Burkina Faso - Urban Environment Project

Document of The World Bank FOR OFFICIAL USE ONLY coe- 9 72 -ReIA Report No. P-6497-BUR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT IN TEE AMOUNT EQUIVALENT TO SDR 24.8 MILLION TO BURKINA FASO FOR AN URBAN ENVIRONMENT PROJECT APRIL 20, 1995 This document has a restricted distribution and mav be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = CFA franc (CFAF) US$1.0 CFAF 560 CFAF I million US$1,785 SDR 1.0 = US$1.49299 FISCAL YEAR January I - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS DGUTF Directorate of Urbanism and Land Use Management (Directioz GCenerale de l'Urbanisrne et des Travaux Fonciers) C0OBF Government of Burkina Faso ICB International Competitive Bidding MTPHU Ministry of Public Works, Housing and Urban Planning NCB National Competitive Bidding NEAP National Environmental Action Plan ONASENE Cleaning Public Utility (Office National des Services d'Entretien, de Netrovage et d'Embellissemenit) ONEA Water & Sanitation Pub] ic Utility (Office National de l'Eau et de I Assainissement) RAF Land Tenure Reform Act (Rgorganisaution Agraire et Fonciere) UTC Project Unit (Unite Technique de Coordinzation)  FOR OFFICIAL USE ONLY BURKINA FASO URBAN ENVIRONMENT PROJECT CREDIT AND PROJECT SUMMARY Borrower: Burkina Faso Beneficiaries: Ministry of Public Works, Housing and Urbanism; Office National de l'Eau et de l'Assainissement (ONEA); and Ministry of Economy, Finance and Plan Credit Amount: SDR 24.8 million (US$37 million equivalent) Terms: Standard IDA terms with 40 years maturity On lending Terms: Same tenns as above Financing Plan: (net of taxes, in US$ million) Government and beneficiaries 7.8 million IDA 37.0 million Other donors 4.9 million TOTAL 49.7 million Economic Rate Respectively 65% and 48% for the road rehabilitation of Return: sub-component in Ouagadougou and Bobo-Dioulasso, (21% of the credit costs) Staff Appraisal Report: Report No. 13802-BUR Poverty Category: Not applicable This document has a restricted distabution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF IDA TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO BURKINA FASO FOR THE URBAN ENVIRONMENT PROJECT I. I subinit for your approval the following memorandum and recommendation on a proposcd credit to Burkina Faso for SDR 24.8 million, the equivalent of US$37 million, on standard IDA terms, to help finance the Urban Environment Project comprising restoration of the primary infrastructure networks and capacity building components. Parallel cofinancing is expected in the amount of US$4.9 million. 2. Country/Sector Background. In 1991, the Government of Burkina Faso (GOBF) launched, with the support of donors, a structural adjustment program aimed at building the foundation for sustainable economic and social development. Structural reforms were undertaken to liberalize the economy and reform public finance management. At the same time, Burkina Faso introduced a democratic political system by adopting a constitution and organizing presidential and legislative elections which led to the re-establishment of the rule of law in 1992. Economic performance in 1993 fell short of expectations: the growth rate of GDP was below one percent; inflation slightly exceeded projections; and the Government experienced a resource shortfall estimated at thrce percent of GDP. 3. With changes in the external environment, and the economic and financial developments in Burkina Faso, the authorities recognized the limitations of the internal adjustment process and the need to strengthen the reformn program. Therefore, Burkina Faso decided, together with the other countries of the CFA franc zone, to devalue the CFA franc by 50 percent in foreign currency terms, effective January 12, 1994. In addition, the authorities set the following objectives for 1994-96: (a) accelerate real GDP growth to more than five percent a year by 1996 (real per capita GDP growth of over two percent); (b) limit inflation, as measured by the GDP deflator, to approximately six percent by 1996 after a rapid increase in 1994 as a result of the currency adjustment; and (c) reduce the external primary current account deficit from 15 percent of GDP in 1993 to 13.5 percent in 1996. The devaluation of the CFA will create an environment in which competitiveness can be re-established. Nevertheless, monetary, fiscal and wage discipline, as well as other structural reforms aimed at liberalizing the labor and production markets should accompany this courageous measure to fully ensure its benefits. The supply response to the shift of relative prices will take some time and the associated benefits will be visible only in the medium term. 4. The total population of Onagadougou and Bobo-Dioulasso, the two main cities of Burkina Faso, is estimated to be about one million inhabitants. It accounts for 80 percent of the country's urban population. According to the 1985 census, Ouagadougou, the capital and the largest city (600,000 inhabitants) alone accounts for more than 50 percent of the total urban population. The average growth rate of Ouagadougou was 9.7 percent per year for the past decade. A consequence of current urban growth is that the city must shelter between 40,000 and 50,000 new inhabitants every year. The resulting housing demand is for at least 5,000 new units a year. Population growth in Bobo-Dioulasso was slightly lower, but the population now exceeds 320,000 inhabitants, with an average growth rate of 6.5 percent per year for the past decade. The current condition of most urban infrastructure is poor, as most housing units have been supplied on poorly serviced plots with inadequate infrastructure. Inappropriate access roads are increasing vehicle operating costs and inadequate drainage, sanitation and waste management systems cause physical damage and health hazards, especially in the suburban areas. Services are mainly produced in urban areas through informal activities, and thus hampered by poor infrastructure. The situation is worsening, as current maintenance needs cannot be met due to insufficient resources and the poor condition of infrastructure. A reversal of deteriorating urban infrastructure and environmental health would enhance the economic productivity of Burkina's main cities, particularly at a time when real economic growth is both national policy and genuinely achievable.  2 5. Project Objectives. The project will lay the groundwork for decentralizing management, operation and control of the overall urban environment to the local governments in Ouagadougou and Bobo-Dioulasso, supporting both decentralizauion and environment policies. The objectives of the project are to: (a) improve urban living conditions in executing priority urban works on primary infrastructure (road. drainage, solid waste and sanitation); (b) develop urban services directly benefiting low income groups; (c) promote active participation of the urban population in urban services development, either directly, or through beneficiary associations or elected representatives; and (d) promote sustainability of urban environment services by supporting the government's decentralization program and setting up new laws, regulations and practices that would result in better land management, investment programming and local resource mobilization. 6. Project description. The proposed project will include the following components: a) restoration of the prinmary infrastructure networks (est. 80 percent of project costs): (i) rehabilitation of priority primary drainage networks; (ii) rehabilitation and improvement of the primary urban road networks; (iii) development of piped sewerage and on-site sanitation; (iv) closing or upgrading of existing landfills and construction of new landfills; and (v) improvement of the current toxic and industrial solid waste managetment system; and b) capacity building (est. 20 percent of project costs): (i) strengthening of the central goveniment's competence for urban management; improvement of the current system for local financial resource mobilization, including the preparation of an adequate land and real property tax system and implementation plan, and improvement of cost recovery; (ii) improvement of the institutional, legal and regulatory framework for urban management at the national and local levels including institutional, legal and regulatory arrangements, urban environment assessment, management controls, financial, operational and managerial capacity of various institutions; (iii) technical assistance, training, and monitoring program; (iv) enhancement of sound community participation practices through the implementation of demonstration projects in Ouagadougou and Bobo- Dioulasso, aimed at fine tuning a methodology that would apply throughout both cities; and (v) support to the Caisses Populaires d'Epargne for increasing their loans for housing. 7. Project Implementation. Based upon experience gained during previous Bank projects in the urban sector, the proposed project will emphasize simplicity and efficiency. A small Project Unit (PU), part of the departmental staff of the Ministry of Public Works, Housing and Urban Planning (MTPHU) will be in charge of overall coordination. In order to avoid a heavy administrative structure, and to ensure the sustainability of the transfer of know-how, the project will make use of existing institutions. Planning, programming, accounting, disbursement and monitoring of specific components or subcomponents will be implemented by the PU, the Ministry of Finanice (Direction Geinerale des Impots), the MTPHU (Direction Genirale de l'Urbanisme et des Travaux Fonciers, DGUTF), and the water and sanitation public utility (Office National de l'Eau et de l'Assainissement, ONEA). A specific manual of procedures, including project implementation plans, applicable procedures, monitoring and performance indicators, accounting methods, management rules and sample bidding documents has been discussed during negotiations and will have to be approved by the Government and IDA before effectiveness. 8. Project Sustainability. The ongoing Second Urban Project supports part of the actions required for the preparation of the legislative and regulatory texts needed to prepare and implement the property tax reform, including a full-scale pilot operation in Ouagadougou. The proposed project would follow up by helping the government set up the new system and develop sound procedures, as well as provide the central government agencies and future local governments with better tax bases and means to meet their obligations and improve tax collection. Cost recovery would also be developed for the sector, including fine-tuning of the existing sanitation tax collecting methods and allocation.  3 9. Lessons Learnedfrom Previous IDA Involvement. The First Urban Project (Cr. 766-BUR) was approved in March 1978 and completed on December 31, 1985. This project launched a reinforcement of Government's technical capability and a sites and services program in Ouagadougou and Bobo-Dioulasso. The first project shows that improvements in municipal, financial, and technical services cannot be achieved through a piecemeal approach It helped draft a medium- to long-term strategy for institutional development and policy reform at the central and local levels in order to ensure better sustainability. The proposed project also benefits trom the lessons of the ongoin.g Second Urban Project (Cr. 2067-BUR). It has been useful in demonstrating that: (a) improvement of the urban environment cannot be achieved without involving the local authorities in developing and monitoring rehabilitation programs with the help of contract managers (mafitres d'ouvrages dildgu6s), in order to allow the municipalities to cope with the lack of technical capability and develop cost recovery; and (b) strengtheniing of high level staff at the municipal and central level is key to efficiently managing/supervising services. Finally, the proposed project will benefit from the ongoing Public Works and Employment Project (Cr. 2282-BUR) which developed contract management delegation in the country, highlighting the need for procurement procedure enhancements for the central government agencies. IDA also financed, under the PPF, pilot projects in order to test a participatory approach and the willingness of the population to support urban development and services. The "Study on Institutional Issues in Participatory Development, Case Study: Burkina Faso" was funded by the Bank during project preparation. Both established the need for a new participatory methodology in support of future decentralized urban govemments, and confirmed the choices made during preparation of the proposed project regarding the participation of the local population. 10. The project also takes into account the following considerations: a) The Strategic Sanitation Plan (SSP), which reviewed the sanitation needs of the city of Ouagadougou and identified the best technology to meet those needs; and b) The Burkina Faso National Environmental Action Plan (NEAP), presented fully in June 1991 and updated in January 1994, which was designed to provide a framework for the coordination in the environment sector. The Plan made it clear that one of the priorities was a programmatic agenda for improving living conditions in the urban areas. This project is a direct product of the NEAP agreements. 11. Rationale for Bank/IDA Involvement. The Government has identified the improvement of urban infrastructure as vital to the renewed economic strer.gth of the country. The modified CAS/CSP presented May 31. 1994 noted the project as an important instrument for promoting human resources development and employment creation, supporting the private sector and strengthening economic and financial management. It contains a full discussion of recent economic developments and IDA's assistance program. The objectives of the proposed project (para. 5) are fully consistent with the objectives for Bank assistance outlined in the CAS to improve long-term development by addressing: (a) population growth and movement; (b) human resource development; (c) natural resource management; and (d) private and sector development. 12. The catalytic function of the project is to recognize the critical importance of a real involvement of local governments in providing adequate service and maintenance of infrastructure in the cities, and thereby assist with the continued transition toward strengthening municipal governments as a first step in real decentralized services delivery in conjunction with an emerging private sector competence. In addition, to support key urban environment sector reforms, the proposed project would be an important complement to other Bank Group efforts in support of Government's overall program of economic and financial recovery supported by the Economic Recovery Credit (Cr. 2590-BUR, approved March 29, 1994) as a response to the re- alignment of the parity of the CFA franc. The project would help to ease the ongoing economic and social reforms by supporting the development of community-based initiatives in urban areas. By taking the lead in this project and with the experience gained from the Second Urban Project, the Bank will help the Govemment coordinate the management of its urban development while sustaining previous Bank projects in the urban sector and supporting further implementatiou of the decentralization policy in Burkina Faso.  4 13. Agreed actions. As a condition of Board presentation, the Government has submitted to IDA a letter of decentralization policy, satisfactory to IDA, which gives details on the estimated schedule for implementing the different stages of decentralization, the institutional reforms, including amendments to the Reyorganisation Agraire el Fonciebre (RAF), and the development of local resources. The following are conditions of credit effectiveness: (a) agreement on a mitigation plan, acceptable to IDA, concerning the works to be undertaken within the piped sewerage subcomponent in Ouagadougou; (b) agreement on a Solid Waste Management Action Plan acceptable to IDA; (c) agreement on an action plan for carrying out the computerization component acceptable to IDA; (d) agreement on a specific manual of procedures for the Pll, including project implementation plans, procedures applicable, monitoring and performance indicators, accounting methods, management rules and sample bidding documents acceptable to IDA; (e) setting up of an operational reporting and accounting system consistent with the manual of procedures and acceptable to IDA; (f) signature of an agreement delegating contract management for the works undertaken within the community participation component; (g) setting up of the new structure of the PU; (h) opening of the project account and deposit into this project account of an initial amount of US$200,000 equivalent; (i) opening of the project account and deposit into this project account of an initial amount of US$130,000; and (j) selection and appointment of the auditors for a minimum period of two years. 14. Poverty category. This credit will enhance the contribution of the Second Urban Project and its Supplemental Credit to improving access to urban services by urban poor and will contribute to immediate, as well as longer term, employment creation. The project is not specifically poverty-focussed; however, a significant proportion of poor people will benefit from the primary infrastructure rehabilitation and the community participation programs financed by the credit. An estimated 25% of the total amount of works undertaken by the credit will be directed toward income creation, mainly for unskilled workers. The project should create 1 1,000 person-years of work. 15. Environmental aspects. The project is rated category B. The project would make a positive overall contribution to environmental quality in the two main cities of Burkina Faso. Since most project-financed civil works would involve drains, solid waste and sanitary facilities, they are not only free of negative environmental consequences, but would contribute to a substantial improvement in environmental sanitation. An analysis of the existing urban environment and the potential impact of the project was carried out as part of the project preparation and did not identify any specific constraint in terms of respecting the present ecological equilibrium. All recommendations made in this study have been addressed by the project and any potentially negative consequences will be properly addressed in project-detailed engineering, including specific environmental impact studies for large investments. No resettlement of households is p!anned in the project. 16. Participatory Approach. This project benefits from pilot operations implemented in Ouagadougou during project preparation, showing that reinforcing the involvement of local residents, associations and non-governmental organizations in identification, construction and maintenance of urban infrastructure is important for the sustainability of the investments. It also benefits from the "Study on Institutional Issues in Participatory Development, Case Study: Burkina Faso, April 30, 1994". 17. Projects Benefits. The project will contribute to the national economy and the Economic Recovery Program by: (a) increasing the efficiency of urban economic activities; (b) ameliorating living conditions; and (c) alleviating environmental problems for the two major cities of the country, Ouagadougou and Bobo-Dioulasso, which produce about 25% of the national GDP. The average economic rate of return (ERR) for the road improvements (21% of the credit) is 63% for Ouagadougou and 48% for Bobo-Dioulasso. 18. Risks. The risks identified are: (a) that implementation capacity of both central and local institutions will not be sufficient; (b) that decision making regarding policy choices (decentralization, housing policy) will not be done in time with the degree of precision and planning needed for serious sustained action; and (c) that MTPHU and the Ministry of Finance  5 will not act in a timely and coordinated manner rc3arding revenue mobilization components. These risks are addre ;sed by the project design. 19. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association, and recommend that the Executive Directors approve it. Lewis T Preston President by Gautam Kaji Attachments Washington, D.C. April 20, 1995  6 Schedule A URBAN ENVIRONMENT PROJECT PROJECT CQST ES3IMATES (in US$ '000) Local Foreign Total % % Foreign Base Exchange Cost A. Restoration of Primary Infrastructure Networks Drainage 5,303.4 3,847.6 9,151.0 42 23 Primary road network rehabilitation 4,685.0 4.430.0 9,115.0 49 23 Piped sewerage and on-site sanitation 4,986.5 3,872.5 8,859.0 43 22 Solid waste management 2,011.5 1,593.5 3,605.0 44 9 Toxic and industrial waste management 113.5 332.0 445.5 75 1 Sub-Total 17,099.9 14,075.6 31,175.5 45 79 B. Capacity Building Local Resource Mobilization - 1,111.5 1,111.5 100 3 Urban Management 145.0 1,327.0 1,472.0 90 4 Training/Human resource dev. program 697.5 302.5 1,000 0 30 3 Community Participation 2,833.8 571.0 3,404.8 17 9 Housing development 684.6 60.0 744.6 8 2 Sub-Total 4,360.9 3,372.0 7,732.9 44 20 C. Operating Expenses 525.0 105.0 630.0 17 -- Total Base Cost 21,985.8 17,552.6 39,538.4 44 100 PPF Refinancing -- 1,400.0 1,400.0 100 Physical Contingencies 1,550.9 1,308.5 2,859.4 46 Price Contingencies 3,895.5 2,009.1 5,904.6 34 TOTAL PROJECT COST 27,432.2 22,270.2 49,702.4 44 FINANCING PLAN (US$ million) Source of Funds Local Foreign Total % Govemment and Beneficiaries 7.8 0.0 7.8 16 IDA-Proposed Project 17.3 19.6 37.0 74 Other donors 2.3 2.7 4.9 10 TOTAL 27.4 22.3 49.7 100  7 Scledule B BURKINA FASO URBAN ENVIRONMENT PROJECT Procurement Method (US$ million equivalent) ICB NCB Other NBF Total _______________________________ ______ ______Cost 1. Works 24.3 4.5 0.1 6.6 35.5 (22.6) (3.8) (0. 1) (26.5) 2. Goods 0.2 1.3 0.1 0.5 2.1 (0.2) (0.8) (0. 1) (1.0) 3. Technical assistance, consultancies, training for policy support, project implementation, capacity building, 7.9 1.4 9.3 technical studies and work supervision (6.7) (6.7) 4. Miscellaneous: Guarantee Fund 0.1 0.7 0.8 (0.1) (0.7) (0.8) 5. Project Management 2.0 2.0 _______________________________ ______ ______(2.0) ___ (2.0) TOTAL 24.5 5.9 10.8 8.5 49.7 _ (22.8) (4.7) (9.5) (37.0) Note: figures in parenthcsis are the respective amounts financed by IDA DISBURSEMENTS Category Credit % of Expenditures Allocation Financed by IDA (US$ million) 1. Civil Works a) ONEA component 1.7 100% foreign 95% local b) community participation program 2.0 100% foreign 95% local c) other 19.8 100% foreign 95% local 2. Goods, Fquipment and Vehicles 1.0 100% foreign & ex-factory 95% local 3. Studies, Tech.Assistance & Training a) ONEA component 1.0 100% b) other 5.0 100% 4. Guarantee Fund a) pilot phase 0.1 80% b) other 0.5 80% 5. Operating expenses 0.5 95% 6. Refinancing of the PPF 1.4 7. Unallocated 4.0 TOTAL 37.0 Estimated IDA Disbursements (US$ million) Fiscal Year 1996 1997 1998 1999 2000 2001 knnual 1.6 8.1 7.7 9.9 6.7 3.0 Cumulative 1.6 9.7 17.4 27.3 34.0 37.0  8 Scdidule C BURKINA FASO URBAN ENVIRONMENT PROJECT Timetable of Key Project Processing Events: (a) Time taken to prepare: 3 years (b) Prepared by 1: Government with IDA assistance (c) First IDA mission: January 1992 (d) Appraisal mission departure: June 1994 (e) Negotiations: March 1995 (f) Planned date of Effectiveness: October 1995 (g) Relevant PCRs or PPARs First Urban Project (Cr. 766-BUR) This project was prepared by Mr. Christian Diou, (Municipal Engineer), with support from Messrs. Robert Maurer (Sr. Municipal Finance Specialist), Jan Drozdz (Sanitary Engineer), and Gilles Horenfeld (Consultant). Special thanks to Ms. Letitia Obeng (Water and Sanitation Specialist) and Mr. Yves Genevier (Health Specialist) for their support. Mr. James Wright and Mr. Olivier Lafourcade are the managing Division Chief and Department Director, respectively, for this operation.  9 S edule D Page I BURKINA FSO IR2AN&ENVIRONiMENT1PROJThC STAThS OP RANK OPERATIONS TN RURKINA FASO (as oF February 28, 1995) Amount In USS miLLlon (less canceLLations) Loan or Fiscal Undis- Closing Credit No. Year Borrower Purpose Bank IDA bursed Date -- - - - . .. .... - - - - - - - ... . -- -- -- -- - - Credits 32 Credits(s) closed 299.62 C18960-BF 1988 BURKINA FASO AG.RESEARCH 17.90 5.14 03/31/96(R) C19790-BF 1989 BURKINA FASO AGRIC. SERVICES 42.00 16.28 12/31/95(R) C20670-BF 1990 BURKINA FASO URBAN 22.20 7.89 06/30/96 C22290-BF 1991 BURKINA FASO ENVIRONMENTAL MGMT 16.50 13.07 12/31/98 C22440-BF 1991 BURKINA FASO EDUCATION IV 24.00 21.02 06/30/98 C22810-BFCS) 1991 BURKINA FASO SAL I 80.00 22.39 06/30/95(R) C22820-BF 1991 BURKINA FASO PUBLIC WORKS & EMPLO 20.00 3.53 06/30/95 C23320-BF 1992 BURKINA FASO TRANSPORT SECAL 66.00 54.09 12/31/96 C23780-BF 1992 BURKINA FASO PUBLIC INSTITUTIONAL 15.00 13.63 03/31/97 C23810-BF(S) 1992 BURKINA FASO AG. SECAL 28.00 19.81 06/30/95(R) C24140-BF 1993 BURKINA FASO FOOD SECURITY 7.50 5.47 06/30/99 C24720-BF 1993 BURKINA FASO PRIVATE SECTOR ASSIS 7.00 6.76 12/31/97 C25190-BF 1993 BURKINA FASO ENGINEERING CREDIT 4.25 3.90 06/30/96 * C25950-BF 1994 BURKINA FASO HEALTH/NUTRITION 29.20 31.65 12/31/99 * C26190-BF 1994 BURKINA FASO POPULATION/AIDS CONT 26.30 28.37 06/30/00 * C20671-BF 1995 BURKINA FASO URBAN 10.00 10.30 06/30/96 TOTAL number Credits - 16 415.85 263.31 TOTAL*** 715.47 of which repaid 16.96 TOTAL held by Bank & IDA 698.50 Amount sold of which repaid TOTAL undisbursed 266.01 Notes: * Not yet effective ** Not yet signed * TotaL Approved, Repayments, and Outstanding balance represent both active and inactive Loans and Credits. tR) indicates formally revised Closing Date. (SJ indicates SAL/SECAL Loans and Credits. The Net Approved and Bank Repayments are historical value, alt others are market value. The Signing, Effective, and Ctosing dates are based upon the Loan Department offical data and are not taken from the Task Budget fite.  l0 Schedule D Page 2 BUJRKIN FASO URBAN ENVIRONMENT PROJECT STATUS OF IFC INVESTMENTS As of Februarv 28. 1995 (Amounts in US$ million) Fiscal Year Company Type of Business Loan 1979 SOVOLPLAS Synthetic Manufacturing 0.55 Total 0.55 Less: Repayments, Sales, Cancellation, and Write-offs: 0.55 Net Commitments held by IFC 0.00