Burkina Faso - Second Urban Project

Document of The World Bank FOR OFFICIAL USE ONLY * Nz Ro 6 S- ,t Report No. P-5131-BUR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 18 MILLION TO BURKINA FASO FOR A SECOND URBAN PROJECT * SEPTEMBER 12, 1989 This document has a restricted distribution and may be used by recipients only in the performae of their officiai duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVANTS Cumency Unit = CFA Firanc (CFAF) US$ 1.00 CFAF 316 CFAF 1 nillion US$ 3,160 SYSTEM OF WVEIGHTS AND MEASIJRES:- hMEIR  FOR OMIcAL USE ONLY BURKINA FASO SECOND lIEh,Q, PROJECr CRQTANDPROJECT UMMARY Burkina Faso Benefi -a ies: Ministy of Finane Ministry of Temtorial Administration Ministry of Public Works Ministry of Water Province of Kadiogo and the city of Bobo-Dioulasso Crdit Amount: SDR 18.0 nillion (US$ 22.2 nillion) Tenns: Standard, with 40 years maturity Onlending Tems: Same as above Einancing Plan: Government US$ 10.8 million Italy US$ 5.5 nillion IDA US$ 22.2 million Total US$ 38.5 million Economic Rate of Retum: Respectively 32% and 30% for the road maintenance component in Ouagadougou and Bobo-Dioulasso. Map NO. IBRD 21495 StaffA praisal Rea t: Report No. 8033-BUR This document has a restricted distribution and may be used by recirients o,.ty in the performance of their officiai duties. Its contents may not otherwise be disctlsed wi- -r Norld Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO BURKINA FASO * FOR A SECOND URBAN MQ J EC 1. The following memorandum and reconmendation on a proposed development credit to Burkina Faso for SDR 18 million (US$ 22.2 million equivalent) is subniitted for approval. The proposed credit would be on standard IDA terms with 40 years matunty to help finance a second urban project. Part of the Credit would be on-lent to the Province of Kadiogo and the city Bobo- Dioulasso. The project would be cofinanced, on a grant basis, by the Italian Government for US$ 5.5 million equivalent. 2. Despite its strongly rural character, Burkina Faso has experienced sustained, rapid urban growth since independence in 1960. The present urban growth rate of about 8% a year is roughly 2.3 times the overall rate of population increase (3.3%). Recent trends in population increase have been compounded by the repatriation of a number of Burkinabe formerly living in neighbtring countries. The total population of Burkina Faso is expected to be at least 11 million by the end of the century, with the urban share climbing from 880,000 inhabitants in 1985 (11% of the total population of 8 million) to 21% or 2.4 million, of which 60% would be less than 20 years of age. According to the 1985 census, Ouagadougou, the largest city (436,000 inhabitants), accounted for about 50% of the urban population and its annual growth rate has averaged 9.7% between 1975 and 1985. Bobo-Dioulasso (about 230,000 inhabitants) accounted for 25% of the urban population with an annual growth rate of 7%. These two cides are likely to at least triple in size within 15 years. The remainder of the urban population is scattered among much smaller towns, most of which are semiurban local market centers. Three other cities, Koudougou, Ouahigouya and Banfora, accounted for over 125,000 inhabitants in 1985. Banfora, wth a population of 35,000, has experienced an annual growth rate of 11% since 1975 and is likely to quickly become the third largest city in the country, overtaking Koudougou which had 52,000 inhabitants in 1985 and an annual growth rate of 3A%. One of the consequences of the current urban growth is that cities must shelter between 80,000 and 90,000 new inhabitants every year, the resulting housing demand is at least 8,000 new units a year. Most of this growth has been supplied by self-help constmction on illegally occupied and poorly serviced plots, except for those allocated tbrough recent Government programs. 3. The developmnent constraints mi Buriina Faso - mi large part the result of the physical environment -- are reflected in a per capita production level that is sUill extremely low (GDP per capita of US$ 203 in 1987). GDP annual growth rate was 4.3% during the period 1982-87 and GDP per capita grew at an annual rate of 1.2%. The share of economic activity located in urban areas is sirikdng, given the still low level of urbanization. During the 1970-81 period, the industrial sector grew at 2.9% a year, and the tertiary sector at 5.4%, while the agricultural sector grew more slowly than the population (1.4% vs. 2.1%). Over the period 1982-87, an average 58% of GDP (constant 1979 prices) was accounted for by urban-based activities (18% by industrial activities and 40% by service-related activities), almost exactly the reverse of the situation in 1960.  Burkina Faso - Second Urban Project -2- 4. Steady efforts to develop agriculture and agr.culture-related activities have paid off over the 1982-87 period, which saw a dramatic speeding up of growth in the agricultural sector (including livestock and forestries) to 5.4% per annum, and to 7.1% for agriculture strricto sensu. Agricultural output increased sharply, by some 25 percent in 1988, due to favorable weather. Industrial sector growth also increased in 1982-87. but less so, growing at 3.8% a year (2.9% for manufacturing), and tertiary sector growth actually slowed to 3.7% a year. It is likely that this slower growth in the manufacturing and tertiary sector in part reflects the increasing constraints experienced by urban-based activities as a result of a deterioration in municipal services, in particular, infrastructure maintenance. 5. Radonale f MA 'nvolveen. The overriding aim of IDA assistance to Burkina is to help the countr; achieve sustainable growth in per capita income, with equity. The main means to this end would be through creating conditions more favorable to the growth of the private sector, managing public resources better, and removing physical and institutional constraints. The proposed project fits well within this overall strategy and contributes to each of thes three objectives. Private investments and the creation of urban employment would be inhibited without the improvements in urban services the project would support -- itnprovements particularly needed to cope with the expected rapid increase in the cities' populations. Further disincentives would arise if the deterioration of infrastructure and the urban environment were allowed to continue, and if a financial stru^,ture to ensure long-term maintenance were not put in place. IDA involvement is made all the more pressing by the preference to date of other donors active in the sector for physical planning and investment in new infrastructure. The project design has benefitted from experience under the First Urban Project (Cr. 766-BUR) in that it works with existing institutions, is not unduly complex, and links physical works to progress in resource mobilization. 6. The proposed Project has two major objectives: (a) to develop the organizational, technical, and financial capacity of the local govemments of Ouagadougou and Bobo-Dioulasso to assume full responsibility, as contracting authorities, for the maintenance of urban infrastructure and the provision of urban services in the face of increasingly high growth levels for the urban population; and (b) to upgrade infrastructure in these two cities to a satisfactory overall standard, enabling effective, regular maintenance to be continued. 7. Project Description. The proposed project includes: (a) a municipal administration component which would include consultant services, training, supplies and equipment to achieve: (i) introduction of computerized accounting; (il) revision of municipal accounting practices and preparation of a user's manual; (iii) establishment of missing accounts for the most recent years in Ouagadougou and Bobo-Dioulasso; and (iv) preparation of the draft legislative and regulatory texts necessary for a clear delineation of municipal responsibilities and improved operational procedures of the local govemments;  Burkina Faso - Second Urban Project - 3 - (b) a financial resource mobilization component which would include consultant services, training, supplies and equipment to achieve: (i) preparation of the draft legislative and regulatory texts to complete implementation of the local tax reforms which have been studied under a PPF advance; (ii) construction or renovation of premises for establishing in each of the three administrative subdivisions of Ouagadougou and the two administrative subdivisions of Bobo-Dioulasso, a single facility -- the h