructuring programs (The export-oriented enterprise restructuring component: US$110 million of the Bank loan); (b) growth of entrepreneurs and small businesses (The small business development component: US$10 million of the Bank loan); and (c) efficient employment creation in regions which are affected by emerging unemployment as a result of industrial restructuring (The regional employment creation component: US$15 million of the Bank loan)\. The PrQject also includes technical assistance to strengthen the operations of the participating banks in the area of small business credit, to prepare enterprise and subsector restructuring programs, to improve the analytical framework for the small business sector, and to help improve the Government measures for addressing unemployment, including limited investment support for the further development of employment and retraining services (The technical assistance component; US$5 million of the Bank loan)\. Table 5\.1 provides an overview of the Project objectives and its components\. B\. Rationale for Bank Involvement 5\.03 The Project contains two main novel features in the Bank's assistance program for Hungary, namely the assistance for small business and entrepreneurial development, and for development of measures to address emerging unemployment\. These are both expected to contribute significantly to the establishment of necessary conditions to accelerate restructuring in the country\. In this respect, the Bank has played an important role in the analysis of development  - 29 - issues and options in these two areas, which are reflected in the design of the Project\. A major contribution of the Bank has been the review of issues related to the small business sector, and the design of an appropriate small business credit component to be included in the Project\. The close involvement of local banks in the design of this component would ensure, for the first time in post- war Hungary, the establishment of specialized credit facilities to the small business sector, including the private sector\. Furthermore, the Bank's review of the Government sponsored schemes for addressing emerging unemployment problems has contributed to adjustments in the schemes, while the Project provides for support for the further development of the policy and institutional framework in this area\. Continued Bank involvement in support of the Hungarian industrial resLrucLuriuig effort would further help improve the necessary institutional framework to facilitate restructuring at the enterprise level, particularly through the strengthening of the bankirg system, and help improve the understanding of the actual implementation of the industrial policy reforms at the enterprise level and facilitate feedback for identification of necessary adjustments to the reform process\. Table 5-1 Overview of Prolect Objectives and Components Projct Objctives Main Project Supporting Components i/ Components a/ Strengtheningof e xport _________ ~~~~~~~~~~~~~~~~~~~~credlit end\. lsurance system (new expofl crodit agency) ROFii[d Wodurmrwket mix to copeitve arm \. - o ~~~~~~E)W -a;eted ente- r _=" iiastnxWngof restngoour Improve entptes (enterpss) Inrov *o / \w Engineering Subsecor sludy (Ministry of Indutry) Smaii business credt trainng (parikelcPalng banks) Stimulate growth email, Wkm ca businesses/ati Smal& businesas (Contrai Statistics Otfice) Invosenon support for sr nofr ngirvastmanet rgao job crsdon appraw kil (job cr-ft firms)- (State Development nln- AnaWate ernpbitatennty m,nni S) if~~~~~~~~~(ae S& Ofs~ _ ce Assutanch ooso In dIep and retrainn f| (Nlon@n P|f fie *Now Ofmpl'oyItwd sah eS lkl -RoWning iods *m iualayoit "icos Wages & Labor Oiflco, county aoundls) a/ Roei _ gerdas no bracdts\. I Barik s onint through participating bnis\.  - 30 - C\. Project Description 1\. Export-oriented Enterprise Restructuring 5\.04 Objectives\. To promote investments in highly competitive areas as a strong incentive for enterprise restructuring, and to help improve the country's balance of payments in the medium term, the component would be oriented toward supporting development of exports to convertible currency areas\. The investments to be supportbd would meet the following criteria: (i) they must directly or indirectly be export-oriented; (ii) the sponsoring enterprise should be managerially, commercially and financially healthy; (iii) they must be part of a well defined overall enterprise business plan/restructuring program; and (iv) they must be sound from commercial, technical, financial, economic, and environmental points of view\. These eligibility criteria are elaborated below\. 5\.05 ExWort Orientation\. Proposed eligibility criteria are based on the criteria, with slight modifications, of the Hungarian Export Promotion Program (para 2\.10) which are also reflected in the credit policy guidelines of NBH, and which are judged as appropriate\. It is proposed that the Project support enterprise investments that: (i) generate incremental exports to convertible currency markets that exceed 60% of subproject sales revenue, and allow a payback of the convertible currency costs of the investment by its net convertible currency earnings within five years from the start of the subproject investment; or (ii) allow increase of exports to convertible currency areas by enterprises that have been exporting, and are expected to continue exporting, to convertible currency areas, at least 30% of their total sales revenue, or maintenance by such enterprises of exports which would have decreased without the subproject\. To support the feasibility of the export orientation of Litw inve5LiWuLL, eacia subJIU-LL application is required to include, as part of the enterprise restructuring program and the subproject feasibility study, the detailed export marketing plans for the subproject output, including related organizational arrangements within the enterprise for export marketing\. As is currently the case under the Export Promotion Program, enterprises will be monitored for continued compliance with the above export criteria\. 5\.06 The Project would also support investments for supply of parts and components to enterprises that would incorporate these in products for export\. In line with criteria under the feeder industry component of the second industrial, restructuring project, the Project would support investments for which at least 70% of sales revenues would represent direct or indirect exports\. To preserve the objective of promoting feeder industry activities in Hungary, including domestic linkages, at least 40% of subproject output should represent sales of intermediate products to be incorporated by Hungarian manufacturing enterprises in export products\. Similarly as for direct exporters, convertible currency costs of the subprojects would need to be paid back from direct and indirect convertible currency export revenues within five years from tiLe start of the subproject investment\. 5\.07 Enterprise Eligibility\. The proposed Project would support enterprise investments in manufacturing industry, excluding certain heavy industry (mining and ferrous metallurgy) and agro-processing industry\. The latter is supported by a separate Bank-financed project with export orientation  - 31 - which was approved on May 5, 1988\. Aside from a review of the enterprise restructuring program (see below) which involves a judgement of the competence and effectiveness of the enterprise management, the creditworthiness of the enterprise and financing plan proposed for the subproject will be assessed on the basis of an analysis of the past and projected financial situation of the enterprise, including its ability to meet the following financial criteria: a current ratio above 1\.3; a debt/equity ratio below 65:35; and a debt service coverage above 1\.5\. 5\.08 Enterprise Restructuring Program\. To support the restructuring objectives of the Project, and in continuation of similar arrangements under the first two restructuring projects, each enterprise will be required to prepare a business plan or restructuring program for its overall operations\. Such plans aim at providing the strat-gic framework for the future operations of the enterprise, including the pt\.posed investment\. They should include an overview of the enterprise product/market strategy including product-mix and technology upgrading, and elimination of uneconomic activities; cost reduction measures including rationalization of production facilities; improvement of organizational and management systems capabilities; and the fit of the proposed investment with the overall strategy\. The plans would also include the definition of software- type measures regarding the enterprise organization and management systems to facilitate the implementation of the enterprise strategy, including measures to improve the (export) marketing organization\. 5\.09 The previous two industrial restructuring projects have provided various models for the preparation of such enterprise restructuring programs, which had been defined with the help of foreign consultants\. In preparation of the Project, restructuring strategies were developed with the assistance of foreign consultants and the Bank, for the Hungarian road vehicle manufacturing subsector and its main enterprises, as well as for a major light source manufacturer which is the leading Hungarian manufacturing exporter to convertible currency markets, and these provide further restructuring examples\. Details of these restructuring cases are contained in the Project File\. To facilitate the preparation of business plans, a standardized approach to the preparation of such plans has been developed\. The Project also includes a credit facility to finance foreign technical assistance in this area (para 5\.35)\. 5\.10 Subproject Viability\. Subprojects will be judged based on the following main viability criteria: (i) a viable (export) market analysis and marketing plan, including analysis of the proposed product and service support against main foreign and domestic competitors, and of potential market share in foreign and domestic markets; (ii) suitability of proposed technology; (iii) minimum financial and economic rates of return higher than 18X in real terms; and (iv) suitable safeguards against environmental impact\. In this last respect, each subproject will be assessed on its compliance with satisfactory environmental standards (para 7\.05)\. 5\.11 Eligible Expenditures\. The proposed Bank loan would support the foreign exchange requirements of eligible enterprise investments, including plant and equipment, technical assistance, training, spares and tools, as well as related permanent working capital neetds\. Further, the Bank loan would finance  - 32 - software-type investments in support of enterprise restructuring programs (eg\., training, and design and related hardware of management information systems)\. 5\.12 Subloan Size\. In order to spread the proceeds of the Bank loan among eligible enterprises, it is proposed that a single enterprise which meets the criteria of direct exporter will not be eligible under this component to receive subloans refinanced from the Bank loan exceeding US$10 million equivalent\. The maximum subloan amount per enterprise for investments by indirect exporters would be US$4 million to stimulate medium-sized feeder activities\. It is expected that the Project may support a few larger subloans for investments for direct exports by enterprises with a well-established export record\. In this respect, it is estimated that the above enterprise limits may be exceeded, on an exceptional basis, for attractive export investments, up to an aggregate amount of US$40 million, which represents 37% of the Bank loan allocation for this Project component\. 5\.13 Credit Demand\. To assess the potential credit demand under the component, a review was carried out both of past enterprise investment credit demand, and of the pipeline of subprojects for which subloan applications are pending or expected by the participating banks\. Table 5\.2 gives an overview of historic investment credit demand for export purposes by industrial enterprises in subsectors eligible under the Project\. which qualified for assistance under the Export Promotion Program (para 2\.1C)\. As shown, eligible subsectors, accounted for US$142\.3 million equivalent of investment credits for export purposes in 1987\. The chemicals subsector has absorbed a major part of export- oriented investment credits, while the light industry subsector increased its share from a low base, and the engineering subsector had a decreasing share\. NBH estimated that about 50% of the credit represent the convertible currency foreign exchange portion of enterprise investments which were financed\. 5\.14 The pipeline of potential export-oriented subprojects has been reviewed with the participating banks\. Demand for new investment credit, including for exports, was at a low level in the first half of 1988\. Main reasons appeared to be the wait-and-see attitude by most enterprises following the major changes in the tax framework in early 1988, and the restrictive macro- economic demand policies including the temporary taxes on investment\. By mid- 1988, credit demand appeared to be increasing\. Annex 5-1 gives details on the export-oriented subprojects that have been identified for potential support under Project\. As shown, the list of projects represent an estimated investment requirement of about Ft8\.2 billion (US$158 million), of which about US$86\.3 million in foreign exchange\. These projects are all expected to be initiated within the coming two years\. Credit demand may have increased further by the end of 1988 in anticipation of the reduction in taxes on investment in 1989, and of the new association framework which was introduced from January, 1989\. Also, historic levels of export investment credit demand (see para above) indicate that there is considerable scope for credit in the areas targeted by the Project\. Based on the current envisaged demand for the Bank loan, and also taking into account the good commitment performance of the first Bank-supported industrial export project (para 2\.40), a Bank loan allocation of US$110 million is proposed for this component\.  - 33 - Table 5\.2 Industrial Credit Demand for Export Investment Purposes a/ (Annual Disbursements) Subsector 1982 1983 1984 1985 1986 1987 1988 (Proj\.)h/ -(Ft\. million) --------------------- Engineering 1,271 614 253 113 70 591 985 Construction Mat\. 4 - 3 2 - 70 39 Chemicals 3,244 3,396 1,672 993 1,527 4,750 4,548 Light Industry 912 320 316 1,424 1,498 1,275 253 Total 5,431 4,330 2,244 2,532 3,195 6,686 5,825 -------------- (US$ million equivalent) ----------- Total 148\.4 101\.4 46\.7 50\.5 69\.8 142\.3 123\.4 As X Total Exp\.Cred\. 68\.3 66\.8 54\.8 58\.9 60\.7 n\.a\. n\.a\. As X Total Inv\.Cred\. 30\.2 25\.4 15\.2 16\.0 20\.0 n\.a\. n\.a\. a/ Excluding for mining, metallurgy, and food industry\. k/ Based on approvals by December, 1987\. source: NBH\. 2\. Small Business Development 5\.15 Objectives\. The proposed Project would include a refinancing facility, for which US$10 million of the Bank loan has been allocated, for the growth of small business firms in industry and related support services\. This component would support the Government's economic strategy of investment in activities which increase the efficiency and competitiveness of Hungarian industry\. It would provide the additio3nal benefit of generating jobs during a period in which the restructuring of the larger industrial establishments is expected to increase the numbers of those available and looking for work\. 5\.16 Eligible firms\. The small business sector in Hungary which the Project is proposed to address is composed of small, independent firms engaged in industry and related support services\. Under the new association framework proposed for introduction from January, 1989, the eligible firms would be: (" proprietorships, (ii) unlimited partnerships, (iii) deposit companies (a form of limited partnership), (iv) small cooperatives, and (iv) limited liability companies\. Specialized contract groups, which are forms of intra-enterprise work organizations (such as VGMKs), would not be eligible for Project support, as they can not be considered independent business ventures, Similarly, subsidiaries of large enterprises would not be considered for support\.  - 34 - 5\.17 Eligible firms would have a maximum employment level of 60 persons prior to Project financing\. The average employment level in small cooperatives at the end of 1987 was about 50\. 5\.18 The Project would support established firms and entrepreneurs with a proven business track record\. To assess a firm's eligibility, the participating banks will appraise the firm's past performance, its business plan, its creditworthiness and its ability to service its proposed credit\. Such assessment would be based on simplified and flexible subloan application and appraisal techniques, for which an outline has been agreed with the participating banks and for which training will be provided under the Project (para 5\.33)\. Specific criteria for assessment of the financial health of the small firms would be established by each of the banks in the context of their preparation of small business credit manuals\. The preparation of such satisfactory manuals by each of the banks is a condition of disbursement of Bank loan proceeds for small business credit purposes to each of the participating banks\. 5\.19 Eligible sub2rojects\. The proposed refinancing facility would support investments in profitable activities for the growth and modernization of small firms\. Eligible activities would be in manufacturing or related business services, such as advisory services in taxation, accounting, management, technical or marketing consulting, training services, computer services, or establishment on a commercial basis of premises for manufacturing small business firms\. The participating bank would assess, in simplified fashion, the market prospects, and technical and financial viability of proposed investments\. Specific viability indicators would be established by each bank in the context of the small business credit manual\. 5\.20 Eligible expenditures\. The eligible expenditures would be fixed assets in the form of machinery and equipment, and associated training costs and permanent working capital\. To provide the flexibility for the participating banks necessary for development of their small business portfolios, and to address the current need for short-term working capital financing of the small business sector, the Project would allow the use of up to 30X of the funds provided through the facility to each of the participating banks, for short-term credits to finance working capital needs in support of the operations of eligible small firms\. The Government has confirmed access by small business firms supported by the Project to imports of technology and operating inputs, and their payment of commercial import duty rates, rather than the higher tourist rates (para 3\.14)\. 5\.21 Subloan limits\. Maximum subloan limits per subproject have been agreed which are consistent with the estimated requirements and capabilities of the business units of the widest segment of the sector\. It has been agreed that the small business facility would refinance subloans made by the participating bank for up to 50X of the cost of the investment\. This will encourage a relatively high level of own funds contribution, which is in line with the established internal financing practice of the Hungarian small business sector\. The subloan limit has been set at US$150,000\. 5\.22 The subloans would be for terms of up to three years\. This period takes into account the very limited experience in Hungary in term lending to the  - 35 - small business sector, and the objective of encouraging investments in subprojects with high returns and quick payback periods\. Subloan maturities and grace periods, within the three year maximum, would be set by the participating financial institutions taking into account the repayment capability of the sub- borrowers\. 5\.23 Credit demand\. The potential market for the subloans is extensive and has been largely unserved\. It currently comprises, within the industrial and related services sector: 32,000 full-time proprietorships, 3,400 partnerships and 900 small cooperatives\. These units have very low levels of debt and an insignificant number of commercial term credits\. Credit demand is expected to be generated through the dissemination of information and other assistance activities of the various small business organizations, KIOSZ, OKISZ, and VOSZ (para 3\.09)\. 5\.24 The design of the facility should make it attractive for the participating banks to become more actively involved in this area and to develop portfolios for small business financing Jfor details on onlending arrangements, see para 6\.05)\. In addition, technical assistance (para 5\.33) will support the development of specialized banking capabilities to serve the small business sector\. Concerns by the banks about potentially high risk levels and transaction costs would be alleviated by: simplified application and appraisal procedures; the relatively large contribution to the subproject investment from a business's own resources; and the self-limiting of the maximum exposure of the participating banks to a single business\. 5\.25 It is estimated that the average subloan under this component would be about US$50,000 equivalent, and that the average value of the covered investment would be US$125,000\. On that basis the proposed US$10 million small business facility would finance an estimated 200 subloans with up to 3 years maturity during the initial round, and a total of about 1,200 subloans during the proposed maturity periods of up to 15 years of the small business portfolio credit lines refinanced by NBH from the Bank loan\. The actual numbers would be determined in part by the distribution by value and term of the subloans and by the decisions of the participating banks as to whether to recycle the repayments into subsequent subloans\. The estimate does not take into account the refinancing with reflows of shorter maturity working capital subloans up to a total value of 30Z of a participating bank's portfolio under the Project (para 5\.20)\. 3\. Regional Employment Creation 5\.26 Obiectives\. The proposed Project would include a refinancing facility, for which US$15 million of the Bank loan has been allocated, to support, on a pilot basis, the Government sponsored program for development of job creating activities in areas suffering the effects of industrial restructuring (para 2\.20)\. Following a review by the Bank, the Government has undertaken to make important changes to the program to make it more effective (para 2\.31)\. The overall objective of the component would be to support the development of enterprise activities which in the long term should form new and self-sustaining economic bases for development in the affected areas\. It is expected that the availability of a new source of credit with access to foreign  - 36 - exchange in the areas will lead to the establishment of projects which are of a higher quality and technological content than projects previously assisted under the Government scheme\. The focus of Project support on areas affected by industrial restructuring would be narrower than the proposed coverage of the Government job creation scheme, which also includes support to areas which generally have limited economic development opportunities (so-called backward areas)\. 5\.27 Eligibility\. Project support would be in the form of a credit facility for onlending by the participating banks to enterprises that qualify for assistance from the Government-supported job creation scheme in areas affected by industrial restructuring\. Initially, three counties which will be affected by the restructuring of coal mining and steel industry have been selected for support by the Project\. These are Borsod, Komarom and Nograd counties in the North of Hungary\. Further areas may be selected based on an agreed set of economic criteria (para 2\.31 (i))\. 5\.28 The proposed investment eligibility criteria for support under the Government program are given in Annex 2-8\. In short, eligible enterprises would include all business entities engaged in manufacturing (excluding ferrous metallurgy), agro-processing, and business services\. Eligible projects would include start-up of new firms, expansioti of existing firms, relocation of/and new investment by enterprises based elsewhere in Hungary (except relocations from other assisted areas), and investment by foreign enterprises\. Projects should create new jobs and would be subject to a limit of Ft500,000 of Government assistance for each job created\. The amount of Government support offered to a project would be the minimum to ensure that it proceeds, subject to a maximum of 30% of total cost\. Investments for which assistance is given should be completed within a three year period, and full job creation should have taken place in four years\. In assessing projec:s for Government support, full regard would be given to financial and economic iability, including a minimum financial and economic rate of return of 12% in real terms\. 5\.29 Enterprises seeking credit under the Project component would be also appraised by the participatir\.g banks against commercial, technical and financi4l criteria similar to those proposed for projects to be financed under the other enterprise credit components of the Project\. Therefore, in the case of a small business (employment below 60 persons, para 5\.16), appraisal criteria and methods developed for the small business component would apply\. Similarly, projects for other enterprises would be evaluated along commercial, technical and financial criteria and methods similar for those developed for export-oriented investments (except for the required export orientation)\. To spread the proceeds of the Bank loan, the maximum subloan size would be US$2 million\. 5\.30 To stimulate the establishment and growth of small, including private, business firms in the affected areas, the sphere of eligible activities of small firms for support under the Government scheme would be broadened to include, besides manufacturing and related services, activities in tourism, construction and trade\. Further, Project support would be extended to small firms with such broader sphere of activities, which are not receiving Government  - 37 - support under the job creation program, provided they are located in one of the areas eligible for support under the Government-supported job creation scheme\. 5\.31 Credit Demand\. On the basis of a review of the projects which have been supported under the existing support schemes (Annex 2-7) and discussions with Government officials about future demand for funds it is estimated that the total investment approvals for job creating projects to be supported by the Government scheme in areas affected by industrial restructuring would be of the order of US$100 million equivalent over the coming two years, of which an estimated US$25 million (25X) would be in foreign exchange\. The proposed credit component therefore would cover 60X of estimated foreign exchange needs in the next two years\. This would involve some 30 subloans (based on an average subloan size of US$500,000) and an estimated total investment of about US$60 million, and would assist in the creation of up to 3,000 new jobs\. 4\. Technical Assistance 5\.32 The technical assistance component would include the following elements: (i) assistance to the participating banks for strengthening their operations in small business credit; (ii) carrying out of enterprise and subsector restructuring studies by eligible enterprises and the Ministry of Industry; (iii) a study to strengthen the understar\.ding of the structure and performance of the small business sector and the impact of Government policies on the sector; and (iv) assistance to help improve Government measures for addressing the employment impact of industrial restructuring\. Each of shese elements is summarized below\. ,mal1 Business Credit Training 5\.33 The Project would include a technical assistance component for the development of financial sector capabilities in the field of small business development\. This support would follow on technical assistance provided in the previous two industrial restructuring projects to the participating banks to develop policies and procedures to perform as full-service commercial banks in the enterprise sector and to strengthen their appraisal and supervision capacity of enterprise investments\. The component would include training in small business lending and portfolio development to be provided by the International Training Center for Bankers (ITCB) which is to start operations in February 1989 (para 4\.11), with the assistance of specialized consultants\. 5\.34 It is envisaged that a series of three structured training courses would be conducted for a total of 60 participants selected from among the loan officers working in the small business departments or subsidiaries of the participating banks, and from financial sector managers responsible for management of small business sector portfolios\. Several participants are expected to be selected from KIOSZ, OKISZ, and VOSZ staff who will promote the Project's small business credit facility and assist firms in the preparation of subloan application documents\. The training program would involve total foreign exchange costs of about US$150,000\. Terms of reference for the training program are given in Annex 5-2\.  - 38 - (b) Restructuring Studies 5\.35 Many enterprises in Hungary do not possess sufficient in-house expertise to prepare satisfactory enterprise business plans and restructuring programs\. As elaborated above (para 5\.08), such plans provide tne enterprise strategic framework for their future operations and their improvement to meet international competitive standards\. In continuation of similar support under the previous industrial restructuring projects, the Project would support the hiring of qualified foreign consultants by the enterprises to provide assistance in the preparation of such plans and programs\. Foreign costs of US$0\.7 million of such studies would be supported by the Bank loan\. 5\.36 Further, the Project would support the carrying out by the Ministry of Industry (MOI) of studies to assess the performance, potential, and strategy for broad industrial subsectors, for which US$0\.8 million of the Bank loan is expected to be used\. Earlier subsector studies sponsored by MOI and supported under the previous industrial restructuring projects focussed more narrowly on specific subsectors (including plastics processing, rubber processing, agricultural and food processing machinery, vacuum technology, and road vehicle production), and involved detailed analysis of selected enterprises\. These studies provided useful models for subsector and enterprise restructuring\. In line with the decentralization of enterprise management away from supervision by the Government, MOI would now take a more strategic view of the future development of the industrial sector and would focus on broader policy instruments and infrastructure measures to stimulate priority activities\. In line with this new orientation, the Project includes support for a broader strategy study to be carried by MOI in the engineering sector, to assess perLuomaiiLe, curupt\.iLivt!Ue,S, fULULe pLuspecLs a1LU dovelupumit prioritits, ,LdI identify appropriate policy instruments and infrastructure measures for stimulating the development of priority areas\. Terms of reference for the study are given in Annex 5-3\. It is further envisaged that HOI would undertake a study related to the further development of its restructuring program for the coal mining industry, which would be financed from the Bank loan\. (c) Small Business Sector Study 5\.37 The Project would support the carrying out a study of small firms in all economic sectors, to strengthen the understanding of the structure and performance of the small business sector and the impact of Government policies on the sector\. The study would be scheduled for the second half of 1989 so as to cover the initial impact of the new Association Law and unified business taxation system\. The study would be undertaken by a team of the Central Statistics Office (CSO) with the assistance of foreign consultants, who would help CSO to define the methodology and procedures for carrying out the study\. Terms of reference for the study are given in Annex 5-4\. The Bank loan includes US$0\.15 million in support of the foreign costs of the study\. The study would provide the basis for further analytical work by the CSO on the small business sector, including for monitoring the changes in the sector's structure and performance\.  - 39 - (d) Employment Creation and Services 5\.38 Investment Promotion for Job Creation\. The Project would include two technical assistance elements associated with the strengthening of the job creation program operated by the Government (para 2\.26)\. The first of these would be concerned with the development of appraisal skills within affected counties and the central agency responsible for the appraisal of projects seeking assistance under the program\. This would involve the employment of ioreign experts who would train county and central agency specialists in the appraisal of enterprise applications for support\. The second element relates to the regional planning activities on which the Government already has commenced work\. The Project supports the use of foreign experts to assist the Government in the development of an economic strategy for one of the areas most affected by industrial restructuring, Borsod county\. The strategy would focus on developing county initiatives for stimulating efficient creation of new jobs\. The two technical assistance components would involve estimated foreign costs of US$0\.3 million supported by the Bank loan\. Terms of reference for the two technical assistance elements are shown in Annexes 5-5 and 5-6\. 5\.39 Employment Services and Retraining\. This technical assistance component is proposed to support the Government to develop an integrated set of employment and retraining services to assist adults who are experiencing temporary or long-term difficulties in obtaining employment\. These difficulties may be as a result of industrial restructuring, or overall lack of development in a certain area (i\.e\. a backward region)\. The Project would support the identification and testing in two counties of selected employment service and retraining models through: (i) provision of short term fellowships for selected state and local represuitLaLlJv bU LVLLy c\.CLL VJ\. fftr- oe employment services; (ii) provision of short term technical assistance to assist in the adaptation and testing of selected new employment services; and (iii) the provision of limited investment support for the purchase of materials and equipment to support the field testing program\. Details of the proposed support to be provided in this area are given in Annex 5-7, and is summarized below\. 5\.40 Project support would be managed by the Wages and Labor Office and would fall into four general areas\. First, the assistance will help define methodologies to increase the effectiveness of the operations of the social benefit programs of the Employment Fund (para 2\.33)\. Second, support would be provided to identify and field test selected new employment services which would help unemployed workers find employment and terminate their need for support from the Employment Fund\. Third, the Project will provide assistance to develop special expertise within Hungary to deal with major enterprise layoffs\. Fourth, the Project will support development of a pilot adult retraining center in an area affected by industrial restructuring (eg\., Borsod County) for those unemployed individuals requiring special assistance and retraining\. The overall program would involve an estimated foreign exchange requirement of US$2\.9 million supported by the Bank loan, including limited support for the purchase of related materials and equipment\. In the case of retraining assistance, the Project would support the equipping of a pilot retraining center\. Detailed terms of reference for the above technical assistance areas have been developed and are available in the Project File\.  - 40 - D\. Project Cost and Financing 5\.41 The total financing required for the Project is estimated at US$342\.8 million, of which US$140 million (41Z) is in foreign exchange, as shown in Table 5\.3\. Table 5\.3 Proiect Cost Estimate X of Local Foreign Total Local Foreign Total Total ---(Ft million)---- --(US$ million)W/--- Enterprise Investment Export-oriented 7,020 5,720 12,740 135\.00 110\.00 245\.00 71\.5 Small Business k_ 780 520 1,300 15\.00 10\.00 25\.00 7\.3 Employment Creation 2\.340 780 3\.120 45\.00 15\.00 60\.00 17\.5 Subtotal 10\.140 7\.020 17 160 195\.00 135\.00 330\.00 96\.3 Technical Assistance Small Business Credit Training 4 8 12 0\.07 0\.15 0\.22 0\.1 Restructuring Studies: - Subsector 10 42 52 0\.20 0\.80 1\.00 0\.3 - Enterprise 10 37 47 0\.20 0\.70 0\.90 0\.2 Small Business Sector Study 3 8 11 0\.06 0\.15 0\.21 0\.1 Employment: - Regional Plan --A Appraisal Skills 4 16 20 0\.08 0\.30 0\.38 0\.1 - Employment Services c/ 8 26 34 0\.15 0\.53 0\.68 0\.2 - Retraining Center d/ 364 125 489 7\.00 2\.37 9\.37 2,, Subtotal 403 262 665 7\.76 5\.00 12\.76 3\.7 Total 10,543 7,282 17,825 202\.76 140\.00 342\.76 100\.0 _- = \.--- -- --== % of Total 59\.1 40\.9 100\.0 a/ Converted at US$1\.0 - Ft52\.0\. h/ Only for the first round of financing\. \./ Including costs for technical assistance and related equipment\. \./ Including costs of technical assistance for retraining, and construction and equipping of a pilot retraining center\. 5\.42 The cost estimate for the three enterprise investment components is based on the expected costs of subprojects for which financing by the Bank loan would be involved\. In the case of the export-oriented component, the estimate is based on the costs of subprojects reviewed in the context of the subproject -pipeline (para 5\.14), and includes costs of fixed capital investments (including contingencies), initial permanent working capital costs, interest during  - 41 - construction, as well as import duties on imported equipment and value-added tax on investment\. In the case of the small business component, the cost estimate is based on an assessment of the cost of small business investment which would be facilitated by the component, including fixed capital investment, permanent working capital, interest during construction and related duties and taxes\. In this context, it is estimated that the foreign exchange part which would be eligible for financing from the Bank loan represents, on average, 40% of small business investment\. For the employment creation component, the US$15 million credit facility is expected to generate total enterprise investments of about US$60 million (para 5\.31)\. 5\.43 For the technical assistance component, the costs refer to the foreign and local currency costs of consultancy services and training requirements for different purposes\. Tne Bank loan would finance an estimated US$3\.00 million for foreign services, including an estimated US$2\.40 million (about 135 man-months) for consulting services and US$0\.60 million for training (including study tours), in support of the participating banks (US$0\.15 million); restructuring studies to be undertaken by the Ministry of Industry (US$0\.80 million) and eligible enterprises (US$0\.70 million); the small business sector study (US$0\.15 million); and improvement of Government measures to address unemployment (US$1\.20 million)\. In the latter case, the costs for supply of materials and equipment related to the field testing program of new employment services, as well as the estimated costs of the estabi\.shment of an experimental adult retraining center also are included in the cost estimate shown in Table 5\.3\. 5\.44 A summary of the financing plan for the Project to meet the above financing requirements is shown in Table 5\.4\. 5\.45 Since the major part of the Project consists of credit facilities for financing of enterprise investments which will be appraised in the context of future enterprise subloan applications, the financing plan for the Project can only be indicative at this stage\. It is based on a review of the potential pipeline of subprojects, and of the pattern of financing of enterprise investments in previous Bank-financed projects\. For the enterprise investment components, it is expected that the Bank loan would finance the foreign exchange requirements\. The local currency requirements for these components would be covered from own resources of the enterprises, and to a lesser extent from additional subloans from the participating banks\. In the case of the small business component, the Bank loan is expected to finance on average 40% of the investment costs of eligible subprojects\. For the employment creation component, besides the Bank loan contribution of US$15 million, the Government is estimated to contribute on average 15% from its job creation promotion program (para 2\.26); the balance would be financed from project entities' own resources, and local credits\. 5\.46 For the technical assistance component, the Bank loan is expected to cover the full foreign exchange needs, while lceal currency costs would be met by: the Project entities involved, including th\. participating banks in the case of their technical assistance programs; the ertterprises in case of enterprise restructuring strategy studies, the small business sector study, and technical assistance for strengthening of Government measures to address  - 42 - unemployment\. For the overall Project, the Bank loan would contribute US$140 million, or 41Z of the estimated financing required\. During negotiations, assurances were obtained from the Government and NBH that they, as well as the participating banks and the beneficiary enterprises through respective subsidiary/subloan agreements, will promptly provide their share of financing to carry out and complete the Project\. Assurances were also obtained from NBH that it will make available foreign exchange to enterprises and small business firms required for financing the foreign exchange requirements of their subprojects\. Table 5\.4 Project Financing Plan (US$ million equivalent) Local Foreign Total Local Govt\. Project Sub- Contri- IBRD Entities loans bution Subloansa/ Enterprise Investment Export-oriented 73\.50 61\.50 - 110\.00 245\.00 Small Business h/ 10\.00 5\.00 - 10\.00 25\.00 Employment Creation 15\.00 21\.00 9\.00 15\.00 60\.00 Subtotal 98\.50 87\.50 9\.00 135\.00 330\.00 Technical Assistance Small Business Credit Training 0\.07 - - 0\.15 0\.2? Restructuring Studies: - Subsector - - 0\.20 0\.80 1\.00 - Enterprise 0\.20 - - 0\.70 0\.90 Small Business Sector Study - - 0\.06 0\.15 0\.21 Employment: - Regional Plan and Appraisal Skills - - 0\.08 0\.30 0\.38 - Employment Services - - 0\.15 0\.53 0\.68 - Retraining Center - - 7\.00 2\.37 9\.37 Subtotal \.2 - 7\.49 5\.00 12\.76 Total 98\.77 87\.50 16\.49 140\.00 342\.76 % of Total 28\.8 25\.5 4\.8 40\.9 100\.0 a/ Including distribution of unallocated part of Bank loan among the three enterprise investment components\. k/ First round of financing only\.  - 43 - VI\. PROJECT IMPLEMENTATION AND ONLENDING ARRANGEMENTS A\. ?roiect ImDlementation Organization 6\.01 NBH would be the borrower of the Bank loan, and would be responsible for the overall coordination of the Project and for monitoring the use of the loan\. For each of the enterprise credit components, onlending arrangements would be based on a refinancing facility in NBH to which the participating banks have access on a first-come first-served basis\. The participating banks would take the final credit decision on each subloan\. Subloans would be appraised by the participating banks, with assistance from consultants and/or the Restructuring Program Office (RPO), which was established under the first industrial restructuring project\. As in the previous industrial restructuring projects, the RPO would continue to be involved in day-to-day implementation of the Project in providing fee-based services to the participating banks and the beneficiary enterprises, including assistance to the banks in their promotional efforts, technical appraisal of subloan applications, and reporting; and to enterprises in preparation of their restructuring programs and subprojects, procurement and reporting\. In the case of the small business component, participating banks are expected to develop internal capabilities to carry out subproject appraisals and provide services to small business clients, for which the Project would provide technical assistance (para 5\.33)\. Also, the representative small business organizations KIOSZ, OKISZ and VOSZ are expected to be involved in promotion of the credit component and assistance to the small firms in subloan applications\. 6\.02 Regarding the technical assistance components, Project implementation will be suvervised bv different institutions\. includine: (i) the new International Training Center for Bankers (para 4\.11) for the small business credit training program; (ii) the Central Statistics Office (CSO) for the small business sector study; (iii) the Ministry of Industry for the subsector studies; (iv) the National Planning Office for assistance to improve the Government investment promotion program for job creation (strengthening of appraisal capabilities and preparation of an economic development strategy for Borsod county); and (v) The Wages and Labor Office for assistance to strengthen the employment and retraining services, together with the councils in the two counties in which new services will be introduced on a pilot basis\. Project implementation would be monitored also by the existing Restructuring Council, which is responsible for overall development and monitoring of the industrial policy reform program\. B\. Onlending Arrangements 6\.03 As in earlier Bank operations, the Bank loan would be made to NBH for a period of 15 years, including a five-year grace period, at the Bank's standard variable interest rate\. Proceeds of the Bank loan would be relent by NBH for various purposes in the Forint equivalent of foreign currency needs covered by the Bank loan\. NBH would carry the foreign exchange risk on Bank funds passed on to the Project beneficiaries\. In order to regulate the flow of funds from NBH to the beneficiaries, and to set out the obligations of the various entities, the following agreements will be signed: (i) Loan Agreement  - 44 - between the Bank and NBH; (ii) Guarantee Agreement between the Bank and the State; (iii) Subsidiary Loan Agreement between NBH and the State; (iv) Subsidiary Financing Agreements between NBH and the participating banks; and (v) Subloan Agreements between the participating banks and the beneficiary enterprises/businesses\. Signature of the Subsidiary Loan Agreement under (iii) above, and at least three of the Subsidiary Financing Agreements under (iv) above is proposed as a condition of effectiveness of the Bank loan\. Further, signature of the Subsidiary Financing Agreements under (iv) above between NBH and additional participating banks is a condition of disbursement for onlending of Bank funds to these banks\. 6\.04 For financing of eligible subprojects, NBH will onlend the Bank loan proceeds to the participating banks through its loan refinancing facility\. Funds would be available for onlending by banks which are found to be suitable intermediary institutions after a complete appraisal by the Bank of their institutional, operational and financial aspects\. In this respect, fourteen banks have been reviewed by the Bank and assessed as suitable intermediaries (para 4\.18)\. All funds for onlending will be available to the participating banks on a first-come first-served basis\. No prior allocation of credit would be made by participating bank, or by beneficiary\. 6\.05 The small business credit component would be based on an onlending mechanism that would facilitate the use of the Bank loan by the participating banks and small businesses, and which would have a number of features which are different from the other credit components\. To facilitate the development within the participating banks of small business sector strategies, capabilities, and financial products, and to contain transaction costs, it is proposed that the onlending arrangements would include the follow\.ng features: (4) onlendin" h- NBH to the participating banks would be at maturities of up to 15 years, while maximum maturities to the beneficiary businesses would be three years, so that the participating banks can relend repayments of subloans in surplus of repayments by the participating banks to NBH to eligible small firms\. For this purpose, each of the banks involved in small business lending would establish a revolving account; (ii) refinancing transactions could be carried out for packages or groups of subloans rather than on a one-to-one basis as in the case for subloans of larger enterprises; (iii) each participating bank would be permitted to maintain up to 30% of its portfolio under this component in short term credits to eligible firms for working capital purposes; and (iv) accelerated repayments by the participating banks to NBH are permitted without penalty\. C\. Main Loan Features 6\.06 Subloan ApRlication\. Appraisal and SuRervision\. The procedures for subloan application, appraisal and supervision, would be based on a common approach\. Applications will be prepared by the prospective beneficiaries along standardized formats developed for each credit component\. The RPO, which has engaged foreign consultants, can help enterprises in their subloan applications, while a number of the local consulting firms have developed capabilities in this area\. For the small business credit component, application and appraisal procedures have been simplified to stimulate credit applications\.  - 45 - 6\.07 The appraisal and supervision of subloans would be the responsibility of the participating banks, which will take the final approval decision for each enterprise credit\. While subloan appraisal and supervision procedures have been developed in the context of previous Bank-financed projects 3/, the application of these procedures by the onlending banks involved has not always been satisfactory\. Although assessment of financial and economic viability of subprojects, and creditworthiness of ent_\.rprises were generally satisfactory, aspects related to strategic, commercial and technical aspects of subprojects were in some cases inadequate\. The second industrial restructuring project includes technical assistance for the banks to strengthening procedures and capabilities ir\. these areas, and provides for hiring of technical consultants by the banks to review selected aspects of subloan applications\. The banks can also avail the assistance of the RPO or local consulting firms\. 6\.08 Concerning the small business component, the participating banks would utilize simplified and flexible subloan appraisal techniques which would be attractive and appropriate for boch the banks and the small businesses\. These would take into account the apparent lack of credit histories of most small firms in this sector, while ensuring adequate concern for creditworthiness, collateral and pr fitability\. Each participating bank would develop internal manuals and application and appraisal guidelines and procedures for small business financing which would be submitted to the Bank for review as a condition of disbursement for the refinancing of small business subloans by each bank\. The Project also includes training to strengthen the banks' policies and procedures in small business credit (para 5\.33)\. 6\.09 For the large enterprise credit components (export-oriented and eLLt,uiv,L- e iet , ULM iarticipatirig banks wou'ld provide the Bank upon appraisal of each subproject with summary information of the subproject on the basis of which the Bank can either authorize the financing of the subproject under the Bank loan, or request further information on the subproject appraisal for review prior to such authorization\. Also, appraisal documents for the first subprojects approved by each bank under each of the components would be reviewed by the Bank\. Based on the above arrangement, there would not be a specific free limit for Bank prior review of subprojects\. 6\.10 Loan Maturities\. A maturity of 15 years, including five years grace, will be applied to loan proceeds onlent to the State\. Subloans made to the beneficiary enterprises for export purposes will have maturities of not more than 12 years, and for employment creation and technical assistance purposes maturities of not more than 10 years, including in all cases a maximum three year grace period\. In the above cases the participating banks w'll repay the funds onlent by them to the beneficiary enterprises to NBH on a back-to-back basis\. As explained above, maturities of subloans to small businesses will be for a maximum of three years while refinancing by NBH to the participating banks for small business purposes will be for maturities up to 15 years\. Relending by the participating banks of repayment surplus funds of small business loans over 3/ A detailed Operational Manual was developed under the Industrial Export and Restructuring Project (loan 2397-HU)\.  - 46 - repayment requirements to NBH will be for small business financing on similar criteria and conditions established for the small business credit component\. NBH will repay the Bank loan on a fixed amortization schedule\. Subloan repayment surplus over the Bank loan repayment requirements of NBH will be onlent again by NBH to the participating banks for finatLcing of subprojects eligible under the Project\. These arrangements have been confirmed at negotiations\. 6\.11 Onlending Interest Rates\. For financing of subprojects under the enterprise credit components, NBH will onlend the Bank loan proceeds to the participating banks at its refinancing rate or the prevailing Bank rate plus a mark-up of at least 20% (comprising NBH's processing costs and a risk-bearing premium to cover the foreign exchange risk), whichever is higher\. In practice, NBH would make the funds available to the banks at its refinancing rate, which currently is 14% and therefore considerably higher than the Bank's current rate plus 20% (presently 9\.2%)\. In turn, each participating bank will set its interest rates for subloans on the basis of principles which are contained in its policy statement, and which have been assessed as satisfactory by the Bank (para 4\.20)\. It is anticipated that interest rates on subloan: to sma' businesses would be somewhat higher than for subloans to larger enterprises, \. cover the expected higher transaction costs for such small subloans, ane to provide adequately for their exposure\. This is fully in line with sound interest rate policy and would contribute to subproject selectivity\. As part of Project supervision, the Bank would periodically review these interest rates\. Further, all onlending by NBH to the State will be at NBH's refinancing rate or the prevailing Bank rate plus 20%, whichever is higher\. The interest rates charged by the participating banks on local currency subloans to Project beneficiaries would be the prevailing commercial rates\. 6\.12 Disbursement of Loan Proceeds\. The allocation of the proposed US$140 million Bank loan is shown in Table 6\.1\. 6\.13 Disbursement for contracts valued at less US$300,000 equivalent would be on the basis of statements of expenditure (SOEs) which detail the individual transactions\. The documentation to support these expenditures would be retained by NBH, audited by i\.ndependent auditors acceptable to the Bank, and made available for review by the Bank upon request\. Applications for withdrawal against contracts valued at more than US$300,000 equivalent would be fully documented\. 6\.14 To facilitate disbursements from the Bank loan, NBH would establish a revolving fund account\. The Bank will make an initial deposit of US$6 million into the account, which is the equivalent of the estimated average four-months' disbursements under the loan\. For replenishment of the revolving fund, NBH will submit withdrawal applications for replenishment for amounts not less than US$1 million\. 6\.15 It is anticipated that the Bank loan will be disbursed over a six- year period, which is in line with the standard disbursement profile for Bank loans covering similar industry sector projects in the EMENA region\. Based on the above disbursement forecast, the Bank loan would be fully disbursed toward the end of 1994\. On that basis, the closing date for the Bank loan is proposed  - 47 - to be June 30, 1995\. The estimated disbursement schedule of the Bank loan is shown in Annex 6-1\. Table 6\.1 Allocation of Bank loan (US$ million equivalent) Loan Category Amount % Financing (US$ million) Eligible Enterprises: - Technical Assistance 0\.70 100% of foreign expenditures\. - Export-oriented 104\.00a/ 100% of foreign exp\. & 100% - Employment Creation 13\.00a\./ of local exp\. (ex-factory) for goods; and 100% of foreign exp\. for consultants'services and training\. - Small Business 8\.00a/ For goods, 100% of foreign exp\. & 100% of local exp\. (ex-factory), or 75% of local expenditures for off-the-shelf purchases; and 100% of foreign exp\. for consul-ants' servicos ar&d training\. NBH 0\.15 100% of foreign expenditures (Small Business Credit Training) Government 4\.15 100% of foreign exp\. & 100% (Small Business Study, of local exp\. (ex-factory) for Subsector Study, goods; and 100% of foreign exp\. Employment Assistance) for consultants' services and training\. Unallocated 10\.00 Total 140\.00 a/ For the purpose of project financing, it has been assumed that the unallocated part of the Bank loan be distributed among enterprise components as follows: export-oriented (to increase to US$110 million); employment creation (to increase to US$15 million); and small business (to increase to US$10 million)\. 6\.16 Retroactive Financing\. A number of eligible subprojects and technical assistance components are at an advanced stage of preparation, and in some cases have already placed contracts\. Expenditures for such contracts prior to Bank approval of the loan could amount to about US$7 million\. Each of these contracts has been reviewed by the Bank, and have followed Bank guidelines for  - 48 - their procurement\. It is proposed to allow retroactive financing by the Bank loan for an amount of up to US$7 million, which would represent 5X of the Bank loan\. D\. Procurement 6\.17 Procurement of goods and services would be the responsibility of the Project beneficiaries, who may use the services of local foreign trading companies\. All procurement under the Bank loan will be in accordance with Bank procurement and consultants guidelines\. The participating banks would oversee procurement by the beneficiaries to ensure efficient procurement and compliance with Bank guidelines, for which the banks are building up their capabilities\. The Restructuring Program Office (RPO), which has built up considerable expertise in the Bank's procurement guidelines and procedures under the previous industrial restructuring projects, would be available to provide procurement assistance to enterprises and the participating banks\. To facilitate procurement, standard procurement documents have been agreed with NBH and the foreign trade companies\. ICB will be used for goods packages with an estimated value of US$150,000 and above each\. Hungarian enterprises competing under ICB will be eligible for a 15% preference on the CIF value of the bids, or the amount of customs duties and taxes, whichever is lower\. 6\.18 Bid packages with an estimated value below US$150,000 each may be procured through interna-ional shopping based on price quotations from at least three suppliers in at least three eligible counties\. Goods and technical licenses of proprietary nature may be procured through direct contracting\. In nrt-r t-n mimnlifv nr-- traj under- tAhe sma\.l business Component, pr^^urement for goods by such small firms will be on the basis of normal commercial practices of the purchases\. The aggregate limit for international shopping is expected not to exceed the equivalent of US$20 million\. Locally financed expenditures for works and goods will be procured under prevailing local procedures which involve competitive bidding and which are judged satisfactory\. Given the nature of the Project, largely involving support to subprojects which have not been preappraised, no detailed estimate is available of the breakdown of total Project expenditures by procurement methods\. Hence no procurement table is included\. 6\.19 All bid packages for goods estimated to cost US$1 million equivalent and above, and proposal invitation packages for consulting services and licenses for contracts would be subject to the Bank's prior review of procurement documentation\. It is estimated that the Bank's prior review of procurement documentation would cover about 45% of the total estimated value of contracts\. The balance of contracts would be subject to random ex-post review after contract award\. E\. Reporting and Auditing 6\.20 The participating banks (for the enterprise credit omponents) and various Government agencies (for the technical assistance components) would submit semi-annual progress reports to NBH, which in turn would verify and consolidate the reports and submit them to the Bank within 60 days after the end  - 49 - of each semester\. To assist in reporting, NBH would use the services of RPO on a contractual basis\. Within six months of the closing date of the Bank loan, NBH will prepare and furnish to the Bank a completion report of the Project\. 6\.21 All Project accounts, the revolving funds, statements of expenditure, and the financial statements of the participating banks and the Project beneficiaries will be audited at the end of each fiscal year by independent auditors acceptable to the Bank\. Short form annual audit reports for the preceding fiscal year would be available to the Bank no later than by the end of May each year\. The audit reports for the participating banks would be submitted to the Bank, while the audit reports for the other entities and accounts would be retained by NBH and the participating banks for review by Bank supervision missions\. The audit wing of the General Bank and Trust Co\., which has been undertaking audit activities for Bank financed projects, has been formed into an independent share company in July 1988\. Further, a number of the larger internationally renowned audit firms are establishing operations in Hungary and are expected to become involved in auditing of Project beneficiaries\. The above reporting and auditing arrangements have been confirmed at negotiations\. F\. Supervision Plan 6\.22 In order to ensure a clear understanding of Project objectives and implementation arrangements as well as effective follow-up of Project implementation both on the sides of the implementation agencies and the Bank staff, a Project supervision plan will be developed and reviewed with counterpart agencies during an early supervision mission\. The plan would include: (i) the schedule of key Bank supervision inputs and the skill mix required; (ii) specialist staff input for review of studies, technical assistance components, subproject reviews, and procurement documentation; (iii) aspects of the Project that require special Bank attention during supervision (eg\., quality of subpreject approvals, and Project coordination arrangements in Hungary); and (iv) the 1-ungarian contribution to supervision including monitoring and reporting and staff participation in supervision missions\. G\. Status of Project Preparation 6\.23 The Project is in an advanced state of preparation and is ready for implementation\. For the three enterprise credit components, procedures for subproject application, appraisal and supervision have been prepared and agreed with the participating banks, and credit demand confirmed\. Regarding the employment creation component, the Government has started to make adjustments to the investment promotion program for job creation in line with recommendations made by the Bank (para 2\.31)\. In the case of the technical assistance components, terms of reference have been prepared in all cases, which have been discussed and finalized with the various executing agencies\.  - 50 - VII\. PROJECT BENEFITS AND RISKS A\. Project Benefits 7\.01 The Project is expected to contribute significantly to the restructuring of Hungarian industry and to the initiation of measures to address the adverse employment impact of restructuring\. The Project would help to make Hungarian industry more competitive, increase exports to convertible currency areas thereby helping to improve the country's trade balance, and stimulate the development of a more balanced structure of the sector by facilitating the growth of small firms which would also contribute to domestic competition, exports and employment\. The Project would help to upgrade the product-mix of Hungarian industrial enterprises toward more competitive areas, lead to improved cost competitiveness as a result of upgrading, rationalization and specialization of production facilities, and facilitate the introduction of new technology\. Further, the restructuring approach at the enterprise level stimulated by the Project, would help to change the attitudes of enterprise managers by focussing on the strategic issues of the firms, while stimulating a greater market/client orientation\. 7\.02 The development of the small business sector is an important part of the overall restructuring of the industrial sector, and facilitates the restructuring of other segments of industry by helping to absorb surplus labor\. The small business component of the Project would stimulate the accelerated growth of the sector, which has been constrained by the lack of specialized credit facilities\. The Project would provide for the establishment of such credit facilities\. The establishment and growth of small firms would contribute to the development of entrepreneurship in Hungary, help stimulate innovation, generate improved service activities, and create new employment\. It would also stimulate competition in the local market and increased exports\. 7\.03 The Project would further help to develop the necessary policies and institutional framework for addressing unemployment caused by restructuring\. These ef rts would help to facilitate the future restructuring of Hungarian enterprises by providing the necessary measures to promote job creating investment to absorb surplus labor, and allowing better mobility of redundant workers through the development of new employment services and retraining facilities\. These measures would therefore contribute to making Hungarian enterprises more productive and competitive\. Other important institutional benefits of the Project include the strengthening of the banking system to facilitate the promotion and appraisal of small business investments, improvement of the investment promotion program for employment creation, strengthening of the export credit and insurance system, and improvement to the analytical framework of the small business sector through the execution of a comprehensive study\. 7\.04 Due to the nature of the Project, involving credit facilities for investments largely to be appraised in the future, it is difficult to quantify the expected impact of the Project on the Hungarian economy\. Based on a review of the subproject pipeline and of expected credit demand, the Pro4ect is estimated to involve investments of about US$285-290 million equivalent (1988  - 51 - prices) during 1989-93, which could result in additional output of about US$370 million per year by 1995\. For the export-oriented investments, incremental convertible currency exports as a result of the Project are estimated at about US$165-170 million per year by 1995, while net convertible currency earnings could amount to about US$110-115 million per year (both in 1988 prices)\. Additional exports would be generated by firms financed under the small business and regional employment components, but are difficult to estimate\. The Project is expected to have a mixed impact on employment\. While the larger enterprises are expected to increase labor only in limited cases in an effort to become more cost competitive, employment creation would be more prevalent in the small business firms and employment creation activities financed under the Project\. Some details of the estimated impact of the Project in the above areas are shown in Table 7\.1\. Table 7\.1 Estimated Impact of the Project Enterprise Credit ComDonents Export- Small Employment Total oriented Business Creation Project No\. of subloans 30 200 30 260 Average subloan size (US$'000) 3,600 50 500 520 Investment (US$ million)a/ 216\.0 22\.5 51\.0 289\.5 Output (US$ million)a/ b/ 238\.0 56\.3 76\.5 370\.8 CC exports (US$ million)a/ hi / 167\.0 n\.a n\.a 167\.0 Net CC earnings (US$ million)_a/ 114\.5 n\.a n\.a 114\.5 Employment (no\.) 500 2,500 3,000 6,000 a/ In 1988 prices\. h/ Annual\. c/ Direct and indirect convertible currency (CC) exports\. B\. Environmental Impact 7\.05 Each subproject to be financed under the Project, particularly those financed under the enterprise credit components for export-oriented investments and regional employment creation which involve larger investments than the small business credit component, will be assessed by the participating banks on its compliance with satisfactory environmental standards in conformity with Hungarian environmental, and occupational safety and health regulations\. The Government places high priority on the quality of the environment and is carrying out its laws and regulations in compliance with pollution control guidelines for air pollution and solid waste set by the Ministry for Environment and Water Protection\. These guidelines have been reviewed by the Bank and are considered satisfactory\. Given the restructuring nature of the Project, involving upgrading of existing facilities and introduction of new technology, it is expected to have a positive environmental impact by reducing waste disposal, better utilization  - 52 - of raw materials and reduction of scrap, and improved occupational health conditions\. For the small business projects, the participating banks would need to verify that these would not have an edverse environmental impact\. During negotiations, assurances have been obtained that each subproject would be undertaken in accordance with the country's safety, health and environmental standards\. C\. Main Risks 7\.06 The main risk that may adversely affect the implementation of the Project and the realization of its benefits concerns the uncertainties perceived by enterprise and small business managers related to Hungary's future macroeconomic situation and to the possible further changes in the industrial policy reform framework, which may affect the incentives for enterprise restructuring and small business development, and the level of credit demand under the Project\. In this respect, the recent implementation of the reform program may not always have given consistent signals to enterprise managers\. Combined with the measures taken by the Government to redress the unsatisfactory macroeconomic performance, including tight monetary policies, this has often resulted in a conservative wait-and-see attitude and a lack of needed enterprise initiatives to improve performance, including investment\. This risk is reduced by the strong support that the new Government and the political leadership give to the economic reform and by the policy actions agreed by the Covernment with the IMF, and with the Bank under the ISAL\. These include the new Association Law and unified company profit taxation system, which would provide clear and consistent signals to the enterprises leading to a stable business environment, nonduiive to restructuring and entrepreneurship development\. The review of the credit demand and of the pipeline of potential subprojects carried out in preparation of the Project also reduces the risk for a lower than expected credit demand under the Project\. 7\.07 The second main risk concerns the capacity of the recently established participating banks to promote, appraise and supervise enterprise restructuring and small business investments\. The involvement of a relatively large number of banks in the onlending arrangements of the Project further increases the complexity of the Project and the difficulty in safeguarding the quality of approved subprojects\. To address this risk, the Bank has reviewed the policies and procedures of each bank\. The Project further includes technical assistance measures for the banks to strengthen their small business credit policies and procedures besides technical assistance to the banks under the second restructuring project for evaluating larger enterprise investments\. Despite the above measures, it is expected that substantial supervision and monitoring on the part of Bank staff will continue to be required\. 7\.08 Concerning the employment component, the main risk concerns the limited institutional capabilities, particularly in county councils, for promoting and appraising job creating investments in areas which are undergoing restructuring\. This may lead to continued emphasis on large branch-type state sector investment projects with limited potential for the long term economic development in the areas, the limited creation of net new jobs through the lack of additionality of supported investments, and insufficient attention to the  - 53 - development of soft infrastructure for developing indigenous business opportunities\. Also in the area of employment and retraining services, the limited availability of qualified staff to supervise and operate the pilot programs supported by the Project may become a bottleneck\. The technical assistance under the Project would help to develop local capabilities in these areas to address this risk\. VIII\. AGREEMENTS AND RECOMMENDATION 8\.01 The signing of a Subsidiary Loan Agreement between NBH and the Hungarian People's Republic, and of Subsidiary Financing Agreements between NBH and at least three participating banks is proposed as a condition of Bank loan effectiveness (para 6\.03)\. Further, conditions of disbursement are as follows: (i) Prior to disbursement to each participating bank, the signature of a Subsidiary Financing Agreement between NBH and the bank (para 6\.03); and (ii) For the small business component, completion of a satisfactory operations manual for small business credit before disbursement to each bank (para 5\.18)\. 8\.02 At negotiations, the Government agreed that it will: (i) implement adjustments to its investment promotion program for dUIIJUyIJu1LLL eaLiULL pg £-\.3 J\., (ii) implement actions to improve the institutional framework and operations of its export credit and insurance system (para 4\.14); (iii) ensure the prompt availability of funds to complete the Project (para 5\.46); (iv) carry out procurement in accordance with Bank guidelines (para 6\.17) and follow agreed reporting and auditing procedures (para 6\.20)\. 8\.03 At negotiations, NBH agreed that it will: (i) monitor continued compliance of participating banks with agreed criteria for their participation in onlending of the Bank loan (para 4\.18); (ii) provide necessary funds to the participating banks and enterprises (including foreign exchange) to meet subloan requirements and expenditures of eligible subprojects (para 5\.46); (iii) use subloan repayment surplus over Bank loan repayments to refinance eligible subprojects (para 6\.10); and (iv) follow agreed procurement, reporting and auditing procedures (paras 6\.17 and 6\.20)\. 8\.04 At negotiations, NBH also confirmed the following: (a) Assurances in the Subsidiary Financing Agreements with the participating banks regarding:  - 54 - (i) maintenance of satisfactory policies, procedures, staffing and financial situation (para 4\.18); (ii) maintenance of interest rates in accordance with agreed principles (para 4\.20); (iii) lending in accordance with agreed eligibility criteria (paras 5\.04, 5\.15 and 5\.26) and on agreed terms and conditions (para 6\.03); (iv) provision of necessary funds to enterprises to meet subloan requirements (para 5\.46); (v) appraisal and supervision of subprojects in accordance with satisfactory policies and procedures (para 6\.06); and (vi) following agreed reporting and auditing procedures (para 6\.20)\. (b) Assurances in the Subsidiary Financing Agreements with regard to inclusion by the participating banks in Subloan Agreements with Project beneficiaries of following provisions: (i) execution of subprojects in compliance with enterprise and subproject eligibility criteria including satisfactory environmental standards (paras 5\.04, 5\.15 and 5\.26, and 7\.05); (ii) timely provision by the beneficiaries of their share of subproject financing (para 5\.46); and (iii) compliance with Bank procurement guidelines (para 6\.17) and with agreed reporting and auditing procedures (para 6\.20)\. 8\.05 On the basis of the staff appraisal and the above mentioned agreements, the Project is considered suitable for a Bank loan of US$140 million for 15 years, including five years of grace, at the Bank's standard variable interest rate\. The establishment of a revolving fluid of US$6 umi;iuu (paLa 6\.14), and retroactive financing of up to US$7 million (para 6\.16) are recommended under the proposed Loan\. The Loan will be made to the National Bank of Hungary and guaranteed by the Government\.  - 55 - ANNEX 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Selected Documents Available in the Proiect File A\. The Industrial Sector A-1: Background note on recent trade performance and policy development of Hungary's industrial sector\. A-2: Law of Economic Associations\. A-3: Company Profit Tax Law\. A-4: Background note on Export Promotion Program\. A-5: Ministerial Order on Conducting Foreign Trade Activity (Minister of Trade, December 29, 1987)\. A-6: Ministerial Order on Qualification System for Staff in Foreign Trade Occupations (Minister of Trade, December 31, 1987)\. A-7: Background papers on the Employment Fund and the Regional Development Fund\. A-8 Background on Current Status of Labor Adjustment Programs in Hungary and Proposal for Further Development\. B\. The Small Business Sector B-1: Detailed tables on recent performance of small business sector\. B-2: Note on policy issues affecting the performance of the small business sector\. C\. The Financial Sector and Participating Banks C-1: Hungary - Development and Reform of Financial Markets, dated October 2, 1987 (Green Cover Report No\. 6941-HU)\. C-2: Credit policy guidelines published by the National Bank of Hungary\. C-3: Report on Hungary's official export finance and credit insurance system, prepared by First Washington Associates, July 1988\. C-4: Background papers on the participating banks\. D\. The Project D-1: Terms of reference for technical assistance for development of employment and retraining services\. D-2: Outline of business plan for enterprises sponsoring investments supported by the Project\. D-3: Outlines of subproject appraisal reports for subloan applications D-4: Outline of subproject appraisal report for small business credit applications\. D-5 Restructuring Program for the Hungarian Road Vehicle Industry, prepared by Boston Consulting Group, dated February 1988\. D-6 Restructuring Program for Tungsrav Enterprise, prepared by A\.D\. Little consultants, dated December 1986\.  - 56 - ANNEX 2-1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT GDP of the Industrial Sector by Branch Branch GDP in Current Prices Annual Growth Rate 1980 1985 1986 1987 1/ 85/80 86/85 87/86 mn Ft X mn Ft X mn Ft X mn Ft X X X X Mining 40106 16\.9 59392 17\.6 56512 16\.4 56600 14\.8 8\.2 -4\.8 0\.2 Electric Energy 13447 5\.7 20011 5\.9 28997 8\.4 36800 9\.6 8\.3 44\.9 26\.9 Netallurgy 17661 7\.5 11261 3\.3 11139 3\.2 12400 3\.2 -8\.6 -1\.1 11\.3 Engineering 64699 27\.3 110357 32\.7 121251 35\.2 128200 33\.5 11\.3 9\.9 5\.7 Btdo Materials 10925 4\.6 14433 4\.3 15459 4\.5 17300 4\.5 5\.7 7\.1 11\.9 Chemical Industry 30525 12\.9 50534 15\.0 44173 12\.8 56900 14\.9 10\.6 -12\.6 28\.8 Light Industry 34902 14\.7 48820 14\.5 49771 14\.4 52800 13\.8 6\.9 1\.9 6\.1 Miscellaneous Ind 5142 2\.2 5961 1\.8 6213 1\.8 6400 1\.7 3\.0 4\.2 3\.0 Food Processing 19574 8\.3 16818 5\.0 11113 3\.2 15200 4\.0 -3\.0 -33\.9 36\.8 \. \. \. \. \. \. \. Social\.Sector Total 236981 100\.0 337587 100\.0 344628 100\.0 382600 100\.0 7\.3 2\.1 11\.0 Private Sector 6372 14268 16332 18500 17\.5 14\.5 13\.3 CPriv\.Sector X) 2/ 2\.6 4\.1 4\.5 4\.6 Branch GDP in 1981 Constant Prices Annual Growth Rate 1980 1985 1986 1987 1/ 85/80 86/85 87/86 mn Ft X mn Ft X mn Ft X mn Ft X X X uuuuus-se= uuas==# ausmi::u=suua#uauzuuxumuainguuu ua3==u======u=2=== cz====2================== Mining 50919 21\.0 42383 15\.7 40166 15\.0 40100 14\.4 -3\.6 -5\.2 -0\.2 Electric Energy 11618 4\.8 11339 4\.2 14223 5\.3 15700 5\.6 -0\.5 25\.4 10\.4 Metallurgy 12250 5\.1 9446 3\.5 9631 3\.6 9700 3\.5 -5\.1 2\.0 0\.7 Engineering 66104 27\.3 86351 31\.9 85031 31\.7 88700 31\.9 5\.5 -1\.5 4\.3 Bldg Naterials 10873 4\.5 11797 4\.4 11625 4\.3 12400 4\.5 1\.6 -1\.5 6\.7 Chemical Industry 28615 11\.8 38989 14\.4 38197 14\.2 41100 14\.8 6\.4 -2\.0 7\.6 Light Industry 35867 14\.8 43278 16\.0 40973 15\.3 42300 15\.2 -\.8 -5\.3 3\.2 Miscellaneous Ind 4982 2\.1 5761 2\.1 5696 2\.1 5600 2\.0 \.9 -1\.1 -1\.7 Food Processing 21163 8\.7 21051 7\.8 22552 8\.4 22700 8\.2 -0\.1 7\.1 0\.7 Social\.Sector Total 242391 100\.0 270395 100\.0 268094 100\.0 278300 100\.0 2\.2 -0\.9 3\.8 Private Sector 6921 9807 10773 10800 7\.2 9\.9 0\.3 (Priv\.Sector X) 2/ 2\.8 3\.5 3\.9 3\.7 1/ Preliminary estimates\. 2/ Ratio of private sector to the sum of socialized sector and private sector\. Source: Central Statistics Office and staff calculation\.  - 57 - ANNEX 2-2 H&RY - THIRD IASTRIAL RESTAULING PRI Gros tAp of Socialized irdstrial Sector bl Brwdh Brwch CIsitifn of Gross Apft in Orrent Prices knsL Grwth Rate of Grams otp in C4stawt Prices 1970 1975 19) 195 196 1W 75/o 80/75 8580 86/s 87/86 N4inirn & Bew 9\.0 7\.4 10\.6 13\.0 13\.6 13\.2 0\.5 1/ -0\.1 -0\.0 -0\.1 -0\.4 9\.5 V/ 3\.4 2\.9 2\.1 4\.5 Netatlurg 10\.7 10\.1 10\.3 8\.2 8\.2 8\.1 2\.1 0\.5 -0\.0 2\.8 0\.9 Fermas NetaLlisW 7\.6 7\.2 6\.9 5\.6 5\.6 5\.5 -0\.1 -1\.1 -1\.5 1\.8 0\.7 Ntferru Metal\. 3\.1 2\.9 3\.3 2\.6 2\.6 2\.6 9\.6 3/ 5\.4 4\.3 5\.4 0\.5 Ergcerirg Irdstry 26\.5 26\.9 22\.7 24\.3 25\.5 26\.0 7\.4 4\.1 3\.4 3\.7 4\.7 Ge"ral Vachiny 6\.9 6\.4 4\.9 5\.5 5\.7 6\.0 4\.6 3\.2 2\.7 2\.3 4\.3 Traiport Ewpit 6\.7 7\.5 6\.4 6\.7 7\.1 6\.9 6\.5 3\.6 2\.6 4\.8 3\.0 Electric Vachinry 3\.5 3\.7 3\.3 3\.1 3\.3 3\.4 6\.8 2\.7 2\.5 0\.8 3\.1 Ebectrcnic EqAipnt 3\.4 4\.0 3\.5 4\.2 4\.4 4\.6 16\.5 8\.6 7\.3 6\.2 9\.3 Precision Iatrunt 2\.0 2\.2 2\.0 2\.2 2\.5 2\.5 14\.7 7\.2 6\.2 4\.8 4\.9 MetaL Pmedts 4\.0 3\.2 2\.5 2\.3 2\.4 2\.4 -1\.4 0\.1 -0\.4 2\.6 3\.4 9ldirn Mterials 3\.2 3\.1 3\.3 3\.1 3\.2 3\.3 4\.7 0\.5 0\.0 2\.3 6\.9 uvt ;ai inrumry w\.; 14\.15 1-\. \.u 1r\.v t \.4 2 tL 74 Petroleun Pruicts 2\.0 4\.0 7\.3 7\.8 6\.1 5\.2 2\.1 -0\.2 -0\.7 2\.7 4\.3 OgA\.& Inorg\.Oh\. n\.a\. n\.a\. 2\.5 2\.5 2\.4 2\.5 13\.3 2\.8 2\.6 1\.1 6\.5 Fortilizer n\.a\. n\.a\. 2\.5 2\.2 2\.0 2\.1 8\.4 0\.6 1\.6 -4\.9 3\.8 Swtetic teriel n\.a\. n\.a\. 1\.9 2\.1 2\.1 2\.3 13\.4 1\.7 2\.2 -2\.3 4\.4 Rtr Prakts 1\.1 1\.0 0\.8 0\.8 0\.9 0\.9 6\.2 2\.4 1\.4 4\.7 6\.4 _twuCOLticals 2\.2 2\.6 2\.3 2\.8 2\.8 2\.9 18\.5 8\.8 8\.4 1\.6 4\.6 Ligt Ird\.stwy 17\.5 17\.3 13\.9 12\.9 12\.9 13\.0 3\.4 1\.3 1\.1 1\.1 2\.9 Wooden Pcts 2\.3 2\.2 2\.2 1\.7 1\.7 1\.8 4\.7 1\.4 0\.6 4\.0 7\.4 Pp & Pper ProdL 1\.3 1\.4 1\.3 1\.4 1\.5 1\.5 9\.1 4\.8 2\.8 9\.7 6\.2 Printirg 1\.0 1\.1 0\.9 1\.0 1\.1 1\.1 12\.4 5\.8 4\.5 6\.0 6\.8 Textile Irdistry 6\.6 6\.4 4\.6 4\.3 4\.2 4\.3 2\.4 0\.5 0\.6 -0\.9 2\.7 Leather & Fur 3\.0 2\.9 2\.3 2\.3 2\.3 2\.2 1\.1 3\.1 1\.9 6\.2 -0\.2 Canwnt 2\.4 2\.2 1\.7 1\.6 1\.5 1\.5 0\.1 -2\.3 -0\.6 -8\.1 -0\.2 Hadicraft 1\.0 1\.1 0\.9 0\.7 0\.6 0\.6 1\.0 -3\.6 -1\.5 -10\.4 -3\.0 Ower Irdstrie 2\.2 2\.1 1\.4 1\.0 1\.0 1\.0 5\.1 0\.6 1\.2 -2\.9 1\.2 Food Prosirg ind\. 19\.9 18\.7 18\.6 16\.8 16\.7 16\.8 5\.6 2\.3 2\.0 1\.3 3\.2 Total 10\.0 100\.0 10\.0 100\.0 100\.0 100\.0 5\.7 2\.3 1\.9 1\.9 3\.8 1/ 14inirg\. 2/ Electric EnrW\. 3/ ALunirum Netalluy ainy\. Swios: Statistical Yearbook 196 adL for grwth rate of aauqt\. Ca2tral Statistics offie for gross alpat cuqx sition\.  - 58 - ANNEX 2-3 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Gross Fixed Investment of Socialized Industrial Sector by Branch (Shares in Current Prices) Branch 1970 1975 1980 1985 1986 1987 nnuuum8u3u3: U U U===3==-=3 =UuuuuUuUU astUUU\.U\.UUU\.= Mining & Fnergy 26\.2 24\.4 33\.9 42\.4 40\.1 38\.8 Metallurgy 10\.5 6\.5 12\.0 5\.7 5\.4 4\.2 Ferrous Metatlurgy 5\.6 4\.9 8\.6 4\.4 4\.3 2\.9 Nonferrous Metal\. 4\.9 1\.7 3\.4 1\.3 1\.1 1\.2 Engineering Industry 18\.6 16\.1 17\.3 12\.3 12\.9 16\.5 General Machinery 4\.0 3\.5 4\.2 1\.8 2\.0 2\.7 Transport Equipmt 6\.2 4\.0 4\.8 3\.4 4\.7 5\.8 Electric Machinery 1\.7 2\.4 2\.3 1\.5 1\.5 1\.2 Electronic Equipmt 3\.4 2\.6 2\.6 2\.7 2\.6 3\.9 Precision Instrumt 1\.5 1\.5 1\.1 1\.2 1\.0 1\.3 Netal Products 1\.8 2\.0 1\.9 1\.5 1\.0 1\.2 Building Materials 7\.2 6\.3 4\.8 4\.1 3\.2 3\.0 Chemical Industry 15\.0 20\.4 11\.3 17\.5 17\.8 18\.8 Petroleum Products 2\.8 4\.3 2\.0 2\.2 2\.1 2\.5 Org\.& Inorg\.Chem\. n\.a\. n\.a\. 1\.0 4\.9 3\.5 1\.7 Fertilizer n\.a\. n\.s\. 1\.6 1\.8 1\.8 1\.5 Synthetic Material n\.a\. n\.a\. 1\.9 1\.6 2\.3 1\.7 Rubber Products 3\.6 0\.5 0\.4 0\.5 0\.4 1\.1 i\.^ 2\.e \. 3 5 n2 Light Industry 10\.6 12\.6 7\.0 6\.2 8\.0 6\.9 Wooden Products 1\.0 1\.4 0\.8 0\.6 0\.7 1\.5 Pulp & Paper Prod\. 3\.1 2\.8 0\.7 2\.0 2\.1 0\.6 Printing 1\.1 1\.6 1\.4 0\.5 0\.7 1\.1 Textile Industry 3\.7 4\.7 2\.4 2\.0 3\.0 2\.3 Leather & Fur 0\.9 1\.1 0\.7 0\.5 0\.9 0\.8 Garment 0\.4 0\.7 0\.7 0\.4 0\.6 0\.5 Handicraft 0\.3 0\.3 0\.2 0\.3 0\.2 0\.2 Other Industries 1\.3 1\.1 1\.2 0\.5 0\.4 0\.5 Food Processing Ind\. 10\.6 12\.7 12\.4 11\.3 12\.3 11\.4 Total 100\.0 100\.0 100\.0 100\.0 100\.0 100\.0 \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. Total Amount Wmln\. ft) 34232 52892 70153 76855 75639 84396 (Annual Growth Rate) (9\.1) (5\.8) (1\.8) (-1\.6) (11\.6) Source: Central Statistics Office\.  - 59 - ANNEX 2-4 HOARY - THIR) ISTRIAL REST1lWlINH PRECr \. \. \. \. \. Tracb Stntre of irdstrial Sector, 1W \. \. \. Brarh Eqoort IUnt (en Ft) Inrt Alxnt (m Ft) E*rt Caqxsitia Inport Cap6itain IST VatL 1/ \. \. \. *\. \. \. \. \. \. \. \. \. \. \. OEA M Total CEA CC Total OEA M Total OEA CC Total OEA M Total Netaltulw 7469 224^ 291 14993 14911 2950 3\.5 9\.5 6\.6 7\.1 5\.9 6\.4 -33\.2 19\.9 -0\.1 Iren & Steel 3471 1222 15733 7640 8595 16034 1\.6 5\.2 3\.5 3\.6 3\.4 3\.5 -37\.5 17\.6 -1\.6 Altunfm Pod 307 8431 12239 5715 499 6214 1\.8 3\.6 2\.7 2\.7 2\.0 1\.3 -20\.0 88\.8 32\.7 Erewrirg 13002 5(88 1M66 7W97 WE30 16165 60\.7 21\.4 40\.1 37\.3 32\.9 34\.9 24\.8 -24\.7 5\.5 Geirl Vachiray 3049 17189 5= 25177 39772 64949 16\.8 7\.3 11\.8 12\.0 15\.7 14\.0 17\.8 -39\.6 -9\.9 Truport Eqjipt 44460 9Z06 53746 30083 89 39029 20\.7 3\.9 11\.9 14\.3 3\.5 8\.4 19\.3 1\.8 15\.9 Electric Ihinery 4282 6272 1C654 4458 420 8741 2\.0 2\.7 2\.3 2\.1 1\.7 1\.9 -2\.0 18\.8 9\.4 Electrnic Egt 2 8672 29035 9775 175 19050 9\.5 3\.7 6\.5 4\.7 3\.7 4\.1 35\.1 -3\.4 20\.8 Precision Irstrunt 2Z545 4972 27317 6276 1394 M0 10\.4 2\.1 6\.1 3\.0 5\.5 4\.4 56\.1 -47\.5 14\.8 etata Poicts 2930 3947 6476 2531 7045 9576 1\.2 1\.7 1\.4 1\.2 2\.8 2\.1 -0\.0 -2B\.2 -19\.3 dOical Irdstry 2 4985 72667 30879 63130 94009 10\.6 21\.2 16\.1 14\.7 24\.9 2D\.3 -15\.0 -11\.7 -12\.8 Petro Refirhy 810 1360 13860 7257 1099 8355 0\.4 5\.5 3\.1 3\.5 0\.4 1\.8 -79\.9 84\.5 24\.8 Or & Irar Chen 1767 6352 8119 8486 27168 35654 0\.8 2\.7 1\.8 4\.0 10\.7 7\.7 -6\.5 -62\.1 -62\.9 Fertilir 3645 52 9437 3846 7367 11213 1\.7 2\.5 2\.1 1\.8 2\.9 2\.4 -2\.7 -12\.0 -8\.6 Spthetic Htarial 798 8414 9212 2760 9494 12254 0\.4 3\.6 2\.0 1\.3 3\.7 2\.6 -55\.1 -6\.0 -14\.2 Mkbwr Prjdcts IZ 3634 S 2974 3603 6677 0\.8 1\.5 1\.2 1\.4 1\.4 1\.4 -24\.0 -2\.4 -11\.2 Iwa*ticals 11722 8W7 19759 2314 M80 10B 5\.5 3\.4 4\.4 1\.1 3\.4 2\.4 67\.0 -3\.3 28\.9 Oter Hy Ird 21 3008 61P 11517 5S991 21362 81C53 1\.4 3\.6 2\.6 28\.4 8\.4 17\.5 -90\.4 -43\.0 -75\.1 Hm y Ira Totat i1ikj7 i3ii4 cw i&(r ia Y ii\. i TI 7i\.2 55\.6 65\.4 7\.5 72\.2 79\.1 -5\.9 -16\.5 -10\.9 Ligt Irdmtry M04 34U67 541W 15950 3M9M 5195 9\.7 14\.5 12\.2 7\.6 14\.2 11\.2 13\.3 -2\.7 2\.8 Wood-bed Prod 829 555 6414 4357 1789 6146 0\.4 2\.4 1\.4 2\.1 0\.7 1\.3 -8\.0 51\.5 2\.1 Pulp & Pqwer Prod 662 1261 192 3427 8015 11442 0\.3 0\.5 0\.4 1\.6 3\.2 2\.5 67\.6 -72\.8 -71\.2 Priritirg 496 930 1426 a 2F 856 1121 0\.2 0\.4 0\.3 0\.1 0\.3 0\.2 30\.4 4\.1 12\.0 Taetile 8379 11064 19M 5106 17795 22O1 3\.9 4\.7 4\.3 2\.4 7\.0 4\.9 24\.3 -23\.3 -8\.2 Leer & Fur 6199 6235 1244 11378 5281 6359 2\.9 2\.6 2\.8 0\.5 2\.1 1\.4 70\.4 8\.3 32\.3 Xnermnt 42D 9819 13123 1685 2236 39Z1 2\.0 4\.2 2\.9 0\.8 0\.9 0\.8 42\.8 62\.9 54\.0 Oher Irdstries 862 1283 2123 1337 2363 37M 0\.4 0\.5 0\.5 0\.6 0\.9 0\.8 -22\.7 -29\.6 -27\.0 Food Procasshir Ind 21070 308 60279 490 19767 24676 9\.8 16\.6 13\.4 2\.3 7\.8 5\.3 62\.2 33\.0 41\.9 Ird\.try Total 20 MS3 Ic 411595 2C595 250817 446752 9%\.1 87\.2 91\.4 98\.1 95\.1 96\.5 0\.0 -7\.9 -4\.1 \. \. \. \. \. \. \. \. \. \. \. \. \. BuM tri Irnatfy 3 3M8 4290 781 1009 17W0 0\.1 1\.7 1\.0 0\.4 0\.4 0\.4 -44\.1 59\.6 41\.1 AricAtull Prudet 8061 2619M 34Y 7 319B 1139 14557 3\.8 11\.1 7\.6 1\.5 4\.5 3\.1 43\.2 39\.5 40\.4 \. \. \. \. \. \. \. \. \. \. \. \. \. Total 2143B7 23C756 450142 209913 253185 46099 100\.0 100\.0 100\.0 100\.0 100\.0 100\.0 1\.1 -3\.6 -1\.4 1/ IST: Intens iaul Slepe of Trod (Ex-I/Ex(*Im)'100\. 2/ Nttly minirg proUts\. Sae: Date of Caitral Statistkcs Office ad staff calculatilo\.  - \.60 - ANNEX 2-5 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Analysis of Industrial Non-Ruble Trade Performance (IST (Int'l Slope of Trade) Value) 1/ Branch 1981 1982 1983 1984 1985 1986 1987 Metallurgy 14\.6 13\.3 16\.5 26\.5 23\.3 22\.1 19\.9 Iron & Steel 13\.8 17\.1 22\.6 32\.2 27\.9 24\.3 17\.6 Aluminum Prod 91\.8 87\.2 92\.7 94\.1 91\.3 89\.3 88\.8 Engineering -17\.8 -9\.6 -8\.4 -12\.8 -15\.3 -20\.8 -24\.7 General Machinery -28\.7 -18\.1 -14\.1 -29\.5 -36\.(\. -37\.9 -39\.6 Transport Equipmt 6\.6 17\.0 3\.8 18\.3 21\.6 8\.2 1\.8 Electric Machinery 23\.4 14\.2 13\.4 14\.8 13\.1 13\.7 18\.8 Electronic Eqpmt 1\.8 13\.7 25\.5 12\.6 11\.0 4\.3 -3\.4 Precision Instrumt -29\.8 -20\.8 -31\.7 -29\.0 -31\.1 -41\.2 -47\.5 Netal Products -44\.9 -44\.3 -35\.2 -34\.4 -40\.6 -37\.9 -28\.2 Chemical Industry -20\.7 -21\.6 -14\.6 -5\.8 -8\.3 -16\.3 -11\.7 Petro Refinery 77\.5 61\.0 71\.1 77\.3 53\.6 65\.1 84\.5 Org & Inorg Chem -60\.7 -57\.1 -57\.5 -53\.7 -47\.2 -37\.1 -62\.1 Fertilizer -1\.2 1\.6 -5\.2 2\.3 13\.2 -8\.4 -12\.0 Synthetic Material -50\.9 -48\.8 -42\.5 -27\.9 -29\.1 -23\.8 -6\.0 Rubber Products -27\.0 -20\.0 -13\.2 -8\.0 0\.3 -3\.7 -2\.4 Pharmaceuticals -2\.5 -4\.5 2\.4 5\.9 2\.1 -2\.7 -3\.3 Other Heavy Ind -22\.8 -9\.5 -6\.9 -11\.6 -43\.8 -48\.7 -43\.0 Heavy Ind Total -14\.7 -10\.5 -7\.1 -4\.9 -11\.7 -16\.5 -16\.5 Light Industry -10\.7 -8\.2 -2\.5 -7\.8 -9\.1 -9\.9 -2\.7 Wood-based Prod 36\.8 57\.5 45\.6 19\.2 25\.8 52\.1 51\.5 Pulp & Paper Prod -81\.2 -84\.9 -59\.5 -73\.6 -73\.6 -77\.6 -72\.8 Printing 5\.3 7\.8 12\.6 15\.0 8\.0 2\.2 4\.1 Textile -32\.6 -27\.6 -19\.7 -26\.5 -25\.0 -29\.3 -23\.3 Leather & Fur 44\.9 33\.1 33\.1 25\.4 10\.0 3\.8 8\.3 Garment 59\.4 62\.6 53\.7 55\.9 49\.2 51\.4 59\.9 Other Industries 24\.5 5\.7 -8\.1 -21\.3 -16\.4 -23\.1 -29\.6 Food Processing Ind 33\.6 43\.3 32\.6 39\.3 37\.3 29\.8 33\.0 Industry Total -5\.6 -1\.2 0\.2 2\.1 -4\.4 -9\.2 -7\.9 …\. Building Industry -17\.1 22\.5 46\.9 19\.9 15\.7 13\.9 59\.6 Agricultural Product 41\.9 63\.8 62\.8 53\.0 50\.7 37\.8 39\.5 …\. \. Total -0\.8 4\.8 5\.7 6\.6 1\.3 -4\.7 -3\.6 1/ IST Value = (Ex - Im)/(Ex + Im)*100 Source:Central Statistics Office (CSO), Statistical Yearbook of Foreign Trade, editIons of 1985 & 1986, CSO data for 1987, and Staff calculation\.  - 61 - ANNEX 2-6 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT ________________________________________________ Recent Industriat Non-Ruble Trade Performance --------------------------------------------- Subsector Metal Fng'ring Chemical Light Total 1/ Export 2/ 1986 452\.4 890\.1 789\.9 523\.5 2670\.5 1987 510\.6 973\.4 923\.5 643\.2 3066\.5 1988/1-4 187\.7 224\.3 301\.9 169\.5 887\.6 Growth Rate 3! 1986 104\.7 105\.4 90\.5 119\.4 102\.7 1987 112\.8 109\.4 116\.9 122\.9 114\.8 1988/1-4 147\.9 114\.7 128\.5 120\.4 126\.5 Import 2/ 1i86 259\.5 977\.8 1039\.9 895\.7 3206\.3 1987 271\.2 1126\.2 1202\.9 944\.4 3583\.5 1988/1-4 76\.3 247\.7 349\.1 271\.1 949\.1 Growth Rate 3/ 1986 102\.5 116\.8 119\.2 125\.1 118\.6 1987 104\.5 115\.2 115\.7 105\.4 111\.8 1988/1-4 96\.7 94\.5 90\.2 98\.6 94\.0 IST Value 4/ 1986 27\.1 -4\.7 -13\.7 -26\.2 -9\.1 1987 30\.6 -7\.3 -13\.1 -19\.0 -7\.8 1988/1-4 42\.2 -5\.0 -7\.3 -23\.1 -3\.3 ~~~,\. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. \. Output Growth 5/ 1986 102\.8 103\.7 101\.4 101\.1 101\.9 1987 101\.6 103\.8 106\.2 102\.9 103\.7 1988/1-4 103\.0 100\.3 101\.1 100\.7 100\.7 Productivity Growth 6/ …---1186 100\.5 104\.1 101\.0 102\.8 102\.6 1987 106\.9 106\.5 107\.5 107\.3 106\.4 1988/1-4 109\.2 103\.3 101\.5 105\.8 103\.0 1/ Includes other industry, not building materials and food industries\. 2/ In current prices (million USt)\. 3/ In current prices (previous period - 100)\. 4/ ISP: International Slope of Trade a (Ex-Im)/(Ex+Im)*100\. 5/ In constant prices (prev\.period 100)\. Total industry includes mining, energy, bldg materials, food & other industries\. Same for 6/ 6/ Production in constant prices per person employed (prev\.period-100)\. 7/ Non-Ruble Trade by Commodity Group in Jon-Apr,1988 (J-A,87 = 100) Export Import (current prices) Fuels 109\.4 86\.7 Intermediate Goods 134\.8 99\.5 Capital Goods 119\.2 86\.0 Ind Consumer Goods 123\.4 84\.1 Food 116\.2 92\.1 Total 124\.8 94\.4 Source: Ministry of Industry Central Statistics Office, (CSO) (Monthly Bulletin of Statistics), 5/15d8, and staff calculation  - 62 - ANNEX 2-7 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Operations of the Investment Promotion AsRects of the Regional DeveloRment Fund and the Employment Fund 1\. This Annex provides a summary of the results of the implemenation of the two Government-supported schemes aimed at promoting job-creating investment in industrial activities in particular localities, namely the Regional Development Fund and the Employment Fund\. The Regional Development Fund started operations in January 1987, while the support for job creating investment under the Employment Fund started in January 1988\. The scope of the two schemes is briefly described in Chapter II of the Staff Appraisal Report\. 2\. The total Budget support for both funds is estimated to reach Ft2\.0 billion in 1988, which is expected to increase to Ft3\.2-3\.9 billion in 1989\. Of the total, about Ftl\.3-1\.4 billion in 1988 would be for promotion of employment creation investments (FtO\.5-0\.6 billion under the Employment Fund and FtO\.8 billion under the Regional Development Fund), which is expected to increase to Ft2\.05-2\.45 billion in 1989 (FtO\.85-1\.05 billion under the Employment Fund and Ftl\.2-1\.4 billion under the Regional Fund)\. The attached Tables 1, 2 and 3 show details of the direction of Government support provided by county and by sector, which briefly are described below\. (a) Regional DeveloRment Fund 3\. Table 1 shows that since it was introduced, the Regional Development Fund has disbursed some Ftl\.6 billion in assistance, supporting about Ft7\.5 billion in investment and helping create some 7,500 new jobs\. Most of the support has been used to promote investment in the backward areas, with more thanI half the funds being applied in Szabolcs County, perhaps the most depressed of the backward areas within Hungary\. Borsod county, which is likely to be most affected by industrial restructuring in the short term, has received only Ftll9 million (about US$2\.3 million)\. 4\. Across the seven counties which contain areas eligible for assistance there has been great variation in the subsidy cost per job and in the proportion of the overall investment cost which has been financed from the Fund\. As regards support per job, only in one county (Bekes) was the notional FtlOO,O0O support limit not breached\. Moreover, in three of the seven c-unties the share of investment cost provided from the Fund exceeded the 30X limit of investment\. 5\. There would appear to be several reasons why these limits have been breached so frequently\. First, some 16X of disbursements have been used to support infrastucture projects which create very few direct jobs\. Second, nearly 45X of funds were used to support projects classified to the agricultural sector (principally agro-processing investments ar'd non-agricultural projects carried out by agricultural enterprises), and here again the subsidy cost per job has been high\. Third, and perhaps of most concern, there appears to have been little regard paid to the limit, especially by county councils\.  - 63 - ANNEX 2-7 Page 2 6\. The emphasis of the Regional Development Fund on projects undertaken by agricultural enterprises arise principally because of the focus of the Fund on 3zabolcs County\. Within Szabolcs the dominant enterprises are agricultural cooperatives, many of which are in a poor financial situation as a consequence of adverse farming conditions\. In order to improve financial performance without laying off workers many of the cooperatives have been diversifying into industry\. Using the Regional Development Fund the county council has been assisting in this process\. (b) Employment Fund 7\. The emphasis of the Employment Fund has been much more on assisting areas which are suffering the effects of restructuring, though as can be seen from Table 2, support has nevertheless been spread across the whole country\. The area which is likely to be hardest hit, Borsod County, has had the largest share of disbursements from the Employment Fund, though in total this amounts to only just over US$2 million, or a little over 25% of total assistance from the Fund\. 8\. Unlike the Regional Development Fund, in no area has the Emloyment Fund breached the support cost per job limit\. But in over half of counties the support per investment limit was breached\. This indicates that compared with the Regional Development Fund, the Employment Fund has been assisting much more labor intensive activities, or that applicants under the Employment Fund may have overstated the number of new jobs they are likely to create\.  - 64 - ANNEX 2-7 Table 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Regional Development Fund - Project Approvals by County A/ Government Number Support Support as % County Investment Support of Jobs Per Job of Investment -----(Ft million) ----- ('000 Ft) Baranya 815 180 290 621 22 Bekes 114 46 520 88 40 Borsod 346 119 941 126 34 Somogy 1,247 158 763 207 13 Szabolcs 2,932 828 4,348 190 28 Vas 508 164 65 2,523 32 Zala 1,530 97 593 164 6 Total 7,492 1,592 7,520 212 21 a/ Covering period January 1987-August 1988\. Source: National Planning Office (NPO)\.  - 65 - ANNEX 2-7 Table 2 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Employment Fund - Project Approvals by County az Support as Number of Government Number Support 2 of County Projects Investment Support of Jobs Per Job Investment - (Ft million) ------ (000 Ft) Baranya 4 23 11 160 69 48 Bacs-Kiskun 3 30 9 160 56 30 Bekes 3 229 35 435 80 15 Borsod 14 324 114 1,212 94 35 Csongrad 1 2 1 56 18 n/a Fejer 3 16 5 142 35 31 Hajdu-Bahir 8 180 56 591 95 31 Heves 3 64 13 131 100 20 Nograd 4 98 27 274 100 27 Pest 1 2 1 20 50 n/a Somogy 2 16 5 48 100 31 Szabolcs 10 251 95 978 97 38 Szolnok 1 3 1 29 34 33 Veszprem 4 21 8 127 63 38 Zala 1 225 15 160 94 7 Total 62 1,484 396 4,523 88 27 a/ Covering period January-August 1988\. Source: Wage and Labor Office (WLO)  - 66 - ANNEX 2-7 Table 3 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Regional Develooment Fund and Employment Fund: Sectoral Distribution of Assistance for Job Creattng Investments A/ Reaional Fund Employment Fund /b Government No\. of Irwestment Support Government No\. of Support Investment Supoort Jobs Per Job Per Job Support Job Per Job (m Ft) (m Ft) (%) (000 Ft) (000 Ft) (m Ft)(%) (000 Ft) AgricultureC/ 3\.366 711 (44\.6) 2\.195 1\.533 324 117 (24\.9) 1,260 93 Industry 3,613 622 (39\.0) 4,967 727 125 307 (65\.5 3,430 90 Construction 19 9 ( 0\.6) 34 559 264 26 (5\.5) 380 68 Infrastructure 495 215 (15\.8) 324 1\.528 775 - - - - Other - - - - - 19 (4\.1) 270 70 7,493 1\.593 (100\.0) 7,S20 996 212 469 (100) 5,340 88 =Y Concerns approvals through August 1988\. bJ Relates to a slightly different time period than Table 2\. c/ Includes agro-processing which acounts for the majority of assisted projects in this sector\. Source: NPO and -tLO  - 67 - ANNEX 2-8 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Eligibility Criteria of Investment Promotion Program for EmDloyment Creation 1\. Eligibility criteria for support of investment projects under the unified Government sponsored investment promotion program for employment creation are set out below\. 2\. Eligible Enterprises\. The program supports enterprise investment in regions eligible for program support in all legal and non-legal (mostly private) business entities, engaged in manufacturing (excluding certain heavy industry such as mining and ferrous metallurgy), agro-processing, and business services (eg\., accounting, tax advisory services, marketing, management consultancy, technical services, etc)\. As far as small firms (employment below 60 persons) are concerned, activities in tourism, construction and trade are included\. 3\. Eligible Projects\. Projects eligible for assistance include start-up of new businesses, expansion of existing enterprises in the assisted regions, relocation of and new plants established by enterprises based elsewhere in Hungary to the assisted regions (excluding relocations from other assisted areas)\. and investments in the assisted regions bv enterprises based outside Hungary\. Projects should create new jobs and be subject to a limit of Ft500,000 of assistance for each job created\. Projects should be sound from commercial, technical and financial points of view and generate financial and economic rates of return of at least 12Z in real terms over a ten year period\. 4\. Additionality\. The amount of program support offered to a project will be the minimum to ensure that it proceeds, but subject to a maximum of 30% of eligible expenditures\. 5\. Maximum Government (Public Sector) Assistance\. The maximum project assistance from all Government (public sector) sources is 50% of eligible expenditures\. 6\. Eligible expenditures\. The program provides assistance towards capital expenditures (excluding taxes) in land and building, plant and machinery (new and second hand), training and technical assistance related to the use of plant and machinery purchased as part of the project and to the general operation of the firm, and permanent working capital increase related to the start of operations of the project\. 7\. Timing\. Investments for which assistance is given should be completed within a three year period from the date at which a program support is provided and the number of new jobs on which the assistance is based should be created within a four year period from that date\. Support is disbursed quarterly on the basis of a forecast of eligible expenditures in the following period\. The level of quaterly payments is adjusted in the light of the actual and forecasted level of eligible expenditures and creation of new jobs\.  - 68 - ANNEX 2-8 Page 2 8\. Recovery of Support Funds\. Assistance which is given to eligible expenditures which in the event are not made is subject to recovery\. The same provision applies to projects which fail to meet the job creation target specified in the support agreement with the enterprise\. The value of assets wihich were treated as eligible expenditures in calculating the value of support funds and which are sold within four years of their purchase date are also subject to recovery of support funds\.  - 69 - ANNEX 3-1 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Structure and Performance of the Small Business Sector A\. Introduction 1\. From January 1, 1982, regulations were introduced in Hungary which prcvided greater opportunites for the establishment of small businesss firms in the private sector\. Individual proprietorships, referred to as artisans or craftsmen, were permitted up to six employees and six family workers\. General partnerships of private individuals were permitted to engage in economic activities with up to 30 employees\. A 'small cooperative' form of limited liability was introduced with simplified and improved taxation treatment for units established with more than 15 and less than 100 members\. These reforms were intended to increase the competitiveness of the Hungarian economy\. One of the problems addressed by the reforms was the concentration of industrial production in a relatively few large units in the public and cooperative sectors, and the relative absence of small scale units\. The skewed size distribution structure provided for inadequate competition amongst firms and inadequate possibilities for sub-contracting and feeder industry relationships\. 2\. Although many restrictions remaineu on the activities of small businesses, January, 1982, marked the starting point for a major opening to the private sector in Hungary, and the response in terms of the establishment of units and growth in employment and output has been considerable\. During 1982-1987, a period of economic restructuring in which the supply response at the aggregate level has been weak, the data that is available indicates that the small scale sector has been the dynamic element in the Hungarian economy\. 3\. The next major step in the creation of opportunities for small enterprises is the introduction in January, 1989, of a greatly revised association (company law) framework and a simplified and unified company profit tax system, the common principle of both being neutrality in treatment of enterprises of different ownership sectors (public, cooperative and private) and scale (large and small)\. 4\. There is no comprehensive survey available of the small business sector or the small industry sector in Hungary\. The recognition in Hungary of the growing importance of the sector is relatively recent, and has not been matched as yet with adjustments in the national and local statistical gathering and publication efforts\. The information for this Annex is therefore based on interviews, plant visits and data gathered during February and June, 1987, during the preappraisal and appraisal missions for the Third Industrial Restructuring Project\. 5\. The small business sector in Hungary discussed in this Annex is composed of independent ventures with less than 100 employees\. VGMK's and other specialised contract groups have not been considered as they are in-plant work organizations rather than independent business ventures\. These groups are numerous and take many forms: sections within enterprises operating part of ths  - 70 - ANNEX 3-1 Page 2 time under in-plant contracts, sections let by lease, contractual catering units, and shops and catering units let by lease\. In 1986, 25,000 of such groups employed an estimated 370,000 persons\. Also, an estimated 120 small state enterprises or subsidiaries are not covered in this discussion as they are not independent ventures\. Agricultural sector businesses are not covered in this review either\. B\. Structure of the Small Business Sector 6\. Small businesses have used three organizational forms in Hungary: proprietorship, general partnership and small cooperative\. The proprietorships and partnerships are considered 'non-legal' entities in Hungary, a key distinction in that sectoral level laws and regulations distinguish between the rights and obligations of non-legal and legal entities\. Legal entities have generally been socialist sector ventures (cooperatives and state enterprises), and thus the impact of the distinction in practice has been to differentially allocate rights and obligations between the private and socialist sector through the terminology of non-legal and legal entities\. A restricted version of a limited liability company (a legal entity) has been available to private individuals since February, 1988, but it required the participation of an already established legal entity\. The new Association Law has revised the legal frameworks available to small businesses and is expected to result in the start- up of new enterprises and in encouraging the change of legal form of many existing ones\. The new framework will include a form of limited partnership (a "deposit company") which, while still a non-legal entity, will permit individuals to invest, as partners with limited liability, in ventures in which they are not actively working\. It will also provide for limited liability companies to be formed by private individuals without the participation of a legal entity\. It is anticipated that many existing partnerships and small cooperatives will adopt the new limited liability company form\. The proprietorships, partnerships and small cooperatives are briefly described below\. (i) Proprietorshi2s 7\. Proprietorships are unincorporated, non-legal entities in which the liability of the owner is unlimited\. Registered proprietorships numbered 185,000 at the end of 1987, including 33,000 small stores, restaurants, and other retail activities\. Of the 152,000 non-retail sector proprietorships, 81,000 were full- time, of which 39% were in industry, 27% in construction, 25% in transport (mainly taxis), and 9% were in personal services\. At the time of the introduction of the January, 1982, reforms, there were 112,000 non-retail proprietorships, of which 69,000 were full-time\. 8\. In 1987, 92% of the non-retail sector proprietorships in Hungary operated as single person businesses reporting no employees\. Observations and interviews indicate that there is considerable unreporued family labor although the general pattern of very small units is clear\. Proprietorships were limited to two employees up to 1982, at which time the maximum permitted was raised tc six, plus six family members\. In 1988, the limit was raised to 30 employees\. In 1987, 17,000 small industry proprietorships reported having a total of 30,430  - 71 - ANNEX 3-1 Page 3 employees\. Proprietors are predominantly male\. In the non-retail sectors four of every five are male\. 9\. Proprietorships are often operated on a part-time basis by individuals employed in a 'main' job by large socialist sector enterprises, and by retired individuals to supplement pensions\. 47% of all non-retail proprietorships are operated on a part-time basis or , recired individuals\. 10\. Proprietorships are frequently established by individuals who initially engaged in the activity on a part-time business basis\. Of the total increase of 4,434 full-time non-retail sector proprietorships registered during 1987, 45% had previously been operating on a part-time basis, with the balance being new proprietorships\. The remainder are established principally by former apprentices and by former proprietors who are registering after a period of non- registration\. 11\. The geographic distribution of non-retail proprietorships reflects wide variations\. Of the total, 21% are located in Budapest\. On a per capita basis, the average number of proprietorships per 10,000 inhabitants for Hungary at the end of 1987 was 144\. For Budapest, there were 151 per 10,000 while for the countryside the average was 142\. The counties with the lowest per capita averages were Borsod (106), Nograd (118), Szabolcs (123), and Hajdu (130)\. The counties with the highest were Somogy (188), Zala (164), Heves (164) and Vas (159)\. (ii) Partnerships 12\. The general partnership in Hungary is an unincorporated, non-legal business unit in which the liability of the partners is unlimited\. For 1986, the Central Statistical Office (CSO) reported 10,920 partnerships, including 115 in the retail trade sector and 232 in the agriculture sector\. Of the non-retail, non- agriculture sector partnerships, 32% were in industry, 26% in construction, 3% in transport and 33% in personal services\. In 1982, one year after the introduction of the reforms, the CSO reported that there were 2,341 partnerships\. 13\. Total employment in partnerships in 1986 was reported as 72,338, of which 30% was full-time\. Partnerships have been permitted 30 members and an additional 30 employees\. Of the total employment of 70,325 in the non-retail, non- agriculture partnerships, 29% was in industry, 33% was in construction, 2% was in transport and 30% was in personal services\. (iii) Small cooperatives 14\. The small cooperative is a legal entity; it is a form of association which has provided a limited liability framework and a fairly simple registration requirement for private individuals who wished to undertake independent for- profit ventures\. The small cooperatives are the largest units in the small business sector; until the end of 1987 they were permitted up to 100 members plus 25% additional workers as non-member employees, and since January, 1988, they have been permitted to have an unlimited number of non-member employees\. 15\. For 1987, OKISZ (the representative group for cooperatives) reported 1,963  - 72 - ANNEX3- Page 4 small cooperatives in non-agricultural sectors\. Of these, 67 were engaged in the trade sector, which for small cooperatives may have included some import and export activities\. Of the 1,900 small cooperative units in the non-trade sectors, 43% were in industry, 39% were in construction, 2% were in transport, and 16% were in personal services\. At the end of 1982, there were 145 small cooperatives\. Of the 88,000 employed full-time in 1986 in non-retail and non- agriculture small cooperatives, the CSO reporter that 46% were in industry, 35% were in construction, 1% were in transport and 18% were in personal services\. C\. Recent performance (i) Number of Units 16\. The number of units in the small scale sector grew rapidly over the 1984- 1987 period\. Proprietorships increased at an annual rate of 5\.1%, partnerships at a rate of 32\.1%, and small cooperatives at a rate of 74\.7%\. Excluding retail sector firms, proprietorships increased at a 3\.6% annual rate and small cooperatives at a 73\.5% rate\. (ii) Emgloyment 17\. Employment in the non-agriculture small business sector has increased in recent years in a context of a declining number ot jobs in the economy and a declIne in the contribution of the agricultural sector to total employment\. Small business employment increased over the 1984-1987 period at an annual rate of 4\.4% in proprietorships and 77\.2% in small cooperatives\. Figures are not available for employment growth in partnerships for the same period; employment in partnerships did, however, increase at a 25\.3% annual rate over 1982-1986\. Excluding retail sector businesses, employment in small cooperatives grew over the 1984-1987 period at a 76\.9% rate\. 18\. At the national level, there was a net decline of 109,400 in the number of active earners (jobs) in the economy reported by the CSO, from 5\.01 million in 1982 to 4\.89 million in 1986, for an annual rate of decline of 0\.6%\. Within this decline, CSO and representative organizations report an increase of 92,600 full-time jobs in small businesses over the 1984-1987 period, of which proprietorships created 7,600 full-time jobs, partnerships 12,000 and small cooperatives 73,000\. During the same period large cooperatives were to a limited extent hiving off units to operate as independent small cooperatives\. In some instances this was a step taken as the alternative to the closing of loss making units, in others it was to gain the benefit of improved tax treatment\. Over the 1985-1987 period for which comparative figures are available, large cooperatives lost 47,300 jobs while the small cooperatives created 57,800 jobs\. The most significant losses were by large industrial (lost 29,000 jobs), construction (lost 10,000) and service (lost 8,500) sector cooperatives\. The most significant gains were by small cooperatives in the industry (gained 22,000 jobs), construction (gained 23,000) and service (gained 9,000) sectors\. An indication that many of the jobs created in small cooperatives were new jobs rather than conversion of employment from large cooperatives is that while the number of  - 73 - ANNEX 3-1 Page 5 large cooperatives declined by 142 units over 1985-1987, the number of small cooperatives increased by 1,193\. 19\. Recognizing the significance of the small business sector to employment generation, especially during the period of major economic restructuring, the Government, through the Employment Fund operated by the Wage and Labor Office, offers from July, 1988, interest free, 10 year 'resumption loans' to individuals who have lost their jobs and who wish to start their own business or become members or partners in another business\. 20\. There are indications, most particularly the higher levels of average education in private firms, that the increased demand for labor in the small business sector in Hungary in the post-1982 period has tended to be for skilled and relatively high paid workers who can produce goods for larger industries and for export\. In this context, the role of the small business sector in Hungary is quite distinct from that often accorded to the small business sector in many developing countries, namely, of being a labor absorbing sector characterized by low paid workers producing low cost goods which meet the basic needs of poor people\. (iii) OutRut and Productivitv 21\. Output in the small business sector expanded at an annual rate of 49\.7% in current prices in the 1985-1987 peLiud\. Over the same period, total output for the economy in current prices expanded at 6\.4% per year\. (By comparison, the inflation rate (CPI) was 7\.0% for 1985, 5\.3% for 1986 and 9-9\.5% for 1987\.) For the small industry sector, the annual growth rate over 1985-1987 was 28\.3% in current prices, while for the total industry sector the growth rate was 1\.5%\. 22\. Output per employee in current prices in small cooperatives over the 1985- 1987 period expanded at an annual rate of 17%, compared with an annual increase in large cooperatives of 12%\. For the small scale industry cooperatives the annual rate of increase per employee was 22%, compared with 12% for large industry cooperatives\. Output per employee in small cooperatives in the industry sector in 1987 was Ft650,000 as compared with Ft460,000 per employee in the large cooperatives\. According to OKISZ, employees in small cooperatives earned 43% more than employees in large cooperatives in 1986, and the pre-tax profits of small cooperatives averaged 20% of revenue, as compared with 13% for t'Le larger ones\. 23\. The small cooperatives have generally more modern technology, a higher proportion of trained engineers per worker, a younger and more educated labor force, and lower indebtedness than the large cooperatives and state enterprises\. Observations and available data also indicate that they have had a greater export orientation to convertible currency markets\. The Ministry of Trade reported that in 1987, 40% of the applications for export incentives were made by small cooperatives\. 24\. The most rapidly growing industrial branch for the small cooperatives has been engineering, which accounts for 59% of small cooperative industrial gross output, and 40% of total cooperative sector output in the engineering branch\.  - 74 - ANNEX 3-1 Page 6 The cooperativ, sector's share of engineering branch output in the socialist sector rose from 9\.3% in 1986 to 10\.9% in 1987\. 25\. While much less information is available on the performance of partnerships than of small cooperatives, observations and interviews indicate that they share many of the characteristics (a tendency toward a younger, more educated work force, more modern technology, low indebtedness) of the small cooperatives although tending to be much smaller in size\. A 1986 survey of 200 small industrial partnerships reportedly found that all were either direct or indirect exporters, and that the average age of workers in partnerships was 35 years as compared with 50 years in proprietorships\. 26\. Comprehensive statistic's are not available on the feeder and subcontractual relationships between the large and small firms in Hungary\. On the other hand, most of the small industry businesses visited during the preappraisal and appraisal missions were suppliers to large scale firms\. In fact, supplier relationships with large scale firms appeared often to be a characteristic of the newer and most dynamic segments (partnerships and small cooperatives) of the small business sector\. A hypothesis would be that from the perspective of the large scale sector, supplier relationships are increasing rapidly from a very low base, while from the perspective of the small scale firms supplier relationships are an important part of total sales\. OKISZ reported that for large cooperatives, "feeder sales" were 21\.4% and 20\.4% of total sales for 1986 and 1987, respectively, while for the small cooperatives, "feeder sales" were 43\.8% and 48\.1% of total sales for 1986 and 1987, respectively\. 27\. As an illustration, a supplier network of 300 industrial proprietorships (craftsmen) plus 23 private foundaries has been operated by a Western firm in Hungary on a systematic basis for more than 30 years\. It is a demonstration of the advantages of an enterprise based on a network of small business suppliers\. The successful operation of this supplier network may be an indication of certain comparative advantages of Hungary's proprietorships (quality control, attention to detail, flexibility and speed of response with one-off and small series production)\. 28\. Comparative advantage is increasingly based on the human and organizational capabilities of firms to adapt technologies and to adjust rapidly to changing signals and conditions\. In this sense, the comparative advantage of Hungary's small business sector is concentrated in the small cooperatives and partnerships\. Observations indicate that the technology in the small cooperatives in particular tends to be new and relatively sophisticated, consistent with their recent establishment and the educated, technical background of their founders and employees\. In comparison, the technology in the proprietorships is in most cases older and the education levels of the owners and employees tends to be lower\.  - 75 - ANNEX 4-1 rRY-THIRD IOMRIAL RESTNJCILRING PRjC Page 1 FININCAL POSITION OF MPCR ChRCIAL BANKS CMIENSED BWN SETS (Ft 9ittia) mWrsisn Ctedit B*rk lst Bar* Caiuwal & Credit Biv* SETS (Aa of) 31/12/1986 31/12/I987 31/12/1986 31/12/1987 31/12/1986 31/1/1987 Dqslts trd cash 6\.960 25\.137 9\.000 24\.617 8\.280 21\.702 hart TeOM LoS 80\.390 71\.540 19\.800 31\.561 76\.000 69\.086 N & LT LOOM 80\.000 79\.979 29\.900 208\.40 60\.000 57\.179 Pulwticip1tlawli 0\.000 5\.922 0\.000 2\.327 0\.500 2\.247 Other Asets 0\.300 23\.153 1\.100 3\.360 1\.000 10\.605 TMAL ASETS 167\.650 5\.731 59\.800 O\.I08 145\.;90 160\.8W9 LIABILITIES & EGJITY \. \. , \. Short Term Debt 92\.880 89\.819 25\.400 49\.012 97\.300 87\.123 Lwg Teme Debt 71\.770 98\.298 29\.900 26\.691 45\.500 55\.308 Oth LIebiLitles o\.0oo 1\.500 0\.500 1\.168 0\.999 8\.837 Caitat 3\.000 8\.93 4\.000 4\.484 1\.981 7\.590 Reos 0\.oo0 0\.644 0\.000 0\.6o1 0\.000 1\.043 Profit 0\.000 6\.487 0\.000 0\.699 0\.000 0\.9;8 LUBILITIES & EJITY 167\.650 235\.73 59\.800 82\.75 145\.780 160\.89 *DESB INIOE STATEIS Irarnm Credit Ba* &4est 81s Camrcial & Credit Ber* INOOE (For er erdirf) 31/12/1986 1/ 31/12/117 31/12/1986 1/ 31/12/1907 31/12/A16 1/ 31/121987 lnterest on Dqits 0\.635 0\.897 0\.000 Interest an Loms 18\.95 6\.21 13\.861 Divid I\.rane 0\.742 0\.437 0\.885 Othe Ireac 3\.271 1\.875 2\.936 TOTAL INDOE 0\.000 23\.473 0\.000 9\.410 0\.000 17\.602 Interest cn Deposits 1\.839 1\.061 0\.721 interest on Refire 11\.7C0 3\.326 9\.615 Adnnistratiwe Ebp\. 1\.124 0\.704 0\.655 Other Ewes 2\.323 1\.064 1\.476 TOtAL BVEBS 0\.000 16\.986 0\.000 6\.155 0\.000 12\.467 --\. ---\. \. \. ------\. \. \. \. \. ------\. \. PROFIT (LOSS) 0\.000 6\.487 0\.000 3\.255 0\.000 5\.215 SIQNIFICWT RATIOS ezWfimn Crdit Brk kst Brk Camercia & Credit Bsk 31/12/196 31/12/1987 31/12/1986 31/12/1987 31/12/1986 31/12/19 Oramt Ratioctinus) 0\.940 1\.076 1\.134 1\.146 0\.866 1\.042 Total Dl*/EqjAty(tinus) 53\.46 15\.739 12\.425 10\.205 68\.6S2 14\.626 NLT Det/Eqity(times; 26\.667 8\.308 7\.475 4\.058 30\.88 6\.623 Relxrn cn Portfolio 0\.0a 4\.1x 0\.0a 5\.9% 0\.08 4\.1% Retui cn Eqjity 0\.08 67\.4X 0\.08 63\.4X 0\.0% 60\.4% Cp\. bWAssets 0\.0% 1\.1% 0\.08 1\.3 o\.08 0\.9% 1/ As the B93* started cptirs fram Jwawy 1, 1987, thee are nD i\.ca\. statmnts for the yew erdiri Deunr 31, 1986\.  HUNGARY-THIRD INDUSTRIAL RESTRUCTURING PROJECT FINANCIAI\. POSITION OF OTHER FINANCIAL INSTITUTIONS a/ ---------\.---------------\.-----------\.----------\.-\.---\. CONDENSED BALANCE SHEETS (Ft million) GBVF Agrobank Interbank IDB Innofinance Investbank Small Vent\. Const\. Bank GBTC Unicbank ============e==============r= = 2 = 2 2 ====e===2 227 2fl============= ==== 2 2222===================== ASSETS (As of December 31, 1987) Deposits and cash 999\.4 596\.0f 739\.8 99\.8 51\.8 238\.0 145\.0 51\.2 1,614\.9 144\.7 Short Term Loans 1,093\.2 1,489 0 1,595\.8 1,134\.1 589\.4 450\.0 3,427\.5 1,379\.5 2,275\.9 836\.6 N & LT Loans 611\.5 2,917\.0 1,266\.4 952\.1 134\.7 769\.0 23\.3 348\.5 1,015\.2 3,861\.5 Participations/Lease 3,252\.0 746\.0 1,220\.7 255\.6 264\.3 266\.0 151\.3 34\.6 381\.2 447\.6 Other Assets 289\.3 812\.0 737\.7 0\.2 43\.2 116\.0 0\.3 323\.1 447\.8 145\.8 TOTAL ASSETS 6,245\.4 6,560\.0 5,560\.4 2,441\.8 1,083\.4 1,839\.0 3,747\.6 2,636\.9 5,735\.0 5,436\.2 LIABILITIES & EQUITY Demand Deposits 161\.0 2,557\.0 922\.8 178\.4 452\.8 512\.0 2,709\.8 655\.6 1,692\.7 101\.9 Term Deposits 3,125\.3 1,853\.0 1,389\.1 0\.0 0\.0 347\.0 50\.0 890\.9 2,166\.4 3,646\.0 Other Liabilities 94\.8 570\.0 95\.4 422\.2 234\.1 255\.0 126\.6 50\.4 569\.3 618\.8 Capital ',200\.5 1,157\.0 2,715\.5 1,772\.8 365\.8 620\.0 759\.3 855\.3 1,000\.0 1,000\.0 Reserves 116\.3 122\.0 41\.8 0\.0 0\.0 0\.0 0\.0 0\.0 118\.8 16\.1 Profit 547\.5 301\.0 395\.8 68\.4 30\.7 105\.0 101\.9 184\.7 187\.8 53\.4 LIABILITIES & EQUITY 6,245\.4 6,560\.0 5,560\.4 2,441\.8 1,083\.4 1,839\.0 3,747\.6 2,636\.9 5,735\.0 5,436\.2 CONDENSED IhCOME STATEMENTS GBVF Agrobank Interbank IDB Innofinance Investbank SmaLL Vent\. Const\. Bank GBTC Unicbank =================================2==============================================2=============~2 INCOME (For the year ending December 31, 1987) -4 Interest Income 212\.8 434\.0 248\.7 270\.8 22\.3 63\.0 309\.9 129\.6 537\.4 232\.6 Income on Investment 66\.4 0\.0 31\.7 0\.0 78\.4 17\.0 0\.0 0\.0 5\.8 14\.0 Leasing Income 822\.2 287\.0 366\.5 0\.0 180\.6 148\.0 0\.0 183\.4 34\.2 28\.9 Other Income 328\.1 34\.0 2,758\.8 0\.0 28\.4 16\.0 21\.3 0\.0 88\.2 78\.2 TOTAL INCOME 1,429\.5 755\.0 3,405\.7 270\.8 309\.7 244\.0 331\.2 313\.0 665\.6 353\.7 EXPENSES Interest Paid 285\.2 203\.0 174\.5 78\.0 25\.7 18\.0 101\.4 22\.7 244\.7 167\.2 Depreciation 466\.4 129\.0 190\.2 47\.9 115\.0 27\.0 24\.3 77\.6 88\.6 16\.1 Fees & Other Exps\. 93\.2 39\.0 2,605\.6 22\.7 64\.3 76\.0 83\.4 73\.8 56\.4 16\.8 Operating Costs 37\.2 83\.0 39\.6 53\.9 74\.0 18\.0 20\.2 28\.1 88\.2 100\.2 TOTAL EXPENSES 882\.0 454\.0 3,009\.9 202\.5 279\.0 139\.0 229\.3 202\.2 477\.9 300\.3 \. ------\. \. \. \. \. \. \. \. ------\. \. \. ------ ------\. \. \. ------ ------\. \. \. \. \. PROFIT (LOSS) 547\.5 301\.0 395\.8 68\.4 30\.7 105\.0 101\.9 110\.8 187\.7 53\.4 SIGNIFICANT RATIOS GBVF Agrobank Interbank ID0 Innofinance Investbank SmaLl Vent\. Const\. Bank GBTC Unicbank r_z 2==== 2============== 2z==2=2=2222=2= ================================================ ==O=2==22 2 Current Ratio(times) 13\.0 0\.8 2\.5 6\.9 1\.4 1\.3 1\.3 2\.2 2\.3 9\.6 >x Total Debt/Equity(ti 0\.7 3\.4 1\.0 1\.2 2\.0 2\.0 4\.5 2\.0 2\.9 4\.6 Z, MLT Debt/EqultyCtlme 0\.3 2\.3 0\.5 0\.5 0\.4 1\.2 0\.0 0\.4 0\.9 3\.8 Return on Portfolio 11\.01 5\.8X 9\.7X 2\.9X 3\.1X 7\.1Z 2\.8X 6\.3X 5\.1X 1\.0X Return on Equity 23\.6X 23\.51 14\.4X 3\.91 8\.41 16\.91 13\.4X 13\.01 16\.81 5\.31 Op\. Exps/Assets 0\.6X 1\.3X 0\.7X 2\.21 6\.81 1\.01 0\.51 1\.1S 1\.5 1\.8X a/ Excluding for the Post Office Savings Bank which was established on July 1, 1988\.  - 77 - ANNEX 4-2 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Hungary: Interest Rate Structure (in Percentage Points Per Year) 1986 1987 \. 1988 1/1 6/1 1/1 6/1 1/1 6/1 A\. Deposit Rates Copmercial Banks and Savings Banks: Enterprise Sector 1/ Demand Deposits - - - 0\.5 0\.5 0\.5 Less than 1 year 4-6 4-6 3-6 4-6 4-8 4-8 1 year 9\.25 9\.25 8\.25 9\.0 13-15 14-16 Household Sector Demand Deposits 2-5 2-5 2-7 2-7 2-11 2-11 1 year 4\.0 4\.0 4\.0 5\.5 9\.0 13\.5 2-3 years 6-8 6-8 6-8 7-10 10-12 14-15 Youth Deposits: -5 years 6\.0 6\.0 6\.0 8\.0 8\.0 8\.0 -Over 5 years 8\.0 8\.0 8\.0 9\.0 12\.5 14\.5 Savings Notes: -2-6 years 6-9 6-9 6-9 8-10 8-13 14-16 -Over 6 years 9\.0 9\.0 9\.0 10\.5 15\.5 16\.5 B\. Credit Rates: NBH Refinance Rates State Loans 11\.0 10\.0 10\.0 10\.0 11\.5 11\.5 Commercial Bank Loans: -Short Term 10\.5 9\.5 11\.5 11\.5 11\.5 11\.0 -Supplementary - - - - 12-16 12-16 -Medium Term 11\.5 10\.5 10\.5 10\.5 12\.0 12\.0 Commercial Banks and Savings Banks Lending Rates Enterprise Sector State Loans 13\.0 12\.0 12\.0 12\.0 13\.5 13\.5 Commercial bank loans:!/ -Sh(, ^Term 2\.0 11\.0 13\.0 13\.0 15-17 16-20 -Medium Term 13\.0 12\.0 12\.0 12\.0 14-17 14-17 Household Sector Housing Loans -NSB only 3\.0 3\.0 3\.0 3\.0 3\.0 3\.0 -Other Banks 8\.0 8\.0 8\.0 8\.0 12\.0 12\.0 Hire Purchase 5-8 5-8 5-8 5-9 12\.0 12\.0 Agriculture 6-8 6-8 6-8 8-9 8-9 12\.0 Small Business 1 12-13 12-13 11-12 12-13 14-15 14-15 Cons- mtr Loans 8-10 8-10 8-10 8-12 13-15 13-15 l/Interest rates set by the commercial banks for transact4ons with enterprises, both for deposits and credits, were liberalized with the setting up of the banks January 1987\. Considerable variations exist around the base rates indicated\.  HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PRO=ECT Pipeline of Potential Export Investment Proiects Incremental Incremental Total Financing World Bank Period of Incremental Annual C\.C\. Employment Bank/Enterorise Suborolect Reauiremerit Su,loan Inulementation Annual Sales Exnoot Sales (+ or - (Ft\. mln) (USS 000) (Ft\. mln) (US$ 000) Budapest Bank Ltd\. 1\. Alkotas Textilip\. Szov\. Ladies blouses 7\.0 120\.0 1989/90 2\.0 36\.4 - 2\. BVK PVC powder capacity increase 650\.0 6,875\.0 1989/91 975\.0 13,000\.0 + 10 3\. Csepel Autogyar Gearbox parts 510\.0 4,410\.0 1989/91 790\.0 10,980\.0 ) + 40 4\. - do - Engine parts 512\.0 3,700\.0 1989/91 235\.0 4,273\.0 ) S\. Ganz Gepgyar Driving gear 200\.0 1,200\.0 1989/90 16\.5 300\.0 - 6\. PRIMEX Kft Stitching machines for office paper 6\.0 80\.0 1989/90 170\.0 400\.0A/ + 14 7\. Veci Kotottarugyar Sportsware 230\.0 2,500\.0 1989/90 230\.0 3,600\.0 + 100 8\. Veszpremi Sznebanyak Gepgyar Safety equipment 110\.0 2,000\.0 1989/90 30\.0 545\.0 - Commercial and Credit Bank 9\. FORCON Bekescsaba Tool holders, software products 123\.0 2,000\.0 1989/991 n\.a\. n\.a\. n\.a\. Hunoarian Credit Bank 10\. Budapesti Vegyimuvek Special intermediate chemicals 1,000\.0 6,000\.0 1990/92 1,000\.0 18,200\.0 i1\. Csepel Muvek Szerszamgepgyar Software project 100\.0 1,850\.0 1989 455\.0 S,65u\. - 11S 12\. IKARUS Intercity bus 1,350\.0 17,000\.0 1989/92 700\.0 12,900\.0 n\.a\. I 13\. RABA Gear manufacturing 1,583\.2 12,800\.0 1989/90 1,164\.0 14,500\.0 -_ 14\. TAURUS Special pipes 222\.0 1,193\.0 1989/91 170\.0 2,290\.0 - x 15\. TAURUS Hydraulic pipes 302\.0 3,030\.0 1989/91 203\.8 2,560\.0 + 70 16\. TUNGSRAJI H4 lamps 407\.4 5,800\.0 1989/91 606\.0 6,200\.0 - 17\. TUNGSRAM Vacuun Technology Machinery 155\.0 2,800\.0 1989 n\.a\. n\.a\. n\.a\. 18\. TUNGSRAM Mgt\. Systems, QC\. CAD\. Mgt\. training, License H4 Lamp S0\.0 9,662\.0 1989 - - 19\. Ujpesti GyapJuszovogyar Modermization of spinning 90\.0 1,200\.0 1989/91 59\.0 730\.0 Industr\.ial Devel ocment Bank 20\. EL-CO Electrical equipment 60\.0 1,000\.0 1989/90 SO\.0 900\.0 Interbank 21\. Hajdosagi Iparmuvek Modernization heating bodies manufacture 80\.0 1\.100\.0 1989/90 55\.0 1,000\.0 TOTAL 8L20\.Q 6 86\.320\.0 A/ Company convertible currency exports exceed 30%\. Source: Restructuring Program Office tRPO)\. based on information provided by the participating banks and enterprises\. %-n  - 79 - ANNEX 5-2 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Terms of Reference for Small Business Credit Training A\. Dackground 1\. This training program is being introduced in anticipation of an increase in small business lending by commercial banks as a response to the proposed small business credit component supported under the World Bank financed Third Industrial Restructuring Project\. B\. Scope of Training Program Consultancy Assignment 2\. The consultants will design, develop course materials, provide external instructors and manage the implementation of a training program to provide an introduction to small business lending to loan officers of Hungarian commercial banks\. The newly established International Training Center for Bankers (ITCB) will provide for the development of local course materials, provJ\.de Hungarian instructors, and be responsible for course coordination and arrangements in Hungary\. 3\. The program will consist of a six day course which will be given three times\. Each course will cover five areas: (i) introduction; (ii) basic analysis of a small business; (iii) assisting small businesses; (iv) loan administration; and, (v) banking straterzes for the small business sector\. The course methodology will consist of case studies and classroom discussions, with the participation of resource people as appropriate\. The course will be given in Hungarian\. All materials, and most especially the case study materials, are to be given to the participants sufficiently in advance to allow for classroom sessions to concentrate on analysis and resolution of the cases\. Each course will have 20 participants\. C\. Content of the Training Program 4\. Part I: Introduction\. This will provide overviews of the course, of the environment for small business in Hungary, and of the market for small business lending in Hungary\. S\. Part II: Basic Analysis of a Small Business\. This part of the course will review the fundamentals of business financial info,\.rmation and business credit analysis from a small business perspective\. This will cover: - basic credit analysis (a review of the major aspects of small business financial statements and tax returns, and financial ratio analysis for small businesses), - the practice of financial information verification (in the context of Hungary documenatation and business proactices, and to include the role of on-site visits in documentation-short situations), - risk assessment (typical financLal problems of Hungarian small  - 80 - ANNEX 5-2 Page 2 businesses; trend analysis; causes and effects of low liquidity, low margins, low sales, poor inventory control; financial impact calculations; projections of income and expenses, cash flow and working capital)\. 6\. Part III: Assisting Small Businesses\. Small firms in Hungary have very limited experience with commercial bank credit\. This part of the course will provide banking sector officials with an overview of the key areas in which they can provide assistance to their clients\. This will cover: - legal and regulatory issues for small businesses, - accounting and taxation issues, - preparing business plans, - preparing cash budgets and profit plans, - understanding differences between profit and cash flow, - understanding cost, volume, price and profit relationships; and breakeven analysis, - assessing seasonal impact, and - credit needs assessment (forecasting short-term needs and structuring debt)\. 7\. Part IV: Loan Administration\. This part of the course is the critical linkage between credit analysis (covered in Part II) and banking strategies (Part V) for the small business sector\. It will cover: - credit application, to it,alude: the procedures, the credit analysis and appraisal (including the risk assessment and financial projections to be used for loan administration), and the checking of references (the course will use the small business loan application and appraisal forms being developed for the small business credit line under the Project), - reporting and monitoring systems, frequency and sources, - portfolio control, - problem loan administration: typical warning signs; assessing severity; and problem loan strategies (collateral mangement, documentation and legal procedures, workout credits, renegotiation, restructuring), and - preparation of operations manuals for small business credit\. 8\. Part V: Banking Strategies for the Small Business Sector\. This part of the course is to provide an overview of strategy development for a bank towards the sector\. It will include: - the bank's business plan, - market size, structure and growth analysis (to include demand for credit and other services), - the role of small business current and fixed deposits, reciprocity analysis, - average cost of funds, loan yields and transaction costs for small business lending, - analysis of the bank's capabilities, weaknesses and performance, - analysis of the competition, - possible strategies and associated risks, and  - 81 - ANNEX 5-2 Page 3 - staff and other resource requirements, including the role of subcontracting\. D\. Preparatory activities 9\. Initial meetings between the selected consultants and the ITCB will be held to agree on detailed course content, materials preparation schedules and identification of instructors\. The consultants will organize a technical visit by the course coordinator to appropriate trainining institutior,s for the purpose of familiarization with methodologies and approaches\. E\. Reporting reguirements 11\. The consultants will report to the course coordinator, to be selected by the ITCB from staff nominated by the commercial banks\. The coordinator will form a course committee, to include financial and small business sector representatives, to advise on course design and content\. 12\. The materials to be prepared for the course will be presented in manuals suitable for subsequent use by the participants and others as reference materials on lending to the small business sector in Hungary\.  - 82 - ANNEX 5-3 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Terms of Reference for Engineering Subsector Study A\. Background 1\. The experience of industrially developed countries shows that the development of the engineering industry cortributes to the increased efficiencv and competitiveness of the industrial sector as a whole\. The engineering industry supplies capital goods to other sectors of the economy and provides a base for their efficient operations\. Also, the parts and components provided by this industry are indispensable inputs for production of downstream products\. The incorporation of microelectronics in machines and process controls is of substantial significance\. Manufacturing processes in the engineering industry are often not capital intensive, nor do they require enormous infrastructural facilities\. The labor intensity of this industry offers significant employment opportunities compared to other subsectors\. 2\. The World Bank has provided financial support for the preparation of several subsector studies with the objective of (a) assisting the Government to identify sector-specific issues and develop the necessary industrial policy measures, and (b) assisting the enterprises and banks concerned to develop their own strategy for restructuring\. The subsectors investigated include plastic processirg, rubber products manufacture of agricultural and food- processing machinery, vacuum engineering industry, manufacture of road vehicles, and the feeder industry\. In the frame of the reform program, the Government's role is shifting from direct control of enterprise operation to indirect guidance of the whole economy\. The subsector study is being undertaken with a long-term perspective to analyze the probiems located between macroeconomic policy framework and enterprise-level restructuring without encroaching on the initiative of each individual enterprise\. At the same time, a demand to specify the required policy actions will not decrease, given the need to accelerate the restructuring process and the scarcity of available resources of the country\. 3\. The subsector study will cover the product groups of the engineering industry as defined by the respective nomenclatures of ISIC and GATT, inc uzding: (a) Machines and equipment and engines, power machines, agricultural machinery and equipment;* metalworking machines; machines for the textile and leather industries; food industry machines;* (b) Vehicles and road vehicles;* cargo and passenger transport vessels; railway rolling stock; air transport facilities; (c) Electric motors and appliances, electric generators, transformers, distribution switchgear, interrupters; household electric appliances; other electric equipment;  - 83 - ANNEX 5-3 Page 2 (d) Telecommunrications and vacuum engineering products, electro- accoustic equipment and devices; telecommunication equipment; computer systein components; vacuum engineering equipment and devices;* microelectronics parts and subassemblies; (e) Precision engineering, electronic, optical and mechanical instruments; telemechanics equipment; components of automatic control systems; (f) Metalware, fittings, connecting parts; tools; devices and fixtures\.* * Note: Product groups marked with an asterisk have been the subject of detailed studies under previous industrial restructuring programs\. B\. Objectives of the Study 4\. The objectives of the study are to determine the general directicns for the future development of the engineering subsector in Hungary with a view to increasing its international competitiveness and exports to convertible currency (CC) markets, and make recommendations for policy changes that need to be made as well as the infrastructural and institutional systems that would have to be strengthened for the optimal development of the subsector as a whole and the strategic thrusts to be provided for the product groups identified by the study as having maximum potential for development\. C\. Expected End Products of the Study 5\. Specifically, the study should lead to the following key sets of outputs, categorized in two groups: (a) Product-Market Strategy 6\. Specific product groaps in which Hungary should develop its production to meet the future domestic demand and the CC export markets in which Hungary should seek to compete based on consideration of market trends, productivity and international competitiveness of the product groups (both current and potential), profitability of different markets, etc\. The relative attractiveness and feasibility of these market goals should be evaluated and made specific in order to gain a clear understanding of the subsector's future prospects\. It should therefore critically examine the assumptions on which the future growth in demand of the respective product grouos is envisioned in the end-user industries, and in light of any substitution trends and new technologies that are foreseen for the end-user community\. It should examine the comparative cost structure and any shifts expected to take place as a  - 84 - ANNEX 5-3 Page 3 result of technological improvements in both product design and manufacturing process\. It should be based on an assessment of the quality of engineering products with regard to raw materials, product and process technologies and the management processes that exist or are planned for the improvement of quality\. Products and markets in which Hungary no longer enjoys or has the potential to achieve comparative advantage should be identified with appropriate remedies\. (b) App-opriate Industry Structure 7\. The study should define an appropriate industry structure within the product groups, taking into account considerations of international competitiveness and long-term viability, number of competitors, respective size and scale, degree of integration, degree of specialization, opportunities for linkage between enterprises, etc\. Some specific issues which may need to be addressed are! (i) the specific measures that are needed for small and medium units in the engineering subsector to grow\. The engineering industries can provide major opportunities for employment creation on the one hand and cost reduction through specialization (manufacture of components and subassemblies for complex large products); structural mechanisms for technology transfer from larger units to smaller enterprises; (ii) given the prevailing situation in the subsector, should additional new capacity be obtained thrDugh expansion of existing manufacturers or through new entrants; (iii) specific measures to facilitate technology licensing to bridge technology gaps including the need for joint ventures; (iv) measures for improving availability of raw materials and components, including placement of bulk orders\. (v) Determination of the resources required by the industry, such as: (a) overall investment in the physical and financial restructuring needs of the industry, (b) skill requirements in management, marketing, manufacturing, skilled workmen, and elaboration of programs for their development and regulation\. (vi) List of changes in government policies and regulations needed to support appropriate changes in the subsector's structure and promote enterprise initiatives\. (vii) A subsector program stating major bottlenecks to be removed,  - 85 - ANNEX 5-3 Page 4 (viii) Identifying a preliminary list of potential promising enterprises whose performance would significantly improve through implementation of enterprise-specific restructuring action programs, including any assistance, and incentives by the Government to stimulate these changes towards an appropriate subsector strategy\. (ix) Likely impact of recommended strategies and resulting investments on production, value added, employment, etc\., in two time horizons: 1989-1992 and 1992-2000\. D\. Analysis to be performed 8\. Several analyses will need to be performed to produce these end products\. This is not a desk study of the existing subsector statistics, reports and studies, although their review and findings will be necessary and will provide very valuable background material\. The analysis will need to be based on extensive field visits to a representative sample of enterprises from each of the product groups as also the infrastructure institutions (R&D, training, standards, institutions, etc\.) which support the engineering subsector\. 9\. The analysis will include: (a) historical development of the subsector, (b) current status of the subsector with a breakdown by product groups with regard to: - capacity, capacity utilization and production together with a broad inventory of key production facilities now existing, - an assessment of product, material and production technology of existing product groups at various stages of production as compared with that in selected industrialized countries, - availability of manpower including skilled workers, mechanics, technicians, manufacturing, design and research personnel, marketing, financial and general management personnel, etc\., - geographic distribution of plants and capacities in terms of large, medium and small units, - financial strtucture of the industry, source of investment and working capital finance, constraints on effective operations due to lack of adequate finance, - marketing and distribution arrangements and practices, including sources of market intelligence, participLtion in industry fairs, etc\., - institutional and policy framework including pricing, incentives, taxation, etc\.  - 86 - ANNEX 5-3 Page 5 (c) Hungary's Competitive Position - manufacturing costs by product groups, present cost structure, comparative advantage, - market share in key EC export markets by product groups, - reputation with buyers, - response time\. (d) Inputs--Raw Materials and Components - analysis of the adequacy i\. cerms of quantity and quality of existing and potential availability of raw materials, components and subassemblies and their prices including that of imports, - impact of above constraints on control and management of inventories by large and small enterprises\. (e) Technology Assessment Analysis of and comparisons with selected industrialized countries, of the following factors: - an assessment of the design capabilities for engineering products, - the prevalence of computer-aided design and manufacturing, - the extent of research, development and product engineering undertaken by individual enterprises\. An assessment of the institutional mechanisms necessary for technology transfer, - the extent and prevalence of consultancy engineering services available in the country and the need for augmentation\. - the nature and extent of quality control activities and the level of consciousness within Hungarian engineering industry of the need for in-house quality assurance systems, - the availability of industrywide testing and product certification facilities, - existence and availability of internationally accepted product standards\. (f) Scale Requirements and choice of appropriate technology needed to compete effectively in domestic and international markets by product segment,  - 87 - ANNEX 5-3 Page 6 (g) Operational Effectiveness Adequacy of prevailing organizational structures, management and information systems including strategic planning, financial and cost controls, human resource development, etc\., with a view to enhance operational effectiveness\. (h) Training The extent and effectiveness of existing institutions for meeting the needs of training at all levels--management development, technicians and craftsmen\. -i) Domestic Demand Analysis of the domestic demand by market segments for different product groups and projections for future demand clearly outlining the assumptions in projection of demand and likely impact of technological innovations\. (j) Export Potential in Convertible Currency Markets - Trends in key international markets (for the engineering products groups under study) paiticularly the US, E\.E\.C\., etc\., as well as developing country competitors\. - Demand by product groups, expected growth rates, impact of quotas, if any\. - Nature of competition in each product group and sources of competitive advantage\. What is the relative importance of price, quality, delivery time, etc\. - Appropriate geographical scope of competition\. (k) Analysis of strategies followed by Hungarian firms which have successfully competed: - in domestic and international markets, - as high volume producers and as small-scale producers\. (1) Analyzing the effects of policy environment on the subsector's structure\. The relationship between policies and structure should be studied in order to recommend the policies needed to induce structural change\.  - 88 - ANNEX 5-3 Page 7 (m) Identifying the specific and appropriate resource requirements of the subsector--physical, managerial and financial--to respond to the identified restructuring strategies\. (n) Evaluation of results under different strategies\. Economic results in terms of value added, employment, CC export, etc\., evaluated for the different product\.market strategies and industry structures proposed\. E\. Timing 10\. The draft final report is expected to be completed within six months of start of the assignment\. The consulting firm chosen to prepare a sector study should expect to hold progress review meetings with the client and the advisory participation of the World Bank personnel at the end of week six of their efforts, at the end of week 12 and when a draft report has been completed prior to its final submission at the time of study\.  - 89 - ANNEX 5-4 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Terms of Reference for Small Business Sector Study A\. Background 1\. There are no comprehensive studies and few partial studies available on the small business sector in Hungary\. The Central Statistics Office (CSO) has not altered the scope or methods of its data gathering and publication on the sector in recent years, and thus is not able to make information available which adequately captures the structural changes and growth of the sector as it has become a steadily more impoxtant contributor to the economy\. Policy decisions affecting the sector have necessarily been made on the basis on general principles and not on extensive quantitative data or analyses\. 2\. There is a need (i) for a benchmark study of the structure, constraints and potential of the small business sector, and (ii) based on recommendations developed during the stuoy, for an upgrading of the regular gathering and publication of data on the sector\. B\. Scope of Study 3\. The study will cover the following sectors: industry and related services, transport, construction, tourism, and trade\. The small scale agriculture sector will not be covered\. The study will: (i) review the recent development of the sector; (ii) describe and analyse the structure and performance of the sector since 1982; (iii) identify and analyze factor and product market related policy sonstraints to the sector's development; (iv) describe and analyse the adequacy of the institutional, professional and other service sector support available to the sector; (v) identify and analyse the sector's comparative advantages; (vi) identify and analyse the potential impact of major trends likely to affect the sector's development; (vii) identify and prioritize institutional development activities and policy and regulatory reforms which will increase the competitiveness and economic contributions of the sector; and (viii) propose information gathering and publication activities to be carried out on a regular basis by Hungarian institutions to meet the requirements for adequate monitoring of the sector's performance and development\. 4\. The study will be carried out in four phases to permit opportunites for adequate feedback, coordinated by the CSO,1 from policy level officials, the financial sector and che major institutions representing firms in the small business sector\. 5\. Phase One\. The CSO will form a team of experts from the CSO, several research institutes, Chamber of Economy, organizations of the small business sector and several financial institutes\. The team will: 1/ Participation of CSO to be confirmed before negotiations  - 90 - ANNEX 5-4 Page 2 - develop a decision on the scale boundaries of the small business sector to be covered by the study (using employment, assets, and sales as criteria); - develop decisions on the information gathering methods and instruments to be employed in the study; it is anticipated that the primary methods will be interviews and the review of existing data although focused surveys of selected subsectors including intensive firm level information gathering will be necessary; - search for information, studies and publications available on the small business sector (including foreign literature); - study experience of other countries; - develop a detailed plan and timetable for the implementation of Phases Two, Three and Four; and - make a detailed estimate of the costs required to carry out the study, including the possible involvement of foreign consultants\. i 6\. Phase Two\. The team will collect and analyse data covering the following topics: - structure and performance since 1982 (by organizational type, by sector and branch, by county and by scale); - factor and other input market policy constraints (to include: capital and labor markets, import regime, foreign exchange and control, price controls, licensing and registration, zoning); - product/market policy constraints (to include: foreign trade regime, demand related policies, price controls, profile restrictions); - service sector and other support environment cabilities and constraints (to include: technology access, training, policy formulation representation, finance, marketing, insurance); - comparative advantdges of the sector (current and potential) compared with other parts of the business sector; and - major trends and potential of the sector\. 7\. Phase Three\. The team will prepare a full draft report of the Phase Two findings and of the preliminary recommendations for policy and institutional reforms\. 8\. Phase Four\. The CSO will organize workshops and seminars to discuss and review the draft report\. The team will prepare the final report taking into account the feedback received from the discussions in workshops and seminars\. C\. Timing 9\. The first phase of the work is to\. be finalized by the end of May 1989\. The final report is to be ready by November 1990\.  - 91 - ANNEX 5-5 Page 1 HUNGARY THIRD INDUSTRIAL RESTRUCTURING PROJECT Terms of Reference for Strengthening of Appraisal Skills for Job Creating Investment Promotion A\. Background 1\. This Annex sets out terms of reference for the provision of project appraisal training to Hungarian officials responsible for administering measures which give financial assist\.ance to job-creating projects\. The work is being commissioned by the Hungaridn Government, using funding under a loan from the World Bank\. 2\. Currently, there are two schemes which provide financial assistance to projects which establish in certain areas of the country: the Repional Development Fund and the Employment Fund\. The overall aims of these measures are to promote new economic activity in areas where heavy industry is declining and in areas which have suffered from an overall shortage of employment opportunities\. If the measures are to succeed in helping develop a new economic base in assisted areas it is vital that projects which are granted assi\.tance have long-term financial viability and improve the quality as well as the number of jobs in these areas\. It is also important that support is focussed on those projects which will do most to improve economic conditions in the localities to which it is applied\. 3\. The Hungarian Government is keen to improve the effectiveness of the above mentioned measures and has decided to make a number of changes to the way they are administered and to eligibility criteria\. Under revised administrative arrangements which are now being implemented the applications for assistance for small projects will be dealt with by county council officials while larger projects will be assessed by SDI directly\. 4\. The decision to commi3sion the work has been taken because of concern that, as they are currently administered, the above mentioned measures are not achieving the full benefits in terms of net new jobs created\. One of the key problems is inadequate skills for appraisal of application for support and the assignment is intended to address this problem\. In particular, it is felt that because of the lack of experience of appraisal staff, many projects were not of sufficient quality and projects which would have proceeded in any event are receiving assistance\. B\. Objectives of the Assignment 5\. In light of the above comments the objectives of the training assistance are: (i) to improve the overall quality of appraisal skills of staff reviewing application for Government support for job making investment;  - 92 - ANNEX 5-5 Page 2 (ii) to help establish common appraisal procedures within relevant organisations; and (iii) to establish a process for generating case material which will assist in the appraisal of future applications; 6\. Overall success of the assignment will depend on the extent to which those providing the training are able to transfer their own knowledge and experience to Hungarian officials\. In this regard it is felt that those individuals providing the training must have personal experience of establishing and operating measures which provide financial assistance on a discretionary basis to job creating investment projects in industry\. C\. Scoge of the Assignment 7\. Training will be provided to five appraisal teams, one in a central agency plus four county council teams, in total involving some 20-30 individuals\. Those submitting proposals for the assignment are expected to make their own proposals on what they judge to be the most appropriate approach\. In doing so they should however bear in mind the following guidelines\. 8\. First, while there may well be some scope for group training involving all those responsible for carrying out project appraisal, it is important that the major part of the training focuses on real cases for which each of the teams is responsible\. It is expected that this on the job training will be carried out in each of the five teams' respective locations\. 9\. Second, effort must be concentrated on those aspects of appraisal in which expertise is currently least developed\. These relate to the viability of projects and the maximisation of additionality, i\.e\. the extent to which support is concentrated on projects which would not have proceeded without assistance and the degree to which the level of assistance offered in individual cases is limited to that which is just sufficient to ensure that the project is implemented\. 10\. Third, the work on current applications for support with each of the appraisal teams is expected to generate case material which will be able to be used to guide future appraisals\. 11\. Fourth, those carrying out the training will be expected to produce an appraisal manual which clearly sets out appraisal procedures and explains the use of various appraisal techniques\. D\. Timing and Organisation 12\. In designing a programme of work, those tendering for this assignment should bear in mind the need that those providing the training should familiarise themselves with the operation of the Government measures\. This will involve a  - 93 - ANNEX 5-5 Page 3 range of consultations in Budapest but is urlikely to require more than a few man-days of effort\. Training accommodation will be provided in Budapest and in each of the respective counties\. The work should be completed within three months of the start of the assignment\. It is envisaged that the assignment will irvolve four man-months of work\.  - 94 - ANNEX_ 5-6 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Terms of Reference for Borsod Regional Plan A\. Background 1\. This Annex sets out terms of reference for the preparation of an economic development strategy study for Borsod-Abauj-Zemplen (Borsod) County in north-east Hungary\. This study is being commissioned by the National Planning Office (NPO) of the Hungarian Government and will be the first such study undertaken in Hungary with the assistance of foreign consultants\. Funding for the foreign exchange component of the project cost will be provided through a loan from the World Bank\. A Steering Committee to deal with the problems in northern Hungary has been set up in the National Planning Office\. The consultants will report to this committee and are expected to work closely with officials of Borsod county council\. 2\. The decision to commission the study arises from the emergence of increasing economic problems in Borsod county resulting rom the restructuring of heavy industry, especially iron and steel making\. This is expected to lead to several thousand labor redundancies within the next few years\. At the same time, like much of north-east Hungary, a large part of Borsod is classified as a backward area, with locational disadvantages, poor soil conditions and consequent unproductive agriculture, and poorly developed physical and social infrastructure\. 3\. Borsod is an important county within the Hungarian economy\. As well as being the largest of the provincial counties in terms of population Borsod is also by far the most significant industrial area outside Budapest, with total employment in the industrial sector of nearly 140,000\. It is a major centre for the production of bulk chemicals and both its two main towns, Odz and Miskolc, are the location of large steel making complexes\. At the same time Borsod has a wide range of other industries, 4\. The emergence of these problems in Borsod and in several other areas in the country has led the Government to introduce several policy initiatives aimed at assisting individuals displaced from heavy industry to find alternative employment, and also to stimulate new job-creating investment in these areas\. Most of these measures fall under either the Regional Development Fund, or the Employment Fund\. 5\. As well as establishing these financial assistance measures, the Government has already started a process of regional planning in north-east Hungary\. This has involved the NPO, the county councils and academic researchers\. To date most effort has been devoted to the collation and analysis of basic regional data and on problem identification\. The present assignment will be expected to build upon what has been done already in relation to Borsod county and the interim results of this research will be make available to the successful consultants\.  - 95 - ANNEX 5-6 Page 2 B\. Objectives of the Study 6\. The proposed study has following objectives: (i) to assess the future employment prospects for Borsod county; (ii) to formulate an economic development strategy for Borsod county for the next five to ten years which focuses on the efficient creation of new jobs; (iii) within the defined strategic framework, to develop proposals for particular job creation initiatives (which might include both specific projects and the establishment of soft infrastructure such as small business advisory services), assess their cost to the different parties involved and estimate their impact in stimulating new employment; (iv) to make recommendations as to the appropriate institutional framework for implementing the overall strategy and specific initiatives and measures, and prepare a costed plan for implementation of all the recommendations; (ir) to help develop a local capability within Hungary to carry out economic development assignments of this nature\. 7\. It is stressed that the proposed assignment is not a traditional planning exercise concerned with forecasting future trends and ensuring that the necessary public investment in infrastructure is put in place to cope with expected growth\. Rather, it will be concerned with identifying the most cost-effective ways of stimulating the growth of new employment in the County\. C\. ScoDe of Work and Phasing 8\. The assignment should be undertaken in two phases\. 9\. Phase 1\. The first phase will involve the preparation of forecasts of employment trends in each economic sector, assuming that no further policy measures are introduced, an analysis of the advantages of the area which might provide a basis for economic growth together with an assessment of key weaknesses, and the formulation of an economic development strategy, focussing on job creation aimed at exploiting the strengths of the area\. The results of Phase 1 should be written up in report form\. This must be available within two and a half months of the agreed start date of the assignment for discussion with the Steering Committee and local and national government officials and representatives of other concerned organisations\. The Phase 1 report should indicate possible initiatives which the consultants consider are worth pursuing as elements of the proposed strategy\. 10\. Phase 2\. The second phase, which should be completed within six months of the date of commencement of the assignment will involve the formulation of proposals for specific economic development initiatives and measures that will form part of the agreed strategy\. These initiatives should not be concerned with the identification of business ideas but rather with creating the conditions in which enterprises can flourish\. For example, they might seek to build on the strength in a specific industry, or improve conditions for start-up businesses, or seek to remove constraints on business development by way of improved supply of finance or industrial and commercial premises\. These proposals must be fully  - 96 - A2NNEX 5- 6 Page 3 costed with\.recommendations on pricing where these involve the supply of services for which charges will be made\. The consultants should indicate how far, if at all, pubLic expenditure on initiatives being proposed will lever in spending by other parties, most especially business enterprises\. Estimates of their likely impact on employment should also be prepared\. 11\. In addition, the consultants will be req,\.ired to make detaiied recommendations on implementation of the proposed strategy and of the specific initiatives that will form part of it\. These must include recommendations on the appropriate orgarnisations for undertaking various economic development activities, and the preparation of an action plan for implementing each of the recommendations\. It should be noted that Government funds which might be made available for economic development are limited\. As with Phase 1 the second phase will need to be written up as a report and this will provide the basis for a formal presentation to the Steering Committee\. 12\. Trainirng\. The economic development strategy for Borsod will provide a model for comparable exercises in other areas of Hungary\. It is expected that future work of this type will be undertaken using predominantly local resources\. The extent to which the Borsod study provides training for local organisations in work of this nature is therefore of importance\. In this regard consultants are encouraged t^ u- \. one or more local organisations in a subsidiary role during the assignment\. 13\. Fieldwork\. It is anticipated that there will be a need to consult widely among concernad organisations within Borsod County itself and to a lesser extent in Budapest\. The consultants will be expected to undertake visits to a wide range of business enterprises across all sectors, including agriculture and agro- processing\. As a result of the work on regional planning which has been undertaken to date, it should not be necessary to devote much effort to the collection and analysis of data\. However, in preparing proposals consultants should appraise themselves of what data is readily availabla, and in their proposals clearly state what information they will be using and whether they this is currently available or whether it will be necessary to put effort into collecting it\. Additionally, following submission of the report on the second phase of the study it will be necessary to make presentations of overall findings and recommendations to several different groups, apart from the official steering group\. These are likely to comprise both local institutions and national government Gfficl:iLs\. D\. CounterRart Staff and Budget 14\. One or more staff from NPO will be seconded to the assignment on a full- time basis\. It is envisaged that thes- individuals will accompany the staff of the consultants rather than engage on fieldwork or analysis by themselves\. An office and telephone will be provided within Borsod to provide a base for the project team\. It is envisaged that the assignment will require of the order of nine man-months of consulting effort\.  - 97 - ANNEX 5-7 Page 1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Project Support for EmRloyment and Retraining Services 1\. The Project will assist the Government to develop and field test expanded employment services in two selected counties and a pilot &:-training center in one county\. Project support will primarily consist of targeted technical assistance (fellowships and consultants) to assist in study, identification, and testing of expanded and new employment service and retraining models in other countries\. Fellowship assistance will emphasize short site visits and internships to study alternate models\. In addition the Project will provide funding for limited purchase of materials to support development and testing of new employment services, and equipment for a pilot retraining center\. Detailed terms of reference for the technical assistance areas are contained in the Project File\. The following paragraphs provide an overview of the Project support\. (a) Strengthening Current Operations of the EmRloyment Fund 2\. General Oneration of the Fund\. The Project would support fellowships and consultant assistance to assist the WLO (i) study and develop methodologies for more effective allocation of EF funds, (ii) develop criteria to evaluate the cost effectiveness of EF benefit programs, (iii) develop an annual EF planning model for utilization by county councils, and (iv) assist in training county staff in the use of this planning model\. 3\. Extension of Period of Notice/Employment Allowance ienefit/Unemplovment Benefit\. The Project would support fellowships and consultant assistance to assist the WLO study and develop alternative methodologie4 for funding the unemployment benefit scheme and for identifying criteria for payment of unemployment allowances to individuaL citizens\. 4\. Resumption Loan/Benefit\. The Project would support: (i) fellowships to provide opportunities for selected WLO, small business organizational representatives and other representatives to visit alternative models of delivering support services to small businesses both prior to initiation of a business venture and after the venture is operating; and (ii) consultant assistance to help the WLO initiate a small business support program in a county in cooperation with smali business organizations\. (b) Extension of Employment Services 5\. Assessment of Client Aptitudes and Interests\. The Project would support: (i) fellowships to assist WLO, county, and selected other institutional\. staff (eg\. Pedagogical Institute Staff) study and select assessment and work sample/exploration systems for adaptation to the Hungarian environment; (ii) consultant assistance to help the WLO/County/selected institution adapt and field test selected systems in two counties; and (iii) purchase of materials and equipment for field testing in two counties\.  - 98 - ANNEX 5-7 Page 2 6\. OccuRational and Educational Information\. The Project would support: (i) fellowships to assist WLO/County/institutional staff to evaluate existing information sources and systems in other countries; and (ii) consultant assistance to assist the WLO develop and field test a model occupational information handbook in two counties\. 7\. Job Search Techniques\. The Project would support fellowships and consultant services to assist the WLO and a County to study, identify, adapt/develop, and field test job search orientation and training materials in two counties\. 8\. ManRower Forecasting\. The Project would support: (i) fellowships for selected NPO/WLO staff to study and participate in internships and short-term training programs on manpower forecasting techniques; (ii) consultant assistance to assist NPO/WLO in the field testing of new techniques of manpower forecasting in two Counties; and (iii) the purchase by NPO/WLO of micro-computer hardware and software to support field testing of new manpower forecasting techniques\. (c) Development of SRecialized Techniaues to Provide Support to Enterprises with Large Scale Layoffs 9\. The Project would support: (i) fellowships to allow WLO/NPO/county and selected enterprise and union representatives to review existing programs in other countries; and (ii) consultant assistance to assist the WLO develop a plan for a Hungarian rapid response capability, in-plant delivery of employment services, and national guidelines for preventing layoffs and procedures for best practice if layoffs occur\. (d) Strengthening of Retraining CaRabilities 10\. DeveloDment of Retraining Institution\. The Project would provide assistance for the development of a pilot retraining center in a selected county affected by industrial restructuring\. The objective of this center will be to support provision of expanded and coordinated employment service and retraining programs\. The center will provide a location to study and field test the delivery of employment services/models and will house facilities for provision of basic adult education, job skill training (both core progrnmns and flexible space for quick-start enterprise specific short-term training programs), curriculum development, and delivery of small business assistance services\. 11\. The Project would support: (i) fellowships for WLO and county officials to study and review existing facilities of this type in operation in other parts of the world; and (ii) consultant services to assist with conceptualization and planning of the overall institution including: establishing flexible administrative procedures, basic adult education programs, core skill training programs, customized enterprise-specific training programs, small business assistance programs, development of a curriculum design capability, and delivery of integrated employment services\. This consultant assistance would include a long-term contract with an individual who is familiar with the overall design and implementation of such retraining centers; and (iii) purchase of program  - 99 - ANNIEX 5-7 Page 3 support equipment, laboratory/workshop equipment, and training hardware and software\. (e) Foreign Exchange Requirements 12\. The estimated foreign exchange requirements for the above technical assistance program are US$2\.9 million, of which US$0\.9 million for consultant services and fellowships, and US$2\.0 million for related equipment and materials\. These foreign exchange requirements, for which details are shown below, would be supported by the Bank loan\. Estimated Foreign Exchange Cost Services/ Equipment/ Component Fellowships Materials Total ----(US$ 000) - Employment Fund 80 - 80 Expansion of Services 270 100 370 Special Layoffs 80 - 80 Retraining 470 1\.900 2\.370 Total 900 2,000 2,900  - 1oo - ANNEX 6-1 HUNGARY - THIRD INDUSTRIAL RESTRUCTURING PROJECT Estimated Disbursement Schedule for Bank Loan Estimated Schedule Calendar Year Fiscal Year Cumulative 2 of and Semester & Semester Amount Amount Total ---(US$ million)--- 1989 1 FY89 11 3\.0 3\.0 3\.0 11 FY90 1 4\.0 7\.0 5\.0 1990 1 FY90 11 8\.4 15\.4 11\.0 11 FY91 1 12\.6 28\.0 20\.0 1991 1 FY91 11 19\.6 47\.6 34\.0 11 FY92 1 21\.0 68\.6 49\.0 1992 1 FY92 11 15\.4 84\.0 60\.0 11 FY93 1 22\.4 106\.4 76\.0 1993 1 FY93 11 11\.2 117\.6 84\.0 11 FY94 1 8\.4 126\.0 90\.0 1994 1 FY94 11 7\.0 133\.0 95\.0 11 FY95 1 4\.2 137\.2 98\.0 1995 1 FY95 11 2\.8 140\.0 100\.0  MAP SECTION  HUNGARY 20 2r THIRD INDUSTRIAL RESTRUCTURING PROJECT _Motorwayd CZEC HOSLOVAK IA S--\Eat3r rccU\. Sw\.S\. R - RS R, \. )adsBRSJAAJ-Faoolole KILOMETERS 0 10 20 3D 40 S0 20 7D0 s,0 Notionol capital NOGRAD Employment Crtion MIRS 0 ~~~~ ~ ~ AC ~~~ 0 Megy~~e capitals MILES O io io 30 Ao so i) Megyecpol 0,,,, r /+e ,t, Kihda Megye (county) boundaries J ' <gMS-!l YY I 4 S Elevations in meehrsa 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~81s A ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~f4 ANA U G O S L AV I A \r YUGOSLAVIEROMANIA )<_'° ) A~\Mk ¢(rcOa,\. , t-S n 0LAd LNA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' _ ar a3* j , ,4) \>~~ ~ ~~~~ TUGR Et RKEY JANUARY 1B98

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