Burundi - Second Urban Development Project

Document of The World Bank FOR OFFICIAL USE ONLY c-g. I46e- ' Repor No. P-4740 - BU MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 16.1 MILLION TO THE REPUBLIC OF BURTJNDI FOR A SECOND URBAN DEVELOPMENT PROJECT November 7, 1988 This document bas a resticted distribuion and may be used by reipients only in the performance of their official dutie Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIV4LENTS Currency Unit - Burundi Franc (FBu) US$ 1.00 a FBu 130 FBu 100 - US$ 0.769 WEIGHTS AND MEASURES 1 Hectare (ha) 10,000 m2 1 Sqaure Kilometer 100 ha 1 Metric Ton (mt) 1,000 kg FISCAL YEAR January 1 - December 31  FOR OMCIAL USE ONLY BURUNDI SECOND URBAN DEVELOPMIENT PROJECT Credit and Proiect Summary Borrower: Republic of Burundi Beneficiaries: Ministry of Public Works and Urban Development, Municipality of Bujumbura, Communes of Gitega, Ngoz4, Kayanza, Rumonge and Bururi, and the Housing Fund Amount: SDR 16.1 million (US$ 21.0 million equivalent) Terms: Standard IDA Terms Financing Plan: ------ US$ million------------- Local Foreign Total IDA Credit 7.28 13.72 21.00 Government 3.12 0 3.12 TOTAL 10.40 13.72 24.12 Economic Rate of Return: 14S Staff Appraisal Report: Burundi Second Urban Development Project Report No. AOIOSU Maps IBRD No. 20686 70 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECCNMENDATION OF THE PRESIDENT OF THE INTEPNATIONAL PEVELOPMENT ASSOCIATTON TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO) THE REPUBTLIC OF BURUNDI FOR A SIJCOND URBAN DEVELOPMENT PROJECT 1. The following memorandum and reco menda-ion on a proposed development credit to the Republic of Burundi for SDR 16.1 million (US$21.0 million equivalent) is submitted for approval. The proposed credit would be on standard IDA terms and 40 years maturity and would help finance urban development in Burundi. 2. Tragic events shook Burundi last August. A mission visited Burundi in October to assess tha situation and its likely evolution. It concluded that the currer.t Government approach -- working toward reconciliation and building national unity .-- represents the best hope of peacefully resolving the long s.onding ethnic issues which have affected the country. Our assistance to burundi will continue supporting Government's efforts to ensure that the benefits of economic development accrue to all Burundians. This proposed urban project is an important step in this long-term strategy. 3. Background: With a population of about 5 uillion, Burundi is the second most densely populated country in Africa. With a constant growth rate of 32, which corresponds to a decline of the fertility rate, the population would be 7.5 million by the year 2000 and 10 million by the year 2010. The present percentage of urban population is only 7%. If this percentage were not to increase, the rural population would double by the year 2010, greatly increasing the pressure on already scarce land. Therefo-e, the additional rural population will have to migrate into the eastern lowlands, where population density is lowest, and into the towns. Up until now, significant urban development has been confined to the Bujumbura area. The city grew rapidly during the 1950's and 1960's, at annual rates of 6-9%, but its growth slowed down during the 1970's to a current 3-5% per year. In the secondary centers, due to administrative restrictions, growth rates have been highly unstable. However, the need for decentralization and mobilization of local resources has progressively emerged during the Fourth Development Plan (1983-1987). The preparation of the Fifth Development Plan (1988-1992) has shown that an acceleration of urban growth rates, both in Bujumbura and in secondary towns, is a necessary condition for modernization of agriculture, long-term food security, employment generation and income growth rates. The purpose of the second urban project is to deal with this expected growth in an efficient and affordable manner. The First Urban Project (Credit 1049-BU) assisted the Government by improving living conditions of the urban poor through provision of basic infrastructure (serviced sites and neighborhood upgrading) and loans for housing construction and improvement; promotion of artisans through training and credit; construction and renovation of primary schools; and institutional and especially financial strengthening of the Municipality to provide maintenance services to Bujumbura.  2 4. Prolect Oblectives: The long-term objective of the project is to set the stage for an acceleration of the urban growth rate, particularly in secondary towns. This will be based on a better division of labor between rural and urban populations, on the development of activities and employment in urban areas and on the strengthening of urban-rural linkages. The proposed project constitutes the cornerstone of the new urban policy, and must be considered as a major step in a longer-term process of modernization of Burundi's economy, that will have implications on all other sectors including agriculture. In the short term, in order to strengthen the economy of secondary towns, the project would provide the necessary infrastructure and community facilities, as well as employment opportunities, and would estajlish the institutional and financial environment that would help these semi-rural agglomerations to evolve into actual urban centers. The project would expand the experience of the first urban project in improving the living conditions of the urban population in Bujumbura and in five selected secondary centers, mainly by upgrading existing low-income neighborhoods. S. Prolect Description: The proposed project wonld include the following components in five secondary centerst Gitega, Ngozi, Kayanza, Rumonge and Bururi, and in Bujumbura. (a) Promotion of Artisanst technical and financial assistance, provision of workshops and stores, creation of activity areas and machine/training centers, and provision of installation and equipment creditsl (b) Uparadint of Infrastructure: roads and drainage, mainly in the urban low-income areas which are poorly served; (c) Housing: upgrading of 15 ha and development of 30 ha at Gasenyi, on the northern outskirts of Bujumbura, and opening up of new areas at Gitegs, Rumonge, Ngozi and Kayanza. This component also includes provision for housing credits mainly for low income families in Bujumbura and Gitega, and creation of a self-sustaining Housing Fund; (d) Community Facilitiess markets with sheds, small shops, stores, cold storage rooms and slaughterhouses. Social facilities: five health centers; and a community hall at Gasenyi; (e) Institutional Strenathening: technical assistance for the communes, upgrading of commune resources, reinforcement of financial services and reform of the legislation governing communal finances, creation of an Urban Equipment Fund for Secondary Centers, and a study on communal resources; (f) Training: for communal financial and technical staff, and for project staff; and  3 (g) Project Coordination: technical assistance and facilities for a project unit established in Bujumbura. The total cost of the project is estimated at US$24.1 million equivalent, with a foreign exchange component of US$13.7 million (57%). A breakdown of costs antA the financing plan are shown in Schedule A. Amounts and methods of procvrement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key pro,ect processing events and the status of Bank Troup operations i4. Burundi are given in Schedules C and D, respectively. Map is attached. The Staff Appraisal Report, No. 7013-BU, dated July 20, 1988, is also attached.1 6. Rationale for IDA Involvement: The Second Adjustment Program (Cr. 1919), approved by the Executive Directors in June 1988, aims at achieving a more rapid GDP growth while diversifying the economy to reduce its dependence on coffee. The urban sector can make an important contribution to the growth of commercit agriculture. IDA's continuous dialogue with the government under the Lrst Urban project has been essential to set up mechanisms to fostex efficient urban growth in Bujumbura. IDA can also make a crucial contribution to establish the financial and institutional environment which can assist the growth of secondary centers. 7. Axreed Actions: The Government has agreed to the following: (i) formulating guidelines for a national urban policy acceptable to IDA; (ii) approval of a new organization of the Bujumbura Municipality; (iii) reform of legislation regarding communal finances and amendment of land tax and tax on rental income, in order to improve communal financial resources; and (iv) creation of an'Urban Equipiint Find for Secondary Centers Conditious of effectiveness will be: (i) promulgation of decree-laws transferring the land and rental income taxes to the Municipality of Bujumbura and to the communes; and (ii) submission of a draft decree for the creation of a Housing Fund. 8. Benefitst The project will improve the living conditions in Gasenyi (Bujumbura) and the five secondary towns, and will provide 650 new serviced plots in Gasenyi. The project will also strengthen the operations of existing urban institutions and contribute to the development of new institutions. Finally, the project will help employment generation by promotion of artisans and increase monetary income of the urban as well as rural population in the towns covered by the project and in their hinterland. 1/ Other than on general country grounds (whose assessment is reflected here), the August events have had no direct impact on the project's appraisal. Hence the staff appraisal report, which was ready for distribution to the Executive Directors in July, has not been modified for time and cost reasons.  4 9. Risks: At the country level, the major risks are those inherent in opening up an heretofore tightly controlled society. The Government's determination to build national unity, and the support of these efforts by the international community, should help minimize these risks. At the project level, the main risks faced by the project are those derived from weaknesses of local authorities. Specific measures, including a high degree of institutional support, have been included as part of the project to limit these risks. 10. 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 the proposed credit. Barter B. Conable President Attachments Washington, DC November 7, 1988  5 Schedule A BURUNDI SECOND URBAN DEVELOPMENT PROJECT ES1'IMATED COSTS AND FINANCING PLAN US$ '000/1 Percent Foreign Local Foreign Total of total as % of total A. Artisans 541 913 1454 6% 632 Credits 338 797 1135 52 70% B. Infrastructure 1248 2307 3555 15% 65% C. Housing: Works 659 642 1301 5% 49% Credits 1870 1530 3400 14% 45' D. Community Facilities 1240 1123 2363 10% 48% E. Institutional Strengthening 723 1592 2315 10% 69% F. Training 108 482 590 2% 82% G. Coordination 592 455 1047 4% 43% H. Consultants Services including PPF 354 846 1200 52 71% TOTAL BASE COSTS 7673 10687 18360 76% 58% Physical Contingencies 767 1127 1894 8% 60% Price Contingencies 1957 1909 3866 16% 49% TOTAL PROJECT COST:/2 10397 13723 24120 100% 57% 1/ Based on exchange rate US$1 = FBu 130 21 Net of Tax Liabilities Financina Plan: -------US$ million------- As % of total Local Foreign Total IDA Credit 7.28 13.72 21.00 87.0 Government 3.12 0 3.12 13.0 TOTAL 10.40 13.72 24.12 100.00  6 Schedule B BURUNDI SEC_OND URBAN DEVELOPMENT PROJECT PROCUREMENT AND DISBURSEMENTS Procurenent Arrangeuents - U$ *illion ---- Project Elesent tCB LCD Other al N.A. Total Cost Civil Works 5.1 6.1 11.2 (4.3) (5. 1) 19.Q Equipment and Vehiclet 1.0 0.5 1.5 (1.0) 10.5) (1.5) Office Equipsent 0.1 0.1 and Furniture (0.1) (0. 1) Credits 5.5 5.5 15.0) (5.0) Technical Assistance 2.6 2.6 (2.2) S2.2) Training 0.7 0.7 (0.6) (0.6) Consiting Services 0.6 0.6 (0.51 (0.5) Operating Expenses 1.2 1.2 (1.0) (1.0) Refinancing of PPF 0.7 0.7 (0.7) !0.7) TOTAL 6.1 6 7 3.9 7.4 24.1 (5.3) (5.7) (3.3) (6.7) (21.0) :S::: 2 :--S :S: S:=:S:S::-:w::S2S:::SS NOTE:Figures in parentheses are the respective amounts financed by IDA. a/ Contract awards for technical assistance and consulting services. b/ Figures shown above are rounded and include contingencies.  7 Disbursements Category Amount of Credit % of expenditures Allocated to be financed --US$ million-- 1. Civil Works for all parts 5.0 80% except in Gasenyi and for health centers 2. Civil works in Gasenyi 0.8 80% 3. Civil Works, Equipment 0.4 90% and furniture for health centers 4. Equipment, vehicles, 0.8 1002 of foreign or furniture 80% of local exp- enditures for items procured locally. 5. Technical assistance, 2.1 100% of foreign and and training 80% of local exp- enditures. 6. Consulting services 0.5 100% of foreign and 80% of local expenditures 7. Housing Credits 3.4 80% 8. Artisans Credits 1.0 80% 9. Operating expenses (3 first years) 0.8 80% 10. Refunding of PPF 0.7 Amount due. 11. Unallocated 5.5 TOTAL 21.0 Estimated Disbursements: -_______-----------US$ million--------------------- IDA FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 Annual 0.9 1.6 3.9 5.6 4.5 2.9 1.1 0.5 Cummulative 0.9 2.5 6.4 12.0 16.5 19.4 20.5 21.0 N.B. Disbursements would be against Statement of Expenditure (SOE) for eligible expenditures under contracts valued at $20,000 equivalent or less.  8 Schedule C BURUNDI SECOND URBAN DEVELOPMENT PROJECT Timetable of key project processing events: (a) Time taken to prepare: 2 years (b) Prepared by: Government of Burundi (c) First IDA mission: August 1985 (d) Appraisal mission departure: October 1987 (e) Negotiations: June 1988 (f) Planned date of effectiveness: June 1989 (g) List of relevant PCRs: First Urban Development Project (Cr. 1049-BU) PCR under preparation  9 Schedule D Paqe i ojT-2 STATUS OF BANK GROUP OPERATIONS IN BURUNDI A. STATEMENT OF BANK LOANS AND IDA CREDITS --------------------------------------- (October 1988) Loan or Amount in USS Million Credit Year ------------------------------ number Signed Borrover Bank IDA (1) Undisbursed (2) One Loan Fully Disbursed 4.80 Twenty Credits (including one SFA) Fully Disbursed 153.47 1165 1981 GOVT OF BURUNDI Kirimiro Rural Development 19.30 .49 1192 1982 REP. OF BURUNDI Integrated Rural Dev./Ngozi 16.00 7.52 1358 1983 REP. OF BURUNDI Third Education 15.80 .05 1419 1983 REP. OF bURUNDI Ruzizi II Regional Hydroelec 15.00 1.53 1456 1984 GOVT OF BURUNDI Third Technical Assistance 5.10 3.40 1583 1985 MIN. OF POWER/DGR Fourth Highway 18.10 14.24 1593 1985 GOB /REGIDESO Power Transmission & Distrib. 12.30 9.97 1620 1986 GOVT OF BURUNDI. Second Forestry 12.80 11.54 1625 1986 GOVT OF BURUNDI Rural Water Supply 9.50 7.43 1795 1987 GOVT OF BURUNDI Econ & Public Enterprise Mgt 7.50 6.97 1805 1987 GOB /ONATEL 2nd Communications 4.80 4.98 1857 1988 GOVT OF BURUNDI Muyinga Agricultural Dev. 10.00 10.35 1862 1988 GOVT OF BURUNDI Population & Health 14.00 14.42 1881 1988 GOVT OF BURUNDI Education Sector Dev. 31.50 30.14 * 1889 1988 GOVT OF BURUNDI Small enterprise /APEX 8.00 7.47 1919 1988 GOVT OF BURUNDI Second Structural Adjustment ---_ 90.00 _ 85.06 Subtotal 16 Active projects n.nn 28Q.7A 215.57 Total less cancellations: 4.80 443.17 of which has been repaid 4.80 1.02 Total outstanding incl. undisbursed: 0.00 442.15 Amount sold : 2.97 5.48 of which has been repaid 2.97 5.48 Total now held by Bank and IDA (1) 0-00 254.00 (2) Total undisbursed : 0.00 215.57 * Not yet effective (1) US$ amounts are computed at rate of negotiations dates for the Original Principals, whereas the current rate is applied to the Undisbursed Amounts. (2) Because of the depreciation of the $US w.r.t. the SDR (i) it is possible that the Undisbursed amount is higher than the Original amount, and (ii) the sum of Total now held by IDA and Bank and Total Undisbursed, is higher than Total outstanding.  10 Schedule D __________ Page 2 of 2 STATUS OF BANK GROUP OPERATIONS IN BURUNDI B. STATEMENT OF IFC INVESTMENTS IN BURUNDI EXPRESSED IN USS -------------------------------------------------------- (March 31, 1988) Amount Year Obligor Type of Business Loan Equity Total ---_ ------- ____ ---- _____ 1981 Verreries du Burundi Glass container 4.7 0.8 5.5 Total gross commitments less cancellations, terminations, repayments and sales 4.' 0.8 5.2 Total comitments now held by IFC 0.08 1.03 1.1 ------------------------------------------------------------- The IFC loan was fully disbursed and all but US$80,000 prepaid. In 1986, IFC capitalized US$250,000 interest for 1986.  BURUNDI SECOND URBAN PROJECT RWANDA ( LOCATION OF PROJECT TOWNS NoGD PRO2ECTTOWNS o PROVINCE CAPITALS ' G- , / NATIONAL CAPITAL ( PROVINCE BOUNDA21ES B.- - COMMUNE BOUNDARIES f INTERNATIONAL BOUNDARIES T NNZA I KIRUND f %>->, io e|'g;8 /^ TANZANIA \ Mcb.yi / KV-mb; Balkubo l . - .1~~~~~~~~~~~~b EhgombE~~ ~ ~~~~~~~~~~~~ R __; _ \ym=hp~ Gchh/ 7/6yno( outOKE 4 _<$hikrww/e 4 '*?> $A.NAqgo ohi5 B\ a \ |. MulQt \ M~U IUI AS>UK L.. i ' oiQ/ iob RU 3ANZA . /b,UBgog * r a b KARUZI Mas (Msic s Mpnd **\ _GRogo \A 8 / T-< U A ' GihonBo / / f 9uSkte PA __/ y~/ nMuAo ,/ CoAiogoo ZAIRE > O B S g&co CANKUZO ' \ BUJSUUMBURA - do Ryi / ;1 R<k~ Kcm/osh ; I / GA \GY EGA 04- 1 Kcboa < > 1, X \ Keokwe ;_ B___KI/OiE/\RS B/b~ / Mwmmbo MkAe | * gNy-TNl..LdES :uSB Ik M mbo\~* R B D < ~ ~ ~ ~ ~ ~ ~ /** /. Tsg KILOvleETRS , ohabw I BURURI /1 ~ ~ ~ ~ ~ ~ ~~~~~~~RU R,O *yctidC U IT T _GhAngo \ * _ _ ~/ TAZAI \. R~o, 'J hUTANA /< GND I