Ghana - Priority Works Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4697-GH MEMORANDUM AND RECOMMENDATTON OF THE PRESIDENT OF THE IITERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 7.8 MILLION TO THE REPUBLIC OF GHANA FOR A PRIORITY WORKS PROJECT December 17, 1987 lThs docment has a eicted di and may be used by only inte _pefomae of their odicim duties. Its couteut may nt odhwise be disclosed Wdd ank h  CURRENCY EQUIVALENTS Currency Unit m Cedi 0 US$1.0 - 175 Cedis 1.0 Cedi - US$0.0057 FISCAL YEAR January 01 - December 31 WEIGHTS AND MEASURES 1 meter tm) - 3.28 feet (ft) 1 hectare (ha) = 2.47 acreas 1 kilometer (km) - 0.62 mile (mi) 1 metric ton (t) - 2,205 pounds (lbs) ABBREVIATIONS ADRP - Accra District Rehabilitation Project BHC - Bank for Housing and Construction ERR - Economic Rate of Return GRA - Ghana Highway Authority GOG - Government of Ghana ICB - International Competitive Bidding IDA - International Development Association IFAD - Internatioaal Food Agricultural and Deveopment IFC - International Finance Corporation ILO - International Labor Organization KDRU - Kumasi District Roads Unit LCB - Local Competitive Bidding MNRH - Ministry of Roads and Highways MWE - Ministry of Works ar4 Housing PAMSCAD - Program of Action to Mitigate the Social Costs of Adjustment PCR - Project Completion Report PPAR - Project Performance Audit Report PPF - Project Preparation Facility PWP - Priority Works Project SSNIT - Social Security and National Insurance Trust TSC - Technical Services Center UKODA - United Kingdom ODA UNICEF - United Nations Children's Fund WFP - World Food Program WHO - World Health Organization  FOR OFCIL" USE ONLY REPUBLIC OF GHAAA PRIORITY WORKS PROJECT CREDIT AND PROJECT SUMMARY Borrower: Republic of Ghana Beneficiary: Ministry of Works and Housing (MWH), Ministry of Roads and Highways (MRH), Ghana Highway Authority (GHA), Accra City Council, Tema City Council, Kumasi City Council, Sekondi-Takoradi City Council, and Bank for Housing and Construction (BHC). Amount: SDR 7.8 (US$10.6 million equivalent) Terms: Standard (40 year term) Onlending Terms: A small share of the credit amounting to US$0.3 million equivalent would be onlent by the Government of Ghana (GOG) to BHC to finance site consolidation in Tema. GOG would on-lend to BHC at an annual interest rate of at least 132 for a period not exceeding 25 years with 2 years of grace, and BHC would on-lend IDA proceeds to qualified borrowers at An annual interest rate of at least 152 for a period not exceeding 20 years with 2 years of grace. GOG would bear the foreign exchange risk. Financing Plan: Government: $1.3 million Cofinancing: 4.9 million IDA: 10.6 million Total US$16.8 million Economic Rate of Return: 30X. Staff Appraisal Report No. 7000-GH Map: IBRD Nos. 21016 and 21017: Ghana Priority Works Project This document has a restrited distribution and may be used by recipients only in tt.' PwfPance of their offlcial duties. Its contents may not otherwe be diclosed without World Ba' vnnorintion.  tv,4 I~~~~~~~~~~~~~~  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF GHANA FOR A PRIORITY WORKS PROJECT 1. The following memorandum and recommendation on a proposed deve- lopment credit to the Republic of Ghana for SDR 7.8 million (US$10.6 million equivalent) is srbmitted for approval. The proposed credit would be on standard IDA terms with 40 years maturity and help finance a special two-year urban priority works project. Cofinancing amounting to SDR 3.6 (US$5 million equtivalent) is being sought. However, this would not be committed before Board presentation. 2. Background. In July 1987 the Bank participated in an inter- Agency 11 workshop with the Government of Ghana's (GOG) Social Sector Task Force convened to develop a program of actions to mitigate the social costs of adjustment (PAMSCAD). During the workshop GOG proposed that urgent measures be taken to address the needs of the urban and rural poor who have suffered a protracted decline in real income and living standards during the past decade and who now face increased competition in the labor market as a result of GOG's measures to retrench some 45,000 persons from the public service and 20,000 from the public enterprise sector in 1987-89. The Task Force focussed on five main areas: (a) employment and redeploy- ment; (b) food, nutrition and health; (c) education and adult literacy; (d) small farmers and women in development; and (e) shelter. Some 17 short-term interventions were identified at an estimated total project cost of $75 million. Among the measures identified was a special two-year labor intensive urban works program which would build on activities presently being uadertaken under the IDA-funded Accra District Rehabilitation Project (ADRP). This project became effective in September 1985 .Ad is progressing satisfactorily. Basic institutional and cost recovery issues are being effectively addressed including the revaluation of Accra property; the revamping and computerization of the property rating, valuation billing and collection systems; the reorganization of the City Treasurer's Department and the strengthening of financial management and planning systems; and the reorganization and strengthening of the Infrastructure Maintenance and Management Systems. This program of institutional and financial reforms would be extended to the secondary cities under the proposed second urban project which would assist in the development of a sustained capacity to finance and implement essential works. In the long term, it is expected that the macro-economic adjustments now under way will increase the capacity of the public sector to finance essential works on a sustained basis from domestic resources, and the capacity of the private sector to absorb manpower. 3. Rationale for IDA Involvement. The Bank has been assisting GOG to develop a special program to address the social costs of adjustment. The Priority Works Project (PWP) is an important component of this program, and provides an opportunity to make concrete the Bank's commitment to address the social dimensions of adjustment in Ghana and in other l/ Including IFAD, ILO, UKODA, UNICEF, WFP, and WHO.  -2- countries. Also, other agencies and donors have indicated a willingness to assist GOG, given Bank leadership. Bank involvement in the urban sector under ADRP hAs resulted in significant physical, financial and institu- tional improvements, providing an adequate framework for the proposed project. Because of its experience with labor intensive urban works projects under ADRP, the Bank is in the best position to assist GOG to develop an effective urban works program. 4. Project Obiectives. The primary objective of the PWP is to support a special program of priority public works which would generate about 10,000 productive jobs over a two-year period beginning April 1988, and thus help to alleviate urban poverty and cushion the effect of the impending lay-offs in the public sector. This objective would be accom- plished through the finarcing of labor-intensive priority urban subprojects with high economic and social rates of retuLn. Other project objectives include helping rehabilite and maintain essential urban infrastructure; beginning the process of helping to relieve the acute shortage of housing; beginning the process of completing and divesting existing Government-owned housing units; and demonstrating more appropriate and cost effective approaches to the provision of shelter for the urban poor. Because of its focus on employment generation and quick implementation (2 years versus the normal 5-7 years), PWP would not attempt major institutional or financial reform. These objectives are being effectively pursued under ADRP and would be furthered under the proposed second urban project. 5. Project Description. The project includes: (a) Infrastructure Rehabilitation and Maintenance (in four cities--Accra, Tema, Kumasi and Seknndi-Takoradi); (b) Urban Upgrading (Accra); (c) Housing consolidation (completion of 200 uncompleted government units); (d) Sites and Services (Tema 400 lots); and (e) Funding for the Technical Service Center (TSC) of the Ministry of Works and Housing (MWH) and the Ghana Highway Authority (GRA) for project preparation, management and studies to prepare future projects. Components "a' and lb' would form the core of the labor-intensive works related to PAMSCAD, while "c' and "d' are pilot components designed to test certain approaches for addressing housing and poverty alleviation issues, prior to the proposed second urban project. 6. The total cost of the project is estimated at US$16.8 million equivalent. and the foreign exchange component is estimated at US$7.4 million equivalent, approximately 44Z of the total project costs. The breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursement are shown in Schedule B. The timetable of key project processing details ad the status of Bank Group operations in Ghana are given in Schedules C and D respectively. Maps (IBRD 21016 and 21017) indicating the location of subprojects are inozluded, and the Staff Appraisal Report (No. 7000-GH, dated December 3, 1987) is attached. Cofinancing is being sought for the urban upgrading component, but would not be committed before Board presentation. Also, the local costs of part of the site and services component would be financed by the Social Security and National Insurance Trust (SSNIT). Project preparation  -3 would be financed through a US$1 mi4lion Project Preparation Facility (PPF). 7. Actions Agreed. The following were agreed at negotiations: the action plan for project implementation; the procedures that GOG would adopt to ensure that contract evaluation and approvals would be expedited; the terms and conditions for SSNIT financing; the terms and conditions for BHC participation in the project; the terms and conditions for acquisition of uncompleted units; the terms and conditions for the transfer/sale of completed units; the terms and conditions for the leasing and subleasing of land for sites and services development; the program for strengthening and/or establishment of implementing units in Accra, Tema, Kumasi and Sekondi-Takoradi; the establishment of coordinating conmittees for the project; and the program for strengthening TSC and GHA. 8. Benefits. This project will provide about 10,000 man-years of employment spread over two years, particularly benefitting poor unemployed workers within urban centers. In addition, this project will directly benefit households and firms through: reduced vehicle operating costs, travel time, traffic congestion and accidents, improved health, sanitation, water supply, and other amenities; improved environment; increased property values and increased supply of housing. Based on indicative calculations and the experience of ADRP, the average economic rate of return (ERR) is estimated at about 30Z. It is also estimated that about 70-802 of project expenditures would directly or indirectly benefit the urban poor. 9. Risks. The main risk is that the short-run implementation capabilities of existing agencies may be overextended, leading to imple- mentation delays and the breakdown of supervision and financial control. This would be addressed under the project by strengthening the managerial capacity of the implementing ministries and agencies through the recruit- ment of qualified staff and the employment of local private consultants where necessary. 10. Recommendation. I ar satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. Barber Conable President Attachments Washington, D.C. December 17, 1987  -4- SCHEDULE A GHANA PRIORITY WORKS PROJECT ES?IMA-TED COST AND FINANCING PLAM Estimated Project Costst Local Foreign Total (USS millions) --_____ Infrastructure Rehab. 3.7 2.4 6.1 and Maintenance Urban Upgrading 2.4 2.0 4.4 Housing Consolidation 1.1 0.9 2.0 Sites and Services -Site Development 0.2 0.2 0.5 -Site Consolidation 0.6 0.3 0.9 TSC and GHA Support 0.4 0.7 1.1 Total Base Cost 8.4 6.6 15.0 Physical Contingencies 0.8 0.7 1.5 Price Contingencies 0.2 0.1 0.3 Total Project Cost 9.4 7.4 16.8 a/ _5 =5 =z= Financing Plan Local Foreian Total (US$ million) ------- Government of Ghana a/ 1.3 0.0 1.3 IDA b/ 5.6 5.0 10.6 Cofinancing 2.5 2.4 4.9 Total 9.4 7.4 16.8 a/ Includes US$0.8 million equivalent in taxes. bl Includes financing of project preparation costs through US$1.0 million equivalent PPF and deposits in revolving funds of US$1.2 million. AF4IN December 1987  SCHEDLrE E B page 1 r 2 REPUBLIC Of GANA P